Document:

EXHIBIT 10.4.1

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                                 LEASE AGREEMENT

                            Dated as of July 29, 1998

                                     Between

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

                                       and

                                ATLAS AIR, INC.,

                                     Lessee

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                   One Boeing Model 747-47UF Aircraft Bearing
                      United States Registration No. N491MC
                   and Bearing Manufacturer's Serial No. 29252
                     with four GE Model CF6-80C2B1F Engines
                      Bearing Engine Manufacturer's Serial
                   Nos. 704-692, 704-693, 704-694 and 704-695

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      The right, title and interest of Lessor in and to, among other things,
this Lease Agreement has been assigned to and is subject to a security interest
in favor of Wilmington Trust Company, a Delaware banking corporation, as
Mortgagee, under the Trust Indenture and Mortgage, dated as of July 29, 1998,
for the benefit of the holders of the Equipment Notes referred to in such Trust
Indenture, all to the extent provided in such Trust Indenture. This Lease
Agreement has been executed in multiple counterparts; to the extent, if any,
that this Lease Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in Lessor's right, title and interest in and to this Lease Agreement
may be perfected through the delivery or possession of any counterpart of this
Lease Agreement other than the counterpart of this Lease Agreement that contains
the original receipt executed by Wilmington Trust Company, as Mortgagee.

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                                TABLE OF CONTENTS

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

SECTION 2.  DELIVERY AND ACCEPTANCE ....................................      1
  2.1    Delivery and Lease of Aircraft ................................      1
  2.2    Acceptance by Lessee ..........................................      2

SECTION 3.  TERM AND RENT ..............................................      2
  3.1    Term ..........................................................      2
  3.2    Rent ..........................................................      2
  3.3    Payments ......................................................      6

SECTION 4.  DISCLAIMER; CERTAIN AGREEMENTS OF
               LESSOR; SECTION 1110 MATTERS ............................      7
  4.1    Disclaimer ....................................................      7
  4.2    Certain Agreements of Lessor ..................................      8
  4.3    Quiet Enjoyment ...............................................      8
  4.4    Investment of Funds Held as Security ..........................      9
  4.5    Title Transfers by Lessor .....................................     10
  4.6    Lessor's Interest in Certain Engines ..........................     10
  4.7    Lease for U.S. Federal Income Tax Law
            Purposes; Section 1110 of Bankruptcy Code ..................     11

SECTION 5.  RETURN OF AIRCRAFT .........................................     11
  5.1    Compliance with Annex B .......................................     11
  5.2    Storage and Related Matters ...................................     11
  5.3    Return of Other Engines .......................................     12
  5.4    Fuel ..........................................................     12

SECTION 6.  LIENS ......................................................     12

SECTION 7.  REGISTRATION, OPERATION, POSSESSION,
               SUBLEASING AND RECORDS ..................................     13
  7.1    Registration and Operation ....................................     13
  7.2    Possession ....................................................     15
  7.3    Certain Limitations on Subleasing or
            Other Relinquishment of Possession .........................     20

SECTION 8.  MAINTENANCE; REPLACEMENT AND POOLING
               OF PARTS; ALTERATIONS, MODIFICATIONS
               AND ADDITIONS; OTHER LESSEE COVENANTS ...................     21
  8.1    Maintenance; Replacement and Pooling of
            Parts; Alterations, Modifications and Additions ............     21

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  15.1   Remedies ......................................................     44
  15.2   Limitations Under CRAF ........................................     48
  15.3   Right to Perform for Lessee ...................................     48
  15.4   Determination of Fair Market Rental Value
            and Fair Market Sales Value ................................     48
  15.5   Remedies Cumulative ...........................................     49

SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF,
               COUNTERCLAIM, ETC. ......................................     49

SECTION 17. RENEWAL AND PURCHASE OPTIONS ...............................     50
  17.1   Preliminary Notices ...........................................     50
  17.2   Renewal Options ...............................................     51
  17.3   Purchase Option ...............................................     53
  17.4   Appraisals ....................................................     54

SECTION 18. MISCELLANEOUS ..............................................     55
  18.1   Amendments ....................................................     55
  18.2   Severability ..................................................     56
  18.3   Third-Party Beneficiary .......................................     56
  18.4   Reproduction of Documents .....................................     56
  18.5   Counterparts ..................................................     57
  18.6   Notices .......................................................     57
  18.7   Governing Law; Submission To
            Jurisdiction; Venue ........................................     57
  18.8   No Waiver .....................................................     58
  18.9   Entire Agreement ..............................................     59

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                                 LEASE AGREEMENT

            LEASE AGREEMENT dated as of July 29, 1998 (this "Agreement" or
"Lease"), between (a) First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) ATLAS AIR,
INC., a Delaware corporation ("Lessee").

                                    RECITALS

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

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

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

SECTION 1. DEFINITIONS AND CONSTRUCTION

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

SECTION 2. DELIVERY AND ACCEPTANCE

      2.1   Delivery and Lease of Aircraft

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

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

      2.2   Acceptance by Lessee

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

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

SECTION 3. TERM AND RENT

      3.1   Term

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

      3.2   Rent

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

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

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

            (i)   In the event that Transaction Expenses paid by Lessor pursuant
      to Section 9.2 of the Participation Agreement are determined to be other
      than 2.086% of Lessor's Cost, then in each case the Basic Rent percentages
      set forth in Schedule 2, Stipulated Loss Value percentages set forth in
      Schedule 3, the Termination Value percentages set forth in Schedule 4, and
      the EBO Price and the EBO Date shall be recalculated (upwards or
      downwards) by the Owner Participant, on or prior to the 120th day after
      the Delivery Date using the same methods and assumptions used to calculate
      original Basic Rent, Stipulated Loss Value and Termination Value
      percentages and the EBO Price and the EBO Date, in order to (1) maintain
      the Owner Participant's Net Economic Return and (2) to the extent possible
      consistent with clause (1) hereof, maintain a targeted monthly Rent and
      then minimize the Net Present Value of Rents and EBO Price to Lessee.

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

            (iii) In the event that Lessee is required to indemnify the Owner
      Participant under the Tax Indemnity Agreement, then (A) in the event that
      Lessee agrees to satisfy such indemnity obligation through an adjustment
      to Basic Rent pursuant to Section 2.1(a) of the Tax Indemnity Agreement,
      the Basic Rent percentages set forth in Schedule 2 and (B) in any event,
      the Stipulated Loss Value percentages set forth in Schedule 3 and the
      Termination Value percentages set forth in Schedule 4 shall be
      recalculated (upwards or downwards) by Owner Participant, using the same
      methods and assumptions (except to the extent such

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                                       -4-

      assumptions shall be varied to take into account the Tax Loss (as such
      term is defined in the Tax Indemnity Agreement) that is the subject of
      such indemnification and any prior or contemporaneous Tax Loss) used to
      calculate the Basic Rent percentages, the Stipulated Loss Value
      percentages and the Termination Value percentages on the Delivery Date, in
      order to (1) maintain Owner Participant's Net Economic Return and (2) to
      the extent possible consistent with clause (1) hereof, maintain, a
      targeted monthly Rent and then minimize the Net Present Value of Rents and
      EBO Price to Lessee.

            (iv)  Notwithstanding anything to the contrary in this paragraph
      (b), all adjustments, upwards or downwards, to Basic Rent shall be made in
      a manner that causes the Lease to comply with Sections 4.02(5) and 4.07 of
      Revenue Procedure 75-28 (or any applicable successor thereto) and Proposed
      Treasury Regulation Section 1.467-3(c)(2)(i) (or any applicable successor
      thereto), provided, however, that if no such Proposed Treasury Regulation
      (or corresponding final Treasury Regulation) is in effect providing an
      applicable "safe harbor" from characterization of the Lease as a
      "disqualified leaseback or long-term agreement" within the meaning of
      Section 467(b)(4) of the Code, taking into account the adjusted Basic Rent
      structure and the event or events giving rise to the adjustment to Basic
      Rent, then the adjustments, upwards or downwards, to Basic Rent shall be
      made in a manner such that independent tax counsel, selected by Owner
      Participant and reasonably acceptable to and compensated by Lessee, is
      able to opine and does opine that there is no non-de minimis increased
      risk that the Lease will be characterized as a "disqualified leaseback or
      long-term agreement" within the meaning of Section 467(b)(4) of the Code
      or will be subject to "constant rental accrual" under Section 467(b)(2) of
      the Code.

            (c)   All adjustments pursuant to Section 3.2.1(b) shall be made as
promptly as practicable after either Owner Participant or Lessee gives notice to
the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Basic Rent, the
EBO Price, the EBO Date (which may change only at the election of Lessee),
Stipulated Loss Value and Termination Value shall be prepared by Owner
Participant, subject to verification by Lessee in accordance with Section
3.2.1(d). Promptly after an adjustment is made hereunder, Owner Participant
shall deliver to Lessee a description of such adjustment,

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                                       -5-

setting forth in reasonable detail the calculation thereof. All adjustments
required pursuant to Section 3.2.1(b) shall be set forth in a Lease Supplement
or in an amendment to this Lease, and, promptly after execution thereof by
Lessor and Lessee, Lessee shall give a copy thereof to Mortgagee. Furthermore,
notwithstanding anything contained in these subparagraphs (b) and (c) to the
contrary, the EBO Price shall not under any circumstances be adjusted to an
amount that is less than the anticipated fair market value of the Aircraft on
the EBO Date (as determined by GRA Aviation Specialists, Inc. on the Closing
Date as set forth in the appraisal required as a closing condition in Section
5.1.2(xv) of the Participation Agreement) nor to an amount that is less than the
amount required to preserve Owner Participant's Net Economic Return. Any such
post-Closing adjustment to the EBO Date shall be conditioned on the Owner
Participant receiving an appraisal (at Lessee's expense) from GRA Aviation
Specialists, Inc. (or such other appraisor selected by the Owner Participant and
reasonably acceptable to the Lessee) at such time to the effect that (A) the EBO
Price on such adjusted EBO Date is not below the greater of (i) the estimated
Fair Market Sales Value on such adjusted EBO Date and (ii) the amount required
to preserve Owner Participant's Net Economic Return, and (B) based on the
remaining scheduled Basic Rent payments and Lessee's fair market value purchase
option at the end of the originally scheduled Base Lease Term, Lessee will not
be economically compelled to exercise its option to purchase the Aircraft at the
EBO Price on such adjusted EBO Date.

            (d)   If Lessee believes that any calculations by Owner Participant
pursuant to Section 3.2.1(c) are in error, and if, after consultation, Lessee
and Owner Participant are unable to agree on an adjustment, then a nationally
recognized independent certified public accounting firm selected by Lessee and
reasonably satisfactory to Owner Participant shall verify such calculations.
Owner Participant will make available to such firm, but not, in any
circumstances, to Lessee or any representative of Lessee, the methodology and
assumptions referred to in Section 3.2.1(b) and any modifications thereto made
to reflect the events giving rise to adjustments hereunder (subject to the
execution by such firm of a confidentiality agreement, reasonably acceptable to
Owner Participant, prohibiting disclosure of such methodology and assumptions to
Lessee or any third party). The determination by such firm of accountants shall
be final. Lessee shall pay all costs and expenses of such verification by such
accountants, provided that if it results in a decrease in Basic Rent which
decreases the remaining Net Present Value of Rents by $10,000 from the re-

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                                       -6-

maining Net Present Value of Rents as recalculated by the Owner Participant,
then the Owner Participant will pay such costs and expenses.

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

            3.2.2 Supplemental Rent

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

      3.3   Payments

            (a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 12:30 p.m., New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior

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to the date such payment of Rent is due or, in the case of any payment of
Supplemental Rent expressly payable to a person other than Lessor, to the person
that shall be entitled thereto to such account in the United States as such
person may specify from time to time to Lessee at least 10 Business Days prior
to the date such payment of Rent is due.

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

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

            (d) Excluded Payments shall be paid by wire transfer of immediately
available Dollars to the account of the person specified in the Participation
Agreement or, if not so specified, to such account in the United States as may
be specified by such person by written notice to Lessor and Lessee from time to
time at least 10 Business Days prior to the date such payment is required to be
made.

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

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

      4.1   Disclaimer

            LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS."
LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR,
MORTGAGEE AND ANY PARTICIPANT

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(i) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF AND (ii) NONE OF
LESSOR, MORTGAGEE AND ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE
MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO:

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

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

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

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

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

      4.2   Certain Agreements of Lessor

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

      4.3   Quiet Enjoyment

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

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      4.4   Investment of Funds Held as Security

            4.4.1 Investment

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

            4.4.2 Payment of Gain or Loss

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

            4.4.3 Limitation of Liability

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

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                                      -10-

      4.5   Title Transfers by Lessor

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

      4.6   Lessor's Interest in Certain Engines

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

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                                      -11-

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

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

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

SECTION 5. RETURN OF AIRCRAFT

      5.1   Compliance with Annex B

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

      5.2   Storage and Related Matters

            If Lessor gives written notice to Lessee not less than 60 days nor
more than 120 days prior to the end of the Term requesting outdoor parking of
the Aircraft upon its return hereunder, Lessee will assist Lessor in arranging
outdoor parking facilities for the Aircraft for a period up to 30 days,
commencing on the date of such return, and upon request of Lessor to Lessee made
at least 10 days prior to the end of such initial 30 day period, for an
additional 30 day period commencing upon expiration of such initial period, at
such outdoor parking facility in the 48 contiguous states of the United States
as Lessee may select. Lessee shall, at Lessor's written request, maintain
insurance (if available) for the Aircraft during such outdoor parking period,
provided that Lessor shall reimburse Lessee for Lessee's out-of-pocket cost of
providing such insurance. Such outdoor parking shall be at Lessor's risk, and
Lessor shall pay all applicable outdoor parking fees; PROVIDED that Lessee's
obligation to assist Lessor in arranging parking shall be subject to Lessor
entering into an agreement prior to the commencement of the outdoor parking
period with the outdoor parking facility providing, among other things, that
Lessor shall bear all maintenance charges (other than maintenance required as a
direct result of Lessee's failure to comply with the provisions of Annex B) and
other costs incurred.

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                                      -12-

      5.3   Return of Other Engines

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

      5.4   Fuel

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

SECTION 6. LIENS

            Lessee shall not, directly or indirectly, create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine or any Part, title to any of the foregoing or any interest of Lessee
therein, or the Lessee's rights in and to this Lease or any Permitted Sublease,
except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens; (c) the rights of others under agreements
or arrangements to the extent permitted by the terms of Sections 7.2 and 7.3;
(d) Liens for Taxes of Lessee or any Permitted Sublessee (and their respective
U.S. federal tax law consolidated groups), or Liens for Taxes of any Tax
Indemnitee (and its U.S. federal tax law consolidated group) for which Lessee is
obligated to indemnify such Tax Indemnitee under any of the Lessee Operative
Agreements, in any such case either not yet due or being contested in good faith
by appropriate proceedings so long as such Liens and such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or the interest of any Participant therein or impair the
lien of the Trust Indenture; (e) materialmen's, mechanics', workers',
repairers', employees'

<PAGE>

                                      -13-

or other like Liens arising in the ordinary course of business for amounts the
payment of which is either not yet delinquent for more than 60 days or is being
contested in good faith by appropriate proceedings, so long as such Liens and
such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Aircraft, the Airframe, any Engine or the interest of any
Participant therein or impair the lien of the Trust Indenture; (f) Liens arising
out of any judgment or award against Lessee (or against any Permitted
Sublessee), so long as such judgment shall, within 60 days after the entry
thereof, have been discharged or vacated, or execution thereof stayed pending
appeal or shall have been discharged, vacated or reversed within 60 days after
the expiration of such stay, and so long as during any such 60-day period there
is not, or any such judgment or award does not involve, any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein or impair the lien of the Trust Indenture,
and (g) any other Lien with respect to which Lessee (or any Permitted Sublessee)
shall have provided a bond, cash collateral or other security adequate in the
reasonable opinion of Lessor. Lessee shall promptly take (or cause to be taken)
such action as may be necessary duly to discharge (by bonding or otherwise) any
Lien not excepted above if the same shall at any time arise in respect of the
Aircraft, the Airframe, any Engine or any Part during the Term.

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

      7.1   Registration and Operation

            7.1.1 Registration and Recordation

            Subject to the compliance by Lessor and Owner Participant with their
respective obligations under Section 13 of the Participation Agreement, Lessee
shall cause the Aircraft to be, and at all times during the Term to remain, duly
registered with the FAA under the Act or with such other country of registry as
shall be permitted under Section 7.1.2 below, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Act cannot be
effected with the FAA because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Act). Lessor shall execute and deliver all such documents as Lessee (or any
Permitted Sublessee) may reasonably request for the purpose of effecting and
continuing such registration. Unless Mortgagee has given Lessee notice

<PAGE>

                                      -14-

that the Trust Indenture has been discharged, Lessee shall also cause the Trust
Indenture to be duly recorded and at all times maintained of record as a
first-priority perfected mortgage (subject to Permitted Liens) on the Aircraft,
the Airframe and each of the Engines (except to the extent such perfection or
priority cannot be maintained solely as a result of the failure by Lessor or
Mortgagee to execute and deliver any necessary documents).

            7.1.2 Reregistration

            So long as no Specified Default or Lease Event of Default shall have
occurred and be continuing, Lessee may, by written notice to Lessor, request to
change the country of registration of the Aircraft. Any such change in
registration shall be effected only in compliance with, and subject to all of
the conditions set forth in, Section 7.6.11 of the Participation Agreement;
PROVIDED, HOWEVER, that any such reregistration to a Permitted Foreign Air
Carrier shall not be permitted to occur prior to the end of the Tax Attribute
Period unless Lessee prepays to the Owner Participant on a lump-sum basis any
indemnity required under the Tax Indemnity Agreement as a result of such
reregistration.

            7.1.3 Markings

            If permitted by applicable Law, on or reasonably promptly after the
Delivery Date, Lessee will cause to be affixed to, and maintained in, the
cockpit of the Airframe and on each Engine, in each case, in a clearly visible
location (it being understood that the location of such placards, as identified
to the Owner Participant prior to the Delivery Date, shall be deemed to be in
compliance with this requirement), a placard of a reasonable size and shape
bearing the legend, in English, set forth in Schedule 6. Such placards may be
removed temporarily, if. necessary, in the course of maintenance of the Airframe
or Engines. If any such placard is destroyed or becomes illegible, Lessee shall
promptly replace it with a placard complying with the requirements of this
Section 7.1.3. Except as provided above, Lessee will not allow the name of any
Person to be placed on the Airframe or on an Engine as an explicit designation
of ownership.

            7.1.4 Compliance With Laws

            Lessee shall not, and shall not allow any other person to, operate,
use, maintain, service, repair or overhaul the Aircraft (a) in violation of any
Law binding on or applicable

<PAGE>

                                      -15-

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

            7.1.5 Operation

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

      7.2   Possession

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

<PAGE>

                                      -16-

            7.2.1 Interchange and Pooling

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

            7.2.2 Testing and Service

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

            7.2.3 Transfer to U.S. Government

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

            7.2.4 Installation of Engines on Owned Aircraft

            Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sub-

<PAGE>

                                      -17-

lessee, as the case may be, free and clear of all Liens, except (a) Permitted
Liens and those that do not apply to the Engines and (b) the rights of third
parties under normal interchange or pooling agreements and arrangements of the
type that would be permitted under Section 7.2.1.

            7.2.5 Installation of Engines on Other Airframes

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

            7.2.6 Installations of Engines on Financed Aircraft

            Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, leased to Lessee or such
Permitted Sublessee, or purchased by Lessee or such Permitted Sublessee subject
to a conditional sale or other security agreement under circumstances where
neither Section 7.2.4 or 7.2.5 is applicable; provided, however, that any such
installation shall be deemed an Event of Loss with respect to such Engine, and
Lessee shall comply with Section 10.2 hereof in respect thereof. Until Section
10.2 shall have been complied with, Lessor's interest in such Engine shall
remain in full force and effect.

            7.2.7 Subleasing

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

<PAGE>

                                      -18-

            (a)   Lessee shall provide written notice to Lessor and Mortgagee
      (such notice in the event of a sublease to a U.S. Air Carrier to be given
      promptly after entering into any such sublease or, in the case of a
      sublease to any other Permitted Air Carrier, 30 days in advance of
      entering into such sublease if during the Tax Attribute Period, otherwise
      10 days in advance of entering into such sub lease);

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

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

            (d)   In connection with a sublease to a Permitted Foreign Air
      Carrier, (1) the United States maintains diplomatic relations with the
      country of domicile of such Permitted Foreign Air Carrier (or, in the case
      of Taiwan, diplomatic relations at least as good as those in effect on the
      Delivery Date) and (2) Lessee shall have furnished Lessor and Mortgagee a
      favorable opinion of counsel, reasonably satisfactory to Lessor, in the
      country of domicile of such Permitted Foreign Air Carrier, that (i) the
      terms of such sublease are the legal, valid and binding obligations of the
      parties thereto enforceable under the laws of such jurisdiction, (ii) it
      is not necessary for Owner Participant, Lessor or Mortgagee to register or
      qualify to do business in such jurisdiction, if not already so registered
      or qualified, as a result, in whole or in part, of the proposed sublease,
      (iii) Lessor's title to, and Mortgagee's Lien in respect of, the Aircraft,
      Airframe and En-

<PAGE>

                                      -19-

      gines will be recognized in such jurisdiction, (iv) the Laws of such
      jurisdiction of domicile require fair compensation by the government of
      such jurisdiction, payable in a currency freely convertible into Dollars,
      for the loss of title to the Aircraft, Airframe or Engines in the event of
      the requisition by such government of such title (unless Lessee shall
      provide insurance in the amounts required with respect to hull insurance
      under Section 11 covering the requisition of title to the Aircraft,
      Airframe or Engines by the government of such jurisdiction so long as the
      Aircraft, Airframe or Engines are subject to such sublease) and (v) the
      agreement of such Permitted Foreign Air Carrier that its rights under the
      sublease are subject and subordinate to all the terms of this Lease is
      enforceable against such Permitted Foreign Air Carrier under applicable
      law;

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

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

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

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

            (i)   Notwithstanding anything to the contrary in this Section 7.2,
      no such sublease shall be made to a Permitted Foreign Air Carrier prior to
      the close of the Tax Attribute Period, unless Lessee prepays to Owner
      Participant on a lump-sum basis any indemnity required under the Tax
      Indemnity Agreement as a result of such sublease based upon the assumption
      that such sublease were to continue for the remainder of the term of the
      Lease.

<PAGE>

                                      -20-

      7.3   Certain Limitations on Subleasing or Other Relinquishment of
            Possession

            Notwithstanding anything to the contrary in Section 7.2:

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

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

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

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

            (e)   Any Wet Lease or ACMI Contract shall not constitute a
      delivery, transfer or relinquishment of possession for purposes of Section
      7.2 and shall not be prohibited by the terms hereof nor shall a Wet Lease
      or ACMI Contract be deemed to be a "sublease," nor shall the lessee of a
      Wet Lease or ACMI Contract be deemed to be a "sublessee" under the Lease;
      and

<PAGE>

                                      -21-

            (f)   Any sublease with a term of two years or longer shall be
      assigned to or for benefit of Lessor and/or Mortgagee, PROVIDED that it is
      understood that such sublease be for security purposes only and the rents
      under such sublease shall not be so assigned and shall be payable directly
      to Lessee.

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

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

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

      8.2   Information, Certificates, Notices and Reports

            8.2.1 Financial Information

            Lessee will furnish to Lessor:

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

            (b)   Within 120 days after the end of each fiscal year of Lessee, a
      consolidated balance sheet of Lessee as of the end of such fiscal year and
      related statements of income and cash flows of Lessee for such fiscal
      year, in comparative form with the preceding fiscal year, prepared in
      accordance with GAAP, together with a report of Lessee's independent
      certified public accountants with respect to their audit of such financial
      statements; pro-

<PAGE>

                                      -22-

      vided that so long as Lessee is subject to the reporting requirements of
      the Securities Exchange Act of 1934, a copy of Lessee's report on Form
      10-K for such fiscal year (excluding exhibits) will satisfy this paragraph
      (b).

            8.2.2 Annual Certificate

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

            8.2.3 Information for Filings

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

<PAGE>

                                      -23-

            8.2.4 Other

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

SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE

      9.1   Right of Termination

            (a)   So long as no Specified Default or Lease Event Default set
forth in Section 14.1 or 14.5 below, shall have occurred and be continuing,
Lessee shall have the right upon not less than 90 days' prior written notice at
its option to terminate this Lease during the Base Lease Term, effective only on
a Termination Date occurring after the seventh anniversary of the close of the
calendar year in which occurs the applicable Closing Date, if:

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

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

            (b)   Lessor shall notify Lessee and Mortgagee of Lessor's intention
to sell or retain the Aircraft, as provided in this Section 9, no less than 30
days after Lessee gives Lessor written notice pursuant to Section 9.1(a). Any
failure by Lessor to give such notice of its election shall be deemed to be an
election to sell the Aircraft, as provided in this Section 9.

            (c)   Any termination pursuant to this Section 9 shall become
effective on the date of the sale, if any, pursuant to Section 9.2 or upon the
date of termination and payment by Lessee and Lessor in accordance with Section
9.3 if Lessor elects to retain the Aircraft.

<PAGE>

                                      -24-

      9.2   Election by Lessor to Sell

            9.2.1 Bids; Closing of Sale

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

            9.2.2 Closing of Sale

            (a)   On the proposed Termination Date (i) Lessee shall deliver the
Airframe and Engines or engines constituting part of the Aircraft to the bidder,
if any, which shall have submitted the highest cash bid on or before the date
ten Business Days prior to such Termination Date, in the same manner as if
delivery were made to Lessor pursuant to Section 5 and Annex B and in full
compliance with the terms thereof, and shall duly transfer to Lessor title to
any such engines not owned by Lessor, all in accordance with the terms of
Section 5 and An-

<PAGE>

                                      -25-

nex B, and (ii) Lessor shall simultaneously therewith transfer the Airframe and
Engines or engines to such bidder, in the manner described in Section 4.5,
against cash paid by such bidder to Lessor in the amount of such highest bid and
in the manner and in funds of the type specified in Section 3.3.

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

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

            (ii)  an amount equal to the excess, if any, of the Termination
      Value for the Aircraft, computed as of such Termination Date, over the
      sales price of the Aircraft less any sales commissions or marketing
      expenses for brokers and agents engaged by Lessee or Permitted Sublessee;
      PROVIDED that such commission and expenses shall have been deducted from
      the sales proceeds of the Aircraft; plus

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

            As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent (other than Termination Value) due by Lessee to
Lessor, Mortgagee or the Participants under this Lease, including, without
limitation, (A) Supplemental Rent in respect of Make-Whole Amount, if any,
payable pursuant to Section 2.10(b) of the Trust Indenture in connection with a
prepayment of the Equipment Notes upon such sale and (B) all interest charges
provided for hereunder or under any other Lessee Operative Agreement with
respect to the late payment of any amounts so payable. In addition, Lessee shall
pay all reasonable out-of-pocket fees and expenses incurred by Lessor, Mortgagee
and Owner Participant in connection with such sale and related termination of
this Lease (but excluding any sales commissions or marketing expenses for
brokers and agents engaged by Lessor or Owner Participant in connection with
such sale unless engaged by Lessee on behalf of Lessor).

<PAGE>

                                      -26-

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

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

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

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

            9.2.3 Withdrawal of Notice of Termination

            (a)   Lessee may withdraw any notice given pursuant to Section 9.1
at any time on or before the date ten Business Days prior to the proposed
Termination Date, whereupon this Agreement shall continue in full force and
effect and all of Lessee's obligations shall continue, including, without
limitation, its obligation to pay Rent, in each case, as if the notice under
Section 9.1 shall not have been given and Lessee may give another notice
pursuant to Section 9.1; provided that Lessee shall not be entitled to give more
than four notices pursuant to Section 9.1.

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

<PAGE>

                                      -27-

      9.3   Retention of Aircraft by Lessor

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

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

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

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

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

                  (2)   as provided in Section 3.2.2, interest on the amounts
            specified in the foregoing clause (1) at the Payment Due Rate from
            and including the date on which any such amount was due to the date
            of payment of such amount in full; and

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

<PAGE>

                                      -28-

      penses incurred by Lessor, Mortgagee and Owner Participant in connection
      with such termination and sale;

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

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

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

SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.

      10.1  Event of Loss With Respect to Aircraft

            10.1.1 Notice and Election

            (a)   Upon the occurrence of an Event of Loss with respect to the
Airframe, and any Engine or Engines installed thereon at the time of such Event
of Loss, Lessee shall promptly (and in any event within 15 days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss.
Within 45 days after such occurrence, Lessee shall give Lessor and Mortgagee
written notice of Lessee's election to make payment in respect of such Event of
Loss, as provided in Section 10.1.2, or to replace the Airframe, and any such
Engines, as provided in Section 10.1.3.

            (b)   Any failure by Lessee to give such notice of its election
shall be deemed to be an election of the option set forth in Section 10.1.2. In
addition, Lessee shall not be entitled to elect the option set forth in Section
10.1.3 if, at the time Lessor receives such notice from Lessee, there shall have
occurred and be continuing a Specified Default or Lease Event of Default.

            (c)   For purposes of Section 10.1.2, an Event of Loss with respect
to the Airframe shall be deemed to constitute an Event of Loss with respect to
the Aircraft. For purposes of

<PAGE>

                                      -29-

Section 10.1.3, any Engine not actually suffering an Event of Loss shall not be
required to be replaced.

            10.1.2 Payment of Loss and Termination of Lease

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

            (i)   on or before the Business Day next following the earlier of
      (x) the 180th day following the date of the occurrence of such Event of
      Loss, and (y) no later than the third Business Day following the receipt
      of all insurance proceeds with respect to such occurrence (but in any
      event not earlier than the date of Lessee's election under Section 10.1.1
      to make payment under this Section 10.1.2), Lessee shall pay to Lessor an
      amount equal to the Stipulated Loss Value of the Aircraft as of the Loss
      Payment Date plus (a) all unpaid Basic Rent or Renewal Rent, as the case
      may be, payable in advance and due prior to the Loss Payment Date, plus
      (b) any unpaid Basic Rent or Renewal Rent, as the case may be, payable in
      arrears and due on or before such Loss Payment Date, plus (c) all other
      amounts of Supplemental Rent due on or before the Loss Payment Date and
      any reasonable expenses and costs incurred in connection with such Event
      of Loss by Lessor, the Owner Participant or the Mortgagee (including with
      respect to Make-Whole Amount, if any).

            (ii)  on or before the date required for payment of the amounts
      specified in paragraph (i) above, Lessee shall also pay to Lessor,
      Mortgagee and the other Participants all other amounts due and payable by
      Lessee to Lessor, Mortgagee and the other Participants under this Lease,
      the Participation Agreement or any other Lessee Operative Agreement.

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

<PAGE>

                                      -30-

            10.1.3 Replacement of Airframe and Engines

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

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

      10.2  Event of Loss With Respect to an Engine

            10.2.1 Notice

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

            10.2.2 Replacement of Engine

            Lessee shall, promptly and in any event within 90 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3

<PAGE>

                                      -31-

and as replacement for the Engine with respect to which any Event of Loss
occurred, title to a Replacement Engine free and clear of all Liens other than
Permitted Liens. Such Replacement Engine shall be an engine that is the same or
improved make and model as the Engine to be replaced, and that is suitable for
installation and use on the Airframe, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).

            10.2.3 Engine Exchange

            Upon not less than five (5) Business Days' prior written notice to
Lessor, Lessee may replace any Engine leased hereunder with another engine (the
"Exchanged Engine") meeting the requirements of Section 10.2.2. Such Exchanged
Engine shall be deemed to be a "Replacement Engine" and Lessor and Lessee shall
comply with the provisions of Section 10.3 with regard to the Exchanged Engine
and the Engine so replaced.

      10.3  Conditions to Any Replacement

            10.3.1 Documents

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

            (a)   furnish Lessor with a full warranty bill of sale duly
      conveying to Lessor such Replacement Airframe or Replacement Engine, in
      form and substance reasonably satisfactory to Lessor and cause such
      Replacement Airframe to be duly registered in the name of Lessor pursuant
      to the Act;

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

<PAGE>

                                      -32-

      (and Lessor and Mortgagee shall execute and deliver the same), to be filed
      in such locations as any such party may reasonably request;

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

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

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

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

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

<PAGE>

                                      -33-

      and remaining useful life requirements set forth in Section 10.1.3(b).

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

            10.3.2 Other Obligations

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

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

      10.4  Conveyance to Lessee

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

<PAGE>

                                      -34-

      10.5  Application of Payments

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

            10.5.1 Replacement of Airframe and Engines

            If such amounts are received with respect to the Airframe, and any
Engine installed thereon at the time of such Event of Loss, then depending upon
whether such amounts are above or below the Threshold Amount, such amounts will
be paid over to either Lessor or Lessee, as applicable, in accordance with
paragraph B.1(ii)(A) and (B) of Annex D, as applicable, and upon compliance by
Lessee with the applicable terms of Section 10.1.3 with respect to the Event of
Loss for which such amounts are received, any such amounts not previously paid
to Lessee shall be paid over to, Lessee.

            10.5.2 Loss of Engine

            If such amounts are received with respect to an Engine (other than
an Engine installed on the Airframe at the time such Airframe suffers an Event
of Loss), then depending upon whether such amounts are above or below the
Threshold Amount, such amounts will be paid over to either Lessor or Lessee, as
applicable, in accordance with clauses (ii)(A) and (B) of the second paragraph
of Section B.1. of Annex D, as applicable, and upon compliance by Lessee with
the applicable terms of Section 10.2.2 with respect to the Event of Loss for
which such amounts are received, any such amounts not previously paid to Lessee
shall be paid over to, Lessee.

            10.5.3 Payment of Loss

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

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

<PAGE>

                                      -35-

      spect to Excluded Payments) to the extent necessary to pay in full such
      sum;

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

      10.6  Requisition of Aircraft for Use

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

      10.7  Requisition of an Engine for Use

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

<PAGE>

                                      -36-

      10.8  Application of Payments

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

      10.9  Application of Payments During Existence of a Specified Default or
            Lease Event of Default

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

SECTION 11. INSURANCE

      11.1  Lessee's Obligation to Insure

            Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are

<PAGE>

                                      -37-

hereby incorporated by this reference as if set forth in full herein.

      11.2  Insurance for Own Account

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

      11.3  Indemnification by Government in Lieu of Insurance

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

      11.4  Application of Insurance Proceeds

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

<PAGE>

                                      -38-

      ll.5  Application of Payments During Existence of Specified Default or
            Event of Default

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

SECTION 12. INSPECTION

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

            (b)   Any inspection of the Aircraft hereunder shall be limited to a
visual, walk-around inspection and shall not include the opening of any panels,
bays or other components of the Aircraft, PROVIDED, HOWEVER, that in the event
any such panels, bays or other components shall have already been opened and
continue to remain open at the sole discretion of Lessee or the Permitted
Sublessee, then such inspection may include such opened areas, and no such
inspection shall interfere with Lessee's or any Permitted Sublessee's
maintenance and operation of the Aircraft, Airframe and Engines.

<PAGE>

                                      -39-

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

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

            (e)   Upon prior written request by Owner Participant, Lessee shall
disclose to Owner Participant as soon as practicable any heavy maintenance
inspection of the Aircraft scheduled to take place within the 12-month period
following such request.

            (f)   Upon the request of the Lessor, the Lessee shall provide to
the Lessor, not more frequently than once per calendar year, or, if an Event of
Default has occurred and is continuing, not more frequently than once per
calendar quarter, a written report with respect to the flight hours and cycles
of operation of the Airframe and each Engine during the period since the end of
the period to which the most recent such report related (or, if there has been
no such previous report, since the commencement of the Term) through the last
day of the calendar year, or quarter, as the case may be, most recently ended
prior to the date of the current report.

SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE

      13.1  In General

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

<PAGE>

                                      -40-

      13.2  Merger of Lessee

            13.2.1 In General

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

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

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

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

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

            (e)   Lessee shall have promptly notified Owner Participant of such
merger or consolidation and provided Owner Participant with copies of all
filings and recordings with the SEC in connection therewith.

            13.2.2 Effect of Merger

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

<PAGE>

                                      -41-

any of the obligations, liabilities, covenants or undertakings of Lessee under
the Lessee Operative Agreements.

      13.3  Assignment Security for Lessor's Obligations

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

      13.4  Successor Owner Trustee

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

<PAGE>

                                      -42-

SECTION 14. LEASE EVENTS OF DEFAULT

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

      14.1  Payments

            Lessee shall fail to pay any amount of Basic Rent, Renewal Rent,
Stipulated Loss Value or Termination Value when due and such failure shall
continue for or period in excess of ten (10) Business Days after the same shall
become due; or Lessee shall fail to pay any Supplemental Rent (other than
Stipulated Loss Value or Termination Value) when due and such failure shall
continue for a period in excess of ten (10) Business Days from and after the
date of any written notice to Lessee from Lessor of the failure to make such
payment when due; provided that any such failure to pay any Excluded Payment
shall not constitute a Lease Event of Default until written notice is given by
the Owner Participant to Lessee and Mortgagee that such failure constitutes a
Lease Event of Default and such failure shall have continued for a period in
excess of ten (10) Business Days after such notice.

      14.2  Insurance

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

      14.3  Other Covenants

            Lessee shall fail to observe or perform (or caused to be observed
and performed) in any material respect any other covenant, agreement or
obligation to be observed or performed by it as set forth herein or in any other
Lessee Operative Agreement (other than the covenants, agreements and obligations
set forth in the Tax Indemnity Agreement), and such failure shall continue
unremedied for a period of 30 days from and after the date of written notice
thereof to Lessee from Lessor or Mortgagee, unless such failure is capable of
being corrected and Lessee shall be diligently proceeding to correct such fail-

<PAGE>

                                      -43-

ure, in which case there shall be no Lease Event of Default unless and until
such failure shall continue unremedied for a period of 180 days after receipt of
such notice.

      14.4  Representations and Warranties

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

      14.5  Bankruptcy and Insolvency

            (a)   Lessee shall consent to the appointment of or the taking of
possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition in bankruptcy or a voluntary petition or
an answer seeking reorganization, liquidation or other relief in a case under
any bankruptcy Laws or other insolvency Laws (as in effect at such time), or
Lessee shall seek relief by voluntary petition, answer or consent, under the
provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time) or
Lessee's board of directors shall adopt a resolution authorizing any of the
foregoing; or

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

<PAGE>

                                      -44-

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

SECTION 15. REMEDIES AND WAIVERS

      15.1  Remedies

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

            15.1.1 Return and Repossession

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

            15.1.2 Sale and Use

            Lessor may sell the Airframe and/or any Engine at public or private
sale, at such times and places, and to such Persons (including Lessor, Mortgagee
or any Participant), as Lessor may determine; or Lessor may otherwise dispose
of, hold, use, operate, lease to others or keep idle the Airframe and/or any
Engine, as Lessor, in its sole discretion, may determine, all free and clear of
any rights of Lessee and without any duty to account to Lessee with respect to
such action or inaction or

<PAGE>

                                      -45-

for any proceeds with respect thereto, except as hereinafter set forth in this
Section 15, and except to the extent that such proceeds would constitute, under
applicable Law, a mitigation of Lessor's damages suffered or incurred as a
result of the subject Lease Event of Default. Lessor shall give Lessee at least
15 days prior written notice of the date fixed for any public sale of the
Airframe and/or any Engine or of the date on or after which will occur the
execution of any contract providing for any private sale.

            15.1.3 Certain Liquidated Damages

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

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

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

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

<PAGE>

                                      -46-

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

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

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

            15.1.4 Liquidated Damages Upon Sale

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

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

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

            (c)   if the date of such sale is not a Stipulated Loss Value Date,
      an amount equal to interest on the outstanding principal amount of the
      Equipment Notes at the rate per annum borne thereby from and including the
      Stipu-

<PAGE>

                                      -47-

      lated Loss Value Date used in the foregoing clause (a) for the computation
      of unpaid Rent to the date of such sale; plus

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

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

            15.1.5 Rescission

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

            15.1.6 Other Remedies

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

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

<PAGE>

                                      -48-

      15.2  Limitations Under CRAF

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

      15.3  Right to Perform for Lessee

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

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

            For the purpose of this Section 15 only, the "Fair Market Rental
Value" or the "Fair Market Sales Value" of the Aircraft, Airframe or any Engine,
shall be determined on an "as is, where is" basis and shall take into account
customary brokerage and other out-of-pocket fees and expenses which typi-

<PAGE>

                                      -49-

cally would be incurred in connection with a re-lease or sale of the Aircraft,
Airframe or any Engine. Any such determination shall be made by an Appraiser
selected by Lessor and the costs and expenses associated therewith shall be
borne by Lessee, unless Lessor does not obtain possession of the Aircraft,
Airframe and Engines pursuant to this Section 15, in which case an Appraiser
shall not be appointed and Fair Market Rental Value and Fair Market Sales Value
for purposes of this Section 15 shall be zero.

      15.5  Remedies Cumulative

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

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

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

<PAGE>

                                      -50-

happening or event whatsoever, whether or not similar to any of the foregoing.

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

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

SECTION 17. RENEWAL AND PURCHASE OPTIONS

      17.1 Preliminary Notices

            (a)   At least (i) 180 days prior to the Scheduled Expiration Date,
Lessee may provide written notice to Lessor that Lessee may exercise either the
option to extend the leasing of the Aircraft for the first Renewal Lease Term
pursuant to Section 17.2 or the option to purchase the Aircraft on the Scheduled
Expiration Date and (ii) 180 days prior to the first Renewal Term Expiration
Date, Lessee may, if it has leased the Aircraft during the first Renewal Lease
Term, provide notice to Lessor that Lessee may exercise either the option to
extend the leasing of the Aircraft for the Subsequent Renewal Lease Term
pursuant to Section 17.2, or the option to purchase the Aircraft on the first
Renewal Term Expiration Date pursuant to Section 17.3. Any such notice (a
"Preliminary Notice") shall be revocable.

            (b)   If any such Preliminary Notice is given by Lessee, then Lessee
may provide a further notice specifying which

<PAGE>

                                      -51-

option it intends to elect, with respect to the relevant period, pursuant to
Section 17.2.1 or 17.3.1, as the case may be. If Lessee fails to provide such
further notice, such Preliminary Notice shall be deemed revoked.

      17.2  Renewal Options

            17.2.1 Renewal Notice

            (a)   If Lessee has given a Preliminary Notice and has not revoked
such Preliminary Notice, as specified in Section 17.1, and subject to the terms
and conditions of this Section 17.2, Lessee may exercise its option to extend
the leasing of the Aircraft hereunder until the applicable Renewal Term
Expiration Date, on the same terms, provisions and conditions (except as
contemplated by this Section 17) set forth herein and in the other Lessee
Operative Agreements with respect to the Base Lease Term, by delivery of an
irrevocable notice (a "Renewal Notice") to Lessor not less than (i) 90 days
prior to the Scheduled Expiration Date or a Renewal Term Expiration Date, as
applicable, or (ii) if a Renewal Lease Term of six months or less is then in
effect, 20 days prior to the Renewal Term Expiration Date.

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

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

            (ii)  Any Renewal Notice shall be irrevocable and shall constitute
      an unconditional obligation of Lessee to extend the leasing of the
      Aircraft hereunder for the Renewal Lease Term to which such Renewal Notice
      relates.

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

            17.2.2 Renewal Rent

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

<PAGE>

                                      -52-

PROVIDED, however if the Renewal Lease Term does not end on a Payment Date, the
last Payment Date of such Renewal Lease Term shall include a payment of Renewal
Rent in advance for the remaining period of such Renewal Lease Term following
such Payment Date.

            (b)   The Renewal Rent payable by Lessee on each Payment Date during
the first Renewal Lease Term (such Term to extend for one period only of not
less than 3 months and not more than two (2) years) shall be the lower of (i) an
amount equal to the Renewal Rent Cap and (ii) the Fair Market Rental Value of
the Aircraft for such Renewal Lease Term. The Renewal Rent payable by Lessee on
each Payment Date during the Subsequent Renewal Lease Term (such Term to extend
for one period only of not less than 3 months and not more than two (2) years)
shall be the Fair Market Rental Value of the Aircraft for such Renewal Lease
Term. Any such Fair Market Rental Value shall be determined not more than 35
days after delivery of a Preliminary Notice by mutual agreement of Lessor and
Lessee or, if they shall be unable to agree, by an appraisal in accordance with
Section 17.4.

            17.2.3 Stipulated Loss and Termination Values

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

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

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

<PAGE>

                                      -53-

      17.3  Purchase Option

            17.3.1 Purchase Notice

            (a)   Subject to the terms and conditions of this Section 17.3,
Lessee or its designee may elect to purchase the Aircraft, (A) on any Purchase
Date, at a purchase price equal to the Fair Market Sales Value of the Aircraft,
(B) on the EBO Date at a purchase price equal to the EBO Price or (C) provided
there shall not have occurred and be continuing at the time of purchase a
Specified Default or a Lease Event of Default, at any time following the
occurrence of a Materially Adverse Tax Event at a purchase price equal to the
Fair Market Sales Value of the Aircraft (or, if greater, the Termination Value
thereof), determined as of the date of purchase.

            (b)   Lessee may exercise its option to purchase the Aircraft
pursuant to clause (A), clause (B) or clause (C) of Section 17.3.1(a), by
delivery of an irrevocable notice (a "Purchase Notice") to Lessor not less than
(i) in the case of Clause A, 90 days prior to the Purchase Date specified in
such Purchase Notice, or (ii) in the case of Clause A, if a Renewal Lease Term
of six months or less is then in effect, 20 days prior to the Purchase Date
specified in such Purchase Notice, or (iii) in the case of Clause (B) of
Sections 17.3.1(a) not less than 60 days prior to the EBO Date or (iv) in the
case of Clause (C) of Section 17.3.1(a) at any time following a Materially
Adverse Tax Event.

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

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

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

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

<PAGE>

                                      -54-

            (iv)  The purchase option herein specified may be effected by the
      acquisition by Lessee of the Owner Participant's beneficial interest in
      the Aircraft.

            17.3.2 Determination of Fair Market Sales Value

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

            17.3.3 Title

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

      17.4 Appraisals

            Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this Section 17,
Lessee and Lessor shall within 7 days after the expiration of the 35-day period
referred to in Sections 17.2.2(b), 17.2.3.(c) and 17.3.2 appoint a mutually
satisfactory Appraiser to conduct such appraisal. If Lessee and Lessor fail to
agree upon a satisfactory Appraiser then each shall promptly appoint a separate
Appraiser and such Appraisers shall jointly determine such amount. If either
Lessee or Lessor fails to so appoint an Appraiser, the determination of the
single Appraiser appointed shall be final. If two Appraisers are appointed and
within 7 days after the appointment of the latter of such two Appraisers, they
cannot agree upon such amount, such two Appraisers shall, within 8 days after
such latter appointment, appoint a third Appraiser and such amount shall be
determined by such three Appraisers, who shall make their separate appraisals
within 7 days following the appointment of the third Appraiser, and any
determination so made shall be conclusive and binding upon Lessor and Lessee. If
no such third Appraiser is appointed within such 8-day period, either Lessor or
Lessee may apply to the American Arbitration Association to make such
appointment, and both parties shall be bound by such appointment. If three
Appraisers are appointed and the difference between the determination which is
farther

<PAGE>

                                      -55-

from the middle determination and the middle determination is more than 125% of
the difference between the middle determination and the third determination,
then such farther determination shall be excluded, the remaining two
determinations shall be averaged and such average shall be final and binding
upon Lessor and Lessee. Otherwise, the average of all three determinations shall
be final and binding upon Lessor and Lessee. The fees and expenses of all such
Appraisers and such appraisal procedure shall be borne equally by Lessee and
Lessor, provided that if Lessee elects not to renew this Lease or purchase the
Aircraft following the conclusion of such appraisal, Lessee shall pay all
expenses of such appraisal. The foregoing appraisal procedure shall in any event
be completed no less than 97 days prior to the Scheduled Expiration Date or
Renewal Term Expiration Date, or, if a Renewal Lease Term of six months or less
is then in effect, no less than 35 days before the end of such Renewal Lease
Term. It is understood that if such appraisal process shall not have been
completed by such time due to any delays or lateness caused by Lessor with
respect to the time constraints set forth in this Section 17, then the notice
requirements for the delivery by Lessee of any Renewal Notice under Section
17.2.1(a) or any Purchase Notice under Section 17.3.1(b) shall each be reduced
from their present number by the same number of days as the completion of the
appraisal procedure shall have been delayed in each case past such 97-day time
limit.

SECTION 18. MISCELLANEOUS

      18.1  Amendments

            No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by Lessor and Lessee. Each such
amendment, supplement, waiver, modification, discharge, termination or variance
shall be effective only in the specific instance and for the specific purpose
for which it is given. No provision of this Agreement shall be varied or
contradicted by oral communication, course of dealing or perform-

<PAGE>

                                      -56-

ance or other manner not set forth in an agreement, document or instrument in
writing and signed by Lessor and Lessee.

      18.2  Severability

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

      18.3  Third-Party Beneficiary

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

      18.4  Reproduction of Documents

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

<PAGE>

                                      -57-

      18.5  Counterparts

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

      18.6  Notices

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

      18.7  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE

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

            (b)   EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND
SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION,

<PAGE>

                                      -58-

SUIT OR PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT.

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

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

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

      18.8  No Waiver

            No failure on the part of Lessor to exercise, and no delay by Lessor
in exercising, any of its rights, powers, remedies or privileges under this
Agreement or provided at Law, in equity or otherwise shall impair, prejudice or
constitute a waiver of any such right, power, remedy or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances

<PAGE>

                                      -59-

or constitute a waiver of the rights of Lessor to any other or further action in
any circumstances without notice or demand.

      18.9  Entire Agreement

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

                     [This space intentionally left blank.]

<PAGE>

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

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

                                       By: /s/ Greg A. Hawley
                                           -------------------------------------
                                           Name:  Greg A. Hawley
                                           Title: Vice President

                                       ATLAS AIR, INC.,
                                          as Lessee

                                       By: _____________________________________
                                           Name:
                                           Title:

<PAGE>

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

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

                                       By: _____________________________________
                                           Name:
                                           Title:

                                       ATLAS AIR, INC.,
                                          as Lessee

                                       By: /s/ Stephen C. Nevin
                                           -------------------------------------
                                           Name:  Stephen C. Nevin
                                           Title: Vice President - Finance &
                                                  Chief Financial Officer

<PAGE>

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

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

                                       By: /s/ Greg A. Hawley
                                           -------------------------------------
                                           Name:  Greg A. Hawley
                                           Title: Vice President

                                       ATLAS AIR, INC.,
                                          as Lessee

                                       By: _____________________________________
                                           Name:
                                           Title:

            Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this 29th day of July, 1998.

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

                                       By: _____________________________________
                                           Name:
                                           Title:

<PAGE>

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

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

                                       By: _____________________________________
                                           Name:
                                           Title:

                                       ATLAS AIR, INC.,
                                          as Lessee

                                       By: /s/ Stephen C. Nevin
                                           -------------------------------------
                                           Name:  Stephen C. Nevin
                                           Title: Vice President - Finance &
                                                  Chief Financial Officer

            Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this 29th day of July, 1998.

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

                                       By: _____________________________________
                                           Name:
                                           Title:

<PAGE>

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

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

                                       By: _____________________________________
                                           Name:
                                           Title:

                                       ATLAS AIR, INC.,
                                          as Lessee

                                       By: _____________________________________
                                           Name:
                                           Title:

            Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this 29th day of July, 1998.

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

                                       By: /s/ Patricia A. Evans
                                           -------------------------------------
                                           Name:  Patricia A. Evans
                                           Title: Financial Services Officer

<PAGE>

                                                    Exhibit A - Lease Supplement
                                                                 Lease Agreement

                             LEASE SUPPLEMENT NO.___

            LEASE SUPPLEMENT No. __, dated ________, 199_, between First
Security Bank, National Association, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement
_____, dated as of ___________, 1998, with the Owner Participant named therein
(such Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and ATLAS AIR, INC., a Delaware corporation, as Lessee ("Lessee").

            Lessor and Lessee have heretofore entered into that certain Lease
Agreement______,  dated  as of  ______________,  relating  to one  Boeing  Model
__________  aircraft  (herein  called the "Lease" and the defined  terms therein
being  hereinafter  used with the same  meanings).  The Lease  provides  for the
execution and delivery of this Lease  Supplement  for the purpose of leasing the
Airframe and Engines  under the Lease as and when  delivered by Lessor to Lessee
in accordance with the terms thereof.

            The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease to which this Lease Supplement is attached and of which
this Lease Supplement is a part, is being filed for recordation on the date
hereof with the Federal Aviation Administration as one document.

            NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:

            1.    Lessee has been duly authorized by Lessor to accept, and does
hereby irrevocably accept on behalf of Lessor delivery of the Aircraft from
Airframe Manufacturer under, and for all purposes of, the Aircraft Bill of Sale,
the Participation Agreement and the Purchase Agreement Assignment.

            2.    Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the following
described Boeing 747-47UF aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:

            (i)   Airframe: U.S. Registration No. N491MC; manufacturer's serial
      no. 29252; and

<PAGE>

                                       -2-

            (ii)  Engines: four (4) GE CF 6-80C2B1F engines bearing,
      respectively, manufacturer's serial nos. 704-692, 704-693, 704-694 and
      704-695 (each of which engines has 750 or more rated takeoff horsepower or
      the equivalent of such horsepower).

            3.    The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.

            4.    Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Lessee Operative Agreements.

            5.    All of the terms and provisions of this Lease Supplement are
hereby incorporated by reference in the Lease to the same extent as if fully set
forth therein.

            6.    This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

            7.    To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no security interest in this Lease
Supplement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by the Mortgagee on the
signature page thereof.

                     [This space intentionally left blank.]

<PAGE>

                                       -3-

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

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

                                                By: ____________________________
                                                    Name:
                                                    Title:

                                                ATLAS AIR, INC.,
                                                  as Lessee

                                                By: ____________________________
                                                    Name:
                                                    Title:

<PAGE>

                                       -4-

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

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

                                                By: ____________________________
                                                    Name:
                                                    Title:

                                                ATLAS AIR, INC.,
                                                  as Lessee

                                                By: ____________________________
                                                    Name:
                                                    Title:

            Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ___ day of ___________, ____________.

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

                                                By: ____________________________
                                                    Name:
                                                    Title:

<PAGE>

                                                                        (FINOVA)

                                     ANNEX A
                          TO LEASE FINANCING AGREEMENTS

                                   DEFINITIONS

GENERAL PROVISIONS

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

            (i)   each of "Lessee," "Lessor," "Loan Participant," "Owner
      Trustee," "Owner Participant," "Mortgagee," "Note Holder" or any other
      person includes, without prejudice to the provisions of any Operative
      Agreement, any successor in interest to it and any permitted transferee,
      permitted purchaser or permitted assignee of it;

            (ii)  words importing the plural include the singular and words
      importing the singular include the plural;

            (iii) any agreement, instrument or document, or any annex, schedule
      or exhibit thereto, or any other part thereof, includes, without prejudice
      to the provisions of any Operative Agreement, that agreement, instrument
      or document, or annex, schedule or exhibit, or part, respectively, as
      amended, modified or supplemented from time to time in accordance with its
      terms and in accordance with the Operative Agreements, and any agreement,
      instrument or document entered into in substitution or replacement
      therefor (including, without limitation, in the case of each Pass Through
      Trust Agreement, the "Related Pass Through Trust Agreement" as defined
      therein);

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

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

<PAGE>

                                       -2-

            (vi)  the words "including," "including, without limitation,"
      "including, but not limited to," and terms or phrases of similar import
      when used in any Operative Agreement, with respect to any matter or thing,
      mean including, without limitation, such matter or thing; and

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

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

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

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

DEFINED TERMS

            "ACT" means part A of subtitle VII of title 49, United States Code.

            "ACMI CONTRACT" means (i) any Wet Lease entered into by Lessee
pursuant to which Lessee furnishes the aircraft, crew, maintenance and insurance
and the other party to such contract bears all other operating expenses and (ii)
any similar Wet Lease in which the other party to such contract provides the
flight crew, all substantially in accordance with Lessee's historical practices.

            "ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or
Mortgagee, as the case may be, actual knowledge of a responsible officer in the
Corporate Trust Department or the Corporate Trust Office, respectively, and (b)
as it applies to Owner Participant or Lessee, actual knowledge of a Vice
President or more senior officer of Owner Participant or Lessee, respectively,
or any other officer of Owner Participant or Lessee, respectively, having
responsibility for the transactions

<PAGE>

                                       -3-

contemplated by the Operative Agreements; PROVIDED that each of Lessee, Owner
Participant, Owner Trustee and Mortgagee shall be deemed to have "Actual
Knowledge" of any matter as to which it has received notice from Lessee, Owner
Participant, any Note Holder, Owner Trustee or Mortgagee, such notice having
been given pursuant to Section 15.7 of the Participation Agreement.

            "ADDITIONAL INSURED" is defined in Section D of Annex D to the
Lease.

            "ADVERSE CHANGE IN TAX LAW" means (a) for Lessee, a Change in Tax
Law that Lessee regards as one that could adversely affect the economic
consequences of the transactions contemplated by the Participation Agreement and
the other Operative Agreements that are anticipated by Lessee or (b) for Owner
Participant, a Change in Tax Law that, in the reasonable judgment of Owner
Participant, would adversely affect its Net Economic Return or that would
adversely affect any of the following tax assumptions:

            (i)   For federal income tax purposes, the Lease will be a "true"
      lease for purposes of the Code and Owner Participant will be treated as
      the owner of the Aircraft and Lessee will be treated as the lessee
      thereof;

            (ii)  For federal income tax purposes, Owner Participant will be
      entitled to depreciation or cost recovery deductions with respect to
      Lessor' s Cost of the Aircraft including amortization of Transaction
      Expenses; and

            (iii) For federal income tax purposes, Owner Participant will be
      entitled to deductions for interest payments on the Equipment Notes.

            "AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.

            "AIRCRAFT" means, collectively, the Airframe and Engines.

<PAGE>

                                       -4-

            "AIRCRAFT BILL OF SALE" means the full warranty bill of sale
covering the Aircraft delivered by Airframe Manufacturer to Owner Trustee on the
Delivery Date.

            "AIRCRAFT DOCUMENTS" means all technical data, manuals and log
books, and all inspection, modification and overhaul records and other service,
repair, maintenance and technical records that are required by the FAA (or the
relevant Aviation Authority), to be maintained with respect to the Aircraft,
Airframe, Engines or Parts; and such term shall include all additions, renewals,
revisions and replacements of any such materials from time to time made, or
required to be made, by the FAA (or other Aviation Authority) regulations, and
in each case in whatever form and by whatever means, or medium (including,
without limitation, microfiche, microfilm, paper or computer disk) such
materials may be maintained or retained by or on behalf of Lessee (PROVIDED,
that all such materials shall be maintained in, or are contemporaneously
translated into, the English language).

            "AIRFRAME" means (a) the aircraft (excluding Engines or engines from
time to time installed thereon) manufactured by Airframe Manufacturer and
identified by Airframe Manufacturer's model number, United States registration
number and Airframe Manufacturer's serial number set forth in Lease Supplement
No. 1 and any Replacement Airframe and (b) any and all Parts incorporated or
installed in or attached or appurtenant to such airframe, and any and all Parts
removed from such airframe, unless title to such Parts shall not be vested in
Lessor in accordance with Section 8.1 and Annex C of the Lease. Upon
substitution of a Replacement Airframe under and in accordance with the Lease,
such Replacement Airframe shall become subject to the Lease and shall be the
"Airframe" for all purposes of the Lease and the other Operative Agreements and
thereupon the Airframe for which the substitution is made shall no longer be
subject to the Lease, and such replaced Airframe shall cease to be the
"Airframe."

            "AIRFRAME MANUFACTURER" means The Boeing Company, a Delaware
corporation.

            "AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as
of any Payment Date, the amount determined by multiplying the percentage set
forth opposite such Payment Date on the Amortization Schedule by the Original
Amount of such Equipment Note.

<PAGE>

                                       -5-

            "AMORTIZATION SCHEDULE" means, with respect to each Equipment Note,
the amortization schedule for such Equipment Note delivered pursuant to Section
2.02 of the Trust Indenture.

            "APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.

            "AVERAGE LIFE DATE" for any Equipment Note shall be the date which
follows the time of determination by a period equal to the Remaining Weighted
Average Life of such Equipment Note. "Remaining Weighted Average Life" on a
given date with respect to any Equipment Note shall be the number of days equal
to the quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining scheduled payment
of principal of such Equipment Note by (ii) the number of days from and
including such determination date to but excluding the date on which such
payment of principal is scheduled to be made, by (b) the then outstanding
principal amount of such Equipment Note.

            "AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted
to be, and is, registered with any other Government Entity under and in
accordance with Section 7.1.2 of the Lease, such other Government Entity.

            "BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.

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

            "BASIC RENT" means the rent payable for the Aircraft pursuant to
Section 3.2.1(a) of the Lease.

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

<PAGE>

                                       -6-

            "BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of
Sale.

            "BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required by law to close in New
York, New York, Denver, Colorado, Salt Lake City, Utah, Wilmington, Delaware, or
Chicago, Illinois.

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

            "CHANGE IN TAX LAW" means any amendment, modification, addition or
change in or to the provisions of the Code, any other federal tax statutes, the
Treasury Regulations promulgated thereunder, the Internal Revenue Service
Revenue Rulings, Revenue Procedures or other administrative or judicial
interpretations of the Code or the federal tax statutes that affects the tax
assumptions set forth in the Tax Indemnity Agreement or otherwise affects Owner
Participant's anticipated Net Economic Return.

            "CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of
the Act and in the FAA Regulations.

            "CLASS A PASS THROUGH TRUST" means the Atlas Air Pass Through Trust
1998-1A.

            "CLASS B PASS THROUGH TRUST" means the Atlas Air Pass Through Trust
1998-1B.

            "CLASS C PASS THROUGH TRUST" means the Atlas Air Pass Through Trust
1998-1C.

<PAGE>

                                       -7-

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

            "CLOSING DATE" means the date on which the Closing occurs.

            "CODE" means the Internal Revenue Code of 1986, as amended;
PROVIDED, that when used in relation to a Plan, "Code" shall mean the Internal
Revenue Code of 1986 and any regulations and rulings issued thereunder, all as
amended and in effect from time to time.

            "COMMENCEMENT DATE" is defined in Schedule 1 to the Lease.

            "COMMITMENT" means, for any Participant, the amount of its
participation in the payment of Lessor's Cost.

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

            "CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement
dated as of even date with the Participation Agreement, of Airframe
Manufacturer.

            "CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.

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

            "CORPORATE TRUST OFFICE" means the corporate trust administration
office of WTC located at One Rodney Square, 1100 North Market Street,
Wilmington, Delaware 19890 or, in the case of any replacement Mortgagee, the
principal office of Mortgagee located at Mortgagee's address for notices under
the Participation Agreement or such other office at which Mortgagee's corporate
trust business shall be administered which Mortgagee shall have specified by
notice in writing to Lessee, Owner Trustee and each Note Holder.

<PAGE>

                                       -8-

            "CRAF" means the Civil Reserve Air Fleet Program established
pursuant to 10 U.S.C. Section 9511-13 or any similar substitute program.

            "CUT-OFF DATE" is defined in Section 1.01 of the Pass Through Trust
Agreements.

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

            "DEBT RATE" means, with respect to (i) any Series, the rate per
annum specified for such Series under the heading "Interest Rate" in Schedule I
to the Trust Indenture and (ii) any other purpose, with respect to any period,
the weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.

            "DEFAULT" means any event or condition that with the giving of
notice or the lapse of time or both would become an Event of Default.

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

            "DELIVERY DATE" means the Business Day specified in Lease Supplement
No. 1 as the date on which, among other things, the Aircraft is delivered to and
accepted by Lessee under the Lease and the Closing occurs.

            "DELIVERY PERIOD TERMINATION DATE" is defined in Section l(b) of the
Note Purchase Agreement.

            "DEPOSIT AGREEMENT" means each of the three Deposit Agreements
between the Depositary and the Escrow Agent, dated as of the Issuance Date, each
of which relates to one of the Pass Through Trusts, PROVIDED that, for purposes
of any obligation of Lessee, no amendment, modification or supplement to, or
substitution or replacement of, any such Deposit Agreement shall be effective
unless consented to by Lessee.

<PAGE>

                                       -9-

            "DEPOSITARY" means ABN-AMRO Bank N.V., acting through its Chicago
Branch, as Depositary under each Deposit Agreement.

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

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

            "EBO DATE" is defined in Schedule 1 to the Lease.

            "EBO PRICE" is defined in Schedule 1 to the Lease.

            "ENFORCEMENT DATE" is defined in Section 4.03 of the Trust
Indenture.

            "ENGINE" means (a) each of the engines manufactured by Engine
Manufacturer and identified by Engine Manufacturer's model number and Engine
Manufacturer's serial number set forth in Lease Supplement No. 1 and originally
installed on the Air-frame on delivery thereof pursuant to the Lease, and any
Replacement Engine, in any case whether or not from time to time installed on
such Airframe or installed on any other airframe or aircraft, and (b) any and
all Parts incorporated or installed in or attached or appurtenant to such
engine, and any and all Parts removed from such engine, unless title to such
Parts shall not be vested in Lessor in accordance with Section 8.1 and Annex C
of the Lease. Upon substitution of a Replacement Engine under and in accordance
with the Lease, such Replacement Engine shall become subject to the Lease and
shall be an "Engine" for all purposes of the Lease and the other Operative
Agreements and thereupon the Engine for which the substitution is made shall no
longer be subject to the Lease, and such replaced Engine shall cease to be an
"Engine."

            "ENGINE CONSENT AND AGREEMENT" means the Engine Manufacturer Consent
and Agreement dated as of even date with the Participation Agreement, of Engine
Manufacturer.

            "ENGINE MANUFACTURER" means General Electric Company, a New York
corporation.

            "EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.

            "EQUIPMENT NOTES" means and includes any equipment notes issued
under the Trust Indenture in the form specified in

<PAGE>

                                      -10-

Section 2.01 thereof (as such form may be varied pursuant to the terms of the
Trust Indenture) and any Equipment Note issued under the Trust Indenture in
exchange for or replacement of any Equipment Note.

            "ERISA" means the Employee Retirement Income Security Act of 1974
and any regulations and rulings issued thereunder all as amended and in effect
from time to time.

            "ESCROW AGENT" means First Security Bank, National Association,
as Escrow Agent under each of the Escrow Agreements.

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

            "EVENT OF DEFAULT" is defined in Section 4.02 of the Trust
Indenture.

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

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

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

            (c)   any theft, hijacking or disappearance of such property for a
      period of 180 consecutive days or more;

            (d)   any seizure, condemnation, confiscation, taking or requisition
      of title to or use of such property (other than a requisition of use by
      the government of the United

<PAGE>

                                      -11-

      States) for a period exceeding 180 consecutive days or, if earlier, at the
      end of the Term;

            (e)   any seizure, condemnation, confiscation, taking or requisition
      of use of such property by the government of the United States that
      continues until the 30th day after the last day of the Term, PROVIDED that
      no such Event of Loss shall exist if Lessor shall have elected not to
      treat such event as an Event of Loss pursuant to Section 10.6 of the
      Lease; and

            (f)   as a result of any law, rule, regulation, order or other
      action by the Aviation Authority or by any Government Entity of the
      government of registry of the Aircraft or by any Government Entity
      otherwise having jurisdiction over the operation or use of the Aircraft,
      the use of such property in the normal course of Lessee's business of
      cargo air transportation is prohibited for a period of 180 consecutive
      days, unless Lessee, prior to the expiration of such 180 day period, shall
      have undertaken and shall be diligently carrying forward such steps as may
      be necessary or desirable to permit the normal use of such property by
      Lessee and such normal use shall have been resumed prior to the expiration
      of a period of two consecutive years (or beyond the end of the Term),
      PROVIDED that no Event of Loss shall be deemed to have occurred after the
      expiration of such two-year period if (A) such prohibition has been
      applicable to Lessee's entire U.S. fleet of such property and (B) prior to
      the expiration of such two-year period, Lessee shall have conformed at
      least one Boeing 747-47UFF aircraft (but not necessarily an Aircraft) to
      the requirements of any such law, rule, regulation, order or other action
      and commenced regular commercial use of the same in such jurisdiction and
      (C) Lessee shall be diligently carrying forward, in a manner which does
      not discriminate against such property in so conforming such property,
      steps which are necessary or desirable to permit the normal use of the
      Aircraft by Lessee and such normal use shall have resumed prior to the
      expiration of a period of three years or such use shall be prohibited at
      the expiration of the Term.

            "EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by
Lessee to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Sections 9
and 11 of the Participation Agreement or any corresponding pay-

<PAGE>

                                      -12-

ments under the Lease, (ii) proceeds of public liability insurance paid or
payable as a result of insurance claims made, or losses suffered, by Owner
Trustee in its individual capacity or by Owner Participant, that are payable
directly to Owner Trustee in its individual capacity, or Owner Participant,
respectively, for their own account, (iii) proceeds of insurance maintained with
respect to the Aircraft by Owner Participant or any Affiliate thereof for its or
their own account or benefit (whether directly or through Owner Trustee) and
permitted under Section 11.2 of the Lease, (iv) all payments required to be made
under the Tax Indemnity Agreement by Lessee whether or not denominated as
Supplemental Rent, (v) any Transaction Expenses paid or payable by the Lessee to
the Owner Trustee (to the extent for its sole benefit) or the Owner Participant
pursuant to the Lease or the Participation Agreement, (vi) any amount payable to
the Owner Participant by any transferee as the purchase price of the Owner
Participant's interest in the Trust Estate, (vii) any interest that pursuant to
the Operative Agreements may from time to time accrue in respect of any of the
amounts described in clauses (i) through (vi) above, (viii) any right to
enforce, against the primary obligor or any guarantor or similar party, the
payment of any amount described in clauses (i) through (vii) above (PROVIDED,
that the rights referred to in this clause (viii) shall not be deemed to include
the exercise of any remedies provided for in the Lease other than the right to
sue for specific performance of any covenant to make such payment or to sue for
damages in respect of the breach of any such covenant) and (ix) any right to
exercise any election or option or make any decision or determination, or to
give or receive any notice, consent, waiver or approval, or to take any other
action in respect of, but in each case, only to the extent relating to, any
Excluded Payments.

            "EXCESS AMOUNT" has the meaning specified in Section 2.03(b) of the
Indenture.

            "EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).

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

<PAGE>

                                      -13-

            "FAA BILL OF SALE" means a bill of sale for the Aircraft on AC Form
8050-2 (or such other form as may be approved by the FAA) delivered to Owner
Trustee on the Delivery Date by Airframe Manufacturer.

            "FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the
Trust Indenture, the Trust Agreement, the initial Trust Indenture Supplement,
the FAA Bill of Sale and an application for registration of the Aircraft with
the FAA in the name of Owner Trustee.

            "FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.

            "FAIR MARKET RENTAL VALUE" means the fair market rental value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made semi-annually, and (c) the Aircraft would be leased during
any such Renewal Lease Term on the same terms and conditions as are set forth in
the Lease with respect to the Base Lease Term.

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

            "FINANCING STATEMENTS" means, collectively, UCC-1 (and, where
appropriate, UCC-3) financing statements (a) covering the Trust Indenture
Estate, by Owner Trustee, as debtor, showing Mortgagee as secured party, for
filing in Utah and each other jurisdiction that, in the opinion of Mortgagee,
is necessary to perfect its Lien on the Trust Indenture Estate and (b) covering
the Lease and the Aircraft, as a precautionary matter, by Lessee, as lessee,
showing Owner Trustee as lessor and Mortgagee as assignee of Owner Trustee, for
filing in Colo-

<PAGE>

                                      -14-

rado and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.

            "FIRST SECURITY" means First Security Bank, a national banking
association, not in its capacity as Owner Trustee under the Trust Agreement, but
in its individual capacity.

            "FITCH" means Fitch IBCA, Inc.

            "FUNDING DATE" has the meaning specified in Section 1(b) of the Note
Purchase Agreement.

            "GAAP" means generally accepted accounting principles as set forth
in the statements of financial accounting standards issued by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, as such principles may at any time or from time to time be varied
by any applicable financial accounting rules or regulations issued by the SEC
and, with respect to any person, shall mean such principles applied on a basis
consistent with prior periods except as may be disclosed in such person's
financial statements.

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

            "GTA" means the General Terms Agreement as defined in the Purchase
Agreement Assignment.

            "INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC,
Pass Through Trustee, Subordination Agent and Mortgagee, (iii) each separate or
additional trustee appointed pursuant to the Trust Agreement or the Trust
Indenture, (iv) each Participant, (v) the Trust Estate and the Trust Indenture
Estate, (vi) each Affiliate of the persons described in clauses (i) through
(iv), inclusive, (vii) the respective directors, officers, employees, agents and
servants of each of the persons described in clauses (i) through (iv) inclusive
and in clause (vi), (viii) the successors and permitted assigns of the persons
described in clauses (i) through (iv), inclusive, and in clauses (vi) and (vii)
and (ix) the Pass Through Indemnitees;

<PAGE>

                                      -15-

PROVIDED THAT the Pass Through Indemnitees are Indemnitees only for purposes of
Section 9.1 of the Participation Agreement. If any Indemnitee is Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of either
thereof, such Person shall be an Indemnitee only in its capacity as Owner
Participant, Loan Participant or Note Holder.

            "INDENTURE AGREEMENTS" means the Participation Agreement, the Lease,
the Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Engine Consent and Agreement, the Bills of Sale, each Permitted
Sublease and any other contract, agreement or instrument from time to time
assigned or pledged under the Trust Indenture.

            "INDENTURE DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.

            "INDENTURE EVENT OF DEFAULT" means any one or more of the
conditions, circumstances, acts or events set forth in Section 4.02 of the
Trust Indenture.

            "INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each
separate or additional trustee appointed pursuant to the Trust Indenture, (iii)
the Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through
Trustee, (vi) the Paying Agent, (vii) the Escrow Agent and (viii) each of the
respective directors, officers, employees, agents and servants of each of the
persons described in clauses (i) through (vii) inclusive above.

            "INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Liquidity Providers and the
Subordination Agent, dated as of the Issuance Date, PROVIDED that, for purposes
of any obligation of Lessee, no amendment, modification or supplement to, or
substitution or replacement of, such Intercreditor Agreement shall be effective
unless consented to by Lessee.

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

            "ISSUANCE DATE" means February 9, 1998.

            "LAW" means (a) any constitution, treaty, statute, law, decree,
regulation, order, rule or directive of any Gov-

<PAGE>

                                      -16-

ernment Entity, and (b) any judicial or administrative interpretation or
application of, or decision under, any of the foregoing.

            "LEASE" or "LEASE AGREEMENT" means the Lease Agreement, dated as of
even date with the Participation Agreement, between Owner Trustee and Lessee.

            "LEASE DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would constitute a
Lease Event of Default.

            "LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.

            "LEASE SUPPLEMENT" means a supplement to the Lease, in the form of
Exhibit A to the Lease.

            "LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated
the Delivery Date.

            "LESSEE" means Atlas Air, Inc., a Delaware corporation.

            "LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the
Lease, Lease Supplement No. 1, the Tax Indemnity Agreement, the Purchase
Agreement Assignment and each other agreement between Lessee and any other party
to the Participation Agreement, relating to the Transactions, delivered on the
Delivery Date.

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

            "LESSEE'S ADVISOR" is defined in Schedule 3 to the Participation
Agreement.

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

<PAGE>

                                      -17-

            "LESSOR LIEN" means, with respect to any person and in respect of
any property (including, without limitation, the Trust Estate, the Trust
Indenture Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents)
or any payments, any Lien on such property or payments which (a) arises from
claims against such person (if such person is a trustee, whether in its
individual capacity or in its capacity as a trustee) not related to any of the
transactions contemplated by the Operative Agreements, (b) results from acts or
omissions of such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) in violation of such person's
obligations under any of the terms of the Operative Agreements, or not related
to the transactions contemplated by the Operative Agreements, (c) is imposed as
a result of Taxes against such person (if such person is a trustee, whether in
its individual capacity or in its capacity as a trustee) or any of its
Affiliates not required to be indemnified by Lessee under the Participation
Agreement, or (d) claims against such person arising out of any transfer by such
person of its interest in the Aircraft, the Trust Estate or the Operative
Agreements, other than a Transfer permitted by the terms of the Operative
Agreements or pursuant to the exercise of remedies set forth in Section 15 of
the Lease.

            "LESSOR'S COST" means the aggregate of the amounts paid by Owner
Trustee to Airframe Manufacturer and Lessee to purchase the Aircraft pursuant to
the Purchase Agreement Assignment and the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.

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

            "LIQUIDITY FACILITIES" means (i) the Revolving Credit Agreement
between the Subordination Agent, as borrower, and ABN-AMRO Bank, N.V., Chicago
Branch, with respect to the Class A Pass Through Trust and (ii) the Revolving
Credit Agreement between the Subordination Agent, as borrower, and Morgan
Stanley Capital Services, Inc. with respect to the Class B Pass Through Trust
and the Class C Pass Through Trust, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.

            "LIQUIDITY PROVIDER" means (i) ABN-AMRO Bank, N.V., Chicago Branch,
as the Class A Liquidity Provider, and

<PAGE>

                                      -18-

(ii) Morgan Stanley Capital Services, Inc. as the Class B Liquidity Provider and
the Class C Liquidity Provider (as such terms are defined in the Intercreditor
Agreement) under the respective Liquidity Facilities, or any successor thereto.

            "LOAN PARTICIPANTS" mean, until the Closing shall have been
consummated, the Pass Through Trustees, and after the Closing shall have been
consummated, each Note Holder.

            "LOSS PAYMENT DATE" means the date on which payment is due pursuant
to Section 10.1.2(a)(i) of the Lease.

            "MAINTENANCE PROGRAM" is defined in Annex C to the Lease.

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

            "MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an
amount (as determined by an independent investment banker of national standing)
equal to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a semiannual basis on each Payment Date
(assuming a 360-day year of twelve 30-day months) using a discount rate equal to
the Treasury Yield over (b) the outstanding principal amount of such Equipment
Note plus accrued interest to the date of determination. For purposes of
determining the Make-Whole Amount, "Treasury Yield" means, at the date of
determination with respect to any Equipment Note, the interest rate (expressed
as a decimal and, in the case of United States Treasury bills, converted to a
bond equivalent yield) determined to be the per annum rate equal to

<PAGE>

                                      -19-

the semi-annual yield to maturity for United States Treasury securities maturing
on the Average Life Date of such Equipment Note and trading in the public
securities markets either as determined by interpolation between the most recent
weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.

            "MANUFACTURER'S PURCHASE PRICE" means the amount required to be paid
to the Airframe Manufacturer to purchase the Aircraft pursuant to the Purchase
Agreement Assignment.

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

            "MATERIALLY ADVERSE TAX EVENT" means any event (other than excessive
foreign usage of the Aircraft) that makes it more likely than not that the
Lessee will be required to indemnify any Indemnitee for Taxes under any of the
Operative Agreements or the Owner Participant or any Tax Indemnitee under the
Tax Indemnity Agreement, or both (but not for any loss of MACRS Deductions (as
defined in the Tax Indemnity Agreement) as a result of foreign use, subleasing
or reregistration of the Aircraft prior to the end of the Tax Attribute Period)
(the determination of whether such event makes the foregoing more likely than
not to be based upon a written opinion of independent tax counsel selected and
compensated by Lessee and reasonably acceptable to Owner Participant to that
effect, which opinion shall be addressed and delivered to both Lessee and Owner
Par-

<PAGE>

                                      -20-

ticipant), provided that (i) the estimated aggregate of such indemnity payments
(computed as a hypothetical adjustment of Basic Rent or, if applicable, Renewal
Rent) over the then-remaining Term is equal to at least 5% of Basic Rent (and,
if applicable, Renewal Rent) payable over the remaining Term, and (ii) future
payments of the Taxes giving rise to the indemnity or indemnities will not be
required if the Lessee purchases the Aircraft.

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

            "MOODY'S" means Moody's Investors Service, Inc.

            "MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust
Indenture.

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

            "MORTGAGEE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Indenture and each other agreement between Mortgagee and
any other party to the Participation Agreement, relating to the Transactions,
delivered on the Delivery Date.

            "MORTGAGEE EVENT" means (i) in the event of a reorganization
proceeding involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the
trustee in such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assuming such obligations, such trustee or the
Lessee ceasing to perform such obligations with the result that the Continuous
Stay Period comes to an end or (ii) either the Equipment Notes shall have become
due and payable pursuant to Section 4.04(b) of the Trust Indenture or Mortgagee
has taken action or notified Owner Trustee that it intends to take action to
foreclose the Lien of the Trust Indenture or otherwise commence the exercise of
any repossessory remedy in accordance with Section 4.04(a) of the Trust
Indenture.

            "NET ECONOMIC RETURN" means the Owner Participant's net after-tax
yield utilizing the multiple investment sinking fund method of analysis and
aggregate net after-tax cash flow,

<PAGE>

                                      -21-

computed on the basis of the same methodology and assumptions as were utilized
by the initial Owner Participant in determining Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages, as of the Delivery Date, as
such assumptions may be adjusted for events that have been the basis for
adjustments to Basic Rent pursuant to Section 3.2.1(b) of the Lease or events
that have given rise to indemnity payments pursuant to the Tax Indemnity
Agreement; PROVIDED, that, if the initial Owner Participant shall have
transferred its interest, Net Economic Return shall be calculated as if the
initial Owner Participant had retained its interest; PROVIDED FURTHER, that,
notwithstanding the preceding proviso, solely for purposes of Section 11 of the
Participation Agreement and calculating any adjustments to Basic Rent,
Stipulated Loss Values and Termination Values in connection with a refunding
pursuant to such Section 11 at a time when Owner Participant is a transferee
(other than an Affiliate of the initial Owner Participant), the after-tax yield
(but not the after-tax cash flow) component of Net Economic Return shall be
calculated on the basis of the methodology and assumptions utilized by the
transferee Owner Participant as of the date on which it acquired its interest.

            "NET PRESENT VALUE OF RENTS" is defined in Schedule 1 to the Lease.

            "NET WORTH" means, for any person, the excess of its total assets
over its total liabilities.

            "NEW DEBT" means debt securities in an aggregate principal amount
specified in the Refunding Information.

            "NON-U.S. PERSON" means any Person other than a United States
person, as defined in Section 7701(a)(30) of the Code.

            "NOTE HOLDER" means at any time each registered holder of one or
more Equipment Notes.

            "NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement, dated
as of the Issuance Date, among Atlas Air, Inc., the Subordination Agent, the
Escrow Agent, the Paying Agent and the Pass Through Trustee under each Pass
Through Trust Agreement providing for, among other things, the issuance and sale
of Equipment Notes.

            "OFFICER'S CERTIFICATE" means, in respect of any party to the
Participation Agreement, a certificate signed by the Chairman, the President,
any Vice President (including

<PAGE>

                                      -22-

those with varying ranks such as Executive, Senior, Assistant or Staff Vice
President), the Treasurer or the Secretary of such party.

            "OPERATIVE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Agreement, the Purchase Agreement Assignment, the Consent
and Agreement, the Engine Consent and Agreement, the Lease, Lease Supplement No.
1, the Trust Indenture, the initial Trust Indenture Supplement, the Bills of
Sale, the Tax Indemnity Agreement and the Equipment Notes.

            "OPERATIVE INDENTURES" means each of the indentures under which
notes have been issued and purchased by the Pass Through Trustees pursuant to
the Note Purchase Agreement.

            "OP JURISDICTION" is defined in Schedule 3 to the Participation
Agreement.

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

            "OWNER PARTICIPANT" means the person executing the Participation
Agreement as "Owner Participant" or, if a second person becomes an "Owner
Participant" pursuant to Section 10.1.1 of the Participation Agreement, both of
such persons; PROVIDED that if an Owner Participant Transfers 100% of its
interest to a successor Owner Participant, such transferring Owner Participant
shall thereafter no longer be considered an "Owner Participant".

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

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

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

<PAGE>

                                      -23-

            "OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes, the
Purchase Agreement Assignment, and each other agreement between Owner Trustee
and any other party to the Participation Agreement, relating to the
Transactions, delivered on the Delivery Date.

            "PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.

            "PARTICIPATION AGREEMENT" means the Participation Agreement dated as
of the July 29, 1998 among Lessee, Owner Participant, Owner Trustee, the Pass
Through Trustees, Subordination Agent and Mortgagee.

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

            "PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements,
the Note Purchase Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letters referred
to in Section 2.03 of each of the Liquidity Facilities, PROVIDED, that no
amendment, modification or supplement to, or substitution or replacement of, any
such Fee Letter shall be effective for purposes of any obligation of Lessee,
unless consented to by Lessee.

            "PASS THROUGH CERTIFICATES" means the pass through certificates
issued by the Pass Through Trusts (and any other pass through certificates for
which such pass through certificates may be exchanged).

            "PASS THROUGH INDEMNITEES" means (i) the Subordination Agent, the
Paying Agent, the Escrow Agent, the Liquidity Providers, the Depositary and the
Pass Through Trustees, (ii) each Affiliate of a person described in the
preceding clause (i), (iii) the respective directors, officers, employees,
agents and servants of each of the persons described in the preceding clauses
(i) and (ii) and (iv) the successors and per-

<PAGE>

                                      -24-

mitted assigns of the persons described in the preceding clauses (i), (ii) and
(iii).

            "PASS THROUGH TRUST" means each of the three separate pass through
trusts created under the Pass Through Trust Agreements.

            "PASS THROUGH TRUST AGREEMENT" means each of the three separate Pass
Through Trust Agreements, each dated as of the Issuance Date, by and between the
Lessee and Pass Through Trustee.

            "PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, in its capacity as trustee under each Pass Through Trust
Agreement.

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

            "PAYMENT DATE" means each January 2 and July 2 during the Term,
commencing with the first such date to occur after the Commencement Date.

            "PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.

            "PAYMENT PERIOD" means each of the consecutive semiannual periods
during the Term ending on a Payment Date, the first such period commencing on
and including the Commencement Date.

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

            "PERMITTED AIR CARRIER" means (i) any manufacturer of airframes or
aircraft engines, or any Affiliate of a manufacturer of airframes or aircraft
engines domiciled in the United States, (ii) any Permitted Foreign Air Carrier,
(iii) any person approved in writing by Lessor or (iv) any U.S. Air Carrier.

            "PERMITTED COUNTRY" means any country listed on Schedule 5 to the
Lease.

            "PERMITTED FOREIGN AIR CARRIER" means any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline opera-

<PAGE>

                                      -25-

tions and to operate jet aircraft similar to the Aircraft under the applicable
Laws of such Permitted Country.

            "PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii)
any Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.

            "PERMITTED INSTITUTION" means any bank, trust company, insurance
company, financial institution or corporation (other than, without Lessee's
consent, a commercial air carrier, a commercial aircraft operator, a freight
forwarder or Affiliate of any of the foregoing), in each case with a combined
capital and surplus or Net Worth of at least $75,000,000.

            "PERMITTED LIEN" means any Lien described in clauses (a) through
(g), inclusive, of Section 6 of the Lease.

            "PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7
of the Lease.

            "PERMITTED SUBLESSEE" means the sublessee under a Permitted
Sublease.

            "PERSONS" or "PERSONS" means individuals, firms, partnerships,
joint ventures, trusts, trustees, Government Entities, organizations,
associations, corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether having
distinct legal status or not, or any member of any of the same.

            "PLAN" means any employee benefit plan within the meaning of Section
3(3) of ERISA, or any plan within the meaning of Section 4975(e)(1) of the
Code.

            "PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.

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

            "PURCHASE AGREEMENT" means the Purchase Agreement dated as of June
6, 1997 between Airframe Manufacturer and Lessee (including all exhibits
thereto, together with all letter agreements entered into that by their terms
constitute part of

<PAGE>

                                      -26-

such Purchase Agreement), to the extent assigned pursuant to the Purchase
Agreement Assignment.

            "PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement and
Engine Warranties Assignment dated as of even date with the Participation
Agreement, between Lessee and Owner Trustee.

            "PURCHASE DATE" means the last day, or if such day is not Business
Day, the immediately succeeding Business Day of the originally scheduled Base
Lease Term or any Renewal Lease Term, as specified in any Purchase Notice.

            "PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.

            "OIB" is defined in Section 2.08 of the Trust Indenture.

            "REFUNDING CERTIFICATE" means a certificate of an authorized
representative of Owner Participant delivered pursuant to Section 11.1.1 of the
Participation Agreement, setting forth (a) the Refunding Date and (b) the
following information, subject to the limitations set forth in Section 11 of the
Participation Agreement: (i) the principal amount of debt to be issued by Owner
Trustee on the Refunding Date, (ii) the proposed adjusted debt/equity ratio and
(iii) the proposed revised schedules of Basic Rent, Stipulated Loss Value
percentages, Termination Value percentages, EBO Price and EBO Date and the
proposed Amortization Schedules, calculated in accordance with Section 3.2.1 of
the Lease.

            "REFUNDING DATE" means the proposed date on which the outstanding
Equipment Notes will be redeemed and refinanced pursuant to Section 11 of the
Participation Agreement.

            "REFUNDING INFORMATION" means the information set forth in the
Refunding Certificate (other than the Refunding Date) as such information may
have been revised by any verification procedures demanded by Lessee pursuant to
Section 3.2.1(d) of the Lease.

            "RENEWAL LEASE TERM" means either term for which the Lease is
extended by Lessee pursuant to Section 17 of the Lease, if any.

            "RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.

<PAGE>

                                      -27-

            "RENEWAL RENT" for the Aircraft means the rent payable therefor in
respect of a Renewal Lease Term determined pursuant to Section 17.2.2 of the
Lease.

            "RENEWAL RENT CAP" is defined in Schedule 1 to the Lease.

            "RENEWAL TERM EXPIRATION DATE" means, in the case of either Renewal
Lease Term, the date determined by Lessee, which date shall be between three
months and two years from the commencement date of each Renewal Lease Term.

            "RENT" means, collectively, Basic Rent, Renewal Rent and
Supplemental Rent.

            "REPLACEMENT AIRFRAME" means any airframe substituted for the
Airframe pursuant to Section 10 of the Lease.

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

            "RESTRICTED PERIOD" means the period commencing on the Delivery Date
and ending on the close of the calendar year in which occurs the seventh
anniversary of the Delivery Date.

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

            "SCHEDULED DELIVERY DATE" means the expected Delivery Date notified
to each Participant, Owner Trustee and Mortgagee by Lessee pursuant to Section
4.1 of the Participation Agreement, which expected Delivery Date shall be a
Business Day not later than the Commitment Termination Date.

            "SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.

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

            "SECOND AIRCRAFT" means the Boeing Model 747-47UF aircraft (other
than the Aircraft) which is the subject of a participation agreement entered
into in 1998 to which FINOVA Capital Corporation is an original signatory in the
capacity of

<PAGE>

                                      -28-

owner participant and Atlas Air, Inc. is an original signatory in the capacity
of lessee.

            "SECTION 1110" means 11 U.S.C. Section 1110 of the Bankruptcy Code
or any successor or analogous section of the federal bankruptcy Law in effect
from time to time.

            "SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust
Indenture.

            "SECURITIES ACT" means the Securities Act of 1933, as amended.

            "SECURITY" means a "security" as defined in Section 2(1) of the
Securities Act.

            "SENIOR HOLDER" is defined in Section 2.14(c) of the Trust
Indenture.

            "SERIES" means any of Series A, Series B or Series C.

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

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

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

            "SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.

            "SPECIFIED DEFAULT" means (i) the occurrence of any event set forth
in Section 14.1 of the Lease that with the passage of time and/or the giving of
notice would become a Lease Event of Default or (ii) the occurrence of any event
set forth in Section 14.5(a) of the Lease or any event set forth in Section
14.5(b) or (c) of the Lease which, upon the passage of the

<PAGE>

                                      -29-

90 day period referred to therein, would become a Lease Event of Default.

            "STANDARD & POOR'S" means Standard & Poor's Ratings Services.

            "STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a)
during the Base Lease Term, the amount determined by multiplying (i) the
percentage set forth in Schedule 3 to the Lease (as adjusted from time to time
in accordance with Section 3.2.1 of the Lease) opposite the Stipulated Loss
Value Date by (ii) Lessor's Cost and (b) during any Renewal Lease Term, the
amount determined pursuant to Section 17.2.3 of the Lease. Notwithstanding
anything to the contrary in any Operative Agreement, Stipulated Loss Value shall
always be sufficient to pay in full, as of the date of payment thereof (assuming
timely payment of the Equipment Notes prior to such date), the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such date, together
with accrued and unpaid interest on all such Equipment Notes as of such date.

            "STIPULATED LOSS VALUE DATE" means, for any month, the day in such
month specified in Schedule 3 to the Lease or, if such day is not a Business
Day, the immediately succeeding Business Day.

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

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

            "SUBSEQUENT RENEWAL LEASE TERM" means the term for which the Lease
is extended by Lessee, if any, after the first Renewal Lease Term.

            "SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other Person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, but excluding any amount as to which
Lessee is obligated to pay a pro rata share pursuant to clause (e) of this
definition, (b) (i) to the extent not payable (whether or not

<PAGE>

                                      -30-

in fact paid) under Section 6(a) of the Note Purchase Agreement (as originally
in effect or amended with the consent of the Owner Participant), an amount or
amounts equal to the fees paid to the relevant Liquidity Provider under Section
2.03 of each Liquidity Facility and the related Fee Letter (as defined in the
Intercreditor Agreement) multiplied by a fraction the numerator of which shall
be the then outstanding aggregate principal amount of the Series A Equipment
Notes, Series B Equipment Notes and Series C Equipment Notes and the denominator
of which shall be the then outstanding aggregate principal amount of all "Series
A Equipment Notes", "Series B Equipment Notes" and "Series C Equipment Notes"
(each as defined in the Note Purchase Agreement); (ii) (x) the amount equal to
interest on any Downgrade Advance (other than any Applied Downgrade Advance)
payable under Section 3.07(e) of each Liquidity Facility minus Investment
Earnings from such Downgrade Advance multiplied by (y) the fraction specified in
the foregoing clause (i); (iii) (x) the amount equal to interest on any
Non-Extension Advance (other than any Applied Non-Extension Advance) payable
under Section 3.07(a)(i) of each Liquidity Facility minus Investment Earnings
from such Non-Extension Advance multiplied by (y) the fraction specified in the
forgoing clause (i); (iv) if any payment default shall have occurred and be
continuing with respect to interest on any Series A Equipment Notes, Series B
Equipment Notes or Series C Equipment Notes, (x) the excess, if any, of (1) an
amount equal to interest on any Unpaid Advance, Applied Downgrade Advance or
Applied Non-Extension Advance payable under Section 3.07(a) of each Liquidity
Facility over (2) the sum of Investment Earnings from any Final Advance plus any
amount of interest at the Payment Due Rate actually payable (whether or not in
fact paid) by Lessee in respect of the overdue scheduled interest on the
Equipment Notes in respect of which such Unpaid Advance, Applied Downgrade
Advance or Applied Non-Extension Advance was made multiplied by (y) a fraction
the numerator of which shall be the then aggregate overdue amounts of interest
on the Series A Equipment Notes, Series B Equipment Notes and Series C Equipment
Notes (other than interest becoming due and payable solely as a result of
acceleration of any such Equipment Notes) and the denominator of which shall be
the then aggregate overdue amounts of interest on all "Series A Equipment
Notes", "Series B Equipment Notes" and "Series C Equipment Notes" (each as
defined in the Note Purchase Agreement) (other than interest becoming due and
payable solely as a result of acceleration of any such "Equipment Notes"); and
(v) Lessee's pro rata share of any other amounts owed to the Liquidity Providers
by the Subordination Agent as borrower under each Liquidity Facility (other than
amounts due as repayment of advances thereunder or as in-

<PAGE>

                                      -31-

terest on such advances), except to the extent payable pursuant to clause (ii),
(iii) or (iv) above, (c) Lessee's pro rata share of all compensation and
reimbursement of expenses, disbursements and advances payable by Lessee under
the Pass Through Trust Agreements, (d) Lessee's pro rata share of all
compensation and reimbursement of expenses and disbursements payable to the
Subordination Agent under the Intercreditor Agreement except with respect to any
income or franchise taxes incurred by the Subordination Agent in connection with
the transactions contemplated by the Intercreditor Agreement, (e) Lessee's pro
rata share of any amount payable under Section 9.1 (and, if attributable
thereto, Section 9.5) of the Participation Agreement to any Pass Through
Indemnitee to the extent such amount relates to, results from or arises out of
or in connection with (i) the Pass Through Agreements or the enforcement of any
of the terms of any of the Pass Through Agreements, (ii) the offer, sale, or
delivery or the Pass Through Certificates or any interest therein or represented
thereby or (iii) any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by Lessee under any Pass Through Agreement or the falsity of any
representation or warranty of Lessee in any Pass Through Agreement and (f) in
the event Lessee requests any amendment to any Operative Agreement or Pass
Through Agreement, Lessee's pro rata share of all reasonable fees and expenses
(including, without limitation, fees and disbursements of counsel) of the Escrow
Agents and the Paying Agents in connection therewith payable by the Pass Through
Trustees under the Escrow Agreements. As used herein, "Lessee's pro rata share"
means as of any time a fraction, the numerator of which is the principal balance
then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures). For purposes of this
definition, the terms "Applied Downgrade Advance", "Applied Non-Extension
Advance", "Cash Collateral Account", "Downgrade Advance", "Final Advance",
"Investment Earnings", "Non-Extension Advance" and "Unpaid Advance" shall have
the meanings specified in each Liquidity Facility.

            "TAX ATTRIBUTE PERIOD" means the Restricted Period or, in the event
the Aircraft, the Airframe, any Engine or any Part is used "predominantly
outside the United States" (within the meaning of Section 168(g)(1)(A) of the
Code) or becomes "tax-exempt use property" (within the meaning of Section 168(h)
of the Code) (in either case to the extent resulting in a Tax Loss as defined in
the Tax Indemnity Agreement) at any time during the Restricted Period, the
period commencing on the De-

<PAGE>

                                      -32-

livery Date and ending on the close of the calendar year in which occurs the end
of the new "recovery period" (as determined under Section 168(g) of the Code)
resulting from such use or from such status as "tax-exempt use property";
PROVIDED, HOWEVER, upon the occurrence, in either case, of an event described in
Section 2.2(b) of the Tax Indemnity Agreement, the Tax Attribute Period shall
end on the close of the calendar year in which occurs the end of the applicable
recovery period as determined in accordance with such Section.

            "TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b)
WTC, Pass Through Trustee, Subordination Agent and Mortgagee, (c) each separate
or additional trustee appointed pursuant to the Trust Agreement or the Trust
Indenture, (d) each Participant, (e) the Trust Estate and the Trust Indenture
Estate and (f) the respective successors, assigns, agents and servants of the
foregoing. For purposes of this definition, the term "Owner Participant" shall
include any member of an affiliated group (within the meaning of Section 1504 of
the Code) of which Owner Participant is, or may become, a member if
consolidated, joint or combined returns are filed for such affiliated group for
federal, state or local income tax purposes.

            "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated
as of even date with the Participation Agreement, between Lessee and Owner
Participant.

            "TAXES" means all license, recording, documentary, registration and
other similar fees and all taxes, levies, imposts, duties, charges, assessments
or withholdings of any nature whatsoever imposed by any Taxing Authority,
together with any penalties, additions to tax, fines or interest thereon or
additions thereto.

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

            "TERM" means the term, commencing on the Delivery Date, for which
the Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended

<PAGE>

                                      -33-

for the period necessary to accommodate usage of the Aircraft or Airframe
pursuant to CRAF plus six months thereafter, and Lessee shall be obligated to
pay Basic Rent with respect to any such period of extension at a semiannual rate
equal to the average of the Basic Rent paid during the Base Lease Term or the
applicable Renewal Lease Term, whichever shall have ended immediately prior to
such extension.

            "TERMINATION DATE" means any Payment Date occurring after the
seventh anniversary of the Delivery Date on which the Lease shall terminate in
accordance with Section 9 of the Lease.

            "TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.1 of the
Lease) opposite the Termination Value Date by (b) Lessor's Cost. Notwithstanding
anything to the contrary in any Operative Agreement, Termination Value shall
always be sufficient to pay in full, as of the date of payment thereof (assuming
timely payment of the Equipment Notes prior to such date), the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such date, together
with accrued and unpaid interest on all such Equipment Notes as of such date.

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

            "THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.

            "TRANSACTIONS" means the transactions contemplated by the
Participation Agreement and the other Operative Agreements.

            "TRANSACTION EXPENSES" means: (i) the reasonable and actual fees,
expenses and disbursements incurred in connection with the negotiation,
execution and delivery of the Operative Agreements of (1) Morris, James,
Hitchens & Williams, special counsel for Mortgagee and the Loan Participants,
such information to be furnished by the Subordination Agent, (2) Crowe &
Dunlevy, special counsel in Oklahoma City, Oklahoma, such information to be
furnished by Lessee, (3) Cahill Gordon & Reindel, special counsel to Lessee,
such information to be furnished by Lessee and (4) Ray, Quinney & Nebeker,
special counsel to the Owner Trustee, such information to be provided by

<PAGE>

                                      -34-

the Owner Trustee, (ii) all fees, taxes and other charges payable in connection
with the recording or filing of instruments and financing statements, such
information to be furnished by Lessee, (iii) the initial fee and reasonable and
actual disbursements of Owner Trustee under the Trust Agreement, such
information to be furnished by the Owner Trustee, (iv) the initial fee and
reasonable and actual disbursements of Mortgagee under the Trust Indenture, such
information to be furnished by Mortgagee, (v) the fee of the Appraiser with
respect to the appraisal of the Aircraft referred to in Section 5.1.2(xv) of the
Participation Agreement, such information to be furnished by the Owner
Participant, (vi) subject to the limitations set forth in a separate agreement
between Owner Participant and Lessee, the reasonable and actual fees,
out-of-pocket expenses and disbursements of special counsel to the Owner
Participant (as defined in Schedule 3 to the Participation Agreement), such
information to be furnished by the Owner Participant, (vii) the reasonable
out-of-pocket costs, fees, expenses and disbursements incurred by Lessee in
respect of the transactions contemplated by the Pass Through Trust Agreements
and the Operative Agreements, such information to be furnished by Lessee, and
(viii) the equity placement and debt arrangement fees and reasonable
disbursements of Lessee's Advisor, such information to be furnished by Lessee.

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

            "TRANSFEREE" means a person to which any Owner Participant, Owner
Trustee or any Loan Participant or Note Holder purports or intends to Transfer
any or all of its right, title or interest in the Trust Estate or in its
Equipment Note and the Trust Indenture Estate, respectively, as described in
Section 10.1.1 (a), 10.1.2 or 10.1.3 (but excluding participants in any
participation referred to in Section 10.1.3), respectively, of the Participation
Agreement.

            "TRIGGERING EVENT" is defined in Section 1.1 of the Intercreditor
Agreement.

            "TRUST" means the trust created by the Trust Agreement.

            "TRUST AGREEMENT" means the Trust Agreement dated as of even date
with the Participation Agreement, between Owner Participant and Owner Trustee.

<PAGE>

                                      -35-

            "TRUST ESTATE" means all estate, right, title and interest of Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement including, without limitation, all amounts of Basic Rent and
Supplemental Rent including, without limitation, insurance proceeds and
requisition, indemnity or other payments of any kind for of with respect to the
Aircraft. Notwithstanding the foregoing, "Trust Estate" shall not include any
Excluded Payment.

            "TRUST INDENTURE" means the Trust Indenture and Mortgage dated as of
even date with the Participation Agreement, between Owner Trustee and Mortgagee.

            "TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the
Trust Indenture.

            "TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.

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

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

            "U.S. AIR CARRIER" means any United States air carrier that is a
U.S. Person and a Citizen of the United States holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to chapter 447 of
title 49 of the United States Code for aircraft capable of carrying 10 or more
individuals or 6000 pounds or more of cargo, and as to which there is in force
an air carrier operating certificate issued pursuant to Part 121 of the FAA
Regulations, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provisions therefor or in the
absence thereof.

            "U.S. PERSON" means any Person described in Section 7701(a)(30) of
the Code.

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

<PAGE>

                                      -36-

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

            "WET LEASE" means any arrangement, including, but not limited to an
ACMI Contract, whereby Lessee or a Permitted Sublessee agrees to furnish the
Aircraft, Airframe or any Engine to a third party pursuant to which the
Aircraft, Airframe or Engine shall at all times be in the operational control of
Lessee or a Permitted Sublessee, provided that Lessee's obligations under the
Lease shall continue in full force and effect notwithstanding any such
arrangement.

            "WTC" means Wilmington Trust Company, a Delaware banking
corporation, not in its capacity as Mortgagee under the Trust Indenture, but in
its individual capacity.

<PAGE>
                           SCHEDULE TO EXHIBIT 10.4.2

The agreements listed below are substantially  identical to this exhibit and are
not being filed  separately as exhibits  pursuant to instruction 2 to Regulation
S-K, Item 601.

<TABLE>
<CAPTION>
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
PROGRAM YEAR       REGISTRATION NUMBER     RESTRUCTURE AGREEMENT TYPE         LESSOR                         LESSEE
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
<C>                 <C>                    <C>                                <C>                            <C>
1998               N494MC                  Owned Aircraft Restructure         Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998               N408MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998               N491MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998               N492MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998               N493MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999               N495MC                  Owned Aircraft Restructure         Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999               N496MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999               N497MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999               N498MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999               N499MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
2000               N409MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
2000               N412MC                  Leased Aircraft Restructure        Wells Fargo Bank Northwest,    Atlas Air, Inc.
                                           Agreement                          National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
</TABLE>EXHIBIT 10.4.2

                                             Federal Aviation Administration
                                          Date __02/08/2005___ Time __2:13 PM__
                                          Conveyance Number ______D001034_______
                                          By ___________________________________
                                          Formerly N491MC_______________________

                       AMENDMENT NO. 1 TO LEASE AGREEMENT
                       ----------------------------------

                  This AMENDMENT NO. 1 to Lease  Agreement  (this  "AMENDMENT"),
dated  as  of  July  27, 2004, between  WELLS  FARGO  BANK  NORTHWEST,  NATIONAL
ASSOCIATION (formerly known as FIRST SECURITY BANK, NATIONAL  ASSOCIATION),  not
in its individual  capacity except as expressly  provided herein,  but solely as
Owner Trustee  ("LESSOR" or "OWNER  TRUSTEE"),  and ATLAS AIR,  INC., a Delaware
corporation  ("LESSEE"),  amends that certain Original Lease (as defined below).
All  capitalized  terms used and not  otherwise  defined  herein  shall have the
respective meanings ascribed to such terms in the Lease (as defined below).

                             W I T N E S S E T H :
                             - - - - - - - - - -

                  WHEREAS,  Lessor and Lessee are parties to that certain  Lease
Agreement,  dated as of July 29, 1998, supplemented  by Lease  Supplement  No. 1
dated July 29, 1998,  both  recorded by the FAA on July 30, 1998,  as Conveyance
No. P16372  (collectively,  the "ORIGINAL LEASE"),  pursuant to which Lessee has
leased from Lessor the Aircraft as defined in the Original  Lease (the  Original
Lease, as amended by this Amendment, the "LEASE").

                  WHEREAS,  as contemplated  by the  Restructure  Agreement (the
"RESTRUCTURE AGREEMENT"), dated as of July 27, 2004, by and among Lessee, Lessor
and the other parties  named  therein,  all such parties  desire that Lessee and
Lessor  enter  into  this  Amendment  to set  forth  the  manner  in  which  the
restructuring of the terms of payment by Lessee of certain installments of Basic
Rent payable under the Original Lease and the  agreements  with respect to other
amendments  and  other  matters  pertaining  to  the  Original  Lease  are to be
definitively documented and implemented.

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

                  SECTION 1. AMENDMENTS TO ANNEX A TO THE ORIGINAL LEASE.  Annex
A to the Original Lease is hereby amended as follows:

                  (i)      ADDITIONS. The following definitions are hereby added
to Annex A to the Original Lease in appropriate alphabetical order:

                  "ACCELERATION" is defined in Section 14.6 of the Lease.

                  "ACQUIRED   INDEBTEDNESS"   means  Indebtedness  of  a  Person
         outstanding  on the date on which such Person  becomes a Subsidiary  or
         Indebtedness  assumed in connection with the acquisition of assets from
         any Person.

                  "ACTION EVENT" means (a) any acceleration or other exercise of
         rights or remedies by  Mortgagee as assignee of Lessor as a result of a
         Cross Default under Section  15.1.7(a) of the Lease,  or (b) the giving
         of instructions or directions by the Controlling  Certificateholders to
         exercise any such rights or remedies.

<PAGE>

                  "ADDITIONAL INDEBTEDNESS INCURRENCE CONDITIONS" means:

                  (a)      no Lease Default or Lease Event of Default shall have
         occurred and be continuing,

                  (b)      the Fixed Charge Coverage Ratio  determined as of the
         last day of the last fiscal quarter for which financial  statements are
         then available is greater than 1.25 to 1.00 and

                  (c)      the  aggregate   principal   amount  of  Indebtedness
         incurred  pursuant to Section  8.4.1(b) does not exceed  $50,000,000 at
         any one time outstanding.

                  If,  before the  occurrence  of an Action  Event,  a Bank Debt
         Refinancing  occurs, and the documents executed in connection with such
         Bank Debt Refinancing contain a restriction on the incurrence by Lessee
         of  indebtedness  (as defined under such Bank Debt  Refinancing),  this
         definition  and the definition of  "Indebtedness"  for purposes of this
         definition  shall  thereafter be deemed to have been amended to provide
         for the same restriction on the incurrence of indebtedness and the same
         definition of indebtedness as is provided in the documents  executed in
         connection with such Bank Debt  Refinancing  (and such lenders shall be
         "Bank Lenders" for purposes of the Lease and such documents executed in
         connection  with  such  Bank  Debt  Refinancing  shall be "Bank  Lender
         Documents" for purposes of the Lease). If such Bank Debt Refinancing is
         with more than one lender under  separate Bank Lender  Documents,  this
         definition  and the definition of  "Indebtedness"  for purposes of this
         definition  shall  thereafter be deemed to have been amended to provide
         for the same restriction on the incurrence of indebtedness and the same
         definition of indebtedness as are provided in those of such Bank Lender
         Documents   which   evidence   the  highest   dollar   amount  of  such
         indebtedness.

                  "ADDITIONAL LEASE INCURRENCE CONDITIONS" means

                  (a)      no Lease Default or Lease Event of Default shall have
         occurred and be continuing,

                  (b)      the Fixed Charge Coverage Ratio  determined as of the
         last date of the last fiscal quarter for which financial statements are
         then available is greater than 1.25 to 1.00;  PROVIDED,  HOWEVER,  that
         Parent or any of its  Subsidiaries may enter into any lease if the cash
         scheduled rental payments  required to be made under all leases entered
         into after the Restructure Agreement Execution Date (including, without
         limitation,  the  lease  proposed  to be  entered  into) do not  exceed
         $15,000,000  during any fiscal year, without having to comply with this
         clause (b), and

                  (c)      the  aggregate  principal  amount of  Capital  Leases
         entered into pursuant to Section  8.4.1(c) does not exceed  $50,000,000
         at anyone time outstanding.

         If, before the occurrence of an Action Event,  a Bank Debt  Refinancing
         occurs,  and the documents  executed in connection  with such Bank Debt
         Refinancing contain a restriction

                                      -2-
<PAGE>

         on the entering into by Lessee of leases or subleases,  this definition
         shall thereafter be deemed to have been amended to provide for the same
         restriction on the entering by Lessee into of leases or subleases as is
         provided in the documents  executed in  connection  with such Bank Debt
         Refinancing  (and such lenders shall be "Bank  Lenders" for purposes of
         the  Lease  and  such  documents   executed  in  connection  with  such
         refinancing  shall be  "Bank  Lender  Documents"  for  purposes  of the
         Lease). If such Bank Debt Refinancing is with more than one such lender
         under separate Bank Lender Documents,  this definition shall thereafter
         be deemed to have been amended to provide for the same  restriction  on
         the  entering  into of leases or  subleases by Lessee as is provided in
         those of such Bank Lender  Documents  which evidence the highest dollar
         amount of such indebtedness.

                  "AFL III" means Atlas Freighter  Leasing III, Inc., a Delaware
         corporation,  a subsidiary of Parent, the sole business of which is the
         ownership  of the AFL III  Equipment  and  the  leasing  of the AFL III
         Equipment  to  Lessee  pursuant  to the AFL III  Leases  and  obtaining
         financing with respect thereto.

                  "AFL III EQUIPMENT" is defined in Schedule 1 to the Lease.

                  "AFL  III  FINANCING  AGREEMENT"  means  that  certain  Credit
         Agreement  dated as of April 25,  2000,  and amended and restated as of
         July 27, 2004,  by and among AFL III,  the  lenders  party  thereto and
         Deutsche Bank Trust Company  Americas,  as agent, as such agreement may
         be amended,  amended and restated,  modified and/or  supplemented  from
         time to time in accordance with the terms thereof.

                  "AFL III  LEASES"  means one or more  triple net leases by and
         between  Lessee and AFL III with respect to the AFL III  Equipment,  as
         lessor thereunder, as such leases may be amended, amended and restated,
         modified and/or supplemented from time to time.

                  "ALLONGES" is defined in the definition of "Equipment Notes".

                  "AMENDMENT NO. 1 TO LEASE AGREEMENT" or "AMENDMENT" means that
         certain Amendment No. 1 to Lease Agreement,  dated as of July 27, 2004,
         between Lessor and Lessee in connection with the Lease.

                  "APPRAISAL" is defined in the Intercreditor Agreement.

                  "ASSUMPTIONS" is defined in Section 8.4.4(e) of the Lease.

                  "AVAILABILITY"  means  at any  time,  the  maximum  additional
         amount  available to be borrowed by Lessee as direct advances under any
         Indebtedness at such time taking into account any applicable  borrowing
         base or similar  requirements  and  limitations at such time,  PROVIDED
         that all of the  conditions to borrowing  (other than the delivery of a
         notice  of  borrowing)  required  pursuant  to  such  Indebtedness  are
         satisfied at such time.

                  "BANK  DEBT  REFINANCING"   means  any  unsecured  or  secured
         refinancing of the indebtedness owed to the Bank Lenders under the Bank
         Lender  Documents  (i)  with  institutional  lenders  or (ii)  with the
         proceeds of a private or public debt offering to lenders,

                                      -3-
<PAGE>

         which institutional  lenders or lenders are not Affiliates of Lessee or
         Parent and which  refinancing  pays such  indebtedness  in full (or any
         such refinancing the  indebtedness of which is subsequently  refinanced
         with Bank Debt Refinancing).

                  "BANK LENDER  DOCUMENTS"  means the Credit  Agreement  and the
         documents  executed in connection  therewith and the documents executed
         in connection with any subsequent extension or renewal thereof or any
         Bank Debt Refinancing.

                  "BANK LENDERS" means lenders under the Bank Lender Documents.

                  "BANKRUPTCY  COURT" means the United States  Bankruptcy  Court
         for the Southern District of Florida, Miami Division.

                  "BOEING" means Boeing Capital Corporation and its Affiliates.

                  "BOEING  DOCUMENTS"  means that certain lease agreement listed
         on Schedule 1 to the Lease opposite the heading "Boeing  Documents" and
         the documents executed in connection  therewith other than that certain
         Supplemental  Agreement,  dated as of June 1, 2002,  between  the owner
         participant  named therein and Lessee, as amended by Amendment No. 1 to
         Supplemental  Agreement  dated as of October 31,  2003,  which  relates
         solely to the tax indemnity  agreement  between such owner  participant
         and Lessee and the general tax indemnity agreement among the parties to
         such transaction.

                  "BUSINESS  PLAN" means  Debtors'  business plan filed with the
         Securities and Exchange Commission on Form 8-K on December 12, 2003 (as
         amended and  modified)  and  attached to the  Disclosure  Statement  as
         Exhibit G.

                  "CAPITAL LEASE" means, as applied to any Person,  any lease of
         any property (whether real, personal or mixed) by that Person as lessee
         that, in  conformity  with GAAP, is accounted for as a capital lease on
         the balance sheet of that Person.

                  "CASH" means money,  currency or a credit balance in a Deposit
         Account.

                  "CHAPTER  11 CASE"  means the  bankruptcy  case  commenced  by
         Lessee under Chapter 11 of Title 11 of the  Bankruptcy  Code on January
         30,  2004 in the  United  States  Bankruptcy  Court  for  the  Southern
         District of Florida.

                  "CONSOLIDATED  ADJUSTED EBITDA" means, for any period, the sum
         of the  amounts for such period of (i)  Consolidated  Net Income,  (ii)
         Consolidated  Interest  Expense,  (iii)  provisions  for taxes based on
         income,  (iv)  total  depreciation   expense,  (v)  total  amortization
         expense,  (vi) other non-cash items  reducing  Consolidated  Net Income
         LESS other non-cash items increasing  Consolidated  Net Income,  all of
         the foregoing as  determined on a consoidated  basis for Parent and its
         Subsidiaries in conformity with GAAP and, (vii) for all periods through
         the first  anniversary of the  Restructure  Agreement  Execution  Date,
         expenses  incurred  in  connection  with  the  Plan of  Reorganization,
         including  professional  fees and  expenses,  severance,  key  employee
         retention plans,  executory contract and lease rejection claims,  asset
         write downs and any other such costs determined by Parent'  independent
         accountants to be reported as "Reorganization Costs".

                                      -4-
<PAGE>

                  "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
         sum of (i) the aggregate of all  expenditures  (whether paid in cash or
         other  consideration  or  accrued as a  liability  and  including  that
         portion of Capital  Leases  which is  capitalized  on the  consolidated
         balance  sheet  of  Parent  and its  Subsidiaries)  by  Parent  and its
         Subsidiaries  during that period that,  in  conformity  with GAAP,  are
         included in "additions  to property,  plant or equipment" or comparable
         items reflected in the  consolidated  statement of cash flows of Parent
         and its Subsidiaries  plus (ii) to the extent not covered by clause (i)
         of this definition,  the aggregate of all  expenditures by Parent and
         its  Subsidiaries  during  that  period  to  acquire  (by  purchase  or
         otherwise) the business, property or fixed assets of any Person, or the
         stock or other evidence of beneficial  ownership of any Person that, as
         a result of such acquisition, becomes a Subsidiary of Parent.

                  "CONSOLIDATED FIXED CHARGES" means, for any period, the sum of
         the amounts for such period (without  duplication) of (i)  Consolidated
         Interest Expense for such period paid in cash, (ii) Consolidated Rental
         Payments  for such  period  paid in cash,  (iii)  Consolidated  Capital
         Expenditures  paid in cash for such  period  (other  than  Consolidated
         Capital Expenditures funded with the proceeds of sales of assets), (iv)
         any Restricted Junior Payments actually made during such period and (v)
         the  scheduled  principal  amount  of all  amortization  payments  with
         respect to the Bank Lender  Documents  (assuming  for this purpose that
         the maximum amount of principal  deferral permitted pursuant to Section
         2.4A(ii)  of the  AFL  III  Financing  Agreement  shall  have  occurred
         (whether or not the conditions  thereto shall have been satisfied)) and
         other  Indebtedness of Parent and its Subsidiaries  required to be made
         during such period (as determined on the first day of such period).

                  "CONSOLIDATED  INTEREST EXPENSE" means, for any period, total
         net interest  expense (to be computed by reducing  interest  expense by
         the amount of interest income) (including that portion  attributable to
         Capital  Leases in accordance  with GAAP and  capitalized  interest) of
         Parent and its Subsidiaries on a consolidated basis with respect to all
         outstanding  Indebtedness  of Parent and its  Subsidiaries,  including,
         without  limitation,  all  commissions,  discounts  and other  fees and
         charges owed with respect to letters of credit and bankers'  acceptance
         financing  and net costs under  Interest Rate  Agreements  and Currency
         Agreements.

                  "CONSOLIDATED  NET  INCOME"  means,  for any  period,  the net
         income (or loss) of Parent and its Subsidiaries on a consolidated basis
         for such  period  taken as a single  accounting  period  determined  in
         conformity  with GAAP;  PROVIDED  that  there shall be excluded (i) the
         income (or loss) of any Person  (other than a Subsidiary  of Parent) in
         which any other Person  (other than Parent or any of its  Subsidiaries)
         has a joint  interest,  except to the extent of the amount of dividends
         or  other  distributions   actually  paid  to  Parent  or  any  of  its
         Subsidiaries  by such Person  during such  period,  (ii) the income (or
         loss) of any Person  accrued  prior to the date it becomes a Subsidiary
         of Parent or is merged into or  consolidated  with Parent or any of its
         Subsidiaries  or that Person's  assets are acquired by Parent or any of
         its  Subsidiaries,  (iii) the income of any Subsidiary of Parent to the
         extent  that  the  declaration  or  payment  of  dividends  or  similar
         distributions  by that  Subsidiary  of that  income  is not at the time
         permitted by  operation  of the terms of its charter or any  agreement,
         instrument,  judgment,  decree,  order,  statute,  rule or governmental
         regulation

                                      -5-
<PAGE>

         applicable  to that  Subsidiary,  (iv) any  after-tax  gains or  losses
         attributable  to a sale of assets  or  returned  surplus  assets of any
         pension  plan,  and (v) (to the extent  not  included  in  clauses  (i)
         through  (iv)  above)  any  net  extraordinary  gains  or net  non-cash
         extraordinary losses.

                  "CONSOLIDATED  RENTAL  PAYMENTS"  means,  for any period,  the
         aggregate amount of all rents with respect to aircraft and engines paid
         or payable  by Parent  and its  Subsidiaries  on a  consolidated  basis
         during that period under all Operating Leases to which Parent or any of
         its  Subsidiaries  is a party as lessee (net of sublease  income  other
         than income from ACMI  Contracts).  For the avoidance of doubt, (x) all
         rental payments to AFL III shall not be included in Consolidated Rental
         Payments  and (y)  payments in respect of Capital  Leases  shall not be
         included in Consolidated Rental Payments.

                  "CONSULTANT" means Simat Helliesen & Eichner,  Inc. or Avitas,
         Inc., or such other aircraft professional  designated from time to time
         by Mortgagee.

                  "CONSULTANT COSTS AND EXPENSES" is defined in Section 8.4.4(h)
         of the Lease.

                  "CONTINGENT  OBLIGATIONS" or "CONTINGENT OBLIGATION" means, as
         applied to any Person, any direct or indirect  liability, contingent or
         otherwise, of that Person (i) with respect to any Indebtedness,  lease,
         dividend  or other  obligation  of  another if the  primary  purpose or
         intent thereof by the Person incurring the Contingent  Obligation is to
         provide  assurance  to the obligee of such  obligation  of another that
         such  obligation  of another  will be paid or  discharged,  or that any
         agreements  relating thereto will be complied with, or that the holders
         of such obligation will be protected (in whole or in part) against loss
         in respect  thereof,  (ii) with respect to any letter of credit  issued
         for the account of that Person or as to which that Person is  otherwise
         liable for  reimbursement  of drawings,  or (iii) under  Interest  Rate
         Agreements  and  Currency  Agreements.   Contingent  Obligations  shall
         include,  without  limitation,  (a) the  direct or  indirect  guaranty,
         endorsement  (otherwise  than for collection or deposit in the ordinary
         course of business), co-making,  discounting with recourse or sale with
         recourse  by  such  Person  of  the  obligation  of  another,  (b)  the
         obligation  to  make   take-or-pay  or  similar  payments  if  required
         regardless  of  nonperformance  by any  other  party or  parties  to an
         agreement,  and (c) any liability of such Person for the  obligation of
         another  through  any  agreement   (contingent  or  otherwise)  (X)  to
         purchase,  repurchase  or  otherwise  acquire  such  obligation  or any
         security therefore, or to provide funds for the payment or discharge of
         such  obligation  (whether  in  the  form  of  loans,  advances,  stock
         purchases,  capital  contributions or otherwise) or (Y) to maintain the
         solvency  or any  balance  sheet  item,  level of income  or  financial
         condition of another if, in the case of any agreement  described  under
         subclauses (X) or (Y) of this sentence,  the primary  purpose or intent
         thereof is as described in the  preceding  sentence.  The amount of any
         Contingent Obligation shall be equal to the amount of the obligation so
         guaranteed or otherwise supported or, if less, the amount to which such
         Contingent Obligation is specifically limited.

                  "CONTROLLING  CERTIFICATEHOLDERS"  means,  as of a  particular
         date of determination, the 1998 Class A Certificateholders beneficially
         holding  1998  Class A  Certificates  evidencing  Fractional  Undivided
         Interests aggregating not less than a majority in interest in

                                      -6-
<PAGE>

         the Class A Pass Through Trust (excluding any 1998 Class A Certificates
         beneficially  held  by  Lessee  or  any  Affiliate  thereof;  PROVIDED,
         HOWEVER,  the foregoing  exclusion shall not apply if Lessee and/or its
         Affiliates  beneficially  hold 100% of the 1998 Class A Certificates as
         of a particular date of determination).

                  "CREDIT AGREEMENT" means the Fifth Amended and Restated Credit
         Agreement,  dated  July  27,  2004 by and  among  Atlas  Air  Worldwide
         Holdings, Inc., Atlas Air, Inc., the lenders party thereto from time to
         time and Deutsche Bank Trust Company Americas, as administrative agent.

                  "CROSS DEFAULT" means a Lease Event of Default that occurs due
         to the  occurrence  of an  Other  Creditor  Payment  Default,  an Other
         Creditor Non-Payment Default or an Acceleration.

                  "CURRENCY  AGREEMENT"  means any  foreign  exchange  contract,
         currency swap agreement,  futures contract, option contract,  synthetic
         cap or other  similar  agreement  or  arrangement  designed  to protect
         Parent or any of its  Subsidiaries  against  fluctuations  in  currency
         values.

                  "DEBTORS" means, collectively,  Parent, Lessee, Polar, Airline
         Acquisition Corp. I and Atlas Worldwide Aviation Logistics, Inc.

                  "DEPOSIT ACCOUNT" means a demand,  time, savings,  passbook or
         like account with a bank, savings and loan association, credit union or
         like  organization,  other than an account  evidenced  by a  negotiable
         certificate of deposit.

                  "DISCLOSED  OTHER  CREDITOR  DOCUMENT"  is  defined in Section
         7(a)(xiii) of the Restructure Agreement.

                  "DISCLOSURE  STATEMENT"  means the Second  Amended  Disclosure
         Statement  filed  with the  Bankruptcy  Court by the  Debtors  under 11
         U.S.C. ss. 1125 in support of the Debtors' Second Amended Joint Chapter
         11 Plan and approved by the Bankruptcy Court on June 8, 2004.

                  "EETC AMENDMENT FEE  CONSIDERATION" is defined in Section 2 of
         the Restructure Agreement.

                  "ENGINE  MAINTENANCE   CONTRACT"  means  that  certain  Engine
         Maintenance  Agreement (1998 EETC Series-CF6-80C2  Engines) dated Apri1
         30, 2004  between  Lessee and the Engine  Maintenance  Contractor,  any
         other engine  maintenance  contract  that is  reasonably  acceptable to
         Mortgagee  (or  the  Consultant)  and  Lessor  with  any  other  Engine
         Maintenance Contractor, and any replacements thereof in accordance with
         Section  8.4.4(d) or Section 14.7 of the Lease, as amended from time to
         time, relating to the Aircraft;  PROVIDED,  HOWEVER,  that Lessor shall
         not have any  rights  with  respect  to the  acceptance  of any  Engine
         Maintenance Contract (and, therefore,  only Mortgagee shall have rights
         with respect to the acceptance of any Engine  Maintenance  Contract) so
         long as  Mortgagee  has not given notice to Lessee that the Lien of the
         Trust Indenture has been discharged.

                                      -7-
<PAGE>

                  "ENGINE  MAINTENANCE  CONTRACT  ASSIGNMENT" means that certain
         Collateral Assignment of Engine Maintenance  Contract dated as of the
         Restructure  Agreement Execution Date from Lessee to Lessor relating to
         the  Aircraft  and  any  assignment  of any  other  Engine  Maintenance
         Contract  which  replaces any Engine  Maintenance  Contract  Assignment
         entered into pursuant to this Lease from time to time.

                  "ENGINE MAINTENANCE CONTRACTOR" means MTU Maintenance Hannover
         GmbH, a German limited  liability  company,  any other engine  overhaul
         contractor of  international  stature that is reasonably  acceptable to
         Mortgagee  (or the  Consultant)  and the Lessor,  and any  replacements
         thereof in  accordance  with  Section  8.4.4(d) or Section  14.7 of the
         Lease;  PROVIDED,  HOWEVER,  that Lessor shall not have any rights with
         respect to the acceptance of any Engine  Maintenance  Contractor  (and,
         therefore,  only  Mortgagee  shall  have  rights  with  respect  to the
         acceptance of any Engine  Maintenance  Contractor) so long as Mortgagee
         has not given notice to Lessee that the Lien of the Trust Indenture has
         been discharged.

                  "ENHANCEMENT"  means (a) new or increased rent, debt payments,
         maintenance  reserves or other form of additional payment, (b) new fees
         or other compensation, (c) an increase in interest rate, (d) additional
         collateral  or credit  support,  (e)  materially  improved  maintenance
         provisions  or  return  condition  provisions,  or (f)  other  form  of
         material enhancement.

                  "ENHANCEMENT RENT" is defined in Section 8.4.2.

                  "EXISTING  INDEBTEDNESS"  means any Indebtedness of Parent and
         its  Subsidiaries  outstanding on and as of the  Restructure  Agreement
         Execution Date as set forth in Schedule  8.4.1(b) of Amendment No. 1 to
         Lease Agreement.

                  "EXIT  FACILITY"  means the primary  senior  revolving  credit
         facility of the Parent or Lessee,  now existing or  hereafter  created,
         which is secured by, among other  things,  a first lien on the accounts
         receivable and inventory of the Parent or Lessee, which facility allows
         the Parent or Lessee (and which  facility may also permit any Affiliate
         thereof) to borrow and reborrow amounts (and which may also provide for
         letters of credit to be issued at the  request of the Parent or Lessee)
         up to a borrowing base determined pursuant to the documents  evidencing
         such facility.

                  "FIXED CHARGE  COVERAGE RATIO" means as of any date, the ratio
         of (i) the sum of (x)  Consolidated  Adjusted  EBITDA for the period of
         twelve consecutive months ending on such date (a "TEST PERIOD") and (y)
         Consolidated  Rental Payments for such Test Period to (ii) Consolidated
         Fixed Charges for such Test Period.

                  "FRACTIONAL UNDIVIDED INTEREST" means the fractional undivided
         interest in the Class A Pass Through Trust.

                  "GECAS" means General Electric  Capital Aviation  Services and
         its Affiliates.

                  "GECAS  DOCUMENTS"  means  those  certain  lease and  sublease
         agreements  listed on  Schedule  1 to the Lease  opposite  the  heading
         "GECAS Documents" and the docu-

                                      -8-
<PAGE>

         ments executed in connection therewith (other than the tax indemnity or
         tax indemnification agreements, as amended, executed in connection with
         the lease and  subleases  listed on  Schedule 1 to  Amendment  No. 1 to
         Lease Agreement).

                  "INDEBTEDNESS"  means,  as  applied  to any  Person,  (i)  all
         indebtedness for borrowed money,  (ii) that portion of obligations with
         respect to Capital Leases that is properly classified as a liability on
         a balance sheet in conformity with GAAP, (iii) notes payable and drafts
         accepted representing  extensions of credit whether or not representing
         obligations for borrowed money, (iv) any obligation owed for all or any
         part of the deferred purchase price of property or services  (excluding
         any such obligations incurred under ERISA), which purchase price is (a)
         due more than six months from the date of incurrence of the  obligation
         in  respect  thereof  or (b)  evidenced  by a note or  similar  written
         instrument,  and  (v)  all  indebtedness  secured  by any  lien  on any
         property or asset owned or held by that  Person  regardless  of whether
         the indebtedness secured thereby shall have been assumed by that Person
         or is  nonrecourse  to the credit of that Person.  For purposes of this
         Lease,   obligations   under  Interest  Rate  Agreements  and  Currency
         Agreements are not Indebtedness.

                  "INTERCOMPANY LOAN" means any loans and advances from any Loan
         Party to any other Loan Party.

                  "INTEREST  RATE   AGREEMENT"  means  any  interest  rate  swap
         agreement,  interest rate cap agreement, interest rate collar agreement
         or other similar agreement or arrangement designed to protect Parent or
         any of its Subsidiaries against fluctuations in interest rates.

                  "INSPECTING PARTIES" is defined in Section 12(a) of the Lease.

                  "LEASE  AMENDMENT  DEFAULT AMOUNT" is defined in Section 19 of
         the Lease.

                  "LESSEE  SECURITY   AGREEMENT"  means  that  certain  Security
         Agreement  dated as of the  Restructure  Agreement  Execution Date from
         Lessee to Lessor relating to the Aircraft.

                  "LOAN PARTIES" means Lessee, Parent and Polar.

                  "MAINTENANCE  SCHEDULE" is defined in Section  8.4.4(c) of the
         Lease.

                  "N409  RESTRUCTURING   EVENT"  means  the  consummation  of  a
         transaction  on terms  substantially  similar with respect to covenants
         and lease  events of default set forth in the lease  documentation  for
         the Aircraft, the 1998 EETC Aircraft bearing U.S. registration number *
         and the 1999 EETC Aircraft bearing U.S.  registration number * pursuant
         to which  Lessee or an  Affiliate  of Lessee  has become the sole owner
         participant of the trust of which the owner trustee is the owner of the
         2000 EETC Aircraft bearing U.S.  registration  number * (except for the
         addition  of  covenants   regarding  the  maintenance  of  an  airframe
         maintenance contract).

---------------
*        This  information has been  intentionally  deleted from  the FAA filing
         counterpart as the parties deem it to be  confidential  and proprietary
         information.

                                      -9-
<PAGE>

                  "OBJECTIVES" is defined in Section 8.4.4(b) of the Lease.

                  "OPERATING  LEASE" means, as applied to any Person,  any lease
         (including,  without  limitation,  leases that may be terminated by the
         lessee at any time) of any property  (whether real,  personal or mixed)
         that is not a Capital  Lease other than any such lease under which that
         Person is the lessor.

                  "ORIGINAL LEASE" means the Lease  Agreement,  dated as of July
         29, 1998 between the Owner Trustee,  as Lessor,  and Lessee, as Lessee,
         as supplemented by Lease Supplement No. 1 dated July 29, 1998.

                  "OTHER  ACCELERATED  CREDITOR"  means any holder  (other  than
         GECAS,  Boeing,  any of the Bank Lenders and any Other EETC Transaction
         Person) of any  Indebtedness of Lessee or any personal or real property
         lease or sublease to which Lessee is bound, other than the Lease.

                  "OTHER  ACCELERATED  CREDITOR  DOCUMENTS"  means the documents
         executed in connection with any Indebtedness  owed by Lessee to, or any
         lease or sublease by Lessee of any personal or real  property  from, an
         Other Accelerated  Creditor,  and the documents  executed in connection
         with any extension or renewal thereof, other than the Lease,

                  "OTHER AIRCRAFT" means the Other 1998 EETC Aircraft,  the 1999
         EETC Aircraft and the 2000 EETC Aircraft.

                  "OTHER CREDITOR" means GECAS,  Boeing,  the Bank Lenders,  the
         Other EETC Transaction Persons and the Other Accelerated Creditors.

                  "OTHER  CREDITOR  AMENDMENT"  is  defined  in the  Restructure
         Agreement.

                  "OTHER  CREDITOR  NON-PAYMENT  DEFAULT"  is defined in Section
         14.6 of the Lease.

                  "OTHER CREDITOR PAYMENT DEFAULT" is defined in Section 14.6 of
         the Lease.

                  "OTHER EETC TRANSACTION DOCUMENTS" means the documents entered
         into with  respect to the lease and  financing  of the Other  Aircraft,
         PROVIDED that,  unless an N409  Restructuring  Event has occurred on or
         prior to December 1, 2004, the term Other EETC Transaction Documents as
         used in Section 14.6 hereof does not include the documents entered into
         solely with respect to the 2000 EETC Aircraft bearing U.S. registration
         number *.

                  "OTHER EETC  TRANSACTION  PERSONS"  means the Persons party to
         the Other EETC  Transaction  Documents  (other than Lessee,  Parent and
         Polar).

---------------
*        This  information has been  intentionally  deleted from the  FAA filing
         counterpart as the parties deem it to be  confidential  and proprietary
         information.

                                      -10-
<PAGE>

                  "OTHER EETC TRANSACTIONS"  means the transactions  pursuant to
         which the Other Aircraft are leased and financed.

                  "OTHER  1998 EETC  AIRCRAFT"  is defined in  Schedule 1 to the
         Lease.

                  "PARENT" means Atlas Air Worldwide Holdings,  Inc., a Delaware
         corporation.

                  "PARENT GUARANTY" means that certain Guaranty  Agreement dated
         as of the  Restructure  Agreement  Execution  Date  from the  Parent to
         Lessor relating to the Aircraft.

                  "PARENT  SECURITY   AGREEMENT"  means  that  certain  Security
         Agreement dated as of the Restructure Agreement Execution Date from the
         Parent to Lessor relating to the Aircraft.

                  "PARENT'S PROJECTED EBITDA" means Parent's Projected EBITDA as
         referenced in the Business Plan.

                  "PERMITTED EXTENSION INDEBTEDNESS" means renewals, extensions,
         substitutions,  refinancings or  replacements  (each an "extension") by
         Parent or any of its Subsidiaries of any Indebtedness of Parent or such
         Subsidiary, including any such successive transactions thereby, so long
         as (i) any such  Indebtedness  bears  interest at a rate which does not
         exceed 15% per annum,  (ii) any such Permitted  Extension  Indebtedness
         shall be in a  principal  amount  that does not  exceed  the  principal
         amount  immediately  prior to such  extension,  PLUS the  amount of any
         premium required to be paid in connection with such extension  pursuant
         to the  terms of such  Indebtedness,  PLUS the  amount of  expenses  of
         Parent or such Subsidiary  reasonably  incurred in connection with such
         extension,   (iii)  in  the  case  of  any  extension  of  subordinated
         Indebtedness, such Permitted Extension Indebtedness is made subordinate
         to the  obligations  of  Lessee  under  the  Lease at least to the same
         extent as the Indebtedness  immediately  prior to such extension,  (iv)
         such Permitted Extension Indebtedness has a final stated maturity later
         than the notes issued in connection with the Bank Lender  Documents and
         (v) the  amortization  and the  other  terms,  provisions,  conditions,
         covenants  and events of default  thereof  taken as a whole shall be no
         more  onerous or  restrictive  from the  perspective  of Parent and its
         Subsidiaries or any more favorable,  from the perspective of Mortgagee,
         than those  contained  in the  Indebtedness  immediately  prior to such
         extension.

                  "PERMITTED INDEBTEDNESS" means

                  (i)      Indebtedness incurred with respect to the Bank Lender
                           Documents;

                  (ii)     the Parent Guaranty and the Polar Guaranty;

                  (iii)    any Existing Indebtedness;

                  (iv)     any Permitted Extension Indebtedness;

                  (v)      with  respect  solely  to AFL III,  any  Indebtedness
         incurred by AFL III with respect to the AFL III Financing Agreement and
         the AFL III Leases;

                                      -11-
<PAGE>

                  (vi)     any Indebtedness incurred with respect to the Lease;

                  (vii)    any  Indebtedness  incurred with respect to the Other
         EETC Transactions;

                  (viii)   the  Exit  Facility,   PROVIDED  that  the  aggregate
         principal  amount  thereof  (including  any  letters  of credit  issued
         thereunder)   shall  not   exceed   $60,000,000.00   at  any  one  time
         outstanding;

                  (ix)     any Indebtedness constituting Intercompany Loans; and

                  (x)      any  other  Indebtedness  in an  aggregate  principal
         amount not to exceed $10,000,000 at any one time outstanding.

                  "PLAN  CONFIRMATION DATE" means the date of entry of the order
         of the Bankruptcy  Court confirming the Plan of  Reorganization,  which
         order is final and unstayed.

                  "PLAN OF  REORGANIZATION"  means  the  Final  Modified  Second
         Amended  Joint Plan of  Reorganization  of the Debtors dated as of July
         14, 2004 and confirmed by order of the Bankruptcy Court entered on July
         16, 2004.

                  "POLAR" means Polar Air Cargo, Inc., a California corporation.

                  "POLAR GUARANTY" means that certain  Guaranty  Agreement dated
         as of the  Restructure  Agreement  Execution  Date from Polar to Lessor
         relating to the Aircraft.

                  "POLAR  SECURITY   AGREEMENT"   means  that  certain  Security
         Agreement  dated as of the  Restructure  Agreement  Execution Date from
         Polar to Lessor relating to the Aircraft;

                  "REQUIRED  RATING"  means a rating of "BB-" by S&P or "Ba3" by
         Moody's.

                  "RESTRICTED  JUNIOR  PAYMENT"  means (i) any dividend or other
         distribution, direct or indirect, on account of any shares of any class
         of stock of  Lessee  or  Parent  now or  hereafter  outstanding  or any
         Affiliate   of  Lessee  or  Parent   other  than   dividends  or  other
         distributions  payable solely in such class of stock of Lessee,  Parent
         or any Affiliate of Lessee or Parent, as applicable,  to the holders of
         that class and except for any  distribution  or  dividend  that is made
         solely  to  Parent,  Polar or Lessee  (and,  if an  Affiliate  is not a
         wholly-owned  Subsidiary,  to the other shareholders of such Subsidiary
         on a pro rata  basis  or on a basis  that  results  in the  receipt  by
         Parent,  Polar or Lessee of dividends or distributions of greater value
         than it would  receive  on a pro  rata  basis),  (ii)  any  redemption,
         retirement,   sinking  fund  or  similar  payment,  purchase  or  other
         acquisition for value,  direct or indirect,  of any shares of any class
         of stock of Lessee,  Parent or any Affiliate of Lessee or Parent now or
         hereafter  outstanding  and (iii) any  payment  made to  retire,  or to
         obtain the surrender  of, any  outstanding  warrants,  options or other
         rights to acquire shares of any class of stock of Lessee, Parent or any
         Affiliate of Lessee or Parent now or hereafter outstanding.

                                      -12-
<PAGE>

                  "RESTRICTED JUNIOR PAYMENT CONDITIONS" means

                           (a)      no Lease  Default or Lease  Event of Default
                  shall have occurred and be continuing, and

                           (b)      Parent's  reserve of  Unrestricted  Cash and
                  Cash  Equivalents  and  Availability  at any time  during  any
                  period set forth below is equal to or greater  than the amount
                  set forth opposite such period below:

                  -------------------------------------------------------
                                                           MINIMUM
                  FOR THE PERIOD                          LIQUIDITY
                  -------------------------------------------------------
                  September 1 to October 7, 2004          $55,000,000
                  -------------------------------------------------------
                  October 8 to November 7, 2004           $60,000,000
                  -------------------------------------------------------
                  November 8 to  December 7, 2004         $65,000,000
                  -------------------------------------------------------
                  December 8, 2004 to January 7, 2005     $70,000,000
                  -------------------------------------------------------
                  January 8 to April 7, 2005              $75,000,000
                  -------------------------------------------------------
                  April 8, 2005 to September 30, 2005     $85,000,000
                  -------------------------------------------------------
                  October 1, 2005 to December 31, 2005    $95,000,000
                  -------------------------------------------------------
                  January 1, 2006 to December 31, 2006    $110,000,000
                  -------------------------------------------------------
                  January 1, 2007 and thereafter          $125,000,000
                  -------------------------------------------------------

                  Notwithstanding  the "at any time"  requirement,  within  each
         calendar   month,   Unrestricted   Cash  and  Cash   Equivalents,   and
         Availability may be less than the Minimum Liquidity set forth above for
         one period not to exceed five consecutive business days.

                  "RESTRUCTURE   AGREEMENT"   means  the   certain   Restructure
         Agreement  dated as of July 27, 2004 among Lessee,  Lessor,  Mortgagee,
         Owner Participant and others relating to the Aircraft.

                  "RESTRUCTURE AGREEMENT EXECUTION DATE" means July 27, 2004.

                  "SPECIAL COVENANTS  TERMINATION DATE" means the earlier of (i)
         the date that the 1998  Class A  Certificates  are paid in full or (ii)
         the first date that the senior  unsecured  debt of Lessee  achieves the
         Required Rating which comes after the debt to the Bank Lenders has been
         paid in full;  PROVIDED that a payment  directly or indirectly from the
         proceeds of a Bank Debt Refinancing shall not be deemed to be a payment
         in full of the debt to the Bank Lenders.

                  "SPECIAL INSPECTOR" is defined in Section 12(g) of the Lease.

                  "SPECIFIED  PRIOR  DEFAULTS"  means any Lease Default or Lease
         Event of Default  arising  out of or in  connection  with (i)  Lessee's
         failure to make payments of Basic Rent that were due under the Original
         Lease on July 2, 2003, January 2, 2004 and July 2, 2004

                                      -13-
<PAGE>

         and were due  under the Lease on  February  2, 2004 and March 2,  2004;
         (ii) Lessee's  failure to deliver  certain  financial  information  and
         other reports, certificates or other information as required by Section
         8.2.1 of the Original  Lease for periods  ending prior to July 1, 2004;
         (iii) Lessee's representations and warranties contained in certificates
         delivered  prior  to the  Restructure  Agreement  Execution  Date  with
         respect  to  Lessee's  financial  statements;  and (iv) the  filing  of
         Lessee's Chapter 11 Case.

                  "SUBSIDIARY"   means,   with   respect  to  any  Person,   any
         corporation,  partnership, association, joint venture or other business
         entity of which  more than 50% of the total  voting  power of shares of
         stock or other  ownership  interests  entitled  (without  regard to the
         occurrence of any contingency) to vote in the election of the Person or
         Persons  (whether  directors,   managers,  trustees  or  other  Persons
         performing  similar  functions) having the power to direct or cause the
         direction of the management  and policies  thereof is at the time owned
         or controlled, directly or indirectly, by that Person or one or more of
         the other Subsidiaries of that Person or a combination thereof.

                  "UNRESTRICTED  CASH AND CASH EQUIVALENTS"  means Cash and Cash
         Equivalents  that are not subject to any  restriction  or limitation on
         Parent's ability to withdraw (in the case of Cash) or sell (in the case
         of Cash Equivalents).

                  "1998  CLASS  A  CERTIFICATEHOLDERS"  means  the  Persons  who
         beneficially hold through the Depository Trust Company the 1998 Class A
         Certificates.

                  "1998 CLASS A CERTIFICATES"  means the 7.38% Atlas Air Initial
         Pass Through Certificates,  Series 1998-1A and 7.38% Atlas Air Exchange
         Pass Through  Certificates,  Series  1998-1A issued by the Class A Pass
         Through Trust.

                  "1998 EETC AIRCRAFT" means the following:

                           (a)      the Aircraft; and

                           (b)      the Other 1998 EETC Aircraft.

                  "1999 EETC AIRCRAFT" is defined in Schedule 1 to the Lease.

                  "2000 EETC AIRCRAFT" is defined in Schedule 1 to the Lease.

                  "747-200   AIRCRAFT"   is  defined  in  Section  6(k)  of  the
         Restructure Agreement.

                  "747-400   AIRCRAFT"   is  defined  in  Section  6(k)  of  the
         Restructure Agreement.

                  "747-400 AIRCRAFT AGREEMENT" is defined in Section 6(k) of the
         Restructure Agreement.

                  (ii)     CHANGES.  The  definitions of the following  terms in
Annex A to the Original  Lease are amended by deleting  each  definition  in its
entirety and inserting the following definitions in lieu thereof:

                                      -14-
<PAGE>

                  "CASH EQUIVALENTS" means, as at any date of determination, (i)
         marketable  securities  (a)  issued  or  directly  and  unconditionally
         guaranteed as to interest and principal by the United States Government
         or (b)  issued by any agency of the United  States the  obligations  of
         which are backed by the full faith and credit of the United States,  in
         each case  maturing  within two years after the date of purchase;  (ii)
         marketable  direct  obligations  (fixed and/or floating rate) issued by
         any state of the United States of America or any political  subdivision
         of any such state or any public  instrumentality  thereof, in each case
         maturing within two years after the date of purchase and having, at the
         time  of the  acquisition  thereof  and at all  times  thereafter,  the
         highest rating  obtainable from at least two of S&P, Moody's and Fitch,
         Inc.; (iii)  Dollar-denominated  marketable direct  obligations  (fixed
         and/or  floating  rate) issued by any  corporation  or commercial  bank
         including   medium   term   notes   and   bonds,   deposit   notes  and
         eurodollar/yankee  notes and bonds,  in each case  maturing  within two
         years  after  the date of  purchase  and,  at the  time of  acquisition
         thereof and at all times  thereafter,  both (A) having a rating from at
         least two of S&P, Moody's,  and Fitch, Inc. and (B) not having a rating
         of less than A from S&P, A2 from Moody's,  or A from Fitch,  Inc.; (iv)
         Dollar-denominated  commercial  paper  maturing  no more than two years
         from the date of purchase  and issued by a  corporation  or  commercial
         bank that, at the time of acquisition  of the  commercial  paper and at
         all times  thereafter,  both (A) has a short-term credit rating from at
         least two of S&P,  Moody's,  and  Fitch,  Inc.  and (B) does not have a
         short-term  credit rating of less than A-1 (or the equivalent  thereof)
         from S&P, P-1 (or the equivalent  thereof) from Moody's, or F-I (or the
         equivalent   thereof)   from  Fitch,   Inc.;   (v)   Dollar-denominated
         certificates  of deposit,  bankers'  acceptances  and/or time  deposits
         maturing  within  two years  after the date of  purchase  and issued or
         accepted by any  commercial  bank that, at the time of  acquisition  of
         such  security and at all times  thereafter,  both (A) has a short-term
         credit rating from at least two of S&P,  Moody's,  and Fitch,  Inc. and
         (B) does not have a short-term  credit  rating of less than A-1 (or the
         equivalent  thereof)  from S&P, P-1 (or the  equivalent  thereof)  from
         Moody's,  or F-1 (or the  equivalent  thereof) from Fitch,  Inc.;  (vi)
         shares of any money market mutual fund that (a) has at least 95% of its
         assets invested continuously in the types of investments referred to in
         clauses  (i) and  (ii)  above,  (b) has net  assets  of not  less  than
         $500,000,000 and (c) has the highest rating obtainable from either S&P,
         Moody's  or  Fitch,   Inc.;   (vii)   Dollar-denominated   asset-backed
         securities  (excluding  any  mortgage  products)  with a stated  bullet
         maturity  of no more than two years from the date of  purchase  and, at
         the time of acquisition  thereof and at all times thereafter,  both (A)
         having a rating from at least two of S&P, Moody's,  and Fitch, Inc. and
         (B) not having a rating of less than A from S&P, A2 from Moody's,  or A
         from  Fitch,  Inc.;  (viii)  repurchase  agreements  entered  into with
         financial institutions  satisfying the criteria set forth in clause (v)
         above with terms of not more than thirty days for securities  described
         in  clauses  (i) and (ii) above and  having a fair  market  value of at
         least  102% of the  amount  of the  repurchase  obligations;  and  (ix)
         auction rate securities (auction rate debt and money market preferreds)
         with terms of not more than ninety days and, at the time of acquisition
         thereof and at all times  thereafter,  both (A) having a rating from at
         least two of S&P, Moody's,  and Fitch, Inc. and (B) not having a rating
         of less than A from S&P, A2 from Moody's, or A from Fitch, Inc.

                                      -15-
<PAGE>

                  "CLASS A PASS THROUGH TRUST" means that certain Atlas Air Pass
         Through Trust  1998-1A-S  formed  pursuant to that certain Pass Through
         Trust  Agreement  dated as of  February  9,  1998  between  Lessee  and
         Wilmington Trust Company,  as Trustee,  as amended by that certain 1998
         Class A Pass  Through  Trust  Supplement  dated  as of the  Restructure
         Agreement Execution Date.

                  "EQUIPMENT  NOTES"  means and  includes  any  equipment  notes
         issued under the Trust  Indenture in the form specified in Section 2.01
         thereof (as such form may be varied  pursuant to the terms of the Trust
         Indenture),  including the applicable  allonge (each, an "ALLONGE" and
         collectively,  the "ALLONGES") thereto dated the Restructure  Agreement
         Execution Date and executed by the Owner Trustee and any Equipment Note
         issued  under the Trust  Indenture in exchange or  replacement  for any
         Equipment Note.

                  "FAIR MARKET  RENTAL VALUE" shall be determined as provided in
         Section 15.4 of the Lease.

                  "LEASE" or "LEASE AGREEMENT" means the Lease Agreement,  dated
         as of July 29, 1998 between the Owner Trustee,  as lessor,  and Lessee,
         as lessee,  as  supplemented  by Lease  Supplement No. 1 dated July 29,
         1998, and amended by Amendment No. 1 to Lease Agreement.

                  "LESSEE   OPERATIVE   AGREEMENTS"   means  the   Participation
         Agreement,  the Lease, the Purchase  Agreement  Assignment,  the Lessee
         Security Agreement,  the Engine Maintenance  Contract  Assignment,  the
         Restructure  Agreement and each other agreement  between Lessee and any
         other  party to the  Participation  Agreement  and/or  the  Restructure
         Agreement,  in each  case  relating  to the  transactions  contemplated
         thereby (other than the related tax indemnity agreement, which has been
         terminated).

                  "MOODY'S"  means  Moody's  Investors  Service,  Inc.  and  its
         successors.

                  "OPERATIVE AGREEMENTS" means, collectively,  the Participation
         Agreement, the Trust Agreement, the Purchase Agreement Assignment,  the
         Consent and Agreement, the Engine Consent and Agreement, the Lease, the
         Trust  Indenture,  the Bills of Sale,  the  Assignment  and  Assumption
         Agreement(s),   if  any,  executed   pursuant  to  Section  10  of  the
         Participation  Agreement,  the  Equipment  Notes,  the Lessee  Security
         Agreement,  the  Engine  Maintenance  Contract  Assignment,  the  Polar
         Guaranty, the Polar Security Agreement, the Parent Guaranty, the Parent
         Security and the Restructure Agreement.

                  "OWNER  PARTICIPANT   AGREEMENTS"  means,  collectively,   the
         Participation  Agreement,  the Trust Agreement and each other agreement
         between the Owner  Participant and any other party to the Participation
         Agreement  (other than the related tax indemnity  agreement,  which has
         been terminated).

                  "PASS  THROUGH  TRUST  AGREEMENT"  means  each  of  the  three
         separate Pass Through Trust  Agreements,  each dated as of the Issuance
         Date, by and between  Lessee and Pass Through  Trustee, and in the case
         of the  Class A Pass  Through  Trust,  includes  the 1998  Class A Pass
         Through  Trust  Supplement  dated  as  of  the  Restructure   Agreement
         Execution Date.

                                      -16-
<PAGE>

                  "PAYMENT DATE" means (a) for the period from the Delivery Date
         up to and  including  January  2,  2003  each  January  2 and  July  2,
         commencing  with the first  such date to occur  after the  Commencement
         Date and (b) after  January 2, 2003,  each date set forth on Schedule 2
         to Amendment No. 1 to Lease Agreement.

                  "PAYMENT  PERIOD"  means (a) for the period from the  Delivery
         Date up to and  including  January  2,  2003,  each of the  consecutive
         semiannual periods (or, if applicable, such shorter period ended on the
         first  Payment  Date of the Base Lease Term) during such portion of the
         Term ending on a Payment Date, the first such period  commencing on and
         including the  Commencement  Date and (b) after January 2, 2003,  means
         each of the consecutive monthly periods during such portion of the Term
         ending  on the date  immediately  proceding  a  Payment  Date  (or,  if
         applicable,  such  shorter  period  ended on the  Scheduled  Expiration
         Date), the first such period  commencing on January 2, 2004;  PROVIDED,
         HOWEVER,  that the period  commencing  after  January 2, 2003 up to and
         including  January 1, 2004 shall have no Payment  Period and Basic Rent
         for such  period  shall be paid on the dates set forth in Schedule 2 to
         Amendment No. 1 to Lease Agreement.

                  "PURCHASE  DATE"  means the last day,  or if such day is not a
         Business  Day, the  immediately  succeeding  Business  Day, of the Base
         Lease Term, as specified in any Purchase Notice.

                  "RENT" means,  collectively,  Basic Rent, Enhancement Rent and
         Supplemental Rent.

                  "SCHEDULED  EXPIRATION  DATE"  is  defined  in  Schedule  1 to
         Amendment No. 1 to Lease Agreement.

                  "SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes
         issued  under  the  Trust   Indenture  and  designated  as  "Series  A"
         thereunder,  in the Original Amount and maturities and bearing interest
         as  specified  in Schedule I to the Trust  Indenture  under the heading
         "Series A", as such Equipment Notes have been amended by the applicable
         Allonge.

                  "SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes
         issued  under  the  Trust   Indenture  and  designated  as  "Series  B"
         thereunder,  in the Original Amount and maturities and bearing interest
         as  specified  in Schedule I to the Trust  Indenture  under the heading
         "Series B", as such Equipment Notes have been amended by the applicable
         Allonge.

                  "SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes
         issued  under  the  Trust   Indenture  and  designated  as  "Series  C"
         thereunder,  in the Original Amount and maturities and bearing interest
         as  specified  in Schedule I to the Trust  Indenture  under the heading
         "Series C", as such Equipment Notes have been amended by the applicable
         Allonge.

                  "STANDARD  & POOR'S" or "S&P" means  Standard & Poor's  Rating
         Services,  a  division  of The  McGraw-Hill  Companies,  Inc.,  and its
         successors.

                                      -17-
<PAGE>

                  "STIPULATED  LOSS VALUE" means,  with respect to the Aircraft,
         during the Base Lease Term,  (a) for the period from the Delivery  Date
         up  to  and  including  January  2,  2003,  the  amount  determined  by
         multiplying  (i) the percentage set forth in Schedule 3 to the Original
         Lease  opposite the Stipulated  Loss Value Date as of which  Stipulated
         Loss Value is required to be  computed  by (ii)  Lessor's  Cost and (b)
         after January 2, 2003 (except as otherwise provided pursuant to Section
         19),  the amount set forth in  Schedule 3 to  Amendment  No. 1 to Lease
         Agreement   opposite  the  Stipulated  Loss  Value  Date  as  of  which
         Stipulated  Loss  Value is  required  to be  computed.  Notwithstanding
         anything to the contrary in any Operative  Agreement,  Stipulated  Loss
         Value  shall  always be  sufficient  to pay in full,  as of the date of
         payment thereof  (assuming  timely payment of the Equipment Notes prior
         to such date),  the aggregate  unpaid principal amount of all Equipment
         Notes  outstanding  as of such date,  together  with accrued and unpaid
         interest on all such Equipment Notes as of such date.

                  "STIPULATED LOSS VALUE DATE" means, for any month, (a) for the
         period from the Delivery Date up to and including  January 2, 2003, the
         day in such month  specified in Schedule 3 to the Original Lease or, if
         such a day is not a Business Day, the immediately  succeeding  Business
         Day and (b) after January 2, 2003,  the day in such month  specified in
         Schedule 3 to Amendment  No. 1 to Lease  Agreement or, if such a day is
         not a Business Day, the immediately succeeding Business Day.

                  "SUPPLEMENTAL  RENT"  means,  without  duplication,   (a)  all
         amounts,  liabilities,  indemnities and  obligations  (other than Basic
         Rent and Enhancement Rent but including Make-Whole Amount, if any, EETC
         Amendment  Fee  Consideration,  if any,  and  Enhancements  pursuant to
         clause (ii) of Section  8.4.2,  if any) that Lessee  assumes or becomes
         obligated to or agrees to pay under any Lessee  Operative  Agreement to
         or on  behalf  of  Lessor  or  any  other  Person,  including,  without
         limitation,  payments of Stipulated Loss Value,  Termination  Value and
         payments of indemnities under Section 9 of the Participation Agreement,
         but  excluding  any amount as to which Lessee is obligated to pay a Pro
         Rata Share  pursuant to clause (e) of this  definition,  (b) (i) to the
         extent not payable  (whether or not in fact paid) under Section 6(a) of
         the Note Purchase  Agreement (as  originally in effect or amended),  an
         amount  or  amounts  equal to the fees paid to the  relevant  Liquidity
         Provider under Section 2.03 of each Liquidity  Facility and the related
         Fee Letter (as defined in the Intercreditor  Agreement) multiplied by a
         fraction the numerator of which shall be the then outstanding aggregate
         principal  amount of the Series A Equipment  Notes,  Series B Equipment
         Notes and Series C Equipment  Notes and the  denominator of which shall
         be the then  outstanding  aggregate  principal  amount of all "Series A
         Equipment  Notes",  "Series B Equipment  Notes" and "Series C Equipment
         Notes" (each as defined in the Note Purchase  Agreement);  (ii) (x) the
         amount  equal to  interest  on any  Downgrade  Advance  (other than any
         Applied  Downgrade  Advance)  payable  under  Section  3.07(e)  of each
         Liquidity  Facility  minus  Investment  Earnings  from  such  Downgrade
         Advance  multiplied  by (y) the  fraction  specified  in the  foregoing
         clause (i); (iii) (x) the amount equal to interest on any Non-Extension
         Advance (other than any Applied  Non-Extension  Advance)  payable under
         Section 3.07(a)(i) of each Liquidity Facility minus Investment Earnings
         from  such  Non-Extension   Advance  multiplied  by  (y)  the  fraction
         specified in the forgoing clause (i); (iv) if any payment default shall
         have occurred and be continuing  with respect to interest on any Series
         A Equipment Notes, Series B

                                      -18-
<PAGE>

         Equipment Notes or Series C Equipment Notes, (x) the excess, if any, of
         (1) an  amount  equal  to  interest  on  any  Unpaid  Advance,  Applied
         Downgrade  Advance  or  Applied  Non-Extension  Advance  payable  under
         Section  3.07(a)  of  each  Liquidity  Facility  over  (2)  the  sum of
         Investment  Earnings from any Final Advance plus any amount of interest
         at the Payment Due Rate actually  payable (whether or not in fact paid)
         by Lessee in respect of the overdue scheduled interest on the Equipment
         Notes in  respect  of which  such  Unpaid  Advance,  Applied  Downgrade
         Advance or Applied  Non-Extension  Advance was made multiplied by (y) a
         fraction  the  numerator of which shall be the then  aggregate  overdue
         amounts of interest on the Series A Equipment Notes, Series B Equipment
         Notes and Series C Equipment  Notes (other than  interest  becoming due
         and payable  solely as a result of  acceleration  of any such Equipment
         Notes) and the denominator of which shall be the then aggregate overdue
         amounts  of  interest  on all  "Series A  Equipment  Notes",  "Series B
         Equipment Notes" and "Series C Equipment Notes" (each as defined in the
         Note Purchase  Agreement) (other than interest becoming due and payable
         solely as a result of acceleration of any such "Equipment Notes");  and
         (v) Lessee's pro rata share of any other  amounts owed to the Liquidity
         Providers by the  Subordination  Agent as borrower under each Liquidity
         Facility (other than amounts due as repayment of advances thereunder or
         as interest on such advances), except to the extent payable pursuant to
         clause  (ii),  (iii) or (iv) above,  (c) Lessee's pro rata share of all
         compensation and reimbursement of expenses,  disbursements and advances
         payable by Lessee under the Pass Through Trust Agreements, (d) Lessee's
         pro rata share of all  compensation  and  reimbursement of expenses and
         disbursements   payable   to  the   Subordination   Agent   under   the
         Intercreditor  Agreement except with respect to any income or franchise
         taxes  incurred  by the  Subordination  Agent  in  connection  with the
         transactions  contemplated by the Intercreditor Agreement, (e) Lessee's
         pro rata  share of any  amount  payable  under  Section  9.1  (and,  if
         attributable  thereto,  Section 9.5) of the Participation  Agreement to
         any Pass  Through  Indemnitee  to the extent  such  amount  relates to,
         results  from or  arises  out of or in  connection  with  (i) the  Pass
         Through Agreements or the enforcement of any of the terms of any of the
         Pass Through Agreements,  (ii) the offer, sale, or delivery of the Pass
         Through  Certificates or any interest therein or represented thereby or
         (iii) any breach of or failure  to  perform  or  observe,  or any other
         noncompliance with, any covenant or agreement or other obligation to be
         performed by Lessee under any Pass Through  Agreement or the falsity of
         any  representation or warranty of Lessee in any Pass Through Agreement
         and (f) in the event  Lessee  requests any  amendment to any  Operative
         Agreement  or Pass  Through  Agreement,  Lessee's pro rata share of all
         reasonable fees and expenses (including,  without limitation,  fees and
         disbursements of counsel) of the Escrow Agents and the Paying Agents in
         connection  therewith  payable by the Pass Through  Trustees  under the
         Escrow Agreements.  As used herein,  "Lessee's pro rata share" means as
         of any time a fraction, the numerator of which is the principal balance
         then outstanding of Equipment Notes and the denominator of which is the
         aggregate  principal  balance then outstanding of all "Equipment Notes"
         (as such term is  defined  in each of the  Operative  Indentures).  For
         purposes of this  definition,  the terms "Applied  Downgrade  Advance",
         "Applied Non-Extension Advance", "Cash Collateral Account",  "Downgrade
         Advance",  "Final  Advance",   "Investment  Earnings",   "Non-Extension
         Advance" and "Unpaid Advance" shall have the meanings specified in each
         Liquidity Facility.

                                      -19-
<PAGE>

                  "TERM"  means the Base  Lease  Term;  PROVIDED  that if at the
         scheduled  end of the Base Lease Term the Aircraft or Airframe is being
         used,  or was within six (6) months prior  thereto  being used,  by the
         U.S. Government pursuant to CRAF, the Term shall be deemed extended for
         the period  necessary to accommodate  usage of the Aircraft or Airframe
         pursuant  to CRAF  plus six  months  thereafter,  and  Lessee  shall be
         obligated to pay with respect to any such period of extension (i) Basic
         Rent at a daily  equivalent rate equal to the average of the Basic Rent
         paid during the Base Lease Term plus (ii) the daily  equivalent rate of
         Enhancement  Rent,  if  applicable  at the time,  paid during the final
         Payment Period.

                  "TERMINATION  VALUE"  means,  with  respect  to the  Aircraft,
         during the Base Lease Term,  (a) for the period from the Delivery  Date
         up  to  and  including  January  2,  2003,  the  amount  determined  by
         multiplying  (i) the percentage set forth in Schedule 4 to the Original
         Lease opposite the Termination Value Date as of which Termination Value
         is required to be computed by (ii)  Lessor's Cost and (b) after January
         2, 2003  (except as  otherwise  provided  pursuant to Section  19), the
         amount set forth in Schedule 4 to  Amendment  No. 1 to Lease  Agreement
         opposite the Termination  Value Date as of which  Termination  Value is
         required to be  computed.  Notwithstanding  anything to the contrary in
         any Operative  Agreement,  Termination Value shall always be sufficient
         to pay in full,  as of the date of  payment  thereof  (assuming  timely
         payment of the  Equipment  Notes  prior to such  date),  the  aggregate
         unpaid principal  amount of all Equipment Notes  outstanding as of such
         date,  together with accrued and unpaid  interest on all such Equipment
         Notes as of such date.

                  "TERMINATION  VALUE DATE"  means,  for any month,  (a) for the
         period from the Delivery Date up to and including  January 2, 2003, the
         day in such month  specified in Schedule 4 to the Original Lease or, if
         such a day is not a Business Day, the immediately  succeeding  Business
         Day and (b) after January 2, 2003,  the day in such month  specified in
         Schedule 4 to Amendment  No. 1 to Lease  Agreement or, if such a day is
         not a Business Day, the immediately succeeding Business Day.

                  "TRUST INDENTURE" means the Trust Indenture and Mortgage dated
         as of even date with the Participation Agreement, between Owner Trustee
         and  Mortgagee,  as  supplemented  by the Trust  Indenture and Mortgage
         Supplement  dated July 29, 1998 and the Trust  Indenture  and  Mortgage
         Supplement  dated  March 19,  2004 and as further  supplemented  by the
         Trust  Indenture and Mortgage  Supplement  dated as of the  Restructure
         Agreement Execution Date.

                  (iii) DELETIONS.  The definitions of the terms "ADVERSE CHANGE
IN TAX LAW", "CHANGE IN TAX LAW", "EBO DATE", "EBO PRICE",  "EXCLUDED PAYMENTS",
"MATERIALLY ADVERSE TAX EVENT", "NEW DEBT", "REFUNDING CERTIFICATE",  "REFUNDING
DATE", "REFUNDING INFORMATION", "RENEWAL LEASE TERM", "RENEWAL NOTICE", "RENEWAL
RENT",  "RENEWAL RENT CAP", "RENEWAL TERM EXPIRATION DATE",  "SUBSEQUENT RENEWAL
LEASE TERM",  "TAX ATTRIBUTE  PERIOD" and "TAX  INDEMNITY  AGREEMENT" are hereby
deleted from Annex A to the Original Lease in their entirety.

                                      -20-
<PAGE>

                  SECTION 2. AMENDMENTS TO SECTION 3 OR THE ORIGINAL LEASE.  (A)
Section  3.1 of the  Original  Lease is hereby  amended by  deleting  the second
sentence of such Section 3.1 in its entirety.

                  (B)      Clauses  (a)  through  (d) of  Section  3.2.1  of the
Original Lease are hereby amended by deleting such clauses in their entirety and
inserting the following in lieu thereof:

                  (a)  During  the  Base  Lease  Term,  (i) up to and  including
         January 2, 2003,  Lessee  shall pay to Lessor,  on each  Payment  Date,
         Basic Rent in the amount  specified in Schedule 2 to the Original Lease
         for such Payment Date,  which shall be allocated to the Payment  Period
         ending on such Payment Date, if designated as a payment in arrears,  or
         allocated to the Payment  Period  commencing  on such Payment  Date, if
         designated  as a  payment  in  advance,  in each case as  specified  in
         Schedule 2 to the Original Lease and (ii) after January 2, 2003, Lessee
         shall,  except as  otherwise  provided  pursuant  to Section 19, pay to
         Lessor,  on each Payment  Date,  Basic Rent in the amount  specified in
         Schedule 2 to Amendment No. 1 to Lease Agreement for such Payment Date,
         which shall be allocated to the Payment  Period  ending on such Payment
         Date,  if  designated  as a payment in  arrears,  or  allocated  to the
         Payment  Period  commencing  on such Payment  Date,  if designated as a
         payment  in  advance,  in  each  case as  specified  in  Schedule  2 to
         Amendment No. 1 to Lease Agreement;  PROVIDED, HOWEVER, that Basic Rent
         paid on the July 2, 2003, October 1, 2003,  October 30, 2003,  November
         5, 2003 and  December  17,  2003  Payment  Dates and Basic Rent paid on
         January 30, 2004 and March 17, 2004 shall be  allocated  as provided in
         Schedule 2 to Amendment No. 1 to Lease Agreement.

                  (C)      Clause (e) of Section 3.2.1 of the Original  Lease is
hereby amended by relettering such clause as clause "(b)".

                  (D)      Section  3.3(a)  of  the  Original  Lease  is  hereby
amended by adding the following words to the end of Section 3.3(a):  "So long as
Mortgagee  has not given  notice to Lessee that the Lien of the Trust  Indenture
has been  discharged,  if (i) Lessee  consolidates a wire transfer of Basic Rent
with payments of Enhancement Rent or Supplemental Rent for the Aircraft, or (ii)
Lessee  consolidates  a wire transfer of Rent with payments of rent under leases
and/or principal or interest under equipment notes (as applicable) for any Other
Aircraft  and such  wire  transfer  contains  payments  of  Enhancement  Rent or
Supplemental Rent for the Aircraft and/or similar  payments,  AMLR and/or Excess
Rent (as defined in the leases for certain of the Other  Aircraft)  with respect
to such Other Aircraft, then, at least one (1) Business Day prior to Mortgagee's
receipt  of such Rent  described  in clauses  (i) or (ii)  above,  Lessee  shall
provide Mortgagee with a spreadsheet itemizing by U.S. registration mark how the
payments of Basic Rent,  Enhancement  Rent or Supplemental  Rent with respect to
the Aircraft and, if  applicable,  such similar  payments  and/or AMLR or Excess
Rent with respect to such Other  Aircraft  should be applied  among the Aircraft
and such Other Aircraft.

                  (E)      Section  3.3(c)  of  the  Original  Lease  is  hereby
amended by deleting the words ", other than Excluded Payments" therefrom.

                  (F)      Section  3.3(d)  of  the  Original  Lease  is  hereby
amended by deleting such section in its entirety.

                                      -21-
<PAGE>

                  (G)      Clause (e) of Section  3.3 of the  Original  Lease is
hereby amended by relettering such clause as clause "(d)".

                  SECTION 3. AMENDMENT TO SECTION 4.7(b) OF THE  ORIGINAL LEASE.
Section 4. 7(b) of the Original  Lease is hereby amended by adding the following
to the end of such Section 4.7(b):

                  Notwithstanding  the foregoing,  at all times on and after the
         date that Lessee or any Affiliate of Lessee is the Owner Participant or
         otherwise  beneficially owns (or has the contractual option to acquire)
         a  majority  of  the  Owner  Participant's  interest  in  the  Aircraft
         (including  all times after Lessee or any Affiliate of Lessee ceases to
         be the Owner Participant or to beneficially own or have the contractual
         option to acquire such Owner Participant's  interest),  Lessor will not
         have the right to exercise its rights as a "secured  party",  "lessor",
         or "conditional  vendor",  or their equivalent,  under Section 1110 for
         any purpose in  connection  with such  Aircraft  in any case  commenced
         under the Bankruptcy Code (and this clause constitutes a waiver, to the
         extent set forth herein, of Lessor's and the Owner Participant's rights
         under Section 12 of the Participation  Agreement),  provided,  however,
         that  (i)  Mortgagee  will  nevertheless  have all of the  rights  of a
         secured party and lessor unless and until the Equipment Notes have been
         indefeasibly  paid in full in cash  (including  any  such  rights  that
         Mortgagee has as an assignee of Lessor under the Trust  Indenture),  it
         being  understood  that,  to the  extent  necessary  for  Mortgagee  to
         exercise any such rights as its  assignee,  Lessor will retain all such
         rights that it may have even though it is  waiving,  as between  Lessor
         and   Mortgagee,   the  right  to  exercise   such  rights   under  the
         circumstances  set forth above,  and (ii) Lessee is not waiving  herein
         any rights it has or could have under  Section  1110 as a lessee of the
         Aircraft.  For the avoidance of doubt, Lessee's options to purchase the
         Aircraft pursuant to Sections 10 and 17 of this Lease do not constitute
         "the   contractual   option  to  acquire  a   majority   of  the  Owner
         Participant's interest in the Aircraft".

                  SECTION  4.  AMENDMENTS  TO SECTION 7 OF THE  ORIGINAL  LEASE.
Section 7 of the  Original  Lease is hereby  amended by (i) deleting the proviso
contained in Section 7.1.2,  (ii) deleting the words "or any Renewal Lease Term"
from Section 7.2.7(c) and (iii) deleting  Section 7.2.7(i) in its entirety.

                  SECTION 5. AMENDMENTS TO SECTION 8 OF THE  ORIGINAL LEASE. (A)
Section 8 of the Original Lease is hereby amended by deleting  Sections 8.2.1(a)
and (b) in their entirety and substituting the following in lieu thereof:

                  (a)      Within  90 days  after  the end of each of the  first
         three  fiscal  quarters  in each fiscal  year of Parent,  an  unaudited
         balance sheet of Parent and its  consolidated  affiliates as of the end
         of such quarter and  unaudited  related  statements  of income and cash
         flows for the period  commencing at the end of the previous fiscal year
         and ending with the end of such quarter,  prepared in  accordance  with
         GAAP and in the case of the fiscal  quarter  ending  March 31, 2005 and
         each and  every  fiscal  quarter  ending  thereafter  setting  forth in
         comparative form the corresponding figures for the corresponding period
         in the

                                      -22-
<PAGE>

         preceding fiscal year, prepared in accordance with GAAP; PROVIDED that,
         so long as Parent  is  subject  to the  reporting  requirements  of the
         Securities Exchange Act of 1934, a copy of Parent's report on Form 10-Q
         for  such  fiscal  quarter  (excluding   exhibits)  will  satisfy  this
         paragraph (a); PROVIDED, FURTHER, that for fiscal quarters ending March
         31, 2004, June 30, 2004 and September 30, 2004,  Lessee will provide an
         unaudited balance sheet and unaudited related  statements of income and
         cash flow of Parent and its consolidated  affiliates within 120 days of
         the end of such quarter.

                  (b)      Within 120 days after the end of each  fiscal year of
         Parent,  an  audited  balance  sheet  of  Parent  and its  consolidated
         affiliates  as of the end of  such  fiscal  year  and  related  audited
         statements  of income and cash flows for such fiscal year,  prepared in
         accordance  with GAAP,  together with a report of Lessee's  independent
         certified  public  accountants  with  respect  to  their  audit of such
         financial  statements,  and  in the  case  of the  fiscal  year  ending
         December 31, 2005 and each and every fiscal year ending  thereafter  in
         comparative  form with the  preceding  fiscal year;  PROVIDED  that, so
         long  as  Parent  is  subject  to  the  reporting  requirements  of the
         Securities Exchange Act of 1934, a copy of Parent's report on Form 10-K
         for such fiscal year  (excluding  exhibits) will satisfy this paragraph
         (b);  PROVIDED,  FURTHER,  that  for the fiscal year ended December 31,
         2003,  Lessee shall provide an audited  balance sheet of Parent and its
         consolidated  affiliates and audited  related  statements of income and
         cash flows as soon as such audited  balance  sheet and audited  related
         statements of income and cash flows are available.

                  (c)      Notwithstanding the foregoing,  as soon as available,
         and in any event within  thirty (30) days  following the date of filing
         with the Securities and Exchange Commission, one copy of each Quarterly
         Report on Form 10-Q (or any successor  form thereto  promulgated by the
         Securities and Exchange Commission) of Parent and each Annual Report on
         Form 10-K (or any successor form thereto  promulgated by the Securities
         and  Exchange  Commission)  of Parent  filed  with the  Securities  and
         Exchange Commission.

                  (d)      Lessee  shall  deliver  to  Mortgagee  a copy  of any
         officer's  certificate  or notice that Lessee is required to deliver to
         the  administrative  agent under the Bank Lender Documents  pursuant to
         Sections 5. 1 (viii),  (ix),  (x) and (xii) of the Credit  Agreement or
         any  comparable  section  of any  Bank  Lender  Documents  executed  in
         connection with a Bank Debt  Refinancing or any amendment of the Credit
         Agreement.

                  (e)      In the  event  that  an  executive  officer  (or  any
         officer  with  responsibility  in  relation  to this Lease or any other
         person determining senior management  policies or exercising  executive
         responsibilities)  of Lessee shall have actual knowledge of the failure
         by Lessee to observe or perform (or  cause to be observed or performed)
         in any material respect any of its covenants, agreements or obligations
         in Sections 8.4.1,  8.4.2, 8.4.3, 8.4.4 or 12(g), Lessee shall deliver,
         within five (5) Business Days of such actual knowledge,  an affirmative
         written notice thereof to Lessor, Owner Participant and Mortgagee.

                  (f)      Lessee shall deliver to Lessor, Owner Participant and
         Mortgagee  as  soon as  available  and in any  event  within  five  (5)
         Business  Days after the end of each  quarter of each fiscal  year,  an
         officer's certificate certifying that Lessee is in compliance with its

                                      -23-
<PAGE>

         covenants,  agreements and obligations in Sections 8.4.1, 8.4.2, 8.4.3,
         8.4.4 or 12(g)  or,  if Lessee  is not in  compliance,  specifying  the
         nature  of  the   non-compliance,   the  period  of  existence  of  the
         non-compliance and the action that Lessee has taken or proposes to take
         with respect thereto.

                  (B)      Section 8 of the Original  Lease is amended by adding
the following to the end of such Section 8 as new Sections 8.3 and 8.4:

                  8.3      [Intentionally Omitted]

                  8.4.1    RESTRICTED  PAYMENTS;  RESTRICTIONS ON  INDEBTEDNESS;
         RESTRICTIONS  ON LEASES  AND  SUBLEASES:  MERGERS;  LINES OF  BUSINESS;
         SUBORDINATED DEBT; CONTINGENT OBLIGATIONS.

                  From and after the  Restructure  Agreement  Execution Date and
         prior to the Special  Covenants  Termination Date, Lessee will not, and
         Lessee will not permit  Parent or any  Subsidiary  or any  Affiliate of
         Lessee or Parent to:

                           (a)      make any Restricted  Junior Payment,  unless
                  the Restricted  Junior  Payment  Conditions are satisfied both
                  immediately  prior to  giving  effect  to the  making  of such
                  Restricted  Junior  Payment  and  after  giving  effect to the
                  making of such proposed Restricted Junior Payment;

                           (b)      create,   incur  (by   merger,   conversion,
                  exchange or  otherwise),  assume,  guarantee or become liable,
                  contingently or otherwise, for any Indebtedness (including any
                  Acquired  Indebtedness),  unless the  Additional  Indebtedness
                  Incurrence  Conditions are satisfied both immediately prior to
                  giving  effect  to the  creation,  incurrence,  assumption  or
                  guarantee of such other  Indebtedness  and after giving effect
                  to such proposed creation, incurrence, assumption or guarantee
                  of such other Indebtedness;  PROVIDED,  HOWEVER,  this Section
                  8.4.l(b)  shall  not  apply  to  Permitted  Indebtedness;  and
                  PROVIDED,   FURTHER,   for  the   avoidance   of   doubt   and
                  notwithstanding  anything to the  contrary  contained  in this
                  Lease,  the accrual of interest,  accretion or amortization of
                  original  issue  discount  and  the  payment  of  interest  or
                  dividends in the form of additional  Indebtedness  will not be
                  deemed to be an incurrence of Indebtedness;

                           (c)      enter into any lease or sublease of any real
                  or  personal  property  as lessee  or  sublessee  (other  than
                  intercompany leases between Parent, Polar and Lessee),  unless
                  the Additional Lease Incurrence  Conditions are satisfied both
                  immediately  prior to giving  effect to the  entering  into of
                  such other lease or sublease and after  giving  effect to such
                  entering  into of  such  other  proposed  lease  or  sublease;
                  PROVIDED, HOWEVER, Operating Leases and Capital Leases entered
                  into after the Restructure  Agreement Execution Date which are
                  replacements  of Operating  Leases or Capital Leases in effect
                  on the  Restructure  Agreement  Execution Date (and related to
                  the same property),  shall be deemed to have been entered into
                  after the  Restructure  Agreement  Execution  Date only to the
                  extent that the scheduled cash rental payments  required to be
                  made  thereunder  during any fiscal year of Lessee  exceed the
                  scheduled cash rental payments required to be made during any

                                      -24-
<PAGE>

                  fiscal year of Lessee under the  replaced  leases as in effect
                  on the Restructure Agreement Execution Date;

                           (d)      (x) enter into any  transaction of merger or
                  consolidation,  or liquidate,  wind up or dissolve  itself (or
                  suffer any  liquidation  or  dissolution),  or  convey,  sell,
                  lease,  sublease,  transfer  or  otherwise  dispose of, in one
                  transaction or a series of transactions,  all or substantially
                  all of its  business,  property or fixed  assets,  whether now
                  owned or  hereafter  acquired,  (y) change to any  substantial
                  extent any line or lines of  business  activity  engaged in by
                  Lessee as described in the Business Plan, or (z) engage to any
                  substantial extent in any line or lines of business other than
                  airfreight  and  airfreight   services   consistent  with  the
                  Business Plan; PROVIDED, HOWEVER:

                                    (i)      any  Subsidiary  of  Parent  may be
                           merged  with or into  Parent,  Lessee  or  Polar,  or
                           (other than Lessee or Polar) be liquidated,  wound up
                           or  dissolved;  PROVIDED  that, in the case of such a
                           merger,   Parent,   Lessee  or  Polar  shall  be  the
                           continuing or surviving corporation; and

                                    (ii)     any   Subsidiary   of  Parent   may
                           convey,  lease  (subject,  in the case of Lessee,  to
                           Section 7.2.7),  license,  sell or otherwise transfer
                           all or substantially all of its business,  properties
                           or  assets  to   Parent,   Lessee  or  Polar  in  one
                           transaction or a series of  transactions,  so long as
                           any security  interests  and liens  granted to Lessor
                           and  Mortgagee  in the  assets so  transferred  shall
                           remain in full force and effect and  perfected (to at
                           least the same extent as in effect  immediately prior
                           to  such  transfer)  and  all  actions   required  to
                           maintain said perfected status have been taken;

                           (e)      in addition to and not in limitation of, any
                  other term,  covenant or condition set forth in this Lease (x)
                  any Indebtedness of Parent and its Subsidiaries which shall be
                  subordinated in right of payment to any other  Indebtedness of
                  Parent  and  its   Subsidiaries   shall   also  be   expressly
                  subordinated  in right  of  payment  on the same  basis to the
                  obligations  under  the  Credit  Agreement,   the  Lease,  the
                  Equipment  Notes,  the  Other  EETC  Transactions  and AFL III
                  Financing   Agreement  and  (y)  no  repayments  of  any  such
                  subordinated   Indebtedness   (except  scheduled  payments  of
                  principal and interest or mandatory  prepayments of principal)
                  shall be made unless, on a pro forma basis after giving effect
                  to such repayment,  Parent and its  Subsidiaries shall be able
                  to  incur  an  additional  $1.00  of  Indebtedness  under  the
                  Additional Indebtedness Incurrence Conditions; or

                           (f)      create  or  become  or  remain  liable  with
                  respect to any Contingent Obligation, except:

                                    (i)      Parent  and  any   Subsidiary   may
                           become and remain  liable with respect to  Contingent
                           Obligations  arising under their guaranties under the
                           Credit   Agreement,   the   Lease,   the  Other  EETC
                           Transactions,  the  Polar  Guaranty  and  the  Parent
                           Guaranty;

                                      -25-
<PAGE>

                                    (ii)     Lessee may become and remain liable
                           with respect to Contingent Obligations under Interest
                           Rate Agreements and Currency Agreements with a lender
                           under the Credit Agreement;

                                    (iii)    Parent  and  its  Subsidiaries  may
                           become and remain  liable with respect to  Contingent
                           Obligations  in respect of customary  indemnification
                           and purchase price adjustment obligations incurred in
                           connection with sales of assets or securities;

                                    (iv)     Parent  and  its  Subsidiaries  may
                           become and remain  liable with  respect to letters of
                           credit issued under the Exit Facility;

                                    (v)      Parent  and  its  Subsidiaries  may
                           become and remain  liable with  respect to letters of
                           credit  issued in the ordinary  course of business of
                           Parent  and  its  Subsidiaries  in an  amount  not to
                           exceed $5,000,000 in the aggregate at any time;

                                    (vi)     Parent  and  its  Subsidiaries,  as
                           applicable,   may  remain   liable  with  respect  to
                           Contingent  Obligations  described  in Schedule 8.4.1
                           (f)(vi)  annexed  hereto  (other  than in  respect of
                           letters of credit);

                                    (vii)    Parent  and  its  Subsidiaries  may
                           become and remain  liable with respect to  Contingent
                           Obligations to the extent such Contingent Obligations
                           are permitted pursuant to Section 8.4.1(c); and

                                    (viii)   Parent  and  its  Subsidiaries  may
                           become  and  remain  liable  with  respect  to  other
                           Contingent  Obligations;  PROVIDED  that the  maximum
                           aggregate  liability,  contingent  or  otherwise,  of
                           Lessee  and its  Subsidiaries  in respect of all such
                           Contingent   Obligations  shall  at  no  time  exceed
                           $10,000,000.

                  8.4.2    ENHANCEMENTS

                  If, after the Restructure  Agreement  Execution Date and prior
         to the Special Covenants  Termination Date, any Other Creditor receives
         any   Enhancement  in  connection   with  any   amendment,   waiver  or
         modification  of the terms of such Other  Creditor's  written  contract
         with Lessee  regarding any action,  inaction,  state of affairs or item
         which  constitutes  an event of default or may have  become an event of
         default under the terms of such Other Creditor's  written contract with
         Lessee without such amendment, waiver or modification. Lessee shall (a)
         give prompt  notice to Mortgagee  and Lessor  describing  in reasonable
         detail the amendment,  waiver or modification and the Enhancement given
         in connection therewith, and (b) cause Lessor to simultaneously receive
         equal and  identical  (or if identical is not  possible,  substantially
         identical) Enhancements (calculated as the net economic benefit to such
         Other Creditor,  but not less than zero);  PROVIDED that any settlement
         by Lessee in the ordinary  course of business of  contractual  aircraft
         return condition obligations of Lessee regarding an aircraft which does
         not exceed the amount of the  applicable  contractual  aircraft  return
         condition  obligation of Lessee shall not constitute an Enhancement for
         the purposes hereof. Enhancements which are calculated on a

                                      -26-
<PAGE>

         per unit  basis will be  provided  to Lessor on a per unit  basis,  and
         Enhancements   which  are  provided  as  a  percentage  of  outstanding
         obligations shall be provided to Lessor pro rata in the proportion that
         the debt then  outstanding on the Series A Equipment Notes bears to the
         amount of the  obligation  owed to such  Other  Creditor.  Enhancements
         which are  payable in cash shall be paid by Lessee to Lessor  hereunder
         either (i) as  additional  Rent in the case of  Enhancements  which are
         being provided  because an Other Creditor is receiving new or increased
         rent,  debt payments or other periodic  payments,  fees or compensation
         ("ENHANCEMENT  RENT")  or (ii)  as  Supplemental  Rent  in the  case of
         Enhancements  which  are  being  provided  because  an  Other  Creditor
         received maintenance reserves or other non-periodic  payments,  fees or
         compensation.

                  8.4.3 ADDITIONAL SALE PROVISIONS. Lessee agrees to comply with
the provisions of Schedule 8.4.3.

                  8.4.4    PROTECTIONS  FOR  THE  USE  AND  DEPRECIATION  OF THE
AIRCRAFT

                  Without  limiting the  generality of the provisions of Section
         8.1 hereof,  after the Restructure  Agreement  Execution  Date,  Lessee
         shall  have  the  following  obligations,  in  addition  to  any  other
         obligations  under this Lease with  respect to the  maintenance  of the
         Aircraft and Engines:

                           (a)      Lessee  shall  at  all  times  maintain  the
                  Airframe and each Engine in airworthy condition, including the
                  performance of all procedures and checks necessary to keep the
                  Aircraft  and  each  Engine  in an  airworthy  condition,  and
                  without limiting the generality of the foregoing, Lessee shall
                  perform  all  airframe  "D-Checks"  as  required  for  further
                  operation  of the  Aircraft  (with no  extensions  of  D-Check
                  intervals  by more  than one year  beyond  the  manufacturer's
                  recommended D-Check interval,  in each case as approved by the
                  FAA),  and  perform all Engine  overhauls  as required  by the
                  Engine's condition.

                           (b)      Lessee shall  establish,  maintain in effect
                  at all  times and  timely  fund all  payments  under an Engine
                  Maintenance Contract designed to meet the objectives set forth
                  in paragraphs 1(a)(i) and (ii) of the Maintenance Schedule (as
                  that term is defined in clause (c) below) (the "OBJECTIVES").

                           (c)      Schedule    8.4.4(c)    (the    "MAINTENANCE
                  SCHEDULE") sets forth  responsibilities  and obligations  that
                  Lessee will timely and fully perform and Lessee agrees to each
                  of the terms, conditions, covenants and other requirements set
                  forth  therein.  Capitalized  terms used in this Section 8.4.4
                  and not  otherwise  defined in this  Amendment  No. 1 to Lease
                  Agreement  shall  have the  meanings  ascribed  to them in the
                  Maintenance Schedule.

                           (d)      Except  as  otherwise  provided  in  Section
                  8.4.4(f),  (g) or (i) or the Maintenance Schedule,  Lessee (i)
                  will  maintain the Engine  Maintenance  Contract in accordance
                  with  the  terms  thereof,   (ii)  will  not  consent  to  any
                  amendment,  supplement  or waiver of any of the  provisions of
                  the Engine  Maintenance  Contract  without  the prior  written
                  consent of Mortgagee and Lessor (other than amend-

                                      -27-
<PAGE>

                  ments,  supplements or waivers that (A) have no adverse effect
                  on any  obligation  to maintain the Airframe or the Engines or
                  (B) have no  material  effect  on any other  provision  of the
                  Engine Maintenance Contract), or (iii) will not enter into any
                  additional Engine Maintenance Contract in replacement (whether
                  in partial replacement or complete  replacement) of the Engine
                  Maintenance  Contract  without  the prior  written  consent of
                  Mortgagee and Lessor;  PROVIDED,  HOWEVER, that the consent of
                  Lessor shall not be required  under this clause (d) so long as
                  Mortgagee  has not given notice to Lessee that the Lien of the
                  Trust Indenture has been duly discharged. For the avoidance of
                  doubt, any  reduction  to or delay in any  payment  obligation
                  under any Engine Maintenance Contract shall be material except
                  any such change, reduction or delay which is effected pursuant
                  to Section 8.4.4(g).

                           (e)      To  monitor   the   maintenance   activities
                  contemplated by the Engine Maintenance Contract, (i) not later
                  than the fifteenth  day of each  calendar  month, Lessee shall
                  provide to the  Consultant  the Report  required by  paragraph
                  1(e) of the  Maintenance  Schedule with respect to the use and
                  operation of each Engine in the immediately  preceding  month,
                  (ii) not later than the  twenty-fifth day of each month Lessee
                  shall cause the Engine  Maintenance  Contractor to provide the
                  Consultant  with a report that  indicates  the current  credit
                  balance  for  each   Engine   under  the   applicable   Engine
                  Maintenance  Contract,  and (iii) not later than the twentieth
                  day after  December 31, 2005 and not later  than the twentieth
                  day after every second year  thereafter  commencing with 2007,
                  Lessee shall provide to the  Consultant a certificate  from an
                  executive  officer of Lessee  certifying,  as of the  relevant
                  date, (A) that all of the  assumptions  set forth in  Schedule
                  8.4.4(e)  to  Amendment   No.  1  to  Lease   Agreement   (the
                  "ASSUMPTIONS")  continue  to be correct  and  accurate  in all
                  respects ( or, if the  Assumptions  are no longer  correct and
                  accurate,  certifying as to the ways in which the  Assumptions
                  have changed) and (B) that the maintenance  programs  provided
                  under the Engine Maintenance  Contract have met the Objectives
                  (or, if they have not met the Objectives, certifying as to the
                  ways in which the Objectives have not been met).

                           (f)      If the  information  provided to or obtained
                  by the Consultant  indicates that the Objectives are not being
                  met,  including  without  limitation, due to a failure to meet
                  the obligations under the Engine Maintenance Contract, or that
                  there has been either a change in any material  respect in the
                  Assumptions  upon which the  Engine  Maintenance  Contract  is
                  based or any material  variance in meeting the Objectives, the
                  Consultant,   after   consultation   with  the  1998  Class  A
                  Certificateholders  as Consultant can reasonably  identify and
                  after  reasonable  discussions and  consultation  with Lessee,
                  shall by written  notice to Lessee  (x) advise  Lessee of such
                  non-compliance,  failure  to  meet  its  obligations,  changed
                  circumstances   or  a  material   variance,  and  (y)  specify
                  reasonable  actions or adjustments  respecting  maintenance in
                  order to  comply  with its  obligations  contemplated  by this
                  Section and the  Maintenance  Schedule.  Lessee  shall have 30
                  days from the  delivery  of such  notice  to  comply  with the
                  obligations  specified in the Consultant's notice, which shall
                  be implemented as provided in clause (g) hereof.

                                      -28-
<PAGE>

                           (g)      Beginning  December  31,  2005 and every two
                  years thereafter the Consultant will review the Assumptions to
                  determine   whether  changes  in  the  Assumptions  that  have
                  occurred, or are reasonably expected to occur, require changes
                  to the  remaining  life  limits  and/or  rate per flight  hour
                  amounts so that the Objectives  can be met.  Within 20 days of
                  December  31, 2005  and within  20 days of every  second  year
                  thereafter  commencing  with  December 31, 2007,  Lessee shall
                  provide to the  Consultant the  maintenance  conditions of the
                  Engines and Airframe and the variance of such  conditions from
                  the  Objectives  (the  "VARIANCE"),  together  with the engine
                  overhaul  costs  pursuant  to  the  then  Engine   Maintenance
                  Contract and the  contractor  quotes or cost estimates for the
                  next D-checks  (including  landing gear, if necessary) for the
                  Airframe and the  then-applicable  values for the Assumptions.
                  If the Variance is more than 0.5% of the time remaining  under
                  either of the two Objectives or there are material differences
                  for the future  periods in the  Assumptions,  then Lessee will
                  propose to the  Consultant  an  increase  or  decrease  in the
                  monthly   payments   per   engine   flight   hour   under  the
                  then-applicable Engine Maintenance Contract so as to eliminate
                  such Variance over the next twelve (12) months,  giving effect
                  to Assumptions  then applicable for future  periods;  PROVIDED
                  that the Variance will be eliminated over a period longer than
                  twelve (12) months, but not to exceed twenty-four (24) months,
                  if such  increase in payments  per flight hour would have been
                  more than 110% of the payments per flight hour  applicable for
                  the month ended December 31, 2005, or the month ended December
                  31 of every second year  thereafter  commencing  with December
                  31, 2007.

                           (h)      Lessee shall pay, promptly upon demand,  all
                  reasonable  costs and expenses of the Consultant in connection
                  with  Lessee's   compliance   with  this  Section  8.4.4  (the
                  "CONSULTANT  COSTS AND  EXPENSES").  The Consultant  Costs and
                  Expenses  shall be paid by  Lessee  directly  and shall not be
                  satisfied from any amounts  otherwise paid by Lessee under the
                  Operative Agreements.

                           (i)      Lessee's  obligation  to maintain the Engine
                  Maintenance  Contract  will end on the earlier to occur of (i)
                  the date that the aggregate amount outstanding on the Series A
                  Equipment  Notes for the Aircraft is $30 million or less,  and
                  (ii)  the  date  that  the  senior  unsecured  debt of  Lessee
                  achieves the Required Rating, in either case, however, only if
                  (x) the Aircraft and the Other 1998 EETC  Aircraft are then in
                  compliance  with the  provisions  of  Section  8.1 and of this
                  section  8.4.4  or (y)  Lessee  is no  longer  subject  to any
                  obligation  to maintain the Engine  Maintenance  Contract with
                  respect to such Other 1998 EETC Aircraft.

                           (j)      Notwithstanding  anything  to  the  contrary
                  contained  herein,  (i) Lessee shall not take the Aircraft out
                  of use or  operation  other  than  for  required  maintenance,
                  unless at such time the Objectives  have been met, (ii) at all
                  times  while the  Aircraft  is taken  out of use or  operation
                  Lessee shall comply with the requirements set forth in Section
                  8.1 and this Section 8.4.4, and (iii) this Section 8.4.4 shall
                  in no way result in any adverse change to Lessee's obligations
                  to maintain the Aircraft under the Original Lease.

                                      -29-
<PAGE>

                           (k)      Notwithstanding  anything  to  the  contrary
                  herein,  this Section 8.4.4 is intended to supplement Lessee's
                  maintenance  obligations  set forth in Section 8.1 and Annex C
                  and the return  conditions set forth in Section 5 and Annex B;
                  PROVIDED,  HOWEVER,  if any of the  obligations,  standards or
                  requirements  set forth in this Section 8.4.4 conflict with or
                  are  inconsistent  with Section 8.1 or Annex C or Section 5 or
                  Annex B and such conflict or inconsistency  (i) results in any
                  adverse  effect on Lessor's  rights with respect to any of the
                  maintenance  provisions contained in Section 8.1 or Annex C or
                  any of the return conditions contained in Section 5 or Annex B
                  or (ii) reduces any of Lessee's obligations or requirements or
                  makes any of the standards less restrictive  under Section 8.1
                  or Annex C or Section 5 or Annex B, then Lessee  shall  comply
                  with the relevant obligation(s), standard(s) or requirement(s)
                  set forth in the applicable provisions of Section 8.1 or Annex
                  C or Section 5 or Annex B, as the case may be.

                  8.4.5    BANK LENDER COVENANTS

                  If, before the occurrence of an Action Event, the Bank Lenders
         waive or amend Sections 6.1,6.4,6.7, 6.9(A), 6.14 or 6.16 of the Credit
         Agreement  (and  the  definitions  relating  thereto),   then  Sections
         8.4.1(b) - (f) (and the definitions  relating  thereto) shall be deemed
         to have been  waived or amended in the same  manner,  so long as Lessee
         has complied with Section 8.4.2; PROVIDED, HOWEVER, that the provisions
         of  Sections  8.4.1(b) - (f) shall not be amended, waived or  otherwise
         affected  by any  amendments  or  waivers  that  were  made or given in
         anticipation  of or in connection with any payment in full (or securing
         by collateral consisting of cash, cash equivalents,  letters of credit,
         surety bonds or the equivalent thereof) of the obligations owed to such
         Bank Lenders.

                  SECTION 6. AMENDMENTS TO SECTION 9 OF THE ORIGINAL LEASE.  (A)
Section  9.2.2(b)(i)  of the Original  Lease is hereby  amended by deleting such
section in its entirety and substituting the following in lieu thereof:

                  (i)      all unpaid Basic Rent or Enhancement  Rent due at any
         time prior to such  Termination  Date but  excluding  any Basic Rent or
         Enhancement Rent payable on such Termination Date; plus

                  (B)      Section  9.2.2(c)(ii) of the Original Lease is hereby
amended by deleting such section in its entirety and  substituting the following
in lieu thereof:

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

                  (C)      Section  9.3(a)(iii)(1)  of  the  Original  Lease  is
hereby  amended by deleting  such section in its entirety and  substituting  the
following in lieu hereof:

                  (1)      all unpaid Basic Rent and Enhancement Rent due at any
         time prior to such  Termination  Date (or any later date  agreed by the
         parties pursuant to Section  9.2.2(d)) but excluding any Basic Rent and
         Enhancement  Rent payable on such  Termination  Date (or any later date
         agreed by the parties pursuant to Section 9.2.2(d)); plus

                                      -30-
<PAGE>

                  (D)      Section  9.3(b)(ii)  of the Original  Lease is hereby
amended by deleting such section in its entirety and  substituting the following
in lieu thereof:

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

                  SECTION  7.  AMENDMENTS  TO SECTION 10 OF THE ORIGINAL  LEASE.
(A) Section  10.1.2(a)(i)  of the Original  Lease is hereby  amended by deleting
such clause in its entirety and substituting the following in lieu thereof:

                  (i)      on the Stipulated  Loss Value Date next following the
         earlier of (x) the 180th day  following  the date of the  occurrence of
         such  Event of Loss,  and (y) no later  than  the  third  Business  Day
         following  the receipt of all  insurance  proceeds with respect to such
         occurrence  (but in any event  not  earlier  than the date of  Lessee's
         election  under  Section  10.1.1 to make  payment  under  this  Section
         10.1.2),  Lessee shall pay to Lessor an amount equal to the  Stipulated
         Loss Value of the  Aircraft  as of the Loss  Payment  Date plus (a) all
         unpaid Basic Rent or Enhancement Rent, as the case may be, due prior to
         the  Loss  Payment  Date,  but  excluding  any  unpaid  Basic  Rent  or
         Enhancement  Rent,  as the case may be,  payable on or before such Loss
         Payment  Date,  plus (b) all  amounts  of  Supplemental  Rent due on or
         before the Loss  Payment  Date and any  reasonable  expenses  and costs
         incurred in  connection  with such Event of Loss by Lessor or Mortgagee
         (including with respect to Make-Whole Amount, if any).

                  (B)      Section  10.1.2(b)  of the  Original  Lease is hereby
amended by deleting such clause in its entirety and  substituting  the following
in lieu thereof:

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

                  (C)      Section  10.5.3(a)  of the  Original  Lease is hereby
amended by  deleting  the words ", except  with  respect to  Excluded  Payments"
therefrom.

                  (D)      Section 10.6 of the Original  Lease is hereby amended
by deleting such section in its entirety and  substituting the following in lieu
thereof:

                  10.6     REQUISITION OF AIRCRAFT FOR USE

                  If  any  Government  Entity  shall  requisition  for  use  the
         Airframe and the Engines or engines  installed  thereon  (including the
         U.S.  Government pursuant to CRAF), and if the same does not constitute
         an Event of Loss,  Lessee shall promptly notify Lessor and Mortgagee of
         such requisition and all of Lessee's  obligations  under this Agreement
         shall  continue  to the  same  extent  as if such  requisition  had not
         occurred;  PROVIDED,  HOWEVER,  that if the  Airframe  and  Engines  or
         engines  installed  thereon are not returned to Lessor by Lessee at the
         end of the Term or within 180 days thereafter, and Lessor, upon notice

                                      -31-
<PAGE>

         given not less than 30 days nor more  than 120 days  before  the end of
         the Term,  shall have  elected to treat such event as  constituting  an
         Event of Loss with respect to the Aircraft, Lessee shall then be deemed
         to have made the election  set forth in Section  10.1.2 with the effect
         that Lessee shall be obligated to pay the Stipulated Loss Value and all
         other amounts  payable  pursuant to Section  10.1.2 with respect to the
         Aircraft as if an Event of Loss had occurred as of the end of the Term.
         If Lessor  shall not have  elected  to treat  such event as an Event of
         Loss,  Lessee  shall be obligated to return the Airframe and Engines or
         engines to Lessor pursuant to, and in all other respects to comply with
         the  provisions  of,  Section  5  promptly  upon  their  return by such
         Government  Entity, and Lessee shall pay to Lessor upon such return for
         each day  after  the end of the Term to but  excluding  the day of such
         return,  up to a maximum of 30 days,  an amount  equal to (i) the daily
         equivalent  rate equal to average  daily  Basic Rent  payable by Lessor
         during  the Base  Lease  Term plus (ii) the  daily  equivalent  rate of
         Enhancement  Rent, if applicable at the time,  payable during the final
         Payment Period.

                  SECTION 8.  AMENDMENT  TO SECTION  12 OF THE  ORIGINAL  LEASE.
Section 12 of the Original  Lease is hereby  amended by adding the  following to
the end of such Section 12 as a new clause (g):

                  (g)      In addition to any inspection as provided  hereunder,
         an aviation professional  designated by Mortgagee and Lessor and chosen
         from the list attached to Amendment No.1 to Lease Agreement in Schedule
         12(g) (the "SPECIAL  INSPECTOR") may, at the times and intervals and on
         the other  terms and  conditions  set forth in this  Section  12 as are
         provided with respect to the Inspecting Parties,  inspect the Aircraft,
         the  Airframe  and  the  Engines  (including  without  limitation,  the
         Aircraft  Documents),  make  copies  of  such  Aircraft  Documents  not
         reasonably deemed  confidential by Lessee or such Permitted  Sublessee,
         and share the results of such inspection and such copies with Mortgagee
         and  Lessor,  and such  Special  Inspector  shall  have such  rights to
         information as the other Inspecting Parties have under this Section 12;
         PROVIDED,  HOWEVER,  that Lessor shall not have any rights with respect
         to the  designation  of the Special  Inspector  (and,  therefore,  only
         Mortgagee  shall have rights  with  respect to the  designation  of the
         Special  Inspector) so long as Mortgagee has not given notice to Lessee
         that the Lien of the Trust Indenture has been duly discharged.

                  SECTION  9.  AMENDMENTS  TO SECTION 13 OF THE ORIGINAL  LEASE.
(A) Section  13.2.1 of the Original  Lease is hereby amended by adding the words
"Subject to the provisions of Section 8.4.1 (d),"  in front of the first word of
such section.

                  (B)      Section 13.3 of the Original  Lease is hereby amended
by deleting the words "(other than Excluded Payments)" therefrom.

                  SECTION  10.  AMENDMENTS TO SECTION 14 OF THE ORIGINAL  LEASE.
(A) Section 14 of the Original  Lease is hereby  amended as follows:  The eighth
line of Section 14 is amended  by adding  the  phrase  "within  any cure  period
provided for herein with respect to such matter" after the word  "remedied"  and
before the ":".

                                      -32-
<PAGE>

                  (B)      Section 14.1 of the Original  Lease is hereby amended
by deleting such section in its entirety and  substituting the following in lieu
thereof:

                  14.1     PAYMENTS

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

                  (C)      Sections  14.3 and  14.4 of the  Original  Lease  are
hereby amended by deleting such sections in their entirety and  substituting the
following Sections 14.3 and 14.4 in lieu thereof:

                  14.3     OTHER COVENANTS

                  (a)      If Lessee  shall fail to observe or perform (or cause
         to be  observed  and  performed)  in any  material  respect  any  other
         covenant,  agreement  or  obligation  set forth  herein or in any other
         Lessee Operative  Agreement  (other than the covenants,  agreements and
         obligations set forth in Sections 8.4.1, 8.4.2, 8.4.3, 8.4.4 and 12(g))
         and such failure continues  unremedied for a period of 30 days from and
         after the date of  written  notice  thereof  to Lessee  from  Lessor or
         Mortgagee, unless such failure is capable of being corrected and Lessee
         shall be diligently  proceeding to correct such failure,  in which case
         there shall be no Lease Event of Default  unless and until such failure
         shall  continue  unremedied  for a period of 120 days after  receipt of
         such notice.

                  (b)      If Parent or Polar  shall  fail to observe or perform
         (or cause to be observed and  performed)  in any  material  respect any
         covenant, agreement or obligation set forth in the Parent Guaranty, the
         Parent  Security  Agreement,  the Polar  Guaranty or the Polar Security
         Agreement,  and such failure  continues  unremedied  for a period of 30
         days from and after the date of written  notice  thereof to Lessee from
         Lessor or Mortgagee,  unless such failure is capable of being corrected
         and Polar or Parent, as applicable,  shall be diligently  proceeding to
         correct  such  failure,  in which case there shall be no Lease Event of
         Default unless and until such failure shall  continue  unremedied for a
         period of 120 days after receipt of such notice.

                  14.4     REPRESENTATIONS AND WARRANTIES

                  (a)      Any representation or warranty made by Lessee herein,
         in  the  Participation  Agreement  or in  any  other  Lessee  Operative
         Agreement  or in any  certificate  required to be  delivered  by Lessee
         pursuant thereto (other than the representations and warranties made by
         Lessee in clauses (x), (xi), (xii),  (xiii) and (xv) in Section 7(a) of
         the  Restructure  Agreement)  (i) shall  prove to have  been  untrue or
         inaccurate  in any  material  respect  as of the date  made,  (ii) such
         untrue or inaccurate representation or warranty is material at the time
         in question and (iii) the same shall  remain  uncured (to the extent of
         the adverse im-

                                      -33-
<PAGE>

         pact of such  incorrectness  on the  interest  of the  Participants  or
         Lessor)  for a period of 30 days  from and  after  the date of  written
         notice thereof to Lessee from Lessor or Mortgagee.

                  (b)      Any  representation  or  warranty  made by  Parent or
         Polar, in the Parent Guaranty, the Parent Security Agreement, the Polar
         Guaranty or the Polar Security Agreement,  (i) shall prove to have been
         untrue or inaccurate in any material  respect as of the date made, (ii)
         such untrue or inaccurate representation or warranty is material at the
         time in question and (iii) the same shall remain uncured (to the extent
         of the  adverse  impact of such  incorrectness  on the  interest of the
         Participants or Lessor) for a period of 30 days from and after the date
         of written notice thereof to Lessee from Lessor or Mortgagee.

                  (D)      Section 14 of the Original Lease is hereby amended by
         adding the following to the end of Section 14.5 as new Sections 14.5(d)
         through (i):

                  (d)      Parent  shall  consent to the  appointment  of or the
         taking of possession by a receiver,  trustee or liquidator of itself or
         of substantially all of its property,  or Parent shall admit in writing
         its inability to pay its debts  generally as they come due, or does not
         pay its debts  generally  as they  become  due or shall  make a general
         assignment  for the  benefit  of  creditors,  or  Parent  shall  file a
         voluntary  petition in bankruptcy or a voluntary  petition or an answer
         seeking reorganization, liquidation or other relief in a case under any
         bankruptcy Laws or other insolvency Laws (as in effect at such time) or
         an answer  admitting  the  material  allegations  of a  petition  filed
         against  Parent  in any such  case,  or  Parent  shall  seek  relief by
         voluntary  petition,  answer or consent,  under the  provisions  of any
         other bankruptcy or other similar Law providing for the  reorganization
         or winding-up of  corporations  (as in effect at such time),  or Parent
         shall seek an agreement, composition,  extension or adjustment with its
         creditors under such Laws, or Parent's board of directors shall adopt a
         resolution authorizing any of the foregoing; or

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

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

                                      -34-
<PAGE>

                  (g)      Polar  shall  consent  to the  appointment  of or the
         taking of possession by a receiver,  trustee or liquidator of itself or
         of substantially  all of its property,  or Polar shall admit in writing
         its inability to pay its debts  generally as they come due, or does not
         pay its  debts  generally  as they  become  due or Polar  shall  make a
         general assignment for the benefit of creditors,  or Polar shall file a
         voluntary  petition in bankruptcy or a voluntary  petition or an answer
         seeking reorganization, liquidation or other relief in a case under any
         bankruptcy Laws or other insolvency Laws (as in effect at such time) or
         an answer  admitting  the  material  allegations  of a  petition  filed
         against Polar in any such case, or Polar shall seek relief by voluntary
         petition,  answer  or  consent,  under  the  provisions  of  any  other
         bankruptcy or other similar Law  providing  for the  reorganization  or
         winding-up of corporations  (as in effect at such time), or Polar shall
         seek an  agreement,  composition,  extension  or  adjustment  with  its
         creditors  under such Laws, or Polar's board of directors shall adopt a
         resolution authorizing any of the foregoing; or

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

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

                  (E)      Section 14 of the Original Lease is hereby amended by
adding the following to the end of such Section 14 as new Sections  14.6,  14.7,
14.8 and 14.9:

                  14.6     CROSS DEFAULT

                  Following the Restructure Agreement Execution Date, (a) Lessee
         shall fail to pay when due, or within any applicable grace period,  any
         obligation under the GECAS Documents,  the Boeing  Documents,  the Bank
         Lender  Documents or the Other EETC  Transaction  Documents  (an "OTHER
         CREDITOR PAYMENT DEFAULT"), (b) Lessee shall fail to observe or perform
         any term, covenant or agreement  contained in the GECAS Documents,  the
         Boeing  Documents,   the  Bank  Lender  Documents  or  the  Other  EETC
         Transaction Documents for such period of time as would permit (assuming
         the giving  of appropriate  notice if required) GECAS, Boeing, the Bank
         Lenders or any Other EETC Transaction Person to accelerate the maturity
         of any  indebtedness  of Lessee  relating  thereto or to terminate  the
         lease relating thereto (an "OTHER CREDITOR NON-PAYMENT DEFAULT") or (c)
         there is an  acceleration of obligations  exceeding  $50,000,000 in the
         aggregate  owed  to  one  or   more  Other  Accelerated  Creditors  (an
         "ACCELERATION");  PROVIDED,  HOWEVER,  that no default under subsection
         7.2(i) and 7.2(ii) of the Credit Agreement (or any similar provi-

                                      -35-
<PAGE>

         sion  subsequently  incorporated  therein or included in any  documents
         executed in connection with a Bank Debt Refinancing) based on a default
         under an agreement with an Other Accelerated  Creditor shall constitute
         a Lease Event of Default  under this Section  14.6,  unless there is an
         acceleration of obligations  exceeding $50,000,000 with respect to such
         default or there is an acceleration of default by GECAS,  Boeing or the
         Bank Lenders as a result of such default.

                  14.7     MAINTENANCE CONTRACTS

                  If (a) Lessee fails or refuses to comply with the  obligations
         in the Consultant's notice referred to in Section 8.4.4(f),  (b) Lessee
         defaults  on  any  of  its  material   obligations   under  any  Engine
         Maintenance  Contract,   and  (c)  any  Engine  Maintenance  Contractor
         breaches any of its material  obligations under any Engine  Maintenance
         Contract,  such breach is not remedied within any cure period set forth
         in such Engine Maintenance  Contract,  and Lessee fails to replace such
         Engine Maintenance  Contractor with another  maintenance  contractor of
         international  stature  acceptable  (and pursuant to a contract that is
         acceptable and an assignment that is acceptable to Lessor and Mortgagee
         and  executed by Lessee) to Lessor and  Mortgagee  within 90 days after
         the date of such breach by Engine Maintenance  Contractor (or, if there
         is a cure period, after the end of such cure period), which replacement
         maintenance  contract  is funded at the same  level as the  maintenance
         contract that it replaced,  and any of the  foregoing  continues for 30
         days after the  earlier of (i) notice  thereof to Lessee from Lessor or
         Mortgagee,  and (ii) knowledge thereof by any executive officer (or any
         officer  with  responsibility  in  relation  to this Lease or any other
         person determining senior management  policies or exercising  executive
         responsibilities) of Lessee;  PROVIDED,  HOWEVER, that Lessor shall not
         have  any  rights  with  respect  to  the   acceptance  of  any  Engine
         Maintenance  Contract  or  Engine  Maintenance  Contractor  so  long as
         Mortgagee  has not given  notice  to Lessee  that the Lien of the Trust
         Indenture has been duly discharged.

                  14.8     SPECIAL COVENANT DEFAULT

                  Subject  to  Section  8.4.5  hereof,  if Lessee  shall fail to
         observe or  perform  (or cause to be  observed  and  performed)  in any
         material  respect any covenant,  agreement or  obligation  set forth in
         Sections 8.4.1, 8.4.2, 8.4.3, 8.4.4 or 12(g) and such failure continues
         Unremedied  for a period of 30 days from and after the  earlier  of the
         date of (i) written  notice thereof to Lessee from Lessor or Mortgagee,
         and (ii)  actual  knowledge  thereof by  any executive  officer (or any
         officer  with  responsibility  in  relation  to this Lease or any other
         person determining senior management  policies or exercising  executive
         responsibilities)  of Lessee,  unless such  failure is capable of being
         corrected  and Lessee shall be  diligently  proceeding  to correct such
         failure,  in which case there shall be no Lease Event of Default unless
         and until such failure shall  continue  unremedied  for a period of 120
         days after receipt of the notice referenced in clause (i) hereof or the
         date such officer or other person referred to in clause (ii) has actual
         knowledge, as applicable.

                                      -36-
<PAGE>

                  14.9     SPECIAL REPRESENTATION DEFAULT

                  If any  representation  or  warranty  made by Lessee in clause
         (x),  (xi),  (xii),  (xiii) or (xv) in Section 7(a) in the  Restructure
         Agreement  (i) shall  prove to have been  untrue or  inaccurate  in any
         material  respect as of the date made,  (ii) such untrue or  inaccurate
         representation  or warranty  is  material  at the time in question  and
         (iii) the same  shall  remain  uncured  (to the  extent of the  adverse
         impact of such  incorrectness  on the  interest of Mortgagee or Lessor)
         for  a  period  of 30  days  from  and  after  (1)  with  respect  to a
         representation  or  warranty  which  is  untrue  or  inaccurate  in any
         material  respect due to a  provision  in a  Disclosed  Other  Creditor
         Document  (as  defined  in  clause   (xiii)  of  Section  7(a)  of  the
         Restructure  Agreement)  other than a provision  thereof  which was not
         delivered  to the  Mortgagee,  the date of  written  notice  thereof to
         Lessee  from   Lessor  or   Mortgagee,   or  (2)  with   respect  to  a
         representation  or  warranty  which  is  untrue  or  inaccurate  in any
         material  respect due to a provision  in any Other  Creditor  Amendment
         with respect to a 747-400 Aircraft, a provision in any 747-400 Aircraft
         Agreement,  or a provision in any Other Creditor Amendment with respect
         to a lease, indenture,  mortgage,  contract or other agreement to which
         the Lessee and the Bank  Lenders  are parties  with  respect to 747-200
         Aircraft,  which  is not a  Disclosed  Other  Creditor  Document  (or a
         provision in a Disclosed Other Creditor Document with respect to any of
         the foregoing which was not delivered to the Mortgagee), the earlier of
         (x) the date of  written  notice  thereof  to  Lessee  from  Lessor  or
         Mortgagee,  and (y) the date that any executive officer (or any officer
         with  responsibility  in  relation  to this  Lease or any other  person
         determining   senior  management   policies  or  exercising   executive
         responsibilities)  of Lessee obtains actual knowledge of such provision
         that has resulted in such  representation  or warranty  being untrue or
         inaccurate,  unless  (in the case of  clause (1) or (2))  such  adverse
         impact is capable of being  corrected  and Lessee  shall be  diligently
         proceeding to correct such adverse impact, in which case there shall be
         no Lease Event of Default  under this  Section 14.9 as a result of such
         representation  or warranty being untrue or inaccurate unless and until
         such adverse impact shall continue  unremedied for a period of 120 days
         after,  in the case of clause (1), the giving of the notice  referenced
         in clause (1) hereof or, in the case of clause (2),  the earlier of the
         dates referred to in clauses (x) and (y) of such clause (2).

                  SECTION  11.  AMENDMENTS TO SECTION 15 OF THE ORIGINAL  LEASE.
(A) Section 15.1.1 of the Original Lease is hereby amended by deleting the words
"or any Renewal Lease Term."

                  (B)      The eleventh  line of Section  15.1.3 of the Original
Lease is hereby amended by deleting the words "or Renewal Rent" and substituting
the words "and Enhancement Rent" in their stead.

                  (C)      Section  15.1.3(a) is hereby  amended by deleting the
words "or Renewal Rent" and  substituting  the words "and  Enhancement  Rent" in
their stead.

                  (D)      Section  15.1.3(b)(i)  is hereby  amended by deleting
such clause in its entirety and substituting the following in lieu thereof:

                                      -37-
<PAGE>

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

                  (E)      Line 10 of Section  15.1.4 and Section  15.1.4(a) are
hereby  amended by deleting the words "or Renewal  Rent," and  substituting  the
words "and Enhancement Rent" in their stead.

                  (F)      Section 15 of the Original Lease is hereby amended by
adding the following to the end of such Section 15 as a new Section 15.1.7:

                  15.1.7   SPECIFIC REMEDIES UPON A CROSS DEFAULT

                  (a)      Notwithstanding  the  foregoing, if  a Lease Event of
         Default occurs due to a Cross Default  pursuant to Section 14.6 (and so
         long  as  the  term,  covenant  or  agreement  the   non-observance  or
         non-performance  of which  gave  rise to the  Lease  Event  of  Default
         pursuant  to Section  14.6 is not also a term,  covenant  or  agreement
         under the Lessee Operative Agreements that if not observed or performed
         would  constitute  a Lease  Event of  Default  other than  pursuant  to
         Section  14.6),  Lessor may exercise its rights and remedies under this
         Lease only after the earliest of (i) 30 days  following the  occurrence
         of  an  Other  Creditor  Payment  Default  or  60  days  following  the
         occurrence of an Other Creditor NonPayment  Default,  (ii) acceleration
         of the  obligation  that is the subject of the Other  Creditor  Payment
         Default  or  the  Other  Creditor  Non-Payment  Default  and  (iii)  an
         Acceleration.

                  (b)      If, before the occurrence of an Action Event,  GECAS,
         Boeing,  any Other EETC  Transaction  Person,  the Bank  Lenders or any
         Other Accelerated  Creditor (i) waive an Other Creditor Payment Default
         or an Other Creditor Non-Payment Default under the GECAS Documents, the
         Boeing  Documents,  the Other EETC  Transaction  Documents  or the Bank
         Lender Documents,  respectively,  or cancel or rescind the Acceleration
         or (ii)  amend  the  provisions  of the  GECAS  Documents,  the  Boeing
         Documents,  the Bank  Lender  Documents,  the  Other  EETC  Transaction
         Documents or Other  Accelerated  Creditor  Documents which gave rise to
         the Other Creditor Payment Default,  Other Creditor Non-Payment Default
         or Acceleration such that the Other Creditor Payment Default, the Other
         Creditor Non-Payment Default or the Acceleration no longer exists, then
         the Cross Default that would otherwise have occurred shall be deemed to
         have been waived on the same terms and  conditions,  so long as (x) the
         provision of the GECAS Documents, the Boeing Documents, the Bank Lender
         Documents,   the  Other  EETC   Transaction   Documents  or  the  Other
         Accelerated  Creditor  Documents  which was so waived or amended is not
         also a  provision  under the Lessee  Operative  Agreements  that if not
         waived or amended would  constitute a Lease Event of Default other than
         pursuant  to Section  14.6, and (y) Lessee has  complied  with  Section
         8.4.2 hereof.

                                      -38-
<PAGE>

                  SECTION  12.  AMENDMENT TO SECTION 16 OF THE  ORIGINAL  LEASE.
Section  16(c) of the  Original  Lease is hereby  amended by deleting  the words
"Renewal Rent" and substituting the words "Enhancement Rent" in their stead.

                  SECTION  13.  AMENDMENT TO SECTION 17 OF THE  ORIGINAL  LEASE.
Section  17 of the  Original  Lease  is  hereby  deleted  and the  following  is
substituted in lieu thereof:

                  SECTION  17. PURCHASE OPTIONS

                  17.1     PRELIMINARY NOTICES

                  At least  180 days  prior to the  Scheduled  Expiration  Date,
         Lessee may provide  written  notice to Lessor that Lessee may  exercise
         the option to purchase the Aircraft on the  Scheduled  Expiration  Date
         pursuant to Section 17.3.1(a). Any such notice (a "PRELIMINARY NOTICE")
         shall not be binding on Lessee. Promptly upon delivery of a Preliminary
         Notice,  Lessee and Lessor shall  determine the Fair Market Sales Value
         under Section 17.3.2.  If within the 35 days allowed for  determination
         of the Fair Market  Sales  Value,  the parties  have not  succeeded  in
         reaching agreement with respect to such Fair Market Sales Value, Lessee
         and Lessor shall commence the appraisal process provided for in Section
         17.4,  and shall be  subject  to the  timing  constraints  set forth in
         Section 17.4.

                  17.2     [Intentionally Omitted]

                  17.3     PURCHASE OPTIONS

                  17.3.1   ELECTION

                  (a)      Subject to the terms and  conditions  of this Section
         17.3. Lessee or its designee may elect to purchase the Aircraft, on the
         Purchase Date, at a purchase price equal to the Fair Market Sales Value
         of the Aircraft (or, if greater,  the Termination Value) computed as of
         the Purchase Date.

                  (b)      Lessee  may  exercise  its  option  to  purchase  the
         Aircraft  by  delivery  of a written  notice (a  "PURCHASE  NOTICE") to
         Lessor not less than 90 days prior to the Scheduled Expiration Date.

                  (c)      Notwithstanding  anything  to the  contrary  in  this
         Section 17:

                                    (i)      Any Purchase  Notice under  Section
                           17.3.1(b) shall be irrevocable  and shall  constitute
                           an unconditional obligation of Lessee to purchase the
                           Aircraft under this Section 17.3.

                                    (ii)     No Purchase  Notice  under  Section
                           17.3.1(b)  shall be  binding  on  Lessor if any Lease
                           Event of  Default  or  Specified  Default  shall have
                           occurred and be continuing on the Purchase Date.

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

                                      -39-
<PAGE>

                  17.3.2   DETERMINATION OF FAIR MARKET SALES VALUE

                  The  Fair  Market  Sales  Value  of  the  Aircraft   shall  be
         determined by mutual  agreement of Lessor and Lessee (i) within 35 days
         after  delivery of a Preliminary  Notice,  if a Preliminary  Notice has
         been given, or (ii) if no Preliminary Notice has been given,  within 35
         days after delivery of a Purchase Notice under this Section 17.3 or, in
         either  case,  if they  shall be  unable to agree, by an  appraisal  in
         accordance with Section 17.4.

                  17.3.3   TITLE

                  Upon full and final  payment  by Lessee of (a) the  applicable
         purchase  price of the  Aircraft,  (b) all unpaid  Rent due and payable
         through and including the Purchase  Date, and (c) all other amounts due
         and  payable  by  Lessee  under  this  Lease  and any  other  Operative
         Agreement,  Lessor will transfer to Lessee or to a Person designated by
         Lessee title to the Aircraft in accordance with Section 4.5.

                  17.4     APPRAISALS

                  Whenever  Fair Market  Sales Value of the Aircraft is required
         to be determined by an appraisal under the foregoing provisions of this
         Section  17,  Lessee  and  Lessor  shall,  within  seven days after the
         expiration of the 35-day period referred to in Section 17.3.2,  appoint
         a mutually  satisfactory  Appraiser to complete such  appraisal  within
         seven days of the appointment and the  determination  of such Appraiser
         shall be final and binding on Lessor and  Lessee.  If Lessee and Lessor
         fail to agree  within such 7-day period upon a  satisfactory  Appraiser
         then each shall within one day thereafter  appoint a separate Appraiser
         and such Appraisers shall within seven days of such appointment jointly
         determine  such  amount,  and such jointly  determined  amount shall be
         final and  binding on Lessor  and  Lessee.  If either  Lessee or Lessor
         fails to so  appoint  an  Appraiser,  the  determination  of the single
         Appraiser appointed shall be final and binding on Lessor and Lessee. If
         two   Appraisers   are  appointed  and  within  seven  days  after  the
         appointment  of the latter of such two  Appraisers,  they cannot  agree
         upon such amount, such two Appraisers shall, within two days after such
         seventh  day,  appoint  a third  Appraiser  and  such  amount  shall be
         determined  by such three  Appraisers,  who shall  make their  separate
         appraisals  within seven days  following the  appointment  of the third
         Appraiser,  and any  determination  so made  shall  be  conclusive  and
         binding  upon  Lessor  and  Lessee  in  accordance  with the  following
         provisions  of this Section 17. If three  Appraisers  are appointed and
         the  difference  between the  determination  which is farther  from the
         middle  determination and the middle determination is more than 125% of
         the  difference   between  the  middle   determination  and  the  third
         determination,  then such farther determination shall be excluded,  the
         remaining two  determinations  shall be averaged and such average shall
         be final and binding upon Lessor and Lessee.  Otherwise, the average of
         all three  determinations  shall be final and  binding  upon Lessor and
         Lessee.  If no such  third  Appraiser is  appointed  within  such 2-day
         period,  either Lessor or Lessee may apply to the American  Arbitration
         Association to make such appointment,  and both parties shall cooperate
         in making, and be bound by, such appointment.  The fees and expenses of
         all such  Appraisers  and such  appraisal  procedure  shall be borne by
         Lessee.

                                      -40-
<PAGE>

                  SECTION 14. NEW SECTION 19 TO THE ORIGINAL LEASE. The Original
Lease is hereby amended by adding the following  section after Section 18 of the
Original Lease as a new Section 19:

                  19.      LEASE EVENT OF DEFAULT

                  At any time after the Restructure Agreement Execution Date, if
         a Lease Event of Default occurs (it being  understood that for purposes
         of this Section 19 a Lease Event of Default  pursuant solely to Section
         14.6 shall not take effect until the expiration of the applicable  cure
         periods set forth in clauses (i) and (ii) of Section  15.1.7(a) of this
         Lease (a  "15.1.7(a)(i)  or (ii) EVENT") and that this Section 19 shall
         take effect solely as a result of a 15.1.7(a)(i)  or (ii) Event only if
         such  default  has not  been  waived  prior  to the  expiration  of the
         applicable cure periods), (a) an amount equal to the excess, if any, of
         (x) the Basic  Rent that  would  have been  payable  under  this  Lease
         pursuant to  Schedule 2 of the  Original  Lease  after  January 2, 2003
         (which  amount  shall be  determined  by  reference  to  Schedule 19 of
         Amendment  No. 1 to Lease  Agreement  for  purposes of this  Section 19
         instead of  Schedule 2 to the  Original  Lease) over (y) the sum of (i)
         the Basic Rent that was paid under this Lease pursuant to Schedule 2 to
         Amendment No. 1 to Lease Agreement after January 2, 2003 up to the date
         of such Lease Event of Default plus (ii) the aggregate  amount, if any,
         of Enhancement  Rent that was paid under this Lease prior to such Lease
         Event of Default shall become  immediately due and payable by Lessee to
         Lessor  on the date that  such  Lease  Event of  Default  occurs  (such
         amounts  payable  under  clause  (a),  the  "LEASE  AMENDMENT   DEFAULT
         AMOUNT"),  shall become immediately due and payable by Lessee to Lessor
         on the date that such Lease Event of Default  occurs and (b) regardless
         of whether any amounts are payable under clause (a) of this  paragraph,
         Basic Rent shall  thereafter  be payable under this Lease each month in
         an amount  equal to the higher of (A) the amount due under  Schedule 19
         to Amendment  No. 1 to Lease  Agreement in such month or (B) the amount
         due under  Schedule  2 to  Amendment  No.1 to Lease  Agreement  in such
         month,  and Lessee's  obligation to pay  Enhancement  Rent shall cease.
         Upon the  occurrence  of a Lease Event of Default,  any claim by Lessor
         for any Termination  Value or Stipulated Loss Value payable pursuant to
         this  Lease  shall be  determined,  for any date of  determination,  by
         reference to the higher of (A) the Termination Value or Stipulated Loss
         Value  (as the case may be) as set  forth in  Schedules  3 or 4 (as the
         case  may be) to the  Original  Lease or (B) the  Termination  Value or
         Stipulated  Loss Value (as the case may be) as set forth in Schedules 3
         or 4 (as the case may be) to Amendment  No. 1 to Lease  Agreement.  For
         the  avoidance  of doubt,  if Lessee  pays  Lessor any Lease  Amendment
         Default Amount upon the occurrence of a Lease Event of Default,  Lessee
         shall not be liable for such particular Lease Amendment  Default Amount
         again,  regardless  of the number of times Lessee  defaults  under this
         Lease.  In addition,  for purposes of calculating  the Lease  Amendment
         Default  Amount,  payments made by Lessee under Schedule 2 to Amendment
         No. 1 to Lease  Agreement  as Basic Rent shall be applied  against  the
         payments of Basic Rent which are set forth on Schedule 19 to  Amendment
         No. 1 to Lease Agreement in the order received. Nothing in this Section
         19 is intended to or shall limit or  prejudice  in any manner or to any
         extent the right of Lessor or Mortgagee, as applicable, to exercise all
         rights and  remedies  that are  available  to Lessor or  Mortgagee,  as
         applicable,  under  this  Lease  or  under  applicable  law  after  the
         occurrence and during the continuance of a Lease Event of Default.

                                      -41-
<PAGE>

                  SECTION 15.  AMENDMENT  TO  SCHEDULE 1 - CERTAIN  TERMS TO THE
ORIGINAL  LEASE.  Schedule  1 - Certain  Terms to the  Original  Lease is hereby
deleted in its entirety and  Schedule 1 Certain  Terms  attached to Exhibit A to
this Amendment is hereby substituted in lieu thereof.

                  SECTION 16. AMENDMENT TO ANNEX B TO THE ORIGINAL LEASE.  Annex
B to the Original  Lease is hereby  amended by deleting the words "or the end of
any Renewal Lease Term" from the fIrst paragraph thereof.

                  SECTION 17. WAIVER.  Lessor hereby waives the Specified  Prior
Defaults and agrees that Lessor will not exercise  remedies  solely by reason of
or in respect of any Specified Prior Default. For the avoidance of doubt, Lessee
acknowledges  that the  foregoing  waiver  does not extend to (i) any failure by
Lessee  to pay as and  when  due  Basic  Rent,  Supplemental  Rent or any  other
obligation under the Lease after giving effect to this Amendment (other than the
failure to make the Basic Rent  payments as and when due on February 2, 2004 and
March 2, 2004),  including without limitation,  any failure by Lessee to pay the
amounts required to be paid pursuant to Section 19 of the Lease as added by this
Amendment,  (ii) any  failure  by  Lessee to  deliver  financial  statements  as
provided in Section 8.2.1 of the Lease after giving effect to this  Amendment or
(iii) any event or circumstance  that constitutes a Lease Event of Default after
giving effect to this  Amendment  (other than the failure to make the Basic Rent
payments as and when due on  February 2, 2004 and March 2, 2004),  if such event
or  circumstance  continues to exist after the Restructure  Agreement  Execution
Date  (other  than the  failure  to make the  Basic  Rent  Payments  when due on
February 2, 2004 and March 2, 2004).

                  SECTION 18. LEASE.  Except as amended by this  Amendment,  the
Original Lease remains unchanged and in full force and effect.

                  SECTION 19. LESSOR  REPRESENTATION.  Lessor  confirms that the
Owner  Participant  has instructed  Lessor to execute and deliver this Amendment
No. 1 to Lease Agreement.

                  SECTION 20.  ENTIRETIES.  This Amendment  represents the final
agreement between the parties about the subject matter of this Amendment and may
not be  contradicted by evidence of prior,  contemporaneous,  or subsequent oral
agreements of the parties.  There are no unwritten oral  agreements  between the
parties.  This  Amendment  shall be considered an "Operative  Agreement" as such
term is defined in the Lease.

                  SECTION 21.  COUNTERPARTS.  This  Amendment may be executed by
one of more of the parties hereto in any number of  counterparts,  each of which
shall be deemed to be an original, but all such counterparts when taken together
shall constitute one and the same instrument.  Except as expressly  provided for
herein, no modification,  amendment or waiver of any provision of this Amendment
shall be effective unless such  modification,  amendment or waiver is in writing
and signed by each of the parties hereto.

                  SECTION 22. FURTHER ASSURANCES. Each of the parties shall take
such further action as may be reasonably requested by the other to carry out the
purposes and intent of this  Amendment  and shall refrain from taking any action
which would frustrate the purposes and intent of this Amendment.

                                      -42-
<PAGE>

                  SECTION 23.  SEVERABILITY.  If any provision of this Amendment
is held to be invalid or  unenforceable  in whole or in part, such invalidity or
unenforceability  shall  attach only to such  provision  or part thereof and the
remaining part of such provision hereof shall continue in full force and effect.

                  SECTION 24. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.

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

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

                  (c)      EACH PARTY  HERETO  HEREBY  IRREVOCABLY  CONSENTS AND
AGREES  THAT THE  SERVICE OF ANY AND ALL LEGAL  PROCESS,  SUMMONS.  NOTICES  AND
DOCUMENTS  OF ANY OF THE  AFOREMENTIONED  COURTS  IN ANY SUCH  SUIT,  ACTION  OR
PROCEEDING  MAY BE MADE BY MAILING  COPIES  THEREOF BY  REGISTERED  OR CERTIFIED
MAIL, POSTAGE PREPAID,  AT THE ADDRESS SET FORTH PURSUANT TO SECTION 18.6 OF THE
LEASE.  EACH PARTY  HERETO  HEREBY  AGREES THAT  SERVICE  UPON IT, OR ANY OF ITS
AGENTS,  IN EACH CASE IN ACCORDANCE WITH THIS SECTION 24, SHALL CONSTITUTE VALID
AND  EFFECTIVE  PERSONAL  SERVICE UPON SUCH PARTY,  AND EACH PARTY HERETO HEREBY
AGREES, THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE
TO ANY SUCH  PARTY  SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE  VALIDITY  OF SUCH
SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING BASED
THEREON.

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

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

                                      -43-
<PAGE>

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

                                  ATLAS AIR, INC., Lessee

                                  By: /s/ William C. Bradley
                                      --------------------------
                                  Name:   William C. Bradley
                                  Title:  Vice President & Treasurer

                                  WELLS FARGO BANK NORTHWEST,
                                  NATIONAL ASSOCIATION (not in its individual
                                  capacity except as expressly provided herein,
                                  but solely as Owner Trustee), Lessor

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

             [THIS IS A DUPLICATE EXECUTED COUNTERPART, AND IS NOT
             THE ORIGINAL COUNTERPART FOR CHATTEL PAPER PURPOSES.]

                                    [N491MC]
<PAGE>

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

                                ATLAS AIR, INC., Lessee

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

                                WELLS FARGO BANK NORTHWEST,
                                NATIONAL ASSOCIATION (not in its
                                individual capacity except as expressly provided
                                herein, but solely as Owner Trustee), Lessor

                                By:  /s/ Michael D. Hoggan
                                    --------------------------
                                Name:   Michael D. Hoggan
                                Title:  Vice President

             [THIS IS A DUPLICATE EXECUTED COUNTERPART, AND IS NOT
             THE ORIGINAL COUNTERPART FOR CHATTEL PAPER PURPOSES.]

                                    [N491MC]
<PAGE>

                           SCHEDULE TO EXHIBIT 10.4.2

The agreements listed below are substantially identical to this exhibit and are
not being filed separately as exhibits pursuant to instruction 2 to Regulation
S-K, Item 601.

<TABLE>
<CAPTION>
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
PROGRAM YEAR       REGISTRATION NUMBER      RESTRUCTURE AGREEMENT TYPE         LESSOR                          LESSEE

------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
<C>                <C>                      <C>                                <C>                             <C>
1998               N494MC                   Owned Aircraft Restructure         Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N408MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N491MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N492MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N493MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N495MC                   Owned Aircraft Restructure         Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N496MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N497MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N498MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N499MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
2000               N409MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
2000               N412MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}]]