S-1

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As filed with the Securities and Exchange Commission on March 11, 2002

Registration No. 333-          

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

REPUBLIC AIRWAYS HOLDINGS INC.

(Exact name of Registrant as specified in its charter)

Delaware	4512	06-1449146
(State or other jurisdiction of Incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

2500 S. High School Road, Suite 160
Indianapolis, IN 46241
(317) 484 - 6000

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive office)

Bryan K. Bedford
Chairman, Chief Executive Officer and President
Republic Airways Holdings Inc.
2500 S. High School Road, Suite 160
Indianapolis, IN 46241
(317) 484-6000

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

James D. Tussing, Esq.
Gregg J. Berman, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 318-3000
Facsimile: (212) 318-3400 Stephen A. Greene, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
(212) 701-3000
Facsimile: (212) 269-5420

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:  / /

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  / /

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  / /

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  / /

        If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box:  / /

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common Stock, $.001 par value	$85,000,000	$7,820

(1)

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment specifically stating that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Subject to Completion
Preliminary Prospectus dated March 11, 2002

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS

                          Shares

REPUBLIC AIRWAYS HOLDINGS INC.

Common Stock

        This is Republic Airways' initial public offering. Republic Airways is selling all of the shares.

        We expect the public offering price to be between $            and $            per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will be quoted on the Nasdaq National Market under the symbol "RJET."

Investing in our common stock involves risks that are described in the "Risk Factors" section beginning on page 7 of this prospectus.

	Per Share	Total
Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to Republic Airways.	$	$

        The underwriters may also purchase up to an additional                        shares at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The shares will be ready for delivery on or about            , 2002.

Merrill Lynch & Co. Raymond James

The date of this prospectus is                        , 2002.

TABLE OF CONTENTS

Prospectus Summary	1
Risk Factors	7
Special Note Regarding Forward-Looking Statements	18
Use of Proceeds	19
Dividend Policy	20
Capitalization	21
Dilution	22
Selected Consolidated Financial Information	23
Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Regional Airline Industry Overview	44
Business	47
Management	65
Related Party Transactions	72
Principal Stockholders	73
Description of Capital Stock	75
Shares Eligible For Future Sale	79
Underwriting	81
Legal Matters	84
Experts	84
Where You Can Find Additional Information	84
Index to Consolidated Financial Statements	F-1

        You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

        We have applied for trademark and service mark protection for our                        logo marks. Other trademarks, tradenames and service marks referred to in this prospectus are the property of their respective owners.

        Unless otherwise indicated, all information in this prospectus reflects a recapitalization of Republic Airways, pursuant to which each outstanding share of our common stock was exchanged for            shares of our common stock and each outstanding option or warrant to purchase one share of our common stock became an option or warrant to purchase            shares of our common stock.

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PROSPECTUS SUMMARY

This summary contains basic information about our company and this offering and may not contain all the information that is important to you. You should, therefore, read the entire prospectus, including "Risk Factors," carefully for a more complete understanding of this offering and our business. Terms such as "we," "our" or "us" refer to Republic Airways Holdings Inc. and our wholly-owned subsidiary, Chautauqua Airlines, Inc., unless the context implies otherwise.

Our Company

        We are a regional airline offering scheduled passenger service on approximately 355 flights daily to 42 cities in 18 states and Canada pursuant to code-sharing agreements with AMR Corp., the parent of American Airlines, Inc., whom we collectively refer to in this prospectus as American, America West Airlines, Inc., and US Airways, Inc. All of our flights are operated as US Airways Express, AmericanConnection or America West Express, providing US Airways, American and America West with portions of their regional service, including service out of their hubs in Boston, Columbus, Indianapolis, New York, Philadelphia, Pittsburgh and St. Louis. Our fleet consists of 46 Embraer regional jets and 17 Saab turboprops. We are in the process of phasing the turboprops out of service and expect to operate an all jet fleet by August 2002. In addition, we have 7 regional jets on firm order which upon delivery will be placed into immediate service with our code-share partners and we also have options for 37 additional jets. From 1999 to 2001, our available seat miles, or ASMs, have grown at a compounded annual growth rate of 97.5%.

        We have long-term code-sharing agreements with each of our partners. During 2001, 75.6% of our passenger revenues were generated under fixed-fee agreements with our code-share partners, and we anticipate that by August 2002, 100% of our passenger revenues will be generated under such fixed-fee agreements. Pursuant to these fixed-fee agreements, which provide for minimum aircraft utilization at fixed rates, we are authorized to use our partners' two-letter flight designation codes to identify our flights and fares in our partners' computer reservation systems, to paint our aircraft in the style of our partners, to use their service marks and to market ourselves as a carrier for our partners. We believe that the shift to fixed-fee agreements has reduced our exposure to fluctuations in fuel prices, fare competition and passenger volumes. Our development of relationships with multiple major airlines has enabled us to reduce our dependence on any single airline. For the year ended December 31, 2001, 67% of our operating revenues were derived from US Airways, 31% of our operating revenues were derived from American and 2% of our operating revenues were derived from America West.

We believe that our primary strengths are:

•

Provide High Quality Service Cost-Effectively.    We provide our code-share partners the ability to offer their customers high quality service at a price to our partners that is generally more cost-effective than flying those routes themselves. We have established ourselves as a low cost, efficient and reliable provider of high quality regional airline services. Upon the elimination of our turboprop operations by August 2002, we believe that we will be one of the lowest cost providers of regional jet service and one of the first U.S. regional airlines to move to a single fleet type business model using jet aircraft.



•

Long-Term, Fixed-Fee Code-Sharing Agreements.    We have long-term code-sharing agreements with three major airlines, with scheduled expirations ranging from March 2009 through February 2013, subject in certain instances to earlier termination. All of our regional jet code-sharing agreements are fixed-fee, rather than pro-rate revenue sharing, arrangements. These fixed-fee agreements generally provide for minimum aircraft utilization levels at fixed rates which provides for a more predictable revenue stream. We are generally not exposed to price fluctuations for fuel, insurance, aircraft property taxes or landing fees, as we are typically reimbursed for those costs by our code-share partners.

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•

Strong Relationships with a Diverse Group of Air Carrier Partners.    Through our long-term code-sharing agreements with US Airways, American and America West, we have created a network of strong partnerships with three major US airlines. Having three air carrier partners has allowed us to diversify our financial and operational risk. Diversity may also allow us to grow at a faster rate and not be limited by the rate at which any one partner can, or wishes to, grow.



•

Significant Opportunity to Attract New Business.    We currently have 46 Embraer regional jets in service and firm orders to acquire an additional 7 Embraer regional jets for which we have commitments from our code-share partners to place them into immediate service under fixed-fee arrangements. In addition, we have options to acquire an additional 37 Embraer regional jets. Our code-sharing agreements have only limited restrictions on our ability to enter into new or expanded relationships with any carrier. Further, we have the infrastructure to place our new regional jets into service quickly.



•

Experienced Management Team.    Our senior management team has extensive operating experience in the regional airline industry. Since their arrival in mid-1999, our management team has significantly grown the business in the following ways:



•

added code-sharing agreements with both American and America West;



•

increased the number of regional jets that we fly for US Airways; and



•

improved our operating efficiencies and costs.




•

Long History of Reliable Operations.    We have a long operating history as a regional airline, having operated as a code-share partner of US Airways or its predecessors for over 27 years. We became an American code-share partner in April 2000 and an America West code-share partner in August 2001.

Our business strategy consists of the following elements:

•

Operate a Modern, All Jet Fleet.    By August 2002, we expect to operate an all regional jet fleet for our code-share partners. Passengers prefer regional jets to turboprops because they are faster, quieter and perceived by passengers to be safer and more comfortable. In addition, we expect to achieve increased efficiencies in employee training and aircraft maintenance by operating a single type of aircraft which should enable us to reduce our operating costs. We believe we will be one of the first U.S. regional airlines to move to a single fleet type business model using jet aircraft.



•

Expand Existing and Develop New Relationships With Code-Share Partners.    We attribute the significant growth in our traffic and profitability to our code-sharing agreements with US Airways, American and America West. We believe that these relationships provide us with an excellent opportunity to achieve stable, long-term growth. To strengthen our existing relationships, we work closely with our code-share partners to expand service to existing markets, open new markets and schedule convenient and frequent flights. We also continue to explore new relationships with other major airlines.



•

All Fixed-Fee Flying.    We believe that fixed-fee agreements allow our major airline partners to enjoy the significant benefits of optimizing total network revenues and matching aircraft size to customer demand, thereby maximizing their own profitability. For the years ended December 31, 2000 and 2001, approximately 77% and 91% of our ASMs were flown under fixed-fee agreements, and we anticipate that by August 2002, 100% of our ASMs will be flown under such fixed-fee agreements. Furthermore, we anticipate that the fixed-fee agreement will be the basis on which we will continue to add jets to our fleet.

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•

Provide Excellent Customer Service.    We believe that our focus on providing excellent customer service in every aspect of operations, including personnel, flight equipment, in-flight amenities, on-time performance, flight completion ratios and baggage handling, is largely responsible for our ability to attract and retain multiple major airline code-share partners. This is because our partners seek to build customer loyalty and preference through consistent, high quality seamless customer service, which they expect their regional partners to be able to provide at a competitive price.



•

Motivate Our Employees to Succeed.    We believe that our employees are key to our success. In addition to offering competitive compensation and benefits, we take a number of steps to make our company an attractive place to work and build a career such as maintaining various employee recognition and bonus award programs and consistently communicating our vision and mission statement to our associates.

        We were formed in 1996 as a holding company but conducted no business until May 1998 when we acquired Chautauqua Airlines, Inc., referred to as Chautauqua. Our executive offices are located at 2500 S. High School Road, Suite 160, Indianapolis, Indiana 46241. Our telephone number at that location is (317) 484-6000.

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The Offering

Common stock offered by Republic Airways	shares
Common stock outstanding after the offering	shares
Use of proceeds	We estimate that our net proceeds from this offering without exercise of the overallotment option will be approximately $                  million. We intend to use these net proceeds to:
	•  repay indebtedness;
	•  redeem preferred stock of Chautauqua; and
	•  expand our operations, including the acquisition of additional aircraft and related spare parts and support equipment and for working capital.
Risk factors	See "Risk Factors" and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
Proposed Nasdaq National Market symbol	"RJET"

        The number of shares outstanding after the offering:

•

excludes            shares of common stock that American has the right to purchase in a private placement concurrently with the closing of this offering;



•

excludes            shares of common stock reserved for issuance upon exercise of outstanding stock options at a weighted average exercise price of $                              per share;



•

excludes            shares of common stock reserved for issuance upon exercise of warrants granted to American and America West (assuming they exercise all options under their code-sharing agreements); and



•

assumes that the underwriters' over-allotment options are not exercised. If the over-allotment options are exercised in full, we will issue and sell an additional            shares of common stock.

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Summary Consolidated Financial Information

			Years Ended December 31,
			1999 (1)			2000			2001 (2)
			(in thousands, except per share and airline operating data)
Operating Statements Data:
Operating revenues			$	88,259		$	147,477		$	238,644
Operating income (loss)				(10,576	)		7,222			15,447
Net income (loss)				(8,854	)		2,522			6,067
Net income (loss) available for common stockholders:
	Basic		$			$			$
	Diluted		$			$			$
Weighted average number of shares outstanding:
	Basic
	Diluted
Other Financial Data:
	EBITDA (3)		$	426		$	13,124		$	32,937
	EBITDAR (3)			9,675			36,027			79,097
	Net cash from:
		Operating activities		2,182			6,710			22,956
		Investing activities		(9,270	)		(10,812	)		(12,690	)
		Financing activities		7,111			3,975			(7,383	)
Airline Operating Data:
	Passengers carried			794,911			1,280,884			2,240,822
	Revenue passenger miles (4)			205,578,811			463,050,021			880,569,802
	Available seat miles (5)			423,011,977			869,629,172			1,649,171,823
	Passenger load factor (6)			48.6	%		53.2	%		53.4	%
	Yield per revenue passenger mile (7)		$	0.421		$	0.315		$	0.269
	Revenue per available seat mile (8)		$	0.209		$	0.170		$	0.145
	Cost per available seat mile (9)		$	0.218		$	0.161		$	0.131
	Average passenger trip length (miles)			259			362			393
Number of aircraft (end of year):
	Embraer regional jets			4			18			45
	Saab turboprops			14			26			25
	Jetstream 31 turboprops			19			15			—
Total aircraft				37			59			70

	December 31, 2001
	Actual		As Adjusted (10)
Consolidated Balance Sheet Information:
Cash and cash equivalents	$	3,272
Aircraft and other equipment, net		133,810
Total assets		204,802
Long-term debt, including current portion		131,350
Redeemable preferred stock of subsidiary at redemption value		4,747
Total stockholder's equity		9,792

(1)

During the fourth quarter of 1999, we decided to return our entire fleet of leased Jetstream

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turboprop aircraft and dispose of related inventory and equipment. We continued to use the aircraft to fly routes under the US Airways turboprop pro-rate code-sharing agreement through December 2000. Certain routes were replaced with Saab 340 aircraft and the remaining routes were discontinued. Pursuant to the lease agreements, we were obligated to return the aircraft to the lessors in the same condition that the aircraft were delivered; therefore, we recorded a liability of $2.6 million for the estimated return costs in 1999.

In addition, a non-cash impairment loss of $4.0 million was recorded in 1999 to reduce the carrying amount of assets to be disposed of to estimated fair value, less costs to sell, or net realizable value.

(2)

During the fourth quarter of 2001, we decided to exit the turboprop business and return our entire fleet of Saab 340 aircraft and dispose of related inventory and equipment. We are planning to use the aircraft to fly routes under the US Airways turboprop pro-rate code-sharing agreement through July 2002. In December 2001, impairment loss and accrued aircraft return costs of $8.1 million were recorded. This charge consists of non-cash impairment costs of $2.1 million, ongoing lease obligations of $4.5 million and $1.5 million to provide for contractual maintenance and return obligations. If new leases are not obtained on equal or better terms or if the new lessee defaults, we may record additional charges.

(3)

EBITDA represents earnings before interest expense, income taxes, depreciation, amortization and impairment loss and accrued aircraft return costs. EBITDAR represents earnings before interest expense, income taxes, depreciation, amortization, aircraft and engine rental expense and impairment loss and accrued aircraft return costs. EBITDA and EBITDAR are not calculations based on generally accepted accounting principles and should not be considered as alternatives to net income (loss) or operating income (loss) as indicators of our financial performance or to cash flow as a measure of liquidity. In addition, our calculations may not be comparable to other similarly titled measures of other companies. EBITDA and EBITDAR are included as supplemental disclosures because they may provide useful information regarding our ability to service debt and lease payments and to fund capital expenditures. Our ability to service debt and lease payments and to fund capital expenditures in the future, however, may be affected by other operating or legal requirements or uncertainties.

(4)

Revenue passengers multiplied by miles flown.

(5)

Passenger seats available multiplied by miles flown.

(6)

Revenue passenger miles divided by available seat miles.

(7)

Passenger revenues divided by revenue passenger miles flown.

(8)

Total airline operating revenues divided by available seat miles.

(9)

Airline operating expenses excluding impairment loss and accrued aircraft return costs divided by available seat miles.

(10)

Adjusted to reflect the sale of shares we are offering hereby at an assumed offering price of $            per share, the midpoint of the range, and the application of the estimated net proceeds therefrom.

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RISK FACTORS

Any investment in shares of our common stock involves a high degree of risk. You should consider carefully the following information about these risks, together with all of the other information contained in this prospectus, before you decide to buy our common stock. If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects could be materially adversely affected. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may impair our business. Any adverse effect on our business, financial condition or results of operations could result in a decline in the trading price of our common stock and the loss of all or part of your investment.

Risks Related to Our Operations

Recent terrorist attacks have harmed our business and may harm our business in the future.

        The terrorist attacks of September 11, 2001, and their aftermath coupled with the economic decline in the U.S. economy during the second half of 2001 have negatively impacted the airline industry and us as well. The primary effects experienced by the airline industry include:

•

substantial loss of revenue and flight disruption costs caused by the grounding of all commercial air traffic in or headed to the United States by the Federal Aviation Administration, or FAA, for three days after the terrorist attacks;

•

increased concerns about future terrorist attacks;

•

airport shutdowns and flight cancellations and delays due to security breaches and perceived safety threats;

•

higher costs, including those related to increased safety measures and insurance premiums; and

•

significantly reduced passenger traffic and yields due to the subsequent dramatic drop in demand for air travel.

        Airline profit levels are highly sensitive to changes in fuel costs, fare levels and passenger demand. Passenger demand and fare levels are influenced by, among other things, the state of the global economy, domestic and international events, airline capacity and pricing actions taken by carriers. The weak U.S. economy, turbulent international events and extensive price discounting by carriers contributed to unprecedented losses for U.S. airlines from 1990 to 1993. Since September 11, 2001, similar factors, together with the effects of the terrorist attacks and the industry's reduction in capacity, have resulted in dramatic losses for the airline industry. Although demand for air travel has increased in recent months, it has yet to return to pre-September 11, 2001 levels. Consequently, most U.S. airlines have significantly reduced their flight schedules and furloughed and terminated employees.

        As a direct result of the terrorist attacks, we have altered the terms of our code-sharing agreement with America West to provide America West with relief from certain expenses for which we were previously reimbursed and to provide us with more flexibility in the number of regional jets we operate for America West. In addition, to rationalize our expenses, we reduced employee headcount by 20%. Although payments made to us under recently passed federal legislation and our employee head count reduction have somewhat mitigated the economic impact of the terrorist attacks on us, it is likely that we will not be compensated for our full loss.

        We are currently unable to estimate the long-term impact of the events of September 11, 2001 and the sufficiency of our financial resources to absorb that impact. However, given both the magnitude of the unprecedented events of September 11 and the potential for future unforeseen events or attacks related to these events, the adverse impact to our financial condition, results of operations and prospects may continue to be material.

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We are dependent on our code-sharing relationships with US Airways, American and America West Airlines.

        We depend on relationships created by our code-sharing agreements with US Airways, American and America West Airlines for all of our revenue. Any material modification to, or termination of, our code-sharing agreements with any of these partners could have a material adverse effect on our financial condition, the results of our operations and the price of our common stock. Each of the code-sharing agreements contains a number of grounds for termination by our partners, including our failure to meet specified performance levels. In addition, American may terminate the code-sharing agreement without cause upon 180 days' notice, provided such notice may not be given prior to September 30, 2005. If American terminates our code-sharing agreement, it has the right to require us to assign to them our leases of all Embraer regional jets then operating under the code-sharing agreement or to lease such jets to them to the extent we own them. If American terminates our code-sharing agreement other than for cause, we have the right to require American to assume our leases of all Embraer regional jets, or to lease such jets from us to the extent we own them, then operating under the code-sharing agreement. For a more complete description of our code-sharing agreements, including their termination provisions, see "Business-Code-Sharing Agreements."

        In addition, because all of our operating revenues are currently generated under the code-sharing agreements, if any one of them is terminated, our operating revenues and net income will be materially adversely affected unless we are able to enter into satisfactory substitute arrangements or, alternatively, fly under our own flight designator code, including obtaining the airport facilities and gates necessary to do so. In 2001, US Airways accounted for 67% of our revenues, American accounted for 31% of our revenues, and America West accounted for 2% of our revenues. We cannot assure you that we would be able to enter into substitute code-share arrangements, that any arrangements would be as favorable to us as the current code-sharing agreements or that we could successfully fly under our own flight designator code.

        We are directly affected by the financial and operating strength of our code-share partners. In the event of a decrease in the financial or operational strength of any of our code-share partners, such partner may seek to reduce, or be unable to make, the payments due to us under the code-share agreement. In addition, they may reduce utilization of our aircraft to the minimum levels specified in the code-sharing agreements. Further, it is possible that if any of our code-share partners becomes bankrupt, our code-sharing agreement with such partner may not be assumed in bankruptcy and would be terminated. Any such event would have an adverse affect on our operations and the price of our common stock. As of February 28, 2002, Standard & Poor's and Moody's respectively, maintained ratings of CCC+ and Caa2 for US Airways, BB- and B1 for AMR Corp., the parent of American, and C and Ca for America West.

Our code-share partners may expand their direct operation of regional jets.

        We depend on major airlines like US Airways, American and America West electing to contract with us instead of purchasing and operating their own regional jets. However, these major airlines possess the resources to acquire and operate their own regional jets instead of entering into contracts with us or other regional carriers. For example, American has acquired many regional jets which they fly under their affiliated carrier, American Eagle. We have no guarantee that in the future our code-share partners will choose to enter into contracts with us instead of purchasing their own regional jets or entering into relationships with competing regional airlines. They are not prohibited from doing so under our code-sharing agreements. A decision by US Airways, American or America West to phase out our contract-based code-sharing relationships and instead acquire and operate their own regional jets or to enter into similar agreements with one or more of our competitors could have a material adverse effect on our financial condition, results of operations and the price of our common stock.

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Any labor disruption or labor strikes would adversely affect our ability to conduct our business.

        All of our pilots, flight attendants, dispatchers and customer service employees are represented by unions. Collectively, these employees represent approximately 78% of our workforce as of December 31, 2001. In addition, we expect that most new employees will be represented by a union. We therefore expect the percentage of employees represented by a union to increase. Although we have never had a work interruption or stoppage and believe our relations with our unionized employees are generally good, we are subject to risks of work interruption or stoppage and/or may incur additional administrative expenses associated with union representation of our employees. Our collective bargaining agreement with our pilot union is amendable in November 2002, and we cannot accurately predict the outcome of any amendment negotiations. If we are unable to reach agreement with any of our unionized work groups on the amended terms of their collective bargaining agreements, we may be subject to work interruptions and/or stoppages. Any sustained work stoppages could adversely affect our ability to fulfill our obligations under our code-sharing agreements and could have a material adverse effect on our financial condition, results of operations and the price of our common stock.

        Under the terms of our jet code-sharing agreements with US Airways and America West, if we are unable to provide scheduled flights as a result of a strike by our employees, they are only required to pay us for certain fixed costs for specified periods. Under the terms of the code-sharing agreement with American, it is not required to pay us any amounts during the period our employees are on strike. A sustained strike by our employees would require us to bear costs otherwise paid by our code-share partners.

        In addition, a labor disruption other than a union-authorized strike may cause us to be in material breach of our code-sharing agreements, all of which require us to meet specified flight completion levels during specified periods. Our code-share partners have the right to terminate their code-sharing agreements if we fail to meet these completion levels.

        Furthermore, since each of our code-share partners is a significant source of revenue, any labor disruption or labor strike by the employees of any one of our code-share partners which would effect their ability to pay us under our code-share agreement could have a material adverse effect on our financial condition, results of operations and the price of our common stock.

Substantial risks accompany our current growth plans.

        We plan to acquire at least an additional 44 Embraer regional jets by June 2004, of which 7 jets are currently subject to firm order. Substantial risks accompany our growth plans. In addition to the other risk factors referred to in this prospectus, some other factors that may impact our growth plans include:

•

demand for regional air transportation;

•

the condition of the U.S. economy generally;

•

our ability to hire and retain enough flight crews and mechanics for our aircraft;

•

the physical availability for growth at certain of our code-share partners' hubs; and

•

our ability to operate and manage a larger enterprise cost-effectively.

        Many of these factors are beyond our control. If we are incorrect in our assessment of the profitability and feasibility of our growth plans, or if circumstances change in a way that was unforeseen by us, we may not be able to grow as planned.

        Under our code-sharing agreements, we are obligated to place in service an additional 7 Embraer regional jets over the next eight months. Our expansion plans related to the acquisition of these aircraft include the acquisition of related additional ground and maintenance facilities and support equipment, the employment of approximately 155 additional employees and the integration of those aircraft, facilities and employees into our existing operations. This expansion of our operations could place a

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significant strain on our management and other corporate resources. Furthermore, there is no assurance that we will be able to obtain the facilities, aircraft and personnel required for our proposed expansion on a timely basis or effectively integrate them into our existing business.

        Our growth plans may be adversely affected by our code-sharing agreement with American, which requires us to provide regional airline services exclusively for American at its St. Louis hub and within 50 statute miles of that hub. This prohibits us from providing competing regional hub services at Memphis, Nashville and Kansas City and means that, without American's consent, we are prohibited from operating flights under our own flight designator code or on behalf of any other air carrier providing "hub" services in or out of these airports. In addition, we are prohibited from operating any of our aircraft subject to the American code-sharing agreement on behalf of any other carrier.

        Employees at major airlines generally oppose efforts by their companies to utilize regional airlines to serve shorter, lower volume routes from their hubs because of their perception that such utilization leads to layoffs at the major airline, as well as lower wages and salaries. In general, the pilots' unions of certain major airlines have negotiated collective bargaining agreements that restrict the number and/or size of regional aircraft that a particular carrier may operate. A "scope" clause in US Airways' current collective bargaining agreement with its pilots prevents US Airways from using more than 70 regional jets not flown by its pilots in its operations. While US Airways is currently negotiating to ease the restrictions placed upon it by such "scope" clauses, we cannot assure you that the outcome of these negotiations will prove successful. A "scope" clause in American's current collective bargaining agreement with its pilots restricts it from operating more than 67 regional jets having 45 or more seats. We cannot assure you that these "scope" clauses will not become more restrictive in the future, or that America West will not become subject to similar or more restrictive "scope" clauses. America West has advised us that an agreement with another regional carrier that is structurally similar to our code-sharing agreement with America West has been alleged by their pilots to violate certain of America West's labor agreements. Any additional limit on the number of regional jets we can fly for our code-share partners could have a material adverse effect on our expansion plans and the price of our common stock.

        We currently have 37 options to purchase regional jets from Embraer. If we are obligated to exercise options to purchase aircraft from Embraer prior to obtaining a commitment from existing or future code-share partners to place the aircraft in service, we will be obligated to purchase the aircraft from Embraer and to bear the cost of operation even if we cannot place the aircraft in service with a code-share partner, which could have a material adverse effect on our financial condition, results of operations and the price of our common stock.

        Furthermore, our ability to manage our growth effectively and efficiently requires us to continue to forecast accurately our equipment needs and human resources and to continue to expend funds to improve our operating, financial and management controls, reporting systems and procedures. In addition, we must effectively expand, train and manage our employee base, which could be costly. Our growth will place a significant strain on our management and other corporate resources. If we are unable to manage our anticipated growth effectively and efficiently, our business could be harmed.

Our fleet expansion program will require a significant increase in our leverage and the financing we require may not be available on favorable terms or at all.

        The airline business is very capital intensive and, as a result, many airline companies are highly leveraged. During the years ended December 31, 2000 and 2001, our mandatory debt service payments totaled $1.9 million and $7.9 million respectively, and our mandatory lease payments totaled $25.4 million and $49.2 million respectively. We have significant lease obligations with respect to our aircraft and ground facilities, which aggregated approximately $869.0 million at December 31, 2001. Our current growth strategy involves the acquisition of 44 more Embraer regional jets between 2002 and 2004, 7 of which we will place in service for American under our existing code-sharing agreement. The current aggregate list price of these 44 Embraer regional jets is approximately $870.0 million. We

10

expect to lease or otherwise acquire on credit all, or substantially all, such 44 Embraer regional jets, which will significantly increase our mandatory lease and debt service payments.

        There can be no assurance that our operations will generate sufficient cash flow to make such payments or that we will be able to obtain financing to acquire the additional aircraft necessary for our expansion. If we default under our loan or lease agreements, the lender/lessor has available extensive remedies, including, without limitation, repossession of the respective aircraft and, in the case of large creditors, the effective ability to exert control over how we allocate a significant portion of our revenues. Even if we are able to timely service our debt, the size of our long-term debt and lease obligations could negatively affect our financial condition, results of operations and the price of our common stock in many ways, including:

•

increasing the cost, or limiting the availability of, additional financing for working capital, acquisitions or other purposes;

•

limiting the ways in which we can use our cash flow, much of which may have to be used to satisfy debt and lease obligations; and

•

adversely affecting our ability to respond to changing business or economic conditions or continue our growth strategy.

        If we need funds and cannot raise them on acceptable terms, we may be unable to realize our current plans or take advantage of unanticipated opportunities and could be required to slow our growth.

We depend on Embraer to supply us with the aircraft we require to expand.

        As of February 28, 2002, we are obligated under our code-sharing agreements to place an additional 7 Embraer regional jets in service over the next eight months. We currently have firm orders with Embraer for 7 regional jets through Solitair Corp., a company controlled by an affiliate of our sole stockholder. We also have options to acquire an additional 37 regional jets that are exercisable from July 2002 through June 2004. We are dependent on Embraer as the manufacturer of all of these jets and certain factors may limit or preclude our ability to obtain these regional jets, including:

•

Embraer could refuse, or may not be financially able, to perform its obligations under the purchase agreement for the delivery of the regional jets; and

•

a fire, strike or other event could occur that affects Embraer's ability to completely or timely fulfill its contractual obligations.

        Any disruption or change in the delivery schedule of these Embraer regional jets would affect our overall operations and our ability to fulfill our obligations under our code-sharing agreements.

        Our operations could be materially adversely affected by the failure or inability of Embraer or any key component manufacturers to provide sufficient parts or related support services on a timely basis or by an interruption of fleet service as a result of unscheduled or unanticipated maintenance requirements for our aircraft.

        In connection with Solitair's agreement to purchase Embraer regional jets, Embraer is obligated to secure for Solitair export financing incentives through the export support program sponsored by Brazil known as the ProEx program. According to the agreement, if ProEx benefits are reduced, withdrawn or cancelled, Embraer will make Solitair whole for the ProEx benefits it did not receive.

Reduced utilization levels of our aircraft under the fixed-fee agreements would adversely impact our revenues and earnings.

        Our agreements with US Airways, American and America West require each of them to schedule our aircraft to a minimum level of utilization. However, the aircraft have historically been utilized more than the minimum requirement. Even though the fixed-fee rates either adjust based on scheduled utilization levels or require a fixed amount per day to compensate us for our fixed costs, if our aircraft

11

are underutilized (including taking into account the stage length and frequency of our scheduled flights) we will likely lose both the opportunity to recover a margin on the variable costs of flights that would have been flown if our aircraft were more fully utilized and the opportunity to earn incentive compensation on such flights.

Our inability to pass through insurance costs to our code-share partners would harm our business.

        Following the September 11th terrorist attacks, aviation insurers dramatically increased airline insurance premiums and significantly reduced the maximum amount of insurance available to airlines for liability to persons other than passengers for claims resulting from acts of terrorism, war or similar events to $50 million per event and in the aggregate.

        Aviation insurers could increase their premiums even further in the event of additional terrorist attacks, hijackings, airline crashes or other events adversely affecting the airline industry. Furthermore, the excess war risk coverage provided by the government is currently scheduled to be in force until March 20, 2002. While the government may extend the deadline for when it will stop providing excess war risk coverage, we cannot assure you that any extension will occur, or if it does, how long the extension will last. It is expected that should the government stop providing excess war risk coverage to the airline industry, the premiums charged by aviation insurers for this coverage will be substantially higher than the premiums, currently charged by the government. Significant increases in insurance premiums would harm our financial condition and results of operations if we are unable to pass these costs through to our code-share partners. Further, if we are unable to obtain aviation insurance, our ability to operate would be substantially affected and our financial condition and results of operations would be materially adversely affected.

Increases in our labor costs, which constitute a substantial portion of our total operating costs, will directly impact our earnings.

        Labor costs constitute a significant percentage of our total operating costs, and we have experienced pressure to increase wages and benefits for our employees. Under our code-sharing agreements, our reimbursement rates contemplate labor costs that increase on a set schedule generally tied to an increase in the consumer price index or the actual increase in the contract. We are responsible for our labor costs, and we may not be entitled to receive increased payments for our flights if our labor costs increase above the assumed costs included in the reimbursement rates. As a result, a significant increase in our labor costs above the levels assumed in our reimbursement rates could result in a material reduction in our earnings. We have entered into collective bargaining agreements with our pilots, flight attendants, customer service employees and dispatchers, which are amendable in November 2002, March 2003, December 2005 and February 2007, respectively. We cannot assure you that future agreements with our employees' unions will be on terms in line with our expectations or comparable to agreements entered into by our competitors, and any future agreements may increase our labor costs and reduce our income.

Our business could be harmed if we lose the services of our key personnel.

        Our business depends upon the efforts of our chief executive officer, Bryan K. Bedford, and our other key management and operating personnel. US Airways can terminate its turboprop code-sharing agreement and American can terminate its code-sharing agreement if we replace Mr. Bedford without their consent, which in the case of American cannot be unreasonably withheld. We may have difficulty replacing management or other key personnel who leave and, therefore, the loss of the services of any of these individuals could harm our business. We maintain a "key man" life insurance policy in the amount of $5 million, but this amount may not adequately compensate us in the event we lose the services of any of our key personnel.

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We may experience difficulty finding, training and retaining employees.

        Our business is labor-intensive, we require large numbers of pilots, flight attendants, maintenance technicians and other personnel and we anticipate that our expansion plans will require us to recruit, train and retain a significant number of new employees over the next several years.

        The airline industry has from time to time experienced a shortage of qualified personnel, specifically pilots and maintenance technicians. In addition, as is common with most of our competitors, we have faced considerable turnover of our employees. Although our employee turnover has decreased significantly since September 11, 2001, our pilots, flight attendants and maintenance technicians often leave to work for larger airlines, which generally offer higher salaries and benefit programs than regional airlines are financially able to offer. Should the turnover of employees, particularly pilots and maintenance technicians, sharply increase, the result will be significantly higher training costs than otherwise would be necessary. We cannot assure you that we will be able to recruit, train and retain the qualified employees that we need to carry out our expansion plans or replace departing employees. If we are unable to hire and retain qualified employees at a reasonable cost, we may be unable to complete our expansion plans, which could materially adversely affect our financial condition, results of operations and the price of our common stock.

We fly and depend upon a limited number of aircraft and aircraft types.

        Our fleet consists 46 Embraer regional jets and 17 Saab 340 turboprops that will be phased out in 2002. We expect that the risks associated with operating a limited number of aircraft types will increase in the future. These risks include:

•

the failure or inability of Embraer-Empresa Brasileira de Aeronautica S.A. (the manufacturer of the Embraer regional jets) to provide sufficient aircraft, parts or related support services on a timely basis;



•

the interruption of fleet service as a result of unscheduled or unanticipated maintenance requirements for these aircraft;



•

the issuance of FAA directives restricting or prohibiting the use of Embraer regional jets or requiring time-consuming inspections and maintenance; or



•

the adverse public perception of an aircraft type as a result of an accident or other adverse publicity.

        The occurrence of any one or more of these factors could result in our failure to meet our obligations under our code-sharing agreements, thereby permitting our code-share partners to terminate these agreements and could material adversely affect our operations and the price of our common stock.

        Many air travelers may perceive smaller, regional aircraft, like our Embraer regional jets, as unsafe, unstable or uncomfortable in comparison to the larger aircraft primarily used by major airline companies. The public's refusal to fly in the types of aircraft that we operate could adversely affect our ability to expand our existing code-sharing agreements or obtain new code-sharing agreements.

We are at risk of losses stemming from an accident involving any of our aircraft.

        While we have never had a crash over our 27 year history, it is possible that one or more of our aircraft may crash or be involved in an accident in the future, causing death or injury to individual air travelers and our employees and destroying the aircraft. Because of the limited number of aircraft that we operate and because of our relatively small size, any accident involving our aircraft could have a material adverse effect on our financial condition and results of operations.

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        In addition, if one of our aircraft were to crash or be involved in an accident, we would be exposed to significant tort liability. Passengers, or their estates, may seek to recover damages for death or injury. There can be no assurance that the insurance we carry to cover such damages will be adequate. Accidents could also result in unforeseen mechanical and maintenance costs. In addition, any accident involving an aircraft that we operate could create a public perception that our aircraft are not safe, which could result in air travelers being reluctant to fly on our aircraft which could cause a decrease in revenues. Such a decrease could materially adversely affect our financial condition, results of operations and the price of our common stock.

We will be controlled by Wexford Capital as long as they own or control a majority of our common stock, and they may make decisions with which you disagree.

        After the completion of this offering, WexAir LLC, which is owned by several investment funds managed by Wexford Capital, will own beneficially approximately     % of the outstanding shares of our common stock, or approximately    % if the underwriters exercise in full their options to purchase additional shares. As a result, Wexford Capital and its affiliates will control all matters affecting us, including the election of directors as long as they own or control a majority of our common stock. They may make decisions which you and other stockholders will not be able to affect by voting your shares.

We may have conflicts of interest with Wexford Capital, and because of their controlling ownership, we may not be able to resolve these conflicts on an arm's length basis.

        Wexford Capital and its affiliates are actively engaged in the airline business. Conflicts of interest may in the future arise between Wexford Capital and us in a number of areas relating to our business and our past and ongoing relationships. Factors that may create a conflict of interest between Wexford Capital and us include the following:

•

Wexford Capital currently owns Shuttle America and is providing debtor-in-possession financing to Midway Airlines. Wexford Capital may in the future make significant investments in other airline companies that directly compete with us and any such investment may encourage Wexford Capital to restrict our ability to grow;



•

sales or distributions by WexAir LLC of all or any portion of its ownership interest in us; and



•

several of our directors also are directors, managing members or general partners of Wexford Capital and its affiliates.

        Wexford Capital is under no obligation to resolve any conflicts that might develop between it and us in a manner that is favorable to us and we cannot guarantee that such conflicts will not result in harmful consequences to our business or prospects. In addition, Wexford Capital and its affiliates are not obligated to advise us of any investment or business opportunities of which they are aware, and they are not restricted or prohibited from competing with us.

We are currently the subject of an FAA investigation.

        In 2001, we were informed by the FAA that it is investigating shipments sent by us on cargo airlines consisting of approximately 46 packages that may have contained regulated hazardous materials without properly training our employees and/or without properly labeling, declaring, marking, describing or packaging the shipments for transportation in air commerce in accordance with applicable requirements. We are cooperating with the FAA's investigation, which is at an early stage. We could be subject to civil penalties of up to $27,500 for each violation; however, given the early stage of the investigation and the discretion the FAA has in imposing penalties, we are unable to estimate the amount of penalties, if any, we might be required to pay. We cannot assure you that the amount of penalties will be immaterial.

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Risks Associated With The Airline Industry

The airline industry has been subject to a number of strikes.

        The airline industry has been negatively impacted by a number of labor strikes. Any new collective bargaining agreement entered into by other regional carriers may result in higher industry wages and add increased pressure on us to increase the wages and benefits of our employees. Furthermore, since each of our code-share partners is a significant source of revenue, any labor disruption or labor strike by the employees of any one of our code-share partners could have a material adverse effect on our financial condition, results of operations and the price of our common stock.

The airline industry is highly competitive.

        Within the airline industry we not only compete with other regional airlines, some of which are owned by or operated as code-share partners of major airlines, but we also face competition from low-fare airlines and major airlines on many of our routes. Other low-fare carriers serve the Indianapolis International Airport, which results in significant price competition in the Indianapolis market, one of our major markets. Competition in the Northeast markets, which we service from US Airways' hubs in New York, Boston and Philadelphia, is particularly intense, due to the large number of carriers in those markets.

        In addition, some of our competitors are larger and have significantly greater financial and other resources than we do. Moreover, federal deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats.

        In addition to traditional competition among airlines, the industry faces competition from ground and sea transportation alternatives. Video teleconferencing and other methods of electronic communication may add a new dimension of competition to the industry as business travelers seek lower-cost substitutes for air travel.

Airlines are often affected by certain factors beyond their control, including weather conditions and the cost of fuel.

        Generally, revenues for airlines depend on the number of passengers carried, the fare paid by each passenger and service factors, such as timeliness of departure and arrival. During periods of fog, ice, low temperatures, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Under our fixed-fee code-sharing agreements, we are substantially protected against cancellations due to weather or air traffic control, although these factors may affect our ability to receive incentive payments for flying more than the minimum number of flights specified in our code-sharing agreement. Should we enter into pro-rate revenue sharing agreements in the future, we will not be protected against weather or air traffic control cancellations and our revenues could suffer as a result.

The airline industry has recently gone through a period of consolidation.

        Since its deregulation in 1978 and continuing to the present, the airline industry has undergone substantial consolidation, and it may in the future undergo additional consolidation. For example, in April 2001, American acquired the majority of Trans World Airlines, Inc.'s assets. We, as well as our code-share partners, routinely monitor changes in the competitive landscape and engage in analysis and discussions regarding our strategic position, including potential alliances and business combination transactions. Further consolidation could limit the number of potential partners with whom we could

15

enter into code-sharing relationships. Any additional consolidation or significant alliance activity within the airline industry could materially adversely affect our relationship with our code-share partners.

The airline industry is heavily regulated.

        Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that involve significant costs. In the last several years, the FAA has issued a number of directives and other regulations relating to the maintenance and operation of aircraft that have required us to make significant expenditures. FAA requirements cover, among other things, retirement of older aircraft, security measures, collision avoidance systems, airborne windshear avoidance systems, noise abatement, commuter aircraft safety and increased inspection and maintenance procedures to be conducted on older aircraft.

        We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. We cannot predict whether we will be able to comply with all present and future laws, rules, regulations and certification requirements or that the cost of continued compliance will not significantly increase our costs of doing business.

        The FAA has the authority to issue mandatory orders relating to, among other things, the grounding of aircraft, inspection of aircraft, installation of new safety-related items and removal and replacement of aircraft parts that have failed or may fail in the future. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, all or any of our Saab 340 turboprops or Embraer regional jets, for any reason, could negatively impact our results of operations.

        In addition to state and federal regulation, airports and municipalities enact rules and regulations that affect our operations. From time to time, various airports throughout the country have considered limiting the use of smaller aircraft, such as Embraer regional jets, at such airports. The imposition of any limits on the use of Embraer regional jets at any airport at which we operate could interfere with our obligations under our code-share agreements and severely interrupt our business operations.

        Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce revenues. For instance, "passenger bill of rights" legislation has been introduced in Congress that would, among other things, require the payment of compensation to passengers as a result of certain delays and limit the ability of carriers to prohibit or restrict usage of certain tickets in manners currently prohibited or restricted. If adopted, these measures could have the effect of raising ticket prices, reducing revenue and increasing costs. Restrictions on the ownership and transfer of airline routes and takeoff and landing slots have also been proposed. In addition, as a result of the terrorist attacks in New York and Washington, D.C. in September 2001, the FAA has imposed more stringent security procedures on airlines. We cannot predict what other new regulations may be imposed on airlines and we cannot assure you that laws or regulations enacted in the future will not materially adversely affect our financial condition, results of operations and the price of our common stock.

Risks Related To Our Common Stock

There has been no prior market for our shares, and we cannot assure you that the price of our shares will not decline after the offering. In addition, our stock price may be volatile.

        Before this offering, there has not been a public market for our shares of common stock, and an active public market for our shares may not develop or be sustained after this offering. The market price of our shares could be subject to significant fluctuations after this offering and could decline below the initial public offering price.

        The initial public offering will be determined by negotiations between the underwriters and our board of directors, and may not be representative of the market price at which our shares of common

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stock will trade after this offering. We cannot assure you that you will be able to sell your shares at or above the initial public offering price.

        The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including:

•

announcements concerning our code-share partners, competitors, the airline industry or the economy in general;



•

strategic actions by us, our code-share partners or our competitors, such as acquisitions or restructurings;



•

media reports and publications about the safety of our aircraft or the aircraft types we operate;



•

new regulatory pronouncements and changes in regulatory guidelines;



•

general and industry-specific economic conditions;



•

changes in financial estimates or recommendations by securities analysts;



•

sales of our common stock or other actions by investors with significant shareholdings or our code-share partners; and



•

general market conditions.

        The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

        In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management's attention and resources and harm our business.

You will suffer immediate and substantial dilution.

        We expect the initial public offering price of our common stock to be substantially higher than the net tangible book value per share of our outstanding common stock, resulting in immediate and substantial dilution. The net tangible book value of a share of our common stock purchased at an assumed initial public offering price of $            (the midpoint of the filing range) will be only $            . Additional dilution may be incurred if stock options or warrants, whether currently outstanding or subsequently granted, are exercised.

Future sales of our common stock by our stockholders could depress the price of our common stock.

        Sales of a large number of shares of our common stock, the availability of a large number of shares for sale, or sales of shares of our common stock by our code-share partners, could adversely affect the market price of our common stock and could impair our ability to raise funds in additional stock offerings. Upon completion of this offering, we will have            shares of common stock outstanding, or            shares if American exercises in full its right to purchase shares of our common stock concurrently with the closing of this offering. Substantially all holders of our common stock are subject to agreements with the underwriters that restrict their ability to transfer their stock for 180 days after the date of this prospectus. Merrill Lynch, on behalf of the underwriters, may in its sole discretion and at any time waive the restrictions on transfer in these agreements during this period. After these agreements expire, approximately            of these shares will be eligible for sale in the public market.

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Our incorporation documents and Delaware law may have anti-takeover provisions that could delay or prevent a change in control of our company, which could negatively affect your investment.

        In addition to the fact that Wexford Capital will own the majority of our common stock after this offering, our certificate of incorporation and bylaws and Delaware law contain provisions that could delay or prevent a change in control of our company that stockholders may consider favorable. Some of these provisions:

•

authorize the issuance of up to 5,000,000 shares of preferred stock that can be created and issued by our board of directors without prior stockholder approval, commonly referred to as "blank check" preferred stock, with rights senior to those of our common stock;



•

limit the persons who can call special stockholder meetings;



•

provide that a supermajority vote of our stockholders is required to amend our certificate of incorporation or bylaws; and



•

establish advance notice requirements to nominate directors for election to our board of directors or to propose matters that can be acted on by stockholders at stockholder meetings.

        These and other provisions in our incorporation documents and Delaware law could allow our board of directors to affect your rights as a stockholder by making it more difficult for stockholders to replace board members. Because our board of directors is responsible for appointing members of our management team, these provisions could in turn affect any attempt to replace the current management team. In addition, these provisions could deprive our stockholders of opportunities to realize a premium on the shares of common stock owned by them.

Our charter documents include provisions limiting voting by foreign owners.

        Our certificate of incorporation provides that no shares of capital stock may be voted by or at the direction of persons who are not citizens of the United States unless the shares are registered on a separate stock record. Our certificate of incorporation further provides that no shares will be registered on this separate stock record if the amount so registered would exceed applicable foreign ownership restrictions. U.S. law currently requires that no more than 25% of the voting stock of our company (or any other domestic airline) may be owned directly or indirectly by persons who are not citizens of the United States. See "Description of Capital Stock—Common Stock—Limitation on Voting by Foreign Owners."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "management believes," "we believe," "we intend" and similar expressions. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed for the reasons described in this prospectus. You should not place undue reliance on these forward-looking statements.

        The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect event or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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USE OF PROCEEDS

        The net proceeds we will receive from the sale of the                         shares of common stock offered by us, at a public offering price of $                   per share, the midpoint of the filing range, and after deducting estimated underwriting discounts and offering expenses, are estimated to be $                   million ($             million if the underwriters' over-allotment option granted by us is exercised in full). In addition, if American elects to purchase the              shares of common stock it has a right to purchase concurrently with the closing of this offering at the public offering price, we will receive $            .

        We currently intend to use the net proceeds of the offering as follows:

•

approximately $18,452,000 to repay indebtedness to our sole stockholder;



•

approximately $4,813,000 to redeem the outstanding preferred stock of Chautauqua held by an affiliate of our sole stockholder;



•

approximately $7,000,000 to repay indebtedness to Embraer-Empresa Brasileira de Aeronautica S.A.;



•

approximately $440,000 to repay indebtedness to an affiliate of our sole stockholder; and



•

the remainder to expand our operations, including the acquisition of additional aircraft and related spare parts and support equipment and for working capital.

        The indebtedness to be repaid to our sole stockholder was initially incurred in May 1998 to finance a portion of the purchase price for Chautauqua. The note, which currently bears interest at the rate of 11.5% compounded semi-annually, currently matures on the earliest of (1) demand by the holder thereof, (2) May 15, 2002 or (3) the closing of this offering.

        In July 1999, Imprimis Investors LLC, one of the members of our sole stockholder, loaned Chautauqua $1,000,000 for working capital purposes. In April 2000, Imprimis loaned Chautauqua an additional $1,500,000 for working capital purposes. These loans bore interest at a rate of 7.5% per annum and were due on demand. In May 2000, Chautauqua issued to Imprimis 10.295828 shares of Chautauqua's Series A preferred stock in payment of principal and accrued interest on the notes, which totaled $2,573,950. In May 2000, Chautauqua sold to Imprimis an additional six shares of Chautauqua's Series A preferred stock for an aggregate purchase price of $1,500,000. Chautauqua used the proceeds from the sale of the preferred stock for working capital. These preferred shares are now owned by Wexford Special Situations 1997 Institutional, L.P. following a distribution by Imprimis to its members. Under the terms of the preferred stock, Chautauqua is required to redeem the preferred stock for a cash payment equal to the stated value ($250,000 per share) plus all accrued and unpaid dividends, upon the consummation of this offering. The preferred stock has an annual dividend of $25,000 per share, which is cumulative to the extent not paid.

        Between December 2001 and February 2002, Embraer-Empresa Brasileira de Aeronautica S.A. loaned Chautauqua approximately $57,000,000 toward the purchase of four new ERJ 140 regional jets. The notes bear an annual interest rate of 7.5% and mature on the earliest of (1) demand by the holder thereof, (2) August 31, 2002 or (3) the closing of a permanent financing arrangement with Agência Especial de Financiamento Industrial, or FINAME. It is contemplated that approximately $50,000,000 will be refinanced with FINAME and that the balance of $7,000,000 will be repaid with the proceeds of this offering.

        In connection with the ERJ 140 that we purchased in February 2002, we issued a note for $440,000 to Solitair Corp. in payment of their fee for the acquisition of this plane. This note bears interest at a rate of 9% and matures on the earliest of (1) demand by the holder thereof, (2) February 20, 2003 or (3) the closing of this offering.

        Pending the use of our net proceeds as described above, the net proceeds will be invested in short-term, investment grade, interest-bearing securities.

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DIVIDEND POLICY

        We have never paid dividends on our common stock. We do not intend to declare or pay any dividends on our common stock in the foreseeable future. Instead, we intend to retain our earnings, if any, to finance our business and to use for general corporate purposes. Our board of directors has the authority to declare and pay dividends on the common stock, in its discretion, as long as there are funds legally available to do so. Chautauqua's credit facility with Fleet limits its ability to pay dividends to Republic Airways. As a holding company, we would only be able to pay dividends from funds received from Chautauqua and any other subsidiaries we may have.

20

CAPITALIZATION

        The following table sets forth our capitalization at December 31, 2001 (adjusted to reflect the recapitalization that will occur in connection with this offering), and as adjusted to give effect to the sale of the             shares of common stock offered by us at an assumed offering price of $                  per share, the midpoint of the filing range, and the application of the estimated net proceeds therefrom, as described under "Use of Proceeds." The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements, including the notes thereto, appearing elsewhere in this prospectus.

		December 31, 2001
		Actual		As adjusted
		(in thousands)
Cash and cash equivalents		$	3,272	$
Current portion of long-term debt			14,533
Subordinated note payable to Parent			16,883
Long-term debt, less current portion			99,934
Redeemable preferred stock of subsidiary at redemption value			4,747
Stockholder's equity:
	Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—
	Common stock, $.001 par value; one vote per share; 75,000,000 shares authorized; 100 shares issued and outstanding actual and            shares issued and outstanding as adjusted(1)
	Additional paid-in capital		7,863
	Accumulated earnings		1,929
Total stockholder's equity			9,792
Total capitalization		$	145,889	$

(1)

Assumes underwriters' over-allotment options to purchase up to an additional            shares of common stock from us are not exercised and American does not elect to purchase shares of common stock concurrently with this offering or upon the exercise of its warrant. If American elects to purchase the            shares of common stock it has the right to purchase concurrently with the closing of this offering at a price of $            per share, which assumes a price equal to the midpoint of the filing range, we would have    shares of common stock issued and outstanding as adjusted, and our as adjusted additional paid-in capital, total stockholders' equity and total capitalization would be $            , $            and $            , respectively.

21

DILUTION

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share and the net tangible book value per share of our common stock after this offering. Our net tangible book value as of December 31, 2001, was $            per share. Net tangible book value per share is determined by dividing our tangible net worth, which is our tangible assets less total liabilities, by the total number of outstanding shares of common stock. After giving effect to the sale of shares of common stock in this offering at an assumed offering price of $            per share, the midpoint of the filing range, and our receipt of the estimated net proceeds, our net tangible book value at December 31, 2001, would have been $            per share. This represents an immediate increase in the net tangible book value of $            per share to our existing stockholder, and an immediate dilution of $            per share to you if you invest in our common stock. The following table illustrates this dilution of $            per share to new stockholders purchasing our common stock in this offering:

Assumed initial public offering price per share		$
Net tangible book value per share as of December 31, 2001	$
Increase per share attributable to new investors
As adjusted net tangible book value per share after this offering
Dilution per share to new investors		$

        The following table summarizes, on a pro forma basis as of December 31, 2001, the total number of shares of our common stock purchased from us, the total consideration paid and the average price per share paid by WexAir LLC, our sole stockholder, and by the new investors in this offering at an assumed initial public offering price of $            per share and before deducting estimated underwriting discounts and commissions and our estimated offering expenses:

		Shares Purchased			Total Consideration
		Number	Percent	Percent of Voting Rights	Amount	Percent	Average Price Per Share
WexAir LLC					$
New investors
	Total

        If the underwriters exercise their over-allotment options in full, the number of shares of common stock held by new investors will increase to            , or     % of the total number of shares of common stock to be outstanding immediately after this offering, representing    % of the voting rights, and the percentage of the total number of shares of common stock to be outstanding immediately after this offering held by WexAir LLC will decrease to                        , representing    % of the voting rights.

        The information presented above excludes:

•

shares of common stock currently reserved for issuance under outstanding options at a weighted average exercise price of $                        per share; and



•

shares subject to outstanding warrants issued to our code-share partners at an exercise price of $                        per share (assuming they exercise all options under their code-sharing agreements).

22

SELECTED CONSOLIDATED FINANCIAL INFORMATION

        The following table sets forth our selected consolidated financial and airline operating data with respect to the periods indicated. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements, including the notes thereto, appearing elsewhere in this prospectus. The selected consolidated financial data for the years ended December 31, 1999, 2000, and 2001, have been derived from our consolidated financial statements, which statements have been audited by Deloitte & Touche LLP, independent public accountants. The airline operating data set forth below is unaudited.

        On May 15, 1998, Republic Airways acquired for cash all the outstanding capital stock of Chautauqua for $20,133,000 (including expenses), and accounted for the acquisition under the purchase method of accounting. Prior to the acquisition, Republic Airways had no operations. The predecessor's financial statements have been prepared using the historical cost of Chautauqua's assets and have not been adjusted to reflect the acquisition. The financial statements of Republic Airways include adjustments required under the purchase method of accounting.

23

Selected Consolidated Financial Information

			Predecessor
			Chautauqua Airlines, inc.						Republic Airways Holdings Inc.
						Period of Jan 1- May 14, 1998			Period of May 15- Dec 31, 1998			Combined Year Ended December 31, 1998(1)			Years Ended December 31,
			Year Ended December 31, 1997
															1999			2000			2001
			(in thousands, except share, per share and airline operating data)
Statement of Operations Data:
Operating revenues:
	Passenger.		$	77,793		$	28,901		$	53,643		$	82,544		$	86,588		$	145,850			236,843
	Freight and other			1,634			450			1,078			1,528			1,671			1,627			1,801
		Total operating revenues		79,427			29,351			54,721			84,072			88,259			147,477			238,644
Operating expenses
	Wages and benefits			16,178			6,031			11,900			17,931			22,679			30,782			45,107
	Aircraft fuel			7,106			2,173			3,530			5,703			7,119			22,192			39,042
	Passenger fees and commissions			14,030			5,089			9,919			15,008			15,038			12,883			11,065
	Landing fees			1,748			795			1,154			1,949			2,105			3,753			7,091
	Aircraft rental.			10,067			3,700			4,653			8,353			9,249			22,903			46,160
	Maintenance and repair			11,077			4,213			7,822			12,035			12,813			19,667			34,069
	Insurance and taxes			2,676			923			817			1,740			1,528			2,822			5,710
	Depreciation and amortization			2,485			874			1,717			2,591			4,303			4,110			7,783
	Impairment loss and accrued aircraft return costs(2)(3)			—			—			—			—			6,603			—			8,100
	Other			7,617			2,809			6,899			9,708			17,398			21,143			26,710
	Stabilization Act compensation			—			—			—			—			—			—			(7,640	)
		Total operating expenses		72,984			26,607			48,411			75,018			98,835			140,255			223,197
Operating income (loss)				6,443			2,744			6,310			9,054			(10,576	)		7,222			15,447
Other income (expense):
Interest expense				(1,492	)		(765	)		(1,528	)		(2,293	)		(3,219	)		(3,550	)		(6,227	)
Other income				—			—			—			—			96			1,792			1,607
		Total other income (expense)		(1,492	)		(765	)		(1,528	)		(2,293	)		(3,123	)		(1,758	)		(4,620	)
Income (loss) before income taxes				4,951			1,979			4,782			6,761			(13,699	)		5,464			10,827
Income tax expense (benefit)				2,112			774			2,275			3,049			(4,845	)		2,942			4,760
Income (loss) before cumulative effect of change in accounting principle				2,839			1,205			2,507			3,712			(8,854	)		2,522			6,067
Cumulative effect of change in accounting principle, net of taxes(4)				(1,227	)		—			—			—			—			—			—
Net income (loss)			$	1,612		$	1,205		$	2,507		$	3,712		$	(8,854	)	$	2,522		$	6,067
Preferred stock dividends(5)				—			—			—			—			—			(255	)		(418	)
Net income (loss) available for common stockholders			$	1,612		$	1,205		$	2,507		$	3,712		$	(8,854	)	$	2,267		$	5,649
Net income (loss) available for common stockholders per share:
	Basic		$	0.81		$	0.60		$			$			$			$			$
	Diluted		$	0.81		$	0.60		$			$			$			$			$
Weighted average common shares outstanding:
	Basic			2,000,000			2,000,000
	Diluted			2,000,000			2,000,000
Other Financial Data:
	EBITDA(6)		$	7,701		$	3,618		$	8,027		$	11,645		$	426		$	13,124		$	32,937
	EBITDAR(6)			17,768			7,318			12,680			19,998			9,675			36,027			79,097
	Net cash from:
		Operating activities	$	6,604		$	(730	)	$	6,625					$	2,182		$	6,710		$	22,956
		Investing activities		1,171			(771	)		(26,090	)					(9,270	)		(10,812	)		(12,690	)
		Financing activities		(7,236	)		1,341			19,958						7,111			3,975			(7,383	)
Airline Operating Data:
	Passengers carried			704,810			255,312			503,469			758,781			794,911			1,280,884			2,240,822
	Revenue passenger miles(7)			153,612,676			56,016,308			111,338,649			167,354,957			205,578,811			463,050,021			880,569,802
	Available seat miles(8)			323,715,092			116,188,609			205,503,654			321,692,263			423,011,977			869,629,172			1,649,171,823
	Passenger load factor(9)			47.5	%		48.2	%		54.2	%		52.0	%		48.6	%		53.2	%		53.4	%
	Yield per revenue passenger mile(10)		$	0.506		$	0.516		$	0.482		$	0.493		$	0.421		$	0.315		$	0.269
	Revenue per available seat mile(11)		$	0.245		$	0.253		$	0.266		$	0.261		$	0.209		$	0.170		$	0.145
	Cost per available seat mile(12)		$	0.230		$	0.236		$	0.243		$	0.240		$	0.218		$	0.161		$	0.131
	Average passenger trip length (miles)			218			219			221			221			259			362			393

24

Number of aircraft (end of period):
Embraer regional jet	0	0	0	0	4	18	45
Saab 340 Turboprop	12	13	13	13	14	26	25
Jetstream 31	17	19	19	19	19	15	—
Total aircraft	29	32	32	32	37	59	70

	As of December 31,
	1997		1998		1999		2000		2001
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	776	$	493	$	516	$	389	$	3,272
Aircraft and other equipment, net		8,235		13,647		17,748		25,529		133,810
Total assets		24,562		45,937		52,983		72,601		204,802
Long-term debt, including current maturities		7,331		26,178		34,428		32,885		131,350
Redeemable preferred stock of subsidiary at redemption value		—		—		—		4,329		4,747
Total stockholder's equity		8,423		10,640		1,786		4,053		9,792

(1)

The combined amounts for 1998 reflect the combined operating results of Chautauqua Airlines, Inc. prior to its acquisition by Republic Airways at its predecessor basis and operating results after the acquisition reflecting the new basis of accounting. Although this presentation facilitates the comparison of operating results for 1999 and 1998, the changes in the basis of accounting affect the comparability of our results of operations for these years.

(2)

During the fourth quarter of 1999, we decided to return our entire fleet of leased Jetstream 31 turboprop aircraft and dispose of related inventory and equipment. We continued to use the aircraft to fly routes under the US Airways turboprop pro-rate code-sharing agreement through December 2000. Certain routes were replaced with Saab 340 aircraft and the remaining routes were discontinued. Pursuant to the lease agreements, we were obligated to return the aircraft to the lessors in the same condition that the aircraft were delivered; therefore, we recorded a liability of $2.6 million for the estimated aircraft return costs in 1999.

In

addition, a non-cash impairment loss of $4.0 million was recorded in 1999 to reduce the carrying amount of assets to be disposed of to estimated fair value, less costs to sell, or net realizable value.

(3)

During the fourth quarter of 2001, we decided to exit the turboprop business and return our entire fleet of Saab 340 aircraft and dispose of related inventory and equipment. We are planning to use the aircraft to fly routes under the US Airways turboprop pro-rate code-sharing agreement through July 2002. In December 2001, impairment loss and accrued aircraft return costs of $8.1 million were recorded. This charge consists of non-cash impairment costs of $2.1 million, ongoing lease obligations of $4.5 million and $1.5 million to provide for contractual maintenance and return obligations. If new leases are not obtained by the lessor on equal or better terms or if the new lessee defaults, we may record additional charges.

(4)

Effective January 1, 1997, Chautauqua changed its method of accounting for preoperating costs to another generally accepted method of accounting. Previously, these amounts were capitalized and amortized on a straight line basis over four years. Effective with the change, Chautauqua expenses preoperating costs as they are incurred. Accordingly, unamortized preoperating costs totaling $1.2 million, net of the related deferred tax of $0.7 million, has been reflected in the December 31, 1997, financial statements as the cumulative effect of an accounting change.

(5)

Preferred stock dividends represent dividends on 16.295828 shares of Series A redeemable preferred stock at a par value of $.01 per share issued by Chautauqua to an affiliate of our sole stockholder. The preferred stockholder is entitled to receive cumulative dividends equal to 10% per annum of the stated value of the preferred stock.

(6)

EBITDA represents earnings before interest expense, income taxes, depreciation, amortization and impairment loss and accrued aircraft return costs. EBITDAR represents earnings before interest expense, income taxes, depreciation, amortization, aircraft and engine rental expense and impairment loss and accrued aircraft return costs. EBITDA and EBITDAR are not calculations based on generally accepted accounting principles and should not be considered as alternatives to net income (loss) or operating income (loss) as indicators of our financial performance or to cash flow as a measure of liquidity. In addition, our calculations may not be comparable to other similarly titled measures of other companies. EBITDA and EBITDAR are included as supplemental disclosures because they may provide useful information regarding our ability to service debt and lease payments and to fund capital expenditures. Our ability to service debt and lease payments and to fund capital expenditures in the future, however, may be affected by other operating or legal requirements or uncertainties.

(7)

Revenue passengers multiplied by miles flown.

(8)

Passenger seats available multiplied by miles flown.

(9)

Revenue passenger miles divided by available seat miles.

(10)

Passenger revenues divided by revenue passenger miles flown.

(11)

Total airline operating revenues divided by available seat miles.

(12)

Airline operating expenses excluding impairment loss and accrued aircraft return costs divided by available seat miles.

25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When you read this section of this prospectus, it is important that you also read our consolidated financial statements and related notes included elsewhere in this prospectus. This section of this prospectus contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. We use words such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," or "continue," the negative of such terms or other terminology to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the factors described below and in "Risk Factors." As used herein, "unit cost" means operating cost per ASM.

Overview

        We are a regional airline offering scheduled passenger service on approximately 355 flights daily to 42 cities in 18 states and Canada pursuant to code-sharing agreements with American, America West and US Airways. All of our flights are operated as US Airways Express, AmericanConnection or America West Express, providing US Airways, American and America West with portions of their regional service, including service out of their hubs in Boston, Columbus, Indianapolis, New York, Philadelphia, Pittsburgh and St. Louis. As of February 28, 2002, our fleet consists of 46 Embraer regional jets and 17 Saab 340 turboprops. We are in the process of phasing the turboprops out of service and expect to operate an all jet fleet by August 2002. From 1999 to 2001, our ASMs have grown at a compounded annual growth rate of 97.5%.

        We have long-term code-sharing agreements with each of our partners. During 2001, 75.6% of our passenger revenues were generated under fixed-fee agreements with our code-share partners, and we anticipate that by August 2002, 100% of our passenger revenues will be generated under such fixed-fee agreements. Pursuant to these fixed-fee agreements, we are authorized to use our partners' two-letter flight designation codes to identify our flights and fares in our partners' computer reservation systems, to paint our aircraft in the style of our partners, to use their service marks and to market ourselves as a carrier for our partners. We believe that the shift to fixed-fee agreements has reduced our exposure to fluctuations in fuel prices, fare competition and passenger volumes. Our development of relationships with multiple major airlines has enabled us to reduce our dependence on any single airline. For the year ended December 31, 2001, 67% of our operating revenues were derived from US Airways, 31% of our operating revenues were derived from American and 2% of our operating revenues were derived from America West.

        We have a long operating history as a regional airline, having operated as a code-share partner of US Airways or its predecessors for more than 27 years. We became a TWA code-share partner in April 2000, which became a code-share relationship with American following its acquisition of TWA, and an America West code-share partner in August 2001.

26

Fleet Transition and Growth

        The following table sets forth the number and type of aircraft operated by us at the end of each period indicated:

		December 31,
		1999	2000	2001
Regional Jets:
	Embraer ERJ 145LR	4	18	38
	Embraer ERJ 140LR	–	–	7
Turboprop:
	Saab 340A	14	26	25
	Jetstream 31	19	15	–
Total		37	59	70

        During 1999, we made the decision and committed to a plan to phase out of revenue service and return to the lessors the entire fleet of leased Jetstream 31 turboprop aircraft and replace certain routes with Saab 340 turboprops. During 2000, in accordance with management's plan, all of the Jetstream 31 aircraft were phased out of revenue service and a portion of the routes were replaced with the addition of 12 leased 30-seat Saab 340 turboprop aircraft to the fleet. The return to the lessors of the Jetstream 31 aircraft was completed in April 2000. The addition of Embraer regional jets and Saab 340 aircraft in 1999 and 2000 resulted in a 31.5% increase in available seat miles from 321.7 million in 1998 to 423.0 million in 1999, and a 105.6% increase in available seat miles from 423.0 million in 1999 to 869.6 million in 2000.

        In December 2001, we made the decision and committed to a plan to phase out of revenue service and return to the lessors the entire fleet of leased Saab 340 aircraft. The two Saab 340 aircraft owned by us are held for sale. Saab Aircraft Leasing, Inc. and affiliates, referred to here as "lessor," have agreed to lease twenty-two of the twenty-four Saab 340 aircraft when new lessees are identified. A letter of intent has been signed between the lessor and a new lessee (a company controlled by Wexford Capital) for up to eighteen Saab 340 aircraft at fair market lease rates. The lessor is actively seeking new lessees for the remaining four of the twenty-two aircraft. The current leases will terminate when a new lease is obtained; however, if new leases are not entered into, or are entered into and subsequently terminated, we will be obligated for the original lease payments. We will pay the lessor a rent differential, based on our original lease payments compared to lease payments of the new lessees. We have accrued $2.6 million for this rent differential at December 31, 2001. In addition, we are responsible for the lease payments on the remaining two Saab 340 aircraft until expiration of these leases (September 2002). Lease payments of $1.9 million are accrued at December 31, 2001 for the period from the date the aircraft is removed from service through the later of the end of the lease term or the date the aircraft is expected to be re-leased by the lessor. We recorded a charge of approximately $8.1 million in the quarter ended December 31, 2001, to reflect our estimate of the cost associated with the complete phase-out and the related asset impairment of our entire Saab 340 turboprop fleet. If new leases are not obtained by the lessor on equal or better terms or if the new lessees default, we may record additional charges. As of Feburary 28, 2002, nine of our 24 leased Saab 340 aircraft have been returned to the lessor.

        All of our passenger revenues for 1998 were generated through a pro-rate revenue sharing arrangement with US Airways. During 1999, we began operating Embraer regional jets on behalf of US Airways under a fixed-fee arrangement. There were four, 11 and 26 Embraer aircraft operating on behalf of US Airways under this agreement at December 31, 1999, 2000 and 2001, respectively. During 2000, we began operating Saab 340 turboprops and Embraer regional jets on behalf of TWA under a fixed-fee arrangement; TWA was subsequently acquired by American. There were six Saab 340

27

turboprops and seven Embraer regional jets operating under the agreement with TWA at December 31, 2000, and 15 Embraer regional jets operating under the agreement with American at December 31, 2001. During 1999, 15.2% of our ASMs and 8.3% of our passenger revenues were generated under fixed-fee agreements. During 2000, 61.6% of our ASMs and 47.4% of our passenger revenues were generated under fixed-fee agreements. During 2001, 84.7% of our ASMs and 75.6% of our passenger revenues were generated under fixed-fee agreements. The shift to fixed-fee flying has reduced our exposure to fluctuations in fuel prices, fare competition and passenger volumes. We anticipate that by the end of 2002 our fixed-fee operations will comprise all of our total daily flights as additional US Airways and America West regional jet aircraft are added to our system under fixed-fee agreements and the Saab 340 turboprop operations are phased out. We believe that by the end of 2002, we will operate 63 Embraer regional jets for our three code-share partners.

Revenue

        Under our fixed-fee arrangements with American, America West and US Airways for regional jets, we receive a fixed-fee, as well as reimbursement of specified costs with additional possible incentives from our partners. Under our pro-rate revenue sharing agreement with US Airways for turboprop aircraft, we receive a negotiated portion of ticket revenue. As of December 31, 1999, 2000 and 2001, approximately 8.3%, 47.4% and 75.6%, respectively, of our passenger revenue was earned under our fixed-fee arrangements. Because most of our revenue is now derived from these fixed-fee arrangements, the number of aircraft we operate will have the largest impact on our revenues.

Operating Expenses

        A brief description of the items included in our operating expenses line items follows:

Wages and Benefits

        This expense includes not only wages and salaries, but also expenses associated with various employee benefit plans, employee incentives and payroll taxes. These expenses will fluctuate based primarily on our level of operations and changes in wage rates for contract and non-contract employees.

Aircraft Fuel

        Fuel expense includes the cost of aircraft fuel, including fuel taxes and into-plane fees. Under the fixed-fee agreement with American, the fixed-fee includes an assumed fuel price per gallon. Any difference between the actual cost and assumed cost included in the fixed fees is paid to or reimbursed by American. Under the fixed-fee agreements with US Airways and America West, we are reimbursed the actual cost of fuel.

Passenger Fees and Commissions

        This expense includes the costs of travel agent commissions, computer reservation system fees and certain fees paid to US Airways for aircraft ground and passenger handling and use of the US Airways aircraft facilities and services with respect to turboprop pro-rate revenue sharing flights performed on behalf of US Airways. These expenses are not borne by us under any of the fixed-fee agreements.

Landing Fees

        This expense consists of fees charged by airports for each aircraft landing. Under our fixed-fee agreement with American, the fixed fee includes an assumed rate per aircraft landing. Any difference between the actual cost and assumed cost included in the fixed fees is paid to or reimbursed by

28

American. Under the fixed-fee agreements with US Airways and America West, we are reimbursed the actual cost of landing fees.

Aircraft Rent

        This expense consists of the costs of leasing aircraft and spare engines. The leased aircraft and spare engines are operated under long-term operating leases with third parties. The lease payments associated with future aircraft deliveries are subject to market conditions for interest rates and contractual price increases for the aircraft. Aircraft rent is reduced by the amortization of integration funding credits received from the aircraft manufacturer for parts and training. The credits are amortized on a straight-line basis over the term of the respective lease of the aircraft. Under the fixed-fee agreements with American and America West, we are reimbursed for our actual costs, up to a cap. Under our fixed-fee agreement with US Airways, we are reimbursed for our actual costs at an agreed rate.

Maintenance and Repair

        Maintenance and repair expenses include all parts, materials, tooling and spares required to maintain our aircraft. We have entered into long-term maintenance "power-by-the-hour" service contracts with third-party maintenance providers under which we are charged fixed rates for each flight hour accumulated by our engines and some of the major airframe components.

Insurance and Taxes

        This expense includes the costs of passenger liability insurance, aircraft hull insurance and all other insurance policies, other than employee welfare insurance. Additionally, this expense includes personal and real property taxes, including aircraft property taxes. Under our fixed-fee agreements, we are reimbursed for the actual costs of passenger liability insurance, war risk insurance, aircraft hull insurance and property taxes, subject to certain restrictions.

Depreciation and Amortization

        This expense includes the depreciation of all fixed assets, including aircraft that we own. Additionally, goodwill, which was incurred in connection with Republic Airways' acquisition of Chautauqua in 1998, is amortized over a 20-year period. Beginning January 1, 2002, we no longer amortize this goodwill, which aggregated $807,000 annually, but are required to evaluate it on an annual basis to determine whether there is an impairment of the goodwill. If we determine the goodwill is impaired, we are required to write-off the amount of goodwill that is impaired.

Other

        This expense includes the costs of crew training, crew travel, airport and passenger related expenses, non-aircraft lease expense, professional fees and all other administrative and operational overhead expenses not included in other line items above.

Income Tax

        Income tax expense is computed by applying estimated effective income tax rates to income before income taxes. Income tax expense varies from the statutory federal income tax rate due primarily to state taxes, amortization of goodwill and non-deductible meals and entertainment expense.

29

Other Item

Warrant Issuance Charge

        Pursuant to our code-sharing agreement with American, American was issued a warrant to purchase 8.75% of the greater of (a) the number of shares of common stock that are sold pursuant to our initial public offering or (b) 60% of the number of shares of common stock outstanding immediately prior to the closing of our initial public offering (computed on a fully diluted basis). The exercise price for the common stock that may be purchased by American pursuant to the warrant is 93% of the per share price at which the IPO shares are offered to the public in this offering. The warrants vest as follows:

•

42.9% of the number of warrant shares vests ratably over ten years beginning June 11, 2002; and



•

57.1% of the number of warrant shares vests ratably over five years beginning June 11, 2006.

        We will incur a non-cash charge of approximately $                        in the fiscal quarter in which this offering closes, based upon an assumed initial public offering price of $    . In addition, as the American warrant vests, we will incur additional non-cash charges in the fiscal quarters in which these warrants vest. However, we cannot at this time quantify the amount of such charges, which will be influenced by a number of factors, including the difference between the market price of our common stock and the warrant exercise price and the volatility of our stock. The charge will reflect the estimated fair value of the American warrants on the vesting dates, using the Black-Scholes option pricing model.

        Pursuant to our code-sharing agreement with America West, upon the in service date of the twelfth aircraft, which is expected to be in the fourth quarter of 2002, we will issue to America West a warrant to purchase 2% of the greater of (a) the number of shares of common stock that are sold pursuant to our initial public offering or (b) 35% of the number of shares of common stock outstanding immediately prior to the closing of our initial public offering (computed on a fully diluted basis). The exercise price for the common stock that may be purchased by America West pursuant to the warrant is the price which the underwriters pay for our shares of common stock in this offering and is subject to downward adjustment if we issue additional shares of our common stock at a price below the exercise price. The warrant will be fully vested upon issuance and America West can exercise its rights for up to three years thereafter. As a result of the issuance of the America West warrant, we will incur a non-cash charge of approximately $                        in the fiscal quarter in which the warrant is issued, based upon an assumed initial public offering price of $            . The non-cash charge will reflect the estimated fair value of the America West warrant using the Black-Scholes option pricing model. Should America West not take delivery of the twelfth aircraft, they are not entitled to receive the warrant.

Effects of September 11, 2001

        Following the terrorist attacks of September 11, 2001, the FAA immediately suspended the entire air travel system in the United States. This suspension lasted until September 13, 2001, when limited flights were allowed.

        Ronald Reagan Washington National Airport in Washington, D.C., referred to as DCA, was closed until October 4, 2001. Flights to and from DCA continue to be approximately 25% below the levels prior to September 11. Because of US Airways' position as the dominant carrier at DCA, US Airways has suffered a more severe economic impact than other carriers without such a concentration of flying at DCA.

        Subsequent to September 11, 2001, the airline industry experienced an immediate and significant decline in traffic, particularly business traffic (which has a higher yield than leisure traffic). All of our code-sharing partners experienced significant declines. Under our fixed-fee contracts, however, we

30

continued to be reimbursed for our expenses. The impact on our short haul, turboprop operations was devastating. Due to heightened airport security, it became more convenient for passengers to drive to a hub rather than wait long periods for short flights. Revenues associated with our "at-risk" prorate business suffered declines greater than 50% of normal revenues. Given that the profitability of our turboprop operation was marginal prior to September 11, 2001, we subsequently determined that the operations were unsustainable. Accordingly, we elected to ground over half of our turboprop fleet. Subsequently, we decided to phase out all Saab 340 operations.

        In addition to greatly curtailing our turboprop operation for US Airways, to stem our losses after these attacks, we took the following steps:

•

reduced staffing levels by 20%, consisting of 204 pilots, flight attendants and customer service agents, and 71 other personnel;



•

instituted a hiring freeze;



•

froze pay for salaried employees; and



•

deferred aircraft deliveries.

        Further, in conjunction with our curtailing of our US Airways turboprop operations, we determined to terminate all turboprop operations by August 2002.

        On September 22, 2001, the President signed into law the Stabilization Act. Among other things, the Stabilization Act:

•

provided $5 billion in payments to compensate U.S. passenger and cargo airlines for losses incurred by the airline industry from September 11, 2001 through December 31, 2001 as a result of the September 11 terrorist attacks;



•

subject to certain conditions and fees, authorized the issuance of up to $10 billion in federal loan guarantees to airlines for which credit is not reasonably available;



•

sought to ensure the continuity of air service to communities, including government subsidized essential air service to small communities;



•

reimbursed airlines for certain increased costs of aviation insurance;



•

extended the due date for payments on certain taxes by airlines;



•

limited the liability of airlines relating to the September 11 attacks; and



•

established a federal compensation fund for the victims of the September 11 terrorist attacks.

        Under the Stabilization Act, each airline is entitled to receive the lesser of (a) its direct and incremental pre-tax losses for the period of September 11, 2001 to December 31, 2001 or (b) its available seat mile share of the $5 billion compensation ($4.5 billion for passenger airlines) available under the Stabilization Act. As of December 31, 2001, we had received $6.5 million out of an expected $7.6 million in compensation under the Stabilization Act, which is subject to change upon determination by the Department of Transportation, or DOT. We expect to receive the balance of the funds in 2002. We expect, however, that our losses as a direct result of the September 11, 2001, terrorist attacks will exceed the amount of compensation we received under the Stabilization Act.

        Despite the actions we have taken, we are unable to determine at this time what the continuing impact of the events of September 11, 2001, will be on us. Consequently, these events could still harm our financial condition, results of operations and cash flows in the future. The extent of this harm will depend on a number of factors, including:

•

the adverse impact of the terrorist attacks on the U.S. economy;

31

•

the level of air travel demand and the impact on fares;



•

our ability to keep our operating costs low and conserve our financial resources;



•

our ability to raise financing for our future aircraft deliveries;



•

the extent of the compensation received by us under the Stabilization Act, taking into account any challenges to and interpretations of the regulations issued; and



•

the ability to retain our employees in light of current industry conditions.

        We will continue to evaluate our operations and financial position in light of the future operating environment and will take additional steps to ensure our continued success, if deemed necessary. However, given the magnitude of these unprecedented events and the possible subsequent effects, the adverse impact to our financial condition, results of operations, cash flows and prospects are difficult to predict.

Certain Statistical Information

		Republic Airways Holdings Inc.
		Years Ended December 31,
		Operating Expenses by ASM in cents
		1999		2000	2001
Wages and benefits		5.36		3.54	2.74
Aircraft fuel		1.68		2.55	2.37
Passenger fees and commissions		3.55		1.48	0.67
Landing fees		0.50		0.43	0.43
Aircraft rent		2.19		2.63	2.80
Maintenance and repair		3.03		2.26	2.07
Insurance and taxes		0.36		0.32	0.35
Depreciation and amortization		1.02		0.47	0.47
Impairment loss and accrued aircraft return costs (1)(2)		1.56		—	0.49
Other		4.12		2.43	1.62
Stabilization Act compensation		—		—	(0.46	)
Total operating expenses		23.37		16.11	13.55
	Less impairment loss and accrued aircraft return costs	(1.56	)	—	(.49	)
Total operating expenses less impairment loss and accrued aircraft return costs		21.81		16.11	13.06

(1)

During the fourth quarter of 1999, we decided to return our entire fleet of leased Jetstream 31 turboprop aircraft and dispose of related inventory and equipment. We continued to use the aircraft to fly routes under the US Airways turboprop pro-rate code-sharing agreement through December 2000. Certain routes were replaced with Saab 340 aircraft and the remaining routes were discontinued. Pursuant to the lease agreements, we were obligated to return the aircraft to the lessors in the same condition that the aircraft were delivered; therefore, we recorded a liability of $2.6 million for the estimated aircraft return costs in 1999.

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        In addition, a non-cash impairment loss of $4.0 million was recorded in 1999 to reduce the carrying amounts of assets to be disposed of to estimated fair value, less costs to sell, or net realizable value.

(2)

During the fourth quarter of 2001, we decided to exit the turboprop business and return our entire fleet of Saab 340 aircraft and dispose of related inventory and equipment. We are planning to use the aircraft to fly routes under the US Airways turboprop pro-rate code-sharing agreement through July 2002. In December 2001, impairment loss and accrued aircraft return costs of $8.1 million were recorded. This charge consists of non-cash impairment costs of $2.1 million, ongoing lease obligations of $4.5 million and $1.5 million to provide for contractual maintenance and aircraft return obligations. If new leases are not obtained by the lessor on equal or better terms or if the new lessee defaults, we may record additional charges.

	Republic Airways Holdings Inc.
	Years Ended December 31,
	1999		Increase/ (Decrease) 1999-2000		2000		Increase/ (Decrease) 2000-2001		2001
Revenue passengers	794,911		61.1	%	1,280,884		74.9	%	2,240,822
Revenue passenger miles (1)	205,578,811		125.2	%	463,050,021		90.2	%	880,569,802
Available seat miles (2)	423,011,977		105.6	%	869,629,172		89.6	%	1,649,171,823
Passenger load factor (3)	48.6	%	4.60	pts.	53.2	%	0.20	pts.	53.4	%
Cost per available seat mile (cents)(4)	21.81		(26.1	%)	16.11		(18.9	%)	13.06
Average price per gallon of fuel (5)	66.36	¢	67.9	%	111.45	¢	(17.4	%)	92.01	¢
Fuel gallons consumed	10,727,823		85.6	%	19,911,917		113.1	%	42,430,372
Block hours (6)	81,266		44.1	%	117,106		35.1	%	158,245
Average length of aircraft flight (miles)	259		39.8	%	362		8.6	%	393
Average daily utilization of each aircraft (hours) (7)	7:44		15.9	%	8:58		4.5	%	9:22
Actual aircraft in fleet at end of year	37		59.5	%	59		18.6	%	70

(1)

Revenue passenger miles is the number of scheduled miles flown by revenue passengers.

(2)

Available seat miles is the number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.

(3)

Revenue passenger miles divided by available seat miles.

(4)

Airline operating expenses excluding impairment loss and accrued aircraft return costs divided by available seat miles.

(5)

Cost of aircraft fuel, including fuel taxes and into-plane fees.

(6)

Hours from takeoff to landing, including taxi time.

(7)

Average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival).

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2001 Compared to 2000

        Operating revenue in 2001 increased by 61.8%, or $91.1 million, to $238.6 million compared to $147.5 million in 2000. The increase was due primarily to the additional Embraer regional jets added to the fixed-fee flying in 2001. We added 15, 8 and 4 Embraer regional jets in 2001 for US Airways, American and America West, respectively. Operating revenue for the pro-rate US Airways turboprop operations decreased by 24.7%, or $19.3 million, to $58.8 million in 2001 from $78.1 million in 2000 due to the elimination of turboprop routes for US Airways during 2001. The yield per revenue passenger mile for the pro-rate turboprop operations decreased by 10.7% to 44.2¢ in 2001 from 49.5¢ in 2000 due to lower average fares in new markets. Yields and passenger demand were depressed as a result of the September 11 attacks.

        Total operating expenses increased by 59.1%, or $82.9 million, to $223.2 million for 2001 compared to $140.3 million during 2000 due to the increase in flight operations and the impairment loss and accrued aircraft return costs recognized in 2001 to exit turboprop routes of $8.1 million. This increase was partially offset by the Stabilization Act compensation of $7.6 million. Excluding the impairment loss, accrued aircraft return costs and the funds received from the federal government, operating expenses increased by $82.5 million, or 58.8%. The operating cost per available seat mile decreased 15.9% to 13.6¢ for 2001 compared to 16.1¢ for 2000 due primarily to the increase in capacity (as measured by ASMs) associated with the additional Embraer regional jets, which have more seats and generally fly longer routes. Factors relating to the change in operating expenses are discussed below.

        Wages and benefits increased by 46.5%, or $14.3 million, to $45.1 million for 2001 compared to $30.8 million for 2000 due to a 35.5% increase in full time equivalent employees to support the increased regional jet operations, as well as scheduled wage increases throughout the year. The cost per available seat mile decreased 22.6% to 2.7¢ for 2001 compared to 3.5¢ for 2000 primarily due to the increase in capacity associated with the additional Embraer regional jets.

        Aircraft fuel costs increased 75.9%, or $16.8 million, to $39.0 million for 2001 compared to $22.2 million for 2000 due to a 113.1% increase in fuel consumption, partially offset by a 17.1% decrease in the average fuel price per gallon, including taxes and into-plane fees. The average price per gallon was 92¢ in 2001 and $1.11 in 2000, with the decrease due to fuel prices in the industry decreasing throughout 2001. The fixed-fee agreements with US Airways and America West provide for a direct reimbursement of fuel costs for Embraer regional jet operations. The fixed-fee agreement with American protects us from future fluctuations in fuel prices, as any difference between the actual cost and assumed cost included in the fixed fees is paid to or reimbursed by American. The unit cost decreased by 7.1% due to the lower average fuel price per gallon and the increase in Embraer regional jet flying.

        Passenger fees and commissions (paid only for the pro-rate turboprop flying for US Airways) decreased by 14.1%, or $1.8 million, to $11.1 million for 2001 compared to $12.9 million for 2000 due to a 9.6% decrease in the number of passengers flying on US Airways Express Turboprops and a 24.5% decrease in passenger revenue resulting from our discontinuation of certain routes in connection with our reduction in turboprop operations. Increased ground handling fees to US Airways partially offset these decreased expenses. The unit cost has decreased by 54.7% to 0.7¢ for 2001 compared to 1.5¢ for 2000 due to increased Embraer regional jet operations.

        Landing fees increased by 88.9%, or $3.3 million, to $7.1 million in 2001 compared to $3.8 million in 2000. The increase is due to the increase in the level of operations, the additional Embraer regional jets and an increase in the average landing fee rate charged by airports. The unit cost was unchanged from 2000 to 2001 due to the increase in Embraer regional jet operations. Our fixed-fee agreements with US Airways and America West provide for a direct reimbursement of landing fees. Any difference between the actual cost and assumed cost included in the fixed-fees paid by American is paid to or reimbursed by American.

34

        Aircraft rent increased by 101.5%, or $23.3 million, to $46.2 million in 2001 compared to $22.9 million in 2000 primarily due to the addition of 20 leased Embraer regional jets in 2001. As a result, unit cost increased by 6.5% to 2.8¢ for 2001 compared to 2.6¢ for 2000.

        Maintenance and repair expenses increased by 73.2%, or $14.4 million, to $34.1 million in 2001 compared to $19.7 million for 2000 due to the increase in operating regional jets, the increased costs of maintaining the aging turboprop fleet, and the volume and timing of heavy airframe checks as part of our ongoing maintenance program for both the turboprop and Embraer regional jet aircraft. The unit cost decreased by 8.4% to 2.1¢ in 2001 compared to 2.3¢ in 2000 due to the increase in capacity from the Embraer regional jet operations.

        Insurance and taxes increased 102.3%, or $2.9 million, to $5.7 million in 2001 compared to $2.8 million in 2000 due primarily to the increase in regional jet operations, increases in passenger liability and hull insurance rates, and an increase in the average hull value of aircraft. Additionally, as a result of the September 11 attacks, the commercial insurance markets have imposed surcharges on all airlines for war risk insurance previously provided at no additional cost. We also participate in the FAA war risk insurance program to supplement the commercial war risk policies. Unit cost remained constant at 0.3¢.

        Depreciation and amortization increased 89.4%, or $3.7 million, to $7.8 million in 2001 compared to $4.1 million in 2000 due to the purchase of four Embraer regional jets and the addition of spare aircraft parts and engines to support the expanding regional jet fleet. We purchased an additional three Embraer regional jets on December 31, 2001. Thus, nominal depreciation expense was recorded in 2001 for these three aircraft. The cost per available seat mile remained unchanged at 0.5¢ from 2000 to 2001.

        The impairment loss and accrued aircraft return costs of $8.1 million was recorded in 2001 due to management's decision to exit the turboprop business and return the entire fleet of leased Saab 340 turboprop aircraft to the lessors. This charge consists of asset impairment costs of $2.1 million, ongoing lease obligations of $4.5 million and $1.5 million to provide for contractual maintenance obligations.

        Other expenses increased by 26.3%, or $5.6 million, to $26.7 million in 2001 from $21.1 million in 2000. The increase is primarily due to higher crew related, training, and administrative costs required to support the growth of the Embraer regional jet fleet. Additionally, higher passenger related expenses were incurred because of increases in traffic. The unit cost decreased by 33.3% to 1.6¢ in 2001 compared to 2.4¢ in 2000 due to the increased capacity resulting from the Embraer regional jet operations.

        The Stabilization Act compensation in 2001 includes a $7.6 million reduction in operating expenses as a result of the compensation from the federal government under the Stabilization Act in 2001 for direct losses incurred beginning on September 11, 2001 through December 31, 2001 as a result of the September 11, 2001 terrorists attacks. During 2001, we received from the federal government $6.5 million in cash and anticipate receiving the remaining $1.1 million in the first half of 2002.

        Interest expense increased 75.4% or $2.6 million, to $6.2 million in 2001 from $3.6 million in 2000 primarily due to interest on debt related to the purchase of four Embraer aircraft during the second quarter of 2001. This increase was partially offset by a decrease in average borrowings to fund operations of 19.5% and a decrease in the weighted average interest rate of all debt to 8.1% in 2001, versus 10.4% in 2000.

        Other non-operating income decreased 10.3%, or $0.2 million to $1.6 million in 2001 compared to $1.8 million in 2000. Non-operating income consists primarily of net gains on fuel swaps.

        We incurred income tax expense of $4.8 million during 2001, compared to $2.9 million in 2000. The effective tax rate for 2001 of 44.0% was higher than the statutory rate due to the effect of

35

amortization of goodwill and non-deductible meals and entertainment expense, primarily for our flight crews.

2000 compared to 1999

        Operating revenue in 2000 increased by 67.1%, or $59.2 million, to $147.5 million compared to $88.3 million in 1999. The increase was due primarily to the additional Embraer regional jets added to the fixed-fee agreement with for US Airways and American in 2000, with seven aircraft added to each operation, as well as the four regional jets added to the fixed-fee agreement with US Airways in the second half of 1999. Additionally, six Saab 340 turboprop aircraft (five scheduled and one spare) were added to the fixed-fee agreement for American in 2000. Operating revenue for the pro-rate US Airways turboprop operations decreased by 3.6%, or $2.9 million, to $78.1 million in 2000 from $81.0 million in 1999 due to the elimination of certain routes that were previously flown by the Jetstream 31 fleet. The yield per revenue passenger mile for the turboprop operations increased by 4.4% to 49.5¢ in 2000 from 47.4¢ in 1999 due to a reduction in the average passenger journey.

        Total operating expenses increased by 41.9%, or $41.5 million, to $140.3 million for 2000 compared to $98.8 million during 1999 due to the increase in flight operations. Excluding the $6.6 million impairment loss and accrued aircraft return costs we recognized in 1999, total operating expenses increased by $48.0 million, or 52.1%. The cost per available seat mile decreased 31.1% to 16.1¢ for 2000 compared to 23.4¢ for 1999 due primarily to the increase in capacity (as measured by ASMs) associated with the additional Embraer regional jets. Factors relating to the change in operating expenses are discussed below.

        Wages and benefits increased by 35.7%, or $8.1 million, to $30.8 million for 2000 compared to $22.7 million for 1999 due to an increase in full time equivalent employees, normal wage increases and employee incentive accruals. The average full time equivalent employees increased by 35.6% to support the additional regional jet operations. The cost per available seat mile decreased 34.0% to 3.5¢ for 2000 compared to 5.4¢ for 1999 due to the increase in capacity associated with the additional Embraer regional jets.

        Aircraft fuel costs increased 211.7%, or $15.1 million, to $22.2 million for 2000 compared to $7.1 million for 1999 due to an 85.6% increase in fuel consumption and a 67.9% increase in average price per gallon, including taxes and into-plane fees. The average fuel price per gallon, net of the benefit of a fuel swap, was $1.11 in 2000 and 66¢ in 1999, with the increase due to fuel prices increasing throughout 2000. We maintained and benefited from an active fuel swap for all of 1999 and from April through December 2000. The fixed-fee agreement with US Airways provides for a direct reimbursement of fuel costs for Embraer regional jet operations. The fixed-fee agreement with American protects us from future fluctuations in fuel prices, as any difference between the actual cost and the assumed cost included in the fixed fees is paid to or reimbursed by American. The unit cost increased by 51.8% due to the increase in fuel prices and the higher fuel consumption resulting from the additional Embraer regional jets.

        Passenger fees and commissions decreased by 14.3%, or $2.1 million, to $12.9 million for 2000 compared to $15.0 million for 1999 due to a decrease in the number of passengers flying on US Airways turboprops resulting from our discontinuation of certain routes in connection with our phase out of the Jetstream 31 fleet and a decrease in the commission rate paid to travel agencies. Passenger fees and commissions are paid only for the pro-rate turboprop operations for US Airways. The unit cost has decreased to 1.5¢ for 2000 compared to 3.6¢ for 1999 due to increased Embraer regional jet operations.

        Landing fees increased by 78.3%, or $1.7 million, to $3.8 million in 2000 compared to $2.1 million in 1999. The increase is due to the increase in the level of operations, the additional Embraer regional jets and an increase in the average landing fee rate charged by airports. The unit cost decreased by

36

14.0% due to the increase in capacity resulting from the additional Embraer regional jet operations. Our fixed-fee agreement with US Airways provides for a direct reimbursement of landing fees. Any difference between the actual cost and assumed cost included in the fixed-fees paid by American is paid to or reimbursed by American.

        Aircraft rent increased by 147.6%, or $13.7 million, to $22.9 million in 2000 compared to $9.2 million in 1999 due to the addition of four leased Embraer regional jets in 1999 and 14 leased Embraer regional jets and 12 leased Saab 340 turboprops in 2000. As a result, unit cost increased by 20.1% to 2.6¢ for 2000 compared to 2.2¢ for 1999.

        Maintenance and repair expenses increased by 53.5%, or $6.9 million, to $19.7 million in 2000 compared to $12.8 million for 1999 due to the increase in operations and the volume and timing of heavy airframe checks as part of our ongoing maintenance program. The unit cost decreased by 25.4% to 2.3¢ in 2000 compared to 3.0¢ in 1999 due to the increase in capacity from the Embraer regional jet operations.

        Insurance and taxes increased 84.7%, or $1.3 million, to $2.8 million in 2000 compared to $1.5 million in 1999 due to an increase in passenger liability and hull insurance resulting from the increase in operations. Additionally, aircraft property tax expense increased 176.4% due to the additional Embraer regional jets. Unit cost has decreased 11.1% due to increased Embraer regional jet operations.

        Depreciation and amortization decreased 4.5%, or $0.2 million, to $4.1 million in 2000 compared to $4.3 million in 1999 due to the elimination of spare parts associated with the phase-out of the Jetstream 31 fleet. The cost per available seat mile decreased by 53.9% due to increased Embraer regional jet operations.

        Impairment loss and accrued aircraft return costs of $6.6 million were recorded in 1999 due to management's decision to eliminate certain routes and to return the entire fleet of leased Jetstream 31 turboprop aircraft and dispose of related inventory and equipment.

        Other expenses increased by 21.5%, or $3.7 million, to $21.1 million in 2000 from $17.4 million in 1999. The increase is primarily due to a 48.6% increase in crew related expenses due to the increased flying and training to support the increase in the Embraer regional jet fleet. The unit cost decreased by 41.0% to 2.4¢ in 2000 compared to 4.1¢ in 1999 due to the increased capacity resulting from the Embraer regional jet operations.

        Interest expense increased 10.3%, or $0.4 million, to $3.6 million in 2000 from $3.2 million in 1999 primarily due to an increase of 11.9% in the average balance outstanding on a related party note payable, while our weighted average interest rate of all debt 10.4% remained constant.

        Other non-operating income increased 1766.7%, or $1.7 million, to $1.8 million in 2000 from $0.1 million in 1999 due to the company recognizing a $1.7 million in net gains on fuel swaps at December 31, 2000.

        We incurred income tax expense of $2.9 million during 2000, compared to a tax benefit of $4.8 million in 1999. The effective tax rate for 1999 and 2000 of 64.6% and 53.8% was higher than the statutory rate due to the effect of amortization expense and non-deductible meals and entertainment expense, primarily for our flight crews. The tax benefit in 1999 was due to our loss for the year.

37

Liquidity and Capital Resources

        Historically, we have used internally generated funds, loans from our sole stockholder and its affiliates and third-party financing to meet our working capital and capital expenditure requirements. As a result of our recent code-sharing agreements with American and America West, which require us to significantly increase our fleet of regional jets, we will significantly increase our cash requirements for debt service and lease payments. See "Risk Factors—Our fleet expansion program will require a significant increase in our leverage and the financing we require may not be available on favorable terms or at all."

        As of December 31, 2001, we had $3.3 million in cash, and $2.1 million available under our revolving credit facility. Substantially all of our cash receipts are swept and used to pay down borrowings under our revolving credit facility. At December 31, 2001, we had a working capital deficit of $33.8 million, due primarily to $18.1 million of debt, including accrued interest, due to WexAir LLC, our sole stockholder and $10.7 million of debt with Fleet Capital Corporation and $3.4 million due to Embraer, all coming due within 12 months. We intend to use a portion of the proceeds of the offering to pay the debt to WexAir LLC and a portion of the debt due to Embraer.

        Chautauqua has a credit facility with Fleet Capital Corporation, which currently provides it with a $23.0 million revolving credit facility, a term loan which aggregated $3.4 million at December 31, 2001, and up to $5.0 million of equipment loans for the purchase of aircraft and spare parts. At December 31, 2001, Chautauqua had $7.0 million outstanding under the revolving credit facility, $1.0 million of outstanding letters of credit and $0.3 million of equipment loans outstanding. The term loan, the proceeds of which were used to finance the purchase of two Saab turboprop aircraft, is payable in monthly principal installments of $56,250, with any outstanding amounts due upon termination of the revolving credit facility. Borrowings under the equipment loans are payable in 96 monthly installments for loans to purchase aircraft and 60 monthly installments for all other equipment, with any outstanding amounts due upon termination of the revolving credit facility. The revolving credit facility expires March 31, 2002 and we are currently discussing the terms of a new agreement with Fleet and other parties.

        The revolving credit facility allows Chautauqua to borrow up to 90% of the monthly passenger revenue generated by our US Airways turboprop operation, up to 65% of the value of spare parts for our regional jet fleet and up to 50% of the value of certain spare parts for our turboprop fleet. The revolving credit facility is collateralized by all of Chautauqua's assets excluding the owned aircraft and engines. Borrowings under the credit facility bear interest at a rate equal to, at Chautauqua's option, LIBOR plus spreads ranging from 2.25% to 2.50% or the bank's base rate (which is generally equivalent to the prime rate) plus 0.50%. Chautauqua pays an annual commitment fee on the unused portion of the revolving credit facility in an amount equal to 0.375% of the unused amounts. The credit facility limits Chautauqua's ability to incur indebtedness, pay dividends, amend the US Airways turboprop agreement, or create or incur liens on our assets. In addition, the credit facility requires Chautauqua to maintain a specified fixed charge coverage ratio and a leverage ratio. The credit facility provides Fleet with the right to terminate the facility if WexAir LLC and its affiliates cease to own at least 51% of the voting control of Republic Airways. As of December 31, 2001, we were not in compliance with all required covenants, but had obtained waivers from Fleet.

        We currently lease seven spare regional jet engines, having a fair market value of approximately $15.1 million, from General Electric Capital Aviation Services, also known as GECAS. We are obligated to purchase an additional two spare regional jet engines to be delivered during 2002. We have an agreement with GECAS to lease these two engines pursuant to a sale-leaseback transaction.

        As of December 31, 2001, we had promissory notes payable to Embraer totaling $103.4 million. These borrowings were made in connection with the purchase of four ERJ 145 and three ERJ 140 aircraft in 2001. The notes bear interest at 7.5% and mature at dates ranging from June 20, 2002,

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through November 23, 2002. The maturity dates automatically extend for an additional 12 months at the earlier of the maturity date or upon failure to obtain long-term replacement financing. Each note is secured by the Embraer regional jet purchased with the proceeds of such note, together with all related equipment. The debt with respect to the four ERJ 145 aircraft has been replaced with financing from FINAME in January 2002. We are currently negotiating with FINAME to refinance the three Embraer promissory notes with respect to the three ERJ 140 aircraft.

        As of December 31, 2001, we had a promissory note due to our sole stockholder in the amount of $16.9 million. We also had $1.2 million in accrued interest payable under this note. This indebtedness was originally incurred in May 1998 to finance a portion of our purchase of Chautauqua. The note, which currently bears interest at the rate of 11.5% compounded semi-annually, currently matures on the earliest of (1) demand by the holder thereof, (2) May 15, 2002, or (3) the closing of this offering. We intend to repay the principal and accrued interest with a portion of the proceeds from this offering. See "Use of Proceeds."

        Net cash from operating activities was $2.2 million, $6.7 million and $23.0 million for the years ended December 31, 1999, 2000 and 2001. The increase from operating activities from 1999 through 2001 is primarily due to the continued growth of our business. In 2001, net cash from operating activities represents net income of $6.1 million, a non-cash charge for impairment loss and accrued aircraft return costs of $8.1 and depreciation and amortization of $7.8 million. The net cash from operating activities for 2000 is primarily net income of $2.5 million plus depreciation and amortization of $4.1 million. In 1999, net cash from operating activities reflects the net loss of $8.9 million and depreciation and amortization of $4.3 million, offset primarily by the $6.6 million non-cash charge for impairment loss and accrued aircraft return costs.

        Net cash from investing activities was $(9.3) million, $(10.8) million and $(12.7) million for the years ended December 31, 1999, 2000, and 2001. The net cash from investing activities consists of our purchase of equipment, including down payments relating to our purchase of seven Embraer regional jets in 2001 and four spare Embraer jet engines and two spare Saab 340 turboprop engines. We purchased 1, 2 and 4 spare aircraft engines for the Embraer regional jets in 1999, 2000 and 2001, respectively, and these engines were sold in a sale-leaseback transaction in the fourth quarter of 2001.

        Net cash from financing activities was $7.1 million, $4.0 million and $(7.4) million for the years ended December 31, 1999, 2000 and 2001. In 2001, we used cash from operating activities to repay $2.2 million of the revolving credit facility and to make scheduled debt payments. In addition, $4.1 million generated from the sale/leaseback of spare engines was used to repay long-term debt. In 2000, the net cash from financing activities primarily represents proceeds from a $1.5 million loan from an affiliate of WexAir LLC, which was subsequently repaid, including accrued interest, through the issuance by Chautauqua of its preferred stock in May 2000. We also received $1.5 million in May 2000 from the issuance by Chautauqua of shares of its preferred stock to an affiliate of WexAir LLC. Net cash from financing activities in 1999 consists primarily of net borrowings of $9.0 million under the credit facility and proceeds from a $1.0 million loan from an affiliate of WexAir LLC, net of scheduled debt payments. We repaid the $1.0 million loan, including accrued interest, in May 2000 through the issuance by Chautauqua of shares of preferred stock to an affiliate of WexAir LLC.

Aircraft Leases

        We have significant obligations for aircraft that are classified as operating leases and therefore are not reflected as liabilities on our balance sheet. These leases expire between 2002 and 2018. As of December 31, 2001, our total mandatory payments under operating leases aggregated approximately $813.7 million (excluding an obligation of $26.9 million due pursuant to our agreement to return the Saab aircraft to the lessor), and total minimum annual aircraft rental payments for 2002 under all noncancellable operating leases was approximately $64.3 million.

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Purchase Commitments

        We have substantial commitments for capital expenditures, including for the acquisition of new aircraft. We intend to finance these aircraft through long-term loans or lease arrangements, although there can be no assurance we will be able to do so. We believe that the expenses of obtaining the loans or leases may be reduced, and the availability of the loans or leases may be facilitated, by the increase in stockholder's equity resulting from the offering.

        As of December 31, 2001, our code-sharing agreements require that we acquire and place in service an additional 8 regional jets over the next nine months. We estimate that the aggregate cost, based on current list price, of these 8 additional regional jets is approximately $145 million, one of which was acquired in February 2002.

        We are currently in negotiations with FINAME to provide debt financing for up to 11 additional Embraer regional jets (including three currently subject to bridge financing with Embraer).

        We expect to fund future capital commitments through internally generated funds, third-party aircraft financings, the proceeds of this offering and other debt and equity financings.

        We currently anticipate that our available cash resources, together with the proceeds of this offering, cash generated from operations and anticipated third-party financing arrangements, will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. We may need to raise additional funds, however, to fund more rapid expansion, principally the acquisition of additional aircraft, or meet unanticipated working capital requirements. It is possible that future funding may not be available to us on favorable terms, or at all. If we issue equity securities, you may experience additional dilution, which could be substantial. In addition, we may issue equity securities that have rights, preferences and privileges senior to those of our common stock. If we borrow money, we may incur significant interest expense and become subject to covenants that could limit our ability to operate and fund our business. If we need funds and cannot raise them on acceptable terms, we may be unable to realize our current plans or meet our obligations to our code-share partners, and we could be required to slow our growth.

        Our contractual obligations and commitments at December 31, 2001, include the following (in thousands):

	Payments Due By Period
	Less than 1 year		1-3 years		4-5 years		Over 5 years		Total
Long-term debt	$	31,416	$	9,902	$	10,992	$	79,040	$	131,350
Operating leases, excluding Saab 340 aircraft		57,469		114,907		114,476		555,259		842,111
Operating leases, Saab 340 aircraft		9,174		15,102		2,590				26,866
Unconditional purchase obligation for spare aircraft engines		5,000								5,000
Total contractual cash obligations	$	103,059	$	139,911	$	128,058	$	634,299	$	1,005,327

        Our commercial commitments at December 31, 2001, include the following (in thousands):

	Expiration
	Less than 1 year		Total
Revolving credit facility	$	7,044	$	7,044
Letters of credit		1,032		1,032
Total commercial commitments	$	8,076	$	8,076

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Critical Accounting Policies

        The discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

        Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and are sufficiently sensitive to result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements.

•

Impairments to Long-Lived Assets. We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cashflows estimated to be generated by those assets are less than the carrying amount of those items. Our cash flow estimates are based on historical results adjusted to reflect our best estimate of future market and operating conditions. Our estimates of fair value represent our best estimate based on industry trends and reference to market rates and transactions.

            We regularly review the estimated useful lives and salvage values for our aircraft and spare parts.

•

Aircraft Maintenance and Repair. We believe our accounting policy is consistent with our competitors. We follow a method of expensing such amounts as incurred rather than accruing for expected costs or capitalizing and amortizing such costs. Maintenance and repairs for spare engines and airframe components under power-by-the-hour contracts are incurred as the aircraft are operated; therefore, amounts are accrued based upon actual hours flown.

Quarterly Information

        The following table sets forth summary quarterly financial information for the years ended December 31, 2000 and 2001.

	Quarter Ended
	March 31			June 30		September 30		December 31
	(dollars in thousands)
2000
Operating revenues	$	28,579		$	34,727	$	39,267	$	44,904
Operating income (loss)		(660	)		2,117		2,935		2,830
Net income (loss)		(823	)		620		1,149		1,576
2001
Operating revenues		52,514			62,812		62,644		60,674
Operating income (loss) (1)		3,813			7,295		6,340		(2,001	)
Net income (loss)		2,528			3,440		2,451		(2,352	)

(1)

Includes Stabilization Act compensation of $2,676 and $4,964 in the third and fourth quarters, respectively, and impairment loss and accrued aircraft return costs of $8,100 in the fourth quarter.

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New Accounting Standards

        In July 2001, SFAS No. 141, Business Combinations, was issued. SFAS No. 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. We have had no business combinations subsequent to June 30, 2001 and, therefore, we believe that the adoption of SFAS No. 141 will not have a significant impact on our consolidated financial statements.

        In July 2001, SFAS No. 142, Goodwill and Other Intangible Assets, was issued and was effective for us on January 1, 2002. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization and annual assessment of impairment. We recorded goodwill amortization of $807 in each of the years ended December 31, 1999, 2000, and 2001. Effective January 1, 2002, we will no longer amortize goodwill, but will evaluate it on an annual basis to determine whether there is an impairment of goodwill. If we determine the goodwill is impaired, we are required to write-off the amount of goodwill that is impaired.

        In August 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, was issued, which was effective for us on January 1, 2002. Among other things, this statement will supersede SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, and the accounting and reporting provisions of APB No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 changes the treatment for the disposal of a business segment and establishes one method of accounting for long-lived assets to be disposed of by sale. We believe the adoption of SFAS No. 144 will not have a significant impact on the our financial position, results of operations and cash flows.

Quantitative and Qualitative Disclosures About Market Risk

        We have been and are subject to market risks, including commodity price risk (such as, to a limited extent, aircraft fuel prices) and interest rate risk.

Aircraft Fuel

        Until we discontinue our pro-rate turboprop operations, we are exposed to fluctuations in the price of aircraft fuel for our turboprops which affects our earnings. Our financial statements reflect both the cost of fuel we purchase for flights we control, as well as fuel we purchase for fixed-fee flights, which is subject to reimbursement by our code-share partners. Currently, we have limited our exposure to fuel price increases with respect to approximately 94% of available seat miles produced, due to contractual arrangements with US Airways, American and America West. US Airways and America West reimburse us for the actual cost of fuel on contracted flights, while American reimburses us to the extent our actual fuel costs exceed the assumed cost of fuel included in the fixed rate it pays us. For illustrative purposes only, we have estimated the impact of market risk using a hypothetical increase in fuel price per gallon of 10% for the years ended December 31, 2001 and 2000. Based on this hypothetical assumption, and after considering the impact of the contractual arrangements, we would have experienced an increase in fuel expense of approximately $650,000 and $934,000 respectively. We currently intend to use cash generated by operating activities to fund any adverse change in the price of fuel.

Interest Rates

        Our earnings are affected by changes in interest rates due to the amounts of variable rate debt and the amount of cash and securities held. The interest rate applicable to variable rate debt may rise and increase the amount of interest expense. At December 31, 2001, 8.2% of our total long-term debt was variable rate debt, compared to 51.8% at December 31, 2000. For illustrative purposes only, we have estimated the impact of market risk using a hypothetical increase in interest rates of one percentage

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point for both our variable rate long-term debt and cash and securities. Based on this hypothetical assumption, we would have incurred an additional $180,000 in interest expense for the year ended December 31, 2001. As a result of this hypothetical assumption, we believe we could fund interest rate increases on our variable rate long-term debt with the increased amounts of interest income. We do not believe we have significant exposure to the changing interest rates on our fixed-rate, long-term debt instruments, which represented 91.8% of our total long-term debt at December 31, 2001, and 48.2% of our total long-term debt at December 31, 2000. We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates.

        We currently intend to finance the acquisition of aircraft through third-party leases or long-term borrowings. Changes in interest rates may impact the actual cost to us to acquire these aircraft. To the extent we place these aircraft in service under our code-share agreements with American and America West, our reimbursement rates will be adjusted higher or lower to reflect any changes in our aircraft rental rates.

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REGIONAL AIRLINE INDUSTRY OVERVIEW

Major, Low-fare and Regional Airlines

        The airline industry in the United States has traditionally been dominated by "major airlines," which currently include American, United Airlines, Delta Air Lines, Northwest Airlines, Continental Airlines, US Airways, America West Airlines and Alaska Airlines. The major airlines offer scheduled flights to many major cities within the United States and often throughout all or part of the world while also serving numerous smaller cities. The major airlines benefit from wide name recognition and long operating histories.

        Most major air carriers have adopted the "hub and spoke" system. This system concentrates most of an airline's operations in a limited number of hub cities, serving most other destinations in the system by providing one-stop or connecting service through the hub between destinations on the spokes. Such an arrangement permits travelers to fly from a point of origin to more destinations without switching air carriers. Hub airports permit carriers to transport passengers between large numbers of destinations with substantially more frequent service than if each route were served directly. The hub and spoke system also allows the carrier to add service to new destinations from a large number of cities using only one or a limited number of aircraft.

        "Low-fare" airlines, such as Southwest Airlines, AirTran Airways and Frontier Airlines, generally offer fewer conveniences to travelers and have lower cost structures than major airlines, thus permitting them to offer flights to many of the same markets as the major airlines, but at lower prices. Some low-fare airlines utilize a hub and spoke strategy, while others, such as Southwest Airlines, offer predominantly point-to-point service between designated city pairs. The reduction, withdrawal or historical absence on shorter haul routes by both major and low-fare carriers has provided increased opportunities for regional airlines to develop these markets.

        Regional airlines, including our airline, American Eagle, Atlantic Coast Airlines, Atlantic Southeast Airlines, Continental Express, Comair, Horizon Airlines, Mesa Airlines, Mesaba Airlines, and SkyWest Airlines, typically operate smaller aircraft on lower-volume routes than major and low-fare airlines. Several regional airlines, including American Eagle, Comair, Atlantic Southeast Airlines and Horizon Airlines, are wholly-owned subsidiaries of major airlines. In contrast to low-fare airlines, regional airlines generally do not try to establish an independent route system to compete with the major airlines. Rather, regional airlines typically enter into cooperative marketing relationships with one or more major airlines, under which the regional airline agrees to use its smaller, lower-cost aircraft to carry passengers booked and ticketed by the major airline between a hub of the major airline and a smaller outlying city. In exchange for such services, the regional airline is either paid a fixed-fee per flight by the major airline or receives a pro-rata portion of the total fare generated in a given market.

Growth of the Regional Airline Industry

        Regional airlines have experienced significant growth over the past decade. According to the FAA, from 1995 to 2000, regional airlines in the United States experienced average annual growth in revenue passenger miles of 13.4%, compared to 5.1% growth for major airlines. Over the same period, the number of passengers flown by regional airlines increased an average of 7.4% per year, compared to 4.0% growth for major airlines. According to the Regional Airline Association, 2000 results for U.S. regional airlines compared to 1999 saw an increase of approximately 22% in revenue passenger miles, with 84.6 million passengers flown, which represents an 8.4% increase in enplanements. In March 2001, the FAA forecasted U.S. revenue passenger miles to grow at an average annual rate of 7.3% over the 12-year period ending 2012, from 22.3 billion in 2000 to 52.2 billion in 2012, and the number of passengers flown to grow by an average annual rate of 5.7% during the same 12-year period, reaching a total of 154.1 million passengers by 2012. We cannot at this time predict what effect, if any, the

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terrorist attacks on New York and Washington, D.C. in September 2001 will have on this anticipated growth, particularly in the short-term.

        We believe that the growth of the number of passengers using regional airlines and the revenues of regional airlines during the last decade is attributable to a number of factors, including:

•

Regional airlines are increasing their fleets of regional jet aircraft, which passengers prefer to turboprops.



•

Regional airlines work with, and often benefit from the strength of, the major airlines. Since many major airlines are increasingly using regional airlines as part of their growth strategies, many regional airlines have expanded, and may continue to expand, with the major airlines they serve.



•

Regional airlines tend to have a more favorable cost structure and greater operating flexibility than many major airlines. Many regional airlines were founded in the midst of the highly competitive market that developed following deregulation of the airline industry in 1978.



•

Many major airlines have determined that an effective method for retaining customer loyalty and maximizing system revenue, while lowering costs, is to utilize more cost-efficient regional airlines flying under the major airline's flight designator code and brand name to serve shorter, low-volume routes.

Growth in the Use of Regional Jets

        We believe that the emergence of the regional jet in the mid-1990s was, and will continue to be, a significant factor in the growth of the regional airline industry. Part of the reason for the regional jets' importance to the growth of the regional airline industry stems from the high level of customer acceptance of the aircraft. Regional jets feature cabin class comfort and low noise levels, and we believe they are frequently preferred by customers to turboprops. In addition, regional jets travel at high speeds and have a traveling range that is similar to 120-plus seat aircraft operated by major airlines. Regional jets can be used effectively on routes of up to approximately 1,500 miles, compared to approximately 400 miles for turboprops. The extended range, speed and greater comfort of regional jets allow regional airlines to operate on longer and more varied routes than they could with turboprops.

        In addition, for many routes, regional jets are more economical than larger jets. As a result, regional jets are often used to fly on what are called "long and thin" routes, which are routes between cities that are too distant to use turboprops (400 to 1,500 miles) but have insufficient customer demand (either overall or during certain times of the day or year) to justify flying larger jet aircraft. The ability of regional jets to fly profitably to smaller markets has allowed the major airlines, in conjunction with their regional partners, to enhance greatly the profitability and general utility of their hubs by adding spoke cities and increasing the frequency of flights, especially in off-peak periods.

        We believe that major air carriers have deployed regional jets in three distinct roles: (1) to increase service in existing markets; (2) to operate new point-to-point services that bypass other airlines' connecting hubs; and (3) to "bend" market share in favor of the air carrier by offering jet service in competition with other airlines' turboprop service. In certain existing markets, airlines are able to economically replace their mainline jet service with more frequent service provided by smaller 30 to 69-seat regional jets, without incurring the risk of increasing the total number of seats offered in a market. In new markets, regional jets allow airlines to profitably serve new long distance markets that lie beyond the range of smaller capacity turboprop aircraft but do not have sufficient traffic volume to justify service with larger jets. Finally, given passengers' demonstrated preference for jet aircraft over turboprop aircraft, airlines are able to capture a larger share of the passenger traffic by offering flights with jet aircraft in markets that have historically been served by turboprop aircraft. The favorable

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operating economics of regional jets have led to significant growth in the regional airline sector, as major air carriers continue to add new regional jet capacity to their route networks.

Relationship of Regional and Major Airlines

        Regional airlines generally enter into code-sharing agreements with major airlines, pursuant to which the regional airline is authorized to use the major airline's two-letter flight designator code to identify the regional airline's flights and fares in the central reservation systems, to paint its aircraft with the colors and/or logos of its code-sharing partner and to market and advertise its status as a carrier for the code-sharing partner. For example, we fly out of New York (La Guardia Airport), Boston, Philadelphia, Pittsburgh and Indianapolis as US Airways Express; out of St. Louis as American Connection; and out of Columbus as America West Express. In addition, the major airline generally provides reservation services, ticket stock, certain ticketing services, ground support services, airport landing slots and gate access to the regional airline, and both partners often coordinate marketing, advertising and other promotional efforts. In exchange, the regional airline provides a designated number of low capacity (usually between 32 and 69 seats) flights between larger airports served by the major airline and surrounding cities, usually lower-volume markets.

        The financial arrangements between the regional airlines and their code-share partners usually involve either a fixed-fee or pro-rate arrangement. We believe that, as a result of the differences between fixed-fee arrangements and revenue-sharing arrangements, the trend in the industry for publicly owned regional carriers is toward using fixed-fee arrangements, similar to arrangements we have with American, America West and US Airways.

Fixed-Fee Capacity Purchase Agreements. Under a fixed-fee arrangement, the major airline generally pays the regional airline a fixed-fee per flight, with additional incentives based on completion of flights, on-time performance and correct baggage handling. In addition, the major and regional airline often enter into an arrangement pursuant to which the major airline bears the risk of changes in the price of fuel and other costs not directly controllable by the regional airlines such as landing fees, liability insurance and aircraft property taxes. Regional airlines benefit from a fixed-fee arrangement because they are sheltered from most of the elements that cause volatility in airline earnings, such as variations in ticket prices, passenger loads and fuel prices. However, regional airlines in fixed-fee arrangements do not benefit from a positive trend in ticket prices, passenger loads or fuel prices and, because the major airlines absorb most of the risks, the margin between the per-flight fixed-fee and expected per-flight costs tends to be much lower than the profit margins associated with pro-rate revenue sharing arrangements under good economic conditions. The major airline can benefit from fixed-fee capacity purchase agreements because under such arrangements it is better able to control its entire network of flights and to serve strategic routes that otherwise might be uneconomical to a regional carrier under a revenue-sharing agreement. Our company and other regional airlines that operate under capacity purchase agreements have been less severely impacted by the events of September 11, 2001 and the decline in the economy primarily as a result of the transfer of passenger traffic risk to the purchaser of capacity and the ability of regional jets to accommodate the lower demand for air transportation better than mainline jets.

Revenue Sharing Arrangements. Under a pro-rate revenue sharing arrangement, the major airline and regional airline negotiate a proration formula, pursuant to which the regional airline receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on the regional airline and the other portion of their trip on the major airline. Substantially all costs associated with the regional airline flight are borne by the regional airline. In such a revenue-sharing arrangement, the regional airline realizes increased profits as ticket prices and passenger loads increase or fuel prices decrease and, correspondingly, realizes decreased profits as ticket prices and passenger loads decrease or fuel prices increase.

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BUSINESS

General

        We are a regional airline offering scheduled passenger service on approximately 355 flights daily to 42 cities in 18 states and Canada pursuant to code-sharing agreements with American, America West Airlines and US Airways. All of our flights are operated as either US Airways Express, AmericanConnection or America West Express, providing US Airways, American and America West with portions of their regional service, including service out of their hubs in Boston, Columbus, Indianapolis, New York, Philadelphia, Pittsburgh and St. Louis. Our fleet consists of 46 Embraer regional jets and 17 Saab 340 turboprops. We are in the process of phasing the turboprops out of service and expect to operate an all jet fleet by August 2002. In addition, we have 7 regional jets on firm order which upon delivery will be placed into immediate service with our code-share partners and we also have options for 37 additional jets. From 1999 to 2001, our available seat miles, or ASMs, have grown at a compounded annual growth rate of 97.4%.

        We have long-term code-sharing agreements with each of our partners. During 2001, 75.6% of our passenger revenues were generated under fixed-fee agreements with our code-share partners, and we anticipate that by August 2002, 100% of our passenger revenues will be generated under such fixed-fee agreements. Pursuant to these fixed-fee agreements, we are authorized to use our partners' two-letter flight designation codes to identify our flights and fares in our partners' computer reservation systems, to paint our aircraft in the style of our partners, to use their service marks and to market ourselves as a carrier for our partners. We believe that the shift to fixed-fee agreements has reduced our exposure to fluctuations in fuel prices, fare competition and passenger volumes. Our development of relationships with multiple major airlines has enabled us to reduce our dependence on any single airline. For the year ended December 31, 2001, 67% of our operating revenues were derived from US Airways, 31% of our operating revenues were derived from American and 2% of our operating revenues were derived from America West.

        For the year ended December 31, 2001, we generated operating revenues of $238.6 million and net income of $6.1 million, as compared to operating revenues of $147.5 million and net income of $2.5 million for the year ended December 31, 2000.

Our Strengths

        We believe that our primary strengths are:

•

Provide High Quality Service Cost-Effectively. We provide our code-share partners the ability to offer their customers high quality service at a price to our partners that is generally more cost-effective than flying those routes themselves. We have established ourselves as a low cost, efficient and reliable provider of high quality regional airline services. This is primarily due to the advantageous economies of scale realized from the operation of a limited number of aircraft types and our productive workforce. The uniformity of our fleet allows for standardization in maintenance and crew training, resulting in substantial cost savings in these areas. We expect to see further cost savings resulting from the planned elimination of our turboprop operations by August 2002. Upon the elimination of our turboprop operations, we believe that we will be one of the lowest cost providers of regional jet service and one of the first U.S. regional airlines to move to a single fleet type business model using jet aircraft. As a result of these efficiencies and our high service standards, we believe that we can provide our current and any future code-share partners with significant cost savings and greater operational flexibility.



•

Long-Term, Fixed-Fee Code-Sharing Agreements. We have long-term code-sharing agreements with three major airlines, with scheduled expirations ranging from March 2009 through February 2013, subject in certain instances to earlier termination. All of our regional jet

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code-sharing agreements are fixed-fee, rather than pro-rate revenue sharing, arrangements. These fixed-fee agreements generally provide for minimum aircraft utilization levels at fixed rates, which provides for a more predictable revenue stream. These rates generally cover our cost of operating these aircraft, while our code-share partners generally bear other passenger and distribution expenses, including reservations, agent commissions and booking fees. We are generally not exposed to price fluctuations for fuel, insurance, aircraft property taxes or landing fees, as we are typically reimbursed for these costs by our code-share partners. Although fixed-fee arrangements eliminate our realization of any benefit resulting from higher ticket prices and other variable factors, these fixed-fee arrangements have substantially reduced our exposure to fluctuations in fare competition and passenger volumes.

•

Strong Relationships with a Diverse Group of Air Carrier Partners. Through our long-term code-sharing agreements with US Airways, American and America West, we have created a network of strong partnerships with three major US airlines. Having three air carrier partners has allowed us to diversify our financial and operational risk. Diversity may also allow us to grow at a faster rate and not be limited by the rate at which any one partner can, or wishes to, grow.



•

Significant Opportunity to Attract New Business. We currently have 46 Embraer regional jets in service and firm orders to acquire an additional 7 Embraer regional jets which will be placed into immediate service with our code-share partners. In addition, we have options to acquire an additional 37 Embraer regional jets. Our code-sharing agreements have only limited restrictions on our ability to enter into new or expanded relationships with any carrier. Further, we have the infrastructure to place our new regional jets into service quickly.



•

Experienced Management Team. Our senior management team has extensive operating experience in the regional airline industry. Since their arrival in mid-1999, our management team has significantly grown the business in the following ways:



•

added code-sharing agreements with both American and America West;



•

increased the number of regional jets that we fly for US Airways; and



•

improved our operating efficiencies and costs.

        Mr. Bedford, our chief executive officer, has over 14 years of experience in the regional airline industry. He was named regional airline executive of the year in 1998 by Commuter and Regional Airline News and while CEO at Mesaba Airlines, Mesaba was recognized as the Regional Airline of the Year in 1997 by Air Transport World Magazine. Mr. Cooper, our chief financial officer, has over nine years of experience in the regional airline industry and Mr. Heller, our chief operating officer, has over 23 years of experience in the regional airline industry.

•

Long History of Reliable Operations. We have a long operating history as a regional airline, having operated as a code-share partner of US Airways or its predecessors for over 27 years. We became an American code-share partner in April 2000 and an America West code-share partner in August 2001.

Our Business Strategy

        Our business strategy consists of the following elements:

•

Operate a Modern, All Jet Fleet. By August 2002, we expect to operate an all regional jet fleet for our code-share partners. Passengers prefer regional jets to turboprops because they are faster, quieter and perceived by passengers to be safer and more comfortable. In addition, we expect to achieve increased efficiencies in employee training and aircraft maintenance by operating a single type of aircraft which should enable us to reduce our operating costs. We believe we will

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be one of the first U.S. regional airlines to move to a single fleet business model using jet aircraft.

•

Expand Existing and Develop New Relationships With Code-Share Partners. We attribute the significant growth in our traffic and profitability to our code-sharing agreements with US Airways, American and America West. We believe that these relationships provide us with an excellent opportunity to achieve stable, long-term growth. To strengthen our existing relationships, we work closely with our code-share partners to expand service to existing markets, open new markets and schedule convenient and frequent flights. We also continue to explore new relationships with other major airlines.



•

All Fixed-Fee Flying. We believe that fixed-fee agreements allow our major airline partners to enjoy the significant benefits of optimizing total network revenues and matching aircraft size to meet customer demand, thereby maximizing their own profitability. Under fixed-fee arrangements, we receive a fixed-fee per flight with additional possible incentives from our partners; under pro-rate revenue sharing arrangements, we receive a negotiated portion of ticket revenue. In some circumstances, fixed-fee arrangements also enable us to operate routes selected by US Airways, American or America West for strategic purposes, even though those routes might not offer margins that are sufficiently attractive to motivate us to conduct such flights on a pro-rate revenue sharing basis. For the years ended December 31, 2000 and 2001, approximately 77% and 91% of our ASMs were flown under fixed-fee agreements. We anticipate that by August 2002, 100% of our ASMs will be flown under such fixed-fee agreements. Furthermore, we anticipate that the fixed-fee agreement will be the basis on which we will continue to add jets to our fleet.



•

Provide Excellent Customer Service. We believe that our focus on providing excellent customer service in every aspect of operations, including personnel, flight equipment, in-flight amenities, on-time performance, flight completion ratios and baggage handling, is largely responsible for our ability to attract and retain multiple major airline code-share partners. This is because our partners seek to build customer loyalty and preference through consistent, high quality seamless customer service, which they expect their regional partners to be able to provide at a competitive price.



•

Motivate Our Employees to Succeed. We believe that our employees are key to our success. In addition to offering competitive compensation and benefits, we take a number of steps to make our company an attractive place to work and build a career such as maintaining various employee recognition and bonus award programs and consistently communicating our vision and mission statement to our associates.

Markets and Routes

Markets

        We believe that our development of hub operations in St. Louis with American and in New York, Boston, Indianapolis and Philadelphia with US Airways has been a principal factor in the growth of our flight operations and will facilitate implementation of our growth and operating strategy. We curently offer scheduled passenger services on approximately 355 flights to 42 cities in 18 states and Canada. The following illustrates the routes we fly for our code-share partners:

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US Airways Express Service

AmericanConnection Service

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American West Express Service

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Flight Equipment

        As of February 28, 2002, we operated 46 Embraer regional jets as described in the following table:

Type	Total Aircraft	Owned	Leased	Option Aircraft		Average Age (in years)	Firm Orders	Seats in Standard Configuration
ERJ 145LR	38	4	34			1.3	0	50
ERJ 140LR	8	4	4			0.2	7	44
Total	46	8	38	37	(1)		7

(1)

We have the option to acquire 37 ERJ 140 or ERJ 145 regional jets.

        Furthermore, we currently operate 17 Saab turboprops that we intend to phase out by the end of 2002.

        America West has contracted for the use of seven additional Embraer regional jets on a fixed-fee basis. We have placed a firm order to acquire these additional 7 Embraer regional jets over the next eight months. We have no orders for additional aircraft other than the Embraer regional jets.

        All of our leased regional jet aircraft are leased by us pursuant to long-term leases, with current lease expirations ranging from 2014 to 2018. We also hold fixed-price purchase options under these leases at approximately 14.0 to 14.5 years after these leases commenced. Furthermore, we have options to renew most of the leases for an additional three years, or purchase outright the leased aircraft at the conclusion of their current lease terms at fair market value. We purchased four ERJ 145 aircraft and three ERJ 140 aircraft with short term loans by Embraer. The ERJ 145 aircraft were refinanced with long term loans and we are currently in negotiations to replace the loans with respect to the ERJ 140 aircraft with a long term financing arrangement. With the exception of two Saab 340 aircraft owned by us, our Saab 340 aircraft are leased under operating leases with remaining terms ranging from seven months to four years.

        The following table outlines the number and type of aircraft being operated for each code-share partner and the number of Embraer regional jets that we must place in service for each code-share partner as of February 28, 2002:

	ERJ 145LR			ERJ 140LR		Total Embraer Regional Jets
	In Operation		Total Required Aircraft	In Operation	Total Required Aircraft
US Airways	26		26	0	0	26
American	7	(1)	0	8	15	15
America West	5		12	0	0	12
Total	38		38	8	15	53

(1)

These ERJ 145s are being replaced by ERJ 140s and will subsequently be placed in service for America West.

        The foregoing table does not include the 17 Saab turboprops that we currently operate and plan to phase out by August 2002.

Ground Operations and Properties

        Our employees perform substantially all routine airframe and engine maintenance and periodic inspection of equipment. We lease a 27,500 square foot aircraft maintenance and training facility at the Indianapolis International Airport, a 45,000 square foot maintenance facility in Ft. Wayne, Indiana and a 56,000 square foot maintenance facility in Columbus, Ohio.

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        We lease ticket counters and check-in, boarding and other facilities in the passenger terminal areas in the majority of the airports we serve and staff these facilities with our personnel. Our partners provide ticket handling and ground support services in 31 of the 42 airports we serve.

        We lease our corporate headquarters, located in the administrative office building at the Indianapolis International Airport terminal. This facility consists of approximately 15,000 square feet of administrative space. The lease expires in July 2003, but is cancelable upon six months' notice if we decide to move our corporate headquarters to a new location in Indianapolis, Indiana.

Maintenance of Aircraft and Training

        Using a combination of FAA certified maintenance vendors and our own personnel and facilities, we maintain our aircraft on a scheduled and "as-needed" basis. We emphasize preventive maintenance and inspect our aircraft engines and airframes as required. We have "power-by-the-hour" agreements with vendors to maintain major components on the aircraft as follows:

•

We have an agreement with Rolls-Royce to maintain the engines on our Embraer regional jet aircraft through August 2009, an agreement with Hamilton/Sunstrand to maintain the auxiliary power units, or APUs, on our Embraer regional jets through August 2009 and an agreement with Honeywell to maintain the avionics on our Embraer regional jets through January 2012. Under these agreements, we are charged for covered services based on a fixed rate for each flight hour accumulated by the engines or airframes in our service during a month. The rates are subject to annual revisions generally based on the Bureau of Labor Statistics' labor and material indices.



•

We have an agreement with General Electric to maintain the engines on our Saab turboprop aircraft through December 2006. Under this agreement, we are charged for covered services based on a fixed rate for each flight hour accumulated by the engines in our service during a month but if no services are used no payment is due. The rates are subject to annual revisions based on the Bureau of Labor Statistics' labor and material indices.

        We believe these agreements, coupled with our ongoing maintenance program, reduces the likelihood of unexpected levels of engine, APU and avionics maintenance expense during their term.

        We have also developed an inventory of aircraft spare parts and have instituted a computerized tracking system to increase maintenance efficiency and to avoid excess inventories of spare parts.

        We perform our heavy and routine maintenance projects at our facilities in Indianapolis and Columbus and we perform routine maintenance services from select line maintenance stations.

        All mechanics and avionics specialists employed by us have appropriate training and experience and hold required licenses issued by the FAA. We provide periodic in-house and outside training for our maintenance and flight personnel and also take advantage of manufacturer's training programs that are offered when acquiring new aircraft.

        We have an agreement with FlightSafety International to provide for aircraft simulator training for all of our pilots. We have no current plans to acquire our own simulator in the near term and believe that FlightSafety or other third party vendors will be able to provide us with adequate and cost effective simulator training to implement our growth plans.

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Employees

        As of December 31, 2001, we employed 1,118 full-time equivalent employees. The following is a table of our principal collective bargaining agreements and their respective amendable dates as of December 31, 2001:

Employee Group	Approximate Number of Full-Time Equivalent Employees	Representing Union	Amendable Date
Pilots	450	International Brotherhood of Teamsters Airline Division Local 747	November 2002
Flight Attendants	226	International Brotherhood of Teamsters Airline Division Local 210	March 2003
Customer Service	177	International Brotherhood of Teamsters Airline Division Local 135	December 2005
Dispatchers	17	Transport Workers Union of America Local 540	February 2007

        As of December 31, 2001, we had 172 maintenance technicians and other maintenance personnel, who are not currently represented by any union, and 76 administration and support personnel. Because of the high level of unionization among our employees we are subject to risks of work interruption or stoppage and/or incur additional expenses associated with union representation of our employees. In connection with our proposed acquisition of 7 additional Embraer regional jets required to meet our obligations under our code-sharing agreements and related expansion, we anticipate hiring approximately 155 additional employees, many of whom will be represented by a union in their current employment. We have never experienced any work stoppages or other job actions and generally consider our relationship with our employees to be good.

        In October 1999 and again in June 2001 we reached tentative agreement with the executive council of our pilot union that would have amended certain provisions of the collective bargaining agreement, including extending the amendable date well ahead of the normal amendable date of the agreement. On both occasions, the membership of the union failed to ratify the tentative agreement.

Code-Sharing Agreements

        Our code-sharing agreements with US Airways, American and America West authorize us to use their two-letter flight designator codes ("US," "AA" and "HP") to identify our flights and fares in their computer reservation systems, to paint our aircraft with their colors and/or logos, to use their service marks and to market and advertise our status as US Airways Express, AmericanConnection and America West Express, respectively. Under our code-sharing agreements with US Airways, we are compensated on a fixed-fee basis for our US Airways Express flights using Embraer regional jets (approximately 70% of our US Airways flights at February 28, 2002) and on a pro-rate revenue-sharing basis for our US Airways Express flights using our Saab turboprop aircraft (approximately 30% of our US Airways flights at February 28, 2002). Under our code-sharing agreements with American and America West, we are compensated on a fixed-fee basis on all of our AmericanConnection and America West Express flights. In addition, under our US Airways, American and America West jet code-sharing agreements, our passengers participate in frequent flyer programs of the major airline, and the major airline provides additional services such as reservations, ticket issuance, ground support services, slot rights and gate access. Under our US Airways turboprop agreement, we pay negotiated fees with respect to such services.

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The US Airways Code-Sharing Agreements

        Jet Code-Sharing Agreement.    We operate 25 Embraer 145 regional jets and one spare Embraer 145 regional jet for US Airways under a jet code-sharing agreement. That code-sharing agreement provides that we will operate these aircraft to provide US Airways Express service between US Airways hubs and cities designated by US Airways. As of February 28, 2002, we were providing 155 regional jet flights per day as US Airways Express between New York, Boston, Philadelphia, Indianapolis and designated outlying cities.

        US Airways provides reservation, check-in, baggage-handling, ground-support and other passenger services, landing slots, gates, tickets, baggage tags, ticket wallets and similar items with respect to such flights and also controls scheduling, ticket prices and seat inventories with respect to such flights. Under the jet code-sharing agreement, US Airways retains all passenger, cargo and other revenues associated with each flight, and is responsible for all revenue-related expenses. In exchange for providing the designated number of flights and performing our other obligations under the jet code-sharing agreement, we receive from US Airways monthly compensation of a fixed-fee per departure, a fixed-fee per block hour flown, a fixed-fee per flight hour flown and a fixed-fee per aircraft per day. We also receive an additional amount per available seat mile flown, as well as per-passenger incentives based upon our performance relative to several operational benchmarks, including on-time performance, flight completion rates and lack of passenger complaints. The per available seat mile fee and per passenger incentive payments are a relatively small component of the total compensation that we are entitled to receive for each of our flights. The fixed rates that we receive from US Airways under the jet code-sharing agreement are increased at times specified in the agreement by an agreed escalation factor. Additionally, certain of our operating costs are considered "pass through" costs whereby US Airways has agreed to reimburse us the actual amount of costs we incur for these items. Fuel, landing fees, passenger catering, passenger liability insurance and aircraft property tax costs are pass through costs.

        The jet code-sharing agreement terminates on March 1, 2009, unless US Airways elects to exercise its option to extend the term for three years by providing us with notice by March 1, 2008; however, US Airways may terminate the jet code-sharing agreement at any time for cause upon not less than 90 days' notice and subject to our right to cure under the following conditions:

•

if we fail to retain or utilize the aircraft in the manner required under the jet code-sharing agreement;



•

if our flight completion factor falls below specified percentages during specified periods due to operational deficiencies that are within our control;



•

if our on time departure performance falls below specified percentages during specified periods; or



•

if we admit liability or are found liable for any safety infraction by the FAA that could reasonably be expected to lead to the suspension or revocation of our operating certificate or if in US Airways' reasonable opinion we are not complying in any material respect with applicable safety and operational requirements.

        In addition, if there is a regulatory change that materially and adversely affects the economic value of the agreement to us or US Airways, and we are unable to agree to amendments to the jet code-sharing agreement to alleviate those regulatory changes within 30 days, the party materially and adversely affected may terminate the agreement upon not less than 90 days' notice. We may terminate the jet code-sharing agreement on 90 days' notice if US Airways terminates the turboprop code-sharing agreement.

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        In general, we have agreed to indemnify US Airways and US Airways has agreed to indemnify us for any damages caused by any breaches of our respective obligations under the jet code-sharing agreement or caused by our respective actions or inactions under the jet code-sharing agreement.

        With respect to the operation of Embraer regional jets, US Airways pays us monthly in advance based on agreed assumptions, which amount is reconciled at the end of the month based on actual flight activity. The spare Embraer regional jet is included in the calculation of payments under our jet code-sharing agreement with US Airways. The jet code-sharing agreement requires US Airways to pay our fixed costs and per aircraft per day costs for a specified period of time in the event of a grounding of the Embraer regional jets as a result of a design or manufacturing defect or a strike by our employees. If we do not perform the services under the agreement due to our failure to maintain the aircraft or comply with FAA regulations, US Airways is not required to make any payments to us under the agreement during that time period. If we cannot provide services for any other reason, including a US Airways strike, US Airways is required to pay us during that time period the fixed costs, the per aircraft per day costs and an agreed upon amount per available seat mile flown based on the guaranteed minimums set forth in the agreement.

        Turboprop code-sharing agreement.    Pursuant to a separate turboprop code-sharing agreement with US Airways, we also operate 17 Saab turboprop aircraft, 8 of which are currently in service, as a US Airways Express carrier between certain cities under a pro-rate revenue sharing arrangement. With respect to such flights, we control scheduling, inventory and pricing subject to US Airways' concurrence that such service does not adversely affect its other operations in the region. In providing services under the turboprop code-sharing agreement, US Airways has the right in its sole discretion to allow us to operate as US Airways Express in markets and may withdraw approval for all or any part of our schedules at any time. Any changes to our operating schedules under the turboprop code-sharing agreement must be approved in advance by US Airways, including adding new markets to the agreement. If we suspend operations in any city served under the turboprop code-sharing agreement for 30 days or more, then that market is automatically deleted from the agreement. At February 28, 2002, we operated 68 flights per day (30% of our total US Airways Express flights) pursuant to such provisions. We plan to eliminate all flying under the turboprop code-sharing agreement by August 2002.

The American Code-Sharing Agreement

        We operate 15 Embraer regional jet aircraft for American under a fixed-fee code-sharing agreement. As of February 28, 2002, we operated seven Embraer 145 aircraft and eight Embraer 140 aircraft pursuant to this agreement. The seven Embraer 145 aircraft will be replaced by Embraer 140 aircraft during 2002 and enter service under the America West code-sharing agreement. As of February 28, 2002, we were providing 104 flights per day as AmericanConnection between St. Louis and designated outlying cities.

        American provides reservation services, tickets, baggage handling, ticket jackets and similar items with respect to such flights and also controls scheduling, ticket prices and seat inventories with respect to such flights. In exchange for providing the designated number of flights and performing our other obligations under the code-sharing agreement, we receive from American a fixed-fee per block hour flown in revenue service and an additional amount per passenger. We are also eligible to receive semi-annual per passenger incentives based upon on-time performance, flight completion rates, lack of complaints and correct baggage handling. Conversely, we must pay semi-annual per passenger penalties should our performance not meet minimum standards for on-time performance, flight completion rates, complaints and correct baggage handling. Under the code-sharing agreement, American retains all passenger, certain cargo and other revenues associated with each flight, and is responsible for all revenue-related expenses. We share revenue with American for certain cargo shipments. Additionally, certain operating costs are considered "pass through" costs and American has agreed to reimburse us the actual amount of costs we incur for these items. Fuel, landing fees, passenger catering, property

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and liability insurance and aircraft property costs are pass through costs. Aircraft lease payments (including fees payable to Solitair Corp. which are financed through the lease) are also considered a pass through cost, but are limited to a specified limit with respect to the first 20 aircraft put into service for American. American pays us periodically throughout the month on an agreed schedule, subject to American's right to offset amounts we owe them under the code-sharing agreement.

        The fixed rates for each scheduled block hour that we receive from American under the code-sharing agreement have been determined through the term of the code-sharing agreement, subject to certain revisions and an agreed annual escalation rate. Certain costs, including fuel costs, aircraft ownership and financing costs (subject to a limitation), landing fees, property and liability insurance, aircraft property taxes and de-icing costs, are "trued-up" for differences between actual costs and the assumed costs included in our fixed rates. In addition, a reconciliation payment will be made by American to us if uncontrollable cancellations exceed a specified level of scheduled block hours during any calendar quarter. We are reimbursed for all third party ground handling costs at certain airport locations, as well as reconciliation for shared ground services between us and American. We are responsible for certain training, automation and other charges and costs.

        The block hour rate we are paid varies based on the number of scheduled block hours per day to be flown in revenue service, subject to a minimum rate without regard to actual number of hours flown. This means that even if we fly less than the specified minimum number of scheduled block hours a day, we are paid as if we had flown the minimum number of block hours. The block hour rate can only be adjusted in connection with schedule changes that change the scheduled block hour utilization, but the minimum number of scheduled block hours cannot be changed. American has agreed to schedule the aircraft under the code-sharing agreement for no less than the specified minimum number of block hours per aircraft per day on average.

        Under the terms of the code-sharing agreement, we are required at specified locations to provide ground support and other passenger services at our expense, and American is required to provide those services at their expense at other locations. At the hub in St. Louis, we are responsible for providing gate operations, security and leasing facilities (which are leased from American), and American is responsible for providing ticketing services and de-icing for the aircraft. Certain costs of personnel training are shared with American.

        Currently, we operate seven Embraer 145 and eight Embraer 140 regional jets under the code-sharing agreement. We will phase-out of service the eight Embraer 145, commencing in the first quarter of 2002, as required by the code-sharing agreement and will replace them with Embraer 140 aircraft on a one-for-one substitution basis. If we fail to place in service the 15 Embraer 140 regional jets required to be in operation under the code-sharing agreement by April 30, 2002, we are obligated to pay American specified liquidated damages per day of delay per regional jet; however, we do not have to pay such amount if we failed to place in service an aircraft due to an event that would permit termination of the code-sharing agreement for force majeure or if American's requested modifications to a lease cause us to delay delivery thereof.

        The code-sharing agreement provides that, during its term, we will provide regional airline services exclusively for American at the St. Louis hub and within 50 statute miles of that hub, and we are prohibited from providing competing regional hub services at Memphis, Nashville and Kansas City. This means that, without American's consent, we are prohibited from operating flights under our own code or on behalf of any other air carrier providing hub services in or out of these airports. In addition, during the term of the agreement, we are prohibited from operating any of our aircraft subject to the code-sharing agreement on behalf of any other carrier. Otherwise, the agreement does not prohibit us from flying aircraft on behalf of other airlines utilizing the airport facilities of those airlines or other airport facilities that we may obtain in the future.

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        At any time that we enter into an agreement with a third party for code-sharing using ERJ 140 aircraft, we must offer American the right, on an all or nothing basis, to amend the code-sharing agreement to incorporate the terms of the agreement with the third party. If American elects to incorporate the terms of the agreement with the third party, those terms will govern all of the aircraft covered by the code-sharing agreement. If we reach an agreement in principle with a third party to provide service using an aircraft other than an ERJ 140 aircraft, we are required to offer the right of first refusal to American on a one time basis to enter into that agreement. American can only exercise their right of first refusal on an all or nothing basis, and American must have previously exercised, or agree to exercise, all of its outstanding options for aircraft under the terms of the existing code-sharing agreement.

        Should we have aircraft in excess of our operational needs, we have granted American a right of first refusal to use those aircraft pursuant to the terms of the code-sharing agreement.

        Under the code-sharing agreement, we are required to have specified terms in the leases of our aircraft. These terms include a limit on the minimum term of the lease, a clause permitting assignment to American without penalty and under identical terms, certain return conditions and a purchase option on terms acceptable to American. We also cannot amend any of the leases without American's prior consent, such consent not to be unreasonably withheld.

        If American terminates the code-sharing agreement for cause, American has a call option to require that we assign to American all of our rights under the leases of aircraft, and to lease to American the aircraft to the extent we own them, used at that time under the code-sharing agreement. If American exercises their call option, we are required to pay certain maintenance costs in transferring the aircraft to American's maintenance program.

        If American terminates the code-sharing agreement without cause, we have the right to put the leases of the aircraft, or to lease the aircraft to them to the extent owned by us, used under the code-sharing agreement to American. American also has a call option to require us to assign to American these leases. If we exercise our put or American exercises their call, both parties are obligated to implement a schedule to terminate the code-sharing agreement in an orderly fashion and transition the aircraft from us to American. With the exception of performance incentives, which are deemed inapplicable during such transition, the term of the code-sharing agreement is deemed to continue during the transition period. Moreover, we would be entitled to receive payments of fixed costs and reimbursement of pass-through costs during such period.

        The code-sharing agreement with American gives American the right to purchase up to five percent of the common stock that we may offer for sale in connection with this offering, referred to as our IPO. The purchase price American will pay for the shares will be the per share price at which the IPO shares are offered to the public. To further induce American to enter into the code-sharing agreement with us, we paid American a contract rights fee in the form of a warrant to purchase shares of our common stock. For a description of this warrant, see "Description of Capital Stock—Warrants."

        For illustrative purposes only, we estimate that, should American acquire all of the common stock they are entitled to acquire under both the code-sharing agreement and the warrant and assuming the warrant shares are 100% vested, American will own approximately    % of our common stock.

        The term of the American code-sharing agreement continues until February 1, 2013. American may reduce the term by one year each time that we fail to achieve an agreed performance level. American may only exercise this right three times during the term of the code-sharing agreement. The

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agreement may be subject to termination for cause prior to that date under various circumstances including:

•

a change in the regulations governing air carriers that materially affects the rights and/or obligations of either party, subject to negotiation of amendments to the code-sharing agreement or third party mediation;



•

if we or American become insolvent or fail to pay our debts as they become due, the other party may terminate the agreement subject to five business days' notice and rights of assurance;



•

failure by us or American to perform the material terms, covenants or conditions of the code-sharing agreement (which includes the American standards of service), subject to 30 day notice and cure rights;



•

if we or American fail to make a payment when due, subject to five business days' notice and cure rights;



•

if either party suspends or is required to suspend its operations due to any safety reason, the other party may terminate the agreement on five days' notice;



•

if American, in its reasonable discretion, determines that we materially breached a representation or warranty to them that creates a serious and imminent threat to the safe operation of American Connection services, American may immediately terminate the code-sharing agreement;



•

if our President and CEO is replaced, American has the right to terminate the agreement if it does not approve of the replacement CEO; however, American cannot unreasonably withhold its approval;



•

if we fail to achieve specified levels of operating performance in completion factor, on-time arrivals, customer complaints and baggage, American may terminate the agreement, subject to corrective action plan and adherence to such plan;



•

if we fail to represent the American brand favorably (subject to certain standards and conditions), American may terminate the agreement; or



•

if either party assigns, by operation of law or otherwise, the code-sharing agreement without the written consent of the other party, subject to five days notice and cure rights, or if we enter into any merger, sale or acquisition of all or substantially all of our assets or a majority of our outstanding voting interests with an air carrier other than an entity that is under common control with us.

        American may terminate the code-sharing agreement without cause upon 180 days' notice, provided that such notice may not be given prior to September 30, 2005. If American exercises this right, it is required to reimburse us for certain deferred costs and we and American have certain "put" and "call" rights with respect to the aircraft we operate for them. American has agreed that, upon American's exercise of its option to add aircraft, it will negotiate an extension to the September 30, 2005, date. In addition, if American terminates the code-sharing agreement early, the unvested portion of its warrant to purchase our common stock will terminate.

        In general, we have agreed to indemnify American and American has agreed to indemnify us for any damages caused by any breaches of our respective obligations under the code-sharing agreement or caused by our respective actions or inactions under the code-sharing agreement.

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The America West Code-Sharing Agreement

        We currently operate four Embraer regional jets for America West under a code-sharing agreement. The code-sharing agreement provides that we will operate 12 Embraer regional jets as America West Express. The first Embraer regional jet was placed into service on August 1, 2001, and we plan to place the twelfth regional jet into service in November 2002. As of February 28, we were providing 28 flights per day as America West Connection between Columbus and designated outlying cities.

        America West provides reservation, check-in, baggage-handling and other ground support and passenger services, tickets and similar items with respect to such flights and also controls scheduling, ticket prices and seat inventories with respect to such flights. In exchange for providing the designated number of flights and performing our other obligations under the America West agreement, we receive from America West a fixed-fee per departure, a fixed-fee per block hour flown, a fixed-fee per flight hour flown, a fixed-fee per aircraft per day and a fixed-fee per day. We also receive an additional amount per available seat mile flown. In addition, we are eligible to receive per passenger incentives based upon on-time performance and flight completion rates. Conversely, we must pay per passenger penalties should our performance not meet minimum standards for on-time performance and flight completion rates. The fixed rates for each block hour, flight hour, flight and day that we receive from America West under the code-sharing agreement have been determined through the term of such agreement, subject to an agreed annual escalation rate. America West reimburses us for certain costs on an actual basis, including fuel costs, aircraft ownership and financing costs (including fees payable to Solitair Corp. at a maximum stated amount), landing fees, passenger liability and hull insurance, aircraft property taxes and de-icing costs. We also receive monthly payment from America West based on a percentage of revenue from flights that we operate under the code-sharing agreement. All aircraft added to the fleet serving under the code-sharing agreement must be either new or in any event no older than 24 months from new manufacturer delivery.

        We have the right to divert all aircraft subject to the America West code-sharing agreement to non-America West uses. We must provide America West with at least 12 months prior written notice of our intent to divert aircraft. If we exercise our right to divert aircraft, we must remove all aircraft from service over a three month period starting no earlier that the twelfth calendar month after providing the written notice. Additionally, any aircraft not yet placed in service under the America West code-sharing agreement at the time we give the notice of intent to divert shall not be added to the fleet. When the last aircraft is removed from service, the code-sharing agreement automatically terminates and neither we nor America West have any further rights or obligations under the agreement.

        America West has a one-time right to eliminate either or both of the eleventh and twelfth aircraft from service. One of these aircraft is currently scheduled for delivery in October 2002 and the other aircraft is scheduled for delivery in November 2002. To exercise this elimination right, America West must provide us notice prior to May 16, 2002, and pay us a cancellation fee for each aircraft by July 31, 2002. If this elimination right is exercised by America West, they have no further early removal rights for any aircraft.

        Should America West not exercise its early elimination right described in the preceding paragraph, America West has the right to remove any one aircraft from service after August 2007 and any two aircraft from service after August 2009. No more than two aircraft may be removed from service under this provision. America West may require us to remove any aircraft after the 10th anniversary of the date such aircraft was placed into service under the code-sharing agreement. America West must compensate us in a specified amount for each aircraft they elect to remove from the fleet serving under the code-sharing agreement prior to the tenth anniversary of the aircraft being placed in service. Additionally, if we fail to place an aircraft in service under the code-sharing agreement as scheduled,

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we are liable to America West for damages unless such failure was due to the failure of the manufacturer to deliver the aircraft. We use commercially reasonable efforts to arrange a replacement aircraft and we pass on any compensation we receive from the manufacturer for such delay to America West. If such failure to deliver an aircraft continues for 90 days, America West may reduce the fleet under the code-sharing agreement by not including such aircraft.

        To further induce America West to enter into the code-sharing agreement with us, we will pay America West contract rights fee in the form of our agreement to issue them, upon the twelfth aircraft entering service, a warrant to purchase shares of our common stock. We also agreed to make certain payments to them upon the occurrence, prior to our initial public offering, of certain corporate change in control transactions. The warrant will represent    % of our outstanding common stock. For a description of this warrant, see "Description of Capital Stock-Warrants."

        The term of the America West code-sharing agreement continues until the tenth anniversary of the date the last aircraft is added to the fleet, currently anticipated to be November 2002. The code-sharing agreement is subject to termination prior to that date in various circumstances including:

•

if our flight completion factor falls below a specified percentage for a specified period of time, upon 180 days' prior notice;



•

if either America West or we become insolvent, file for bankruptcy or fail to pay our debts as they become due, the non-defaulting party may terminate the agreement;



•

failure by us or America West to perform the covenants, conditions or provisions of the code-sharing agreement, subject to 15 days' notice and cure rights;



•

if we or America West fails to make a payment when due, subject to five business days' notice and cure rights; or



•

if we are required by the FAA or the DOT to suspend operations and we have not resumed operations within ten business days, or if we suspend a substantial portion of services under the code-sharing agreement for any reason (other than a grounding of the ERJ 145 aircraft), America West may terminate the agreement.

        In general, we have agreed to indemnify America West and America West has agreed to indemnify us for any damages caused by any breaches of our respective obligations under the code-sharing agreement or caused by our respective actions or inactions under the code-sharing agreement.

        America West has advised us that an agreement with another regional airline that is structurally similar to our code-sharing agreement with America West has been alleged by their pilots to violate certain of America West's labor agreements. Subject to the outcome of such dispute, our code-sharing agreement might, by analogy, also violate such agreements. We have entered into an agreement with America West that provides that if our code-sharing agreement conflicts with America West's labor agreements, America West and we will seek to amend the code-sharing agreement to cure the applicable violation but preserve the economic benefits to us of the code-sharing agreement. If we cannot agree on a restructuring of the code-sharing agreement, America West may terminate the code-sharing agreement, provided it pays us a specified amount. There can be no assurances that we and America West will be able to reach a mutually agreeable amendment to the code-share agreement if the provisions of the code-sharing agreement are found to violate America West's labor agreements.

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Safety and Security

        We are dedicated to ensuring the safety of our customers and employees. We have taken numerous measures, voluntarily and as required by regulatory authorities, to increase both the safety and security of our operations in the wake of the terrorist attacks of September 11, 2001.

        Since September 11, 2001, we and our code-share partners have implemented security enhancements, including the following:

•

positive bag matching procedures;



•

enhanced aircraft search procedures and aircraft guarding;



•

more thorough passenger screening and search procedures; and



•

securing cockpit doors.

        In addition to these measures, we have complied with all other new FAA security requirements designed to enhance passenger security and will continue to abide by all future security enhancement requirements. Immediately following September 11, 2001, the FAA began to issue many new security requirements which airlines have been required to implement, including passenger and baggage screening.

        Further, under the new Aviation Security Act, numerous new responsibilities and procedures have been or will be put in place to ensure civil aviation security, including:

•

the creation of the Transportation Security Administration, or TSA, of the DOT, with responsibility for assessing transportation security threats, developing responses to such threats and acting as the primary liaison between the transportation sector and intelligence and law enforcement communities;



•

federal employees will assume the screening of all passengers and baggage;



•

new qualification standards will be set for security screening personnel;



•

criminal background checks will be conducted on all airport employees;



•

a law enforcement officer will be present at every screening check point;



•

a new security fee of $2.50 per enplanement levied on passengers;



•

all checked baggage will need to be screened;



•

additional training will be required for airline employees;



•

additional air marshals will be deployed; and



•

further steps will be taken to reinforce cockpit doors.

Competition and Economic Conditions

        The airline industry is highly competitive. We not only compete with other regional airlines, some of which are owned by or are operated as code-sharing partners of major airlines, but also face competition from low-fare airlines and major airlines on some of our routes.

        The principal competitive factors in the regional airline industry are fare pricing, customer service, routes served, flight schedules, aircraft types and code-sharing relationships. Certain of our competitors are larger and have significantly greater financial and other resources than we do. Moreover, federal deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats.

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        Generally, the airline industry is highly sensitive to general economic conditions, in large part due to the discretionary nature of a substantial percentage of both business and pleasure travel. In the past, many airlines have reported decreased earnings or substantial losses resulting from periods of economic recession, heavy fare discounting and other factors. Economic downturns combined with competitive pressures have contributed to a number of bankruptcies and liquidations among major and regional carriers. The effect of economic downturns is somewhat mitigated by our fixed-fee arrangements with respect to certain flights. Nonetheless, the per passenger component in such fee structure would be affected by an economic downturn. In addition, if our major airline code-share partners experience longer-term decline in passenger load or are injured by low ticket prices or high fuel prices, they will likely seek to reduce our fixed-fees or cancel a number of flights in order to reduce their costs.

Government Regulation

        All interstate air carriers are subject to regulation by the DOT, the FAA and certain other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, air worthiness and other certificates; approval of personnel who may engage in flight maintenance or operations activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs. Generally, governmental agencies enforce their regulations through, among other mechanisms, certifications, which are necessary for our continued operations, and proceedings, which can result in civil or criminal penalties or revocation of operating authority. The FAA can also issue maintenance directives and other mandatory orders relating to, among other things, grounding of aircraft, inspection of aircraft, installation of new safety-related items and the mandatory removal and replacement of aircraft parts that have failed or may fail in the future.

        We believe that we are operating in material compliance with FAA regulations and hold all necessary operating and air worthiness certificates and licenses. We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. Our flight operations, maintenance programs, record keeping and training programs are conducted under FAA-approved procedures.

        The DOT allows local airport authorities to implement procedures designed to abate special noise problems, provided such procedures do not unreasonably interfere with interstate or foreign commerce or the national transportation system. Certain airports, including the major airports at Boston, Washington, D.C., Chicago, Los Angeles, San Diego, Orange County (California) and San Francisco, have established airport restrictions to limit noise, including restrictions on aircraft types to be used and limits on the number of hourly or daily operations or the time of such operations. In some instances, these restrictions have caused curtailments in services or increases in operating costs, and such restrictions could limit our ability to commence or expand our operations at affected airports. Local authorities at other airports are considering adopting similar noise regulations.

        Pursuant to law and the regulations of the DOT, we must be effectively controlled by United States citizens. In this regard, our President and at least two-thirds of our Board of Directors must be United States citizens and not more than 25% of our voting stock may be owned or controlled by foreign nationals (although subject to DOT approval the percent of foreign economic ownership may be as high as 49%).

Environmental Proceedings

        We are subject to various federal, state, local and foreign laws relating to the protection of the environment, including discharge or disposal of materials and chemicals and the regulation of aircraft noise, which laws are administered by numerous state and federal agencies. We are and may from time to time become involved in environmental matters, including the investigation and/or remediation of

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environmental conditions at properties used or previously used by us. We are not, however, currently subject to any environmental cleanup orders imposed by regulatory authorities, nor do we have any active investigations or remediations at this time.

Insurance

        We maintain insurance policies that we believe are of types customary in the industry and in amounts we believe are adequate to protect us against material loss. The policies principally provide coverage for public liability, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment, and workers' compensation insurance. There is no assurance, however, that the amount of insurance we carry will be sufficient to protect us from material loss. Each of our code-sharing agreements requires us to maintain specified types and amounts of insurance.

Legal Proceedings

        We are subject to certain legal and administrative actions which we consider routine to our business activities. As of December 31, 2001, we believe that, after consultation with our legal counsel, the ultimate outcome of any pending legal matters will not have a material adverse effect on our financial position, liquidity or results of operation.

        We recently were informed by the FAA that it is investigating shipments sent by us on cargo airlines consisting of approximately 46 packages that may have contained regulated hazardous materials without properly training our employees and/or without properly labeling, declaring, marking, describing or packaging the shipments for transportation in air commerce in accordance with applicable requirements. We are cooperating with the FAA's investigation, which is at an early stage. We could be subject to civil penalties of up to $27,500 for each violation; however, given the early stage of the investigation and the discretion the FAA has in imposing penalties, we are unable to estimate the amount of penalties, if any, we might be required to pay.

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MANAGEMENT

Executive Officers, Directors and Key Employees

        The following table sets forth information regarding our current executive officers, directors and key employees as of March 1, 2002:

Name	Age	Position
Bryan K. Bedford	40	Chairman of the Board, President and Chief Executive Officer
Robert H. Cooper	42	Executive Vice President, Chief Financial Officer, Treasurer and Secretary
Arthur H. Amron	44	Director
Charles E. Davidson	49	Director
Joseph M. Jacobs	49	Director
Douglas J. Lambert	44	Director
Jay L. Maymudes	41	Director
Wayne C. Heller	43	Executive Vice President—Chief Operating Officer of Chautauqua

Bryan K. Bedford joined us in July 1999 as our president and chief executive officer and a member of our board of directors and became chairman of the board in August 2001. From July 1995 through July 1999, Mr. Bedford was the president and chief executive officer and a director of Mesaba Holdings, Inc., a publicly-owned regional airline. He has over 14 years of experience in the regional airline industry, and was named regional airline executive of the year in 1998 by Commuter and Regional Airline News. Mr. Bedford is a licensed pilot and a certified public accountant. He also served as the 1998 Chairman of the Regional Airline Association.

Robert H. Cooper joined us in August 1999 as vice president and chief financial officer. In February 2002, he became executive vice president, chief financial officer, treasurer and secretary and assumed responsibility for all purchasing and material control. He was previously employed with Mesaba Holdings, Inc. from September 1995 through August 1999 as its vice president, chief financial officer and treasurer. Mr. Cooper is a certified public accountant. He has over nine years experience in the regional airline industry. He has responsibility for financial accounting, treasury, public reporting, investor relations, human resources, information technology, purchasing and material control.

Arthur H. Amron became a director in August 2001. Mr. Amron joined Wexford Capital LLC in 1994, became a Principal in 1999 and serves as Wexford's General Counsel. From 1991 to 1994, he was an associate at Schulte Roth & Zabel, LLP and from 1984 to 1991, he was an associate at Debevoise & Plimpton LLP. Mr. Amron is a director of several privately-held companies in which Wexford Capital has an investment.

Charles E. Davidson has been a director since May 1998, and served as Chairman of the Board from May 1998 to August 2001. He co-founded Wexford Capital LLC in 1994 and serves as its Chairman. From 1984 to 1994, Mr. Davidson was a General Partner of Steinhardt Partners, L.P. From 1977 to 1984, he was employed by Goldman Sachs & Co. where he was the head of domestic corporate bond trading and proprietary trading. Mr. Davidson is a director of several privately-held companies in which Wexford Capital has an investment.

Joseph M. Jacobs has been a director since May 1998, and served as Vice-Chairman of the Board from May 1998 to August 2001. He co-founded Wexford Capital LLC in 1994 and serves as its President. From 1982 to 1994, Mr. Jacobs was employed by Bear Stearns & Co., Inc. where he attained the position of Senior Managing Director. From 1979 to 1982, he was employed as a commercial lending officer at Citibank, N.A. Mr. Jacobs is a director of several privately-held companies in which Wexford Capital has an investment.

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Douglas J. Lambert has been a director since August 2001. He joined Wexford Capital LLC in 1994 and serves as a Senior Vice President. He presently is a Vice President of Solitair Corp. and is Deputy Managing Director of Solitair Kapital AB, both affiliates of Wexford Capital. From 1983 to 1994, Mr. Lambert held various financial positions with Integrated Resources, Inc.'s Equipment Leasing Group, including Treasurer and Chief Financial Officer. He is a certified public accountant. Mr. Lambert is a director of several privately-held companies in which Wexford Capital has an investment.

Jay L. Maymudes has been a director since May 1998. He joined Wexford Capital LLC in 1994, became a Principal in 1997 and serves as Wexford's Chief Financial Officer. From 1988 to 1994, Mr. Maymudes was the Chief Financial Officer of Dusco, Inc., a real estate investment advisory firm which managed publicly-traded and privately-held real estate investment trusts. He is a certified public accountant. Mr. Maymudes is a director of several privately-held companies in which Wexford Capital has an investment.

Wayne C. Heller joined Chautauqua in August 1999 as Vice President—Flight Operations with responsibility for flight crew supervision, system control, flight safety and flight quality standards. In February 2002, he became Executive Vice President and Chief Operating Officer, and assumed responsibility for all aircraft maintenance, records and engineering. From April 1996 until August 1999 he was employed by Mesaba Airlines, Inc., as its Director of System Operations Control. He is a licensed pilot and a licensed dispatcher and has over 23 years of regional airline experience in operations.

Committees of the Board of Directors

        We have established a compensation committee and plan to establish an audit committee upon the consummation of this offering. Our compensation committee reviews and recommends to the board of directors the salaries, benefits and stock option grants for all employees, consultants, directors and other individuals compensated by us. The compensation committee also administers our stock option and other employee benefit plans. The compensation committee consists of                        . The audit committee will review our internal accounting procedures and will consider and report to the board of directors with respect to other auditing and accounting matters, including the selection of our independent auditors, the scope of annual audits, fees to be paid to our independent auditors and the performance of our independent auditors. Our audit committee will consist of three directors who are not our employees or otherwise affiliated with us.

The Board of Directors

        Currently, we have six members on our board of directors. We intend to add three independent directors before the date of the offering. Each of our directors holds office until his or her successor is duly elected and qualified or until his or her resignation or removal, if earlier, as provided in our by-laws. No family relationship exists among any of the directors or executive officers.

Executive Compensation

        The following table sets forth certain summary information with respect to compensation we paid in 2001 to our Chief Executive Officer and our other executive officers as of December 31, 2001.

Name and position	Salary		Bonus		All Other Compensation(1)
Bryan K. Bedford Chairman of the Board, President and Chief Executive Officer	$	310,000	$	0	$	3,577
Robert H. Cooper Executive Vice President, Chief Financial Officer, Treasurer and Secretary		150,000		0		3,317
Wayne C. Heller Executive Vice President and Chief Operating Officer of Chautauqua		110,000		0		2,538

(1)

Consists of matching payments made under our 401(k) plan.

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Aggregated Option Values as of December 31, 2001

        The executive officers named in the summary compensation table did not exercise any stock options during the year ended December 31, 2001. The following table sets forth information concerning the year-end number and value of unexercised options with respect to our named executive officers. There was no public trading market for our common stock as of December 31, 2001. Accordingly, the values set forth below have been calculated on the basis of the assumed initial public offering price of $    per share, less the applicable exercise price per share, multiplied by the number of shares underlying the options.

	Number of Securities Underlying Unexercised Options At Fiscal Year-End		Value of Unexercised In-The-Money Options At Fiscal Year-End
	Unexercisable	Exercisable	Unexercisable	Exercisable
Bryan K. Bedford
Robert H. Cooper
Wayne C. Heller

Option Grants

        No stock options were granted for the year ended December 31, 2001, to any of Messrs. Bedford, Cooper or Heller.

Employment Agreements

        We entered into an employment agreement with Mr. Bedford in June 1999. Mr. Bedford's current annual salary is $310,000. Mr. Bedford is entitled to receive an annual bonus of at least $140,000, or such greater amount as our board of directors may determine in its discretion, throughout the term of the agreement. The agreement expires in June 2003. When he entered into the employment agreement with us, Mr. Bedford received options to purchase            shares of our common stock with an exercise price of $            per share. The options vest monthly on a pro rata basis over a period of four years, commencing June 1999. If we terminate Mr. Bedford's employment without "cause," within the meaning of the employment agreement, or if Mr. Bedford terminates his employment for "cause," within the meaning of the employment agreement, he will be entitled to receive a severance payment of $23,333 for each month remaining under his employment agreement, with a specified minimum payment of $140,000 and a specified maximum payment of $560,000. Mr. Bedford will be precluded from competing with us and soliciting our employees for a period of twelve months following the expiration or any termination of his employment agreement.

        We entered into an employment agreement with Mr. Cooper in July 1999. Mr. Cooper's current annual salary is $175,000. Mr. Cooper is entitled to receive an annual bonus of at least $52,000, or such greater amount as our board of directors may determine in its discretion, throughout the term of the agreement. The agreement expires in July 2003. When he entered into the employment agreement with us, Mr. Cooper received options to purchase            shares of our common stock with an exercise price of $        per share. The options vest monthly on a pro rata basis over a period of four years, commencing in July 1999. If we terminate Mr. Cooper's employment without "cause," within the meaning of the employment agreement, or if Mr. Cooper terminates his employment for "cause," within the meaning of the employment agreement, he will be entitled to receive a $130,000 severance payment, prorated for the remainder of the term. Mr. Cooper will be precluded from competing with us and soliciting our employees for a period of twelve months following the expiration or any termination of his employment agreement.

        We entered into an employment agreement with Mr. Heller in July 1999. Mr. Heller's current annual salary is $140,000. Mr. Heller is entitled to receive an annual bonus of at least $36,000, or such

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greater amount as our board of directors may determine in its discretion, throughout the term of the agreement. The agreement expires in July 2003. When he entered into the employment agreement with us, Mr. Heller received options to purchase            shares of our common stock with an exercise price of $            per share. The options vest monthly on a pro rata basis over a period of four years, commencing in July 1999. If we terminate Mr. Heller's employment without "cause," within the meaning of the employment agreement, or if Mr. Heller terminates his employment for "cause," within the meaning of the employment agreement, he will be entitled to receive a $45,000 severance payment. This severance payment will be prorated if the remaining term of the agreement is less than six months. Mr. Heller will be precluded from competing with us and soliciting our employees for a period of twelve months following the expiration or any termination of his employment agreement.

Stock Options

        To date, we have outstanding options to purchase    shares of our common stock. These options were granted pursuant to employment agreements with several of our key employees and were not granted pursuant to any established stock option plan. These options do not qualify as incentive stock options (within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended), which we refer to as ISOs. The exercise price of these options is $            per share, and they vest monthly on a pro rata basis for four years, commencing on the date of grant.

The 2002 Equity Incentive Plan

        The following is a description of the material terms of our 2002 Equity Incentive Plan, which will become effective prior to the closing of this offering. You should, however, refer to the exhibits that are a part of the registration statement for a copy of the 2002 Equity Incentive Plan.

        Type of Awards.    The 2002 Equity Incentive Plan provides for grants of options to purchase shares of our common stock, including options intended to qualify as ISOs, and options which do not qualify as ISOs, which we refer to as NQSOs, restricted shares of our common stock, restricted stock units, the value of which is tied to shares of our common stock and other equity-based awards related to our common stock, including stock appreciation rights and dividends equivalents. In addition, Non-Employee Directors shall receive automated grants of NQSOs.

Available Shares. A maximum of                        shares of our common stock has been reserved for issuance under the 2002 Equity Incentive Plan, subject to adjustment upon certain changes in capitalization (as described below). New awards may be granted under the 2002 Equity Incentive Plan with respect to shares of our common stock covered by any award that terminates or expires by its terms (by cancellation or otherwise) or with respect to shares of our common stock that are withheld or surrendered to satisfy a recipient's income tax or other withholding obligations or tendered to pay the purchase price of any award.

        Eligibility.    Awards under the 2002 Equity Incentive Plan may be granted to any of our (or any of our subsidiaries' or affiliates') directors, officers or other employees, including any prospective employee, and to any of our (or any of our subsidiaries' or affiliates') advisors or consultants selected by the compensation committee of our board of directors.

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        Administration.    The 2002 Equity Incentive Plan will be administered by the compensation committee of our board of directors or the board of directors. However, our board of directors may, in its sole discretion, delegate to one or more of our executive officers the authority to grant options to employees and consultants who are not officers or directors on terms specified by our board of directors. The compensation committee will have full discretion and authority to make awards under the 2002 Equity Incentive Plan, to apply and interpret the provisions of the 2002 Equity Incentive Plan and to take such other actions as may be necessary or desirable in order to carry out the provisions of the 2002 Equity Incentive Plan. The determinations of the compensation committee on all matters relating to the 2002 Equity Incentive Plan and the options, restricted stock, restricted stock units and other equity-based awards granted thereunder will be final, binding and conclusive.

        Stock Options.    The compensation committee may grant ISOs and NQSOs in such amounts and subject to such terms and conditions as it may determine. The exercise price of an option granted under the 2002 Equity Incentive Plan will not be less than the fair market value of our common stock on the date of grant. Unless sooner terminated or exercised, options will generally expire ten years from the date of grant. Payment for shares acquired upon the exercise of an option may be made in cash and/or such other form of payment as may be permitted by the compensation committee from time to time, which may include previously-owned shares of our common stock or pursuant to a broker's cashless exercise procedure. The 2002 Equity Incentive Plan also allows us (or one of our subsidiaries or affiliates) to make loans to optionees under the 2002 Equity Incentive Plan to enable them to pay the exercise price of outstanding options. Except as otherwise permitted by the compensation committee, no option may be exercised more than 30 days after termination of the optionee's employment or other services (or, if the optionee's service is terminated by reason of retirement, disability or death, one year thereafter). If an optionee's employment is terminated for cause, options held by such optionee immediately terminate.

        Restricted Stock and Restricted Stock Units.    The compensation committee may grant restricted shares of our common stock in amounts, and subject to terms and conditions (such as time vesting and/or performance-based vesting criteria) as it may determine. Generally, prior to vesting, the recipient will have the rights of a stockholder with respect to the restricted stock, subject to any restrictions and conditions as the compensation committee may include in the award agreement. The 2002 Equity Incentive Plan permits us (or one of our subsidiaries or affiliates) to make loans to recipients of restricted stock units. Among other things, these loans will bear interest at a fair interest rate as determined by the compensation committee and, unless otherwise determined by the compensation committee, shall be secured by shares of our common stock having an aggregate fair market value at least equal to the principal amount of the loan. The compensation committee may grant restricted stock units, the value of which is tied to shares of our common stock, in amounts, and subject to terms and conditions, as the compensation committee may determine.

        Other Equity-Based Awards.    The compensation committee may grant other types of equity-based awards related to our common stock under the 2002 Equity Incentive Plan, including the grant of unrestricted shares of our common stock, stock appreciation rights, and dividend equivalent, in amounts and subject to terms and conditions as the compensation committee may determine. These awards may involve the transfer of actual shares of common stock or the payment in cash or otherwise of amounts based on the value of shares of our common stock.

        Non-Employee Director Stock Options.    Each individual who is appointed or elected to the board of directors as a non-employee director will be automatically granted an initial option to purchase                        shares of common stock on the first trading day following his or her commencement of service as a non-employee director. In addition, each non-employee director will be automatically granted an option to purchase            shares of common stock on the date of each annual meeting of stockholders at which he or she is reelected as a non-employee director. A non-employee director is

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any member of our board of directors who is not employed by or a consultant to us of any of our subsidiaries and includes any director who serves as one of our officers but is not paid by us for this service. The exercise price per share covered by an option granted shall be equal to the fair market value of the common stock on the date of grant. A director's options will become exercisable with respect to                        of the total number of shares issuable under such option on the            successive anniversaries of the grant date. Upon the cessation of a non-employee director's service, such individual will generally have 180 days to exercise all options that are exercisable on the termination date. If a director's service terminates by reason of his or her death or disability, his or her beneficiary will generally have twelve months to exercise any portion of a director option that is exercisable on the date of death. Except as otherwise provided herein, if not previously exercised, each option granted shall expire on the tenth anniversary of the date of grant. Upon a change in control as defined in the 2002 Equity Incentive Plan, vesting of the options held by a non-employee director will accelerate and become fully vested.

        Adjustments Upon Changes in Capitalization.    Upon any increase, reduction, or change or exchange of the common stock for a different number or kind of shares or other securities, cash or property by reason of a reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants or rights, stock dividend, stock split or reverse stock split, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise, or any other corporate action, such as declaration of a special dividend, that affects our capitalization, an equitable substitution or adjustment may be made in the aggregate number and/or kind of shares reserved for issuance under the 2002 Equity Incentive Plan, the aggregate number and/or kind of shares for which prospective awards to non-employee directors are made, the kind, number and/or exercise price of shares or other property subject to outstanding options granted under the 2002 Equity Incentive Plan, and the kind, number and/or purchase price of shares or other property subject to outstanding awards of restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and other equity-based awards granted under the 2002 Equity Incentive Plan, as may be determined by the compensation committee, in its sole discretion. The compensation committee may provide, in its sole discretion, for the cancellation of any outstanding awards in exchange for payment in cash or other property of the fair market value of the shares of our common stock covered by the awards, reduced, in the case of options, by the exercise price.

        Nonassignability.    Except to the extent otherwise provided in an award agreement or approved by the compensation committee with respect to NQSOs, no award granted under the 2002 Equity Incentive Plan will be assignable or transferable other than by will or by the laws of descent and distribution and all awards will be exercisable during the life of a recipient only by the recipient or his or her legal representative.

        Amendment and Termination.    The 2002 Equity Incentive Plan may be amended or terminated at any time by our board of directors, subject, however, to stockholder approval in the case of certain material amendments if required by applicable law, such as an increase in the number of shares available under the 2002 Equity Incentive Plan or a change in the class of individuals eligible to participate in the 2002 Equity Incentive Plan.

        U.S. Federal Income Tax Consequences.    The following is a brief description of the material U.S. federal income tax consequences generally arising with respect to awards granted under the 2002 Equity Incentive Plan.

        In general, the grant of an option will have no income tax consequences to the recipient or to us. Upon the exercise of an option, other than an ISO, the recipient generally will recognize ordinary income equal to the excess of the fair market value of the shares of common stock subject to the option on the date of exercise over the exercise price for such shares (i.e., the option spread), and we generally will be entitled to a corresponding tax deduction in the same amount. Upon the sale of the

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shares of our common stock acquired pursuant to the exercise of an option, the recipient will recognize capital gain or loss equal to the difference between the selling price and the sum of the exercise price plus the amount of ordinary income recognized on the exercise.

        A recipient generally will not recognize ordinary income upon the exercise of an ISO (although, on exercise, the option spread is an item of tax preference income potentially subject to the alternative minimum tax) and we will not receive any deduction. If the stock acquired upon exercise of an ISO is sold or otherwise disposed of within two years from the grant date or within one year from the exercise date, then gain realized on the sale generally is treated as ordinary income to the extent of the ordinary income that would have been realized upon exercise if the option had not been an ISO, and we generally will be entitled to a corresponding deduction in the same amount. Any remaining gain is treated as capital gain.

        If the shares acquired upon the exercise of an ISO are held for at least two years from the grant date and one year from the exercise date and the recipient is employed by us at all times beginning on the grant date and ending on the date three months prior to the exercise date, then all gain or loss realized upon the sale will be capital gain or loss and we will not receive any deduction.

        In general, an individual who receives an award of restricted stock will recognize ordinary income at the time such award vests in an amount equal to the difference between the value of the vested shares and the purchase price for such shares, if any, and we generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the recipient at such time.

        The recipient of an award of restricted stock units generally will recognize ordinary income upon the issuance of the shares of common stock underlying such restricted stock units in an amount equal to the difference between the value of such shares and the purchase price for such units and/or shares, if any, and we generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the recipient at such time.

        With respect to other equity-based awards, upon the payment of cash or the issuance of shares or other property that is either not restricted as to transferability or not subject to a substantial risk of forfeiture, the participant will generally recognize ordinary income equal to the cash or the fair market value of shares or other property delivered, less any amount paid by the participant for such award. Generally, we will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant.

Our 401(k) Plan

        We maintain a 401(k) Plan. The plan permits eligible employees to make voluntary, pre-tax contributions to the plan up to a specified percentage of compensation, subject to applicable tax limitations. We may make a discretionary matching contribution to the plan equal to a pre-determined percentage of an employee's voluntary, pre-tax contributions and may make an additional discretionary profit sharing contribution to the plan, subject to applicable tax limitations. Eligible employees who elect to participate in the plan are generally vested in any matching contribution after three years of service with the company. The plan is intended to be tax-qualified under Section 401(k) of the Internal Revenue Code so that contributions to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan, and so that our contributions, if any, will be deductible by us when made.

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RELATED PARTY TRANSACTIONS

Arrangements with Solitair Corp.

        In July 1999, Chautauqua entered into an agreement with Solitair Corp., a wholly-owned subsidiary of Solitair Kapital AB. Solitair Kapital AB is controlled by Solitair Intressenter AB, a wholly-owned subsidiary of Wexford Solitair Corp. Wexford Solitair Corp. is an affiliate of WexAir LLC, our sole stockholder. Pursuant to the agreement as currently in effect, Chautauqua has agreed to purchase Embraer regional jets from Solitair which had contracts to purchase such jets from Embraer. Solitair is required to sell the firm aircraft to Chautauqua. To date, we have purchased 8 aircraft from Solitair under this arrangement and third party lessors which lease the aircraft to us have purchased 38 aircraft from Solitair. Through December 31, 2001, the cost to us per aircraft was equal to the purchase price paid by Solitair, including Solitair's expenses related to the purchase of the aircraft, plus $500,000. We will purchase the remaining 7 aircraft on firm order at a cost per aircraft equal to the purchase price paid by Solitair, including Solitair's expenses related to the purchase of the aircraft, plus $440,000. In those situations where we lease aircraft from a third party, we have included the amounts we pay that are over and above Solitair's cost to acquire the aircraft in our leasing arrangement. With respect to each aircraft purchased by Chautauqua, Chautauqua has the option to enter into a short-term lease with Solitair for a maximum of 30 days commencing on the date Solitair acquires the aircraft and ending on the date Chautauqua purchases the aircraft. This monthly lease rate is equal to $136,000 per month. Pursuant to the agreement with Solitair, Chautauqua made the following payments in connection with our acquisition of the aircraft covered by the agreement:

		Years Ended December 31,
		1999		2000		2001
		(In Thousands)
Short-term lease payments		$	703	$	957	$	36
Reimbursement of expenses			8		131		121
Fee			2,046		7,000		13,500
	Total	$	2,757	$	8,088	$	13,657

Transactions with Wexford Capital LLC

        In May 1998, WexAir LLC, a limited liability company formed by several investment funds managed by Wexford Capital LLC, purchased all of our outstanding capital stock, for an aggregate purchase price of $8,133,000 and loaned us $12,000,000. We used these proceeds to purchase Chautauqua for a purchase price of $20,133,000 (including expenses). We intend to use a portion of the proceeds of this offering to repay the loan from WexAir LLC. See "Use of Proceeds."

        At February 28, 2002, approximately $18,452,000 of principal and accrued interest was outstanding under the loan from WexAir LLC. The loan matures on the earliest of (1) demand by WexAir LLC, (2) May 15, 2002 or (3) the closing of the offering. The note currently bears interest at a rate of 11.5% annually and interest is compounded semi-annually. We intend to use a portion of the proceeds of this offering to repay this indebtedness. See "Use of Proceeds."

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        In July 1999, Imprimis Investors LLC, one of the members of our sole stockholder, loaned Chautauqua $1,000,000 for working capital purposes. In April 2000, Imprimis loaned Chautauqua an additional $1,500,000 for working capital purposes. These loans were evidenced by a note that bore interest at a rate of 7.5% per annum and were due on demand. In May 2000, Chautauqua issued to Imprimis 10.295828 shares of Chautauqua's Series A preferred stock in payment of principal and accrued interest on the note, which totaled $2,573,950. In May 2000, Chautauqua sold to Imprimis an additional six shares of Chautauqua's Series A preferred stock for an aggregate purchase price of $1,500,000. Chautauqua used the proceeds from the sale of the preferred stock for working capital. These preferred shares are now owned by Wexford Special Situations 1997 Institutional, L.P. following a distribution by Imprimis to its members. Under the terms of the preferred stock, we are required to redeem the preferred stock for a cash payment equal to the stated value ($250,000 per share) plus all accrued and unpaid dividends, upon the consummation of this offering. The preferred stock has an annual dividend of $25,000 per share, which cumulates to the extent not paid. We intend to use a portion of the proceeds of this offering to redeem this preferred stock. See "Use of Proceeds."

        Employees of Wexford Capital provide certain administrative functions to us, including legal services and assistance with financing transactions. We paid Wexford Capital $421,000, $139,000 and $77,000 for these services in the years ended December 31, 1999, 2000 and 2001.

        We have contracts to sell our Saab 340 turboprop inventories and spare parts at net book value, which approximates net realizable value, to a company owned by Wexford Capital.

        Wexford Capital has advised us that following the closing of the offering it and the investment funds it manages will not enter into any transaction with us unless the transaction is approved by the disinterested members of our board of directors.

        Our by-laws provide that any interested party transaction involving Wexford Capital, any of its affiliates and us, shall be approved by a majority of our directors not otherwise affiliated with Wexford Capital or any of its affiliates.

PRINCIPAL STOCKHOLDERS

        The following table sets forth certain information regarding the beneficial ownership of our common stock as of the date of this prospectus for:

•

each person who is known by us to be the beneficial owner of more than 5% of our common stock;



•

each executive officer named in the summary compensation table;



•

each of our directors; and



•

all directors and executive officers as a group.

        In connection with our application to list our common stock on the Nasdaq National Market, we intend to appoint three additional directors prior to this offering who will not be our employees or affiliated with management.

        Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to the securities. Except as otherwise indicated, the persons or entities listed below have sole voting and investment power with respect to all

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shares of common stock beneficially owned by them, except to the extent such power may be shared with a spouse.

		Percent Beneficially Owned(1)
						Percent of Voting Stock Beneficially Owned After Offering
Name and Address	Shares Beneficially Owned Prior to Offering	Before Offering		After Offering
WexAir LLC (2)		100	%		%		%
Bryan K. Bedford
Robert H. Cooper
Arthur Amron(3)
Charles E. Davidson(3)
Joseph M. Jacobs(3)
Douglas J. Lambert(3)
Jay L. Maymudes(3)
All directors and executive officers as a group (7 persons)		100	%

*

Less than 1%.

(1)

For purposes of this table, information as to the shares of common stock assumes, in the case of the column "After Offering," that the underwriters' over-allotment option is not exercised. In addition, a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock when such person or persons has the right to acquire them within 60 days after the date of this prospectus. For purposes of computing the percentage of outstanding shares of common stock held by each person or group of persons named above, any shares which such person or persons have the right to acquire within 60 days after the date of this prospectus is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

(2)

Imprimis Investors LLC, Wexford Spectrum Fund I, L.P., Wexford Offshore Spectrum Fund, and Wexford Partners Investment Co. LLC, each a member of WexAir LLC, may be deemed to beneficially own more than 5% of our common stock because the same persons serve as managing members or general partners of each of these entities. Wexford Special Situations 1997, L.P., and Wexford Special Situations 1997 Institutional, L.P., each a member of Imprimis Investors LLC, may be deemed to beneficially own more than 5% of our common stock because the persons who serve as managing members or general partners of the members of WexAir LLC also serve as the general partner of these entities. Each of these entitles disclaims beneficial ownership of the shares owned by WexAir except to the extent of its pecuniary interest therein. The address at each of the entities listed in this footnote is: Wexford Plaza, 411 West Putnam Avenue, Greenwich, Connecticut 06830.

(3)

This individual may be deemed to be the beneficial owner of the shares of our common stock owned by WexAir LLC by virtue of being a managing member or general partner of WexAir LLC or each of the members of WexAir LLC. This individual disclaims beneficial ownership of the shares owned by WexAir LLC except to the extent of his interest in such shares through his interest in each member of WexAir LLC.

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DESCRIPTION OF CAPITAL STOCK

        Our authorized capital stock consists of 75,000,000 shares of common stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par value $.001 per share.

        Of the authorized shares of common stock,                        shares are being offered hereby, or                        shares if the underwriters exercise their over-allotment option. American will own            shares of our common stock if it elects to exercise its right to purchase shares of our common stock in a private placement that will occur concurrently with the closing of this offering. No shares of our preferred stock will be outstanding.

Common Stock

Voting

        The holders of common stock are entitled to one vote per share. Voting rights of non-U.S. citizens are limited as described under "—Limitation on Voting by Foreign Owners." Common stockholders do not have the right to cumulate their votes in the election of directors. Accordingly, a plurality of the votes cast in any election of directors may elect all of the directors standing for election. As a result, as long as WexAir LLC owns a majority of our common stock, it will control all matters put to a vote of stockholders, including the election of directors and the sale of Republic Airways. See "Risk Factors—We will be controlled by Wexford Capital as long as they own or control a majority of our common stock, and they may make decisions with which you disagree."

Rights to Dividends and on Liquidation, Dissolution or Winding Up

        Common stockholders participate ratably in any dividends or distributions on the common stock. In the event of any liquidation, dissolution or winding up of our company, common stockholders are entitled to share ratably in our assets available for distribution to the stockholders, subject to the prior rights of holders of any outstanding preferred stock.

Limitation on Voting by Foreign Owners

        Our certificate of incorporation provides that shares of capital stock may not be voted by, or at the direction of, persons who are not citizens of the United States unless the shares are registered on a separate stock record. Applicable restrictions currently require that no more than 25% of our voting stock be owned or controlled, directly or indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of our directors or other managing officers be U.S. citizens. For purposes of the certificate of incorporation, "U.S. citizen" means:

•

an individual who is a citizen of the United States;



•

a partnership each of whose partners is an individual who is a citizen of the United States; or



•

a corporation or association organized under the laws of the United States or a State, the District of Columbia, or a territory or possession of the United States, of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the United States, and in which at least 75% of the voting interest is owned or controlled by persons that are citizens of the United States.

        In addition, the U.S. Department of Transportation has broad authority to determine on a case-by-case basis whether an air carrier is effectively owned and controlled by U.S. citizens, and has indicated that the ownership of less than 50% of an air carrier's total equity securities by non-U.S. citizens, taken alone, is not indicative of foreign control of the airline. Registration on the foreign stock record is made in chronological order based on the date we receive a written request for registration.

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Other

        No stockholder has preemptive or other rights to subscribe for additional shares of our common stock.

Registration Rights

        The current holders of our common stock are entitled to registration rights under the terms of a registration rights agreement. Subject to the limitations specified in this agreement, the registration rights include the following:

Piggyback Registration Rights. The existing holders of our common stock have rights to have their shares registered for resale under the Securities Act if we register any of our securities, either for our own account or for the account of other security holders, except with respect to this offering, and subject to the right of underwriters to limit the number of shares included in an underwritten offering.

        Demand Registration Rights.    The existing holders of our common stock have the unlimited right, at their request, to have their shares registered for resale under the Securities Act.

        All holders of Registrable Securities have agreed not to exercise their registration rights, if at all, until 180 days following the effective date of this prospectus.

        We will bear all registration expenses incurred in connection with any of the above registrations. Each selling stockholder participating in any registration will pay their own underwriting discounts, selling commission and stock transfer taxes applicable to the sale of their securities.

Preferred Stock

        The board of directors has the authority, without action by the stockholders, to designate and issue preferred stock and to designate the rights, preferences and privileges of each series of preferred stock, which may be greater than the rights attached to the common stock. It will not be possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of common stock until the board of directors determines the specific rights attached to that preferred stock. The effects of issuing preferred stock could include one or more of the following:

•

restricting dividends on the common stock;



•

diluting the voting power of the common stock;



•

impairing the liquidation rights of the common stock; or



•

delaying or preventing a change of control of our company.

Warrants

        To induce American to enter into the code-sharing agreement with us, we paid American a contract rights fee in the form of a warrant to purchase shares of our common stock. The warrant gives American the right to purchase 8.75% of the greater of (a) the number of shares of common stock that are sold pursuant to our initial public offering or (b) 60% of the number of shares of common stock outstanding immediately prior to the closing of our initial public offering (computed on a fully diluted basis). The exercise price for the common stock that may be purchased by American pursuant to the warrant is 93% of the per share price at which the IPO shares are offered to the public in this offering. The warrant vests as follows:

•

42.9% of the number of warrant shares vests ratably over ten years beginning June 11, 2002; and



•

57.1% of the number of warrant shares vests ratably over five years beginning June 11, 2006.

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        If American terminates its code-sharing agreement with us, the unvested portion of the warrant will terminate. The warrant will represent    % of our outstanding common stock. American may exercise its rights for a period of five years after vesting occurs.

        To induce America West to enter into the code-sharing agreement with us, we will pay to America West a contract rights fee in the form of our agreement to issue them, upon the twelfth aircraft entering service under such code-sharing agreement, a warrant to purchase shares of our common stock. The warrant gives America West the right to purchase 2% of the greater of (a) the number of shares of common stock that are sold pursuant to our initial public offering or (b) 35% of the number of shares of common stock outstanding immediately prior to the closing of our initial public offering (computed on a fully diluted basis). The exercise price for the common stock that may be purchased by America West pursuant to the warrant is the per share price at which the shares are sold to the underwriters in this offering and is subject to downward adjustment if we issue additional shares of our common stock at a price below the exercise price. The warrant will be fully vested upon issuance and America West can exercise its rights for up to three years thereafter. The warrant will represent    % of our outstanding common stock.

        In connection with the issuance of the America West warrant, we agreed to give America West registration rights for the shares underlying the warrant. According to our agreement with them, they have the right to require us to register under the Securities Act all or a portion of their shares of common stock during the period commencing 180 days after the date of this prospectus and ending three years from the date of the warrant. This right may only be exercised once. In addition, if we propose to register any of our shares pursuant to the Securities Act, America West has the right to require us to include all or a portion of their shares of common stock in that registration. The underwriter, if any, of any such offering will have the right to limit or exclude registrable securities from such registration. Furthermore, if we become eligible to register our common stock on a Form S-3 registration statement, America West can require us to register their common stock on that form. In the event America West exercises its right to reduce the fleet below the contemplated 12 aircraft or we divert the aircraft to non-America West usage, then any warrant issued to America West shall become null and void.

Limitation On Liability and Indemnification Matters

        Our certificate of incorporation limits the liability of our directors to us and our stockholders to the fullest extent permitted by Delaware law. Specifically, our directors will not be personally liable for money damages for breach of fiduciary duty as a director, except for liability:

•

for any breach of the director's duty of loyalty to us or our stockholders;



•

for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;



•

under Section 174 of the Delaware General Corporation Law, which concerns unlawful payments of dividends, stock purchases or redemptions; and



•

for any transaction from which the director derived an improper personal benefit.

        Our certificate of incorporation and by-laws also contain provisions indemnifying our directors and officers to the fullest extent permitted by Delaware law. The indemnification permitted under Delaware law is not exclusive of any other rights to which these persons may be entitled.

        In addition, we maintain directors' and officers' liability insurance to provide our directors and officers with insurance coverage for losses arising from claims based on breaches of duty, negligence, errors and other wrongful acts.

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Anti-Takeover Provisions

        A number of provisions under Delaware law and in our certificate of incorporation and by-laws may make it more difficult to acquire control of us. These provisions could deprive the stockholders of opportunities to realize a premium on the shares of common stock owned by them. In addition, these provisions may adversely affect the prevailing market price of the common stock. These provisions are intended to:

•

enhance the likelihood of continuity and stability in the composition of the board and in the policies formulated by the board;



•

discourage certain types of transactions which may involve an actual or threatened change in control of our company;



•

discourage certain tactics that may be used in proxy fights; and



•

encourage persons seeking to acquire control of our company to consult first with the board of directors to negotiate the terms of any proposed business combination or offer.

Special Meetings of Stockholders

        Our certificate of incorporation provides that special meetings of the stockholders may be called only by the chairman of our board of directors, our president or a majority of our whole board of directors and may not be called by the holders of common stock.

Advance Notice Procedure For Director Nominations and Stockholder Proposals

        Our by-laws provide that adequate notice must be given to nominate candidates for election as directors or to make proposals for consideration at annual meetings of stockholders. Notice of a stockholder's intent to nominate a director or propose business to be considered by the stockholders must be delivered to our principal executive offices as follows:

•

nominations or other business to be brought before an annual meeting of stockholders, not less than 45 days nor more than 75 days prior to the first anniversary of the date on which we first mailed our proxy materials for the preceding year's annual meeting of stockholders; and



•

nominations to be brought before a special meeting of stockholders, not earlier than 90 days prior to the special meeting and not later than the later of (1) 70 days prior to the special meeting or (2) ten days following the public announcement of the special meeting.

Authorized but Unissued Shares of Common Stock

        The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Corporate Opportunities

        Under our certificate of incorporation, we have renounced any interest or expectancy in being offered any business opportunities presented to Wexford Capital or any of its affiliates from whatever source other than us. Therefore, if Wexford becomes aware of a potential transaction that may be a corporate opportunity for both Wexford or any of its affiliates and us, Wexford will have no duty to communicate or present this corporate opportunity to us and will not be liable to us or our

78

stockholders for breach of any fiduciary duty as a stockholder by reason of the fact that Wexford pursues or acquires the corporate opportunity for itself, directs the corporate opportunity to another person or does not communicate information regarding such corporate opportunity to us. Similarly, in the event that one of our directors who is also a principal, officer or employee of Wexford acquires knowledge of a potential transaction or matter which may be a corporate opportunity for both us and Wexford or its affiliates, that person will have no duty to communicate or present this corporate opportunity to us. We will have no duty to communicate corporate opportunities to Wexford, and nothing will prohibit us from competing against Wexford for future corporate opportunities.

Transfer Agent And Registrar

        The transfer agent and registrar for our common stock is            . Its address is            .

Quotation on the Nasdaq Stock Market's National Market

        We expect our common stock to be approved for quotation on the Nasdaq National Market under the symbol "RJET."

SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has been no market for our common stock. Future sales in the public market of substantial amounts of our common stock, including shares issued upon exercise of outstanding options, could adversely affect prevailing market prices and impair our ability to raise equity capital in the future.

        Rule 144 Securities.    Upon the consummation of this offering, we will have    shares of common stock outstanding, assuming no exercise of the underwriters' over-allotment options and no exercise of outstanding options. All of the shares of common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any of the shares that are acquired by "affiliates" as that term is defined in Rule 144 under the Securities Act. The    shares of common stock held by WexAir and our directors and executive officers and American after the offering will be "restricted" securities under the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act, unless an exemption from registration is available, including exemptions pursuant to Rule 144 or Rule 144A under the Securities Act.

        In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:

•

1% of the number of shares of common stock then outstanding, which will equal approximately            shares outstanding immediately after this offering, or



•

the average weekly trading volume of the common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

        Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

        Under Rule 144(k), a person who is not deemed to have been one of our "affiliates" at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an "affiliate," is entitled to sell its shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately upon the completion of this offering. The sale of these shares, or the perception that sales

79

will be made, could adversely affect the price of our common stock after the offering because a greater supply of shares would be, or would be perceived to be, available for sale in the public market.

        We, our executive officers and directors and Wexford have agreed that, without the prior written consent of Merrill Lynch on behalf of the underwriters, we will not, during the period ended 180 days after the date of this prospectus, sell shares of common stock or take certain related actions, subject to limited exceptions, all as described under "Underwriting."

        The shares held by WexAir will be eligible for sale in the public market, subject to compliance with the volume restrictions described above, beginning 180 days after the date of this prospectus, or earlier to the extent Merrill Lynch consents to such sale.

        Rule 701.    In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchases common stock from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this prospectus is entitled to resell those shares 90 days after the effective date of this prospectus in reliance on Rule 144, without having to comply with certain restrictions (including the holding period) contained in Rule 144.

        Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. It permits non-affiliates to sell their Rule 701 shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling those shares.

        Stock Options.    Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock issued or reserved for issuance under the 2002 Equity Incentive Plan and certain stock option agreements. The registration statement will become effective automatically upon filing. As of February 28, 2002, options to purchase    shares of common stock were issued and outstanding, of which     shares have vested. Accordingly, shares registered will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the 180-day lock-up agreements expire.

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UNDERWRITING

        Merrill Lynch, Pierce, Fenner & Smith Incorporated and Raymond James & Associates, Inc. are acting as representatives of the underwriters named below. Subject to the terms and conditions described in a purchase agreement between us and the underwriters, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares listed opposite their names below.

Underwriter	Number of Shares
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Raymond James & Associates, Inc.
Total

        Subject to the terms and conditions in the purchase agreement, the underwriters have agreed to purchase all the shares of our common stock being sold pursuant to the purchase agreement if any of these shares of our common stock are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.

        We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

        The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officers' certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commissions and Discounts

        The representatives have advised us that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $                      per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $                      per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.

        The following table shows the public offering price, underwriting discount and the proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment options.

	Per Share	Without Option	With Option
Public offering price	$	$	$
Underwriting discount	$	$	$
Proceeds, before expenses, to Republic Airways	$	$	$

        The expenses of the offering, not including the underwriting discount, are estimated at $                  and are payable by us.

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Overallotment Option

        We have granted an option to the underwriters to purchase up to            additional shares at the initial public offering price less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any overallotments. If the underwriters exercise this option, each underwriter will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.

Reserved Shares

        At our request, the underwriters have reserved for sale, at the initial public offering price, up to            shares offered by this prospectus for sale to some of our directors, officers, employees, business associates and related persons. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.

No Sales of Similar Securities

        We, our executive officers, directors and our stockholder have agreed, with certain exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and these other individuals have agreed not to directly or indirectly

•

offer, pledge, sell or contract to sell any common stock;



•

sell any option or contract to purchase any common stock;



•

purchase any option or contract to sell any common stock;



•

grant any option, right or warrant for the sale of any common stock;



•

lend or otherwise dispose of or transfer any common stock;



•

request or demand that we file a registration statement related to the common stock; or



•

enter into any swap or other agreement that transfers, in whole or in part, the economic consequences of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

        This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.

Electronic Distribution

        Merrill Lynch will be facilitating Internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet Web site maintained by Merrill Lynch. Other than the prospectus in electronic format, the information on the Merrill Lynch Web site is not a part of this prospectus.

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Quotation on the Nasdaq National Market

        We expect our common stock to be approved for quotation on the Nasdaq National Market, subject to notice of issuance, under the symbol "RJET."

        Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations between us and the representatives. In addition to prevailing market conditions, the factors considered in determining the initial public offering price are

•

the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;



•

our financial information;



•

the history of, and the prospects for, our company and the industry in which we compete;



•

an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;



•

the present state of our development; and



•

the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

        An active trading market for the shares of our common stock may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price. The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

        Until the distribution of the shares is completed, rules of the Securities and Exchange Commission may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.

        In connection with the offering, the underwriters may make short sales of our common stock. Short sales involve the sale by the underwriters at the time of the offering of a greater number of shares than they are required to purchase in the offering. Covered short sales are sales made in an amount not greater than the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the public offering price at which they may purchase the shares through the over-allotment option.

        Naked short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

        Similar to other purchase transactions, the purchases by the underwriters to cover syndicate short positions may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than it would otherwise be in the absence of these transactions.

83

        The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase shares of our common stock in the open market to reduce the underwriter's short position or to stabilize the purchase of such shares, they may reclaim the amount of the selling commission from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares of our common stock in that it discourages resales of those shares.

        Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make any representation that the representatives or the lead managers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Other Relationships

        Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us. They have received customary fees and commissions for these transactions.

LEGAL MATTERS

        The validity of the shares of common stock offered by this prospectus will be passed upon for us by Fulbright & Jaworski L.L.P., New York, New York. Certain legal matters related to the offering will be passed upon for the underwriters by Cahill Gordon & Reindel, New York, New York.

EXPERTS

        The consolidated financial statements included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

        We have filed with the Commission a registration statement on Form S-1, which includes amendments, exhibits, schedules and supplements, under the Securities Act and the rules and regulations under the Securities Act, for the registration of the common stock offered by this prospectus. Although this prospectus, which forms a part of the registration statement, contains all material information included in the registration statement, parts of the registration statement have been omitted from this prospectus as permitted by the rules and regulations of the Commission. For further information about us and the common stock offered by this prospectus, please refer to the registration statement. Statements contained in this prospectus as to the contents of any contracts or other document referred to in this prospectus are not necessarily complete and, where such contract or other document is an exhibit to the registration statement, each such statement is qualified in all respects by the provisions of such exhibit, to which reference is now made. The registration statement can be inspected and copied at prescribed rates at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at other public reference facilities maintained by the Commission. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. In addition, the registration statement is publicly available through the Commission's site on the Internet's World Wide Web, located at: http://www.sec.gov.

        After the offering, we will be subject to the full informational requirements of the Securities Exchange Act. To comply with these requirements, we will file periodic reports, proxy statements and other information with the Commission.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPUBLIC AIRWAYS HOLDINGS INC.

		Page
Consolidated Financial Statements
	Independent Auditors' Report	F-2
	Consolidated Balance Sheets as of December 31, 2000 and 2001	F-3
	Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001	F-4
	Consolidated Statements of Stockholder's Equity for the years ended December 31, 1999, 2000 and 2001	F-5
	Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001	F-6
	Notes to the Consolidated Financial Statements	F-7

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Republic Airways Holdings Inc.

        We have audited the accompanying consolidated balance sheets of Republic Airways Holdings Inc. and subsidiary as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Republic Airways Holdings Inc. and subsidiary as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 7, 2002

F-2

REPUBLIC AIRWAYS HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

				December 31,
				2000			2001
ASSETS
Current Assets:
	Cash and cash equivalents			$	389		$	3,272
	Receivables, net of allowance for doubtful accounts of $592 and $415 at December 31, 2000 and 2001, respectively				8,136			7,240
	Inventories				5,557			6,628
	Assets held for sale:
		Inventories			480			3,226
		Aircraft and other equipment			895			9,675
	Prepaid expenses and other current assets				2,695			3,063
	Deferred income taxes				3,688			5,340
			Total current assets		21,840			38,444
Aircraft and other equipment, net					25,529			133,810
Other assets					10,435			18,335
Deferred income taxes					631			878
Goodwill, net					14,166			13,335
			Total assets	$	72,601		$	204,802
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
	Current portion of long-term debt			$	11,314		$	14,533
	Subordinated note payable to Parent				15,025			16,883
	Accounts payable				9,045			9,986
	Accrued liabilities				15,684			30,889
			Total current liabilities		51,068			72,291
Long-term debt, less current portion					6,546			99,934
Deferred credits					6,605			18,038
			Total liabilities		64,219			190,263
Commitments and Contingencies
Redeemable preferred stock of subsidiary at redemption value					4,329			4,747
Stockholder's Equity:
	Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding
	Common stock, $.001 par value; one vote per share; 75,000,000 shares authorized; 100 shares issued and outstanding
	Additional paid-in capital				7,878			7,863
	Accumulated earnings (deficit)				(3,825	)		1,929
			Total stockholder's equity		4,053			9,792
			Total liabilities and stockholder's equity	$	72,601		$	204,802

See accompanying notes to consolidated financial statements.

F-3

REPUBLIC AIRWAYS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

				For the Years Ended December 31,
				1999			2000			2001
OPERATING REVENUES:
	Passenger			$	86,588		$	145,850		$	236,843
	Freight and other				1,671			1,627			1,801
			Total operating revenues		88,259			147,477			238,644
OPERATING EXPENSES:
	Wages and benefits				22,679			30,782			45,107
	Aircraft fuel				7,119			22,192			39,042
	Passenger fees and commissions				15,038			12,883			11,065
	Landing fees				2,105			3,753			7,091
	Aircraft rent				9,249			22,903			46,160
	Maintenance and repair				12,813			19,667			34,069
	Insurance and taxes				1,528			2,822			5,710
	Depreciation and amortization				4,303			4,110			7,783
	Impairment loss and accrued aircraft return costs				6,603						8,100
	Other				17,398			21,143			26,710
	Stabilization Act compensation										(7,640	)
			Total operating expenses		98,835			140,255			223,197
OPERATING INCOME (LOSS)					(10,576	)		7,222			15,447
OTHER INCOME (EXPENSE):
	Interest expense:
		Non-related party			(1,707	)		(1,797	)		(4,283	)
		Related party			(1,512	)		(1,753	)		(1,944	)
	Other income				96			1,792			1,607
			Total other income (expense)		(3,123	)		(1,758	)		(4,620	)
INCOME (LOSS) BEFORE INCOME TAXES					(13,699	)		5,464			10,827
INCOME TAX (EXPENSE) BENEFIT					4,845			(2,942	)		(4,760	)
NET INCOME (LOSS)				$	(8,854	)	$	2,522		$	6,067
Preferred stock dividends								(255	)		(418	)
Net income (loss) available for common stockholders				$	(8,854	)	$	2,267		$	5,649
Basic net income (loss) available for common stockholders per share				$	(88,538	)	$	22,670		$	56,494
Diluted net income (loss) available for common stockholders per share				$	(88,538	)	$	22,670		$	54,748

See accompanying notes to consolidated financial statements.

F-4

REPUBLIC AIRWAYS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

(In thousands)

		Comprehensive Income			Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Accumulated Earnings (Deficit)			Total
Balance at January 1, 1999					$	—	$	8,133					$	2,507		$	10,640
Net loss														(8,854	)		(8,854	)
Balance at December 31, 1999						—		8,133						(6,347	)		1,786
Dividends on redeemable preferred stock of subsidiary								(255	)								(255	)
Net income														2,522			2,522
Balance at December 31, 2000						—		7,878						(3,825	)		4,053
Stock compensation expense								90									90
Dividends on redeemable preferred stock of subsidiary								(105	)					(313	)		(418	)
Net income		$	6,067											6,067			6,067
Other comprehensive income:
	SFAS No. 133 transition adjustment, net of tax		248							$	248						248
	Realization of deferred amounts, net of tax		(248	)							(248	)					(248	)
Comprehensive income		$	6,067
Balance at December 31, 2001					$	—	$	7,863		$	—		$	1,929		$	9,792

See accompanying notes to consolidated financial statements.

F-5

REPUBLIC AIRWAYS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

					For the Years Ended December 31,
					1999			2000			2001
OPERATING ACTIVITIES:
	Net income (loss)				$	(8,854	)	$	2,522		$	6,067
	Adjustments to reconcile net income (loss) to net cash from operating activities:
		Depreciation and amortization				4,303			4,110			7,783
		(Gain) loss on aircraft and other equipment disposals				351			(31	)		(460	)
		Impairment loss and accrued aircraft return costs				6,603						8,100
		Amortization of deferred credits							(278	)		(889	)
		Unrealized (gain) loss on fuel swaps							(841	)		202
		Stock compensation expense										90
		Deferred income taxes				(4,016	)		2,166			(1,899	)
		Change in certain assets and liabilities:
			Receivables			(317	)		(884	)		896
			Inventories			(2,076	)		(1,597	)		579
			Prepaid expenses and other current assets			(373	)		(373	)		(368	)
			Accounts payable			1,307			2,512			1,490
			Accrued liabilities			5,412			7,164			10,826
			Other assets			(158	)		(7,760	)		(9,461	)
				Net cash from operating activities		2,182			6,710			22,956
INVESTING ACTIVITIES:
	Purchase of aircraft and other equipment					(9,270	)		(10,812	)		(28,879	)
	Proceeds from sale of spare aircraft equipment											16,189
				Net cash from investing activities		(9,270	)		(10,812	)		(12,690	)
FINANCING ACTIVITIES:
	Revolving credit facility, net					8,986			(2,517	)		(2,227	)
	Proceeds from short-term borrowings					3,729			1,500
	Payments on short-term borrowings					(2,729	)
	Payments on long-term debt					(5,463	)		(1,932	)		(7,857	)
	Proceeds from long-term debt					2,286			2,322			1,850
	Proceeds from issuance of redeemable preferred stock of subsidiary								1,500
	Change in deferred credits								1,913			1,400
	Other					302			1,189			(549	)
				Net cash from financing activities		7,111			3,975			(7,383	)
NET CHANGE IN CASH						23			(127	)		2,883
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD						493			516			389
CASH AND CASH EQUIVALENTS AT END OF PERIOD					$	516		$	389		$	3,272
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Interest paid				$	1,129		$	2,001		$	4,216
	Income taxes paid (refunded)					420			(532	)		4,771
NON-CASH TRANSACTIONS:
	Deferred credits				$	677		$	4,326		$	8,858
	Conversion of debt and accrued interest to redeemable preferred stock of subsidiary								2,574
	Conversion of accrued interest to subordinated note payable to Parent					1,440			1,585			1,858
	Purchase, sale and leaseback of aircraft								15,500
	Preferred stock dividends declared								255			418
	Aircraft, inventories, and other equipment purchased through financing arrangements											104,841

See accompanying notes to consolidated financial statements.

F-6

REPUBLIC AIRWAYS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 1999, 2000 and 2001
Dollars in thousands, except share and per share amounts

1. ORGANIZATION & BUSINESS

        Republic Airways Holdings Inc. (the "Company" or "Republic") is an airline holding company wholly-owned by WexAir LLC ("Parent"). The Company was incorporated in the state of Delaware in 1996 and acquired all of the common stock of Chautauqua Airlines, Inc. ("Chautauqua") in May 1998.

        Chautauqua operates as an air carrier providing scheduled passenger and airfreight service as US Airways Express, AmericanConnection, and America West Express under code-sharing agreements with US Airways Inc. ("US Airways"), AMR Corporation ("American"), and America West Airlines, Inc. ("America West"). Chautauqua has two agreements with US Airways and offers passenger and freight service from US Airways' hub airports in Pittsburgh, Pennsylvania, Indianapolis, Indiana and New York, New York (LaGuardia). Under the agreement with American, Chautauqua offers passenger and freight service from American's hub airport in St. Louis, Missouri. The agreement with America West offers passenger and freight service from America West's hub airport in Columbus, Ohio.

        Under the US Airways' code-sharing agreements, which expire in 2009, Chautauqua provides service to designated areas utilizing turboprop and jet aircraft. The agreements provide Chautauqua with a nonexclusive license to US Airways' trademarks as well as general air carrier support services and contain provisions relating to the size and use of aircraft, insurance requirements and service requirements. Under the US Airways' code-sharing agreements, US Airways is required to provide fuel, reservation systems, ground handling and other services to Chautauqua. Chautauqua paid $16,181, $26,846 and $37,059 for the years ended December 31, 1999, 2000 and 2001, respectively, for these products and services. As of December 31, 2001, Chautauqua has twenty-five turboprops, of which eleven were in service dedicated to US Airways and fourteen were taken out of service to prepare the aircraft to be returned to the lessor or due to the decrease in routes available for these aircraft (See Note 16).

        The US Airways' code-sharing agreement with Chautauqua was amended on December 20, 2000 to allow Chautauqua to operate twenty-six (twenty-five scheduled and one spare) Embraer 145-LR regional jets on a fixed-fee basis with reimbursement of certain pass-through costs. As of December 31, 2001, Chautauqua has twenty-six jets dedicated to US Airways' service.

        Chautauqua started jet service for American in August 2000. The code-sharing agreement with American, which expires in 2013, is on a fixed-fee basis with reimbursement of certain pass-through costs. The agreement may be terminated by American without cause at any time after September 30, 2005 with 180 days notice. As of December 31, 2001, Chautauqua has fifteen jets dedicated to American service.

        Chautauqua started jet service for America West in August 2001. The code-sharing agreement with America West provides for twelve aircraft to be placed into service by November 2002 and expires in 2011. The agreement is on a fixed-fee basis with reimbursement of certain pass-through costs. The agreement allows America West to discontinue operating one aircraft after August 2007 and two aircraft after August 2009. The service is operated out of America West's Columbus, Ohio, hub. As of December 31, 2001, Chautauqua has four jets dedicated to America West service.

        Approximately 67%, 31%, and 2% of Chautauqua's passenger revenues for the year ended December 31, 2001 were earned from services provided to passengers connecting to US Airways, American and America West, respectively. At December 31, 2001, approximately 41%, 4%, 4% of

F-7

receivables are due from US Airways, American and America West, respectively. Termination of any regional jet code-share agreements is likely to have a material adverse effect on Chautauqua's business prospects, financial position, results of operations and cash flows.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation—The consolidated financial statements for the years ended December 31, 1999, 2000 and 2001 include the accounts of the Company and its wholly-owned subsidiary, Chautauqua. All intercompany accounts and transactions are eliminated in consolidation.

Risk management—Chautauqua has fuel price risk for its US Airways' turboprop operations and enters into fuel swap agreements to hedge this risk. Prior to January 1, 2001, hedging gains and losses were accounted for under Statement of Financial Accounting Standard ("SFAS") No. 80, Accounting for Futures Contracts, with net realized gains recorded in aircraft fuel expense. Fuel swap gains or losses for gallons in excess of those needed for the US Airways' turboprop operations were recorded in other income with the fair value of the fuel swaps in prepaid expenses and other current assets.

        On January 1, 2001, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was adopted and a gain of $248, net of tax, was recorded in other comprehensive income. During 2001, the deferred gain was realized as the fuel swap agreements matured. Fuel swaps are not designated as hedging instruments and, accordingly, are carried at fair value in prepaid expenses and other current assets or accrued liabilities with gains and losses recorded in other income.

Cash and cash equivalents—Cash equivalents consist of short-term, highly liquid investments with maturities of three months or less when purchased.

Inventories consist primarily of spare parts and supplies, which are charged to expense as they are used in operations. Inventories are valued at average cost.

Inventories Held for Sale are comprised of Jetstream 31 and Saab 340 turboprop aircraft inventories (see Note 16). Chautauqua currently has a contract to sell the Saab 340 inventories at net book value, which approximates net realizable value, to a company owned by Wexford Capital LLC. Jetstream 31 inventories are recorded at estimated net realizable value.

Aircraft and Other Equipment Held for Sale are comprised of two Saab 340 turboprop aircraft and Jetstream 31 and Saab 340 rotable inventories associated with these fleets (see Note 16). Chautauqua currently has a contract to sell the Saab 340 rotable inventories to a company owned by Wexford Capital LLC at net book value, which approximates fair value. The Jetstream 31 rotable inventories have been written down to their estimated fair value less costs to sell.

Aircraft and Other Equipment are carried at cost. Incentives received from the aircraft manufacturer are recorded as reductions to the cost of the aircraft. Depreciation is computed on a straight-line basis to salvage value over the estimated useful lives of the related assets, which are 8 to 16.5 years for aircraft and 3 to 10 years for other equipment. Leasehold improvements are amortized over the expected life or lease term, whichever is less.

F-8

Goodwill is amortized over 20 years using the straight-line method. Accumulated amortization is $2,130 and $2,937 at December 31, 2000 and 2001, respectively.

Long-Lived Assets—Management reviews goodwill and other long-lived assets for possible impairment, if there is a significant event that detrimentally affects operations. The primary financial indicator used by the Company to assess the recoverability of its long-lived assets, including goodwill, is undiscounted future cash flows from operations. The amount of impairment, if any, is measured based on estimated fair value less costs to sell or projected future cash flows using a discount rate reflecting the Company's average cost of funds. Certain long-lived assets held for sale are recorded at estimated fair value less costs to sell.

Deferred Credits consist of credits for parts and training from the aircraft and engine manufacturers and deferred gains from the sale and leaseback of one aircraft and seven spare jet engines. Deferred credits are amortized on a straight-line basis as a reduction of aircraft rent over the term of the respective leases.

Comprehensive Income—Republic reports comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income for the year ended December 31, 2001 consists of net income and the SFAS No. 133, Accounting for Derivatives and Hedging Activities, transition adjustment and the realization of this deferred amount. There were no comprehensive income (loss) components for the years ended December 31, 1999 and 2000.

Income Taxes—Republic accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. The measurement of deferred tax assets is adjusted by a valuation allowance, if necessary, to recognize the future tax benefits to the extent, based on available evidence, it is more likely than not they will be realized.

Aircraft Maintenance and Repair is charged to expense as incurred under the direct expense method. Engines and some of the airframe component overhaul and repair costs are subject to power-by-the-hour contracts with external vendors and are accrued as the aircraft are flown.

Preoperating Costs related to the introduction of the Embraer jet aircraft are expensed as incurred.

Other Income for the years ended December 31, 2000 and 2001 includes gains of $1,684 and $1,470, respectively, for fuel swap agreements.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

F-9

Revenue Recognition—Revenues are recognized in the period the service is provided. Chautauqua does not have an air traffic liability, or the related asset, under the US Airways' turboprop revenue-sharing agreement as all ticket sales are made on US Airways ticket stock.

Stock Compensation—Republic applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for stock options. No compensation expense is recorded for stock options with exercise prices equal to or greater than fair market value on the grant date. Warrants issued to non-employees are accounted for under SFAS No. 123, Accounting for Stock-Based Compensation, at fair value on the measurement date.

Net Income (Loss) Available for Common Stockholders Per Share is based on the weighted average number of shares outstanding during the period.

        The following is a reconciliation of the weighted average common shares for the basic and diluted per share computations:

	Years Ended December 31,
	1999	2000	2001
Weighted-average common shares outstanding for basic net income (loss) available for common stockholders per share	100	100	100
Effect of dilutive employee stock options	—	—	3.19
Adjusted weighted-average common shares outstanding and assumed conversions for diluted net income (loss) available for common stockholders per share	100	100	103.19

        Employee stock options are not included in the calculation of net loss applicable to common stockholders per share for the year ended December 31, 1999 due to their anti-dilutive impact.

Segment Information—The Company has one operating segment for the scheduled transportation of passengers and freight under code-sharing agreements.

New Accounting Standards—In July 2001, SFAS No. 141, Business Combinations, was issued. SFAS No. 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. The Company has had no business combinations subsequent to June 30, 2001 and, therefore, management believes that the adoption of SFAS No. 141 will not have a significant impact on the consolidated financial statements.

        In July 2001, SFAS No. 142, Goodwill and Other Intangible Assets, was issued and is effective for Republic on January 1, 2002. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization and an annual assessment of impairment. Republic recorded goodwill amortization of $807 in each of the years ended December 31, 1999, 2000, and 2001. Effective January 1, 2002, the Company will no longer amortize goodwill, but will evaluate it on an annual basis to determine whether there is an impairment of goodwill. If management determines the goodwill is impaired, management is required to write-off the amount of goodwill that is impaired.

F-10

        In August 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, was issued, which is effective for Republic on January 1, 2002. Among other things, this statement will supersede SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, and the accounting and reporting provisions of APB No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 changes the treatment for the disposal of a business segment and establishes one method of accounting for long-lived assets to be disposed of by sale. Management believes the adoption of SFAS No. 144 will not have a significant impact on the Company's financial position, results of operations and cash flows.

3. AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT

        As a result of the large financial losses attributed to the terrorist attacks on the United States that occurred on September 11, 2001, the Senate and House of Representatives of the United States of America passed, and the President signed into law H.R. 2626, the Air Transportation Safety and System Stabilization Act (the "Stabilization Act"). The intent of the Stabilization Act is to preserve the continued viability of the United States air transportation system. This legislation included support to passenger airlines in the form of a $4.5 billion grant, $10 billion in loan guarantees, and assistance with increased insurance costs. The $4.5 billion grant provided assistance for direct losses incurred as a result of the temporary shut down of the air transportation system and for incremental losses incurred through December 31, 2001 as a direct result of the terrorist attacks. The loan guarantees will be made to air carriers for which credit is not reasonably available and guarantees are subject to certain conditions. The federal government is providing insurance assistance because, as a result of September 11, 2001, aviation insurers have significantly reduced the maximum amount of insurance coverage available to commercial air carriers for war-risk coverage. In addition, the insurance carriers have significantly increased the premiums for this coverage as well as for aviation insurance in general. In addition, the federal government has issued war-risk coverage to U.S. air carriers for renewable 30-day periods.

        The terrorist attacks of September 11, 2001 had a significant impact on Chautauqua. Following the attacks, the air transportation system was temporarily shut down, resulting in the cancellation of flights. The cancelled flights and loss of consumer confidence in the airline industry resulted in lost revenue from these cancelled flights and lower load factors and revenue yield on flights operated. Chautauqua was also impacted because fixed costs continued during the temporary shutdown while revenue from Chautauqua's code-share partners decreased.

        Subsequent to September 11, 2001, the Company recorded $7,640 as a reduction of operating expenses for amounts claimed under the Stabilization Act. The Company received $6,493 in 2001 and the remaining $1,147 is included in accounts receivable at December 31, 2001. Amounts paid or payable under the Stabilization Act are subject to audit and adjustment by the federal government.

4. AIRCRAFT AND OTHER EQUIPMENT

        At December 31, 2001, Chautauqua has a fleet of seventy aircraft, including twenty-five 30-seat Saab 340 aircraft, thirty-eight 50-seat Embraer 145-LR jet aircraft, and seven 44-seat Embraer 140-LR

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jet aircraft. Chautauqua owns four Embraer 145-LR aircraft and three Embraer 140-LR aircraft, and leases all other aircraft under operating lease agreements.

        Aircraft and other equipment, excluding aircraft and other equipment held for sale, consists of the following:

		December 31,
		2000		2001
Aircraft		$	5,595	$	117,040
Flight equipment			21,443		18,634
Furniture and equipment			1,692		1,911
Leasehold improvements			2,028		2,020
	Total aircraft and other equipment		30,758		139,605
Less accumulated depreciation and amortization			5,229		5,795
	Aircraft and other equipment, net	$	25,529	$	133,810

        Depreciation expense for the years ended December 31, 1999, 2000, and 2001 was $3,298, $3,105, and $6,777, respectively.

5. OTHER ASSETS

        Other assets consist of the following:

	December 31,
	2000		2001
Prepaid aircraft rent	$	6,245	$	15,694
Restricted cash		1,500		1,500
Deposits and other		2,690		1,141
	$	10,435	$	18,335

        In accordance with a lease agreement, Chautauqua maintains a $1,500 certificate of deposit with a bank that bears an interest rate of 1.5%.

6. ACCRUED LIABILITIES

        Accrued liabilities consist of the following:

		December 31,
		2000		2001
Accrued wages and benefits and related taxes		$	2,873	$	4,693
Accrued maintenance and inventory			2,827		6,091
Accrued aircraft return costs			1,404		6,202
Accrued property taxes			1,832		2,122
Accrued interest payable to Parent			1,140		1,227
Other			5,608		10,554
	Total accrued liabilities	$	15,684	$	30,889

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7. DEBT AND NOTES PAYABLE

        Debt and notes payable consists of the following:

		December 31,
		2000		2001
Revolving credit facility with Fleet Capital Corporation (the "Bank"), maximum of $23,000 available (including outstanding letters of credit), subject to 90% of eligible ticket revenue and eligible inventory and equipment. Interest is payable monthly at the Bank's LIBOR rate plus spreads ranging from 2.25% to 2.5% or the Bank's base rate (which is generally equivalent to the prime rate) plus 0.50%. The weighted average interest rates for the years ended December 31, 2000 and 2001 are 10.76% and 6.15%, respectively. Fees are payable at .375% on the unused revolver amount. The credit facility expires March 31, 2002 and is collateralized by all of Chautauqua's assets, excluding the owned aircraft and engines.		$	9,271	$	7,044
Promissory notes with Embraer-Empresa Brasileira de Aeronautica, S.A., collateralized by aircraft, bearing interest at a fixed rate of 7.5%, monthly principal and interest payments of $952, due dates ranging from June 20, 2002 through November 23, 2002. The maturity dates can be automatically extended for an additional twelve months at each maturity date.					103,362
Subordinated note payable to Parent, bearing interest at 11.5% as of December 31, 2001. Accrued and unpaid interest and principal are due on May 15, 2002 or upon sale by the Company of any capital stock.			15,025		16,883
Term loans with the Bank due December 2006 or upon termination of the Bank credit facility, with monthly principal payments of $56, and interest payable monthly at the Bank's LIBOR rates plus spreads ranging from 2.25% to 2.5% or the Bank's base rate (which is generally equivalent to the prime rate) plus 0.50% (6.46% at December 31, 2001). The term loans are collateralized by substantially all of Chautauqua's assets, including the two Saab 340 aircraft held for sale.			4,050		3,375
Term loans with the Bank due July 2006 or upon termination of the Bank credit facility, with monthly principal payments of $6, and interest payable monthly at the Bank's LIBOR rates plus spreads ranging from 2.25% to 2.5% or the Bank's base rate (which is generally equivalent to the prime rate) plus 0.50% (4.18% at December 31, 2001). The term loans are collateralized by substantially all of Chautauqua's assets, including the Saab 340 aircraft and equipment held for sale.			3,728		321
Other obligations			811		365
	Total		32,885		131,350
Current portion			26,339		31,416
Debt and notes payable, less current portion		$	6,546	$	99,934

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        On March 7, 2002, Chautauqua obtained waivers for previous instances of noncompliance with the restrictive covenants. Chautauqua's debt agreements with the Bank contain restrictive covenants that require, among other things, that Chautauqua maintain a certain fixed charge coverage ratio and leverage ratio. The credit facility expires March 31, 2002 and we are currently discussing terms with the Bank and other parties. Chautauqua has outstanding letters of credit totaling $140 and $1,032 as of December 31, 2000 and 2001, respectively.

        In January 2002, four promissory notes payable to Embraer-Empresa Brasileira de Aeronautica, S.A. ("Embraer") were refinanced with fifteen-year term loans. The amounts outstanding at December 31, 2001 that were refinanced with the term loans total $60,786. The new term loans require semi-annual principal and interest payments beginning March 2002. The first payment in March 2002 will be $663 and $2,790 on each semi-annual payment date thereafter. The new term loans are collateralized by the aircraft.

        Future maturities of debt at December 31, 2001 are as follows:

2002		$	31,416
2003			4,822
2004			5,080
2005			5,352
2006			5,640
Thereafter			79,040
	Total	$	131,350

8. REDEEMABLE PREFERRED STOCK

        Chautauqua has authorized 1,000,000 shares of Series A redeemable preferred stock at a par value of $.01 per share. In May 2000, 10.295828 shares of Series A redeemable preferred stock were issued with a stated value of $250 per share in full satisfaction of a related party note payable and accrued interest thereon, and Chautauqua issued six shares of Series A redeemable preferred stock for cash of $1,500. At December 31, 2001, 16.295828 shares are issued and outstanding and held by two related parties. The preferred stockholders are entitled to receive cumulative dividends equal to 10% per annum of the stated value of the preferred stock. Redeemable preferred stock dividends have priority over dividends declared and paid on Chautauqua's common stock. Cash dividends cannot be declared or paid on shares of Chautauqua's common stock unless all cumulative dividends on the shares of redeemable preferred stock have been paid. As of December 31, 2000 and 2001, Chautauqua had accrued dividends of $255 and $673, respectively.

        The preferred stockholders have a liquidation preference equal to the sum of the stated value and all accrued and unpaid dividends. The redeemable preferred stock is subject to a mandatory

F-14

redemption clause, which requires Chautauqua to redeem all the outstanding preferred stock, at the stated value plus accrued interest, upon the earlier of Republic's initial public offering ("IPO") or December 31, 2010.

9. COMMITMENTS

        As of December 31, 2001, Chautauqua leases 61 aircraft with varying terms extending through 2018 and leases terminal space, operating facilities and office equipment with terms extending through 2012. Rent expense is as follows:

		For the years ended December 31,
		1999		2000		2001
Aircraft rent		$	9,249	$	22,903	$	46,160
Other			1,961		2,334		2,275
	Total rent expense	$	11,210	$	25,237	$	48,435

        Chautauqua has long-term maintenance agreements with engine and aircraft equipment manufacturers through June 2009. Payments under such agreements are based upon flight hours and were $4,082, $8,211, and $17,163 for the years ended December 31, 1999, 2000 and 2001, respectively. Chautauqua is responsible for all other maintenance costs of its aircraft and must meet specified return conditions upon lease expiration for both the airframes and engines.

        Future minimum payments at December 31, 2001, under noncancellable operating leases are as follows:

		Aircraft
		Turboprop		Jet		Other		Total
2002		$	9,174	$	55,148	$	2,321	$	66,643
2003			8,676		55,148		2,324		66,148
2004			6,426		55,148		2,287		63,861
2005			2,146		55,148		2,267		59,561
2006			444		55,148		1,913		57,505
Thereafter					537,936		17,323		555,259
	Total	$	26,866	$	813,676	$	28,435	$	868,977

        Future turboprop lease payments will be reduced by future lease payments made by a new lessee (see note 16). As of December 31, 2001, Chautauqua has purchase commitments of $5,000 for two spare jet engines to be delivered in 2002 and a sale-leaseback facility is in place at December 31, 2001 to finance the spare jet engines.

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10. CONTINGENCIES

        Chautauqua was recently informed by the Federal Aviation Administration ("FAA") that it is investigating shipments sent by Chautauqua on cargo airlines consisting of approximately 46 packages that may have contained regulated hazardous materials without properly training Chautauqua's employees and/or without properly labeling, declaring, marking, describing or packaging the shipments for transportation in air commerce in accordance with applicable requirements. Management is cooperating with the FAA's investigation, which is at an early stage. Chautauqua could be subject to civil penalties of up to $28 for each violation; however, given the early stage of the investigation and the discretion the FAA has on imposing penalties, management is unable to estimate the amount of penalties, if any, Chautauqua might be required to pay.

        Chautauqua is also subject to certain legal and administrative actions which management considers routine to their business activities. As of December 31, 2001, management believes, after consultation with legal counsel, the ultimate outcome of any pending legal matters will not have a material adverse effect on our financial position, liquidity, or results of operations.

        As of December 31, 2001, approximately 78% of Chautauqua's workforce is employed under union contracts, and 52% of this workforce is under a contract that is amendable on November 1, 2002.

11. RELATED PARTY TRANSACTIONS

        Fees are paid to an affiliated company for administrative functions not performed by Republic and its subsidiary. Fees incurred were approximately $421, $139, and $77 for the years ended December 31, 1999, 2000 and 2001, respectively.

        In addition to the administrative functions performed by an affiliated company, Republic receives advances for working capital purposes. As of December 31, 2000 and 2001, advances to the Company were $463 and $530, respectively.

        During 1999, Chautauqua entered into an agreement with Solitair Corp. ("Solitair"), an affiliate of WexAir LLC, to purchase or lease Embraer regional jets from Solitair. As of December 31, 2001, Chautauqua has purchased seven aircraft and leased thirty-eight aircraft from third parties, who acquired the aircraft from Solitair. The cost per aircraft was equal to the purchase price paid by Solitair, including all direct and indirect costs and expenses ($8, $131 and $121 for the years ended December 31, 1999, 2000 and 2001, respectively) relating thereto, plus up to $500 per aircraft. Under this agreement, Chautauqua will purchase or lease eight additional aircraft at a cost per aircraft equal to the purchase price paid by Solitair, including all direct and indirect costs and expenses relating thereto, plus $440 per aircraft. With respect to each aircraft purchased by Chautauqua, Chautauqua has the option to enter into a short term lease with Solitair for a maximum of 30 days commencing on the date Solitair acquires the aircraft and ending on the date Chautauqua purchases the aircraft. This monthly lease rate is equal to $136 per month and amounted to $703, $957 and $36 of lease payments paid to Solitair for the years ended December 31, 1999, 2000, and 2001, respectively.

        During 2000, Chautauqua purchased an aircraft from Solitair. Subsequently, this aircraft was sold to an unrelated third party and leased back. The gain of $720 is deferred and is being accreted to rent expense on a straight-line basis over the related lease term.

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12. CAPITAL STOCK AND STOCK OPTIONS

Common Stock

        On May 15, 1998, WexAir LLC acquired 100 shares of Republic's common stock for cash of $8,133. These proceeds and the proceeds from the subordinated promissory note (see Note 7) were used by Republic to acquire the common stock of Chautauqua.

Stock Options

        In connection with employment agreements for certain key employees, Republic granted options to purchase shares of Republic's common stock. The stock options vest ratably over the term of the employment agreements (generally 48 months) and are exercisable for five years following the vesting date. Because the exercise price of the options equal fair value on the grant dates, no compensation expense was recorded for options granted in 1999 and 2000. Compensation expense of $90 was recorded in 2001 for options issued in August 2001, because the exercise price of such options was less than the fair value on the grant date.

        The following is a summary of stock option activity for the years ended December 31, 1999, 2000 and 2001 and the stock options outstanding at the end of the respective periods.

	December 31, 1999			December 31, 2000			December 31, 2001
	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding, beginning of year				8.50	$	398,869	9.60	$	396,985
Granted	8.50	$	398,869	1.10		382,432	.60		1,576,717
Outstanding, end of year	8.50	$	398,869	9.60	$	396,985	10.20	$	466,381
Weighted average remaining contractual life in years	6.6			5.7			4.8
Options exercisable at end of year	1.01	$	398,909	3.29	$	397,794	5.75	$	410,613

        Had compensation expense for the options been determined based on fair value at the grant dates for awards consistent with the fair value method of SFAS No. 123, the pro forma net income (loss)

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available for common stockholders and pro forma net income (loss) available for common stockholders per share would have been as follows:

				Net income (loss) available for common stockholders per share
	Net income (loss) available for common stockholders
				Basic			Diluted
1999
As reported	$	(8,854	)	$	(88,538	)	$	(88,538	)
Pro forma		(8,999	)	$	(89,995	)	$	(89,995	)
2000
As reported	$	2,267		$	22,670		$	22,670
Pro forma		1,939			19,394			19,394
2001
As reported	$	5,649		$	56,494		$	56,494
Pro forma		5,270			52,704			51,075

        The per share weighted average fair value of options granted in 1999, 2000 and 2001 was $240,246, $231,480 and $922,655, respectively. The fair value of the option grants is estimated on the date of the grant using the Black Scholes option pricing model with the following assumptions: no dividend yield; risk-free interest rates ranging from 4.84% to 6.70%; volatility of 50%; and an expected life of 6.5 years. The pro forma amounts are not representative of the effects on reported earnings for future years.

13. INCOME TAXES

        The components of the provision for income tax expense (benefit) are as follows:

		For the years ended December 31,
		1999			2000		2001
Federal:
	Current	$	(2,488	)	$	700	$	5,299
	Deferred		(1,432	)	$	1,659		(1,462	)
			(3,920	)		2,359		3,837
State:
	Current		(188	)		74		1,360
	Deferred		(737	)		509		(437	)
			(925	)		583		923
Income tax expense (benefit)		$	(4,845	)	$	2,942	$	4,760

F-18

        A reconciliation of the expense (benefit) for taxes on income at the applicable federal statutory income tax rate to the tax provision as reported is as follows:

		For the years ended December 31,
		1999			2000		2001
Federal income tax expense (benefit) at statutory rate		$	(4,658	)	$	1,858	$	3,681
State income tax expense (benefit), net of federal benefit			(701	)		385		609
Nondeductible meals and entertainment			239			393		156
Goodwill amortization			275			275		275
Other						31		39
	Income tax expense (benefit)	$	(4,845	)	$	2,942	$	4,760

        The components of deferred tax assets and liabilities are as follows:

			December 31, 2000
			Assets		Liabilities			Total
Current:
	Nondeductible accruals		$	1,982				$	1,982
	Nondeductible accrued interest			1,739					1,739
	Alternative minimum tax credit			273					273
	Unrealized gain				$	(351	)		(351	)
	Prepaid rent			45					45
				4,039		(351	)		3,688
Noncurrent:
	Nondeductible accruals			2,270					2,270
	Accelerated depreciation and fixed asset basis differences for tax purposes					(2,644	)		(2,644	)
	Prepaid rent			698					698
	Deferred credits and sale leaseback gain			307					307
				3,275		(2,644	)		631
		Total	$	7,314	$	(2,995	)	$	4,319

F-19

			December 31, 2001
			Assets		Liabilities			Total
Current:
	Nondeductible accruals		$	2,623				$	2,623
	Nondeductible accrued interest			2,551					2,551
	Other			166					166
				5,340					5,340
Noncurrent:
	Nondeductible accruals			3,819					3,819
	Accelerated depreciation and fixed asset basis differences for tax purposes				$	(7,294	)		(7,294	)
	Asset impairment for book			733					733
	Prepaid rent			1,276					1,276
	Deferred credits and sale leaseback gain			2,344					2,344
				8,172		(7,294	)		878
		Total	$	13,512	$	(7,294	)	$	6,218

        Management has evaluated the available evidence about the realization of deferred tax assets and does not believe a valuation allowance is necessary.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

        The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in an arm's length transaction between knowledgeable, willing parties. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Fuel Swap Agreements—The fair value reflects the estimated amounts that would be received or paid to terminate the contract at the reporting date based upon quoted market prices of comparable contracts. The fair values of fuel swap agreements at December 31, 2000 and 2001 are $1,254 and ($202), respectively.

Long-Term Debt—The fair value is estimated based on discounting expected cash flows at the rates currently offered to Republic for debt of the same remaining maturities. As of December 31, 2000 and 2001, the carrying value of long-term debt approximates its fair value.

Subordinated note payable to affiliate-—It is not practicable to estimate fair value of related party financial instruments because the related parties most likely have investment strategies and expectations different from unrelated third parties.

15. BENEFIT PLAN—401(K)

        Chautauqua has a defined contribution retirement plan covering substantially all eligible employees. Chautauqua matches up to 2.5% of eligible employees' wages. Employees are generally vested in matching contributions after three years of service with Chautauqua. Employees are also permitted to make pre-tax contributions of up to 15% and after-tax contributions of up to 10% of their

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annual compensation. Chautauqua's expense under this plan was $225, $246, and $312 for the years ended December 31, 1999, 2000 and 2001, respectively.

16. IMPAIRMENT LOSS AND ACCRUED AIRCRAFT RETURN COSTS

Jetstream 31 Turboprop Aircraft

        During the fourth quarter of 1999, Chautauqua made the decision to return the entire fleet of leased Jetstream 31 turboprop aircraft to the lessors and to dispose of related equipment, spare parts and supplies. Chautauqua continued to use the aircraft to fly routes under the US Airways code sharing agreement through December 2000. Certain routes were replaced with Saab 340 turboprop aircraft and the remaining routes were eliminated. Pursuant to the lease agreements, Chautauqua was required to return the aircraft to the lessors in the same condition that the aircraft were delivered; therefore, Chautauqua accrued estimated return costs of $2,636 in 1999. During 2000 and 2001, Chautauqua incurred return costs of $1,232 and $1,234, respectively. Accrued return costs for these aircraft at December 31, 2000 and 2001 are $1,404 and $170, respectively. In addition, an impairment loss of $3,967 was recorded in 1999 to reduce the carrying amounts of assets to be disposed of (consisting of spare engines, parts and supplies needed to maintain and operate the Jetstream 31 fleet) to estimated fair value, less costs to sell, or net realizable value.

Saab 340 Turboprop Aircraft

        On December 26, 2001, management made the decision to exit its Saab 340 turboprop operations (representing 32% of 2001 revenue) in an orderly manner by July 2002. The exit plan includes the scheduled removal of aircraft (consisting of twenty-four leased and two owned aircraft) from flight service, the preparation of the aircraft for return to the lessors or for sale, and the sale of related spare engines, parts and supplies used to maintain and operate the Saab fleet.

        Saab Aircraft Leasing, Inc. and affiliates (collectively referred to as "lessor") have agreed to lease twenty-two of the twenty-four Saab 340 aircraft when new lessees are identified. A letter of intent has been signed between the lessor and a new lessee (a company controlled by Wexford Capital LLC) for up to eighteen Saab 340 aircraft at fair market lease rates. The lessor is actively seeking new lessees for the remaining four of the twenty-two aircraft. The current leases will terminate when a new lease is obtained; however, if new leases are not entered into, or are entered into and subsequently terminated, Chautauqua will be obligated for the original lease payments. Chautauqua will pay the lessor a rent differential, based on our original lease payments compared to lease payments of the new lessees. Chautauqua has accrued $2,646 for this rent differential at December 31, 2001. In addition, Chautauqua is responsible for the lease payments on the remaining two Saab 340 aircraft until expiration of these leases (September 2002). Lease payments of $1,886 are accrued at December 31, 2001 for the period from the date the aircraft is removed from service through the later of the end of the lease term or the date the aircraft is expected to be re-leased by the lessor.

        While the aircraft are out of flight service, they will be inspected and overhauled to the required return condition. Chautauqua accrued $1,500 for estimated overhaul and return costs at December 31, 2001.

F-21

        An impairment loss of $2,068 was recorded in 2001 to reduce the carrying amounts of assets to be disposed of (consisting of two owned aircraft, leasehold improvements, and all assets needed to maintain and operate the Saab fleet) to estimated fair value or net realizable value. Estimated fair value for owned aircraft are based on quotations from an aircraft dealer, less selling costs. Chautauqua has an agreement to sell the spare engines, parts and supplies to the new lessee at net book value, which approximates net realizable value.

17. WARRANTS

        In connection with the America West code-sharing agreement entered into in March 2001, Republic agreed to grant a warrant to America West as an inducement to execute such agreement. The warrant to purchase Republic shares will be issued with an exercise price equal to the underwriters' price on the closing date of Republic's IPO. The number of shares granted will be 2% of the IPO shares and expire three years after the grant date.

        In connection with the American code-sharing agreement entered into in June 2001, Republic granted a warrant to American to purchase shares of its common stock at 93% of the IPO price as an inducement to enter into such agreement. The number of shares of common stock to be issued under the warrant agreement is 8.75% of the number of shares registered in an IPO. Beginning June 2002, 42.9% of the warrant shares vest at 10% per year for ten years and, beginning June 2006, 57.1% of the warrant shares vest at 20% per year for five years. The warrant shares are exercisable for a five-year period after vesting. Republic also granted American an IPO participation right to purchase up to 5% of Republic's common stock offered for sale in its IPO at the IPO price.

18. VALUATION AND QUALIFYING ACCOUNTS

Description	Balance at Beginning of Year		Additions Charged to Expenses		Deductions(1)			Balance at End of year
	(In thousands)
Allowance for doubtful accounts Deducted from receivables
December 31, 2001	$	592	$	334	$	(511	)	$	415
December 31, 2000		326		486		(220	)		592
December 31, 1999		154		763		(591	)		326

(1)

Uncollectible accounts written off net of recoveries.

* * * * *

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        Through and including                        , 2002 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

                          Shares

REPUBLIC AIRWAYS HOLDINGS INC.

Common Stock

P R O S P E C T U S

Merrill Lynch & Co.

Raymond James

                          , 2002

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

        The expenses payable by the Registrant in connection with the issuance and distribution of the securities being registered (other than underwriting accounts and commissions) are estimated to be as follows:

Securities and Exchange Commission registration fee		$	7,820
National Association of Securities Dealers filing fee		$	9,000
Nasdaq National Market Listing Fee		$	*
Legal fees and expenses		$	*
Blue Sky fees and expenses		$	*
Accounting fees and expenses		$	*
Transfer agent's fees and expenses		$	*
Printing and engraving fees		$	*
Miscellaneous		$	*
	Total	$	*

*

To be supplied by amendment.

Item 14. Indemnification of Directors and Officers

        Section 145(a) of the General Corporation Law of the State of Delaware provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

        Section 145(b) provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under standards similar to those discussed above, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine that despite the adjudication of liability, such person is fairly and reasonably entitled to be indemnified for such expenses which the Court shall deem proper.

        Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation may purchase and maintain insurance on behalf of a director or officer of the

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corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation would have the power to indemnify him against such liabilities under such Section 145. The Company's directors and officers are insured against losses arising from any claim against them as such for wrongful acts or omissions, subject to certain limitations.

        Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit.

        The Company's Certificate of Incorporation and Bylaws provide that the Company shall indemnify certain persons, including officers, directors and controlling persons, to the fullest extent permitted by the General Corporation Law of the State of Delaware.

Item 15. Recent Sales of Unregistered Securities

        The following is a summary of our transactions since May 1998 involving sales of our securities that were not registered under the Securities Act of 1933, as amended:

        Since May 1998, Republic Airways has issued and sold the following securities that were not registered under the Securities Act (all sales of information regarding sales of common stock give effect to the recapitalization pursuant to which each outstanding share of Republic Airways common stock was exchanged for    shares of Republic Airways common stock and each outstanding option or warrant to purchase one share of our common stock became an option or warrant to purchase    shares of our common stock):

        (1)    In May 1998, we issued a note in the aggregate principal amount of $12 million to WexAir, LLC, in connection with our purchase of Chautauqua. In May 2001, we issued in substitution of our May 1988 note a note in the aggregate principal amount of approximately $16.9 million to WexAir, LLC, an accredited investor, representing all outstanding principal and interest obligations due under our May 1998 note.

        (2)    In May 1998 we issued 2,000,000 shares of our common stock to WexAir LLC for $8,133,000, in connection with our purchase of Chautauqua.

        (3)    In June 1999, we granted an option to purchase                        shares of our common stock to Bryan K. Bedford, our chairman, chief executive officer and president, pursuant to an employment agreement, dated June 1999, between Chautauqua and Bryan K. Bedford with an exercise price equal to $            per share.

        (4)    In July 1999, we granted an option to purchase                        shares of our common stock to Robert H. Cooper, our vice president and chief financial officer, pursuant to an employment agreement, dated July 1999, between Chautauqua and Robert H. Cooper with an exercise price equal to $            per share.

        (5)    In July 1999, we granted an option to purchase            shares of our common stock to Wayne C. Heller, our vice president—flight operations, pursuant an employment agreement, dated July 1999, between Chautauqua and Wayne C. Heller with an exercise price equal to $            per share.

        (6)    In November 1999, we granted an option to purchase                        shares of our common stock to Jeffrey Jones, our vice president, planning and corporate development, pursuant to a letter

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agreement, dated November 1, 1999, between Chautauqua and Jeffrey Jones with an exercise price equal to $            per share.

        (7)    In June 2001, we issued to American Airlines, Inc. a warrant to purchase    shares of our common stock at an exercise price per share of $            in connection with our entrance into a code-sharing arrangement with them. The number of shares issuable under the warrant is subject to increase under certain circumstances.

        (8)    In June 2001, we granted American the right to purchase up to five percent of the common stock that we may offer for sale in connection with our initial public offering. American may purchase up to five percent of the common stock offered in the IPO. The purchase price American will pay for the shares will be the per share price at which the IPO shares are offered to the public. American may purchase up to a number of our shares of common stock equal to five percent of the IPO shares in a private placement contemporaneous with the IPO. The purchase price of these private placement shares will be the price at which the IPO shares are offered to the public.

        (9)    In July 2001, we granted an option to purchase                        shares of our common stock to Warren R. Wilkinson, our vice president—marketing and corporate communications, pursuant to a letter agreement, dated June 25, 2001, between Chautauqua and Warren R. Wilkinson with an exercise price equal to $                        per share.

        The sale and issuance of securities in the transactions described above were exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering, where the purchasers were sophisticated investors who represented their intention to acquire securities for investment only and not with a view to distribution and received or had access to adequate information about the Registrant or in reliance on Rule 701 promulgated under the Securities Act. Appropriate restrictive legends were affixed to the stock certificates issued in the above transactions. Similar legends were imposed in connection with any subsequent sales of any such securities. No underwriters were employed in any of the above transactions.

Item 16. Exhibits and Financial Statement Schedules

        (a) Exhibits.

Exhibit No.	Description
1.1*	Form of Underwriting Agreement.
3.1	Amended and Restated Certificate of Incorporation.
3.2*	Amended and Restated Bylaws.
5.1*	Opinion of Fulbright & Jaworski L.L.P.
10.1*	2002 Equity Incentive Plan.
10.1(a)*	Form of Option Agreement.
10.2†	Code Share and Revenue Sharing Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of March 20, 2001.
10.2(a)†	First Amendment to Code Share and Revenue Sharing Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of December 24, 2001.
10.3†	Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of March 20, 2001.

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10.4	Warrant Issuance Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of March 20, 2001.
10.5†	Air Services Agreement, between American Airlines, Inc. and Chautauqua Airlines, Inc., dated as of June 11, 2001.
10.5(a)†	Letter Agreement between AMR Corp. and Chautauqua Airlines, Inc., dated as of December 31, 2001, amending the Air Services Agreement.
10.5(b)†	Letter Agreement between AMR Corp. and Chautauqua Airlines, Inc., dated as of February 20, 2002, amending the Air Services Agreement.
10.5(c)	Warrant to Purchase Shares of Common Stock of Chautauqua Airlines, Inc., dated as of June 11, 2001.
10.6†	Service Agreement between US Airways, Inc. (previously USAir, Inc.), Inc. and Chautauqua Airlines, Inc., as amended, dated as of February 9, 1994.
10.6(a)†	Third Amendment to the Service Agreement, by and between US Airways, Inc. (previously USAir, Inc.) and Chautauqua Airlines, Inc., as amended, dated as of March 19, 1999.
10.7†	Chautauqua Jet Service Agreement, by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of March 19, 1999.
10.7(a)†	First Amendment to the Chautauqua Jet Service Agreement, by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of September 6, 2000.
10.7(b)†	Second Amendment to the Chautauqua Jet Service Agreement, by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of September 20, 2000.
10.8	Agreement between Chautauqua Airlines, Inc. and Teamsters Airline Division Local 747 representing the Pilots of Chautauqua Airlines, dated as of November 17, 1998.
10.9	Agreement between Chautauqua Airlines, Inc. and the Flight Attendants of Chautauqua Airlines, Inc. as represented by the Airline Division, International Brotherhood of Teamsters, AFL-CIO, dated as of March 9, 1999.
10.10	Agreement between Chautauqua Airlines, Inc. and the Flight Dispatchers in the employ of Chautauqua Airlines, Inc. as represented by Transport Workers Union of America, AFL-CIO, dated as of February 19, 2001.
10.11	Agreement between Chautauqua Airlines, Inc. and the Passenger and Fleet Service Employees in the service of Chautauqua Airlines, Inc. as represented by the International Brotherhood of Teamsters, dated as of December 15, 1999.
10.12*	Agreement between Chautauqua Airlines, Inc. and Solitair Corp., as amended, dated as of March 13, 2000.
10.13†	EMB-145 Purchase Agreement Number GCT-025/98 between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 9, 1998.
10.13(a)	Amendment Number 1 to Purchase Agreement GCT-028/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 12, 1998.
10.13(b)†	Amendment Number 2 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of December 2, 1998.

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10.13(c)†	Amendment Number 3 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of August 18, 1999.
10.13(d)†	Amendment Number 4 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of September 28, 1999.
10.13(e)†	Amendment Number 5 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 15, 1999.
10.13(f)	Amendment Number 6 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 15, 1999.
10.13(g)†	Amendment Number 7 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 29, 1999.
10.13(h)	Amendment Number 8 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of September 11, 2000.
10.13(i)†	Amendment Number 9 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 30, 2000.
10.13(j)†	Amendment Number 10 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of May, 2001.
10.13(k)†	Amendment Number 11 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of May, 2001.
10.13(l)†	Amendment Number 12 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of July 31, 2001.
10.13(m)†	Amendment Number 13 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 19, 2001.
10.13(n)†	Amendment Number 14 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 13, 2001.
10.14†	Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 17, 1998.
10.14(a)†	Amendment Number 1 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 13, 2000.
10.14(b)†	Amendment Number 2 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of March 24, 2000.
10.14(c)†	Amendment Number 3 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of March 28, 2000.

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10.14(d)†	Amendment Number 4 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 1, 2000.
10.14(e)†	Amendment Number 5 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 18, 2000.
10.14(f)†	Amendment Number 6 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 29, 2001.
10.14(g)†	Amendment Number 7 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of July 31, 2001.
10.14(h)†	Amendment Number 8 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 19, 2001.
10.14(i)†	Amendment Number 9 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 13, 2001.
10.15	Lease Agreement by and between McDonnell Douglas Finance Corporation and Chautauqua Airlines, Inc., dated as of August 15, 1988, for the lease of two Saab S-340A airframes with engines and propellers.
10.15(a)	Lease Supplement No. 1, dated as of August 25, 1988, by and between McDonnell Douglas Finance Corporation and Chautauqua Airlines, Inc.
10.15(b)†	Lease Supplement No. 2, dated as of August 25, 1988, by and between McDonnell Douglas Finance Corporation and Chautauqua Airlines, Inc.
10.16†	Aircraft Lease Agreement No. 1, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of February 1, 1995, for to the lease of one Saab S-340A airframe with engines, propellers and one spare engine.
10.16(a)	Lease Supplement No. 1 to Aircraft Lease Agreement No. 1, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of March 9, 1995.
10.17	Aircraft Lease Agreement No. 2, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of February 1, 1995, for to the lease of one Saab S-340A airframe with engines and propellers. There are five additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.17(a)†	Lease Supplement No. 1 to Aircraft Lease Agreement No. 2, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of March 9, 1995. There are five additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.18*	Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of December 9, 1998.
10.18(a)*	Amendment No. 1 to Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of July 27, 1999.
10.18(b)*	Amendment No. 2 to Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of August 28, 1999.

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10.18(c)*	Amendment No. 3 to Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of October 29, 2001.
10.19	Aircraft Sublease Agreement No. 8, by and between Fairbrook Leasing, Inc., as sublessor, and Chautauqua Airlines, Inc., as sublessee, dated as of March 1, 1996. There are fourteen additional Aircraft Sublease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.19(a)†	Sublease Supplement No. 1, by and between Fairbrook Leasing, Inc., as sublessor, and Chautauqua Airlines, Inc., as sublessee, dated as of March 29, 1996. There are fourteen additional Sublease Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.20†	Participation Agreement (N281SK) dated as of February 23, 2000, among Chautauqua Airlines, Inc., as Lessee, First Security Bank, National Association, as Owner Trustee and General Electric Capital Corporation, as Owner Participant. There are fifteen additional Participation Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.21	Letter Agreement (N281SK) dated as of February 23, 2000, among Chautauqua Airlines, Inc., as Lessee, First Security Bank, National Association, as Owner Trustee and General Electric Capital Corporation, as Owner Participant. There are fifteen additional Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.22	Trust Agreement (N281SK) dated as of February 23, 2000, between First Security Bank, National Association, as Owner Trustee and General Electric Capital Corporation, as Owner Participant. There are fifteen additional Trust Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.23†	Lease Agreement (N281SK) dated as of February 23, 2000, between First Security Bank, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are fifteen additional Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.23(a)	Lease Supplement No. 1 (N281SK) dated February 23, 2000, between First Security Bank, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are fifteen additional Lease Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.24	Warranty Assignment Agreement and Consent (N281SK) dated as of February 23, 2000, among Solitair Corp., First Security Bank, National Association, as Owner Trustee and Chautauqua Airlines, Inc. and consented to by Rolls-Royce Corporation. There are fifteen additional Warranty Assignment Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.25	Tax Indemnity Agreement (N281SK) dated as of February 23, 2000, between Chautauqua Airlines, Inc. and General Electric Capital Corporation. There are fifteen additional Tax Indemnity Agreements which are substantially identical in all material respects except as indicated on the exhibit.

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10.26†	Lease Agreement (N296SK), by and between Wells Fargo Bank Northwest, National Association, Owner Trustee, Lessor and Chautauqua Airlines, Inc., Lessee, dated as of December 20, 2001. There are twelve additional Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.27†	Participation Agreement (N296SK), by and among Wells Fargo Bank Northwest, National Association, not in its individual capacity (except as otherwise expressly set forth herein) but solely as Owner Trustee, Chautauqua Airlines, Inc., as Lessee, and Silvermine River Finance Two, Inc., as Owner Participant, dated as of December 20, 2001. There are twelve additional Participation Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.28	Trust Agreement (N296SK), by and between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Silvermine River Finance Two, Inc., as Owner Participant, dated as of December 20, 2001. There are twelve additional Trust Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.29	Tax Indemnity Agreement (N296SK), by and between Chautauqua Airlines, Inc. and Silvermine River Finance Two, Inc., dated as of December 20, 2001. There are twelve additional Tax Indemnity Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.30	Warranty Assignment Agreement and Consent (N296SK), by and among Solitair Corp., Wells Fargo Bank Northwest, National Association, as Owner Trustee and Chautauqua Airlines, Inc. and consented to by Rolls-Royce Corporation, dated as of December 20, 2001. There are twelve additional Warranty Assignment Agreements and Consents which are substantially identical in all material respects except as indicated on the exhibit.
10.31	Letter Agreement (N296SK), dated as of December 20, 2001, among Chautauqua Airlines, Inc., as Lessee, Wells Fargo Bank Northwest, National Association, as Owner Trustee and Silvermine River Finance Two, Inc., as Lessor. There are twelve additional Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.32	Side Letter Agreement to the Lease Agreement, by and among Chautauqua Airlines, Inc., as Lessee, Wells Fargo Bank Northwest, National Association, as Owner Trustee and Silvermine River Finance Two, Inc., as Lessor and acknowledged by Solitair Corp. There are twelve additional Side Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.33	Lease Agreement by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc. dba US Airways Express, dated as of June 17, 1994.
10.33(a)	First Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of July 17, 1998.
10.33(b)	Second Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of October 2, 1998.
10.33(c)	Third Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of November 6, 1998.

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10.33(d)	Fourth Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of September 3, 1999.
10.34	Letter Agreement by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of July 17, 2000, amending Lease Agreement for office space.
10.35†	Aircraft Lease Agreement (N260SK), dated as of June 25, 1999 between ICX Corporation, as Lessor and Chautauqua Airlines, Inc., as Lessee.
10.36†	Aircraft Lease Agreement dated as of September 2, 1999, between Finova Capital Corporation, as Lessor and Chautauqua Airlines, Inc., as Lessee. There are three additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit. †
10.37†	First Amendment to the Aircraft Lease Agreement (N261SK) dated as of January 1, 2000, between Finova Capital Corporation, as Lessor and Chautauqua Airlines, Inc., as Lessee. There are three additional First Amendments to the Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.38†	Aircraft Purchase Agreement (N288SK) dated as of June 5, 2001 among Solitair Corp., as Seller, Chautauqua Airlines, Inc., as Lessee, Mitsui & Co. (U.S.A.), Inc., as Beneficiary and Wells Fargo Bank Northwest, National Association, as Owner Trustee. There are two additional Aircraft Purchase Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.39	Trust Agreement (N288SK) dated as of June 5, 2001, between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Mitsui & Co. (U.S.A.), Inc., as Beneficiary. There are two additional Trust Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.40†	Aircraft Lease Agreement (N288SK) dated as of June 5, 2001 between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are two additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.41	Lease Supplement No. 1 (N288SK) dated June 5, 2001 between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are two additional Lease Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.42	Warranty Assignment Agreement and Consent (N288SK) dated as of June 5, 2001, between Solitair Corp. and Wells Fargo Bank Northwest, National Association, as Owner Trustee and consented to by EMBRAER—Empresa Brasileira de Aeronáutica S.A. There are two additional Warranty Assignment Agreements and Consents which are substantially identical in all material respects except as indicated on the exhibit.
10.43†	Tax Indemnity Agreement (N288SK) dated as of June 5, 2001, between Chautauqua Airlines, Inc. and Mitsui & Co. (U.S.A.), Inc. There are two additional Tax Indemnity Agreements which are substantially identical in all material respects except as indicated on the exhibit.

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10.44†	Engine Lease Common Terms Agreement, by and between General Electric Capital Corporation and Chautauqua Airlines, Inc., dated as of December 18, 2001.
10.45†	Master Engine Lease Agreement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 18, 2001, and incorporating the provisions of an Engine Lease Common Terms Agreement.
10.46	Engine Lease Supplement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 19, 2001.
10.47	Side Letter Agreement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 18, 2001.
10.48†	Engine Purchase Agreement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 18, 2001.
10.49*	Loan Agreement between Chautauqua Airlines, Inc. and Agência Especial de Financiamento Industrial (FINAME), dated as of January 17, 2001. There are three additional Loan Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.50*	Aircraft Security Agreement between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as Security Trustee, dated as of January 17, 2001. There are three additional Loan Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.51*	Security Agreement Supplement No. 1 between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as Security Trustee, dated as of January 17, 2002. There are three additional Security Agreement Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.52*	Securities Account Control Agreement among Chautauqua Airlines, Inc. as Debtor, Agência Especial de Financiamento Industrial (FINAME) as Lender, and JPMorgan Chase Bank as Securities Intermediary and Security Deposit Trustee, dated as of December 27, 2001. There are three additional Securities Account Control Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.53*	Security Deposit Agreement, among Chautauqua Airlines, Inc. as Debtor, Agência Especial de Financiamento Industrial (FINAME) as Lender, and JPMorgan Chase Bank as Securities Intermediary and Security Deposit Trustee, dated as of December 27, 2001. There are three additional Security Deposit Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.54*	Funding Agreement between Chautauqua Airlines, Inc. and Agência Especial de Financiamento Industrial (FINAME), dated as of December 27, 2001. There are three additional Funding Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.55†	Aircraft Lease Agreement (N266SK) between First Security Bank, N.A., as owner-trustee, as lessor and Chautauqua Airlines Inc., as lessee, dated as of May 18, 2000.
10.56	Interim Loan Agreement (N375SK), by and between Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Loan Agreements which are substantially identical in all material respects except as indicated on the exhibit.

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10.57	Letter Agreement (N375SK), by and between Solitair Corp., Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.58	Promissory Note (Relating to N375SK), between Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Promissory Notes which are substantially identical in all material respects except as indicated on the exhibit.
10.59	Aircraft Security Agreement (N375SK), by and between Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Promissory Notes which are substantially identical in all material respects except as indicated on theexhibit.
10.60	Partial Assignment of Purchase Agreement and Consent (N375SK), by and among Solitair Corp., Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002.
10.61	Registration Rights Agreement, by and among Republic Airways Holdings Inc., Imprimis Investors, LLC, Wexford Spectrum Fund I, L.P., Wexford Offshore Spectrum Fund, Wexford Partners Investment Co. LLC, and Wexair LLC, dated as of May 15, 1998.
10.62	Promissory Note of Republic Airways Holdings Inc. (previously Wexford III Corp.), dated as of May 14, 2001, in favor of Wex Air, LLC in the principal amount of $16,882,520.34, bearing interest at the rate of 11.5% per annum.
10.63	Employment Agreement by and between Bryan K. Bedford and Republic Airways Holdings Inc., dated as of June 25, 1999.
10.64	Employment Agreement by and between Robert H. Cooper and Republic Airways Holdings Inc., dated as of July 16, 1999.
10.65	Employment Agreement by and between Wayne Heller and Republic Airways Holdings Inc., dated as of July 16, 1999.
10.66	Port Columbus International Airport Signatory Airline Operating Agreement and Lease, dated as of January 1, 2000.
10.67	Office/Shop Space Permit by and between Signature Combs and Chautauqua Airlines, Inc., dated as of January 16, 2001.
10.68	Hangar and Office Lease by and between AMR Combs, Inc. and Chautauqua Airlines, Inc., dated as of December 22, 1998.
21.1*	Subsidiaries of Republic Airways Holdings Inc.
23.1*	Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
23.2	Consent of Deloitte and Touche LLP, Independent Auditors.
24.1	Power of Attorney (on signature page).

*

To be filed by amendment

†

A request for confidential treatment was filed for certain portions of the indicated document. Confidential portions have been omitted and filed separately with the Commission as required by Rule 406.

        All other schedules are omitted because they are not required or are not applicable or the information is included in the financial statements or notes thereto.

II-11

Item 17. Undertakings

        A. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described above in Item 14, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

        B. The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.

        C. The undersigned Registrant hereby undertakes that:

1.

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.



2.

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-12

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Indianapolis, State of Indiana on March 7, 2002.

REPUBLIC AIRWAYS HOLDINGS INC.
By:	/s/  BRYAN K. BEDFORD Name: Bryan K. Bedford Title:  Chairman of the Board, Chief Executive Officer and President

POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Bryan K. Bedford and Robert H. Cooper, or any one of them acting alone, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign (i) any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, and (ii) a Registration Statement, and any and all amendments thereto, relating to the offering covered hereby filed pursuant to Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that any said attorneys-in-fact and agents, or any substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  BRYAN K. BEDFORD Bryan K. Bedford	Chairman of the Board, Chief Executive Officer and President (principal executive officer)	March 7, 2002
/s/  ROBERT H. COOPER Robert H. Cooper	Executive Vice President and Chief Financial Officer (principal financial and accounting officer)	March 7, 2002
/s/  ARTHUR H. AMRON Arthur H. Amron	Director	March 7, 2002

II-13

/s/  CHARLES E. DAVIDSON Charles E. Davidson	Director	March 7, 2002
/s/  JOSEPH M. JACOBS Joseph M. Jacobs	Director	March 7, 2002
/s/  DOUGLAS J. LAMBERT Douglas J. Lambert	Director	March 7, 2002
/s/  JAY L. MAYMUDES Jay L. Maymudes	Director	March 7, 2002

II-14

EXHIBIT INDEX

Exhibit No.	Description
1.1*	Form of Underwriting Agreement.
3.1	Amended and Restated Certificate of Incorporation.
3.2*	Amended and Restated Bylaws.
5.1*	Opinion of Fulbright & Jaworski L.L.P.
10.1*	2002 Equity Incentive Plan.
10.1(a)*	Form of Option Agreement.
10.2†	Code Share and Revenue Sharing Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of March 20, 2001.
10.2(a)†	First Amendment to Code Share and Revenue Sharing Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of December 24, 2001.
10.3†	Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of March 20, 2001.
10.4	Warrant Issuance Agreement, by and between America West Airlines and Chautauqua Airlines, Inc., dated as of March 20, 2001.
10.5†	Air Services Agreement, between American Airlines, Inc. and Chautauqua Airlines, Inc., dated as of June 11, 2001.
10.5(a)†	Letter Agreement between AMR Corp. and Chautauqua Airlines, Inc., dated as of December 31, 2001, amending the Air Services Agreement.
10.5(b)†	Letter Agreement between AMR Corp. and Chautauqua Airlines, Inc., dated as of February 20, 2002, amending the Air Services Agreement.
10.5(c)	Warrant to Purchase Shares of Common Stock of Chautauqua Airlines, Inc., dated as of June 11, 2001.
10.6†	Service Agreement between US Airways, Inc. (previously USAir, Inc.), Inc. and Chautauqua Airlines, Inc., as amended, dated as of February 9, 1994.
10.6(a)†	Third Amendment to the Service Agreement, by and between US Airways, Inc. (previously USAir, Inc.) and Chautauqua Airlines, Inc., as amended, dated as of March 19, 1999.
10.7†	Chautauqua Jet Service Agreement, by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of March 19, 1999.
10.7(a)†	First Amendment to the Chautauqua Jet Service Agreement, by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of September 6, 2000.
10.7(b)†	Second Amendment to the Chautauqua Jet Service Agreement, by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of September 20, 2000.
10.8	Agreement between Chautauqua Airlines, Inc. and Teamsters Airline Division Local 747 representing the Pilots of Chautauqua Airlines, dated as of November 17, 1998.
10.9	Agreement between Chautauqua Airlines, Inc. and the Flight Attendants of Chautauqua Airlines, Inc. as represented by the Airline Division, International Brotherhood of Teamsters, AFL-CIO, dated as of March 9, 1999.
10.10	Agreement between Chautauqua Airlines, Inc. and the Flight Dispatchers in the employ of Chautauqua Airlines, Inc. as represented by Transport Workers Union of America, AFL-CIO, dated as of February 19, 2001.

10.11	Agreement between Chautauqua Airlines, Inc. and the Passenger and Fleet Service Employees in the service of Chautauqua Airlines, Inc. as represented by the International Brotherhood of Teamsters, dated as of December 15, 1999.
10.12*	Agreement between Chautauqua Airlines, Inc. and Solitair Corp., as amended, dated as of March 13, 2000.
10.13†	EMB-145 Purchase Agreement Number GCT-025/98 between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 9, 1998.
10.13(a)	Amendment Number 1 to Purchase Agreement GCT-028/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 12, 1998.
10.13(b)†	Amendment Number 2 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of December 2, 1998.
10.13(c)†	Amendment Number 3 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of August 18, 1999.
10.13(d)†	Amendment Number 4 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of September 28, 1999.
10.13(e)†	Amendment Number 5 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 15, 1999.
10.13(f)	Amendment Number 6 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 15, 1999.
10.13(g)†	Amendment Number 7 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 29, 1999.
10.13(h)	Amendment Number 8 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of September 11, 2000.
10.13(i)†	Amendment Number 9 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 30, 2000.
10.13(j)†	Amendment Number 10 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of May, 2001.
10.13(k)†	Amendment Number 11 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of May, 2001.
10.13(l)†	Amendment Number 12 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of July 31, 2001.
10.13(m)†	Amendment Number 13 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 19, 2001.
10.13(n)†	Amendment Number 14 to Purchase Agreement GCT-028/98, as amended, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 13, 2001.

10.14†	Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 17, 1998.
10.14(a)†	Amendment Number 1 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 13, 2000.
10.14(b)†	Amendment Number 2 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of March 24, 2000.
10.14(c)†	Amendment Number 3 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of March 28, 2000.
10.14(d)†	Amendment Number 4 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 1, 2000.
10.14(e)†	Amendment Number 5 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 18, 2000.
10.14(f)†	Amendment Number 6 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of June 29, 2001.
10.14(g)†	Amendment Number 7 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of July 31, 2001.
10.14(h)†	Amendment Number 8 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of October 19, 2001.
10.14(i)†	Amendment Number 9 to Letter Agreement GCT-026/98, between Embraer—Empresa Brasileira de Aeronáutica S.A. and Solitair Corp., dated as of November 13, 2001.
10.15	Lease Agreement by and between McDonnell Douglas Finance Corporation and Chautauqua Airlines, Inc., dated as of August 15, 1988, for the lease of two Saab S-340A airframes with engines and propellers.
10.15(a)	Lease Supplement No. 1, dated as of August 25, 1988, by and between McDonnell Douglas Finance Corporation and Chautauqua Airlines, Inc.
10.15(b)†	Lease Supplement No. 2, dated as of August 25, 1988, by and between McDonnell Douglas Finance Corporation and Chautauqua Airlines, Inc.
10.16†	Aircraft Lease Agreement No. 1, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of February 1, 1995, for to the lease of one Saab S-340A airframe with engines, propellers and one spare engine.
10.16(a)	Lease Supplement No. 1 to Aircraft Lease Agreement No. 1, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of March 9, 1995.
10.17	Aircraft Lease Agreement No. 2, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of February 1, 1995, for to the lease of one Saab S-340A airframe with engines and propellers. There are five additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.17(a)†	Lease Supplement No. 1 to Aircraft Lease Agreement No. 2, by and between Lambert Leasing, Inc. and Chautauqua Airlines, Inc., dated as of March 9, 1995. There are five additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.

10.18*	Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of December 9, 1998.
10.18(a)*	Amendment No. 1 to Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of July 27, 1999.
10.18(b)*	Amendment No. 2 to Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of August 28, 1999.
10.18(c)*	Amendment No. 3 to Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated as of October 29, 2001.
10.19	Aircraft Sublease Agreement No. 8, by and between Fairbrook Leasing, Inc., as sublessor, and Chautauqua Airlines, Inc., as sublessee, dated as of March 1, 1996. There are fourteen additional Aircraft Sublease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.19(a)†	Sublease Supplement No. 1, by and between Fairbrook Leasing, Inc., as sublessor, and Chautauqua Airlines, Inc., as sublessee, dated as of March 29, 1996. There are fourteen additional Sublease Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.20†	Participation Agreement (N281SK) dated as of February 23, 2000, among Chautauqua Airlines, Inc., as Lessee, First Security Bank, National Association, as Owner Trustee and General Electric Capital Corporation, as Owner Participant. There are fifteen additional Participation Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.21	Letter Agreement (N281SK) dated as of February 23, 2000, among Chautauqua Airlines, Inc., as Lessee, First Security Bank, National Association, as Owner Trustee and General Electric Capital Corporation, as Owner Participant. There are fifteen additional Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.22	Trust Agreement (N281SK) dated as of February 23, 2000, between First Security Bank, National Association, as Owner Trustee and General Electric Capital Corporation, as Owner Participant. There are fifteen additional Trust Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.23†	Lease Agreement (N281SK) dated as of February 23, 2000, between First Security Bank, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are fifteen additional Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.23(a)	Lease Supplement No. 1 (N281SK) dated February 23, 2000, between First Security Bank, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are fifteen additional Lease Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.24	Warranty Assignment Agreement and Consent (N281SK) dated as of February 23, 2000, among Solitair Corp., First Security Bank, National Association, as Owner Trustee and Chautauqua Airlines, Inc. and consented to by Rolls-Royce Corporation. There are fifteen additional Warranty Assignment Agreements which are substantially identical in all material respects except as indicated on the exhibit.

10.25	Tax Indemnity Agreement (N281SK) dated as of February 23, 2000, between Chautauqua Airlines, Inc. and General Electric Capital Corporation. There are fifteen additional Tax Indemnity Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.26†	Lease Agreement (N296SK), by and between Wells Fargo Bank Northwest, National Association, Owner Trustee, Lessor and Chautauqua Airlines, Inc., Lessee, dated as of December 20, 2001. There are twelve additional Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.27†	Participation Agreement (N296SK), by and among Wells Fargo Bank Northwest, National Association, not in its individual capacity (except as otherwise expressly set forth herein) but solely as Owner Trustee, Chautauqua Airlines, Inc., as Lessee, and Silvermine River Finance Two, Inc., as Owner Participant, dated as of December 20, 2001. There are twelve additional Participation Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.28	Trust Agreement (N296SK), by and between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Silvermine River Finance Two, Inc., as Owner Participant, dated as of December 20, 2001. There are twelve additional Trust Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.29	Tax Indemnity Agreement (N296SK), by and between Chautauqua Airlines, Inc. and Silvermine River Finance Two, Inc., dated as of December 20, 2001. There are twelve additional Tax Indemnity Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.30	Warranty Assignment Agreement and Consent (N296SK), by and among Solitair Corp., Wells Fargo Bank Northwest, National Association, as Owner Trustee and Chautauqua Airlines, Inc. and consented to by Rolls-Royce Corporation, dated as of December 20, 2001. There are twelve additional Warranty Assignment Agreements and Consents which are substantially identical in all material respects except as indicated on the exhibit.
10.31	Letter Agreement (N296SK), dated as of December 20, 2001, among Chautauqua Airlines, Inc., as Lessee, Wells Fargo Bank Northwest, National Association, as Owner Trustee and Silvermine River Finance Two, Inc., as Lessor. There are twelve additional Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.32	Side Letter Agreement to the Lease Agreement, by and among Chautauqua Airlines, Inc., as Lessee, Wells Fargo Bank Northwest, National Association, as Owner Trustee and Silvermine River Finance Two, Inc., as Lessor and acknowledged by Solitair Corp. There are twelve additional Side Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.33	Lease Agreement by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc. dba US Airways Express, dated as of June 17, 1994.
10.33(a)	First Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of July 17, 1998.
10.33(b)	Second Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of October 2, 1998.
10.33(c)	Third Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of November 6, 1998.

10.33(d)	Fourth Amendment to Office Lease Agreement, by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of September 3, 1999.
10.34	Letter Agreement by and between the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as of July 17, 2000, amending Lease Agreement for office space.
10.35†	Aircraft Lease Agreement (N260SK), dated as of June 25, 1999 between ICX Corporation, as Lessor and Chautauqua Airlines, Inc., as Lessee.
10.36†	Aircraft Lease Agreement dated as of September 2, 1999, between Finova Capital Corporation, as Lessor and Chautauqua Airlines, Inc., as Lessee. There are three additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit. †
10.37†	First Amendment to the Aircraft Lease Agreement (N261SK) dated as of January 1, 2000, between Finova Capital Corporation, as Lessor and Chautauqua Airlines, Inc., as Lessee. There are three additional First Amendments to the Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.38†	Aircraft Purchase Agreement (N288SK) dated as of June 5, 2001 among Solitair Corp., as Seller, Chautauqua Airlines, Inc., as Lessee, Mitsui & Co. (U.S.A.), Inc., as Beneficiary and Wells Fargo Bank Northwest, National Association, as Owner Trustee. There are two additional Aircraft Purchase Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.39	Trust Agreement (N288SK) dated as of June 5, 2001, between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Mitsui & Co. (U.S.A.), Inc., as Beneficiary. There are two additional Trust Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.40†	Aircraft Lease Agreement (N288SK) dated as of June 5, 2001 between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are two additional Aircraft Lease Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.41	Lease Supplement No. 1 (N288SK) dated June 5, 2001 between Wells Fargo Bank Northwest, National Association, as Owner Trustee and Chautauqua Airlines, Inc., as Lessee. There are two additional Lease Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.42	Warranty Assignment Agreement and Consent (N288SK) dated as of June 5, 2001, between Solitair Corp. and Wells Fargo Bank Northwest, National Association, as Owner Trustee and consented to by EMBRAER—Empresa Brasileira de Aeronáutica S.A. There are two additional Warranty Assignment Agreements and Consents which are substantially identical in all material respects except as indicated on the exhibit.
10.43†	Tax Indemnity Agreement (N288SK) dated as of June 5, 2001, between Chautauqua Airlines, Inc. and Mitsui & Co. (U.S.A.), Inc. There are two additional Tax Indemnity Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.44†	Engine Lease Common Terms Agreement, by and between General Electric Capital Corporation and Chautauqua Airlines, Inc., dated as of December 18, 2001.

10.45†	Master Engine Lease Agreement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 18, 2001, and incorporating the provisions of an Engine Lease Common Terms Agreement.
10.46	Engine Lease Supplement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 19, 2001.
10.47	Side Letter Agreement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 18, 2001.
10.48†	Engine Purchase Agreement, by and between Aviation Financial Services Inc. and Chautauqua Airlines, Inc., dated as of December 18, 2001.
10.49*	Loan Agreement between Chautauqua Airlines, Inc. and Agência Especial de Financiamento Industrial (FINAME), dated as of January 17, 2001. There are three additional Loan Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.50*	Aircraft Security Agreement between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as Security Trustee, dated as of January 17, 2001. There are three additional Loan Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.51*	Security Agreement Supplement No. 1 between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as Security Trustee, dated as of January 17, 2002. There are three additional Security Agreement Supplement No. 1 which are substantially identical in all material respects except as indicated on the exhibit.
10.52*	Securities Account Control Agreement among Chautauqua Airlines, Inc. as Debtor, Agência Especial de Financiamento Industrial (FINAME) as Lender, and JPMorgan Chase Bank as Securities Intermediary and Security Deposit Trustee, dated as of December 27, 2001. There are three additional Securities Account Control Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.53*	Security Deposit Agreement, among Chautauqua Airlines, Inc. as Debtor, Agência Especial de Financiamento Industrial (FINAME) as Lender, and JPMorgan Chase Bank as Securities Intermediary and Security Deposit Trustee, dated as of December 27, 2001. There are three additional Security Deposit Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.54*	Funding Agreement between Chautauqua Airlines, Inc. and Agência Especial de Financiamento Industrial (FINAME), dated as of December 27, 2001. There are three additional Funding Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.55†	Aircraft Lease Agreement (N266SK) between First Security Bank, N.A., as owner-trustee, as lessor and Chautauqua Airlines Inc., as lessee, dated as of May 18, 2000.
10.56	Interim Loan Agreement (N375SK), by and between Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Loan Agreements which are substantially identical in all material respects except as indicated on the exhibit.
10.57	Letter Agreement (N375SK), by and between Solitair Corp., Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Letter Agreements which are substantially identical in all material respects except as indicated on the exhibit.

10.58	Promissory Note (Relating to N375SK), between Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Promissory Notes which are substantially identical in all material respects except as indicated on the exhibit.
10.59	Aircraft Security Agreement (N375SK), by and between Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002. There are three additional Promissory Notes which are substantially identical in all material respects except as indicated on theexhibit.
10.60	Partial Assignment of Purchase Agreement and Consent (N375SK), by and among Solitair Corp., Chautauqua Airlines, Inc. and Embraer—Empresa Brasileira de Aeronáutica S.A., dated as of February 20, 2002.
10.61	Registration Rights Agreement, by and among Republic Airways Holdings Inc., Imprimis Investors, LLC, Wexford Spectrum Fund I, L.P., Wexford Offshore Spectrum Fund, Wexford Partners Investment Co. LLC, and Wexair LLC, dated as of May 15, 1998.
10.62	Promissory Note of Republic Airways Holdings Inc. (previously Wexford III Corp.), dated as of May 14, 2001, in favor of Wex Air, LLC in the principal amount of $16,882,520.34, bearing interest at the rate of 11.5% per annum.
10.63	Employment Agreement by and between Bryan K. Bedford and Republic Airways Holdings Inc., dated as of June 25, 1999.
10.64	Employment Agreement by and between Robert H. Cooper and Republic Airways Holdings Inc., dated as of July 16, 1999.
10.65	Employment Agreement by and between Wayne Heller and Republic Airways Holdings Inc., dated as of July 16, 1999.
10.66	Port Columbus International Airport Signatory Airline Operating Agreement and Lease, dated as of January 1, 2000.
10.67	Office/Shop Space Permit by and between Signature Combs and Chautauqua Airlines, Inc., dated as of January 16, 2001.
10.68	Hangar and Office Lease by and between AMR Combs, Inc. and Chautauqua Airlines, Inc., dated as of December 22, 1998.
21.1*	Subsidiaries of Republic Airways Holdings Inc.
23.1*	Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
23.2	Consent of Deloitte and Touche LLP, Independent Auditors.
24.1	Power of Attorney (on signature page).

*

To be filed by amendment

†

A request for confidential treatment was filed for certain portions of the indicated document. Confidential portions have been omitted and filed separately with the Commission as required by Rule 406.

QuickLinks

TABLE OF CONTENTS
PROSPECTUS SUMMARY
Our Company
The Offering
Summary Consolidated Financial Information
RISK FACTORS
Risks Related to Our Operations
Risks Associated With The Airline Industry
Risks Related To Our Common Stock
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REGIONAL AIRLINE INDUSTRY OVERVIEW
BUSINESS
MANAGEMENT
RELATED PARTY TRANSACTIONS
PRINCIPAL STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
SHARES ELIGIBLE FOR FUTURE SALE
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS REPUBLIC AIRWAYS HOLDINGS INC.
INDEPENDENT AUDITORS' REPORT
REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)
REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (In thousands)
REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
REPUBLIC AIRWAYS HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 1999, 2000 and 2001 Dollars in thousands, except share and per share amounts
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
POWER OF ATTORNEY
EXHIBIT INDEX

EX-3.1

                                                                     EXHIBIT 3.1

                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                         REPUBLIC AIRWAYS HOLDINGS INC.


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

            The undersigned hereby certifies that:

      ONE: He is the duly elected and acting Executive Vice President and
Secretary of said corporation.

      TWO: That the name of said corporation is Republic Airways Holdings Inc.
Said corporation was originally incorporated pursuant to the General Corporation
Law on March 20, 1996, under the name Wexford III Corp. and changed its name to
Wexford Air Holdings Inc. on November 8, 1999.

      THREE: The Certificate of Incorporation of said corporation shall be
amended and restated to read in full as follows:

            FIRST: The name of the corporation is REPUBLIC AIRWAYS HOLDINGS INC.

            SECOND: The address of the registered office of this corporation in
      the State of Delaware is Corporation Trust Center, 1209 Orange Street,
      Wilmington, Delaware 19801, County of New Castle. The name of its
      registered agent at such address is The Corporation Trust Company.

            THIRD: The purpose of the corporation is to engage in any lawful act
      or activity for which a corporation may be organized under the General
      Corporation Law of Delaware as set forth in Title 8 of the Delaware Code
      1953, as amended (the "GCL").

            FOURTH: The total number of shares of stock which the corporation
      shall have the authority to issue is Eighty Million (80,000,000) shares,
      of which Seventy Five Million (75,000,000) shares shall be Common Stock
      and Five Million (5,000,000) shares shall be Preferred Stock, with both
      Common and Preferred Stock having a par value of $.001 per share.

                  A. PREFERRED STOCK. The Board of Directors is expressly
            authorized to provide for the issue from time to time of all or any
            shares of the Preferred Stock, in one or more series, and to fix for
            each such series such voting powers, full or limited, and such
            designations, preferences and relative, participating, optional or
            other special rights and such qualifications, limitations or
            restrictions thereof as shall be stated and expressed in the
            resolution or resolutions adopted by the Board of Directors
            providing for the issue of such series (a "Preferred Stock


                                       1


            Designation") and as may be permitted by the GCL. The number of
            authorized shares of Preferred Stock may be increased or decreased
            (but not below the number of shares thereof then outstanding) by the
            affirmative vote of the holders of a majority of the voting power of
            all the then outstanding shares of the capital stock of the
            Corporation entitled to vote generally in the election of directors,
            voting together as a single class, without a separate vote of the
            holders of the Preferred Stock, or any series thereof, unless a vote
            of any such holders is required pursuant to any Preferred Stock
            Designation.

                  B. COMMON STOCK. Except as otherwise required by law or as
            otherwise provided in any Preferred Stock Designation, the holders
            of the Common Stock shall exclusively possess all voting power and
            each share of Common Stock shall have one vote.

            FIFTH: The corporation is to have perpetual existence.

            SIXTH: In furtherance and not in limitation of the powers conferred
      by statute, the Board of Directors is expressly authorized to make, alter
      or repeal the by-laws of the corporation. Notwithstanding anything in this
      Certificate of Incorporation to the contrary, this paragraph and
      paragraphs ELEVENTH, TWELFTH and THIRTEENTH of this Certificate of
      Incorporation may not be repealed or amended in any respect, and no
      provision inconsistent therewith may be adopted by the stockholders unless
      such action is approved by the affirmative vote of the holders of
      sixty-six and two-thirds percent (662/3%) of the outstanding shares of all
      classes and series of the corporation entitled to vote generally in the
      election of the corporation's directors.

            SEVENTH: Meetings of stockholders may be held within or without the
      State of Delaware, as the by-laws may provide. The books of the
      corporation may be kept (subject to any provision of the GCL) outside the
      State of Delaware at such place or places as may be designated from time
      to time by the Board of Directors or in the by-laws of the corporation.
      Election of directors need not be by written ballot unless the by-laws of
      the corporation shall so provide.

            EIGHTH: A. Except as the GCL may otherwise require, any vacancies in
      the Board of Directors for any reason, including unfilled vacancies
      resulting from the removal of directors for cause, and newly created
      directorships, may be filled by the vote of a majority of the remaining
      directors then in office, although less than a quorum, or by the sole
      remaining director. All directors shall hold office until the expiration
      of their respective terms of office and until their successors shall have
      been elected and qualified.

            B. Notwithstanding anything contained in this Certificate of
      Incorporation or the By-Laws of the Corporation to the contrary, the
      affirmative vote of the holders of at least 66 2/3% of the outstanding
      shares of capital stock of the Corporation entitled to vote generally in
      the election of directors, voting


                                       2


      together as a single class, shall be required to alter, change, amend,
      repeal, or adopt any provision inconsistent with, this Article EIGHTH:

            NINTH: Whenever a compromise or arrangement is proposed between this
      corporation and its creditors or any class of them and/or between this
      corporation and its stockholders or any class of them, any court of
      equitable jurisdiction within the State of Delaware may, on the
      application in a summary way of this corporation or of any creditor or
      stockholder thereof or on the application of any receiver or receivers
      appointed for this corporation under the provisions of Section 291 of the
      GCL or on the application of trustees in dissolution or of any receiver or
      receivers appointed for this corporation under the provisions of Section
      279 of the GCL, order a meeting of the creditors or class of creditors,
      and/or of the stockholders or class of stockholders of this corporation,
      as the case may be, to be summoned in such manner as the said court
      directs. If a majority in number representing three-fourths in value of
      the creditors or class of creditors, and/or of the stockholders or class
      of stockholders of this corporation, as the case may be, agree to any
      compromise or arrangement and to any reorganization of this corporation as
      consequence of such compromise or arrangement, the said compromise or
      arrangement and the said reorganization shall, if sanctioned by the court
      to which the said application has been made, be binding on all the
      creditors or class of creditors, and/or on all the stockholders or class
      of stockholders, of this corporation, as the case may be, and also on this
      corporation.

            TENTH: The corporation reserves the right to amend, alter, change or
      repeal any provision contained in this Certificate of Incorporation, in
      the manner now or thereafter prescribed by statute, and all rights
      conferred on the stockholders herein are granted subject to this
      reservation.

            ELEVENTH. The corporation shall indemnify each person who is or was
      a director, officer, employee or agent of the corporation, or is or was
      serving at the request of the corporation as a director, officer, employee
      or agent of another corporation, partnership, joint venture, trust or
      other enterprise, or is or was a director, officer, employee or agent of a
      foreign or domestic corporation that was a predecessor corporation of this
      corporation or another enterprise at the request of the predecessor
      corporation to the fullest extent permitted by Section 145 of the GCL, as
      amended. The indemnification provided for herein shall not be deemed
      exclusive of any other rights to which those indemnified may be entitled
      under any bylaw, agreement, vote of stockholders or disinterested
      directors or otherwise, both as to action in an official capacity and as
      to action in another capacity while holding such office, and such
      indemnification shall continue as to a person who has ceased to be such a
      person and shall inure to the benefit of the heirs, executors and
      administrators of such a person.

            Any repeal or modification of the foregoing paragraph by the
      stockholders of the corporation shall be prospective only, and shall not
      adversely affect any


                                       3


      right or protection of a director, officer, agent, or other person
      existing at the time of such repeal or modification.

            TWELFTH: A director of this corporation shall not be personally
      liable to the corporation or its stockholders for monetary damages for the
      breach of any fiduciary duty as a director, except (i) for any breach of
      the director's duty of loyalty to the corporation or its stockholders,
      (ii) for acts or omissions not in good faith or that involve intentional
      misconduct or a knowing violation of law, (iii) under Section 174 of the
      GCL, as the same exists or hereafter may be amended, or (iv) for any
      transaction from which the director derived an improper personal benefit.
      If the GCL is amended after the date of Incorporation of the corporation
      to authorize corporate action further eliminating or limiting the personal
      liability of directors, then the liability of a director of the
      corporation shall be eliminated or limited to the fullest extent permitted
      by the GCL, as so amended.

            Any repeal or modification of the foregoing paragraph by the
      stockholders of the corporation shall be prospective only, and shall not
      adversely affect any limitation on the personal liability of a director of
      the corporation existing at the time of such repeal or modification.

            THIRTEENTH: A. If Wexford Capital LLC or any of its Affiliates
      (collectively, "Parent") or any director or officer of the corporation who
      is a director, officer or employee of Parent acquires knowledge of a
      potential transaction or matter which may be a Competitive Opportunity or
      otherwise is then exploiting or investigating the exploitation of any
      Competitive Opportunity, the corporation shall have no interest in, and no
      expectation that, such Competitive Opportunity be offered to it, any such
      interest or expectation being hereby renounced so that Parent and such
      individuals (1) shall (i) have no duty to communicate or present such
      Competitive Opportunity to the corporation and (ii) have the right to hold
      any such Competitive Opportunity for Parent's (and its officers',
      directors', agents', stockholders', members', partners', Affiliates' or
      Subsidiaries') own account and benefit; or to recommend, assign or
      otherwise transfer or deal in such Competitive Opportunity to Persons
      other than the corporation or any Affiliate of the corporation and (2)
      cannot be, and shall not be, liable to the corporation or its stockholders
      for breach of any fiduciary duty as a stockholder, officer or director of
      the corporation or otherwise by reason of the fact that Parent or any such
      individual pursues or acquires such Competitive Opportunity for Parent,
      directs, sells, assigns or otherwise transfers or deals in such
      Competitive Opportunity to another Person, or does not communicate
      information regarding such Competitive Opportunity to the corporation.

            B. For purposes of this Article, capitalized terms shall have the
      following meanings:

            (i) "Affiliate" means, as applied to a person, any other person
      directly or indirectly controlling, controlled by, or under common control
      with, that person. For purposes of this definition "control" (including,
      with correlative meanings,


                                       4


      the terms "controlling," "controlled by" and "under common control with"),
      as applied to any Person, means the possession, directly or indirectly, of
      the power to direct or cause the direction of the management and policies
      of that person, whether through the ownership of voting securities, by
      contract or otherwise.

            (ii) "Capital Stock" of any person means any and all shares,
      interests, rights to purchase, options, warrants, participation or other
      equivalents of or interest in (however designated) the equity of such
      person, including any preferred stock.

            (iii) "Competitive Opportunity" means an investment or business
      opportunity or prospective economic or competitive advantage in which the
      corporation could have an interest or expectancy.

            (iv) "Subsidiary" of any person means any other person of which more
      than fifty percent (50%) of the total Voting Power thereof or the Capital
      Stock thereof is at the time owned or controlled, directly or indirectly,
      by the first person and/or one or more of its Subsidiaries.

            (v) "Voting Power" means, as of the date of determination, the
      voting power in the general election of directors, managers or trustees,
      as applicable.

            FOURTEENTH: The corporation elects not to be governed by Section 203
      of the GCL.

            FIFTEENTH:

                         FEDERAL AVIATION ACT COMPLIANCE

      Section 1. DEFINITIONS. The following definitions shall apply for purposes
      of this Article FIFTEENTH:

            (a)   "Act" shall mean the Federal Aviation Act of 1958, recodified
                  at Title 49 United States Code (Transportation), as amended
                  from time to time.

            (b)   "Excess Shares" shall have the meaning set forth in Section 4
                  of this Article FIFTEENTH.

            (c)   "Foreign Stock" shall mean the Voting Stock registered in the
                  Foreign Stock Record.

            (d)   "Foreign Stock Record" shall have the meaning set forth in
                  Section 3 of this Article FIFTEENTH.

            (e)   "Non-Citizen" shall mean any person or entity that is not a
                  "citizen of the United States" as defined in 49 U.S.C. ss.
                  40102(a)(15), as amended, or in any successor provision,
                  including any agent, trustee or representative of a
                  non-citizen.


                                       5


            (f)   "Own or Control" or "Owned or Controlled", when used in
                  reference to Voting Stock, shall mean (i) ownership of record,
                  (ii) beneficial ownership, or (iii) the power to direct, by
                  agreement, agency or in any other manner, the voting of Voting
                  Stock. Any determination by the Board of Directors as to
                  whether Voting Stock is Owned or Controlled by a Non-Citizen
                  shall be final.

            (g)   "Permitted Foreign Ownership" shall mean the number of shares
                  of Voting Stock in the aggregate that may be owned or
                  controlled by Non-Citizens pursuant to the Act or pursuant to
                  any United States statutory or United States Department of
                  Transportation regulatory or interpretive restrictions on
                  foreign ownership and control of the corporation, such that
                  the corporation and any of its subsidiaries may or still be
                  deemed "a citizen of the United States" as defined in 49
                  U.S.C. ss. 40102(a)(15), as amended, or in any successor
                  provision.

            (h)   "Redemption Price" shall have the meaning set forth in Section
                  5 of this Article FIFTEENTH.

            (i)   "Voting Stock" shall mean the outstanding shares of capital
                  stock of the corporation entitled to vote, including any such
                  shares that would be entitled to vote but for the operations
                  of this Article FIFTEENTH.

      Section 2. POLICY. It is the policy of the corporation that, consistent
      with the requirements of the Act or of any other United States statutory
      or United States Department of Transportation regulatory or interpretive
      restrictions on foreign ownership and control of the corporation,
      Non-Citizens shall not Own or Control more than the Permitted Foreign
      Ownership and, if Non-Citizens nonetheless at any time Own or Control more
      than the Permitted Foreign Ownership, the voting rights of the shares of
      Foreign Stock in excess of the Permitted Foreign Ownership shall be
      suspended in accordance with Section 4 of this Article FIFTEENTH below.

      Section 3.  FOREIGN STOCK RECORD.

            (a)   DESCRIPTION. The corporation or any transfer agent designated
                  by it shall maintain a separate stock record (the "Foreign
                  Stock Record") for purposes of registering Voting Stock Owned
                  or Controlled by Non-Citizens. The Foreign Stock Record shall
                  include (a) the name and nationality of each such Non-Citizen,
                  (b) the number of Voting Stock Owned or Controlled by such
                  Non-Citizen, and (c) the date of registration of such shares
                  in the Foreign Stock Record.

            (b)   REGISTRATION. The corporation shall register in the Foreign
                  Stock Record shares of Voting Stock that the corporation
                  determines are Owned or Controlled by one or more
                  Non-Citizens. Such shares shall be registered in the Foreign
                  Stock Record in chronological order based


                                       6


                  on the date and time of the written request for determination
                  by the corporation of the status of any such Voting Stock. The
                  corporation may rely on such certifications or other evidence
                  it deems appropriate in determining the citizenship status of
                  any person and, by way of illustration but not limitation, the
                  corporation may presume that Voting Stock is Owned or
                  Controlled by a Non-Citizen and may register such Voting Stock
                  in the Foreign Stock Record if the registered holder thereof
                  has an address located outside the United States.

            (c)   CONFIRMATION OF CITIZENSHIP. The corporation from time to time
                  may require the holder of record of any Voting Stock to
                  confirm the citizenship status of the person or persons who
                  Own or Control that Voting Stock by executing such
                  certificates and providing such other evidence that the
                  corporation determines is reasonably necessary for that
                  purpose. If the holder of record of shares of Voting Stock
                  fails to confirm or provide evidence to the satisfaction of
                  the corporation that such shares are not Owned or Controlled
                  by one or more Non-Citizens, the corporation shall be
                  entitled, but not obligated, to register those shares in the
                  Foreign Stock Record.

      Section 4.  SUSPENSION OF VOTING RIGHTS.

            (a)   SUSPENSION. If at any time the number of shares of Foreign
                  Stock exceeds the Permitted Foreign Ownership, the voting
                  rights of shares of Foreign Stock shall automatically be
                  suspended, in the reverse chronological order of the dates and
                  times of registry of such shares in the Foreign Stock Record,
                  until the voting rights of a sufficient number thereof shall
                  have been suspended so that the number of shares of Foreign
                  Stock that continues to have voting rights equals the greatest
                  whole number that is less than or equal to the Permitted
                  Foreign Ownership. The particular shares of Foreign Stock that
                  shall have their voting rights suspended are referred to
                  collectively as the "Excess Shares".

            (b)   REINSTATEMENT: If, while the voting rights of any shares of
                  Foreign Stock are suspended, the corporation determines that
                  the number of shares of Foreign Stock that have voting rights
                  is less than the Permitted Foreign Ownership, voting rights
                  shall automatically be reinstated for shares of Foreign Stock
                  as to which voting rights have been suspended, in the reverse
                  order in which the voting rights thereof were suspended under
                  Section 4(a) above, until the maximum number of shares of
                  Foreign Stock, not exceeding the Permitted Foreign Ownership,
                  shall have voting rights. Voting rights also shall
                  automatically be reinstated for any shares of Foreign Stock
                  that have suspended voting rights if such shares are
                  transferred to a person or entity that is not a Non-Citizen.


                                       7


      Section 5. REDEMPTION OF EXCESS SHARES. To the extent necessary for the
      corporation to comply with any present or future registration, licensing
      or other provisions of the Act, or regulations promulgated thereunder, the
      corporation shall have the power, but not the obligation, to redeem Excess
      Shares out of funds legally available therefor, subject to the following
      terms and conditions:

            (a)   The per share redemption price (the "Redemption Price") to be
                  paid for the Excess Shares to be redeemed shall be the average
                  closing sales price of such shares on the NASDAQ National
                  Market System Composite Tape during the 10 trading days
                  immediately prior to the date the notice of redemption is
                  given; or if such shares are not then traded on the NASDAQ
                  National Market System, then the closing sales prices of such
                  shares on any other national securities exchange on which such
                  shares are then listed; or if such shares are not then listed
                  on any national securities exchange, then the closing sales
                  prices as quoted in the NASDAQ National Market System; of if
                  such shares are not then so quoted, then the mean between the
                  representative bid and ask prices as quoted by NASDAQ or
                  another generally recognized reporting system, on each of such
                  10 trading days.

            (b)   The Redemption Price may be paid in cash or by delivery of a
                  promissory note of the corporation, at the election of the
                  corporation. Any such promissory note shall have a maturity of
                  not more than ten years from the date of issuance and shall
                  bear interest at the rate equal to the then current coupon
                  rate of a 10-year treasury note as such rate is published in
                  the Wall Street Journal or comparable publication.

            (c)   A notice of redemption shall be given by first class mail,
                  postage prepaid, mailed not less than 15 calendar days prior
                  to the redemption date to each holder of record of the shares
                  to be redeemed, at such holder's address as the same appears
                  on the stock register of the corporation. Each such notice
                  shall state (i) the redemption date, (ii) the number of shares
                  of Voting Stock to be redeemed from such holder, (iii) the
                  Redemption Price and the manner of payment thereof, (iv) the
                  place where certificates for such shares are to be surrendered
                  for payment of the Redemption Price, and (v) that dividends on
                  the shares to be redeemed will cease to accrue on such
                  redemption date.

            (d)   From and after the redemption date, dividends, if any, on the
                  shares of Voting Stock called for redemption shall cease to
                  accrue and such shares shall no longer be deemed to be
                  outstanding and all rights of the holders thereof as
                  stockholders of the corporation (except the right to receive
                  from the corporation the Redemption Price) shall cease. Upon
                  surrender of the certificates for any shares so redeemed in
                  accordance with the requirements of the notice of redemption
                  (properly endorsed or assigned for transfer if the Board of
                  Directors shall so require and the notice shall so state),
                  such shares shall be redeemed by the


                                       8


                  corporation at the Redemption Price. In case fewer than all
                  the shares represented by any such certificate are redeemed, a
                  new certificate shall be issued representing the shares not
                  redeemed without cost to the holder thereof.

      Section 6. ADMINISTRATIVE MATTERS AND EFFECTIVENESS.

            (a)   BY-LAWS. The Amended and Restated By-Laws of the corporation
                  may be amended by majority vote of the Board of Directors to
                  include appropriate provisions to effectuate the requirements
                  of this Article FIFTEENTH.

            (b)   QUORUM. Except as otherwise provided or required by law, the
                  presence, in person or by proxy, of the holders of record of
                  shares of Voting Stock entitling the holders thereof to cast a
                  majority of the voting power of all shares of Voting Stock
                  (after giving effect to the reduction of voting rights
                  prescribed in Section 4 of this Article FIFTEENTH) shall
                  constitute a quorum at all meetings of stockholders of the
                  corporation, and any quorum requirement or any requirement for
                  stockholder approval shall be determined after giving effect
                  to the reduction in voting rights prescribed in Section 4 of
                  this Article FIFTEENTH.

            (c)   SEVERABILITY. If any section or lesser provision of this
                  Article FIFTEENTH is determined to be invalid, void, illegal
                  or unenforceable, then the remaining sections and provisions
                  of this Article FIFTEENTH shall continue to be valid and
                  enforceable and in no way be affected, impaired or
                  invalidated.

            (d)   EFFECTIVENESS. The limitations on the rights of the holders of
                  shares of Voting Stock and the other limitations and rights of
                  the corporation provided for in this Article FIFTEENTH shall
                  be effective notwithstanding any other provision of this
                  Certificate of Incorporation but only for so long as the
                  corporation or any subsidiary (i) is subject to any
                  restriction on the ownership of Voting Stock by Non-Citizens
                  or (ii) if not then subject to any restriction on the
                  ownership of Voting Stock by Non-Citizens, intends to
                  reinstate any license, franchise or operating certificate or
                  authority lost as a result of a restriction on the ownership
                  of Voting Stock by Non-Citizens within a reasonable time after
                  ceasing to hold the same.

      FOUR: The foregoing amendment and restatement was approved by the holders
of the requisite number of shares of said corporation in accordance with Section
228 of the General Corporation Law.

      FIVE: That said amendment and restatement was duly adopted in accordance
with the provisions of Sections 228, 242 and 245 of the General Corporation Law.


                                       9


            IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed by the Vice President and Secretary of this
corporation on this 2nd day of March, 2002.

                                        /s/ Robert H. Cooper
                                       --------------------------------------
                                       Robert H. Cooper
                                       Executive Vice President and Secretary





                                       10

EX-10.2

                                                                    EXHIBIT 10.2

                    CODE SHARE AND REVENUE SHARING AGREEMENT

This CODE SHARE AND REVENUE SHARING AGREEMENT (the "Agreement") is made and
entered into to be effective as of March 20, 2001 (the "Effective Date"), by and
between AMERICA WEST AIRLINES, INC., a Delaware corporation ("AWA"), and
CHAUTAUQUA AIRLINES, INC., a New York corporation ("CAI").

                                 R E C I T A L S

A. AWA holds a certificate of public convenience and necessity issued by the
Department of Transportation ("DOT") authorizing AWA to engage in the interstate
and oversees air transportation of persons, property and mail between all points
in the United States, its territories and possessions.

B. CAI holds a certificate of public convenience and necessity issued by the DOT
authorizing CAI to engage in the interstate transportation of persons, property
and mail in the United States, its territories and possessions.

C. AWA owns various trades marks, services marks and logos, including "America
West Airlines," "America West Express," and distinctive exterior color decor and
patterns on its aircraft, hereinafter referred to individually and collectively
as the "AWA Service Marks".

D. AWA and CAI desire to provide scheduled air transportation services as
America West Express using a Columbus, Ohio hub and to share in the revenue and
costs of such services as provided in this Agreement.

NOW, THEREFORE, in consideration of the promises, covenants, representations and
warranties hereinafter set forth, and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, AWA and CAI agree as
set forth below.

                                A G R E E M E N T

1.       RIGHTS, RESPONSIBILITIES AND OBLIGATIONS OF CAI:

         1.1      FLIGHT SERVICE. Commencing upon the date the first Aircraft is
                  placed into Flight Services pursuant to Section 1.2 (the
                  "Commencement Date"), and continuing during the term of this
                  Agreement, CAI shall operate America West Express air
                  transportation services (the "Flight Services"), using the
                  fleet of aircraft as established pursuant to Section 1.2, to
                  and from Columbus, Ohio as the hub city ("CMH") for the Flight
                  Services, and based upon the schedule established from time to
                  time by AWA (the "Schedule") in written notice to CAI (a
                  "Schedule Notice"). AWA, to the extent reasonably practicable,
                  shall provide CAI with a Schedule Notice at least 60 days
                  prior to any Schedule change. For purposes of this Agreement,
                  "Flights" means flights operated pursuant to the Schedule. AWA
                  may change the Schedule by issuance of a Schedule Notice at
                  any time. When creating a Schedule,



                  AWA shall: (i) take into account the number of Aircraft in the
                  Fleet and CAI's aircraft maintenance requirements; (ii) create
                  a Schedule which will permit CAI to schedule flight crews in a
                  manner consistent with industry operational practices; (iii)
                  schedule block times based on AWA's internal block time
                  policy; (iv) provide for a minimum of [*] turn time in CMH and
                  [*] turn time in other cities; (v) provide for at least [*] of
                  the Aircraft to remain overnight in CMH for a minimum of [*]
                  hours; (vi) provide for Aircraft to remain overnight at least
                  [*] (vii) take into account airport facilities available for
                  Aircraft handling; (viii) provide for the following Aircraft
                  utilization: (a) an average of not less than [*] block hours
                  per day per Aircraft in the Fleet during each calendar month;
                  (b) an average of [*] Available Seat Miles nor more than [*]
                  Available Seat Miles per day per Aircraft in the Fleet during
                  each calendar month; and (c) an average of not less than [*]
                  departures per day per Aircraft in the Fleet during each
                  calendar month; and (ix) provide for scheduled heavy
                  maintenance on Aircraft as required from time to time. CAI, to
                  the extent reasonably practicable, shall implement all changes
                  in the Schedule contained in a Schedule Notice in accordance
                  with AWA's scheduling requirements but in no event greater
                  than [*] after receipt of a Schedule Notice. CAI or any of
                  its affiliates shall not provide any flight service from
                  Columbus for any other airline utilizing Columbus, Ohio as a
                  hub city. Except as provided in the previous sentence, CAI may
                  provide flight services for other airlines. "Available Seat
                  Miles" means one seat traveling one statute mile.

                  CAI acknowledges that AWA may Schedule Flights using ERJs in
                  and out of the Phoenix, Arizona Sky Harbor International
                  airport. Prior to CAI commencing such Flights, CAI and AWA, in
                  good faith based on prevailing market costs and expenses,
                  [*] to take into consideration the additional and increased
                  cost of operating such Flights in such location. Upon agreeing
                  to the Guaranteed Costs adjustment, AWA and CAI shall execute
                  and attach an addendum to this Agreement supplementing the
                  Guaranteed Costs Schedule. In addition to paying the increased
                  or additional Guaranteed Costs, [*] in connection with
                  establishing Flight Services out of the Phoenix, Arizona Sky
                  Harbor International Airport (the "Transition Costs"). CAI,
                  within 60 days after commencement of such Flights, shall
                  submit to AWA a statement for the Transition Costs together
                  with backup documentation of such Transition Costs (the
                  "Transition Statement"). AWA shall reimburse the Transition
                  Costs within 30 days after receipt of the Transition
                  Statement.

         1.2      FLEET.

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                                       2


                  1.2.1    INITIAL ERJ FLEET. CAI shall provide the Flight
                           Services using [*] (collectively, the "Fleet" and
                           individually, each an "Aircraft"). [*] shall be
                           placed into Flight Services by CAI during or before
                           each of the following calendar months: August 2001,
                           September, 2001, October 2001 (2 Aircraft), January
                           2002, February 2002, March 2002, April 2002, May
                           2002, June 2002, July 2002, and August 2002 for a
                           total of 12 Aircraft (collectively, the "Firm
                           Aircraft"). CAI shall provide AWA with at least 90
                           days' prior written notice of the calendar week in
                           which each of the Firm Aircraft will be placed into
                           Flight Services under this Agreement (each, a
                           "Scheduled Delivery Week"). If an Aircraft is not a
                           "new" Aircraft from the manufacturer, then the
                           Aircraft shall not be older than [*] from new
                           manufacturer delivery and the interior and exterior
                           shall be decorated, painted and reconfigured to AWA
                           specifications at CAI's sole cost and expense prior
                           to the delivery date.

                  1.2.2    ERJ FLEET EXPANSION. AWA shall have the options to
                           expand the Fleet by [*] to acquire the Aircraft in
                           the years pursuant to that certain agreement with the
                           Aircraft manufacturer referenced on Exhibit D,
                           attached hereto. On or before each Option Exercise
                           Date (set forth in the chart below), AWA, by written
                           notice to CAI, shall have the option to require CAI
                           to increase the Fleet by the addition  of two new
                           Aircraft in the applicable In Service Months (each,
                           a "Fleet Expansion Option"):




                                    Option Exercise Date          in Service Months
                                    --------------------          -----------------
                                        [*]                         [*]




                                    [*] The two Aircraft that are the subject
                                    of each Fleet Expansion Option shall be
                                    added to the Fleet by CAI one each in each
                                    of the applicable In Service Months.

                           (c)      CAI shall provide AWA with at least 90 days'
                                    prior written notice of the Scheduled
                                    Delivery Week for each Option Aircraft that
                                    is placed into Flight Service pursuant to
                                    this Section 1.2.2.

                  1.2.3    [*]

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                                       3


                           Aircraft after the 10th anniversary of the date such
                           Aircraft is placed into Flight Services (each, a
                           [*]). In addition, AWA may require CAI to [*] (i) any
                           [*] after the sixth anniversary of the Commencement
                           Date, and (ii) any [*] after the eighth anniversary
                           of the Commencement Date, by providing CAI with an
                           [*] no less than 365 days prior to the [*] date
                           (each, an [*]). CAI shall remove the applicable
                           Aircraft from providing Flight Services on the date
                           set forth in the [*] (the [*]). From and after the
                           [*], the Aircraft shall no longer be used to provide
                           Flight Services and AWA shall have no further
                           payment obligations under this Agreement for such
                           Aircraft. [*]

                  1.2.4    SPARE AIRCRAFT. The [*] Aircraft placed into Flight
                           Services under this Agreement shall be a spare
                           Aircraft under this Agreement. The spare Aircraft
                           shall be an Aircraft providing Flight Services for
                           all purposes under this Agreement, including, without
                           limitation, payments under Section 6.1.7 and 6.2.

                  1.2.5    FAILED DELIVERY. Notwithstanding anything in this
                           Agreement to the contrary, CAI shall not be liable to
                           AWA for the failure to deliver any Aircraft during a
                           Scheduled Delivery Week (a "FAILED DELIVERY") if: (i)
                           the failure to deliver is the result of the
                           manufacturer's failure to deliver the Aircraft to CAI
                           as a result events, facts or circumstances beyond the
                           control of CAI and not directly or indirectly
                           attributable to or arising or resulting from the acts
                           or omissions of CAI, its agents, employees or
                           contractors; (ii) CAI uses commercially reasonable
                           efforts to acquire a replacement aircraft for the
                           Aircraft that was not delivered; and (iii) [*]
                           (an "EXCUSED FAILURE"). In the event of a Failed
                           Delivery, CAI shall use commercially reasonable
                           efforts to obtain the applicable Aircraft as soon as
                           practicable after the Scheduled Delivery Week. If the
                           Aircraft that is the subject of a Failed Delivery is
                           not delivered within [*] after the Scheduled Delivery
                           Week, then AWA shall have the option to elect not to
                           include such Aircraft under this Agreement by
                           providing written notice to CAI at any time prior to
                           the actual delivery of such Aircraft. If a Failed
                           Delivery is not the result of an Excused Failure,
                           then AWA shall have all rights and remedies under
                           this Agreement for such Failed Delivery.

         1.3      PERSONNEL; TRAINING. CAI shall employ and maintain a
                  sufficient number of competent, trained personnel, including,
                  but not limited to [*]. In addition, CAI shall employ and

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                                       4


                  maintain a commercially reasonable number of [*] area based
                  on the Flight Services to be provided pursuant to this
                  Agreement. CAI shall cause all CAI personnel providing Flight
                  Services to wear uniforms approved by AWA, which approval
                  shall not be unreasonably withheld, and shall comply with all
                  appearance guidelines required of all AWA personnel.

                  CAI shall provide initial training, recurrent training and
                  customer service training to personnel reasonably identified
                  by AWA at programs approved by AWA. AWA shall provide
                  applicable training materials. [*] all training expenses
                  including [*] travel expenses. In the event AWA becomes a
                  hazardous materials carrier, CAI, at AWA's expense, shall
                  conduct all hazardous materials training required by AWA or
                  AWA's other code share partners.

         1.4      SERVICE QUALITY AND LEVEL. All Flight Services shall be
                  provided by CAI at a service quality and level of service
                  (other than first class service) equal to or greater than the
                  service quality and level of service provided by AWA to the
                  extent applicable to the type of Aircraft used to provide the
                  Flight Services.

         1.5      MAINTENANCE.

                  1.5.1    OBLIGATION. CAI, at its own cost and expense, shall
                           be responsible for the service, repair, maintenance,
                           overhauling and testing of each Aircraft: (i) in
                           compliance with the maintenance program for each
                           Aircraft as approved by the FAA and pursuant to all
                           applicable aircraft maintenance manuals applicable to
                           each Aircraft; (ii) so as to keep each Aircraft in
                           good and safe operating condition; and (iii) so as to
                           keep the Aircraft in such operating condition as may
                           be necessary to enable the airworthiness
                           certification of the Aircraft to be maintained in
                           good standing. CAI shall retain full authority and
                           control over the service, repair, maintenance,
                           overhauling and testing of each Aircraft. AWA shall
                           have no obligations or duties with respect to the
                           service, repair, maintenance, overhauling or testing
                           of any Aircraft.

                  1.5.2    LOCATION. CAI shall maintain its maintenance base for
                           the Aircraft in Columbus, Ohio. CAI shall not
                           relocate its maintenance base, without the prior
                           written consent of AWA, which consent may be withheld
                           if the new location fails to meet AWA's maintenance
                           base requirements. CAI, with the prior written
                           consent of AWA, may add maintenance bases as
                           necessary to provide the Flight Services at locations
                           which meet AWA's maintenance base requirements.

         1.6      EMERGENCY OPERATIONS. CAI and AWA shall coordinate to develop
                  a plan that complies with applicable Regulations (as defined
                  below) to be implemented in the event of any incident
                  involving personal injury or death to a passenger or crew
                  member on a Flight. The emergency response teams of AWA and
                  CAI shall coordinate their efforts and shall cooperate fully
                  in response to such emergency.

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                                       5


         1.7      FLEET CONFIGURATION. All Aircraft in the Fleet on the
                  Commencement Date and Aircraft added to the Fleet shall have a
                  passenger seating configuration and seating capacity as
                  provided in the first Aircraft in the Fleet. AWA, at AWA's
                  cost and expense, may require CAI to reconfigure or change the
                  seating capacity of an Aircraft. All such requested changes
                  shall be implemented within 180 days after CAI's receipt of
                  written request from AWA. Upon the expiration or termination
                  of this Agreement or the elimination of any reconfigured
                  Aircraft pursuant to Section 1.2.3, AWA, within 30 days after
                  receipt of written request, shall reimburse CAI for all actual
                  out-of-pocket costs and expenses incurred by CAI to
                  reconfigure any Aircraft back to the original configuration
                  existing prior to any reconfiguration requested by AWA.

         1.8      CLEANLINESS. [*], shall cause all Aircraft while remaining
                  overnight at CMH to be cleaned and maintained in an
                  appearance in accordance with cleaning standards, requirements
                  and guidelines promulgated by AWA from time to time.

2.       RIGHTS, RESPONSIBILITIES AND OBLIGATIONS OF AWA.

         2.1      FLIGHT MANAGEMENT ITEMS. AWA, in its sole discretion, shall:
                  (i) designate from time to time, pursuant to each Schedule
                  Notice, the routes on and destinations to which CAI is to
                  provide the Flight Services and the times of departure for the
                  Flights; (ii) set the fares to be paid for such Flights by the
                  passengers; and (iii) be responsible for the passenger
                  booking, yield management and overbooking of Flights, limited
                  only by the Fleet required to be maintained by CAI pursuant to
                  this Agreement.

         2.2      MARKETING/REVENUE. AWA, in its sole discretion and at its sole
                  cost, shall market, advertise and sell tickets on all Flights.
                  AWA shall provide all reservation services for the Flight
                  Services and shall pay all ticketing and advertising expenses,
                  credit card charges, travel agent commissions and CRS fees
                  applicable to such services. AWA shall be entitled to retain,
                  and CAI shall pay to AWA, all revenue and income generated by
                  the Flight Services. CAI shall provide to AWA all tickets and
                  other revenue documentation collected or lifted by CAI. AWA
                  shall process CAI lifted passenger lift documents using
                  standard industry pricing procedures. CAI agrees to cooperate
                  with AWA on any special pricing or reporting requirements. CAI
                  shall supply AWA with specific reporting requirements.

         2.3      AIRPORT SERVICES. [*]: (i) provide curb-side service, check-in
                  service, ticketing and security services for all Flights;
                  (ii) transfer all baggage for passengers connecting to and
                  from AWA flights and Flights; (iii) provide baggage, cargo and
                  mail handling services for all Flights; (iv) provide Aircraft
                  ground handling; (v) provide Aircraft cleaning (other than
                  during overnight turns at CMH) and provisioning during turns
                  and overnight stays; (vi) provide food and beverage supplies
                  for each Flight; and (vii) [*].

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                                       6


         2.4      OTHER CODE SHARE PARTNERS. AWA shall have the right to enter
                  into code share, joint marketing, charter or other
                  alliance-type agreements with any other flight service
                  commuter operator to provide flight services to any
                  destinations or for any routes. AWA may permit any of AWA's
                  other code share partners to place their code on any Flight.
                  AWA or its code share partners shall pay all costs and
                  expenses incurred by CAI in placing such other code on such
                  Flights.

         2.5      CHARTERS. AWA, at its sole discretion, may market charter
                  flights on the Aircraft. CAI shall operate such charter
                  flights provided flight crews and Aircraft are available and
                  not otherwise subject or committed to maintenance
                  requirements. CAI is required to operate the charters in a
                  manner consistent with the terms of this Agreement. In respect
                  of any charter flight, AWA and CAI, in good faith, shall
                  negotiate the costs and expenses to be paid by AWA for such
                  services.

         2.6      AIRPORT SLOTS. AWA shall provide to CAI the right to use the
                  airport slots owned by AWA at airports that are or become slot
                  controlled (the "Slots"). The Slots shall at all times remain
                  the property of AWA and upon the expiration or earlier
                  termination of this Agreement or upon the request of AWA, CAI
                  shall take all steps necessary to insure all rights acquired
                  by CAI in the Slots, if any, are conveyed to AWA or any other
                  person or entity designated by AWA.

         2.7      HANGER. AWA shall use commercially reasonable efforts to
                  provide CAI with hanger space at CAI leased by AWA (the
                  "Hanger"). Prior to entering into a lease for hanger space at
                  CMH, CAI shall meet and confer with AWA as to the availability
                  of the Hanger. If CAI executes a lease for hanger space at
                  CMH, then CAI shall not be required to use the Hanger provided
                  by AWA unless AWA reimburses CAI for all costs and expenses
                  incurred by CAI in terminating the lease and any unamortized
                  capital improvements to such space. If AWA provides the Hanger
                  to CAI, then the Guaranteed Costs shall be reduced by an
                  amount equal to the actual occupancy costs being paid by CAI
                  at CMH.

3.       COMPLIANCE WITH REGULATIONS.

         3.1      REGULATIONS. CAI shall perform its obligations and duties
                  under this Agreement, including, without limitation, all
                  Flight Services in full compliance with any and all applicable
                  laws, ordinances, codes, statutes, orders, directives,
                  mandates, requirements, rules and regulations, whether now in
                  effect or hereafter adopted or promulgated, of all
                  governmental agencies having jurisdiction over CAI's
                  operations, including but not limited to the FAA and the DOT
                  (collectively, "Regulations").

         3.2      FLIGHT OPERATIONS. CAI shall be responsible for the operation
                  of each Aircraft and the safe performance of the Flights in
                  accordance with the Regulations and airline industry standard
                  practice and shall retain full authority, operational control
                  and possession of the Aircraft to do so. CAI, its


                                       7


                  agents or employees, for the purpose of the safe performance
                  of the Flights, shall have absolute discretion in and shall
                  have sole responsibility for all matters concerning the
                  preparation of each Aircraft for its Flights, and all other
                  matters relating to the technical operation of the Aircraft.
                  CAI, insofar as such relates to the safe operation of a
                  Flight, shall have sole and absolute discretion as to the load
                  carried and its distribution and as to the decision whether
                  such Flight shall be taken. CAI shall be solely responsible
                  for and AWA shall have no obligations or duties with respect
                  to the dispatch of all Flights.

         3.3      REGISTRATION. All Aircraft shall remain registered in the
                  United States of America in accordance with the Regulations.

         3.4      DISCLOSURE. CAI, upon 3 business days' prior written request,
                  shall provide AWA the opportunity to review all operating
                  specifications, operational regulations, manuals and
                  calculations with respect to all Aircraft and flight
                  statistics with respect to all Flights at CAI's corporate or
                  other relevant offices where such records are located.

         3.5      REVIEW/AUDIT. AWA, [*], may review, at CAI's corporate office,
                  airport ticket offices and other relevant offices, all
                  records, books, logs, files, documentation and information
                  maintained by CAI, or any of its maintenance or service
                  contracts, in connection with Flight operation, safety and
                  regulatory compliance, employee training, Flight dispatch,
                  Aircraft use, operation, maintenance and repair, Flight
                  incidents and governmental orders, mandates and requirements.

         3.6      REPORTING. This Agreement shall be treated as a code share for
                  DOT reporting requirements. AWA, in a timely manner, shall
                  provide CAI with such information necessary for CAI to make
                  the DOT reports and disclosures.

4.       OPERATIONAL PERFORMANCE CRITERIA, INCENTIVES AND PENALTIES.

         4.1      ON TIME PERFORMANCE RATE CRITERIA. [*],

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                                       8


         4.2      FLIGHT COMPLETION FACTOR. [*] "FCF" is defined as the
                  percentage of published, scheduled Flights completed for a
                  calendar month. Flights not completed due to events or
                  circumstances beyond the control of CAI, its employees,
                  agents, contractors or subcontractors, including, without
                  limitation, weather, air traffic control failures, the acts or
                  omissions of AWA, its employees, agents or contractors, the
                  grounding of all the Aircraft as a result of a governmental
                  requirement applied to all aircraft similar to the Aircraft,
                  the failure of the Aircraft manufacturer to deliver an
                  Aircraft timely (except to the extent such delay is caused by
                  CAI ) and acts of God will not be included for calculating the
                  FCF. For purposes of the prior sentence, all Aircraft
                  maintenance and repair events or circumstances shall be deemed
                  to be within CAI's control. [*]

         4.3      RECORDS. All records of Delayed and canceled flights (the
                  "Flight Records") shall be input into AWA's internal MAPPER
                  System ("MAPPER System"). AWA shall make the Flight Records
                  available to CAI through a computer link to the MAPPER
                  System. [*] If CAI does not object to any entry, timely, then
                  absent manifest error, the MAPPER System Flight Records
                  shall control. If CAI does object to any entry, timely,
                  then CAI and AWA, in good faith, shall work to correct the
                  error within 24 hours after the objection is made and if
                  CAI and AWA agree to revise the entry, then AWA shall
                  revise the entry in the MAPPER System. [*]



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                                       9


         4.4      SETOFF. All undisputed sums payable by CAI to AWA pursuant to
                  this Section 4 may, at AWA's election, be setoff against
                  amounts next due by AWA to CAI pursuant to this Agreement.

         4.5      DUPLICATIVE PAYMENTS. [*] If penalties or bonuses are due for
                  both the OTP Rate or FCF in any calendar month, [*].

5.       [*]


         AWA, by written notice given to CAI at the end of any calendar month in
         which CAI's OTP Rate falls below [*], shall [*] this Section 5 (the
         "Denied Boarding Invoice"). CAI shall [*]. The Denied Boarding
         Invoice shall be accompanied by [*].

6.       PAYMENT OF FEES/REVENUE SHARING. Commencing on the Commencement Date,
         CAI and AWA hereby agree to pay the following sums as consideration for
         this Agreement and the provision of the Flight Services and Other
         Services provided for herein:

         6.1      CAI ACTUAL COSTS. AWA, in accordance with Section 6.5, [*]

                  6.1.1    [*]


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                                       10


                           [*]

                  6.1.2    [*]

                  6.1.3    [*]

                  6.1.4    [*]

                  6.1.5    [*]

                  6.1.6    [*]


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                                       11


                  6.1.7    [*]

                  6.1.8    [*]

                  6.1.9    [*]

                  6.1.10   [*]

                  [*]

         6.2      CAI GUARANTEED COSTS. Commencing on the Commencement Date,
                  AWA, in accordance with Section 6.5, shall pay to CAI the
                  amounts set forth in and determined in accordance with the
                  number of Aircraft in Flight Services as set forth in Exhibit
                  A (the "Guaranteed Costs Schedule"),



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                                       12


                  [*] (the "Guaranteed Costs"). If the term of this Agreement
                  commences or expires or an Aircraft is added or eliminated
                  from the Fleet on other than the first or last day of a
                  calendar month, then the Guaranteed Costs payable by AWA
                  under this Agreement, for existing Aircraft and for such
                  additional Aircraft shall be prorated based on the actual
                  number of days this Agreement is in effect, the actual
                  number of days before and after an Aircraft is added or
                  eliminated for existing Aircraft, and the number of days
                  the new Aircraft is in the Fleet during such month and the
                  actual number of days in such month. Guaranteed Costs shall
                  not be incurred for an Aircraft until it is placed into
                  Flight Services under this Agreement which in no event
                  shall be sooner that 7 days prior to the Scheduled Delivery
                  Week for an Aircraft. For purposes of prorating Guaranteed
                  Costs on existing Aircraft the actual date that an Aircraft
                  is placed into or eliminated from Flight Services shall be
                  used.

         6.3      CONTRACT NEGOTIATION. AWA, in its sole discretion, may assist
                  CAI in the negotiation of contracts for the provision of
                  materials or services, including, without limitation, fuel,
                  subject to the Actual Costs and Guaranteed Costs; provided CAI
                  is not subject to an existing contract for such services or
                  materials.

         6.4      CONSUMER PRICE INDEX ADJUSTMENT. For the purposes of
                  calculating CPI increases in certain categories of the
                  Guaranteed Costs as provided in Exhibit A and the Revenue Rate
                  pursuant to Section 6.6, the following definitions and
                  formulas shall be applied:

                  6.4.1    DEFINITION. "CPI" shall mean the Consumer Price
                           Index, U.S. City Average, All Urban Consumers, All
                           Items (base index year 1982-84 = 100) as published by
                           the United States Department of Labor, Bureau of
                           Labor Statistics. If the manner in which the Consumer
                           Price Index as determined by the Bureau of Labor
                           Statistics shall be substantially revised, including,
                           without limitation, a change in the base index year,
                           an adjustment shall be made by the parties in such
                           revised index which would produce results equivalent,
                           as nearly as possible, to those which would have been
                           obtained if such Consumer Price Index had not been so
                           revised. If the Consumer Price Index shall become
                           unavailable to the public because publication is not
                           readily available to enable the parties to make the
                           adjustment referred to in this Section, then the
                           parties shall mutually agree to substitute therefor a
                           comparable index based upon changes in the cost of
                           living or purchasing power of the consumer dollar
                           published by any other governmental agency or, if no
                           such index shall be available, then a comparable
                           index published by a major bank or other financial
                           institution or by a university or a recognized
                           financial publication.

                  6.4.2    ADJUSTMENT FORMULA. [*]



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                                       13


                           [*]

         6.5      PAYMENT OF ACTUAL AND GUARANTEED COSTS. Commencing on the
                  Commencement Date, AWA shall pay to CAI the estimated
                  Actual Costs and Guaranteed Costs for each calendar month
                  based on [*] as follows: By the 20th day of each calendar
                  month commencing July 20, 2001, CAI shall provide AWA with
                  a statement of the Estimated Costs for the following month.
                  CAI shall use its commercially reasonable judgment to
                  establish the Estimated Costs for each month. For purposes
                  of the Estimated Costs, AWA's fuel cost forecasts shall
                  apply. On or before the 5th, 10th, 15th and 20th day of
                  each calendar month (or next business day thereafter if any
                  such dates is other than a business day), AWA shall pay [*]
                  of the Estimated Costs for such calendar month.

                  On or before the 25th day of each calendar month, CAI shall
                  submit to AWA a statement of the actual Guaranteed Costs and
                  Actual Costs (the "Incurred Costs") payable by AWA for the
                  prior calendar month (the "Incurred Costs Statement"). If the
                  Estimated Costs paid by AWA in any calendar month exceed the
                  Incurred Costs in any calendar month, then CAI, together with
                  the Incurred Costs Statement for such calendar month, shall
                  reimburse AWA the amount by which the Estimated Costs paid by
                  AWA exceeded the Incurred Costs. If the Incurred Costs in any
                  calendar month exceed the Estimated Costs paid by AWA in any
                  calendar month, then AWA within [*] after receipt of the
                  Incurred Costs Statement, shall reimburse and pay to CAI the
                  amount by which the Incurred Costs exceed the Estimated Costs
                  paid by AWA for the subject calendar month.

         6.6      SEGMENT REVENUE SHARING. Commencing in the first calendar
                  month after the month in which the Commencement Date occurs,
                  AWA shall pay to CAI, by the 20th day of each calendar month,
                  an amount equal to [*]


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                                       14


                  For purposes of this Agreement, the following terms have the
                  following definitions:

                  "Segment Revenue" means [*] For calculating Segment
                  Revenue, [*]

                  "Segment Revenue Percentage" means [*]

         6.7      STATEMENTS AND AUDIT RIGHTS. All Incurred Costs Statements and
                  other requests for payment made by CAI pursuant to this
                  Section 6 shall be [*] AWA, by written notice given within
                  [*] set forth in an Incurred Costs Statement and, within [*]
                  all records and files (including computer data bases) [*]
                  If AWA does not object to an Incurred Costs Statement
                  timely, then the Incurred Costs Statement, absent fraud,
                  shall be final.

7.       TERM AND TERMINATION. The term of this Agreement (the "Term") shall
         commence on the Effective Date and expire on the 10th anniversary of
         the date that the last Aircraft is added to the Fleet pursuant to
         Section 1.2 of this Agreement ("Expiration Date"), unless earlier
         terminated as provided in this Agreement. AWA, [*] to CAI
         ("Termination Notice"), may terminate this Agreement [*] (the
         "Cancellation Event"). [*]pursuant to Section 12 if a Cancellation
         Event shall occur. Such termination right shall be [*] If AWA elects
         to terminate this Agreement pursuant to this Section 7, AWA, in the
         Termination Notice, shall establish as the termination date [*]


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                                       15


         [*] AWA and CAI shall make all payments as required by this
         Agreement for the period through and including the termination date
         set forth in the Termination Notice.

8.       SERVICE MARK LICENSE FOR SERVICES PROVIDED BY CAI.

         8.1      GRANT OF LICENSE. For the payment of [*], AWA hereby grants
                  to CAI a non-exclusive, non-transferable license to use such
                  AWA Service Marks as AWA may designate, in writing, from
                  time-to-time in connection with the Flight Services and Other
                  Services to be rendered by CAI; provided, however, that at any
                  time prior to expiration or termination of this Agreement AWA
                  may alter, amend or revoke the license hereby granted and
                  require CAI's use of any new or different AWA Service Mark in
                  conjunction with the Services provided hereunder as AWA may
                  determine in its sole discretion and judgment.

         8.2      OPERATION UNDER AWA SERVICE MARKS. CAI shall [*] cause the
                  Fleet and any replacement Aircraft utilized by CAI to
                  provide the Flight Services, to bear AWA Service Marks,
                  consisting of AWA aircraft exterior and interior color
                  decor and pattern provided by AWA and the name "America
                  West Express." Upon written notice from AWA, which shall
                  include the specifications for any such changes in AWA
                  Service Marks and exterior or interior aircraft decor and
                  patterns, CAI shall effect changes in the aircraft decor
                  and patterns within 3 months from the date of such notice.
                  AWA shall reimburse CAI for the cost of repainting and
                  redecorating the Fleet in the event that AWA changes its
                  logo and color decor and pattern from the design existing
                  as of the Effective Date. CAI shall use and display
                  suitable signs on the interior and exterior of each
                  Aircraft identifying CAI as the operator of the Services,
                  such signs shall be subject to the prior written consent of
                  AWA as to nature, size and location provided that the signs
                  shall comply with all Regulations. All announcements,
                  displays or literature used or viewed by CAI customers on
                  Flights shall highlight "America West Express." No such
                  announcements, displays or literature shall reference "CAI
                  Airlines," other than to identify CAI or the operator of
                  the Services, on briefing cards or as required by the
                  Regulations.

         8.3      TERMS AND CONDITIONS GOVERNING TRADEMARK LICENSE.

                  8.3.1    CAI hereby acknowledges AWA's ownership of the AWA
                           Service Marks, further acknowledges the validity of
                           the AWA Service Marks, and agrees that it shall not
                           do anything in any way to infringe or abridge upon
                           AWA's rights in the AWA Service Marks or directly or
                           indirectly to challenge the validity of the AWA
                           Service Marks.

                  8.3.2    To assure that the production appearance and quality
                           of the AWA Service Marks is consistent with AWA's
                           reputation for high quality and the goodwill
                           associated with the AWA Service Marks, CAI agrees to
                           maintain a level of quality consistent with AWA's
                           quality in the


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                                       16


                           Flight Services it provides pursuant to this
                           Agreement and to follow AWA's written instructions
                           regarding use of AWA's Service Marks, as they may be
                           amended from time to time.

                  8.3.3    CAI agrees that, in providing the Flight Services, it
                           shall not advertise or make use of the AWA Service
                           Marks without the prior written consent of AWA. AWA
                           shall have absolute discretion to withhold its
                           consent concerning any and all such advertising and
                           use of the AWA Service Marks in any advertising by
                           CAI. In the event AWA approves the use of such AWA
                           Service Marks in any advertising, such advertising
                           shall identify AWA as the owner of such Service Marks
                           and conform with any additional requirements
                           specified by AWA.

                  8.3.4    To the extent that CAI is licensed to use the AWA
                           Service Marks, the AWA Service Marks shall be used
                           only in connection with the Flight Services
                           specifically covered by this Agreement and not in
                           connection with any other business or activity of CAI
                           or any other entity, except for approved charters.

                  8.3.5    Nothing in this Agreement shall be construed to give
                           CAI the exclusive right to use the AWA Service Marks
                           or abridge AWA's right to use and license the AWA
                           Service Marks, and AWA hereby reserves the right to
                           continue to use the AWA Service Marks and to license
                           such other uses of the AWA Service Marks as AWA may
                           desire.

                  8.3.6    No term or provision of this Agreement shall be
                           construed to preclude the use of the AWA Service
                           Marks, including "America West Express," or the
                           aircraft exterior color decor and patterns by other
                           individuals or entities not covered by this
                           Agreement.

                  8.3.7    Upon the termination or expiration of this Agreement,
                           the license and use of the AWA Service Marks by CAI
                           shall cease and such use shall not thereafter occur.

9.       LIABILITY AND INDEMNIFICATION.

         9.1      RELATIONSHIP BETWEEN THE PARTIES. Nothing contained in this
                  Agreement will be deemed to create any agency or partnership
                  or similar relationship between AWA and CAI. Nothing contained
                  in this Agreement will be deemed to authorize either AWA or
                  CAI to bind or obligate the other. CAI and its employees
                  engaged in performing the Flight Services shall be employees
                  of CAI for all purposes, and under no circumstances shall be
                  deemed to be employees, agents or independent contractors of
                  AWA. AWA and its employees engaged in performing the
                  obligations of AWA under this Agreement shall be employees,
                  agents and independent contractors of AWA for all purposes,
                  and under no circumstances shall be deemed to be employees,
                  agents or independent contractors of CAI. Pursuant to this


                                       17


                  Agreement, CAI shall act, for all purposes, as an independent
                  contractor and not as an agent for AWA. AWA shall have no
                  supervisory power or control over any employees engaged by CAI
                  in connection with its performance hereunder, and all
                  complaints or requested changes in procedures shall be
                  transmitted by AWA to a designated officer of CAI. Nothing
                  contained in this Agreement shall be intended to limit or
                  condition CAI's control over its operations or the conduct of
                  its business as an air carrier, and CAI and its principals
                  assume all risks of financial losses which may result from the
                  operation of the Flight Services to be provided by CAI
                  hereunder.

         9.2      INDEMNIFICATION BY CAI. CAI agrees to indemnify, defend and
                  hold harmless AWA, its directors, officers, employees, agents,
                  parent corporation, subsidiaries and affiliates for, from and
                  against any and all loss, liability, claim, damage, penalty,
                  fine, charge, cause of action, demand, cost and expense
                  (including attorneys' and consultants' fees and costs)
                  whatsoever (collectively, "Damages"), as incurred, arising out
                  of, resulting from or incurred in connection with: (i) the
                  provision of the Flight Services by CAI; (ii) CAI's breach of
                  this Agreement; (iii) damage or destruction of property of any
                  person, or injury or death of any person, caused by, arising
                  out of, or in connection with any act or omission of CAI, its
                  employees, agents, licensees, contractors, suppliers, officers
                  or directors; (iv) any taxes, impositions, assessments or
                  other governmental charges incurred by CAI in providing the
                  Flight Services or imposed on any revenue generated by this
                  Agreement (except as set forth in Section 6.1.3); (v)
                  passenger complaints or claims by passengers using the Flight
                  Services; and (vi) failure to comply with any Regulations. CAI
                  shall reimburse AWA or other Indemnified Party (as defined
                  below) for any legal and any other expenses reasonably
                  incurred in investigating, preparing or defending against any
                  claim or action arising out of or relating to any of the
                  foregoing.

         9.3      INDEMNIFICATION BY AWA. AWA agrees to indemnify, defend and
                  hold harmless CAI, its directors, officers, employees, agents,
                  parent corporation, subsidiaries and affiliates for, from and
                  against any and all Damages, as incurred, arising out of,
                  resulting from or incurred in connection with: (i) AWA's
                  breach of this Agreement; (ii) damage or destruction of
                  property of any person, or injury or death of any person,
                  caused by, arising out of, or in connection with any act or
                  omission of AWA, its employees, agents, licensees,
                  contractors, suppliers, officers or directors in performing
                  AWA's obligations under this Agreement to the extent not
                  covered by insurance required to be maintained by CAI pursuant
                  to this Agreement; and (iii) any taxes, impositions,
                  assessments or other governmental charges incurred by AWA for
                  revenue received by AWA under this Agreement. AWA shall
                  reimburse CAI or other Indemnified Party (as defined below)
                  for any legal and any other expenses reasonably incurred in
                  investigating, preparing or defending against any claim or
                  action arising out of or relating to any of the foregoing.

         9.4      CONDUCT OF INDEMNIFICATION PROCEEDINGS. The person or entity
                  claiming indemnification hereunder is referred to as the
                  "Indemnified Party" and the


                                       18


                  party against whom such claims are asserted hereunder is
                  referred to as the "Indemnifying Party". Each Indemnified
                  Party shall give reasonably prompt notice to the
                  Indemnifying Party of any action or proceeding or assertion
                  or threat of claim commenced against it in respect of which
                  indemnity may be sought hereunder, but failure to so notify
                  the Indemnifying Party (i) shall not relieve the
                  Indemnifying Party from any liability which it may have
                  under the indemnity agreement provided in this Agreement,
                  unless and to the extent it did not otherwise learn of such
                  action, threat or claim and the lack of notice by the
                  Indemnified Party results in the forfeiture by the
                  Indemnifying Party of substantial rights and defenses and
                  (ii) shall not, in any event, relieve the Indemnifying
                  Party from any obligations to the Indemnified Party other
                  than the indemnification obligation provided under Sections
                  9.2 and 9.3 above. If the Indemnifying Party elects within
                  a reasonable time after receipt of notice, the Indemnifying
                  Party may assume the defense of the action or proceeding at
                  Indemnifying Party's own expense with counsel chosen by the
                  Indemnifying Party and approved by the Indemnified Party;
                  PROVIDED, HOWEVER, that, if the Indemnified Party
                  reasonably determines upon advice of counsel that a
                  conflict of interest exists where it is advisable for the
                  Indemnified Party to be represented by separate counsel or
                  that, upon advice of counsel, there may be legal defenses
                  available to it which are different from or in addition to
                  those available to the Indemnifying Party, then the
                  Indemnified Party shall be entitled to separate counsel at
                  the Indemnifying Party's expense, which counsel shall be
                  chosen by the Indemnified Party in its sole discretion. If
                  the Indemnifying Party does not assume the defense, after
                  having received the notice referred to in the second
                  sentence of this Section, the Indemnifying Party will pay
                  the reasonable fees and expenses of counsel for the
                  Indemnified Party. Unless and until a final judgment that
                  an Indemnified Party is not entitled to the costs of
                  defense under the foregoing provision, the Indemnifying
                  Party shall reimburse, promptly as they are incurred, the
                  Indemnified Party's costs of defense. The Indemnifying
                  Party shall not settle or compromise any claim for which an
                  Indemnified Party is entitled to indemnity without the
                  prior written consent of the Indemnified Party.

                                       19


9.5      INSURANCE.

         9.5.1    CAI, at all times during the Agreement, shall have and
                  maintain in full force and effect, policies of insurance
                  satisfactory to AWA, of the types of coverage, and in the
                  minimum amounts stated below with insurance companies
                  satisfactory to AWA and under terms and conditions
                  satisfactory to AWA, including insurance coverage on all
                  Aircraft used to provide Flight Services. Unless otherwise
                  specified, the minimum amounts of insurance coverage required
                  hereunder shall be per occurrence, combined single limit for
                  all insurance coverage required hereunder.

                                                                      
                            1.    Aircraft Liability and Ground Liability      [*]
                                  Insurance (including Commercial General
                                  Liability)

                                  a.       Bodily Injury and Personal Injury   [*]
                                           - Passengers

                                  b.       Bodily Injury and Personal Injury   [*]
                                           - Third Parties

                                  c.       Property Damage                     [*]

                                                                               Per Accident
                                                                               ------------

                            2.    Worker's Compensation Insurance (Company     [*]
                                  Employees)

                            3.    Employers' Liability (Company Employees)     [*]

                            4.    All Risk Hull Insurance on Aircraft          [*]
                                  Performing Services Hereunder


                            5.    Baggage Liability                            [*]

                            6.    Cargo Liability                              [*]

                                                                               [*]





         9.5.2    The parties hereby agree that from time to time during the
                  Term of this Agreement, AWA may require CAI to have and
                  maintain amounts of insurance coverage different from those
                  amounts set forth



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                                       20


                  in Section 9.5.1, should AWA, in its reasonable judgment, deem
                  the circumstances and conditions of the Flight Services to
                  require increases in any or all of the foregoing minimum
                  insurance coverages.

         9.5.3    CAI shall cause all policies of insurance which it maintains
                  pursuant to this Agreement, to be duly and properly endorsed
                  by CAI's insurance underwriters as follows:

                  9.5.3.1  To provide that any waiver of rights of subrogation
                           against other parties by CAI shall not affect the
                           coverage provided hereunder with respect to AWA.

                  9.5.3.2  To provide that CAI's underwriters shall waive any
                           and all subrogation rights against AWA, its
                           directors, officers, agents and employees without
                           regard to any breach of warranty by CAI or to provide
                           other evidence of such waiver of recourse against
                           AWA, its directors, officers, agents, or employees as
                           shall be acceptable to AWA.

                  9.5.3.3  Be duly and properly endorsed to provide that each
                           such policy or policies or any part or parts thereof
                           shall not be canceled, terminated, or materially
                           altered, changed or amended by CAI's insurance
                           underwriters, until after [*] written notice shall
                           commence to run from the date such notice is
                           actually received by AWA.

         9.5.4    With respect to policies of insurance described as Aircraft
                  Liability and Ground Liability Insurance, CAI will provide
                  that such policies:

                  9.5.4.1  Endorse AWA, its directors, officers, agents,
                           parents, subsidiaries and employees as Additional
                           Insureds thereunder.

                  9.5.4.2  Constitute primary insurance for such claims and
                           acknowledge that any other insurance policy or
                           policies of AWA will be secondary or excess
                           insurance;

                  9.5.4.3  [*]

                  9.5.4.4  Provide a [*]



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                                       21


         9.5.5    With respect to policies of insurance for coverage described
                  as Aircraft Liability and General Liability Insurance and All
                  Risk Hull Insurance, CAI shall cause its insurance
                  underwriters to provide a breach of warranty clause.

         9.5.6    All aircraft hull insurance provided pursuant to [*] In the
                  event of loss, settled on the basis of a total loss, all
                  losses shall be payable in full.

         9.5.7    Prior to the Commencement Date and from time to time
                  thereafter upon request by AWA, CAI shall furnish to AWA
                  evidence satisfactory to AWA of the aforesaid insurance
                  coverage and endorsements, including certificates certifying
                  that the aforesaid insurance policy or policies with the
                  aforesaid policy limits are duly and properly endorsed as
                  aforesaid and are in full force and effect.

         9.5.8    With respect to policies of insurance obtained directly from
                  foreign underwriters, CAI shall cause such insurance
                  underwriters to provide that AWA may maintain against CAI's
                  underwriters a direct action in the United States upon such
                  insurance policies and to this end to provide a standard
                  service of suit clause designating an agent for service of
                  process in the United States of America.

         9.5.9    In the event CAI fails to maintain in full force and effect
                  any of the insurance and endorsements described in Section
                  9.5, AWA shall have the right (but not the obligation) to
                  procure and maintain such insurance or any part thereof. The
                  cost of such insurance shall be payable by CAI to AWA upon
                  demand by AWA. The procurement of such insurance or any part
                  thereof by AWA shall not discharge or excuse CAI's obligation
                  to comply with the provisions of Section 9.5. CAI agrees not
                  to cancel, terminate or materially alter, change or amend any
                  of the policies referred to in Section 9.5 without [*] to AWA
                  of its intent to cancel, terminate or materially alter,
                  change or amend said policies or insurance which [*]

         9.5.10   AWA shall maintain cargo liability coverage, in types and
                  amounts required by law, for all air freight transported by
                  CAI under an AWA airbill on any Flights.

         9.5.11   CAI shall use commercially reasonable efforts to divide the
                  Fleet from CAI's turbo prop fleet in order to reduce its
                  liability insurance costs. AWA, in its sole discretion, may
                  elect to acquire the liability insurance required to be
                  maintained by CAI on behalf of CAI.



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                                       22


10.      CONFIDENTIALITY.

         10.1     AWA and CAI agree that the terms of this Agreement shall be
                  treated as confidential and shall not be disclosed to third
                  parties without the express written consent of AWA and CAI, or
                  as required by law. In the event of disclosure required by
                  law, only those portions of this Agreement required to be
                  disclosed shall be disclosed. The disclosing party shall make
                  good faith efforts to minimize the portions to be disclosed
                  and shall seek confidential treatment by the receiving party
                  or agency for any portions disclosed. In the event of one
                  party being served a subpoena or discovery request, prior to
                  responding to the subpoena or request, the party served shall
                  notify the other party to provide the other party an
                  opportunity to contest the disclosure of any terms of this
                  Agreement.

         10.2     "Confidential Information" means any information in any form,
                  including, without limitation, the terms of this Agreement,
                  written documents, oral communications, recordings, videos,
                  software, data bases, business plans, and electronic and
                  magnetic media, provided to or observed by AWA or CAI pursuant
                  to this Agreement, including information owned or provided by
                  either party to the other party, except for information
                  generally available to the public. AWA and CAI agree that they
                  shall maintain all Confidential Information in confidence and
                  use such Confidential Information solely for purposes of
                  performance under this Agreement. Such Confidential
                  Information shall be distributed within each party's company
                  only to personnel and to its legal counsel, auditors and other
                  consultants on a need-to-know basis for purposes related to
                  this Agreement or in compliance with a court order or
                  statutory or regulatory requirements. Except for legal counsel
                  and auditors, and as permitted by Section 10.1, in no event
                  shall either party disclose Confidential Information to any
                  third parties except subcontractors and independent
                  consultants and then only if approved by both parties in
                  writing in advance of such disclosure. Confidential
                  Information does not include information that is available to
                  the general public other than as a result of disclosure by the
                  disclosing party or information that was known or
                  independently developed by the receiving party prior to
                  disclosure, as evidenced by records kept in the ordinary
                  course of business.

         10.3     CAI acknowledges and agrees that any Confidential Information
                  shared or given to AWA pursuant to this Agreement may be
                  shared by AWA on a confidential basis with America West
                  Holdings Corporation, The Leisure Company and other
                  subsidiaries and affiliates of AWA. AWA acknowledges and
                  agrees that the terms of this Agreement and any Confidential
                  Information shared or given to CAI pursuant to this Agreement
                  may be shared by CAI on a confidential basis with Wexford
                  Capital LLC, CAI's financial partners and financial providers
                  and other subsidiaries or affiliates of CAI and may be
                  disclosed to the extent legally required or necessary.

11.      TAXES. [*] shall pay, prior to delinquency, all airport, property,
         sales, use, excise or any other taxes, impositions, assessments or
         other governmental charges incurred in connection with the provision of
         the Flight Services under this Agreement and all



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                                       23


         taxes imposed or any sums paid by [*] under this Agreement. [*]
         shall pay, prior to delinquency, all taxes imposed on any sums paid by
         [*] under this Agreement.

12.      DEFAULTS AND REMEDIES.

         12.1     DEFAULT BY CAI. The occurrence of any one or more of the
                  following events shall constitute a material default and
                  breach of this Agreement by CAI (an "Event of Default"):

                  12.1.1   The failure of CAI to make any payment required to be
                           made by CAI to AWA hereunder, as and when due, and
                           such failure continues for [*]

                  12.1.2   If CAI is required by the FAA or DOT to suspend a
                           substantial portion of its operations for any
                           safety reason and has not resumed such operation
                           within [*]of the suspension or if CAI [*] of the
                           Flight Services for any other reason, except as a
                           result of an emergency airworthiness directive
                           from the FAA affecting all aircraft similarly
                           equipped to the Aircraft (not just those owned or
                           operated by CAI);

                  12.1.3   The failure of CAI to observe or perform any of the
                           covenants, conditions or provisions of this Agreement
                           to be observed or performed by CAI, other than as
                           described in Sections 7 or 12.1.1 or 12.1.2 above,
                           and such failure shall continue for a period of 15
                           days after written notice thereof from AWA to CAI;

                  12.1.4   (i) the cessation of CAI's business operations as a
                           going concern; (ii) the making of CAI of any general
                           assignment, or general arrangement for the benefit of
                           creditors; (iii) the failure of CAI to generally pay
                           CAI's debts as they come due or CAI's written
                           admission of its inability to pay its debts as they
                           come due; (iv) the filing by or against CAI of a
                           petition to have CAI adjudged bankrupt or a petition
                           for reorganization or arrangement under any law
                           relating to bankruptcy (unless, in the case of
                           petition filed against CAI, the same is dismissed,
                           stayed or vacated within 60 days); (v) an
                           adjudication of CAI's insolvency; (vi) appointment of
                           a trustee or receiver to take possession of
                           substantially all of CAI's assets which is not
                           dismissed, stayed or vacated within 60 days; or (vii)
                           the attachment, execution or other judicial seizure
                           of all of CAI's assets.

                  12.1.5   Upon an Event of Default, AWA may: (a) by written
                           notice to CAI (a "Default Termination Notice")
                           terminate this Agreement effective as of the date
                           set forth in the Default Termination Notice which
                           date[*] and/or (b) pursue all other rights and
                           remedies available at law or in

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                                       24


                           equity to AWA for the Event of Default, including,
                           without limitation, injunctive relief, specific
                           performance and damages. After receipt of a Default
                           Termination Notice, CAI shall continue to provide the
                           Flight Services in accordance with this Agreement
                           until the termination date set forth in the Default
                           Termination Notice. No remedy or election by AWA
                           hereunder shall be deemed exclusive, but shall,
                           wherever possible, be cumulative with all other
                           rights and remedies at law or in equity.

         12.2     AWA DEFAULT. The occurrence of any one or more of the
                  following events shall constitute a material default and
                  breach of this Agreement by AWA (an "AWA Event of Default"):

                  12.2.1   The failure of AWA to make any payment required to be
                           made to CAI by AWA hereunder, as and when due, and
                           such failure continues for [*]

                  12.2.2   The failure of AWA to observe or perform any of the
                           covenants, conditions or provisions of this Agreement
                           to be observed or performed by AWA, and such failure
                           shall continue for [*]

                  12.2.3   (i) the cessation of AWA's business operations as a
                           going concern; (ii) the making of AWA of any general
                           assignment, or general arrangement for the benefit of
                           creditors; (iii) the failure of AWA to generally pay
                           AWA's debts as they come due or AWA's written
                           admission of its inability to pay its debts as they
                           come due; (iv) the filing by or against AWA of a
                           petition to have AWA adjudged bankrupt or a petition
                           for reorganization or arrangement under any law
                           relating to bankruptcy (unless, in the case of
                           petition filed against AWA, the same is dismissed,
                           stayed or vacated within 60 days); (v) an
                           adjudication of AWA's insolvency; (vi) appointment of
                           a trustee or receiver to take possession of
                           substantially all of AWA's assets which is not
                           dismissed, stayed or vacated within 60 days; or (vii)
                           the attachment, execution or other judicial seizure
                           of all of AWA's assets which is not dismissed, stayed
                           or vacated within 60 days.

                  12.2.4   Upon the occurrence and continuance of an AWA Event
                           of Default, CAI may: (a) by written notice to AWA
                           (an "AWA Default Notice") terminate this Agreement
                           effective as of the date set forth in the AWA
                           Default Notice which [*]After receipt of an AWA
                           Default Notice, AWA shall continue to perform its
                           obligations under this Agreement until the
                           termination date set forth in the AWA Default
                           Notice. No remedy or election by CAI hereunder
                           shall be deemed


- ---------
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                                       25


                           exclusive, but shall, wherever possible, be
                           cumulative with all other rights and remedies at law
                           or in equity.

         12.3     LIMITATION ON DAMAGES. In no event shall either party be
                  liable to the other party for consequential, special or
                  speculative damages, except to the extent recoverable in an
                  indemnity claim pursuant to Section 9.

13.      RECORDS AND REPORTS.

         13.1     RETENTION OF RECORDS. CAI shall keep accurate and complete
                  books and records of all Flight Services and Other Services
                  performed under this Agreement as well as any additional
                  records that the parties agree may be required in accordance
                  with AWA's procedures and the Regulations. CAI shall retain
                  such records in accordance with applicable law, AWA's
                  procedures and the Regulations.

         13.2     PROVISION OF FINANCIAL RECORDS. Upon AWA's request, and until
                  such time as AWA advises CAI that such reports are no
                  longer necessary, CAI shall furnish to AWA, [*] following
                  the close of the first three fiscal quarters of CAI,
                  unaudited financial statements including CAI's current
                  corporate balance sheets and profit and loss statements,
                  and [*]after the close of its fiscal year, CAI shall
                  furnish AWA with audited financial statements of CAI (or
                  its parent company) including, either separately or on a
                  consolidated basis, the balance sheet and profit and loss
                  statements of that party. The appropriate reports filed on
                  Form 10-Q and 10-K shall be satisfactory to fulfill such
                  obligation.

         13.3     PROVISION OF ADDITIONAL RECORDS. CAI shall promptly furnish
                  AWA with a copy of every report that it prepares and is
                  required to submit to the DOT, FAA, National Transportation
                  Safety Board ("NTSB") or any other governmental agency,
                  relating to any accident or incident involving an Aircraft
                  used in performing Flight Services under this Agreement, when
                  such accident or incident is claimed to have resulted in the
                  death of or substantial injury to any person or the loss of,
                  damage to, or destruction of any property.

         13.4     ADDITIONAL REPORTS. CAI shall promptly notify AWA in writing
                  of (i) any change in or relinquishment of control of CAI, (ii)
                  any agreement contemplating such a change or relinquishment
                  with a copy of such agreement, if in writing, to AWA, or (iii)
                  any change or contemplated change in the Chief Executive
                  Officer position of CAI.

14.      MISCELLANEOUS PROVISIONS.

         14.1     NOTICES. All notices, consents, approvals or other instruments
                  required or permitted to be given by either party pursuant to
                  this Agreement shall be in writing and given by (i) hand
                  delivery, (ii) facsimile, (iii) express overnight delivery
                  service or (iv) certified or registered mail, return receipt
                  requested. Notices shall be provided to the parties and
                  addresses (or facsimile numbers, as applicable) specified
                  below and shall be effective upon receipt, except if



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                                       26


                  delivered by facsimile outside of business hours in which case
                  they shall be effective on the next succeeding business day:


                  If to AWA:                America West Airlines, Inc.
                                            4000 E. Sky Harbor Blvd.
                                            Phoenix, Arizona 85034
                                            Attn:  Vice President and General
                                                   Counsel
                                            Telephone:        (602) 693-5805
                                            Facsimile:        (602) 693-5932

                  If to CAI:                Chautauqua Airlines, Inc.
                                            2500 S. High School Drive
                                            Indianapolis, Indiana   46241
                                            Attn:  President
                                            Telephone:        (317) 484-6047
                                            Facsimile:        (317) 484-4547\

                  with a copy to:           Wexford Capital LLC
                                            Wexford Plaza
                                            411 West Putnam Avenue
                                            Greenwich, Connecticut  06830
                                            Attn:  General Counsel
                                            Telephone:        (203) 861-7012
                                            Facsimile:        (203) 862-7312

         14.2     WAIVER AND AMENDMENT. No provisions of this Agreement shall be
                  deemed waived or amended except by a written instrument
                  unambiguously setting forth the matter waived or amended and
                  signed by the party against which enforcement of such waiver
                  or amendment is sought. Waiver of any matter shall not be
                  deemed a waiver of the same or any other matter on any future
                  occasion.

         14.3     CAPTIONS. Captions are used throughout this Agreement for
                  convenience of reference only and shall not be considered in
                  any manner in the construction or interpretation hereof.

         14.4     ATTORNEYS' FEES. In the event of any judicial or other
                  adversarial proceeding between the parties concerning this
                  Agreement, the prevailing party shall be entitled to recover
                  its attorneys' fees and other costs in addition to any other
                  relief to which it may be entitled.

         14.5     ENTIRE AGREEMENT. This Agreement constitutes the entire
                  agreement between the parties with respect to the subject
                  matter hereof, and there are no other representations,
                  warranties or agreements, written or oral, between AWA and CAI
                  with respect to the subject matter of this Agreement.


                                       27


         14.6     CHOICE OF LAW. This Agreement shall be governed by and
                  construed in accordance with the laws of the State of Arizona.

         14.7     SEVERABILITY. If this Agreement, any one or more of the
                  provisions of this Agreement, or the applicability of this
                  Agreement or any one or more of the provisions of this
                  Agreement to a specific situation, shall be held invalid,
                  illegal or unenforceable or in violation of any contract or
                  agreement to which CAI or AWA are a party, then AWA and CAI
                  shall in good faith amend and modify this Agreement,
                  consistent with the intent of CAI and AWA, as evidenced by
                  this Agreement, to the minimum extent necessary to make it or
                  its application valid, legal and enforceable and in accordance
                  with the applicable agreement or contract, and the validity or
                  enforceability of all other provisions of this Agreement and
                  all other applications of any such provision shall not be
                  affected thereby.

         14.8     COUNTERPARTS. This Agreement may be executed in one or more
                  counterparts, each of which shall be deemed an original.

         14.9     BINDING EFFECT. This Agreement shall be binding upon and inure
                  to the benefit of AWA and CAI and their respective successors
                  and permitted assigns.

         14.10    NO ASSIGNMENT. The rights, obligations and duties of AWA and
                  CAI under this Agreement may not be assigned or delegated,
                  except as may otherwise be mutually agreed by AWA and CAI, in
                  their sole and absolute discretion.

                                          AWA:

                                          America West Airlines, Inc.,
                                          a Delaware corporation


                                          By: /s/ William A. Franke
                                             -----------------------------------
                                          Name: William A. Franke
                                               ---------------------------------
                                          Title: Chairman and CEO
                                                --------------------------------

                                          CAI:

                                          Chautauqua Airlines, Inc.,
                                          a New York corporation


                                          By: /s/ Bryan Bedford
                                             -----------------------------------
                                          Name: Bryan Bedford
                                               ---------------------------------
                                          Title: President
                                                --------------------------------



                                       28




                                    EXHIBITS





                                   EXHIBIT A


[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURUSANT TO A REQUEST FOR CONFIDENTIAL TREATEMENT]



                                    EXHIBIT B


[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURUSANT TO A REQUEST FOR CONFIDENTIAL TREATEMENT]





EXHIBIT C


[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURUSANT TO A REQUEST FOR CONFIDENTIAL TREATEMENT]

EX-10.2(A)

                                                                   EXHIBIT 10.2A

                          FIRST AMENDMENT TO CODE SHARE
                          AND REVENUE SHARING AGREEMENT

      THIS FIRST AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT
("Amendment") is made to be effective as of December 24, 2001 (the "Effective
Date"), by and between AMERICA WEST AIRLINES, INC., a Delaware corporation
("AWA"), and CHAUTAUQUA AIRLINES, INC., a New York corporation ("CAI").

      RECITALS:

            A. AWA and CAI entered into that certain Code Share and Revenue
Sharing Agreement, dated to be effective March 20, 2001 (the "Code Share
Agreement"). All capitalized terms used herein, but not defined herein, have the
meanings given to such terms in the Code Share Agreement.

            B. CAI and AWA desire to amend the Code Share Agreement to [*] to
provide CAI with the opportunity to and to alter [*] in each case as provided
herein, and to temporarily amend the expense reimbursement model.

      NOW, THEREFORE, in consideration of the promises, covenants,
representations and warranties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, AWA and CAI agree as set forth
below.

      AGREEMENTS:

1.          AMENDMENTS. The Code Share Agreement is amended as follows:

      1.1 Section 1.2.1 of the Code Share Agreement is deleted in its entirety
and replaced with the following:

            1.2.1 INITIAL ERJ FLEET. CAI shall provide the Flight Services using
      [*] (collectively, the "Fleet" and individually, each an "Aircraft").
      [*] Aircraft shall be placed into Flight Services by CAI during each of
      the following calendar months: [*] for a total of [*] Aircraft
      (collectively, the "Firm Aircraft"). In consideration for CAI altering
      the delivery schedule as originally set forth in this Agreement, [*]
      shall pay to [*] the sum of [*] on or before each of the following
      dates: [*] by wire transfer pursuant to wiring instructions provided to
      AWA by CAI. CAI shall provide AWA with at least 90 days' prior written
      notice of the calendar week in which each of the Firm Aircraft will be
      placed into Flight Services under this Agreement (each a "Scheduled
      Delivery Week"). If an Aircraft is not a

- ----------
* Confidential


      "new" Aircraft from the manufacturer, then the Aircraft shall not be older
      than [*] months from the new manufacturer delivery and the interior and
      exterior shall be decorated, painted and reconfigured to AWA
      specifications at [*] prior to the delivery date.

            CAI, by providing AWA with at least [*] (the "Diversion Notice"),
      shall have the right, in CAI's sole discretion, to cause all, but not
      less than all, of the Aircraft to be diverted to other non-AWA uses. If
      CAI issues a Diversion Notice to divert the Aircraft to other non-AWA
      uses, then: (i) from and after the date of the Diversion Notice, the
      Aircraft not yet placed into Flight Service pursuant to SECTION 1.2.1
      shall not be put into Flight Services for AWA, shall not be considered
      part of the Fleet, shall not be considered an Aircraft under this
      Agreement and neither CAI nor AWA shall have any further right,
      liability, obligation or duty under this Agreement in regard to such
      diverted Aircraft; and (ii) any Aircraft in the Fleet as of the date of
      the Diversion Notice shall be removed from Flight Services over up to
      [*] commencing no earlier than the [*] after the date of the Diversion
      Notice. Upon the removal of the last Aircraft from Flight Services this
      Agreement shall automatically terminate and neither AWA nor CAI shall
      have any further right, liability or obligation under this Agreement,
      except for the payment of any sums accrued under this Agreement to the
      date of such termination, the indemnity obligations set forth in 9 and
      any other obligations that expressly survive the termination of this
      Agreement. If CAI does not divert the Aircraft as provided herein, then
      the Aircraft shall be subject to the terms and conditions of this
      Agreement on the applicable in service date.

            In the event that CAI obtains short-term lease expense relief on
      behalf of AWA for the Fleet, it being understood and agreed that [*],
      then [*] attached hereto, shall be [*].

      1.2 Section 1.2.3 of the Code Share Agreement is revised by adding the
following new paragraph to the end of the Section:

            Notwithstanding anything in this Section 1.2.3 to the contrary, [*]
      (the [*]): (i) AWA shall provide CAI with written notice of its election
      to exercise the [*] on or before 5:00 p.m., Phoenix, Arizona time, on
      May 15, 2002 designating which of such Aircraft AWA [*] and (ii) [*] on
      or before 5:00 p.m., Phoenix, Arizona time, on July 31, 2002, by wire
      transfer pursuant to wiring instructions provided by CAI to AWA. [*] to
      be delivered in October 2002 and November 2002, then


- ----------
* Confidential

                                       2


      AWA shall have [*]

      1.3 A new section 14.11 of the Code Share Agreement shall be added as
follows:

            14.11 [*] then the Warrant Issuance Agreement, dated March 20,
      2001, between CAI and AWA, as of the date of any notice exercising any
      such rights, [*]

      1.4 Exhibit A to the Code Share Agreement is amended to provide that
for the period commencing on [*] Upon the expiration of the Reduction Period,
Exhibit A shall be reinstated in its entirety as originally attached to the
Code Share Agreement. In the event that the Code Share Agreement is
terminated prior to the Expiration Date other than as a result of a breach of
the Code Share Agreement by CAI, [*] shall pay to [*]on the effective date of
such termination the difference between (a) [*] and (b) [*]

2.          COUNTERPARTS. This Amendment may be executed in counterparts, all of
which shall be deemed to be one and the same document. This Amendment may be
executed by facsimile copies.

3.          EFFECT. Except as set forth in this Amendment, the Code Share
Agreement remains in full force and effect as originally executed.

      AWA:                                AMERICA WEST AIRLINES, INC.


                                          By: /s/ Andrew Nocella
                                             ---------------------------------
                                                Its: Vice President, Planning
                                                    --------------------------


      CAI:                                CHAUTAUQUA AIRLINES, INC.


                                          By: /s/ Bryan Bedford
                                             ---------------------------------
                                                Its: President
                                                    --------------------------



- ----------
* Confidential
                                       3

EX-10.3

                                                                    EXHIBIT 10.3

                                    AGREEMENT

      THIS AMENDMENT (the "Agreement") is made and entered into as of March 20,
2001 (the "Effective Date"), by and between AMERICA WEST AIRLINES, INC., a
Delaware corporation ("AWA"), and CHAUTAUQUA AIRLINES, INC., a Nevada
corporation ("CAI").

      RECITALS:

            A. AWA and CAI entered into that certain Code Share and Revenue
Sharing Agreement, dated March 20, 2001 (the "Code Share Agreement"). All
capitalized terms used in this Agreement, but not defined herein, shall have the
meaning given to such terms in the Code Share Agreement.

            B. The Code Share Agreement provides for the reimbursement of CAI
for certain [*] (the "CAI Compensation Structure").

            C. [*]

            D. AWA believes that the [*], as well as the [*], do not violate
the terms of the [*] and that the pending [*].

            E. AWA and CAI desire to provide for the continuance of the Code
Share Agreement in the event the [*].

      NOW, THEREFORE, in consideration of the recitals and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, AWA and CAI agree as follows:

- ----------
* Confidential


      AGREEMENTS:

1.          RESTRUCTURE. [*]

2.          EFFECT ON BALANCE OF CONTRACT. Any amendment to the Code Share
Agreement to incorporate the Prorate Arrangement pursuant to Paragraph 1 above
shall not affect any of the other duties, obligations, rights, liabilities,
terms, covenants, conditions, promises and agreements contained in the Code
Share Agreement which shall remain in full force and effect as set forth in the
Code Share Agreement.


- ----------
* Confidential
                                       2


3.          MISCELLANEOUS. This Agreement shall remain in full force and
effect during the entire Term of the Code Share Agreement and shall apply to
any and all grievances or other claims alleging [*]. Until AWA issues a
Restructure Notice, this Agreement shall not be used to interpret or clarify,
and shall not be deemed to amend, modify or change, any of the terms,
covenants, conditions, promises or agreements contained in the Code Share
Agreement.

                                          AMERICA WEST AIRLINES, INC.


                                          By: /s/ William A. Franke
                                             ---------------------------
                                          Name: William A. Franke
                                               -------------------------
                                          Title: Chairman and CEO
                                                ------------------------


                                          CHAUTAUQUA AIRLINES, INC.


                                          By: /s/ Bryan Bedford
                                             ---------------------------
                                          Name: Bryan Bedford
                                               -------------------------
                                          Title: President
                                                ------------------------



- ----------
* Confidential


                                       3

EX-10.4

                                                                    EXHIBIT 10.4

                           WARRANT ISSUANCE AGREEMENT

      THIS WARRANT ISSUANCE AGREEMENT (the "Agreement") is made and entered into
as of ___________, 2001, by and between Chautauqua Airlines, Inc. a New York
corporation ("Chautauqua"), and America West Airlines, Inc., a Delaware
corporation ("AWA").

                                    RECITALS

      WHEREAS, Chautauqua and AWA are entering into concurrently herewith a Code
Share and Revenue Sharing Agreement (the "Code Share Agreement"); and

      WHEREAS, Chautauqua desires to issue to AWA a warrant (the "Warrant") to
purchase shares of common stock, $0.01 par value (the "Common Stock"), of
Chautauqua on the terms and conditions set forth herein.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

      1. ISSUANCE OF WARRANT

            1.1 ISSUANCE OF WARRANT. Upon the closing date (the "Issuance Date")
of the initial public offering of shares of Common Stock of Chautauqua (the
"IPO"), Chautauqua shall issue to AWA a warrant (the "Warrant") to purchase the
number of shares of Common Stock (the "Warrant Shares") determined as set forth
below at the exercise price (the "Exercise Price") determined as set forth
below.

            1.2 NUMBER OF WARRANT SHARES. The number of Warrant Shares shall be
determined as follows:




          ---------------------------------------------------------
               COMMITTED AIRCRAFT            % OF IPO SHARES
          ---------------------------------------------------------
                                               
                  Less than 12                      0
          ---------------------------------------------------------
                       12                         2.000
          ---------------------------------------------------------
                       14                         2.635
          ---------------------------------------------------------
                       16                         3.400
          ---------------------------------------------------------
                       18                         3.825
          ---------------------------------------------------------
                       20                         4.250
          ---------------------------------------------------------
                       22                         5.255
          ---------------------------------------------------------
                       24                         6.000
          ---------------------------------------------------------



Where "Committed Aircraft" for the purpose of this Section 1.2 means the number
of aircraft committed into flight services by AWA pursuant to the Code Share
Agreement as of the Issuance Date and remaining committed into flight services
as of that date and "IPO Shares" means the greater of (a) the number of shares
of Common Stock offered to the public, including any


                                       1.


overallotment option granted to the underwriters whether or not exercised,
pursuant to the IPO and (b) thirty five percent (35%) of the number of shares
outstanding immediately prior to the closing of the IPO on a fully diluted basis
(assuming the exercise or conversion of any outstanding rights, options and
convertible securities).

            1.3 EXERCISE PRICE. The Exercise Price shall be the price to the
underwriters in the IPO (the "IPO Price").

            1.4 FORM OF WARRANT. The Warrant will be in the form attached hereto
as Exhibit A.

      2.    REGISTRATION RIGHTS

            2.1 IPO NOTICE. Chautauqua will give AWA not less than sixty (60)
days prior written notice before the closing date of its IPO.

            2.2   DEMAND REGISTRATION

                  2.2.1 If Chautauqua shall receive a written request from AWA
that Chautauqua file a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering the registration of at least a
majority of the Warrant Shares then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed five million dollars ($5,000,000)), then Chautauqua
shall expeditiously effect the registration under the Securities Act of all
shares of Common Stock (including any Warrant Shares) that AWA has requested to
be registered (the "Registrable Securities").

                  2.2.2 If AWA intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise
Chautauqua as a part of its request made pursuant to this Section 2.2 and
Chautauqua shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by AWA (which
underwriter or underwriters shall be reasonably acceptable to Chautauqua).
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises Chautauqua that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then Chautauqua
shall so advise AWA, and the number of Registrable Securities that may be
included in the underwriting shall be allocated among AWA, Chautauqua and any
other stockholders including shares of Common Stock in such registration on a
PRO RATA basis based on the number of shares of Common Stock held by all such
holders.

                  2.2.3 The Company shall not be required to effect a
registration pursuant to this Section 2.2:

                        (a) prior to the earlier of (i) the third anniversary of
the date of this Agreement or (ii) one hundred eighty (180) days following the
effective date of the registration statement pertaining to the IPO; and

                        (b) after the Company has effected one registration
pursuant to this Section 2.2, and such registration has been declared or ordered
effective;

            2.3   PIGGYBACK REGISTRATIONS.

                  2.3.1 In addition to the notice requirement set forth in
Section 2.1, Chautauqua shall notify AWA in writing at least fifteen (15) days
prior to the filing of any


                                       2.


registration statement under the Securities Act for purposes of a public
offering of securities of Chautauqua (including, but not limited to,
registration statements relating to secondary offerings of securities of
Chautauqua, but excluding registration statements relating to any employee
benefit plan or to any corporate reorganization) and will afford AWA an
opportunity to include in such registration statement all or part of any shares
of Common Stock held by AWA. If AWA desires to include in any such registration
statement any shares of Common Stock held by AWA it shall, within ten (10) days
after the above-described notice from Chautauqua, so notify Chautauqua in
writing. If AWA decides not to include any shares of Common Stock in any
registration statement filed by Chautauqua, AWA shall nevertheless continue to
have the right to include any shares of Common Stock in any subsequent
registration statement or registration statements as may be filed by Chautauqua
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.

                  2.3.2 Notwithstanding any other provision of this Agreement,
if the underwriter with respect to an underwritten offering (other then an
underwritten offering pursuant to Section 2.2) determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the holders of Common
Stock (including AWA) on a PRO RATA basis based on the total number of shares of
Common Stock held by such holder.

            2.4.  FORM S-3 REGISTRATION. If Chautauqua shall receive from AWA a
written request or requests that Chautauqua effect a registration on Form S-3
(or any successor to Form S-3) or any similar short-form registration statement
and any related qualification or compliance with respect to all or a part of the
Common Stock owned by AWA, the Company will as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of the Registrable Securities; PROVIDED, HOWEVER, that Chautauqua shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:

                  (a) if Form S-3 is not available for such offering by AWA, or

                  (b) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for AWA pursuant to this Section 2.4, or

                  (c) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.

Subject to the foregoing, Chautauqua shall file such Form S-3 registration
statement as soon as practicable after receipt of the request of AWA.
Registrations effected pursuant to this Section 2.4 shall not be counted as a
demand for registration effected pursuant to Section 2.2.

            2.5   EXPENSES OF REGISTRATION. Except as specifically provided
herein, all expenses incurred in connection with any registration, qualification
or compliance pursuant to Sections 2.2, 2.3 or 2.4, including, without
limitation all registration and filing fees, printing expenses, fees and
disbursements of counsel for Chautauqua, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the selling stockholders, blue sky fees and expenses and the expense of any
special audits incident to or


                                       3.


required by any such registration shall be borne by Chautauqua. All underwriting
discounts and selling commissions incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered PRO
RATA on the basis of the number of shares so registered.

      3.    SALE EVENT

            3.1 SALE EVENT. At any time prior to the closing of the IPO, in the
event that Chautauqua (a) liquidates, (b) dissolves, (c) winds up, (d)
consolidates or merges with or into any other entity, or effects any other
corporate reorganization, in which the stockholders of Chautauqua immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of the voting power of the surviving entity immediately after such
consolidation, merger or reorganization, (e) effects any transaction or series
of related transactions in which in excess of fifty percent (50%) of the voting
power of Chautauqua is transferred, or (f) sells, leases or otherwise disposes
of all or substantially all of its assets (each a "Sale Event"), then upon the
closing of such Sale Event (the "Sale Event Closing"), Chautauqua will pay or
will cause to be paid to AWA an amount equal to the percentage of the
consideration received in the Sale Event as determined as follows:




          ---------------------------------------------------------
               COMMITTED AIRCRAFT          % OF CONSIDERATION
          ---------------------------------------------------------
                                               
                  Less than 12                      0
          ---------------------------------------------------------
                       12                         2.000
          ---------------------------------------------------------
                       14                         2.635
          ---------------------------------------------------------
                       16                         3.400
          ---------------------------------------------------------
                       18                         3.825
          ---------------------------------------------------------
                       20                         4.250
          ---------------------------------------------------------
                       22                         5.255
          ---------------------------------------------------------
                       24                         6.000
          ---------------------------------------------------------


Where "Committed Aircraft" for the purpose of this Section 3.1 means the number
of aircraft committed into flight services by AWA pursuant to the Code Share
Agreement as of the date immediately prior to the Sale Event Closing and
remaining committed into flight services as of that date and "Consideration"
means thirty-five percent (35%) of the value of the aggregate consideration
received by Chautauqua and the stockholders of Chautauqua upon the Sale Event
Closing in excess of one hundred fifty million dollars ($150,000,000). For the
purpose of determining the aggregate consideration received by Chautauqua and
the stockholders of Chautauqua, (a) to the extent it consists of cash, it shall
be computed at the gross amount of cash received by Chautauqua and the
stockholders without any deduction for payment of expenses or otherwise, (b) to
the extent it consists of securities that are traded on a national securities
exchange or admitted to unlisted trading privileges on such an exchange, or are
listed on the Nasdaq National Market, it shall be valued at the average of the
last reported sale price of such security for the five (5) trading days ended
the day before the Sale Event Closing, and (c) to the extent that it consists of
property other than cash or such securities, it shall be valued as


                                       4.


Chautauqua and AWA may mutually agree; PROVIDED that both parties shall
negotiate in good faith, and if the parties are unable to reach an agreement as
to value, either party shall have the right within thirty (30) days of the Sale
Event Closing to commence an action seeking declaratory judgment with respect to
such value.

            3.2 NOTICE OF SALE EVENT. Chautuaqua will give AWA not less than
thirty (30) days prior written notice before a Sale Event Closing.

      4.    MISCELLANEOUS

            4.1 BINDING AGREEMENT. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

            4.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents, made and to be performed entirely within the State of Delaware.

            4.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

            4.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

            4.5 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to Chautauqua
at Chautauqua Airlines, Inc., 2500 South High School Road, Indianapolis,
Indiana, 46241, Fax No.: (317) 484-6060, Attention: President, with a copy to
Wexford Capital LLC, 411 West Putnam Avenue, Greenwich, Connecticut, 06830, Fax
No.: (203) 862-7312, Attention: General Counsel and AWA at America West
Airlines, Inc., 111 West Rio Salado Parkway, Tempe, Arizona, 85281, Fax No.:
(480) 693-5155, Attention: General Counsel, with a copy to Cooley Godward LLP,
One Maritime Plaza, 20th Floor, San Francisco, 94111, Fax No.: (415) 951-3699,
Attention: Samuel Livermore, or at such other address as Chautauqua or AWA may
designate by ten (10) days advance written notice to the other party hereto.

            4.6 MODIFICATION; WAIVER. No modification or waiver of any provision
of this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by Chautauqua and AWA.

            4.7 ENTIRE AGREEMENT. This Agreement and the Exhibit hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein.


                                       5.




      IN WITNESS WHEREOF, the parties have executed this WARRANT ISSUANCE
AGREEMENT as of the date first written above.

CHAUTAUQUA AIRLINES, INC.                 AMERICA WEST AIRLINES, INC.

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

Name:                                     Name:
     -------------------------                 -------------------------

Title:                                    Title:
      ------------------------                  ------------------------






                                       6.


                                    EXHIBIT A

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

                            CHAUTAUQUA AIRLINES, INC.
                        WARRANT TO PURCHASE COMMON STOCK

                                                          ________ ____, _____

      THIS CERTIFIES THAT, for value received, America West Airlines, Inc., with
its principal office at 111 West Rio Salado Parkway, Tempe Arizona, 85281, or
assigns (the "Holder" or "Purchaser"), is entitled to subscribe for and purchase
at the Exercise Price (defined below) from Chautauqua Airlines, a New York
corporation, with its principal office at 2500 South High School Road,
Indianapolis, Indiana, 46241 (the "Company"), ____________ shares of common
stock of the Company, par value $0.01 per share (the "Common Stock"), as
provided herein.

      1.    DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:

            (a) "Exercise Period" shall mean the time period commencing with the
date of this Warrant and ending on the date three years from the closing date of
the initial public offering of the Common Stock (the "IPO").

            (b) "Exercise Price" shall mean _______, subject to adjustment
pursuant to the terms herein.

            (c) "Exercise Shares" shall mean the shares of the Company's Common
Stock issuable upon exercise of this Warrant, subject to adjustment pursuant to
the terms herein.

      2.    EXERCISE OF WARRANT.

            2.1 EXERCISE. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):

                  (a) An executed Notice of Exercise in the form attached
hereto;

                  (b) Payment of the Exercise Price either (i) in cash or by
check, or (ii) by cancellation of indebtedness; and

                  (c) This Warrant.

      Upon the exercise of the rights represented by this Warrant, a certificate
or certificates for the Exercise Shares so purchased, registered in the name of
the Holder or persons affiliated with the Holder, if the Holder so designates,
shall be issued and delivered to the Holder within a reasonable time after the
rights represented by this Warrant shall have been so exercised.



      The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.

            2.2 NET EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Exercise Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant by payment of cash, the Holder may elect (the
"Conversion Right") to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Notice of Exercise in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:

                  X = Y (A-B)
                      -------
                        A

      Where X =   the number of shares of Common Stock to be issued to the
                  Holder

            Y =   the number of shares of Common Stock purchasable under the
                  Warrant or, if only a portion of the Warrant is being
                  exercised, the portion of the Warrant being canceled (at the
                  date of such calculation)

            A =   the fair market value of one share of the Company's Common
                  Stock (at the date of such calculation)

            B =   Exercise Price (as adjusted to the date of such calculation)

      For purposes of the above calculation, the fair market value of one share
of Common Stock shall be:

                  (a) the product of (i) the average daily Market Price (as
defined below) during the period of the most recent 10 days, ending on the last
business day before the effective date of exercise of the Conversion Right, on
which the national securities exchanges were open for trading and (ii) the
number of shares of the Common Stock (as defined herein) into which each
Exercise Share is convertible on such date; or

                  (b) if no class of Common Stock is then listed or admitted to
trading on any national securities exchange or quoted in the over-counter
market, the fair market value shall be the Market Price on the last business day
before the effective date of exercise of the Conversion Right.

      If the Common Stock is traded on a national securities exchange or
admitted to unlisted trading privileges on such an exchange, or is listed on the
National Market System (the "National Market System") of the Nasdaq, the Market
Price as of a specified day shall be the last reported sale price of Common
Stock on such exchange or on the National Market System on such date or if no
such sale is made on such day, the mean of the closing bid and asked prices for
such day on such exchange or on the National Market System. If the Common Stock
is not so listed or admitted to unlisted trading privileges, the Market Price as
of a specified day shall be the mean


                                       2.


of the last bid and asked prices reported on such date (x) by the Nasdaq or (y)
if reports are unavailable under clause (x) above by the National Quotation
Bureau Incorporated. If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and ask prices are not reported, the Market
Price as of a specified day shall be determined in good faith by the Board of
Directors of the Company.

      3.    COVENANTS OF THE COMPANY.

            3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and
agrees that all Exercise Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights represented
by this Warrant. If at any time during the Exercise Period the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
exercise of this Warrant, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.

            3.2 NO IMPAIRMENT. Except and to the extent as waived or consented
to by the Holder, the Company will not, by amendment of its
[Articles/Certificate] of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in the carrying out of all the provisions
of this Warrant and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment, PROVIDED that nothing herein shall in any manner restrict the
Company from undertaking a Sale Event (as defined in the Warrant Issuance
Agreement, dated as of _____, between the Company and the Holder (the "Warrant
Issuance Agreement")) based on the good faith determination by the Company's
Board of Directors that such transaction is in the best interests of the Company
if the Company complies fully with Section 3 of the Warrant Issuance Agreement.

            3.3 NOTICES OF RECORD DATE. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to the Holder, at least
ten (10) days prior to the date specified herein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend or
distribution.

            3.4 NOTICE OF EXPIRATION. If this Warrant has not been fully
exercised on or before the date thirty (30) days prior to the end of the
Exercise Period, the Company shall thereafter provide Holder with at least
twenty (20) days advance written notice of the date on which this Warrant is to
expire. If the Company fails to provide such notice, the Exercise Period shall
be extended until the date thirty (30) days after the date said notice is
provided to Holder.

      4.    REPRESENTATIONS OF HOLDER.

            4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder
represents and warrants that it is acquiring the Warrant solely for its account
for investment and not with a


                                       3.


view to or for sale or distribution of said Warrant or any part thereof, other
than potential transfers between affiliates. The Holder also represents that the
entire legal and beneficial interests of the Warrant and Exercise Shares the
Holder is acquiring is being acquired for, and will be held for, its account
only.

            4.2   SECURITIES ARE NOT REGISTERED.

                  (a) The Holder understands that the Warrant and the Exercise
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act") on the basis that no distribution or public offering of the stock of
the Company is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention, other than potential transfers between
affiliates.

                  (b) The Holder recognizes that the Warrant and the Exercise
Shares must be held indefinitely unless they are subsequently registered under
the Act or an exemption from such registration is available.

                  (c) The Holder is aware that neither the Warrant nor the
Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met, including, among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale following the required holding period
under Rule 144 and the number of shares being sold during any three month period
not exceeding specified limitations. Holder is aware that the conditions for
resale set forth in Rule 144 have not been satisfied and that the Company
presently has no plans to satisfy these conditions in the foreseeable future.

            4.3   DISPOSITION OF WARRANT AND EXERCISE SHARES.

                  (a) The Holder further agrees not to make any disposition of
all or any part of the Warrant or Exercise Shares in any event unless and until:

                        (i) The Company shall have received a letter secured by
the Holder from the Securities and Exchange Commission stating that no action
will be recommended to the Commission with respect to the proposed disposition;
or

                        (ii) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or

                        (iii) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition; provided, however, that
such statement will not be required if the disposition is permitted under Rule
144 of the Act.

                  (b) Notwithstanding the provisions of paragraph (a) above, the
Holder may assign this Warrant and the Exercise Shares to any affiliate.


                                       4.


      5.    ADJUSTMENT OF EXERCISE PRICE.

            5.1 STOCK DIVIDENDS; SPLITS; ETC. In the event of changes in the
outstanding Common Stock of the Company after the date hereof by reason of stock
dividends, splits, recapitalizations, reclassifications, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate and
the Exercise Price shall be correspondingly adjusted to give the Holder of the
Warrant, on exercise for the same aggregate Exercise Price (the "Aggregate
Exercise Price"), the total number, class, and kind of shares as the Holder
would have owned had the Warrant been exercised prior to the event and had the
Holder continued to hold such shares until after the event requiring adjustment.
The form of this Warrant need not be changed because of any adjustment in the
number of Exercise Shares subject to this Warrant.

            5.2   SALE OF SHARES BELOW SERIES PREFERRED CONVERSION PRICE.

                  (a) If at any time or from time to time after the date hereof,
the Company issues or sells, or is deemed to have issued or sold, Additional
Shares of Common Stock (as defined below), for an Effective Price (as defined
below) less than the then effective Exercise Price, then and in each such case,
the then existing Exercise Price shall be reduced, as of the opening of business
on the date of such issue or sale, to a price determined as set forth below and
the Holder shall have the right to purchase on exercise of the Warrant the
number of shares of Common Stock obtained by dividing the Aggregate Exercise
Price by the Exercise Price as reduced. The Exercise Price shall be reduced by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by a fraction equal to:

                        (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
Aggregate Consideration received (as defined below) by the Company for the total
number of Additional Shares of Common Stock so issued would purchase at such
Exercise Price, and

                        (ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of Common Stock
so issued.

      For the purposes of the preceding sentence, the number of shares of Common
Stock deemed to be outstanding as of a given date shall be the sum of (A) the
number of shares of Common Stock outstanding, and (B) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities outstanding on the day
immediately preceding the given date.

                  (b) For the purpose of making any adjustment required under
this Section 5.2, the aggregate consideration received by the Company for any
issue or sale of securities (the "Aggregate Consideration") shall: (i) to the
extent it consists of cash, be computed at the net amount of cash received by
the Company after deduction of any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection with
such issue or sale but without deduction of any expenses payable by the Company,
(ii) to the extent it consists of property other than cash, be computed at the
fair value of that property as determined in good faith by the Board of
Directors, and (iii) if Additional


                                       5.


Shares of Common Stock, Convertible Securities (as defined below) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.

                  (c) For the purpose of the adjustment required under this
Section 5.2, if after the date hereof the Company issues or sells (x) stock or
other securities convertible into Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as "Convertible
Securities") or (y) rights or options for the purchase of Additional Shares of
Common Stock or Convertible Securities and if the Effective Price of such
Additional Shares of Common Stock is less than the Exercise Price, in each case
the Company shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities plus:

                        (i) in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options; and

                        (ii) in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company upon the conversion
thereof (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities); PROVIDED that if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.

                        (iii) If the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; PROVIDED FURTHER, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.

                        (iv) No further adjustment of the Exercise Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares of Common
Stock or the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Exercise Price as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Exercise
Price which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the


                                       6.


exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.

      6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.

      7. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle
the Holder to any voting rights or other rights as a stockholder of the Company.

      8. TRANSFER OF WARRANT. Subject to applicable laws, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder.

      9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.

      10. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at Chautauqua Airlines, Inc., 2500 South High School Road, Indianapolis,
Indiana, 46241, Fax No.: (317) 484-6060, Attention: President, with a copy to
Wexford Capital LLC, 411 West Putnam Avenue, Greenwich, Connecticut, 06830, Fax
No.: (203) 862-7312, Attention: General Counsel and the Holder at America West
Airlines, Inc., 111 West Rio Salado Parkway, Tempe, Arizona, 85281, Fax No.:
(480) 693-5155, Attention: General Counsel, with a copy to Cooley Godward llp,
One Maritime Plaza, 20th Floor, San Francisco, California, 94111, Fax No. (415)
951-3699, Attention: Samuel Livermore, or at such other address as the Company
or the Holder may designate by ten (10) days advance written notice to the other
party hereto.


                                       7.


      11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.

      12. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by the laws of the State of Delaware.






                                       8.




      IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of .

                                    CHAUTAUQUA AIRLINES, INC.

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

                                    Name:
                                         -------------------------------

                                    Title:
                                          ------------------------------







                                       9.


                               NOTICE OF EXERCISE

TO:  CHAUTAUQUA AIRLINES, INC.

      (1)   |_|   The undersigned hereby elects to purchase ________ shares of
the Common Stock of Chautauqua Airlines, Inc. (the "Company") pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.

            |_|   The undersigned hereby elects to purchase ________ shares of
the Common Stock of Chautauqua Airlines, Inc. (the "Company") pursuant to the
terms of the net exercise provisions set forth in Section 2.2 of the attached
Warrant, and shall tender payment of all applicable transfer taxes, if any.

      (2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:

                        ________________________________
                                     (Name)


                        ________________________________

                        ________________________________
                                    (Address)

      (3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; (ii) the undersigned is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding its investment in the
Company; (iii) the undersigned is experienced in making investments of this type
and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that the shares of Common Stock issuable upon exercise of this Warrant have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), by reason of a specific exemption from the registration provisions of the
Securities Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent as expressed herein, and, because such
securities have not been registered under the Securities Act, they must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available; and (v) the undersigned is aware
that the aforesaid shares of Common Stock may not be sold pursuant to Rule 144
adopted under the Securities Act unless certain conditions are met and until the
undersigned has held the shares for the number of years prescribed by Rule 144,
that among the conditions for use of the Rule is the availability of current
information to the public about the Company and the Company has not made such
information available and has no present plans to do so.



- -----------------------             ----------------------------
(Date)                              (Signature)

                                    ----------------------------
                                    (Print name)




                                 ASSIGNMENT FORM

                     (To assign the foregoing Warrant, execute
                     this form and supply required information.
                     Do not use this form to purchase shares.)

      FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

Name:
       _______________________________________________________________________
                                 (Please Print)

Address:
          ____________________________________________________________________
                                 (Please Print)

Dated: _________________
Holder's
Signature:
           _____________________________________
Holder's
Address:
         _______________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

EX-10.5

                             AIR SERVICES AGREEMENT

         This Agreement, dated as of June 11, 2001, but to be effective on the
SABRE Cutover Date (as defined below), is between AMERICAN AIRLINES, INC.
("AA"), a Delaware corporation having offices at 4333 Amon Carter Boulevard,
Mail Drop 5494, Fort Worth, Texas, 75261, and CHAUTAUQUA AIRLINES, INC.
("CONTRACTOR"), a New York corporation having its principal place of business at
Indianapolis International Airport, 2500 South High School Road, Indianapolis,
IN 46241.

                                   WITNESSETH:

         WHEREAS, AA holds a certificate of public convenience and necessity
issued pursuant to the federal transportation statutes authorizing it to engage
in air transportation of persons, property and mail, and is a major air carrier
providing scheduled domestic and international air transportation; and

         WHEREAS, Contractor holds a certificate of public convenience and
necessity issued pursuant to the Federal Transportation Statute authorizing it
to engage in air transportation of persons, property and mail, and is a regional
air carrier providing scheduled domestic air transportation; and

         WHEREAS, TWA Airlines, L.L.C., an Affiliate (as defined below) of AA,
and Contractor have entered into an agreement regarding the operation of Feeder
Air Service (as defined herein) utilizing turbo-prop aircraft and regional jets
pursuant to that certain Asset Purchase Agreement dated January 9, 2001; and

         WHEREAS, AA and Contractor desire to amend and restate said agreement,
namely the Amended and Restated Trans World Express Air Service Agreement dated
February 15, 2001.

         NOW, THEREFORE, in consideration of the foregoing premises, mutual
covenants and obligations hereinafter contained and subject to securing any and
all necessary corporate and Federal, State and local regulatory approvals, and
where necessary, airport consents or approvals, but only to the extent such
approvals and consents are required for the performance of services hereunder,
the parties agree as follows:

DEFINITIONS

         1.       "AA" means American Airlines, Inc.

         2.       "AADAMS" means American Airlines Digital Asset Management
                  System.

         3.       "AA TARIFFS" has the meaning ascribed to it in Exhibit H.

         4.       "AATV" means AA Travel Vouchers.

         5.       "AA UNAUTHORIZED OBLIGATION" has the meaning ascribed to it in
                  Section 6.02(b).

         6.       "ABR" means the name, as to be designated in writing by AA on
                  or prior to July 31, 2001, pursuant to which Contractor will
                  operate Feeder Air Service.




         7.       "ABR MARKS" shall mean those trademarks, service marks,
                  tradenames, logos, emblems, uniform designs, and distinctive
                  exterior and interior color decor and patterns for aircraft,
                  all as used in connection with the AA ABR brand of commuter
                  air service and listed or described on Exhibit B-1.

         8.       "ACCEPTED FREQUENT FLYER PROGRAM" means the AAdvantage
                  Frequent Flyer Program and any other carrier's frequent flyer
                  program designated by AA.

         9.       "ACQUIRING PARTY" has the meaning ascribed to it in Section
                  9.02(b).

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

         11.      "AFFILIATE" means, with respect to a Person, any other Person
                  controlling, controlled by, or under common control with, such
                  Person.

         12.      "AIRPORT SUPPORT SERVICES" means those Ground Handling,
                  Passenger Handling Duties associated with providing AA's
                  desired ground service levels in conjunction with the Feeder
                  Air Services contemplated herein.

         13.      "AMERICAN EAGLE" OR "AE" means AMR Corporation's wholly owned
                  regional airline, American Eagle Airlines, Inc.

         14.      "AMR ENTITIES" means AMR Corporation and its successors,
                  subsidiaries, Affiliates, parent companies, general partners,
                  limited partners, predecessors and assigns, including but not
                  limited to TWA, AA and AE.

         15.      "APPROVED AIRCRAFT" means any aircraft included in the Fleet
                  Plan and made a part of this Agreement.

         16.      "ATAC" means AA's automated agent check out system.

         17.      "ATA MANUAL" means the Air Transportation Association's Air
                  Cargo Council Trade Practice Manual.

         18.      "AUTOMATION EQUIPMENT" has the meaning ascribed to it in
                  Exhibit L.

         19.      "BAGGAGE CLAIM" means notification by a passenger that his
                  baggage has been lost, damaged, delayed, pilfered or stolen
                  and may originate in the form of a report prepared on behalf
                  of the passenger by airline personnel, which may or may not
                  entitle the passenger to receive compensation.

         20.      "BANKRUPT PARTY" has the meaning ascribed to it in Section
                  7.02(a).

         21.      "BLOCK HOUR" means that time that commences when an aircraft
                  moves under its own power for the purpose of flight and ends
                  when the aircraft comes to rest after landing.

         22.      "BMAS" or "BAGGAGE MANAGEMENT ANALYSIS SYSTEM" means an
                  internal AA baggage tracking system.

         23.      "CALL OPTION" has the meaning ascribed to it in Section 7.03.




         24.      "CAUSE" means termination of this Agreement prior to the end
                  of the Term for any of the reasons specified in Section 7.02.

         25.      "CDO" means continual duty overnight.

         26.      "CHARTER FLIGHT" means an unpublished revenue flight marketed
                  by an AMR Entity and operated by Contractor with an Approved
                  Aircraft.

         27.      "CLAIMS" has the meaning assigned to it in Section 6.03(b).

         28.      "CLDR" means the Contractor Location Departure Ratio as
                  defined in Exhibit E.

         29.      "COMMON STOCK" has the meaning ascribed to it in Section
                  9.03(d).

         30.      "COMPLETION FACTOR" means number of Scheduled Flights operated
                  divided by number of Scheduled Flights.

         31.      "CONNECTING PASSENGERS" means passengers whose flight
                  itinerary involves a transfer to (or from) a Contractor flight
                  from (or to) an AA or AA Affiliate flight at the STL Hub,
                  Focus City or other such location where Contractor has
                  connections to multiple AA destinations.

         32.      "CONSUMER ADJUSTMENTS" has the meaning ascribed to it in
                  Exhibit F.

         33.      "CONSUMER PRICE INDEX" or "CPI" means the reference index
                  published by the Bureau of Labor Statistics Data, U.S.
                  Department of Labor Statistics Data, U.S. Department of Labor
                  for the Consumer Price Index - All-Urban Consumers, U.S. City
                  average, all items (Base year [*]).

         34.      "CONTRACTOR" means Chautauqua Airlines, Inc.

         35.      "CONTRACTOR CONVERSION" means the complete assumption by
                  Contractor of ground operations at a Covered Location, which
                  results in the Covered Location becoming a Contractor
                  Location.

         36.      "CONTRACTOR LOCATION" means any airport terminal facility
                  where Contractor provides Feeder Air Services pursuant to this
                  Agreement and only Contractor has employees stationed, or
                  causes the delivery of vendor-provided services in lieu of
                  services provided by Contractor employees (including joint
                  locations where Contractor provides Feeder Air Services
                  pursuant to this Agreement at a different terminal facility
                  from which AA and/or its Affiliate operates in the same
                  airport).

         37.      "CONTRACTOR TICKETING LOCATION" has the meaning ascribed to it
                  in Exhibit F.

         38.      "CONTRACTOR UNAUTHORIZED OBLIGATION" has the meaning ascribed
                  to it in Section 6.02(a).

         39.      "CONVERSION EXPENSES" has the meaning ascribed to it in
                  Section 7.03.

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* Confidential



         40.      "CORPORATE COMPLAINT RATIO" means Corporate Complaints per
                  1,000 boarded passengers.

         41.      "CORPORATE COMPLAINTS" means total number of complaints
                  received by Contractor and AA from passengers which are
                  attributable to Contractor's ABR service, as tracked and
                  reported in AA's CAARE System or any successor system.

         42.      "COSTS" has the meaning ascribed to it in Exhibit E.

         43.      "COVERED CONVERSION" means the complete assumption by an AMR
                  Entity of ground operations at a Feeder Airport which results
                  in the Feeder Airport becoming a Covered Location.

         44.      "COVERED LOCATION" means any airport terminal facility where
                  Contractor and an AMR Entity both have operations and only the
                  AMR Entity has employees stationed in such terminal facility.

         45.      "CRS" means computerized reservation system.

         46.      "CUSTOMER SERVICE POLICIES AND PROCEDURES" means the
                  procedures prescribed in writing by AA from time to time, for
                  various activities relating to the provision of air
                  transportation services.

         47.      "DBC" means denied boarding compensation.

         48.      "DEFAULTING PARTY" has the meaning ascribed to it in Section
                  7.02(a).

         49.      "DESIGNATED USERS" has the meaning ascribed to it in Exhibit
                  L.

         50.      "DISCREPANCY NOTICES" has the meaning ascribed to it in
                  Exhibit F.

         51.      "DOD" means United States Department of Defense.

         52.      "DOT" means United States Department of Transportation.

         53.      "ESCALATION PERCENT" and "EP" shall be defined and calculated
                  pursuant to Schedule E-4.

         54.      "EXTRAORDINARY TRANSACTION" has the meaning ascribed to it in
                  Section 9.03(a).

         55.      "FAA" means United States Federal Aviation Administration.

         56.      "FEEDER AIR SERVICE" and "FEEDER AIR SERVICE FLIGHTS" means
                  scheduled air transportation utilizing the AA code, and
                  operated by Contractor as ABR or comparable AA fully branded
                  flights under a non-exclusive license to use the AA Marks in
                  connection with such transportation.

         57.      "FEEDER AIRPORT" means any airport, other than the Hub, where
                  Contractor provides Feeder Air Service Flights at the request
                  of AA pursuant to this Agreement.




         58.      "FIRM APPROVED AIRCRAFT" has the meaning ascribed to it in
                  Schedule C-1.

         59.      "FLEET PLAN" shall mean the schedule of placing aircraft into
                  operation for Feeder Air Service and code share flights as
                  more fully set forth in Exhibit C.

         60.      "FOCUS CITY" shall mean any airport so designated by AA other
                  than the STL Hub where AA and/or an AA Affiliate has
                  connections to multiple points within the AA network.

         61.      "FORCE MAJEURE" has the meaning ascribed to it in Section
                  7.03.

         62.      "FOS" means AA's Flight Operations System.

         63.      "FTP" means File Transfer Protocol.

         64.      "GROUND HANDLING" and "GROUND HANDLING DUTIES" means the
                  provision of one or more of the following: (1) handling,
                  loading, and unloading of baggage, cargo and mail, (2) receipt
                  and dispatch, including , towing/pushback, and observing
                  aircraft engine start (3) baggage delivery, (4) servicing
                  potable water (5) connection and removal of ground power unit
                  and pre-conditioned air, (6) Light Aircraft Cleaning, and (7)
                  any other similar duties agreed upon by the parties in
                  writing.

         65.      "HOLDING COMPANY" has the meaning ascribed to it in Section
                  9.02.

         66.      "HUB" and "STL" means Lambert - St. Louis International
                  Airport, St. Louis, Missouri.

         67.      "INSECURE PARTY" has the meaning ascribed to it in Section
                  7.02(a).

         68.      "IPO" has the meaning ascribed to it in Section 9.03(d).

         69.      "IPO PARTICIPATION RIGHT" has the meaning ascribed to it in
                  Section 9.03(d).

         70.      "IPO SHARE PRICE" has the meaning ascribed to it in Section
                  9.03(d)(1).

         71.      "IPO SHARES" has the meaning ascribed to it in Section
                  9.03(d).

         72.      "LABOR CONTRACT RESTRICTIONS" means certain contractual
                  limitations related to AA commuter carriers and the operation
                  of regional jets as stated in the AA-Allied Pilots Association
                  collective bargaining agreement dated May 5, 1997, as amended
                  from time to time, or any successor agreement.

         73.      "LEASE" means a long-term aircraft lease for Approved Aircraft
                  that complies with the provisions hereof.

         74.      "LIGHT AIRCRAFT CLEANING" means wiping interior surfaces and
                  windows, sweeping/vacuuming, crossing seat belts, folding
                  blankets, trash removal, clean/restock seatback pockets and
                  overhead bins, mopping galley and lavatory, and lavatory
                  service on an as needed basis.

         75.      "MAGSA" has the meaning ascribed to it in Exhibit E.



         76.      "MAIL" has the meaning ascribed to it in Schedule H-1.

         77.      "MARKS" means any trademark, trade name, trade dress, service
                  mark, domain name, or other indicia of ownership owned or used
                  by the AMR Entities.

         78.      "MISHANDLED BAGS" means total number of Baggage Claims
                  received by AA from Connecting Passengers for which Contractor
                  is at fault for lost, damaged, delayed, or pilfered baggage.

         79.      "MITIGATING FACTORS" means on days where AA operations control
                  has advised Contractor operations control that AA is
                  "thinning" its operation, Contractor's maximum 100% completion
                  number will be reduced by the percentage of flights cancelled
                  by AA and those "thinned" Contractor flights will be excluded
                  from the Completion Factor calculation.

         80.      "NEW AHI CALCULATED RATE" has the meaning ascribed to it in
                  Schedule E-3.

         81.      "NEW PLI CALCULATED RATE" has the meaning ascribed to it in
                  Schedule E-3.

         82.      "NTSB" means the National Transportation Safety Board.

         83.      "OAG" means the Official Airline Guide.

         84.      "ON-TIME ARRIVAL" means a Scheduled Flight that arrives prior
                  to 15 minutes after scheduled arrival time; cancelled and
                  diverted flights are not considered on-time arrivals.

         85.      "ONE-TIME CALL OPTION" has the meaning ascribed to it in
                  Section 7.03(b).

         86.      "ONE-TIME PUT OPTION" has the meaning ascribed to it in
                  Section 7.03.

         87.      "OPTION AIRCRAFT" has the meaning ascribed to it in Schedule
                  C-1.

         88.      "ORIGINAL APPROVED AIRCRAFT" has the meaning ascribed to it in
                  Schedule C-1.

         89.      "PASSENGER HANDLING" and "PASSENGER HANDLING DUTIES" means the
                  provision of one or more of the following in conformance with
                  Customer Service Policies And Procedures: (1) ticketing and
                  check-in of passengers, including boarding pass issuance,
                  re-accommodating and reprotecting passengers, (2) gate
                  passenger processing, including aircraft boarding and
                  deplaning duties via jetway or ramp level, (3) baggage service
                  office duties, (4) passenger security screening, (5) skycap
                  services, (6) special passenger assistance, and (7) any other
                  duties normally agreed upon by the parties in writing.

         90.      "PASS THROUGH COSTS" mean those specific costs identified in
                  Schedule E-3.

         91.      "PAWOB" means passengers arriving without bags.

         92.      "PAWOB RATIO" means Mishandled Bags divided by 50% of
                  Connecting Passengers measured per 1,000 Connecting
                  Passengers.



         93.      "PERFORMANCE PERIOD" means a six (6) month period, from
                  January 1 - June 30, and from July 1 - December 31.

         94.      "PERSON" means a natural person, a corporation, a partnership,
                  a limited liability company, an estate, a governmental agency
                  or any other entity.

         95.      "PRIVATE PLACEMENT SHARES" has the meaning ascribed to it in
                  Section 9.03(d)(2).

         96.      "PROPOSED AGREEMENT" has the meaning ascribed to it in Section
                  10.04(c).

         97.      "REVENUE PASSENGER" means each passenger who holds a ticket
                  (electronic or otherwise), flight coupon, voucher, or other
                  form of document which is valid for travel. The term "Revenue
                  Passenger" includes all passengers boarded on a Contractor ABR
                  flight except AA, Contractor, and/or other airline employees,
                  dependents and other eligible persons traveling on a space
                  available or positive space basis in conjunction with an
                  employee travel benefits program.

         98.      "RJ TURN FEE" has the meaning ascribed to it in Exhibit E.

         99.      "RON" means remain over night.

         100.     "RPMS" means revenue passenger miles.

         101.     "SABRE CUTOVER DATE" means the date designated by AA that
                  Contractor discontinues the use of WorldSpan technology and
                  commences the use of Sabre Services in the performance of its
                  duties under this Agreement.

         102.     "SABRE SERVICES" means the computerized SABRE Reservations and
                  Ticketing Service (or any similar or substitute service
                  offered by or on behalf of AA), including associated support
                  systems as designated by AA that performs flight, hotel,
                  rental car and other travel related services, reservations and
                  ticket issuance functions.

         103.     "SCHEDULED FLIGHTS" means those flights published in AA's CRS
                  as of seven (7) days prior to departure date.

         104.     "SHARED CODE SHARING JET FLIGHTS" shall mean the regional jet
                  air transportation operated by Contractor, as may be
                  designated in writing by AA from time to time, which flights
                  are code shared with AA and a third party air carrier.

         105.     "SHIPMENTS" has the meaning ascribed to it in Exhibit H.

         106.     "SSIM" means Standard Schedules Information Manual.

         107.     "STANDARD MARKED" means Approved Aircraft painted with the
                  "ABR" markings and distinctive colors described in Exhibit B-1
                  in addition to being painted with Contractor's name in such
                  fashion as AA shall approve, such approval not to be
                  unreasonably withheld or delayed; PROVIDED, that with respect
                  to the Original Approved Aircraft, the term "Standard Marked"
                  means the TransWorld Express" markings and distinctive colors
                  described in Exhibit B-2.



         108.     "TAX" or "TAXES" has the meaning ascribed to it in Article 8.

         109.     "TERM" has the meaning ascribed to it in Section 7.01(a).

         110.     "TP TURN FEE" has the meaning ascribed to it in Exhibit E.

         111.     "TWA" means TWA Airlines, LLC, a subsidiary of American
                  Airlines, Inc.

         112.     "TWA MARKS" shall mean those trademarks, service marks,
                  tradenames, logos, emblems, uniform designs, and distinctive
                  exterior and interior color decor and patterns for aircraft
                  all as used in connection with the TransWorld Express brand of
                  commuter air service and listed or described on Exhibit B-2.

         113.     "UNCONTROLLABLE CANCELLATIONS" means cancellations that are
                  not due to any failure of Contractor or its vendors or
                  subcontractors to provide equipment, facilities, personnel,
                  aircraft and crews necessary to operate scheduled Feeder Air
                  Service flights and include, without limitation cancellations
                  due to acts or omissions of AA or any other third party or
                  cancellations due to acts of God.

         114.     "USPS" means the United States Postal Service.

         115.     "WORLDTRACER" means an external AA baggage tracking system.

                                      * * *


















ARTICLE 1 - OPERATION OF FEEDER AIR SERVICES

1.01 - USE OF MARKS

         (a)      Contractor has no right or permission to use any of the Marks
                  without first receiving AA's express written approval to do
                  so. Subject to the terms of this Agreement, as amended,
                  Contractor is hereby granted the non-exclusive,
                  non-transferable right and license to use the TWA Marks (but
                  only to the extent affixed to the Original Approved Aircraft)
                  and to use the ABR Marks both in connection with the operation
                  of Contractor's Feeder Air Services. If Contractor receives
                  written permission to reproduce any additional Marks, then
                  Contractor will be given access to the AADAMS so that
                  Contractor may retrieve accurate renditions of such Marks.
                  Contractor acknowledges and agrees that it has permission to
                  use to the extent provided herein only the TWA Marks and the
                  ABR Marks and those Marks to which it has been granted access
                  on AADAMS. Contractor may not use the Marks in any manner
                  other than as contemplated by this Agreement, as amended.
                  Contractor acknowledges that the Marks are the property of the
                  AMR Entities, and upon termination of this Agreement,
                  Contractor will immediately cease use of the Marks. Under no
                  circumstances will Contractor: (1) use or display any Marks
                  (other than the TWA Marks) that Contractor obtained from a
                  source other than AADAMS; (2) alter the Marks in any way; or
                  (3) display the Marks without the appropriate proprietary
                  rights notices. Contractor agrees that it shall in no way
                  contest or deny the validity of, or the right or title of the
                  AMR Entities in or to the Marks, and shall not encourage or
                  assist others directly or indirectly to do so, whether during
                  the Term of this Agreement or thereafter. Contractor will take
                  no actions that are adverse to the AMR Entities' ownership
                  rights in the Marks. Contractor shall not utilize the Marks in
                  any manner that would diminish their value or harm the
                  reputation of the AMR Entities. Contractor shall not use or
                  register any domain name that is identical to or similar to
                  any of the Marks without first receiving AA's prior written
                  approval. Upon written request from AA, Contractor agrees to
                  provide AA with reports at least every ninety days setting
                  forth Contractor's use of the Marks. Contractor may combine
                  these reports with any other report Contractor provides to AA
                  under this Agreement. Contractor will not, under any
                  circumstances, transfer, sell, or give away to a third party
                  any products bearing the Marks that do not meet AA's quality
                  standards.

                  Notwithstanding the above, and except as may be otherwise
                  provided herein, Contractor shall have no right to use the TWA
                  Marks beyond the date that 145-08 is removed from service
                  under the phase out plan set forth in Schedule C-1.

         (b)      The Feeder Air Services operated by Contractor shall be
                  identified as follows:

                           1. The name "ABR" and/or other ABR Marks shall be
                  painted on aircraft and ground equipment used for Contractor's
                  Feeder Air Service Flights in accordance with paint color and
                  graphic design specifications of AA; no other identification
                  shall appear on the aircraft and ground equipment except that
                  Contractor's name shall appear in such fashion as AA shall
                  approve. Use of the "ABR" painted aircraft for Charter Flight
                  use is also permitted.

                           2. Signage at the STL Hub and at Feeder Airport
                  ticket counters and gates shall depict the name "ABR" and/or
                  other ABR Marks in accordance with size, color and design
                  specifications of AA. "ABR" is a Mark as defined by this
                  Agreement and subject to the provisions relating to Marks,
                  including but not limited to Section 1.01(a).




                           3. All Feeder Air Services shall be operated under
                  the name "ABR" or other such name, incorporating an AA Mark,
                  as AA shall from time to time approve. All Feeder Air Service
                  Flights shall be identified by an "AA" or "AA*" designator
                  code, as appropriate, in the OAG; in AA, Contractor, and third
                  party computer reservations systems, including internet
                  reservation systems; in AA timetables; in airport flight
                  information displays; and in passenger tickets and like media
                  distributed to or accessed by travel agents, other airlines or
                  the public.

                           4. Contractor personnel at Feeder Airports and Hub
                  ramp positions and gates used for "ABR" flights shall wear an
                  AA designed "ABR" uniform, if so designated by AA.

                           5. All ground equipment used by Contractor for the
                  Feeder Air Services shall be painted in an AA's color scheme,
                  and identified by an "ABR" marking.

                           6. All advertising and promotion of the Feeder Air
                  Services by Contractor or by AA shall use the name "ABR," and
                  not the Contractor name, except to the extent required by law
                  for disclosure of the operating carrier.

                           7. To the extent not already implemented, AA and
                  Contractor shall establish a Marks conversion timeline to
                  effect the usage of the ABR Marks at locations where TWA Marks
                  are in use.

         (c)      In the event AA adopts new or different ABR Marks for which AA
                  grants Contractor a license pursuant to subsection (a) above,
                  AA may require Contractor to use such new or different ABR
                  Marks in connection with Contractor's Feeder Air Services and
                  if AA does so, Contractor's right and license to use
                  previously licensed ABR Marks shall automatically terminate
                  upon completion of Contractor's changeover to the new ABR
                  Marks pursuant to Section 1.02(l). Contractor's right and
                  license to use any and all Marks shall also automatically
                  terminate after 10 days prior written notice and opportunity
                  to cure in the event Contractor does anything during the Term
                  of this Agreement to contest, infringe or abridge AA's rights
                  in any ABR Marks or TWA Marks.

         (d)      AA may from time to time change the Marks and logos used for
                  "ABR" service. At any time during the Term of this Agreement,
                  and in the sole discretion of AA, Contractor may be required
                  to use such new or different Marks, external or internal color
                  decor and patterns on its Approved Aircraft and uniform design
                  as AA may determine and to discontinue use of certain other
                  Marks; PROVIDED, Contractor will not be required to
                  discontinue its use of TWA Marks on the Original Approved
                  Aircraft. Upon written notice from AA, which will include the
                  specifications for any such changes, Contractor will effect
                  such changes as promptly as practicable. Contractor will pay
                  all costs it incurs in any painting and decor modification of
                  its aircraft as a result of a change in AA's specifications of
                  its external and internal decor; PROVIDED such modifications
                  occur at the end of the useful life of the existing decor. For
                  the purposes of this subsection, the parties agree that the
                  useful life shall be forty-eight (48) months from the date the
                  Approved Aircraft are decorated with the ABR Marks. If AA
                  requires a change to new or different ABR Marks on a
                  Contractor aircraft which has been previously decorated with
                  the ABR Marks within the last four years, the cost of such
                  modifications will be prorated between AA and Contractor based
                  upon forty-eight (48) month useful life commencing on the date
                  each aircraft is decorated with the ABR Marks. For example, if




                  AA requires Contractor to repaint an Approved Aircraft at the
                  end of the third year (36th month) of its useful life,
                  Contractor would be responsible for 75% of the cost and AA
                  would be responsible for the remaining 25% of the cost.

1.02 - SERVICE DESCRIPTION

         (a)      Contractor will continue Feeder Air Service with Original
                  Approved Aircraft as described in the Fleet Plan in Schedule
                  C-1. Further, Contractor will commence Feeder Air Service with
                  Firm Approved Aircraft (as defined in Schedule C-1) upon the
                  Sabre Cutover Date (which shall not be prior to October 1,
                  2001), including obtaining all DOD, DOT, FAA and other
                  regulatory approvals and will phase-in operation of all Firm
                  Approved Aircraft in accordance with the in service dates
                  provided in the Fleet Plan in Schedule C-1. Contractor will
                  discontinue operation of all Original Approved Aircraft in
                  accordance with the phase-out dates indicated in the Fleet
                  Plan provided in Schedule C-1. Unless otherwise agreed by AA,
                  Contractor will operate all flights under this Agreement with
                  such aircraft type and passenger seat capacity as specified in
                  the Fleet Plan.

                  Contractor acknowledges that in the event such Firm Approved
                  Aircraft are not placed into service as of the date(s)
                  indicated in the Fleet Plan, except to the extent any such
                  delay or failure arises out of (i) an event that would give
                  rise to a right to terminate this Agreement for Force Majeure,
                  or (ii) a matter exempted from this Section 1.02(a) under the
                  terms of Section 7.03(c), AA will suffer damages in connection
                  with air transportation services AA intended to market and
                  sell in connection with the use of such Firm Approved
                  Aircraft. Accordingly, in such situation, [*], as
                  liquidated damages.

         (b)      Contractor agrees to operate Feeder Air Services from
                  concourse `B' or some other space at the STL Hub as designated
                  by AA that is adequate to perform its duties hereunder.
                  Contractor shall not operate Approved Aircraft in revenue
                  service at the Hub except for the Feeder Air Services (other
                  than occasional Charter Flights).

         (c)      Contractor acknowledges and agrees that participation in the
                  ABR program obligates Contractor to offer and maintain a
                  quality and professional level of service in terms of
                  schedules, customer service, and the like. Accordingly, at the
                  request of AA, the parties will: (1) meet to review and
                  discuss the services, operations, and objectives of Contractor
                  as an ABR carrier; and (2) jointly develop a written business
                  plan for the operations and services of Contractor. Contractor
                  will use its commercially reasonable best efforts to comply
                  with said business plan and to accommodate all reasonable
                  recommendations of AA in these respects.

         (d)      It is understood and agreed that the use of regional jets in
                  the performance of services under this Agreement is subject to
                  Labor Contract Restrictions. Further, with respect to AA, the
                  provision of Feeder Air Service on certain routes and with
                  certain aircraft types is subject to certain restrictions in
                  existing agreements with other parties. Accordingly,
                  Contractor agrees to dedicate such aircraft type and number to
                  accommodate such Labor Contract Restrictions. Notwithstanding
                  the foregoing, AA represents that Contractor shall have the
                  right to provide Contractor's Feeder Air Services with Firm
                  Approved Aircraft.


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* Confidential


         (e)      Contractor may operate its Feeder Air Services as an ABR
                  carrier only as directed in writing by AA. Pursuant to the
                  terms of this Agreement, AA hereby consents to Contractor's
                  operation as an ABR carrier with respect to such routes and
                  frequency of service designated by AA in writing.

                  At AA's request Contractor agrees to enter into such
                  agreements(s) with another air carrier (holding a valid and
                  effective Certificate of Public Convenience and Necessity or
                  other appropriate authority) as may be necessary to implement
                  Shared Code Sharing Jet Flights with such other carrier in
                  connection with the Feeder Air Service Flights which are the
                  subject of this Agreement, including, but not limited to,
                  passenger and baggage transit procedures.

         (f)      Contractor agrees to maintain the Feeder Air Service in
                  accordance with the criteria set forth in Exhibits A and C,
                  with respect to the aircraft types and operation of Feeder Air
                  Service Flights. Within the operating capability of the
                  aircraft used by Contractor, and subject to equipment
                  availability and the other provisions of this Agreement,
                  Contractor will comply with all requests by AA to increase,
                  decrease, or in any other way adjust or terminate the flight
                  frequencies or city pairs, or both, as operated and served
                  pursuant to the provisions of Exhibit A. AA will cooperate
                  with Contractor to optimize the use of its aircraft and crews
                  to maintain schedule integrity and efficiency. Contractor
                  agrees to assist AA with market planning and sales functions
                  as requested by AA. Coinciding with each regular AA schedule
                  change after the date hereof, Contractor shall adjust the
                  scheduled times of operation of its Feeder Air Service Flights
                  as directed by AA, based on a minimum connecting time of
                  twenty five (25) minutes or such other minimum connect time as
                  AA may from time to time publish. Additionally, the Feeder Air
                  Service Flights shall at all times be maintained by Contractor
                  at levels sufficient to satisfy the Scheduled Flights.

         (g)      AA shall be responsible for schedule production for
                  Contractor's Feeder Air Service Flights and input of such
                  schedules into AA's scheduling system. However, AA may
                  delegate certain of those functions and responsibilities to a
                  third party or by mutual agreement with Contractor, to
                  Contractor. Such schedule changes will be included in the
                  information sent to the OAG.

         (h)      Procedures for regular submission of schedules shall be set
                  forth in a procedures manual which will be jointly developed
                  by Contractor and AA scheduling departments.

         (i)      All aircraft used by Contractor to provide the Feeder Air
                  Services shall comply with the applicable portions of Parts
                  298 and 25 of the Economic Regulations of the DOT and Part 121
                  of the Federal Aviation Regulations, or their successor
                  regulations as applicable. Further, aircraft types shall be
                  subject to acceptance by AA in accordance with the approved
                  Fleet Plan provided for in Exhibit C.

         (j)      All aircraft used for the Feeder Air Services shall be
                  Standard Marked. From time to time, [*]
                  operate Approved Aircraft that are not Standard Marked (as
                  provided in Exhibit C(1)(A)(3)) but utilize an AA flight
                  designator. All of Contractor's airport ticket counters and
                  gates used for Feeder Air Services shall display AA timetables
                  (and such promotional material as is from time to time
                  furnished by AA), and shall be identified by signage as
                  described in Exhibit B-1. All Feeder Air Service Flights shall
                  display on the exterior (adjacent to the


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* Confidential


                  boarding door) and in the interior of the aircraft, an AA
                  approved sign or legend identifying the flight as an "ABR"
                  flight "operated by Chautauqua Airlines, Inc." Aircraft safety
                  briefing cards shall incorporate the ABR Marks. Contractor
                  shall also distribute or place American Way or other magazines
                  in the aircraft seat pockets as determined and provided by AA.
                  No other airline magazine shall be placed in aircraft used for
                  Feeder Air Services.

         (k)      Contractor shall require all of its personnel in job
                  classifications requiring direct public contact who provide
                  Contractor's Feeder Air Services to wear uniforms and
                  accessories furnished by Contractor which are of colors and
                  styles as approved by AA from time to time. Other Contractor
                  employees who are visible to the public and who provide
                  Contractor's Feeder Air Services are to wear industry standard
                  AA approved uniforms furnished by Contractor as are
                  appropriate for the locale and environment. AA will consider
                  modifications to such uniforms that may better represent the
                  demands of the regional airline employee (E.G. exposure to
                  elements and cross utilization).

1.03 - STANDARDS OF SERVICE AND PERFORMANCE

         Contractor agrees that, in providing services under this Agreement in
         conjunction with one or more of the AA Marks, it will maintain or
         exceed the Standards of Service and Performance Standards set forth in
         Exhibits D and J respectively. AA will have the right, from time to
         time, to inspect Contractor's Feeder Air Services to determine if they
         conform with such Standards. Failure on the part of AA to conduct such
         inspections will not relieve Contractor of its obligations to conform
         to the applicable standards. [*]

ARTICLE 2 - SUPPORT SERVICES AND FACILITIES

2.01 - GENERAL

         AA and Contractor agree that support services and facilities shall be
         required to provide a high quality, seamless Feeder Air Service to
         passengers. Facilities must, at all times, be kept clean, up-to-date,
         and have adequate signage and lighting. Both parties agree to adhere to
         the provisions described herein as the mechanism by which such support
         services and facilities shall be managed.

2.02 - RESERVATIONS SUPPORT SERVICES

         AA, at its sole cost, will handle reservations for all Feeder Air
         Service Flights in the same manner and within the same standards that
         AA utilizes to handle its own reservations.

2.03 - COMPUTERIZED RESERVATIONS SYSTEM AND ASSOCIATED SERVICES

         (a)      AA, at its sole cost, will provide Contractor with Sabre
                  Services, including without limitation, maintenance of the
                  Feeder Air Service Flights seat inventory and passenger
                  processing, and other associated support systems as directed
                  by AA .


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* Confidential


         (b)      Contractor will perform and maintain in effect its standard
                  SABRE equipment and systems use agreement at all times during
                  the Term of this Agreement. Contractor shall comply with the
                  provisions of Exhibit L.

         (c)      Unless otherwise agreed to in writing between Contractor and
                  AA, connecting reservations to or from AA or other air
                  carriers in an "AA*" itinerary will be made by AA and
                  Contractor (and their respective agents) and by other airlines
                  in accordance with AA's practices and any currently applicable
                  industry methods and procedures. In all cases, SABRE will be
                  used by Contractor to confirm the reservations of ABR
                  passengers through the entire itinerary of their scheduled
                  trips. AA will make reasonable efforts to notify passengers of
                  any last minute changes in Contractor's Feeder Air Service
                  schedules or operations, consistent with notification
                  practices and policies for AA's own flights.

         (d)      Contractor shall provide AA in a timely manner, and in the
                  format required by AA, such flight movement, bulkout, sales
                  and other information as AA reasonably requires to enable it
                  to carry out the reservations, sales, invoicing, audit,
                  planning, and other services to be performed by AA under this
                  Agreement.

         (e)      AA shall be responsible for the collection and remittance of
                  all booking fees, passenger facilities charges (PFCs),
                  transportation Taxes, and the like, applicable to Contractor's
                  Feeder Air Services.

2.04 - OPERATIONS

         (a)      Contractor will provide accurate updates of its flights'
                  planned and actual departure and arrival times (including
                  updates of irregularities) in SABRE as soon as the planned
                  flight schedule is changed, or the flight departs or arrives,
                  or suffers an irregularity. In the event of flight delays,
                  cancellations or other schedule irregularities affecting
                  Contractor's Feeder Air Services Flights, and as soon as
                  information concerning such irregularities is available,
                  Contractor shall update AA's FOS system via SABRE to reflect
                  such information. Further, when requested by AA, Contractor
                  will notify the designated AA department/personnel regarding
                  certain irregularities. For purposes of this Agreement, such
                  scheduled and actual departure and arrival and irregularity
                  information shall be known as "FLIFO." If Contractor becomes
                  aware of any station(s) which have any deficiencies in
                  reporting FLIFO as required by this Section, Contractor will
                  promptly take corrective action to remedy such problem
                  including, if requested by AA, the submission to AA of a
                  corrective action plan.

         (b)      Contractor will be solely responsible for, and AA will have no
                  obligations or duties with respect to, the dispatch of
                  Contractor's flights. For the purposes of this Section, the
                  term "flight dispatch" will include, but will not be limited
                  to, all planning of aircraft itineraries and routings, fueling
                  and flight release.

         (c)      Each party hereby represents, warrants and agrees that all air
                  transportation services performed, including the maintenance
                  of aircraft and engines, pursuant to this Agreement or
                  otherwise shall be conducted in full compliance with all
                  applicable statutes, orders, rules, regulations and
                  notifications, whether now in effect or hereafter promulgated,
                  of all governmental agencies having jurisdiction over its
                  operations, including, but not limited to, the FAA, DOD, and
                  DOT. Each party's compliance with such governmental statutes,
                  orders, rules, regulations and notifications will be the sole
                  and exclusive obligation of the




                  operating carrier, and the non-operating carrier will have no
                  obligation, responsibility, or liability, whether direct or
                  indirect, with respect to such matters. Additionally,
                  Contractor will comply during the Term of this Agreement with
                  the AA/ABR Safety Standards, as described on Exhibit I.

         (d)      From time to time and upon the request of Contractor or its
                  flight crews, AA shall furnish Contractor's flight crews with
                  such U.S. Weather Bureau information or data as may be
                  available to AA, provided that in furnishing any such weather
                  information or data to Contractor: (1) neither AA nor its
                  employees or agents will be responsible or liable for the
                  accuracy thereof; and (2) that any and all costs incurred by
                  AA in connection with providing such weather information or
                  data will be paid by Contractor.

2.05 - STATION FACILITIES, EQUIPMENT AND GROUND SUPPORT SERVICES

         (a)      Covered Locations

                  At all Covered Locations, AA, at its sole cost, shall provide
                  Contractor with [*], with the exception of the following:

                           1.       [*]
                           2.       [*]

                           3.       [*]

                           4.       [*]

                  At Covered Locations where an AMR Entity has the capability to
                  provide the above excluded equipment and Airport Support
                  Services, [*]

                  In the event that AA requests that Contractor utilize third
                  party vendors to provide Airport Support Services not excluded
                  above, [*]. Charges associated with vendor service provided
                  to Contractor at Covered Locations shall be handled in
                  accordance with Exhibit E.

         (b)      Contractor Locations

                           1. At all Contractor Locations, [*], at its
                  sole cost, [*] shall be handled in accordance with
                  Exhibit E(1)(C)(3-4).

                           2. Contractor agrees to staff Contractor Locations
                  that have three (3) or more daily round trips (weekdays) [*]
                  where facility constraints permit. Contractor shall be
                  given reasonable notice of schedule changes that will
                  require it to staff under this provision.


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                           3. In the event AA and/or its Affiliate(s) operates a
                  flight to a Contractor Location and requests Contractor to
                  handle such flight, AA agrees to pay Contractor [*].

                           However, where AA operates flight(s) to Contractor
                           Locations that utilize a third party vendor to
                           provide Airport Support Services, AA shall, if it
                           desires to use such vendor, [*].

                           4. For the initial purchase of new Contractor
                  Location automation equipment, as defined in Exhibit L,
                  Contractor and AA agree to adhere to the terms set forth in
                  Exhibit E(3).

         (c)      The Hub

                           1. Except as provided in subsection 3 below, at the
                  Hub, [*], shall be responsible for the gate operations of
                  its passengers and aircraft, security screening charges,
                  purchasing its equipment and leasing its facilities,
                  including facilities improvement surcharges. [*]

                           2. At the Hub, [*], shall be responsible for
                  providing ticket counter services, skycap services, all
                  passenger busing resulting from AA mandated remote parking
                  of Contractor aircraft, remote de-icing service for
                  regional jet aircraft (when such a remote de-icing
                  operation is in effect for AA), and de-icing fluid for on-gate
                  de-icing. Charges associated with the de-icing fluid for
                  on-gate de-icing shall be handled in accordance with the
                  provisions set forth in Exhibit E(1)(C)(3-4).

                           3. At AA's sole discretion, AA, and/or its Affiliate,
                  or a third party may assume all gate and ramp handling duties
                  at the Hub, as detailed in subsection 1 above, upon 120 days
                  prior written notice. In such case and for this purpose only,
                  [*].

         (d)      Contractor Conversion

                  In the event AA or an AA Affiliate no longer staffs personnel
                  at a Covered Location, AA reserves the right to designate such
                  former Covered Location as a Contractor Location, and
                  Contractor will completely assume ground operations at such
                  former Covered Location.


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         (e)      Covered Conversion

                  In the event of a Covered Conversion, AA, at its sole
                  discretion, [*]. Furthermore, before hiring new
                  employees in that city, provided they meet AA's eligibility
                  requirements, AA shall allow Contractor's employees to apply
                  for appropriate positions in that location.

2.06 - SALES; PROMOTION; PASSENGER SERVICE DOCUMENTS

         (a)      [*]

         (b)      [*]

         (c)      Contractor will notify all Feeder Air Service passengers
                  connecting to AA flights, via AA-provided ticket jackets and
                  appropriate signage, AA's passenger liability limits (Warsaw
                  and domestic), conditions of carriage, denied boarding
                  compensation and like matters. Contractor also agrees to adopt
                  and maintain AA's domestic (and if applicable, international)
                  baggage liability rules as well as AA's PAWOB and DBC policies
                  as are from time to time in effect. In selling air
                  transportation of passengers, both on-line and off-line,
                  Contractor will use AA passenger ticket stock. Contractor will
                  report and remit to AA all ticket sales in accordance with the
                  Accounting Procedures set forth in Exhibit F.

         (d)      In the performance of its duties hereunder, Contractor will
                  follow the Customer Service Policies and Procedures using AA
                  passenger handling documents, including but not limited to
                  ticket stock, travel vouchers, baggage tags, passenger refund
                  and compensation checks, and the like. Contractor will
                  reimburse AA for any expenses incurred as a result of
                  Contractor's non-compliance with the Customer Service Policies
                  and Procedures, in accordance with Exhibit F.

         (e)      AA will include in its public timetables all of the Feeder
                  Airports and the scheduled Feeder Air Services provided by
                  Contractor pursuant to this Agreement, along with appropriate
                  notations showing that services between the Hub and such
                  Feeder Airports are flights operated by Contractor as an
                  independent contractor. All such references in AA's public
                  timetables shall also contain notations indicating that use of
                  the name "ABR" or any Marks by Contractor is pursuant to a
                  limited trademark license from AA.

         (f)      Area phone directories (white and yellow pages) for the Feeder
                  Airports will include, at the earliest possible time (at the
                  expense of AA), the AA toll free reservations phone number
                  which shall be answered by AA reservations personnel in
                  accordance with Section 2.02, and, if desired by AA, a local
                  phone number for the station.

         (g)      Contractor is authorized to, and shall, issue AA boarding
                  passes to those passengers checking in at the Feeder Airports
                  who are ticketed for AA, or an AA Affiliate and ABR
                  connections at the Hub. AA and its Affiliates, as appropriate
                  will issue boarding passes to those passengers checking in for
                  such Feeder Air Service Flights at all locations where AA or
                  an AA Affiliate provides Passenger Handling Duties.


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         (h)      AA shall be responsible for sales programs promoting "ABR" and
                  the Feeder Air Services including, without limitation,
                  Contractor participation in AA's "AAdvantage" Program. No
                  advertisement, solicitation, document or any other material
                  using any AA Mark will be published or otherwise promulgated
                  without AA's prior inspection and approval. No advertising
                  that relates in any way to AA, ABR or Contractor's Feeder Air
                  Services will be placed by Contractor with an advertising
                  agency unless AA has given its prior consent regarding copy,
                  layout and the specific media plan. In addition, if AA has
                  agreed to share the costs of any such advertising, Contractor
                  will obtain the prior consent of AA regarding the funds to be
                  expended for such advertising.

         (i)      Contractor shall participate in the AAdvantage Frequent Flyer
                  Program at no charge to Contractor. Feeder Air Service
                  passengers shall be eligible to accrue and redeem mileage on
                  such flights and on AA, and/or AA Affiliate flights consistent
                  with AA's policies for AA. Contractor shall carry all
                  passengers traveling pursuant to award travel from an Accepted
                  Frequent Flyer Program at no charge to AA.

2.07 - BAGGAGE HANDLING AND SETTLEMENT

         (a)      In the performance of its duties hereunder, Contractor will
                  follow the Customer Service Policies and Procedures related to
                  baggage handling, including procedures for delayed, pilfered,
                  lost, and damaged baggage. Baggage Claims shall be settled in
                  accordance with the procedures specified in Exhibit F.

         (b)      The parties agree to report and search for AA (and/or AA
                  Affiliate) and ABR lost baggage in accordance with AA's
                  procedures using WorldTracer and/or BMAS as appropriate..

ARTICLE 3 - PASSENGER FARES

3.01 - PASSENGER FARES

         [*] under this Agreement.

3.02 - CONTRACTOR COMPENSATION

         In consideration for the Feeder Air Services provided hereunder, AA
         shall pay Contractor the amounts set forth [*].

3.03 - INVENTORY CONTROL

         AA shall establish and maintain all inventory and seat allocations on
         flights operated by Contractor pursuant to this Agreement. AA may at
         its discretion delegate this responsibility to a third party or to
         Contractor, subject to Contractor's concurrence to perform such duties
         for the time period requested by AA.


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ARTICLE 4 - SMALL PACKAGE, FREIGHT AND MAIL

         Terms for an ABR small package, freight and Mail service on Feeder Air
         Service Flights are set forth in Exhibit H. Settlement of all small
         package and Mail transportation transactions shall be in accordance
         with Exhibit F.

ARTICLE 5 - OTHER ACTIVITIES

         (a)      Contractor shall not either directly or indirectly engage (or
                  attempt to engage) on its own behalf in any revenue air
                  transportation (other than pursuant to this Agreement) in any
                  of the routes between the Hub and Feeder Airports.

         (b)      Nothing in this Agreement shall prohibit Contractor or its
                  Affiliates from operating such air services as they may
                  desire, except to the extent such activities directly conflict
                  with the express provisions of this Agreement. In this regard,
                  both parties recognize that this Agreement would be violated
                  if:

                           1. Contractor, or any Affiliate of Contractor,
                  entered into a cooperative marketing and service arrangement
                  comparable to this Agreement with another air carrier
                  providing feeder air service in connection with hub operations
                  at MEM, BNA, MCI, or any location within fifty (50) statute
                  miles of the STL Hub.

                           2. Contractor or any of its Affiliates operates
                  aircraft with Marks for non-Feeder Air Service (other than for
                  Charter Flights).

                           3. Contractor, or any Affiliate of Contractor,
                  markets any flight to or from the Hub with any name other than
                  as provided herein, including but not limited to, under
                  Contractor's or such Affiliate's own two letter airline code.

         (c)      Contractor agrees to not engage in any conflicting activity
                  referred to in (b) above unless the AA has given its advance
                  written consent for such activity to be undertaken, except as
                  may otherwise be provided for herein.

         (d)      Nothing in this Agreement shall prohibit any of the AMR
                  Entities from operating such air services as they may desire.
                  Further, nothing in this Agreement shall prohibit AA from
                  engaging in comparable "ABR" cooperative marketing and
                  services arrangements with other operators of aircraft.

         (e)      [*]
                  Neither Contractor nor any of its Affiliates will be permitted
                  to operate aircraft bearing Marks in city pairs other than
                  those specified by AA without the prior written consent of AA.
                  Contractor will not, without AA's prior written consent,
                  permit any third party, whether under a lease arrangement or
                  otherwise, to operate any aircraft in revenue service bearing
                  Marks.

         (f)      AA reserves the right, at its sole discretion, to finance the
                  Option Aircraft and become the Lessor of such aircraft to
                  Contractor under the terms of a Lease.


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ARTICLE 6 - LIABILITY, INDEMNIFICATION AND INSURANCE

6.01 - INDEPENDENT CONTRACTORS

         (a)      The employees, agents, and independent contractors of
                  Contractor engaged in performing any of the services
                  Contractor is to perform pursuant to this Agreement shall be
                  deemed to be employees, agents or independent contractors of
                  Contractor for all purposes, and under no circumstances shall
                  be deemed to be employees, agents or independent contractors
                  of AA or any of the other AMR Entities. In its performance
                  under this Agreement, Contractor shall act, for all purposes,
                  as an independent contractor and not as an agent of AA or any
                  of the other AMR Entities. Neither AA nor any of the other AMR
                  Entities shall have supervisory power or control over any
                  employees, agents or independent contractors engaged by
                  Contractor in connection with its performance hereunder, and
                  all complaints or requested changes in procedures shall, in
                  all events, be transmitted by AA to a designated officer of
                  Contractor. Nothing contained in this Agreement is intended to
                  limit or condition Contractor's control over its operations or
                  the conduct of its business as an air carrier, and Contractor
                  and its principals assume all risks or financial losses which
                  may result from the operation of the air services to be
                  provided by Contractor hereunder.

         (b)      The employees, agents, and independent contractors of AA
                  engaged in performing any of the services AA is to perform
                  pursuant to this Agreement shall be deemed to be employees,
                  agents, and independent contractors of AA for all purposes,
                  and under no circumstances shall be deemed to be employees,
                  agents or independent contractors of Contractor. In its
                  performance under this Agreement, AA shall act, for all
                  purposes, as an independent contractor and not as an agent of
                  Contractor. Contractor shall have no supervisory power or
                  control over any employees, agents or independent contractors
                  engaged by AA in connection with its performance hereunder,
                  and all complaints or requested changes in procedures shall,
                  in all events, be transmitted by Contractor to a designated
                  officer of AA. Nothing contained in this Agreement is intended
                  to limit or condition AA's control over its operations or the
                  conduct of its business as an air carrier.

6.02 - UNAUTHORIZED OBLIGATIONS

         (a)      Nothing in this Agreement authorizes AA to make any contract,
                  agreement, warranty, or representation on Contractor's behalf,
                  or to incur any debt or obligation in Contractor's name
                  ("CONTRACTOR UNAUTHORIZED OBLIGATION"); and AA hereby agrees
                  to defend, indemnify, save, release, reimburse and hold
                  Contractor, its officers, directors, shareholders, employees
                  and agents harmless from any and all liabilities, claims,
                  judgments and obligations which arise as a result of or in
                  connection with, or by reason of any such Contractor
                  Unauthorized Obligation made by AA, its officers, directors,
                  shareholders, employees, agents or independent contractors in
                  the conduct of AA's operations.

         (b)      Nothing in this Agreement authorizes Contractor to make any
                  contract, agreement, warranty, or representation on AA's
                  behalf or on behalf of any other AMR Entity, or to incur any
                  debt or obligation in AA's name or on behalf of any other AMR
                  Entity ("AA UNAUTHORIZED OBLIGATION"); and Contractor hereby
                  agrees to defend, indemnify, save, release, reimburse and hold
                  AA, the AMR Entities, and their respective officers,
                  directors, shareholders, employees and agents harmless from
                  any and all liabilities, claims, judgments and obligations
                  which arise as a result of or in connection with, or by




                  reason of any such AA Unauthorized Obligation made by
                  Contractor, its officers, directors, shareholders, employees,
                  agents or independent contractors in the conduct of
                  Contractor's operations.

         (c)      The fact that Contractor's operations are conducted under
                  Marks and listed under the TW designator code will not affect
                  their status as flights operated by Contractor for purpose of
                  this Agreement or any other agreement between the parties.
                  Further, both parties acknowledge that the Contractor's Feeder
                  Air Services are flights operated by Contractor and both
                  parties agree to advise passengers and all third parties of
                  Contractor's operation of these flights as required by
                  applicable law, rule, or regulation.

6.03 - INDEMNIFICATION AND INSURANCE

         (a)      Each party, with respect to its own employees, accepts full
                  and exclusive liability for the payment of worker's
                  compensation and/or employer's liability insurance premiums
                  with respect to such employees, and for the payment of all
                  Taxes, contributions or other payments for unemployment
                  compensation or old age benefits, pensions or annuities now or
                  hereafter imposed upon employers by the government of the
                  United States or by any state or local governmental body with
                  respect to such employees measured by the wages, salaries,
                  compensation or other remuneration paid to such employees, or
                  otherwise, and each party further agrees to make such payments
                  and to make and file all reports and returns, and to do
                  everything necessary to comply with the laws imposing such
                  Taxes, contributions or other payments.

         (b)      Contractor shall indemnify, defend, hold harmless and promptly
                  reimburse AA, the AMR Entities and their respective directors,
                  officers, employees and agents from and against any and all
                  claims, suits, penalties, liabilities, judgments, fines,
                  losses and expenses of any nature or kind ("CLAIMS") arising
                  out of, caused by or occurring in connection with (or alleged
                  to arise out of, be caused by or be occurring in connection
                  with):

                           1. The death of or injury to persons, or delay or
                  loss of or damage to property (including aircraft, baggage or
                  cargo) occurring while such persons or property are under the
                  control or in the custody of, or being transported by
                  Contractor (including, for the avoidance of doubt, claims
                  arising out of death of or injury to Feeder Air Service
                  passengers traveling on AA tickets that implement limits or
                  conditions of liability or jurisdictional rules with respect
                  to passenger claims that differ from those of Contractor),
                  except to the extent caused by the willful misconduct of AA or
                  another AMR Entity; and

                           2. Negligent acts or omissions of Contractor that are
                  in any way related to services contemplated by this Agreement,
                  except for Claims arising from the death of, or injury to,
                  persons, or delay or loss of or damage to property occurring
                  while such persons or property are in the control or custody
                  of, or being transported by, AA of the type referred to in
                  Section 6.03(c)(1), in which case AA shall indemnify and
                  reimburse Contractor, notwithstanding such negligent (but not
                  willful) acts or omissions of Contractor.

         (c)      AA shall indemnify, defend and hold harmless Contractor and
                  its directors, officers, employees and agents from and against
                  any and all Claims arising out of, caused by or occurring in
                  connection with (or alleged to arise out of, be caused by or
                  occurring in connection with):




                           1. The death of or injury to persons, or delay or
                  loss of or damage to property (including aircraft, baggage or
                  cargo) occurring while such persons or property are under the
                  control or in the custody of, or being transported by, AA,
                  except to the extent caused by the willful misconduct of
                  Contractor.

                           2. Negligent acts or omissions of AA that are in any
                  way related to services contemplated by this Agreement, except
                  for Claims arising from the death of, or injury to, persons,
                  or delay or loss of or damage to property occurring while such
                  persons or property are in the control or custody of, or are
                  being transported by, Contractor of the type referred to in
                  Section 6.03(b)(1) (in which event Contractor shall indemnify
                  and reimburse AA notwithstanding such negligent (but not
                  willful) acts or omissions of AA); and

                           3. Passenger claims based on AA's failure to properly
                  issue and complete transportation documentation in accordance
                  with the provisions of the standard Airlines Clearing House or
                  IATA ticketing procedures, including the failure to put a
                  proper notice of the limits of liability on such documentation
                  (it being understood that in ticketing Feeder Air Service
                  passengers, AA is entitled to apply the limits of liability
                  provided for in its own conditions of carriage).

         (d)      During the Term of the Agreement, Contractor agrees to
                  maintain Airline Liability insurance, including
                  comprehensive/commercial general liability, passenger
                  (including passengers on Feeder Air Service flights, and all
                  other revenue and non-revenue passengers), baggage, cargo,
                  mail, and aircraft third party legal liability (all policies
                  shall be extended to include war risks, hijacking, and allied
                  perils), with limits of at least [*]. Such insurance
                  policies shall be with an insurance company or companies of
                  recognized financial responsibility, and satisfactory to
                  AA, and which at a minimum shall:

                           1. [*]

                           2. [*]

                           3. [*]

                           4. [*] and each of the other Additional Insureds the
                  benefit of all of the provisions of the policy, except the
                  limits of liability, in the same manner as if there were a
                  separate policy covering each insured,

                           5. Specifically state that the [*] stated in (b)
                  above is insured as a [*],

                           6. Contain a provision requiring Contractor's
                  insurers to [*]


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                  providing that the same shall not be effective as to the
                  benefit and interest of AA or any of the other Additional
                  Insureds for thirty (30) days after written notice of such
                  cancellation or adverse material change is received by
                  Contractor and AA,

                           7. Contain a provision stating that Contractor's
                  liability policy is [*]. The notice period in respect of
                  war and allied perils coverage shall be [*] or such lesser
                  period as is or may be available in accordance with policy
                  conditions, and

                           8. Contain a [*]

         (e)      [*]

         (f)      Contractor agrees to furnish AA, in a timely manner, and not
                  later than the expiration date of each respective policy, with
                  certificates of insurance evidencing its maintaining and
                  renewal of the insurance required under (d) above.

6.04 - ENVIRONMENTAL

         With respect to all matters which relate to or may affect the
         environment, each party agrees to conduct its operations (including its
         compliance with all federal, state and local laws and regulations
         relating to pollution or the environment) in a prudent manner
         consistent with industry policies and practices related to
         environmental matters, including, without limitation, taking reasonable
         preventive measures consistent with such policies and practices to
         avoid liabilities related to environmental matters.

ARTICLE 7 - EFFECTIVE DATE, TERMINATION AND CANCELLATION

7.01 - EFFECTIVE DATE AND TERM

         (a)      This Agreement will become effective on the SABRE Cutover Date
                  and will continue in effect through February 1, 2013, unless
                  terminated or canceled at an earlier date pursuant to one or
                  more of the provisions of this Article 7 or Exhibit
                  J(2)(D)(the "TERM").

         (b)      In the event there is any change in the statutes governing the
                  economic regulation of air carriers, or in the applicable
                  rules, regulations or orders of the DOT or some successor
                  agency or department of the government having jurisdiction
                  over air transportation which change or changes materially
                  affect the rights and/or obligations presently in force with
                  respect to the air transportation services of AA or
                  Contractor, or both, or in the event for reasons wholly beyond
                  the control of the parties, the AA designator code cannot for
                  any reason be used as contemplated under this Agreement, then
                  the parties will consult within [*] after any of the
                  occurrences described herein, in order to determine what,
                  if any, changes to this Agreement are necessary or
                  appropriate, including but not limited to the early
                  termination and cancellation of this Agreement. If the parties
                  hereto are unable to agree whether any change or changes to
                  this Agreement are necessary or appropriate, or as to the
                  terms of such changes, or whether the Agreement should be


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                  cancelled in light of the occurrences described above, then
                  the parties shall submit the matter to a neutral third party
                  mediator who will assist the parties in reaching a mutually
                  agreeable settlement in accordance with the Commercial
                  Mediation Rules of the American Arbitration Association. Each
                  party covenants to cooperate in any such proceeding for up to
                  thirty (30) days.

7.02 - TERMINATION

         In addition to the foregoing provisions of this Article:

         (a)      If one party (the "DEFAULTING PARTY") becomes insolvent or
                  fails to pay debts as they become due; or if the Defaulting
                  Party takes steps leading to its cessation as a going concern;
                  makes an assignment for the benefit of creditors or a similar
                  disposition of the assets of the business; or if the
                  Defaulting Party either ceases or suspends operations for
                  reasons other than a strike, then the other party (the
                  "INSECURE PARTY") may on five (5) business days prior written
                  notice, terminate this Agreement on notice to the Defaulting
                  Party unless the Defaulting Party, within said five (5)
                  business days, gives adequate assurance of the future
                  performance of this Agreement by establishing an irrevocable
                  letter of credit, issued by a U.S. bank acceptable to the
                  Insecure Party, on terms and conditions acceptable to the
                  Insecure Party, and in an amount sufficient to cover all
                  amounts potentially due from the Defaulting Party under this
                  Agreement. Such letter of credit may be drawn upon by the
                  Insecure Party if the Defaulting Party does not fulfill its
                  obligations under this Agreement in a timely manner.

                  If bankruptcy proceedings are commenced with respect to either
                  party ("BANKRUPT PARTY") and if this Agreement has not
                  otherwise terminated, then the non-bankrupt party may suspend
                  all further performance of this Agreement until the Bankrupt
                  Party assumes or rejects this Agreement pursuant to Section
                  365 of the Bankruptcy Code or any similar or successor
                  provision. Within thirty (30) days of the commencement of such
                  bankruptcy proceeding, the Bankrupt Party agrees to move the
                  Court in which such bankruptcy proceeding is pending to assume
                  or reject this Agreement. Any such suspension of further
                  performance by the non-bankrupt party pending the Bankrupt
                  Party's assumption or rejection will not be a breach of this
                  Agreement and will not affect the non-bankrupt party's right
                  to pursue or enforce any of its rights under this Agreement or
                  otherwise.

         (b)      Unless provided for elsewhere in this Agreement, and except
                  for the failure to make payments of amounts when due, if
                  either party shall fail to perform, keep, and observe any of
                  the material terms, covenants or conditions herein contained
                  on the part of such party to be performed, kept or observed
                  (other than insurance requirements or any other condition or
                  requirement, noncompliance with which is specifically covered
                  under another subsection of this Article 7), the other party
                  may give notice in writing to correct the condition or cure
                  the default and, if the condition or default continues for
                  thirty (30) days after the receipt of notice by the defaulting
                  party and, if within that thirty (30) day period the
                  defaulting party has not prosecuted with due diligence and
                  corrected or commenced efforts to correct the condition or
                  default, the other party may then terminate this Agreement
                  upon an additional thirty (30) days prior written notice, and
                  this Agreement shall thereupon cease and expire at the end of
                  such additional thirty (30) days in the same manner and with
                  the same effect as if it were the expiration of the original
                  term. For purposes of this Article 7.02 (b), Contractor's
                  failure to comply with the Standards of Service as set forth
                  in Exhibit D hereof, shall be deemed a material default.




                  If either party shall fail to make payment of amounts when due
                  under this Agreement after receiving written notice thereof,
                  the non-paying party shall have five (5) business days after
                  the receipt of such written notice to cure such non-payment.

         (c)      In the event Contractor fails to meet any of the milestones,
                  as may be provided in a corrective action plan pursuant to
                  Exhibit J(3)(D), AA may terminate this Agreement upon fifteen
                  (15) days written notice to Contractor.

         (d)      If the services of the Airline Clearing House are withdrawn as
                  to either party, or if either party suspends or is required to
                  suspend all system operations for any safety reason, the other
                  party may terminate this Agreement upon five (5) days prior
                  written notice.

         (e)      In the event of a material breach of any representation or
                  warranty of Article 2.04(c), that in AA's reasonable
                  discretion, creates a serious and imminent threat to the safe
                  operation of Contractor's ABR Services, AA may immediately
                  terminate this Agreement in writing.

         (f)      In the event of any material failure to comply with the
                  insurance provisions of Article 6.03, this Agreement may be
                  immediately terminated by AA.

         (g)      Early termination or cancellation of this Agreement based on
                  one or more of the provisions of this Article 7 shall not be
                  construed so as to relieve any party hereto of any debts or
                  monetary obligations to any other party that shall have
                  accrued hereunder prior to the effective date of such
                  termination or cancellation, or any damages suffered as a
                  result of such termination, if such termination is due to a
                  breach of this Agreement.

         (h)      In the event of the replacement of the President and Chief
                  Executive Officer of Contractor (or any executive performing
                  the duties of a chief executive officer however so titled)
                  (the "CEO"). Contractor shall have the right to designate an
                  interim CEO. At such time as Contractor identifies or selects
                  a proposed permanent replacement CEO (or at Contractor's
                  option, one or more candidates for the position of permanent
                  replacement CEO) (collectively, the "Proposed CEO"),
                  Contractor shall provide written notice to AA identifying such
                  Proposed CEO. AA shall have the right to approve (such
                  approval not to be unreasonably withheld) or disapprove (such
                  disapproval not to be unreasonably provided) such Proposed
                  CEO, and shall provide written notice to Contractor of its
                  approval or disapproval within 10 business days following AA's
                  receipt of notice of the Proposed CEO. In the event AA fails
                  to provide notice of its approval or disapproval within such
                  10 day period, AA shall be conclusively deemed to have
                  approved the Proposed CEO. In the event Contractor fails to
                  identify a Proposed CEO who is approved by AA as provided
                  herein within 180 days after the replacement of the CEO, AA
                  may terminate this Agreement.

         (i)      In the event of a termination of this Agreement prior to the
                  end of the Term for any reason, AA agrees to reimburse
                  Contractor for any pre-paid aircraft rents under any Lease for
                  all Firm Approved Aircraft upon the date of such termination.

         (j)      Upon termination of this Agreement for any reason, the right
                  to use Marks granted herein will immediately revert back to
                  AA.

         (k)      AA may terminate this Agreement without Cause upon 180 days
                  prior written notice; PROVIDED, that (1) such notice may not
                  be given prior to September 30, 2005, (2) AA shall




                  reimburse Contractor for the unamortized portion of training
                  start up costs (principal only) pursuant to the 120-month
                  amortization table attached hereto as Exhibit M corresponding
                  to the month during which the Agreement terminates, and (3)
                  the provisions of Section 7.03 herein will apply. As a
                  condition to AA's conversion of the Option Aircraft to Firm
                  Approved Aircraft, AA and Contractor will negotiate a mutually
                  acceptable extension of the date set forth in clause (1) of
                  this Section 7.02(k) prior to conversion of the Option
                  Aircraft.

         (l)      A material failure to represent the AA brand to the same
                  extent as other users of the AA brand, including AE and other
                  ABR carriers, as reasonably specified by AA in writing and
                  uniformly applied to all users of the AA brand, including AE
                  and other ABR carriers, will be deemed cause for termination
                  of this Agreement as provided in Section 7.02, provided that
                  such failure is noted in two consecutive audits.

         (m)      The provisions of Sections 6.02, 6.03, 6.04, 7.03, 11.01,
                  11.02, 11.03, 11.04, 13.02 and Article 8 shall survive the
                  termination of this Agreement.

7.03 - RECIPROCAL OPTION FOR ASSIGNMENT OF LEASES

         (a)      In the event of a termination of this Agreement for Cause by
                  AA, Contractor grants to AA an option to be assigned any or
                  all of the Leases for the Firm Approved Aircraft (the "CALL
                  OPTION"), exercisable at its sole discretion, at the date
                  notice of such termination is delivered to Contractor. AA may
                  exercise this Call Option by written notice delivered to
                  Contractor, within [*] following delivery of the notice of
                  such termination, designating those Leases to be assigned to
                  AA. Upon delivery of notice of such exercised Call Option,
                  Contractor will be deemed to have assigned all of its rights
                  and duties under the designated Leases to AA. Contractor shall
                  pay within [*] for any maintenance conversion
                  expenses required to transfer the Firm Approved Aircraft
                  subject to such Leases from compliance with the Contractor's
                  FAA-approved maintenance program to AA's FAA-approved
                  maintenance program ("CONVERSION EXPENSES"). Further, any
                  parts and components subject to "power-by-the-hour"
                  maintenance arrangements shall be paid in full by Contractor
                  through the date of termination of this Agreement.

         (b)      In the event of termination of this Agreement without Cause by
                  AA:

                           1. AA grants to Contractor a one-time option to
                  assign to AA any or all of the Leases for the Firm Approved
                  Aircraft (the "ONE-TIME PUT OPTION"), exercisable, at its sole
                  discretion, within [*] after Contractor's receipt of
                  written notice of termination by AA. Contractor may exercise
                  this One-Time Put Option by written notice delivered to AA
                  within such [*] exercising the One-Time Put Option and
                  designating those Leases to be put to AA. Upon delivery of
                  notice of such exercise of the One-Time Put Option, AA will be
                  deemed to assume the designated Leases on the schedule set
                  forth in subsection (3) below.

                           2. Contractor grants to AA a one-time Call Option
                  (the "ONE-TIME CALL OPTION") to be assigned any or all of the
                  Leases for the Firm Approved Aircraft, exercisable, at its
                  sole discretion, at the date notice of such termination is
                  delivered to Contractor. AA may exercise this One-Time Call
                  Option by written notice delivered to Contractor
                  contemporaneously with the notice of such termination. Upon
                  delivery of notice of such exercised One-Time Call Option,
                  Contractor will be deemed to have


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                  assigned all of its rights and duties under the designated
                  Leases to AA on the schedule set forth in subsection (3)
                  below.

                           3. Following notice of the One-Time Put Option or
                  One-Time Call Option under this subsection (b), the parties
                  shall meet not later than [*] following such notice, to
                  effect a plan of orderly transition and wind down of the
                  Agreement. Such transition plan shall include, but not be
                  limited to a transition phasing of the designated aircraft
                  from Contractor to AA (beginning not later than the [*]
                  following such notice), at a rate of two aircraft per month,
                  on the last day of each month, for five months, based on a
                  schedule to be determined by AA, followed by the remaining
                  five aircraft on the last day of the sixth month. In such
                  event, the Term of the Agreement will be deemed to continue
                  until the last designated aircraft is phased from Contractor
                  to AA, provided however that performance measurement pursuant
                  to Exhibit J shall not be applicable during such a transition.

         Contractor will not be liable for Conversion Expenses under this
         Section 7.03(b), provided that Contractor continues to operate each
         Firm Approved Aircraft in strict accordance with its approved
         maintenance program following notice of termination, up to and
         including the date of termination of this Agreement. Further, any parts
         and components subject to "power-by-the-hour" arrangements must be paid
         in full by Contractor through the date of termination of this Agreement
         in the event of the exercise of either a Put Option or Call Option
         pursuant to this Section 7.03(b).

         AA agrees to indemnify and hold harmless Contractor from and against
         any Claim arising from events or circumstances occurring after the date
         of assignment out of any Lease that AA is deemed to assume hereunder.

         Contractor agrees to indemnify and hold harmless AA from and against
         any Claim arising from events or circumstances occurring on or before
         the date of assignment out of any Lease that AA is deemed to assume
         hereunder.

         (c)      Contractor agrees not to enter into any lease or similar
                  arrangement (however so titled) for Firm Approved Aircraft
                  other than pursuant to a Lease. Contractor will not amend any
                  Leases, or waive any material rights thereunder, without the
                  prior written consent of AA, such consent not to be
                  unreasonably withheld.

                  Each Lease entered into by Contractor must, at a minimum,
                  contain terms providing for the following: (1) the Lease must
                  be not less than 13 years in duration; (2) the Lease must be
                  assignable to AA without the consent of the Lessor and may not
                  contain any provisions that, upon assignment of such Lease to
                  AA, impose a penalty or any other adverse action on AA as a
                  result of such assignment; (3) the Lease must be assignable to
                  AA under the exact same terms and provisions as existed in the
                  Lease immediately prior to such assignment and such terms may
                  not become more onerous to the Lessee over the Term of the
                  Lease; (4) shall contain a "half-life" return condition
                  provision; and (5) AA must have the ability to purchase the
                  leased aircraft on commercially reasonable terms reasonably
                  acceptable to AA.

                  AA will make its representative reasonably available for
                  consultation and assistance in negotiating a Lease. Once terms
                  and provisions of a Lease have been agreed upon by Contractor
                  and the third party, Contractor shall provide a copy of such
                  Lease to AA. AA will then have ten (10) business days to
                  approve the Lease (such approval not to be


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                  unreasonably withheld) or to disapprove the Lease (such
                  disapproval not to be unreasonably provided), and to provide
                  written notice to Contractor of such approval or disapproval.
                  If AA disapproves a Lease, it shall include in its notice of
                  disapproval a detailed statement of the reasons for its
                  disapproval and a detailed statement of any suggested
                  non-economic changes, which if obtained by Contractor, would
                  require AA to approve the Lease, as modified. In the event AA
                  fails to provide notice of its approval or disapproval within
                  such 10 business day period, AA shall be conclusively deemed
                  to have accepted the Lease. Approval or disapproval of a Lease
                  by AA shall not be considered a waiver of its rights hereunder
                  with respect to future Leases. In the event that AA desires to
                  change any non-economic term or provision of the Lease or add
                  a new term or provision and such changes are reasonable taking
                  into account the aircraft type subject to the proposed Lease
                  and the relative bargaining power of Contractor, Contractor
                  shall have 15 business days to seek to effect such changes.
                  Further, during both the period in which AA reviews and
                  comments on the Lease term (up to 10 business days) and the
                  period in which Contractor seeks to effect such changes (up to
                  15 business days), Contractor shall be exempt from the [*]
                  of delay liquidated damages provided for in Section 1.02(a).
                  If such changes cannot be agreed upon between
                  Contractor and the third party, then Contractor may not enter
                  into the Lease.

                  To the extent that AA requires changes to a Lease that cause a
                  delay in placing a Firm Approved Aircraft into service, AA
                  will not be entitled to, and Contractor will not be liable
                  for, the penalty of [*] delay per regional jet, as
                  liquidated damages, provided for pursuant to Section 1.02(a).

7.04 - FORCE MAJEURE

         Except for any payments due hereunder, neither party shall be liable
         for delays or failure in performance hereunder caused by acts of God,
         acts of terrorism or hostilities, war, strike, labor disputes, work
         stoppage, fire, act of government, court order, or any other cause,
         whether similar or dissimilar, beyond the control of that party
         including but not limited to non-delivery or delay in delivery of
         aircraft to Contractor or delay in completion of required training of
         Contractor's employees by the aircraft manufacturer or delay in receipt
         of any necessary government approvals ("FORCE MAJEURE"). If any such
         event of Force Majeure substantially prevents one party's performance
         of the Agreement for a period of [*] or more, the other
         party may terminate this Agreement on [*] prior written
         notice.

ARTICLE 8 - TAXES

         Each of Contractor and AA shall be responsible for and agree to pay all
         Taxes, fees, levies, imposts, duties, charges and withholdings of any
         nature (together with any and all fines, penalties, additions to Tax or
         interest thereon or computed by reference thereto)(individually, a
         "TAX" and collectively, "TAXES") which are imposed by any government,
         governmental subdivision or other taxing authority of or in any
         jurisdiction, or by any international organization on the sale,
         delivery, use of materials, equipment or facilities or performance of
         services under this Agreement which are related to such party's
         respective operations or such party's performance of its respective
         obligations under this Agreement.

         Neither party shall be required by the foregoing Section to be
         responsible for any Taxes which are imposed by any government,
         governmental subdivision or other taxing authority of or in the United
         States or any foreign jurisdiction and which are based on or measured
         by the net income, capital, assets or net worth of the other party.


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ARTICLE 9 - ASSIGNMENT, MERGER AND EXTRAORDINARY TRANSACTION

9.01 - ASSIGNMENT

         This Agreement may be cancelled or terminated by either AA or
         Contractor if there is, by operation of law or otherwise, an assignment
         of this Agreement, or of any of the rights, duties or obligations
         created hereunder with respect to any party to this Agreement, without
         the written consent of the other party. In the event that this
         Agreement is assigned, whether by operation of law or otherwise,
         without such consent having been given in writing, the party not making
         the assignment shall have the right to terminate the Agreement
         following five (5) business days written notice to the other party and
         an opportunity to cure within such five (5) business days period.
         Notwithstanding the foregoing, (i) AA may, without consent of
         Contractor, assign and/or delegate any or all of its rights or
         obligations under this Agreement to any Affiliate or any company into
         which or with which AA or its successor may be merged, combined or
         consolidated, or which may otherwise succeed to all or any substantial
         portion of AA's assets; (ii) Contractor may, without consent of AA,
         assign or transfer this Agreement pursuant to a transaction permitted
         under Section 9.02(a) hereof; and (iii) either party shall have the
         right to assign as security all of its rights to money to be received
         so long as all offsets in favor of, and amounts due to, the party not
         assigning such rights, have been or shall be taken into account.

9.02 - MERGER

         In the event Contractor merges with or is controlled or acquired by
         another air carrier, or a corporation Affiliated with such an air
         carrier ("HOLDING COMPANY"), or a corporation owned, controlled or
         Affiliated with any such Holding Company and except for any such merger
         with or acquisition by an entity that is under common control, directly
         or indirectly, with Contractor, AA will have the option to terminate
         this Agreement without liability to Contractor except as otherwise
         provided in Section 9.03 (b) below.

9.03 - EXTRAORDINARY TRANSACTION

         (a)      For purposes of this Section, "EXTRAORDINARY TRANSACTION"
                  means any (1) merger of Contractor with another company not
                  under common control, directly or indirectly with Contractor,
                  (2) sale, transfer or lease by Contractor of all or
                  substantially all of its assets, rights or powers to an entity
                  not under common control, directly or indirectly, with
                  Contractor, or (3) the acquisition by another corporation or
                  entity not under common control, directly or indirectly, with
                  Contractor of all or a majority (at least 51%) of the
                  outstanding voting power of Contractor.

         (b)      Contractor may enter into an Extraordinary Transaction,
                  provided that AA's consent to assignment of this Agreement is
                  not otherwise required pursuant to Article 9.01 herein and
                  Contractor obtains for AA an affirmation from any such third
                  party, who succeeds to Contractor's interest in this
                  Agreement, that guarantees the full and faithful performance
                  of Contractor's Feeder Air Services under this Agreement. In
                  the event Contractor is unable to obtain such affirmation, AA
                  may, at its option, terminate this Agreement upon consummation
                  of the Extraordinary Transaction.

         (c)      Contractor agrees that (1) within thirty (30) days prior to
                  the closing of any Extraordinary Transaction with a third
                  party, or any initial or subsequent public offering of common
                  stock of Contractor, or (2) within seven (7) days prior to the
                  closing of any merger, sale,




                  lease, or transfer of all or substantially all of its assets,
                  or acquisition by another entity which is not an Extraordinary
                  Transaction, Contractor will notify AA of such event.

         (d)      Contractor grants to AA a right to purchase up to five percent
                  (5%) of the common Stock of Contractor (the "COMMON STOCK")
                  offered for sale in connection with any initial public
                  offering of Common Stock ("IPO SHARES") by Contractor pursuant
                  to an effective registration statement under the Act or
                  comparable statement under any similar federal or other
                  statute then in force that will result in the IPO Shares being
                  listed or admitted to trading on a national securities
                  exchange or nationally recognized automated interdealer
                  quotation system ("IPO"). This right to purchase Common Stock
                  of Contractor granted to AA ("IPO PARTICIPATION RIGHT") shall
                  be subject to the following terms and conditions:

                           1. In the event that the effective date of the
                  registration statement covering the IPO Shares under the Act
                  occurs after February 15, 2002 (the one year anniversary of
                  the granting of the IPO Participation Right), AA may purchase
                  up to five percent (5%) of the IPO Shares in the IPO. The
                  purchase price of the IPO Shares subject to the IPO
                  Participation Agreement shall equal the per share price at
                  which the IPO Shares are offered to the public pursuant to the
                  IPO ("IPO SHARE PRICE"). AA may purchase less than all of the
                  IPO Shares available under the IPO Participation Right.

                           2. In the event that the effective date of the
                  registration statement covering the IPO Shares under the Act
                  occurs prior to February 15, 2002, AA may purchase up to a
                  number of shares of Common Stock equal to five percent (5%) of
                  the IPO Shares in the IPO in a private placement
                  contemporaneous with the IPO ("PRIVATE PLACEMENT SHARES"). The
                  purchase price of the Private Placement Shares subject to the
                  IPO Participation Right shall equal 75% of the IPO Share
                  Price. AA may purchase less than all of the Private Placement
                  Shares available under the IPO Participation Right.

                           3. Contractor shall give AA prompt notice of its
                  determination to conduct an IPO, but in no event later than
                  the date of the filing of the IPO Shares registration
                  statement under the Act. Contractor shall provide to AA a copy
                  of the preliminary prospectus concurrent with its distribution
                  to the public. Contractor shall provide AA no less than 72
                  hours notice of the commencement of public trading of the IPO.
                  AA shall inform Contractor of the number of IPO Shares or
                  Private Placement Shares that AA will purchase pursuant to the
                  IPO Participation Right no later than 48 hours prior to the
                  commencement of public trading of the IPO.

                  Further, in the event Contractor enters into an agreement with
                  another air carrier to provide regional air service under a
                  code share agreement and provides such other air carrier with
                  the right to participate in an IPO on terms more favorable to
                  such air carrier than the foregoing with respect to the type,
                  amount or pricing of participation, Contractor agrees, subject
                  to the provisions of this Section, to amend the type, amount
                  and/or pricing of rights granted to AA to participate in an
                  IPO so that they are not less favorable than the type, amount
                  and pricing or rights granted to such other air carrier.
                  Notwithstanding the foregoing, Contractor may provide another
                  air carrier with the right to participate in an IPO with a
                  type, amount or pricing of participation more favorable than
                  that available to AA, provided that such more favorable
                  treatment is proportionate to an increase in the number of
                  regional jets subject to such third party code share agreement
                  as compared to the Firm Approved Aircraft committed by AA to
                  be placed in service under the terms of this Agreement
                  (initially fifteen).




         (e)      Sections 9.03 (b) and (c) herein above will not apply to any
                  proposed sale or disposition by Contractor of its aircraft or
                  assets that: (a) have become worn out or obsolete or are no
                  longer used and useful in Contractor's day to day business;
                  PROVIDED, however, that such sale or disposition does not
                  impair or negatively affect Contractor's ability to complete
                  scheduled service on a day to day basis under this Agreement;
                  or (b) are being replaced with other assets of a similar type
                  which are at least of equal quality and utility to Contractor
                  in carrying on its day to day business and meeting its
                  obligation under this Agreement.

ARTICLE 10 - COMMUNICATIONS, TRAINING AND BENEFITS

10.01 - MEDIA COMMUNICATIONS

         The corporate communications functions and personnel of Contractor and
         AA will operate independently but in coordination with respect to "ABR"
         joint marketing objectives. In the event of any Feeder Air Service
         accident or flight or ground incident involving the death of any
         person(s) or threat or injury or potential injury to persons or
         property, it is agreed that the provisions concerning emergency
         response procedures as set forth in Exhibit I shall apply and that the
         sole official spokespersons and liaison personnel with the media shall
         be those individuals designated in AA's Emergency Response Procedures
         Plan.

10.02 - TRAINING AND TRAINING MATERIALS

         Subject to the terms or specific training programs set forth in
         Exhibits D and H:

         (a)      For existing programs, [*]

         (b)      For new programs, AA will [*]

         (c)      Should Contractor request AA instructors for the purpose of
                  exclusive training for Contractor employees either for
                  existing or new programs, and if such training is permitted by
                  AA, [*]

10.03 - CONTRACTOR REPORTS

         (a)      Upon departure of each Contractor Feeder Air Service flight
                  from Feeder Air Service cities, flight close-out entries shall
                  be made by Contractor in SABRE as required by AA. If
                  Contractor becomes aware of any station(s) which have any
                  deficiencies in making "close-out "entries as required by this
                  Section, Contractor will promptly take corrective action to
                  remedy such problem including the submission to AA of a
                  corrective action plan.

         (b)      Contractor will furnish to AA operating performance reports in
                  accordance with Exhibit K.


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         (c)      Contractor will furnish to AA (1) within [*] after the end
                  of each of the three interim calendar quarters, unaudited
                  financial statements including Contractor's then current
                  corporate balance sheet and profit and loss statement, and (2)
                  within [*] after the end of Contractor's fiscal year,
                  Contractor's then current, audited financial statements
                  including, either separately or on a consolidated basis, the
                  balance sheet and the profit and loss statement, together with
                  associated footnotes, and a copy of the independent auditor's
                  report.

         (d)      AA may inspect Contractor's corporate records and accounts
                  related to Contractor's Feeder Air Services, from time to
                  time, upon reasonable notice during the life of this
                  Agreement.

         (e)      Each business day Contractor will furnish to AA (Attention: -
                  Director - Planning) daily operating reports for each day of
                  the week in a format specified by AA for the preceding day(s)
                  as per Exhibit K.

         (f)      Contractor will be responsible for filing all reports and
                  plans relating to its operations with the DOD, DOT, FAA, NTSB
                  or any state or airport authority, and Contractor will
                  promptly furnish AA with copies of all such reports and such
                  other available traffic and operating reports as AA may
                  request from time to time during the life of this Agreement as
                  per Exhibit K.

         (g)      Contractor will promptly furnish AA with a copy of every
                  report and plan that Contractor prepares, whether or not such
                  report is filed with the FAA, NTSB or any other governmental
                  agency, relating to any accident or incident involving an
                  aircraft used by Contractor in performing services under this
                  Agreement, whether or not such aircraft bears any Marks, when
                  such accident or incident is claimed to have resulted in the
                  death or injury to any person or the loss of, damage to or
                  destruction of any property.

         (h)      [*] If requested by AA, Contractor shall provide copies
                  of any written communications. Further, each party will
                  endeavor to report to the other party any unplanned meetings
                  (where it is anticipated that negative media coverage could
                  result) that occur between either party and any local, state,
                  or federal governmental officials regarding Contractor's
                  performance as an ABR carrier.


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10.04 -  AGREEMENTS WITH OTHER CARRIERS

         (a)      [*]

         (b)      Subject to Article 5 herein, in the event Contractor enters
                  into an agreement with a third party governing pursuant to
                  which Contractor will provide services substantially similar
                  to those provided to AA under this Agreement employing ERJ-140
                  aircraft, Contractor shall: (i) [*], and (ii) [*].

         (c)      Subject to Article 5 herein, in the event Contractor reaches
                  agreement in principle on all of the material terms of a
                  contemplated agreement with a third party pursuant to which
                  Contractor proposes to provide services substantially similar
                  to those provided under the terms of this Agreement employing
                  aircraft other than ERJ-140 aircraft (a "PROPOSED AGREEMENT"),
                  Contractor shall (i) [*]

10.05 -  WAIVERS

         No failure by either party to exercise, or delay in exercising, any
         right, power or remedy, and no course of dealings between the parties
         shall constitute a waiver of such right, power or remedy. No waiver by
         either party or any default, misrepresentation or breach of warranty,
         whether intentional or not, shall be deemed to extend to any prior or
         subsequent default, misrepresentation or breach. No waiver shall be
         valid unless in writing.

         Notwithstanding the foregoing, neither party shall recover costs (with
         the exception of interline settlements made in accordance with
         Exhibit F) or enforce monetary penalties or incentive


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         payments to which it is entitled by the terms of this Agreement if the
         party seeking such recovery or enforcement either knew or, with
         reasonable due diligence, should have known of the facts or conditions
         giving rise to its claim and failed to notify the other party in
         writing within twelve (12) months thereafter.

ARTICLE 11 - CONFIDENTIALITY

11.01 -  NONDISCLOSURE OF AGREEMENT

         Except as required by law or in any proceeding to enforce the
         provisions of this Agreement, AA and Contractor hereby agree not to
         disclose or publicize to any third party the terms or conditions of the
         Agreement or any related Agreement except in the sole discretion and
         with the prior written consent of AA.

         Notwithstanding the foregoing, either party may disclose the terms of
         this Agreement on a need-to-know basis to its Affiliates, financial
         advisors, outside law and accounting firms, bank lenders, or to other
         financial entities or underwriters, provided such entities acknowledge
         the confidential nature of such information and agree to be bound by
         the non-disclosure requirements of this Article 11.

11.02 -  NONDISCLOSURE OF INFORMATION

         For purposes of this Agreement, confidential information, whether oral,
         written or in any other form is that information which pertains to the
         business, marketing, or operational plans or procedures of the
         disclosing party and which should reasonably be understood by the
         receiving party by the circumstances of disclosure or by the nature of
         the information itself, to be proprietary and confidential to the
         disclosing party. Except as required by law or in any proceeding to
         enforce the provision of this Agreement, AA and Contractor hereby agree
         to use confidential information solely for purposes related to the
         performance of services under this Agreement and further agree not to
         disclose to any third party any confidential information received from
         the other party without the prior written consent of the party
         providing such confidential information or data. The foregoing
         restrictions for the use and/or disclosure of confidential information
         shall not apply to information that:

         (a)      was publicly known at the time such information was
                  communicated by the disclosing party to the receiving party;
                  or

         (b)      becomes publicly known through no fault of the receiving
                  party subsequent to the disclosure of such information; or

         (c)      was in the receiving party's possession, free of any
                  obligation of confidence at the time of the disclosing
                  party's communication to the receiving party; or

         (d)      is developed by the receiving party independently of and
                  without reference to the disclosing party's confidential
                  information or other information that the disclosing party
                  communicated in confidence to any third party; or

         (e)      is rightfully obtained by the receiving party from third
                  parties authorized to make such disclosure without
                  restriction; or

         (f)      is identified by the disclosing party as no longer proprietary
                  or confidential.

         (g)      is disclosed to an Affiliate on a need-to-know basis and that
                  Affiliate agrees to abide by the provisions of this Section
                  11.02.




11.03 -  NOTIFICATION

         If either party is served with a subpoena or other process requiring
         the production or disclosure of any of the Agreement or confidential
         information referenced in Article 11.02, then the party receiving such
         subpoena or other process, [*]


11.04 -  RETURN OF INFORMATION

         Upon termination of this Agreement, each party must return to the other
         any confidential information or data received from the other and
         designated as such by the party providing such confidential information
         which is still in the recipient's possession or control.

ARTICLE 12 - RELATED AGREEMENTS

         (a)      Contemporaneously with the execution of this Agreement, AA and
                  Contractor acknowledge that the parties have or will enter
                  into the following additional agreements:

                           Reduced Rate Agreement for Employee Travel

                           Hub Real Estate Subleases

                           System Ground Handling Agreement

                           Warrant Agreement of even date herewith

                           Amendment No. 3 to the Amended and Restated Trans
                           World Express Air Services Agreement, dated February
                           15, 2001

         (b)      Upon execution of this Agreement, the parties shall promptly
                  meet and proceed to work together in good faith to negotiate
                  and conclude the terms and conditions of each of the Related
                  Agreements not executed simultaneously with this Agreement.

         (c)      The agreements enumerated in this Article 12 are herein
                  referred to as the "Related Agreements." Notwithstanding
                  anything to the contrary contained in the Related Agreements,
                  the term of each of the Related Agreements shall be
                  coterminous with the Term of this Agreement.

ARTICLE 13 - MISCELLANEOUS

13.01 -  ENTIRE AGREEMENT AND AMENDMENTS

         This Agreement, including any Appendices, Attachments and Exhibits
         attached hereto or thereto, contains the complete, final and exclusive
         agreement between the parties hereto with respect to the subject matter
         hereof, and supersedes all previous agreements and understandings, oral
         and written, with respect to such specific matter. This Agreement will
         not be modified, amended or terminated by mutual agreement or in any
         manner except by an instrument in writing, executed by the parties
         hereto.


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13.02 -  GENERAL

         (a)      Any and all notices, approvals or demands required or
                  permitted to be given under this Agreement shall be sufficient
                  if sent by certified or registered mail, postage prepaid, or
                  if sent by courier or overnight delivery service, or via
                  facsimile provided a confirming copy of such notice is sent
                  via one of the foregoing methods,



                  if addressed to AA:                         with a copy to:
                                                           
                  Director - Planning                         Corporate Secretary
                  American Airlines, Inc.                     American Airlines, Inc.
                  4333 Amon Carter Blvd.                      4333 Amon Carter Blvd.
                  MD 5494                                     Ft. Worth, TX  76155
                  Ft. Worth, TX  76155
                  Fax: (817) 967-3407                         Fax: (817) 967-4313

                  and if to Contractor, addressed to:         with a copy to:

                  President and CEO                           Wexford Capital, LLC
                  Chautauqua Airlines, Inc.                   411 West Putnam Avenue
                  Indianapolis Int'l Airport                  Greenwich, CT  06830
                  Suite #160                                  Attention: President
                  2500 South High School Road                 Attention: General Counsel
                  Indianapolis, IN 46241
                  Fax # 317-484-4547                          Fax # 203-862-7312


                  or to such other addresses as either party may hereafter
                  specify by notice as provided herein.

         (b)      This Agreement shall be governed by and construed and enforced
                  in accordance with the laws of the State of Texas.

         (c)      This Agreement may be executed in two or more counterparts,
                  each of which will be deemed an original and all of which
                  together will constitute one instrument.

         (d)      If any provision of this Agreement is held to be illegal,
                  invalid or unenforceable under present or future laws
                  effective during the Term, the legality, validity, and
                  enforceability of the remaining provisions of this Agreement
                  shall not be affected thereby, and in lieu of such illegal,
                  invalid, or unenforceable provision, there shall be added
                  automatically as a part of this Agreement a provision as
                  similar in terms to such illegal, invalid or unenforceable
                  provision as may be legal, valid, and enforceable.

         (e)      The prevailing party in any legal proceeding based upon this
                  Agreement shall be entitled to reasonable attorney's fees and
                  court costs, in addition to any other recoveries allowed by
                  law.






IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered
into and signed by their proper officers thereunto duly authorized as of the day
and year first above written.

CHAUTAUQUA AIRLINES, INC.                   AMERICAN AIRLINES, INC.


By: /s/ Bryan Bedford                       By: /s/ T.F. Bacon
   -------------------------------             ---------------------------------

Name:  Bryan Bedford                        Name:  T.F. Bacon

Title:  President                           Title:
       ---------------------------                 -----------------------------






                           EXHIBIT A - FEEDER AIRPORTS

1.       ST. LOUIS FEEDER AIRPORTS AND SCHEDULING STANDARDS

         A.       Subject to conditions specified elsewhere in the Agreement,
                  Contractor will provide Feeder Air Service between AA
                  designated Feeder Airports on the one hand, and the STL Hub on
                  the other hand during and upon completion of the Fleet Plan
                  phase-in.

         B.       In scheduling Contractor operated aircraft, AA will not unduly
                  require the use of more than one flight crew (pilots and
                  flight attendants) per overnight ("RON"). In the event the
                  marketing schedule does not provide the crew with "legal
                  rest," Contractor shall either "stage" a replacement crew at
                  the affected location or schedule the crew on a CDO. If a CDO
                  or staged RON is required, AA shall reimburse Contractor its
                  direct cost for such CDO or staged RON.

         C.       AA shall designate which Approved Aircraft type will be
                  operated to and from Feeder Airports and the STL Hub.

         D.       AA shall schedule the Approved Aircraft to maintain average
                  daily scheduled utilization within the minimum and maximum
                  parameters noted on [*].

         E.       AA shall schedule the Approved Aircraft in an efficient manner
                  at the Hub and Feeder Airports.

         F.       AA shall have the discretion to change the frequency and
                  deployment of Feeder Air Service Flights between the Hub and
                  Feeder Airports provided reasonable notice, as defined in
                  Section 2 below, is given to Contractor.

2.       ROUTE CHANGES

         AA shall have the discretion to redeploy Approved Aircraft from time to
         time given reasonable prior written notice is provided to the
         Contractor. For the purposes of this Section, reasonable notice shall
         mean:

         A.       [*] to add or delete service to Feeder Airports
                  that are Covered Locations or locations served by a third
                  party ABR provider; and

         B.       [*] to add Feeder Airports that are new Contractor
                  Locations; and

         C.       [*] to delete Feeder Airports that are Contractor
                  Locations.

         In the event AA requests Contractor to operate routes other than to or
         from the STL Hub, Contractor and AA shall meet to determine what, if
         any, changes are required to the STL cost model for the operation of
         such non-STL Hub Feeder Air Service Flights.

                                    *    *    *


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                             EXHIBIT B-1 -ABR MARKS

1.       THE ABR MARKS ARE:

         A.       "ABR," "ABR," and AA's aircraft interior and exterior decor,
                  colors, and logos. Such ABR Marks may be retrieved by
                  Contractor when granted access to AADAMS pursuant to Section
                  1.01(a) on or after the execution date of this Agreement. The
                  ABR Marks may be revised by AA from time to time.

         B.       "AA" and "AA*", as appropriate as code to designate Feeder Air
                  Service Flights in the OAG, airline and third party
                  reservations systems, airport flight information displays,
                  passenger tickets, and similar media.

         C.       The "AAdvantage" frequent traveler program for promotion and
                  benefits.

         D.       Any other ABRMark which AA from time to time may designate.

                                    *    *    *






                             EXHIBIT B-2 - TWA MARKS

1.       THE TWA MARKS ARE:

         A.       "Trans World Express," "TWE," "TWExpress," and TWA's aircraft
                  interior and exterior decor, colors, and logos. Such TWA Marks
                  are depicted in the logo sheet previously furnished by TWA to
                  Contractor, and attached hereto, which may be revised by AA
                  from time to time.

         B.       "TW" and "TW*", as appropriate as code to designate Feeder Air
                  Service Flights in the OAG, airline and third party
                  reservations systems, airport flight information displays,
                  passenger tickets, and similar media.

         C.       The "Aviators" frequent traveler program for promotion and
                  benefits.

         D.       Any other TWA Mark which AA from time to time may designate.

                                    *    *    *






                   EXHIBIT C - FLEET PLAN AND OTHER CONDITIONS

1.       FEEDER AIR SERVICE APPROVED AIRCRAFT

         A.       REGIONAL JET AND TURBO PROP AIR TRANSPORTATION SERVICE

                  (1)      As directed by AA and subject to certain Labor
                           Contract Restrictions, Contractor will utilize
                           Embraer regional jet aircraft, types 145 and 140,
                           (ERJ) configured in American Eagle specifications
                           (including but not limited to airframe, powerplant,
                           cabin interior, exterior trade dress, avionics, and
                           the like) , and Saab 340 (SF3) turbo prop aircraft,
                           configured with not less than [*]. Each aircraft
                           shall be equipped with [*]. Unless otherwise
                           directed by AA, all ERJ aircraft operated by
                           Contractor will be the 140 LR version, although AA
                           may at its discretion change from the 140 LR version
                           to the 145 LR version. AA will give Contractor
                           timely notice of such change. Both parties agree
                           that the use of ERJ type 145 will require a
                           separate schedule of Block Hour and passenger
                           stipend charges.

                  (2)      Other regional jet and turbo-prop aircraft types may
                           be used subject to AA's prior approval and
                           corresponding amendment to this Agreement as
                           appropriate.

                  (3)      Contractor is permitted to assign one or more
                           Standard Marked Approved Aircraft as a spare aircraft
                           to protect operations pursuant to this Agreement.

         B.       RIGHT OF FIRST REFUSAL

                  Should Contractor have aircraft in excess of its operational
                  needs, Contractor will grant AA a right of first refusal to
                  place such aircraft in service for AA. All terms and
                  conditions contained in this Agreement shall apply to any
                  service operated by Contractor on behalf of AA with such
                  additional aircraft.

2.       IN-SERVICE DATES / PHASE OUT DATES

                  In-service and phase out dates shall be as indicated on
                  Schedule C-1.

3.       AIRCRAFT INTERIOR AND EXTERIOR SPECIFICATIONS

                  AA shall direct Contractor regarding the exterior trade dress
                  and interior fabric and color selection process of all
                  aircraft Contractor operates under this Agreement to ensure
                  consistency with AA's or AE's product appearance.

4.       MAINTENANCE

         A.       Contractor agrees to maintain the Firm Approved Aircraft fleet
                  to the highest service non-mandatory bulletin/modification
                  ("SB") status maintained on the other aircraft operated by
                  Contractor. Contractor and AA agree to cause their maintenance
                  personnel to meet at least once each calendar quarter, or more
                  often at the request of AA, to review the SB status of the
                  Firm Approved Aircraft fleet. In the event that Contractor
                  determines a particular SB is not cost beneficial, AA may
                  cause Contractor to perform the SB on the Firm Approved
                  Aircraft under the following circumstances:


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                  (1)      If AA performs an SB on its fleet and desires such SB
                           to be performed on Contractor's Firm Approved
                           Aircraft fleet when such SB is not already preformed
                           or is not intended to be performed on any of the
                           Contractor fleet, then:

                           If AA provides a part or component to Contractor at
                           no charge to Contractor, Contractor will provide, at
                           no additional charge to AA, up to 100 man-hours per
                           Firm Approved Aircraft of labor to comply with the
                           SB. Any man-hours in excess of 100 shall be
                           reimbursed by AA to Contractor at straight-time
                           rates.

         B.       During the Term, Contractor shall furnish to AA such
                  information concerning the location, condition, use and
                  operation of the Approved Aircraft as AA may reasonably
                  request. Contractor shall permit any Person designated in
                  writing by AA, at AA's expense, to visit and inspect (at any
                  reasonable time, provided that such inspection shall not
                  unreasonably interfere in any material respect with
                  Contractor's business operations or operation or maintenance
                  of the Approved Aircraft) the Approved Aircraft and the logs,
                  manuals, records and other documentation maintained in
                  connection therewith and, at AA's expense, to make copies of
                  such records as AA may reasonably designate. AA shall have no
                  duty to make any such inspection and shall not incur any
                  liability or obligation by reason of making or not making any
                  such inspection. Any such inspection of the Approved Aircraft
                  shall be a visual, walk-around inspection which may include
                  going on board the Approved Aircraft and shall not include
                  opening any panels, bays, or the like; PROVIDED, that any such
                  designee of AA shall be entitled to be present during any
                  maintenance check of any Approved Aircraft at which any
                  panels, bays or the like may be opened and shall have the
                  right to inspect such items during such maintenance check.
                  Upon written request from AA, Contractor shall provide AA with
                  the anticipated dates of any scheduled major maintenance
                  checks (including any "C", heavy "C" or "D" check) occurring
                  within the six-month period following such request. Contractor
                  shall promptly address any concerns of AA's Flight Operations,
                  Ground Operations, Maintenance and Safety Departments.

         C.       Contractor shall maintain, service, repair, overhaul and test
                  or cause to be maintained, serviced, repaired, overhauled and
                  tested each Approved Aircraft (and all parts and components
                  thereof) in accordance with its FAA approved maintenance
                  program, so as to keep each Approved Aircraft (and all parts
                  and components thereof) in at least as good an operating
                  condition as when delivered, ordinary wear and tear excepted,
                  and within the acceptable limits of performance provided in
                  the manufacturer's manuals.

                                    *    *    *






                 SCHEDULE C-1 - FLEET PLAN AND IN-SERVICE DATES

         At the STL Hub, Contractor has agreed to continue to operate the
         following in service ERJ-145 LR and Saab 340 aircraft until the phase
         out dates listed (the ERJ-145 units and the SAAB 340 units are
         collectively referred to as "ORIGINAL APPROVED AIRCRAFT"), and to place
         the following 15 firm ERJ-140 LR units into service according to the
         following schedule (the ERJ-140 LR units are collectively referred to
         as "FIRM APPROVED AIRCRAFT"):



   Contractor          Make/        In-Service   Total AA          Phase-out         Total AA
      Unit             Model           Date      SF3 Units           Date            RJ Units
- ----------------- ---------------- ------------- ---------- ------------------------ ----------
                                                                         
   SF 01 - 06           SF3                          6           April 1, 2002
     145-01           145 LR                                 F-08 in service date        1
     145-02           145 LR                                 F-09 in service date        2
     145-03           145 LR                                 F-10 in service date        3
     145-04           145 LR                                 F-11 in service date        4
     145-05           145 LR                                 F-12 in service date        5
     145-06           145 LR                                 F-13 in service date        6
     145-07           145 LR                                 F-14 in service date        7
     145-08           145 LR                                 F-15 in service date        8
      F-01            140 LR             [*]                                             9
      F-02            140 LR             [*]                                            10
      F-03            140 LR             [*]                                            11
      F-04            140 LR             [*]                                            12
      F-05            140 LR             [*]                                            13
      F-06            140 LR             [*]                                            14
      F-07            140 LR             [*]                                            15
      F-08            140 LR             [*]                                            15
      F-09            140 LR             [*]                                            15
      F-10            140 LR             [*]                                            15
      F-11            140 LR             [*]                                            15
      F-12            140 LR             [*]                                            15
      F-13            140 LR             [*]                                            15
      F-14            140 LR             [*]                                            15
      F-15            140 LR             [*]                                            15



Note:    For the purposes of Section 1.02, specific "in-service" date shall be
         confirmed to AA by Contractor not less than 90 days prior to the
         scheduled date of delivery.

         Additional Approved Aircraft may be added to the Fleet Plan by mutual
         agreement between the parties and under the same terms and conditions
         stated herein.


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                                 OPTION AIRCRAFT

         The aircraft described in the table below are collectively known as the
"OPTION AIRCRAFT."



                                                                                         Potential
   Option RJ                            Commitment         Notice to        Delivery     Total AA
     Unit           Make/ Model            Date             Convert           Date         Units
   ---------        -----------         ----------         ---------        --------     ---------
                                                                             
      O-01                                Jul-01             Jul-01             [*]         16
      O-02                                Jul-01             Jul-01             [*]         17
      O-03                                Jul-01             Jul-01             [*]         18
      O-04                                Jul-01             Jul-01             [*]         19
      O-05                                Jul-01             Jul-01             [*]         20
      O-06                                Jul-01             Oct-01             [*]         21
      O-07                                Jul-01             Oct-01             [*]         22
      O-08                                Aug-01             Nov-01             [*]         23
      O-09                                Aug-01             Nov-01             [*]         24
      O-10                                Sep-01             Dec-01             [*]         25
      O-11                                Sep-01             Dec-01             [*]         26
      O-12                                Oct-01             Jan-02             [*]         27
      O-13                                Oct-01             Jan-02             [*]         28
      O-14                                Nov-01             Feb-02             [*]         29
      O-15                                Nov-01             Feb-02             [*]         30
      O-16                                Dec-01             Mar-02             [*]         31
      O-17                                Dec-01             Mar-02             [*]         32
      O-18                                Jan-02             Apr-02             [*]         33
      O-19                                Jan-02             Apr-02             [*]         34
      O-20                                Feb-02             May-02             [*]         35



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                        EXHIBIT D - STANDARDS OF SERVICE

1.       CUSTOMER SERVICE

         Contractor will perform all customer-related services in a
         professional, businesslike, and courteous manner.

         A.       In order to ensure a high level of customer satisfaction,
                  Contractor agrees that it will train or cause to be trained to
                  proficiency, all Contractor customer service employees
                  associated with Contractor's ABR Services.

         B.       Contractor will establish and maintain customer handling
                  procedures and policies which conform with Customer Service
                  Policies and Procedures or other such documentation as AA may
                  from time to time adopt, to the extent that such procedures
                  and policies are appropriate for an ABR operation.

                  Further, Contractor will establish, maintain, and enforce
                  employee conduct, appearance and training standards and
                  policies which are similar to those utilized by AA.

         C.       Contractor agrees to participate in any and all special
                  training or other programs that AA provides for its customer
                  service employees. Contractor may elect to accomplish such
                  training through the use of a "Train the Trainer" concept, if
                  permitted by AA.

         D.       Upon the request of either party, Contractor and AA will meet
                  to discuss and review Contractor's customer handling
                  procedures and policies and Contractor's employee conduct,
                  appearance, and training standards and policies to ensure
                  compliance with this Exhibit D.

         E.       Contractor shall resolve all customer complaints in accordance
                  with AA's Customer Service Policies and Procedures and will
                  forward all customer complaints to AA's Customer Relations
                  Department to ensure timely resolution of all customer
                  concerns associated with the ABR Services provided by
                  Contractor.

2.       IN-FLIGHT SERVICE PRODUCT AND DELIVERY

         [*] Contractor shall coordinate with AA's (or its Affiliate's)
         In-flight Services Department to ensure consistency and quality
         of Contractor's in-flight service product, including but not
         limited to non-safety related functions such as inflight
         marketing announcements, meal and beverage presentation and
         delivery, provisioning and usage of passenger amenity kits, and the
         like. Contractor shall implement suggestions made by AA's (or its
         Affiliate's) In-flight Services Department if such suggestions can be
         implemented without additional cost to Contractor. AA shall assist
         Contractor in obtaining commissary items (beverages and complimentary
         foodstuffs) at [*].

         Contractor will coordinate with AA to ensure consistency with AA's
         product delivery, including but not limited to AA logo napkins, stir
         rods, cups and the like. AA shall provide such amenities at no charge
         to Contractor.


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3.       REPRESENTATION AND PRESENTATION OF THE AA BRAND

         A material failure to represent the AA brand to the same extent as
         other users of the AA brand, including AE and other ABR carriers as
         reasonably specified by AA in writing and uniformly applied to all
         users of the AA brand, including AE and other ABR carriers, [*]
         of this Agreement as provided in Section 7.02, provided that such
         failure is [*].

                                    *    *    *


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                           EXHIBIT E - CHARGES PAYABLE

1.       CHARGES PAYABLE BY AA

         A.       BLOCK HOUR CHARGE

                  AA shall pay Contractor a fixed fee per actual Block Hour
                  flown in revenue service. The Block Hour rate is based upon
                  Contractor's fixed costs and will vary based upon the number
                  of scheduled Block Hours on an average daily basis for each
                  Approved Aircraft fleet (see Schedules E-1a and E-1b for
                  ERJ-145 and ERJ-140 respectively, and Schedule E-2).
                  Contractor will bear all product reliability and operating
                  cost risk unless otherwise stated herein. The rate per Block
                  Hour shall be adjusted only in conjunction with schedule
                  changes that affect the scheduled Block Hour utilization
                  subject to a minimum payment calculated on the basis of [*].

                  For the avoidance of doubt, AA will schedule the Firm Approved
                  Aircraft for a minimum daily utilization of [*]. For example,
                  in the event that AA schedules the Firm Approved Aircraft
                  for an average of [*].

                  Certain components of the Block Hour cost shall be subject to
                  periodic adjustment based upon Section C below.

         B.       [*]

                  [*]

         C.       ADJUSTMENTS TO CHARGES

                  In addition to the Block Hour charge and passenger stipend, AA
                  agrees to pay Contractor the following items:

                  (1)      [*] These Pass Through Costs and their associated
                           rules of application are listed in
                           Schedule E-3(1)(I).

                  (2)      AA agrees to reimburse Contractor for [*].

                  (3)      AA agrees to [*] Contractor should contract such
                           services when necessary, pay the vendor directly,
                           and then submit charges to AA as [*].


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                  (4)      [*]

                  (5)      The Block Hour charge contemplates Contractor
                           performing Passenger Handling and Ground Handling
                           Duties for [*]. That number will be adjusted for
                           actual deployment by use of CLDR (or Contractor
                           Location Departure Ratio) as defined herein. "CLDR"
                           means the number of scheduled, weekday Feeder Air
                           Service regional jet departures handled by
                           Contractor, divided by the total number of scheduled
                           weekday Feeder Air Service regional jet departures
                           operated by Contractor. AA shall recompute the CLDR
                           based upon the current marketing schedule then in
                           effect. The computation of CLDR shall be made at the
                           beginning of each calendar quarter when the total
                           regional jet fleet count is less than 20 units and
                           semi-annually (January 1 and July 1) when the total
                           regional jet fleet count is 20 units or more. For
                           purposes of Contractor cost reimbursement, the
                           following calculations shall be performed on a
                           monthly basis and AA agrees to reimburse Contractor
                           the amount generated by such calculation:

                                    [*]

                                    [*]

                  (6)      If, during any calendar quarter, the level of
                           Uncontrollable Cancellations incurred by Contractor
                           is more than [*] of scheduled Block Hours, then AA
                           shall pay to Contractor an amount determined in
                           accordance with the following formula:

                           [*]

                                    where

                           [*]

                                    In such a circumstance where AA is obligated
                                    to pay Contractor for Uncontrollable
                                    Cancellations, [*]


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2.       CHARGES PAYABLE BY CONTRACTOR

         A.       AA GROUND AND PASSENGER SUPPORT SERVICES TRAINING

                  [*], at no cost to AA, all necessary training to
                  enable AA, and/or its Affiliate(s) to fulfill its
                  obligations under any ground handling agreements.

         B.       AUTOMATION

                  1.       [*]
                           in the Feeder Cities and Hub, as appropriate.
                  2.       [*]
                           associated with the transmission and reception of
                           ACARS data.

         C.       UNANTICIPATED COSTS

                  Any costs incurred by Contractor in conjunction with
                  Contractor's ABR Services shall [*]

         D.       OTHER CHARGES INCURRED

                  1.       [*] with regard to the ticketing and boarding
                           of any passenger for ABR Services or any
                           other passenger connecting to transportation services
                           offered by AA, including but not limited to Costs
                           arising out of Contractor's failure to verify travel
                           documents or under collection or under remittance of
                           fares, Taxes, PFC's, security surcharges or the like,
                           except to the extent Contractor's non-compliance is
                           due to the failure of AA to comply with any such
                           applicable law, rule, regulation, or procedure.

                  2.       Any services, if requested by Contractor and
                           performed by TWA, that are not otherwise identified
                           in this Agreement shall be at [*]

         E.       TURBO-PROP AIRPORT SUPPORT SERVICES

                  Contractor shall pay AA [*] Covered Location where AA or its
                  Affiliate provides Airport Support Services. Contractor shall
                  make arrangements with AA Vendors, if applicable, to pay such
                  Vendors directly and may submit such bills back to AA for
                  credit/reimbursement from the TP Turn Fee.

                  Contractor's payment of the TP Turn Fee may be withheld from
                  the Contractor payment/wire transfer by AA at AA's option.

3.       SHARED COSTS

         AA and Contractor agree to [*] the following costs on [*] basis:


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         A.       Ongoing SABRE automation equipment cost
         B.       Installation of initial SABRE automation equipment at
                  Contractor locations

         AA will purchase and install equipment, then [*] of such cost.
         AA will retain all rights to the equipment. In the event of a
         Covered Conversion, AA will reimburse Contractor's
         expenses for the initial purchase and installation.

4.       HUB RELOCATION

         In the event AA requires Contractor to relocate to different facilities
         at the Hub other than Concourse B, [*]

                                    *   *   *


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      SCHEDULE E-1a


                   CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
                   WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                   TO A REQUEST FOR CONFIDENTIAL TREATMENT



                                    *   *   *






   SCHEDULE E-1b


                   CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
                   WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                   TO A REQUEST FOR CONFIDENTIAL TREATMENT




                                    *   *   *






   SCHEDULE E-2



                   CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
                   WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                   TO A REQUEST FOR CONFIDENTIAL TREATMENT




                                    *   *  *






                        SCHEDULE E-3



                   CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
                   WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                   TO A REQUEST FOR CONFIDENTIAL TREATMENT







                                  CONTINUED



                   CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
                   WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                   TO A REQUEST FOR CONFIDENTIAL TREATMENT










                        SCHEDULE E-4 - ESCALATION PERCENT

The escalation percent as computed below (the "ESCALATION PERCENT" or "EP")
shall be applied to the Block Hour rates and Revenue Passenger stipend rates in
Schedules E-1a, E-1b and E-2. The first escalation adjustment shall be made
effective April 1, 2002, and shall be computed based upon the change (expressed
as a percent) from the March 2000 CPI index of 171.2. Thereafter, the escalation
adjustment shall be made effective April 1 of each subsequent year and shall be
computed based upon the published report of CPI released during the immediately
preceding March. The escalation adjustment shall be used to adjust the rates for
the fiscal year beginning that April 1st by applying the EP to the rates in
effect for the prior year. However, in no event shall any EP adjustment for any
single year exceed [*]. The Escalation Percent shall be computed as follows:


                                       [*]


                                    *   *   *


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                        EXHIBIT F - ACCOUNTING PROCEDURES

The following accounting procedures reflect the understanding between AA and
Contractor regarding various accounting, reporting and settlement procedures.
These procedures are based on Contractor using AA stock, and each
Contractor-operated AA ticketing location ("CONTRACTOR TICKETING LOCATION")
operating as if it were an AA-operated AA ticketing location.

1.       SALES REPORTING AND CASH TRANSFER

         A.       Each Contractor Ticketing Location will be automated with AA's
                  ATAC, and Contractor agrees to adhere to the same ticketing
                  procedures, ticket reporting and cash remittance timing as
                  required of a Covered Location, including:

                  (1)      Reporting of auditor coupons and other sale documents
                           daily to AA's ticket lift processing facility in
                           Juarez, Mexico.

                  (2)      Depositing cash and check sales the next business day
                           into the local AA depository bank. These funds will
                           be withdrawn automatically from the local depository
                           bank (on the second business day following the day of
                           the sale) by AA's central depository bank through
                           utilization of the Bank Automated Clearing House
                           system.

         B.       AA and Contractor have agreed to establish the local
                  depository bank accounts as AA accounts managed and overseen
                  by AA.

         C.       All sales by Contractor will be subject to the same sales
                  audits, to be conducted at such times as AA may elect, as may
                  be performed by AA on sales reports for any AA staffed
                  location. The audit will include establishing discrepancy
                  notices ("DISCREPANCY NOTICES") for ticketing errors, cash
                  under collections or shortages, and unreported sales which
                  have been determined to be the fault of Contractor. Contractor
                  will be charged for these errors (up to the amount of any
                  actual expense incurred by AA) in the same manner AA charges
                  any AA staffed location, if not corrected, except as provided
                  in Section 4.B of this Exhibit, within 90 days after the
                  Discrepancy Notice is established.

         D.       Sales will include those made using the same credit cards
                  accepted by AA. The sale amount will be billed directly to the
                  credit card companies for billing to their cardholders via
                  AA's Advance Credit Billing System programs through ATAC.

         E.       Contractor will be responsible for and will indemnify, hold
                  harmless and reimburse/pay AA the tariff value of, any
                  transportation furnished by AA or other carriers on AA ticket
                  stock lost, stolen or fraudulently issued after delivery of
                  the same to Contractor, up to the date that such ticket stock
                  is blacklisted. Blacklisted ticket stock accepted by
                  Contractor employees for transportation shall be subject to
                  full reimbursement by Contractor to AA.

2.       REFUNDS

         A.       Contractor shall be responsible for and shall indemnify, hold
                  harmless and reimburse/pay AA the tariff value of, any
                  transportation refunded by AA or other carriers on AA ticket
                  stock lost, stolen or fraudulently issued after delivery of
                  the same to Contractor, up to the date that such ticket stock
                  is blacklisted. Blacklisted ticket stock accepted by
                  Contractor




                  employees for refund shall be subject to full reimbursement
                  by Contractor to AA, if the refund applied to AA.

         B.       Refunds made by Contractor are subject to audit and a
                  Discrepancy Notice will be established for any over refunds
                  issued at the error of Contractor. The original Discrepancy
                  Notice will be sent to the issuing location with a copy to
                  Contractor central accounting within 45 days of the issued
                  refund. If the discrepancy is not corrected, Contractor will
                  be charged 90 days after the Discrepancy Notice is
                  established.

         C.       Contractor shall adhere to AA's procedures pertaining to the
                  flow of refund documents (unused coupons, lost ticket
                  applications, and the like). AA will provide such procedures
                  to Contractor in writing.

         D.       Applications for refunds of lost AA tickets will follow
                  standard AA procedures, including but not limited to
                  collection and payment to AA by Contractor of the applicable
                  AA lost ticket charge.

         E.       For consumer adjustments, denied boarding, Baggage Claims or
                  involuntary refunds pertaining to Contractor flights
                  (collectively "CONSUMER ADJUSTMENTS"), Contractor shall be
                  authorized to issue appropriate settlement documents as AA may
                  direct and authorize from time to time, and in accordance with
                  AA's policies and procedures pursuant to Section 2.06(d).

3.       INTERLINE SETTLEMENTS AND WIRE TRANSFERS

         A.       Except as otherwise provided for herein, AA and Contractor
                  agree to settle all interline transactions using the rules
                  prescribed in the ACH Manual of Procedure and any other
                  applicable industry procedures.

         B.       AA shall pay Contractor for Feeder Air Services, via wire
                  transfer, according to the provisions set forth below:

                  (1)      AA shall estimate Contractor monthly payment based
                           upon the published flight schedule and shall pay
                           Contractor [*] in the following installments:

                           (a)      [*], or the next
                                    business day, AA shall pay Contractor [*]
                                    of the estimated Block Hour charge for the
                                    current month;

                           (b)      [*], or the next business day,
                                    AA shall pay Contractor [*] of the estimated
                                    Block Hour charge for the current month; and

                           (c)      [*], or the next business day AA
                                    shall pay Contractor [*] of the estimated
                                    Block Hour charge for the current month,
                                    plus the reconciliation of the prior month's
                                    Block Hours charges and prior month's
                                    passenger stipend, as detailed below, plus
                                    any amounts due Contractor for Freight and
                                    Small Package shipments under Section 6 of
                                    Exhibit F below.


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* Confidential


                                    AA may offset amounts due AA by Contractor
                                    against the prior month's reconciled amount
                                    identified in Section 1.C above.

         C.       AA shall perform all revenue accounting functions for
                  passenger revenue to the same degree as it would for any AA
                  station, within the limits of AA's automation systems.
                  Contractor may audit AA's procedures at any time upon
                  reasonable notice.

         D.       Within 60 days of the conclusion of a performance period as
                  specified in Exhibit J, AA and Contractor will settle as
                  appropriate under Exhibit J, based upon Contractor's
                  performance and amount of bonus or penalty incurred. AA and
                  Contractor will be jointly responsible for determining the
                  payment to be made or any penalty to be credited to AA.

         E.       Ticket Stock, AATVs, and the like will be payable by
                  Contractor, and Contractor shall at all times be responsible
                  for all accountable items, including but not limited to AATVs,
                  ticket stock, and the like. There shall be no charge for
                  proper use of AATVs for DBC.

         F.- N.   [INTENTIONALLY OMITTED]

         O.       BAGGAGE SETTLEMENTS

                  Contractor shall handle all baggage related matters in
                  accordance with AA's procedures, as may be amended from time
                  to time. [*] Baggage Claims involving Connecting Passengers
                  in which the cause or blame cannot be determined shall be
                  [*].

4.       FURTHER DEDUCTIONS FROM INTERLINE SETTLEMENTS / WIRE TRANSFERS

         A.       [INTENTIONALLY OMITTED].

         B.       AA will deduct from its payment under Section 3.B above to
                  Contractor any Discrepancy Notices issued to Contractor
                  Locations which have not been paid or cleared within ninety
                  (90) days from date of issuance. If Contractor, after making a
                  good faith effort to collect, cannot do so because of the age
                  of the item at the time the discrepancy was established, AA
                  will consider adjusting the deduction, but is not obligated to
                  do so.

         C.       AA, in the exercise of its sole discretion, may elect to
                  deduct from AA's payment to Contractor under Section 3.B above
                  those charges to Contractor outlined in Exhibit E of this
                  Agreement, or any other amounts or charges payable to AA by
                  Contractor pursuant to this Agreement, or otherwise as may be
                  authorized by Contractor, including Performance Penalties
                  under Exhibit J(2)(C).

         D.       In lieu of Section 4.C above, AA, may invoice Contractor
                  through the ACH for passenger billings, non-transportation or
                  any other charges payable to AA.

5.       CREDIT TRANSACTIONS

         A.       AA authorization and form of payment procedures will be
                  followed for acceptance of credit cards and checks.


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* Confidential


6.       SMALL PACKAGE, FREIGHT, AND MAIL

         A.       Exhibit H sets forth the applicable procedures and revenue
                  split for the carriage of Shipments, as that term is defined
                  in Exhibit H. Contractor shall use only AA documents for
                  Shipments.

                  (1)      Contractor will report all Shipment transactions in
                           accordance with AA's procedures.

                  (2)      AA payments to Contractor for Shipments shall be in
                           conjunction with AA's wire transfers under Section
                           3.B above on a mutually agreed schedule.

                  (3)      Billing discrepancies detected at the time of an
                           audit by AA will be handled consistent with Section 1
                           of this Exhibit F above.

                  (4)      In consideration of the revenue split detailed in
                           Exhibit H, AA shall provide Cargo Revenue Accounting
                           services for Shipments and applicable required
                           documents to Contractor at no additional charge.

         B.       Schedule H-1 sets forth the applicable procedures for the
                  carriage of Mail, as that term is define in Schedule H-1.
                  Contractor shall carry mail at no charge to AA. All mail
                  revenues accrue to AA.

7.       AUDIT AND SECURITY MATTERS

         A.       Contractor shall permit AA to examine Contractor Ticketing
                  Locations to the same extent any AA staffed location is
                  audited internally.

         B.       Security reviews will be conducted as required by AA's
                  Security Department.

         C.       Contractor will follow AA policy and procedures for security
                  of ticket stock, undeposited cash, and the like, copies of
                  which shall be furnished to Contractor upon request.

         D.       Contractor will observe all sine table security and other
                  computer security measures that AA adopts for its own airport
                  and sales functions.

8.       AA ACCOUNTS

         A.       AA shall maintain such books of accounts and records as shall
                  be necessary to perform the foregoing accounting and
                  settlement services, which books of accounts and records will
                  be available at all reasonable times upon reasonable prior
                  notice for inspection by Contractor or its designated
                  representatives.

         B.       AA will use the same degree of care and will apply the same
                  standards and safeguards for the accounting and settlement
                  services provided hereunder as AA uses for its own accounting
                  services.

                                    *   *   *






                    EXHIBIT G - DIVISION OF PASSENGER REVENUE

         All passenger revenues shall accrue to the benefit of AA.

                                    *   *   *






                   EXHIBIT H - SMALL PACKAGE, FREIGHT AND MAIL

1.       If requested by AA, Contractor will provide services under the terms of
         this Exhibit H. This Exhibit H sets forth the terms which will govern
         the transport of small packages ("AA TODAY DOOR TO DOOR" and "PRIORITY
         PARCEL SERVICE") and general air freight, but not mail (herein
         collectively referred to as "SHIPMENTS") carried from origin to
         destination in part on AA and in part on Contractor's Feeder Air
         Services. The attached Schedule H-1 states the terms governing the
         transport of Mail. Shipments shall be as defined in AA's tariffs, as
         published in the ATPCO Official Local Cargo Rate Tariff (the "AA
         TARIFFS") for Domestic shipments and the TACT for International
         shipments.

2.       All Shipments shall be transferred between AA and Contractor at the
         designated transfer city as shown on the airbill of each Shipment.
         However, general air freight shall be originated only at AA staffed
         stations. Freight routed inbound to an ABR city from the Hub may be
         accepted for carriage. ABR shall not carry hazardous materials, as that
         term is defined by federal aviation regulations and/or the DOT.

3.       The procedures which govern the interline transfer of Shipments between
         Contractor and AA, as described in this Exhibit H, shall be those set
         forth in the AA Tariffs and the ATA Manual, all as are in effect from
         time to time, except that (a) to the extent that any such procedures
         are inconsistent with the terms of this Agreement, this Agreement shall
         govern, and (b) to the extent the procedures set forth in the AA
         Tariffs and the ATA Manual are inconsistent, the AA Tariffs shall
         govern. Contractor agrees to adopt the AA Tariffs as from time to time
         are in effect.

4.       For all Shipments flown by both AA and Contractor, Contractor shall
         receive [*].

5.       AA and Contractor shall cooperate in the promotion of Shipment
         services.

6.       For Shipments carried from origin to destination entirely on
         Contractor, [*]. Contractor may establish its own rates which
         AA, at Contractor's request, shall relay to ATPCO for publication.
         Contractor acknowledges, however, that AA shall not be responsible in
         any way for the content of any rates which AA relays to ATPCO for
         Contractor hereunder, and Contractor shall be solely responsible for
         assuring the accuracy of any such information published by ATPCO. When
         cumulative ATPCO charges for Contractor tariff revisions exceed $1,000
         during any twelve (12) month period, that portion of the charges in
         excess of $1,000 will be billed to Contractor by AA, and Contractor
         will make prompt payment to AA of such charges in excess of $1,000.

7.       [INTENTIONALLY OMITTED]

8.       [INTENTIONALLY OMITTED]

9.       Refunds for small package service failures will be apportioned as
         follows:

         A.       When carriage is in part on AA and in part on Contractor,
                  [*]

         B.       When carriage to exclusively on Contractor, [*]


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* Confidential


         C.       In the event that AA or Contractor discover repetitive refunds
                  or other unusual activity associated with a particular flight
                  or shipper, AA and Contractor shall promptly meet to discuss
                  the appropriate action to be taken.

         10.      From time to time Contractor shall permit AA to inspect
                  Contractor's cargo operations, including Contractor policies
                  and procedures for the handling of cargo; PROVIDED however
                  that any inspection of Contractor operations shall be
                  conducted by AA so as to minimize any disruption to
                  Contractor. Contractor shall promptly address all reasonable
                  concerns of AA noted during such inspection, to AA's
                  satisfaction.

         11.      Contractor agrees to pay for, adopt and implement, in
                  accordance with AA's policies and procedures, any automation
                  (to the extent that the cost/benefit of such automation allows
                  Contractor's to continue its cargo operations) required by any
                  regulatory authority in connection with the security, tracking
                  and accounting functions of handling and transporting small
                  package shipments by air. Contractor shall comply with AA's
                  reasonable request of Contractor to implement new
                  automation/technology that is not required by regulation. For
                  any new automation functions, AA will provide training to
                  Contractor training instructors per Section 10.02(b).

         12.      AA will make cargo training available to Contractor employees
                  requiring such training on a space available basis at no cost
                  to Contractor. However, Contractor will pay the cost of its
                  employee travel and expenses while attending such training.
                  Cargo training classes established exclusively for Contractor
                  personnel will be conducted by AA at a cost agreed upon by
                  Contractor and AA based on the locations and the number of
                  Contractor personnel to be trained.

                  A.       Each Contractor station manager shall receive
                           approved AA cargo training.

                  B.       Each Contractor employee who bills, handles or
                           processes small packages shall receive approved AA
                           cargo training.

                  C.       If, in AA's sole discretion, [*]


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* Confidential




                               SCHEDULE H-1 - MAIL

1.       This Schedule H-1 to Exhibit H sets forth the terms which will govern
         the carriage of mail, when carried by Contractor at AA's request. Mail
         shall be defined as all items offered by the USPS for carriage on
         flights operated by AA, Contractor, or both ("MAIL").

2.       The provisions of sections 10, 11, and 12 of Exhibit H shall equally
         apply to the carriage of Mail. However, Contractor bears the
         responsibility of obtaining any training that is provided or required
         by the USPS for the carriage of mail.

3.       All revenues for Mail shall accrue to AA.

4.       Contractor's compliance with the terms of this Schedule H-1 shall be at
         no additional cost to AA.

5.       Contractor shall not be responsible for service failures in the
         carriage of mail provided that identifiable service failure issues are
         promptly addressed to prevent future failures.

6.       Mail shall be handled and carried by Contractor (or an AA approved
         subcontractor) at no additional charge to AA. Contractor will arrange
         all necessary staffing and ground handling to pickup Mail from the
         origin airport Mail facility and insure such Mail is loaded on its
         flights. Mail scheduled for delivery to the Mail facility at a
         destination of a flight operated by the Contractor shall be delivered
         by the Contractor or its subcontractor to the designated facility.
         Contractor shall also be responsible to transfer Mail arriving on one
         of its flights to another Contractor flight, third party ABR operator,
         AE, or AA, when the USPS has designated such a flight routing on the
         destination and routing label affixed to the Mail container(s). At the
         STL Hub, such transfer shall occur at a mutually agreeable Mail
         exchange point.

7.       Contractor agrees to comply with all personnel screening requirements
         set forth by the USPS, and all other provisions of the USPS Air System
         Contract for transportation of Mail by air. The USPS Air System
         Contract shall be made available by AA to Contractor in the event
         Contractor is not already a signatory to the USPS offering. Contractor
         understands that any of its subcontractors who are engaged in mail
         handling as any part of their duties must comply with USPS personnel
         screening requirements in order to become and remain eligible
         subcontractors for mail handling services.

                                    *   *   *






                        EXHIBIT I - ABR SAFETY STANDARDS

1.       Contractor shall comply with all applicable safety, operational,
         maintenance, and personnel standards. These shall include all
         applicable Federal Aviation Regulations; all DOD, DOT regulations; any
         appropriate directives from the NTSB and all special regulatory
         mandates, such as advisory circulars. Contractor shall coordinate with
         AA to ensure that Contractor's compliance with such initiatives is not
         inconsistent with AA's compliance (E.G. timing of placing
         defibrillators on board aircraft and associated training).

2.       AA is entitled to audit all relevant aspects of Contractor's operations
         and facilities, including safety, flight operations, maintenance, cargo
         and ground operations. These audits shall be of reasonable length, and
         shall be in sufficient depth and detail to permit AA's auditors to
         properly certify Contractor's safety and compliance with all applicable
         regulations. AA shall notify Contractor of an intended audit with
         reasonable notice of the audit dates. The audit shall not unreasonably
         disrupt Contractor's operations.

3.       AA and Contractor agree to fully comply with all provisions of the
         Family Assistance Act of 1996 and any amendments thereto. AA and
         Contractor shall maintain and file with the NTSB and DOT required plans
         which are fully compliant with the provisions of the Act. Copies of
         these plans shall be exchanged for effective planning purposes.

4.       Within a reasonable time following the execution of this Agreement, AA
         and Contractor shall meet to set forth, at AA's direction, each party's
         role, responsibilities, and obligations in the event of an aviation
         disaster and the activation of each carrier's family assistance plan.
         Both parties shall accomplish all training and preparation necessary
         for their respective full and complete compliance with every
         requirement under the Family Assistance Act and for the coordinated
         response to a disaster involving either party, as determined by AA.

                                    *   *   *







           EXHIBIT J - PERFORMANCE STANDARDS, INCENTIVES AND PENALTIES

         Pursuant to Article 1.02 (c) of this Agreement, both parties recognize
the importance of maintaining the highest level of product delivery and customer
satisfaction. Accordingly, Contractor agrees to adhere to the performance
standards outlined in this Exhibit J.

1.       PERFORMANCE STANDARDS

         Contractor agrees to use its best efforts to meet the target range
         standards of completion, on-time performance, customer service
         performance (complaints), and baggage delivery during each month of the
         Term of this Agreement, as indicated in the following table:



            SERVICE                     BONUS                   TARGET                PENALTY           DEFAULT
            CATEGORY                    LEVEL                   RANGE                  LEVEL             LEVEL
         ----------------------- -------------------- --------------------------- ----------------- -----------------
                                                                                             
         Completion                   [*]                      [*]                     [*]               [*]
         Factor                       or greater                                       or lower          or lower

         On-Time                      [*]                      [*]                     [*]               [*]
         Arrivals                     or greater                                       or lower          or lower

         Corporate Complaint          [*]                      [*]                     [*]               [*]
         Ratio                        or less                                          or greater        or greater

         PAWOB                        [*]                      [*]                     [*]               [*]
         Ratio                        or less                                          or greater        or greater



         The above service categories shall be measured according to DOT
         definitions and rules unless otherwise agreed by AA and Contractor.
         Contractor shall make available to AA its statistics within 15 days of
         the close of each calendar month and in accordance with Exhibit K of
         this Agreement. AA may periodically audit Contractor statistics for
         accuracy and compliance to definitions.

         Contractor shall be held accountable to the PAWOB ratio performance
         standards to the extent Contractor performs Ground Handling Duties at
         the Hub.

         The parties agree to review performance status upon delivery of the
         15th regional jet aircraft (as delineated in Exhibit C) to Contractor.
         Contractor agrees to negotiate in good faith other performance criteria
         that AA may request.

2.       INCENTIVES/PENALTIES

         A.       BONUS LEVEL

                  In the event that Contractor meets the bonus level for any
                  performance category on average for a Performance Period,
                  [*]


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* Confidential


         B.       TARGET RANGE

                  Should Contractor fall within the target range levels for any
                  performance category on average for a Performance Period,
                  there shall be no payment due to/from Contractor for the
                  performance category measured.

         C.       PENALTY LEVEL

                  In the event that Contractor falls within or below the penalty
                  level for any performance category for a Performance Period,
                  [*]

         D.       DEFAULT LEVEL

                  In the event that Contractor fails to achieve a level of
                  performance above the lesser of (i) the default level, or (ii)
                  [*]. In the event that Contractor fails to meet the
                  milestones of such approved plan, then AA may terminate this
                  Agreement pursuant to Section 7.02(c).

                  For each Performance Period in which Contractor's performance
                  falls within the Default Level provided in the chart above in
                  any category, [*]

         E.       MEASUREMENT AND PAYMENT PARAMETERS

                  (1)      Measurement of the service categories shall be made
                           on a semi-annual basis, from January 1 - June 30, and
                           from July 1 - December 31.

                  (2)      The first Performance Period measured shall be
                           January - July 2002, and thereafter all Performance
                           Periods shall follow regularly.

                  (3)      AA and Contractor shall measure Contractor's monthly
                           and semi-annual performance based upon the most
                           recent information pursuant to the provision of
                           reports in Exhibit K of this Agreement. Contractor
                           and AA shall jointly share responsibility for
                           performance measurement and calculation of incentive
                           or penalty. Verification of performance shall be
                           accomplished within 25 days following the end of
                           every month and semi-annual Performance Period as
                           appropriate, unless otherwise agreed to by the
                           parties.

                  (4)      Contractor shall be eligible to receive the bonus
                           payment from AA, or required to make its penalty
                           payment to AA, within 60 days of the conclusion of
                           the end of each Performance Period. All payments will
                           be made by wire transfer between the parties.

                                    *   *   *


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* Confidential




                               EXHIBIT K - REPORTS

1.       BOARDING INFORMATION. Information reports containing data covering
         boarding and other information agreed to by the parties for
         Contractor's operations hereunder will be produced from the close-out
         entries and provided by AA to Contractor, on a monthly basis as soon as
         available.

2.       QUARTERLY COST DATA. Contractor will furnish to AA in a Microsoft
         Excel(R) spreadsheet format, within forty-five (45) days after the end
         of each quarter, the following reports: DOT Form 41 Schedule P-1.2
         (Statement of Operations) and P-5.2 (Aircraft Operating Expenses by
         type). Contractor agrees to provide this information to AA regardless
         of its obligation to report to the DOT.

3.       DAILY / MONTHLY OPERATIONS. Each day Contractor will furnish to AA
         (Attention: Director - Planning) daily operating reports for the
         preceding day which will include the number of revenue passengers
         boarded; the number of denied boardings, in both raw numbers and
         percentage terms (using a base of 1,000 passenger boardings); the
         number of scheduled flight departures; the number and percentage
         (compared to schedule) of actual flight departures; the reason for each
         flight cancellation; number of flight departures on time within five
         minutes; percentage of On-Time Arrivals in accordance with a format to
         be provided by AA or other mutually agreed upon format. The foregoing
         flight departure, flight cancellation and on-time performance response
         shall show a break down by equipment type.

         The above report shall be furnished to AA by Contractor and will
         include month-to-date numbers and an attachment describing Mitigating
         Factors, if any.

4.       PASSENGER IRREGULARITY REPORTS. Contractor shall provide a copy
         (Attention: AA's Managing Director - Inflight) of any irregularity
         report involving a passenger travelling on Contractor's Feeder Air
         Services that is deemed reportable to any governing authority.

5.       FURTHER INFORMATION. Additional information as may be reasonably
         requested by AA shall be furnished by Contractor upon request.


                                    *   *   *








                       EXHIBIT L - AUTOMATION INTEGRATION

1.       COMPUTER RESERVATIONS SYSTEM USE

         A.       INSTALLATION AND TRAINING

                  Subject to the provisions of this Agreement, and
                  notwithstanding any separate agreement between Contractor and
                  SABRE, Contractor will maintain a minimum complement (as
                  designated by AA, consistent with its standard automation
                  installations) of terminals plus associated equipment for
                  printing messages, data, air tickets, boarding passes, baggage
                  tags, and the like ("AUTOMATION EQUIPMENT") at each of
                  Contractor's Feeder Air Service airport locations and selected
                  administrative locations. Any and all modifications,
                  enhancements, improvements or developments pertaining to the
                  Automation Equipment, or other new related technology, may be
                  made available to Contractor by AA, in its sole discretion,
                  under terms and conditions to be determined by AA on a
                  case-by-case basis. AA will train Contractor employees in
                  accordance with Section 10.02 of this Agreement, as
                  applicable, in the proper use of SABRE and Automation
                  Equipment. Where permitted by AA, Contractor agrees to
                  establish a training program with internal instructors. Only
                  qualified personnel who have satisfactorily completed an AA
                  prescribed training program will be permitted to operate any
                  Automation Equipment (hereinafter "DESIGNATED USERS"). AA may,
                  at its discretion, monitor or test the proficiency level of
                  Designated Users. If AA determines that their proficiency
                  levels are insufficient for the proper use of the Automated
                  Equipment or SABRE, then Contractor must arrange for its
                  Designated Users to undertake any further training which AA
                  determines necessary to bring such Designated Users to the
                  desired proficiency level.

         B.       STANDARDS OF USE

                  (1)      To maintain an effective interconnection between
                           SABRE and the Automation Equipment and to prevent
                           misuse thereof, Contractor agrees that SABRE and the
                           Automation Equipment will be used and operated (1) in
                           strict accordance with operating instructions
                           provided by AA , and (2) solely for the performance
                           of the specific business functions designated by AA.
                           Any undesignated business use and all non-business
                           uses are strictly prohibited. Prohibited uses
                           include, but are not limited to, personal messages,
                           servicing subscribers, travel agencies, or any other
                           third party, training any other party or any other
                           use designated as prohibited in the SABRE Manual.
                           Contractor will maintain a list of all employees and
                           agents who have access to SABRE and their assigned
                           file number and passwords. AA may at any time deny
                           access to SABRE to any employee of Contractor if such
                           employee is found by AA to have engaged in
                           unauthorized operation of SABRE or abused the
                           Automation Equipment. Contractor will take all
                           precautions necessary to prevent unauthorized
                           operation or use of SABRE and the Automation
                           Equipment.

                  (2)      Contractor will not alter or change the SABRE
                           Services display as provided by AA or its Affiliates
                           without the consent of AA as reflected in an
                           amendment to this Agreement. Contractor may not
                           provide SABRE or its data base to any other person or
                           entity without the consent of AA as reflected in a
                           written amendment to this Agreement.




                  (3)      Except as expressly permitted in this Agreement or
                           other written agreement with AA, Contractor will not
                           allow (or permit) SABRE (including, but not limited
                           to, its software, data bases, intellectual property,
                           and customer information) to be used (as a basis for
                           any software development or otherwise), commercially
                           exploited, copied, redistributed, retransmitted,
                           published, sold, rented, leased, marketed,
                           sublicensed, pledged, assigned, disposed of,
                           encumbered, transferred, or otherwise altered,
                           modified or enhanced, without the express written
                           permission of AA.

                  (4)      Contractor will not engage in any speculative booking
                           or reservation of space for any airline, hotel,
                           rental car company, or any other vendor's service or
                           product available through SABRE.

2.       TECHNOLOGY INTERFACE

         AA agrees to provide the necessary support to ensure dynamic transfer
         of operational data directly to Contractor's System Operational Control
         center in Indianapolis, IN. [*]

         AA may require Contractor to install and operate certain support
         programs necessary for AA's internal reporting systems. In such case,
         AA shall bear responsibility for purchase, installation, and training
         of Contractor employees for use of such support programs.

                                    *   *   *



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* Confidential




                        EXHIBIT M



                   CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
                   WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                   TO A REQUEST FOR CONFIDENTIAL TREATMENT

EX-10.5(A)

                                                                 Exhibit 10.5(a)



                                          December 31, 2001



Mr. Bryan K. Bedford
President and CEO
Chautauqua Airlines, Inc.
Indianapolis Int'l Airport
Suite #160
2500 South High School Road
Indianapolis, IN 46241

Sent via Fax to (317) 484-6060


   Air Services Agreement, dated as of June 11, 2001 by and between Chautauqua
            Airlines, Inc. ("Chautauqua") and AMR Corporation ("AMR")


Dear Mr. Bedford:

                  We refer to the agreement described above (the "Air Services
Agreement"). (Unless otherwise defined in this letter, capitalized terms that we
use below have the meaning set forth in the Air Services Agreement.)

Chautauqua has informed AMR that Chautauqua wishes to take delivery of [*]
Firm Approved Aircraft under a financing arrangement [*]. The [*] Firm
Approved Aircraft referred to above have serial numbers [*] (each, a
"Specified Aircraft"). AMR consents, on the following terms, to such
deliveries under such Alternative Financing arrangements.

1)   Until such time as Chautauqua is able to close an Alternative Financing
     arrangement with Banco Nacional de Desenvolvimento Economico e Social or
     its affiliate Agencia Especial de Financimento Industrial - FINAME
     (either being referred to hereafter as "BNDES"), Chautauqua will only
     enter into an Alternative Financing with [*], and thereafter, Chautauqua
     will only enter into an Alternative Financing (including, without
     limitation, a refinancing of an [*] other than pursuant to a Lease
     meeting the requirements of Section 7.03(c) of the Air Services
     Agreement) with BNDES.

2)   Chautauqua acknowledges that AMR and AA intend to negotiate with BNDES
     forms of leveraged lease documentation (the "AA/BNDES Form Lease") based on
     existing




- ----------
* Confidential


     aircraft loans by BNDES to AMR affiliates and acceptable to AMR for
     submission to lessors (which may include Solitair Corp., an affiliate of
     Chautauqua; Chautauqua or a subsidiary of Chautauqua (each a "CAI
     Affiliate") as the equity participant) with respect to any Firm Approved
     Aircraft financed by BNDES that are subsequently leased to AA or an AMR
     affiliate (a "Permitted Assignee") pursuant to either the "put" or "call"
     provisions of the Air Services Agreement. Any AA/BNDES Form Lease shall be
     subject to the approval of the lessor under such leveraged lease.
     Chautauqua and AMR intend to negotiate leveraged lease documentation based
     on the AA/BNDES Form Lease and acceptable to AMR for lease to an AMR
     affiliate with a CAI Affiliate as equity participant acting through a trust
     or similar entity (such lease, a "Chautauqua Leasing Arrangement"). AMR and
     Chautauqua and their respective affiliates shall not have any liability
     under this letter for any failure to reach agreement as to an AA/BNDES Form
     Lease, as to a Chautauqua Leasing Arrangement, or as to any Alternative
     Financing or other arrangement.

3)   Until the date that (i) AMR and BNDES agree to the terms of an AA/BNDES
     Form Lease, (ii) AMR and Chautauqua agree on the terms of a Chautauqua
     Leasing Arrangement and, (iii) financing for a Specified Aircraft has
     been put in place with BNDES that permits such Specified Aircraft to be
     leased to a Permitted Assignee pursuant to an AA/BNDES Form Lease (and,
     if applicable, under a Chautauqua Leasing Arrangement) upon exercise of
     any put or call option referred to below, Chautauqua will not enter into
     any [*]. If the conditions of the preceding sentence are satisfied,
     Chautauqua may enter into an Alternative Financing of a Specified
     Aircraft on such agreed terms without further approval by AMR of such
     financing (a "Definitive Alternative Arrangement") for purposes of the
     Air Services Agreement.

4)   At the time of (a) a transfer to AMR or an affiliate of a leasehold
     interest in a Specified Aircraft or (b) a lease to an AMR affiliate under a
     Chautauqua Leasing Arrangement, in either case pursuant to a [*] (but
     otherwise free and clear of all liens, including liens permitted by the
     Alternative Financing).

5)   At such time as Chautauqua enters into an [*], provided that (a) the
     "Lender's Debt Rate" shall be the interest rate charged by [*], and (b)
     the illustrative Average Monthly Accounting Rent shall be [*] rather
     than the figure set forth on such [*] in each case subject to further
     adjustment as provided in [*]. In the event Chautauqua subsequently
     enters into a Definitive Alternative Financing with BNDES, Chautauqua's
     reimbursable aircraft


- ----------
* Confidential



     ownership costs with respect to the respective Specified Aircraft shall
     be recalculated pursuant to [*], as if such aircraft was leased by
     Chautauqua, provided that the illustrative Average Monthly Accounting
     Rent shall be [*] rather than the figure set forth on such Exhibit P
     subject to further adjustment as provided in Exhibit P. The foregoing is
     not intended to amend or modify Schedule E-3, Section 1. J of the Air
     Services Agreement or Schedule E-3, Section 1. K of the current proposed
     draft of the Amended and Restated Air Services Agreement.

6)   AMR agrees that it may not [*] of the Air Services Agreement and
     Chautauqua agrees that it may not [*] of the Air Services Agreement with
     respect to any Specified Aircraft that is subject to an Alternative
     Financing until such time, if any, that a Definitive Alternative
     Financing or a Lease is entered into with respect to such aircraft.

7)   Except as otherwise expressly provided herein, this letter does not limit
     (a) any of AMR's[*] of the Air Services Agreement, which options will
     remain in effect with respect to each Specified Aircraft, or (b) any of the
     other rights or obligations of Chautauqua or AMR under the Air Services
     Agreement.

8)   This letter agreement does not apply to any Firm Approved Aircraft other
     than the Specified Aircraft.

9)   AMR agrees that each Specified Aircraft shall be placed into service under
     the Air Services Agreement and waives any claim for any delay in placing
     such Aircraft into service, including any claim for liquidated damages
     under Section 1.02(a) of the Air Services Agreement. AMR further
     acknowledges and agrees that Chautauqua has the right under certain
     circumstances to return the Specified Aircraft to Embraer and agrees that
     in the event Chautauqua exercises such right, (a) such Aircraft shall
     be [*], (b) such Aircraft shall[*], (c) the Air Services Agreement[*],
     and (d) AMR[*].

         Except as modified hereby, the Air Services Agreement remains in
effect. This letter agreement shall be governed by the internal laws of Texas
without reference to conflict of laws rules.

         This letter agreement may be executed 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.
Execution may be effected by delivery of facsimiles of signature pages (and the
parties shall follow such delivery by prompt delivery of originals of such
pages). This letter agreement may be executed in any


- ----------
* Confidential



number of counterparts (and each of the parties hereto shall not be required to
execute the same counterpart). Any counterpart may be executed by facsimile
signature and such



         [Intentionally Blank.  Continued on next page.]





























facsimile signature shall be deemed an original. Each counterpart of this letter
agreement including a signature page executed by each of the parties hereto
shall be an original counterpart of this letter agreement, but all of such
counterparts together shall constitute one instrument.

         If you are in agreement with the foregoing, please countersign a copy
of this letter agreement and return a copy to the parties set forth in the
notice provisions of the Air Services Agreement.

Very Truly Yours,


AMR CORPORATION

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

Its:
    ------------------------------




AGREED AND ACCEPTED:

CHAUTAUQUA AIRLINES, INC.

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

Its:
    ------------------------------






cc:      Wexford Capital, LLC, 411 West Putnam Avenue, Greenwich, CT  06830;
         Attention: Joseph Jacobs, President; Attention: Arthur Amron,
         General Counsel;
         Fax # 203-862-7312
         Tom Bacon - American Eagle
         Gary Foss - American Eagle
         Holly Stroud - American Airlines
         Lisa May - Haynes & Boone, Fax # 214-200-0511
         John Hoyns - Hughes Hubbard & Reed, Fax # 212-422-4726
         Debevoise & Plimpton, 919 Third Avenue, New York, NY 10022;
         Attn: Nilima Muttana; Fax # 212-909-6836





                          ATTACHMENT TEXT OF EXHIBIT P

Note: input items marked with an asterisk (*) will be adjusted in the manner
specified. The figures included below are based on GECC indicative financing as
of November 7, 2001.

Purchase Price*:    [*]

Closing Date*:      November 23, 2001 (to be adjusted to reflect the actual
                    delivery date of the respective Firm Approved Aircraft).

5-yr Generic
US Swap Rate*:      [*] (determined using Bloomberg page "IRSB18." To be
                    adjusted to reflect the rate in effect on the Closing Date).

Equity After-Tax
Yield*:             [*]

Composite
Tax Rate:           35%

Lender's
Debt Rate*:         CIRR Rate (as adjusted for the rate in effect on date of
                    closing, which is [*] as of November __, 2001).

CIRR                Rate: For any day, the Commercial Interest Reference Rate
                    for the U.S. dollar with respect to loans with a tenor
                    exceeding 17 semi-annual repayment periods applicable for
                    such day, as published for monthly periods by the United
                    States Export-Import Bank, at its official website address
                    under the heading "Commercial Interest Reference Rate
                    (CIRRS)."

Rent Structure:     [*]

Average Monthly
Accounting Rent:    [*] (to be determined using the Warren & Selbert ABC
                    Program using the input items set forth herein; provided,
                    however, that in no event shall the rent be less than the
                    Lender's debt service).


- ----------
* Confidential



Residual:           [*] of Purchase Price

Early Buyout Date:  [*] Anniversary of the Closing Date.

Early Buyout Price: The greater of (a) the termination value, as determined
                    according to the Warren & Selbert ABC Program, and (b) the
                    estimated fair market value as of the Early Buyout Date of
                    the respective Firm Approved Aircraft determined by an
                    outside appraiser on the Closing Date.


- ----------
* Confidential

EX-10.5(B)

                                                                 Exhibit 10.5(b)

                                                               EXECUTION VERSION

                                                               February 20, 2002

Mr. Bryan K. Bedford
President and CEO
Chautauqua Airlines, Inc.
Indianapolis Int'l Airport
Suite #160
2500 South High School Road
Indianapolis, IN 46241

Sent via Fax to (317) 484-6060

                AIR SERVICES AGREEMENT, DATED AS OF JUNE 11, 2001
                    BY AND BETWEEN CHAUTAUQUA AIRLINES, INC.
                   ("CHAUTAUQUA") AND AMR CORPORATION ("AMR")

Dear Mr. Bedford:

      We refer to the agreement described above (the "Air Services Agreement").
(Unless otherwise defined in this letter, capitalized terms that we use below
have the meaning set forth in the Air Services Agreement.)

      Chautauqua has informed AMR that Chautauqua wishes to take delivery on or
about February 20, 2002 of [a] Firm Approved Aircraft under a financing
arrangement, [*] The Firm Approved Aircraft referred to above (the "Specified
Aircraft") has serial number 145569. AMR consents, on the following terms, to
such delivery under such Alternative Financing arrangement.

1)    Until such time as Chautauqua is able to close an Alternative Financing
      arrangement with Banco Nacional de Desenvolvimento Economico e Social or
      its affiliate Agencia Especial de Financimento Industrial - FINAME (either
      being referred to hereafter as "BNDES"), Chautauqua will only enter into
      an [*], and thereafter, Chautauqua will only enter into an [*] (including,
      without limitation, a refinancing of [*] other than pursuant to a Lease
      meeting the requirements of Section 7.03(c) of the Air Services Agreement)
      with BNDES.

- ---------------
* Confidential



2)    Chautauqua acknowledges that AMR and AA intend to negotiate with BNDES
      forms of leveraged lease documentation (the "AA/BNDES Form Lease") based
      on existing aircraft loans by BNDES to AMR affiliates and acceptable to
      AMR for submission to lessors (which may include Solitair Corp., an
      affiliate of Chautauqua; Chautauqua or a subsidiary of Chautauqua (each a
      "CAI Affiliate") as the equity participant) with respect to any Firm
      Approved Aircraft financed by BNDES that are subsequently leased to AA or
      an AMR affiliate (a "Permitted Assignee") pursuant to either the "put" or
      "call" provisions of the Air Services Agreement. Any AA/BNDES Form Lease
      shall be subject to the approval of the lessor under such leveraged lease.
      Chautauqua and AMR intend to negotiate leveraged lease documentation based
      on the AA/BNDES Form Lease and acceptable to AMR for lease to an AMR
      affiliate with a CAI Affiliate as equity participant acting through a
      trust or similar entity (such lease, a "Chautauqua Leasing Arrangement").
      AMR and Chautauqua and their respective affiliates shall not have any
      liability under this letter for any failure to reach agreement as to an
      AA/BNDES Form Lease, as to a Chautauqua Leasing Arrangement, or as to any
      Alternative Financing or other arrangement.

3)    Until the date that (i) AMR and BNDES agree to the terms of an AA/BNDES
      Form Lease, (ii) AMR and Chautauqua agree on the terms of a Chautauqua
      Leasing Arrangement and, (iii) financing for a Specified Aircraft has been
      put in place with BNDES that permits such Specified Aircraft to be leased
      to a Permitted Assignee pursuant to an AA/BNDES Form Lease (and, if
      applicable, under a Chautauqua Leasing Arrangement) upon exercise of any
      put or call option referred to below, Chautauqua will not enter into any
      [*]. If the conditions of the preceding sentence are satisfied, Chautauqua
      may enter into an Alternative Financing of a Specified Aircraft on such
      agreed terms without further approval by AMR of such financing (a
      "Definitive Alternative Arrangement") for purposes of the Air Services
      Agreement.

4)    At the time of (a) a transfer to AMR or an affiliate of a leasehold
      interest in a Specified Aircraft or (b) a lease to an AMR affiliate under
      a Chautauqua Leasing Arrangement, in either case pursuant to [*]
      (but otherwise free and clear of all liens, including liens permitted by
      the Alternative Financing).

5)    (a) At such time as Chautauqua enters into an [*]

- ----------------
* Confidential




      (b) Notwithstanding the provisions of Section 5(a) hereof, until such time
      as Chautauqua enters into an Alternative Financing arrangement with
      respect to the Aircraft, the provisions of Schedule E-3, Section J(2) of
      the Air Services Agreement shall not apply to the Specified Aircraft, and
      the limit on the [*].

6)    AMR agrees that it may not [*] of the Air Services Agreement and
      Chautauqua agrees that it may not [*] of the Air Services Agreement with
      respect to the Specified Aircraft that is subject to an Alternative
      Financing until such time, if any, that a Definitive Alternative
      Financing or a Lease is entered into with respect to such aircraft.

7)    Except as otherwise expressly provided herein, this letter does not limit
      (a) any of AMR's [*] of the Air Services Agreement, which options will
      remain in effect with respect to the Specified Aircraft, or (b) any of the
      other rights or obligations of Chautauqua or AMR under the Air Services
      Agreement.

8)    This letter agreement does not apply to any Firm Approved Aircraft other
      than the Specified Aircraft.

9)    AMR agrees that the Specified Aircraft shall be placed into service under
      the Air Services Agreement. AMR further acknowledges and agrees that
      Chautauqua has the right under certain circumstances to return the
      Specified Aircraft to Embraer. In the event Chautauqua exercises such
      right, AMR agrees that Chautauqua shall have the further right to elect on
      written notice to AMR that: (a) such Aircraft shall be [*], (b) such
      Aircraft shall [*], (c) the Air Services Agreement [*], and (d) [*].

      Except as modified hereby and by the letter of December 31, 2001, the Air
Services Agreement remains in effect. This letter agreement shall be governed by
the internal laws of Texas without reference to conflict of laws rules.

- ---------------
* Confidential




This letter agreement may be executed 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. Execution may be
effected by delivery of facsimiles of signature pages (and the parties shall
follow such delivery by prompt delivery of originals of such pages). This letter
agreement may be executed in any number of counterparts (and each of the parties
hereto shall not be required to execute the same counterpart). Any counterpart
may be executed by facsimile signature and such facsimile signature shall be
deemed an original. Each counterpart of this letter agreement including a
signature page executed by each of the parties hereto shall be an original
counterpart of this letter agreement, but all of such counterparts together
shall constitute one instrument.

                 [Intentionally Blank. Continued on next page.]



      If you are in agreement with the foregoing, please countersign a copy of
this letter agreement and return a copy to the parties set forth in the notice
provisions of the Air Services Agreement.

Very Truly Yours,


AMR CORPORATION

By: /s/ Charles D. MarLett
    ---------------------------
Its: Corporate Secretary
    ---------------------------

AGREED AND ACCEPTED:

CHAUTAUQUA AIRLINES, INC.

By: /s/ Bryan Bedford
    ---------------------------
Its: President and CEO
    ---------------------------

cc:   Wexford Capital, LLC, 411 West Putnam Avenue, Greenwich, CT 06830;
      Attention: Joseph Jacobs, President; Attention: Arthur Amron, General
      Counsel; Fax # 203-862-7312
      Tom Bacon - American Eagle
      Gary Foss - American Eagle
      Holly Stroud - American Airlines
      Lisa May - Haynes & Boone, Fax # 214-200-0511
      John Hoyns - Hughes Hubbard & Reed, Fax # 212-422-4726
      Debevoise & Plimpton, 919 Third Avenue, New York, NY 10022;
      Attn: Nilima Muttana; Fax # 212-909-6836



                          ATTACHMENT TEXT OF EXHIBIT P

Note: input items marked with an asterisk (*) will be adjusted in the manner
specified. The figures included below are based on GECC indicative financing as
of November 7, 2001.

Purchase Price*:        [*]

Closing Date*:          November 23, 2001 (to be adjusted to reflect the actual
                        delivery date of the respective Firm Approved Aircraft).

5-yr Generic
US Swap Rate*:          [*] (determined using Bloomberg page "IRSB18." To be
                        adjusted to reflect the rate in effect on the Closing
                        Date).

Equity After-Tax
Yield*:                 [*]

Composite
Tax Rate:               35%

Lender's
Debt Rate*:             CIRR Rate (as adjusted for the rate in effect on date of
                        closing, which is [*] as of November __, 2001).

CIRR Rate:              For any day, the Commercial Interest Reference Rate for
                        the U.S. dollar with respect to loans with a tenor
                        exceeding 17 semi-annual repayment periods applicable
                        for such day, as published for monthly periods by the
                        United States Export-Import Bank, at its official
                        website address under the heading "Commercial Interest
                        Reference Rate (CIRRS)."

Rent Structure:         [*]

Average Monthly
Accounting Rent:        [*] (to be determined using the Warren & Selbert
                        ABC Program using the input items set forth herein;
                        provided, however, that in no event shall the rent be
                        less than the Lender's debt service).
- ----------------
* Confidential




Residual:               [*] of Purchase Price

Early Buyout Date:      [*] Anniversary of the Closing Date.

Early Buyout Price:     [*]

- ----------------
* Confidential

EX-10.5(C)

                                                                 Exhibit 10.5(c)

NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION THEREFROM UNDER THE
PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                                     WARRANT
                       TO PURCHASE SHARES OF COMMON STOCK
                                       OF
                            CHAUTAUQUA AIRLINES, INC.

Date: June 11, 2001 (the "EXECUTION DATE")

      THIS IS TO CERTIFY THAT, for value received, AMERICAN AIRLINES, INC., a
Delaware corporation ("AA"), is entitled, subject to the terms herein, to
purchase from CHAUTAUQUA AIRLINES, INC., a New York corporation (the "COMPANY"),
at any time, or from time to time, fully paid and nonassessable shares of the
Company's common stock, [$.001] par value (the "COMMON STOCK"), at the Exercise
Price (as defined below), all on the terms and conditions and pursuant to the
provisions hereinafter set forth. The term "WARRANT SHARES," as used herein,
refers to the shares of Common Stock purchasable hereunder. As used herein, the
term "HOLDER" shall initially mean AA, and shall subsequently mean each person
or entity to whom this Warrant is duly assigned.

      1. VESTING AND EXERCISE OF WARRANT. This Warrant shall be exercisable for
vested Warrant Shares commencing on the closing date (the "EFFECTIVE DATE") of
the Company's initial public offering of shares of Common Stock registered under
the Securities Act (the "IPO"). Warrant Shares constituting three and three
quarters percent (3.75%), subject to increase as provided herein, of the Number
of IPO Shares (as defined below) shall vest over a ten-year period (at the rate
of 10% on each anniversary of the Execution Date), beginning on the first
anniversary of the Execution Date (the "TEN-YEAR VESTING PERIOD"). Warrant
Shares constituting five percent (5%) of the Number of IPO Shares shall vest
over a five-year period (at the rate of 20% on each anniversary of the Execution
Date), beginning on the fifth anniversary of the Execution Date (the "FIVE-YEAR
VESTING PERIOD" and collectively with the Ten-Year Vesting Period, the "VESTING
PERIODS") (for any Warrant Share the Holder elects to purchase hereunder, the
date upon which such Warrant Share vests is referred to herein as its "VESTING
DATE"). A Warrant Share that has vested may be purchased pursuant to this
Warrant at the option of the Holder, in whole or part, at any time between the
Effective Date and the later of the fifth anniversary of (a) the Effective Date
or (b) its Vesting Date (with respect to a Warrant Share, such time period is
referred to herein as its "EXERCISE PERIOD"). Notwithstanding the foregoing and
notwithstanding anything contained in this Warrant to the contrary, no unvested
Warrant Share shall continue to vest and the option to purchase unvested Warrant
Shares shall


                                       -1-


automatically expire upon the date that the Holder issues notice to the Company
to terminate that certain Air Services Agreement, dated of even date herewith,
by and between AA and the Company, as amended from time to time (the "AIR
SERVICES AGREEMENT"). To the extent an increase in the Number of Committed
Aircraft (as defined below) after the Effective Date results in a corresponding
increase in the Applicable Percentage Shares (as defined below) and, thereby,
Warrant Shares, pursuant to SECTION 2 hereof, such additional Warrant Shares
shall be deemed to have been issuable on the Execution Date for purposes of
vesting, and shall vest over a ten-year period (at the rate of 10% on each
anniversary of the Execution Date), beginning on the first anniversary of the
Execution Date.

      2. NUMBER OF WARRANT SHARES ISSUABLE. At any given time, the total number
of Warrant Shares issuable pursuant to this Warrant shall be determined by
multiplying the Applicable Percentage of IPO Shares (as defined below) by the
Number of IPO Shares (as defined below). The "NUMBER OF IPO SHARES" shall equal
the greater of (a) the number of shares of Common Stock registered under the
Securities Act, including any over allotment option granted to the underwriters
whether or not exercised, pursuant to the IPO or (b) sixty percent (60%) of the
number of shares of Common Stock outstanding immediately prior to the closing of
the IPO (such number of shares of Common Stock to be computed on a fully diluted
basis assuming the conversion or exchange of all securities of the Company
convertible or exchangeable, either directly or indirectly, into Common Stock
and the exercise of all options, warrants and rights exercisable, either
directly or indirectly, for Common Stock). The "APPLICABLE PERCENTAGE OF IPO
SHARES" shall be equal to the percentage of IPO Shares corresponding to the
Number of Committed Aircraft (as defined below) as set forth on SCHEDULE A
attached hereto. The Number of Committed Aircraft means the number of aircraft
at any given time committed to Feeder Air Service (as defined in the Air
Services Agreement), pursuant to the Air Services Agreement, including Firm
Approved Aircraft and Option Aircraft (as those terms are defined in the Air
Services Agreement) that AA and any Affiliate (as defined in Rule 144
promulgated under the Securities Act) have committed to engage in Feeder Air
Service but that are not then in service.

      3. EXERCISE PRICE. The per share price at which the Warrant Shares may be
purchased shall equal ninety-three percent (93%) of the public offering price
per share of Common Stock as set forth on the cover page of the final prospectus
delivered in connection with the IPO (the "EXERCISE PRICE").

      4. MANNER OF EXERCISE; PAYMENT FOR SHARES; ISSUANCE OF CERTIFICATES;
DEFINITIONS.

            (a) MANNER OF EXERCISE. Subject to the provisions of this Warrant,
      the Warrant Shares may be purchased by the Holder, in whole or in part, by
      the surrender of this Warrant together with a completed election to
      purchase agreement in the form attached to this Warrant (the "ELECTION
      AGREEMENT"), to the Company during normal business hours on any business
      day, during the Exercise Period, at the Company's principal executive
      offices (or such other office or agency of the Company as it may
      reasonably designate by notice to the Holder), and upon payment to the
      Company of an


                                      -2-


      amount of consideration equal to the aggregate Exercise Price of the
      purchased Warrant Shares ("TOTAL PURCHASE PRICE").

      (b) PAYMENT FOR SHARES. The Total Purchase Price may be paid (a) in cash,
      by certified or official bank check or by wire transfer for the account of
      the Company (the "CASH EXERCISE"); (b) notwithstanding (a), if the Fair
      Market Value (as defined below) of the Company's Common Stock is greater
      than the Exercise Price, in lieu of exercising this Warrant by payment of
      cash, the Holder may elect to receive shares of Common Stock (the
      "CASHLESS EXERCISE") computed as of the date of such calculation using the
      following formula:

                                   X= Y(A-B)
                                      ------
                                         A

      Where X = the number of shares of Common Stock to be issued to the Holder
            Y = the number of shares of Common Stock purchasable under the
            Warrant or, if only a portion of the Warrant is being exercised, the
            portion of the Warrant being exercised and canceled
            A = the Fair Market Value of one share of the Company's Common Stock
            B = the Exercise Price

      or (c) in any combination of the foregoing.

      (c)   Definitions.

            (i) "FAIR MARKET VALUE" shall mean, as of any date of determination,
            with respect to any Common Stock, (x) if there is a Qualified Public
            Market (as defined below) for such Common Stock, the value per share
            determined pursuant to clause (i) or (ii) below of this definition
            or (y) if there is no such Qualified Public Market, the value
            determined pursuant to clause (iii) below of this definition:

                  (i) if such Common Stock is listed on a national securities
                  exchange or admitted to unlisted trading privileges on such an
                  exchange, the average last reported sale price (as reported in
                  THE WALL STREET JOURNAL) of a share of such Common Stock over
                  the 21 trading day period immediately prior to the date of
                  determination or if no such sale is made on any such day, the
                  mean of the closing bid and asked prices for such Common Stock
                  on such day on such exchange; or

                  (ii) if such Common Stock is not so listed or admitted to
                  unlisted trading privileges, the average mean of the last bid
                  and asked prices reported for a share of such Common Stock
                  over the 21 trading day period immediately prior to the date
                  of determination (A) by the National Association of Securities
                  Dealers Automatic Quotation System or (B) if


                                      -3-


                  reports are unavailable under clause (a) above by the National
                  Quotation Bureau Incorporated; or

                  (iii) if such Common Stock is not so listed or admitted to
                  unlisted trading privileges and bid and asked prices are not
                  so reported, then the Company shall give prompt written notice
                  to the Holder of the need to determine the Fair Market Value
                  of such Common Stock, as well as a statement of the fair
                  market value of such Common Stock determined by the Board of
                  Directors of the Company. In such event, the Fair Market Value
                  of such Common Stock shall be the fair market value per share
                  agreed to by the Board of Directors of the Company and the
                  Holder; PROVIDED, HOWEVER, if no such agreement is reached
                  within thirty (30) days of the date on which the event for
                  which the Fair Market Value is required to be determined
                  occurs, then the Fair Market Value shall be determined as
                  follows: the Company and the Holder shall each designate
                  promptly in a written notice to the other its determination of
                  the fair market value of such Common Stock as of the
                  applicable reference date, and the Fair Market Value of such
                  Common Stock as of the applicable reference date shall then be
                  determined by a nationally recognized independent appraiser
                  (the "INDEPENDENT FINANCIAL EXPERT") selected by the Holder
                  from a group of three appraisers chosen by the Company (with
                  whom the Company does not have an existing business
                  relationship) and the Holder assuming an arm's-length private
                  sale between a willing buyer and a willing seller, neither
                  acting under compulsion. The determination by the Independent
                  Financial Expert of the Fair Market Value shall be final and
                  binding on the Company and the Holder. The costs and expenses
                  of any such Independent Financial Expert making such valuation
                  shall be paid by the Company, except that such expenses shall
                  be borne solely by the Holder to the extent that the
                  Independent Financial Expert concludes that the valuation of
                  such Common Stock made by the Board of Directors of the
                  Company is within ten percent (10%) of the Fair Market Value.

            (ii) "QUALIFIED PUBLIC MARKET" shall mean with respect to the Common
            Stock of the Company, an active trading market on a national
            securities exchange or over-the-counter market which consists of
            such publicly held Common Stock in the Company, with a minimum
            market value of $10,000,000 for such Common Stock. A "Qualified
            Public Market" shall be deemed to exist if the financial parameters
            set forth in the immediately preceding sentence have been met for
            the Common Stock for a period of 21 consecutive days.

      (d) ISSUANCE OF CERTIFICATES. The Warrant Shares so purchased shall be
      deemed to be issued to the Holder, as the record owner of such shares, as
      of the close of business on the date on which this Warrant shall have been
      surrendered, the completed Election Agreement shall have been delivered,
      and payment of the Total Purchase Price shall have been made as set forth
      above. Certificates for the Warrant Shares so purchased shall be delivered
      to the Holder within a reasonable time, not to exceed three (3) business
      days


                                      -4-


      after this Warrant shall have been so exercised. The certificates so
      delivered shall be in such denominations as may be requested by the Holder
      and shall be registered in the name of the Holder. If this Warrant should
      be exercised in part only, the Company shall, upon surrender of this
      Warrant, execute and deliver a new Warrant evidencing the rights of the
      Holder thereof to purchase the balance of the Warrant Shares issuable
      hereunder.

      5. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:

            (a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
      in accordance with the terms of this Warrant, be validly issued, fully
      paid and nonassessable and free from all taxes, liens and charges with
      respect to the issue thereof.

            (b) RESERVATION OF SHARES. During the Exercise Period, the Company
      shall at all times have authorized, and reserved for the purpose of
      issuance upon exercise of this Warrant, a sufficient number of shares of
      Common Stock to provide for the exercise of this Warrant.

            (c) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
      entity succeeding to the Company by merger, consolidation or acquisition
      of all or substantially all of the Company's assets.

      6. ADJUSTMENT TO THE NUMBER OF WARRANT SHARES. During the Exercise Period,
the number of Warrant Shares and the Exercise Price shall be subject to
adjustment from time to time as provided in this SECTION 6.

            (a) SUBDIVISION OF COMMON STOCK. During the Exercise Period, if the
      Company subdivides (by any stock split, stock dividend, recapitalization,
      reorganization, reclassification or otherwise) any shares of Common Stock
      into a greater number of shares, then, after the date of record for
      effecting such subdivision, the number of shares of Common Stock issuable
      upon exercise of this Warrant shall be proportionally increased so that
      the percentage of Warrant Shares, after the subdivision, of the total
      number of shares of Common Stock will be equal to the percentage of
      Warrant Shares, immediately prior to such subdivision, of the total number
      of shares of Common Stock immediately prior to such subdivision. In
      addition, the Exercise Price shall be proportionally decreased to
      appropriately reflect such subdivision.

            (b) CONSOLIDATION, MERGER OR SALE. During the Exercise Period, in
      case of any consolidation of the Company with, or merger of the Company
      into any other corporation, or in case of any sale or conveyance of all or
      substantially all of the assets of the Company other than in connection
      with a plan of complete liquidation of the Company, then as a condition of
      such consolidation, merger or sale or conveyance, adequate provision will
      be made whereby the Holder of this Warrant will have the right to acquire
      and receive upon exercise of this Warrant in lieu of the shares of Common
      Stock immediately theretofore acquirable upon the exercise of this
      Warrant, such shares of stock, securities or assets as may be issued or
      payable with respect to or in exchange


                                      -5-


      for the number of shares of Common Stock immediately theretofore
      acquirable and receivable upon exercise of this Warrant had such
      consolidation, merger or sale or conveyance taken place. In any such case,
      the Company will make appropriate provision to insure that the provisions
      of this SECTION 6 will thereafter be applicable as nearly as may be in
      relation to any shares of stock or securities thereafter deliverable upon
      the exercise of this Warrant.

            (c) NOTICE OF ADJUSTMENT. Upon the occurrence of any event that
      requires any adjustment of the number of Warrant Shares and Exercise
      Price, then, and in each such case, the Company shall give notice thereof
      to the Holder, which notice shall state the increase or decrease in the
      number of Warrant Shares purchasable and Exercise Price, setting forth in
      reasonable detail the method of calculation and the facts upon which such
      calculation is based.

      7. NO FRACTIONAL SHARES. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant. In lieu of delivering any fractional
shares to which the Holder would otherwise be entitled, the number of shares of
Common Stock shall be rounded to the nearest whole number.

      8. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the Holder or such
shares for any issuance tax or other costs in respect thereof.

      9. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

      10. TRANSFER AND REPLACEMENT OF WARRANT.

            (a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
      the Holder are transferable, in whole or in part, upon surrender of this
      Warrant, together with a properly executed assignment in the form attached
      hereto, at the office of the Company referred to in SECTION 11 below;
      PROVIDED, that any transfer or assignment shall be subject to the
      conditions set forth in SUBSECTION 10(e). Until due presentment for
      registration of transfer on the books of the Company, the Company may
      treat the registered Holder as the owner and Holder of this Warrant for
      all purposes, and the Company shall not be affected by any notice to the
      contrary.

            (b) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
      satisfactory to the Company of the loss, theft, destruction, or mutilation
      of this Warrant and, in the case of any such loss, theft, or destruction,
      upon delivery of an indemnity agreement reasonably satisfactory in form
      and amount to the Company, or, in the case of


                                      -6-


      any such mutilation, upon surrender and cancellation of this Warrant, the
      Company, at its expense, will execute and deliver, in lieu thereof, a new
      Warrant of like tenor.

            (c) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
      Warrant in connection with any transfer or replacement as provided in this
      SECTION 10, this Warrant shall be promptly canceled by the Company. The
      Company shall pay all taxes and all other expenses (other than legal
      expenses, if any, incurred by the Holder) in connection with the
      preparation, execution, and delivery of Warrants pursuant to this SECTION
      10.

            (d) REGISTER. The Company shall maintain, at its principal executive
      offices (or such other office of the Company as it may designate by notice
      to the Holder), a register for this Warrant, in which the Company shall
      record the name and address of the person or business entity in whose name
      this Warrant has been issued, as well as the name and address of each
      transferee and each prior owner of this Warrant.

            (e) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
      the surrender of this Warrant in connection with any exercise, transfer,
      or exchange of this Warrant, this Warrant (or in the case of any exercise,
      the Warrant Shares issuable hereunder) shall not be registered under the
      Securities Act, and under applicable state securities or blue sky laws,
      the Company may require, as a condition of allowing such exercise,
      transfer, or exchange (i) that the Holder or transferee of this Warrant,
      as the case may be, furnish to the Company a written opinion of counsel,
      which opinion and counsel shall be reasonably acceptable to the Company,
      to the effect that such exercise, transfer or exchange may be made without
      registration under said Act and under applicable state securities or blue
      sky laws, and (ii) that the Holder or transferee execute and deliver to
      the Company an investment intent representation letter in form and
      substance acceptable to the Company. AA, as the initial Holder of this
      Warrant, by taking and holding the same, represents to the Company that
      such Holder is acquiring this Warrant for investment and not with a view
      to the distribution thereof. Notwithstanding anything in this SUBSECTION
      10(e) to the contrary, the Company may transfer this Warrant to any
      Affiliate of the Company without compliance with CLAUSE (i) of this
      SUBSECTION 10(e).

            (g) LEGENDS.

                  (i) Each Warrant Share (and each Warrant Share issued to
                  transferees of the Warrant), unless and until such time as the
                  same is no longer required under the applicable requirements
                  of the Securities Act, or any applicable state securities
                  laws, shall bear the following legend:

                  "NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON
                  EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
                  APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED
                  FOR SALE, PLEDGED, TRANSFERRED


                                      -7-


                  OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER
                  THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
                  OR THE AVAILABILITY OF AN EXEMPTION THEREFROM UNDER THE
                  PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
                  SECURITIES LAWS."

                  (ii) Each certificate or instrument (if any) representing any
                  Warrant Shares issued upon the exercise of this Warrant (and
                  each certificate or instrument representing any Warrant Shares
                  issued to transferees of this Warrant or such certificate or
                  instrument), unless and until such time as the same is no
                  longer required under the applicable requirements of the
                  Securities Act, or any applicable state securities laws, shall
                  bear substantially the following legend:

                  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
                  "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES
                  LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
                  BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED
                  OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
                  THEREFROM UNDER THE PROVISIONS OF THE SECURITIES ACT AND ANY
                  APPLICABLE STATE SECURITIES LAWS."

      11. NOTICES. All notices, requests and other communications required or
permitted to be given or delivered hereunder to the Holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such Holder at the address shown for such Holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such Holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed to the office of the Company at 2500 South High School
Road, Indianapolis, IN 46241, Attention: President, or at such other address as
shall have been furnished to the Holder of this Warrant by notice from the
Company. Any such notice, request or other communication may be sent by
facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this SECTION 10 or, if mailed by registered or
certified mail or with a recognized overnight mail


                                      -8-


courier upon deposit with the United States Post Office or such overnight mail
courier, if postage is prepaid and the mailing is properly addressed, as the
case may be.

      12. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICTS OF LAW.

      13. MISCELLANEOUS.

            (a) AMENDMENTS. This Warrant may only be amended by an instrument
      signed by the Company and the Holder.

            (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
      paragraphs of this Warrant are inserted for purposes of reference only,
      and shall not affect the meaning or construction of any of the provisions
      of this Warrant.

            (c) SEVERABILITY AND SAVINGS CLAUSE. If any one or more of the
      provisions contained in this Agreement is for any reason (i) objected to,
      contested or challenged by any court, government authority, agency,
      department, commission or instrumentality of the United States or any
      state or political subdivision thereof, or any securities industry
      self-regulatory organization (collectively, "GOVERNMENTAL AUTHORITY"), or
      (ii) held to be invalid, illegal or unenforceable in any respect, the
      Company and the Holder agree to negotiate in good faith to modify such
      objected to, contested, challenged, invalid, illegal or unenforceable
      provision. It is the intention of the Company and the Holder that there
      shall be substituted for such objected to, contested, challenged, invalid,
      illegal or unenforceable provision a provision as similar to such
      provision as may be possible and yet be acceptable to any objecting
      Governmental Authority and be valid, legal and enforceable. Further,
      should any provisions of this Agreement ever be reformed or rewritten by a
      judicial body, those provisions as rewritten will be binding, but only in
      that jurisdiction, on the Holder and the Company as if contained in the
      original Agreement. The invalidity, illegality or unenforceability of any
      one or more provisions of this Warrant will not affect the validity and
      enforceability of any other provisions of this Warrant.


                                      -9-


      WITNESS the signature of a proper officer of the Company as of the date
first above written.

                                          CHAUTAUQUA AIRLINES, INC.
                                          A NEW YORK CORPORATION


                                          By:  /s/ Arthur H. Amron
                                              -------------------------------
                                              Arthur H. Amron
                                              Vice President


                                      -10-


                                   SCHEDULE A



             NUMBER OF COMMITTED
                   AIRCRAFT                  PERCENTAGE OF IPO SHARES
          -------------------------------------------------------------
                                                    
                  Less than 15                             0%
          -------------------------------------------------------------
                       15                               8.75%
          -------------------------------------------------------------
                       16                               9.00%
          -------------------------------------------------------------
                       17                               9.25%
          -------------------------------------------------------------
                       18                               9.50%
          -------------------------------------------------------------
                       19                               9.75%
          -------------------------------------------------------------
                       20                              10.00%
          -------------------------------------------------------------
                       21                              10.25%
          -------------------------------------------------------------
                       22                              10.50%
          -------------------------------------------------------------
                       23                              10.75%
          -------------------------------------------------------------
                       24                              11.00%
          -------------------------------------------------------------
                       25                              11.25%
          -------------------------------------------------------------
                       26                              11.50%
          -------------------------------------------------------------
                       27                              11.75%
          -------------------------------------------------------------
                       28                              12.00%
          -------------------------------------------------------------
                       29                              12.25%
          -------------------------------------------------------------
                       30                              12.50%
          -------------------------------------------------------------
                       31                              12.75%
          -------------------------------------------------------------
                       32                              13.00%
          -------------------------------------------------------------
                       33                              13.25%
          -------------------------------------------------------------
                       34                              13.50%
          -------------------------------------------------------------
                       35                              13.75%
          -------------------------------------------------------------


For purposes of calculating the Applicable Percentage of IPO Shares, the Number
of Committed Aircraft after the expiration of the term of the Air Services
Agreement shall equal the Number of Committed Aircraft on the last day of the
term of the Air Services Agreement.


                                      -11-


                              [FORM OF ASSIGNMENT]

                   (TO BE EXECUTED BY THE REGISTERED HOLDER IF
                  SUCH HOLDER DESIRES TO TRANSFER THE WARRANT)

      FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers unto

________________________________________________________________________________
(Please print name, address and taxpayer identification number or social
security number of transferee.)

the accompanying Warrant, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint:

________________________________________________________________________________
attorney, to transfer the accompanying Warrant on the books of the Company, with
full power of substitution. The transferee's tax identification or social
security number is ___________________.

Dated:__________________, 20___.

                                         [HOLDER]


                                         By:   _________________________________
                                         Name: _________________________________
                                         Title:_________________________________

                                     NOTICE

      The signature to the foregoing Assignment must correspond to the name as
written upon the face of the accompanying Warrant or any prior assignment
thereof in every particular, without alteration or enlargement or any change
whatsoever.


                                      -12-


                    [FORM OF ELECTION TO PURCHASE AGREEMENT ]

                   (TO BE EXECUTED BY THE REGISTERED HOLDER IF
                  SUCH HOLDER DESIRES TO EXERCISE THE WARRANT)

To:____________________:

The undersigned hereby irrevocably elects to (i) purchase [INSERT NUMBER OF
SHARES IN WORDS] ([INSERT NUMBER OF SHARES IN numbers]] of the shares of common
stock of Chautauqua Airlines, Inc. ,[ ] par value, ("COMMON STOCK"), pursuant to
the provisions of SECTION 4(a) of the accompanying warrant (the "WARRANT"), and
tenders herewith payment of the aggregate purchase price for such Warrant Shares
in full; (ii) elects to exercise the Warrant for the purchase of [INSERT NUMBER
OF SHARES IN WORDS] ([INSERT NUMBER OF SHARES IN NUMBERS]] of the shares of
Common Stock pursuant to the provisions of SECTION 4(b) (the "CASHLESS EXERCISE"
provision) of the attached Warrant; or (iii) elects to exercise this Warrant for
the purchase of [INSERT NUMBER OF SHARES IN WORDS] ([INSERT NUMBER OF SHARES IN
NUMBERS]] of the shares of Common Stock pursuant to the provisions of SECTION
4(c) (the "COMBINATION EXERCISE" provision) of the attached Warrant. The
undersigned requests that certificates for such shares of Common Stock be issued
in the name of:

________________________________________________________________________________
(Please print name and address.)

________________________________________________________________________________
(Please insert social security or other identifying number.)

The undersigned hereby confirms and acknowledges that it is acquiring the shares
of Common Stock solely for investment for its own account and not with a view to
distribution, and it will not offer, sell or otherwise dispose of any such
shares of Common Stock except in compliance with the Securities Act of 1933, as
amended, or any applicable state securities laws.

If such number of shares of Common Stock shall not be all of the shares of
Common Stock evidenced by the accompanying Warrant, the undersigned requests
that a new Warrant for the balance remaining of such Warrant Shares shall be
issued to, registered in the name of, and delivered to:

________________________________________________________________________________
(Please print name and address.)

________________________________________________________________________________
(Please insert social security or other identifying number.)


                                      -13-


Dated:__________________, _____.         [HOLDER]


                                         By:   _________________________________
                                         Name: _________________________________
                                         Title:_________________________________

                                     NOTICE

      The signature to the foregoing Election to Purchase Agreement must
correspond to the name as written upon the face of the accompanying Warrant or
any prior assignment thereof in every particular, without alteration or
enlargement or any change whatsoever.


                                      -14-

EX-10.6

                                                                    Exhibit 10.6

                                SERVICE AGREEMENT

     AGREEMENT made this 9th day of February, 1994 by and between USAIR, INC.
(USAir), a Delaware corporation having a principal place of business at Crystal
Park Four, 2345 Crystal Drive, Arlington, Virginia 22227 and Chautauqua
Airlines, Inc., (Contractor), a New York corporation having a principal place of
business at Chautauqua county Airport, RD #1, Airport Drive, Jamestown, New York
14701 as follows:

                                   WITNESSETH:

     WHEREAS, USAir holds a certificate of public convenience and necessity
issued by the Department of Transportation (DOT) authorizing USAir to engage in
the interstate and overseas air transportation of persons, property and mail
between all points in the United States, its territories and possessions:

     WHEREAS, Contractor is a commuter air carrier engaged in air transportation
of persons and property pursuant to Part 298 of the DOT's Economic Regulations:

     WHEREAS, USAir owns various trademarks, service marks and logos, including
"USAir," "USAir Express," and distinctive exterior color decor and patterns on
its aircraft, hereinafter referred to individually and collectively as the
"USAir Servicemarks;"

     WHEREAS, contractor wishes to acquire a nonexclusive license, and USAir
does hereby grant unto the Contractor, the use

                                        i


of one or more of USAir's Trademarks in connection with the scheduled air
transportation services operated by Contractor pursuant to this Agreement,
including the use of the "US" designator code; and

     WHEREAS, Contractor desires to operate, and USAir is willing to contract
for, USAir Express operations in the manner and to the extent hereinafter
described;

     NOW, THEREFORE, for and in consideration of the foregoing premises and the
mutual covenants and obligations hereinafter set forth, the parties to this
Agreement hereby agree as follows:

                                       ii


Article 1 - COMPLIANCE WITH REGULATIONS

     Contractor hereby represents, warrants, and agrees that all air
transportation services performed by it pursuant to this Agreement or otherwise
shall be conducted in full compliance with any and all applicable statutes,
orders, rules, and regulations, whether now in effect or hereafter promulgated,
of all governmental agencies having jurisdiction over Contractor's operations,
including, but not limited to the Federal Aviation Administration (FAA) and the
DOT. Contractor's compliance with such governmental statutes, orders, rules, and
regulations shall be the sole and exclusive obligation of Contractor, and USAir
will have no obligations or responsibilities, whether direct or indirect, with
respect to such matters.

                                       1.1


Article 2 - AIR SERVICES TO BE PROVIDED BY CONTRACTOR

          Section 2.01 SCHEDULES TO BE OPERATED

I. Section 2.u1(a) is hereby amended by adding the following under the two
column headings:



     "MARKETS                EFFECTIVE DATES

                 
     PIT-HGR
     PIT-YXU
     PIT-LNS
     PIT-YHM                     [*]
     PIT-A00
     PIT-JST
     DAY-DTW
     DAY-GRR
     CMH-GRR


Unless otherwise approved by USAir in writing, Contractor will operate a minimum
of [*].

          (b) USAir, at its sole discretion, shall allow Contractor to operate
as "USAir Express" in non-exclusive markets provided the Contractor complies
with Sections 2.01(c) and (e), Section 8.O1(c), and provided, further, that
USAir reserves the right to withdraw its approval of all or any part of
Contractor's schedules at any time and to require Contractor to reduce its
schedules if USAir's facilities do not have the ability or

                                       2.1

- ----------
* Confidential



capacity to handle Contractor's schedules as determined by USAir in the exercise
of its sole discretion and judgment.

          (c) Any changes in the schedules operated by Contractor pursuant to
Section 2.01(a) or 2.01(b), whether necessitated by altered connections,
operating experience or other reasons, [*] to the effective date of such
changes, and all such changes must be approved, [*]. Requests for new markets
to Section 2.01(a) and 2.01(b) must be submitted to USAir [*]. Requests for
changes in Contractor's schedules must be made in writing. Before such
requests, USAir and Contractor will, as far in advance as practicable, advise
each other of any desired modifications or amendments of their respective
schedules so as to ensure that the primary needs of both the local and
connecting traffic between the cities operated by Contractor as a USAir
Express carrier are being adequately met. Within the operating capability of
the aircraft used by Contractor as described in Section 2.03, or some other
substitute aircraft used by Contractor with the prior written consent of
USAir, all reasonable and practicable requests by USAir to Contractor to
adjust the service schedules required by Section 2.01 will be complied with
by Contractor; provided that the primary needs of the markets listed in
Section 2.01(a) are met.

                                       2.2

- --------
* Confidential



          (d) [*]

          (e) [*]

          (f) In the event Contractor suspends operations in any city pair
previously approved under Section 2.01 for a period of [*].

          (g) No terms, provision or condition contained in this Article shall
be construed so as to prohibit the operation of additional schedules beyond
those frequencies in cities pairs previously approved in 2.01(a) or 2.01(b) with
the aircraft described in Section 2.03, if, in contractor's judgment, [*].

          Section 2.02 OPERATION OF NON-AFFILIATED FLIGHTS Notwithstanding
anything to the contrary contained in this Section 2.01, Contractor shall be
entitled to operate additional services under its own name [*], provided that
such services, [*]

                                       2.3

- ---------
* Confidential



[*] and that any aircraft used in providing such services [*].

III. Section 2.03(a) is deleted in its entirety and the following is
substituted:

          (a) Contractor will provide the scheduled air services described in
Section 2.01 with [*] aircraft shall meet the requirements for commuter air
carrier operations set forth in Part 298 of the DOT's Economic Regulations
and the Federal Aviation Regulations. Such aircraft shall have a design
capacity of [*]. Contractor and USAir agree that the Fairchild Metro III
aircraft, Jetstream J31 series of aircraft and SAAB 340 aircraft are
acceptable for purposes of this Agreement.

          (b) The aircraft scheduled and any replacement aircraft utilized by
Contractor pursuant to this Section 2.01, shall bear USAir's Trademarks,
consisting of the red, white, and blue aircraft exterior color decor and pattern
provided by USAir and the name "USAir Express." At any time during the life of
this Agreement, and at the sole discretion of USAir, Contractor may be permitted
to use such new or different trademarks and exterior color decors and patterns
on its aircraft as USAir may determine. Upon written notice from USAir, which
shall include the specifications for any such changes in trademarks and/or
exterior aircraft decor and patterns, Contractor shall effect such changes as
promptly as is reasonably practicable.

                                       2.4

- --------
* Confidential



          In addition to use of the USAir Trademarks on its aircraft, Contractor
shall use and display a suitable sign on the exterior of its aircraft
identifying Contractor as the operator of the services being provided pursuant
to this Agreement. The use and display of such sign shall be subject to the
prior written approval of USAir as to its nature, size and location on
Contractor's aircraft.

          (c) In addition to the aircraft described in Section 2.03(a) above,
Contractor will arrange for, and will have available for its use such [*] as
are required to maintain effectively the scheduled services operated pursuant
to Sections 2.01 during periods when Contractor's [*] due to unforeseen and
irregular maintenance requirements. Such [*].

          Section 2.04 FLIGHT CREWS TO BE USED

          All services performed by Contractor pursuant to Sections 2.01 and
10.01 shall be operated with at least the minimum number of qualified flight
crew members required by the Federal Aviation Agency. All such crew members
shall at all times meet all currently applicable governmental requirements, as
such requirements may be amended from time to time during the life of this
Agreement, and shall be fully licensed and qualified for the services to be
performed hereunder, and, in addition, all of Contractor's captains shall hold a
current Airline Transport Pilot Certificate. All of contractor's first officers
must have

                                       2.5

- --------
* Confidential



satisfactorily completed the [*]. Such crew members shall also meet any and
all requirements imposed by the insurance policies which are to be maintained
pursuant to Section 7.03.

          2.05 MAINLINE OPERATIONS

          Nothing contained in Section 2.01 or any other provision of this
Agreement shall prevent the operation of [*].

                                       2.6

- -------
* Confidential



Article 3 - SUPPORT SERVICES AND FACILITIES

          Section 3.01 GENERAL PROVISION

          USAir and Contractor will provide ground support services and
facilities to the extent and in the manner set forth in the subsequent sections
of this Article 3. Such ground support services and facilities will be furnished
only with respect to Contractor's scheduled air services described in Sections
2.01; PROVIDED, HOWEVER, that with respect to schedules operated by Contractor
in addition to the minimum schedules established by Section 2.01(a), [*].

          Section 3.02 COMMUNICATIONS

          Reservation telephone lines will be maintained by USAir at the points
in Section 2.01 connecting those cities with USAir's reservations center.

          Section 3.03 RESERVATIONS

          (a) All reservations will be requested and confirmed for passengers
using the services described in Sections 2.01 through USAir's reservations
system (PACER). Connecting reservations to USAir or to other air carriers will
be requested and confirmed through USAir's PACER system in accordance with
currently established industry methods and procedures. For

                                       3.1

- -------
* Confidential



passengers originating their travel at points other than those served by
Contractor pursuant to Section 2.01, either on USAir's system or on the systems
of other airlines, connecting reservations to the services of Contractor will
also be made in accordance with currently established industry methods and
procedures. In all cases, USAir will confirm the reservations of Contractor's
passengers through the entire itinerary of their scheduled trips. When a contact
number is supplied by the passengers making such reservations, USAir will assume
the responsibility of notifying passengers of any changes in Contractor's
schedules or operations, PROVIDED that Contractor furnishes USAir with
sufficient advance notice of such changes.

          (b) Contractor agrees to make available the minimum of [*].

          (c) In the event of flight delays, cancellations or other schedule
irregularities affecting Contractor's scheduled services, and as soon as
information concerning such irregularities is available, Contractor shall notify
USAir's reservations control center in a manner prescribed by USAir and furnish
USAir such information in as much detail as practicable.

          (d) [*]

                                       3.2

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[*]. For the purposes of this section 3.03(d), the term flight dispatch shall
include, but shall not be limited to, all planning of flight itineraries and
routings, fueling and flight release.

          (e) From time to time, and solely upon request of Contractor or its
flight crews, USAir may furnish Contractor's flight crews with such U.S. Weather
Bureau information or data as may be available to USAir; PROVIDED, that in
furnishing any such weather information or data to Contractor, neither USAir nor
its employees or agents will be responsible or liable for the accuracy thereof.

          Section 3.04 RESERVED

          Section 3.05 [*]

          (a) USAir will provide the following services at locations (except as
mutually agreed) outlined in Sections 2.01 and 2.06 where USAir personnel are
represented, subject to provisions outlined in Section 3.01 and 8.01(c).

               (1)  [*]
               (2)  use of USAir's passenger facilities by Contractor's
                    passengers;
               (3)  [*]

                                       3.3

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               (4)  [*]
               (5)  [*]
               (6)  arrangements, made at Contractor's request and its sole cost
                    and expense, for [*]
               (7)  in the event USAir is unable to accommodate Contractor's
                    scheduled air services beyond the minimum requirements of
                    Section 2.01(a) at USAir's own facilities, USAir reserves
                    the right to provide the services and facilities herein at
                    another suitable location on the airport selected by mutual
                    agreement by the

                                       3.4

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                    parties subject to provisions outlined in Section 8.01(c).

          (b) Contractor will provide the following services and facilities at
locations not provided under Section 3.05(a):

               (1)  [*]

               (2)  [*]

               (3)  [*]

               (4)  [*]

          Section 3.06 TERMS OF TRANSPORTATION, SALES AND PROMOTION

          (a) USAir's Terms of Transportation, with certain exceptions as listed
therein, shall be applicable to services provided by Contractor pursuant to this
Agreement. Such Terms of Transportation shall at all times be available for
public inspection at Contractor's corporate offices and at each airport ticket
counter and sales office maintained and operated by or on behalf of Contractor.

                                       3.5

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          (b) USAir and contractor agree that each carrier is authorized to sell
air transportation of passengers and property on the scheduled flights operated
by the other carrier; PROVIDED, HOWEVER, that neither USAir nor Contractor shall
issue passenger tickets or exchange orders which provide for space on a
particular flight except on the basis of a confirmed reservation for such space.

          (c) The party issuing a ticket or exchange order for passenger
transportation shall pay to the party furnishing the transportation pursuant
thereto, or pursuant to a ticket issued in exchange for such exchange order, the
charges applicable to the transportation furnished. Such payments shall be made
as follows:

               (1)  with respect to passenger tickets and exchange orders issued
                    by Contractor for transportation on Contractor, USAir and
                    other air carriers, Contractor shall remit to USAir through
                    the Airlines Clearing House, Inc. (Clearing House) in
                    accordance with the procedures set forth in the currently
                    effective MANUAL OF PROCEDURES issued by said Clearing
                    House, but in no event later than the twenty-eighth (28th)
                    day of the month following the month in which the sale
                    occurred, all of the monies or proceeds of such sales.
                    Contractor shall prepare and

                                       3.6


                    furnish to USAir all written reports, accounts, and
                    documentation that USAir may require daily or at such lesser
                    frequency as USAir may prescribe, at its sole reasonable
                    discretion, from time to time during the life of this
                    Agreement; and

               (2)  with respect to passenger transportation furnished by
                    Contractor pursuant to this Agreement, invoices for all
                    flight coupons collected by Contractor from its passengers,
                    whether issued by, or on behalf of Contractor, USAir or
                    other air carriers, shall be forwarded to the Clearing House
                    in accordance with the procedures set forth in the currently
                    effective MANUAL OF PROCEDURES issued by said Clearing
                    House. All payments for transportation furnished by
                    Contractor shall be made by the Clearing House, including
                    all passenger transportation accounts receivable from USAir
                    and other air carrier participants in the Clearing House.

          (d) With respect to airbills issued by Contractor for transportation
of property on Contractor, USAir and other air carriers, and with respect to
inbound collect shipments, including without limitation, inbound C.O.D.
shipments, handled by Contractor as the final carrier, all monies or proceeds

                                       3.7


collected and received by Contractor in connection with such transactions shall
be remitted to USAir through the Clearing House in accordance with the
procedures set forth in the currently effective MANUAL OF PROCEDURES issued by
said clearing House, but in no event later than the twenty-eighth (28th) day of
the month following the month in which such monies or proceeds were collected.
In addition, Contractor shall prepare and furnish to USAir all written reports,
accounts and documents that USAir may reasonably require, on a daily basis or at
such lesser frequency as USAir may prescribe, at its sole discretion, from time
to time during the life of this Agreement.

          (e) USAir may prescribe in its reasonable discretion from time to time
during the life of this Agreement such new or different passenger and air
freight sales and accounting procedures as may reasonably be required by
experience or changed circumstances. In addition, USAir and Contractor by mutual
agreement, may reasonably establish alternative or modified passenger sales and
accounting procedures in order to accommodate tickets or exchange orders issued
by air carriers which are not participants in the Clearing House.

          (f) No commission will be paid for the sale of air transportation when
such sale is made directly by the parties hereto and not by a travel agent. When
Contractor accepts as payment a credit card charge on behalf of USAir in
exchange for issuing tickets, exchange orders or air freight bills for
transportation of persons or property on Contractor, USAir or

                                       3.8


other carriers, [*] all commissions charged by the issuer of such credit card
with respect to such credit card charge sale.

          (g) [*] shall assume full liability for and shall indemnify, defend,
protect, save, and hold harmless [*], its directors, officers, agents, and
employees from any and all liabilities, damages, claims, suits, judgments,
and all related expenses or losses on account of the loss, misapplication,
theft or forgery of passenger tickets, exchange orders, airbills or other
supplies furnished by or on behalf of [*], or the proceeds thereof, whether
or not such loss is occasioned by the insolvency of either the purchaser of
the aforesaid passenger tickets, exchange orders, airbills or other documents
or of a bank in which Contractor may have deposited such proceeds. [*]
responsibility hereunder for passenger tickets, exchange orders, airbills,
and other supplies shall commence immediately upon delivery of said passenger
tickets, exchange orders, airbills, and other supplies into the possession of
[*] or any duly authorized officer, agent or employee of contractor. [*]
shall furnish [*] prompt and timely notice of any claims made, or suits
instituted against USAir which in any way may result in the indemnification
hereunder, and [*] shall have the right to compromise or participate in the
defense of same to the extent of its own interest.

          (h) USAir will include the scheduled air services provided by
Contractor pursuant to Section 2.01 in its public

                                       3.9

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timetables. All references in USAir's public timetables to Contractor's USAir
Express services shall also contain notations indicating that such scheduled
services are performed by Contractor as an independent contractor under the
appropriate USAir Trademarks.

                                      3.10


Article 4 - PASSENGER FARES AND DIVISION OR REVENUES

          Section 4.01 [*]

          [*]

          Section 4.02 ALL OTHER FARES

          [*]

          Section 4.03 DIVISION OF REVENUES

          (1)  [*]

          (2)  [*]

                                       4.1

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Article 5 - AIR FREIGHT RATES

          Section 5.01 JOINT AIR FREIGHT RATES

          Throughout the life of this Agreement, USAir and Contractor shall
[*] air freight rates, including rates covering general commodity, small
package, and priority air freight shipments.

          Section 5.02 Compensation to Contractor FOR AIR FREIGHT

          For the transportation of air freight on the scheduled services to be
operated by Contractor pursuant to Section 2.01 above, USAir will pay Contractor
the following:

          (a)  General Commodity Freight - [*] per pound;
          (b)  Priority Freight - [*] per pound;
          (c)  Small Package Freight - [*] per shipment, originated or
               terminated.

The foregoing rates to be paid Contractor for the transportation of air freight
shall be subject to adjustment from time to time as required by experience and
as mutually agreed to by USAir and Contractor.

                                       5.1

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Article 6 - U.S. MAIL

          (a) Contractor shall accept for transportation, and shall transport on
the regularly scheduled air transportation services it shall operate pursuant to
Section 2.01 of this Agreement, such U.S. mail as shall be tendered to it by the
United States Postal Service (USPS) and by USAir. In the performance of its
transportation of the U.S. mail as aforesaid, Contractor shall observe and
comply with any and all applicable postal regulations, instructions and
procedures and with any applicable orders or regulations of the DOT governing
the transportation of mail by scheduled air carriers.

          (b) All mail transported by Contractor pursuant to this Article 6
shall be transported under the currently effective service mail rates
established by the DOT or the USPS for the transportation of the U.S. mail by
USAir. USAir shall make all reports and keep all records and accounts and
perform such other administrative functions as may be required by the USPS in
connection with the transportation of the mails by Contractor in the markets
covered by this Agreement.

          (c) All payments by the USPS under USAir's effective service mail
rates for the transportation of the mails by Contractor in the markets covered
by this Agreement, shall be made to USAir. USAir shall pay to Contractor
monthly, via procedures of the Airline's Clearing House, a sum of money equal to
20 CENTS per pound for all categories of mail boarded on Contractor's scheduled
flights. The rate of 20 CENTS per pound of

                                       6.1


mail boarded established by this paragraph (c) shall be subject to adjustment
from time to time during the effectiveness of this Agreement as mutually agreed
upon by USAir and Contractor.

          (d) Contractor shall assume full liability for and shall indemnify,
defend, protect, save, and hold harmless USAir, its directors, officers, agents,
and employees from and against any and all liabilities, damages, claims,
demands, suits, judgments, including, without limitation, any and all fines,
penalties or other sanctions imposed by the USPS (including all costs, fees, and
expenses in connection therewith or incident thereto), for the loss, delay,
damage or destruction of any of the mails tendered to Contractor by the USPS or
by USAir for transportation pursuant to this article and for any and all
violations or failures on the part of Contractor, its directors, officers,
agents, employees or independent contractors to observe and comply with any
applicable rules, regulations or orders of the USPS, the DOT, or any other duly
authorized governmental agency relating to the transportation of the mails,
arising out of, or in any way connected with the performance by Contractor, its
directors, officers, agents, employees, and independent contractors of the
transportation of the mails pursuant to this Agreement. USAir shall give
Contractor prompt and timely notice of any claims made, suits instituted or
fines, penalties or other sanctions imposed against USAir which may in any way
result in a claim for the indemnification hereunder, and Contractor shall have
the right to participate in the compromise, or the defense

                                       6.2


of same, at its sole expense and to the extent of its own interest. In the event
USAir shall be required to pay any fine, penalty or other monetary sanction
imposed against USAir which in any way results in the indemnification hereunder,
it is mutually agreed that the amount of such fines, penalties or other monetary
sanctions shall be deducted and set off against payments USAir is required to
make to Contractor pursuant to paragraph (c) above, such deduction and setoff to
continue until USAir recovers the full amount of any fine, penalty or other
monetary sanction it shall be required to pay by reason of any act or omission
of Contractor, its directors, officers, agents, employees, and independent
contractors in the performance under this article.

                                       6.3


Article 7 - LIABILITY, INDEMNIFICATION AND INSURANCE

          Section 7.01 Contractor Shall Act as An INDEPENDENT CONTRACTOR

          (a) The employees, agents, and/or independent contractors of
Contractor engaged in performing any of the services Contractor is to perform
pursuant to this Agreement shall be employees, agents, and independent
contractors of Contractor for all purposes, and under no circumstances shall be
deemed to be employees, agents or independent contractors of USAir. In its
performance under this Agreement, Contractor shall act, for all purposes, as an
independent contractor and not as an agent for USAir. USAir shall have no
supervisory power or control over any employees, agents or independent
contractors engaged by Contractor in connection with its performance hereunder,
and all complaints or requested changes in procedures shall, in all events, be
transmitted by USAir to a designated officer of Contractor. Nothing contained in
this Agreement is intended to limit or condition Contractor's control over its
operations or the conduct of its business as a commuter air carrier, and
Contractor and its principals assume all risks of financial losses which may
result from the operation of the air services to be provided by Contractor
hereunder.

          (b) The employees, independent contractors, and agents of USAir
engaged in performing any of the services USAir is to perform pursuant to this
Agreement shall be employees, independent contractors, and agents of USAir for
all purposes, and under no circumstances shall be deemed to be employees and

                                       7.1


agents of Contractor. contractor shall have no supervisory power or control over
any such USAir employees, independent contractors, and agents engaged by USAir
and any complaint or requested change in procedure shall be transmitted by
Contractor to USAir's designated representative.

          Section 7.02 LIABILITY AN INDEMNIFICATION

          (a) Each party hereto assumes full responsibility for any and all
liability to its own directors, officers, employees, or agents on account of
injury, or death resulting from or sustained in the performance of their
respective services under this Agreement.

          (b) Contractor shall indemnify, defend, protect, save, and hold
harmless USAir, its directors, officers, employees, and agents from and against
any and all liabilities, claims, demands, suits, judgments, damages, and losses
(including the costs, fees, and expenses in connection therewith and incident
thereto), brought against USAir, its directors, officers, employees or agents by
or on behalf of any director, officer, employee, agent or independent contractor
of Contractor or anyone else claiming through such persons, or by reason of
damage or destruction of property of any such person, or injury to or death of
such person caused by, arising out of, or in any way related to the services
contimplated by the Agreement, and any acts or omissions of Contractor occurring
while this Agreement is in effect. USAir shall give Contractor prompt and timely
notice of any claim made or suit instituted against USAir which in any way
results in

                                       7.2


indemnification hereunder, and Contractor shall have the right to compromise or
participate in the defense of same to the extent of its own interest.

          (c) Each party, with respect to its own employees, accepts full and
exclusive liability for the payment of worker's compensation and/or employer's
liability insurance premiums with respect to such employees, and for the payment
of all taxes, contributions or other payments for unemployment compensation or
old age benefits, pensions or annuities now or hereafter imposed upon employers
by the government of the United States or by any state or local governmental
body with respect to such employees measured by the wages, salaries,
compensation or other remuneration paid to such employees, or otherwise, and
each party further agrees to make such payments and to make and file all reports
and returns, and to do everything necessary to comply with the laws imposing
such taxes, contributions or other payments.

          (d) Contractor hereby assumes liability for and shall indemnify,
defend, protect, save, and hold harmless USAir, its directors, officers, agents,
and employees from and against any and all liabilities, claims, demands, suits,
judgments, damages, and losses (including all costs, fees, and expenses in
connection therewith or incident thereto), for death of or injury to any person
whomsoever, including, but not limited to Contractor's directors, officers,
employees, or agents, and for loss of, damage to, or destruction of any
property whatsoever, including

                                       7.3


any loss of use thereof, and including, but not limited to, property of
Contractor, its directors, officers, employees or agents, caused by, arising out
of, or in any way related to the performance, operations, and any acts or
omissions of either Contractor or USAir, or their respective directors,
officers, employees, and agents, except for the gross negligence or willful
misconduct of USAir, its directors, officers, employees or agents, which are in
any way related to the services contemplated by this Agreement, and in the case
of Contractor alone, any other services, or acts or omissions or the use,
operation, storage or possession of any aircraft, whether or not bearing USAir
Express exterior decor, colors, and logo, and whether or not used in performance
of the services contemplated hereby or in connection with any other services
permitted by Article 10, or otherwise. USAir shall give Contractor prompt and
timely notice of any claim made or suit instituted against USAir which in any
way results in indemnification hereunder, and Contractor shall have the right to
compromise or participate in the defense of same to the extent of its own
interest.

          Section 7.03 INSURANCE COVERAGE

          (a) In consideration of the privileges granted herein, Contractor
shall, at all times during the effectiveness of this Agreement, commencing with
the first day thereof, have and maintain in full force and effect policies of
insurance satisfactory to USAir, of the types of coverages, including coverage
on all aircraft described in Section 2.03, and in the

                                       7.4


minimum amounts stated below with companies satisfactory to USAir and under
terms and conditions satisfactory to USAir as follows:

                                                            Minimum
                                                  Amounts of Insurance coverages
                                                        (U.S. CURRENCY)

1.   AIRCRAFT LIABILITY
     AND GROUND LIABILITY
     INSURANCE;
     (Including Comprehensive
      Public Liability)

     a. Bodily Injury and
        Personal Injury -
        Passengers
     b. Bodily Injury and
        Personal Injury -
        Third Parties
     c. Property Damage

          The minimum amounts of insurance coverages required under this
paragraph shall be [*] per occurrence, combined single limit for all coverages
required under this paragraph 1 utilizing aircraft with less than twenty
seats and [*] per occurrence combined single limit liability for all
coverages utilizing aircraft with twenty or greater seating capacity.

                                           PER ACCIDENT

2.   WORKMEN'S COMPENSATION
     INSURANCE:
     (Company Employees)                   [*]

3.   EMPLOYER'S LIABILITY:
     (Company Employees)                   [*]

4.   ALL RISK HULL INSURANCE
     ON AIRCRAFT PERFORMING                [*]
     SERVICES HEREUNDER:

5.   BAGGAGE LIABILITY:                    [*]

                                       7.5

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6. CARGO LIABILITY:                        [*]

          (b) The parties hereby agree that from time to time during the life of
this Agreement, USAir may require Contractor to have and maintain amounts set
forth in paragraph (a) above, should the circumstances and conditions of
Contractor's operations under this Agreement be deemed in USAir's sole
judgment,' to require reasonable increases in any or all of the foregoing
minimum insurance coverages.

          Section 7.04 ADDITIONAL REQUIREMENT

          (a) Contractor shall cause the policies of insurance described in
Section 7.03 to be duly and properly endorsed by Contractor's insurance
underwriters as follows:

               (1)  as to the policies of insurance described in paragraphs 1,
                    2, 3, 4, 5, and 6 of said Section 7.03(a);

                    (A)  to provide that any waiver of rights of subrogation
                         against other parties by contractor will not affect the
                         coverage provided hereunder with respect to USAir; and

                    (B)  [*]

                                       7.6

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                         [*]

               (2)  as to policies of insurance described in paragraphs 1, 5,
                    and 6 of said Section 7.03(a):

                    (A)  [*]

                    (B)  [*]

               (3)  as to policies of insurance described in paragraphs 1 and 4
                    of said Section 7.03(a) to provide a breach of warranty
                    clause to said policies acceptable to USAir;

               (4)  as to policies of insurance described in paragraph 1 only of
                    said Section 7.03(a):

                    (A)  to provide, with respect to claims in favor of USAir,
                         its directors, officers,

                                       7.7

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* Confidential



                         agents and employees against Contractor, its directors,
                         officers, agents and employees, that USAir, its
                         directors, officers, agents, and employees shall not be
                         deemed to be insured under the said insurance policies,
                         and to this end to provide a [*]

                    (B)  to provide contractual liability insurance coverage for
                         liability assumed by Contractor under this Agreement.

               (5)  as to policies of insurance described in paragraph 4 above
                    of said Section 7.03(a), to provide that said Aircraft Hull
                    Insurance shall be on an agreed value basis, and, except
                    with the consent of USAir, shall not be subject to more than
                    the standard market deductibles in the event of loss,
                    settled on the basis of a total loss, all losses shall be
                    payable in full:

               (6)  as to any insurance obtained directly from foreign
                    underwriters, to provide that USAir

                                       7.8

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                    may maintain against said Contractor's underwriters a direct
                    action in the United States upon said insurance policies and
                    to this end provide a standard service of suit clause
                    designating a United States attorney in Washington, D.C. or
                    New York, N.Y.

          (b) Contractor shall cause each of the insurance policies referred
to in Section 7.03 to be duly and properly endorsed to provide that said policy
or policies or any part or parts thereof shall not be cancelled, terminated or
materially altered, changed or amended by Contractor's insurance underwriters,
until after [*] written notice to USAir which [*] notice period shall commence
to run from the date such notice is actually received by USAir.

          (c) Upon the effective date of this Agreement, and from time to time
thereafter upon request by USAir, Contractor shall furnish to USAir evidence
satisfactory to USAir of the aforesaid insurance coverages and endorsements,
including certificates certifying that the aforesaid insurance policy or
policies with the aforesaid policy limits are duly and properly endorsed as
aforesaid and are in full force and effect. Initially, this evidence shall be
certified copies of the policies required hereunder.

          (d) In the event Contractor fails to maintain in full force and
effect any of the insurance and endorsements described in Sections 7.03 and
7.04, USAir shall have the right (but not

                                       7.9

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the obligation) to procure and maintain such insurance or any part thereof. The
cost of such insurance shall be payable by Contractor to USAir upon demand by
USAir. The procurement of such insurance or any part thereof by USAir does not
discharge or, excuse Contractor's obligation to comply with the provisions of
Sections 7.03 and 7.04. Contractor agrees not to cancel, terminate or materially
alter, change or amend any of the policies referred to in Section 7.03 until
after providing [*] to USAir, of its intent to so cancel, terminate or
materially alter, change or amend said policies of insurance, which [*]
period shall commence to run from the date [*] by USAir.

          Section 7.05 CARGO LIABILITY INSURANCE

          USAir agrees to make available to Contractor cargo liability
insurance coverage under USAir's cargo liability insurance policy solely with
respect to air freight transported by Contractor under a USAir airbill in
scheduled air services operated pursuant to Sections 2.01 and 2.03 and such
coverage shall be deemed to satisfy Contractor's obligation to have and maintain
in full force and effect cargo liability insurance coverage in accordance with
the terms of Section 7.03(a)(6), PROVIDED, HOWEVER, that USAir may cancel,
terminate, alter, change or amend the cargo liability insurance coverage
furnished to Contractor pursuant to this Section 7.06, upon [*], and PROVIDED,
FURTHER, if

                                      7.10

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USAir cancels or terminates such coverage with respect to Contractor, Contractor
shall furnish USAir evidence, on or before the effective date of such
cancellation or termination, that it has obtained cargo liability insurance
coverage in accordance with Section 7.03(a)(6).

                                      7.11


Article 8 - CONSIDERATION, RECORDS AND REPORTS

          Section 8.01 CONSIDERATION

          (a) For and in consideration of system charges, such as but not
limited to reservations (OAL CRS charges excluded) ground services, credit
card fees, facilities and other related services to be provided to contractor
hereunder; the nonexclusive, nontransferable license granted to Contractor
authorizing the specified uses of USAir's Trademarks and other valuable
consideration provided by this Agreement, Contractor shall [*].

          (b) Contractor shall remit such [*] to USAir through the Clearing
House referred to in Article 3 in accordance with the procedures set forth in
the currently effective MANUAL OF PROCEDURES issued by said Clearing House,
but in no event later than [*] following the month in which services were
provided. In the event Contractor fails to pay USAir in full all [*] payable
hereunder when due, Contractor agrees to pay to USAir, in addition to such
Service Charges, interest on the unpaid balance of such Service Charges
computed at the rate per annum of [*]

                                       8.1

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* Confidential



[*].

          (c) It is hereby mutually agreed and understood by the parties
hereto that the aforesaid [*] per Contractor passenger boarded contemplate
that in the performance of the services described in Article 3 hereof, USAir
will use only the personnel in its employ and the equipment and facilities
which it owns or leases. In the event USAir is required to employ, retain or
otherwise furnish additional personnel or obtain, by purchase, lease or
otherwise any additional facilities or equipment, or incur in any manner
whatsoever any expenses or disbursements in connection with its performance
of this Agreement in excess of the personnel, facilities or equipment being
provided in the normal course of business, [*].

          (d) The [*] referenced in Paragraph (a) of this Section shall be
subject to adjustment from time to time during the term of this Agreement in
order to more accurately reflect [*]experienced in furnishing the services
contemplated hereby. Such reasonable

                                       8.2

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adjustments shall be made upon [*] advance notice in writing from USAir to
Contractor.

          (e) All payments and/or reimbursements contemplated in this Article
shall be deemed to be in addition to and not in lieu of any other payments
and/or reimbursements required of either party hereto by other articles of this
Agreement, including but not limited to Article 3.

          Section 8.02 RECORDS AND REPORTS

          (a) Contractor shall provide reports in a form acceptable to USAir
detailing scheduled air services operated by Contractor pursuant to Sections
2.01.

          (1) Reports due by the 10th working day of the following month shall
contain the following minimum:

              -     [*]

              -     [*]

              -     [*]

              -     [*]

              -     [*]

              -     [*]

                                       8.3

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                    [*]

          (2) Reports due by the 5th working day of the month following shall
contain the following minimum:

              -     [*]

          (b) [*]

          (c) At USAir's option, an authorized representative of USAir may
inspect Contractor's corporate records and accounts at least [*] during each
calendar [*] during the life of this Agreement.

          (d) Contractor shall promptly furnish USAir a copy of every report
that Contractor files with the DOT, or some

                                       8.4

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* Confidential



successor agency, and such other traffic, operating and financial information as
USAir may request, from time to time, during the life of this Agreement.

          (e) Contractor shall also promptly furnish USAir with a copy of
every report that Contractor prepares, whether or not such report is filed with
the FAA, National Transportation Safety Board (NTSB) or any other governmental
agency, relating to any accident or incident involving an aircraft used by
Contractor in performing services under this Agreement, whether or not such
aircraft bears any USAir Trademarks, when such accident or incident is claimed
to have resulted in the death of or injury to any person or the loss of, damage
to or destruction of any property.

          (f) Contractor shall promptly notify USAir in writing of (i) any
change in or relinquishment of the ownership or control of Contractor or (ii)
any agreement contemplating such a change or relinquishment. Contractor agrees
to provide promptly a copy of such agreement, if in writing, to USAir.

                                       8.5


Article 9 - EFFECTIVE DATE, TERMINATION AND CANCELLATION

     II. Section 9.01(a) is deleted in its entirety and the following is
     substituted:

          (a) This Agreement will become effective on May 8, 1994 and will
          continue in effect thereafter until [*], unless it is terminated
          at an earlier date pursuant to one or more of the provisions of
          Article 9.

operated by Contractor pursuant to Section 2.01 shall be maintained, without
interruption, throughout the term of this Agreement.

          (c) In the event there is any change in the statutes governing the
economic regulation of air transportation, or in the applicable rules,
regulations or orders of the DOT or some successor agency or department of the
government having jurisdiction over air transportation which change or changes
materially affect the rights and/or obligations presently in force with respect
to the air transportation services of USAir or Contractor, or both, then the
parties hereto will consult, within [*] after any of the occurrences
described herein, in order to determine what, if any, changes to this
Agreement are necessary or appropriate, including but not limited to the
early termination and cancellation of this Agreement. If the parties hereto
are unable to agree whether any change or changes to this Agreement are
necessary and proper, or as to the terms of such changes, or whether this
Agreement should be cancelled in light of the occurrences described above,
and such failure to reach

                                       9.1

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agreement shall continue for a period of [*] following the commencement of
the consultations provided for by this Section 9.01(c), then [*].

          Section 9.02 TERMINATION

          (a) In addition to the foregoing provisions of this Article, this
Agreement may be cancelled or terminated by either USAir or Contractor if [*].
In the event that this Agreement is assigned, whether by operation of law
or otherwise, without such consent having been given in writing, [*].
Notwithstanding the foregoing, USAir may, without consent of the other party
hereto, [*].

          (b) In the event that USAir shall file a voluntary petition in
bankruptcy or that proceedings in bankruptcy shall be instituted against it and
USAir shall be adjudged bankrupt, or that a court shall take jurisdiction of
USAir and its assets pursuant to proceedings brought under the provisions of any

                                       9.2

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federal reorganization act, or that a receiver of USAir's assets shall be
appointed and such taking or appointment shall not be stayed or vacated
within a period of sixty [*], Contractor may thereupon terminate this
Agreement by [*] prior written notice to USAir.

          (c) If USAir shall fail to perform, keep, and observe any of the
terms, covenants or conditions herein contained on the part of USAir to be
performed, kept or observed, Contractor may give USAir notice in writing to
correct such condition or cure such default and, if any such condition or
default shall continue for [*] after the receipt of such notice by USAir and,
if within such period of time USAir has not prosecuted with diligence the
correction of such condition or default, Contractor may then [*], and this
Agreement shall thereupon [*] manner and to the same effect as if it were the
expiration of the original term.

          (d) USAir, in addition to the other provisions of this section and
Section 9.01 above, may terminate this Agreement upon [*]:

               (1)  [*]

                                       9.3

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              (2)(a)  If, during the life of this Agreement, [*]

                 (b)  [*]

                      [*]

               (3)  if Contractor fails to comply with the [*] provisions of
                    Article 11 of this Agreement;

               (4)  in the event that Contractor shall file a voluntary petition
                    in bankruptcy or that proceedings in bankruptcy shall be
                    instituted against it and Contractor shall be adjudged

                                       9.4

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* Confidential



                    bankrupt, or that a court shall take jurisdiction of
                    Contractor, and its assets pursuant to proceedings
                    brought under the provisions of any federal
                    reorganization act, or that a receiver of the assets of
                    Contractor shall be appointed and such taking or
                    appointment shall not be stayed or vacated within a
                    period of sixty (60) days, or that Contractor shall be
                    divested of, or be prevented by any action of any
                    federal authority from [*];

               (5)  if Contractor shall fail to perform, keep, and observe any
                    of the terms, covenants or conditions herein contained on
                    the part of such party to be performed, kept or observed,
                    USAir may give Contractor notice in writing to correct such
                    condition or cure such default and, [*].

                                       9.5

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               (6)  if there is, without the written approval of USAir first had
                    and obtained, any change in or relinquishment of the [*].
                    For the purposes of this Agreement, ownership or control of
                    Contractor shall consist of [*] of [*] of the [*] stock of
                    Contractor,

          (e) Either USAir or Contractor may terminate this Agreement without
cause [*] to the other party. USAir incurs substantial personnel, facilities
and other costs in contemplation of continued provision of Contractor's USAir
Express services, which costs cannot be eliminated without adequate advance
notice. In the event Contractor terminates this Agreement on less than [*],
Contractor agrees to [*].

          (f) Any early termination or cancellation of one or more of the
provisions of this Article 9 shall not be construed so as to relieve any party
hereto of any debts or monetary obligations to the other party that shall have
accrued hereunder prior to the effective date of such termination of
cancellation.

                                       9.6

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          Section 9.03 FORCE MAJEURE

          Neither USAir nor Contractor shall be liable for any failure to
perform under this Agreement if such failure is due to causes beyond its
control, including, but not limited to, acts of God or the public enemy, fire,
floods, epidemics, quarantine, work actions or strikes; PROVIDED, HOWEVER, that
the foregoing shall not apply to the obligations assumed by Contractor under
Article 7 of this Agreement.

                                       9.7


Article 10 - OPERATING RESTRICTIONS

          Section 10.01 USE OF CONTRACTOR'S AIRCRAFT

          In the event that aircraft owned and/or operated by Contractor
bearing the USAir Trademarks are available and can be utilized without adversely
affecting in any manner the regular scheduled services operated pursuant to
Sections 2.01, such aircraft may be used:

               (1)  for nonscheduled planeload passenger charters; or

               (2)  for scheduled or nonscheduled services limited to the
                    transportation of freight and/or mail in markets other than
                    the markets described in [*]; or

               (3)  on an emergency basis in operations not covered by this
                    Agreement.

                                      10.1

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Article 11 - TRADEMARK LICENSE FOR OPERATIONS TO BE CONDUCTED
             BY CONTRACTOR PURSUANT TO THIS AGREEMENT

          Section 11.01 GRANT OF TRADEMARK LICENSE

          Contractor will conduct all operations described in Section 2.01
above, and any additional operations undertaken by subsequent amendment hereto
under the trademark "USAir Express" and shall utilize the USAir Trademarks
consisting of the exterior color decor and patterns on its aircraft as
prescribed by USAir. USAir hereby grants to Contractor a nonexclusive,
nontransferable license to use such USAir Trademarks in connection with the
services to be rendered by Contractor under this Agreement; PROVIDED, HOWEVER,
that at any time during the life of this Agreement, USAir may alter, amend or
revoke the license hereby granted and require Contractor's use of any new or
different USAir Trademarks in conjunction with the air transportation services
provided hereunder as USAir may determine in the exercise of its sole discretion
and judgment.

          Section 11.02 TERMS AND CONDITIONS GOVERNING TRADEMARK LICENSE

          (a) Contractor hereby acknowledges USAir's ownership of the USAir
Trademarks, further acknowledges the validity of the USAir Trademarks, and
agrees that it will not do anything in any way to infringe or abridge USAir's
rights in its trademarks or directly or indirectly to challenge the validity of
the USAir Trademarks.

          (b) Contractor agrees that, in providing the services to be provided
under this Agreement in conjunction with one or more of the USAir Trademarks, it
will conform to such standards of service (including types of aircraft,
qualification of personnel, customer

                                      11.1


service standards, and other reasonable quality control measures) as may be
prescribed by USAir either specifically in this Agreement or by subsequent
written communications to Contractor. USAir shall have the right, through such
agents or representatives as it may designate, to inspect the services and
standards being performed by Contractor under this Agreement, and in the event
that, in USAir's opinion, there has been some deviation from such services
and/or standards, Contractor agrees upon written notice from USAir to rectify
promptly any such deviation.

          (c) Contractor shall not, without USAir's express prior written
consent, advertise the services to be rendered hereunder, nor make use of the
USAir Trademarks referred to in Section 11.01 above in any advertising. USAir
shall have absolute discretion to withhold its consent concerning any and all
such advertising and use of the USAir Trademarks in advertising by Contractor.
In the event USAir approves the use of such USAir Trademarks in any advertising,
such advertising shall identify USAir as the owner of such trademark(s), and to
the extent that any mark is registered, shall so specify.

          (d) To the extent that Contractor is licensed to use the mark
"USAir," Contractor will use said mark only in the mark "USAir Express" and then
only in conjunction with the services specifically embraced by this Agreement.

          (e) Nothing in this Agreement shall be construed to give Contractor
the exclusive right to use the USAir trademarks, or to bridge USAir's right to
use and/or to license its trademarks, and USAir hereby reserves the right to
continue use of the USAir

                                      11.2


Trademarks and to license such other uses of said trademarks as USAir may
desire.

          (f) No term or provision of this Agreement shall be construed to
preclude the use of the trademarks "USAir Express" or the aircraft exterior
color decor and patterns by other individuals or corporations not covered by
this Agreement, except in the markets covered by Section 2.01 (a) of this
Agreement.

          (g) Should this Agreement be cancelled or otherwise terminated for
any reason as set forth in Article 9 hereof, the USAir Trademarks shall revert
to USAir and shall not thereafter be used by Contractor in connection with any
operations of Contractor.

                                      11.3


Article 12 - ENTIRE AGREEMENT, AMENDMENT, NOTICES AND TITLES

          Section 12.01 ENTIRE AGREEMENT AND AMENDMENTS

          (a) This Agreement represents the entire agreement between the
parties hereto unless subsequently amended as hereinafter provided, and said
Agreement shall not be modified or cancelled by mutual agreement or in any
manner except by an instrument in writing, executed by the parties or their
respective successors in interest.

          (b) The parties hereto may by mutual agreement amend any provision
of this Agreement, or delete or add any provision to this Agreement by an
instrument in writing, executed by each of the parties or their authorized
representatives or successors in interest. Any amendment, deletion or additions
executed as prescribed herein shall become a part of, and shall be construed as
part of this Agreement.

          (c) Effective May 8, 1994, this Agreement supersedes and cancels the
prior Service Agreement between the parties, dated June 26, 1984.

          Section 12.02 NOTICES AND MISCELLANEOUS PROVISIONS

          (a) Any and all notices, approvals or demands required or permitted
to be given by the parties hereto shall be sufficient if sent by certified mail,
postage prepaid, to USAir addressed to:

          Vice President-Express Division
          USAir, Inc.
          Crystal Park Four
          2345 Crystal Drive
          Arlington, VA 22227

and to Contractor, addressed to:

          President
          Chautauqua Airlines, Inc.
          RD #1, Airport Drive
          Jamestown, NY 14707

                                      12.1


With a copy to:

          Glenn W. Sturm
          Nelson, Mullins, Riley & Scarborough
          400 Colony Square, Suite 2200
          1201 Peachtree Street
          Atlanta, Georgia 30361

or to such other addresses in the continental United States as the parties may
specify by notice as provided herein.

          (b) Description titles contained in this Agreement are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.

          (c) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be entered into and signed as of the day and year first written above.

                                                       CHAUTAUQUA AIRLINES, INC.

WITNESS: /s/                                           By  /s/ Bryan Bedford
        ----------------------                            ---------------------

                                                       USAIR, INC.

WITNESS: /s/                                           By /s/ Keith D. Houk
        ----------------------                            ---------------------
                                                          Keith D. Houk
                                                          Vice President-
                                                          USAir Express Division

                                      12.2


     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.1 to
said Agreement to be entered into and duly executed as of the day and year first
written above.

                                                       CHAUTAUQUA AIRLINES, INC.

                                                       By /s/ Bryan Bedford
                                                         -----------------------

                                                       Title President
                                                            --------------------
ATTEST:
/s/
- ----------------------------
                                                       USAIR, INC.

                                                       By /s/ Keith D. Houk
                                                         -----------------------
                                                            Keith D. Houk
                                                            Vice President-
                                                              USAir Express and
                                                              Shuttle Divisions

ATTEST:
/s/
- ----------------------------

                                        3

EX-10.6(A)

                                                                 Exhibit 10.6(a)

                                 THIRD AMENDMENT

This Third Amendment dated as of March 19, 1999 (the "Amendment") to the Service
Agreement dated as of February 9, 1994, by and between US Airways, Inc.
(previously USAir, Inc.) ("US Airways") and CHAUTAUQUA AIRLINES, INC.
("Contractor") as amended (the "Service Agreement").

WITNESSETH:

WHEREAS, US Airways and the Contractor have entered into the Service Agreement;

WHEREAS, on or about the date of this Amendment, US Airways and the Contractor
have entered into a Chautauqua Jet Service Agreement relating to the operation
of certain [*] as US Airways Express air transportation services;

WHEREAS, US Airways and Contractor desire to amend certain provisions of the
Service Agreement;

NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, US Airways and Contractor hereby agree as
follows:

1.   Section 2.01(a) of the Service Agreement is hereby amended by adding the
following:

     "Markets            Effective Dates

     [*]                 The effective date for this market shall be the date
                         that the first EMB-145 LR Regional Jet goes into
                         service as US Airways Express under the terms of
                         the Chautauqua Jet Service Agreement dated as of
                         [*], by and between US Airways and Contractor (the
                         "Chautauqua Jet Service Agreement")."

2.   Section 9.01(a) of the Service Agreement is hereby amended by deleting such
Section in its entirety and inserting the following in its place:

"(a) This Agreement will become effective on May 8, 1994 and will continue in
effect thereafter until [*] years from the implementation date of the [*]
Aircraft under the Chautauqua Jet Service Agreement, unless it is terminated
at an earlier date pursuant to one or more of the provisions of Article 9,
and provided that in the event the term of the Chautauqua Jet Service
Agreement is extended, the term of this Agreement shall be extended to the
same date."

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3.   Section 9.01 (c) of the Service Agreement is hereby amended by deleting the
last sentence of such Section and inserting the following in its place:

"If the parties hereto are unable to agree whether any change or changes to this
Agreement are necessary and proper, or as to the terms of such changes, or
whether this Agreement should be cancelled in light of the occurrences described
about, and such failure to reach agreement shall continue for a period of [*]
following the commencement of the consultations provided for by this Section
9.01(c), then [*]."

4.   Section 9.02(e) of the Service Agreement is hereby amended by deleting such
Section in its entirety and inserting the following in its place:

"Contractor shall have the right to terminate this Agreement [*] to US Airways
in the event US Airways [*]."

5.   Section 12.02 of the Service Agreement is hereby amended by deleting the
addresses for notices to Contractor and inserting the following in their place"

     Chautauqua Airlines, Inc.
     2500 S. High School Road
     Indianapolis, IN 46251
     Attn: President
     Telephone: (317) 484-6000
     Facsimile (317) 484-6060

With a copy to:

     Wexford Management LLC
     411 West Putnam Avenue
     Greenwich, CT 06830
     Attn: President & General Counsel
     Telephone: (203) 862-7000
     Facsimile: (203) 862-7320 & (203) 862-7312"

6.   The effective date of this Amendment shall be [*].

7.   Except as amended hereby, the Services Agreement shall remain in full force
and effect.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duties authorized representatives.

CHAUTAUQUA AIRLINES, INC.                      US AIRWAYS, INC.

/s/ Arthur Amron                               /s/ Gregory T. Taylor
- ----------------------                         -------------------------
By:    Arthur Amron                     By:    Gregory T. Taylor
Title: Vice President                   Title: Vice President
       Chautauqua Airlines, Inc.               US Airways Express

/s/ Kia E. Hardy                               /s/
- --------------------------------               -------------------------
Witness                                        Witness

[SEAL]                                        [SEAL]

EX-10.7

                                                                    Exhibit 10.7

                                 CHAUTAUQUA JET
                               SERVICE AGREEMENT

                                     BETWEEN

                                   US AIRWAYS

                                       AND

                                   CHAUTAUQUA

                                   DATED AS OF
                                 MARCH 19,1999



                        CHAUTAUQUA JET SERVICE AGREEMENT

This Agreement is made and entered as of this 19th day of March, 1999, by and
between US Airways, Inc., (herein referred to as "US Airways"), a Delaware
corporation having its principal place of business at 2345 Crystal Drive,
Arlington, Virginia 22227, and Chautauqua Airlines, Inc., (herein referred to as
"Chautauqua"), a New York corporation, having a principal place of business at
2500 S. High School Road, Indianapolis, Indiana 46251.

WITNESSETH:

WHEREAS, US Airways holds a certificate of public convenience and necessity
issued by the Department of Transportation ("DOT") authorizing US Airways to
engage in the interstate and overseas air transportation of persons, property
and mail between all points in the United States, its territories and
possessions;

WHEREAS, Chautauqua engages in the interstate air transportation of persons,
property and mail in the United States pursuant to an exemption under 14 C.F.R
Part 298;

WHEREAS, US Airways owns various trademarks, service marks and logos, including
"US Airways," "US Airways Express," and distinctive exterior color decor and
patterns on its aircraft, hereinafter referred to individually and collectively
as the "US Airways servicemarks";

WHEREAS, Chautauqua desires to operate regional jets as US Airways Express air
transportation services as provided in this Agreement and wishes to acquire a
nonexclusive license for use of one or more of US Airways' Servicemarks for use
in connection with Chautauqua's operation of such services;

WHEREAS, US Airways desires to contract for the operation of such regional jets
as scheduled air transportation services by Chautauqua and does hereby grant
Chautauqua the use of one or

                                        1


more of US Airways' Servicemarks in connection with Chautauqua's operation of
such services; and

WHEREAS, both parties desire that Chautauqua be compensated by US Airways for
operating such regional jets as air transportation services and that US Airways
assume certain of the business obligations associated with the marketing and
sale of such transportation services to the traveling public, in each case as
more particularly described herein;

NOW THEREFORE, for and in consideration of the foregoing premises and the mutual
covenants and obligations hereinafter set forth, the parties to this Agreement
hereby agree as follows:

                                        2


ARTICLE 1 COMPLIANCE WITH REGULATIONS

Chautauqua hereby represents, warrants and agrees that all air transportation
services performed by it pursuant to this Agreement or otherwise shall be
conducted in full compliance with any and all applicable statutes, orders,
rules, and regulations, whether now in effect or hereafter promulgated, of all
governmental agencies having jurisdiction over Chautauqua's operations,
including, but not limited to the Federal Aviation Administration and the DOT
(for purposes of this Agreement, any applicable regulatory authority, whether
domestically or internationally, shall be referred to as the "FAA"). Chautauqua
hereby accepts the sole and exclusive responsibility for complying with such
governmental statutes, orders, rules, and regulations and the parties agree that
US Airways will have no obligations or responsibilities, whether direct or
indirect, with respect to such matters, except for sharing the costs associated
therewith as and to the extent provided herein.

                                        3


ARTICLE 2 AIR TRANSPORTATION SERVICES TO BE PROVIDED BY CONTRACTOR

SECTION 2.1 SCHEDULE REQUIREMENTS

At all times during the term of this Agreement and any amendment or extension
thereof, Chautauqua will schedule and operate US Airways Express air
transportation service between various U.S. domestic city-pairs and between
various U.S - Canadian city-pairs selected in accordance with the immediately
succeeding sentence (hereinafter referred to as the "Service") using [*]
aircraft or such other aircraft as may be substituted therefore pursuant to
the terms hereof (hereinafter referred to as the "Aircraft"), based on the
implementation schedule set forth in Exhibit 2.1, attached hereto and made a
part hereof. The city-pairs from which the air transportation services are to
be provided by Chautauqua pursuant to this Agreement will be selected [*]
subject only to operations and safety requirements, minimum and maximum
schedule requirements, and the other parameters set forth in Exhibit 2.1(a).
US Airways may, [*] to Chautauqua, designate changes in the following: [*]
provided that the new [*] continue to satisfy the parameters set forth in
Exhibit 2.1(a).

SECTION 2.2 LEFT INTENTIONALLY BLANK

SECTION 2.3 TECHNICAL OPERATIONS

During the term of this Agreement, Chautauqua will be responsible for the
technical operation of the Aircraft and the safe performance of the flights in
accordance with all applicable law (such law of any jurisdiction having
authority, the "FAA Regulations'). Chautauqua shall retain full authority,
operational control and possession of the Aircraft to enable it to do so. In
particular,

                                        4

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Chautauqua or its agents or employees will, for the purpose of the safe
performance of such flights, have absolute discretion in all matters concerning
the preparation of the Aircraft for flight, the flight, the load carried and its
distribution in so far as such matters affect the safety of the Aircraft, the
decision whether or not such flight shall be undertaken, and all other matters
relating to the technical operation of the Aircraft. Chautauqua will be solely
responsible for, and US Airways will have no obligations or duties with respect
to the dispatch of Chautauqua's flights operated pursuant to this Agreement or
otherwise. For the purpose of this Section 2.3, the, term flight dispatch will
include, but will not be limited to, all planning of flight itineraries and
flight paths, fueling and flight release.

SECTION 2.4 FAA REGULATIONS

The operation of the Aircraft shall be carried out in accordance with the FAA
Regulations and the approved standards and practices of Chautauqua thereunder.

SECTION 2.5 OPERATING PROCEDURES

Chautauqua will furnish to US Airways a copy of relevant operating
specifications, operational regulations, manuals and calculations in respect of
the Aircraft and will also furnish to US Airways a copy of all flight statistics
in respect of the flights operated.

SECTION 2.6 AIRCRAFT REGISTRATION

During the term of this Agreement, the Aircraft will remain registered in the
United States of America in accordance with the FAA Regulations.

                                        5


SECTION 2.7 CHAUTAUQUA RESPONSIBILITIES

Chautauqua will be responsible for providing, at its own cost, in connection
with the Services provided under this Agreement, all services and materials
identified under [*] (collectively, the "Chautauqua Services").

SECTION 2.8 SUBSTITUTE AIRCRAFT

In addition to the Aircraft described in Section 2.1, Chautauqua may arrange
for, and may have substitute aircraft as may be required to maintain
effectively the seat miles which US Airways will purchase under this
Agreement, during periods when Chautauqua's primary aircraft may be out of
service due to unforeseen and irregular maintenance requirements. [*] In the
case of another aircraft, US Airways' prior approval shall be required, but
such approval not be unreasonably withheld or delayed. In such event,
Chautauqua will be paid as follows with respect to [*]. In addition,
Chautauqua will be paid for the [*]. For all other Chautauqua Services
involving substitute aircraft, Chautauqua will be compensated in accordance
with [*] between Chautauqua and US Airways. If a substitute aircraft is to be
utilized for [*], Chautauqua and US Airways will mutually agree upon the
route that will be covered by the substitute aircraft.


                                        6

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ARTICLE 3 OPERATION UNDER THE "US AIRWAYS EXPRESS" NAME

SECTION 3.1 SERVICE TRADEMARKS

The Aircraft utilized by Chautauqua pursuant to this Agreement will bear US
Airways Servicemarks, presently consisting of the red, white, gray and blue
aircraft exterior color decor and pattern provided by US Airways and the name
"US Airways Express." At any time during the term of this Agreement, and at the
sole discretion of US Airways, Chautauqua shall use such new or different
servicemarks and exterior color decor and patterns on its Aircraft as US Airways
may determine. Interior color schemes must also be approved by US Airways. Upon
written notice from US Airways, which will include the specifications for any
such changes in servicemarks and/or exterior aircraft decor and patterns,
Chautauqua will effect such changes as promptly as is reasonably practicable.
Chautauqua will not be required to implement changes in the exterior color decor
and pattern more than once in any consecutive three-year period. Any
out-of-pocket expenses to repaint or to redecorate the Aircraft or reconfigure
or redecorate the interior of the Aircraft as a result of changes required by US
Airways, other than routine maintenance, shall be [*].

SECTION 3.2 SIGNAGE

In addition to use of the US Airways Servicemarks on the Aircraft, Chautauqua
will use and display suitable signs on the interior and exterior of the Aircraft
identifying Chautauqua as the operator of the services being provided pursuant
to this Agreement. The location of the signs will be subject to the prior
written approval, such approval not to be unreasonably withheld or delayed, of
US Airways as to nature, size and location on Chautauqua's Aircraft provided
that the signs will satisfy the FAA Regulations.

                                        7

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ARTICLE 4 US AIRWAYS' SUPPORT SERVICES AND FACILITIES

SECTION 4.1 US AIRWAYS SERVICES

US Airways and/or third party providers, at the discretion of US Airways,
will provide [*] to the extent and in the manner set forth in the subsequent
sections of this Article 4 (collectively, and together with the
responsibilities of US Airways under Exhibit 2.8 hereof, the "US Airways
Services"). Such services and facilities will be furnished only with respect
to Chautauqua's Services offered under this Agreement.

SECTION 4.2 RESERVATIONS

(a) All reservations will be requested and confirmed for passengers using the
Aircraft operated by Chautauqua under this Agreement through US Airways'
internal reservations services. Connecting reservations to US Airways or to
other air carriers will be requested and confirmed through US Airways' internal
reservations system in accordance with currently established methods and
procedures utilized by US Airways for its passengers. For passengers originating
their travel at points other than those served by Chautauqua under this
Agreement, either on US Airways' internal reservations system or on the
reservations systems of other airlines, connecting reservations to the services
of Chautauqua will also be made in accordance with currently established methods
and procedures utilized by US Airways for its passengers. In all cases, US
Airways will confirm the reservations of Chautauqua's passengers through the
entire itinerary of their scheduled trips. When a contact number is supplied by
the passengers making such reservations, US Airways will assume the
responsibility of notifying passengers of any changes in Chautauqua's schedules
or operations, provided that Chautauqua furnishes US Airways with sufficient
advance notice of such changes.

(b) In the event of flight delays, cancellations or other schedule
irregularities affecting Chautauqua's scheduled services, and as soon as
information concerning such irregularities is

                                        8

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* Confidential


available, Chautauqua will notify US Airways' reservations control center in a
manner prescribed by US Airways and furnish such information in as much detail
as is reasonably practicable. All schedule changes and passenger
re-accommodations for Chautauqua passengers will be performed in the same manner
as they would for US Airways passengers.

(c) From time to time, and solely upon the request of Chautauqua or its flight
crews, US Airways may furnish Chautauqua's flight crew with such U.S. weather
bureau information or data as may be available to US Airways; provided, that in
furnishing any such weather information or data to Chautauqua, neither US
Airways nor its employees or agents will be responsible or liable for the
accuracy thereof.

SECTION 4.3 STATION FACILITIES AND GROUND SUPPORT SERVICE

US Airways and/or third patty providers, at the discretion of US Airways, will
provide, at US Airways' cost and expense, the following services at locations
where Chautauqua provides air transportation services pursuant to this
Agreement:

     (a) [*]

     (b) [*]

     (c) [*]

     (d) [*]

     (e) [*]

                                        9

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* Confidential


     (f) [*]

     (g) [*]

     (h) [*]

SECTION 4.4 CARGO, COMPANY MATERIALS ("COMAT") AND MAIL HANDLING SERVICES

(a) US Airways' personnel and/or third party personnel, at the discretion of US
Airways, will process appropriate tickets and/or bills of lading and US Airways
airbills, accept for transportation, and will load on the regularly scheduled
air transportation Services operated by Chautauqua under this Agreement, such
cargo and U. S. mail as will be tendered to it by the United States Postal
Service ("USPS") and by cargo customers, provided that no Hazardous Materials
may be accepted and transported on Chautauqua Aircraft, except as permitted by
the Department of Transportation pursuant to regulations contained in 49 C.F.R.
Parts 171 through 180.

(b) US Airways will observe and comply with all applicable regulations,
instructions and procedures with respect to mail, CoMat and cargo packages.

                                       10

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(c) Subject to subpart (b) of Section 4.4, above, US Airways will process any
Chautauqua CoMat that Chautauqua may desire to send on Chautauqua Aircraft.

(d) Chautauqua personnel will comply with US Airways' applicable instructions
and procedures with respect to CoMat packages tendered to US Airways pursuant to
this Agreement.

SECTION 4.5 TERMS OF TRANSPORTATION, SALES AND PROMOTION

(a) US Airways' Terms of Transportation, with certain exceptions listed therein,
including procedures with respect to schedule change and passenger
re-accommodation procedures, will be applicable to Chautauqua Services provided
pursuant to this Agreement. Such Terms of Transportation will at all times be
available for public inspection at Chautauqua's corporate offices and at each
airport ticket counter and sales office maintained and operated by US Airways in
connection with the Services provided under this Agreement.

(b) All tickets issued for air passenger transportation, and all bills of
lading, US Airways airbills and invoices issued for U. S. mail and cargo
shipments, provided on the Service offered under this Agreement, will bear the
"US Airways" airline designator code.

(c) US Airways is responsible for [*].

(d) US Airways will include the scheduled air services provided by Chautauqua
pursuant to Article 2 of this Agreement in its public timetables (including
Chautauqua's connecting schedules on the same basis as it does its own), if
published. All references in US Airways' public timetables to Chautauqua's US
Airways Express services will also contain notations indicating that such
scheduled services are performed by Chautauqua as an independent contractor
under the appropriate US Airways Servicemarks and will comply with all
regulatory disclosure requirements.

                                       11

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ARTICLE 5 PURCHASE OF [*]

SECTION 5.1    PRICING MODEL

US Airways and Chautauqua have developed a certain model, hereinafter referred
to as "the Pricing Model" and set forth in Exhibit 5.1, which will be used to
determine the compensation to be paid by US Airways for city-pairs flown by
Chautauqua pursuant to this Agreement.

SECTION 5.2 CHAUTAUQUA [*]

The Pricing Model, which will be used to compensate Chautauqua, [*].

(a) Chautauqua will be reimbursed for [*] according to the rates
set forth in [*] based upon the following:

     (i) with respect to the [*] costs set forth therein, the number of
     [*]

     (ii) with respect to the [*] costs set forth therein, the [*]

     (iii) with respect to the [*] costs set forth therein,; [*]

     (iv) with respect to the [*] set forth therein, the [*]

     (v) with respect to the [*] set forth therein, the amount of such
     [*]. After [*] of the implementation of Service with the [*]


                                       12

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     [*]

(b) Each cost component will be adjusted [*] within the Term of this
Agreement based upon the escalation factor set forth in [*], except that with
respect to [*] such escalation will take effect at the time of the increases
provided for [*], currently [*], and currently [*].

(c) Chautauqua will be reimbursed for "Pass Through Costs" based upon the actual
costs incurred by Chautauqua.

SECTION 5.3 LEFT INTENTIONALLY BLANK

SECTION 5.4 [*]

(a) US Airways will pay Chautauqua [*] based upon the Pricing Model's [*]

(b) After the end of the month, US Airways will pay Chautauqua an amount
based upon [*]. If it is determined that US Airways' estimated payment is [*].


                                       13
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(c) At the end of the month, a payment from [*]

(d) Notwithstanding the provisions set forth in this Article 5, in the event
that Chautauqua is unable to provide the Chautauqua Services due to the
grounding of the Aircraft as a result of a defect in the design or
manufacture of the Aircraft or as a result of a strike by employees of
Chautauqua, US Airways shall [*]. In the event that Chautauqua is unable to
provide the Chautauqua Services as a result of Chautauqua's failure to
properly maintain the Aircraft, or to otherwise comply with FAA Regulations
associated with the maintenance and/or operation of the Aircraft, [*]. In the
event Chautauqua is unable to provide the Chautauqua Services as a result of
any other reason, including without limitation, due to a US Airways strike,
[*].

SECTION 5.5 [*]

In addition to the cost reimbursement set forth in Section 5.2 above, US Airways
will pay Chautauqua monthly in arrears a [*]


                                       14

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[*]

SECTION 5.6 INTENTIONALLY LEFT BLANK

SECTION 5.7 LEFT INTENTIONALLY BLANK

SECTION 5.8 PAYMENTS

All payments due under this Article will be paid directly to Chautauqua, or
US Airways, as the case may be, [*] of the calculation of any payment that is
due under this Agreement, except as provided in [*].


                                       15

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ARTICLE 6 LIABILITY, INDEMNIFICATION AND INSURANCE

SECTION 6.1 CHAUTAUQUA IS AN INDEPENDENT CONTRACTOR

(a) The employees, agents, and/or independent contractors of Chautauqua engaged
in performing any of the services Chautauqua is to perform pursuant to this
Agreement will be employees, agents, and independent contractors of Chautauqua
for all purposes, and under no circumstances will be deemed to be employees,
agents or independent contractors of US Airways. 1n its performance under this
Agreement, Chautauqua will act, for all purposes, as an independent contractor
and not as an agent for US Airways. US Airways will have no supervisory power or
control over any employees, agents or independent contractors engaged by
Chautauqua in connection with its performance hereunder, and all complaints or
requested changes in procedures will, in all events, be transmitted by US
Airways to a designated officer of Chautauqua. Nothing contained in this
Agreement is intended to limit or condition Chautauqua's control over its
operations or the conduct of its business as an air carrier, and Chautauqua and
its principals assume all risks of financial losses which may result from the
operation of the air transportation services to be provided by Chautauqua
hereunder.

(b) The employees, agents, and/or independent contractors of US Airways engaged
in performing any of the services US Airways is to perform pursuant to this
Agreement will be employees, agents, and/or independent contractors of US
Airways for all purposes, and under no circumstance will they be deemed to be
employees, agents, and/or independent contractors of Chautauqua. Chautauqua will
have no supervision or control over any such US Airways employees, agents,
and/or independent contractors and any complaint or requested change in
procedure will be transmitted by Chautauqua to US Airways' designated
representative.

                                       16


SECTION 6.2 LIABILITY AND INDEMNIFICATION

(a) Each party hereto assumes full responsibility for any and all liability to
its own directors, officers, employees, or agents arising from injury, or death
resulting from or sustained in the performance of its respective services under
this Agreement.

(b) Chautauqua will indemnify, defend, protect, save, and hold harmless US
Airways, its directors, officers, employees, and agents from and against any
and all liabilities, claims, demands, suits, judgments, damages, and losses
(including the reasonable costs, fees, and expenses in connection therewith and
incident thereto), brought against US Airways, its directors, officers,
employees or agents by or on behalf of any director, officers, employee, agent
or independent contractor of Chautauqua or anyone else claiming through such
persons, or by reason of damage or destruction of property of any such person,
or injury to or death of such person, caused by or arising out of any act or
omission of Chautauqua (collectively "Chautauqua Claims") occurring during the
term of this Agreement except for claims based on matters for which US Airways
is responsible under the terms of this Agreement or claims arising solely from
the gross negligence or willful misconduct of US Airways. US Airways will give
Chautauqua prompt and timely written notice of any claim made or suit instituted
against US Airways which in any way results in indemnification hereunder, and
Chautauqua will have the right to compromise or participate in the defense of
same to the extent of its own interest, including the selection of counsel to
represent its interest in the matter.

(c) Each party, with respect to its own employees, accepts full and exclusive
liability for the payment of worker's compensation and/or employer's liability
insurance premiums with respect to such employees, and for the payment of all
taxes, contributions or other payments for unemployment compensation or
retirement benefits, pensions or annuities now or hereafter imposed upon
employers by the government of the United States or by any state or local
governmental body with respect to such employees measured by the wages,
salaries, compensation or other remuneration paid to such employees, or
otherwise, and each party further agrees to made such payments and to make and
file all reports and returns, and to do everything necessary to comply with the
laws imposing such taxes, contributions or other payments.

                                       17


(d) US Airways will indemnify, defend, protect, save, and hold harmless
Chautauqua, its directors, officers, employees, and agents from and against any
and all reasonable liabilities, claims, demands, suits, judgments, damages, and
losses (including all reasonable costs, fees and expenses in connection
therewith or incident thereto), brought against Chautauqua, its directors,
officers, employees or agents by or on behalf of any director, officer,
employee, agent or independent contractor of US Airways or anyone else claiming
through such persons, or by reason of damage or destruction of property of any
such person, or injury to or death of such person, caused by or arising out of
any act or omission of US Airways (collectively "US Airways Claims") occurring
during the term of this Agreement except for claims based on matters for which
Chautauqua is responsible under the terms of this Agreement or claims arising
solely from the gross negligence or willful misconduct of Chautauqua. Chautauqua
will give US Airways prompt and timely notice of any claim made or suit
instituted against Chautauqua which in any way results in indemnification
hereunder, and US Airways will have the right to compromise or participate in
the defense of same to the extent of its own interest, including the selection
of counsel to represent its interest in the matter.

SECTION 6.3 INSURANCE COVERAGE

(a) [*]

                                       18

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* Confidential


     (i) provide that any waiver of rights of subrogation against other parties
     by Chautauqua will not affect the coverage provided hereunder with respect
     to US Airways;

     (ii) with respect to the Services performed by the parties pursuant to this
     Agreement, provide that Chautauqua's underwriters will [*], except for
     claims based solely upon the gross negligence or willful misconduct of US
     Airways or any such person; and

     (iii) be duly and properly endorsed to provide that each such policy or
     policies or any part or parts thereof will not be canceled, terminated, or
     materially altered, changed or amended by Chautauqua's insurance
     underwriters, until [*] to US Airways which thirty (30) days written
     notice will commence to run from the date such notice is mailed via
     reputable overnight carrier to the attention of [*].

(d) With respect to policies of insurance described in subsection numbered 1 of
Section 6.3 (a) of this Agreement, Chautauqua will provide that such policies:

     (i) [*]

     (ii) constitute primary insurance for such claims and acknowledge that any
     other insurance policy or policies of US Airways will be secondary or
     excess insurance;

     (iii) [*]

     (iv) [*] clauses acceptable to US Airways, and a specific contractual
     liability insurance provision covering liability assumed by Chautauqua
     under this Agreement.

(e) With respect to policies of insurance for coverage described in subsections
1 and 4 of Section 6.3(a) of this Agreement, [*] must be provided by
Chautauqua's insurers.

(f) All aircraft hull insurance provided pursuant to subsection 4 of Section
6.3(a) of this Agreement will be provided on [*], and, except with the
consent of


                                       20

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US Airways, will not be subject to more than the standard market deductibles, as
certified by a recognized broker in the event of loss, settled on the basis of a
total loss, all losses will be payable in full.

(g) In the event that any of Chautauqua's insurance policies under this
Agreement are obtained directly from foreign underwriters, US Airways must be
allowed to maintain against such foreign underwriters, a direct action in the
United States upon said insurance policies and to provide for service of
process to an attorney located within the United States, who maintains an office
in Washington, D. C., or New York, New York.

(h) Upon the effective date of this Agreement, and from time to time thereafter
upon request by US Airways, Chautauqua will furnish to US Airways certificates
of insurance satisfactory to US Airways of the aforesaid insurance coverage,
limits and endorsements. In addition to the certificates of insurance,
Chautauqua's insurance broker will provide their written opinion that the policy
or policies of insurance carried by Chautauqua are in full compliance with all
of the insurance requirements set forth herein and are in full force and effect.
Initially, this evidence will be provided by certified copies of the policies
required hereunder. In the event of a change of broker by Chautauqua, such
certificates will be supplied to US Airways from broker reasonably satisfactory
to US Airways.

(i) In the event Chautauqua fails to maintain in full force and effect any of
the insurance and endorsements described in this Section 6.3, US Airways will
have the right [*]. Chautauqua agrees not to cancel, terminate or materially
alter, change or amend any of the policies referred to in this Section until
after providing [*] advance written notice to US Airways, of its intent to so
cancel, terminate or materially alter, change or amend said policies or
insurance, which [*] period will commence to run from the date notice is
mailed via reputable overnight carrier to the [*].


                                       21

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SECTION 6.4 CARGO LIABILITY INSURANCE

US Airways will maintain cargo liability insurance coverage, in types and
amounts required by law, for all air freight transported by Chautauqua under a
US Airways airbill on flights operated pursuant to the Services provided by
Chautauqua under this Agreement.

                                       22


ARTICLE 7 TERM AND TERMINATION

SECTION 7.1 EFFECTIVE DATE AND TERM

This Agreement is effective as of the date and year first written above, and
Services provided hereunder will continue, without interruption, for a period
of [*] from the implementation date of the first Aircraft, unless it is
terminated on an earlier date pursuant to the provisions of this Article 7.
US Airways, [*]

SECTION 7.2 REGULATORY CHANGES

In the event of any change in the statutes and/or regulations governing the
provision of the Services to be provided pursuant to this Agreement that
materially and adversely affects the economic value of this Agreement, taken as
a whole, to either US Airways or Chautauqua, or both, then the parties hereto
will consult within [*] after any of the occurrences described
herein in order to determine what, if any, changes to this Agreement are
necessary or appropriate to preserve the essence of the Agreement. If the
parties hereto are unable to agree whether any change or changes to this
Agreement are necessary and proper, or as to the terms of such change or
changes, or whether this Agreement should be canceled in light of the
occurrences as described above, and such failure to reach agreement will
continue for a period of [*] following the commencement of the
consultations provided for by this Section 7.2, then [*]


                                       23

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SECTION 7.3 TERMINATION

US Airways may terminate this Agreement, for cause, upon not less than [*] to
Chautauqua, should any of the following conditions set forth in subparts (a)
through (d) of this Section 7.3 occur during the term of this Agreement,
subject to Chautauqua's right to cure such condition as set forth herein.
After notice of termination is given, US Airways will meet with Chautauqua
for the purpose of resolving the conditions so occurring. Should such
conditions not be corrected [*], then the termination is effective. If the
conditions are corrected (or all steps to remedy the situation were promptly
taken if the correction cannot be completed reasonably within [*] days), the
termination notice shall be deemed rescinded. The conditions arc:

     (a) [*], except as otherwise provided herein; or

     (b) If, after Chautauqua's introduction of services hereunder with the
     [*], Chautauqua's [*] responsibility of Chautauqua under thus
     Agreement:
          [*] months, or
          [*] months, or

     (c) If, after Chautauqua's introduction of services hereunder with the
     [*], Chautauqua's [*] as measured in [*] falls below either of the
     following:
          [*], or
          [*] months; or

     (d) If Chautauqua admits liability or is found liable [*]

                                       24

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SECTION 7.4 TERMINATION BY CHAUTAUQUA

Chautauqua shall have the right to terminate this Agreement [*]

SECTION 7.5 RETURN OF PROPERTY

Upon final termination of this Agreement, each party will, as soon as
practicable, return any and all property of the other party to such other party.

                                       25

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ARTICLE 8 PENALTIES FOR [*]

SECTION 8.1 [*]

Following Chautauqua's introduction of Services hereunder with the [*]
US Airways will [*]

SECTION 8.2 [*]

Chautauqua's operating performance will be measured each month following
Chautauqua's introduction of services hereunder with the [*]
based upon the following metrics:

     (a) [*]

     (b) [*]

     (c) [*]

                                       26

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     [*]

SECTION 8.3 [*]

At the end of each month, US Airways will compute the total number [*]
Chautauqua and provide a summary statement summarizing [*] the preceding
month. US Airways will [*] based upon the following table:

                                             
        [*]



SECTION 8.4 [*]

Any disputes between US Airways and Chautauqua arising as a result of [*]
will be resolved in accordance with the dispute resolution procedures set
forth in Article 15.


                                       27

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ARTICLE 9 SERVICE MARK LICENSE FOR SERVICES PROVIDED PURSUANT TO THIS AGREEMENT

SECTION 9.1 GRANT OF LICENSE

US Airways hereby grants to Chautauqua a nonexclusive, nontransferable license
to use such US Airways Servicemarks as US Airways may designate from
time-to-time in connection with the services to be rendered by Chautauqua under
this Agreement; PROVIDED, HOWEVER, that at any time during the term of this
Agreement, US Airways may alter, amend or revoke the license hereby granted and
require at US Airways' expense, if directed by US Airways, Chautauqua's use of
any new or different US Airways Servicemarks in conjunction with the air
transportation services provided hereunder as US Airways may determine in the
exercise of its sole discretion and judgment.

SECTION 9.2 TERMS AND CONDITIONS GOVERNING TRADEMARK LICENSE

(a) Chautauqua hereby acknowledges US Airways' ownership of the US Airways
Servicemarks, further acknowledges the validity of the US Airways Servicemarks,
and agrees that it will not do anything in any way to infringe or abridge US
Airways' rights in its Servicemarks or directly or indirectly to challenge the
validity of the US Airways Servicemarks.

(b) Chautauqua agrees that, in providing the Services contemplated under this
Agreement or the Service Agreement dated February 9, 1994, as amended, it will
not advertise or make use of the US Airways Servicemarks without the prior
written approval of US Airways. US Airways will have absolute discretion to
withhold its consent concerning any and all such advertising and use of the US
Airways Servicemarks in advertising by Chautauqua. In the event US Airways
approves the use of such US Airways Servicemarks in any advertising, such
advertising will identify US Airways as the owner of such servicemarks, and
conform with any additional requirements specified by US Airways.

                                       28


(c) To the extent that Chautauqua is licensed to use the US Airways Servicemarks
or the Service Agreement dated as of February 9, 1994, as amended, they will
only be used in conjunction with the Chautauqua Services specifically covered by
this Agreement and not in connection with any other businesses or activities of
Chautauqua or any other entity.

(d) Nothing in this Agreement will be construed to give Chautauqua the exclusive
right to use the US Airways Servicemarks, or to abridge US Airways' right to use
and/or license its Servicemarks, and US Airways hereby reserves the right to
continue use of the US Airways Servicemarks and to license such other uses of
said Servicemarks as US Airways may desire.

(e) No term or provision of this Agreement will be construed to give Chautauqua
the exclusive right to use the US Airways Servicemarks. US Airways hereby
reserves the right to continue use of the US Airways Servicemarks and to license
such other uses of said Servicemarks as US Airways may desire.

(f) No term or provision of this Agreement will be construed to preclude the use
of the Servicemarks "US Airways Express" or the aircraft exterior color decor
and patterns by other individuals or entities not covered by this Agreement.

(g) Upon the cancellation or termination of this Agreement, the license and use
of the US Airways Servicemarks by Chautauqua will cease, and such use will not
thereafter occur except as appropriate in any phase-out of service of this
Agreement.

                                       29


ARTICLE 10 FORCE MAJEURE

SECTION 10.1 FORCE MAJEURE

Notwithstanding anything to the contrary herein contained, it is agreed that
either Party will be relieved of its obligations hereunder in the event and to
the extent that performance hereof is delayed or prevented by any cause beyond
its control and not caused by the Party claiming relief hereunder, including,
without limitation, acts of God, public enemies, war, labor shortages, strikes,
insurrection, acts or orders of governmental authorities, fire, flood,
explosion, or riots or the recovery from such cause ("force majeure"), PROVIDED,
HOWEVER, that the foregoing will not apply to the obligations of the parties
under Article 6 or the obligations of US Airways to pay for the Chautauqua
Services as and to the extent provided under Article 5 of this Agreement.

SECTION 10.2 RESUMPTION OF SERVICE

Chautauqua agrees that where relief is obtained under this provision to make its
best efforts to resume Service. Chautauqua further agrees to consult with and
advise US Airways of any anticipated delay or failure, as soon as it becomes
aware of such anticipated delay or failure or the possibility thereof, whether
for FORCE MAJEURE or otherwise, and where applicable, to reestablish applicable
timetables.

                                       30


ARTICLE 11 NOTICES

Except where specified elsewhere in this Agreement, any and all notices,
approvals or demands required or permitted to be given by the Parties hereto
will be sufficient if made in writing and sent by certified mail, postage
prepaid, overnight courier or delivered by hand. When sent by mail, such notices
will also be sent by facsimile. Notices to US Airways will be addressed to:



US Airways, Inc.:                                        Chautauqua Airlines, Inc.:

                                                      
Gregory T. Taylor
Vice President, US Airways Express                       President
US Airways, Inc.                                         Chautauqua Airlines, Inc.
2345 Crystal Drive                                       2500 S. High School Road
Arlington, VA 22227                                      Indianapolis, IN 46251

Telephone: (703)872-7062                                 Telephone: (317)484-6000
Facsimile: (703)872-7312                                 Facsimile: (317)484-6060

with copies delivered at the same address                with copies delivered to:
to the attention of US Airways' General Counsel,
Facsimile: (703)872-5252                                 Arthur Amron
                                                         Senior Vice President and General Counsel
                                                         Wexford Management, LLC
                                                         411-West Putnam Avenue
                                                         Greenwich, CT 06830

                                                         Telephone: (203)862-7012
                                                         Facsimile: (203)862-7312

                                                         and to

                                                         Joseph Jacobs
                                                         President
                                                         Wexford Management, LLC
                                                         411 West Putnam Avenue
                                                         Greenwich, CT 06830

                                                         Telephone: (203)862-7020
                                                         Facsimile: (203)862-7320


                                       31


ARTICLE 12 MAINTENANCE [*]

SECTION 12.1 MAINTENANCE [*]

[*]

SECTION 12.2 INTENTIONALLY DELETED

SECTION 12.3 MAINTENANCE [*]

[*]

                                       32

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[*]

SECTION 12.4 MAINTENANCE [*]

Any disputes between US Airways and Chautauqua arising as a result of the
application of the Maintenance [*] will be resolved in accordance
with the dispute resolution procedure set forth in Article 15.

                                       33

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ARTICLE 13 MISCELLANEOUS

SECTION 13.1 ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties hereto
unless subsequently amended in writing, executed by duly authorized
representatives of both parties or their respective successors in interest.

SECTION 13.2 HEADINGS

Article titles and subheadings contained herein are inserted only as a matter of
convenience and for reference. Such titles in no way define, limit, or describe
the scope or extent of any provision of this Agreement.

SECTION 13.3 SEVERABILITY

If, for any reason, any portion of this Agreement will be deemed unenforceable
or determined by a court of competent jurisdiction to be in violation of or
contrary to any applicable statute, regulation, ordinance, order, or common law
doctrine, then that portion will be of no effect. Nevertheless, the balance of
the Agreement will remain in full force and effect as if such provision were
never included.

SECTION 13.4 WAIVER

Except as otherwise specifically provided in this Agreement, a waiver by either
Party of any breach of any provision of this Agreement, or either Party's
decision not to invoke or enforce any right under this Agreement, will not be
deemed a waiver of any right or subsequent breach, and all provisions of this
Agreement will remain in force.

                                       34


SECTION 13.5 ASSIGNABILITY

The Parties agree that this Agreement and the rights and obligations
established hereunder, [*]. Notwithstanding any such assignment, the Parties
agree that they will remain responsible for their financial obligations under
this Agreement.

SECTION 13.6 GOVERNING LAW

This Agreement will be governed by, construed and enforced in accordance with
the laws of the United States and the State of New York, as though the entire
contract were performed in New York and without regard to New York's conflict of
laws, rules, or statutes. The parties further agree that they consent to the
jurisdiction of the Courts of New York or the federal courts located within the
State of New York and waive any claim of jurisdiction or FORUM NON CONVENIENS.

SECTION 13.7 NO FRANCHISE

Nothing is this Agreement is intended to imply or confer upon the arrangements
contemplated hereunder, any status as a "franchise" as recognized under any
state law. Accordingly, no franchiser-franchisee relationship exists between US
Airways and Chautauqua as a result of this Agreement.

                                       35

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ARTICLE 14 CONFIDENTIALITY

SECTION 14.1 CONFIDENTIALITY OF AGREEMENT

The Parties agree that the terms of this Agreement and any other Confidential
Information (as defined in Section 14.2 hereof) furnished hereunder will be
treated as confidential and will not be disclosed to any other person or entity
without the express written consent of the other party; provided that each party
may, without the consent of the other party, disclose Confidential Information
as expressly permitted below:

     (a) to directors, officers, employees, permitted assigns and agents of each
     party and their respective Affiliates (as defined in Section 14.4 or 14.5
     hereof); or

     (b) to prospective financial institutions for the purposes of providing
     financing of Aircraft for Chautauqua; or

     (c) to subcontractors, auditors, accountants or legal and financial
     advisors of such party and its Affiliates; or

     (d) to such other parties as may be required by law, by government
     regulation or order, by subpoena or by any other legal process. In the
     event that a disclosure becomes necessary, as provided in this subclause
     (d) of this Section 14.1, each party shall consult and cooperate with the
     other party to limit (to the extent permissible) the scope and form of such
     disclosure. In the event of such disclosure required by law, only those
     portions of this Agreement required to be disclosed will be released. The
     disclosing party will make good faith efforts to minimize the portions to
     be disclosed and will seek confidential treatment by the receiving party or
     agency or any portions disclosed. In the event of one party being served a
     subpoena or discovery request, prior to responding to the subpoena or
     request, the party served will notify the other party, so that the other
     party will have an opportunity to contest, if it chooses to do so, the
     disclosure of the content of this Agreement.

                                       36


SECTION 14.2 CONFIDENTIAL INFORMATION

"Confidential Information" means all restricted information having business
value, regardless of the form in which it exists, including, without limitation,
the terms of this Agreement, written documents, oral communications, recordings,
videos, software, databases, business plans, and electronic/magnetic media,
provided to or observed by either party pursuant to this Agreement, including
information owned or provided by either party to the other party, except
otherwise as expressly provided in Section 14.3 hereof. Each party agrees that
it will maintain all Confidential Information in confidence using the same
degree of care with respect to such Confidential Information as it uses in
protecting its own proprietary information, and will use it solely for purposes
of its own business operations in accordance with the terms hereof. Such
Confidential Information will be distributed within each party's company only to
personnel with a need to know such information for permitted purposes or in
compliance with a court order or statutory or regulatory requirements; PROVIDED,
HOWEVER, that prior to any such latter disclosure, the party shall inform all
such persons of the confidential nature of the information, and that it is
subject to this non-disclosure obligation, and shall further instruct such
persons to treat such information confidentially. The parties expressly
acknowledge and agree that the terms and conditions of this Agreement and any
reports, invoices, or other communications between US Airways and Chautauqua
given hereunder or in connection herewith constitute Confidential Information of
both parties.

SECTION 14.3 EXCLUSIONS FROM CONFIDENTIAL INFORMATION

Notwithstanding the foregoing, Confidential Information will not be considered
confidential and each party and their respective Affiliates may disclose any
item of Confidential Information without restriction in any of the following
circumstances if such item:

     (a) is publicly available (either to the general public or to any relevant
     trade or industry) prior to either party's receipt of it from the other
     party hereto;

                                       37


     (b) is thereafter made publicly available (either to the general public or
     to any relevant trade or industry) by another party hereto or by a third
     party which is entitled to make such item publicly available;

     (c) becomes available to either party hereto on a non-confidential basis
     from a source which has represented to such party that such source is
     entitled to disclose it; or

     (d) was known to either party hereto on a non-confidential basis prior to
     its disclosure to such party by another party hereto. The provisions of
     this Article 14 will survive any termination of this Agreement for a period
     of three (3) years.

SECTION 14.4 INFORMATION SHARED WITH US AIRWAYS GROUP, INC.

Notwithstanding anything to the contrary herein, Chautauqua acknowledges and
agrees that any Confidential Information shared or given to US Airways pursuant
to this Agreement may be [*].

SECTION 14.5 INFORMATION SHARED WITH CHAUTAUQUA

Notwithstanding anything to the contrary herein, US Airways acknowledges and
agrees that any Confidential Information shared or given to Chautauqua pursuant
to this Agreement may be [*].

SECTION 14.6 RETURN OF DOCUMENTS

(a) Upon the reasonable request of either party, each party will immediately
return to the other party, at its own expense, all documents of the requesting
party and all copies of such

                                       38

- --------------------
* Confidential


documents in its possession or under the control either directly or indirectly
of its agents. Each party acknowledges and agrees that the other party will have
the right to exercise this right as many times as it deems necessary throughout
the term of this Agreement.

(b) Upon termination of this Agreement, with or without cause and for any
reason, each party shall, within ninety (90) days of such termination, either
deliver to the other party, of destroy, all of such other party's Confidential
Information (including copies thereof encoded or stored on magnetic or other
electronic media or processors; PROVIDED, HOWEVER, that neither party shall be
required to purge or destroy any Confidential Information for so long as such
Confidential Information is reasonably necessary continued administration and
operation of their respective programs or is reasonably necessary in connection
with the resolution of any disputes which may have at the time arisen pursuant
to the terms of this Agreement; PROVIDED, FURTHER, that any Confidential
Information not purged or destroyed pursuant to the preceding proviso shall be
purged or destroyed as soon as it is no longer reasonably necessary for
continued administration or resolution of disputes.

SECTION 14.7 REMEDIES

Each party acknowledges and agrees that the party disclosing Confidential
Information under this Agreement will have no adequate remedy at law if there is
a breach or threatened breach of this Article 14 and accordingly, that the
disclosing party shall be entitled to an injunction or other equitable or
preventative relief against the other party or its representatives for such
breach or threatened breach. Nothing herein shall be construed as a waiver of
any other legal or equitable remedies which may be available to the disclosing
party in the event of a breach or threatened breach of this Article 14 and the
disclosing party may pursue any other such remedy, including the recovery of
damages.

                                       39


ARTICLE 15 DISPUTE RESOLUTION

SECTION 15.1 CERTAIN DISPUTES

Any dispute, difference, controversy or claim arising out of or relating to a
significant event that might affect [*] Section 8.2 of this Agreement, [*]
Article 12 or the adjustment of [*]Section 5.2(a), the breach or
non-performance thereof shall first be attempted to be resolved by US Airways
and Chautauqua through mutual negotiations, consultation and discussions for
[*].

SECTION 15.2 DISPUTE RESOLUTION PROCEEDINGS

In the event that the parties are unable to settle their differences or disputes
which may arise between them under Section 15.1, above, then either party [*]:

     (a) [*]

     (b) [*]

     (c) [*]

     (d) [*]

     (e) [*]

                                       40

- --------------------
* Confidential


     (f) [*]

     (g) [*]

     (h) [*]

IN WITNESS WHEREOF, US Airways and Chautauqua have caused this Agreement to be
executed by their duly authorized representatives on the day and year first
above written.

CHAUTAUQUA AIRLINES, INC.                  US AIRWAYS, INC.

/s/ Arthur Amron                           /s/ Gregory T. Taylor
- --------------------                       --------------------------
By: Arthur Amron                           By: Gregory  Taylor
Title: Vice President                      Title: Vice President
Chautauqua Airlines, Inc.                  US Airways Express

/s/ Kia E. Hardy                           /s/ [ILLEGIBLE]
- --------------------                       --------------------------
Witness                                    Witness

[SEAL]                                     [SEAL]

                                       41

- --------------------
* Confidential


EXHIBIT 2.1 IMPLEMENTATION SCHEDULE OF AIRCRAFT DEPLOYMENT



DATE                    NUMBER OF OPERATIONAL AIRCRAFT

                            
July 1999                       [*]

September 1999                  [*]

December 1999                   [*]

February 2000                   [*]

April 2000                      [*]

June 2000                       [*]

August 2000                     [*]

October 2000                    [*]

December 2000                   [*]



                                       42

- --------------------
* Confidential


EXHIBIT 2.1(a) SCHEDULE REQUIREMENTS

The weekly schedules for the Aircraft specified by US Airways must meet the
following [*] schedule parameters.



[*]
                                                          
[*]


US Airways will meet the following criteria in devising the schedule:

1. [*]

[*]

2. [*]

[*]

                                       43

- --------------------
* Confidential


3. Maintenance Base

The schedule will allow for the establishment of a single maintenance base in
Indianapolis, Indiana.

4. Crew Overnights

[*]

5. Crew Bases

[*]

6. Hub Arrivals/Departures

[*]

7. Consent to Schedule Changes

To the extent that US Airways' schedule falls outside of the criteria set forth
herein, US Airways [*].

                                       44

- --------------------
* Confidential


EXHIBIT 2.8 DIVISION OF RESPONSIBILITIES

(1) The parties will be responsible for providing, at their own cost, service
and materials, as set forth below, Assignment of services and materials to
categories will be according to generally accepted accounting principals and in
keeping with Airline Industry Standard Functional Classifications as required
for reporting Form 41 data to the Department of Transportation. Except as
otherwise provided in Articles 4 and 5, the assignment of responsibility will be
as follows:

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

(2) Chautauqua will be responsible for [*] as described in Section 5.4.


                                       45

- --------------------
* Confidential


EXHIBIT 5.1 PRICING MODEL

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]


                                       46


EXHIBIT 12.2  AIRCRAFT MAINTENANCE ITEMS*

APU (Sundstrand)
Engine (Allison)
Avionics (Honeywell)
Placards & Markings (ATA ref 11)
AC Press (ATA ref. 21)
Auto Flight (ATA ref 22)
Communications (ATA ref. 23)
Electrical Power (ATA ref. 24)
Interior (ATA ref. 25)
Fire Protection (ATA ref. 26)
Flight Controls (ATA ref. 27)
Fuel System (ATA ref, 28)
Hydraulic Systems (ATA ref. 29)
Ice/Rain Prot (ATA ref. 30)
Indicating & Rec. (ATA ref. 31)
Landing Gear (ATA ref. 32)
Lights (ATA ref. 33)
Navigation (ATA ref. 34)
Oxygen (ATA ref. 35)
Bleed Air (ATA ref. 36)
Waste Water (ATA ref. 38)
Central MTC System (ATA ref. 45)
Airborne Auxiliary Power (ATA ref 49)
Structures (ATA ref. 51)
Doors (ATA ref. 52 and 53)
Nacelles/Pylons (ATA ref 54)
Stabilizers (ATA ref 55)
Windows (ATA ref. 56)
Wings (ATA ref 57
Engine Mounting (ATA ref 71)
Engines (ATA ref 72)
Fuel & Control (ATA ref 73)
Ignition (ATA ref 74)
Engine Controls (ATA ref 76)
Engine Indicating (ATA ref. 77)
Exhaust (ATA ref. 78)
Oil (ATA ref 79)
Starting (ATA ref. 80)

- ----------
* Aircraft maintenance subjects as defined by the Air Transportation Authority
  (ATA)

                                       47

EX-10.7(A)

                                                                 Exhibit 10.7(a)

                                 FIRST AMENDMENT

This First Amendment is entered and made as of September 6, 2000 (the
"Amendment") as an amendment to the ChautauquaJet Service Agreement dated as of
March 19, 1999, by and between US Airways, Inc. ("US Airways") and CHAUTAUQUA
AIRLINES, INC. ("Chautauqua") (the "Agreement").

                                   WITNESSETH:

WHEREAS, US Airways and Chautauqua have entered into the Agreement; and

WHEREAS, US Airways and Chautauqua desire to amend certain provisions of the
Agreement;

NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter
set forth and for good and valuable consideration, the receipt and sufficiency
of which is acknowledged, US Airways and Chautauqua hereby agree as follows:

     1. Section 2.1 is hereby amended by deleting [*] in the fifth line and
replacing it with, [*] which have an engine performance rating at least as
good as the rating provided by the Rolls Royce engine with an AIP rating.
Chautauqua represents that all aircraft delivered after [*] shall be
configured with the AIP performance rating, subject to FAA certification, and
that Chautauqua shall use its best efforts to retro-fit the existing US
Airways ERJ Fleet with the AIP performance modification in a timely manner.

     2. Exhibit 2.1 of the Agreement is hereby deleted in its entirety and
replaced with Exhibit 2.

                                        1
- --------------------
* Confidential


     3. A new Section 2.9 is hereby added to the Agreement for a "Spare
Aircraft", aircraft number 16.

     "The [*] Aircraft will be [*]. For the purposes of calculating the
payment to Chautauqua as described in Section 5 of the Agreement, [*] For the
purposes of calculating the schedule requirements as described in Exhibit
2.1(a) of the Agreement, the [*] will not be included."

     4. Exhibit 5.1 is hereby deleted in its entirety and replaced with Exhibit
5.1 attached hereto as of the monthly billing period beginning when the eleventh
(11th) Aircraft is placed into service. Further, in lieu of payment for
Hull Insurance and Passenger Liability Insurance as specified in the Pricing
Model, US Airways reserves the right to provide Hull Insurance and Passenger
Liability Insurance at the levels specified in the Section 6 of the Agreement or
at mutually agreed levels.

     5. Section 7.1 of the Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:

     "7.1 This Agreement is effective as of [*] and Services provided
hereunder will continue, without interruption, for a period of [*] from the
in-service date of the [*], unless it is terminated on an earlier date
pursuant to the provisions of this Article 7 of the Agreement. US Airways
will have the right to extend the term of this Agreement [*] upon [*] notice
prior to the end of the initial term.


                                        2

- --------------------
* Confidential


     6. Effective as of July 2000 Article 8 of the Agreement is hereby
deleted in its entirety and the following is substituted in lieu thereof
except for the period [*] where Chautauqua has the option, upon its
notification of US Airways within [*] business days after the calculations
have been completed, of continuing Article 8 as originally specified in the
Agreement:

"ARTICLE 8 PERFORMANCE PLAN

SECTION 8.1 PERFORMANCE PLAN METRICS

Chautauqua's operating performance will be tracked by US Airways each month
based upon the following metrics:

[*]

                                        3

- --------------------
* Confidential


SECTION 8.2 [*]

a) After the end of each month when the measurement data has become available,
US Airways will compute the measurements included in Section 8.1 and provide a
summary statement showing the operating performance of Chautauqua in the
preceding month. US Airways, in consultation with Chautauqua, will also compute
[*]

     [*] Payment Schedule:

[*]

b) The table of [*] set forth below and as adjusted per Section 8.3 will meet
the criteria described below:

     i)   The upper and lower bounds of each classification are directly or
          indirectly related to the Midpoint of the [*] classification.

     ii)  The upper bound and lower bound of the [*] classification is fixed
          amount from the Midpoint as shown in the [*] table
          below subject to the minimums described in Section 8.3

                                        4

- --------------------
* Confidential


     iii) The upper bound of the [*] classification is set below the lower
          bound of the [*] classification by amount equal to the smallest
          measurement fraction subject to the minimums as shown in the
          [*] table below.

     iv)  The lower bound of the [*] classification is set above the upper
          bound of the [*] classification by amount equal to the smallest
          measurement fraction.

     v)   The upper bound of the [*] classification is set at an amount shown
          in the [*] table below.

     vi)  The lower bound of the [*] classification is set above the
          upper bound of the [*] by an amount equal to the smallest
          measurement fraction.

[*] Standards:

[*]

The [*] after adjustments are subject to the following limits.

[*]

                                        5

- --------------------
* Confidential


SECTION 8.3 [*] ADJUSTMENT

[*]

                                        6

- --------------------
* Confidential


[*]

[*]

                                       7

- --------------------
* Confidential


EXAMPLE OF THE [*] PROCESS

If actual [*] was:

[*]

then the New [*] would be:

[*]

                                        8

- --------------------
* Confidential


SECTION 8.4 [*]

Any disputes between US Airways and Chautauqua arising as a result of the
[*] will be resolved in accordance with the dispute resolution
procedures set forth in Article 15.

     7. [*]

     8. Article 12 Maintenance Cost Adjustment of the Agreement is hereby
deleted in its entirety.

     9. A new Article 14.1 (e) is added as follows:

     [*]

     10. Section 7.3(c) is hereby amended by deleting "as measured in Section
8.2 of this Agreement" in the second and third lines and replacing it with
"as measured by departures within [*] of scheduled departure time based on
departures made within Aircraft turn times, but excluding departures delayed
due to operational deficiencies (including, without limitation, [*]) that
are not within the responsibility of Chautauqua".


                                        9

- --------------------
* Confidential


Except as amended hereby, the Agreement remains unchanged in all other respects.
Upon its execution, this First Amendment together with the Agreement, will be
the complete and binding understanding of the Parties with respect to the terms
and conditions of the Agreement, us amended by the terms set forth herein.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

     CHAUTAUQUA AIRLINES, INC.              US AIRWAYS INC.

     /s/ Bryan Bedford                      /s/ Thomas M. Hanley
    ------------------------               ----------------------------
     By:    Bryan Bedford                   By:    Thomas M. Hanley
     Title: President                       Title: Vice President, US Airways

                                       10


EXHIBIT 2 IMPLEMENTATION SCHEDULE OF AIRCRAFT DEPLOYMENT



DATE                         OPERATIONAL AIRCRAFT

                               
Date of Amendment                 [*]

December 2000                     [*]

December 2000                     [*]

February 2001                     [*]

May 2001                          [*]

August 2001                       [*]

August 2001                       [*]

September 2001                    [*]

October 2001                      [*]

November 2001                     [*]

December 2001                     [*]

January 2002                      [*]

February 2002                     [*]



                                       11

- --------------------
* Confidential


EXHIBIT 5.1 [*]

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]


                                       12

EX-10.7(B)

                                                                 Exhibit 10.7(b)

                                SECOND AMENDMENT

This Second Amendment is entered and made as of December 20, 2000 (the
"Amendment") as an amendment to the Chautauqua Jet Service Agreement dated as of
March 19, 1999, by and betwccn US Airways, Inc. ("US Airways") and CHAUTAUQUA
AIRLINES. INC. ("Chautauqua") as amended by the First Amendment dated as of
September 6, 2000 (as amended, the "Agreement").

                                   WITNESSETH:

WHEREAS, US Airways and Chautauqua have entered into the Agreement; and

WHEREAS, US Airways and Chautauqua desire to further amend certain provisions of
the Agreement;

NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter
set forth and for good and valuable consideration, the receipt and sufficiency
of which is acknowledged US Airways and Chautauqua hereby agree as follows:

1. Section 2.1 is hereby amended by deleting [*] as stated in item 1 of the
First Amendment and replacing it with, [*] which have an engine performance
rating at least as high as the rating provided by the Rolls Royce engine with
an AIP rating. Chautauqua represents that all aircraft delivered after [*]
shall be configured with the AIP performance rating, subject to FAA
certification, and that Chautauqua shall use its best efforts to retro-fit
the existing US Airways ERJ Fleet with, the AIP performance modification in a
timely manner.

2. Exhibit 2.1 of the Agreement is hereby deleted in its entirety and replaced
with Exhibit 2.1 attached hereto.

                                       1

- --------------------
* Confidential


3. (a) Exhibit 5.1 of the Agreement is hereby deleted in its entirety and
   replaced with Exhibit 5.1 attached hereto as of December 20, 2000.

   (b) US Airways reserves the right but not the obligation to provide Hull
   Insurance and Passenger Liability Insurance at the levels specified in the
   Section 6 of the Agreement or at mutually agreed levels in lieu of payment
   far Hull Insurance and Passenger Liability Insurance as specified in the
   Pricing Model.

4. As of the date when the [*] aircraft is placed into service, Section 5.5
is hereby amended by deleting " [*] as stated in the first sentence of
Section 5.5 and replacing it with" [*].

5. Section 7.1 of the Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:

"7.1 This Agreement is effective as of [*] and Services provided hereunder
will continue, without interruption until [*] unless it is terminated on an
earlier date pursuant to the provisions of this Article 7 of the Agreement.
US Airways will have the right to extend the term of this Agreement by [*]
upon [*] notice prior to the end of the initial term."


                                       2

- --------------------
* Confidential


Except as amended hereby, the Agreement remains unchanged in all other respects.
Upon its execution, this Second Amendment, together with the Agreement, will be
the complete and binding understanding of the parties with respect to the terms
and conditions of the Agreement, as amended by the terms set forth heroin.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

     CHAUTAUQUA AIRLINES, INC.               US AIRWAYS, INC.

     /s/ Bryan Bedford                       /s/ Thomas M. Hanley
    ------------------------                --------------------------
     By:    Bryan Bedford                    By:    Thomas M. Henley
     Title: President                        Title: Vice President, US Airways

                                       3

- --------------------
* Confidential


EXHIBIT 2.1 IMPLEMENTATION SCHEDULE OF AIRCRAFT DEPLOYMENT



                                  NUMBER OF
DATE                         OPERATIONAL AIRCRAFT

                               
Date of Amendment                 [*]

January 2001                      [*]

May 2001                          [*]

July 2001                         [*]

July 2001                         [*]

August 2001                       [*]

September 2001                    [*]

September 2001                    [*]

October 2001                      [*]

October 2001                      [*]

November 2001                     [*]

December 2001                     [*]

December 2001                     [*]

January 2001                      [*]

February 2002                     [*]

March 2002                        [*]



                                       4

- --------------------
* Confidential


EXHIBIT 5.1 PRICING MODEL PER 2ND AMENDMENT

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]



[U.S AIRWAYS LOGO]

     DATA TRANSMITTAL. COVER SHEER

     Date: December 20, 2000

     Time: 4;05 PM

     To: Bryan Bedford / Fax: 317-484-6047

     From: Tom Hanley

     Number of Pages (including cover sheet): 8

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

     Comments:

     Re: Second Amendment














     Fax Number: 703-872-7312
     Telephone Number: 703-872-7617

EX-10.8

                                                                    EXHIBIT 10.8




                                    AGREEMENT

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

                                   THE PILOTS

                                in the service of

                            CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

This Agreement is made and entered into in accordance with the provisions of the
Railway Labor Act, as amended, by and between Chautauqua Airlines, Inc.
(hereinafter known as the "Company") and the pilots in the service of the
Company, as represented by the International Brotherhood of Teamsters
(hereinafter known as the "Union").

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





                                TABLE OF CONTENTS

ARTICLE                       TITLE

ARTICLE 1         RECOGNITION AND SCOPE

ARTICLE 2         DEFINITIONS

ARTICLE 3         COMPENSATION

ARTICLE 4         EXPENSES

ARTICLE 5         MOVING EXPENSES

ARTICLE 6         SCHEDULING

ARTICLE 7         VACANCIES

ARTICLE 8         PAID DAYS OFF

ARTICLE 9         SENIORITY

ARTICLE 10        TRAINING

ARTICLE 11        REDUCTION IN FORCE OR FURLOUGH

ARTICLE 12        LEAVES OF ABSENCE

ARTICLE 13        PHYSICAL STANDARDS

ARTICLE 14        INSURANCE AND OTHER BENEFITS

ARTICLE 15        TRANSFER TO SUPERVISORY DUTY

ARTICLE 16        MISCELLANEOUS FLYING

ARTICLE 17        NOTICES TO PILOTS

ARTICLE 18        GRIEVANCE PROCEDURE

ARTICLE 19        SYSTEM BOARD OF ADJUSTMENT

ARTICLE 20        UNION MEMBERSHIP

ARTICLE 21        UNIFORMS

ARTICLE 22        NEW EQUIPMENT

ARTICLE 23        GENERAL

ARTICLE 24        HOURS OF SERVICE

ARTICLE 25        DURATION


                            ****************************
Letter of Agreement 1        Dornier 328 Base Protection
Letter of Agreement 2        Retroactive Pay
Letter of Agreement 3        Centralized Basing
Letter of Agreement 4        One Time System Bid
Letter of Agreement 5        Red Circle Pay Rates For Certain 0-19 Seat Captains
Letter of Agreement 6        Vacation Week Bidding

                            ****************************

APPENDIX A              SEGMENT TIMES




                                    ARTICLE 1

                              RECOGNITION AND SCOPE

A.    National Mediation Board Certification

      Pursuant to the certification by the National Mediation Board in Case No.
      R-6199, dated July 30, 1993, the Company hereby recognizes the
      International Brotherhood of Teamsters, Airline Division, as the duly
      designated and authorized representative of the pilots in the employ of
      the Company for the purposes of the Railway Labor Act, as amended.

B.    Purpose of Agreement

      The purpose of this Agreement is in the mutual interest of: the Company,
      the Union, and the pilots in the employ of the Company; to provide for the
      operation of the Company under methods which will further, to the fullest
      extent possible: the safety of air transportation, the efficiency of
      operation, and the continuation of employment of pilots under conditions
      of reasonable working conditions and proper compensation, and maintain
      profitability of the carrier. It is recognized to be the duty of the
      Company, the Union, and the pilots to cooperate fully for the attainment
      of these purposes.

C.    Sole Agreement

      This Agreement shall supersede all existing or previously executed
      agreements by and between the Company and the Union or any other labor
      organization or individual with respect to the rates of pay, rules, or
      working conditions specifically covered by the provisions of this
      Agreement in accordance with the provisions of the Railway Labor Act, as
      amended. Any and all subsequent agreements between the parties shall be
      reduced to writing, signed by their authorized representatives, and become
      a part of this Agreement.

D.    Whenever the words "pilot(s)," "employee(s)," or "crew member(s)" are used
      in this Agreement, they designate and refer to only such pilots as are
      covered by this Agreement. It is further recognized that whenever in this
      Agreement pilots or jobs are referred to in either the masculine or
      feminine gender, it shall be understood to mean both male and female
      pilots. It is further understood that there shall be no discrimination by
      either party against any pilot who is now, or may become, subject to the
      terms of this Agreement because of age, race, sex, color, religion,
      national origin, handicap or disability.

E.    Except as otherwise provided in this Agreement, all present and future
      revenue flying (including that international flying which originates or
      terminates within the United States or its possessions) and all charters,
      ferry flights (not including ferry flights of newly-acquired aircraft
      prior to being placed in revenue service), training flights, test flights,
      (except test flights assigned to management), or other utilization of
      Company owned or leased aircraft, performed in and for the service of
      Chautauqua Airlines, Inc. shall be performed by pilots on the Pilots'
      System Seniority List in accordance with the terms and conditions of this
      Agreement or any other applicable agreement between Chautauqua Airlines,
      Inc. and the International Brotherhood of Teamsters, Airline Division.

F.    Nothing in this Agreement shall prevent the Company from acquiring,
      establishing or merging with any other carrier. In the event of such
      acquisition, establishment or merger, the following will apply:

      1.    The Company will not acquire or establish another air carrier (alter
            ego or otherwise) to replace any present or future flying performed
            in and for the service of Chautauqua Airlines, Inc. or to avoid the
            terms and conditions of this Agreement;

            a.    The Company will not transfer any aircraft necessary to
                  operate the Chautauqua system to any other carrier either it
                  or its parent controls.



      2.    If the Company acquires or merges with another air carrier (except
            as may be agreed pursuant to paragraph F.2.d., below) flying
            operations are not consolidated or merged until the seniority lists
            of the two pilot groups are integrated in accordance with Sections 3
            and 13 of the Allegheny-Mohawk Labor Protective Provisions; and

            a.    The respective pilot collective bargaining agreements (if
                  applicable) are merged into one (1) agreement as the result of
                  negotiations between the Union and the Company. If a fully
                  merged agreement is not executed within six (6) months from
                  the date a final and binding integrated pilot system seniority
                  list is issued, the parties shall jointly submit outstanding
                  issues to binding interest arbitration; and

            b.    The Company and the Union meet to negotiate an appropriate
                  fence agreement pending the merger.

            c.    No pilots within the bargaining unit on the date of
                  acquisition or merger of another company which employs pilots
                  or has a lease agreement for pilots will be reduced in status
                  or lose any income or employee benefits as a result of such
                  acquisition or merger.

            d.    All other terms and conditions of this Agreement remain in
                  full force and effect unless changes are mutually agreed to
                  between the Union and the Company.

            e.    Paragraphs a., b., c. and d., above, shall be applicable until
                  paragraph F.2., above, is resolved.

      3.    This Agreement is binding upon any successors and assigns of the
            parties hereto, unless or until changed in accordance with the
            provisions of the Railway Labor Act, as amended.

      4.    The Company will not enter into any dry lease or wet lease
            agreement, or contract with or for any other carrier or entities
            (government, military or commercial) without mutual agreement with
            the Union.

            a.    No pilot within the bargaining unit will be reduced in status
                  or lose any income or employee benefits while discussions are
                  taking place.

            b.    The Union will not disagree to a dry lease when such dry lease
                  is for the sole purpose of leasing out excess aircraft owned
                  or leased by the Company. No aircraft dry leased to another
                  carrier or entity will be operated into or out of any cities
                  where the Company operates. Such dry lease will not result in
                  the reduction in status or the furlough of any Chautauqua
                  pilot in cases where the dry lease provides a profit to the
                  Company. At the request of the Union it may review the actual
                  dry lease documents.






                                    ARTICLE 2

                                   DEFINITIONS

A.    "Block-to-block" means the elapsed time starting with the removal of the
      chocks or other restraining devices from the wheels of the aircraft when
      the aircraft first moves for the purpose of flight under its own power and
      ending when the chocks or other restraining devices are replaced.

B.    "Captain" means a pilot who is in command and who is responsible for the
      manipulation of, or who manipulates, the flight controls of an aircraft
      while under way, including takeoffs and landings of such aircraft, and who
      is qualified to serve and holds a currently effective airman's certificate
      or type rating authorizing him to serve as such a pilot.

C.    "Charter" means an off-line or on-line revenue passenger flight that is
      not a regularly scheduled flight. Extra sections are not considered
      charter flights.

D.    "Check Airmen" means those pilots who are designated at the sole
      discretion of the Company and are authorized by the FAA to conduct line
      checks.

E.    "Company Check Airman" means instructor and check pilots who are
      designated at the sole discretion of the Company and are authorized by the
      FAA to instruct, train, conduct proficiency checks and line checks, but
      who do not occupy management positions. Such pilots are to be considered
      line pilots and are covered by this Agreement.

F.    "Date of Hire" means a pilot's first day of pilot training by the Company
      after the pilot becomes an employee of the Company.

G.    "Day" means the time commencing at 0001 and ending at 2400 based on local
      time.

H.    "Day Off" means a day free from all duty required by the Company.

I.    "Deadhead" means the time spent by a pilot in traveling from one point to
      another at the direction of the Company, either for duty or returning from
      duty.

J.    "Domestic" means the forty-eight (48) contiguous states and the District
      of Columbia.

K.    "Domicile" means a geographical location where a pilot is based.

L.    "Duty Time" means the time a pilot is on duty commencing when a pilot is
      required to report or actually reports, whichever is later, for duty and
      ending at release from duty.

M.    "First Officer" means a pilot who is second in command and who is
      responsible for the manipulation of, or who manipulates, the flight
      controls of an aircraft while under way, including takeoffs and landings
      of such aircraft, and who is qualified to serve and holds a currently
      effective airman's certificate or type rating authorizing him to serve as
      such a pilot.

N.    "Flight Time" means block-to-block time.

O.    "Hot Reserve" means a period of time when a pilot is required to be on
      reserve at an airport location designated by the Company.

P.    "International" means any point or area outside of the forty-eight (48)
      contiguous states and the District of



      Columbia.

Q.    "Longevity" means the period of time a pilot has actively served as a
      pilot.

R.    "Month" means that period of time from and including the first day of, and
      including the last day of, each calendar month of the year except that,
      for pay and scheduling purposes, January, February, and March will each be
      a thirty (30) day month through the addition of January 31 and March 1 to
      the month of February. In a leap year, February will be a thirty-one (31)
      day month.

S.    "Operational reasons" shall mean actions taken by the Company after
      careful planning and analysis, and not arbitrarily or capriciously.
      Examples of such reasons shall include, but are not limited to, the
      following: 1. To avoid a potential flight delay, 2. To avoid a potential
      flight cancellation, and 3. To fulfill FAA/Regulatory requirements.

T.    "Pilot" means an employee of the Company whose name appears on the pilot
      seniority list.

U.    "Probationary period" means a pilot's first thirteen (13) months of active
      service (exclusive of furlough or leave of absence) with the Company from
      date of hire or until completion of his first annual recurrent checkride.
      If a pilot upgrades to Captain during the probationary period, his
      probation will end upon completion of the upgrade checkride.

V.    "Rescheduled" means a change to the pilot's original scheduled assignment.

W.    "Seniority" means the length of service as a pilot with the Company.

X.    "Shift" means a single flight assignment that does not include a rest
      period.

Y.    "Supervisory Pilot" means a pilot designated by the Company to be
      responsible for managing pilots and administering Company policy.

Z.    "Trip" means a flight or series of flights that are paired together and
      may include one or more duty periods.

AA.   "Vacancy" means a position(s) in a particular status, equipment and
      domicile in excess of the number of pilots already in that status,
      equipment and domicile.

BB.   "Wet Lease" means an agreement with another air carrier in which the
      Company provides an aircraft and crew to the other air carrier.






                                    ARTICLE 3

                                  COMPENSATION

A.    Pilots will be paid for flight time based upon status and longevity in
      accordance with the hourly rates below. In computing hours for pay
      purposes, the actual time flown or the scheduled block time, whichever is
      greater, will be used.




      CAPTAIN 0-19 Seat Turbo-prop
      ----------------------------

                  11-01-98    11-01-99    11-01-00
                  --------    --------    --------
      Year
      ----
                                 
      1           26.28       26.94       27.61
      2           27.75       28.44       29.15
      3           29.40       30.14       30.89
      4           31.07       31.85       32.64
      5           32.72       33.54       34.38
      6           34.10       34.95       35.83
      7           35.23       36.11       37.01
      8           35.75       36.64       37.56
      9           36.28       37.19       38.12
      10          36.88       37.80       38.75



      CAPTAIN 20-37 SEAT TURBO-PROP
      -----------------------------

                  11-01-98    11-01-99    11-01-00
                  --------    --------    --------
      Year
      ----
                                 
      1           36.71       37.63       38.57
      2           38.61       39.58       40.56
      3           40.00       41.00       42.03
      4           42.00       43.05       44.13
      5           43.82       44.92       46.04
      6           45.39       46.52       47.69
      7           46.75       47.92       49.12
      8           48.63       49.85       51.09
      9           49.68       50.92       52.20
      10          50.87       52.14       53.45
      11          52.15       53.45       54.79
      12          53.10       54.43       55.79
      13          53.94       55.29       56.67








      CAPTAIN 50-59 Seat Turbojet
      ---------------------------

                  11-01-98    11-01-99    11-01-00
                  --------    --------    --------
      Year
      ----

                                 
      1           48.50       49.71       50.96
      2           49.96       51.21       52.49
      3           51.45       52.74       54.05
      4           53.00       54.33       55.68
      5           54.59       55.95       57.35
      6           56.22       57.63       59.07
      7           57.55       58.99       60.46
      8           59.35       60.83       62.35
      9           61.20       62.73       64.30
      10          63.08       64.66       66.27
      11          64.98       66.60       68.27
      12          66.93       68.60       70.32
      13          68.95       70.67       72.44
      14          71.05       72.83       74.65
      15          72.75       74.57       76.43



      CAPTAIN 37-49 Seat Turbojet
      ---------------------------

                  11-01-98    11-01-99    11-01-00
                  --------    --------    --------
      Year
      ----
                                 
      1           42.20       43.25       44.33
      2           43.47       44.55       45.67
      3           44.76       45.88       47.03
      4           46.11       47.26       48.44
      5           47.49       48.68       49.90
      6           48.91       50.13       51.39
      7           50.07       51.32       52.60
      8           51.63       52.93       54.25
      9           53.24       54.58       55.94
      10          54.88       56.25       57.66
      11          56.53       57.95       59.39
      12          58.23       59.68       61.18
      13          59.99       61.49       63.02
      14          61.81       63.36       64.94
      15          63.29       64.87       66.50










      FIRST OFFICER - All Turbo-prop Aircraft
      ---------------------------------------

                  11-01-98    11-01-99    11-01-00
                  --------    --------    --------
      Year
      ----
                                 
      1           19.00       19.48       19.96
      2           22.00       22.55       23.11
      3           23.50       24.09       24.69
      4           25.25       25.88       26.53
      5           26.00       26.65       27.32
      6           27.00       27.68       28.37



      FIRST OFFICER - All Turbojet Aircraft
      -------------------------------------

                  11-01-98    11-01-99    11-01-00
                  --------    --------    --------
      Year
      ----
                                 
      1           19.00       19.48       19.96
      2           22.00       22.55       23.11
      3           30.50       31.26       32.04
      4           31.50       32.29       33.09
      5           32.50       33.31       34.15
      6           33.50       34.34       35.20



B.    Pay Procedures

      1.    Pilots will be paid on a bi-monthly basis, i.e., twenty-four (24)
            pay periods per year.

      2.    Pilots will be paid on the fifteenth (15th) and the last day of each
            month. If the fifteenth (15th) or the last day of each month falls
            on a Saturday or Sunday, pilots will be paid on the preceding
            Friday. The pay check on the fifteenth (15th) of the month will
            adjust for any additional amounts owed the pilot from the previous
            month.

      3.    A pilot will be paid at his option by direct deposit into an account
            for that pilot at a financial institution of the pilot's choice.

      4.    Clerical pay errors involving fifty dollars ($50.00) or more shall
            be reconciled within five (5) working days after the error is
            verified. Errors of less than fifty dollars ($50.00) will be
            reconciled in the next pay check following verification.

C.    The minimum monthly guarantee will be seventy-five (75) hours at the
      pilot's hourly rate, except that a Captain who is subject to the 0-19 seat
      "red circle" as per Letter of Agreement 5 will have an eighty (80) hour
      guarantee. A pilot who is unavailable for part of a month will have his
      guarantee prorated (except for paid vacation or paid sick leave).

D.    A pilot who is called to the airport and assigned to flight or reserve
      duty and actually flies on a scheduled day off will be compensated at the
      greater of four (4) hours for the trip or his actual flight time for the
      trip in addition to his monthly guarantee or other flight pay accrued.
      This paragraph does not apply to a pilot assigned on one of his minimum
      days off who has that day restored.

E.    Training Pay



      1.    A pilot who attends a day of recurrent training or checks will be
            paid and credited with four (4) hours of flight pay for up to six
            (6) days in any calendar year.

      2.    If the Company elects to use any method of training such as "home
            study" to comply with FAA requirements, a pilot will be paid and
            credited with one (1) hour of flight pay for every two (2) hours of
            FAA-approved training credit earned in home study.

      3.    Line checks and IOE will be paid in accordance with Article 3.A.

      4.    A pilot in training will be paid no less than the appropriate
            minimum monthly guarantee.

F.    A pilot who performs management-related functions, e.g., Check Airman
      duties, will be paid additional compensation as determined by the Company.

G.    For purposes of this Article, scheduled block times will be determined by
      using the average of historic enroute (block-to-block) times between city
      pairs by type of equipment and are attached hereto as "Appendix A."

      1.    Scheduled block times will be reviewed by a joint Company/Union
            Scheduling Committee every six (6) months using the prior twelve
            (12) months average to determine whether any adjustments are to be
            made.

      2.    Adjustments will be made only when the average varies from the
            established scheduled block time by seven and one-half percent
            (7.5%), or more, plus or minus.

      3.    When a new route is established for which no scheduled block time
            has been computed in accordance with this Article, the initial
            scheduled block time will be established based upon the marketing
            time for that segment. After one hundred and twenty (120) days of
            operation, the scheduled block time will be reviewed.

      4.    Non-scheduled flights on routes where no established scheduled block
            time exists will be credited on the basis of actual (block-to-block)
            flight time.

      5.    "Tests," "Attempts" and "Diverted" flights will be paid on the basis
            of actual (block-to-block) flight time. Taxi time not associated
            with a flight will be credited at the rate of two tenths (0.2) hours
            of flight pay.

      6.    Data necessary for an accurate and complete review of scheduled
            block times will be made available to the Company/Union Scheduling
            Committee. After the Union representatives have had an opportunity
            to review the data, the Company will meet with those representatives
            upon request, at a mutually agreeable time, to resolve any questions
            or disputes. Members of the Company/Union Scheduling Committee will
            not disclose any confidential or proprietary information provided
            pursuant to this paragraph.

H.    A pilot holding a Captain's position shall be compensated for all hours
      flown at the applicable Captain's rate. A Captain-qualified First Officer
      who flies as Captain shall be compensated for those hours at the
      applicable Captain rate of pay.

I.    If a pilot is required to deadhead, he shall be credited with fifty
      percent (50%) of the scheduled block time for such flight. If required to
      deadhead via surface transportation, he shall be credited with fifty
      percent (50%) of driving time based upon AAA mileage at 50 MPH. A day
      consisting solely of deadhead to or from a flight assignment shall be
      considered a workday.

J.    A pilot called in for drug testing on a scheduled day off shall be
      compensated two (2) hours of flight pay.



K.    If a pilot is displaced by the Company from his flight due to training, to
      accomplish training for another pilot, or for any other reason, he may be
      reassigned another flight on the same day(s) as his original schedule,
      however, he shall be credited for the flight time on his original
      scheduled flight or the reassigned flight whichever is greater.

L.    If a pilot is requested to report early, such pilot will be paid at the
      rate five dollars ($5.00) per hour, or fraction thereof, prorated for all
      hours on duty prior to his originally scheduled report time.

M.    A pilot who is awarded a higher paying position and becomes qualified to
      perform duties in the higher paying position will be paid the higher rate
      upon completing his training, including initial operating experience.

N.    A pilot who is assigned to flight duty or reserve on any of the below
      listed holidays will receive four (4) hours of flight pay in addition to
      his monthly guarantee or flight pay accrued for that month.

            New Year's Day                Labor Day
            Thanksgiving                  Memorial Day
            Christmas                     Independence Day




                                    ARTICLE 4

                                    EXPENSES

A.    The Company will furnish guaranteed suitable single room lodging for a
      pilot who is scheduled to layover at a location for legal rest while on
      flying or training duty away from his permanent domicile. A pilot who is
      assigned to a continuous duty overnight away from domicile with a
      scheduled break of five (5) hours or more, block-in to block-out, will be
      provided lodging at the Company's expense.

B.    When lodging is required in accordance with paragraph A., above, the
      Company will provide transportation to and from such lodging to the
      airport or training site, as applicable. If no eating facilities are
      available within walking distance of the lodging, transportation to and
      from an eating facility will be provided.

C.    The Company will make prompt inquiries into complaints related to
      deterioration of service at any facility which has been approved for
      layovers. Prompt remedial action will be taken in those cases where
      investigation affirms a deterioration of service.

D.    In lieu of reimbursement for meals and incidental travel expenses, pilots
      will be paid a per diem allowance of $1.25 per hour for time away from
      domicile in connection with flight duty, training or on-premise reserve,
      commencing at report for duty at domicile and ending upon release from
      duty at domicile. Effective twelve (12) months after date of signing, the
      per diem allowance will be increased to $1.30, and effective twenty-four
      (24) months after date of signing, the per diem allowance will be
      increased to $1.35.

E.    When a pilot agrees to drive his personal vehicle at the request of the
      Company, he will be allowed $.31 per mile point-to-point and return. A
      pilot will not be required to drive his personal vehicle.

F.    At domicile or another location of the pilot's choice where free parking
      is not available, the Company will pay for the cost of the parking while
      the pilot is performing duty. The Company will not be required to pay for
      parking at more than one (1) location per pilot. Pay for parking at a
      location other than the pilot's domicile shall be required only when such
      employee parking is available and only to the extent of what the parking
      would have cost at the pilot's domicile.

G.    The Company will provide travel on a booked basis when a pilot is
      deadheading on-line between the pilot's domicile and the point of his
      assigned duty.

H.    The Company will reimburse each pilot for the cost of passports or visas
      or any airport government charges incurred in traveling on Company
      business.

I.    When, due to irregular operations, special assignments, etc., a pilot
      incurs lodging or transportation expenses, he will be reimbursed upon
      presentation of receipts for such expenses, provided he requests and
      receives advance approval for such expenses.




                                    ARTICLE 5

                                 MOVING EXPENSES

A.    Successful vacancy bidders, pilots moving to a domicile upon initial
      employment, and pilots making domicile swaps shall pay their own moving
      expenses.

B.    The Company will pay for moving expenses when a pilot is required by the
      Company to change his permanent domicile. A pilot displaced as a result of
      a reduction in schedules, domicile closure, equipment change or relocation
      of a domicile shall be considered transferred at the Company's request.

C.    When the Company is required to pay moving expenses, the move must be
      coordinated with the Flight Department. Moving expenses must be submitted
      within thirty (30) days after incurring the expenses. Moving expenses
      other than automobile mileage and meals must be verified by receipts. The
      Company will not be responsible for any damages incurred during moving.
      The Company will not be responsible for paying any expenses under this
      Article after one (1) year from the date the pilot reports to the new
      domicile.

D.    Moving expenses paid by the Company will include the following:

      1.    When the pilot moves himself, the rental truck or trailer, packing
            materials, insurance, and one hundred dollars ($100.00) to offset
            other costs.

      2.    When a professional mover is used, actual moving expenses for
            household goods and effects up to a maximum of one thousand two
            hundred (1,200) cubic feet or eight thousand (8,000) pounds, packing
            materials, shipping and insurance coverage, but excluding packing
            and unpacking and extra insurance coverage and storage.

      3.    When personal automobile transportation is used by the pilot and his
            immediate family, the Company will reimburse the pilot at the rate
            of $.31 per mile using the most direct AAA routing between domiciles
            for up to two (2) automobiles.

      4.    The Company will reimburse a pilot for meals and lodging for the
            pilot and his immediate family for the time required to travel to
            the domicile up to five (5) days. A pilot will be removed from trips
            which conflict with the time allowed for travel. A day of travel
            shall be considered a minimum of three hundred fifty ( 350) miles by
            the most direct AAA mileage. The daily allowance for meals shall be
            twenty-two dollars ($22.00) per day for the pilot, twenty-two
            dollars ($22.00) per day for the spouse traveling with the pilot,
            and twelve dollars ($12.00) per day for each dependent traveling
            with the pilot.

      5.    If a lease is broken as a result of moving to a new domicile and a
            penalty is incurred, the Company will pay such penalty not to exceed
            one (1) month's rent.

      6.    The Company will pay up to two hundred dollars ($200.00) for
            termination and hook-up of utilities (excluding deposits) including:
            gas, electric utilities, telephone and cable television, which
            result from a move to a new domicile.

      7.    The Company will pay moving expenses only for actual moves of a
            pilot's primary residence. If a pilot elects not to move his primary
            residence, the Company will pay the pilot two hundred dollars
            ($200.00) which need not be verified by receipts. To qualify for
            moving expenses under this Article, the pilot must move to a
            location within thirty-five (35) miles of the new domicile.

E.    When the Company is required to pay moving expenses, nothing in this
      Article is intended to prevent the Company and the pilot from agreeing to
      an amount to be paid to the pilot in lieu of the expenses set forth in
      this Article.

F.    The Company's liability for moving expenses under this Article shall not
      exceed five thousand dollars ($5,000.00).





                                    ARTICLE 6

                                   SCHEDULING

A.    Scheduling Committee

      The Union will establish a Scheduling Committee which will meet with the
      Company for the purpose of facilitating the efficient operation of this
      Article. The Scheduling Committee will be given reasonable access to
      non-confidential information regarding aircraft flows, block time reports,
      scheduled training, checkrides, vacations and leaves of absence. The
      Scheduling Committee may submit recommendations to the Company. When
      conflicts between the schedule and FARs or this Agreement are verified,
      the Company will take immediate action, if practicable, to resolve such
      conflicts.

B.    Bidding and Awarding of Monthly Schedules

      1.    Bid packages will be made available to all pilots at each domicile
            at or before 1700 hours on the second Friday of each month.

      2.    A pilot must bid on an approved format submitted to Crew Scheduling
            by U.S. mail, overnight express, facsimile, electronically, if
            available, or any other means mutually agreed upon.

      3.    A pilot must submit his bid by 1700 hours on the Tuesday following
            the second (2nd) Friday of each month.

      4.    The initial bid award will be made available to pilots by 1700 hours
            on the third (3rd) Friday of each month.

      5.    Pilots who were initially awarded or assigned reserve or build-up
            lines may bid among themselves for such lines after they are
            constructed. Such lines will be made available to such pilots at the
            time of the initial bid award. Bids must be submitted by 1700 hours
            on the Sunday following the third Friday of each month.

      6.    The final bid award, which will include the final award of build-up
            and reserve lines, will be posted no later than 1200 hours on the
            fourth Thursday of each month.

      7.    All eligible pilots may bid for lines based upon their position. All
            bids shall be awarded in accordance with seniority. Awards will be
            published in each domicile.

      8.    The Company shall make only the necessary adjustments to awarded
            lines to correct errors and to provide for the month-to-month
            interface period, vacation, training, minimum days free from duty
            and approved leaves.

      9.    Eligibility to Bid

            a.    A pilot attending initial, transition, or upgrade training
                  (from the beginning of ground school to completion of IOE)
                  will not bid a schedule for the month, except when the ground
                  school is scheduled to begin after the fifteenth (15th) of the
                  month; in such cases, the pilot will bid a schedule for the
                  month, and all trips that conflict with the training will be
                  dropped.

            b.    A pilot not eligible to bid will receive his schedule at the
                  same time as all other pilots.

            c.    A pilot will not bid in a month where he is scheduled for
                  leave (other than paid sick leave or vacation) in excess of
                  fifteen (15) days of the month.



            d.    Pilots who have been on an approved leave will provide the
                  Company with documentation regarding the termination of the
                  leave. If the pilot will be available for more than fifteen
                  (15) days of the month, the pilot will be eligible to bid.

      10.   A pilot failing to make a sufficient number of bids, failing to meet
            the deadline, or submitting a bid form that is either unsigned,
            incomplete or illegible, will be assigned the highest unbid
            numerical line at the pilot's domicile after all bidders'
            preferences have been awarded. If more than one pilot fails to bid,
            they will be assigned remaining lines in numerical order based on
            their seniority.

      11.   A pilot who will be on vacation or leave of absence when bid
            packages are distributed may provide the Company with a prepaid,
            pre-addressed overnight delivery envelope in which case the Company
            will forward a copy of the bid package to such pilot using such
            envelope. A pilot who is sent a bid package by such method may
            submit his bid via fax pursuant to Company directions.

C.    Contents of the Bid Package

      1.    Bid packages will contain:

            a.    All known trip series arranged in regular lines except the
                  Company may withhold up to five percent (5%) of known flying.

            b.    An anticipated number of reserve lines, if any, which will be
                  blank.

            c.    An anticipated number of buildup lines, if any, which will be
                  blank.

            d.    All known training (inclusive of dates).

            e.    All awarded and available vacation time.

            f.    Flight and duty times.

            g.    Report and release times.

            h.    RON information, including hotels, ground transportation, etc.

            i.    A list of pilots who are due for recurrent training or
                  checkrides and dates for recurrent ground schools, if known.

            j.    A list of pilots eligible to bid in each domicile.

            k.    A list of pilots due for medicals.

      2.    The Company will create as many hardlines as practical for a given
            domicile, attempting insofar as practicable to offer a variety of
            bid lines. Hardlines will contain the following:

            a.    A planned sequence of trips with intervening days off,
                  arranged in a schedule for the month.

            b.    No reserve duty or charters.

            c.    Days off at domicile.



            d.    Up to ninety (90) scheduled hours of block time. However, the
                  Company may seek the concurrence of the Union Scheduling
                  Committee Chairman or Union to exceed this limit. Such
                  concurrence shall not be unreasonably withheld.

            e.    No out of domicile trips.

      3.    Build-up lines

            a.    Buildup lines shall be blank when published in the bid package
                  and subsequently constructed from trips and/or series of trips
                  that become available as a result of vacation awards,
                  training, checkrides, leaves of absence and trips that are not
                  in hardlines. Buildup lines will also contain days off and may
                  contain reserve days.

            b.    Buildup lines will contain up to ninety (90) scheduled hours
                  of block time. However, the Company may seek the concurrence
                  of the Union Scheduling Committee Chairman or Union to exceed
                  this limit. Such concurrence shall not be unreasonably
                  withheld.

            c.    The Company will construct build-up lines with as many in
                  domicile trips as practicable.

            d.    Build-up lines may contain charters.

            e.    Reserve days and out of domicile trips may be built into the
                  build-up lines.

            f.    If the number of build-up lines is less than anticipated,
                  additional reserve lines will be constructed and assigned to
                  those pilots able to hold build-up lines.

            g.    The Company will conduct a secondary bid among pilots awarded
                  blank build-up lines to award the constructed build-up lines.

            h.    The Company will create as many build-up lines as practicable
                  in a given domicile.

      4.    Reserve lines

            a.    Reserve lines will be blank when published in the bid package
                  and subsequently constructed to show reserve days and days
                  off.

            b.    When constructed, reserve lines will contain:

                  (i)   Intervening periods of availability and days off;

                  (ii)  As many in domicile days as practicable;

                  (iii) Out of domicile reserve days, if available, and
                        associated deadhead; and

                  (iv)  Type of reserve.

            c.    The Company will conduct a secondary bid among pilots awarded
                  blank reserve lines to award reserve lines that show reserve
                  days and days off.

D.    Month-to-Month Interface Period

      1.    The interface period shall consist of the first three (3) days of
            the month. During this time, Crew Scheduling may adjust bid lines
            for those pilots whose lines are in conflict with the previous
            month's schedule, including FAR conflicts.



      2.    A pilot may be assigned an AVL ("available") day(s) during the
            interface period.

            a.    If assigned an AVL day, the pilot must contact Crew Scheduling
                  after 1900 domicile time on the evening prior to the AVL day
                  for assignment.

            b.    An AVL day cannot become a reserve shift or charter.

            c.    If not assigned a specific flight assignment, the AVL day will
                  be converted to a day off.

E.    Reserve Duty

      1.    For the purposes of calculating days off, a reserve day will be
            considered a day of work.

      2.    A reserve pilot will not be required to start an on-call period with
            less than the minimum rest required by Article 24.

      3.    A reserve pilot will not be scheduled to be on call in excess of
            twelve (12) hours in a day. A reserve pilot may not be assigned to a
            flight assignment that is scheduled to exceed fourteen (14) hours
            after reporting for duty at the airport.

      4.    A pilot on reserve may be scheduled for hot reserve duty for up to
            twelve (12) hours, including any on call and scheduled flight
            assignments.

      5.    A pilot on reserve will be subject to a one and one-half (1.5) hour
            call out unless assigned to a domicile where a shorter call out time
            has been mutually agreed upon between the Company and the Union. A
            pilot will make every effort to report earlier.

      6.    The Company may, in its discretion, release a pilot from reserve
            earlier than scheduled.

      7.    A pilot on reserve may use a "pager" at his expense. However, the
            pilot is solely responsible for ensuring the quality of service of
            the pager, and any malfunction of a pager is solely the
            responsibility of the pilot. The pilot is also solely responsible
            for ensuring that he remains within the pager's calling area.

      8.    A pilot on reserve will respond to a telephone message or page from
            the Company within twenty (20) minutes, and such time will be
            included in the call out time required in paragraph E.5., above.
            Once a pilot receives an assignment, he is no longer responsible to
            be available for contact prior to such assignment until report time.

      9.    A pilot on reserve who is assigned a RON that extends into a day off
            will be given the option of receiving day off pay pursuant to
            Article 3.D. or having that day off restored in the current or
            following month. The Company will not make such assignment if there
            is another reserve available in the domicile and calling out such
            reserve will not delay the flight.

F.    Assignment of Open Time

      1.    Open time which remains after the construction of buildup lines and
            open time which subsequently becomes available during the month will
            be assigned in the following order, provided that such assignment
            shall not conflict with FARs or any other provision of this
            Agreement:

            a.    Assign to a reserve pilot in domicile (the Company may opt to
                  skip such pilot); then

            b.    Award to any other pilot, on a first-come, first-served basis,
                  who volunteers for open time;



                  then

            c.    Assign to a supervisory pilot (the Company may opt to skip
                  such pilot); then

            d.    Assign to a reserve pilot in domicile; then

            e.    Assign to a reserve pilot from another domicile (the Company
                  may opt to skip such pilot).

      2.    The Company will make reasonable efforts to post open time.

G.    Displacement

      1.    If more than one (1) pilot is assigned to the same trip, the senior
            pilot will have the choice of flying the trip or not. The pilot not
            flying the trip will either be reassigned to a trip or released from
            duty for the remainder of the trip and will be credited with the
            greater of the value of the trip originally assigned or the trip to
            which he is reassigned.

      2.    If a pilot is displaced from his assignment by another pilot at the
            Company's direction for the purpose of training or IOE, the pilot
            who is displaced will either be reassigned to a trip or released
            from duty for the remainder of the day and will be credited with the
            greater of the value of the trip originally assigned or the trip to
            which he is reassigned.

      3.    If a pilot is displaced from a trip because of minimum experience
            between a Captain and a First Officer being paired together, the
            pilot who is displaced will either be reassigned to a trip or
            released from duty for the remainder of the day and will be credited
            with the greater of the value of the trip originally assigned or the
            trip to which he is reassigned.

H.    Rescheduling for Operational Reasons

      1.    Reserve Pilots

            A pilot holding a reserve line may be rescheduled within the
            limitations of Articles 6 and 24.

      2.    Hardline and Buildup Lineholders

            After the publication of the final award, a pilot holding a hardline
            or build-up line may be rescheduled for operational reasons.
            However, any rescheduled trip must remain within the date(s) of the
            original trip, regardless of when the rescheduling occurs or how
            many times the pilot is rescheduled. Rescheduling must be within the
            limitations of Articles 6 and 24. A pilot scheduled for a single day
            trip will not be rescheduled for a multi-day trip.

      3.    Regular and Build-up Lineholders on Reserve

            If a regular or build-up lineholder has been removed from a trip, or
            a portion thereof, and Crew Scheduling has no immediate assignment
            for the pilot, he may be placed on reserve (subject to Article
            6.E.5.) during the time of the original trip. Such pilot shall not
            be placed on hot reserve. If a pilot is placed on reserve pursuant
            to this paragraph, he will be paid the greater of his actual or
            scheduled flight time during such period of reserve.



I.    Trip Trades

      1.    Trip trade requests must be in writing, signed by both pilots and
            received by Crew Scheduling no later than forty-eight (48) hours
            prior to the date of the earliest trip being traded. Crew Scheduling
            may waive the forty-eight (48) hour requirement.

      2.    A pilot may participate in up to five (5) trades each month.

      3.    Trip trade requests may be for a partial or an entire trip.

      4.    Trip trades must not violate FARs or any provision of this
            Agreement. Crew Scheduling may require a buffer equivalent to the
            buffer(s) used to construct the lines of time at any time when there
            is any potential for illegality under the FARs or this Agreement. If
            all of the provisions of this Article are met, the trade will be
            approved. If a trade is disapproved, the pilot will be advised, upon
            request, of the reasons for the denial.

      5.    Pilots on reserve may trade one (1) reserve day for another, subject
            to approval by Crew Scheduling.

      6.    A pilot who loses time from his schedule because of a trip trade
            which causes him to fall below his minimum monthly guarantee will
            have his minimum monthly guarantee adjusted.

      7.    Crew Scheduling will approve or reject a trip trade request within
            seven (7) days after it is received, but no later than twenty-four
            (24) hours before the report time for the earliest trip being
            traded. Crew Scheduling may waive this requirement. Trip trades are
            approved when the pilot obtains confirmation from Crew Scheduling.
            If Crew Scheduling implements a system of trip trade approval
            notification involving electronic, faxed, or other similar means of
            notification to the pilot's domicile, the trip trade will be
            considered approved when such notification is posted electronically
            or by hard copy.

      8.    At Company discretion, a pilot may drop trips into open time with a
            corresponding reduction of the pilot's monthly guarantee.

J.    Continuous Duty Overnights

      1.    Pure CDO lines

            a.    A pilot on a pure CDO line will be scheduled for no more than
                  four (4) consecutive CDOs.

            b.    A pilot on a pure CDO line will be scheduled for a minimum of
                  two (2) consecutive days off after three (3) consecutive CDOs
                  and three (3) consecutive days off after four (4) consecutive
                  CDOs.

            c.    CDO trips in pure CDO lines will be scheduled with a minimum
                  of five (5) hours of ground time, block in to block out. If
                  less than four (4) hours of ground time is realized, a pilot
                  must have twelve (12) hours off duty during his next scheduled
                  rest period.

      2.    Except for pure CDO lines, all other hardlines will be scheduled for
            no more than two (2) blocks of up to three (3) consecutive CDOs in a
            month.

      3.    A CDO trip will not be scheduled for more than five (5) legs.

      4.    CDO trips will terminate and the pilot will be released upon first
            arrival at the domicile following the



            CDO period.

      5.    A pilot will not be required to participate in training without his
            consent during the scheduled ground time on a CDO.

      6.    Except for pure CDO lines, CDO trips will be scheduled with a
            minimum of six (6) hours of ground time, block in to block out
            (minimum of five (5) hours block in to block out if the scheduled
            duty time for the CDO is fourteen (14) hours or less). If less than
            six (6) hours of ground time is realized, a pilot must have twelve
            (12) hours off duty during his next scheduled rest period.

      7.    No pilot will be scheduled/rescheduled from a CDO trip to any other
            trip, other than another CDO, unless he has received the minimum
            number of days off required by Article 24.D.2.

K.    General

      1.    A First Officer who cannot be awarded a bid because of the FAR
            minimum experience requirements will be awarded another bid in
            accordance with his seniority.

      2.    For the purposes of filling open time or the trading of trips, the
            individual pilot's experience category will be determined by the
            amount of hours accumulated as of the time of the awarding or
            assigning of such open time or the date on which the trip trade is
            processed.

      3.    A flight scheduled to terminate before 00:00 (midnight) of the first
            (1st) day will be considered to have terminated on the first (1st)
            day if it terminates no later than 0200 hours local time on the
            second (2nd) day.

      4.    Pilots domiciled outside the United States will be subject to this
            Agreement.

      5.    A reserve pilot must be assigned in specific equipment.

      6.    A pilot will not be required to drive or be driven to an airport as
            part of a regularly scheduled duty assignment nor will a pilot be
            required to transport passengers via ground transportation.

      7.    All times referred to in this Article are local time at the
            domicile.







                                    ARTICLE 7

                                    VACANCIES

A.    Standing Bids

      1.    Pilots must submit standing bids indicating order of preference for
            vacancies in status, equipment, and domiciles. The Company may
            require pilots to submit new or updated standing bids at least
            thirty (30) days prior to any circumstances that may cause the
            existing bid file to become outdated (e.g., domicile closures,
            domicile openings or other substantial operational changes, etc.).

      2.    The standing bid file will be maintained by the Company. Standing
            bids will be available for inspection by any pilot during normal
            office hours.

      3.    A pilot may change his standing bid at any time by submitting a new
            standing bid to the Company. A pilot must bid on an approved format
            submitted to the Company by U.S. Mail, overnight express, facsimile,
            electronically, if available, or any other means mutually agreed
            upon.

B.    Notice of Vacancy

      1.    The Company will determine when a vacancy exists.

      2.    No later than ten (10) days after the Company determines that a
            vacancy exists, it will post a notice of the vacancy. The notice
            will specify the status, equipment, and domicile within which each
            vacancy will occur.

      3.    Bidding will close at 1700 hours seven (7) days after the posting of
            the notice of vacancy.

C.    Awarding and Assignment of Vacancies

      1.    Awards will be posted by 1700 hours four (4) days after the closing
            of the bid.

      2.    The Company will not normally post secondary, tertiary, etc.,
            vacancies caused by filling primary vacancies.

      3.    Bids for vacancies will be awarded in order of seniority using
            standing bids on file as of the date bidding is closed.

      4.    If no pilot bids a vacancy, the Company may assign a pilot to that
            vacancy in reverse order of seniority.

      5.    The Company will determine the effective date of an award which may
            be changed provided adequate notice is given and the change is not
            made for arbitrary reasons. The Company may cancel an award at any
            time before its effective date.

      6.    If a pilot does not require initial, upgrade or transition training,
            he will fill the vacancy within forty five (45) days after the
            effective date of the award. If a pilot requires initial, upgrade or
            transition training, he will be assigned to training not later than
            sixty (60) days after the effective date of the award.

      7.    Once a pilot has successfully completed training, he will fill the
            vacancy as soon as possible after the effective date of the award.
            Prior to filling the vacancy, such pilot may be assigned such duties
            in his former status, equipment and domicile.



D.    Award Restrictions

      1.    The Company is not required to award a captain vacancy to a pilot
            who:

            a.    has not completed the ATP written;

            b.    does not have a current first class medical certificate;

            c.    does not have 2,500 hours total flight time; and,

            d.    does not have 500 hours multi-engine time.

      2.    The Company is not required to award a vacancy to a pilot if the
            vacancy requires initial, upgrade or transition training unless the
            awarded vacancy has a higher rate of pay.

      3.    The Company is not required to award a vacancy to a pilot until at
            least twelve (12) months of active service after he completes
            initial, upgrade or transition training for his current position.

      4.    Effective date of signing, new hire pilots will be frozen in their
            seat for a period of twenty-four (24) months of active service,
            except that they may be awarded an upgrade during such period.

      5.    The Company may waive any of the restrictions of this Article on a
            non-discriminatory basis. The Union will be notified in advance when
            any of the restrictions are waived.

E.    Domicile Swaps

      Pilots requesting a domicile swap must submit a request in writing to the
      Company. Approval of a swap is subject to the following:

      1.    No training expense will be incurred by the Company.

      2.    The Company will publish the proposed domicile swap for no less than
            three (3) days. If any pilot who is senior to the junior pilot
            involved in the proposed swap objects in writing before the end of
            the three (3) day period, the Company will not grant the requested
            swap.

      3.    If the swap is approved by the Company, it will be approved within
            fifteen (15) days of the date the Company receives the swap request.
            The pilots involved in the swap will coordinate the swap with Crew
            Scheduling.

F.    Temporary Vacancies

      1.    A temporary vacancy will be any known vacancy anticipated to exist
            for less than ninety (90) days.

      2.    Temporary vacancies will be filled by qualified pilots holding
            reserve lines in seniority order system-wide.

      3.    Pilots filling temporary vacancies away from their domiciles will be
            paid per diem and expenses in accordance with this Agreement.

G.    All times referred to in this Article are local time at the Company's
      headquarters.







                                    ARTICLE 8

                                  PAID DAYS OFF

A.    Pilots will accrue PDOs in accordance with the following schedule:




      1.    Years Of          Monthly
            Service           Accrual
            -------           -------

                           
            1                 4.0 hours
            2                 4.33 hours
            3                 4.67 hours
            4                 5.0 hours
            5                 5.33 hours
            6                 5.67 hours
            7                 6.0 hours
            8                 7.0 hours
            9                 7.33 hours
            10                7.67 hours


            PDOs will be charged at four (4.0) hours for each day a PDO is
            taken.

      2.    Pilots must be on active status on or before the fifteenth (15th)
            day of each month to accrue PDOs for that month.

      3.    At year end unused PDOs may be:

            a.    Cashed in.

            b.    Placed in the PDO Sick Bank.

            c.    Up to two times a pilot's annual accrual may be carried over
                  for subsequent use.

B.    PDOs For Annual Vacation

      1.    Not later than the 15th day of November, the Company will distribute
            the annual PDO Request Form for the following calendar year. Annual
            bids for PDOs must be returned by the 30th day of November. Pilots
            will be notified of their annual vacation bid award by the 15th day
            of December. Annual bids have priority over the ensuing monthly
            requests for PDOs.

      2.    Annual vacation bids will be awarded in order of seniority within
            equipment and status.

      3.    Vacation bids must be in full week increments, i.e., seven (7)
            consecutive days, Monday through Sunday. A pilot may bid only the
            PDOs that will be accrued as of November 30 of the current year;
            however, if the pilot's PDO bank drops below the vacation actually
            bid, the Company may cancel the corresponding amount of vacation
            (minimum of one (1) week).

      4.    Annual vacation bid awards will not be changed except by mutual
            agreement between the Company and the pilot.

      5.    The Company may restrict up to eight (8) weeks during a calendar
            year in each equipment type during which annual vacation may not be
            bid. Such a restriction will be imposed only for operational reasons
            that will be discussed with the Union before being imposed.



      6.    No less than seventy-five percent (75%) of accrued PDO's will be
            made available for the annual vacation bid by equipment type and
            status.

      7.    A pilot who is awarded a vacancy in different equipment after having
            been awarded annual vacation must rebid his annual vacation from
            remaining available vacation periods in the awarded equipment type.

      8.    Annual vacation periods that are vacated will be made available to
            other pilots on a first-come, first-served basis.

C.    PDOs For Monthly Vacation

      1.    Not later than the 1st day of each month, the Company will accept
            requests for PDOs in the following month (i.e., requests for a PDO
            in March must be submitted by February 1). Requests will be on a
            first-come, first-serve basis. Not later than the 20th day of the
            month, the Company will post the upcoming month's schedule that will
            indicate the PDO award for that month.

      2.    The Company will award all bids reasonably possible taking into
            account the needs of the schedule.

D.    PDO Sick Bank

      1.    Pilots may elect payment from their PDO Sick Bank up to one-half
            (1/2) of the minimum monthly guaranteed hours per pay period for
            furlough, medical, or family leave.

      2.    PDO Sick Bank days may be used for personal or family illness and
            injuries on or off the job.

      3.    There is no maximum number of days which can be placed in the PDO
            Sick Bank. During the month of December, pilots may notify the
            Company of the number of PDOs to be placed in the PDO Sick Bank.

      4.    Old Sick Bank days may be used for unscheduled absences, personal or
            family illness and injuries on or off the job. Old Sick Bank means
            the sick time accrued prior to December 5, 1994.

E.    General

      1.    Accrued PDOs may be exchanged for pay at the pilot's request. If a
            pilot elects to be paid for PDOs in lieu of taking time off, he will
            be paid at his current hourly rate for each PDO exchanged. A maximum
            of fifteen (15) PDOs may be exchanged each month. A pilot who leaves
            the employment of the Company will be paid for all PDOs accrued. In
            the event of a pilot's death, the amount will be paid to his estate.

      2.    PDOs will be charged only on days the pilot is scheduled to perform
            duty for the Company.

      3.    One (1) PDO will be charged for each continuous duty overnight (CDO)
            missed as a result of vacation or sick leave.




                                    ARTICLE 9

                                    SENIORITY

A.    A pilot's seniority date, except as hereinafter provided, shall begin on
      the first day he enters ground school. When two (2) or more pilots enter
      ground school on the same date, they shall be placed on the seniority list
      according to their age, i.e., the oldest shall be the most senior number,
      etc. A pilot's pay shall commence the day the pilot is instructed to
      report to the Company. All pilots covered by this Agreement shall be full
      time employees of the Company.

B.    A pilot shall lose his seniority if any of the following occurs:

      1.    Voluntary resignation;

      2.    Justifiable discharge;

      3.    Failure to report at the expiration of a leave of absence;

      4.    Failure to report for work after layoff within fourteen (14) days
            after written registered notice (date of mailing) to the last
            address appearing on Company records.

      5.    Absent three (3) consecutive working days without reasonable cause.

C.    Seniority shall prevail at all times, in matters concerning equipment
      bids, reductions, recall, base bidding, assignments, upgrades, transitions
      and vacations, or except as otherwise specified in this Agreement.

D.    A current seniority list will be published quarterly (January 1, April 1,
      July 1 and October 1) and a copy sent to the Union and each of the Union
      Executive Council Members.




                                   ARTICLE 10

                                    TRAINING

A.    The Company will establish, in accordance with the applicable FARs,
      training requirements for pilots.

B.    Pilots assigned to training will be so notified at least three (3) days
      prior to commencement of training, or unless such notice is waived by the
      pilot. Pilots assigned to upgrade or transition training shall have a
      minimum of one (1) calendar day free of duty at his domicile prior to the
      commencement of training. Further, pilots assigned to upgrade or
      transition training shall receive forty-eight (48) hours free of all duty
      prior to their first scheduled revenue flight but in no case later than
      five (5) calendar days after completion of the flight check. This
      requirement may be waived by the pilot.

C.    Training will not be scheduled for more than six (6) consecutive days
      followed by twenty-four (24) consecutive hours free of duty.

D.    Pilots shall not be required to attend training for more than eight (8)
      classroom hours a day.

E.    Initial, Upgrade and Transition Training:

      1.    Minimum requirements for First Officer to be considered for upgrade
            training are:

            a.    ATP written passed.

            b.    Current first class medical certificate.

            c.    2500 hours total flight time.

            d.    500 hours Multi Engine time.

            The Company may waive any of the requirements above.

      2.    Pilots must successfully pass ground training before progressing to
            flight training.

      3.    Pilots who successfully pass ground and flight training, but fail
            the first flight check shall be provided additional training and a
            second flight check. Non-recommendation for a flight check will be
            considered a failure.

      4.    Pilots in a first attempt at initial, upgrade or transition training
            programs who are unable to complete that program due to failure to
            pass a second flight check, or are not recommended for a second
            flight check, shall be treated as follows:

            a.    Pilots who are undergoing training for a Captain position will
                  be placed in a position of Company need, retain their
                  seniority number and become eligible to bid after 180 days,
                  provided they can successfully qualify for such position.

            b.    Pilots who are undergoing training for a First Officer
                  position will be given a maximum of two (2) additional days of
                  ground training and two (2) additional hours of flight
                  training in order to complete training. If they are unable to
                  complete the training, they, at the Company's discretion, may
                  be terminated.

      5.    Pilots entering an initial, upgrade or transition program for a
            second attempt shall likewise be provided with two (2) opportunities
            to pass a flight check. Non-recommendation for a flight check will
            be considered a failure. Pilots who fail to qualify after a second
            attempt at an initial, upgrade or




            transition program may, at the Company's discretion, be terminated.

      6.    Pilots who re-enter initial, upgrade or transition training for a
            second attempt may request a substitute to the instructor or check
            pilot assigned to the flight training. Such requests will be honored
            if another instructor or check pilot is available.

F.    Recurrent Checks:

      1.    Pilots shall take all required flight checks. All flight checks
            shall be given by an FAA representative or authorized Company check
            pilot. No flight check will be given subsequent to the pilot being
            on continuous duty for more than eight (8) hours or during a
            continuous duty overnight unless the pilot consents.

      2.    Pilots shall be given two (2) days advance notice of all flight
            checks, except for enroute line checks. Crews shall have the right
            to waive notice.

      3.    Pilots who fail to pass any recurrent proficiency flight check shall
            be given additional training in the areas in which they failed to
            demonstrate acceptable proficiency within three (3) days if
            practicable.

      4.    The eligibility for additional training or an additional flight
            check for any pilot who is unable to demonstrate acceptable
            proficiency after a second flight check shall be at the Company's
            discretion.

      5.    No maneuvers will be required during recurrent flight checks other
            than those included in the current Chautauqua Airlines Crewmember
            Training Program and or FARs.

      6.    Pilots will be given up to two (2) hours to become familiar with and
            adapt to the characteristics of a flight simulator before being
            required to take a proficiency flight check in that simulator.

      7.    Pilots who fail to successfully complete a flight check will not
            receive pay for a maximum of three (3) scheduled days missed while
            undergoing training and a second flight check.

      8.    A representative of the Professional Standards Committee may observe
            the recurrent proficiency flight check of any pilot who requests
            such an observation. Such observation shall be without pay; shall
            not impinge on the observing pilot's rest requirements; and shall
            not interfere with the conduct of the flight check.

G.    No pilot after receiving his first paycheck shall be required to pay for
      the use of any Company equipment or equipment outside the Company that is
      required for training.

H.    Whenever a pilot fails a simulator or aircraft check ride, oral or written
      examination, he shall be given additional training. Prior to such
      training, the pilot may consult with the instructor and a representative
      of the Professional Standards Committee as to the nature of training
      desirable.

I.    Prior Failures: when a pilot successfully completes an upgrading program
      to a higher status, prior failures shall no longer be counted against him
      in subsequent upgrade training. Once a pilot successfully completes
      transition training from one type to another type in the same status,
      prior failures shall no longer be counted against him when transitioning
      to another type in the same status.

J.    Equal Training: all pilots will receive equal and like training regarding
      oral or written examinations except during initial training for new hires
      or during type qualification as may be required by the FAA.

K.    Effective one (1) year from the date of signing of this Agreement no pilot
      shall be required to maintain qualification on more than one (1) type of
      equipment. The EMB 145/135 are a common type.




                                   ARTICLE 11

                         REDUCTION IN FORCE OR FURLOUGH

A.    The Company will provide at least fourteen (14) days written notice of any
      force surplus requiring a reduction in the number of pilots in a
      particular status, equipment or domicile.

B.    A pilot holding an award in the surplus status, equipment or domicile will
      be displaced in inverse order of seniority.

C.    Displaced pilots, in order of seniority, will be afforded the following
      options in the following order:

      1.    a.    Displace the most junior pilot in the same status and
                  equipment in the system, or;

            b.    Displace the most junior pilot in the same status in other
                  equipment at the current domicile, or, if the options in
                  C.1.a. and C.1.b. are unavailable;

            c.    Displace the most junior pilot in the same status in other
                  equipment in the system.

                                       or

      2.    a.    Displace the most junior pilot in a lower status, in the
                  same equipment in the same domicile, or, if unavailable;

            b.    Displace the most junior pilot in a lower status in other
                  equipment in the same domicile.

D.    Notwithstanding the options in paragraph C., above, the Company may assign
      any displaced pilot to a lower status in the same equipment, or into a
      status and equipment for which the pilot has previously been trained, for
      a period not to exceed one hundred and twenty (120) days. If such
      assignment occurs, the pilot will be paid according to the status and
      equipment to which his seniority entitles him.

E.    Any pilot who is bumped will be considered displaced and will be entitled
      to the same options as set forth in paragraph C., above.

F.    No pilot may be bumped by a pilot who is junior to him.

G.    Furlough

      1.    Pilots will be furloughed in inverse order of seniority. However, a
            pilot may, at the Company's option, take a voluntary furlough in
            lieu of displacing in other equipment, status or domicile.

      2.    Pilots returning from a voluntary furlough will give a thirty (30)
            day notice prior to returning. Pilots returning from voluntary
            furlough will return to their same status, equipment and domicile if
            their seniority allows. If their seniority does not permit them to
            hold their previous status, equipment and domicile, paragraph C.,
            will apply.

      3.    Pilots who are furloughed will retain and continue to accrue
            seniority.

      4.    Furloughed pilots will be recalled in seniority order prior to the
            Company hiring additional pilots.

      5.    During periods of furlough, pilots remaining on active service will
            be encouraged to take, on a voluntary basis, earned vacation and
            leaves of absence to prevent furlough. Pilots who are granted
            voluntary leaves of absence without pay during periods of furlough
            will continue to accrue seniority.



H.    Notification of Furlough

      1.    When a pilot is to be furloughed, he will be given fourteen (14)
            days notice, by return receipt requested, from the Company, unless
            the furlough occurs as a result of conditions beyond the Company's
            control, such as a curtailment or reduction in operation because of
            fire, flood, storm or similar acts of God, strikes, Company
            bankruptcy, catastrophic air accidents that have a direct effect on
            the Company's business, grounding of a fleet type, or similar
            occurrences. In such cases, the Company will give as much notice as
            possible. Copies of all furlough or recall notices will be sent to
            the EC Chairman and the Union.

      2.    A furloughed pilot will file his current address and phone number
            with the Company and will advise the Company, in writing, of any
            changes within seven (7) days of a change.

I.    Recall From Furlough

      1.    Recall notices will be sent by the Company, return receipt
            requested, to the last known address the Company has on file for the
            pilot.

      2.    A recalled pilot must notify the Company of acceptance within
            fourteen (14) days after the receipt of the recall notice or he will
            be subject to termination.

      3.    A furloughed pilot will be allowed fifteen (15) days after his
            receipt of a notice of a recall to report for duty at the point
            specified by the Company. The Company may, at its discretion, extend
            this period of time.






                                   ARTICLE 12

                                LEAVES OF ABSENCE

A.    Personal Leave of Absence

      The Company, at its sole discretion, may grant an administrative leave of
      absence without pay to pilots for a good cause for a period of time
      determined by the Company, but not to exceed ninety (90) days or such
      other period, as may be extended by mutual agreement of the parties
      hereto. Pilots shall submit their request for an administrative leave of
      absence in writing, setting forth the reasons therefore. The Company will
      then return to the pilot either a written approval or denial of the
      request. If the leave is approved, the Company shall, in writing, specify
      the details of the leave including, but not limited to, the date on which
      the pilot must report to the Company. While on leave of absence the pilot
      will continue to accrue seniority but not accrue benefits. However, said
      pilot on leave of absence may elect to continue health and life insurance
      benefits, provided the pilot pays in advance the full monthly premiums to
      the Company.

B.    Military Leave of Absence

      The Union and the Company agree to abide by all federal and state laws in
      regard to the granting of military leave to employees who are called to
      Reserve or National Guard duty. The Company will grant a leave of absence,
      without pay, not to exceed fifteen (15) days to any person ordered to
      Reserve or National Guard duty for annual training, or in the case of
      national emergency, except under specific military orders, or as otherwise
      required by federal law. The pilot shall give the Company reasonable
      notice of said active duty. An employee who volunteers for extended duties
      must get prior approval from the Company.

C.    Medical Leave of Absence

      1.    This type of leave of absence is designed to cover pilots who are
            unable to perform their duties as flight crew members due to health
            reasons. Upon presentation of documentation from a physician, which
            would deny, revoke, suspend or defer the pilot's medical
            certificate, these pilots will be allowed to draw full pay until
            accrued sick leave and or vacation are exhausted.

      2.    The Company may offer a non-flying position to any pilot who can no
            longer perform his job due to loss of medical.

      3.    Pilots who return to duty following a leave of absence under ninety
            (90) days shall return to the status, equipment and domicile they
            held prior to the leave. Such pilots shall fly as reserve from the
            day of return to active duty until the beginning of the following
            month.

      4.    Pilots who return to active duty after a leave of absence ninety
            (90) days or greater shall be entitled to return to the same status,
            equipment and domicile held by the pilot at the beginning of the
            leave. The junior pilot in the same status, equipment and domicile
            may be displaced as a result of the return from leave.

      5.    A pilot on medical leave of absence shall continue to accrue
            seniority. The Company shall continue to provide health and life
            benefits for a period of up to ninety (90) days after the pilot has
            exhausted his PDOs and old sick bank days.

D.    Family Leave of Absence

      All pilots covered by this Agreement, who have twelve (12) months of
      service will be eligible for the "Family and Medical Leave Act of 1993."
      Bases with less than fifty (50) employees will also be covered by the Act.
      While on family leave, the pilot will continue to accrue seniority and all
      benefits, without interruption and at no cost. Pilots on family leave will
      have the option to draw full pay until sick leave accumulation and



      vacation accumulation are exhausted. Upon return from family leave said
      pilot will have the option to return to the position and domicile held
      prior to said leave, or any vacancy in accordance with his seniority.

E.    Bereavement Leave of Absence

      If a pilot suffers a death in his immediate family he shall immediately
      notify the Chief Pilot, or his designee, and be granted up to five (5)
      consecutive days leave with full pay as requested by the pilot. A pilot's
      immediate family shall be defined as a pilot's mother, father, spouse,
      child. Three (3) consecutive days granted for brother, sister,
      mother-in-law, father-in-law, or grandparent. Such bereavement leave may,
      upon request, be extended additional days, and, if extended, may be either
      without pay or with pay charged against the pilot's earned vacation.

F.    Union Leave

      At the request of the Union (sixty (60) day advanced notice) a pilot shall
      be granted an indefinite Union leave of absence without pay to accept
      employment with the Teamsters Airline Division. While on such leave the
      pilot shall continue to accrue seniority, and be covered by Company
      insurance which will be reimbursed to the Company by the Union. The pilot
      will maintain all other benefits covered by this Agreement and may
      continue to participate in the 401K Plan. No more than one (1) pilot shall
      be permitted a Union leave at one time. A pilot on Union leave will be
      given a flight when necessary to remain current as a Chautauqua pilot. A
      pilot on such leave beyond ninety (90) days will be required to bid a
      vacancy to return to the service of the Company.






                                   ARTICLE 13

                               PHYSICAL STANDARDS

      The physical standards required of a pilot will be the standards
      established by the FAA.






                                   ARTICLE 14

                          INSURANCE AND OTHER BENEFITS

A.    The Company shall provide each pilot with a life insurance policy after
      ninety (90) days of service. The Company shall pay one hundred percent
      (100%) of the premium for this coverage.

      1.    Pilot Life Insurance:

            Two (2) times the basic annual earnings, rounded to the next higher
            $1,000. to a maximum of $250,000.

      2.    Accidental Death and Dismemberment:

            Four (4) times the basic annual earnings, rounded to the next higher
            $1,000. to a maximum of $500,000.

      3.    Dependent Life Benefits:

                                                
                  a.    Spouse:                       $5000

                  b.    Children:   0-8 days          $   0
                                    8 days - 6 mo     $ 100
                                    6 mo - 19 yrs     $2500



B.    The Company will provide health insurance for the pilots and qualifying
      dependents, the benefits of which shall not be less advantageous than the
      existing program coverage and benefits. For pilots with under one (1) year
      of service, the Company shall pay one hundred percent (100%) of the
      premium cost, minus fifteen dollars ($15.00), per pay period, for said
      pilot, however, dependent coverage premiums may be paid by said pilot
      through payroll deduction. For pilots with over one (1) year of service,
      the Company shall pay one hundred percent (100%) of the premium cost,
      minus fifteen dollars ($15.00) for individual pilot coverage, twenty-five
      dollars ($25.00) for pilot and spouse coverage or thirty-five dollars
      ($35.00) for pilot and family coverage, per pay period. Should the cost of
      such insurance increase, the Company may require greater contributions
      from pilots.

C.    The Company will provide the EC Chairman and the Union with copies of
      master insurance contracts for each policy required under the terms of
      this Agreement.

D.    The Company will provide a 125 Flexible Benefits Plan to all pilots, the
      benefits of which shall not be less advantageous than the existing
      program.

E.    The Company will provide retirement benefits (i.e., 401(k)) to all pilots
      and the benefits shall be no less advantageous than the existing program.

F.    The Company will provide pre-paid legal benefits to each pilot as provided
      in the Teamsters Airline Division Pre-Paid Legal Trust Fund. The Company's
      obligation to provide such benefit shall not exceed ten dollars ($10.00)
      per pilot per month.

G.    Effective January 1, 1999 the Company shall pay for dental plan coverage
      for single pilots or sixteen and one-half dollars ($16.50) per month
      towards the cost of family coverage. The plan for pilots and qualified
      dependents will be no less advantageous than the program offered to other
      employee groups.

H.    The Company will include the pilots in any profit sharing plan, bonus and
      incentive programs offered to all other non-management employees.






                                   ARTICLE 15

                          TRANSFER TO SUPERVISORY DUTY

A.    Pilots who are transferred to supervisory positions shall not lose their
      seniority number or placement on the Pilot Seniority List.

B.    Management flying of Company aircraft shall be restricted to those
      management pilots whose names appear on the Chautauqua Airlines Pilots
      Seniority List. Management pilots will not be eligible to bid nor be
      awarded a flying line, including those normally assigned as reserve lines.
      Management pilots may fly a trip for the purpose of remaining current in
      accordance with FARs, and to fly a trip in the event of an emergency or
      when no other line pilots are available.






                                   ARTICLE 16

                              MISCELLANEOUS FLYING

A.    Captains and First Officers shall be paid in accordance with the rates set
      forth in the Agreement on all flights.

B.    Pilots may not fly commercially outside the Company so as to reduce the
      number of available flight hours per month as agreed herein or as stated
      in applicable FAA regulations except for flying associated with military
      reserve or guard duties.

C.    The Company will not transfer any Company aircraft or schedule any
      pilot(s) to fly any trips for airlines that are on strike unless mutually
      agreed to by the Company and the Union.

D.    A rental car will be provided to any pilot away from his domicile and off
      duty for a calendar day.







                                   ARTICLE 17

                                NOTICES TO PILOTS

      All notices to pilots involving station assignment, promotion, demotion,
      furloughs, and leaves of absence shall be stated in writing, with a copy
      mailed to the Union office.






                                   ARTICLE 18

                               GRIEVANCE PROCEDURE

A.    Non Disciplinary Grievances

      Any pilot or group of pilots covered by this Agreement who has a grievance
      concerning any action of the Company affecting them, except matters
      involving discipline or discharge, shall have such grievance(s) considered
      and handled in accordance with the following procedures. It is the intent
      of the parties to resolve grievances or potential grievances informally
      and at the lowest level possible. There shall be an earnest effort on the
      part of the parties to settle grievances promptly and in accordance with
      the procedures outlined herein.

      1.    Step 1 - The complaint should be informally discussed between the
            grievant, the Chief Pilot, and a Union representative, if the pilot
            desires a Union representative to be present. Teleconferencing may
            be used at the discretion of the parties. This discussion should
            take place within thirty (30) calendar days of the incident giving
            rise to the dispute or within thirty (30) days of the grievant
            reasonably having knowledge of the incident.

      2.    Step 2 - If the above discussion does not resolve the complaint
            outlined in paragraph 1, above, the grievant then may discuss the
            complaint with the Vice President of Operations within ten (10) days
            following the decision arrived at in paragraph A.1., above. If the
            grievant desires, a Union representative may be requested to be
            present or teleconferencing may be used. Any disagreement should be
            reduced to writing and a copy sent to the grievant and the Union.

      3.    Step 3 - If a resolution is not reached in paragraphs A.1. and A.2.,
            above, the grievant may have the Union reduce the complaint to
            writing on a grievance form and forward the grievance to the Vice
            President of Operations within ten (10) days following receipt of
            the written decision arrived at in paragraph A.2., above. The
            current Union grievance form will be utilized. The Company shall
            have fifteen (15) calendar days, following the postmarked date of
            the grievance mailing to complete and return the grievance form. The
            Company shall convene a hearing within ten (10) days of the previous
            decision to review the case. The hearing should include, as a
            minimum, the Vice President of Operations, or his designated
            representative, the grievant, and a Union representative.
            Teleconferencing may be used. The Company will deliver its decision
            in writing within ten (10) days following the hearing.

      4.    Step 4 - The grievant may appeal this decision to the System Board,
            if desired, within fifteen (15) calendar days of the hearing
            decision.

      5.    The Union may file a grievance on behalf of a grievant. A member of
            the pilot's Executive Council may be appointed to act on behalf of
            the Union.

B.    Discipline and Discharge

      1.    Pilots, who are a party to incidents involving discipline or
            discharge, shall be retained on the payroll, but may be removed from
            service, until a meeting has been held and a decision arrived at in
            writing by the Company. Teleconferencing may be utilized and the
            grievant, a Company representative, and a Union representative, and
            any others, as desired, may be present. Following the Company
            decision, the grievant may be suspended from the payroll,
            discharged, or given other disciplinary actions.

      2.    In the case of discipline or discharge of a probationary or
            non-probationary pilot, the precise charge and or actions will be
            reduced to writing and a copy furnished to the grievant and the
            Union. A probationary employee does not have the right of employing
            the grievance, System



            Board, and arbitration procedure.

      3.    Within ten (10) calendar days of receipt of notice of the action
            taken in paragraph 2, above, the grievant may file a grievance with
            the Vice President of Operations, or his designee, appealing the
            action.

      4.    The Vice President of Operations, or his designee, will convene a
            hearing to hear the appeal within fifteen (15) calendar days of the
            date of postmark of the appeal. The Company will render a written
            decision within ten (10) calendar days following the hearing which
            shall be forwarded to the grievant and the Union.

      5.    Any appeal of the decision rendered in paragraph 4, above, must be
            made to the System Board within fifteen (15) calendar days following
            receipt of said decision. The appeal will be forwarded as in
            paragraph 3, above. Nothing in this Article shall be construed as
            extending the rights of Section B to a pilot during his or her
            probationary period.

C.    General

      1.    The time limits set forth in this Article may be extended by mutual
            agreement of the parties reduced to writing.

      2.    Failure on the part of the Company, the grievant, or the Union to
            adhere to the time limits set forth herein, or as mutually agreed
            to, shall constitute a waiver of the position of the party failing
            to comply.

      3.    If a grievant is exonerated, his personnel file shall be cleared of
            all reference to the incident. Records may be kept in a dead file
            but may not be used in future disciplinary actions. A grievant who
            is cleared of all charges shall be made whole as pertains to wages,
            seniority, longevity, and benefits.

      4.    Grievances, decisions, and appeals shall be forwarded by personal
            delivery or through the U.S. Mail, certified postage prepaid, return
            receipt requested, addressed to the last known address of the
            grievant with a copy to the Union. Refusal to accept delivery
            constitutes delivery.

      5.    A pilot shall have the right of Union representation at all meetings
            with the Company. A pilot shall be advised in advance of the nature
            of the subject of any investigation, hearing, or conference.

      6.    The Union, or its representative, and the grievant shall have access
            to the grievant's personnel file for review in any discipline or
            discharge case. The Company shall cooperate in making any reasonably
            requested material available that is relevant to the case.






                                   ARTICLE 19

                           SYSTEM BOARD OF ADJUSTMENT

A.    In compliance with Section 204, Title II, of the Railway Labor Act, as
      amended, there is hereby established a System Board of Adjustment for the
      purpose of adjusting and deciding disputes which may arise under the terms
      of this Agreement and any amendment or additions thereto and which are
      properly submitted to it, which Board shall be known as Chautauqua Pilots'
      System Board of Adjustment, hereinafter referred to as "the Board."

B.    Composition of the Board

      1.    The Board shall consist of four (4) members, two (2) of whom shall
            be selected and appointed by the Company and two (2) of whom shall
            be selected and appointed by the Union, and such appointees shall be
            known as "Board Members." In addition, the Company and the Union
            shall each designate an alternate, and in the event of
            unavailability of a Board Member, such alternate shall serve in
            place of the absent Board Member.

      2.    The two (2) Board Members appointed by the Company and the two (2)
            Board Members appointed by the Union (normally one (1) line pilot
            and one (1) Union representative), and their alternates, shall serve
            for one (1) year from the date of their appointment and thereafter
            until their successors have been duly appointed. Vacancies shall be
            filled within thirty (30) days in the same manner as is provided
            herein for the selection and appointment of the original Board
            Members and the original alternates.

      3.    The terms of office of Chairman and Vice Chairman shall be for one
            (1) calendar year. Thereafter, from year to year, the Board shall
            designate one (1) member to act as Chairman and one (1) member to
            act as Vice Chairman for one (1) year terms or until his successor
            has been duly selected. Such terms of office shall commence on
            January 1st of each year.

      4.    The office of Chairman shall be filled alternately by the parties. A
            Union representative shall serve as Chairman and a Company
            representative shall serve as Vice Chairman in even years, and vice
            versa, in odd years. The Vice Chairman shall act as Chairman in his
            absence.

      5.    The Board shall meet once every three (3) months at Company
            headquarters, (unless a different place for the meeting is jointly
            agreed upon by the Board), during the months of January, April, July
            and October of each year provided that at such time there are cases
            filed with the Board for consideration. The meetings shall continue
            in session until all matters before it have been considered unless
            otherwise mutually agreed upon in writing.

      6.    Members of the Board who are employees of the Company shall suffer
            no loss of pay while attending Board meetings.

C.    Jurisdiction of the Board

      1.    The Board shall have jurisdiction over all disputes growing out of
            grievances or out of the interpretation or application of any of the
            terms of this Agreement or amendments thereto submitted by the Union
            to the Vice President of Operations for Chautauqua or his designee.
            The jurisdiction of the Board shall not extend to proposed changes
            in hours of employment, rates of compensation, or working conditions
            covered by this or other existing agreements between the parties
            hereto.

      2.    The Board shall consider any dispute properly submitted to it when
            such dispute has not been previously settled in accordance with the
            provisions of Article 18.



D.    Proceeding Before the Board

      1.    All disputes properly referred to the Board for consideration shall
            be addressed to the Chairman. Five (5) copies of each petition,
            including all papers and exhibits in connection therewith, shall be
            forwarded to the Chairman, who shall transmit one (1) copy thereof
            to each member of the Board within three (3) calendar days. Each
            case submitted shall show:

            a.    Question or questions at issue.

            b.    Statement of facts.

            c.    Position of the grievant(s).

            d.    Position of the Company.

      2.    Upon receipt of notice of the submission of a dispute, the Chairman
            shall set a date for hearing, which shall be the time of the next
            regular meeting of the Board as provided in Section B, above, or, if
            at least two (2) Board Members consider the matter of sufficient
            urgency and importance, then at such earlier date at such place as
            the Chairman and Vice Chairman shall agree upon but not more than
            thirty (30) days after such request for a meeting is made by at
            least two (2) of said Board Members, and the Chairman shall give the
            necessary notices in writing of such meeting to the Board Members
            and to the parties to the dispute.

      3.    Pilots covered by this Agreement may be represented at Board
            hearings by such person or persons as they may choose and designate,
            and the Company may be represented by such person or persons as it
            may choose to designate. Evidence may be presented either orally or
            in writing, or both.

      4.    The Board Member(s) may summon witnesses who are employed by the
            Company and who are deemed necessary by the Board. Such employee
            shall suffer no loss of pay.

      5.    The Board shall be competent to hear the disputes properly submitted
            to it and decide said disputes by a majority vote of all members of
            the Board. Decisions of the Board shall be final and binding upon
            the parties hereto.

E.    Deadlock Procedures

      When a dispute is properly submitted to the Board for hearings before the
      two (2) Company and the two (2) Union Board Members, or their alternates,
      and the Board is unable by majority vote to decide the dispute, the Board
      shall declare itself deadlocked and it shall select an arbitrator as
      provided herein. The arbitrator shall join the Board as a Board Member and
      as Chairman in subsequent consideration and hearing of the dispute. The
      Board, so composed, shall be competent to decide said dispute by majority
      vote. Decisions of the Board so composed shall be final and binding on the
      parties.

F.    Deadlock Notices

      When a deadlock occurs for any reason, the Board, by written notice, shall
      immediately notify the Union of such deadlock, including the date thereof,
      and the need for the services of a fifth member of the Board. If the Union
      desires to submit the case to such five (5) member Board, it must do so by
      written notice to the Company President with copies to the Chairman and
      Vice-Chairman of the Board within ten (10) days from the receipt of notice
      from the Board that the Board was deadlocked.

G.    Selection of a Fifth (5th) Board Member (Arbitrator)



      1.    If notice is provided of the desire to convene the five (5) member
            Board, the Union and the Company shall promptly meet, but in no
            event later than ten (10) days from the date of such notice by the
            Union to select an arbitrator by mutual agreement, and if agreement
            is reached, shall advise the members of the Board of the name,
            address, and availability of the arbitrator.

      2.    Within ten (10) days after proper notification, if no agreement on
            the selection of an arbitrator can be reached, the Company or the
            Union may petition the Federal Mediation and Conciliation Service
            (FMCS) for a list of seven (7) names from which the fifth (5th)
            member shall be selected. Either party shall have the right to
            reject one (1) list of arbitrators sent by the FMCS in its entirety,
            in which case the parties will request a new list of arbitrators
            from the FMCS. The order of striking shall be determined by lot for
            the first case in which a neutral member is chosen under the
            provisions thereof and, in subsequent cases, the parties shall
            alternate taking the first strike.

H.    Five (5) Member Board Hearing

      Within thirty (30) days after the selection of the fifth (5th) member from
      the panel, and with the arbitrator's concurrence, the Board shall schedule
      a hearing of the dispute by the five (5) member Board, including the
      presentation of such witnesses and evidence as the five (5) member Board
      shall in its discretion permit. A decision of a majority of the Board
      sitting with the fifth (5th) member shall be final and binding upon the
      parties thereto. The Board may agree to have the arbitrator hear the case
      without the Board present.

I.    General

      1.    Expenses of the Board

            Each of the parties hereto will assume the travel expenses and other
            expenses of the Board members selected by it and each of the parties
            hereto will assume the travel expense and other expenses of the
            witnesses called or summoned by it except employees of the Company
            will suffer no loss of pay and that the Company will provide space
            available transportation over its lines, in accordance with existing
            regulations, for any Board Member or Company employee who is called
            or summoned as a witness. The reasonable expense and compensation of
            the fifth (5th) member arbitrator appointed in accordance with
            Section G hereof will be born equally by the parties hereto. The
            Chairman and the Vice Chairman, acting jointly, shall have the
            authority to incur such other expenses as in their judgment may be
            deemed necessary for the proper conduct of the Board, and such
            expenses shall be borne equally by each of the parties hereto.

      2.    Freedom to Act

            Each and every Board Member shall be free to discharge his duty in
            an independent and uncoerced manner, without fear that his
            individual relations with the Company, with the pilots, or with the
            Union will be affected in any manner by any action taken by him in
            good faith in his capacity as a Board Member.

      3.    Time Limits

            Time limits as set forth in this Article may be extended in writing
            by mutual agreement of the Company and the Union.

      4.    Rights Under Railway Labor Act

            Nothing herein shall be construed to limit, restrict, or abridge the
            rights or privileges accorded either to the pilots or to the
            Company, the Union, or to their duly accredited representatives
            under the provisions of the Railway Labor Act, as amended.

      5.    Records of the Board

            The Board shall maintain a record of all matters submitted to it for
            its consideration and of all findings and decisions made by it.



                                   ARTICLE 20

                                UNION MEMBERSHIP

A.    Union Membership

      It shall be a condition of employment that all employees of the Company
      covered by this Agreement or any part thereof, shall on the effective date
      of this Agreement, become and remain members in good standing of the
      Union. It shall be a condition of employment that all employees of the
      Company covered by this Agreement and hired on or after its effective date
      shall, on or before the ninetieth (90th) day following the beginning of
      the initial seniority date, become and remain members in good standing in
      the Union.

B.    Initiation Fees and Dues Deduction

      The Company will deduct from the wages of any employee covered by this
      Agreement said employee's dues as a member of the Union upon receiving the
      employee's voluntary and individual written authorization for the Company
      to make such deductions, signed by the employee. Such authorization form
      to be provided by the Union. The Company will pay over to the proper
      officers of the Union the wages withheld for such initiation fees and/or
      dues. The amount so withheld shall be deducted from the appropriate
      paycheck, reported and paid to the Union monthly. The following
      information will be reported and transmitted with the monthly check off:
      employee's social security number, full name, dues rate, rate of pay and
      status of employment.

C.    Indemnification Clause

      The Union agrees that it shall indemnify the Company and hold the Company
      harmless from any and all claims which may be made by the employee or
      employees against the Company by virtue of the wrongful application or
      misapplication of any of the terms of this Article.

D.    Dues Collection After Termination

      In the event of termination of employment, there shall be no obligation
      upon the Company to collect dues until all other deductions have been
      made.

E.    Failure to Pay Dues

      The Union agrees that written notice shall be given to the Company at
      least thirty (30) days before the Company is required to remove such
      employee from his employment by reason of his failure to maintain his
      membership in good standing in the Union in accordance with Section A. of
      this Article.

F.    Employee List

      1.    When applicable, the Company will advise the Union of the names of
            any new hires, termination, layoffs or recall of any employees
            covered by this Agreement. Such information will include the
            name(s), hire date, layoff date, termination date or recall date of
            such employees.

      2.    The Company will mail to the Union a report, broken down by aircraft
            type, containing the current address, telephone number and base pay
            rate of each pilot, subject to modifications for consistency. The
            report will be mailed to the Union quarterly or when there are
            substantial changes.

G.    Individual Dues Payment

      It shall be the responsibility of any employee who is not on a dues
      deduction program to keep his



      membership current by direct payments of monthly dues to the Union.

H.    Dues Deduction Error

      Should a deduction be missed, or if an insufficient amount is deducted,
      the Company will be responsible to make the proper adjustment the
      following month.

I.    Bulletin Board

      The Company will provide the Union with one (1) suitable glass covered
      bulletin board at a location designated by the Union for the posting of
      official notice of Union meetings, elections and other notices pertaining
      to internal Union matters. All such notices shall be signed by a duly
      authorized representative of the Union.

J.    Union Access

      The Company agrees the Union Representative(s) shall have free access to
      its operations facilities to transact that which is necessary for the
      administration of this Agreement. The Company further agrees to provide
      the Union Representative with proper ID to enter its operation facilities,
      if required.

K.    Hospitality Committee

      The Company agrees to formally set aside a mutually agreeable period of
      time during or immediately after each new hire class during which the
      Union Hospitality Committee may meet with each new hire class. The Company
      and the Union will mutually agree upon those committee representatives
      that will present Hospitality Committee materials during the new hire
      class.






                                   ARTICLE 21

                                    UNIFORMS

A.    A pilot shall wear the standard uniform as required in Company regulations
      at all times in connection with any event or special assignment where the
      employee is identified as a pilot with the Company.

B.    The pilot will be responsible for the total cost of the initial basic
      uniform. The basic uniform consists of pants, shirts, ties, hat and
      jacket.

C.    The Company will provide each pilot with one set of wings, one hat badge
      and one pair of epaulets. The Company will also supply a Captain's hat
      after completion of his upgrade.

D.    The pilot shall be permitted to wear the official Union insignia on a
      place visible on the pilot's uniform.

E.    The Company will meet with the EC Chairman, or his designee, to resolve
      problems involving procurement of uniform items or before making changes
      to the uniform.

F.    If the Company changes uniforms, it shall be responsible for supplying
      each pilot with the new uniform.

G.    After the first full year of longevity and after every year of longevity
      accrued thereafter, the Company will credit each pilot's uniform account
      with the uniform vendor with two hundred dollars ($200.00) to be used for
      the replacement of uniform items and accessories available from a
      Company-approved vendor.

H.    The price of items purchased through the Company will be at the Company's
      cost.







                                   ARTICLE 22

                                  NEW EQUIPMENT

      Before an aircraft for which pay scales are not specified in this
      Agreement is placed into service, conferences may, irrespective of any
      provisions of the Agreement, be initiated by either the Company or the
      Union, in accordance with Section 6, Title I of the Railway Labor Act, as
      amended, for the purpose of negotiating salaries, rules, and/or working
      conditions for such aircraft which shall be retroactive to the date such
      aircraft is placed into service. Such conferences, if held, shall not
      delay the placing of such aircraft into service providing the Company has
      given the Union sixty (60) days advance notice in writing that it is
      considering a different type of aircraft. However, if any such aircraft is
      placed into service sixty (60) days or thereafter of written notice to the
      Union and before agreement is reached regarding pay, rules, and/or working
      conditions, such aircraft will be operated by the pilots covered by this
      Agreement and will be operated in accordance with all of the provisions of
      this Agreement except where FARs are more restrictive, in which case FARs
      will represent the minimum standard in those areas where it is more
      restrictive than the Agreement.






                                   ARTICLE 23

                                     GENERAL

A.    Nothing in this Agreement will be construed to limit or deny any pilot any
      rights or privileges to which he may be entitled under provisions of the
      Railway Labor Act, as amended.

B.    The Company will supply copies of the Agreement for distribution to the
      pilots within thirty (30) days of the signing of this Agreement. The
      Company will also provide trainees with a copy of this Agreement during
      initial training.

C.    A pilot will immediately notify the Company of any change in address or
      telephone contact number.

D.    The Company will furnish an identification card to each pilot. Pilots will
      bear the cost of replacement, if lost.

E.    No pilot or his estate will be required to pay the cost of repair or
      replacement of any aircraft, equipment or property damaged or destroyed in
      the performance of his duties with the Company.

F.    Pilots will be subject to the pass policy of the Company as afforded to
      all other employees of the Company not covered by this Agreement. Pilots
      who retire from the Company after reaching age sixty (60) with fifteen
      (15) or more years of service will be entitled to Company pass privileges.
      The designated Union Business Representative will be provided space
      available travel on the Company system for the purpose of administering
      this Agreement.

G.    This Agreement, when accepted by the parties and signed by the respective
      representatives duly authorized, will constitute the sole agreement
      between them involving the pilots. Any alteration or modification of this
      Agreement must be made by and between the parties and must be in writing.

H.    If any provision of this Agreement is declared invalid by any competent
      court or government agency because of existing or future legislation, such
      invalidation will not affect the remaining provisions of this Agreement.

I.    The Company will provide all pilots with required Company manuals. The
      pilots will be responsible for such manuals and will, if such manuals are
      lost or negligently damaged, be required to reimburse the Company for the
      cost of replacements. Upon termination, the pilot must return such manuals
      or reimburse the Company for the cost thereof.

J.    The Union will appoint a Professional Standards Committee composed of
      pilots which will confer with the Company on matters pertaining to the
      professional proficiency of pilots. Members of this Committee will be
      permitted to observe any training period or proficiency check. The Union
      will appoint a Safety Committee, composed of pilots, which will confer
      with the Company on matters pertaining to safety operations. A member of
      each of these Committees will be permitted to attend any hearing or
      investigation of an accident or incident of Company aircraft operated by
      pilots, subject to the regulations of the government agency involved. The
      Company will cooperate in releasing such members to participate in such
      hearings.

K.    A personnel file will be maintained for each pilot. Upon request, the
      pilot will be given the opportunity to review his file. If a pilot
      receives disciplinary action, any portion of this file to be relied on by
      the Company in support of such disciplinary action will be open for review
      upon request by the Union representative and the pilot. Further, any
      rebuttal letter written by the affected pilot related to the disciplinary
      letter will also be placed in his personnel file. The Company cannot use
      any disciplinary notices in support of disciplinary action if the pilot
      had not been provided with written notice of the prior disciplinary action
      at the time discipline was assessed. A copy of all disciplinary letters
      issued to pilots will be forwarded to the Union.

L.    The Company will provide current Jepps Approach plates and IFR charts to
      each pilot.



M.    Reimbursement for Flight Pay Loss

      1.    Except as provided in Article 19 .D.4. and Article 19. I. 1., the
            Union shall reimburse the Company for Union leave paid to a pilot by
            multiplying the number of hours on leave paid by the Company times
            the applicable hourly rate for the pilot, plus twenty-three percent
            (23%) to cover the cost of fringe benefits.

      2.    The Union agrees to reimburse the Company within forty-five (45)
            days after receipt of the Company's bill.

N.    The Company will not randomly review flight data recorder or cockpit voice
      recorder information for the purpose of discovering unsuspected
      misconduct.






                                   ARTICLE 24

                                HOURS OF SERVICE

A.    Rest Periods

      1.    Scheduled Rest

            a.    In domicile, a pilot will be scheduled with a minimum of ten
                  (10) hours of rest between duty periods (from release time
                  until next report time).

            b.    A pilot will not be scheduled for reduced rest of less than
                  eight and one half (8.5) hours (from release time until next
                  report time).

            c.    When away from domicile, a pilot will not be scheduled for
                  less than eight and one half (8.5) hours of rest (from release
                  time until next report time).

      2.    Actual Rest

            A pilot will receive no less than eight (8) hours between duty
            periods (from release time until next report time).

B.    Duty Time Limitations

      1.    A pilot will not be scheduled/rescheduled for a duty period in
            excess of fourteen (14) hours, unless by consent of the pilot,
            except that a CDO may be scheduled for up to fifteen (15) hours.

      2.    A pilot scheduled for a reduced rest overnight will be scheduled for
            no more than ten (10) hours of duty in his next duty period.

      3.    A pilot's duty time for a flight, trip or trip pairing shall
            commence at the later of the pilot's scheduled report time or actual
            report time. Report time shall be scheduled for thirty (30) minutes
            prior to departure time of the first flight, but may be extended to
            forty-five (45) minutes at the Company's discretion. It will end
            fifteen minutes after arrival time of the last flight of the duty
            period, plus an additional fifteen (15) minutes if clearing customs,
            repositioning an aircraft, or a combination of the above. At the
            request of either party, the parties will meet to evaluate, on an
            airport-by-airport basis, circumstances involving longer or shorter
            times for clearing customs or repositioning that do not fit the
            foregoing parameters. If the parties agree that an adjustment should
            be made, the change will be implemented.

      4.    Duty time for multiple day trip pairings will begin and end at a
            pilot's domicile.

      5.    Trip pairings will not be scheduled in excess of five (5)
            consecutive days and if scheduled for five (5) days, the fifth day
            may only be one leg returning the pilot to domicile.

      6.    A duty period will contain a maximum of ten (10) landings.

      7.    Except in unusual circumstances, a duty period will contain a
            maximum of three (3) scheduled consecutive round trips to the same
            destination.

C.    Flight Time Limitations

      A pilot will not be scheduled for more than:



      1.    Eight (8) hours of block time in a duty period, except that a pilot
            flying turbo-jet equipment may be scheduled for no more than nine
            (9) hours of block time in a duty period.

      2.    Thirty (30) hours of block time in any seven (7) day period.

      3.    One hundred (100) hours of block time in a calendar month.

D.    Days Off

      1.    The Company will schedule regular and buildup lineholders with at
            least twelve (12) days off in domicile per bid period. A pilot
            holding a reserve line will be scheduled for at least eleven (11)
            days off in domicile per bid period. A pilot in training will be
            scheduled for days off during such training in accordance with
            Article 10.

      2.    Hardlines, buildup and reserve lines will be scheduled with one (1)
            period of at least three (3) consecutive days off. All other periods
            of days off will be scheduled as groups of at least two (2) days,
            except during the integration period, which may contain single days
            off.

      3.    If a pilot is unavailable for flight duty for a part of a bid
            period, his minimum scheduled days off will be prorated. A pilot is
            unavailable if he cannot perform flight duty because, e.g., of lack
            of current qualifications or leaves, excluding sick leave and
            bereavement leave.

      4.    A pilot will not be scheduled/rescheduled to perform any duty,
            including ground school, for more than six (6) consecutive days
            without a calendar day off.

      5.    In no case will any pilot be reduced below his minimum days off in
            domicile without receiving a replacement day off in the same or
            following month.

      6.    A pilot who voluntarily reduced his days off will not be entitled to
            replacement day(s) off.

E.    Notification

      1.    The Company will maintain a standard method of notifying a pilot if
            scheduled departure time will be appreciably delayed (more than one
            (1) hour) or canceled. A pilot will be notified as far in advance as
            is practicable.

      2.    The Company will not contact an off duty pilot between 2200 and 0600
            local domicile time. The following exceptions apply:

            a.    If there is a change in the pilot's schedule, the pilot may be
                  called one (1) hour prior to the original or revised report
                  time, whichever is earlier, provided the call is made to
                  minimize the disruption to the pilot's rest. No more than one
                  (1) personal contact will be made during that period by the
                  Company for this reason.

            b.    A pilot on reserve may be contacted during his period of
                  reserve availability.

            c.    A pilot off duty may be contacted when the operational
                  requirements dictate.

      3.    A pilot who is unable to report for duty will notify Crew Scheduling
            as far in advance as practicable.

      4.    A pilot will not be required to keep the Company notified of his
            whereabouts on his days off.







                                   ARTICLE 25

                                    DURATION

This Agreement will become effective on date of signing and will continue in
full force and effect through November 17, 2001 and will renew itself without
change until each succeeding November 17 thereafter, unless written notice of
intended change is served in accordance with Section 6, Title I, of the Railway
Labor Act, as amended, by either party thereto at least ninety (90) but not more
than one hundred and twenty (120) days prior to November 17, 2001 , or any
November 17 thereafter.

IN WITNESS WHEREOF, the parties have signed this Agreement this 17th day of
November, 1998.

For International Brotherhood               For Chautauqua Airlines, Inc.
Of Teamsters

/s/ Ray Benning                             /s/ Edward Wegel
- ------------------------------              -------------------------------
Ray Benning                                 Edward Wegel
Teamsters Airline Division                  President and CEO

/s/ Henry Ward                              /s/ Donald Young
- ------------------------------              -------------------------------
Henry Ward                                  Donald Young
Secretary-Treasurer                         Executive Vice President and COO
Teamsters Local 747

/s/ Bruce Perkins                           /s/ James Muroski
- ------------------------------              -------------------------------
Captain Bruce Perkins                       James Muroski
Chairman Executive Council                  V.P. - Maintenance and
                                            Operations

/s/ Christopher Sovich                      /s/ Alex Osleger
- ------------------------------              -------------------------------
Captain Christopher Sovich                  Alex Osleger
Negotiating Committee Member                Director Operations


/s/ Michael Melody
- ------------------------------
Captain Michael Melody
Negotiating Committee Member

/s/ Larry Cutler
- ------------------------------
First Officer Larry Cutler
Negotiating Committee Member






                              LETTER OF AGREEMENT 1

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

             THE PILOTS IN THE SERVICE OF CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                           DORNIER 328 BASE PROTECTION

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

This Letter of Agreement is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union").

For the twenty-four (24) month period set forth in the grievance settlement
dated September 16, 1998 regarding the Dornier 328, pilots assigned to equipment
other than the Dornier 328 will be base protected should a Dornier 328 be
assigned to their base.

IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 17th
day of November, 1998.

For International Brotherhood             For Chautauqua Airlines, Inc.
Of Teamsters

/s/ Ray Benning                             /s/ Edward J. Wegel
- ------------------------------              -------------------------------
Ray Benning, Director                       Edward J. Wegel
Teamsters Airline Division                  President and CEO

/s/ Henry Ward                              /s/ Donald C. Young
- ------------------------------              -------------------------------
Henry Ward                                  Donald C. Young
Secretary-Treasurer                         Executive Vice President and COO
Teamsters Local 747

/s/ Bruce Perkins                           /s/ James I. Muroski
- ------------------------------              -------------------------------
Captain Bruce Perkins                       James I. Muroski
Chairman Executive Council                  V.P. - Maintenance and Operations

/s/ Christopher Sovich                      /s/ Alex Osleger
- ------------------------------              -------------------------------
Captain Christopher Sovich                  Alex Osleger
Negotiating Committee Member                Director of Operations

/s/ Michael Melody
- ------------------------------
Captain Michael Melody
Negotiating Committee Member

/s/ Larry Cutler
- ------------------------------
First Officer Larry Cutler
Negotiating Committee Member







                              LETTER OF AGREEMENT 2

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

             THE PILOTS IN THE SERVICE OF CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                                 RETROACTIVE PAY

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

This Letter of Agreement is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union").

WHEREAS: the Company and the Union desire to address the delay in pay increases
associated with the negotiation of the new Agreement;

NOW THEREFORE IT IS AGREED:

1.    Each pilot in the employ of the Company on the date of signing of the
      Agreement shall receive an amount equal to two and one-half percent (2.5%)
      of his annual salary on the day before the date of signing the Agreement,
      subject to applicable deductions. For a pilot whose date of hire is later
      than December 1, 1997, such amount shall be prorated for that portion of
      the previous twelve (12) months that he was not on the seniority list. All
      such payments shall be made no later than the second paycheck following
      the date of signing of the Agreement.

2.    In addition, each pilot in the employ of the Company on the date of
      signing of the Agreement who is also in the employ of the Company on the
      date of distribution of 1998 profit sharing (approximately March 1999)
      shall receive an amount equal to one percent (1%) of his annual salary on
      the day before the date of signing the Agreement, subject to applicable
      deductions. The same proration shall be made as for the payment provided
      for in the preceding paragraph. All such payments shall be made at or
      about the time of paying the 1998 profit sharing as indicated above.

IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 17th
day of November, 1998.

For International Brotherhood               For Chautauqua Airlines, Inc.
Of Teamsters

/s/ Ray Benning                             /s/ Edward J. Wegel
- ------------------------------              -------------------------------
Ray Benning, Director                       Edward J. Wegel
Teamsters Airline Division                  President and CEO



/s/ Henry Ward                              /s/ Donald C. Young
- ------------------------------              -------------------------------
Henry Ward                                  Donald C. Young
Secretary-Treasurer                         Executive Vice President and COO
Teamsters Local 747

/s/ Bruce Perkins                           /s/ James I. Muroski
- ------------------------------              -------------------------------
Captain Bruce Perkins                       James I. Muroski
Chairman Executive Council                  V.P. - Maintenance and Operations

/s/ Christopher Sovich                      /s/ Alex Osleger
- ------------------------------              -------------------------------
Captain Christopher Sovich                  Alex Osleger
Negotiating Committee Member                Director of Operations

/s/ Michael Melody
- ------------------------------
Captain Michael Melody
Negotiating Committee Member

/s/ Larry Cutler
- ------------------------------
First Officer Larry Cutler
Negotiating Committee Member







                              LETTER OF AGREEMENT 3

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

             THE PILOTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                               CENTRALIZED BASING

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the pilots in the
service of the Company, as represented by the INTERNATIONAL BROTHERHOOD OF
TEAMSTERS (hereinafter referred to as the "Union").

WHEREAS the Company has a system of domiciles, including many small domiciles;
and

WHEREAS the parties wish to reduce the current number of domiciles and to
provide guidance as to what should constitute an appropriate circumstance when a
domicile should exist.

NOW THEREFORE the parties agree as follows:

1.    A domicile should not normally exist unless there are at least eleven (11)
      hard (i.e., regular or buildup lines) available for bid at that location
      and the Company flies routes that connect that domicile location with at
      least two (2) other airport locations.

2.    The parties recognize that the above-stated criteria may fluctuate
      periodically, but in the interest of stability, the Company would not
      normally be required to close a non-conforming domicile unless one or both
      of the above-stated criteria has not been met for at least a one-year
      period.

3.    The parties further recognize that the current system of domiciles cannot
      be made to conform to the above-stated criteria immediately. Accordingly,
      it is expected and desirable that the current system of domiciles will be
      brought into conformance with the above-stated criteria by January 1,
      1999.

4.    The parties also recognize that, from time to time, there may be a
      location that does not meet the above-stated criteria but would
      nonetheless constitute an appropriate domicile in accordance with the
      Company's business needs. The parties agree to meet, upon ten (10) days
      notice by either party, to discuss opening a domicile at such location.
      Such meeting shall occur before the Company opens the additional domicile.

IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 17th
day of November, 1998.



For International Brotherhood               For Chautauqua Airlines, Inc.
Of Teamsters

/s/ Ray Benning                             /s/ Edward J. Wegel
- ------------------------------              -------------------------------
Ray Benning, Director                       Edward J. Wegel
Teamsters Airline Division                  President and CEO

/s/ Henry Ward                              /s/ Donald C. Young
- ------------------------------              -------------------------------
Henry Ward                                  Donald C. Young
Secretary-Treasurer                         Executive Vice President and COO
Teamsters Local 747

/s/ Bruce Perkins                           /s/ James I. Muroski
- ------------------------------              -------------------------------
Captain Bruce Perkins                       James I. Muroski
Chairman Executive Council                  V.P. - Maintenance and Operations

/s/ Christopher Sovich                      /s/ Alex Osleger
- ------------------------------              -------------------------------
Captain Christopher Sovich                  Alex Osleger
Negotiating Committee Member                Director of Operations

/s/ Michael Melody
- ------------------------------
Captain Michael Melody
Negotiating Committee Member

/s/ Larry Cutler
- ------------------------------
First Officer Larry Cutler
Negotiating Committee Member






                              LETTER OF AGREEMENT 4

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

             THE PILOTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                               ONE TIME SYSTEM BID

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the pilots in the
service of the Company, as represented by the INTERNATIONAL BROTHERHOOD OF
TEAMSTERS (hereinafter referred to as the "Union").

WHEREAS the Company has a system of domiciles, including many small domiciles,
and the parties wish to reduce the current number of domiciles; and

WHEREAS at or about the same time, the Company is preparing for the planned
introduction of one or more new aircraft types into the system, and both parties
desire that such bid opportunities will be made available to the pilots in an
orderly and fair manner;

NOW THEREFORE the parties agree as follows:

1.    At the earliest practicable time, the Company will conduct a one-time
      system wide bid.

2.    The system wide bid will include anticipated domiciles and all positions
      expected upon implementation of the Centralized Basing Letter of Agreement
      as well as jet positions for staffing the first two (2) expected jet
      aircraft.

3.    The bid will include reasonable effective date(s).

4.    Bids will be awarded by seniority, and there will be no base protection in
      awarding the bids.

5.    The Company and the Union will consult periodically regarding the time
      required to complete training to implement the bid, but it is understood
      that training will be conducted within a reasonable amount of time,
      consistent with the Company's ability to release pilots for training, with
      the availability of training resources and the need for the trained
      pilots.

6.    The Company is not required to award a first officer bid to a first
      officer if such award would require training.

7.    If a vacancy(s) exist the Company will award at least three (3) Dornier
      328 Captain bids to current SAAB Captains within twelve (12) months of the
      Company introducing Dornier 328 operations and at least three (3)
      additional bids during the twelve (12) to twenty-four (24) month period of
      the Dornier operation.



IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 17th
day of November, 1998.

For International Brotherhood             For Chautauqua Airlines, Inc.
Of Teamsters

/s/ Ray Benning                             /s/ Edward J. Wegel
- ------------------------------              -------------------------------
Ray Benning, Director                       Edward J. Wegel
Teamsters Airline Division                  President and CEO

/s/ Henry Ward                              /s/ Donald C. Young
- ------------------------------              -------------------------------
Henry Ward                                  Donald C. Young
Secretary-Treasurer                         Executive Vice President and COO
Teamsters Local 747

/s/ Bruce Perkins                           /s/ James I. Muroski
- ------------------------------              -------------------------------
Captain Bruce Perkins                       James I. Muroski
Chairman Executive Council                  V.P. - Maintenance and Operations

/s/ Christopher Sovich                      /s/ Alex Osleger
- ------------------------------              -------------------------------
Captain Christopher Sovich                  Alex Osleger
Negotiating Committee Member                Director of Operations

/s/ Michael Melody
- ------------------------------
Captain Michael Melody
Negotiating Committee Member

/s/ Larry Cutler
- ------------------------------
First Officer Larry Cutler
Negotiating Committee Member







                              LETTER OF AGREEMENT 5

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

             THE PILOTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

               RED CIRCLE PAY RATES FOR CERTAIN 0-19 SEAT CAPTAINS

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the pilots in the
service of the Company, as represented by the INTERNATIONAL BROTHERHOOD OF
TEAMSTERS (hereinafter referred to as the "Union").

Notwithstanding the pay rates set forth in Section 3 of the Agreement for 0-19
seat Captains, pilots on the seniority list on the date of signing of the
Agreement who are assigned to a Captain position in a 0-19 seat aircraft will be
paid according to the following pay rates:




      CAPTAIN - 0-19 Seat Turboprop
      -----------------------------

                  11-16-98    11-16-99    11-16-00
                  --------    --------    --------
      Year
      ----
                                 
      1           34.42       35.28       36.16
      2           36.20       37.11       38.03
      3           37.34       38.27       39.23
      4           39.12       40.10       41.10
      5           40.62       41.64       42.68
      6           42.56       43.62       44.71
      7           44.25       45.36       46.49
      8           46.28       47.44       48.62
      9           47.72       48.91       50.14
      10          48.88       50.10       51.35
      11          50.10       51.35       52.64
      12          50.23       51.49       52.77
      13+         50.71       51.98       53.28



IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 17th
day of November, 1998.

For International Brotherhood             For Chautauqua Airlines, Inc.
Of Teamsters

/s/ Ray Benning                             /s/ Edward J. Wegel
- ------------------------------              -------------------------------
Ray Benning, Director                       Edward J. Wegel
Teamsters Airline Division                  President and CEO




/s/ Henry Ward                              /s/ Donald C. Young
- ------------------------------              -------------------------------
Henry Ward                                  Donald C. Young
Secretary-Treasurer                         Executive Vice President and COO
Teamsters Local 747

/s/ Bruce Perkins                           /s/ James I. Muroski
- ------------------------------              -------------------------------
Captain Bruce Perkins                       James I. Muroski
Chairman Executive Council                  V.P. - Maintenance and Operations

/s/ Christopher Sovich                      /s/ Alex Osleger
- ------------------------------              -------------------------------
Captain Christopher Sovich                  Alex Osleger
Negotiating Committee Member                Director of Operations

/s/ Michael Melody
- ------------------------------
Captain Michael Melody
Negotiating Committee Member

/s/ Larry Cutler
- ------------------------------
First Officer Larry Cutler
Negotiating Committee Member







                              LETTER OF AGREEMENT 6

                                                            November 17, 1998

Mr. James L. Muroski
Vice President Operations
Chautauqua Airlines
Box 160
2500 S. High School Road
Indianapolis, Indiana 46241

Dear Jim,

I am writing to confirm our agreement reached during negotiations.

We agreed that the available vacation weeks posted for the annual bid would be
distributed as evenly as possible. For purposes of determining available weeks
each five (5) days of accrued vacation as of November 30 shall be considered a
week i.e. four hundred (400) days accrued shall be considered a total of eighty
(80) weeks.

For example:

      1.    If one hundred and four (104) weeks were available for bid and no
            periods were restricted in accordance with Section 8 (B)(5), two (2)
            slots would be awarded in each of the available fifty-two (52) weeks
            of the year.

      2.    If one hundred twenty-four (124) weeks were available for bid, and
            no periods were restricted in accordance with Section 8(B)(5), one
            hundred and four weeks would be awarded as follows: two (2) weeks
            would be awarded in each of the available fifty-two (52) weeks, and
            the remaining twenty (20) weeks would be awarded in seniority
            preference order as a third slot from among all fifty-two (52)
            weeks.

      3.    If twenty (20) weeks were available and no periods were restricted
            in accordance with Section 8(B)(5), twenty weeks would be awarded at
            one slot per week among the fifty-two (52) weeks.

If this properly reflects your understanding, please sign below.

                                               Hank V. Ward


                                               Teamsters Business Representative
                                               Local 747

/s/ James L. Muroski
- ------------------------
James L. Muroski
Vice President Operations
Chautauqua Airlines, Inc.

EX-10.9

                                                                    Exhibit 10.9













                                    AGREEMENT

                                     BETWEEN

                            CHAUTAUQUA AIRLINES, INC.

                                     AND THE

                                FLIGHT ATTENDANTS

                          OF CHAUTAUQUA AIRLINES, INC.

                                AS REPRESENTED BY

               THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, AFL-CIO






                                TABLE OF CONTENTS
                                -----------------

Article 1     Recognition and Scope                                        1-1
Article 2     Definitions                                                  2-1
Article 3     Compensation                                                 3-1
Article 4     Expenses                                                     4-1
Article 5     Moving Expenses                                              5-1
Article 6     Scheduling                                                   6-1
Article 7     Vacancies                                                    7-1
Article 8     Paid Days Off                                                8-1
Article 9     Seniority                                                    9-1
Article 10    Training                                                     10-1
Article 11    Reduction in Force or Furlough                               11-1
Article 12    Leaves of Absence                                            12-1
Article 13    Physical Standards                                           13-1
Article 14    Insurance and Other Benefits                                 14-1
Article 15    Transfer to Management Duty                                  15-1
Article 16    Miscellaneous Flying                                         16-1
Article 17    Notices to Flight Attendants                                 17-1
Article 18    Grievances                                                   18-1
Article 19    System Board of Adjustment                                   19-1
Article 20    Union Membership                                             20-1
Article 21    Uniforms                                                     21-1
Article 22    General                                                      22-1
Article 23    New Equipment                                                23-1
Article 24    Hours of Service                                             24-1
Article 25    Duration                                                     25-1

LETTERS OF AGREEMENT
- --------------------
1.       Red Circle Pay Rates
2.       Signing Bonus
3.       Anniversary Bonus
4.       Flight Attendant Job Share Program





                                    ARTICLE 1

                              RECOGNITION AND SCOPE
                              ---------------------

A.       Pursuant to the certification by the National Mediation Board in Case
         No. R-6225 dated January 3, 1994, the Company recognizes the
         International Brotherhood of Teamsters, Airline Division, as the duly
         designated and authorized representative of the flight attendants in
         the employ of the Company for the purposes of the Railway Labor Act, as
         amended.

B.       The purpose of this Agreement is in the mutual interest of the Company,
         the Union, and the flight attendants to provide for the operation of
         the Company under methods which will further to the fullest extent
         possible the safety of air transportation, the efficiency of operation,
         and the continuation of employment of flight attendants under
         conditions of reasonable working conditions and proper compensation,
         and the profitability of the Company. It is recognized to be the duty
         of the Company, the Union, and the flight attendants to cooperate fully
         for the attainment of these purposes.

C.       This Agreement supersedes all existing or previously executed
         agreements by and between the Company and the Union or any other labor
         organization or individual with respect to the rates of pay, rules, or
         working conditions specifically covered by the provisions of this
         Agreement in accordance with the provisions of the Railway Labor Act,
         as amended. Any and all subsequent agreements between the parties shall
         be reduced to writing, signed by their authorized representatives, and
         become a part of this Agreement.

D.       Whenever the words "flight attendant" are used in this Agreement, they
         designate and refer to only such flight attendant(s) as covered by this
         Agreement. It is further recognized that whenever in this Agreement
         flight attendant(s) are referred to in either the masculine or feminine
         gender, it shall be understood to mean both male and female flight
         attendants.

E.       In accordance with applicable law, there shall be no discrimination by
         either party against any flight attendant because of age, race, sex,
         color, religion, union activity, national origin, handicap or
         disability that would not prevent them from safely performing the
         duties of a flight attendant.

F.       Except as otherwise provided in this Agreement, all present and future
         revenue flying (including that international flying which originates or
         terminates within the United States or its possessions) and all
         charters, or other utilization of Company owned or leased aircraft
         requiring flight attendants, performed in and for the service of the
         Company shall be performed by flight attendants on the flight
         attendants' Seniority List in accordance with the terms and conditions
         of this Agreement.

G.       Nothing in this Agreement shall prevent the Company from acquiring,
         establishing or merging with another air carrier. In the event of such
         acquisition, establishment or merger, the following will apply:

         1.       The Company will not acquire or establish another air carrier
                  (alter ego or otherwise) to replace flying performed for the
                  Company or to avoid the terms and conditions of this
                  Agreement;






         2.       If the Company acquires or merges with another air carrier
                  that employs flight attendants, the flying operations will not
                  be consolidated or merged until the seniority lists of the two
                  flight attendant groups are integrated in a manner agreed upon
                  by the respective collective bargaining representatives or
                  other designated representatives. In the absence of an
                  agreement within four (4) months of the acquisition or merger,
                  the seniority lists will be integrated in accordance with
                  Sections 3 and 13 of the Allegheny-Mohawk Labor Protective
                  Provisions.

         3.       If the Company acquires or merges with an air carrier that
                  employs flight attendants, no flight attendant covered by this
                  Agreement on the date of such acquisition or merger will lose
                  any income or benefits as a result of such acquisition or
                  merger;

         4.       If the Company acquires or merges with an air carrier that
                  employs and has a collective bargaining agreement covering
                  flight attendants, the parties will meet to negotiate an
                  appropriate fence agreement pending the negotiation of a
                  merged agreement. If a merged agreement is not executed within
                  six (6) months from the date a final and binding integrated
                  list is issued, the parties shall jointly submit any
                  unresolved issues to binding interest arbitration.

H.       This Agreement is binding upon any successors and assigns of the
         parties hereto, unless or until changed my mutual agreement of the
         parties or in accordance with the provisions of the Railway Labor Act,
         as amended.

I.       The Company will not enter into any dry lease or wet lease agreement,
         or contract with or for any other carrier or entities (government,
         military or commercial) without mutual agreement with the Union.

                  1.       No flight attendant within the bargaining unit will
                           be reduced in status or lose any income or employee
                           benefits while discussions are taking place.

                  2.       The Union will not disagree to a dry lease when such
                           dry lease is for the sole purpose of leasing out
                           excess aircraft owned or leased by the Company. No
                           aircraft dry leased to another carrier or entity will
                           be operated into or out of any cities where the
                           Company operates. Such dry lease will not result in
                           the reduction in status or the furlough of any
                           Chautauqua flight attendant in cases where the dry
                           lease provides a profit to the Company. At the
                           request of the Union it may review the actual dry
                           lease documents.





                                    ARTICLE 2

                                   DEFINITIONS
                                   -----------

A.       "Block - to - block" means the elapsed time starting with the removal
         of the chocks or other restraining devices from the wheels of the
         aircraft when the aircraft first moves for the purpose of flight under
         its own power, and ending when the chocks or other restraining devices
         are replaced. [match]

B.       "Buildup Line" means a schedule built by the Company in accordance with
         Sections 6 and 24 that is blank when initially posted and which
         consists of trips, reserve days, and days off. [match]

C.       "Charter" means an off-line or on-line revenue passenger flight that is
         not a regularly scheduled flight. Extra sections are not considered
         charter flights. [match]

D.       "Check Flight Attendant" means a flight attendant selected at the
         discretion of the Company, after consultation with the Union, from
         among those flight attendants who have expressed, in writing, an
         interest in, and who meet the criteria for, such position. A check
         flight attendant will perform duties which include line checks, IOE,
         and other in-flight training. [match]

E.       "Company" means Chautauqua Airlines, Inc., its subsidiaries and
         divisions. [match]

F.       "Date of Hire" means the date on which a flight attendant first reports
         for flight attendant training by the Company. [match]

G.       "Day" means the time commencing at 0001 and ending at 2400 based on
         local time. [match]

H.       "Day Off" means a day free from all duty required by the Company at
         domicile. [match]

I.       "Deadhead Time" means the time spent by a flight attendant in traveling
         from one point to another at the direction of the Company, either for
         duty or returning from duty. [match]

J.       "Domestic" the forty-eight (48) contiguous states and the District of
         Columbia. [match]

K.       "Domicile" means a geographical location where a flight attendant is
         based. [match]

L.       "Duty Time" means the time a flight attendant is on duty commencing
         when a flight attendant is required to report or actually reports,
         whichever is later, for duty and ending ten (10) minutes after the
         conclusion of her flight or release from duty, whichever is later.
         [match]

M.       "Flight Attendant" means an employee of the Company whose name appears
         on the flight attendant seniority list and whose duties include
         ensuring the safety of passengers, the performance of in-flight service
         duties as assigned by the Company. [match]

N.       "Flight Time" means block-to-block time. [match]

0.       "Hot Reserve" means a period of time when a flight attendant is
         required to be on reserve at any domicile airport.






P.       "International" means any point or area outside the forty-eight (48)
         contiguous states and the District of Columbia. [match]

Q.       "Longevity" means the period of time the flight attendant has actively
         served as a flight attendant. [match]

R.       "Month" means that period of time from and including the first day of
         and including the last day of each calendar month of the year, except
         that for pay and scheduling purposes, January, February, and March will
         each be a thirty (30) day month through the addition of January 31 and
         March 1 to the month of February.
         In a leap year, February will be a 31 day month. [match]

S.       "Operational reasons" shall mean actions taken by the Company after
         careful planning and analysis, and not arbitrarily or capriciously.
         Examples of such reasons shall include, but are not limited to, the
         following: 1. To avoid a potential flight delay, 2. To avoid a
         potential flight cancellation, and 3. To fulfill FAA/regulatory
         requirements. [match]

T.       "Hard Line" means a schedule built by the Company in accordance with
         Sections 6 and 24 that includes trips and days off. [match]

U.       "Rescheduled" means a change to a flight attendant's original scheduled
         assignment. [match]

V.       "Reserve Line" means a schedule built by the Company in accordance with
         Sections 6 and 24 that will be blank when posted and will include
         periods of availability for duty and days off. [match]

W.       "Seniority" means the length of service as a flight attendant with the
         Company. [match]

X.       "Trip" means a flight or series of flights that are paired together and
         may include one or more duty periods. [match]

Y.       "Vacancy" means a position(s) in a particular domicile in excess of the
         number of flight attendant(s) already in that domicile. [match]

Z.       "Wet Lease" means an agreement with another air carrier in which the
         Company provides an aircraft and crew to the other air carrier. [match]




                                    ARTICLE 3

                                  COMPENSATION
                                  ------------

A.       Flight attendants will be paid for flight time based upon status and
         longevity in accordance with the hourly rates below. In computing hours
         for pay purposes, the actual time flown or the scheduled block time,
         whichever is greater, will be used. [match]




                                        DOS+           DOS+         DOS+
            YEAR            DOS         12 MOS        24 MOS        36 MOS
            ----            ---         ------        ------        ------
                                                         
            0-6   mths      14.05        14.40        14.76          15.13
            7-12 mths       15.00        15.37        15.76          16.15
            2               16.50        16.92        17.34          17.77
            3               17.70        18.14        18.59          19.06
            4               18.80        19.27        19.75          20.24
            5               19.91        20.40        20.91          21.44
            6               20.80        21.32        21.85          22.39
            7               21.63        22.18        22.73          23.30
            8               22.43        22.99        23.57          24.16
            9               23.10        23.68        24.27          24.87
            10              23.78        24.37        24.98          25.60[match]



B.       Pay Procedures [match]

         1.       Flight attendants will be paid on a bi-monthly basis, i.e.,
                  twenty-four (24) pay periods per year. [match]

         2.       Flight attendants will be paid on the fifteenth (15th) and the
                  last day of each month. If the fifteenth (15th) or the last
                  day of each month falls on a Saturday or Sunday, flight
                  attendants will be paid on the preceding Friday. The pay check
                  on the fifteenth (15th) of the month will adjust for any
                  additional amounts owed the flight attendant from the previous
                  month. [match]

         3.       A flight attendant will be paid at his option by direct
                  deposit into an account for that flight attendant at a
                  financial institution of the flight attendant's choice.
                  [match]

         4.       Clerical pay errors involving fifty dollars ($50.00) or more
                  shall be reconciled within five (5) working days after the
                  error is verified. Errors of less than fifty dollars ($50.00)
                  will be reconciled in the next pay check following
                  verification. [match]

C.       The minimum monthly guarantee will be seventy-five (75) hours at the
         flight attendant's hourly rate. A flight attendant who is unavailable
         for part of a month will have her guarantee prorated (except for paid
         vacation or paid sick leave). [match]

D.       A flight attendant who is called to the airport and assigned to flight
         or reserve duty and actually flies on a scheduled day off will be
         compensated at the greater of four (4) hours for the trip or her actual
         flight time for the trip in addition to her monthly guarantee or other
         flight



         pay accrued. This paragraph does not apply to a flight attendant
         assigned on one of her minimum days off who has that day restored.
         [match]

E.       Training Pay [match]

         1.       A flight attendant who attends a day of recurrent training or
                  checks will be paid and credited with four (4) hours of flight
                  pay for up to six (6) days in any calendar year. [match]

         2.       If the Company elects to use any method of training such as
                  "home study" to comply with FAA requirements, a flight
                  attendant will be paid and credited with one (1) hour of
                  flight pay for every two (2) hours of FAA-approved training
                  credit earned in home study. [match]

         3.       Line checks and IOE will be paid in accordance with Article
                  3.A. [match]

         4.       A flight attendant in training will be paid no less than the
                  appropriate minimum monthly guarantee. [match]

         5.       Home study training mandated by the Company will be paid in
                  accordance with paragraph E.2., above. It is understood that
                  normal administrative paperwork, e.g., paycards, flight
                  reports, IOE evaluations, the Twin Turbine News, and other
                  routine Company memos do not constitute training. [match]

F.       1.       A flight attendant who performs management-related functions,
                  e.g., marketing promotions, special projects, etc., will be
                  paid additional compensation as determined by the Company.
                  [match]

         2.       A flight attendant who performs check flight attendant duties
                  will be paid five dollars ($5.00) per flight hour, or portion
                  thereof, in addition to her regular flight attendant hourly
                  rate. [match]

G.       For purposes of this Article, scheduled block times will be determined
         by using the average of historic enroute (block-to-block) times between
         city pairs by type of equipment and are attached hereto as "Appendix
         A." [match]

         1.       Scheduled block times will be reviewed by a joint
                  Company/Union Scheduling Committee every six (6) months using
                  the prior twelve (12) months average to determine whether any
                  adjustments are to be made. [match]

         2.       Adjustments will be made only when the average varies from the
                  established scheduled block time by seven and one-half percent
                  (7.5%), or more, plus or minus. [match]

         3.       When a new route is established for which no scheduled block
                  time has been computed in accordance with this Article, the
                  initial scheduled block time will be established based upon
                  the marketing time for that segment. After one hundred and
                  twenty (120) days of operation, the scheduled block time will
                  be reviewed. [match]


         4.       Non-scheduled flights on routes where no established scheduled
                  block time exists will be credited on the basis of actual
                  (block-to-block) flight time. [match]

         5.       "Ferries," "attempts" and "diverted" flights will be paid on
                  the basis of actual (block-to-block) flight time. Taxi time
                  not associated with a flight will be credited at the rate of
                  two tenths (0.2) hours of flight pay. [match]

         6.       Data necessary for an accurate and complete review of
                  scheduled block times will be made available to the
                  Company/Union Scheduling Committee. After the Union
                  representatives have had an opportunity to review the data,
                  the Company will meet with those representatives upon request,
                  at a mutually agreeable time, to resolve any questions or
                  disputes. Members of the Company/Union Scheduling Committee
                  will not disclose any confidential or proprietary information
                  provided pursuant to this paragraph. [match]

H.       If a flight attendant is required to deadhead, she shall be credited
         with fifty percent (50%) of the scheduled block time for such flight.
         If required to deadhead via surface transportation, she shall be
         credited with fifty percent (50%) of driving time based upon AAA
         mileage at 50 MPH. A day consisting solely of deadhead to or from a
         flight assignment shall be considered a workday. [match]

I.       A flight attendant called in for drug testing on a scheduled day off
         shall be compensated two (2) hours of flight pay. [match]

J.       If a flight attendant is displaced by the Company from her flight due
         to training, to accomplish training for another flight attendant, or
         for any other reason, she may be reassigned another flight on the same
         day(s) as her original schedule, however, she shall be credited for the
         flight time on her original scheduled flight or the reassigned flight
         whichever is greater. [match]

K.       If a flight attendant is requested to report early, such flight
         attendant will be paid at the rate of five dollars ($5.00) per hour, or
         fraction thereof, prorated for all hours on duty prior to her
         originally scheduled report time. [match]

L.       A flight attendant who is assigned to flight duty or reserve on any of
         the below-listed holidays will receive four (4) hours of flight pay in
         addition to her monthly guarantee or flight pay accrued for that month.
         [match]

                  New Year's Day            Labor Day
                  Thanksgiving              Memorial Day
                  Christmas                 Independence Day  [match]

M.       Each flight attendant will receive a holiday bonus of one hundred fifty
         dollars ($150.00) the first week in December in each year of this
         Agreement. [match]




                                    ARTICLE 4

                                    EXPENSES
                                    --------

A.       The Company will furnish guaranteed suitable single room lodging for a
         flight attendant who is scheduled to layover at a location for legal
         rest while on flying or training duty away from her permanent domicile.
         A flight attendant who is assigned to a continuous duty overnight away
         from domicile with a scheduled break of five (5) hours or more,
         block-in to block-out, will be provided lodging at the Company's
         expense. [match]

B.       When lodging is required in accordance with paragraph A., above, the
         Company will provide transportation to and from such lodging to the
         airport or training site, as applicable. If no eating facilities are
         available within walking distance of the lodging, transportation to and
         from an eating facility will be provided. [match]

C.       The Company will make prompt inquiries into complaints related to
         deterioration of service at any facility which has been approved for
         layovers. Prompt remedial action will be taken in those cases where
         investigation affirms a deterioration of service. [match]

D.       In lieu of reimbursement for meals and incidental travel expenses,
         flight attendants will be paid a per diem allowance of $1.25 per hour
         for time away from domicile in connection with flight duty, training or
         on-premise reserve, commencing at report for duty at domicile and
         ending upon release from duty at domicile. Effective twelve (12) months
         after date of signing, the per diem allowance will be increased to
         $1.30, and effective twenty-four (24) months after date of signing, the
         per diem allowance will be increased to $1.35. [match]

E.       When a flight attendant agrees to drive her personal vehicle at the
         request of the Company, she shall be allowed $.31 per mile point to
         point and return. A flight attendant will not be required to drive her
         personal vehicle. [match]

F.       At domicile or another location of the flight attendant's choice where
         free parking is not available, the Company will pay for the cost of the
         parking while the flight attendant is performing duty. The Company will
         not be required to pay for parking at more than one (1) location per
         flight attendant. Pay for parking at a location other than the flight
         attendant's domicile shall be required only when such employee parking
         is available and only to the extent of what the parking would have cost
         at the flight attendant's domicile. [match]

G.       The Company will provide travel on a booked basis when a flight
         attendant is deadheading on-line between the flight attendant's
         domicile and the point of her assigned duty. If the flight attendant is
         bumped from such on-line flight, the Company will book the flight
         attendant for positive space on the alternate on-line flight.

H.       The Company will reimburse each flight attendant for the cost of
         passports or visas or any airport government charges incurred in
         traveling on Company business. [match]

I.       When, due to irregular operations, special assignments, etc., a flight
         attendant incurs lodging or transportation expenses, she shall be
         reimbursed upon presentation of receipts for such expenses, provided
         she requests and receives advance approval for such expenses. [match]





                                    ARTICLE 5

                                 MOVING EXPENSES
                                 ---------------

A.       Successful vacancy bidders, flight attendants moving to a domicile upon
         initial employment, and flight attendants making domicile swaps will
         pay their own moving expenses.

B.       The Company will pay for moving expenses when a flight attendant is
         required by the Company to change permanent domicile. A flight
         attendant displaced as a result of a reduction in schedules, domicile
         closure, equipment change or relocation of a domicile shall be
         considered transferred at the Company's request.

C.       When the Company is required to pay moving expenses, the move must be
         coordinated with the Inflight Department. Moving expenses must be
         submitted within thirty (30) days after incurring the expenses. Moving
         expenses other than automobile mileage and meals must be verified by
         receipts. The Company will not be responsible for any damages incurred
         during moving. The Company will not be responsible for paying any
         expenses under this Section after one (1) year from the date the flight
         attendant reports to the new domicile.

D.       Moving expenses paid by the Company will include the following:

         1.       When the flight attendant moves herself, the Company will pay
                  for all shipping containers, insurance for the move, one
                  hundred dollars ($100.00) to offset the cost of moving
                  helpers, the cost of vehicle registration, fuel, and
                  licensing.

         2.       Actual moving expenses for household goods and effects up to a
                  maximum of one thousand two hundred (1,200) cubic feet or
                  eight thousand (8,000) pounds, shipping and insurance
                  coverage, but excluding packing and unpacking and extra
                  insurance coverage, storage, and packing materials.

         3.       When personal automobile transportation is used by the flight
                  attendant and her immediate family, the Company will reimburse
                  the flight attendant at the current IRS rate per mile using
                  the most direct AAA routing between domiciles for up to two
                  (2) automobiles.

         4.       The Company will reimburse a flight attendant for meals and
                  lodging for the flight attendant and her immediate family for
                  the time required to travel to the domicile up to five (5)
                  days. A day of travel will be considered a minimum of three
                  hundred fifty (350) miles by the most direct AAA mileage. The
                  daily allowance for meals will be twenty-two dollars ($22.00)
                  per day for single flight attendants, and forty-four dollars
                  ($44.00) per day for married flight attendants traveling with
                  their spouse.

         5.       If a lease is broken as a result of moving to a new domicile
                  and a penalty is incurred, the Company will pay such penalty
                  not to exceed one month's rent. The Company will cooperate
                  with the flight attendant to provide substantiating
                  documentation of the transfer for the lessor.

         6.       The Company will pay up to two hundred dollars ($200.00) for
                  termination and hook-up of utilities (excluding deposits)
                  including: gas, electric utilities, telephone



                  and cable television, which result from a move to a new
                  domicile.

         7.       The Company will pay moving expenses only for actual moves of
                  a flight attendant's primary residence. To qualify for moving
                  expenses under this Section, the flight attendant must move to
                  a location within fifty (50) miles of the new domicile.

E.       When the Company is required to pay moving expenses, nothing in this
         Section is intended to prevent the Company and the flight attendant
         from agreeing to an amount to be paid to the flight attendant in lieu
         of the expenses set forth in this Section.

F.       The Company's liability for moving expenses under this Section will not
         exceed five thousand dollars ($5,000.00).





                                    ARTICLE 6

                                   SCHEDULING
                                   ----------

A.       Scheduling Committee [match]

         The Union will establish a Scheduling Committee which will meet with
         the Company for the purpose of facilitating the efficient operation of
         this Article. The Scheduling Committee will be given reasonable access
         to non-confidential information regarding aircraft flows, block time
         reports, scheduled training, checkrides, vacations and leaves of
         absence. The Scheduling Committee may submit recommendations to the
         Company. When conflicts between the schedule and FARs or this Agreement
         are verified, the Company will take immediate action, if practicable,
         to resolve such conflicts. [match]

B.       Bidding and Awarding of Monthly Schedules [match]

         1.       Bid packages will be made available to all flight attendants
                  at each domicile at or before 1700 hours on the second Friday
                  of each month. [match]

         2.       A flight attendant must bid on an approved format submitted to
                  Crew Scheduling by U.S. mail, overnight express, facsimile,
                  electronically, if available, or any other means mutually
                  agreed upon. [match]

         3.       A flight attendant must submit her bid by 1700 hours on the
                  Tuesday following the second (2nd) Friday of each month.
                  [match]

         4.       The initial bid award will be made available to flight
                  attendants by 1700 hours on the third (3rd) Friday of each
                  month. [match]

         5.       Flight attendants who were initially awarded or assigned
                  reserve or build-up lines will be provided with their
                  scheduled lines after they are constructed on the final bid
                  award. [match]

         6.       The final bid award, which will include the final award of
                  build-up and reserve lines, will be posted no later than 1200
                  hours on the fourth Thursday of each month. [match]

         7.       All eligible flight attendants may bid for lines based upon
                  their domicile. All bids shall be awarded in accordance with
                  seniority. Awards will be published in each domicile. [match]

         8.       The Company shall make only the necessary adjustments to
                  awarded lines to correct errors and to provide for the
                  month-to-month interface period, vacation, training, minimum
                  days free from duty and approved leaves. [match]

         9.       Eligibility to Bid [match]

                  a.       A flight attendant attending initial, transition, or
                           upgrade training (from the beginning of ground school
                           to completion of IOE) will not bid a schedule for



                           the month, except when the ground school is scheduled
                           to begin after the fifteenth (15th) of the month; in
                           such cases, the flight attendant will bid a schedule
                           for the month, and all trips that conflict with the
                           training will be dropped. [match]

                  b.       A flight attendant not eligible to bid will receive
                           her schedule at the same time as all other flight
                           attendants in accordance with paragraph 6.B.10.,
                           below. [match]

                  c.       A flight attendant will not bid in a month where she
                           is scheduled for leave (other than paid sick leave or
                           vacation) in excess of fifteen (15) days of the
                           month. [match]

                  d.       Flight attendants who have been on an approved leave
                           will provide the Company with documentation regarding
                           the termination of the leave. If the flight attendant
                           will be available for more than fifteen (15) days of
                           the month, the flight attendant will be eligible to
                           bid. [match]

         10.      A flight attendant failing to make a sufficient number of
                  bids, failing to meet the deadline, or submitting a bid form
                  that is either unsigned, incomplete or illegible, will be
                  assigned the highest unbid numerical line at the flight
                  attendant's domicile after all bidders' preferences have been
                  awarded. If more than one flight attendant fails to bid, they
                  will be assigned remaining lines in numerical order based on
                  their seniority. [match]

         11.      A flight attendant who will be on vacation or leave of absence
                  when bid packages are distributed may provide the Company with
                  a prepaid, pre-addressed overnight delivery envelope in which
                  case the Company will forward a copy of the bid package to
                  such flight attendant using such envelope. A flight attendant
                  who is sent a bid package by such method may submit her bid
                  via fax pursuant to Company directions. [match]

C.       Contents of the Bid Package [match]

         1.       Bid packages will contain: [match]

                  a.       All known trip series arranged in regular lines
                           except the Company may withhold up to five percent
                           (5%) of known flying. [match]

                  b.       An anticipated number of reserve lines, if any, which
                           will be blank. [match]

                  c.       An anticipated number of buildup lines, if any, which
                           will be blank. [match]

                  d.       All known training (inclusive of dates). [match]

                  e.       All awarded and available vacation time. [match]

                  f.       Flight and duty times. [match]


                  g.       Report and release times. [match]

                  h.       RON information, including hotels, ground
                           transportation, etc. [match]

                  i.       A list of flight attendants who are in their prior or
                           due months for recurrent training and dates for
                           recurrent ground schools, if known. [match]

                  j.       A list of flight attendants eligible to bid in each
                           domicile. [match]

         2.       The Company will create as many hardlines as practical for a
                  given domicile, attempting insofar as practicable to offer a
                  variety of bid lines. Hardlines will contain the following:
                  [match]

                  a.       A planned sequence of trips with intervening days
                           off, arranged in a schedule for the month. [match]

                  b.       No reserve duty or charters. [match]

                  c.       Days off at domicile. [match]

                  d.       Up to ninety (90) scheduled hours of block time.
                           However, the Company may seek the concurrence of the
                           Union Scheduling Committee Chairman or Union to
                           exceed this limit. Such concurrence shall not be
                           unreasonably withheld. [match]

                  e.       No out of domicile trips. [match]

         3.       Build-up lines [match]

                  a.       Buildup lines shall be blank when published in the
                           bid package and subsequently constructed from trips
                           and/or series of trips that become available as a
                           result of vacation awards, training, checkrides,
                           leaves of absence and trips that are not in
                           hardlines. Buildup lines will contain a minimum of
                           thirty-seven and one-half (37.5) hours of scheduled
                           activity as identified above. Buildup lines will also
                           contain days off and may contain reserve days.
                           [match]

                  b.       Buildup lines may contain up to ninety (90) scheduled
                           hours of block time. However, the Company may seek
                           the concurrence of the Union to exceed this limit.
                           Such concurrence shall not be unreasonably withheld.
                           Concurrent with the initial monthly bid, a flight
                           attendant who is awarded a buildup line may express
                           her preference(s) for type of trips, days off,
                           training assignments, etc., by listing the
                           appropriate letter code followed by the specific
                           preference in the appropriate spot on the bid sheet.
                           To the extent practicable, preferences will be
                           awarded in seniority order and in the order listed.
                           [match]


                             PREFERENCE CODE     PREFERENCE
                             ---------------     ----------

                                     A           Specific dates off

                                     B           Weekends off

                                     C           Consecutive days off at anytime

                                     D           Multi-day trips

                                     E           Single day trips

                                     F           Training

                                     G           Charter flights

                  c.       The Company will construct build-up lines with as
                           many in domicile trips as practicable. [match]

                  d.       Build-up lines may contain charters. [match]

                  e.       Reserve days and out of domicile trips may be built
                           into the build-up lines. [match]

                  f.       If the number of build-up lines is less than
                           anticipated, additional reserve lines will be
                           constructed and assigned to those flight attendants
                           able to hold build-up lines. [match]

                  g.       The Company will create as many build-up lines as
                           practicable in a given domicile. [match]

         4.       Reserve lines [match]

                  a.       Reserve lines will be blank when published in the bid
                           package and subsequently constructed to show reserve
                           days and days off. [match]

                  b.       When constructed, reserve lines will contain: [match]

                           (i)      Intervening periods of availability and days
                                    off; [match]

                           (ii)     As many in domicile days as practicable;
                                    [match]

                           (iii)    Out of domicile reserve days, if available,
                                    and associated deadhead; and [match]

                           (iv)     Type of reserve. [match]

                  c.       Concurrent with the initial monthly bid, flight
                           attendants may express preferences for days off,
                           number of days off in a given spread, training, etc.,
                           by listing the appropriate letter code followed by
                           the specific preference in the appropriate spot on
                           the bid sheet. To the extent practicable, preferences
                           will be awarded in seniority order and in the order
                           listed. [match]




                             PREFERENCE CODE     PREFERENCE
                             ---------------     ----------

                                     A           Specific days off

                                     B           Weekends off

                                     C           Consecutive days off at anytime

                                     F           Training

                  d.       Assignment of reserve spread(s) shall be made in
                           accordance with preference(s) bid. Once assigned,
                           reserve spreads shall be considered immovable with
                           the exception that two (2) spreads may be moved by no
                           more than forty-eight (48) hours except by mutual
                           agreement or when necessary to accomplish training
                           for the flight attendant. [match]

D.       Month-to-Month Interface Period [match]

         1.       The interface period shall consist of the first three (3) days
                  of the month. During this time, Crew Scheduling may adjust bid
                  lines for those flight attendants whose lines are in conflict
                  with the previous month's schedule, including FAR conflicts.
                  [match]

         2.       A flight attendant may be assigned an AVL ("available") day(s)
                  during the interface period. [match]

                  a.       If assigned an AVL day, the flight attendant must
                           contact Crew Scheduling after 1900 domicile time on
                           the evening prior to the AVL day for assignment.
                           [match]

                  b.       An AVL day cannot become a reserve day or charter.
                           [match]

                  c.       If not assigned a specific flight assignment, the AVL
                           day will be converted to a day off. [match]

E.       Reserve Duty [match]

         1.       For the purposes of calculating days off, a reserve day will
                  be considered a day of work. [match]

         2.       A reserve flight attendant will not be required to start an
                  on-call period with less than the minimum rest required by
                  Article 24. [match]

         3.       A reserve flight attendant will not be scheduled to be on call
                  in excess of twelve (12) hours in a day. A reserve flight
                  attendant may not be assigned to a flight assignment that is
                  scheduled to exceed fourteen (14) hours after reporting for
                  duty at the airport. [match]

         4.       A flight attendant on reserve may be scheduled for hot reserve
                  duty for up to twelve



                  (12) hours, including any on call and scheduled flight
                  assignments. The Company may schedule a buildup lineholder for
                  up to five (5) hot reserve days, and a reserve lineholder may
                  be scheduled for hot reserve for up to ten (10) hot reserve
                  days. If the Company later determines that it needs additional
                  hot reserve, it may assign a reserve lineholder to serve
                  additional hot reserve duty and will compensate such flight
                  attendant at the rate of twenty-five dollars ($25.00) for each
                  additional hot reserve assignment, or portion thereof, above
                  the maximums set forth above. [match]

         5.       A flight attendant on reserve will be subject to a one and
                  one-half (1.5) hour call out unless assigned to a domicile
                  where a shorter call out time has been mutually agreed upon
                  between the Company and the Union. A flight attendant will
                  make every effort to report earlier. [match]

         6.       The Company may, in its discretion, release a flight attendant
                  from reserve earlier than scheduled. [match]

         7.       A flight attendant on reserve may use a "pager" at her
                  expense. However, the flight attendant is solely responsible
                  for ensuring the quality of service of the pager, and any
                  malfunction of a pager is solely the responsibility of the
                  flight attendant. The flight attendant is also solely
                  responsible for ensuring that she remains within the pager's
                  calling area. [match]

         8.       A flight attendant on reserve will respond to a telephone
                  message or page from the Company within twenty (20) minutes,
                  and such time will be included in the call out time required
                  in paragraph E.5., above. Once a flight attendant receives an
                  assignment, she is no longer responsible to be available for
                  contact prior to such assignment until report time. [match]

         9.       A flight attendant on reserve who is assigned a RON that
                  extends into a day off will be given the option of receiving
                  day off pay pursuant to Article 3.D. or having that day off
                  restored in the current or following month. The Company will
                  not make such assignment if there is another reserve available
                  in the domicile and calling out such reserve will not delay
                  the flight. [match]

F.       Assignment of Open Time [match]

         1.       Open time which remains after the construction of buildup
                  lines and open time which subsequently becomes available
                  during the month will be assigned in the following order,
                  provided that such assignment shall not conflict with FARs or
                  any other provision of this Agreement: [match]

                  a.       Assign to a reserve flight attendant in domicile (the
                           Company may opt to skip such flight attendant); then
                           [match]

                  b.       Award to any other flight attendant, on a first-come,
                           first-served basis, who volunteers for open time;
                           then [match]

                  c.       Assign to a flight attendant who has been rescheduled
                           (the Company may



                           opt to skip such flight attendant); then [match]

                  d.       Assign to a reserve flight attendant in domicile;
                           then [match]

                  e.       Assign to a reserve flight attendant from another
                           domicile (the Company may opt to skip such flight
                           attendant). [match]

                  f.       Assign to a supervisory flight attendant. [match]

         2.       The Company may assign open time to a supervisory flight
                  attendant without regard to paragraph F.1., above, if no other
                  flight attendant is available for such assignment without
                  delaying or canceling the flight. [match]

         3.       The Company will make reasonable efforts to post open time.
                  [match]

G.       Displacement [match]

         1.       If more than one (1)flight attendant is assigned to the same
                  trip, the senior flight attendant will have the choice of
                  flying the trip or not. The flight attendant not flying the
                  trip will either be reassigned to a trip or released from duty
                  for the remainder of the trip and will be credited with the
                  greater of the value of the trip originally assigned or the
                  trip to which she is reassigned. [match]

         2.       If a flight attendant is displaced from her assignment by
                  another flight attendant at the Company's direction for the
                  purpose of training or IOE, the flight attendant who is
                  displaced will either be reassigned to a trip or released from
                  duty for the remainder of the day and will be credited with
                  the greater of the value of the trip originally assigned or
                  the trip to which she is reassigned. [match]

H.       Rescheduling for Operational Reasons [match]

         1.       Reserve flight attendant [match]

                  A flight attendant holding a reserve line may be rescheduled
                  within the limitations of Articles 6 and 24. [match]

         2.       Hardline and Buildup Lineholders [match]

                  After the publication of the final award, a flight attendant
                  holding a hardline or build-up line may be rescheduled for
                  operational reasons. However, any rescheduled trip must remain
                  within the date(s) of the original trip, regardless of when
                  the rescheduling occurs or how many times the flight attendant
                  is rescheduled. If Scheduling has no assignment for her within
                  3 hours, the Flight Attendant will be released until the
                  following day, provided she was on a multi-day trip. [match]

         3.       Availability for Rescheduling [match]

                  The Flight Attendant will contact or be available to be
                  contacted by Scheduling between the hours of 6:00 a.m. and
                  9:00 a.m. each day she was originally scheduled. If at the
                  time of contact, Scheduling has no assignment, she will be



                  released until the following morning, until rescheduled or
                  until the days of the original trip have been exhausted.
                  Flight Attendants subject to rescheduling shall not be
                  expected to report sooner than 3 hours after being assigned to
                  the rescheduled trip. [match]

         4.       Rescheduling restrictions [match]

                  Flight Attendants subject to rescheduling shall not be placed
                  on reserve. Rescheduling must be within the limitations of
                  Articles 6 and 24. A Flight Attendant scheduled for a single
                  day trip will not be rescheduled for a multi-day trip. A
                  Flight Attendant subject to be rescheduled pursuant to this
                  paragraph will be paid the greater of her actual or
                  rescheduled trip, if any. A Flight Attendant who has
                  voluntarily picked up trips in Open Time, and whose trips are
                  subsequently cancelled will not be required to be available
                  over the same day(s) of their trip, nor will they be pay
                  protected for the trip. [match]

I.       Trip Trades [match]

         1.       Trip trade requests must be in writing, signed by both flight
                  attendants and received by Crew Scheduling no later than
                  forty-eight (48) hours prior to the date of the earliest trip
                  being traded. Crew Scheduling may waive the forty-eight (48)
                  hour requirement. [match]

         2.       A flight attendant may participate in up to five (5) trades
                  each month. [match]

         3.       Trip trade requests may be for a partial or an entire trip.
                  [match]

         4.       Trip trades must not violate FARs or any provision of this
                  Agreement. Crew Scheduling may require a buffer equivalent to
                  the buffer(s) used to construct the lines of time at any time
                  when there is any potential for illegality under the FARs or
                  this Agreement. If all of the provisions of this Article are
                  met, the trade will be approved. If a trade is disapproved,
                  the flight attendant will be advised, upon request, of the
                  reasons for the denial. [match]

         5.       Flight attendants on reserve may trade one (1) reserve day for
                  another, subject to approval by Crew Scheduling. [match]

         6.       A flight attendant who loses time from her schedule because of
                  a trip trade which causes her to fall below her minimum
                  monthly guarantee will have her minimum monthly guarantee
                  adjusted. [match]

         7.       Crew Scheduling will approve or reject a trip trade request
                  within seven (7) days after it is received, but no later than
                  twenty-four (24) hours before the report time for the earliest
                  trip being traded. Crew Scheduling may waive this requirement.
                  Trip trades are approved when the flight attendant obtains
                  confirmation from Crew Scheduling. If Crew Scheduling
                  implements a system of trip trade approval notification
                  involving electronic, faxed, or other similar means of
                  notification to the flight attendant's domicile, the trip
                  trade will be considered approved when such notification is
                  posted electronically or by hard copy. [match]




         8.       At Company discretion, a flight attendant may drop trips into
                  open time with a corresponding reduction of the flight
                  attendant's monthly guarantee. [match]

J.       Continuous Duty Overnights [match]

         1.       Pure CDO lines [match]

                  a.       A flight attendant on a pure CDO line will be
                           scheduled for no more than four (4) consecutive CDOs.
                           [match]

                  b.       A flight attendant on a pure CDO line will be
                           scheduled for a minimum of two (2) consecutive days
                           off after three (3) consecutive CDOs and three (3)
                           consecutive days off after four (4) consecutive CDOs.
                           [match]

                  c.       CDO trips in pure CDO lines will be scheduled with a
                           minimum of five (5) hours of ground time, block in to
                           block out. If less than four (4) hours of ground time
                           is realized, a flight attendant must have twelve (12)
                           hours off duty during her next scheduled rest period.
                           [match]

         2.       Except for pure CDO lines, all other hardlines will be
                  scheduled for no more than two (2) blocks of up to three (3)
                  consecutive CDOs in a month. [match]

         3.       A CDO trip will not be scheduled for more than five (5) legs.
                  [match]

         4.       CDO trips will terminate and the flight attendant will be
                  released upon first arrival at the domicile following the CDO
                  period. [match]

         5.       A flight attendant will not be required to participate in
                  training without her consent during the scheduled ground time
                  on a CDO. [match]

         6.       Except for pure CDO lines, CDO trips will be scheduled with a
                  minimum of six (6) hours of ground time, block in to block out
                  (minimum of five (5) hours block in to block out if the
                  scheduled duty time for the CDO is fourteen (14) hours or
                  less). If less than six (6) hours of ground time is realized,
                  a flight attendant must have twelve (12) hours off duty during
                  her next scheduled rest period. [match]

         7.       No flight attendant will be scheduled/rescheduled from a CDO
                  trip to any other trip, other than another CDO, unless she has
                  received the minimum number of days off required by Article
                  24.D.2. [match]

K.       General [match]

         1.       A flight scheduled to terminate before 00:00 (midnight) of the
                  first (1st) day will be considered to have terminated on the
                  first (1st) day if it terminates no later than 0200 hours
                  local time on the second (2nd) day. [match]

         2.       Flight attendants domiciled outside the United States will be
                  subject to this Agreement. [match]


         3.       A flight attendant will not be required to drive or be driven
                  to an airport as part of a regularly scheduled duty assignment
                  nor will a flight attendant be required to transport
                  passengers via ground transportation. [match]

         4.       All times referred to in this Article are local time at the
                  domicile. [match]




                                    ARTICLE 7

                                    VACANCIES
                                    ---------

A.       Standing Bids [match]

         1.       Flight attendants must submit standing bids indicating order
                  of preference for domicile vacancies. The Company may require
                  flight attendants to submit new or updated standing bids at
                  least thirty (30) days prior to any circumstances that may
                  cause the existing bid file to become outdated (e.g., domicile
                  closures, domicile openings or other substantial operational
                  changes, etc.). [match]

         2.       The standing bid file will be maintained by the Company.
                  Standing bids will be available for inspection by any flight
                  attendant during normal office hours. [match]

         3.       A flight attendant may change her standing bid at any time by
                  submitting a new standing bid to the Company. A flight
                  attendant must bid on an approved format submitted to the
                  Company by U.S. Mail, overnight express, facsimile,
                  electronically, if available, or any other means mutually
                  agreed upon.
                  [match]

B.       Notice of Vacancy [match]

         1.       The Company will determine when a vacancy exists. [match]

         2.       No later than ten (10) days after the Company determines that
                  a vacancy exists, it will post a notice of the vacancy. The
                  notice will specify the domicile at which each vacancy will
                  occur. [match]

         3.       Bidding will close at 1700 hours seven (7) days after the
                  posting of the notice of vacancy. [match]

C.       Awarding and Assignment of Vacancies [match]

         1.       Awards will be posted by 1700 hours four (4) days after the
                  closing of the bid. [match]

         2.       The Company will not normally post secondary, tertiary, etc.,
                  vacancies caused by filling primary vacancies. [match]

         3.       Bids for vacancies will be awarded in order of seniority using
                  standing bids on file as of the date bidding is closed.
                  [match]

         4.       If no flight attendant bids a vacancy, the Company may assign
                  a flight attendant to that vacancy in reverse order of
                  seniority. [match]

         5.       The Company will determine the effective date of an award
                  which may be changed provided adequate notice is given and the
                  change is not made for arbitrary reasons. The Company may
                  cancel an award at any time before its effective date. [match]




         6.       A flight attendant awarded a vacancy will fill the vacancy
                  within sixty (60) days after the effective date of the award.
                  [match]

D.       Domicile Swaps [match]

         Flight attendants requesting a mutual domicile swap must submit a
         request in writing to the Company no later than the fifth (5th) of the
         month. Approval of a swap is subject to the following: [match]

         1.       The Company will review the mutual swaps on file no later than
                  the seventh (7th) of the month and post those mutual swaps
                  that will become effective with the following month's bid
                  award. [match]

         2.       If approved, flight attendants involved in the mutual swap
                  will be restricted from submitting a subsequent mutual swap
                  request for a period of six (6) months from the effective date
                  of the mutual swap. [match]

E.       Temporary Vacancies [match]

         1.       A temporary vacancy will be any vacancy anticipated to exist
                  for less than ninety (90) days. [match]

         2.       When the Company decides to fill a temporary vacancy, it will,
                  if practicable, fill such vacancy from among qualified flight
                  attendants in seniority order who have expressed a desire to
                  fill a temporary vacancy. If the vacancy remains unfilled, the
                  temporary vacancy will be assigned to a reserve flight
                  attendant in reverse seniority order, insofar as may be
                  practicable. [match]

         3.       A flight attendant filling a temporary vacancy will be paid
                  per diem and expenses in accordance with this Agreement.
                  [match]

F.       All times referred to in this Article are local time at the Company's
         headquarters. [match]




                                    ARTICLE 8

                                  PAID DAYS OFF
                                  -------------

A.       Flight attendants will accrue PDOs in accordance with the following
         schedule: [match]

         1.       Years Of          Monthly
                  Service           Accrual
                  -------           -------

                  1                 4.0 hours
                  2                 4.33 hours
                  3                 4.67 hours
                  4                 5.0 hours
                  5                 5.33 hours
                  6                 5.67 hours
                  7                 6.0 hours
                  8                 7.0 hours
                  9                 7.33 hours
                  10                7.67 hours       [match]

                  PDOs will be charged at four (4.0) hours for each day a PDO is
                  taken. [match]

         2.       Flight attendants must be on active status on or before the
                  fifteenth (15th) day of each month to accrue PDOs for that
                  month. [match]

         3.       At year end unused PDOs may be: [match]

                  a.       Cashed in. [match]

                  b.       Placed in the PDO Sick Bank. [match]

                  c.       Up to two times a flight attendant's annual accrual
                           may be carried over for subsequent use. [match]

B.       PDOs For Annual Vacation [match]

         1.       Not later than the 15th day of November, the Company will
                  distribute the annual PDO Request Form for the following
                  calendar year. Annual bids for PDOs must be returned by the
                  30th day of November. Flight attendants will be notified of
                  their annual vacation bid award by the 15th day of December.
                  Annual bids have priority over the ensuing monthly requests
                  for PDOs. [match]

         2.       Annual vacation bids will be awarded in order of seniority.
                  [match]

         3.       Vacation bids must be in full week increments, i.e., seven (7)
                  consecutive days, Monday through Sunday. A flight attendant
                  may bid only the PDOs that will be accrued as of November 30
                  of the current year; however, if the flight attendant's PDO
                  bank drops below the vacation actually bid, the Company may
                  cancel the corresponding amount of vacation (minimum of one
                  (1) week). [match]





         4.       Annual vacation bid awards will not be changed except by
                  mutual agreement between the Company and the flight attendant.
                  [match]

         5.       The Company may restrict up to four (4) weeks during a
                  calendar year in each domicile during which annual vacation
                  may not be bid. Such a restriction will be imposed only for
                  operational reasons that will be discussed with the Union
                  before being imposed. [match]

         6.       No less than seventy-five percent (75%) of accrued PDO's will
                  be made available for the annual vacation bid by domicile.
                  [match]

         7.       A flight attendant who is awarded a vacancy in a different
                  domicile after having been awarded annual vacation may be
                  required to rebid her annual vacation from remaining available
                  vacation periods in the new domicile. [match]

         8.       Annual vacation periods that are vacated will be made
                  available to other flight attendants on a first-come,
                  first-served basis. [match]

C.       PDOs For Monthly Vacation [match]

         1.       Not later than the 1st day of each month, the Company will
                  accept requests for PDOs in the following month (i.e.,
                  requests for a PDO in March must be submitted by February 1).
                  Requests will be on a first-come, first-serve basis. Not later
                  than the 20th day of the month, the Company will post the
                  upcoming month's schedule that will indicate the PDO award for
                  that month. [match]

         2.       The Company will award all bids reasonably possible taking
                  into account the needs of the schedule. [match]

D.       PDO Sick Bank [match]

         1.       Flight attendants may elect payment from their PDO Sick Bank
                  up to one-half (1/2) of the minimum monthly guaranteed hours
                  per pay period for furlough, medical, or family leave. [match]

         2.       PDO Sick Bank days may be used for personal or family illness
                  and injuries on or off the job. [match]

         3.       There is no maximum number of days which can be placed in the
                  PDO Sick Bank. During the month of December, flight attendants
                  may notify the Company of the number of PDOs to be placed in
                  the PDO Sick Bank. [match]

E.       General [match]

         1.       Accrued PDOs may be exchanged for pay at the flight
                  attendant's request. If a flight attendant elects to be paid
                  for PDOs in lieu of taking time off, she will be paid at her
                  current hourly rate for each PDO exchanged. A maximum of
                  fifteen (15) PDOs may be exchanged each month. A flight
                  attendant who resigns and has given the Company



                  fourteen (14) days written notice of her intention to resign,
                  and who actually works on each such assigned work day during
                  such notice period, will be entitled to her accumulated PDOs
                  up to her date of resignation. In the event of a flight
                  attendant's death, the amount will be paid to her estate.

         2.       PDOs will be charged only on days the flight attendant is
                  scheduled to perform duty for the Company. [match]

         3.       One (1) PDO will be charged for each continuous duty overnight
                  (CDO) missed as a result of vacation or sick leave. [match]

         4.       A flight attendant who, in a rolling 6-month period, has
                  perfect attendance will be credited with four (4) additional
                  hours for each such six (6) month period to a maximum of eight
                  (8) hours in any calendar year. [match]



                                    ARTICLE 9

                                    SENIORITY
                                    ---------

A.       A flight attendant's seniority shall begin on the flight attendant's
         date of hire. When two (2) or more flight attendants have the same date
         of hire, they shall be placed on the seniority list according to the
         last four (4) digits of their social security numbers, i.e., the lowest
         number shall be the most senior. A flight attendant's pay shall
         commence on date of hire. Except as otherwise specified in this
         Agreement, all flight attendants shall be full time employees of the
         Company.

B.       A flight attendant shall lose her seniority if any of the following
         occurs:

         1.       Voluntary resignation;

         2.       Discharge for just cause;

         3.       Failure to report for duty at the expiration of a leave of
                  absence;

         4.       Failure to report for duty after recall from furlough in
                  accordance with Section 11.

C.       Seniority shall prevail at all times in matters concerning equipment
         bids, reductions, recall, base bidding, assignments, upgrades,
         transitions and vacations, or except as otherwise specified in this
         Agreement.

D.       A current seniority list will be posted on the flight attendant's
         bulletin board and posted in each flight attendant domicile quarterly
         (January 1, April 1, July 1, and October 1) with a copy sent to the
         Union and the Chief Steward. Any alleged error or omission affecting a
         flight attendant's seniority on any list must be protested by the
         affected flight attendant, in writing, within thirty (30) days of the
         posting. A flight attendant making no protest within the time specified
         may not thereafter protest the alleged error or omission on the
         disputed list or any subsequent list.

E.       A flight attendant will be on probation for the flight attendant's
         first twelve (12) months of active service with the Company.




                                   ARTICLE 10

                                    TRAINING
                                    --------

A.       The Company will establish training requirements for flight attendants.

B.       The Company will post recurrent training dates, if any, for bid in the
         monthly bid package. A flight attendant who will be in her prior or due
         month in the month being bid may bid on available recurrent training
         dates. Such bids will be awarded in seniority order, provided that: (1)
         awarding the bid does not result in a conflict with other duty; (2)
         seniority notwithstanding, a flight attendant in her due month will
         have bidding priority over a flight attendant in her prior month; (3) a
         flight attendant in her due month who has not made a successful bid for
         a recurrent training date, or who is in her grace month, may be
         assigned a recurrent training date. A flight attendant assigned to
         training will be so notified at least five (5) days prior to
         commencement of training unless shorter notice is required because of
         regulatory agency or aircraft manufacturer directive. Such notice may
         be waived by the flight attendant. If the Company finds it necessary to
         move a flight attendant's recurrent date and/or to assign her to a
         training date due to operational reasons (e.g., loss or reduction of
         training staff, an excess of flight attendants who require training,
         etc.), the Company will make reasonable efforts to accommodate flight
         attendants' preferences for training dates.

C.       Training will not be scheduled for more than six (6) consecutive days
         followed by twenty - four (24) consecutive hours free of duty.

D.       A flight attendant shall not be required to attend training for more
         than ten (10) hours a day, no more than eight (8) of which shall be
         classroom hours.

E.       A flight attendant removed from duty for retraining or reexamination
         shall lose no more than three (3) days of pay.

F.       No flight attendant shall be required to pay for the use of any Company
         equipment or equipment outside the Company that is required for
         training.

G.       The Chief Steward, or her designee, (either of whom shall be an
         employee of the Company) may observe any ground-based training. Such
         observation shall be without pay and shall not interfere with the
         conduct of the training.



                                   ARTICLE 11

                         REDUCTION IN FORCE OR FURLOUGH
                         ------------------------------

A.       The Company will provide at least fourteen (14) days written notice of
         any force surplus requiring a reduction in the number of flight
         attendants in a particular domicile.

B.       A flight attendant holding an award in the surplus domicile shall be
         displaced in inverse order of seniority.

C.       A displaced flight attendant may accept layoff at the point, displace
         the most junior flight attendant in the system or fill any vacancy in
         accordance with Section 7. If there are multiple flight attendants
         displacing junior flight attendants at more than one domicile, the
         displacing flight attendants may elect which of those available
         domiciles to displace into in seniority order. A flight attendant who
         accepts layoff at the point will thereafter be treated as a furloughed
         flight attendant for purposes of recall.

D.       Notification of Furlough.

         1.       When a flight attendant is to be furloughed, she will be given
                  fourteen (14) days notice, by return receipt requested, from
                  the Company, unless the furlough occurs as a result of
                  conditions beyond the Company's control, such as a curtailment
                  or reduction in operation because of fire, flood, storm or
                  similar acts of God, strikes, Company bankruptcy, catastrophic
                  air accidents that have a direct effect on the Company's
                  business, grounding of a fleet type, or similar occurrences.
                  In such cases, the Company will give as much notice as
                  possible. Copies of all furlough or recall notices will be
                  sent to the Chief Steward and the Union.

         2.       A furloughed flight attendant will file her current address
                  and telephone number with the Company and will advise the
                  Company, in writing, of any changes within seven (7) days of a
                  change.

E.       Furlough

         1.       Flight attendants will be furloughed in inverse order of
                  seniority.

         2.       A flight attendant who is furloughed will retain and continue
                  to accrue seniority.

         3.       A furloughed flight attendant will be recalled in seniority
                  order prior to the Company hiring additional flight
                  attendants.

         4.       Prior to effecting a furlough, flight attendants will be
                  encouraged to take earned vacation or a personal leave of
                  absence to prevent furlough.

         5.       Flight attendants who are granted a personal leave of absence
                  during periods of furlough will continue to accrue seniority.

         6.       No flight attendant may be bumped by a more junior flight
                  attendant.




F.       Recall From Furlough

         1.       Recall notices will be sent by the Company, return receipt
                  requested, to the last known address the Company has on file
                  for the flight attendant. The Company may notify more flight
                  attendants than the number being recalled to identify those
                  who will accept or bypass recall.

         2.       A recalled flight attendant must notify the Company of
                  acceptance or bypass within seven (7) days after the receipt
                  of the recall notice or she will be subject to termination.

         3.       A flight attendant may bypass recall until all of the
                  furloughed flight attendants junior to her have been recalled.
                  If an insufficient number of flight attendants accept recall,
                  the Company shall notify furloughed flight attendants in
                  reverse seniority order that recall is mandatory. Such flight
                  attendants must report to active service within seven (7) days
                  of receipt of the mandatory notice.

         4.       A furloughed flight attendant will be allowed fifteen (15)
                  days after receipt of a notice of a recall to report for duty
                  at the point specified by the Company. The Company may, at its
                  discretion, extend this period.

G.       Time Off Without Pay

         When the Company intends to furlough one or more flight attendant(s)
         involuntarily, it will offer voluntary time off without pay to a like
         number of flight attendants in seniority order within the domicile(s)
         where the Company is overstaffed. Such flight attendants may request
         time off without pay in writing for a specified duration. The Company
         will grant such requests, in writing, specifying the authorized
         duration of the leave which may be less, but not more, than the
         duration requested by the flight attendant. A flight attendant who
         accepts voluntary time off without pay will continue to accrue
         seniority but will not accrue longevity or benefits. Such flight
         attendant may continue her medical insurance in accordance with COBRA.
         The Company may, but is not required to, allow the flight attendant to
         return early from the leave, but the flight attendant will not be
         required to return to work before the leave has expired. A flight
         attendant may request an extension of the leave in writing which may be
         granted by the Company in writing. Immediately after the expiration of
         a leave of absence granted under this paragraph, a flight attendant
         will return to the domicile where she was assigned immediately prior to
         the leave. If the domicile no longer exists for flight attendants, the
         flight attendant may displace a less senior flight attendant in the
         domicile of her choosing.





                                   ARTICLE 12

                                LEAVES OF ABSENCE
                                -----------------

A.       Personal Leave of Absence

         The Company at its sole discretion may grant a personal leave of
         absence without pay. A flight attendant shall submit her request for a
         personal leave of absence, in writing, on a form to be supplied by the
         Company, setting forth the reasons therefore. The Company will then
         return to the flight attendant either a written approval or denial of
         the request. If the leave is approved, the Company shall, in writing,
         specify the details of the leave including, but not limited to, the
         date on which the flight attendant must return to active service with
         the Company. While on leave of absence the flight attendant will
         continue to accrue seniority but not accrue benefits. However, the
         flight attendant may elect to continue health and life insurance
         benefits, provided the flight attendant pays the full monthly premiums
         to the Company in accordance with COBRA. The Company and the flight
         attendant may mutually agree to extend the leave of absence. Such
         extension must be in writing and signed by both parties, setting a
         specific date by which the flight attendant must return to active
         service.

B.       Military Leave of Absence

         Military leaves will be granted in accordance with applicable law. The
         Company will grant a leave of absence, without pay, not to exceed
         fifteen (15) days to any person ordered to Reserve or National Guard
         duty for annual training, or in the case of national emergency, except
         under specific military orders, or as otherwise required by Federal
         Law. The flight attendant shall give the Company reasonable notice of
         said active duty. A flight attendant who volunteers for extended duties
         must get prior approval from the Company.

C.       Medical Leave of Absence

         1.       This type of leave of absence is designed to cover a flight
                  attendant who is unable to perform her duties due to illness
                  or injury. Upon exhaustion of sick leave, a flight attendant
                  will be placed on a medical leave of absence.

         2.       The Company may offer a non-flying position to any flight
                  attendant who can no longer perform her job because of illness
                  or injury.

         3.       A flight attendant on medical leave of absence shall continue
                  to accrue seniority. The Company shall continue to provide
                  health and life insurance benefits for a period of up to
                  ninety (90) days after the flight attendant has exhausted her
                  sick leave. The flight attendant may elect to continue health
                  and life insurance benefits, provided the flight attendant
                  pays the full monthly premiums to the Company in accordance
                  with COBRA.

         4.       In no case shall a medical leave of absence exceed a total
                  continuous period of five (5) years.

D.       Family Leave of Absence




         The Company will grant leaves in accordance with the Family and Medical
         Leave Act of 1993. Bases with less than fifty (50) employees will also
         be covered by the Act. While on Family Leave the flight attendant will
         continue to accrue seniority and all benefits, without interruption and
         at no cost. A flight attendant on Family Leave will have the option to
         draw full pay until sick leave accumulation and vacation accumulation
         are exhausted. Upon return from Family Leave the flight attendant will
         have the option to return to the domicile held prior to said leave, or
         any vacancy in accordance with her seniority.

E.       Bereavement Leave of Absence

         If a flight attendant suffers a death in her immediate family she shall
         immediately notify Crew Scheduling and be granted up to five (5)
         consecutive days leave with full pay. Such days shall be mutually
         agreed upon by the flight attendant and Crew Scheduling. A flight
         attendant's immediate family shall be defined as a flight attendant's
         mother, father, spouse, children and step-children. Up to three
         consecutive days will be granted for the death of the flight
         attendant's brother, sister, mother-in-law, father-in-law, or
         grandparent. Such bereavement leave may, upon request, be extended for
         additional days, and, if extended, may be either without pay or with
         pay charged against the flight attendant's earned vacation.

F.       Union Leave

         1.       At the request of the Union (sixty (60) day advance notice) a
                  flight attendant shall be granted an indefinite Union leave of
                  absence without pay to accept employment with the Teamsters
                  Airline Division. While on such leave the flight attendant
                  shall continue to accrue seniority and be covered by Company
                  insurance, the cost of which will be reimbursed to the Company
                  by the Union at the monthly rate of twenty-three percent (23%)
                  times the flight attendant's monthly guarantee, prorated. The
                  flight attendant will maintain all other benefits covered by
                  this Agreement and may continue to participate in the 401K
                  Plan. No more than one (1) flight attendant shall be permitted
                  a Union leave at one time. A flight attendant on Union leave
                  will be given recurrent training necessary to remain current
                  as a Chautauqua flight attendant.

         2.       At the request of the Union, the Company will, subject to the
                  needs of the service, release flight attendants for the
                  purpose of conducting union business. Requests for release
                  must be submitted in writing to the Manager of Inflight at
                  least seven (7) days before the requested day(s) off. The
                  Company may waive the seven (7) day requirement. Trips dropped
                  to accommodate such leaves will be placed in open time unless
                  the Company elects to assign such trips to reserves.

         3.       Reimbursement for Flight Pay Loss

                  a.       Except as provided in Section 12.F.1., the Union
                           shall reimburse the Company for Union leave paid to a
                           flight attendant by multiplying the number of hours
                           on leave paid by the Company times the applicable
                           hourly rate for the flight attendant, plus 23% to
                           cover the cost of fringe benefits.

                  b.       The Union agrees to reimburse the Company within
                           forty-five (45) days after receipt



                           of the Company's bill.

G.       Jury Duty Leave

         1.       A flight attendant shall provide the Manager of Inflight with
                  a copy of the summons or notice of jury duty immediately upon
                  receipt of such documents. A flight attendant shall
                  concurrently provide the Company with authorization to
                  intercede with the appropriate authorities for the purpose of
                  removing her from jury duty.

         2.       A flight attendant who is required to serve on jury duty shall
                  be granted a leave of absence for that purpose.

         3.       A flight attendant who is called for jury duty shall be paid
                  and credited four (4.0) hours pay and credit at her applicable
                  hourly rate for each scheduled duty or reserve day lost to
                  jury duty. Such jury duty leave pay shall be offset by any
                  amount the flight attendant receives from the court.

         4.       Immediately upon release from jury duty, a flight attendant
                  shall notify the Company of her availability for flying
                  status.

         5.       A flight attendant on jury duty leave shall continue to accrue
                  seniority, longevity and all benefits as if she had been in
                  active service.

H.       Maternity Leave

         1.       Maternity leave for flight attendants shall be handled in
                  accordance with applicable law.

         2.       A flight attendant shall notify the Company immediately upon
                  confirmation of her pregnancy.

         3.       A pregnant flight attendant shall be permitted to continue in
                  service until her physician determines that she is no longer
                  able to perform all required flight attendant duties.

         4.       A flight attendant who ceases to perform flight attendant
                  duties shall be placed on sick leave. Following exhaustion of
                  sick leave benefits, the flight attendant shall be placed on
                  medical leave.

I.       Return From Leave

         Immediately after the expiration of a leave of absence granted under
         paragraphs 12.A., 12.C., 12.F. or 12.H., a flight attendant will return
         to the domicile where she was assigned immediately prior to the leave.
         If the domicile no longer exists for flight attendants, the flight
         attendant may displace a less senior flight attendant in the domicile
         of her choosing.



                                   ARTICLE 13

                               PHYSICAL STANDARDS
                               ------------------

The physical standards required of a flight attendant shall be no less than the
standards established by the FAA. A flight attendant shall maintain the ability
to perform all required duties.






                                   ARTICLE 14

                          INSURANCE AND OTHER BENEFITS
                          ----------------------------

A.       The Company shall provide each flight attendant with a life insurance
         policy after ninety (90) days of service. The Company shall pay one
         hundred percent (100%) of the premium for this coverage.

         1.       Flight Attendant Life Insurance:

                  Two (2) times the basic annual earnings, rounded to the next
                  higher $1,000. to a maximum of $250,000.

         2.       Accidental Death and Dismemberment:

                  Four (4) times the basic annual earnings, rounded to the next
                  higher $1,000. to a maximum of $500,000.

         3.       Dependent Life Benefits:

                           a.       Spouse:                        $5000

                           b.       Children:    0-8 days          $0
                                                 8 days - 6 mo     $100
                                                 6 mo - 19 yrs     $2500

B.       The Company will provide health insurance for the flight attendants and
         qualifying dependents, the benefits of which shall not be less
         advantageous than the existing program coverage and benefits. For
         flight attendants with under one (1) year of service, the Company shall
         pay one hundred percent (100%) of the premium cost, minus fifteen
         dollars ($15.00), per pay period, for said flight attendants, however,
         dependent coverage premiums may be paid by said flight attendants
         through payroll deduction. For flight attendants with over one (1) year
         of service, the Company shall pay one hundred percent (100%) of the
         premium cost, minus fifteen dollars ($15.00) for individual flight
         attendant coverage, twenty-five dollars ($25.00) for flight attendant
         and spouse coverage or thirty-five dollars ($35.00) for flight
         attendant and family coverage, per pay period. Should the cost of such
         insurance increase, the Company may require greater contributions from
         flight attendants.

C.       The Company will provide the Chief Steward and the Union with copies of
         master insurance contracts for each policy required under the terms of
         this Agreement.

D.       The Company will provide a 125 Flexible Benefits Plan to all flight
         attendants, the benefits of which shall not be less advantageous than
         the existing program.

E.       The Company will provide retirement benefits (i.e., 401(k)) to all
         flight attendants, and the benefits shall be no less advantageous than
         the existing program.

F.       Effective upon ratification of this Agreement, the Company shall
         contribute to the Local 210 Scholarship Fund the sum of four dollars
         ($4.00) per month for each employee covered by



         this Agreement.

G.       Effective upon ratification of this Agreement, the Company shall
         contribute to the Local 210 Maternity Fund the sum of four dollars
         ($4.00) per month for each employee covered by this Agreement.

H.       Effective date of signing, the Company shall pay for dental plan
         coverage for single flight attendants or sixteen and one-half dollars
         ($16.50) per month towards the cost of family coverage. The plan for
         flight attendants and qualified dependents will be no less advantageous
         than the program offered to other employee groups.

I.       The Company will include the flight attendants in any profit sharing
         plan, bonus and incentive programs offered to all other non-management
         employees.






                                   ARTICLE 15

                           TRANSFER TO MANAGEMENT DUTY
                           ---------------------------

A.       A flight attendant who is transferred to a managerial position shall
         retain but not accrue seniority for six (6) months. At the expiration
         of six (6) months, the flight attendant's name shall be removed from
         the seniority list.

B.       A flight attendant accepting or transferring to a managerial position
         will not be awarded a bid line of flying.





                                   ARTICLE 16

                              MISCELLANEOUS FLYING
                              --------------------

A.       Flight attendants may not fly commercially outside the Company.

B.       The Company will not transfer any Company aircraft to, or schedule any
         flight attendant to fly any trips for, airlines that are on strike
         unless mutually agreed to by the Company and the Union.

C.       The Company will not transfer aircraft to a subsidiary or alter-ego for
         the purpose of avoiding the terms of this Agreement





                                   ARTICLE 17

                          NOTICES TO FLIGHT ATTENDANTS
                          ----------------------------

All notices to flight attendants involving domicile assignment, promotion,
demotion, furlough, and leaves of absence shall be stated in writing, with a
copy mailed to the Union office and a designee.






                                   ARTICLE 18

                                   GRIEVANCES
                                   ----------

A.       Grievance

         A grievance is a claim or dispute by a Flight Attendant or the Union
         concerning the interpretation, application, or the alleged breach of
         this Agreement. Any flight attendant or group of flight attendants who
         has a grievance concerning any action of the Company affecting them
         shall have such grievance considered and handled in accordance with the
         following procedures. It is the intent of the parties to resolve
         grievances or potential grievances informally and at the lowest level
         possible. There shall be an earnest effort on the part of the parties
         to settle grievances promptly and in accordance with the procedures
         outlined herein. [match]

B.       Step One - Informal Discussion With a Supervisor

         1.       A Flight Attendant or Union representative who believes that
                  her rights under this Agreement have been violated should
                  first bring the matter to the attention of the Flight
                  Attendant's immediate supervisor.

         2.       The immediate supervisor, or her designee, must reply to the
                  Flight Attendant within five (5) business days. [match]

         3.       Disciplinary grievances shall be initiated at Step Two, below.

C.       Step Two - Written Grievance

         1.       After receipt of an unsatisfactory response, or lapse of the
                  five (5) business days in Step One, the Flight Attendant or
                  the Union shall reduce the grievance to writing and submit it
                  to the Director of Inflight, or his designee, within thirty
                  (30) days of the event giving rise to the grievance, or when
                  the grievant should have reasonably known of the event.
                  [match]

         2.       The written grievance shall set forth, with reasonable detail,
                  a statement of the facts giving rise to the grievance, the
                  provision of the Agreement alleged to have been breached and
                  the relief sought. The Director of Inflight, or his designee,
                  shall hold a hearing within fifteen (15) business days of
                  receipt of the written grievance by the Company. The grievant
                  shall, if requested by the Company or the Union, attend such
                  hearing. [match]

         3.       The Director of Inflight, or his designee, shall, within ten
                  (10) business days of said hearing, provide the Union Business
                  Representative, or his designee, with a written statement of
                  his decision. [match]

D.       Step Three

         If the Union is not satisfied with the disposition of the grievance in
         the Step Two proceeding above, it may appeal the case to the System
         Board of Adjustment by submitting a written



         submission of the case to the System Board, with a copy to the Director
         of Inflight within fifteen (15) business days after receiving the Step
         Two decision. [match]

E.       Discipline or Discharge.

         1.       No Flight Attendant shall be subject to discipline or
                  discharge without just cause. A Flight Attendant shall be
                  notified in writing of discharge, disciplinary time off and
                  written reprimand. The Company will send a copy of such notice
                  to the Flight Attendant and to the Union. A Flight Attendant
                  so disciplined or discharged may submit a written grievance
                  directly at the Step Two level, above. Such written grievance
                  must be filed within ten (10) business days of the postmark of
                  the written discipline or discharge action by the Company.

         2.       Flight Attendants who are a party to incidents involving
                  discipline or discharge shall be retained on the payroll but
                  may be removed from service until a meeting has been held and
                  a decision arrived at in writing by the Company.
                  Teleconferencing may be utilized and the grievant, a company
                  representative and a Union representative and others as
                  desired may be present. Following the Company decision, the
                  grievant may be suspended from the payroll, discharged or
                  given other disciplinary actions.

         3.       The provisions of Article 18.D. shall not be available to
                  probationary employees and no grievance related to discipline
                  or discharge may be filed by them or on their behalf. However,
                  a probationary employee may file non-disciplinary grievances
                  in accordance with Articles 18.A-D.

F.       General

         1.       Time limits contained in this Article may be extended by
                  mutual agreement of the parties, reduced to writing.

         2.       Failure on the part of the Company, the grievant or the Union
                  to adhere to the time limits set forth herein, or as mutually
                  agreed to, shall constitute a waiver of the position of the
                  party failing to comply.

         3.       If a grievant is exonerated, her personnel file shall, to the
                  extent permitted by law, be cleared of all reference to the
                  incident. A grievance who is cleared of all charges shall be
                  made whole as pertains to wages, seniority, longevity and
                  benefits.

         4.       Grievances, decisions, and appeals shall be forwarded by
                  personal delivery or through the U.S. Mail, certified, postage
                  prepaid, return receipt requested, addressed to the last known
                  address of the grievant, with a copy to the Union. Refusal to
                  accept delivery constitutes delivery.

         5.       A flight attendant shall have the right of Union
                  representation at all meetings with the Company. A flight
                  attendant shall be advised in advance of the nature of the
                  subject of any investigation, hearing or conference.

         6.       The Union, or its representative, and the grievant shall have
                  access to the grievant's personnel file for review in any
                  discipline or discharge case. The Company shall



                  cooperate in making any reasonably requested material
                  available that is relevant to the case.

         7.       When it is mutually agreed that a stenographic report is to be
                  taken of the hearing, in whole or in part, the cost will be
                  borne equally by both parties to the dispute. If it is not
                  mutually agreed that a stenographic report be taken, any
                  stenographic report taken of such hearing made by either of
                  the parties shall be furnished to the other party, upon
                  request, provided that the cost of such stenographic report so
                  requested shall be borne equally by both parties.





                                   SECTION 19

                           SYSTEM BOARD OF ADJUSTMENT
                           --------------------------

A.       In compliance with Section 204, Title II of the Railway Labor Act, as
         amended, there is hereby established a System Board of Adjustment for
         the purpose of adjusting and deciding disputes which may arise under
         the terms of this Agreement and any amendment or additions thereto and
         which are properly submitted to it, which Board shall be known as
         Flight Attendants' System Board of Adjustment, hereinafter referred to
         as "the Board."

B.       Composition of the Board

         1.       The Board shall consist of four (4) members, two (2) of whom
                  shall be selected and appointed by the Company and two (2) of
                  whom shall be selected and appointed by the Union, and such
                  appointees shall be known as "Board Members." In addition, the
                  Company and the Union shall each designate an alternate, and
                  in the event of unavailability of a Board Member, such
                  alternate shall serve in place of the absent Board Member.

         2.       The two (2) Board Members appointed by the Company and the two
                  (2) Board Members appointed by the Union, and their
                  alternates, shall serve for one (1) year from the date of
                  their appointment and thereafter until their successors have
                  been duly appointed. Vacancies shall be filled within thirty
                  (30) days in the same manner as is provided herein for the
                  selection and appointment of the original Board Members and
                  their original alternates.

         3.       The terms of the Office of Chairman and Vice Chairman shall be
                  for one (1) calendar year. Thereafter, from year to year, the
                  Board shall designate one (1) member to act as Chairman and
                  one (1) member to act as Vice Chairman for one (1) year terms
                  or until a successor has been duly selected. Such terms of
                  office shall commence on January 1 of each year.

         4.       The office of the Chairman shall be filled alternately by the
                  parties. A Union representative shall serve as Chairman and
                  the Company representative shall serve as Vice Chairman in
                  even years, and vice versa, in odd years. The Vice Chairman
                  shall act as Chairman in her absence.

         5.       The Board shall meet once every three (3) months at Company
                  headquarters, unless a different place for the meeting is
                  jointly agreed upon by the Board, during the months of
                  January, April, July and October provided that at such time
                  there are cases filed with the Board for consideration. The
                  meetings shall continue in session until all matters before it
                  have been considered unless otherwise mutually agreed upon in
                  writing.

         6.       Members of the Board who are employees of the Company shall
                  suffer no loss of pay while attending Board meetings.

C.       Jurisdiction of the Board




         1.       The Board shall have jurisdiction over all disputes growing
                  out of grievances or out of the interpretation or application
                  of any of the terms of this Agreement or amendments thereto
                  submitted by the Union to the Vice President of Flight
                  Operations or his designee. The jurisdiction of the Board
                  shall not extend to proposed changes in hours of employment,
                  rates of compensation, or working conditions covered by this
                  or other existing agreements between the parties.

         2.       The Board shall consider any dispute properly submitted to it
                  when such dispute has not been previously settled in
                  accordance with Section 18.

D.       Proceeding Before the Board

         1.       All disputes properly referred to the Board for consideration
                  shall be addressed to the Chairman. Five (5) copies of each
                  petition, including all papers and exhibits in connection
                  therewith, shall be forwarded to the Chairman, who shall
                  transmit one (1) copy to each member of the Board within three
                  (3) days. Each case submitted shall show:

                  a.       Question or questions at issue.
                  b.       Statement of facts.
                  c.       Position of the grievant(s).
                  d.       Position of the Company

         2.       Upon receipt of notice of the submission of a dispute, the
                  Chairman shall set a date for hearing, which shall be the time
                  of the next regular meeting of the Board as provided in
                  paragraph B, above, or, if at least two (2) Board Members
                  consider the matter of sufficient urgency and importance, then
                  at such earlier date at such place as the Chairman and Vice
                  Chairman shall agree upon but no more than thirty (30) days
                  after such request for a meeting is made by at least two (2)
                  of the Board Members. The Chairman shall give the necessary
                  notices in writing of such meeting to the Board Members and to
                  the parties to the dispute.

         3.       Flight attendants may be represented at Board hearings by such
                  person or person as they may choose and designate, and the
                  Company may be represented by such person or person as it may
                  choose to designate. Evidence may be presented either orally
                  or in writing, or both.

         4.       The Board Member(s) may summon witnesses who are employed by
                  the Company and who are deemed necessary by the Board. Such
                  employee shall suffer no loss of pay. The number of witnesses
                  summoned at any one time shall not be greater than the number
                  which can be spared from the operation without interference
                  with the service of the Company.

         5.       The Board shall be competent to hear the disputes properly
                  submitted to it and decide disputes by a majority vote of all
                  members of the Board. Decisions of the Board shall be final
                  and binding upon the parties.

E.       Deadlock Procedures




         When a dispute is properly submitted to the Board for hearing before
         the two (2) Company and the two (2) Union Board Members, or their
         alternates, and the Board is unable by majority vote to decide the
         dispute, the Board shall declare itself deadlocked and select an
         arbitrator. The arbitrator shall join the Board as a Board Member and
         as Chairman in subsequent consideration and hearing of the dispute. The
         Board, so composed, shall be competent to decide said dispute by
         majority vote. Decisions of the Board so composed shall be final and
         binding on the parties.

F.       Deadlock Notices

         When a deadlock occurs for any reason, the Board, by written notice
         shall, immediately notify the Union of such deadlock, including the
         date thereof, and the need for the services of a fifth (5th) member of
         the Board. If the Union desires to submit the case to the five (5)
         member Board, it must do so by written notice to the President of the
         Company with copies to the Chairman and Vice Chairman of the Board
         within ten (10) days from the receipt of notice from the Board that the
         Board was deadlocked.

G.       Selection of a Fifth (5th) Board Member

         1.       If notice is provided of the desire to convene the five (5)
                  Member Board, the Union and the Company shall promptly meet,
                  but in no event later than seven (7) days from the date of the
                  notice by the Union to select an arbitrator by mutual
                  agreement from the following names:

                  Richard Block             Lawrence Holden       Nicholas Zumas
                  John Dunsford             Herbert Fishgold
                  Robert Harris             Joseph Scerno

         2.       If none of the above-named arbitrators are available to
                  conduct a hearing within sixty (60) days of their selection,
                  the Company or the Union may petition the National Mediation
                  Board (NMB) for a list of seven (7) names from which the fifth
                  (5th) arbitrator shall be selected. Either party shall have
                  the right to reject one (1) list of arbitrator sent by the NMB
                  in its entirety, in which case the parties will request a new
                  list of arbitrators from the NMB. The order of striking shall
                  be determined by lot for the first case in which an arbitrator
                  is chosen and in subsequent cases, the parties shall alternate
                  taking the first strike.

H.       Five (5) Member Board Hearing

         Within thirty (30) days after the selection of the fifth (5th) member,
         and with the arbitrator's concurrence, the Board shall schedule a
         hearing of the dispute by the five (5) member Board, including the
         presentation of such witnesses and evidence as the five (5) member
         Board shall, in its discretion, permit. A decision of a majority of the
         Board sitting with the fifth (5th) member shall be final and binding
         upon the parties. The Board may agree to have the arbitrator hear the
         case without the Board present.

I.       General

         1.       Expenses of the Board




                  Each of the parties will assume the travel and expenses of the
                  Board members selected by it and each of the parties will
                  assume the travel expense and other expenses of the witnesses
                  called or summoned by it except employees of the Company will
                  suffer no loss of pay and that the Company will provide space
                  available transportation over its lines, in accordance with
                  the existing regulations, for any Board member or Company
                  employee who is called or summoned as a witness. The expense
                  and compensation of the fifth (5th) member of the Board will
                  be borne by the parties. The Chairman and the Vice Chairman,
                  acting jointly, shall have the authority to incur such other
                  expenses as in their judgment may be deemed necessary for the
                  proper conduct of the Board, and such expenses shall be borne
                  equally by each of the parties.

         2.       Freedom to Act

                  Each and every Board member shall be free to discharge her
                  duty in an independent and uncoerced manner without fear that
                  her individual relations with the Company, with the flight
                  attendants, or with the Union will be affected in any manner
                  by any action taken by him in good faith in her capacity as a
                  Board member,

         3.       Time Limits

                  Time limits may be extended in writing by mutual agreement of
                  the Company and the Union.

         4.       Rights Under Railway Labor Act

                  Nothing herein shall be construed to limit, restrict, or
                  abridge the rights or privileges accorded to the flight
                  attendants or to the Company, the Union, or their duly
                  accredited representatives under the provisions of the Railway
                  Labor Act, as amended.

         5.       Records of the Board

                  The Board shall maintain a record of all matters submitted to
                  it for its consideration and of all findings and decisions
                  made by it.







                                   ARTICLE 20

                                UNION MEMBERSHIP
                                ----------------

A.       Union Membership

         It shall be a condition of employment that all flight attendants
         covered by this Agreement shall, on the effective date of this
         Agreement, become and remain members in good standing of the Union. It
         shall be a condition of employment that all flight attendants covered
         by this Agreement and hired on or after its effective date shall, on or
         before the ninetieth (90th) day following the beginning of the initial
         seniority date, become and remain members in good standing in the
         Union.

B.       Initiation Fees and Dues Deductions

         The Company will deduct from the wages of any flight attendants covered
         by this Agreement said flight attendants' dues as a member of the Union
         upon receiving the flight attendant's voluntary and individual written
         authorization for the Company to make such deductions, signed by the
         flight attendant. Such authorization form will be provided by the
         Union. The Company will pay over to the proper officers of the Union
         the wages withheld for such initiation fees and/or dues. The amount so
         withheld shall be deducted from the appropriate paycheck, reported and
         paid to the Union monthly. The following information will be reported
         and transmitted with the monthly check off: the flight attendant's
         Social Security number, full name, dues rate, rate of pay and status of
         employment.

C.       Indemnification Clause

         The Union shall indemnify the Company and hold the Company harmless
         from any and all claims which may be made by a flight attendant against
         the Company by virtue of the wrongful application or misapplication of
         any of the terms of this Section.

D.       Dues Collection after Termination

         In the event of termination of employment, there shall be no obligation
         upon the Company to collect dues until all other deductions have been
         made.

E.       Failure to Pay Dues

         The Union agrees that written notice shall be given to the Company at
         least thirty (30) days before the Company is required to remove a
         flight attendant from her employment by reason of her failure to
         maintain her membership in good standing in the Union in accordance
         with Section A., above.

F.       Flight Attendant List

         1.       When applicable, the Company will advise the Union of the
                  names of any new hires, termination, layoffs or recall of any
                  flight attendants covered by this Agreement. Such information
                  will include the name, hire date, layoff date, termination
                  date or recall date of such flight attendants.




         2.       The Company will mail to the Union and a designee a report,
                  containing the current address, telephone number and pay rate
                  of each flight attendant quarterly or when there are
                  substantial changes.

G.       Individual Dues Payment

         It shall be the responsibility of any flight attendant who is not on a
         dues deduction program to keep her membership current by direct
         payments of monthly dues to the Union.

H.       Dues Deduction Error

         Should a deduction be missed, or in the event an insufficient amount is
         deducted, the Company will be responsible to make the proper adjustment
         the following month.

I.       Bulletin Board

         The Company will provide the Union with one suitable glass covered
         bulletin board at a location designated by the Union for posting of
         official notice of Union meetings, elections and other notices
         pertaining to internal Union matters. All such notices shall be signed
         by a duly authorized representative of the Union.

J.       Union Access

         The Union Representative(s) shall have free access to the Company's
         operations facilities to transact that business which is necessary for
         the administration of this Agreement. The Company further agrees to
         provide the Union Representative with proper ID to enter its operation
         facilities, if required.

K.       Hospitality Committee

         The Company shall set aside a mutually agreeable period of time during
         or immediately after each new hire class during which the Union
         Hospitality Committee may meet with each new hire class. The Company
         and the Union will mutually agree upon those committee representatives
         who will present Hospitality Committee materials during the new hire
         class.




                                   ARTICLE 21

                                    UNIFORMS
                                    --------

A.       A flight attendant shall wear the standard uniform as required in
         Company regulations at all times when on duty or in connection with any
         event or special assignment where the flight attendant is identified as
         a flight attendant with the Company.

B.       The flight attendant will be responsible for the cost of the initial
         basic uniform and all accessories.

C.       The Company will provide each flight attendant with one (1) set of
         wings and one (1) name tag.

D.       The flight attendant shall be permitted to wear the official Union
         insignia (not to exceed one (1) inch in diameter) on the right lapel or
         one-half (1/2) inch below the wings.

E.       Upon reasonable notice, the Company will meet with the Chief Steward or
         her designee to resolve problems involving procurement of basic uniform
         items or before making changes to the basic uniform.

F.       If the Company changes the basic uniform, it shall be responsible for
         supplying each flight attendant with the new basic uniform item(s).

G.       The Company will pay fifty percent (50%) of all replacement parts due
         to normal wear and tear after eighteen (18) months. The flight
         attendant will be paid a uniform allowance of twenty dollars ($20.00)
         per month.

H.       The price of uniform items purchased through the Company will be at the
         Company's cost.

I.       Required Basic Uniform Items (Male and Female)

                           1 Blazer
                           2 Bottoms
                           1 Belt
                           5 Shirts
                           1 Tie
                           1 Raincoat with removable liner

J.       The Company will replace or repair any uniform item that is damaged
         while on duty.

K.       The Company will loan maternity uniforms to flight attendants as
         needed.

L.       The Company will consider the recommendations of the Union's Uniform
         Committee.






                                   ARTICLE 22

                                     GENERAL
                                     -------

A.       Nothing in this Agreement shall be construed to limit or deny any
         flight attendant any rights or privileges to which she may be entitled
         under provisions of the Railway Labor Act, as amended.

B.       The Company shall supply copies of the Agreement for distribution to
         the flight attendants within thirty (30) days of the signing of this
         Agreement. The Company will also provide trainees with a copy of this
         Agreement during initial training.

C.       Flight attendants shall immediately notify the Company of any change in
         address or telephone contact number. The Company shall supply such
         information to the Union at the time it supplies the Union with the
         seniority list.

D.       The Company shall furnish an identification card to each flight
         attendant. Flight attendants shall bear the cost of replacement, if
         lost.

E.       No flight attendant or her estate shall be required to pay the cost of
         repair or replacement of any aircraft, equipment or property damaged or
         destroyed in the performance of her duties with the Company.

F.       Flight attendants will be subject to the pass policy of the Company on
         the same basis as groups of other Company employees. Flight attendants
         who retire from the Company after reaching age 60 with fifteen (15) or
         more years of service shall be entitled to Company pass privileges. The
         designated Union Business Representative will be provided space
         available travel on the Company system for the purpose of administering
         this Agreement.

G.       This Agreement, when accepted by the parties and signed by the
         respective representatives duly authorized, shall constitute the sole
         agreement between them involving the flight attendants. Any alteration
         or modification of this Agreement must be made by and between the
         parties and must be in writing.

H.       If any provision of this Agreement is declared invalid by any competent
         court or government agency because of existing or future legislation,
         such invalidation shall not affect the remaining provisions of this
         Agreement.

I.       The Company will provide all flight attendants with required Company
         manuals. The flight attendants will be responsible for such manuals and
         will, if such manuals are lost or negligently damaged, be required to
         reimburse the Company for the cost of replacements. Upon termination,
         the flight attendant must return such manuals or reimburse the Company
         for the cost thereof.

J.       The Union shall appoint a Professional Standards Committee, composed of
         flight attendants which shall confer with the Company on matters
         pertaining to the professional proficiency and training of flight
         attendants. Members of this Committee shall be permitted to observe any
         training period. The Union shall appoint a Safety Committee, composed
         of flight attendants, which shall confer with the Company on matters
         pertaining to safety operations.



         A member of each of these Committees shall be permitted to attend any
         hearing or investigation of an accident or incident of Company aircraft
         involving a flight attendant, subject to the regulations of the
         government agency involved. The Company will cooperate in releasing
         such members to participate in such hearings.

K.       A personnel file will be maintained for each flight attendant. Upon
         request, the flight attendant will be given the opportunity to review
         her file. If a flight attendant receives disciplinary action, any
         portion of her file to be relied upon by the Company in support of such
         disciplinary action shall be open for review upon request by the Union
         representative and the flight attendant. Further, any rebuttal letter
         written by the affected flight attendant related to the disciplinary
         letter shall also be placed in her personnel file. The Company cannot
         use any disciplinary notices in support of disciplinary action if the
         flight attendant had not been provided with written notice of the prior
         disciplinary action at the time discipline was assessed. A copy of all
         disciplinary letters issued to flight attendants will be forwarded to
         the Union. Disciplinary letters will be removed from a flight
         attendant's file twelve (12) months after the date of issuance provided
         there are no other infractions of a similar nature in the intervening
         period.

L.       When it is not required to have a cabin attendant jumpseat occupied for
         Company purposes, cabin jumpseat authority for personal business shall
         be granted to active Inflight Services personnel on a first come, first
         served basis before offering access to such jumpseat to other
         authorized jumpseat riders on personal business. Such authorization
         shall be subject to the FARs and the Company Operations Specifications.
         The Captain has final authority to ensure that carriage of a flight
         attendant jumpseat rider does not affect weight or operational
         restrictions or cause displacement of revenue. The Company, in
         consultation with the Union, will develop and publish reasonable
         procedures to implement this jumpseat policy.







                                   ARTICLE 23

                                  NEW EQUIPMENT
                                  -------------

A.       If the Company decides to place into service a new aircraft type that
         requires more than one flight attendant crewmember for revenue
         operation, before such new aircraft type is placed into revenue
         service, meeting(s) between the Company and the Union shall be
         initiated by either the Company or the Union, in accordance with
         Section 6, Title I of the Railway Labor Act, as amended, for the
         purpose of negotiating salaries, rules, and/or working conditions for
         such aircraft which shall be retroactive to the date such aircraft is
         placed into service. Such conferences, when held, shall not delay the
         placing of such aircraft into service providing the Company has given
         the Union sixty (60) days advance notice in writing that it is
         considering a different type of aircraft. However, if any such aircraft
         is placed into service sixty (60) days or thereafter of written notice
         to the Union and before agreement is reached regarding pay, rules,
         and/or working conditions, such aircraft will be operated by the flight
         attendants covered by this Agreement and will be operated in accordance
         with all of the provisions of this Agreement except where FARs are more
         restrictive, in which case FARs will represent the minimum standard in
         those areas where it is more restrictive than the Agreement.

B.       When the introduction of such new equipment necessitates that flight
         attendants be retrained, the Company will post the available training
         dates for bid in the monthly bid package. Such bids will be awarded in
         seniority order, provided that awarding the bid does not result in a
         conflict with other duty. A flight attendant who is not awarded a date
         for training may be assigned to training. If training is assigned, the
         Company will provide at least five (5) days notice prior to
         commencement of training unless shorter notice is required because of
         regulatory agency or aircraft manufacturer directive. Such notice may
         be waived by the flight attendant.







                                   ARTICLE 24

                                HOURS OF SERVICE
                                ----------------

A.       Rest Periods

         1.       Scheduled Rest

                  a.       In domicile, a flight attendant will be scheduled
                           with a minimum of ten (10) hours of rest between duty
                           periods (from release time until next report time).

                  b.       A flight attendant will not be scheduled for reduced
                           rest of less than eight and one half (8.5) hours
                           (from release time until next report time).

                  c.       When away from domicile, a flight attendant will not
                           be scheduled for less than eight and one half (8.5)
                           hours of rest (from release time until next report
                           time).

         2.       Actual Rest

                  A flight attendant will receive no less than eight (8) hours
                  between duty periods (from release time until next report
                  time).

B.       Duty Time Limitations

         1.       A flight attendant will not be scheduled/rescheduled for a
                  duty period in excess of fourteen (14) hours, unless by
                  consent of the flight attendant, except that a CDO may be
                  scheduled for up to fifteen (15) hours.

         2.       A flight attendant scheduled for a reduced rest overnight will
                  be scheduled for no more than ten (10) hours of duty in her
                  next duty period.

         3.       A flight attendant's duty time for a flight, trip or trip
                  pairing shall commence at the later of the flight attendant's
                  scheduled report time or actual report time. Report time shall
                  be scheduled for thirty (30) minutes prior to departure time
                  of the first flight, but may be extended to forty-five (45)
                  minutes at the Company's discretion. It will end fifteen
                  minutes after arrival time of the last flight of the duty
                  period, plus an additional fifteen (15) minutes if clearing
                  customs, repositioning an aircraft (as required by the
                  Company), or a combination of the above. At the request of
                  either party, the parties will meet to evaluate, on an
                  airport-by-airport basis, circumstances involving longer or
                  shorter times for clearing customs or repositioning that do
                  not fit the foregoing parameters. If the parties agree that an
                  adjustment should be made, the change will be implemented.

         4.       Duty time for multiple day trip pairings will begin and end at
                  a flight attendant's domicile.

         5.       Trip pairings will not be scheduled in excess of five (5)
                  consecutive days and if scheduled for five (5) days, the fifth
                  day may only be one leg returning the flight



                  attendant to domicile.

         6.       A duty period will contain a maximum of ten (10) landings.

         7.       Except in unusual circumstances, a duty period will contain a
                  maximum of three (3) scheduled consecutive round trips to the
                  same destination.

C.       Flight Time Limitations

         A flight attendant will not be scheduled for more than:

         1.       Eight (8) hours of block time in a duty period, except that a
                  flight attendant flying turbo-jet equipment may be scheduled
                  for no more than nine (9) hours of block time in a duty
                  period.

         2.       Thirty (30) hours of block time in any seven (7) day period.

         3.       One hundred (100) hours of block time in a calendar month.

D.       Days Off

         1.       The Company will schedule regular and buildup lineholders with
                  at least twelve (12) days off in domicile per bid period. A
                  flight attendant holding a reserve line will be scheduled for
                  at least eleven (11) days off in domicile per bid period. A
                  flight attendant in training will be scheduled for days off
                  during such training in accordance with Article 10.

         2.       Hardlines, buildup and reserve lines will be scheduled with
                  one (1) period of at least three (3) consecutive days off. All
                  other periods of days off will be scheduled as groups of at
                  least two (2) days, except during the integration period,
                  which may contain single days off.

         3.       If a flight attendant is unavailable for flight duty for a
                  part of a bid period, her minimum scheduled days off will be
                  prorated. A flight attendant is unavailable if she cannot
                  perform flight duty because, e.g., of lack of current
                  qualifications or leaves, excluding sick leave and bereavement
                  leave.

         4.       A flight attendant will not be scheduled/rescheduled to
                  perform any duty, including ground school, for more than six
                  (6) consecutive days without a calendar day off.

         5.       In no case will any flight attendant be reduced below her
                  minimum days off in domicile without receiving a replacement
                  day off in the same or following month.

         6.       A flight attendant who voluntarily reduced her days off will
                  not be entitled to replacement day(s) off.

E.       Notification

         1.       The Company will maintain a standard method of notifying a
                  flight attendant if



                  scheduled departure time will be appreciably delayed (more
                  than one (1) hour) or canceled. A flight attendant will be
                  notified as far in advance as is practicable.

         2.       The Company will not contact an off duty flight attendant
                  between 2200 and 0600 local domicile time. The following
                  exceptions apply:

                  a.       If there is a change in the flight attendant's
                           schedule, the flight attendant may be called one (1)
                           hour prior to the original or revised report time,
                           whichever is earlier, provided the call is made to
                           minimize the disruption to the flight attendant's
                           rest. No more than one (1) personal contact will be
                           made during that period by the Company for this
                           reason.

                  b.       A flight attendant on reserve may be contacted during
                           her period of reserve availability.

                  c.       A flight attendant off duty may be contacted when the
                           operational requirements dictate.

         3.       A flight attendant who is unable to report for duty will
                  notify Crew Scheduling as far in advance as practicable.

         4.       A flight attendant will not be required to keep the Company
                  notified of her whereabouts on her days off.







                                   ARTICLE 25

                                    DURATION
                                    --------

This Agreement will become effective on date of signing and will continue in
full force and effect through [DOS + 48 months] and will renew itself without
change until each succeeding [ ] thereafter, unless written notice of intended
change is served in accordance with Section 6, Title I, of the Railway Labor
Act, as amended, by either party thereto at least ninety (90) but not more than
one hundred and twenty (120) days prior to [DOS + 48 months], or any [ ]
thereafter.


IN WITNESS WHEREOF, the parties have signed this Agreement this _____ day of
___________, 1999.


For International Brotherhood of Teamsters      For Chautauqua Airlines, Inc.

/s/ Ray Benning                                 /s/ Edward J. Wegel
- ------------------------------                  ------------------------------
Ray Benning, Director                           Edward J. Wegel
Teamsters Airlines Division                     President and CEO

/s/ Barry Schimmel                              /s/ Donald C. Young
- ------------------------------                  ------------------------------
Barry Schimmel                                  Donald C. Young
Business Agent, Local 210                       Executive Vice President and COO

/s/ Mary Schrier                                /s/ Barry Confer
- ------------------------------                  ------------------------------
Mary Schrier                                    Barry Confer
Chief Steward                                   Director of Inflight Services

/s/ Lisa Paterini                               /s/ Amy Pogacnik
- ------------------------------                  ------------------------------
Lisa Paterini                                   Amy Pogacnik
Assistant Chief Steward                         Manager of Inflight Services

/s/ Debra Tate
- ------------------------------
Debra Tate
Negotiating Committee Member






                            LETTER OF AGREEMENT NO. 1

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

        THE FLIGHT ATTENDANTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                              RED CIRCLE PAY RATES

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the flight
attendants in the service of the Company, as represented by the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union").

Flight attendants who are on the seniority list as of, or before, January 1,
1999 will be paid for flight time based upon status and longevity in accordance
with the hourly rates below. In computing hours for pay purposes, the actual
time flown or the scheduled block time, whichever is greater, will be used.




                                     DOS+            DOS+         DOS+
       YEAR              DOS         12 MOS         24 MOS        36 MOS
       ----              ---         ------         ------        ------

                                                       
       0-6   mths        14.18        14.53         14.90          15.27
       7-12 mths         15.15        15.53         15.92          16.31
       2                 17.07        17.50         17.93          18.38
       3                 18.80        19.27         19.75          20.25
       4                 19.99        20.49         21.00          21.53
       5                 22.66        23.23         23.81          24.40
       6                 23.98        24.58         25.19          25.82
       7                 24.61        25.23         25.86          26.50
       8                 25.49        26.13         26.78          27.45
       9                 25.88        26.53         27.19          27.87
       10                26.25        26.91         27.58          28.27 [match]


IN WITNESS WHEREOF, the parties have signed this Agreement this _____ day of
___________, 1999.

For International Brotherhood of Teamsters     For Chautauqua Airlines, Inc.

/s/ Ray Benning                                /s/ Edward J. Wegel
- ------------------------------                 ------------------------------
Ray Benning, Director                          Edward J. Wegel
Teamsters Airlines Division                    President and CEO




/s/ Barry Schimmel                             /s/ Donald C. Young
- ------------------------------                 ------------------------------
Barry Schimmel                                 Donald C. Young
Business Agent, Local 210                      Executive Vice President and COO

/s/ Mary Schrier                               /s/ Barry Confer
- ------------------------------                 ------------------------------
Mary Schrier                                   Barry Confer
Chief Steward                                  Director of Inflight Services

/s/ Lisa Paterini                              /s/ Amy Pogacnik
- ------------------------------                 ------------------------------
Lisa Paterini                                  Amy Pogacnik
Assistant Chief Steward                        Manager of Inflight Services

/s/ Debra Tate
- ------------------------------
Debra Tate
Negotiating Committee Member




                            LETTER OF AGREEMENT NO. 2

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

        THE FLIGHT ATTENDANTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                                  SIGNING BONUS

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the flight
attendants in the service of the Company, as represented by the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union").

Each flight attendant in the employ of the Company on the date of signing of the
Agreement shall receive an amount equal to two hundred dollars ($200) for each
year or portion thereof of completed service on the day before the date of
signing the Agreement, subject to applicable deductions. All such payments shall
be made no later than the second paycheck following the date of signing of the
Agreement.

IN WITNESS WHEREOF, the parties have signed this Agreement this _____ day of
___________, 1999.

For International Brotherhood of Teamsters     For Chautauqua Airlines, Inc.

/s/ Ray Benning                                /s/ Edward J. Wegel
- ------------------------------                 ------------------------------
Ray Benning, Director                          Edward J. Wegel
Teamsters Airlines Division                    President and CEO

/s/ Barry Schimmel                             /s/ Donald C. Young
- ------------------------------                 ------------------------------
Barry Schimmel                                 Donald C. Young
Business Agent, Local 210                      Executive Vice President and COO

/s/ Mary Schrier                               /s/ Barry Confer
- ------------------------------                 ------------------------------
Mary Schrier                                   Barry Confer
Chief Steward                                  Director of Inflight Services



/s/ Lisa Paterini                              /s/ Amy Pogacnik
- ------------------------------                 ------------------------------
Lisa Paterini                                  Amy Pogacnik
Assistant Chief Steward                        Manager of Inflight Services

/s/ Debra Tate
- ------------------------------
Debra Tate
Negotiating Committee Member







                            LETTER OF AGREEMENT NO. 3

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

        THE FLIGHT ATTENDANTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                                ANNIVERSARY BONUS

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the flight
attendants in the service of the Company, as represented by the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union").

Each flight attendant in the employ of the Company shall, upon completion of
three (3) years of service, receive an amount equal to three hundred dollars
($200), subject to applicable deductions. All such payments shall be made no
later than the second paycheck following the 3rd anniversary of the Flight
Attendants' hire date with the Company.

IN WITNESS WHEREOF, the parties have signed this Agreement this _____ day of
___________, 1999.

For International Brotherhood of Teamsters     For Chautauqua Airlines, Inc.

/s/ Ray Benning                                /s/ Edward J. Wegel
- ------------------------------                 ------------------------------
Ray Benning, Director                          Edward J. Wegel
Teamsters Airlines Division                    President and CEO

/s/ Barry Schimmel                             /s/ Donald C. Young
- ------------------------------                 ------------------------------
Barry Schimmel                                 Donald C. Young
Business Agent, Local 210                      Executive Vice President and COO

/s/ Mary Schrier                               /s/ Barry Confer
- ------------------------------                 ------------------------------
Mary Schrier                                   Barry Confer
Chief Steward                                  Director of Inflight Services



/s/ Lisa Paterini                              /s/ Amy Pogacnik
- ------------------------------                 ------------------------------
Lisa Paterini                                  Amy Pogacnik
Assistant Chief Steward                        Manager of Inflight Services

/s/ Debra Tate
- ------------------------------
Debra Tate
Negotiating Committee Member







                            LETTER OF AGREEMENT NO.4

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

        THE FLIGHT ATTENDANTS in the service of CHAUTAUQUA AIRLINES, INC.

                              as represented by the

                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS

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

                       FLIGHT ATTENDANT JOB SHARE PROGRAM

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

THE LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between CHAUTAUQUA
AIRLINES, INC. (hereinafter referred to as the "Company") and the flight
attendants in the service of the Company, as represented by the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union").

1.       The goal of the Flight Attendant Job Share Program is to allow two
         flight attendants to share equally either a hard or a reserve line.

2.       The Job Share positions will not exceed ten percent (10%) of the total
         flight attendant work force. However, should ten percent of the work
         force equal an odd number of positions, the number of available Job
         Share positions will be rounded up to the next even number. For
         example, a total work force of forty-nine flight attendants would yield
         four Job Share positions, but a total work force of fifty flight
         attendants would yield six such positions.

3.       Any two (2) Job Share position holders who share a line must be in the
         same domicile.

4.       For bidding purposes, Job Share position holders will accrue seniority
         in accordance with the basic Agreement.

5.       A pair of Flight attendants who are interested in transferring to
         available Job Share positions should notify the Manager of Inflight
         Services in writing. The Company will award an available Job Share
         position to the pair of flight attendants who have submitted a written
         bid for such position and who have the highest aggregate seniority. The
         Company is not required to award a bid to become or return to a
         full-time flight attendant to any flight attendant who has been in a
         Job Share position for less than six months.

6.       If a flight attendant who holds a Job Share position leaves such
         position by bidding out of such position, because her employment has
         terminated, by taking a leave of absence of



         more than five days or for any other reason that makes the flight
         attendant unavailable for more than five days, the following will
         apply. The Company will cover the flying for which the departed or
         unavailable flight attendant had been responsible before her departure
         for up to five days following her departure. During this time, the
         Company will post a Job Share vacancy. Thereafter, the flight attendant
         who had been paired with the unavailable Job Share flight attendant
         shall be fully responsible for the Job Share line until the unavailable
         flight attendant returns to her position or another flight attendant
         has been paired with the remaining Job Share flight attendant. Although
         the Company will assist with informing other flight attendants of the
         Job Share opening, the responsibility for identifying a candidate for
         such opening will be the sole responsibility of the remaining Job Share
         flight attendant. When the remaining Job Share flight attendant has
         identified a replacement for the unavailable Job Share flight
         attendant, she should notify the Company in writing. The Company will
         use reasonable efforts to coordinate the transfer of the regular flight
         attendant to the Job Share position without disrupting the schedule.

7.       Job Share flight attendants shall bid for a line of time or reserve in
         accordance with Article 6 of the basic Agreement. The paired Job Share
         flight attendants will bid for a joint line of time or reserve in
         accordance with the seniority of the most senior flight attendant in
         the pairing. The bid sheet shall be signed by both flight attendants.

8.       The paired Job Share flight attendants shall be responsible for
         allocating and scheduling the trips on their jointly awarded line of
         flying or days of reserve coverage. No later than 1800 IND time on the
         day before the first day of each new bid month, each pair of Job Share
         flight attendants shall provide Crew Scheduling with a detailed written
         work schedule detailing such allocation. The work schedule must be
         signed by both of the paired Job Share flight attendants. If Crew
         Scheduling does not receive such detailed written work schedule by the
         deadline, the Company will assign a schedule of work and allocation of
         duties in accordance with their awarded bid line. It shall be the
         responsibility of the Job Share flight attendants to obtain the final
         confirmation of their work schedule before the new month starts. Except
         as otherwise set forth in this letter of agreement, a Job Share flight
         attendant will not be responsible for duties assigned to her Job Share
         partner. For example, if one Job Share flight attendant calls in sick,
         that work shall be covered using normal operating procedures.

9.       A Job Share flight attendant shall be compensated for all trips
         actually flown by her but will not be eligible for a monthly minimum
         guarantee.

10.      A Job Share flight attendant shall be eligible for PDOs which shall
         accrue at one-half the accrual rates set forth in Article 8 of the
         basic Agreement.

11.      A Job Share flight attendant will be eligible for flight benefits on
         the same terms as regular full-time flight attendants, including
         applicable work hour requirements.

12.      A Job Share flight attendant will be eligible for Health Plan Insurance
         benefits if she works more than one thousand forty (1040) hours in an
         anniversary year (a one-year period beginning from the flight
         attendant's date of hire). A Job Share flight attendant shall become
         eligible to receive Health Plan Insurance benefits in accordance with
         this letter of agreement in the year following her anniversary year.
         The Company will pay one-half of the Health Plan Insurance premium cost
         that it pays for a regular full-time flight attendant for each Job
         Share flight attendant, minus the flight attendant co-pay amount set
         forth in Article 14. A Job



         Share flight attendant shall not be eligible to obtain Health Plan
         Insurance for their spouse and/or family member(s). If a Job Share
         flight attendant's employment terminates for any reason, she shall not
         be entitled to payment of any accrued benefit(s) by any unpaid
         premiums. Flex benefits are not available to Job Share flight
         attendants. If any change in the law requires the Company to incur
         additional costs attributable to Job Share flight attendants, this
         letter of agreement may be renegotiated at the discretion of the
         Company.

13.      Job Share flight attendants shall be eligible for 401k benefits if they
         work more than one thousand hours per year.

14.      Moving expenses incurred pursuant to Article 5 of the basic Agreement
         shall be payable to a Job Share flight attendant, if eligible, at a
         rate of one-half that for a regular flight attendant.

15.      The holiday bonus, profit sharing and any and all other compensation
         not specifically addressed in this letter of agreement for which a Job
         Share flight attendant claims entitlement shall be paid t each such
         entitled flight attendant, if so entitled, at a rate of one-half the
         amount that would be available to a regular flight attendant. The
         uniform allowance shall be paid to each Job Share flight attendant at
         one-half the amount owed to regular flight attendants.

16       A Job Share flight attendant shall be covered by the basic Agreement
         and shall owe to the Union the same amount of dues and other Union
         assessments, if any, that a regular flight attendant would owe in order
         to remain a member in good standing of the Union.

IN WITNESS WHEREOF, the parties have signed this Agreement this _____ day of
___________, 1999.

For International Brotherhood of Teamsters     For Chautauqua Airlines, Inc.

/s/ Ray Benning                                /s/ Edward J. Wegel
- ------------------------------                 ------------------------------
Ray Benning, Director                          Edward J. Wegel
Teamsters Airlines Division                    President and CEO

/s/ Barry Schimmel                             /s/ Donald C. Young
- ------------------------------                 ------------------------------
Barry Schimmel                                 Donald C. Young
Business Agent, Local 210                      Executive Vice President and COO

/s/ Mary Schrier                               /s/ Barry Confer
- ------------------------------                 ------------------------------
Mary Schrier                                   Barry Confer
Chief Steward                                  Director of Inflight Services

/s/ Lisa Paterini                              /s/ Amy Pogacnik
- ------------------------------                 ------------------------------
Lisa Paterini                                  Amy Pogacnik
Assistant Chief Steward                        Manager of Inflight Services




/s/ Debra Tate
- ------------------------------
Debra Tate
Negotiating Committee Member

EX-10.10

                                                                   Exhibit 10.10


                      [LOGO FOR CHAUTAUQUA AIRLINES, INC.]


                                    AGREEMENT

                                     between

                            CHAUTAUQUA AIRLINES, INC.

                                       and

                             THE FLIGHT DISPATCHERS

                                in the employ of

                            CHAUTAUQUA AIRLINES, INC.

                                as represented by

                   TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO


             [LOGO FOR TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO]


                      FEBRUARY 19, 2001 - FEBRUARY 19, 2007

                            Signed February 19, 2001






                                TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Section    Title                                                          Page



1          Recognition and Scope...............................              4
2          Definitions.........................................              6
3          Compensation........................................              8
4          Work Schedules and Vacations........................             10
5          Seniority...........................................             13
6          Training............................................             14
7          Sick Leave..........................................             15
8          Probation...........................................             16
9          Leave of Absence....................................             17
10         Benefits............................................             18
11         Furlough and Recall.................................             19
12         Grievance Procedures................................             21
13         System Board of Adjustment..........................             24
14         Union Security......................................             27
15         General.............................................             35
16         Duration............................................             38



                                       2




                                    AGREEMENT

                                     between

                               CHAUTAUQUA AIRLINES

                                       and

                               FLIGHT DISPATCHERS

                                in the employ of

                               CHAUTAUQUA AIRLINES

                                as represented by

                   TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO

This Agreement is made and entered into in accordance with the provisions of
Title II of the Railway Labor Act, as amended by and between CHAUTAUQUA
AIRLINES, hereinafter known as the "Company", and the FLIGHT DISPATCHERS in the
service of CHAUTAUQUA AIRLINES, who are represented by the TRANSPORT WORKERS
UNION OF AMERICA, AFL-CIO, hereinafter known as the "Union". In making this
Agreement, the Company and the Union and the represented employees recognize
their duty, individually and collectively, to comply and cooperate with the
intent and purpose of this Agreement.



                                       3




                                    SECTION 1

                              RECOGNITION AND SCOPE

A.  Recognition

The Union is recognized by the Company, in accordance with the National
Mediation Board Certification Case R-6673 dated July 22, 1999, as the duly
designated and authorized bargaining agent with respect to rates of pay, rules
and working conditions of Flight Dispatchers in the employ of the Company.

B.  Scope

It is understood and agreed that all dispatch functions as detailed in Section
II (Definitions) of this Agreement as well as, at a minimum, in the Chautauqua
Airlines, General Policies Manual, Revision 14, dated 20Jul00, will be performed
by the employees covered under this Agreement and in accordance with the terms
and conditions of this Agreement. It is specifically understood that the scope
of this work includes all FAR Part 121 flying by pilots on the Chautauqua Pilots
System Seniority List, performed in accordance with the terms and conditions of
their Agreement, with the exception of training and delivery flights.

C.  Operational efficiency

The purpose of this Agreement is, in the mutual interest of the Company and of
the employees, to provided for the operation of the services of the Company
under methods which will further, to the fullest extent possible, the safety of
air transportation, the efficiency of operation, and the continuation of the
employment under conditions of reasonable hours, proper compensation, and
reasonable working conditions. It is recognized by this Agreement to be the duty
of the Company and the employees, to cooperate fully both individually and
collectively.

D.  Management Rights

The rights of ownership, the management of the Company and the direction of the
working forces, including the right to hire, promote, demote, discharge and
discipline for cause, transfer, layoff, and recall, the right to direct, plan
and control operations, and to establish work schedules, and the right to
determine the type of work to be performed, and the right to introduce new and
improved methods, equipment or facilities, and to change existing methods,
equipment and to determine the location of the Company's facilities, and the
right to lease facilities or equipment, and the right to establish or change
Company rules, and in general to maintain discipline and efficiency, are vested
exclusively with the Company so long as the exercise of such rights shall not be
in conflict with the specific provisions of this agreement.

E.  No strike/lockout



                                       4


It is the intent of the parties of this Agreement that the procedure set forth
herein and in the Railway Labor Act, as amended, for the resolution of disputes
shall serve as a means of peaceable settlement of all disputes that may arise
between them and that, therefore:

         1.       The Company shall neither cause nor permit any lockout of
                  employees covered hereunder during the life of this Agreement;
                  and

         2.       Neither the Union nor the employees covered hereunder, both
                  individually and collectively, shall authorize, cause,
                  sanction or engage in any strike against the Company, illegal
                  picketing of the Company's premises, slowdown, sit-down,
                  walk-off, work stoppage, or curtailment of work of any kind,
                  during the life of this Agreement.

F.  Supervisor qualification shifts/operational emergencies

It is understood and agreed that, in order to maintain their proficiency,
qualified supervisors may be scheduled up to twenty (20) hours per year to
perform the functions of a Flight Dispatcher. Qualified supervisors may also
perform the functions of a Flight Dispatcher in the event of an operational
emergency. Supervisors may not be used to avoid the payment of overtime.

It is further understood and agreed that qualified supervisors and other
employees may assist in performing the functions of a Dispatch Coordinator
necessary to complete a particular operation. Supervisors may not be used to
avoid the payment of overtime.



                                       5






                                    SECTION 2

                                   DEFINITIONS

1.       The term "employee" shall mean an employee of Chautauqua Airlines,
         Inc., who is covered by this Agreement.

2.       The term "Dispatch Coordinator," as used herein, shall mean an employee
         selected by the Company who may perform the duties of a Flight
         Dispatcher and, in addition, is the lead Flight Dispatcher on Duty.
         This position is responsible for coordinating the day to day activities
         of flight dispatch with the appropriate departments, government
         agencies, and other effected parties, as applicable. This position will
         also have the responsibility of assuring that shift opening and closing
         procedures are completed, a shift turnover log is filled out and other
         responsibilities, as designated by the Company, are completed.

3.       The term "Flight Dispatcher," as used herein, shall mean an employee
         who has been designated as such by the Company and holds a currently
         effective Aircraft Dispatcher's Certificate, who is regularly assigned
         to be responsible for operational control concerning the dispatch,
         release and movement of Company aircraft.

4.       The term "Check Dispatcher," as used herein, shall mean an employee who
         has been designated as such by the Company to perform FAA-mandated
         competency checks of the Flight Dispatchers.

5.       The term "Relief Flight Dispatcher," as used herein, shall mean a
         Flight Dispatcher who holds a permanent position and who is required to
         work other than the normal work cycle on a pre-planned basis to cover
         known open time and in order to provide qualified relief for Flight
         Dispatchers for vacation, qualification trips and training, and any
         other abnormality as agreed to by the Union on a non-precedent setting
         case by case basis.

6.       The term "special assignment," as used herein, shall mean the
         assignment of Flight Dispatcher to duties in lieu of regular Flight
         Dispatcher activities, but such assignment must be directly related to
         the dispatch function.

7.       The term "work cycle," as used herein, shall mean the basic rotation of
         work days and regular days off established for the quarterly work
         period, prior to overlay of such factors as vacations, qualification
         flights, training, relief schedules, etc.

8.       The term "bid line" as used herein, shall mean the specific assignment
         of individual employees by calendar quarter to a work cycle, adjusted
         for such



                                       6


         factors as vacations, qualification, training relief schedules, etc.
         The bid lines shall be subject to quarterly bidding procedures.

9.       The term "Work Schedule," as used herein, shall mean a cycle of
         workdays and days off, developed by the Company, to which an individual
         Flight Dispatcher is assigned.

10.      Wherever the term "Flight Dispatcher" appears in this Agreement, the
         provisions of the paragraph in which it appears shall apply to Dispatch
         Coordinators, Flight Dispatchers, Check Dispatchers and Relief Flight
         Dispatchers, unless otherwise stated.



                                       7




                                    SECTION 3

                                  COMPENSATION

A.       Minimum Rates of Pay per Hour



             Longevity   Salary at  DOS plus   DOS plus   DOS plus   DOS plus
                          signing    1  year    2 years    3 years    4 years
         -----------------------------------------------------------------------
                                                       
             Hire date     11.15     11.49       11.83     12.19      12.55
              6 Months     11.46     11.80       12.16     12.52      12.90
               1 Year      11.67     12.02       12.38     12.75      13.14
           1 1/2 Years     11.93     12.28       12.65     13.03      13.42
              2 Years      12.25     12.62       13.00     13.39      13.79
              3 Years      12.72     13.10       13.49     13.90      14.32
              4 Years      13.17     13.56       13.97     14.39      14.82
              5 Years      13.65     14.06       14.48     14.92      15.37
              6 Years      14.18     14.61       15.05     15.50      15.96
              7 Years      14.84     15.29       15.74     16.22      16.70
              8 Years      15.13     15.58       16.05     16.53      17.03
              9 Years      15.44     15.90       16.38     16.87      17.38
              10 Years     15.74     16.21       16.70     17.20      17.72
              11 Years     16.15     16.63       17.13     17.65      18.18


       Any Flight Dispatcher(s) currently on the Chautauqua Flight Dispatcher
       Seniority List whose pay falls below that of a any newly-hired Flight
       Dispatcher(s) that is (are) brought in above minimum salary levels
       outlined above, shall have his/her pay rate adjusted to that of the newly
       hired Flight Dispatcher (s).

       Employees with more than twenty (20) years of active service will receive
       premium pay as follows: $.50 per hour per year to a maximum of $2.50.

B.       Overtime

         1.       Overtime will be at time and a half (1.5 times a Flight
                  Dispatcher's applicable hourly rate) when a Flight
                  Dispatcher's time worked (including vacation and sick time) is
                  in excess of eighty (80) hours within a single pay period.

         2.       In the event that the Company is unable to cover an open shift
                  with overtime, the Company reserves the right to assign the
                  shift to the most junior, available, qualified Flight
                  Dispatcher.

C.       Holiday Pay

         1.       Holidays eligible for holiday pay are those identified in the
                  most current Chautauqua Human Resources Policies and Benefits
                  Manual, dated 06Jun96.



                                       8


         2.       All Flight Dispatchers will receive eight (8) hours of
                  straight time pay on the holidays listed in paragraph C1 of
                  this Section.

         3.       Flight Dispatchers who work on the holidays designated above
                  will, in addition to the pay provided for in paragraph C2, be
                  compensated at the rate of 1.5 times their hourly rate for all
                  hours worked on the holiday.

D.       Override for Dispatch Coordinator

         1.       Effective on the date of signing, a Flight Dispatcher shall
                  receive an override of $.75 per hour while working the
                  Dispatch Coordinator position.

         2.       Effective on January 1, 2003, this override shall increase to
                  $1.25 per hour.

E.       On-The-Job Training Pay

         Flight Dispatchers who perform on-the-job training of new, unqualified
         Flight Dispatchers shall be compensated at a rate $.60 per hour higher
         than their current salary while performing such training.

F.       Check Dispatcher Qualification

         Effective on the date of signing, a Flight Dispatcher qualified as a
         Check Dispatcher shall receive an override of $.60 per hour while
         performing Flight Dispatcher competency checks.



                                       9



                                    SECTION 4

                           WORK SCHEDULES AND VACATION

A.       Work Schedules

         Work Schedules, designated as either fixed or relief, are based on days
         on and days off and are determined and planned by the Company in
         accordance with the provisions outlined below.

B.       Fixed Work Schedules

         1.       Work Cycles which are fixed in nature shall be composed of
                  four (4) consecutive workdays followed by three (3)
                  consecutive days off.

         2.       Workdays within a fixed work cycle shall be planned as ten
                  (10) hour shifts (inclusive of shift overlap).

         3.       For the purpose of bidding a fixed work cycle, a proposed Work
                  Schedule shall be published a minimum of forty-five (45) days
                  in advance of each calendar quarter for the following ninety
                  (90) days.

         4.       The awards of bid lines for the fixed Work Cycles shall be
                  posted a minimum of thirty (30) days before each calendar
                  quarter for the following ninety (90) days.

C.       Relief Work Schedules

         1.       Relief Work Schedules shall be composed of a mixture of
                  variable days on and variable days off, but shall not exceed
                  one-hundred and sixty (160) hours in a four week period and
                  the Company shall strive to create as many 4/3 work cycles as
                  possible.

         2.       In the event that operational requirements necessitate, the
                  company may, with fourteen (14) days prior notice, add a bid
                  line (or bid lines) that does not follow the basic work cycle
                  outlined in Section 4 (A). The basic work cycle and schedule
                  for this (these) line(s) shall be five (5) days of work, with
                  no shift scheduled for more than eight hours (8), followed by
                  two (2) days off.

         3.       For the purpose of bidding a relief Work Cycle, a proposed
                  Work Schedule shall be published a minimum of fourteen (14)
                  days in advance for the following calendar month.

         4.       The awards of bid lines for the relief Work Cycles shall be
                  posted a minimum of seven (7) days before the first day of the
                  following calendar month.



                                       10


D.       Training

         For the purposes of training only, a Flight Dispatcher working a fixed
         work cycle may be moved off his/her fixed rotation with a minimum of
         thirty (30) days notice.

E.       Ratio of Fixed and Relief Lines

         1.       A minimum of fifty (50) percent of the bid lines within the
                  department shall be fixed lines as outlined in this Section.

         2.       A maximum of fifty (50) percent of the bid lines within the
                  department may be relief lines as outlined in this Section.

F.       Schedule start time changes

         1.       In the event that operational requirements necessitate, such
                  as a permanent flight schedule change or charter operation,
                  the Company may, with seven (7) days prior notice, change the
                  start time of a shift by up to two hours.

         2.       Nothing in this Section will prevent the Company from changing
                  a Flight Dispatcher's Work Schedule to accommodate assigned
                  classroom training or specific familiarization flights
                  assigned by the Company. There must be a minimum ten (10) hour
                  break between training and other assignments.

         3.       Shift start times may be rotated as outlined in F. 1. above,
                  but there shall not be more than one change creating two
                  different shift start times within a five (5) day period. The
                  Company shall endeavor to publish consistent rotation of shift
                  start times for the work schedules developed for bidding and
                  the work schedules published. Such rotation is subject to
                  change by the Company in accordance with F. 1. above.

G.       Schedule Evaluation Meeting

         1.       A meeting between the Company and the Union shall be held on
                  or before March 1st, 2003, in order to evaluate the
                  flexibility and feasibility of revising the items contained in
                  Paragraphs A through D above.

         2.       Any change to such items must be agreed to by both the Company
                  and the Union and revised by Letter of Agreement.

H.       Extraordinary Circumstances



                                       11


         If, due to an extraordinary event, changes are necessary to the fixed
         or relief work schedules that have already been awarded, the Company
         will meet with the Union to seek input as to how best implement a
         re-bid.

I.       Vacation

         1.       Flight Dispatchers shall receive vacation in accordance with
                  the provisions of the Benefits Section of the Chautauqua Human
                  Resources Policies and Benefits Manual, dated 6/6/96. The
                  number of vacation hours shall not be reduced below those set
                  forth therein.

         2.       Vacations will be bid no later than the 15th day of the month
                  prior to each calendar quarter. Awards will be subject to
                  operational requirements and awarded in seniority order, as
                  reflected on the Chautauqua Flight Dispatcher Seniority List.

         3.       At the time vacations are bid, employees may defer four (4)
                  days annually of his/her vacation entitlement to be utilized
                  as single vacation days ("DAT"). Such days must be utilized
                  within the calendar year. Requests to utilize DAT days must be
                  made fifteen (15) days in advance of the required
                  publication/posting date of the monthly work schedule. DAT
                  awards will be subject to operational requirements and must be
                  taken after use of regular vacation bids.

         4.       Vacation days remaining but not yet used by the December 15th
                  bid of each year may be carried over to the next calendar
                  year, to a maximum carryover of 40 hours.



                                       12




                                    SECTION 5

                                    SENIORITY

A.  Chautauqua Flight Dispatcher Seniority List

Dispatch employees holding an Aircraft Dispatcher Certificate shall be placed on
the Chautauqua Flight Dispatcher Seniority List in order of their hire date as a
Flight Dispatcher. Should two (2) or more employees have the same seniority
date, they shall be placed on the Chautauqua Flight Dispatcher Seniority List in
order of their birth date with the oldest being listed first.

B.  Accrual

Seniority shall continue to accrue until such time as the employee separates
from the Company or as otherwise provided in this Agreement.

C.  Dispatch Management

Dispatch Management shall be listed on the Chautauqua Flight Dispatcher
Seniority List in order of their hire date into a Flight Dispatcher position.

D.  Management Seniority

Managers shall retain and continue to accrue seniority while in a managerial
position.

E.  Displacement Protection

No Flight Dispatcher on the Chautauqua Flight Dispatcher Seniority List shall be
displaced or furloughed as the result of any manager or supervisor returning to
a dispatch position.

F.  Managerial Exemption

Dispatch management shall not be entitled to utilize the provisions of Sections
12 or 13 of this Agreement. This shall apply to both discipline and contract
interpretation issues.

G.  Posting

The Company shall update and distribute the Chautauqua Flight Dispatcher
Seniority List annually to the Union and all Flight Dispatchers during January
of each year.



                                       13




                                    SECTION 6

                                    TRAINING

A.  Required Training

Flight Dispatchers may be assigned to attend training on their days off provided
that such training shall not result in a Flight Dispatcher being scheduled for
more than six (6) consecutive days. Pay for training accomplished on days off
shall be compensated at the overtime rate.B. Route Familiarization Flights

Route familiarization shall be accomplished on workdays if possible or, if on
days off, will be compensated at the overtime rate. The Company shall provide
hotel accommodations, when applicable, and paid expenses in accordance with
Company Policy.

C.  Dispatch Management

Flight Dispatchers assigned by the Company as a Check Dispatcher during a shift
shall receive additional compensation as set forth in Section 3E of this
Agreement.



                                       14



                                    SECTION 7

                                   SICK LEAVE

A.  Paid Sick Time

Flight Dispatchers shall receive paid sick time in accordance with the
provisions of the Chautauqua Human Resources Policies and Benefits Manual, Dated
06Jun96. The number of annual sick hours and the maximum sick bank hours shall
not be reduced below the levels set forth in the Human Resources Policies and
Benefits Manual, dated 06Jun96.

B.  Sick Pay Bank

The maximum six-hundred sixty (660) hour Sick Pay Bank may be accrued pursuant
to the table below. The maximum sick bank is divided into accounts of
three-hundred sixty (360) and three-hundred (300) hours. Only after accruing the
maximum three-hundred sixty hours (360) in the first account may an employee
begin accruing toward the maximum three-hundred (300) hours in the second
account. The three-hundred (300) hour account may be used only for major,
long-term illness or injury (i.e. longer than thirty (30) calendar days), and
then only after the three-hundred sixty (360) hour regular account has been
exhausted. Upon retirement, employees are entitled to be paid for all accrued
but unused Sick Pay Bank hours.



              Years of Service      Pay Period Accrual      Annual Accrual
            --------------------- ----------------------- -------------------
                                                         
                  1st Year              .92 Hours              24 Hours
                  2nd Year              1.54 Hours             40 Hours
                  3rd Year              1.85 Hours             48 Hours
                  4th Year              2.15 Hours             56 Hours
                  5th Year              2.77 Hours             72 Hours









                                       15




                                    SECTION 8

                                    PROBATION

A.  Probation

An employee shall be on probation for his/her first six (6) months of active
service with the Company as a Flight Dispatcher.

B.  Adjustments to Length

Time off due to sickness, injury, leave of absence, furlough or discipline will
not be counted toward completion of the active service requirement for
completion of an employee's probationary period.

C.  Applicability

A Flight Dispatcher on probation shall not be entitled to utilize the grievance
and/or System Board procedures of this Agreement for any disciplinary action,
including discharge. In any case, should a Flight Dispatcher on probation be
afforded a grievance or System Board hearing, by law or otherwise, the Company
shall not be required to prove "just cause" in any disciplinary or discharge
grievance or System Board hearing.



                                       16






                                    SECTION 9

                                LEAVE OF ABSENCE

A.  Leave of Absence

When requirements of service will permit, an employee hereunder may be granted a
leave of absence in accordance with Company policy, as stated in the Human
Resources Policies and Benefits Manual, dated 06Jun96.



                                       17






                                   SECTION 10

                                    BENEFITS

A.  Benefits

Flight Dispatchers shall be provided a minimum level of coverage as outlined in
the Health Benefits Section of the Chautauqua Human Resources Policies and
Benefits Manual, dated 6/6/96.



                                       18






                                   SECTION 11

                               FURLOUGH AND RECALL

A.  Involuntary Furlough

       1.     The Company shall notify the Union prior to official announcement
              and implementation of a furlough of Flight Dispatchers.

       2.     In the event of a furlough, Flight Dispatchers will be furloughed
              in inverse order of seniority from the Chautauqua Flight
              Dispatcher Seniority List.

       3.     The Company shall provide fifteen (15) days notification of
              furlough or pay in lieu thereof, except in case of emergency, act
              of God, or where there is no work because of a labor dispute, or
              other circumstances over which the Company has no control.

       4.     A furloughed Flight Dispatcher shall retain all seniority and
              longevity accrued prior to the time of furlough for a period not
              to exceed three (3) years. He/She shall continue to accrue
              seniority but not longevity while on furlough. At the time of
              furlough, Flight Dispatchers must provide the proper contact
              information to Flight Operations management.

       5.     A furloughed Flight Dispatcher shall retain medical coverage, as
              provided prior to furlough, for a period of sixty (60) days
              following the date of furlough. Flight Dispatchers with less than
              24 months of service at the time of furlough shall be responsible
              to pay the employer portion of the medical cost during the sixty
              (60) day period.

       6.     Flight Dispatchers on furlough for less than thirty (30) days
              shall continue to accrue longevity for benefit and pay purposes
              during the period on furlough.

       7.     Flight Dispatchers who remain on furlough at the end of three (3)
              years from the effective date of the furlough shall be released
              from employment with Chautauqua Airlines, and their names shall be
              deleted from the Chautauqua Flight Dispatcher Seniority List.

B.  Recall

       1.     The Company shall notify the Union prior to official announcement
              and implementation of a recall of Flight Dispatchers.

       2.     Flight Dispatchers shall be recalled in order of seniority from
              the Chautauqua Flight Dispatcher Seniority List.


                                       19


       3.     A written recall notice shall be sent to each Flight Dispatcher
              entitled to recall to the last address provided to the Company. A
              Flight Dispatcher shall be given fifteen (15) days from his/her
              receipt of the notice of recall to return to duty, and must notify
              Flight Operations within ten (10) days from the date of receipt of
              the written recall notice of his/her response to the recall on the
              date specified in the recall notice. Upon request, a recalled
              Flight Dispatcher shall have the fifteen (15) day period to report
              for duty extended for a period of up to an additional period of
              fifteen (15) days (i.e. to a maximum of 30 days from receipt of
              notice of recall) should the Flight Dispatcher need the additional
              time to relocate in order to resume his/her position as a
              Chautauqua Flight Dispatcher.

       4.     The Company shall make a reasonable effort to provide space
              available air transportation on Chautauqua aircraft to Flight
              Dispatchers being recalled.

       5.     If the Company is unable to contact a furloughed Flight Dispatcher
              for recall or if the Flight Dispatcher fails to notify the Company
              of his/her response by the deadline date, the Company will
              consider the Flight Dispatcher to have voluntarily resigned
              his/her employment with Chautauqua Airlines, Inc.

       6.     Flight Dispatchers on furlough shall retain recall rights for up
              to three (3) years from the date of furlough and thereafter shall
              be released from full-time employment with Chautauqua Airlines,
              Inc.

C.       Severance

       1.     In the event of a reduction in force or when the Company decides
              to close a station, Flight Dispatchers at that station, with at
              least one (1) year of service as a Flight Dispatcher, who decide
              not to transfer to another station will receive eighty (80) hours
              of severance pay, at the employee's current hourly rate.

       2.     In addition to the eighty (80) hours outlined in A. above, Flight
              Dispatchers shall receive additional hours of severance pay in
              accordance with the schedule below:



                  Yrs. of Service   Number of Additional Hrs. for Each Yr of Service
                  ---------------   ------------------------------------------------
                                                  
                  For Years 1-10                     Eight (8) Hours
                  For Years 11-15                    Sixteen (16) Hours
                  For Years 15+                      Twenty-Four (24) Hours




                                       20



                                   SECTION 12

                              GRIEVANCE PROCEDURES

       A.     A grievance is defined as a claim or dispute by an employee or
              group of employees covered by this Agreement concerning the
              interpretation and/or application of the Agreement or disciplinary
              or discharge action taken against the employee.

       B.     Grievances Other Than Those Involving Discipline and Discharge

              PRE-GRIEVANCE DISCUSSION

              Any employee covered by this Agreement who believes that he/she
              has a grievance concerning the meaning or application of the terms
              of the Agreement shall, within fifteen (15) days after the
              employee has, or reasonably should have had, knowledge of the
              matter giving rise to the grievance, request an informal
              discussion with the Dispatch Manager, or his/her designee to
              attempt to resolve the dispute. The employee shall present his/her
              grievance in person. The Dispatch Manager, or designee, shall meet
              with the employee within ten (10) days of receiving a request for
              a discussion. The employee is permitted to have present a Union
              representative of his/her choice at the meeting.

              STEP 1

              Should the result of the pre-grievance discussion be
              unsatisfactory to the employee or should the discussion fail to
              take place within the ten day period, the employee may file a
              grievance in writing to the Director of System Operations Control.
              Such grievance shall be filed within ten (10) days of the
              pre-grievance discussion deadline. The written grievance shall
              include a statement of the facts of the grievance and list the
              section(s) of the Agreement that relate to the dispute. The
              Director of System Operations Control, or designee (a person other
              than the person who conducted the pre-grievance discussion), shall
              investigate the grievance and provide a written response within
              fifteen (15) days of receipt of the grievance. Should the employee
              find the decision of the Director of System Operations Control, or
              designee, unsatisfactory, the grievance may be appealed to Step 2.
              The appeal to Step 2 shall be made in writing within thirty (30)
              days of the employee's receipt of the Step 1 decision.

              STEP 2

              Representatives for the Union and the Company shall meet once each
              calendar



                                       21


              quarter to discuss and attempt to resolve all grievances
              appealed to Step 2. All resolutions of grievances at Step 2
              shall be final and not subject to further appeal. Should the
              Union and Company representatives be unable to reach agreement
              on a resolution to a grievance, the Union may appeal the
              grievance to the Chautauqua Dispatchers' System Board of
              Adjustment within sixty (60) days of the Step 2 meeting in
              accordance with the procedures set forth in Section 15 of the
              Agreement.

       C.     Grievances Involving Discipline and Discharge

              STEP 1

              All actions by the Company concerning the discipline or discharge
              of an employee covered by this Agreement shall be confirmed in
              writing to the employee with a copy of such written confirmation
              supplied to the Union. An employee may, within five (5) days of
              receipt of written confirmation of the discipline or discharge
              file an appeal of the Company's action with the Director of System
              Operations Control. The Director of System Operations Control, or
              designee, shall investigate the facts related to the discipline or
              discharge and render a written decision to the employee with a
              copy to the Union within fifteen (15) days of receipt of the
              appeal. Should the decision of the Director of System Operations
              Control, or designee, be unsatisfactory to the employee, the
              dispute may be appealed by the employee to Step 2. The appeal to
              Step 2 shall be made in writing within fifteen (15) days of the
              employee's receipt of the Step I decision.

              STEP 2

              Representatives for the Union and the Company shall meet once each
              calendar quarter to discuss and attempt to resolve all grievances
              appealed to Step 2. All resolutions of grievances at Step 2 shall
              be final and not subject to further appeal. Should the Union and
              Company representatives be unable to reach agreement on a
              resolution to a grievance, the Union may appeal the grievance to
              the Chautauqua Dispatchers' System Board of Adjustment within
              sixty (60) days of the Step 2 meeting in accordance with the
              procedures set forth in Section 15 of the Agreement.

D. General

     1.    All written communication required by this Section shall be either
           delivered in person, with a signature and date confirming receipt, or
           shall be sent by certified mail with a return receipt.

     2.    The Company shall inform an employee in advance of any meeting with
           such employee that may result in discipline or discharge. Nothing
           herein shall be construed to restrict the right of an employee
           covered by this Agreement to have



                                       22


            a Union Representative present during any meeting concerning
            discipline or discharge.

     3.     All "days" as referred to in this Section are calendar days.

     4.     The time limits specified herein may be extended by mutual agreement
            between the Company and the Union.



                                       23



                                   SECTION 13

                         SYSTEM BOARD OF ADJUSTMENT

       A.     Establishment and Purpose

              In compliance with Section 204, Title 11, of the Railway Labor
              Act, as amended, there is hereby established a System Board of
              Adjustment for the purpose of adjusting and deciding disputes
              which may arise under the terms of this Agreement and which are
              properly submitted to it. This board shall be known as the
              Chautauqua Dispatchers' System Board of Adjustment (hereinafter
              referred to as the "Board").

       B.     Composition of the Board

              1.    The Board shall consist of one (1) member appointed by the
                    Company and one (1) member appointed by the Union. A third
                    member shall be added to the Board to serve as a neutral
                    referee for the purpose of hearing an arbitration conducted
                    pursuant to this Section. The Company and the Union shall
                    advise each other in writing of the name, position, address
                    and phone number of their initial appointments to the Board
                    and any subsequent replacement appointments.

              2.    A Chairperson and Vice Chairperson of the Board will be
                    selected from the Board members. The office of Chairperson
                    shall alternate yearly between the Company Board member and
                    the Union Board member, with the Chairperson position being
                    held by the Union-appointed Board member in even-numbered
                    years. Whenever the position of Chairperson is filled by a
                    Company-appointed Board member, the position of Vice
                    Chairperson shall be filled by the Union-appointed Board
                    member and vice versa.

              3.    Whenever the Board is convened to hear an arbitration, the
                    Company and Union may elect to appoint an alternate to serve
                    as a Board member for the arbitration.

              4.     The appointment of a neutral referee shall be by mutual
                     agreement between the parties from the panel described in
                     paragraph G below or, if the parties are unable to reach
                     agreement, by the alternate strike method whereby each
                     party shall alternately strike the name of a panel member
                     with the last remaining panel member being the neutral
                     referee for the subject arbitration.

       C. Jurisdiction of the Board

                                       24



              The Board shall have jurisdiction over and shall consider all
              disputes properly submitted to it that are covered under the terms
              of this Agreement and that arise through grievance out of disputed
              interpretations or applications of this Agreement or that involve
              discipline or discharge. The jurisdiction shall not extend to
              proposed changes in hours of employment, rates of compensation, or
              working conditions nor shall the Board have the authority to alter
              the express terms of this Agreement.

       D.     Submission of Disputes

              Disputes properly submitted to the Board shall be addressed to the
              Chairperson with copies to the Vice Chairperson and the Vice
              President-Flight Operations. The written appeal shall include:

              o The grievant's name and address,

              o A statement of the question at issue,

              o A summary of the facts giving rise to the grievance,

              o A statement setting forth the position of the grievant,

              o A statement setting forth the position of the Company,

              o The relief sought, and

              o A copy of the Step 2 decision.

       E.     Convening the Board

              The Board will docket a grievance for an arbitration at the
              earliest date of availability for the selected arbitrator but not
              earlier than thirty (30) days from the date of filing with the
              Board Chairperson unless the parties mutually agree to an earlier
              date. Arbitrations involving the discharge of an employee shall be
              docketed for hearing within ninety (90) days from the date of
              filing with the Board Chairperson unless the parties mutually
              agree to a later date.

       F.     Decisions of the Board

              Decisions of the Board shall be by a majority vote and shall be
              final and binding on all parties.

       G.     Neutral Referees



                                       25


              1.    The Company and the Union shall select a panel of nine (9)
                    neutral referees (arbitrators) who will serve as the third
                    member of the Board for the purpose of conducting
                    arbitrations. The selection of the panel shall be by mutual
                    agreement between the Company and the Union. If the parties
                    are unable, within sixty (60) days from the signing of this
                    Agreement, to agree on a full panel, the Chairperson and
                    Vice Chairperson of the Board shall mutually petition the
                    National Mediation Board and/or the American Arbitration
                    Association for the names of three arbitrators for each
                    unfilled position on the panel. Upon receipt of the names,
                    the Company and the Union shall attempt to mutually agree on
                    a member from each group of three names. In the event the
                    parties are unable to mutually agree within ten (10)
                    business days of receipt of the names, each remaining open
                    position shall be filled utilizing the alternate strike
                    method with each group of three names. The last remaining
                    name in each group shall fill the applicable open position
                    on the panel.

              2.    Once the panel is established, the Company and the Union may
                    mutually agree to change the membership of the panel at any
                    time. Further, either the Company or the Union may
                    unilaterally remove a member from the panel, provided the
                    panel member is not serving as the neutral referee for an
                    arbitration that has commenced. The Company or the Union may
                    not exercise a unilateral removal more often than once in
                    any six (6) month period.

       H.     Board Records

              The Board shall maintain a complete record of all matters properly
              submitted to it and of all findings and decisions made by it. The
              aforementioned "complete record" does not necessarily include a
              stenographic transcript of all testimony of all witnesses who
              appear before the Board.

       I.     Hearings

              1.    Arbitration hearings shall be conducted in Indianapolis,
                    Indiana unless the Company and the Union mutually agree to
                    an alternate location.

              2.    The parties should attempt to agree on a statement of issue
                    to present to the Board prior to the commencement of the
                    hearing. Should they be unable to agree, both parties shall
                    submit their version of a statement of issue and shall
                    provide the other party no later than the day prior to the


                                       26


                    arbitration with a copy of the statement of issue they
                    intend to submit to the Board.

              3.     The parties should utilize joint exhibits whenever
                     possible.

       J.     General

              1.    All members of the Board shall be free to discharge their
                    duties in an independent manner and witnesses shall be free
                    to testify without fear of recrimination by either of the
                    parties.

              2.    Each party will assume the expenses of its Board member, or
                    alternate, and its own witnesses.

              3.    When it is mutually agreed that a stenographic transcript is
                    to be made of a hearing, one-half the costs shall be borne
                    equally by each party. Should one of the parties have
                    stenographic transcript made, that party shall pay the
                    complete cost of the transcript. The other party shall,
                    however, be provided with a copy of the transcript upon
                    request by paying one-half of the costs.

              4.    Costs associated with a hearing (e.g. hearing room rental,
                    the arbitrator's fees and expenses) shall be borne equally
                    by the Company and the Union.



                                       27




                                   SECTION 14

                                 UNION SECURITY

A.       Conditions

     1.  Each employee now or hereafter employed as a Flight Dispatcher under
         this Agreement shall, as a condition of continued employment in such
         work, within sixty (60) days following the beginning of such employment
         or the effective date of this Section, whichever is later, become a
         member of, and thereafter maintain membership in good standing (as
         herein defined) in the Union, except as provided otherwise herein. Such
         condition shall not apply with respect to any employee to whom such
         membership is not available upon the same terms and conditions as are
         generally applicable to any other member of his/her classification, or
         with respect to any employee to whom membership is denied or terminated
         for any reason other than the failure of the employee to tender the
         dues uniformly required of other members of his/her classification as a
         condition of acquiring or retaining membership.

     2.  The condition of payment shall be met if the amount due is tendered to
         the Treasurer of the Union in person or is mailed to him/her within the
         prescribed time limits.

     3.  For the purpose of this Section, "membership in good standing in the
         Union" shall consist of the payment by the employee, not later than the
         last day of the second following calendar month, of dues for each
         calendar month, initiation fees and assessments (not including fines
         and penalties), which are uniformly required of his/her classification
         as a condition of acquiring or retaining membership.

     4.  The employee may have his/her monthly membership dues deducted from
         his/her earnings as provided in paragraph B1 of this Section, or he/she
         may pay his/her membership dues directly to the Union. Initiation fees
         must be paid directly to the Union.

     5.  Any employee who fails to voluntarily acquire and maintain membership
         in the Union shall not be required, as a condition of continued
         employment, to become a member of the Union as set out in this section.
         Such employee shall be required, beginning sixty (60) says following
         the beginning of employment as a Flight Dispatcher or the effective
         date of this Section, whichever is later, to pay the Union each month a
         service charge equal to the Union's regular and usual dues. Any such
         employee who, subsequent to the effective date of this Section and
         during the term of this Agreement, joins the Union, must thereafter
         maintain his/her membership in the Union as provided in this Section.



                                       28


     6.  Notwithstanding any other provisions contained in this Agreement, if
         any person is transferred or promoted to a position in which he/she is
         not covered by this Agreement, the provisions of this Section shall be
         inoperative as to such employee. This paragraph shall not apply to an
         employee who is transferred or promoted on a "Temporary" or "Acting"
         basis.

     7.  When any person holding seniority under this Agreement returns to a
         position covered by this Agreement from furlough, leave of absence,
         military leave, or a position in which he/she was not covered by this
         Agreement, the appropriate provisions of this Section shall, at time of
         return, apply in the same manner as if he/she had been actively
         employed in such position on the effective date of this Section.

     8.  When an employee becomes delinquent by not meeting the requirements of
         this Section for "membership in good standing in the Union," or
         paragraph 5 above, the following procedure shall be observed.

         (a)      The Treasurer of the Union shall notify the employee by
                  certified mail, return receipt requested, copy to the
                  Company's Vice President-Flight Operations, that the employee
                  is delinquent in the payment of dues as specified herein and
                  accordingly is subject to discharge as an employee of the
                  Company. Such letter shall also notify the employee that
                  he/she make the required payments within thirty (30) calendar
                  days of the date of mailing of the notice or be subject to
                  discharge under the terms of this Agreement. If the notice
                  above is not received by the employee or is delayed in
                  reaching such employee as the result of the employee's failure
                  to keep both the Company and the Union informed as to his
                  correct mailing address, no extension in the time limit
                  specified in the original notice is required.

         (b)      Upon the expiration of the thirty (30) day period following
                  the mailing of the notice in subsection 8(a) above, if the
                  employee still remains delinquent the Treasurer of the Union
                  may certify in writing to the Company's Vice President-Flight
                  Operations that the employee has failed to make the required
                  payment within the thirty (30) day grace period and is,
                  therefore, to be discharged.

         (c)      Within fifteen (15) days after receipt by the Company of the
                  Union's certified notice in subsection 8(b) above that the
                  employee is to be discharged, the Company shall discharge the
                  employee from its services for failure to pay or to tender
                  dues or service charges as required under this Section.

     9.  Appeal

         (a)      If the employee discharged or to be discharged under this
                  Section contends that he/she is not properly subject to
                  discharge under the terms of this


                                       29


                  Section he/she may protest such action to the Chautauqua
                  Flight Dispatcher's System Board of Adjustment provided that
                  such protest in writing is mailed to the Board within (10)
                  days after the date the employee is notified of such action.
                  This protest shall be submitted in duplicate to the Chairman
                  of the System Board of Adjustment, with one copy to be mailed
                  of the Vice President-Flight Operations, at such address as
                  he/she may from time to time designate, and the other copy to
                  be mailed in care of the Treasurer of the Union. The letter to
                  the Chairman of the Board and both copies shall be sent by
                  registered mail, return receipt requested. In the event no
                  protest is so filed within the above time limits, the action
                  will be considered as proper and will be final and binding
                  upon all parties concerned. Within thirty (30) days of receipt
                  of such a protest, the System Board of Adjustment will meet
                  and consider the dispute. A representative of the Company, a
                  representative of the Union, and the employee affected will be
                  allowed to present to the Board all evidence and argument
                  pertinent to the issue. Prior to the expiration of the workday
                  following such Board meeting, the Board will issue either a
                  majority decision or a notice of deadlock. If a majority
                  decision is issued, it will be final and binding upon all
                  parties concerned. If a deadlock is reached, and if at the
                  time of the deadlock the Board cannot agree upon a neutral to
                  sit with the Board to decide the dispute, the Board will
                  immediately request the National Mediation Board to appoint a
                  neutral, and the Board will meet with him/her at the earliest
                  opportunity and decide the dispute. At the meeting the Board,
                  sitting with a neutral, a representative of the Company, a
                  representative of the Union, and the employee affected, will
                  be allowed to present to the Board all evidence and arguments
                  pertinent to the issue. A majority decision of the Board,
                  including the neutral, will be issued within thirty (30) days
                  after such meeting and will be final and binding upon all
                  parties concerned. The expenses and reasonable compensation of
                  the neutral selected as provided herein shall be borne equally
                  by the parties to this Agreement.

         (b)      The provisions of Section 12 shall not apply to disputes
                  arising under this Section, and the provisions of this
                  Agreement establishing a System Board of Adjustment shall
                  apply to such disputes except as they are superseded by the
                  above provisions relating to procedure for handling disputes.

         (c)      The effective date of an employee's discharge under this
                  Section will be held in abeyance during the time that a
                  dispute is unsettled as to whether or not the individual is
                  properly employed under the provisions of the Section. If a
                  decision is made that the employee should be discharged, the
                  discharge shall be effected the day following the issuance of
                  the decision. In the event a reduction in force occurs during
                  such time as an employee's status is being protested under the
                  provisions of this Section, such employees will considered as
                  having seniority under this Agreement for purposes of
                  effecting the reduction.



                                       30


10.      Time limits specified in this Section may be extended in individual
         cases only, and then only by written agreement between the Company and
         the Union.

11.      An employee discharged under the provisions of this Section shall be
         deemed to have been "discharged for just cause" within the meaning of
         the terms of this Agreement.

12.      All letters and notices provided for by this Section shall be sent by
         registered mail, return receipt requested. Such letters and notices or
         copies sent to the Union shall be addressed to the Treasurer of the
         Union at such address as he/she may from time to time designate. Such
         letters and notices or copies sent to the Company shall be addressed to
         the Company's Vice President-Flight Operations at such address as
         he/she may from time to time designate.

13.      Nothing in this Section shall require the Company to terminate the
         employment of any employee until the services of a qualified
         replacement are available except that the provisions of this paragraph
         will not permit the Company to retain an employee in its employment in
         excess of ninety (90) calendar days from the date of the Union's notice
         given pursuant to the paragraph A(8)(c) of this Section.

14.      For the purposes of this Section, when an employee is discharged or
         resigns and he/she returns more than twelve (12) months from the date
         of discharge or resignation, he/she will be considered as a new
         employee for purposes of this Agreement.

15.      Both the Union and the Company, or either of them, shall have the right
         at any time, to notify individual employees directly of any provisions
         of this Agreement.

16.      When new employees are hired or transferred into classifications
         covered by this Agreement the Company will furnish monthly to the Union
         the names, classification, point of employment and payroll register
         number of such new employees. The Company will furnish to the Union the
         names, present and previous classification, point of employment and
         payroll register number of all employees who may transfer out of
         classifications covered by this Agreement; in addition, the Company
         will furnish to the Union the names, location, payroll register number
         and status of employees covered by this Agreement who terminate their
         payroll status for any reason, such listing will be furnished monthly.

B.  DUES CHECK - OFF

1.       During the life of this Agreement the Company will deduct from the pay
         of each Flight Dispatcher and remit to the Union monthly membership
         dues or service charges uniformly levied in accordance with the Railway
         Labor Act, as amended, and the constitution and bylaws of the Union,
         provided such Flight Dispatcher voluntarily executes the agreed form,
         which is hereinafter included in this Agreement to be known as
         "check-off form," which shall be prepared and furnished


                                       31


         by the Union. The Company will not be required to deduct monthly
         membership dues from the pay of employees covered by this Agreement
         unless the Company has received a check-off form and has not received a
         notice of revocation thereof.

                          ASSIGNMENT AND AUTHORIZATION
                            FOR CHECK-OFF UNION DUES

                  TO CHAUTAUQUA AIRLINES

                  I, ___________, hereby assign to the Transport Workers
                  Union of America, AFL-CIO, Union dues from any wages earned
                  or to be earned by me as your employee and authorize and
                  direct you to deduct the sum of $___________ each month,
                  which are the monthly membership dues (or such monthly
                  membership dues as may hereinafter be established by the
                  Union as dues for employees in my present or future
                  classification under the Agreement upon notification to the
                  Company by the Treasurer of the Union) from one pay check
                  per month and to remit same to the Treasurer of the Union.
                  This assignment and authorization may be revoked by me in
                  writing after the expiration of one (1) year from this
                  date, or upon the termination date of the applicable
                  collective bargaining agreement between CHAUTAUQUA
                  AIRLINES, and the Union in effect at the time this is
                  signed, whichever occurs sooner. This authorization and
                  direction is made subject to the provisions of the Railway
                  Labor Act, as amended, and in accordance with existing
                  Agreement between the Union and the Company.

                  Employee Payroll No.

                  Job Classification

                  Department Location

                  Date

                  Signature of Employee

                  Street Address

                  City and State

2.       When a Flight Dispatcher properly executes such check-off form, the
         Treasurer of the Union shall forward the original signed copy to the
         Company's Manager - Payroll. A check-off form must be completed in a
         legible manner or it will be returned to the Treasurer of the Union for
         correction. Any notice of revocation as provided for in this Section or
         the Railway Labor Act, as amended, must be in writing, signed by the
         employee and two copies delivered by registered or certified mail,
         addressed to the Treasurer of the Union. Dues deductions will be
         continued


                                       32


         until one (1) copy of such notice of revocation is received by the
         Company's Manager - Payroll, from the Treasurer of the Union. Check-off
         forms and notices received by the Company's Manager - Payroll will be
         stamp-dated on the date received and will constitute notice to the
         Company on the date received and not when mailed.

3.       When a check-off form, as specified herein, is received by the Manager
         - Payroll fifteen (15) days or more before the issuing date of the
         first bi-weekly paycheck of the month, deductions will commence with
         such paycheck and continue thereafter until revoked or canceled as
         provided in this Section. The Company will remit to the Union a check
         in payment of all dues collected as soon after the payday on which
         deductions were made, as practicable and within thirty (30) days. The
         Company remittance of Union membership dues to the office of the
         Treasurer of the Union will be accompanied by two (2) copies of a list
         for each location which includes (1) names, (2) employee register
         numbers and (3) individual amounts deducted.

4.       An employee who has executed a check-off form and who has been (1)
         transferred or promoted to a job not covered by this Agreement,
         (excluding transfers or promotions on a "Temporary" or "Acting" basis),
         (2) who has taken a leave of absence without pay, (3) who quits or
         resigns from the Company, (4) who is laid off, or is (5) otherwise
         terminated from the employ of the Company, shall be deemed to have
         automatically revoked his/her assignment as of the date of such action
         and if he/she (1) transfers back or returns to a job covered by this
         Agreement, (2) returns from leave of absence, (3) is rehired, (4) is
         recalled or (5) re-employed, further deductions of Union dues will be
         made only upon execution and receipt of another check-off form.

5.       Collection of initiation fees, as well as any back dues or service
         charges owed at the time of starting deductions for an employee,
         collection of dues or service charges missed because the employee's
         earnings were not sufficient to cover the payment of dues for a
         particular pay period, and collection of dues or service charges missed
         because of accidental errors in the accounting procedure, will be the
         responsibility of the Union and will not be the subject of payroll
         deduction. It will be the Union's responsibility to verify apparent
         errors with the individual Union member before the representative
         contacts the Company's Manager - Payroll.

6.       Deductions of membership dues shall be made from one (1) paycheck each
         month provided there is a balance in the paycheck sufficient to cover
         the amount after all other deductions authorized by the employee or
         required by law have been justified. In the event of termination of
         employment, there shall be no obligation of the Company to collect dues
         until all such other deductions (including money claims of the Company
         and the Credit Union) have been made, and such obligation to collect
         dues shall not extend beyond the pay period in which the employee's
         last day of work occurs.



                                       33


C.  General

1.       This Section shall be in force only so long as the Union continues as
         the recognized representative of the employees under this Agreement.

2.       The Company shall not be liable for any wages or other claims
         (including discharge) of any Flight Dispatcher which may result from
         action taken by the Company pursuant to a written order by an employee
         or an authorized Union representative under the terms of this Section.

3.       As used herein, the word "Union" means Local 540, and "Treasurer of the
         Union" means Treasurer of Local 540 where applicable.



                                       34






                                    SECTON 15

                                     GENERAL

A.       The Company shall share the expense of providing each Flight Dispatcher
         with a bound, printed copy of this Agreement with the union.

B.       All orders to and requests from a Flight Dispatcher involving
         transfers, promotions, demotions, layoff, re-employment, leaves of
         absence, or anything affecting his/her pay or status, shall be writing.

C.       The Company will meet with the Union to review new technology that the
         Company may introduce that directly relates to the Flight Dispatcher
         position.

D.       For the term of this Agreement, neither the Union nor any employees
         represented by the Union will authorize, support or engage in any
         strikes, work stoppages, slowdowns, job actions (including any sympathy
         strike or refusal to cross picket lines established by other unions)
         directed against the Company. The Company reserves the right to
         discipline, up to and including discharge, any employee who violates
         any portion of this provision. Further, the Company shall not cause,
         permit, or engage in any lockout of its Flight Dispatchers during the
         term of this Agreement.

E.       Should any part hereof or any provisions herein contained be rendered
         invalid by reason of any existing or subsequently enacted legislation
         or act of any authorized agency of government or by any decree of a
         court of competent jurisdiction, such invalidation of such part or
         portion of this Agreement shall not invalidate the remaining portions
         thereof, and they shall remain in full force and effect. Upon the
         request of either party hereto, subsequent to any such invalidation,
         the Company and the Union shall meet to discuss whether any
         modifications to this Agreement are necessary.

F.       A Flight Dispatcher shall be permitted to attend any formal
         investigation of a Chautauqua aircraft incident or accident, as such
         terms are defined by the NTSB, in which a Flight Dispatcher is believed
         to be involved.

G.       The Company shall provide space for a Union bulletin board in the
         general work area of the Flight Dispatchers. Such bulletin board must
         be lockable and shall be for the exclusive use of the Union. Materials
         posted shall be limited to official Union business and shall not
         contain any editorial material contrary to the interests of the
         Company.

H.       Flight Dispatchers will be afforded travel benefits similar to those
         extended to other employee groups as established by company policy as
         may be amended by


                                       35


         the Company from time-to-time. Whenever the Company intends to modify
         its online employee travel policy it shall provide the Union thirty
         (30) days notice of the change. The Union will have an opportunity to
         comment on the change and such comments will be considered by the
         Company. The Company shall make available to Flight Dispatchers, each
         year, a list of carriers with which it has jumpseat agreements.

I.       Flight Dispatchers who at the time of retirement are covered by this
         Agreement shall receive retiree travel privileges in accordance with
         the Company's Employee Handbook.

J.       Flight Dispatchers who are furloughed/severed under the terms of this
         Agreement, as the result of a reduction in force will be granted, upon
         request, one (1) free round trip space available pass on Company
         aircraft for the purpose of seeking employment. Such pass may be to any
         point on the Company's system within the continental limits of the
         United States, to the extent permitted by law.

K.       In accordance with applicable law, there shall be no discrimination
         against Flight Dispatchers covered by this Agreement because of race,
         color, creed, national origin, religion, sex, age, handicap or
         disability, or veteran status (including Vietnam era veteran and
         special disabled veteran status).

L.       The Section Chairman or alternate designee performing official Union
         business shall be granted time off from work to a maximum aggregate of
         96 unpaid hours per calendar year. All time granted will be contingent
         upon there being adequate schedule coverage.

M.       The Company will continue providing for direct deposit (electronic
         transfer) of paychecks.

N.       Flight Dispatchers covered under this Agreement shall be given time off
         for jury duty as per applicable state law. Time off will be without pay
         unless the applicable state law changes.

O.       Flight Dispatchers shall be authorized to occupy cockpit jumpseats on
         Company aircraft in accordance with the provisions of the Company's
         General Operations Manual. Chautauqua Flight Dispatchers will have
         higher priority than pilots and dispatchers employed by other carriers.

P.       The Company will continue to provide the Flight Dispatchers with free
         parking at their work location.

Q.       Upon written request to the Dispatch Manager, a Flight Dispatcher's
         complete personnel file will be made available to him/her during
         regular business hours.



                                       36


R.       The Company will not use discipline letters more than three (3) years
         old during the grievance process involving a Flight Dispatcher.

S.       The Company will allow an opportunity for input from the Union
         regarding functionality and ergonomics before introducing new equipment
         or new furniture into the Dispatch Office, or before the Company
         relocates the Dispatch Office.

T.       No Flight Dispatcher covered under this Agreement shall be required to
         perform the duties of employees who are conducting a legal strike or
         other job action against the Company.



                                       37




                                   SECTION 16

                                    DURATION

This Agreement shall become effective upon signing and shall continue in full
force and effect through February 19, 2007 and shall renew itself for yearly
periods thereafter unless written notice of intended change is served in
accordance with Section 6, Title I, of the Railway Labor Act, as amended, by
either party hereto not sooner than one-hundred twenty (120) days but not less
than sixty (60) days prior to February 19, 2007 or a subsequent anniversary of
such date, unless the parties mutually agree otherwise.

IN WITNESS WHEREOF, the parties hereto have signed this Agreement this 18th day
of February 2001.

For    CHAUTAUQUA, AIRLINES INC.         For    THE TRANSPORT WORKERS
                                         UNION OF AMERICA, AFL-CIO


By: /s/ Wayne Heller                     By: /s/ David Durkin
   ---------------------------------        ---------------------------------
   Wayne Heller                             David Durkin
   Vice President,                          TWU Local 540,
         Flight Operations                        President



                                       38




                               LETTER OF AGREEMENT
                                     between
                            CHAUTAUQUA AIRLINES, INC.
                                       and
                             THE FLIGHT DISPATCHERS
                                in the service of
                            CHAUTAUQUA AIRLINES, INC.
                                as represented by
                             TRANSPORT WORKERS UNION
                               OF AMERICA, AFL-CIO


                                    OVERTIME

The letter shall serve as a temporary agreement between the parties above to
provide interim relief while new dispatchers are being trained.

     1.  During the month of September 2000, Flight Dispatcher and Dispatch
         Coordinator shifts worked on overtime shall be paid at the rate of time
         and one half, with an additional stipend of $60.00 per day.

     2.  If, in the event that a staffing situation continues to exist at the
         end of September 2000, the Union and the Company shall meet to discuss
         an extension.

AGREED AND ACCEPTED:


/s/ David Durkin                             /s/ Wayne Heller
- ----------------------------------           ---------------------------------

By:  David Durkin                            Wayne Heller
President                                    Vice President, Flight Operations
Transport Workers Union, Local 540           Chautauqua Airlines, Inc.











                                       39


                               LETTER OF AGREEMENT
                                     between
                            CHAUTAUQUA AIRLINES, INC.
                                       and
                             THE FLIGHT DISPATCHERS
                                in the service of
                            CHAUTAUQUA AIRLINES, INC.
                                as represented by
                             TRANSPORT WORKERS UNION
                               OF AMERICA, AFL-CIO


                               COMPENSATION SCALE

The letter shall serve as an agreement between the parties mentioned above as to
the minimum base rates of pay for the Flight Dispatchers of Chautauqua Airlines,
Inc. that will go into effect on February 19, 2006.



                                 Longevity      Effective
                                                 2/19/06
                             -------------------------------
                                               
                                 Hire date        12.93
                                 6 Months         13.29
                                  1 Year          13.53
                               1 1/2 Years        13.82
                                  2 Years         14.20
                                  3 Years         14.75
                                  4 Years         15.27
                                  5 Years         15.83
                                  6 Years         16.44
                                  7 Years         17.20
                                  8 Years         17.54
                                  9 Years         17.90
                                 10 Years         18.25
                                 11 Years         18.73


AGREED AND ACCEPTED:


/s/ David Durkin                           /s/ Wayne Heller
- -----------------------------------        -----------------------------------

By:  David Durkin                          Wayne Heller
President                                  Vice President, Flight Operations
Transport Workers Union, Local 540         Chautauqua Airlines, Inc.



                                       40




                               LETTER OF AGREEMENT
                                     between
                            CHAUTAUQUA AIRLINES, INC.
                                       and
                             THE FLIGHT DISPATCHERS
                                in the service of
                            CHAUTAUQUA AIRLINES, INC.
                                as represented by
                             TRANSPORT WORKERS UNION
                               OF AMERICA, AFL-CIO


                              FILLING OF VACANCIES

This Letter shall serve as an agreement between the parties mentioned for the
policies to be followed in the event that Flight Dispatcher vacancies need to be
filled.

A.   Filling of Vacant Work Schedules

     1.  A Permanent Vacancy on a fixed or rotating Work Schedule shall be
         filled by awarding the bid of the most senior Flight Dispatcher who had
         bid to move to the open Work Schedule. Any fixed or rotating Work
         Schedule opened by the award of such bid shall be filled by the most
         senior Relief Dispatcher who desires to move to the open fixed or
         rotating Work Schedule. Should there be no bids and should no Relief
         Dispatcher wish to move to the open fixed or rotating Work Schedule,
         the Company may assign the most junior qualified Relief Dispatcher to
         the open Work Schedule.

     2.  A vacancy that is expected to last less than sixty (60) days shall be
         considered a temporary vacancy and will be filled using Relief
         Dispatchers.

     3.  The selection of Flight Dispatchers to fill Special Assignment Work
         Schedules shall be the sole decision of the Company from among those
         Flight Dispatchers who have indicated their desire for the Special
         Assignment. Should no Flight Dispatcher express an interest for a
         particular Special Assignment and the Company deems it necessary to
         fill the Special Assignment, the most junior qualified Flight
         Dispatcher may be assigned.

AGREED AND ACCEPTED:

/s/ David Durkin                            /s/ Wayne Heller
- ----------------------------------          -----------------------------------

By:  David Durkin                           By:  Wayne Heller
President                                   Vice President, Flight Operations
Transport Workers Union, Local 540          Chautauqua Airlines, Inc.


                                       41

EX-10.11

                                    AGREEMENT

                                     Between

                            CHAUTAUQUA AIRLINES, INC.

                                     And the

                      FLEET AND PASSENGER SERVICE EMPLOYEES

                          OF CHAUTAUQUA AIRLINES, INC.

                                As represented by

                   THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS,
                                AIRLINE DIVISION



                                   Effective:

                      December 15, 1999 - December 15, 2005



                                TABLE OF CONTENTS

ARTICLE                                                        Page

1.       Recognition, Purpose and Scope                         1-1
2.       Definitions                                            2-1
3.       Compensation                                           3-1
4.       Hours of Service                                       4-1
5.       Overtime                                               5-1
6.       Holidays                                               6-1
7.       Vacations                                              7-1
8.       Leaves of Absence                                      8-1
9.       Sick Leave                                             9-1
10.      Seniority                                             10-1
11.      Probation                                             11-1
12.      Filling of Vacancies                                  12-1
13.      Reduction in Force                                    13-1
14.      Expenses                                              14-1
15.      Grievance Procedures                                  15-1
16.      System Board of Adjustment                            16-1
17.      Physical Examinations                                 17-1
18.      Orders to Employees                                   18-1
19.      Training                                              19-1
20.      Moving Expenses                                       20-1
21.      Union Security                                        21-1
22.      Severance Pay                                         22-1
23.      Health and Welfare                                    23-1
24.      Safety and Health                                     24-1
25.      General                                               25-1
26.      Part-Time Employees                                   26-1
27.      Uniforms                                              27-1
28.      Duration                                              28-1

LETTERS OF AGREEMENT

Signing Bonus
Reopener
Personnel Files
Station Enhancement Fund
Out of Station Overtime Availability
Part Time Employee Schedules
Temporary Wage Rate Adjustments
Implementation



                                     Page 2


                                    AGREEMENT

This Agreement, concerning the Fleet and Passenger Service Employees in the
service of Chautauqua Airlines, Inc., is entered into by and between Chautauqua
Airlines, Inc., hereinafter referred to as the "Company," and the International
Brotherhood of Teamsters (IBT), hereinafter referred to as the "Union," pursuant
to the terms of the Railway Labor Act, as amended, in the mutual interests of
the Fleet and Passenger Service Employees and of the Company in order to promote
safety, efficiency, and economy of operations, to provide for orderly collective
bargaining relations between the Company and the Union, to provide a means for
the prompt and equitable disposition of grievances, to provide a method for the
establishment of fair wages, hours of service, and working conditions for the
Fleet and Passenger Service Employees covered herein under, and to increase the
profitability of the Company. In making this Agreement it is recognized to be
the duty of the Union, the Fleet and Passenger Service Employees and the Company
to cooperate fully for the advancement of the purposes of this Agreement.


                                     Page 3


                                    ARTICLE 1
                         RECOGNITION, PURPOSE AND SCOPE

A.       In accordance with Certification No. R-6371 issued by the National
         Mediation Board on June 23, 1995, the Company recognizes the
         International Brotherhood of Teamsters, Airline Division, as the
         collective bargaining representative of the Fleet and Passenger Service
         Employees employed by the Company, for the purposes of the Railway
         Labor Act, as amended.

B.       The purpose of this Agreement is in the mutual interest of the Company,
         the Union, and the Passenger and Fleet Service employees, to provide
         for the operation of the Company under methods that will further, to
         the fullest extent possible, the safety of air transportation, the
         efficiency of operation, and the continuation of employment of
         Passenger and Fleet Service employees under conditions of reasonable
         working conditions and proper compensation, and the profitability of
         the Company. It is recognized to be the duty of the Company, the Union,
         and the Passenger and Fleet Service employees to cooperate fully for
         the attainment of these purposes.

C.       This Agreement shall supersede all existing or previously executed
         agreements by and between the Company and the Union or any other labor
         organization or individual with respect to the rates of pay, rules, or
         working conditions specifically covered by the provisions of this
         Agreement in accordance with the provisions of the Railway Labor Act,
         as amended. Any and all subsequent agreements between the parties shall
         be reduced to writing, signed by their authorized representatives, and
         become a part of this Agreement.

D.       All work defined as Fleet and Passenger Service work shall be assigned
         to the employees covered by this Agreement.

E.       In accordance with applicable law, there shall be no discrimination by
         either party against any Passenger and Fleet Service employee because
         of age, race, sex, color, religion, union activity, national origin,
         handicap or disability that would not prevent them from safely
         performing the duties of a Passenger Service or Fleet Service employee.

F.       The provisions of this Agreement shall be binding upon the Company and
         its successors or assigns. In the event of a sale or merger in which
         the Company is the surviving entity, the terms and conditions of this
         Agreement shall be retained in full force and effect unless and until a
         determination is made by the National Mediation Board (NMB) as to a
         different representative for the craft or class thereunder.

         1.       Nothing in this Agreement shall prevent the Company from
                  either acquiring, or establishing, or merging with any other
                  carrier. In the event of such acquisition, establishment or
                  merger, the following will apply:

                  a.       The Company will not acquire or establish another air
                           carrier to replace any present flying performed in
                           and for the service of Chautauqua Airlines, Inc., or
                           to avoid the terms and conditions of this Agreement.


                                     Page 4


                           i.       The Company may transfer any aircraft
                                    operated in the Chautauqua system to any
                                    other carrier either it or its parent
                                    controls as long as Chautauqua has
                                    sufficient aircraft to operate Chautauqua's
                                    system, so long as no covered employees will
                                    suffer any loss of pay or be laid off as a
                                    result of such transfer of aircraft.

                  b.       In the event the Company acquires or merges with
                           another air carrier, the operations are not
                           consolidated or merged until the seniority lists of
                           the two Fleet and Passenger Service groups are
                           integrated in accordance with Sections 3 and 13 of
                           the Allegheny-Mohawk Labor Protective Provisions; and

                           i.       The Company and the Union meet to negotiate
                                    an appropriate fence agreement pending the
                                    merger.

                           ii.      All other terms and conditions of this
                                    Agreement remain in full force and effect
                                    unless changes are mutually agreed to
                                    between the Union and the Company.

                           iii.     The respective Fleet and Passenger Service
                                    employees' collective bargaining agreements
                                    are merged into one (1) agreement as the
                                    result of negotiations between the Union and
                                    the Company. If a fully merged agreement is
                                    not executed within six (6) months from the
                                    date of merger and if a final and binding
                                    integrated Fleet and Passenger Service
                                    employees system seniority list is not
                                    issued, then the parties shall jointly
                                    submit outstanding issues to binding
                                    arbitration.

G.       Any masculine noun or pronoun used in this Agreement shall be
         recognized as referring to any employee covered under this Agreement,
         whether male or female.

H.       The Company shall have sole jurisdiction of the management and
         operation of its business, the direction of its working force, the
         right to maintain discipline and efficiency in its place of employment,
         and the right of the Company to hire, promote, demote, select for
         training, discipline, and discharge employees for just cause. The
         rights listed herein shall not be deemed to exclude or limit the other
         pre-existing rights of management not listed that do not conflict with
         other provisions of this Agreement.

I.       The Company will not enter into any dry lease or wet lease agreement
         without the agreement of the Union, nor contract with or for any other
         carrier or entities (government, military or commercial) for services
         within the scope of this Agreement without consulting with the Union.

                  1.       No employee within the bargaining unit will be
                           reduced in status or lose any income or employee
                           benefits while discussions are taking place.

                  2.       The Union will not disagree to a dry lease when such
                           dry lease is for the sole purpose of leasing out
                           excess aircraft owned or leased by the Company. No
                           aircraft dry leased to another carrier or entity will
                           be operated into or out of any cities where the
                           Company operates. Such dry lease will not result in
                           the reduction

                                     Page 5



                           in status or the furlough of any Fleet
                           and Passenger Service Employee in cases where the dry
                           lease provides a profit to the Company. At the
                           request of the Union it may review the actual dry
                           lease documents.



                                     Page 6


                                    ARTICLE 2
                                   DEFINITIONS

A.       "Business Agent" means a paid representative from the Union.

B.       "Calendar Day" means a period of time commencing at 0001 and ending at
         2400, based on local time at the station.

C.       "Calendar Month" means the first calendar day of any given month to and
         including the last calendar day of that month.

D.       "Classification Seniority" means the length of service as a Fleet or
         Passenger Service Employee with the Company.

E.       "Company Seniority" means the period of time the employee has served as
         an employee of the Company in any and all positions including covered
         and uncovered positions.

F.       "Day Off" means one calendar day free from scheduled duty.

G.       "Employee" means a person covered by this Agreement. He must be
         knowledgeable and capable of performing duties in the following areas
         as required: passenger ticketing, reservations, cargo procedures, gate,
         ramp, radio/telephone procedures, catering, deicing, towing/pushback
         and light cleaning.

H.       "Equalization" means records will be maintained for voluntary overtime
         hours to allow the overtime hours to be evenly distributed among the
         employee group.

I.       "Lead Agent" means an employee responsible for performing work in his
         duty assignment area as a working member of his group. He will be
         required to direct/train other employees assigned to him to ensure that
         the work assigned is performed in an efficient and productive manner. A
         lead agent does not have authority to discipline or discharge employees
         covered by this Agreement.

J.       "Light cleaning" means cleaning such as: wiping down of aircraft
         interior surfaces and windows, sweeping and vacuuming, crossing of seat
         belts, folding of blankets, removal of trash, cleaning and restocking
         of seatback pockets and overhead bins, mopping galley and lavatory
         floors.

K.       "Station" means the geographical location where an employee is assigned
         to work. Base, domicile, and location have the same meaning and are
         used interchangeably with station.

L.       "Shift" and "Work Shift" mean workdays.

M.       "Work Day" means that period of time beginning at the report time for a
         scheduled shift and continuing through the end of a scheduled shift. A
         workday may overlap two (2) calendar days and can include time for a
         split shift.




N.       "Work Period" means a work period that consists of a fourteen (14) day
         period with not more

                                     Page 7


          than ten (10) consecutive work days and with at least two (2)
          consecutive calendar days off.

O.       "Work Week" means the first seven (7) days of a work period or the
         second seven (7) days of a work period.

P.       "Anniversary Year" means a one-year period, beginning from the
         individual employee's hire date.



                                     Page 8


                                    ARTICLE 3
                                  COMPENSATION

A. Employees will be paid an hourly wage in accordance with the following
   schedule:





                                            Pay Rate Pay Rate   Pay Rate           Pay Rate
                                            Effective         Effective           Effective         Effective
                  Longevity                 11/29/1999        12/15/2000          12/15/2001        12/15/2002
                  ---------                 ------------------------------------------------------------------
                                                                                       

                  1-6 months                  7.10              7.28               7.46              7.65
                  7-12 months                 7.75              7.94               8.14              8.34
                  13-18 months                8.10              8.30               8.51              8.72
                  19-24 months                8.25              8.46               8.67              8.89
                  3rd year                    8.70              8.92               9.14              9.37
                  4th year                    9.20              9.43               9.67              9.91
                  5th year                    9.70              9.94              10.19             10.44
                  6th year                   10.10             10.35              10.61             10.88
                  7th year                   10.50             10.76              11.03             11.31
                  8th year                   11.00             11.28              11.56             11.85
                  9th year                   11.50             11.79              12.08             12.38
                  10th year                  12.00             12.30              12.61             12.93
                  11th year                  12.50             12.81              13.13             13.46




B.       Employees who are designated as a Lead Agent shall be paid a minimum
         premium of one dollar ($1.00) per hour in addition to all applicable
         compensation for hours worked in that status and shall be included in
         the calculation of overtime calculation. An employee temporarily
         upgraded to a Lead Agent position shall receive the premium for all
         hours worked as a Lead Agent.

C.       Employees who are required to and obtain their weather observing
         license (and retain currency) will be paid a premium of thirty cents
         ($.30) per hour in addition to all applicable compensation for hours
         worked in that status. Employees who voluntarily obtain their weather
         observing license (and retain currency) will be paid a premium of
         thirty cents ($.30) per hour in addition to all applicable compensation
         when working at a station where weather observation is required.

D.       All employees shall be capable of performing all tasks assigned by
         management with the exception of flight attendant/maintenance/lead
         agent/pilot/dispatch/accounting/ and executive and there shall be no
         distinction for compensation or seniority because of the actual task
         performed except those enumerated in paragraphs B and C, above.

E.       When the Company has acknowledged that there is a shortage equal to one
         (1) day's pay or more in the pay of an employee, the employee will be
         reimbursed for such shortage as soon as possible but in no case later
         than three (3) working days.

F.       When there is an overpayment to a covered employee, the Company will
         notify the affected employee, provide documentation and substantiation
         of the overpayment and arrange a mutually agreeable repayment schedule.
         The Company may require the employee to authorize the Company to deduct
         repayment from his subsequent check(s). The maximum amount that can be



                                     Page 9


         deducted from each pay period shall be fifty dollars ($50.00), unless
         the amount of overpayment exceeds five hundred dollars ($500.00), in
         which case the repayment amount will not be more than twenty percent
         (20%) of the original repayment amount per pay period. An employee and
         the Company may agree to different repayment terms.

G.       Paychecks will include an itemized statement of all hours, wages,
         adjustments and deductions for the pay period including, but not
         limited to: withheld taxes, union dues, 401(k) contributions, Section
         125 deductions, uniform deductions, etc., as well as year to date
         wages, FICA and withheld taxes.

H.       Employees leaving the service of the Company will be paid for all the
         time due at the earliest possible time after separation and in
         compliance with state law.

I.       Increases are effective for employees paid bi-weekly starting with the
         pay period that begins nearest the employee's anniversary date, and for
         employees paid weekly, starting with the pay period in which the
         anniversary date falls.



                                    Page 10




                                    ARTICLE 4
                                HOURS OF SERVICE

A.       All time worked in any continuous work day, including overtime, shall
         be considered as work performed on the calendar day the work day is
         started.

B.       Work schedules will be posted for bid as far in advance as possible but
         no later than ten (10) calendar days before the bid closing date. Work
         schedules will be awarded and posted ten (10) calendar days before
         their effective date. Work schedules may be rebid when required by the
         Company or once each ninety (90) calendar days from the date of the
         last rebid, whichever is sooner. If an employee fails to bid through no
         fault of his own, he will be assigned a work schedule closest to or the
         same as his previously scheduled starting time within his work
         assignment. If an employee does not bid sufficient slots or does not
         enter a bid, he will be assigned to any remaining open slot after all
         bids have been awarded.

         1.       Separate work schedules will be posted for each work
                  assignment, if applicable (Fleet Service, Passenger Service).
                  Award of work shifts, including hours and days off, shall be
                  based on applicable classification seniority.

         2.       An employee on an authorized leave of absence is not permitted
                  to bid a work schedule if his date of return to work is after
                  the expiration of such bid period. Employees returning after
                  such bid period or those who failed to bid while on such leave
                  will be assigned a work schedule.

         3.       An employee who transfers into another location will be
                  assigned a schedule until he participates in the next bid.

         4.       An employee may be scheduled up to thirteen (13) hours in any
                  one shift, excluding time for a meal period.

C.       Trading of shift assignment or days off shall be permitted if requested
         in writing and signed by all the employees involved in the swap and
         submitted no later than the day before the first intended swap and are
         subject to approval in writing by the appropriate manager, or his
         designee. Shift trades outside of duty assignment; for example, gate to
         ramp, etc., must be approved by appropriate management. Management
         reserves the sole discretion in approving swaps. Management will
         endeavor to accommodate the employee whenever practical.

         1.       There will be no overtime restrictions on employees who swap
                  shifts. However, there will be no overtime paid for any
                  scheduled hours as a result of shift swaps (See example
                  below). Employees who trade shifts become responsible to work
                  the shift as agreed to as if the shift were part of their
                  regular assignment.

                  Example:

                  a.       Joe has worked 75 hours
                           Mary has worked 70 hours


                                    Page 11


                           Mary swaps with Joe for a 10-hour shift. Joe works 85
                           hours in pay period Joe receives no overtime pay.

                  b.       #1 has worked 75 hours
                           #2 has worked 75 hours
                           #2 swaps a 10-hour shift with #1
                           #1 works 85 hours in pay period
                           #1 gets paid for 5 hours overtime

                  c.       #1 is scheduled for a 10 hour shift
                           #2 swaps shift with #1 and actually works 11 hours.
                           #2 is paid 1 hour overtime


D.       For shifts scheduled for six (6) hours or more, unpaid meal periods of
         not less than thirty (30) minutes and not more then sixty (60) minutes
         shall be scheduled between the third (3rd) and fifth (5th) hour of the
         shift. If a meal period cannot be taken in the specified time frame, it
         will be rescheduled, and the employee will be paid one-half (1/2) hour
         at the applicable overtime rate in addition to his regular pay.

         E. The Company will not schedule an employee for less than nine (9)
         consecutive hours of rest between his shifts. When an employee is
         required to work and has less than nine (9) consecutive hours of rest
         between his shifts, the Company will either relieve him of duty with
         pay from such portion of his shift so as to give him the nine (9)
         consecutive hour rest period or compensate him for those hours worked
         at two (2) times his hourly rate for the number of hours his minimum
         rest period was reduced. If the employee is required to work overtime
         (mandatory) and this results in insufficient rest, the employee will
         then be entitled to this provision.

         This provision shall not apply:

         1.       If insufficient rest is caused as a result of the employee's
                  new work schedule at a periodic shift bid.

                  Example:

                  Joe worked on 4/15/99 until 11 PM. Periodic schedule changes
                  on 4/16/99. Joe's new start time is 6AM on 4/16. Joe gets no
                  additional pay or rest.

         2.       If the employee volunteers for overtime or a swap that causes
                  the insufficient rest.

         3.       If the employee is working a scheduled split shift.

F.       An employee transferred or assigned temporarily or permanently to a
         higher paying classification shall receive the higher rate of pay for
         all time worked in such classification. An employee



                                    Page 12



         temporarily assigned to a lower paying classification shall not have
         his rates of pay reduced. An employee permanently reclassified to a
         lower paying classification shall have his pay rate lowered on the date
         of reclassification.

G.       When occasions arise beyond the Company's control, such as unscheduled
         absences, or due to weather or other Acts of God, then non-covered
         personnel may perform covered personnel's work until such time as there
         are sufficient covered personnel available, at their place of work, to
         perform their work through the awarding of voluntary overtime to
         employees, or, in the absence of volunteers, the assigning of mandatory
         overtime to employees, in reverse seniority order, utilizing the
         equalization process.

H.       In stations with twenty (20) or less employees, management personnel
         will be regularly scheduled to work and perform similar, same, and
         equal tasks as those performed by covered personnel.

I.       The Company may schedule employees for split shifts. A split shift
         schedule will include at least three (3) hours of scheduled work on
         each side of an unpaid break that is not scheduled to exceed six (6)
         hours. An employee may perform voluntary or involuntary overtime during
         the scheduled break.



                                    Page 13


                                    ARTICLE 5
                                    OVERTIME

A.       Where the Company determines that overtime work is required, such
         voluntary overtime work will be proffered to qualified covered
         employees on an equalized basis.

B.       Voluntary overtime will be proffered to the covered employee whose name
         appears on the overtime availability list with the lowest number hours
         of overtime worked to the date of proffer. If two (2) or more
         volunteering employees have the same number hours of overtime, the
         senior employee will be offered the overtime first.

C.       If no employee accepts voluntary overtime, then the Company may assign
         mandatory overtime in reverse order of seniority, using an equalization
         method. Prior to assigning mandatory overtime the Company will:

         1.       Identify all available overtime in an Overtime Book, updated
                  daily and accessible at all times.

         2.       Make every reasonable effort to secure voluntary overtime.

         The Company will not utilize mandatory overtime as a means to
         circumvent the rest and normal staffing requirements of Article 4.

D.       All equalization records for voluntary overtime will be set back to
         zero (0) hours on January 1st, and July 1st of each calendar year.

E.       Voluntary overtime that is proffered to an employee one (1) hour or
         less prior to its beginning, if refused, will not be charged to the
         employee on equalization record as if worked.

F.       Voluntary overtime shall be paid as follows:

                                                                       


         1.       Time worked in excess of an employee's scheduled shift but
                  less than  twelve (12) hours in a single shift                        1 1/2X the hourly
                  rate

         2.       Time worked in excess of  twelve (12) hours in a single shift         2X the hourly rate

         3.       Time worked up to ten (10) hours on the first day off hourly rate     1 1/2X the

         4.       Time worked in excess of 10 hours on the first day off                2X the hourly rate

         5.       Time worked on a second or subsequent day off in a work week          2X the hourly rate


         

G.       Mandatory overtime will be paid at the rate of 2X the hourly rate for
         all hours worked. Up to three (3) hours worked in excess of the
         scheduled shift during the last shift of the day, as a result of
         irregular flight operations, whether voluntary or involuntary, is not
         paid at the mandatory overtime rate.




                                    Page 14



H.       When in the Company's judgment it is not economically efficient to work
         a continuous shift for one or more employees, split shifts may be
         scheduled.


                                    Page 15



                                    ARTICLE 6
                                    HOLIDAYS

A.       An employee who is assigned to duty by the Company on any of the below
         listed holidays will receive pay at the compensation cited in Article
         6.D., below.

         New Year's Day             Labor Day             Day after Thanksgiving
         Thanksgiving Day           Memorial Day
         Christmas Day              Independence Day

B.       If an employee is scheduled to work a holiday and the employee does not
         show up for work without proper notice and valid cause, the employee
         will not receive holiday pay. Proper notice shall be defined as one (1)
         hour notice before start time of the employee's scheduled shift with a
         valid excuse.

C.       All full-time employees will receive eight (8) hours of pay on the
         above-designated holidays or eight (8) hours off with pay at the
         Company's discretion. All part-time employees will receive four (4)
         hours of pay on the above-designated holidays or four (4) hours off
         with pay at the Company's discretion. If an employee is absent for any
         reason on the scheduled work day before or after the holiday, he will
         not be entitled to pay for the holiday.

D.       Employees who work the holidays designated above will, in addition to
         the hours of pay provided for in paragraph C., above, be compensated at
         the greater of 11/2X their hourly rate for all hours worked on the
         holiday or the overtime provided for in Article 5.F.



                                    Page 16


                                    ARTICLE 7
                                    VACATIONS

A.       Vacation Policy

         1.       All employees are eligible for paid vacation. The rate at
                  which an employee accrues vacation is based on the employee's
                  Company seniority. The number of days an employee actually
                  accrues vacation, to be used in the next year, is based on the
                  employee's accrual rate and the number of pay periods the
                  employee is active in the current year.

         2.       Accrual Schedule - The number of vacation hours an employee
                  actually receives will be based on his accrual rate and the
                  number of pay periods the employee is active in the prior
                  year. The employee must be at work, on paid sick leave, on
                  vacation, or on a Company-offered leave of absence for more
                  than one pay period in a month in order to be considered to be
                  an active employee for vacation accrual purposes.

                  The number of vacation hours earned is based on the following
                  rate of accrual:

                  Years of Service  Annual Accrual   Accrual Per Pay Period
                  ----------------------------------------------------------
                  1- 7 years        80 hours                   3.08 hours

                  8+ years          120 hours                  4.62 hours

         3.       Employees working on schedules other than five (5) day work
                  weeks will be paid for vacation based on forty (40) hours per
                  work week. Employees are compensated for earned vacation in
                  proportion to their normally scheduled work week in effect at
                  the time they take their vacations.

         4.       An employee who leaves the Company voluntarily will receive
                  full payment for unused vacation time credited from the
                  previous year as well as vacation accrued in the year of
                  separation.

         5.       An employee who has not accrued six (6) months of Company
                  seniority is not eligible for vacation pay upon termination.

         6.       In the event of the employee's retirement, permanent
                  disability or death, current year accruals will also be paid.

         7.       An employee may elect any of the following options in
                  connection with any unused vacation:

                  a.       Elect to be paid for remaining vacation.  Pay-out
                           will be made on the first paycheck following
                           January 1st of the next year, or

                  b.       Elect to carryover the remaining vacation to the next
                           year.



                                    Page 17


B.    Vacation Bidding

         1.       Vacations will be bid by station and awarded based on
                  Classification Seniority.

         2.       Bids will open November 1st and close November 15th of each
                  year. Available vacation weeks will be evenly distributed
                  throughout the year. Bids will be submitted on the Vacation
                  Bid form. Vacation awards will be posted no later than
                  December 1st.

         3.       Once an employee is eligible for eighty (80) hours of vacation
                  or more, the employee may split the employee's vacation into
                  separate periods of complete weeks and, if a partial week
                  remains, it may be taken in conjunction with one (1) of the
                  employee's complete weeks.

         4.       Although vacation weeks are bid using the Sunday date, the
                  actual vacation begins following the scheduled days off in
                  that week except that employees with Friday and Saturday or
                  Saturday and Sunday will start their vacation in conjunction
                  with their days off at the beginning of that week, unless the
                  employee and the supervisor agree otherwise.

         5.       Employees who are involuntarily transferred may elect to keep
                  the vacation period they bid on the prior November bidding
                  period.

C.       VAC-DAT (Vacation-Day-At-A-Time)

         1.       Employees may elect to designate any amount of earned vacation
                  days to be taken as day-at-a-time (VAC-DAT). The employee may
                  designate the number of VAC-DAT days during the vacation
                  bidding in November.

         2.       During the year, an employee may request VAC-DAT for a
                  specific day or sequence of days if the employee has VAC-DAT
                  available. At each non-hub station at least one (1) VAC-DAT
                  per shift, per day, with a maximum of two (2) per day, and at
                  hub stations up to one (1) Passenger Service employee and one
                  (1) Fleet Service employee per shift per day to a maximum of
                  four (4) per day (two (2) per classification) will be
                  automatically approved provided the request is submitted at
                  least three (3) weeks in advance on a first- come,
                  first-served basis. Requests not eligible for automatic
                  approval will be reviewed and the employee notified whether it
                  is approved, within seventy-two (72) hours after submission.
                  Requests submitted with less than three (3) weeks notice may
                  also, subject to the needs of the operation, be approved.
                  Shift swaps submitted as a result of non-approved VAC-DAT
                  requests will not be denied.

         3.       Once a request has been properly made, the VAC-DAT must be
                  taken as scheduled unless agreed to otherwise by the employee
                  and the supervisor.

         4.       VAC-DAT cannot be scheduled on a holiday. Further, VAC-DAT
                  cannot infringe on any existing rules regarding a holiday.

         5.       An employee may split a VAC-DAT into one (1) hour increments.



                                    Page 18


D.       Changes To The Posted Schedule

         1.       If necessary, additional periods will be opened during the
                  year to accommodate additional vacations because of an
                  increase in complement or changes in the work group that
                  increase the number of weeks to be taken, unless those weeks
                  can be accommodated in the existing periods. In all other
                  cases, any open week on the vacation schedule will be
                  available for employees within the vacation bid group who wish
                  to switch their scheduled weeks of vacation.

         2.       An employee must notify his supervisor at least two (2) weeks
                  prior to the employee's scheduled vacation period or two (2)
                  weeks prior to the effective date of the vacation period the
                  employee wishes to select, whichever occurs first. The request
                  must be made in writing. If the employee is the most senior
                  employee to make such a request, the supervisor will approve
                  the change, and the posted vacation schedule will be revised
                  accordingly.

         3.       Any vacation period vacated on the vacation schedule will
                  remain open for seventy-two (72) hours prior to being awarded
                  to the senior eligible bidder within the vacation group. No
                  vacation will be bid for seventy-two (72) hours after shift
                  bid change. Then the senior eligible bidder on the shift or
                  coming on the shift will bid first.

E.       Perfect Attendance Incentive

         For each rolling consecutive six (6) month period of perfect
         attendance, each full-time employee shall be entitled to eight (8)
         additional vacation hours, up to a maximum of sixteen (16) hours in
         each calendar year. Part-time employees will be eligible to receive
         four (4) hours and eight (8) hours respectively. At the option of the
         employee, perfect attendance days may be taken as day-at-a-time, added
         to the employee's vacation bank or, with the mutual agreement of the
         Company, added to the employee's awarded vacation days.

F.       Improvements to Vacation

         If the Company increases the amount of vacation entitlement for any
         other work group, excluding any represented work group, it will
         increase the entitlement for employees covered by this Agreement an
         equivalent amount.



                                    Page 19


                                    ARTICLE 8
                                LEAVES OF ABSENCE

A.       Personal Leave of Absence - The Company at its sole discretion may
         grant a personal leave of absence without pay to an employee for a
         period of time determined by the Company, or as may be extended by
         written mutual agreement of the parties hereto. Employees shall submit
         their request for a personal leave of absence, or extension of a leave
         of absence, in writing, setting forth the reasons for the leave. The
         Company will then return to the employee a written approval or denial
         of the request. If the leave is approved, the Company shall, in
         writing, specify the details of the leave including, but not limited
         to, the date on which the employee must report back and be ready to
         work at his designated place of work. The Company reserves the right to
         terminate an employee's employment if he does not return to work on his
         designated return date. While on a personal leave the employee will
         continue to accrue seniority for up to ninety (90) days but will not
         accrue benefits. However, the employee on a personal leave of absence
         may elect to continue health and life insurance benefits, provided the
         employee pays in advance the full monthly cost of such benefits to the
         Company.

B.       Medical and Occupational Leave of Absence

         1.       A medical leave of absence, without pay, will be granted for a
                  non-occupational sickness or injury after the employee has
                  exhausted his accrued sick leave and upon the receipt of a
                  written verification from a qualified medical doctor. Such
                  written verification shall state at a minimum that (1) the
                  employee is unable to perform his work due to such disability,
                  (2) the doctor's estimate of the anticipated duration of the
                  medical leave and (3) the doctor's opinion that the employee
                  will be able to return to work in the same position the
                  employee had before the sickness or injury in less than five
                  (5) years.

         2.       The employee shall accrue Company and Classification Seniority
                  but not accrue benefits and/or pay during the period of a
                  leave for his medical disability.

         3.       In no case shall a medical leave exceed a total continuous
                  period of five (5) years.

         4.       An employee desiring to return to duty upon expiration of his
                  medical leave shall, in accordance with his seniority, be
                  permitted to return to his former position or, if the former
                  position is not available, utilize Article 13.A. to displace a
                  less senior employee.

         5.       Occupational Injury Leave of Absence - An unpaid leave of
                  absence will be granted to an employee who suffers an
                  occupational injury/sickness after the employee has exhausted
                  his accrued sick leave. If an employee is found fit for "light
                  duty" i.e., a physician certifies that an employee will be
                  able to return to full duty on a certain date and that he is
                  able to perform certain restricted duties as may be assigned
                  by the Company for up to a two (2) week period prior to such
                  release date, the Company will provide such light duties, if
                  such duties are available and said employee is qualified, to
                  aid in an employee's rehabilitation. An employee on
                  occupational injury leave shall retain and continue to accrue
                  seniority for a maximum of five (5) continuous years. After
                  five (5) continuous years the employer/employee relationship
                  will terminate.



                                    Page 20


         6.       An employee who returns to work from an authorized leave of
                  absence within six (6) months of the last day he worked shall
                  be permitted to resume his position in the same status and
                  position to which he was assigned. If an employee does not
                  return to work within six (6) months of the last day he
                  worked, when he does return, he shall be permitted to assume
                  his former position, if still vacant, or exercise Article
                  13.A. to displace a less senior employee. If an employee does
                  not return to work on the specified date after a leave of
                  absence, his employment may be terminated at the Company's
                  option.

C.       Military leave - The Union and the Company agree to abide by all
         Federal and State laws in regard to the granting of military leave to
         employees who are called to Reserve or National Guard duty. The Company
         will grant a leave of absence, without pay, not to exceed fifteen (15)
         days, to any person ordered to Reserve or National Guard duty for
         annual training, or in the case of a national emergency, or as
         otherwise required by federal law. The employee shall give the Company
         notice within twenty-four (24) hours of the employee's receipt of
         notification of said active duty. An employee who desires to volunteer
         for extended duties must get prior approval from the Company.

D.       Jury Duty Leave

         1.       An employee shall provide the Station Manager with a copy of
                  the summons or notice of jury duty immediately upon the
                  receipt of such documents. The employee shall concurrently
                  provide the Company with authorization to intercede with the
                  appropriate authorities for the purpose of removing him from
                  jury duty.

         2.       An employee who is required to serve on jury duty shall be
                  granted a leave of absence for that purpose.

         3.       An employee who is called for jury duty will not be paid the
                  difference between his regular pay and jury duty pay.

         4.       Immediately upon release from jury duty, the employee shall
                  notify the Company of his availability for work. An employee
                  called for jury duty whose services in court are not required
                  on a specific day or who is released within two (2) hours of
                  reporting for jury duty will contact his supervisor to
                  determine if he is needed to report to work for the remainder
                  of the scheduled shift and will be paid for any hours actually
                  worked.

         5.       An employee on jury duty leave shall continue to accrue
                  seniority, longevity and all benefits as if he had been in
                  active service.

         6.       An employee may take an unpaid eight (8) hour rest prior to
                  serving on jury duty and/or an unpaid eight (8) hours rest
                  after being relieved from jury duty prior to reporting to
                  work.

E.       Bereavement/Emergency Leave

         1.       If a member of an employee's immediate family suffers a death,
                  he shall immediately notify the Station Manager and he will be
                  granted up to five (5) consecutive working days paid leave
                  beginning within five (5) calendar days following the date of
                  the death. An



                                    Page 21


                  employee's immediate family shall be defined as an employee's
                  mother, father, spouse, children, stepchildren, brother, and
                  sister. Up to three (3) consecutive working days of paid leave
                  will be granted for the death of the employee's mother-in-law,
                  father-in-law, or grandparent.

         2.       Such family emergency leave may, upon request, be extended. If
                  the leave is extended, it shall be without pay or, at the
                  option of the employee, be with pay charged against the
                  employee's earned sick bank. The employee will be paid for all
                  scheduled hours of work during the leave period but not during
                  any extensions thereto, except as otherwise provided for in
                  this paragraph.

F.       Family and Medical Leave of Absence - All full-time and part-time
         employees covered by this Agreement, including those locations with
         less than fifty (50) employees, who have worked more than 1250 hours in
         the preceding twelve (12) months, and who have twelve (12) months of
         service, will be eligible for the "Family and Medical Leave Act of
         1993." While on family leave, the employee will continue to accrue
         seniority and all benefits, without interruption and at no cost to the
         employee. Upon return from family leave, the employee will have the
         option to return to the position held prior to the leave, or exercise
         Article 13.A.

G.       Union Leave

         1.       At the request of the Union (thirty (30) day advance notice
                  given to the Company) an employee shall be granted an
                  indefinite Union leave of absence without pay to accept
                  employment with the Teamsters Airline Division. While on such
                  leave, the employee shall continue to accrue seniority and
                  will be covered by Company health and life insurance the cost
                  of which will be reimbursed to the Company by the Union at the
                  monthly rate of twenty-three percent (23%) times the
                  employee's monthly regularly scheduled hours, prorated. The
                  employee will maintain all other benefits covered by this
                  Agreement and may continue to participate in the 401(k) Plan.
                  The Company's share of the 401(k) Plan shall be fully
                  reimbursed to the Company by the Union. No more than one (1)
                  employee shall be permitted a Union leave at one time. Upon
                  return from leave, an employee on Union leave will be given
                  recurrent training necessary to remain current as a Chautauqua
                  employee.

         2.       AT THE REQUEST OF THE UNION, THE COMPANY WILL, SUBJECT TO THE
                  NEEDS OF THE SERVICE, RELEASE EMPLOYEES FOR THE PURPOSE OF
                  CONDUCTING UNION BUSINESS. REQUESTS FOR RELEASE MUST BE
                  SUBMITTED IN WRITING TO THE STATION MANAGER AT LEAST SEVEN (7)
                  DAYS BEFORE THE REQUESTED DAY(S) OFF. THE COMPANY MAY WAIVE
                  THE SEVEN (7) DAY REQUIREMENT. SHIFTS DROPPED TO ACCOMMODATE
                  SUCH LEAVES WILL BE HANDLED AS PROVIDED IN ARTICLE 4.

         3.       Reimbursement for Pay Loss

                  Except as provided in Article 8.G.1., the Union shall
                  reimburse the Company for Union leave paid to an employee by
                  multiplying the number of hours normally scheduled to work and
                  paid by the Company times the applicable hourly rate for the
                  employee, plus twenty-three percent (23%) to cover the cost of
                  fringe benefits.



                                    Page 22


H.       Maternity Leave

         1.       Maternity leave for employees shall be handled in accordance
                  with applicable law.

         2.       An employee shall notify the Company immediately upon
                  confirmation of her pregnancy.

         3.       A pregnant employee shall be permitted to continue in service
                  until her physician determines that she is no longer able to
                  perform all required employee duties.

         4.       An employee who ceases to perform employee duties shall be
                  placed on sick leave. Following exhaustion of sick leave
                  benefits, the employee shall be placed on medical leave.

I.       Return from Leave

         Immediately after the expiration of a leave of absence, an employee
         will return to the job classification and base station where he was
         assigned immediately prior to the leave. If the station no longer
         exists for employees, the employee may displace a less senior employee
         in the station of his choosing.




                                    Page 23


                                    ARTICLE 9
                                   SICK LEAVE

A.       Sick Pay Bank

         Paid sick time is provided to allow the time off necessary to
         recuperate from illness or injury.

B.       Definitions

         1.       Sick Pay - is pay to an eligible non-probationary employee who
                  cannot perform his regular duties because of sickness
                  (physical or psychological) or non-occupational injury,
                  including maternity. Sick pay may also be utilized when an
                  employee's presence would jeopardize the health of others
                  because of exposure to a contagious disease. Sick pay does not
                  cover time for routine physical examinations or dental
                  check-ups. Pay during a period of sick absence will be based
                  on the employee's base rate and scheduled hours.

         2.       Worker's Compensation Temporary Disability Pay - is pay to an
                  eligible employee unable to work because of an injury on the
                  job at the Company.

                  a.       The injury must be one that is covered by the
                           applicable state worker's compensation law and must
                           be verified in writing by the treating physician.

                  b.       Payment for occupational injury by the Company's
                           insurance carrier, or the state, is generally set at
                           a percentage of the employee's average weekly wage.
                           However, this rate and the maximum weekly payment may
                           vary from state to state.

         3.       State Mandated Benefits - are disability income benefits
                  required by law in certain states. State mandated benefits may
                  include or require payments from an outside source.

         4.       In no event may an employee be entitled to State Mandated
                  Benefits and Sick Pay in excess of the employee's normal rate
                  of pay times his scheduled straight time hours.

         5.       Base Rate or regular rate, as used in this Article, is an
                  employee's base hourly rate plus all premiums he normally
                  receives.

C.       Sick and Occupational Injury Accrual

         Full time employees accrue hours of sick pay credits for each month
         that they are in a paid status, up to a maximum of six hundred sixty
         (660) hours sick pay (see paragraph K., below).

         YEARS OF SERVICE          PAY PERIOD ACCRUAL           ANNUAL ACCRUAL
         ---------------------------------------------------------------------
         1st Year                    .92 Hours                     24 Hours
         2nd Year                   1.54 Hours                     40 Hours
         3rd Year                   1.85 Hours                     48 Hours
         4th Year                   2.15 Hours                     56 Hours
         5th Year and thereafter    2.77 Hours                     72 Hours



                                    Page 24


D.       Commencement and Payment of Paid Sick Time

         Sick time is paid based on the number of hours in the employee's
         regular work schedule. Pay will be at the employee's normal rate until
         his sick bank has been exhausted or the employee returns to work.

E.       Use of Sick Pay for an Occupational Injury

         An employee may elect to use his Sick Pay to supplement Worker's
         Compensation benefits.

F.       Exhaustion of Sick Pay

         When an employee exhausts his accrued sick leave, the employee will be
         placed on an unpaid medical leave of absence. An employee will not
         accrue Sick Pay while on a medical leave of absence.

G.       Travel While on Sick Pay Status

         Employees on sick pay status may use their pass privileges or reduced
         rate travel for personal travel. Eligible family members (and buddies
         if accompanied by the employee's spouse or other eligible family pass
         rider), are permitted to travel while the employee is in a paid status.
         To allow time for family members to return from trips in progress or be
         notified to make alternate travel arrangements, eligible family members
         may continue to travel for thirty (30) days from the date an employee's
         status changes to "unpaid" (i.e., an employee has exhausted his accrued
         sick leave)

H.       Request for Medical Documentation

         The Company may request a doctor's note after an employee has been off
         duty due to illness or injury in excess of three (3) consecutive days
         or where there may be suspected abuse.

I.       Worker's Compensation and Occupational Injury

         Worker's Compensation Temporary Disability payments will be made
         directly to the employee by the Worker's Compensation carrier (or the
         state) in the amount equal to the statutory requirements. Payments will
         be made to the employee, by the Company, in the amount calculated to be
         the difference between the employee's regular base pay and the
         statutory payment amount, until such time as the employee's accrued
         sick leave (if elected) is exhausted.

J.       Sick Pay Bank

         The maximum six hundred sixty (660) hour Sick Pay bank provided for in
         paragraph C above is divided into accounts of three hundred sixty (360)
         and three hundred (300) hours. Only after accruing the maximum three
         hundred sixty (360) hours in the first account may an employee begin
         accruing toward the maximum three hundred (300) hours in the second
         account. The three hundred (300) hour account may be used only for
         major, long term illness or injury (i.e. longer


                                    Page 25



         than thirty (30) calendar days), and then only after the three hundred
         sixty (360) hour regular account has been exhausted. Upon retirement,
         employees are entitled to be paid for all accrued but unused sick pay
         bank hours.


                                    Page 26


                                   ARTICLE 10
                                    SENIORITY

A.       Company seniority shall be based upon total uninterrupted service with
         the Company from the employee's date of hire.

B.       Classification seniority shall be the total time employed in Passenger
         and Fleet Service functions. Classification seniority shall govern all
         covered employees in their retention in case of a reduction in force,
         voluntary demotion, bidding rights for work schedules, choice of
         vacation periods, choice of and filling of vacancies and recall after
         release due to reduction in force.

C.       Employees with the same hire date will be placed on the seniority lists
         according to the last four digits of their social security number
         reading from left to right (the employee with the higher number will be
         placed on the list first.).

D.       An employee who is accepted for transfer within the Company outside the
         scope of this Agreement shall retain but not accrue seniority as above
         in Article 10 B. for up to six (6) months. After six (6) months, the
         employee shall be removed from the seniority list and lose all rights
         to return to the covered class.

E.       A classification seniority roster reflecting the job title, Company and
         classification seniority dates and domicile of each employee shall be
         brought up to date as of June 1st and Dec 1st of each year and posted
         on each bulletin board at each location where there are individuals
         employed under this Agreement within thirty (30) days following such
         dates. In addition, the Company shall, on a monthly basis, make
         available to the Union a list of changes affecting this roster. A copy
         of the seniority list will be furnished to each Steward at each station
         and to the Union Business Agent.

F.       Employees who wish to protest any omission or error affecting their
         classification seniority shall follow the normal grievance procedure
         within thirty (30) days of posting of the erroneous information on the
         bulletin board in their domicile. It is the intent of this section to
         ensure each employee his rightful classification seniority accrual and
         position on the Company seniority roster.

G.       An employee covered by this Agreement shall lose his seniority status
         and his name shall be removed from the seniority lists under the
         following conditions:

         1.       He quits, resigns, or retires.

         2.       He is discharged for cause (after grievance procedure is
                  exhausted).

         3.       He does not return to duty from furlough within the time
                  limits.

         4.       Or as otherwise provided in this Agreement.


                                    Page 27


                                   ARTICLE 11
                                    PROBATION

A.       An employee shall be on probation during the first ninety (90) days
         after the date of placement on the Company payroll.

B.       The provisions of Article 15.E. shall not be available to probationary
         employees, and no grievance related to discipline or discharge may be
         filed by them or on their behalf. However, a probationary employee may
         file non-disciplinary grievances in accordance with Articles 15.A.-F.

C.       The Company has no responsibility to re-employ any employee separated
         during his probationary period.

D.       If an employee's service is broken during his probationary period as a
         result of an involuntary action (i.e., reduction in force) and the
         employee is recalled within a period of twenty-four (24) months, the
         employee's seniority date will be adjusted to reflect credit for all
         past service. An employee will not accrue benefits such as sick or
         occupational injury leave, or vacation, or holidays, etc., during any
         period of separation.

E.       The Company may terminate any employee during their probationary period
         with or without cause at the Company's sole discretion. The Company
         shall not be required to inform the employee or the Union of the reason
         for the probationary employee's termination.




                                    Page 28


                                   ARTICLE 12
                              FILLING OF VACANCIES

A.       Permanent Vacancies

         1.       A permanent vacancy is one where the Company determines there
                  is an open position in a covered function with an expected
                  duration of at least one hundred twenty (120) calendar days or
                  more, and where the total complement of covered employees does
                  not change, and where a shifting of employees from one covered
                  duty assignment to another, or from one position to another
                  position is required, or as per paragraph 12.A.5.e., below.
                  There is no vacancy deemed to exist for system bidding
                  purposes when any of the above events occur.

         2.       When the Company fills a vacancy at any covered station, it
                  will be filled by the Vice President-Customer Service, or his
                  designee, from the results of a system bid. The senior
                  employee qualified to fill the vacancy with a bid on file will
                  be awarded the job.

         3.       Bids for a change of location or from part-time to full-time
                  shall be submitted in writing to the Vice President-Customer
                  Service, or his designee, with copies to the Manager of the
                  location desired and a copy to the Steward. Bids shall be
                  acknowledged by the Vice President-Customer Service, or his
                  designee.

         4.       Each station shall have at least one Lead Agent or a
                  Supervisor. At stations with more than twenty (20) covered
                  employees, a ratio of one (1) Lead Agent for each fifteen (15)
                  covered employees regularly assigned to that station shall be
                  maintained. Lead agents shall be chosen from among those
                  full-time employees expressing a desire for the position and
                  shall be awarded to the most senior qualified employee at the
                  location as determined by the Company.

         5.       Miscellaneous

                  a.       All vacancies will be posted in US Airways SABRE
                           reservations system. Bids must be received by the
                           Vice-President of Customer Service, or his designee,
                           prior to the bid closing date as posted in the US
                           Airways SABRE reservations system.

                  b.       An employee may withdraw any bid he has filed by
                           submitting to the Vice-President of Customer Service,
                           or his designee, and the Union a written withdrawal
                           forty-eight (48) hours prior to the bid closing date.

                  c.       An employee whose bid is awarded and who accepts the
                           bid will not be eligible to bid another
                           vacancy/position for six (6) months, except employees
                           will not be precluded from accepting promotions into
                           the higher classification of Lead Agent.

                  d.       An employee whose bid is awarded shall be notified
                           promptly. All bid awards will be posted in US Airways
                           SABRE reservations system. The employee shall be
                           available immediately after such notification except
                           where such award requires a transfer to another
                           covered station, in which case the employee may
                           request his


                                    Page 29



                           supervisor to exchange his regular days off to those
                           consistent with his reporting date at the new
                           station. Employees will be granted up to ten (10)
                           days without pay to effect their move to the new
                           station.

                  e.       Prior to considering any bid for a vacancy, all
                           furloughed, covered employees at the location where
                           the vacancy exists shall be recalled, then any
                           furloughed covered employees at other locations will
                           be given an opportunity to fill the opening, before
                           hiring a new employee to fill the vacancy.

                  f.       Probationary employees are ineligible to bid under
                           this Article, except those probationary employees can
                           have a request on file and will receive consideration
                           before new hires.

B.       Temporary Vacancies

         1.       A temporary vacancy is where the Company determines there is
                  an open position in a covered function at a covered station
                  with an expected duration of one hundred and twenty (120)
                  calendar days or less to cover personal leaves of absence,
                  maternity leaves, military leaves, etc.

         2.       Temporary vacancies may be extended to a maximum of one
                  hundred eighty (180) calendar days (the original one hundred
                  twenty (120) and up to an additional sixty (60), if necessary)
                  where the specific leave requirements necessitate.

         3.       Temporary vacancies will be filled by giving an option to
                  furloughed covered employees at the location where the vacancy
                  exists in order of seniority to fill the vacancy, then to
                  furloughed, covered employees at any covered location.

         4.       If there are no employees on furlough, then the temporary
                  position will be filled as followed:

                  a.       When temporary full-time positions become available,
                           they will be offered to the most senior part-time
                           agent with a request on file.

                  b.       Any subsequent temporary full-time position that
                           becomes available at a covered location will be
                           offered to the most senior part-time agent with a bid
                           on file, whether he is presently working as a
                           part-time agent or is in another temporary full-time
                           position at that location.

                  c.       If it is necessary to eliminate a temporary full-time
                           position, the junior part-time agent covering a
                           temporary full-time position will be reduced to his
                           former part-time status.

                  d.       If there is no qualified covered part-time employee
                           willing to accept the available temporary full-time
                           position, the Company may assign the most junior
                           covered employee at the location or hire a new
                           employee.



                                    Page 30


         5.       Temporary full-time employees will accrue seniority at the
                  regular full-time rate.

         6.       An employee who is awarded a temporary vacancy shall receive
                  lodging and a meal allowance in accordance with Article
                  14.A.3.



                                    Page 31


                                   ARTICLE 13
                               REDUCTION IN FORCE

A.       A reduction in force shall be in the reverse order of classification
         seniority at the location. An employee who has completed his
         probationary period and who is notified he is affected by the reduction
         in force, at his option, may make one of the following choices:

         1.       Exercise his seniority to accept a transfer to a vacancy at
                  any covered station.

         2.       Exercise his seniority to "bump" the least senior employee on
                  the system.

         3.       Accept furlough at his domicile.

B.       Furloughed employees will be offered re-employment in the order of
         their classification seniority at their domicile. Vacancies shall not
         exist at a location until all employees eligible to fill the vacancy at
         the location (those on furlough or those transferred due to exercising
         the above option) have been recalled and offered employment and then as
         per Article 12.A.5.e. An employee who transferred to another station
         from his original station or was furloughed shall retain the rights to
         recall to his previous station for a period of eighteen (18) months.

C.       Expiration of Recall Rights

         1.       An employee furloughed due to a reduction in force shall
                  continue to accrue Company seniority and Classification
                  seniority, but not benefits, for the greater of five (5) years
                  from the date of furlough or a period equal to their
                  classification seniority accrued up to the time of furlough.

         2.       If the employee is not recalled within the time specified in
                  Article 13.C.1., above, employment and seniority rights will
                  expire.

D.       An employee who has been released due to a reduction in force shall
         file his address in writing with the Director of Human Resources and
         shall, thereafter, promptly advise the Director of Human Resources, in
         writing, of any change in his address. The Company will send notice to
         the address of record via U. S. Postal Service, certified-return
         receipt requested. If the furloughed employee does not contact the
         Company within fourteen (14) days from the date of receipt of notice of
         recall, his name will be dropped from the seniority lists.

E.       An employee is entitled to preference in re-employment only if he
         conforms to the following conditions:

         1.       Comply with the provisions in Article 13.D., above.

         2.       Give written notice via personal service, telegram, or
                  certified mail, return receipt requested, of his intention to
                  return to the service of the Company within seven (7) calendar
                  days of receipt of such written certified notice from the
                  Company to return.


                                    Page 32



         3.       Return on the specified date, which date shall not be less
                  than twenty (20) calendar days after notice to return is sent
                  by Certified Mail or telegram to the last address filed with
                  the Director of Human Resources.

         4.       If a furloughed employee does not return on the specified
                  return date, he will be removed from the seniority lists,
                  unless, by mutual agreement extenuating or mitigating
                  circumstances existed to extend the return date.

F.       Notice of Reduction in Force

         1.       The Company will give the employee two (2) weeks notice in
                  writing in the event of a reduction in force, or pay in lieu
                  thereof. However, such notice requirements shall be waived in
                  cases of an Act of God, strike involving a group of organized
                  employees on the carrier, or circumstances beyond the control
                  of the Company.

         2.       The Company will comply with the WARN Act where applicable.



                                    Page 33


                                   ARTICLE 14
                                    EXPENSES

A.       Expense Allowance

         The Company will pay certain reasonable expenses associated with the
following:

         1.       New Employee Training

                  New employees may be required to undergo formal training. A
                  new employee will be placed on the payroll from the first day
                  of training. If this training is conducted in a city other
                  than where the employee will be based, the Company will
                  arrange and pay for lodging at designated hotels and provide a
                  meal allowance. No expenses will be paid by the Company if the
                  training is conducted in the city where the employee will be
                  based.

         2.       Follow-up or Recurrent Training

                  Employees required to undergo training in a city other than
                  where they are based will be provided with lodging and a meal
                  allowance in accordance with paragraph B.1., below.

         3.       Temporary Assignment away from Base City

                  The Company will arrange and pay for reasonable expenses for
                  employees who are temporarily assigned to a city away from
                  their base. This may include lodging, meal allowance, and,
                  local transportation, depending on circumstances.

         4.       Company Business Travel

                  The Company will pay employees a meal allowance and
                  travel-related expenses when they are required to travel for
                  Company business. These expenses may include lodging,
                  business-related phone calls, and local transportation.

B.       Any allowed expenses will conform to the following guidelines.

         1.       Meal allowances - An employee will be paid a per diem up to
                  the current limits set by the Accounting Department which
                  currently are $5.00 for breakfast, $6.00 for lunch, and $11.00
                  for dinner, until the limits are changed by the Accounting
                  Department.

         2.       Lodging - The Company designates which hotels must be used in
                  each city.

         3.       Rental Cars - The Company shall determine when a rental car is
                  to be used and what company the car shall be rented from.

         4.       Use of Personal Vehicle - Approval must be obtained from the
                  Vice President of Customer Service, or his designee, and
                  reimbursement will be at the current rate set by the
                  Accounting Department. Currently, the rate is $.31 per mile,
                  until the rate is changed by the Accounting Department.


                                    Page 34



         5.       Telephone Calls - Business-related telephone calls to an
                  employee's supervisor, operations, headquarters, etc., should
                  be made collect only if a Dialnet line is not available.

         6.       An employee will be reimbursed for the cost of one (1) long
                  distance telephone call home per day. This allowance, set by
                  the Accounting Department, is currently three dollars ($3.00)
                  per day.

C.       Reimbursement for approved expenses is accomplished by use of the
         Chautauqua Airlines "Expense Report" forms with all required receipts
         attached. Expense advances can be obtained through the Accounting
         Office by completing an "Accommodation Request Form." Reconciliation of
         expense advances is accomplished by use of the "Expense Report" form.

D.       "Accommodation Request" and "Expense Report" forms must be approved by
         a Manager prior to being submitted to the Accounting Office. Expense
         reports and reconciliation of expense advances must be submitted to the
         department manager within seven (7) working days after the last expense
         incurred or the advance received may be considered a loan and may be
         deducted from the next pay check. A waiver by the Company of the seven
         (7) day requirement will not prejudice the Company's right to require
         compliance with a seven (7) day limit.



                                    Page 35


                                   ARTICLE 15
                              GRIEVANCE PROCEDURES

A.       Grievance

         A grievance is a claim or dispute by a covered employee or the Union
         concerning the interpretation, application, or the alleged breach of
         this Agreement. Any covered employee or group of covered employees who
         has a grievance concerning any action of the Company affecting them
         shall have such grievance considered and handled in accordance with the
         following procedures. It is the intent of the parties to resolve
         grievances or potential grievances informally and at the lowest level
         possible. There shall be an earnest effort on the part of the parties
         to settle grievances promptly and in accordance with the procedures
         outlined herein.

B.       Step One - Informal Discussion With a Supervisor

         1.       An employee or Union representative who believes that his
                  rights under this Agreement have been violated should first
                  bring the matter to the attention of the employee's immediate
                  supervisor.

         2.       The immediate supervisor, or his designee, must reply to the
                  employee within five (5) business days.

         3.       Disciplinary grievances shall be initiated at Step Two, below.

C.       Step Two - Written Grievance

         1.       After receipt of an unsatisfactory response, or lapse of the
                  five (5) business days in Step One, the employee or the Union
                  shall reduce the grievance to writing and submit it to the
                  Vice President-Customer Service, or his designee, within
                  thirty (30) days of the event giving rise to the grievance, or
                  when the grievant should have reasonably known of the event.

         2.       The written grievance shall set forth, with reasonable detail,
                  a statement of the facts giving rise to the grievance, the
                  provision of the Agreement alleged to have been breached and
                  the relief sought. The Vice President-Customer Service, or his
                  designee, shall hold a hearing within fifteen (15) business
                  days of receipt of the written grievance by the Company. The
                  grievant shall, if requested by the Company or the Union,
                  attend such hearing.

         3.       The Vice President-Customer Service, or his designee, shall,
                  within ten (10) business days of said hearing, provide the
                  Union Business Representative, or his designee, with a written
                  statement of his decision.

D.       Step Three

         If the Union is not satisfied with the disposition of the grievance in
         the Step Two proceeding above, it may appeal the case to the System
         Board of Adjustment by submitting a written


                                    Page 36



         submission of the case to the System Board, with a copy to the Vice
         President-Customer Service within fifteen (15) business days after
         receiving the Step Two decision.

E.       Discipline or Discharge.

         1.       No employee shall be subject to discipline or discharge
                  without just cause. An employee shall be notified in writing
                  of discharge, disciplinary time off and written reprimand. The
                  Company will send a copy of such notice to the employee and to
                  the Union. An employee so disciplined or discharged may submit
                  a written grievance directly at the Step Two level, above.
                  Such written grievance must be filed within ten (10) business
                  days of the postmark (on the Union's copy) of the written
                  discipline or discharge action by the Company.

         2.       Employees who are a party to incidents involving discipline or
                  discharge shall be retained on the payroll but may be removed
                  from service until a meeting has been held and a decision
                  arrived at in writing by the Company. Teleconferencing may be
                  utilized and the grievant, a Company representative and a
                  Union representative and others as desired may be present.
                  Following the Company decision, the grievant may be suspended
                  from the payroll, discharged or given other disciplinary
                  actions.

         3.       The provisions of Article 15.D. shall not be available to
                  probationary employees and no grievance related to discipline
                  or discharge may be filed by them or on their behalf. However,
                  a probationary employee may file non-disciplinary grievances
                  in accordance with Articles 15.A-D.

F.       General

         1.       Time limits contained in this Article may be extended by
                  mutual agreement of the parties, reduced to writing.

         2.       Failure on the part of the Company, the grievant or the Union
                  to adhere to the time limits set forth herein, or as mutually
                  agreed to, shall constitute a waiver of the position of the
                  party failing to comply.

         3.       If a grievant is exonerated, her personnel file shall, to the
                  extent permitted by law, be cleared of all reference to the
                  incident. A grievant who is cleared of all charges shall be
                  made whole as pertains to wages, seniority, longevity and
                  benefits.

         4.       Grievances, decisions, and appeals shall be forwarded by
                  personal delivery or through the U.S. Mail, certified, postage
                  prepaid, return receipt requested, addressed to the last known
                  address of the grievant, with a copy to the Union. Refusal to
                  accept delivery constitutes delivery.

         5.       An employee shall have the right of Union representation at
                  all meetings with the Company. An employee shall be advised in
                  advance of the nature of the subject of any investigation,
                  hearing or conference that would not be compromised and/or
                  made ineffective if advance notice was given to the employee
                  and/or the Union.


                                    Page 37



         6.       The Union, or its representative, and the grievant shall have
                  access to the grievant's personnel file for review in any
                  discipline or discharge case. The Company shall cooperate in
                  making any reasonably requested material available that is
                  relevant to the case.

         7.       When it is mutually agreed that a stenographic report is to be
                  taken of the hearing, in whole or in part, the cost will be
                  borne equally by both parties to the dispute. If it is not
                  mutually agreed that a stenographic report be taken, any
                  stenographic report taken of such hearing made by either of
                  the parties shall be furnished to the other party, upon
                  request, provided that the cost of such stenographic report so
                  requested shall be borne equally by both parties.



                                    Page 38


                                   ARTICLE 16
                           SYSTEM BOARD OF ADJUSTMENT

A.       In compliance with Section 204, Title II, of the Railway Labor Act, as
         amended, there is hereby established a System Board of Adjustment for
         the purpose of adjusting and deciding disputes that may arise under the
         terms of this Agreement and any amendment or additions thereto and that
         are properly submitted to it, which Board shall be known as the
         Chautauqua Employees System Board of Adjustment, hereinafter referred
         to as "the Board."

B.       Composition of the Board

         1.       The Board shall consist of four (4) members, two (2) of whom
                  shall be selected and appointed by the Company and two (2) of
                  whom shall be selected and appointed by the Union, and such
                  appointees shall be known as the "Board Members." In addition,
                  the Company and the Union shall each designate an alternate,
                  and in the event of unavailability of a Board Member, such
                  alternate shall serve in place of the absent Board Member.

         2.       The two (2) Board Members appointed by the Company and the two
                  (2) Board Members appointed by the Union, and their
                  alternates, shall serve for one (1) year from the date of
                  their appointment and thereafter until their successors have
                  been duly appointed. Vacancies shall be filled within thirty
                  (30) days in the same manner as is provided herein for the
                  selection and appointment of the original Board Members and
                  the original alternates.

         3.       The terms of the office of Chairman and Vice Chairman shall be
                  for one (1) calendar year. Thereafter, from year to year, the
                  Board shall designate one (1) member to act as Chairman and
                  one (1) member to act as Vice Chairman for one (1) year terms.
                  Such term of office shall commence on January 1st of each
                  year.

         4.       The office of Chairman shall be filled alternately by the
                  parties. A Union representative shall serve as Chairman and a
                  Company representative shall serve as Vice Chairman in even
                  years, and vice versa, in odd years.

         5.       The Board shall meet once every three (3) months at Company
                  headquarters, (unless a different place for the meeting is
                  jointly agreed upon by the Board), during the months of
                  January, April, July, and October of each year provided that
                  at such time there are cases filed with the Board for
                  consideration. The meetings shall continue in session until
                  all matters before it have been considered unless otherwise
                  mutually agreed upon in writing.

         6.       Meetings shall be scheduled so that Members of the Board who
                  are employees of the Company shall suffer no loss of pay while
                  attending Board meetings. Each party shall bear the cost of
                  compensation and expenses of its Board Members

C.       Jurisdiction of the Board

         1.       The Board shall have jurisdiction over all disputes growing
                  out of


                                    Page 39




                  grievances or out of interpretation or application of any
                  terms of this Agreement or amendments thereto submitted by the
                  Union to the Vice President-Customer Service, or his designee.
                  The jurisdiction of the Board shall not extend to proposed
                  changes in hours of employment, rates of compensation, or
                  working conditions covered by this or other existing
                  agreements between the parties hereto.

         2.       The Board shall consider any dispute properly submitted to it
                  when such dispute has not been previously settled in
                  accordance with the provisions of Article 15.

D.       Proceeding before the Board

         1.       All disputes properly referred to the Board for consideration
                  shall be addressed to the Chairman. Five (5) copies of each
                  petition, including all papers and exhibits in connection
                  therewith, shall be forwarded to the Chairman, who shall
                  transmit one (1) copy thereof to each member of the Board
                  within three (3) calendar days of his receipt of same. Each
                  case submitted shall show:

                  a.       Question or questions at issue
                  b.       Statement of facts
                  c.       Position of the grievant(s)
                  d.       Position of the Company

         2.       Upon receipt of notice of the submission of a dispute, the
                  Chairman shall set a date for the hearing, which shall be the
                  time of the next regular meeting of the Board as provided in
                  Section B., above, or if at least two (2) Board Members
                  consider the matter to be of sufficient urgency and
                  importance, then at such earlier date and at such place as the
                  Chairman and Vice Chairman shall agree upon but not more then
                  thirty (30) days after such request for a meeting is made by
                  at least two (2) of said Board Members; the Chairman shall
                  give the necessary notices in writing of such meeting to the
                  Board Members and to the parties to the dispute.

         3.       Employees covered by this Agreement may be represented at
                  Board hearings by such person or persons as they may choose
                  and designate, and the Company may be represented by such
                  person or persons as it may choose to designate. Evidence may
                  be presented either orally, or in writing, or both.

         4.       The Board Member(s) may summon witnesses who are employed by
                  the Company and who are deemed necessary by the Board. Such
                  employees shall be scheduled so as to suffer no loss of pay.

         5.       The Board shall be competent to hear the disputes properly
                  submitted to it and decide said disputes by a majority vote of
                  all members of the Board. Decisions of the Board shall be
                  final and binding upon the parties hereto. The Board may, at
                  its option, agree to have an arbitrator hear the case without
                  the Board present.



                                    Page 40


E.       Deadlock Procedures

         When a dispute is properly submitted to the Board for hearings before
         the two (2) Company and the two (2) Union Board Members, or their
         alternates, and the Board is unable by majority vote to decide the
         dispute, the Board shall declare itself deadlocked and the parties
         shall select an arbitrator as provided herein. The arbitrator shall
         join the Board as a Board Member and as Chairman in subsequent
         consideration and hearing of the dispute. The Board, so composed, shall
         be competent to decide said dispute by majority vote. Decisions of the
         Board so composed shall be final and binding on the parties. The Board
         may agree to have the arbitrator hear the case without the Board
         present.

F.       Deadlock Notices

         When a deadlock occurs for any reason, the Board, by written notice
         shall immediately notify the Union and Company of such deadlock,
         including the date thereof, and the need for the services of a fifth
         (5th) member of the Board. If the Union or Company desires to submit
         the case to such five (5) member Board, it must do so by written notice
         to the Company president with copies to the Chairman and Vice Chairman
         of the Board within ten (10) calendar days from the receipt of notice
         from the Board that the Board was deadlocked.

G.       Selection of a Fifth (5th) Board Member (Arbitrator)

         1.       If notice is provided of the desire to convene the five (5)
                  member Board, the Union and the Company shall meet promptly,
                  but in no event later than five (5) calendar days from the
                  date of such notice by the Union or Company, to select an
                  arbitrator by mutual agreement, and if agreement is reached,
                  shall advise the members of the Board of the name, address,
                  and the availability of the arbitrator.

         2.       Within ten (10) calendar days after proper notification, if no
                  agreement on the selection of an arbitrator can be reached,
                  the Company and the Union shall agree upon the selection of an
                  arbitrator from the list below. If the parties are unable to
                  agree upon an arbitrator from the list below, the parties will
                  select an arbitrator from the list below using an alternate
                  strike method. In even years, the union will strike first; in
                  odd years, the Company will strike first. If it becomes
                  necessary to replace an arbitrator on the list below, the
                  parties shall mutually agree upon such replacement before
                  selecting any arbitrator from the list. Such replacements
                  shall be members of the National Academy of Arbitrators and
                  shall have airline case experience. Once each year, the Union
                  and the Company will each have the option to remove one
                  arbitrator from the list below. Such arbitrator shall be
                  replaced in accordance with the provisions of this paragraph
                  for replacing arbitrators.

                             Richard I. Bloch
                             Herbert Fishgold
                             Robert O. Harris
                             Peter R. Meyers
                             George Nicolau
                             Anthony Sinicropi
                             William L. Schecter


                                    Page 41


                             Barbara Zausner-Tener
                             Nicolas H. Zumas

H.       Five (5) Member Board Hearing

         Within thirty (30) calendar days after the selection of the fifth (5th)
         member from the panel, and with the arbitrator's concurrence, the Board
         shall schedule a hearing of the dispute by the five (5) member Board,
         including the presentation of such witnesses and evidence as the five
         (5) member Board shall in its discretion permit. A decision of a
         majority of the Board sitting with the fifth (5th) member shall be
         final and binding upon the parties thereto. The Board may agree to have
         the arbitrator hear the case without the Board present.

I.       General

         1.       Expenses of the Board

                  Each of the parties hereto will assume the travel expenses and
                  other expenses of the Board Members selected by it, and each
                  of the parties hereto will assume the travel expense and other
                  expenses of the witnesses called or summoned by it except that
                  employees of the Company will be scheduled so not to suffer
                  loss of pay and that the Company will provide space available
                  transportation over its lines, in accordance with existing
                  regulations, for any Board Member or Company employee who is
                  called or summoned as a witness. The reasonable expense and
                  compensation of the fifth (5th) member arbitrator appointed in
                  accordance with Section G hereof will be borne equally by the
                  parties hereto. The Chairman and the Vice Chairman, acting
                  jointly, shall have the authority to incur other expenses as
                  in their judgment may be deemed necessary for the proper
                  conduct of the Board, and such expenses shall be borne equally
                  by the parties hereto.

         2.       Freedom to Act

                  Each Board Member shall be free to discharge his duty in an
                  independent and un-coerced manner, without fear that his
                  individual relations with the Company, with the employees, or
                  with the Union will be affected in any manner by any action
                  taken by him in good faith in his capacity as a Board Member.

         3.       Time Limits

                  Time limits as set forth in this Article may be extended in
                  writing by mutual agreement of the Company and the Union.

         4.       Rights Under Railway Labor Act

                  Nothing herein shall be construed to limit, restrict, or
                  abridge the rights or privileges accorded either to the
                  employees, the Company, the Union or their duly accredited
                  representatives under the provisions of the Railway Labor Act,
                  as amended.


                                    Page 42



         5.       Records of the Board

                  The Board shall maintain a record of all matters submitted to
                  it for its consideration and of all findings and decisions
                  made by it.

         6.       When it is mutually agreed that a stenographic report is to be
                  taken of the hearing, in whole or in part, the cost will be
                  borne equally by both parties to the dispute. If it is not
                  mutually agreed that a stenographic report be taken, any
                  stenographic report taken of such hearing made by either of
                  the parties shall be furnished to the other party, upon
                  request, provided that the cost of such stenographic report so
                  requested shall be borne equally by both parties.



                                    Page 43


                                   ARTICLE 17
                              PHYSICAL EXAMINATIONS

A.       An employee shall be required to submit to a Company paid
         physical/mental examination at the time of employment and at any other
         time the Company shall determine in its sole discretion that an
         employee's physical or mental condition may or has impaired the
         performance of his duties or poses a safety hazard to himself, other
         employees, or customers. The employee, can request, and will be
         furnished with, a copy of his medical examiner's report from the
         Company's medical examiner. These examinations are limited to no more
         than two (2) examinations per calendar year.

B.       Any information obtained by or as a result of a Company's
         physical/mental examination of an employee shall be strictly
         confidential between the Company, its insurance carriers, the FAA, the
         Company doctor, and the employee, and shall not be divulged to any
         other person without the written permission of the employee.

C.       Any employee who is dismissed or has his pay scale lowered based on his
         failure to pass a Company physical/mental examination shall have
         fourteen (14) days in which to appeal for lost wages, and shall at his
         option, have his case reviewed in the following manner.

         1.       The employee may employ a qualified medical examiner of his
                  own choosing and at his own expense for the purpose of
                  conducting a physical/mental examination covering the
                  disqualifying problem(s) and/or conditions covered by the
                  Company medical examiner's report that found the employee
                  unfit for duty.

         2.       A copy of the findings of the medical examiner chosen by the
                  employee shall be furnished to the Company; and if such
                  findings corroborate the findings of the medical examiner
                  employed by the Company, no further review of the case shall
                  be afforded.

         3.       If the findings of the medical examiner chosen by the employee
                  disagree with the findings of the medical examiner employed by
                  the Company, the Company and the employee will, at the written
                  request of the employee, ask that the two (2) medical
                  examiners agree upon and appoint a third qualified and
                  disinterested medical examiner, preferably a specialist, for
                  the purpose of making a further review of the report and/or an
                  examination of the employee to determine his fitness for duty.

         4.       The said disinterested medical examiner shall then make a
                  further examination of the employee in question, and the case
                  shall be decided on the basis of the third medical examiner's
                  findings. If the disinterested medical examiner's report finds
                  the employee fit for duty, all lost wages will be paid,
                  retroactive to the date the employee was removed from payroll.
                  Copies of such medical examiner's report shall be furnished to
                  the Company and the employee.

         5.       The expense of employing a disinterested medical examiner
                  shall be borne equally by the Company and the employee.



                                    Page 44


D.       Drug and alcohol screening will not be considered a physical/mental
         examination under this Article. Employees must submit to Drug and
         Alcohol testing to conform with the DOT/FAA and the Company's present
         or future policies.



                                    Page 45


                                   ARTICLE 18
                               ORDERS TO EMPLOYEES

A.       All orders to employees involving a change in stations, promotions,
         demotions, furloughs, leaves of absence, etc, shall be delivered to the
         employee in writing by personal service on and receipt by the employee,
         or by certified mail, return receipt requested, to the employee's last
         address on file.


                                    Page 46


                                   ARTICLE 19
                                    TRAINING

A.       No employee shall be required to pay for the use of any Company
         equipment or equipment outside of the Company that is provided as part
         of a Company training requirement. Any training required of an employee
         for maintenance or improvements in proficiency standards shall be borne
         by the Company. No employee shall be required to pay a fine or be
         responsible for the repair or replacement of any part of equipment
         damaged except for willful damage or destruction to the equipment.

B.       Training time shall be considered as time worked, and the applicable
         rate shall be paid.

C.       Travel time in connection with training shall be considered as time
         worked.


                                    Page 47

\
                                   ARTICLE 20
                                 MOVING EXPENSES

A.       Employees who have completed their probationary period and who are
         transferred as a result of the closing of an existing station will be
         considered as being transferred at the Company's request.

B.       An employee transferred from one station to another station as a result
         of a voluntary bid or request to fill a vacancy shall be considered as
         having transferred at his own request. Employees having transferred
         from one station to another station at their own request shall bear the
         expense of their move.

C.       Moving expenses incurred when moving at the Company's request are paid
         by the Company and are limited to the following expenses:

         1.       The Company has the right to request the employee to obtain
                  estimates for moving himself, and an estimate using
                  professional movers. The Company may choose the lower
                  estimate. When the employee moves himself, the Company will
                  pay for all shipping, containers, insurance for the move, and
                  one hundred dollars ($100.00) (to offset the cost of moving
                  helpers).

         2.       The Company will pay for the hook-up of all utilities
                  (excluding deposits) including, but not limited to: gas,
                  electric utilities, telephone and cable television, that
                  result from a move to a new domicile, provided it does not
                  involve alterations or materials.

         3.       When personal automobile transportation is used by the
                  employee and his immediate family, the Company will reimburse
                  the employee at the prevailing Company rate per mile. Single
                  employees shall have one (1) automobile covered, married
                  employees up to two (2) vehicles, using the most direct AAA
                  mileage between domiciles.

         4.       The Company will reimburse an employee for meals and lodging
                  for the employee and his immediate family, for the time
                  required to travel to the station up to five (5) days. A day
                  of travel shall be considered a minimum of three hundred fifty
                  (350) miles by the most direct AAA mileage. The daily
                  allowance for meals will be twenty-two dollars ($22.00) per
                  day for single employees and forty-four dollars ($44.00) per
                  day for married employees traveling with their spouse.

         5.       If a lease is broken as a result of moving to a new domicile
                  and a penalty is incurred, the Company will pay the penalty
                  not to exceed one month's rent. The Company will cooperate
                  with the employee to provide substantiating documentation of
                  the transfer for the lessor.

         6.       The Company will pay up to two hundred dollars ($200.00) for
                  termination and hook-up of utilities (excluding deposits)
                  including gas, electric utilities, telephone and cable
                  television, that result from a move to a new domicile.


                                    Page 48



D.       When the Company is required to pay moving expenses, nothing in this
         Article is intended to prevent the Company and the employee from
         agreeing to an amount to be paid to the employee in lieu of the
         expenses set forth in paragraph C., above.

E.       The Company's liability for moving expenses under this Article will not
         exceed five thousand dollars ($5,000).


                                    Page 49


                                   ARTICLE 21
                                 UNION SECURITY

A.       Union Membership

         It shall be a condition of employment that all employees covered by
         this Agreement shall, on the effective date of this Agreement, become
         and remain members in good standing of the Union. It shall be a
         condition of employment that all employees covered by this Agreement
         and hired on or after its effective date shall, on or before the
         ninetieth (90th) day following the beginning of the initial seniority
         date, become and remain members in good standing in the Union.

B.       Initiation Fees and Dues Deductions

         The Company will deduct from the wages of any employees covered by this
         Agreement said employees' dues as a member of the Union upon receiving
         the employee's voluntary and individual written authorization for the
         Company to make such deductions, signed by the employee. Such
         authorization form will be provided by the Union. The Company will pay
         over to the proper officers of the Union the wages withheld for such
         initiation fees and/or dues. The amount so withheld shall be deducted
         from the appropriate paycheck, reported and paid to the Union monthly.
         The following information will be reported and transmitted with the
         monthly check off: the employee's Social Security number, full name,
         dues rate, rate of pay and status of employment.

C.       Indemnification Clause

         The Union shall indemnify the Company and hold the Company harmless
         from any and all claims that may be made by an employee against the
         Company by virtue of the wrongful application or misapplication of any
         of the terms of this Article.

D.       Dues Collection after Termination

         In the event of termination of employment, there shall be no obligation
         upon the Company to collect dues until all other deductions have been
         made.

E.       Failure to Pay Dues

         The Union agrees that written notice shall be given to the Company at
         least thirty (30) days before the Company is required to remove an
         employee from his employment by reason of his failure to maintain his
         membership in good standing in the Union in accordance with Article A.,
         above.

F.       Employee List

         1.       When applicable, the Company will advise the Union of the
                  names of any new hires, terminations, layoffs or recall of any
                  employees covered by this Agreement. Such

                                    Page 50



                  information will include the name, hire date, layoff date,
                  termination date or recall date of such employees.

         2.       The Company will mail to the Union and a designee a report,
                  containing the current address, telephone number and pay rate
                  of each employee quarterly or when there are substantial
                  changes.

G.       Individual Dues Payment

         It shall be the responsibility of any employee who is not on a dues
         deduction program to keep his membership current by direct payments of
         monthly dues to the Union.

H.       Dues Deduction Error

         Should a deduction be missed, or in the event an insufficient amount is
         deducted, the Company will be responsible to make the proper adjustment
         the following month.

I.       Hospitality Committee

         The Company shall set aside a mutually agreeable period of time during
         or immediately after each new hire class during which the Union
         Hospitality Committee may meet with each new hire class. The Company
         and the Union will mutually agree upon those committee representatives
         who will present Hospitality Committee materials during the new hire
         class.



                                    Page 51


                                   ARTICLE 22
                                  SEVERANCE PAY

In the event of a reduction in force or when the Company decides to close a
station, full-time employees at that station with at least one (1) year of
service as a full-time employee, who are ineligible or decide not to transfer to
another station will receive eighty (80) hours of severance pay, (at the
employee's current hourly rate). Part-time employees with at least one (1) year
of service will receive forty (40) hours of severance pay. In addition to the
eighty (80), or forty (40) hours respectively, they shall receive additional
hours according to schedule `A' below.

A.       Years of Service          Number of Hours for Each Year of Service
         ----------------          ----------------------------------------

         For Years 1-10                     Eight (8) Hours

         For Years 11-15                    Sixteen (16) Hours

         For Years 15 +                     Twenty Four (24) Hours



                                    Page 52


                                   ARTICLE 23
                               HEALTH AND WELFARE

A.       The Company shall provide each full-time employee with a life insurance
         policy after ninety (90) days of service. The Company shall pay one
         hundred percent (100%) of the premium for this coverage.

         1.       Life Insurance coverage is two (2) times the basic annual
                  earnings, rounded to the next higher $1000, to a maximum of
                  $250,000.

         2.       Accidental Death and Dismemberment coverage is two (2) times
                  the basic annual earnings, rounded to the next higher $1000,
                  to a maximum of $250,000.

         3.       Dependent Life Benefits;

                  a. Spouse                                      $5,000

                  b. Children          0-8 days                  $0
                                       8 days-6 months           $100
                                       6 months-19 years         $2,500

B.       The Company will provide Health Insurance for all full-time employees
         and qualifying dependents after thirty (30) days of service, the
         benefits of which shall not be less advantageous than the existing
         program coverage and benefits. For employees with under one (1) year of
         service, the Company shall pay the premium cost less $13.80 per pay
         period to be paid by the employee. Optional dependent coverage is not
         available during the first year. For employees with over one (1) year
         of service, the Company will pay the premium cost, less $13.80 for
         individual employee coverage, or $23.00 for employee and spouse
         coverage, or $32.20 for employee and family coverage, per pay period
         for said employee and his dependents. The employee will pay his share
         of the premium through payroll deductions. Should the cost of such
         insurance increase, the Company may require greater contributions from
         the employees.

C.       The Company will provide the Business Agent and the Union with copies
         of the Master Insurance Contracts for each policy required under the
         terms of this Agreement.

D.       The Company will provide an IRS Section 125 Flexible Benefits Plan to
         all covered employees, the benefits of which plan shall not be less
         advantageous than the existing program .

E.       The Company shall provide a retirement benefit in the form of an IRS
         Section 401k plan to all covered employees, and the benefits shall be
         no less advantageous than the existing program.

F.       The Company shall pay for dental plan coverage for single covered
         employees or sixteen and one-half dollars ($16.50) per month towards
         the cost of family coverage. The plan for covered employees and
         qualified dependants will be no less advantageous than the program
         offered to other employee groups.



                                    Page 53


G.       The Company will include the covered employees in any profit sharing
         plan, bonus and incentive programs offered to all other non-management
         employees.


                                    Page 54


                                   ARTICLE 24
                                SAFETY AND HEALTH

A.       At each station, one (1) representative will be designated by the
         Company and one (1) representative will be designated by the Union to
         discuss, and if a problem or violation exists of a law or rule, to
         correct any practice that causes said violation in any safety or health
         factors that may directly affect the employees or the Company in their
         work areas.

B.       Accordingly, this joint Safety Committee at each station will meet
         periodically at the station to review any pending matters of safety or
         health.

C.       Safety and health items presented by either the Company or the Union
         member at these periodic meetings will be documented in writing, with a
         copy to the Vice President of Safety.

D.       Items not resolved at the station level will be presented to the Vice
         President of Safety for resolution by the Vice President of Customer
         Service and the designee of the Union.

E.       The Company and the Union will work toward a mutual resolution of any
         safety or health factor(s), and therefore, employees must register and
         attempt to resolve any complaints through the respective Safety
         Committee prior to filing a complaint with the local, state, or federal
         regulatory agency.



                                    Page 55


                                   ARTICLE 25
                                     GENERAL

A.       Nothing in this Agreement shall be construed to limit or deny any
         employee of the Company covered by this Agreement any rights or
         privileges to which he may be entitled under the Railway Labor Act, as
         amended.

B.       The Company will provide, free of charge, to each employee one (1) copy
         of this Agreement and any letters of understanding applicable to them,
         supplemental to the Agreement, which shall be printed and bound in a
         convenient-sized booklet.

C.       The Company will provide a glass enclosed, lockable bulletin board at
         each station where covered employees work for the Union to post
         official Union notices. The bulletin board shall be located in a
         convenient, accessible area.

D.       The Company shall furnish an identification card to each employee.
         Employees shall bear the cost of replacement of the identification
         card, if lost.

E.       No employee or his estate shall be required to pay the cost of repair
         or replacement of any aircraft, equipment or property damaged or
         destroyed in the performance of his duties with the Company, unless
         caused by criminal and/or malicious and/or intentional mischief.

F.       Employees covered by this Agreement will be subject to the pass policy
         of USAirways (or such other pass policy as the employees of the Company
         generally may have access) and the Company as afforded to all other
         employees of the Company not covered by this Agreement. The designated
         Union Business Agent will be provided positive space travel on the
         Company system for the purpose of administering this Agreement. The
         Company, at its sole discretion, reserves the right to suspend or
         revoke the pass privileges for any employee who violates the pass
         policy rules.

G.       The Union Representative(s) shall have free access to the Company's
         operations facilities to transact business that is necessary for the
         administration of this Agreement, but at a time that does not interfere
         with the operation of the Company's business. The Company will provide
         the Union Representative with proper ID to enter its facilities, if
         required.

H.       This Agreement, when accepted by the parties hereto and signed by the
         respective representatives duly authorized, shall constitute the sole
         agreement between them involving the employees covered by this
         Agreement.

I.       The Company will provide free parking to all employees covered by this
         Agreement.

J.       A personnel file will be maintained for each employee. Upon request,
         the employee will be given the opportunity to review his file. If an
         employee receives disciplinary action, any portion of this file to be
         relied on by the Company in support of such disciplinary action shall
         be open for review upon request by the Union Representative and the
         employee. The Company cannot use any prior disciplinary notices in
         support of disciplinary action if the employee had not been provided
         with written notice of the prior disciplinary action at the time
         discipline was assessed,




                                    Page 56



         which action was subject to the grievance procedure. All disciplinary
         action will be according to Company policies and procedures.
         Disciplinary letters pertaining to events that are closed and no longer
         pending will be removed twelve (12) months after being issued, provided
         that the employee has not had any intervening discipline events. Such
         letters will be removed after twenty-four (24) months even if there has
         been an intervening disciplinary event.

K.       Employees covered by this Agreement must have a local telephone contact
         and notify the Personnel Department with the telephone number or any
         changes.

L.       The Company will make every reasonable effort to protect employees from
         physical assault, theft, vandalism and the like in connection with
         their employment, within the confines of their work place. The Company
         is not responsible under any circumstances for the loss or theft of any
         money or valuables left on the Company's premises or in lockers by the
         employees.

M.       Two Weeks Notice - If an employee fails to give or fails to work his
         scheduled hours during the fourteen (14) calendar days after their
         notice to the Company of their resignation, they will forfeit accrued
         vacation.

N.       Employees conducting Union business or attending meetings at their
         domicile or at other domiciles shall not be required to clock-out for
         the time spent on such business or meetings, as long as it does not
         interfere with their regular duties, or the operation.

O.       If any provision of this Agreement is declared invalid by any competent
         court or government agency because of existing or future legislation,
         such invalidation shall not affect the remaining provisions of this
         Agreement.

P.       The Company will provide secure lockable lockers for each covered
         employee at each station.



                                    Page 57


                                   ARTICLE 26
                               PART-TIME EMPLOYEES

All provisions of the Agreement shall apply to part-time employees, unless
otherwise noted in other Articles and with the following specific exceptions.

A.       Seniority

         1.       All part-time employees who were hired prior to April 26, 1996
                  will retain their current seniority and begin accruing
                  seniority in accordance with paragraph 26.A.2., below,
                  effective April 26, 1996. A single classification seniority
                  roster will be compiled from the date of hire for the purposes
                  of determining classification seniority for part-time
                  employees to be used to fill vacancies, retention in the case
                  of a reduction in force, bidding of shifts, bidding vacation,
                  etc.

         2.       Part-time employees shall accrue longevity and advance their
                  position within the longevity scale in the compensation
                  schedule in Article 3.A. in the amount equal to half of that
                  accrued by full-time employees, except that, employees who
                  work in excess of one thousand six hundred thirty-two (1632)
                  hours in the prior anniversary year will be progressed as if a
                  full-time employee.

B.       Vacation

         Vacation will accrue in accordance with Article 7, and will be based on
         the total number of hours worked in the prior year (i.e. employees who
         work less than one thousand six hundred thirty-two (1632) hours in the
         prior year will accrue vacation at the fifty percent (50%) rate, and
         employees who work one thousand six hundred thirty-two (1632) or more
         hours will accrue vacation at the full-time rate.)

C.       Sick Leave

         Sick leave will accrue in accordance with Article 7 and will be based
         on the total number of hours worked in the prior anniversary year (i.e.
         employees who work less than one thousand six hundred thirty two (1632)
         hours in the prior anniversary year will accrue vacation at the fifty
         percent (50%) rate, and employees who work one thousand six hundred
         thirty-two (1632) or more hours will accrue sick leave at the full-time
         rate.)

D.       Health and Life Insurance

         Part-time employees who work more than one thousand forty (1040) hours
         in an anniversary year shall accrue and be eligible for one half (1/2)
         the premium for Company-paid Life and Health (Medical/Dental) insurance
         of that of a full-time employee. Part-time employees who work in excess
         of one thousand six hundred thirty two (1632) hours in an anniversary
         year will be eligible to receive fully Company-paid Life and Health
         insurance benefits minus co-pay, equal to that of a full-time employee,
         for himself and his dependents. Part-time employees who do not qualify
         for fully paid Company benefits may elect to purchase Life and Health
         (Medical/Dental) Insurance for himself and his dependents at the same
         cost as the Company. If


                                    Page 58



         the employee elects this coverage, the additional cost shall be paid by
         payroll deduction. The percentage amount of premium benefit paid by the
         Company is paid in the year following the anniversary year and shall be
         subject to re-qualification on each succeeding anniversary. If the
         employee is terminated for any reason, the employee shall not be
         entitled to payment of any accrued but unpaid benefits. There will be
         no Health and Life insurance benefits for employees who work less than
         1040 hours in an anniversary year.

E.       The Company will not regularly schedule part-time employees within
         the same work function back to back continuously in a work period. It
         is the purpose of this paragraph that two (2) part-time employees shall
         not be regularly scheduled continuously within the same duty function
         within the same work period.

F.       The Company may use part-time employees to ensure adequate coverage
         or to cover a schedule and to avoid creating the opportunity for
         necessity of having to pay overtime premium.



                                    Page 59


                                   ARTICLE 27
                                    UNIFORMS

A.       An employee shall wear the standard uniform as required in Company
         regulations at all times when on duty.

B.       The uniform or its identifying insignia may not be worn at any
         function, meeting, or event not directly associated with, or sanctioned
         by, the Company unless specifically authorized by the Company.

C.       The employee will be responsible for the total cost of the basic
         uniform.

D.       The Company will provide each employee with one (1) name tag.

E.       The employee shall be permitted to wear the official Union insignia on
         a place visible on the employee's uniform, but not to exceed a one (1)
         inch diameter in size.

F.       Employees will maintain their uniforms so as to present a neat and
         clean appearance at all times while on duty. Each employee will be paid
         a uniform allowance of twenty (20) dollars per month.

G.       Special clothing and equipment will be provided by the Company to each
         station where duty functions require work in inclement weather on a
         regular basis. These include parka, rain gear (head covering, jacket,
         pants, boots), parking wands and ear protectors.

H.       If the Company initiates a complete change in the basic uniform style,
         employees will be provided with a new required uniform, at no expense
         to the employee.

I.       If any of an employee's uniform parts are damaged beyond repair by
         aircraft fluids, cargo, equipment, etc., the Company will pay for
         replacement of such uniform parts. However, if the damage occurs while
         the employee is off duty, or is due to improper care/maintenance or as
         a result of not wearing protective clothing when applicable, the
         employee is responsible to pay for replacement of the uniform part.

J.       Required Basic Uniform - The wearing of uniforms/employees' appearance
         will be as required by Company guidelines. There will be no minimum or
         maximum quantity of required uniform, but all employees must be in the
         required uniform at all times while on duty. An employee who works the
         ramp and also an inside function in the same shift will be able to wear
         the uniform of his choice.


                                    Page 60


                                   ARTICLE 28
                                    DURATION

This Agreement shall become effective on the date of signing hereof and shall
continue in force and effect until December 15, 2005 and shall renew itself
without change thereafter, unless written notice by either party of intended
change is served in accordance with Section 6, Title II, of the Railway Labor
Act, as amended, at least ninety (90) days prior to December 15, 2005 or
December 15 of any year thereafter.

IN WITNESS WHEREOF, the parties hereto have signed this Agreement the 15th day
of December, 1999.

For the International Brotherhood      For Chautauqua Airlines, Inc.
of Teamsters


/s/ Raymond Benning                    /s/ Bryan K. Bedford
- ------------------------------         ------------------------------------
Raymond Benning                        Bryan K. Bedford
Director                               President
International Brotherhood of
Teamsters, Airline Division

/s/ Douglas L. Schmidt                 /s/ Jerome L. Balsano
- ------------------------------         ------------------------------------
Douglas L. Schmidt                     Jerome L. Balsano
Vice President                         Vice President of Customer Service
Local 135

/s/ Barry D. Schimmel                  /s/ Joe S. Dale
- ------------------------------         ------------------------------------
Barry D. Schimmel                      Joe S. Dale
Business Representative                Customer Service Manager
Local 210

/s/ Michael W. Harmes
- ------------------------------
Michael W. Harmes
Steward

/s/ Andre D. B. Fairbanks
- ------------------------------
Andre D. B. Fairbanks
Steward

                                    Page 61

EX-10.13

                                                                   Exhibit 10.13

                                     EMB-145

                      PURCHASE AGREEMENT NUMBER GCT-025/98

                          EMBRAER - EMPRESA BRASILEIRA

                               DE AERONAUTICA S.A.

                                       AND

                                 SOLITAIR CORP.



                                      INDEX

   ARTICLE

01    -  DEFINITIONS
02    -  SUBJECT
03    -  PRICE
04    -  PAYMENT
05    -  DELIVERY
06    -  CERTIFICATION
07    -  ACCEPTANCE AND TRANSFER OF OWNERSHIP
08    -  STORAGE CHARGE
09    -  DELAYS IN DELIVERY
10    -  INSPECTION AND QUALITY CONTROL
11    -  CHANGES
12    -  WARRANTY
13    -  TECHNICAL ASSISTANCE SERVICES
14    -  SPARE PARTS POLICY
15    -  PUBLICATIONS
16    -  ASSIGNMENT
17    -  RESTRICTIONS AND PATENT INDEMNITY
18    -  MARKETING AND PROMOTIONAL RIGHTS
19    -  TAXES
20    -  APPLICABLE LAW
21    -  ARBITRATION
22    -  JURISDICTION
23    -  TERMINATION
24    -  OPTION FOR THE PURCHASE OF ADDITIONAL EMB-145 AIRCRAFT
25    -  INDEMNITY
26    -  NOTICES
27    -  CONFIDENTIALITY
28    -  INTEGRATED AGREEMENT
29    -  NEGOTIATED AGREEMENT
30    -  COUNTERPARTS
31    -  ENTIRE AGREEMENT
32    -  NO WAIVER
33    -  REPRESENTATIONS AND WARRANTIES




                                   ATTACHMENTS

"A" - AIRCRAFT SPECIFIC CONFIGURATION, FINISHING AND REGISTRATION MARKS -
      "APPENDIX 1" - TECHNICAL DESCRIPTION

"B" - FERRY EQUIPMENT, SPARE PARTS POLICY AND LIST OF PUBLICATIONS

"C" - WARRANTY CERTIFICATE - MATERIAL AND WORKMANSHIP

"D" - EMB-145 PRICE ESCALATION FORMULA

"E" - DISPATCH RELIABILITY GUARANTEE

"F" - FORM OF AUTHORIZED REPRESENTATIVE APPOINTMENT

"G" - FORM OF WARRANTY BILL OF SALE

"H" - FORM OF GUARANTEE




                       PURCHASE AGREEMENT N(0) GCT-025/98

THIS AGREEMENT IS ENTERED INTO AS OF THIS ____ DAY OF JUNE, 1998 BY AND BETWEEN
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. AND SOLITAIR CORP., FOR THE
PURCHASE AND SALE OF EMBRAER AIRCRAFT, SERVICES AND RELATED SPARE PARTS.

THIS AGREEMENT SUPERCEDES AND REPLACES (A) PURCHASE AGREEMENT GCT-020/98 DATED
MAY 15, 1998, AND (B) LETTER AGREEMENT GCT-021/98, DATED MAY 15, 1998, AS
AMENDED BY AMENDMENT NUMBER ONE TO LETTER AGREEMENT, DATED MAY 22, 1998, BOTH OF
WHICH HAVE TERMINATED IN ACCORDANCE WITH THE TERMS OF LETTER AGREEMENT
GCT-021/98 WITHOUT LIABILITY TO EITHER PARTY. THE SALE COVERED BY THIS AGREEMENT
SHALL BE GOVERNED SOLELY BY THE TERMS AND CONDITIONS HEREIN SET FORTH, AS WELL
AS BY THE PROVISIONS SET FORTH IN THE ATTACHMENTS HERETO.

THIS AGREEMENT SHALL NOT BE EFFECTIVE UNLESS AND UNTIL IT IS SIGNED BY AN
AUTHORIZED OFFICER OF SOLITAIR CORP. AND EXECUTED BY TWO AUTHORIZED OFFICERS OF
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.

1.    DEFINITIONS

      For the purpose of this Agreement, the following definitions are hereby
      adopted:

      a.    Actual Delivery Date - shall mean, with respect to each Aircraft,
            the date on which Buyer obtains title to that Aircraft in accordance
            with Article 7(c).

      b.    Aircraft - shall mean the EMB-145 LR aircraft or, where there is
            more than one of such Aircraft, each of the EMB-145 LR aircraft,
            manufactured by Embraer, for sale to Buyer pursuant to this
            Agreement (for the avoidance of doubt shall include Firm Aircraft
            and Option Aircraft), according to the Technical Description number
            TD-145 /010, dated January 1998 (Appendix I) and the Aircraft
            Specific Configuration, Finishing and Registration Marks described
            in the Attachment "A" to this Agreement as may be amended from time
            to time by Buyer at its expense as specified in Article 11. The
            Preliminary Technical Description and Aircraft Specific
            Configuration which are contained in Attachment "A" hereto, shall be
            substituted by Buyer's Aircraft Technical Specification no later
            than three (3) months prior to the first Aircraft Contractual
            Delivery Date. The Aircraft is composed entirely of vendor parts and
            parts manufactured by Embraer and Embraer subcontractors,




            and the parts manufactured by Embraer and Embraer subcontractors
            shall have Embraer part numbers.

      c.    Agreement - shall mean this Purchase Agreement No. GCT-025/98, its
            Attachments, and any Letter Agreement between the Parties executed
            on the date hereof.

      d.    Business Day - shall mean days on which the banks in each of New
            York, New York, United States and Sao Paulo, and Sao Jose dos
            Campos, S.P. Brazil are open for the normal transaction of business.

      e.    Basic Price - shall mean the Aircraft total price, effective on the
            date of execution of this Purchase Agreement contained in Article 3
            (a)(1) or, in case of revision thereof, on the date of its revision.

      f.    Buyer - shall mean SOLITAIR CORP., a Delaware corporation with its
            principal place of business at 411 West Putnam Avenue, Greenwich, CT
            06830, United States or its assignee pursuant to Article 16 hereof.

      g.    Contractual Delivery Date - shall mean the delivery dates referred
            to in Article 5 of this Agreement.

      h.    CTA - shall mean the Aerospace Technical Center of the Brazilian
            Ministry of Aeronautics.

      i.    Designated Operator or "DO" - shall have the meaning specified in
            Article 16 hereof.

      j.    Embraer - shall mean EMBRAER - Empresa Brasileira de Aeronautica
            S.A., a Brazilian corporation with its principal place of business
            at Av. Brigadeiro Faria Lima, 2170 - Putim, Sao Jose dos Campos, Sao
            Paulo, Brazil.

      k.    FAA - shall mean the Federal Aviation Administration of the United
            States of America.

      l.    Firm Aircraft - shall have the meaning specified in Article 2.a
            hereof.

      m.    Initial Provision List or "IPL" - shall have the meaning specified
            in Article 2.b hereof.

      n.    Option Aircraft - shall have the meaning specified in Article 2.a
            hereof.

      o.    Parties - shall mean Embraer and Buyer.

      p.    Purchase Price - shall mean the Aircraft total price, effective on
            the relevant Aircraft Contractual Delivery Date, resulting from the
            application of the Escalation Formula contained in Attachment "D"
            pursuant to the terms hereof.




      q.    Services - shall mean technical assistance services, as specified in
            Article 13 herein.

      r.    Spares - shall mean line replaceable units, spare parts and ground
            support equipment, except engines, available for purchase through
            Embraer, to be selected and acquired by Buyer through the initial
            provisioning list agreed to by the Parties and provided pursuant to
            Article 2.b. (the "IPL").

2.    SUBJECT

      a.    Embraer shall sell and Buyer shall purchase and take delivery of ten
            (10) Aircraft ("Firm Aircraft") and, if Buyer so elects, up to
            twenty (20) option Aircraft ("Option Aircraft") upon the terms and
            conditions contained in this Agreement.

      b.    Embraer shall sell, and Buyer shall acquire, Spares for each of the
            Aircraft. Buyer shall inform Embraer at least six (6) months prior
            to the Contractual Delivery Date of the Spares for each Aircraft
            selected from IPL for such Aircraft and such Spares shall be
            delivered in accordance with Article 5.b.

      c.    Embraer shall render the Services as specified in Article 13.

3.    PRICE

      a.    Buyer agrees to pay Embraer, subject to the terms and conditions of
            this Agreement, in United States dollars, the following prices:

            1.    The Aircraft Basic Price of [*]

            2.    Buyer shall have in its sole discretion the right to purchase
                  up to [*]

            [*]Embraer of the list of Spares selected by Buyer from the
            IPL.

      b.    The Services are to be provided [*]

      c.    The Aircraft Basic Price [*]. Such price as escalated shall be
            the Aircraft Purchase Price and [*]

4.    PAYMENT


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      The prices specified in the previous Article shall be paid in cash, by
      means of a wire transfer, on each Business Day specified below by Buyer as
      follows for Firm Aircraft:

      a.    Aircraft

            1.    An initial deposit of [*] United States dollars) per Aircraft
                  [*] in total) is due and payable within one (1) Business Day
                  after signature of this Agreement.

            2.    A [*] progress payment of each Aircraft Basic Price, less a
                  credit of [*] per Aircraft based upon payment pursuant to
                  Article 4.a.1 is due and payable eighteen (18) months prior
                  to each relevant Aircraft Contractual Delivery Date.

            3.    [*]

            4.    [*] prior to each relevant Aircraft Contractual Delivery
                  Date.

            5.    The difference between [*] and the amounts previously paid
                  pursuant to items "a.1" through "a.4" above, is due and
                  payable [*] of each relevant Aircraft.

            6.    The balance of each Aircraft Purchase Price, shall become due
                  and payable upon acceptance of each relevant Aircraft by
                  Buyer.

      b.    Spares:

            1.    [*] or the date of delivery of the Spares calculated in
                  accordance with Article 5.b, and in no event later than
                  the Aircraft Contractual Delivery Date if the Buyer fails
                  to select Spares within the time provided for in Article 2.b.

            2.    [*] shall become due and payable upon delivery of the Spares
                  items as set forth in Article 5.b.

      c.    Late Payments and Termination for Failure to Make Payments:

            Interest will accrue at a Rate of [*] per month or any
            part thereof on any amount not paid to Embraer as set forth in
            Article 4.a and 4.b above from the date on which such payments
            should have been made or as set forth therein until the actual
            receipt by Embraer of such amounts. However, if the late payment is
            a


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            deposit or progress payment required by items "a" or "b" above for
            any Aircraft or Spares, Embraer shall grant Buyer a three (3)
            Business Day grace period within which to make the required payment
            and shall refrain from sending out the notice referred to below in
            this item "c" for the three (3) Business Day grace period. Such
            grace period shall apply only to the first late deposit or progress
            payment by Buyer under this Agreement. Such grace period shall under
            no circumstances apply to payments due pursuant to Articles 4.a.6
            and 4.b.2. If Buyer fails a second time to make any deposit or
            progress payment for any Aircraft or Spares, Embraer shall be
            entitled to exercise its right pursuant to this item "c" without
            waiting for the expiration of the above referenced three (3)
            Business Day grace period. In the event Embraer does not receive any
            payment required by Articles 4.a and 4.b within ten (10) Business
            Days after Buyer receives written notice from Embraer of its failure
            to receive the payment, Embraer shall have the right to terminate
            this Agreement as to the relevant Aircraft or in its entirety in
            accordance with Article 23.c. Furthermore in the event any payment
            referred to in Articles 4.a and 4.b is not made when required, and
            Embraer has not terminated the Agreement in accordance with this
            Article 4.c and the Buyer fails to provide to Embraer, within ten
            (10) Business Days after the Embraer notice referred to herein, the
            federal reserve wire transfer number for the payment in question and
            issued on or before the day such payment was due, Buyer shall also
            pay Embraer, [*] in accordance with Article 23.c or through and
            including ten (10) Business Days after such payment is due,
            whichever is shorter.

5.    DELIVERY

      a.    AIRCRAFT: Subject to payment in accordance with Article 4 and the
            provisions of Articles 4, 7 and 9, the Aircraft shall be offered for
            delivery by Embraer to Buyer, by means of a notice, for inspection,
            acceptance and subsequent delivery in F.A.F. (Fly Away Factory)
            condition, at Sao Jose dos Campos, State of Sao Paulo, Brazil,
            according to the following schedule. Under no circumstances shall
            Buyer be obligated to accept Aircraft 1 or 2 more than three (3)
            Business Days prior to the Contractual Delivery Date. Under no
            circumstances shall Buyer be obligated to accept Aircraft 3 through
            10 more than seven (7) Business Days prior to the Contractual
            Delivery Date.

                FIRST  AIRCRAFT            April 30, 1999
                SECOND AIRCRAFT            June 30, 1999
                THIRD AIRCRAFT             August 31, 1999
                FOURTH AIRCRAFT            November 30, 1999
                FIFTH AIRCRAFT             January 31, 2000
                SIXTH AIRCRAFT             March 31, 2000
                SEVENTH AIRCRAFT           May 31, 2000


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                EIGHTH AIRCRAFT            July 31, 2000
                NINTH AIRCRAFT             September 30, 2000
                TENTH AIRCRAFT             November 30, 2000

            The above dates are hereafter referred to as the Contractual
            Delivery Dates and with respect to the Aircraft, Aircraft
            Contractual Delivery Dates.

      b.    SPARES: Subject to receipt by Embraer of the list of Spares selected
            by Buyer from the IPL in accordance with Article 2.b, such items
            shall be delivered by Embraer to Buyer in F.C.A. (Free Carrier -
            INCOTERMS 1990) condition, at Sao Jose dos Campos, State of Sao
            Paulo, Brazil, or at any other port of clearance that Embraer may
            identify to Buyer. The provision of Spares for each Aircraft shall
            be delivered on the relevant Aircraft Actual Delivery Date. Should
            Buyer not inform Embraer of Spares items selected by Buyer within
            the schedule set forth in Article 2.b., the Spares shall be provided
            to Buyer in F.C.A. condition, at the same places above mentioned,
            one hundred eighty (180) days after such Spares are selected by
            Buyer. However, Buyer must supply such list of Spares to Embraer no
            later than the relevant Aircraft Contractual Delivery Date.

6.    CERTIFICATION

      On the Actual Delivery Date of an Aircraft, the EMB 145-LR aircraft shall
      have valid and effective type certificates issued by the CTA and FAA. The
      Aircraft shall also be delivered to Buyer with an export certificate of
      airworthiness issued by CTA complying with the requirements of FAA
      regulation ("FAR") Part 25 and the requirements of the FAA. The condition
      of the Aircraft on delivery and the documentation delivered with the
      Aircraft, including the above mentioned export certificate of
      airworthiness, shall be sufficient to enable Buyer to obtain an FAR Part
      25 certificate of airworthiness for the Aircraft. Subject to the above, it
      shall be Buyer's responsibility to obtain such certificate of
      airworthiness for the Aircraft, at Buyer's sole expense, although Embraer
      will provide assistance if requested to do so, at Buyer's cost. Embraer
      shall also provide, with Buyer's assistance, a Brazilian export license
      for the export of the Aircraft from Brazil, if required.

7.    ACCEPTANCE AND TRANSFER OF OWNERSHIP

a.    Unless Embraer notifies Buyer otherwise, the Aircraft shall be delivered
      in accordance with the provisions and schedules specified in Article 5
      herein. Embraer shall give Buyer fifteen (15) days advance notice of the
      date on which Embraer considers that each Aircraft will be ready for
      delivery in the condition specified herein. Upon successful completion of
      ground and flight tests performed by Embraer, Buyer will receive a
      confirmation from Embraer of the day that the Aircraft concerned is ready
      for inspection and will provide Buyer within three (3) Business Days
      notice of the date of such inspection.

b.    Buyer shall be allowed a reasonable period of time to conduct a ground
      inspection and an acceptance flight or flights, if necessary
      ("Inspection") of each Aircraft prior




      to its delivery. All costs including fuel, pilot, and insurance for the
      Aircraft's acceptance flight will be provided by Embraer ("Inspection
      Costs"). After such acceptance flight and if Buyer accepts the Aircraft in
      accordance with this Article 7, each Aircraft will be delivered by Embraer
      to Buyer in accordance with Article 6 hereof with its fuel tanks full.

      c.    Buyer shall accept the Aircraft provided, in the reasonable
            determination of Buyer, the Aircraft meets the terms and conditions
            of this Agreement. Immediately after such acceptance, Buyer shall
            make the payments due, if any, according to Article 4 and accept
            delivery of such Aircraft, whereupon good and marketable title and
            risk of loss will be transferred to Buyer and Buyer shall execute
            the necessary title and risk transfer documents required in order to
            effect title transfer, including but not limited to an FAA form Bill
            of Sale and a Warranty Bill of Sale substantially in the form
            attached hereto as Schedule G. However, in the event of a declared
            strike at Embraer of relevant Embraer personnel, or a declared
            strike of relevant Buyer personnel, Buyer shall not be required to
            accept the Aircraft as provided for herein until three (3) Business
            Days after Embraer or Buyer provides notice that such strike has
            terminated.

      d.    If Buyer declines to accept an Aircraft after its Inspection because
            the Aircraft failed to meet the terms of this Agreement, Buyer shall
            immediately give Embraer notice of all specific reasons for such
            refusal and [*], commencing on the first Business Day after receipt
            of such notice, to take all necessary actions at no cost to Buyer
            in order to resubmit the Aircraft to Buyer for re-inspection.

      e.    Buyer shall inspect the Aircraft, as provided for in Article 7.b.,
            within [*] after receipt of notice from Embraer that all necessary
            actions were taken ("Reinspection"). All costs of such Reinspection
            shall be borne by Embraer. This period as well as the one mentioned
            in item "d" above shall not be considered as part of the thirty (30)
            day grace period provided for in Article 9.b.1.

      f.    Embraer shall ensure that the Spares for each Aircraft are available
            for inspection by Buyer on or before the date of delivery in
            accordance with Article 5.b. and shall notify Buyer of such
            availability. Buyer shall be allowed to inspect the Spares to be
            delivered in connection with each Aircraft. If Buyer finds such
            Spares acceptable, Buyer shall be entitled, but not obligated, to
            inspect the packing process, and if such an inspection is conducted,
            Buyer shall thereupon give Embraer notice of acceptance and receipt
            of Spares in question, after which notice Embraer shall not be
            responsible for shortages or have any liability in regard to any
            claim or demand whatsoever, from Buyer, with respect to such
            provision and Buyer shall be deemed to have waived any of its rights
            with respect to such delivery except for warranty claims submitted
            pursuant to Attachment C. If Buyer reasonably rejects one or more of
            the Spares during such inspection as not conforming to this
            Agreement, Embraer shall replace at Embraer's cost such rejected
            Spare or Spares with Spares which are in conformity to the
            Agreement. Buyer's failure, including but not limited to Buyer's
            refusal to perform the inspection or acceptance of all their


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            Spares after being notified of their availability by Embraer, shall
            not prevent Embraer from delivering such Spares direct to Buyer in
            accordance with Article 5.b. In the event that Buyer does not
            inspect the packing process as provided for herein, it shall have
            fifteen (15) Business Days to inspect the Spares after Buyer's
            receipt of such Spares and serve Embraer with written notice of
            acceptance or rejection of such Spares. If Buyer fails to issue the
            notice within such fifteen (15) days or provide Embraer with a
            shortage claim, it shall be deemed to waive any shortage claims.

      g.    Should Buyer fail to comply with the procedures specified in any of
            the preceding items 7 (a) through 7 (e), Embraer shall not be held
            liable for any delays in delivery resulting from such failure.

      h.    Should Buyer not perform its obligations in accordance with items
            7(a) through 7(e) hereof within ninety (90) calendar days to be
            computed from the notification specified in item "a" above, Embraer
            shall be entitled to either terminate this Agreement with respect to
            such Aircraft, pursuant to Article 23.c. or, at its sole discretion,
            re-negotiate the terms of this Agreement with respect to such
            Aircraft with Buyer. If Buyer wrongfully fails to perform its
            obligations in accordance with items 7(a) through 7(e) hereof, at
            any subsequent time, Embraer shall be entitled to terminate this
            Agreement with respect to all unaccepted or undelivered Aircraft or
            related Spares pursuant to Article 23.c. below.

      i.    Buyer shall be permitted to delegate its duties in this Article 7
            and in Article 5 as to the physical Inspection, Reinspection, and
            acceptance and delivery of the Aircraft and Spares to its authorized
            representative in the form attached hereto as Schedule F.

      j.    [*]


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            [*]

8.    STORAGE CHARGE

      a.    [*]

            1.    Buyer's failure to perform Inspection or Re-inspection of an
                  Aircraft, per the date or time period specified in writing by
                  Embraer, according to Article 7.

            2.    Buyer's acceptance of an Aircraft when Buyer defaults in the
                  fulfillment of any payment due and in taking title to such
                  Aircraft immediately thereafter.

            3.    Buyer's failure within one (1) Business Day after title
                  transfer to remove an Aircraft from Embraer's facilities.

                  Storage charges shall end on the earlier of i) Buyer's and
                  Embraer's agreement to end such storage charge, ii) removal of
                  the relevant Aircraft from Embraer's facilities or iii) in the
                  event this Agreement with respect to such Aircraft is
                  terminated in accordance with Article 23.

                  If however, Buyer notifies Embraer in writing ten (10) days in
                  advance of its expected delay in the performance of its
                  obligations set forth in this Article 8, the storage charge
                  shall commence on the fifteenth (15th) day after the
                  occurrence of the events set forth in this Article 8.a.

      b.    In the event that an Aircraft Contractual Delivery Date must be
            extended by Embraer from that which is designated in Article 5, due
            to Buyer's failure to perform any action or provide any information
            contemplated by this Agreement other than the ones specified in the
            preceding items, and the Aircraft otherwise was to be delivered on
            the Contractual Delivery Date, the storage charge shall commence on
            the fifteenth (15th) day after the Contractual Delivery Date
            relative to such Aircraft.


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      c.    Buyer shall pay the storage charge set forth in Article 8.a. and
            8.b., as applicable, per each month of delay or part thereof, within
            five (5) Business Days after the presentation of each invoice by
            Embraer.

9.    DELAYS IN DELIVERY

      a.    EXCUSABLE DELAYS:

            1.    Embraer shall not be held liable or be found in default for
                  any delays in the delivery of an Aircraft or any Spares or in
                  the performance of any act to be performed by Embraer under
                  this Agreement, resulting from the following events or
                  occurrences, hereinafter referred to as "Excusable Delays":
                  (a) force majeure (including, but not limited to, war or state
                  of war, civil war, insurrection, fire, accident, explosion,
                  flood, act of government or governmental priorities (other
                  than acts of the Government of Brazil acting in its capacity
                  as a shareholder of Embraer), requisition, strike, labor
                  troubles), (b) any delay to the extent resulting from any
                  failure by Buyer to perform any action or provide any
                  information contemplated by this Agreement.

            2.    Within [*] after the occurrence of any of the above mentioned
                  events which constitute causes of Excusable Delays in delivery
                  of an Aircraft or any Spares or in the performance of any act
                  to be performed by Embraer under this Agreement, Embraer shall
                  send a notice to Buyer, with a requested acknowledgment of
                  receipt, including a description of details involved and an
                  estimate of the effects expected upon the timing of the
                  performance of its contractual obligations.

            3.    Any such delays shall extend the time for delivery of an
                  Aircraft or Spares by the same number of days required for the
                  cause of delay to be remedied. Embraer undertakes to use all
                  commercially reasonable efforts whenever possible to avoid or
                  remove any such cause of delay and to minimize its effect on
                  the Contractual Delivery Date of an Aircraft or Spares.

            4.    If the cause of such Excusable Delay is such as to last longer
                  than three hundred (300) days or to render the performance of
                  this Agreement impossible, then Buyer shall have the option to
                  terminate this Agreement without liability to either party, in
                  accordance with Article 23.b.

      b.    NON-EXCUSABLE DELAYS:




            1.    If the delivery of an Aircraft or Spares is delayed, not as a
                  result of an Excusable Delay, by more than [*] after the
                  Contractual Delivery Date for such Aircraft or, in the case
                  of Spares, the date for delivery as agreed between the Parties
                  in accordance with Article 5.b., Buyer will be entitled to
                  elect to receive in accordance with item "b.3" below from
                  Embraer liquidated damages as compensation for such delay
                  equal to [*], up to the date that the Aircraft is ready for
                  delivery and available to Buyer by means of confirmation of
                  the successful completion of ground and flight tests performed
                  by Embraer, to be provided per Article 7.a, it being
                  understood that such liquidated damages will not, in any
                  event, [*] and that it will only be due and payable by Embraer
                  to Buyer after Buyer pays to Embraer the total Aircraft
                  Purchase Price and/or Spares items price as applicable. Such
                  liquidated damages shall be paid at Buyer's option in cash or
                  in the form of a credit for spare parts or other Embraer-
                  provided services.

            2.    The grace period of [*], or part thereof, granted by Buyer to
                  Embraer as mentioned herein shall prevail if Embraer provides
                  notice to Buyer advising the expected delay, provided that
                  such notice shall be issued to Buyer [*] prior to the
                  relevant Aircraft Contractual Delivery Date, or in the case
                  of Spares, [*] prior to the date of delivery as agreed
                  between the Parties in accordance with Article 5.b. The grace
                  period shall be reduced by the same number of days Embraer
                  delays the issuance of said notice beyond such [*].

            3.    If, with respect to a delayed Aircraft or Spares, Embraer does
                  not receive notice for liquidated damages as mentioned in item
                  "b.1" above, from Buyer within one hundred and twenty (120)
                  days after the Delivery Date of such Aircraft, or in the case
                  of Spares, the date of delivery as agreed between the Parties
                  in accordance with Article 5.b., Buyer shall be deemed to have
                  fully waived its right to such liquidated damages.

            4.    If as a result of a Non-Excusable Delay, the delivery of any
                  Aircraft will be delayed to a date beyond the Contractual
                  Delivery Date or any revised date previously agreed to in
                  writing by the parties, the price escalation formula set forth
                  in Attachment D will not apply with respect to the days
                  constituting the delay.

            5.    Embraer hereby acknowledges that the schedule by which the
                  Aircraft and Spares are to be delivered as set forth in
                  Article 5 hereof, was a material inducement to Buyer to enter
                  into this Agreement. Consequently, it hereby represents and
                  warrants to Buyer that in the event of a nonexcusable delay by
                  Embraer, Buyer's delivery positions will not be unfairly
                  prejudiced relative to the delivery positions of any other
                  purchaser or acquirer ("Purchaser") of any


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                  EMB-145 aircraft, by Embraer having declared a Nonexcusable
                  Delay in accordance with this Agreement. If Buyer's delivery
                  positions are unfairly prejudiced for less than 15 days
                  relative to any other Purchaser's delivery positions, such
                  delay shall not be considered a breach of this Article 9.b.5.
                  In the event of Seller's breach of the representation and
                  warranty provided for herein, Buyer may terminate this
                  Agreement in accordance with Article 23.b.1. and/or may seek
                  damages for Embraer's breach in accordance with Article 23.a.

      c.    DELAY DUE TO LOSS OR STRUCTURAL DAMAGE TO THE AIRCRAFT:

            Should any Aircraft be destroyed or damaged before acceptance by the
            Buyer to the extent that it becomes commercially useless, Buyer may,
            at its sole discretion take a replacement Aircraft under the same
            terms and conditions of this Agreement at a later delivery date to
            be agreed by the Parties. Within three (3) months after such loss,
            Embraer will provide Buyer with a new delivery date for a
            replacement Aircraft. If Buyer in its sole discretion rejects the
            new delivery date after further consultation with Embraer on
            scheduling the delivery of the Aircraft, it may terminate this
            Agreement with respect to such Aircraft and the Spares to be
            delivered with such Aircraft, by notice to Embraer given in
            accordance with Article 25, without any liability to either party
            and Embraer will return all deposits and progress payments paid with
            respect to such terminated Aircraft to Buyer within five (5)
            Business Days after Embraer receives the notice referred to above
            with interest at the [*] commencing on the date such deposits and
            progress payments were paid to Embraer. In the event Embraer fails
            to return the deposits and progress payments with accumulated
            interest to Buyer as provided for herein, Embraer should also pay
            to Buyer additional interest of [*] on such outstanding amounts not
            paid by Embraer from the date on which such payments should have
            been made until receipt by the Buyer.

10.   INSPECTION AND QUALITY CONTROL

      a.    Buyer is hereby permitted to have one or more authorized
            representatives at Embraer's facilities for a period commencing
            three (3) months prior to the Contractual Delivery Date of each
            Aircraft in order to assure that the Aircraft, Spares and Services
            were developed in accordance with the procedures specified in this
            Agreement and according to all applicable quality control standards.
            Buyer may communicate its concerns as to the production of the
            Aircraft and Spares to Embraer.

      b.    Buyer shall communicate to Embraer the names of its authorized
            representatives, by means of notice, at least fifteen (15) days
            prior to the arrival of the authorized representatives, provided
            written notice is given to Embraer fifteen (15) calendar days prior
            to effectivity.


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      c.    Such representatives may also be authorized to sign the acceptance
            and transfer of title and risk documents and accept delivery of the
            Aircraft and Spares pursuant to Article 7.

      d.    With respect to this Article 10, Embraer shall provide for use in
            accordance with the Agreement at no cost to Buyer, communication
            facilities (telephone and facsimile) for Buyer's authorized
            representatives, as well as the necessary tools, measuring devices,
            test equipment and technical assistance as may be necessary to
            perform acceptance tests.

      e.    Buyer's authorized representatives shall observe Embraer's
            administrative rules and instructions while at Embraer's facilities,
            and Buyer's representatives will be provided with all appropriate
            rules and regulations upon arrival.

      f.    Buyer's authorized representatives shall be allowed exclusively in
            those areas related to the subject matter hereof and Buyer agrees to
            hold harmless Embraer from and against all and any kind of
            liabilities in respect to such representatives, for whom Buyer is
            solely and fully responsible under all circumstances and in any
            instance except to the extent caused by the gross negligence or
            willful misconduct of Embraer, its officers, directors, employees or
            agents.

11.   CHANGES

      a.    At delivery each Aircraft will comply with the standards defined in
            Attachment "A" and shall incorporate all modifications which are
            classified as Airworthiness Directives (AD's) mandatory by CTA or
            FAA and shall also at Delivery incorporate any change agreed upon by
            Buyer and Embraer in accordance with this Article 11.

      b.    All the specified tray-mounted avionic equipment installed in the
            Aircraft shall be of the latest modification standard made available
            to Embraer by the relevant vendor at such time as not to violate the
            delivery schedule of the Aircraft. All other parts will be of the
            latest modification standard available at the moment of scheduled
            installation in the Aircraft.

      c.    Embraer may make changes in the design of the Aircraft, the
            definition of which and its respective classification shall be in
            compliance to the Aircraft type specification, as follows:

            1.    MINOR CHANGES: defined as those modifications which shall not
                  adversely affect the Aircraft in any of the following:

                  o     Performance, weight or balance;
                  o     Structural strength, flight qualities, operation and/or
                        characteristics;
                  o     Interchangeability of parts reasonably defined by
                        Embraer as interchangeable;




                  o     Aircraft delivery, delivery dates, and prices;
                  o     Operational safety;
                  o     Ease of maintenance;
                  o     Noise and environmental control

            2.    MAJOR CHANGES: defined as those modifications which affect at
                  least one of the topics mentioned in item "c.1." above.

      d.    Embraer shall have the right, without the prior consent of Buyer, to
            make Minor Changes, as referred to in item "c.1" above, in the
            design of the Aircraft. The costs of any such changes shall be borne
            by Embraer.

      e.    Major Changes as referred to in item "c.2." above which are
            classified as AD's mandatory by CTA and or FAA shall be conveyed to
            Buyer by means of Service Bulletins, approved by said authorities.
            Incorporation of such Service Bulletins in all Aircraft and Spares
            yet to be delivered to Buyer will be made by Embraer at Embraer's
            own costs, in a commercially reasonable period of time.
            Incorporation of Service Bulletins in Aircraft and Spares delivered
            to Buyer shall be made by Buyer at its own cost but for Service
            Bulletins which are issued arising from mandatory AD's issued by the
            FAA or CTA and which relate to defective parts which are identified
            by an Embraer part number ("Embraer AD's"). Such Embraer AD's shall
            be provided to Buyer in accordance with the warranty period provided
            in Attachment C. When flight safety is affected, such changes will
            be immediately incorporated.

            Whenever warranty coverage is not available or applicable, item "e"
            of this Article 11 shall apply. No indemnification shall be due by
            Embraer for the down-time of the delivered Aircraft needed for the
            incorporation of any such changes but for delays caused by the
            incorporation of Embraer AD's. In the event of delay caused by
            incorporation of Embraer AD's, Embraer shall be responsible for
            liquidated damages in accordance with Article 9.b (and the price
            escalation formula as set forth in Attachment D shall not apply with
            respect to any delay occasioned by the need to incorporate an AD).

            Embraer shall not be held liable for any delays in the Aircraft
            Contractual Delivery Date resulting from the execution of any change
            classified as mandatory by CTA or FAA when the Aircraft shall have
            already passed the specific production stage affected by the
            incorporation of said change. In the event that an AD is issued by
            the CTA or FAA prior to delivery with a terminating action date
            after delivery of the relevant Aircraft and Embraer has a solution
            for implementation of such AD prior to delivery and such
            implementation will not alter the delivery date of such Aircraft,
            Embraer will use commercially reasonable efforts to incorporate such
            AD prior to delivery of the relevant Aircraft .

      f.    Major Changes (other than those which are AD's mandatory per item
            "e" above), any change developed by Embraer as product improvement,
            and any change requested by Buyer which are either Major or Minor ,
            including those changes required by FAA




            as a consequence of alterations, amendments and/or innovations of
            its present airworthiness regulations which are in effect subsequent
            to the date of the Agreement but before an Aircraft Delivery Date
            and which are applicable to all aircraft in general as the all
            aircraft of the same category as the Aircraft, shall be considered
            as optional and, pursuant to Buyer's request, the corresponding cost
            proposals shall be submitted by Embraer to Buyer for consideration
            and approval. Should Buyer not approve any such change, it shall not
            be incorporated in the Aircraft.

      g.    Any change made by Embraer in accordance with the preceding items
            which affects the provisions of Attachment "A", shall be
            incorporated in said Attachment by means of an amendment. The
            amendment shall be submitted to Buyer for signature thirty (30) days
            prior to the relevant Aircraft Contractual Delivery Date, a copy of
            which shall be received by Embraer, duly signed, prior to such
            Aircraft Actual Delivery Date.

      h.    Except as it relates to AD's made mandatory by CTA or FAA which do
            not materially affect the performance of the Aircraft and Minor
            Changes, should an Aircraft not comply with the terms and conditions
            of Attachment "A", Buyer shall be entitled to either terminate this
            Agreement with respect to that relevant Aircraft, pursuant to
            Article 23.d, or, at its sole discretion, renegotiate the terms and
            conditions of this Agreement with Embraer.

12.   WARRANTY

      The Aircraft and Spares will be warranted in accordance with the terms and
      conditions specified in Attachment "C". The warranty may not be assigned
      except as permitted therein or by Article 16.

13.   TECHNICAL ASSISTANCE SERVICES

      a.    Familiarization and technical support programs specified below are
            being offered at no charge to Buyer unless otherwise specified,
            except for the expenses involved with travel and lodging of
            Designated Operator's trainees, which shall be borne by Buyer or
            Designated Operator (as defined in Article 16). Such familiarization
            and technical support programs shall be in accordance with Embraer's
            training syllabus.

      b.    Notwithstanding the use of the term "training" in this Article 13 or
            in the Agreement, the intent of the Services is solely to
            familiarize a Designated Operator's pilots, mechanics, employees or
            representatives, duly qualified per the governing body in the United
            States of America, with the operation and maintenance of the
            Aircraft. It is not the intent of Embraer to provide basic training
            ("Ab-initio") to any representatives of a Designated Operator.

      c.    The Services, as applicable, shall be provided prior to the last
            Aircraft Actual Delivery Date as shall be agreed upon by Buyer and
            Embraer and in accordance with Article 7.j. herein. Each Designated
            Operator must give notice to Embraer




            one-hundred and twenty (120) days in advance of Designated
            Operator's expected training schedule. Should Buyer or a Designated
            Operator not take all or any portion of the Services on or before
            the delivery of Buyer's last Aircraft, Buyer and the relevant
            Designated Operator shall be deemed to have fully waived their
            rights to such service. No other penalty or indemnity shall be due
            from Embraer in this case.

      d.    All Services shall be provided by Embraer or its qualified
            designated representative at Embraer's facilities at Fort
            Lauderdale, Florida, USA, or at such other location as Embraer shall
            reasonably designate in the United States, except that flight
            training may also be designated by Embraer to occur in Brazil if it
            cannot reasonably occur in the United States.

      e.    The Services in regard to the Firm Aircraft shall include:

            1.    One (1) Pilot Familiarization Program for up to [*] pilots
                  of the Designated Operator's pilots per Firm Aircraft
                  including ground familiarization as regards Aircraft systems,
                  weight and balance, performance and normal/emergency
                  procedures; Flight simulator training in accordance with
                  Designated Operator's approved Flight Operations Training
                  Program, up to, but not exceeding the equivalent training in
                  Level C simulator.

            2.    One (1) Maintenance Familiarization Course for up to [*]
                  qualified mechanics of the Designated Operator's mechanics per
                  Firm Aircraft. This course shall consist of classroom
                  familiarization with Aircraft systems and structures and shall
                  be in accordance with ATA specification 104, level III.

            3.    One (1) Flight Attendant Familiarization Course for up to
                  [*] of Designated Operator's flight attendant representatives
                  per Firm Aircraft. This course shall consist of classroom
                  familiarization, including a general description of Aircraft
                  and systems to be used by flight attendants if requested,
                  Embraer may demonstrate procedures described in the classroom,
                  subject to Buyer's Aircraft availability.

            4.    [*] Embraer technical [*] selected by Embraer in its sole
                  discretion shall be assigned to stay at the main maintenance
                  base of the first Designated Operator in the United States in
                  order to assist and advise such Designated Operator on
                  Aircraft maintenance during its initial operation and to act
                  as liaison between such first Designated Operator and
                  Embraer. The presence of Embraer's technical representative
                  in the maintenance base of such first Designated Operator
                  shall be free of charge for the first [*] after the first
                  Actual Aircraft Delivery Date. Thereafter, every time Buyer
                  requests the placement of an Embraer technical representative
                  at a Designated Operator's installations, Embraer will charge
                  Buyer for any such Designated Operator according to Embraer's


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* Confidential


                  price list per month per each such Embraer's technical
                  representative's presence.

                  At no charge to Embraer, Buyer shall insure and require the
                  Designated Operator to provide such representative with
                  reasonable communication facilities (telephone and facsimile)
                  as well as office space and facilities at the main maintenance
                  base of the Designated Operator. Buyer shall also cause the
                  Designated Operator to (a) arrange all necessary work permits
                  and airport security clearances required for Embraer
                  employees, to permit the accomplishment of the services
                  mentioned in this item "4", in due time; and (b) obtain all
                  necessary custom clearances both to enter and depart from the
                  United States for Embraer's employees and their personal
                  belongings and professional tools. During the stay of the
                  Embraer's technical representative at the Designated
                  Operator's base, Buyer shall cause the Designated Operator to
                  permit access to the maintenance and operation facilities as
                  well as to the data and files of Designated Operator's fleet
                  of aircraft to the extent necessary to perform its obligations
                  hereunder. Embraer will sign an appropriate confidentiality
                  undertaking relating to materials made available to its
                  representatives. Buyer shall cause the Designated Operator to
                  make available at the office designated for the technical
                  representative, one (1) set of updated Technical Publications
                  referred to in Article 15, and it shall be Designated
                  Operator's responsibility to perform the revision services in
                  order to maintain such publications updated during the
                  technical representative's stay at Designated Operator's base.
                  Buyer shall bear all expenses related to the transportation,
                  board & lodging of Embraer representative when such
                  representative shall render the services specified herein in
                  any place other than the first Designated Operator's main
                  maintenance base.

                  Without a previous written authorization from Embraer, Embraer
                  technical representatives shall not participate in test
                  flights or flight demonstrations. If Designated Operator
                  obtains such authorization, Designated Operator shall include
                  the technical representative in Designated Operator's
                  insurance policy. Embraer reserves the right to stop the
                  services mentioned in this item "4", should any of the
                  following situations occur at Designated Operator's base: a)
                  there is a declared strike in progress; b) war or war like
                  operations, riots or insurrections; c) any condition which is
                  dangerous to the safety or health of Embraer's employee; or d)
                  the government of the United States refuses permission to
                  Embraer's employee to enter the country.

      f.    If Buyer or Designated Operator elects not to take all or any
            portion of the Services, no refund or other financial adjustment of
            the Basic Price will be made, since such Services are offered free
            of charge as referred to in item "b" of Article 3 of the Agreement,
            unless the Service is being charged by Embraer as specified in
            paragraph e.4 above. Any other additional services shall depend on
            subsequent agreement and shall be charged by Embraer accordingly,
            except




            that Embraer further agrees, in addition to the Services as
            described above, to provide each Designated Operator, at such
            Designated Operator's expense, a customized product support package
            to meet such Designated Operator's need at service entry.

      g.    Buyer and the Designated Operator's authorized trainees and
            representatives at Embraer's facilities shall be allowed exclusively
            in those areas related to the subject matter hereof and Buyer agrees
            to, and to cause the relevant Designated Operator to, hold harmless
            Embraer from and against all and any kind of liabilities in respect
            of such trainees and representatives for whom Buyer and Designated
            Operator, as the case may be, are solely and fully responsible under
            all circumstances, except to the extent caused by the gross
            negligence or willful misconduct of Embraer, its employees or
            agents.

14.   SPARE PARTS POLICY

      Embraer guarantees the supply of spare parts and ground support equipment
      for the Aircraft in accordance with Section 2 of Attachment "B" for a
      period of [*] Such spare parts and ground support equipment shall be
      supplied according to the prevailing availability, sale conditions,
      delivery schedule and effective price on the date of acceptance by
      Embraer of the purchase order. The spare parts and ground support
      equipment may be supplied either by Embraer or through its subsidiaries
      or branch offices located abroad.

15.   PUBLICATIONS

a.    AIRCRAFT PUBLICATIONS - Embraer shall supply, at no cost to Buyer, copies
      of operational and maintenance publications applicable thereto, in the
      English language and in the quantities as specified in item "3" of
      Attachment "B". Such publications are issued under the applicable
      specification and are available in hard copies. The revision service for
      these publications is provided, free of charge, including mailing services
      (except for air cargo shipping), for the first [*] Such publications will
      be delivered together with the Aircraft.

      If requested by Buyer, one (1) set of basic publications (not reflecting
      Buyer's Aircraft configuration) may be supplied earlier, at a time and
      location to be agreed upon by the Parties, but in no event before four (4)
      months prior the delivery of the first Aircraft.

b.    VENDOR ITEMS PUBLICATIONS - With respect to vendor items installed in the
      Aircraft which have their own publications, Buyer will receive them in the
      quantity specified in item "3" of Attachment "B", in their original
      content and printed form, directly from the suppliers, which are also
      responsible to keep them continuously updated through a direct
      communication system with Buyer.


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* Confidential


16.   ASSIGNMENT AND GUARANTEE

      a.    Provided the warranty provisions in Article 12, 13, 14, 15 and
            Attachment B and C are still effective in accordance with their
            terms, then after Delivery of an Aircraft and Spares, Buyer may
            lease, sell or otherwise transfer the Aircraft and Spares to one or
            more air carriers (whether certificated or not and whether based in
            the United States or any other country) or to any other entities,
            (but for entities or air carriers which are owned, effectively
            controlled or managed by or to any other airframe manufacturer which
            competes in the thirty seven (37) to seventy (70) seat turbo jet
            market) (collectively referred to as "Transferees", and
            individually, together with each Other Transferee (as defined
            below), a "Designated Operator") and in connection with such leases,
            sales, or transfers Buyer may assign Buyer's rights pursuant to
            Articles 12, 13, 14, 15 and Attachments B and C with respect to the
            relevant Aircraft and Spares to such Transferees provided that Buyer
            notifies Embraer of the identity of such Transferees at least thirty
            (30) calendar days prior to such transaction and provides Embraer
            with prior written notice of any events under such agreement that
            would cause any rights thereby assigned to revert to Buyer under
            such agreement. In the event such Transferees or Other Transferees
            (as defined below) subsequently transfer the Aircraft and Spares,
            any Transferees' or Other Transferees' rights which remain pursuant
            to Articles 12, 13, 14, 15 and Attachments B and C with respect to
            the relevant Aircraft and Spares may also be transferred with
            respect to the relevant Aircraft to any other entity (but for
            entities or air carriers which are owned, effectively controlled or
            managed by any other airframe manufacturer which competes in the
            thirty seven (37) to seventy (70) seat turbo jet market) ("Other
            Transferees") provided that the Transferees or Other Transferees
            notify Embraer of the identity of such other entity at least sixty
            (60) calendar days prior to such transaction and provide Embraer
            with prior written notice of any events under such agreement that
            would cause any rights thereby assigned to revert to Transferees or
            Other Transferees under such agreement.

      b.    Before Delivery Buyer may assign any or all of its rights under this
            Agreement to purchase any one or more of the Aircraft and Spares to
            any one or more non-Brazilian majority owned subsidiaries of Buyer,
            or non-Brazilian affiliates of Buyer or Wexford Management LLC which
            as of the date of such assignment are effectively managed by Buyer
            or Wexford Management LLC; provided that Buyer guarantees the
            payment obligations of such assignee in the form attached hereto as
            Attachment H. Buyer may also assign, sell, transfer or dispose of
            any or all of its rights and obligations to a financing institution
            reasonably approved by Embraer, considering the size of the proposed
            financing relative to the creditworthiness of the financing
            institution, when such disposition is made in connection with the
            initial financing of the progress payments or the final payments
            required under this Agreement. Buyer may request, and Embraer will
            take, any action reasonably necessary for the purpose of causing an
            Aircraft and




            Spares at the time of delivery to be subject to an equipment trust
            conditional sale, lien or other arrangement for the initial
            financing of the Aircraft and Spares.

      c.    Except as expressly permitted by this Article 16, Buyer's rights and
            obligations hereunder may not be assigned, conveyed, subcontracted,
            transferred or delegated, without Embraer's prior written consent.

17.   RESTRICTIONS AND PATENT INDEMNITY

      This sale does not include the transfer of designs, copyrights, patents,
      and other similar rights to Buyer. Subject to Buyer's or Designated
      Operator's duty to promptly advise Embraer of any alleged copyright or
      patent infringement, Embraer shall indemnify, defend, protect and hold
      Buyer and each Designated Operator (including respective officers,
      controlling persons, employees and directors) harmless with respect to any
      claims, suits actions, judgments, liabilities, damages and costs,
      including reasonable attorney fees, made against it or them if the
      Aircraft or Spares with Embraer part numbers infringes copyright patents
      or the proprietary rights of others. In such event Embraer shall to the
      extent necessary and as promptly as possible at its sole option and
      expense either

      (i)   procure for Buyer or its Designated Operator the right under patent
            to use the system, accessory or equipment or part;

      (ii)  replace such system accessory, equipment or part with a
            non-infringing item or part of similar quality; or

      (iii) modify such system, accessory, equipment or part to make it
            non-infringing.

18.   MARKETING PROMOTIONAL RIGHTS

      Embraer shall have the right to show for marketing purposes, free of any
      charge, the image of the Aircraft, painted with Buyer's colors and emblems
      or the colors and emblems of any Designated Operator, affixed in
      photographs, drawings, films, slides, audiovisual works, models or any
      other medium of expression (pictorial, graphic, and sculptural works),
      through all mass communications media such as billboards, magazines,
      newspaper, television, movie, theaters, as well as in posters, catalogues,
      models and all other kinds of promotional material. In the event such
      Aircraft is sold to or operated by or for another company or person,
      Embraer shall be entitled to disclose such fact, as well as to continue to
      show the image of the Aircraft, free of any charge, for marketing
      purposes, either with the original or the new colors and emblems, unless
      otherwise notified by Buyer or Designated Operator, provided that such
      notification shall be subject to the reasonable satisfaction and agreement
      of Embraer. If accepted, said prohibition, however, shall in no way apply
      to the promotional materials or pictorial, graphic or sculptural works
      already existing or to any contract for the display of such materials or
      works already binding Embraer at the time of receipt of the notification.
      The provisions of this



      Article shall be included in all future sales or lease agreements
      concerning the Aircraft.

19.   TAXES

      Embraer shall pay all taxes arising from the sales subject of this
      Agreement, as may be imposed on the sale under Brazilian laws. All other
      taxes (but for any U.S. taxes on the income of Embraer or its affiliates
      and subsidiaries), impost, fees, withholding taxes, stamp taxes,
      documentary taxes and any other similar or dissimilar taxes, as well as
      any duties as may be imposed on the sale subject of this Agreement
      ("Taxes"), shall be borne by Buyer. Upon the request of either party, the
      other party shall execute and deliver to the requesting party any document
      reasonably necessary or desirable in connection with an exemption from,
      reduction of, or the contesting of the imposition of any Taxes.

20.   APPLICABLE LAW

      This Agreement, and the rights and obligations of the Parties hereunder,
      shall in all respects be governed by, and construed and interpreted in
      accordance with, the laws of the State of New York (excluding conflicts of
      law principles), and including all matters of construction, validity and
      performance.

21.   ARBITRATION

a.    The Parties each irrevocably submit to the exclusive jurisdiction of
      arbitration and expressly and irrevocably waive its right to bring suit
      against the other party in any court of law except for the limited
      purposes of enforcing an arbitral award obtained with respect to a
      dispute, or for obtaining any injunctive, temporary or preventative order
      or similar order available to it under the laws of any jurisdiction for a
      breach or threatened breach by the other party of this Agreement which
      threatens irreparable damage.

b.    Any dispute submitted for arbitration must be finally settled by binding
      and confidential arbitration according to the Rules of the American
      Arbitration Association (the "Rules"), except as may be modified by mutual
      agreement of Embraer and Buyer. The arbitration, including the rendering
      of the award, will be conducted by arbitrators (selected as set forth
      below) who are fluent in the English language. The arbitration proceeding
      will be conducted with discovery in accordance with the Federal Rules of
      Civil Procedure. The arbitrators will be appointed in accordance with the
      Rules except as otherwise provided for herein. The arbitration proceedings
      will take place in New York, New York, and will be conducted in the
      English language.

c.    The Arbitrator will be selected as follows: within fifteen (15) Business
      Days of the referral of any matter to arbitration, each party will select
      an arbitrator. Thereafter, within fifteen (15) Business Days of each
      party's selection of an arbitrator, the two




      arbitrators selected by the Parties shall meet to select a mutually
      agreeable third arbitrator. In the event a party fails to select an
      arbitrator with in the time period specified above, the party that has
      timely complied with the selection of an arbitrator shall select a second
      arbitrator. These two arbitrators shall within seven (7) Business Days
      after the time in which the other party should have selected an
      arbitrator, meet to select a mutually agreeable third arbitrator. These
      three arbitrators shall comprise the arbitral panel and all arbitral
      proceedings shall be conducted in the presence of all three arbitrators.

d.    If there is a dispute submitted to arbitration, any subsequent additional
      disputes referred for arbitration (including counterclaims between the
      parties) will be consolidated in the same arbitration proceeding.

e.    The arbitral proceeding will not exceed one hundred (100) days commencing
      on the date the last arbitrator accepts his or her appointment. If the
      arbitral award is not issued within this time, then the arbitration
      proceeding will be automatically renewed for another one hundred (100)
      days. Evidence may not be taken in the arbitral proceeding except in the
      presence of both parties and all witnesses, if any , may be questioned by
      both parties. The only evidence which may be considered by the arbitrators
      in reaching their decision is that which is otherwise admissible in
      accordance with the then current United States Federal Rules of Evidence.

f.    Any decision or award of the arbitrators must be based solely on the terms
      of this Agreement and the substantive governing law applicable to this
      Agreement. The decision of the arbitrators must be issued in writing with
      an explanation of its reasoning, and will be final and conclusive when
      issued. Judgment upon the award rendered in the arbitration may be entered
      and enforced by the Court specified in Article 21.g. hereof.

g.    Each party irrevocably submits to the exclusive jurisdiction of the United
      States District Court for the Southern District of New York sitting in the
      County of New York for purposes of enforcing any arbitral award or for
      other legal proceedings arising out of this Agreement or any transactions
      contemplated in this Agreement as provided for herein. However nothing
      contained in this Agreement shall be deemed to prevent either party from
      enforcing any decision of the United States District Court for the
      Southern District of New York sitting in the County of New York for
      purposes of enforcing or collecting any such award in any court or
      jurisdiction as such party deems necessary or prudent.

h.    Each party shall bear its own costs and expenses of arbitration. The
      parties shall share equally the costs, expenses and fees of any arbitral
      panel designated pursuant to this Agreement.

22.   SOVEREIGN IMMUNITY, VENUE AND FORUM NON CONVENIENCE




      Embraer, under the laws of the United States or of any other jurisdiction
      affecting Embraer, is subject to private commercial law and suit, and is
      not entitled to (and hereby waives) sovereign immunity under any such
      laws, for its performance of its obligations under this Agreement.
      Embraer's performance of its obligations hereunder constitute commercial
      acts done for commercial purposes. The parties hereto furthermore waive to
      the extent permitted by law any objections to venue of the United States
      District Court for the Southern District of New York sitting in the County
      of New York for purposes of enforcing any arbitral award and any right or
      claim to any transfer or dismissal of any enforcement proceeding in the
      United States District Court for the Southern District of New York sitting
      in the County of New York on the grounds of forum non convenience.

23.   TERMINATION

      a.    Should either party fail to comply partially or completely with its
            obligations hereunder, the other party shall be entitled to give
            notice of such failure and to require that such failure be remedied
            within the period specified in that notice, which period shall not
            be less than ten (10) days. Should such failure not be remedied
            within the period so specified, then the party who gave notice of
            such failure shall be entitled to terminate this Agreement. Should
            termination occur in accordance with the foregoing, the defaulting
            party shall pay to the non-defaulting party, as damages, an amount
            determined by agreement or by law. The foregoing provision shall not
            apply in any circumstance where a specific right of termination is
            available or will be available upon the expiration of a specific
            period of time whether or not such termination rights are exercised,
            except with respect to Buyer's right to terminate this Agreement in
            accordance with Article 23.b in case of termination for a
            Non-excusable delay of 90 days or longer as a result of Embraer's
            breach of Article 9.b.5 or termination of this Agreement in
            accordance with Article 23.b.1.

      b.    Buyer shall have the right but not the obligation to terminate this
            Agreement in respect to the relevant Aircraft, upon the occurrence
            of any Excusable Delay in accordance with Article 9.a.4 of three
            hundred (300) days or longer, impossibility as provided for in
            Article 9.a.4, or any non-excusable delay in accordance with Article
            9.b.1 of ninety (90) days or longer after such Aircraft Contractual
            Delivery Date, such right to be exercisable by notice from Buyer to
            Embraer to such effect no earlier than the three hundredth (300th),
            day, ninetieth (90th) day, or in the event of impossibility,
            reasonably thereafter, as applicable. Upon receipt of such notice of
            termination, Embraer shall, within five (5) Business Days after
            Embraer receives the notice referred to above, return to Buyer an
            amount equal to the amounts previously paid by Buyer relative to the
            relevant Aircraft with interest at the [*] in effect as of the time
            such amounts were paid, less the value of equipment previously
            delivered and services previously performed by Embraer specifically
            for Buyer, permitted assigns, and prospective assigns, with respect
            to such terminated Aircraft valued in accordance with Embraer's list
            price for such equipment and services at time of such termination in
            accordance with


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* Confidential


            this Article 23.b and not previously paid for by Buyer. In the event
            the equipment referred to above in the immediately preceding
            sentence has not been used, it may be returned to Embraer at the
            Buyer's sole cost and expense and subject to Embraer's reasonable
            right to inspect such equipment, and in the event of such return and
            acceptance of the condition of the equipment, the value of such
            returned equipment shall not be deducted from the amounts payable by
            Embraer as provided for above. No other penalty or indemnity shall
            be due from Embraer in this case, except in the case of a
            termination for a Non-Excusable Delay of 90 days or longer as a
            result of a breach of Article 9.b.5. In the event Embraer fails to
            return the deposits and progress payments with accumulated interest
            to Buyer as provided for herein, Embraer shall also pay to Buyer
            additional interest of one percent (1%) per month on such
            outstanding amounts not paid by Embraer from the date on which such
            payments were to have been made until receipt by Buyer.

      b.1   In the event that Embraer breaches the representations and
            warranties contained in Article 9.b.5 Buyer may terminate this
            entire Agreement and Embraer will return to the Buyer [*],
            permitted assigns, and prospective assigns with respect to such
            terminated Aircraft valued in accordance with Embraer's list price
            for such equipment and services at time of such termination in
            accordance with this Article 23.b.1 and not previously paid for
            by Buyer. In the event the equipment referred to above in the
            immediately preceding sentence has not been used, it may be
            returned to Embraer at the Buyer's sole cost and expense and
            subject to Embraer's reasonable right to inspect such equipment,
            and in the event of such return and acceptance of the condition
            of the equipment, the value of such returned equipment shall not
            be deducted from the amounts payable by Embraer as provided for
            above. In the event Embraer fails to return the deposits and
            progress payments with accumulated interest to Buyer as provided
            for herein, Embraer shall also pay to Buyer additional interest
            of [*] per month on such outstanding amounts not paid by Embraer
            from the date on which such payments were to have been made until
            receipt by Buyer. In addition to and not in lieu of this remedy
            the Buyer may seek to recover damages for breach of Article 9.b.5
            pursuant to Article 23.a.

      c.    If Buyer terminates this Agreement before an Aircraft Actual
            Delivery Date for any reason not attributable to Embraer's default
            under this Agreement or, if Embraer terminates this Agreement as to
            any Aircraft or in its entirety pursuant to Article 7.h. or Article
            4.c., Buyer shall pay to Embraer the amount of all deposits and
            progress payments due and owing as of the date of such termination
            under this Agreement and shall indemnify Embraer for the value of
            equipment previously delivered and/or services previously performed
            by Embraer specifically for Buyer, permitted assigns, and
            prospective assigns, and for the reasonable costs and expenses of
            reconfiguring Aircraft for sale to another customer. Such costs and
            expenses shall be based on Embraer's then prevailing price list. For
            these


- ----------
* Confidential


            purposes Embraer may, in its sole discretion, retain all amounts
            previously paid by Buyer to apply as part of the payments of the
            damages resulting from such default on the part of Buyer.

      d.    If Buyer terminates this Agreement in respect to an Aircraft or all
            Aircraft, as the case may be, pursuant to Articles 9.c or 11.h ,
            Embraer, upon Buyer's request, shall within five (5) Business Days
            after Embraer receives the notice of termination referred to above,
            return to Buyer all amounts previously paid by Buyer with respect to
            the relevant Aircraft, with interest at the [*] in effect on the
            date of receipt of such amounts. No other penalty or indemnity shall
            be due from Embraer in this case. In the event Embraer fails to
            return the deposits and progress payments with accumulated interest
            to Buyer as provided for herein, Embraer shall also pay to Buyer
            additional interest of [*] per month on such outstanding amounts
            not paid by Embraer from the date on which such payments were to
            have been made until receipt by Buyer.

      e.    In the case of a termination of this Agreement or as to any
            Aircraft, the indemnities set forth in Articles 17 and 25 of this
            Agreement and the warranty as provided for in Attachment C hereto
            and as such warranty may have been assigned pursuant to Article16.a
            with respect to any delivered Aircraft and Spares shall survive the
            termination of this Agreement or the termination of this Agreement
            with respect to one or more Aircraft.

24.   OPTION FOR THE PURCHASE OF ADDITIONAL EMB-145 AIRCRAFT

      Buyer shall have the option to purchase the Option Aircraft, to be
      delivered at a rate of one Aircraft every other month beginning March 2001
      through May 2004, subject to the terms and conditions of this Article 24.

      The Option Aircraft shall be divided into four groups of five aircraft.
      The groups shall be referred to respectively as " Group One", " Group
      Two", " Group Three", and "Group Four". The groups shall be referred to
      collectively as the "Option Groups" and each may be referred to
      individually as an "Option Group".

      a.    INITIAL DEPOSIT A deposit of US [*]

      b.    BASIC PRICE The unit basic price of each Option Aircraft shall be
            equal to the Basic Price, provided that such Option Aircraft be
            delivered to Buyer between March 2001 and May 2004 and in the same
            configuration, specification and installations specified in
            Attachment "A", as such attachment is written on the date of
            signature of this Agreement unless otherwise modified by the Parties
            and the costs for such changes shall be in addition to the Basic
            Price.

      c.    ESCALATION The unit basic price of each relevant Option Aircraft
            shall be escalated according to [*]


- ---------
* Confidential



      d.    DEPOSIT AND PROGRESS PAYMENTS The payment of the price specified in
            item "c" above, shall be made according to the following:

            1.    [*]

            2.    [*]

            3.    [*]

            4.    [*]

            5.    [*]

            6.    [*]

      e.    CONFIRMATION OF GROUPS ONE AND TWO Buyer's options to purchase
            Option Group One and Option Group Two shall be confirmed on or
            before [*] specified above for the first Option Aircraft of
            that Option Group.


- ----------
* Confidential


      f.    CONFIRMATION OF GROUPS THREE AND FOUR If Buyer confirms Group One
            and Group Two in accordance with item "e" above, Buyer shall receive
            an option to purchase Group Three. If Buyer confirms Group Three in
            accordance with this item "f" , Buyer shall receive an option to
            purchase Group Four. The delivery positions in Group Three and Group
            Four (the "Proposed Delivery Positions") are subject to availability
            until confirmed by Embraer in accordance with this item "f".

            1.    If Buyer has satisfied the requirements of items "a" and "e"
                  above and has notified Embraer in writing that it desires to
                  confirm the relevant Option Group, no later than [*] in that
                  Option Group, Embraer shall notify Buyer whether the Proposed
                  Delivery Positions are available for the Option Group. This
                  notice shall be referred to as the "Confirmation Notice" and
                  shall be provided no later than [*]

            2.    The Confirmation Notice shall offer either the Proposed
                  Delivery Positions for the Option Group or other delivery
                  positions. If the Confirmation Notice offers the Proposed
                  Delivery Positions for the Option Group, or if Buyer accepts
                  the other offered delivery positions within [*] after receipt
                  of the Confirmation Notice, then the offered delivery
                  positions shall immediately be removed from the market by
                  Embraer, Buyer shall be deemed to have confirmed the Option
                  Group, and the Option Aircraft in the Option Group shall be
                  purchased pursuant to this Agreement.

      g.    FAILURE TO CONFIRM; RETURN OF DEPOSIT If Buyer (i) fails to confirm
            an Option Group as provided in items "e" or "f" above, (ii)
            renounces its rights to receive any Option Group, or (iii) fails to
            obtain an option to purchase Group Three or Group Four, Buyer shall
            have no right to acquire Option Aircraft in that Option Group and
            the relevant portion of the deposit made according to item "d.1"
            above, if any, shall be refunded to Buyer within five (5) Business
            Days after Buyer's failure to confirm, renunciation of , or failure
            to obtain, an option to purchase the Option Group, with interest at
            the [*] commencing on the date such deposits were paid to Embraer,
            or at Buyer's option Embraer shall apply any amounts paid by Buyer
            to any amounts then due and owing to Embraer by Buyer. In the event
            Embraer fails to return the deposits with accumulated interest to
            Buyer as provided for herein, Embraer shall also pay to Buyer
            additional interest of [*] per month on such outstanding amounts
            not paid by Embraer from the date on which such payments were to
            have been made until receipt by Buyer.

      h.    SERVICES The services Embraer will provide pursuant to Article 13 in
            regard to the Option Aircraft which will be delivered pursuant to
            this Article 24 shall be in accordance with Article 13.e.1 - 4
            above, but such Services per Option Aircraft shall be limited to one
            (1) pilot Familiarization Program for up to [*] pilots per
            Option Aircraft, one (1) Maintenance Familiarization Course for up
            to [*]


- ---------
* Confidential


            qualified mechanics per Option Aircraft, and one (1) Flight
            Attendant Familiarization Course for up to [*] flight
            attendants per Option Aircraft.

25.   INDEMNITY

      Buyer agrees to indemnify and hold harmless Embraer and Embraer's
      officers, agents, employees and assignees from and against all
      liabilities, damages, losses, judgments, claims and suits, including costs
      and expenses incident thereto, which may be suffered by, accrued against,
      be charged to or recoverable from Embraer and/or Embraer's officers,
      agents, employees and assignees by reason of loss or damage to property or
      by reason of injury or death of any person (excluding Embraer's officers,
      directors, employees or agents) resulting from or in any way connected
      with the performance of services by employees, representatives or agents
      of Embraer for or on behalf of Buyer related to Aircraft delivered by
      Embraer to Buyer or a Designated Operator, including, but not limited to,
      technical operations, maintenance, and training services and assistance
      performed while on the premises of Embraer, a Designated Operator, or
      Buyer, while in flight on Buyer-owned Aircraft or while performing any
      other service, at any place, in conjunction with the Aircraft except to
      the extent caused by the gross negligence or willful misconduct of
      Embraer, its employees or agents.

26.   NOTICES

      All notices permitted or required hereunder shall be in writing in the
      English language and sent, by registered mail, express courier or
      facsimile, to the attention of the Sr. Manager - Contracts as to Embraer
      and of the President as to Buyer, to the addresses indicated below or to
      such other address as either party may, by written notice, designate to
      the other. In the event notice is issued by registered mail or express
      courier, it shall be deemed received on the day on which the party
      receiving such notice executes the delivery receipt . In the event notice
      is issued by facsimile, it shall be deemed received on the day on which
      the sender of such notice receives a facsimile confirmation receipt of
      such facsimile notice.

            a. Embraer:

            EMBRAER - Empresa Brasileira de Aeronautica S.A.
            Av. Brigadeiro Faria Lima, 2170
            12.227-901 Sao Jose dos Campos - SP
            BRAZIL
            Attention:
            Senior Manager, Contract Administration
            Telephone: (55-12)345-1410
            Facsimile: (55-12)345-1257

            b. Buyer


- --------
* Confidential


         Solitair Corp.
         411 West Putnam Avenue, Suite 125
         Greenwich, CT  06830
         USA
         Attention: Frederick Simon, President
         Telephone: (203) 862-7011
         Facsimile: (203) 862-7490

         with copies to
         Wexford Management LLC
         411 West Putnam Avenue, Suite 125
         Greenwich, CT  06830
         USA
         Attention: Jay L. Maymudes, Principal and Chief Financial Officer
         Telephone: 203-862-7050
         Facsimile: 203-862-7350

27.   CONFIDENTIALITY

      Neither party shall have the right to disclose the terms of this Agreement
      except as required by law. To the fullest extent permitted by law, except
      as aforesaid, neither party shall disclose any portion of this Agreement
      or its Attachments, amendments or any other supplement, to any third
      party, other than to its accountants, attorneys, agents, consultants or
      permitted assignees without the other party's prior written consent, and
      any such accountants, attorneys, agents consultants or permitted assignees
      shall agree in writing to be bound by the terms of this Article 27.
      Without limiting the foregoing, in the event either party is legally
      required to disclose the terms of this Agreement, the parties agree to
      exert their reasonable best efforts to request confidential treatment of
      the clauses and conditions of this Agreement relevantly designated by
      either party as confidential. Notwithstanding the foregoing, nothing
      contained herein shall limit the ability of the Buyer (i) to disclose (a)
      information relating to the specifications of the Aircraft, (b) the
      delivery schedule relating to the Aircraft, or (c) copies of Attachments
      A, B, C, F, or G to the Agreement to any prospective buyer, lessor,
      assignee or any agent or broker with respect to any Aircraft, or (ii) to
      disclose, subject to a confidentiality agreement reasonably acceptable to
      Embraer, copies of relevant portions of this Agreement to any prospective
      lender with respect to any Aircraft (provided that such lender is a
      permitted lender pursuant to Article 16.b).

28.   INTEGRATED AGREEMENT

      All Attachments referred to in this Agreement and attached hereto are, by
      such reference and attachment, incorporated in this Agreement. This
      Agreement, including all Attachments and all amendments, modifications and
      supplements, is herein and hereinafter called the "Agreement" or the
      "Purchase Agreement".





29.   NEGOTIATED AGREEMENT

      This Agreement, including all of its Attachments, has been the subject of
      discussion and negotiation and is fully understood by the Parties, and the
      rights, obligations and other agreements of the Parties contained in this
      Agreement are the result of complete discussion and negotiation between
      the Parties.

30.   COUNTERPARTS

      This Agreement may be signed by the Parties in any number of separate
      counterparts with the same effect as if the signatures thereto and hereto
      were upon the same instrument and all of which when taken together shall
      constitute one and the same instrument.

31.   ENTIRE AGREEMENT

      This Agreement constitutes the entire agreement of the Parties with
      respect to the sale described as its subject and supersedes all previous
      and connected negotiations, representations and agreements between the
      Parties. This Agreement may not be altered, amended or supplemented except
      by a written instrument executed by the Parties.

32.   NO WAIVER

      Any party's forbearance from exercising any claim or remedy provided for
      herein shall not be deemed a waiver of such claim or remedy, and shall not
      relieve the other Party from the performance of such obligation at any
      subsequent time or from the performance of any of its other obligations
      hereunder.

33.   REPRESENTATIONS AND WARRANTIES

      A. Effective as of the date of this Agreement and as of the Actual
      Delivery Date of each Aircraft, Embraer represents and warrants that:

      1.    Embraer is a corporation duly organized, validly existing and in
            good standing under the laws of Brazil, is the manufacturer of the
            EMB-145 LR Aircraft and has all necessary corporate power and
            authority to conduct the business in which it is currently engaged
            and to enter into and perform its obligations under this Agreement.

      2.    Embraer has taken, or caused to be taken, all necessary corporate
            action to authorize the execution and delivery of this Agreement and
            the performance of its obligations hereunder.




      3.    The execution and delivery by Embraer of this Agreement, the
            performance by Embraer of its obligations hereunder and the
            consummation by Embraer of the transactions contemplated hereby, do
            not and will not (A) violate or conflict with any provision of the
            constitutional documents of Embraer, (B) violate or conflict with
            any law, rule, or regulation applicable to or binding on Embraer or
            (C) violate or constitute any breach or default (other than a breach
            or default that would not (x) result in a material adverse change to
            Embraer or (y) adversely affect Embraer's ability to perform any of
            its obligations hereunder),under any agreement, instrument or
            document to which Embraer is a party or by which Embraer or any of
            its properties is or may be bound or affected.

      4.    The execution and delivery by Embraer of this Agreement, the
            performance by Embraer of its obligations hereunder and the
            consummation by Embraer of the transactions contemplated hereby do
            not and will not require the consent, approval or authorization of,
            or the giving of notice to, or the registration with, or the
            recording or filing of any documents with, or the taking of any
            other action in respect of, (A) any trustee or other holder of any
            indebtedness or obligation of Embraer, (B) any national, state or
            municipal government regulatory, judicial, or administrative entity
            of competent jurisdiction, or (C) any other party.

      5.    This Agreement has been duly authorized, executed and delivered by
            Embraer and, assuming the due authorization, execution and delivery
            hereof by the other Party constitutes the legal, valid and binding
            obligation of Embraer enforceable against Embraer in accordance with
            the terms hereof, except as such enforceability may be limited by
            bankruptcy, insolvency, reorganization, receivership, moratorium and
            other similar laws affecting the rights of creditors generally and
            general principles of equity, whether considered in a proceeding at
            law or in equity.

      6.    Each of the foregoing representations and warranties shall survive
            the execution and delivery of this Agreement and any termination
            hereof.

      B Effective as of the date of this Agreement and as of the Actual Delivery
      Date of each Aircraft, Buyer represents and warrants that:

      1.    Buyer is a corporation duly organized, validly existing and in good
            standing under the laws of the State of Delaware and has all
            necessary corporate power and authority to conduct the business in
            which it is currently engaged and to enter into and perform its
            obligations under this Agreement.

      2.    Buyer has taken, or caused to be taken, all necessary corporate
            action to authorize the execution and delivery of this Agreement and
            the performance of its obligations hereunder.




      3.    The execution and delivery by Buyer of this Agreement, the
            performance by Buyer of its obligations hereunder and the
            consummation by Buyer of the transactions contemplated hereby, do
            not and will not (A) violate or conflict with any provision of the
            constitutional documents of Buyer, (B) violate or conflict with any
            law, rule, or regulation applicable to or binding on Buyer or (C)
            violate or constitute any breach or default (other than a breach or
            default that would not (x) result in a material adverse change to
            Buyer or (y) adversely affect Buyer's ability to perform any of its
            obligations hereunder),under any agreement, instrument or document
            to which Buyer is a party or by which Buyer or any of its properties
            is or may be bound or affected.

      4.    The execution and delivery by Buyer of this Agreement, the
            performance by Buyer of its obligations hereunder and the
            consummation by Buyer of the transactions contemplated hereby do not
            and will not require the consent, approval or authorization of, or
            the giving of notice to, or the registration with, or the recording
            or filing of any documents with, or the taking of any other action
            in respect of, (A) any trustee or other holder of any indebtedness
            or obligation of Buyer, (B) any national, federal, state or local
            government regulatory, judicial, or administrative entity of
            competent jurisdiction (other than recordation of the Aircraft with
            FAA) or (C) any other party.

      5.    This Agreement has been duly authorized, executed and delivered by
            Buyer and, assuming the due authorization, execution and delivery
            hereof by the other Party constitutes the legal, valid and binding
            obligation of Buyer enforceable against Buyer in accordance with the
            terms hereof, except as such enforceability may be limited by
            bankruptcy, insolvency, reorganization, receivership, moratorium and
            other similar laws affecting the rights of creditors generally and
            general principles of equity, whether considered in a proceeding at
            law or in equity.

      6.    Each of the foregoing representations and warranties shall survive
            the execution and delivery of this Agreement and any termination
            hereof.

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]





IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and delivered by their proper and duly authorized officers and to be effective
as of the day and year first above written.

   EMBRAER - EMPRESA BRASILEIRA              SOLITAIR CORP.
      DE AERONAUTICA S.A.


By:_____________________________             By: /s/ Frederick Simon
                                                 -----------------------------
Name: __________________________             Name:  Frederick Simon
                                                   ---------------------------
Title: _________________________             Title: President
                                                    --------------------------


By:_____________________________

Name: __________________________

Title: _________________________

Date:___________________________             Date: 6/17/98
                                                   ---------------------------
Place:__________________________             Place: Greenwich, CT
                                                    --------------------------
Witness:________________________             Witness: /s/ Arthur Amron
                                                      ------------------------
Name:___________________________             Name: Arthur Amron
                                                   ---------------------------






- --------------------------------------------------------------------------------
                     ATTACHMENT "A" WITH MODIFICATIONS FROM
                        AMENDMENT NO. 1, NO. 2 AND NO. 3
- --------------------------------------------------------------------------------

                              NON OFFICIAL DOCUMENT
                                 REFERENCE ONLY

        AIRCRAFT SPECIFIC CONFIGURATION, FINISHING AND REGISTRATION MARKS

1.    STANDARD AIRCRAFT

      The Aircraft shall be manufactured according to the standard configuration
      specified in the Technical Description TD-145/010, dated January 1998
      (Appendix I) (the "Technical Description") and the optional equipment
      described in item 2 below.

2.    OPTIONAL EQUIPMENT

      2.1   OPTIONS TO THE STANDARD AVIONICS CONFIGURATION

            a)    CAT-II
            b)    2nd Radio Altimeter
            c)    2nd DME
            d)    2nd ADF
            e)    2nd Transponder Mode S
            f)    Selcal - Trimble
            g)    FMS/GPS - Honeywell
            h)    EGPWS
            i)    VHF (1st and 2nd) 8,33 khz spacing


      2.2   OPTIONAL SYSTEM / OTHER EQUIPMENT

            a.    Thrust Reversers
            b.    LR version
            c.    Cockpit Floodlight
            d.    External Painting (with capability to be reverted to polished)
            e.    Service Door Sill Protection
            f.    Cargo Door Sill Protection
            g.    Cargo Door Light
            h.    Wiring provision on the panel lamps for Filament Test
            i.    Structural provision for 10(degree)rudder deflection
            j.    Wiring provision for the nose landing gear door position
                  indication in the EICAS
            k.    Provision for warning of the selection of Flaps 22(degree)to
                  take-off
            l.    Provision for limitation of the hydraulic pressure on the
                  speed brake actuator when the aircraft is above 200 knots
            m.    Plug type passenger door




                              NON OFFICIAL DOCUMENT
                                 REFERENCE ONLY

      2.3   INTERIOR OPTIONAL ITEMS

            a.    Interior Option 1
            b.    Audio Entertainment (CD player)
            c.    2nd Attendant kit (include Handset/Cradle)
            d.    Blue Sterile Light
            e.    Baggage Compartment Class C
            f.    Standard main door with structural provisions for plug type
                  door
            g.    Passenger Seats - Customized Cushion Version Top w/
                  Ultra-leather
            h.    Baggage Restraint Net
            i.    Extra Oxygen Mask (3 mask for each double seat)

3.    FINISHING

      a.    EXTERIOR FINISHING:

            The Aircraft shall be painted according to Buyer's or a Designated
            Operator's color and paint scheme which shall be supplied to Embraer
            by Buyer no later than six (6) months prior to the relevant Aircraft
            Contractual Delivery Date.

      b.    INTERIOR FINISHING:

            Buyer shall inform Embraer no later than seven (7) months prior to
            the relevant Aircraft Contractual Delivery Date of its choice of
            materials and colors of all and any item of interior finishing such
            as seat covers, carpet, floor lining on galley areas, side walls and
            overhead lining, galley lining and curtain. The above mentioned
            schedule for definition of interior finishing shall only be
            applicable if Buyer selects its materials from the choices offered
            by and available at Embraer. In case Buyer elects to use different
            materials and or patterns, such schedule shall be agreed between the
            Parties at the time of signature of this Purchase Agreement.

      If Buyer does not supply Embraer with the information in the time period
      as described in Article 3.a and 3.b, the Aircraft will be produced and
      will be made available for Buyer's inspection in the same condition of
      exterior and interior finishing as the first Aircraft.

4.    REGISTRATION MARKS




      The Aircraft shall be delivered to Buyer with the registration marks
      painted on them, which shall be supplied to Embraer by Buyer no later than
      ninety (90) days before each relevant Aircraft Contractual Delivery Date.

IF THERE IS ANY CONFLICT BETWEEN THE TERMS OF THIS ATTACHMENT "A" AND THE TERMS
OF THE TECHNICAL DESCRIPTION, THE TERMS OF THIS ATTACHMENT "A" SHALL PREVAIL.




- --------------------------------------------------------------------------------
                                 ATTACHMENT "B"
- --------------------------------------------------------------------------------

                                FERRY EQUIPMENT,
                   SPARE PARTS POLICY AND LIST OF PUBLICATIONS

1.    FERRY EQUIPMENT

      If it is necessary for any ferry equipment to be installed by Embraer for
      the ferry flight between Brazil and the United States of America, Embraer
      may provide such equipment to Buyer, for a price to be agreed between the
      Parties. In this case, Buyer shall immediately upon its arrival remove
      such ferry equipment from the Aircraft and turn it over to Embraer in
      Brazil at Buyer's own expense.

      If Embraer provides any ferry equipment to Buyer and if such equipment is
      utilized, for any reason, or if such equipment is not returned by Buyer,
      in Embraer's sole judgment, complete and in perfect condition, Buyer shall
      fully indemnify Embraer for the value of such equipment, provided that in
      case of partial utilization of, or damage to any such equipment, the value
      to be charged shall be the price of a new complete set of equipment.

      In such case, the original equipment shall become the property of Buyer,
      and the above mentioned payment shall be made to Embraer by Buyer upon
      presentation of a sight draft by Embraer.

      The presence of an Embraer qualified crew member during the ferry flight
      on the way to Buyer's facilities, to act as second in command to assist in
      handling communication with Air Traffic Control (ATC) while overflying
      Brazilian airspace up to the last stop within Brazilian territory, shall
      depend on previous agreement between the Parties provided that written
      advance notice shall be given from Buyer to Embraer at least thirty (30)
      days prior to the date of such ferry flight.

2.    SPARE PARTS

      2.0   POLICY

            Embraer's spare parts policy is to provide the following categories
            of spares as specified in the respective Embraer publications and
            available to be purchased through Embraer:

            o     Line Replaceable Units (LRU's);
            o     Parts to repair and overhaul components manufactured under
                  Embraer specification to be used only on the EMB-145 Aircraft;
            o     Parts to line maintenance;
            o     Parts to fulfill all maintenance tasks per maintenance manual
                  and/or maintenance plan issued by Embraer;




            o     Embraer-made parts;
            o     Aircraft Ground Equipment (AGE);
            o     Aircraft Ground Equipment spare parts manufactured under
                  Embraer specifications;
            o     Special tools; and
            o     Bulk materials.

      2.1   INITIAL PROVISIONING

            The objective of the IPL is to provide Buyer with accurate technical
            data supplied by Embraer, in order to enable an adequate selection
            of spares, aiming to support initial scheduled maintenance, based
            upon operational parameters established by Buyer or a Designated
            Operator.

      2.2   PRE-PROVISIONING CONFERENCE

            If requested, Embraer will provide a qualified team to attend
            pre-provisioning conferences as necessary to discuss Buyer or a
            Designated Operator requirements and all points of the IPL. Such
            meeting shall be held at a mutually agreed upon time and place. On
            or before such pre-provisioning conference, Embraer shall provide
            Buyer with an initial list of recommended provisioning. Buyer and
            Embraer shall thereafter agree to the actual initial provisioning
            which shall be acquired by Buyer. For the first Firm Aircraft Buyer
            and Embraer shall agree on such initial provisioning on or before
            one hundred eighty (180) days prior to delivery of the first Firm
            Aircraft. For all other Aircraft to be delivered pursuant to this
            Agreement Buyer and Embraer shall agree on such initial provisioning
            on or before two hundred (200) days prior to delivery of each such
            Aircraft.

      2.3   DATA

            Initial provisioning data will be supplied to Buyer or a Designated
            Operator upon request.

            2.3.1 INITIAL PROVISIONING DATA: Embraer will supply initial
                  provisioning data within a time period to be mutually agreed
                  upon by both Party.

            2.3.2 PROVISIONING DATA REVISIONS: As requested, the IPL will have
                  the data updated by incorporating engineering and price
                  changes. Embraer will maintain a master copy of the IPL
                  updated until ninety (90) calendar days after delivery of the
                  last Aircraft of Buyer's Aircraft fleet.

      2.4   SPARE PARTS RECOMMENDATIONS




            Embraer will provide, if requested, a breakdown of recommended spare
            parts to support the components used during the Aircraft operation
            (inventory reprovisioning).

      2.5   DELIVERY OF SPARE PARTS

            Except for those spare parts referred to in item 2.4. above, Spare
            items (initial provisioning spare parts) are normally in inventory
            and available for delivery on the Aircraft Contractual Delivery
            Date. Nevertheless, delivery dates shall be those agreed between the
            Party in the relevant Purchase Agreement. Replenishment of Embraer
            made parts will be in accordance with the lead times quoted by
            Embraer. Embraer will deliver parts in FCA (Free Carrier - Incoterms
            1990) condition, at Sao Jose dos Campos, State of Sao Paulo, Brazil,
            or at any other port of clearance that may be chosen by Embraer and
            informed to Buyer.

      2.6   EMERGENCY SPARE PARTS SERVICE

            Embraer will maintain an emergency spare parts service, twenty four
            (24) hours a day, seven (7) days a week. Embraer will deliver in
            F.C.A. condition at Sao Jose dos Campos, State of Sao Paulo, Brazil,
            or at any other port of clearance that may be chosen by Embraer and
            informed to Buyer, spare parts in inventory needed for
            aircraft-on-ground (AOG) orders within twenty-four (24) hours after
            receipt. Embraer will notify Buyer (or Designated Operator) of the
            action taken to satisfy each emergency in accordance with the
            following schedule:

      --    AOG (Aircraft-on-Ground)                           within 4 hours
      --    Critical (imminent AOG or Work Stoppage)           within 24 hours
      --    Expedite (Less than published or quoted lead time) within 7 days

      2.7   CREDIT FOR SURPLUS SPARE PARTS

            Embraer offers to Buyer a "credit" program for certain surplus parts
            manufactured by Embraer and purchased according to the initial
            provisioning by Buyer and which were recommended in writing by
            Embraer limited to the quantities, part numbers and serial numbers
            (if applicable) identified in the relevant invoices. Such program
            will provide terms no less favorable than the following:

            2.7.1. Credit Program: During the period commencing four (4) years
                   after delivery of the first Aircraft under the initial
                   Purchase Agreement between Buyer and Embraer and ending five
                   (5) years after such delivery, Embraer will, upon receipt of
                   a written request and subject to the exceptions and
                   conditions in paragraphs 2.7.1.1; 2.7.1.2; 2.7.1.3 and
                   2.7.1.4. of this




                   section, offer a credit for new and unused spare parts
                   manufactured by Embraer (i) which were ordered from Embraer
                   by Buyer as initial provisioning for Aircraft in accordance
                   with Embraer's recommendation; (ii) which have been supplied
                   by Embraer under this Agreement and (iii) which are surplus
                   to Buyer's needs. Such credit may be used toward the purchase
                   of spare parts manufactured by Embraer, Technical
                   Publications or Services offered by Embraer.

                   2.7.1.1.   EXCEPTIONS: Embraer will not issue credits for
                              spare parts which were purchased by Buyer in
                              excess to or differently from the parts
                              recommended in writing by Embraer to Buyer as
                              initial provisioning for the Aircraft and for
                              spare parts which have become obsolete or have
                              been superseded by another part as a result of (i)
                              Buyer's modification of an Aircraft for which the
                              spare parts were purchased; (ii) Embraer design
                              improvements (except for spare parts which have
                              become obsolete because of a defect in design);
                              (iii) parts which are shelf-life limited; (iv)
                              damaged parts; or (v) parts that were not properly
                              stored.

                   2.7.1.2.   CREDIT VALUES: The credit for each spare part to
                              be issued by Embraer will be: (i) an amount equal
                              to ninety percent (90%) of the invoice price of
                              the spare part paid to Embraer or (ii) an amount
                              equal to ninety percent (90%) of Embraer's price
                              for the equivalent spare part at the time of the
                              issue of credit, whichever is less.

                   2.7.1.3    DELIVERY OF SURPLUS SPARE PARTS: Spare parts for
                              which a credit has been requested shall be
                              redelivered by Buyer to Embraer with prepaid
                              freight and insurance to Embraer's plant in Sao
                              Jose dos Campos, SP, Brazil, or any other
                              destination as Embraer may reasonably designate.
                              All returned spare parts are subject to Embraer's
                              quality control inspection and acceptance. All
                              spare parts which are rejected by Embraer's
                              quality control and/or are included in the
                              exceptions set forth in paragraph 2.7.1.1
                              hereinabove, will be returned to Buyer at Buyer's
                              expense, no credit being due in this case.




                   2.7.1.4    Credit Issue: After Embraer's acceptance of those
                              items suitable for the credit program, under the
                              terms of this Agreement, Embraer will notify the
                              available credit amount to Buyer and provide all
                              relevant information as to credit utilization.

      2.8.  PARTS EXCHANGE PROGRAM

            According to its prevailing availability, Embraer may offer an
            "exchange program" for repairable parts whenever the vendor does not
            have its own exchange program.

      2.9.  PARTS REPAIR PROGRAM

            For any repair required by Buyer or Designated Operator on any
            Embraer or vendor repairable item, Embraer may assist Buyer or
            Designated Operator to perform such repair in order to ensure the
            shortest turn around time (TAT).

      2.10. PRICING

            Embraer will maintain a spare parts price list updated periodically.
            Items not shown on the list will be quoted on request.

3.    LIST OF PUBLICATIONS

      As provided for in Article 15 of this Agreement, the technical
      publications covering operation and maintenance shall be delivered to
      Buyer in accordance with the following list:



                                                                   QTY
       TITLE                                                     (COPIES)
       -----                                                     --------
                                                                  
OPERATIONAL

1. [*]                                                               [*]
2. [*]                                                               [*]
3. [*]                                                               [*]
4. [*]                                                               [*]
5. [*]                                                               [*]
6. [*]                                                               [*]
7. [*]                                                               [*]
8. [*]                                                               [*]


MAINTENANCE - BASIC SET


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* Confidential


                                                                
9.  [*]                                                            [*]
10. [*]                                                            [*]
11. [*]                                                            [*]
12. [*]                                                            [*]
13. [*]                                                            [*]
14. [*]                                                            [*]
15. [*]                                                            [*]
16. [*]                                                            [*]
17. [*]                                                            [*]



MAINTENANCE SUPPLEMENTARY SET

                                                                
18. [*]                                                            [*]
19. [*]                                                            [*]
20. [*]                                                            [*]
21. [*]                                                            [*]
22. [*]                                                            [*]
23. [*]                                                            [*]
24. [*]                                                            [*]
25. [*]                                                            [*]
26. [*]                                                            [*]



      (*)   One extra copy on board each Aircraft
      (**)  To be delivered by the suppliers directly to Buyer.

If Buyer elects not to take all or any one of the publications above mentioned,
or revisions thereof, no refund or other financial adjustment of the Basic Price
will be made since such publications are offered at no cost to Buyer as referred
to in Article 15.a of the Purchase Agreement.


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- --------------------------------------------------------------------------------
                                 ATTACHMENT "C"
- --------------------------------------------------------------------------------

                 WARRANTY CERTIFICATE - MATERIAL AND WORKMANSHIP

                                     EMB-145

1.    Embraer, subject to the conditions and limitations hereby expressed,
      warrants each Aircraft as follows:

      a.    For a period of thirty-six (36) months from the date of delivery of
            each Aircraft to the first Buyer, each Aircraft will be free from:

            -     Defects in materials, workmanship and manufacturing processes
                  in relation to parts manufactured by Embraer or by its
                  subcontractors holding an Embraer part number;

            -     Defects inherent to the design of the Aircraft and its parts
                  designed or manufactured by Embraer or by its subcontractors
                  holding an Embraer part number.

      b.    For a period of twenty-four (24) months from the date of delivery of
            each Aircraft to the first Buyer, each Aircraft will be free from:

            -     Defects in operation of vendor (Embraer's supplier)
                  manufactured parts, not including the Engines, Auxiliary Power
                  Unit (APU) and their accessories, as well as failures of
                  mentioned parts due to incorrect installation or installation
                  not complying with the instructions issued or approved by
                  their respective manufacturers.

            -     Defects due to non-conformity to the Technical Description
                  Number TD 145 /010 dated January 1998 as may be amended by
                  Buyer's Aircraft Technical Specification referred to in
                  Article 1.b of the Purchase Agreement of the Aircraft.

      Once the above mentioned periods have expired, Embraer will transfer to
      Buyer the original warranties issued by the vendors, if they still exist.

2.    Embraer, subject to the conditions and limitations hereby expressed,
      warrants that:

      a.    All spare parts which have been manufactured by Embraer or by its
            subcontractors holding an Embraer part number, and by vendors which
            will permit their particular identification and which have been sold
            by Embraer or its representatives will, for a period of twenty four
            (24) months from the date of delivery of such spares to Buyer, be
            free from defects of material,




            workmanship, manufacturing processes and defects inherent to the
            design of the above mentioned parts.

      b.    All ground support equipment, which has been designed and
            manufactured by Embraer or by its subcontractors holding an Embraer
            part number and by vendors, not including Engines, APU and their
            accessories, and stamped with a serial number which will permit
            their particular identification and which have been sold by Embraer
            or its representatives will, for a period of twelve (12) months from
            the date of delivery to Buyer of said equipment, be free from
            malfunction, defect of material and manufacture.

      c.    Each Aircraft is composed entirely of vendor parts and parts
            manufactured by Embraer and Embraer subcontractors, and the parts
            manufactured by Embraer and Embraer subcontractors shall have
            Embraer part numbers.

3.    The obligations of Embraer as expressed in this warranty and as specified
      in Article 11.e are limited to replacement, repair or rework of the
      defective item, depending solely upon Embraer's own judgment, of the parts
      that are returned to Embraer or its representatives within a period of
      sixty (60) days after the occurrence of the defect, at Buyer's own expense
      (including but not limited to, freight, insurance, taxes and, customs
      duties), adequately packed, provided that such components are actually
      defective and that the defect has occurred within the periods stipulated
      in this certificate. Should the defective part not be shipped to Embraer
      within such sixty (60) days period, Embraer may in its sole discretion,
      deny the warranty claim. In the event that it is not practical in the
      international commercial transportation industry to return the part or
      component which is the subject of a warranty claim under this Attachment
      C, to Embraer, because of either its extremely large size or its
      relationship to the Airframe, then thirty (30) days after a defect is
      found in such structural component (hereafter referred to as "Structural
      Component"), Buyer shall send notice of such defect to Embraer and
      notwithstanding the above, Buyer shall not be obligated to return such
      Structural Component to Embraer. Embraer shall thereafter send an
      appropriate inspection team to Buyer's facilities to inspect the
      Structural Component for the alleged defect. In the event that Embraer in
      its sole judgment finds the Structural Component defective, it shall
      either repair, rework, or replace the defective Structural Component.

      Notification of any defect claimed under three (3) above must be given to
      Embraer within thirty (30) calendar days after such defect is found.

      Parts supplied to Buyer as replacement for defective parts are warranted
      for the balance of the warranty period still available from the original
      warranty of the exchanged parts. However, freight, insurance, taxes and
      other costs eventually incurred during the shipment to Embraer or its
      representative, re-installation and adjustments are Buyer's
      responsibility.




4.    Embraer will accept no warranty claims under any of the circumstances
      listed below unless it can be demonstrated in accordance with the
      standards of the international aircraft manufacturing industry that such
      operation or maintenance or other circumstance did not cause the defect:

      a.    When the Aircraft has been used in an attempt to break records, or
            subjected to experimental flights, or in any other way not in
            conformity with the flight manual or the airworthiness certificate,
            or subjected to any manner of use in contravention of the applicable
            aerial navigation or other regulations and rules, issued or
            recommended by government authorities of whatever country in which
            the aircraft is operated, when accepted and recommended by I.C.A.O.;

      b.    When the Aircraft or any of its parts have been altered or modified
            by Buyer, without prior approval from Embraer or from the
            manufacturer of the parts through a service bulletin;

      c.    Whenever the Aircraft or any of its parts have been involved in an
            accident, or when parts either defective or not complying to
            manufacturer's design or specification have been used;

      d.    Whenever parts have had their identification marks, designation,
            seal or serial number altered or removed;

      e.    In the event of negligence, misuse or maintenance services done on
            the Aircraft, or any of its parts not in accordance with the
            respective maintenance manual;

      f.    In cases of deterioration, wear, breakage, damage or any other
            defect resulting from the use of inadequate packing methods when
            returning items to Embraer or its representatives.

5.    The warranty hereby expressed does not apply to defects presented by
      expendable items, whose service life or maintenance cycle is lower than
      the warranty period, and to materials or parts subjected to deterioration.

6.    The warranty hereby expressed is established between Embraer and the first
      Buyer, and it cannot be transferred or assigned to others, unless by
      written consent of Embraer, or as otherwise provided for pursuant to
      Article 16 of the Purchase Agreement of which this is an Attachment or
      Article 9 hereof.

7.    THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF Embraer AND REMEDIES OF
      Buyer SET FORTH IN THIS WARRANTY CERTIFICATE ARE EXCLUSIVE AND IN
      SUBSTITUTION FOR, AND Buyer HEREBY WAIVES, RELEASES AND RENOUNCES, ALL
      OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF Embraer AND ANY ASSIGNEE
      OF Embraer AND ALL




      OTHER RIGHTS, CLAIMS AND REMEDIES OF Buyer AGAINST Embraer OR ANY ASSIGNEE
      OF Embraer, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT
      TO ANY NON-CONFORMANCE OR DEFECT OR FAILURE OR ANY OTHER REASON IN ANY
      Aircraft OR OTHER THING DELIVERED UNDER THE PURCHASE AGREEMENT OF WHICH
      THIS IS AN ATTACHMENT, INCLUDING DATA, DOCUMENT, INFORMATION OR SERVICE,
      INCLUDING BUT NOT LIMITED TO:

      a.    ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

      b.    ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
            DEALING OR USAGE OF TRADE;

      c.    ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
            OR NOT ARISING FROM THE NEGLIGENCE OR OTHER RELATED CAUSES OF
            Embraer OR ANY ASSIGNEE OF Embraer, WHETHER ACTIVE, PASSIVE OR
            IMPUTED; AND

      d.    ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
            DAMAGE TO ANY Aircraft, FOR LOSS OF USE, REVENUE OR PROFIT WITH
            RESPECT TO ANY Aircraft OR FOR ANY OTHER DIRECT, INCIDENTAL OR
            CONSEQUENTIAL DAMAGES.

8.    No representative or employee of Embraer is authorized to establish any
      other warranty than the one hereby expressed, nor to assume any additional
      obligation, relative to the matter, in the name of Embraer and therefore
      any such statements eventually made by, or in the name of Embraer, shall
      be void and without effect.

9.    Provided the provisions hereof are still effective in accordance with
      their terms, then Buyer may assign Buyer's rights pursuant to this
      warranty to any entity (but for entities or air carriers which are owned,
      effectively controlled or managed by any other airframe manufacturer which
      competes in the thirty seven (37) to seventy (70) seat turbo jet market
      ("Transferee")) provided Buyer notifies Embraer of the identity of such
      Transferee at least thirty (30) calendar days prior to such transaction.
      In the event such Transferees or Other Transferees (as defined herein)
      subsequently transfer any Aircraft or Spares, any Transferees' or Other
      Transferees' rights which remain pursuant to this Warranty with respect to
      such Aircraft and Spares may also be transferred to any other entity (but
      for entities or air carriers which are owned, effectively controlled or
      managed by any other airframe manufacturer which competes in the thirty
      seven (37) to seventy (70) seat turbo jet market) ("Other Transferees"))
      provided that the Transferees or Other Transferees notify Embraer of the
      identity of such other entity at least sixty (60) calendar days prior to
      such transaction.




- --------------------------------------------------------------------------------
                                 ATTACHMENT "D"
- --------------------------------------------------------------------------------

                                     EMB-145
                               ESCALATION FORMULA

                                       [*]


        [*]

        [*]

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        [*]

        [*]

        [*]

        [*]

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        [*]

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* Confidential


        [*]

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- --------------------------------------------------------------------------------
                                 ATTACHMENT "E"
- --------------------------------------------------------------------------------

                         DISPATCH RELIABILITY GUARANTEE

I.    Definitions

      a.    Available for Dispatch

            An Aircraft which is on the ground and cleared for dispatch by
            signature of the responsible maintenance personnel of the Specific
            Designated Operator, as defined in Article II.a of this Attachment
            E, at least half an hour before the scheduled departure time of the
            initial flight in any given day shall be deemed to be "available for
            dispatch".

      b.    Maintenance Interruption

            1.    A Maintenance Interruption occurs when the malfunction of an
                  item, or necessary checking and/or corrective actions, cause a
                  flight not to be available for dispatch, or a flight delay
                  exceeding 15 minutes.

            2.    A Maintenance Interruption of any or all the flight legs of a
                  multileg flight constitute only one interruption.

            3.    To be accounted as a Maintenance Interruption, any reported
                  malfunction, either verbal or written, must result in
                  maintenance corrective action.

            4.    A repetitive problem shall not be counted as a Maintenance
                  Interruption. However, chronic failures due to design defect
                  of Embraer-manufactured parts or vendor parts with Embraer
                  part numbers shall be counted as Maintenance Interruptions.

      c.    Achieved Dispatch Reliability Percentage ("ADR")

            Achieved Dispatch Reliability Percentage ("ADR") is the actual
            dispatch reliability percentage obtained by the specific Designated
            Operator's fleet of Aircraft in regular revenue service.

            [*]

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* Confidential


                        [*]

II.   Embraer, subject to the conditions and limitations expressed in this
      Attachment E, will guarantee the Aircraft's dispatch reliability
      percentage as follows Aircraft:

      a.    This Dispatch Reliability Guarantee will be applicable only for
            Aircraft first operated by Chautauqua Airlines, Inc. (the "Specific
            Designated Operator") and only so long as the Aircraft are operated
            by the Specific Designated Operator.

      b.    The average ADR for the first 12 months period after commencement of
            commercial operations of the first Aircraft shall be [*]. The
            average ADR for the second 12 months period after commencement of
            commercial operations of the first Aircraft shall be [*]. The
            average ADR for the third 12 month period after commencement of
            commercial operations of the first Aircraft shall be [*] The
            average ADR for the fourth 12 month period after commencement of
            commercial operations of the first Aircraft (the "Final Period")
            shall be [*] (collectively "GDR").

      c.    In the event that the ADR any 12 month period referred to above is
            lower than GDR for the relevant period, Embraer shall diligently,
            after notification by Buyer:

            1.    Develop and offer modification kits to improve ADR under
                  conditions to be mutually agreed to by the Parties;

            2.    Make recommendations concerning Specific Designated Operator's
                  programs, publications and maintenance and operational
                  policies to improve ADR; and

            3.    Take all measures, as deemed necessary and appropriate by
                  Embraer when vendor action does not provide the required
                  improvement in the ADR.

      d.    In the event that the average ADR at the end of any twelve month
            period described in paragraph II.b. above is lower than the GDR for
            such period, Embraer shall credit BUYER for Maintenance
            Interruptions calculated according to the following formula:

            [*]



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* Confidential



            In the event the average ADR at the end of any twelve month period
            described in paragraph II.b. above is greater than the GDR for such
            period, then the negative credit calculated according to the formula
            described above shall be carried over the calculation of the
            subsequent periods, in a cumulative way, in favor of Embraer.

            Buyer or Specific Designated Operator shall calculate measurements
            and submit them to Embraer within 60 days after the end of each
            12-month period referred to in Article II a. of this Attachment E.
            Embraer and Buyer shall attempt to reach an agreement over the data
            within 60 days of the submission. Any achieved credit amount will be
            credited to Buyer 30 days after the Final Period data conciliation.
            Such credit may be used by Buyer only toward future purchases of
            Embraer sold spare parts or technical publications or services
            offered by Embraer, excluding training.

      e.    This dispatch reliability guarantee is based upon the following
            assumptions provided by Specific Designated Operator, and any change
            to the assumptions shall be cause for reevaluation or adjustments of
            this guarantee in Embraer's sole discretion.

            UTILIZATION: [*]

      f.    The following elements are not covered under this guarantee:

            Interruptions of scheduled flights due to reasons other than
            Aircraft mechanical failures, including without limitation:

            -     Air Traffic Control

            -     Weather

            -     Acts of God (i.e. natural disasters, floods and earthquakes,
                  lightning strikes, bird strikes etc.).

            -     Accidents

            -     Incidents

            -     Negligence

            -     Force majeure

            -     Crew refusal

            -     Optional equipment other than that identified on Attachment
                  "A" to this Agreement


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* Confidential


            -     Operational delays not related to maintenance

            -     Passenger and/or baggage loading

            -     Non-availability of spares or equipment, except when Buyer has
                  followed Embraer's I.P. and continuous reprovisioning
                  recommendations as provided for in paragraph II.e. hereof;

            -     Non-availability of personnel;

            -     Operation interruptions or Maintenance Interruptions which
                  could have been prevented if the Minimum Equipment List
                  ("MEL") issued and/or approved by the local regulatory
                  authority was followed

            -     If the FAA grounds Specific Designated Operator's fleet, or
                  one of Specific Designated Operator's Aircraft,

            -     Maintenance problems caused by Specific Designated Operator's
                  negligence or misuse of parts or Specific Designated
                  Operator's failure to take all maintenance actions on the
                  Aircraft as recommended in all applicable maintenance manuals

            -     Maintenance problems involving Aircraft or parts that has/have
                  been involved in an accident, or when parts either defective
                  or not complying to manufacturer's design or specification
                  have been used;

            -     Maintenance problems involving parts that have had their
                  identification marks, designation, seal or serial number
                  altered or removed

            -     Maintenance problem resulting from inadequate parking for
                  shipment and storage.

            -     Conditions that exist prior to dispatch which lead to a flight
                  interruption and could have been prevented by maintenance
                  prior to dispatch (including but not limited to worn, flat and
                  cut tires, servicing (ATA Chapter 12), hard landing, dead
                  batteries, and worn brakes).

III.  The foregoing dispatch reliability guarantee is provided subject to
      Specific Designated Operator's adherence in all material respects to the
      following general conditions:

      a.    Airplane Operation

            Aircraft shall be operated in airline service in accordance with FAA
            regulations and as recommended by Embraer through the official and
            most updated Operations and Airplane Flight Manual. Specific
            Designated Operator shall have available one spare aircraft for each
            twenty Aircraft at all times.

      b.    Inspection Program

            The Aircraft shall be maintained in accordance with the most current
            EMB-145 MRB document and using the "A" and "C" checks intervals
            Specific Designated Operator's program must have provisions for
            escalating the checks intervals as




            soon as the FAA allows. Specific Designated Operator's program
            should also include the use of task cards to assist the maintenance
            personnel in performing inspection tasks.

      c.    Aircraft Manuals

            Specific Designated Operator shall keep a complete set of Embraer
            recommended manuals up-to-date and available to airline personnel
            for assisting them with the maintenance and operation of the
            Aircraft. A set of recommended manuals should be available at all
            maintenance bases (line or heavy) and shall be maintained with the
            latest revisions at all times.

      d.    MEL

            Specific Designated Operator shall keep its MEL up to date, with the
            most current issue.

      e.    Stocking Levels

            Specific Designated Operator shall stock and maintain Embraer and
            suppliers' reasonable recommended spare parts in inventory,
            throughout the guarantee period. There shall be a minimum inventory
            level at each line maintenance base along with the major parts being
            stored at the heavy maintenance facility. Embraer shall provide a
            list of recommended parts inventory to the Specific Designated
            Operator prior to delivery of the first Aircraft and within
            sufficient time for the Specific Designated Operator through Buyer
            to place an order with Embraer or the supplier. Specific Designated
            Operator shall annually provide an inventory list to Embraer which
            shows current stocking levels and the locations of all ERJ-145
            parts, and Embraer will then make any recommendations on additional
            inventory if needed.

      f.    Parts Repair

            All shop repairs shall be performed in FAA certificated and
            authorized repair shops.

      g.    Staff Levels

            Specific Designated Operator shall have available reasonable staff
            to properly maintain the Aircraft during scheduled and unscheduled
            maintenance. This shall include, but not be limited to, mechanics,
            electricians, avionics specialists, inspectors, cleaners, ground
            personnel and flight crews licensed or certified by the FAA as
            required by appropriate FAA regulations.

      h.    Training

            Specific Designated Operator shall put and keep in place a training
            program approved by the FAA, which, at a minimum, shall include the
            following items:

            1.    Initial and recurrent training for pilots in the Aircraft;




            2.    Initial and recurrent training for flight attendants in the
                  Aircraft; and

            3.    Initial and recurrent training for the maintenance staff
                  (airframe, powerplant, electric avionics specialists) in the
                  Aircraft.

                  Any maintenance specialist (engine, APU, avionics) will
                  require suppliers' training.

                  Specific Designated Operator shall train to the above
                  standards any new hired employee who will work in or on the
                  Aircraft.

      i.    Aircraft Cleaning

            Specific Designated Operator shall keep the Aircraft reasonably
            clean, inside and out, by commercial airline standards at all times.
            This includes without limitation, the engines, wheel wells,
            nacelles, landing gear and flight control areas.

      j.    Service Bulletins

            When Embraer recommends that Specific Designated Operator implement
            a service bulletin which improves performance or dispatch
            reliability, enhances flight operations or decreases maintenance
            costs, without materially adversely impacting any of the foregoing,
            Embraer Customer Support Department shall contact Specific
            Designated Operator's Vice President of Maintenance, in writing,
            with recommendations that the service bulletin be complied with.
            Specific Designated Operator will schedule the Aircraft for
            incorporation of such service bulletin within three (3) months, but,
            subject to Embraer's agreement, may schedule it for incorporation
            during a maintenance check, so as to minimize interruption to
            scheduled service.

      k.    Ground Support Equipment

            Embraer shall provide Specific Designated Operator two lists of
            tooling and ground support equipment required to maintain the
            Aircraft which lists shall be subject to Specific Designated
            Operator's reasonable approval. One list will cover line maintenance
            bases while the other will apply to heavy maintenance facilities.
            Specific Designated Operator will be required to maintain these
            levels of required tooling and ground support equipment in good
            working order at all times.

      l.    Reliability Reporting

            Specific Designated Operator shall provide monthly to Embraer a
            complete Aircraft reliability report. This report shall include
            Aircraft total time and cycles, dispatch reliability, on-time
            performance, completion factor, pilot reports, schedule interruption
            description, and component removals. Shop finding reports and tear
            down reports (for each failure completed) by authorized agencies and
            SDR's with date, Aircraft registration, problem description,
            maintenance action, and part number and serial number of the
            components




            removed and installed shall be maintained by the Designated Operator
            and shall be provided to Embraer as requested. Specific Designated
            Operator shall use the ATA 100 chapter breakdown format for all
            reports.

      m.    Rejection

            Specific Designated Operator shall not unreasonably reject Embraer's
            recommendations/changes/solutions which in Embraer's opinion, would
            result in an improvement in Specific Designated Operator's dispatch
            reliability. Any such rejection shall be cause for re-evaluation or
            adjustment of this guarantee in Embraer's sole discretion.

      n.    Certification or Regulatory Changes

            The achieved maintenance interruption shall not take into account
            those interruptions which were originated by conformity to mandatory
            regulatory change.

      o.    Achieved Dispatch Reliability Review Meeting

            An Achieved Dispatch Reliability Review Meeting shall be scheduled ,
            if necessary, and at the end of each six (6) month period of
            Specific Designated Operator's Aircraft operation. Representatives
            of Specific Designated Operator and Embraer shall participate in the
            meetings and will:

            1.    Review current Achieved Dispatch Reliability;

            2.    Eliminate irrelevant or non-Aircraft-intrinsic interruption
                  claims from computed cancellation rates; and

            3.    Review Specific Designated Operator's compliance with Service
                  Bulletins as required by Article III.j of this Attachment E,
                  review disputed claims, and consider methods for improvement
                  of Achieved Dispatch Reliability.

                  Specific Designated Operator shall permit Embraer access to
                  all of its data which can be used in understanding and
                  analyzing the dispatch reliability failure.

IV.   Suspension

      This guarantee shall be automatically suspended and shall not apply during
      the period of any labor disruption or dispute involving a significant work
      action which affects in whole or in part the Aircraft normal operation and
      maintenance.

V.    Specific Designated Operator will not include in the calculation of the
      ADR Maintenance Interruptions occurring under any of the circumstances
      listed below:

      a.    When the Aircraft has been used in an attempt to break records, or
            subjected




            to experimental flights, or in any other way not in conformity with
            the flight manual or the airworthiness certificate, or subject to
            any manner of use in contravention of the applicable aerial
            navigation or other regulations or rules, issued or recommended by
            government authorities of whatever country in which the Aircraft is
            operated, when accepted and recommended by ICAO; and

      b.    When the Aircraft or any of its parts has/have been altered or
            modified by Specific Designated Operator, without prior approval
            from Embraer or from the manufacturer of the parts through a service
            bulletin, provided such approval has not been unreasonably withheld.

VI.   THE GUARANTEES, OBLIGATIONS AND LIABILITIES OF EMBRAER, AND REMEDIES OF
      BUYER SET FORTH IN THIS DISPATCH RELIABILITY GUARANTEE ARE EXCLUSIVE AND
      IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL
      OTHER RIGHTS, CLAIMS, DAMAGES AND REMEDIES OF BUYER AGAINST EMBRAER OR ANY
      ASSIGNEE OF EMBRAER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH
      RESPECT TO ANY ACHIEVED DISPATCH RELIABILITY.

VII.  The terms and conditions of this dispatch reliability guarantee do not
      alter, modify or impair, in any way, the terms and conditions of
      Attachment C (EMB-145 Aircraft WARRANTY CERTIFICATE) to this Agreement.

VIII. The guarantee hereby expressed is established between Embraer and Buyer
      and it cannot be transferred or assigned to others, unless by previous
      written consent of Embraer.

IX.   As of condition of the guarantee hereby expressed, Specific Designated
      Operator shall execute a waiver consistent with Section VII of this
      Attachment E, in a form acceptable to Embraer.




- --------------------------------------------------------------------------------
                                 ATTACHMENT "F"
- --------------------------------------------------------------------------------

                FORM OF APPOINTMENT OF AUTHORIZED REPRESENTATIVE

      ______________ ("Buyer") hereby designates and appoints _________________
as the authorized representative of Buyer for the purpose of inspecting,
reinspecting, and accepting delivery from EMBRAER-Empresa Brasileira de
Aeronautica S.A.("Embraer"), on behalf of and in the name of Buyer, of the
Embraer Model EMB-145 aircraft having Manufacturer's Serial No. 145___
(including the engines, appliances and parts installed thereon, the "Aircraft")
and Spares, as defined in that certain Purchase Agreement GCT-025/98 between
Buyer and Embraer dated June __, 1998, to be delivered by Embraer to Buyer
pursuant to the Purchase Agreement Assignment to be dated as of or about ______
__, 199__ between Solitair Corp. and Buyer, including the authority to accept
delivery of said Aircraft and Spares, and to execute and deliver any additional
documents with respect to the delivery for said Aircraft and Spares in such form
as such authorized representative executing the same shall deem appropriate.

Dated: __________ __, 199__

                                                 _______________________________


                                              By:_______________________________
                                                 Name:
                                                 Title:

The foregoing appointment
is hereby accepted

____________________________
Name:




- --------------------------------------------------------------------------------
                                 ATTACHMENT "G"
- --------------------------------------------------------------------------------

                          FORM OF WARRANTY BILL OF SALE

KNOW ALL MEN BY THESE PRESENT THAT Embraer - Empresa Brasileira de Aeronautica
S.A. ("SELLER"), a Brazilian company, whose address Av. Brigadeiro Faria Lima,
2170 - Putim, Sao Jose dos Campos, Sao Paulo, Brazil, is the owner of good and
marketable title to that certain EMB-145 LR Aircraft bearing Manufacturer's
Serial No. ___________, with all appliances, parts, instruments, appurtenances,
accessories, furnishings and/or other equipment or property incorporated in or
installed on or attached to said engine (hereinafter collectively referred to as
the "Aircraft") purchased by Solitair Corp. ("BUYER") under the Purchase
Agreement No. GCT-025/98, dated as of June __, 1998, including Attachments,
Exhibits, Letters, Amendments and Agreements by and between SELLER and BUYER.

THAT for and in consideration of the sum of US$ 10.00 and other valuable
consideration, receipt of which is hereby acknowledged, SELLER does this
__________ day of __________, 1998, grant, convey, transfer, bargain and sell,
deliver and set over to BUYER and unto its successors and assigns forever, all
of SELLER's rights, title and interest in and to the Aircraft.

THAT SELLER hereby represents and warrants to BUYER, its successors and assigns:

(i)   that SELLER has good and marketable title to the Aircraft and the good and
      lawful right to the Aircraft and the good and lawful right to sell the
      same; and

(ii)  that good and marketable title to the Aircraft is hereby duly vested in
      BUYER free and clear of all claims, liens, encumbrances and rights of
      others of any nature. SELLER hereby covenants and agrees to defend such
      title forever against all claims and demands whatsoever.

This Full Warranty Bill of Sale is governed by the laws of the state of New
York, United States of America.

IN WITNESS WHEREOF, SELLER has caused this instrument to be executed and
delivered by its duly authorized officer and attorney in fact.

Date as of ____________________, 1998.

EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.

By:    ___________________________
Name:  ___________________________
Title: ___________________________




- --------------------------------------------------------------------------------
                                 ATTACHMENT "H"
- --------------------------------------------------------------------------------

                           FORM OF GUARANTY- ASSIGNEE

FOR VALUE RECEIVED, Solitair Corp., a corporation owned, managed, or effectively
controlled by Wexford Management LLC and organized under the laws of Delaware
("Guarantor"), pursuant to Article 16 b. of that certain Purchase Agreement
GCT-025/98 dated as of June __, 1998, among Solitair Corp. ("Buyer") and
EMBRAER-Empresa Brasileira de Aeronautica S.A. ("Embraer"), as the same may be
amended from time to time (the "Purchase Agreement"), does hereby
unconditionally and irrevocably guarantee to Embraer (i) the due and punctual
payment of each amount due and owing that ____(NAME)_____, as assignee of the
Purchase Agreement from Buyer ("Assignee"), is or may become obligated to pay
under and in accordance with the terms of the Purchase Agreement, and (ii) in
the event of any nonpayment, Guarantor agrees to immediately pay, or cause such
payment to be made, of such (such payment obligations of Assignee being herein
referred to as the "Obligations"). Guarantor further agrees to pay all
reasonable expenses (including, without limitations all reasonable fees and
disbursements of counsel) that may be paid or incurred in enforcing any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, Guarantor under this
Guaranty. The obligations of Guarantor to make any payments hereunder shall be
subject to the terms and conditions of the Purchase Agreement applicable to the
Obligations.

Capitalized terms used but not defined herein shall have the respective meanings
set forth in, and shall be construed and interpreted in the manner described in,
the Purchase Agreement.

Guarantor hereby waives notice of acceptance of this Guaranty, and agrees that,
in its capacity as a guarantor, it shall not be required to consent to, or to
receive any notice of, any supplement to or amendment of, or waiver or
modification of the terms of, the Purchase Agreement.

This Guaranty is being furnished to induce Embraer to execute an acknowledgement
of assignment of the Purchase Agreement to Assignee.

Guarantor represents and warrants that, as of the date hereof:

a.    Guarantor is a corporation duly organized, validly existing and in good
      standing under the laws of Delaware and has all necessary corporate power
      and authority to conduct the business in which it is currently engaged and
      to enter into and perform its obligations under this Guaranty.

b.    Guarantor has taken, or caused to be taken, all necessary corporate action
      to authorize the execution and delivery of this Agreement and the
      performance of its obligations hereunder.




c.    The execution and delivery by Guarantor of this Guaranty, the performance
      by Guarantor of its obligations hereunder and the consummation by
      Guarantor of the transactions contemplated hereby, do not and will not (A)
      violate or conflict with any provision of the certificate of incorporation
      or by-laws of Guarantor, (B) violate or conflict with any law, rule, or
      regulation applicable to or binding on Guarantor or (C) violate or
      constitute any breach or default (other than a breach or default that
      would not (x) result in a material adverse change to Guarantor or (y)
      adversely affect Guarantor's ability to perform any of its obligations
      hereunder) under any agreement, instrument or document to which Guarantor
      is a party or by which Guarantor or any of its properties is or may be
      bound or affected.

d.    The execution and delivery by Guarantor of this Guaranty, the performance
      by Guarantor of its obligations hereunder and the consummation by
      Guarantor of the transactions contemplated hereby do not and will not
      require the consent, approval or authorization of, or the giving of notice
      to, or the registration with, or the recording or filing of any documents
      with, or the taking of any other action in respect of, (A) any trustee or
      other holder of any indebtedness or obligation of Assignee, (B) any
      national, federal, state or local government regulatory, judicial, or
      administrative entity of competent jurisdiction, or (C) any other party.

e.    This Guaranty has been duly authorized, executed and delivered by
      Guarantor and constitutes the legal, valid and binding obligation of
      Guarantor enforceable against Guarantor in accordance with the terms
      hereof, except as such enforceability may be limited by bankruptcy,
      insolvency, reorganization, receivership, moratorium and other similar
      laws affecting the rights of creditors generally and general principles of
      equity, whether considered in a proceeding at law or in equity.

f.    Each of the foregoing representations and warranties shall survive the
      execution and delivery of this Guaranty.

No failure or delay or lack of demand, notice or diligence in exercising any
right under this Guaranty shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right under this Guaranty.

This Guaranty is an absolute, unconditional and continuing guaranty of payment
and not of collection. Guarantor waives any right to require that any right to
take action against Assignee be exhausted or that resort be made to any security
prior to action being taken against Guarantor.

In the event that this Guaranty or the Purchase Agreement shall be terminated,
rejected or disaffirmed as a result of bankruptcy, insolvency, reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
proceedings with respect to Assignee, Guarantor's obligations hereunder to
Embraer shall continue to the same




extent as if the same had not been so terminated, rejected or disaffirmed.
Guarantor shall and does hereby waive all rights and benefits that might , in
whole or in part, relieve it from the performance of its duties and obligations
by reason of any proceeding as specified in the preceding sentence, and
Guarantor agrees that it shall be liable for all sums guaranteed, in respect of
and without regard to, any modification, limitation or discharge of the
liability of Assignee that may result from any such proceedings and
notwithstanding any stay, injunction or other prohibition issued in any such
proceedings. Furthermore, the obligation of Guarantor hereunder will not be
discharged by: (a) any extension or renewal of any obligation of Assignee under
the Purchase Agreement; (b) any modification of, or amendment or supplement to,
any such Purchase Agreement; (c) any furnishing or acceptance of additional
security or any release of any security; (d) any waiver, consent or other action
or inaction or any exercise or non-exercise of any right, remedy or power with
respect to Assignee; (e) any change in the structure of the Assignee, any change
in ownership of the shares of capital stock of Guarantor or Assignee or any
merger or consolidation of either thereof into or with any other person; (f) any
assignment, transfer, sublease or other arrangement by which Assignee transfers
or loses control of the use of the Aircraft or any part thereof; or (g) any
other occurrence whatsoever, except payment in full of all amounts payable by
Assignee under the Purchase Agreement and performance in full of all the
Obligations in accordance with the terms and conditions of the Purchase
Agreement.

Guarantor understands and agrees that its obligations hereunder shall be
continuing, absolute and unconditional without regard to, and Guarantor hereby
waives any defense to, or right to seek a discharge of, its obligations
hereunder with respect to; (a) the validity, legality or enforceability of the
Purchase Agreement, any of the Obligations or any collateral security therefor
or guaranty or right of offset with respect thereto at any time or from time to
time held by Embraer; (b) any defense, setoff or counterclaim (other than a
defense of payment, performance (including payment or performance attributable
to a right of setoff provided for in the Purchase Agreement that may at any time
be available to or be asserted by Assignee) or breach by either party to the
Purchase Agreement until such breach is resolved under the terms of the Purchase
Agreement); or (c) any other circumstances whatsoever (with or without notice to
or knowledge of Assignee or Guarantor) that constitutes, or might be construed
to constitute, an equitable or legal discharge of Assignee or the Obligations,
or of Guarantor under this Guaranty, in bankruptcy or in any other instance.

Notwithstanding any payment or payments made by Guarantor hereunder or any set
off or application of funds of Guarantor by Embraer, Guarantor shall not be
entitled to be subrogated to any of the rights of Embraer against Assignee or
any collateral, security or guaranty or right of set off held by Embraer for the
payment of the Obligations, nor shall Guarantor seek or be entitled to seek any
reimbursement from Assignee in respect of payments made by Guarantor hereunder,
until all amounts and performance owing to Embraer by Assignee on account of the
Obligations are paid and performed in full. The obligations of Guarantor
hereunder shall be automatically reinstated if and to the extent that any
payment by or on behalf of Assignee in respect of any of the




Obligations is rescinded or must be otherwise restored by any holder of any of
the Obligations as a result of any proceedings in bankruptcy or reorganization
or similar proceedings and Assignee agrees that it will reimburse such holders
on demand for all reasonable expenses (including, without limitation, all
reasonable fees and disbursements of counsel) incurred by such holders in
connection with such rescission or restoration.

Any provision of this Guaranty that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

This Guaranty shall be binding upon the successors and assigns of Guarantor;
provided, that no transfer, assignment or delegation by Guarantor, other than a
transfer, assignment or delegation by operation of law, without the consent of
Embraer, shall release Guarantor from its liabilities hereunder. Subject to the
second preceding paragraph, this Guaranty shall terminate and be of no further
force and effect upon the performance and observance in full of the Obligations.

All notices, requests and demands to or upon Guarantor or any beneficiary shall
be mailed in accordance with the terms of Article 34 of the Purchase Agreement.
Guarantor hereby agrees to be bound as if it were the Assignee by the provisions
of Articles 20, 21, 23, and 25 of the Purchase Agreement, which are incorporated
herein by reference as if fully set forth herein.

Dated: _____ __,  199__

SOLITAIR CORP.


By:  _______________________________
     Name:
     Title:

EX-10.13(A)

                                                                Exhibit 10.13(a)

               AMENDMENT NUMBER 1 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 1 To Purchase Agreement GCT-025/98, dated as of November
12th, 1998 ("Amendment No.1") relates to the Purchase Agreement GCT-025/98
between EMBRAER-Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and Solitair
Corp. ("SOLITAIRBUYER") (the "Purchase Agreement"), dated June 17, 1998. This
Amendment No.1 is between EMBRAER and BUYER, collectively referred to herein as
the "Parties".

This Amendment No.1 constitutes an amendment and modification regarding the
incorporation of Changes and other modifications, pursuant to Article 11, items
"a" and "g" of the Purchase Agreement. All terms defined in the Purchase
Agreement and not defined herein shall have the meaning given in the Purchase
Agreement when used herein, and in case of any conflict between this Amendment
No.1 and the Purchase Agreement, this Amendment No.1 shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    CONFIGURATION CHANGES

      1.1   Item 2.1 of Attachment A to the Purchase Agreement, "OPTIONS TO THE
            STANDARD AVIONICS CONFIGURATION" is hereby amended to read as
            follows:

          " a)    CAT-II
            b)    2nd Radio Altimeter
            c)    2nd DME
            d)    2nd ADF
            e)    2nd Transponder Mode S
            f)    Selcal - Trimble
            g)    FMS/GPS - Honeywell
            h)    EGPWS
            i)    VHF (1st and 2nd) 8,33 khz spacing"

      1.2   Item 2.2 of Attachment A to the Purchase Agreement, "OPTIONAL
            SYSTEM/OTHER EQUIPMENT" is hereby amended by inserting after item
            "b" the following:

            ".....
            c)    Cockpit Floodlight
            d)    External Painting (with capability to be reverted to polished)
            e)    Service Door Sill Protection
            f)    Cargo Door Sill Protection
            g)    Cargo Door Light"

      1.3   Item 2.3 of Attachment A to the Purchase Agreement, "INTERIOR
            OPTIONAL ITEMS" is hereby amended to read as follows:

          " a) Interior Option 1
            b)    Audio Entertainment (CD player)



            c)    2nd Attendant kit (include Handset/Cradle)
            d)    Blue Sterile Light
            e)    Baggage Compartment Class C
            f)    Standard main door
            g)    Passenger Seats - Customized Cushion Version Top w/
                  Ultra-leather
            h)    Baggage Restraint Net
            i)    Extra Oxygen Mask (3 mask for each double seat)"

      1.4   The Aircraft Basic Price described in Article 3 of the Purchase
            Agreement will be increased in the amount of US$ 455,532.00 (Four
            hundred fifty five thousand five hundred thirty two United States
            dollars) in July 1997 economic conditions.

2.    MISCELLANEOUS

All other provisions of the Purchase Agreement which have not been specifically
amended or modified by this Amendment shall remain valid in full force and
effect without any change.

IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No.1 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By   /s/ Frederico Fleury Curado                 By  /s/ Frederick Simon
     ----------------------------                    ----------------------

Name:  Frederico Fleury Curado                   Name  Frederick Simon
     ----------------------------                     ---------------------

Title: E.V.P.--Commercial                        Title: President
     ----------------------------                      --------------------

By  /s/ Satoshi Yokota                           Date:  11-24-98
    -----------------------------                      --------------------

Name:  /s/ Satoshi Yokota                        Place: Greenwich, CT
    -----------------------------                      --------------------

Title: E.V.P.--Industrial
      ---------------------------


Date: November 24, 1998
      ---------------------------

Place: Sao Jose dos Campos, Brazil
       ---------------------------

EX-10.13(B)

                                                                Exhibit 10.13(b)

               AMENDMENT NUMBER 2 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 2 to Purchase Agreement GCT-025/98, dated as of December
2nd, 1998 ("Amendment No. 2") relates to the Purchase Agreement GCT-025/98
between EMBRAER-Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and Solitair
Corp. ("BUYER") dated June 17, 1998 as amended by Amendment No. 1 to the
Purchase Agreement GCT-025/98, dated November 12, 1998 (together referred to
herein as the "Agreement"). This Amendment No. 2 is between EMBRAER and BUYER,
collectively referred to herein as the "Parties".

This Amendment No. 2 constitutes an amendment and modification regarding the
incorporation of Changes and other modifications, pursuant to Article 11, items
"a" and "g" of the Agreement. All terms defined in the Agreement and not defined
herein shall have the meaning given in the Agreement when used herein, and in
case of any conflict between this Amendment No.2 and the Agreement, this
Amendment No.2 shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    CONFIGURATION CHANGES

      1.1   Item 2.2 of Attachment A to the Agreement, "OPTIONAL SYSTEM / OTHER
            EQUIPMENT" is hereby amended by inserting after item "g" the
            following:

            "....
            h)    Wiring provision on the panel lamps for Filament Test
            i)    Structural provision for 10(degree)rudder deflection
            j)    Wiring provision for the nose landing gear door position
                  indication in the EICAS
            k)    Provision for warning of the selection of Flaps 22(degree)to
                  take-off
            l)    Provision for limitation of the hydraulic pressure on the
                  speed brake actuator when the aircraft is above 200 knots"

      1.2   Item 2.3.f of Attachment A to the Agreement, "OPTIONAL SYSTEM/OTHER
            EQUIPMENT" is hereby deleted and replaced with:
            ".....
            f)    Standard main door with structural provisions for plug type
                  door
            ..... "

      1.3   Due to the changes described in item 1.1 and 1.2 herein, the
            Aircraft Basic Price described in Article 3 of the Agreement will be

                                     [*]

- --------------------
* Confidential



2.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment shall remain valid in full force and effect
without any change.

IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 2 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By     /s/ Satoshi Yokota                        By     /s/ Frederick Simon
      -----------------------------                  ---------------------------
Name:  Satoshi Yokota                            Name:   Frederick Simon
Title: E.V.P. Industrial                         Title:  President


By     /s/ Frederico Fleury Curado               Date:  _______________________
      -----------------------------              Place: _______________________
Name:   Frederico Fleury Curado
Title:  E.V.P. Commercial


Date:  December 8, 1998
Place: Sao Jose dos Campos, Brazil

EX-10.13(C)

                                                                Exhibit 10.13(c)

               AMENDMENT NUMBER 3 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 3 to Purchase Agreement GCT-025/98, dated as of August 18,
1999 ("Amendment No. 3") relates to the Purchase Agreement GCT-025/98 between
EMBRAER - Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and Solitair Corp.
("BUYER") dated June 17, 1998 as amended from time to time (together referred to
herein as the "Agreement"). This Amendment No. 3 is between EMBRAER and BUYER,
collectively referred to herein as the "Parties".

This Amendment No. 3 constitutes an amendment and modification regarding the
incorporation of Changes and other modifications, pursuant to Article 11, items
"a" and "g" of the Agreement, with respect to the inclusion of the plug type
passenger door. All terms defined in the Agreement and not defined herein shall
have the meaning given in the Agreement when used herein, and in case of any
conflict between this Amendment No.3 and the Agreement, this Amendment No.3
shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    CONFIGURATION CHANGES

      1.1   Item 2.2 of Attachment A to the Agreement, "OPTIONAL SYSTEM / OTHER
            EQUIPMENT" for the FOURTH AIRCRAFT and all subsequent Aircraft is
            hereby amended by inserting after item "l" the following:
            "....
            m)    Plug type passenger door"

      1.2   Due to the changes described in item 1.1, the Aircraft Basic Price
            described in Article 3 of the Agreement for the FOURTH AIRCRAFT and
            all subsequent Aircraft will be [*]. Therefore, the Aircraft
            Basic Price for the FOURTH AIRCRAFT and all subsequent Aircraft
            shall be [*]

2.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment shall remain valid in full force and effect
without any change.

- ----------
* Confidential




IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 3 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By     /s/ Frederico Fleury Curado               By     /s/ Frederick Simon
       -----------------------------                    -----------------------
Name:   Frederico Fleury Curado                  Name:  Frederick Simon
Title:  E.V.P. Commercial                        Title: President


By     /s/ Flavio Rimoli                         Date:  8/18/99
       -----------------------------             Place: Greenwich, CT
Name:  Flavio Rimoli
Title: Director of Contracts


Date:  August 18, 1999
Place: Sao Jose dos Campos, Brazil

EX-10.13(D)

                                                                Exhibit 10.13(d)

               AMENDMENT NUMBER 4 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 4 to Purchase Agreement GCT-025/98, dated as of September
___, 1999 ("Amendment No. 4") relates to the Purchase Agreement GCT-025/98
between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and
Solitair Corp. ("BUYER") dated June 17, 1998 as amended from time to time
(together referred to herein as the "Agreement"). This Amendment No. 4 is
between EMBRAER and BUYER, collectively referred to herein as the "Parties".

This Amendment No. 4 constitutes an amendment and modification regarding the
Confirmation of Option Aircraft Group One, pursuant to Article 31 of the
Purchase Agreement. All terms defined in the Agreement and not defined herein
shall have the meaning given in the Agreement when used herein, and in case of
any conflict between this Amendment No.4 and the Agreement, this Amendment No.4
shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    CONFIRMATION OF OPTION AIRCRAFT GROUP ONE

The date for Confirmation of Option Aircraft Group One shall be changed to
October 15,1999 and Article 24.is hereby deleted and replaced to read as
follows:

      "24.  OPTION FOR THE PURCHASE OF ADDITIONAL EMB-145 AIRCRAFT
            . . . . . . . . . .

      e.    CONFIRMATION OF GROUPS ONE AND TWO Buyer's option to purchase Option
            Group One shall be confirmed [*] the delivery date specified
            above for the first Option Aircraft of Group Two."

2.    PROGRESS PAYMENT FOR THE FIRST AIRCRAFT OF OPTION GROUP ONE

Notwithstanding the provisions of Article 24.d.2 of the Purchase Agreement, the
first progress payment of [*] pursuant to Article 24(d)(1)) for the first
Aircraft of Option Group One shall be due and payable on or before [*]

3.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment shall remain valid in full force and effect
without any change.

- ----------
* Confidential




IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 4 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By /s/ Frederico Fleury Curado                 By  /s/ Frederick Simon
   -----------------------------                  -----------------------------
Name:  Frederico Fleury Curado                 Name:  Frederick Simon
   -----------------------------                  -----------------------------
Title: E.V.P. Commercial                       Title: President
   -----------------------------                  -----------------------------

By  /s/ Flavio Rimoli                          Date:  9-28-99
   -----------------------------                  -----------------------------
Name:   Flavio Rimoli                          Place: Greenwich, CT
   -----------------------------                  -----------------------------
Title: Director of Contracts
   -----------------------------

Date:  9-28-99
     -----------------------------
Place: Sao Jose dos Campos, Brazil
     -----------------------------

EX-10.13(E)

                                                                Exhibit 10.13(e)

               AMENDMENT NUMBER 5 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 5 to Purchase Agreement GCT-025/98, dated as of October
15, 1999 ("Amendment No. 5") relates to the Purchase Agreement GCT-025/98
between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and
Solitair Corp. ("BUYER") dated June 17, 1998 as amended from time to time
(together referred to herein as the "Agreement"). This Amendment No. 5 is
between EMBRAER and BUYER, collectively referred to herein as the "Parties".

This Amendment No. 5 constitutes an amendment and modification regarding the
Confirmation of Option Aircraft Group One, pursuant to Article 31 of the
Purchase Agreement. All terms defined in the Agreement and not defined herein
shall have the meaning given in the Agreement when used herein, and in case of
any conflict between this Amendment No.5 and the Agreement, this Amendment No.5
shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    CONFIRMATION OF OPTION AIRCRAFT GROUP ONE

The date for Confirmation of Option Aircraft Group One shall be changed to
[*] and Article 24.is hereby deleted and replaced to read as follows:

      "24.  OPTION FOR THE PURCHASE OF ADDITIONAL EMB-145 AIRCRAFT
            . . . . . . . . . .

      e.    CONFIRMATION OF GROUPS ONE AND TWO Buyer's option to purchase Option
            Group One shall be confirmed [*]

2.    PROGRESS PAYMENT FOR THE FIRST AIRCRAFT OF OPTION GROUP ONE

Notwithstanding the provisions of Article 24.d.2 of the Purchase Agreement, the
first progress payment of [*] based upon payment pursuant to Article 24(d)(1))
for the first Aircraft of Option Group One shall be due and payable [*]

3.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment shall remain valid in full force and effect
without any change.

- ----------
* Confidential




IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 5 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By /s/ Satoshi Yokota                            By /s/ Frederick Simon
  ----------------------------                     ----------------------------
Name:  Satoshi Yokota                            Name:  Frederick Simon
  ----------------------------                     ----------------------------
Title: E.V.P. Industrial                         Title: President
  ----------------------------                     ----------------------------


By /s/ Flavio Rimoli                             Date:  October 15, 1999
  ----------------------------
Name: Flavio Rimoli                              Place: Greenwich, USA
  ----------------------------
Title: Director of Contracts
  ----------------------------


Date:  October 21, 1999

Place: Sao Jose dos Campos, Brazil

EX-10.13(F)

                                                                Exhibit 10.13(f)

               AMENDMENT NUMBER 6 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 6 to Purchase Agreement GCT-025/98, dated as of October
29, 1999 ("Amendment No. 6") relates to the Purchase Agreement GCT-025/98
between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and
Solitair Corp. ("BUYER") dated June 17, 1998 as amended from time to time
(together referred to herein as the "Agreement"). This Amendment No. 6 is
between EMBRAER and BUYER, collectively referred to herein as the "Parties".

This Amendment No. 6 constitutes an amendment and modification regarding the
Aircraft delivery schedule, pursuant to Article 31 of the Purchase Agreement.
All terms defined in the Agreement and not defined herein shall have the meaning
given in the Agreement when used herein, and in case of any conflict between
this Amendment No. 6 and the Agreement, this Amendment No. 6 shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    DELIVERY SCHEDULE

The delivery schedule for the [*] Aircraft, described in item 5.a, will be
hereby deleted and replaced with the following:

      "5.   DELIVERY

      a.    . . .

                  . . .
                  SIXTH AIRCRAFT                [*]
                  SEVENTH AIRCRAFT              [*]
                  EIGHTH AIRCRAFT               [*]
                  NINTH AIRCRAFT                [*]
                  TENTH AIRCRAFT                [*]
                  . . ."

2.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment No. 6 shall remain valid in full force and effect
without any change.

- ----------
* Confidential



IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 6 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By /s/ Frederico Fleury Curado                  By  /s/ Frederick Simon
   -----------------------------                   -----------------------------
Name:  Frederico Fleury Curado                  Name:  Frederick Simon
   -----------------------------                   -----------------------------
Title: E.V.P. Commercial                        Title: President
   -----------------------------                   -----------------------------


By /s/ Flavio Rimoli                             Date:  November 2, 1999
   -----------------------------
Name: Flavio Rimoli                              Place: Greenwich, USA
   -----------------------------
Title: Director of Contracts
   -----------------------------

Date:  November 4, 1999

Place: Sao Jose dos Campos, Brazil

EX-10.13(G)

                                                                Exhibit 10.13(g)

               AMENDMENT NUMBER 7 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 7 to Purchase Agreement GCT-025/98, dated as of March 13,
2000 ("Amendment No. 7") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended from
time to time (collectively referred to herein as "Agreement"). This Amendment
No. 7 is between Embraer and Buyer, collectively referred to herein as the
"Parties".

This Amendment No. 7 sets forth certain additional agreements between Embraer
and Buyer relative to Buyer's exercise of its option to purchase the [*].

This Amendment No. 7 constitutes an amendment and modification of the Purchase
Agreement. Except as otherwise provided for herein all terms of the Purchase
Agreement shall remain in full force and effect. All terms defined in this
Amendment No. 7 which are not defined in the Purchase Agreement shall have the
meaning set forth in this Amendment No. 7. All capitalized terms used in this
Amendment No. 7 which are not defined herein shall have the meaning given in the
Purchase Agreement. In the event of any conflict between this Amendment No. 7
and the Purchase Agreement the terms, conditions and provisions of this
Amendment No. 7 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to amend the Purchase Agreement as provided for below;

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:

1.    SUBJECT: Article "2.a" shall be deleted and replaced with the following:

      a.    Embraer shall sell and Buyer shall purchase and take delivery of
            forty-five (45) Aircraft ("Firm Aircraft"), and if Buyer so elects,
            up to forty-five (45) Option Aircraft, upon the terms and conditions
            contained in this Agreement.

2.    PRICES: Article "3.a.1" shall be deleted and replaced with the following
      chart:

      1.    The per unit Aircraft Basic Price shall be:



- --------------------------------------------------------------------------------
     Aircraft #                              Price
- --------------------------------------------------------------------------------
                           
    1 through 6

                                     [*]


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



- --------------------
* Confidential




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

                                     [*]

- --------------------------------------------------------------------------------
    7 through 10

                                     [*]

- --------------------------------------------------------------------------------
   11 through 27
                                     [*]

- --------------------------------------------------------------------------------
   28 through 45

                                     [*]

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


3.    AIRCRAFT DELIVERY SCHEDULE: The delivery schedule contained in Article
      "5.a" shall be deleted and replaced with the following:



- -----------------------------------------------------------------------------------------------------------------
         A/C #         DELIVERY MONTH         A/C #         DELIVERY MONTH         A/C #           DELIVERY MONTH
- -----------------------------------------------------------------------------------------------------------------
                                                                                      
          01              Apr-99*              16             30 Nov-00             31               28 Sep-01
- -----------------------------------------------------------------------------------------------------------------
          02              Jun-99*              17             15 Dec-00             32               12 Oct-01
- -----------------------------------------------------------------------------------------------------------------
          03              Aug-99*              18             19 Jan-01             33               26 Oct-01
- -----------------------------------------------------------------------------------------------------------------
          04              Nov-99*              19             31 Jan-01             34               16 Nov-01
- -----------------------------------------------------------------------------------------------------------------
          05            30 Jan-00*             20             28 Feb-01             35               30 Nov-01
- -----------------------------------------------------------------------------------------------------------------
          06            28 Feb-00*             21             30 Mar-01             36               20 Dec-01
- -----------------------------------------------------------------------------------------------------------------
          07             31 Mar-00             22             27 Apr-01             37               18 Jan-02
- -----------------------------------------------------------------------------------------------------------------
          08             31 May-00             23             17 May-01             38               31 Jan-02
- -----------------------------------------------------------------------------------------------------------------
          09          07 Jun-00 (**)           24             31 May-01             39               15 Feb-02
- -----------------------------------------------------------------------------------------------------------------
          10             28 Jul-00             25             29 Jun-01             40               28 Feb-02
- -----------------------------------------------------------------------------------------------------------------
          11             24 Aug-00             26             20 Jul-01             41               15 Mar-02
- -----------------------------------------------------------------------------------------------------------------
          12             31 Aug-00             27             27 Jul-01             42               28 Mar-02
- -----------------------------------------------------------------------------------------------------------------
          13             29 Sep-00             28             24 Aug-01             43               30 Apr-02
- -----------------------------------------------------------------------------------------------------------------
          14             31 Oct-00             29             31 Aug-01             44               17 May-02
- -----------------------------------------------------------------------------------------------------------------
          15             30 Nov-00             30             21 Sep-01             45               31 May-02
- -----------------------------------------------------------------------------------------------------------------


REMARKS: * Delivered to Buyer as of the date hereof

         ** Delivery in first week of stated month

4.    TRAINING CONTINGENCY: In Article "7.j" the second to last sentence in such
      Article shall be deleted and shall be replaced with the following
      sentence:

      In regard to the fifth (5th) through the ninetieth (90th) Aircraft to be
      provided to Buyer, any Transferee or Other Transferee, a material portion
      of Pilot Familiarization Program, Maintenance Familiarization Course, and
      Flight Attendant Familiarization Course shall be respectively at least
      [*] of the pilot training services allocated in proportion to the delivery
      of each Aircraft, [*] qualified mechanics and [* ]flight attendant
      representatives per Aircraft.

5.    AIRWORTHINESS DIRECTIVES: paragraph "11.e" shall be changed to read as
      follows:


- --------------------
* Confidential



      e.    Major Changes as referred to in item "c.2." above which are
            classified as AD's mandatory by CTA and or FAA shall be conveyed to
            Buyer by means of Service Bulletins, approved by said authorities.
            Incorporation of such Service Bulletins in all Aircraft and Spares
            yet to be delivered to Buyer will be made by Embraer at Embraer's
            own costs, in a commercially reasonable period of time. For all
            mandatory AD issued by the FAA and or CTA during the applicable
            warranty period for each Aircraft as provided for in Attachment C,
            Embraer shall provide to Buyer at Embraer's own cost and expense all
            parts kits necessary for the incorporation of such AD's in Aircraft
            and Spares delivered to Buyer. Buyer shall incorporate such AD's in
            the relevant Aircraft at its own cost and expense. For all AD's
            which apply to defective parts in the Aircraft airframe (excluding
            the Aircraft systems), Embraer shall however reimburse Buyer for
            [*]  of reasonable direct labor costs incurred by Buyer for
            implementation of each such AD which exceeds [*] at a rate of [*].
            When flight safety is affected, such changes will be immediately
            incorporated.

6.    TECHNICAL ASSISTANCE SERVICES:

      6.1   Article "13.e.1" shall be deleted and replaced with the following
            sentence:

      One (1) Pilot Familiarization Program for up to [*] of the
      Designated Operator's pilots per Aircraft #1 through #4, and up to
      [*] of the Designated Operator's pilots per Aircraft #5 through
      #45 including ground familiarization as regards Aircraft systems, weight
      and balance, performance and normal/emergency procedures; Flight simulator
      training in accordance with Designated Operator's approved Flight
      Operations Training Program, [*]."

      6.2   Article "13.e.2" shall be deleted and replaced with the following
            sentence:

      One (1) Maintenance Familiarization Course for up to [*] qualified
      mechanics of the Designated Operator's mechanics per each of the first [*]
      Firm Aircraft and for up to [*] qualified mechanics of the
      Designated Operator's mechanics per each of the Firm Aircraft #11 through
      #45. This course shall consist of classroom familiarization with Aircraft
      systems and structures and shall be in accordance with ATA specification
      104, level III.

      6.3   Article "13.e.3" shall be deleted and replaced with the following
            sentence:

      One (1) Flight Attendant Familiarization Course for up to [*] of
      Designated Operator's flight attendant representatives per each of the
      first [*] Firm


- --------------------
* Confidential



      Aircraft, and for up to [*] of Designated Operator's flight attendant
      representatives per each of Firm Aircraft #31 through #45. This course
      shall consist of classroom familiarization, including a general
      description of Aircraft and systems to be used by flight attendants if
      requested, Embraer may demonstrate procedures described in the classroom,
      subject to Buyer's Aircraft availability.

      6.4   The first full paragraph in Article "13.e.4" shall be deleted and
            replaced with the following paragraph:



                                [*]



7.    PUBLICATIONS: The first full paragraph of Article "15.a" shall be deleted
      and replaced as follows:

      AIRCRAFT PUBLICATIONS - Embraer shall supply, at no cost to Buyer, copies
      of operational and maintenance publications applicable thereto, in the
      English language and in the quantities as specified in item "3" of
      Attachment "B". Such publications are issued under the applicable
      specification and are available in hard copies or in CD ROM format as
      provided for in Attachment B. The revision service for these publications
      and the license fee for the CD ROM software is provided, free of charge,
      including mailing services (except for air cargo shipping), for [*]
      and subsequently at a nominal fee. Such publications will be delivered
      together with the Aircraft.

8.    OPTION FOR THE PURCHASE OF ADDITIONAL EMB-145 AIRCRAFT: Article 24 shall
      be deleted and shall be replaced with the following:

      Buyer shall have the option to purchase the Option Aircraft, to be
      delivered in accordance with the chart below, subject to the terms and
      conditions of this Article


- --------------------
* Confidential



      24.



- ------------------------------------------------------------------------------------------------------------
        A/C #        DELIVERY MONTH       A/C #       DELIVERY MONTH        A/C #       DELIVERY MONTH
- ------------------------------------------------------------------------------------------------------------
                                                                           
         01            14 Jun-02           16           18 Abr-03            31           27 Feb-04
- ------------------------------------------------------------------------------------------------------------
         02            28 Jun-02           17           30 Abr-03            32           17 Mar-04
- ------------------------------------------------------------------------------------------------------------
         03            15 Jul-02           18           16 May-03            33           31 Mar-04
- ------------------------------------------------------------------------------------------------------------
         04            29 Jul-02           19           30 May-03            34           30 Abr-04
- ------------------------------------------------------------------------------------------------------------
         05            30 Aug-02           20           30 Jun-03            35           17 May-04
- ------------------------------------------------------------------------------------------------------------
         06            16 Sep-02           21           18 Jul-03            36           31 May-04
- ------------------------------------------------------------------------------------------------------------
         07            30 Sep-02           22           31 Jul-03            37           16 Jun-04
- ------------------------------------------------------------------------------------------------------------
         08            17 Oct-02           23           29 Aug-03            38           30 Jun-04
- ------------------------------------------------------------------------------------------------------------
         09            29 Nov-02           24           16 Sep-03            39           30 Jul-04
- ------------------------------------------------------------------------------------------------------------
         10            20 Dec-02           25           30 Sep-03            40           17 Aug-04
- ------------------------------------------------------------------------------------------------------------
         11            17 Jan-03           26           31 Oct-03            41           31 Aug-04
- ------------------------------------------------------------------------------------------------------------
         12            31 Jan-03           27           28 Nov-03            42           30 Sep-04
- ------------------------------------------------------------------------------------------------------------
         13            14 Feb-03           28           17 Dec-03            43           29 Oct-04
- ------------------------------------------------------------------------------------------------------------
         14            28 Feb-03           29           31 Dec-03            44           30 Nov-04
- ------------------------------------------------------------------------------------------------------------
         15            31 Mar-03           30           30 Jan-04            45           22 Dec-04
- ------------------------------------------------------------------------------------------------------------


      The Option Aircraft shall be divided into nine groups of five aircraft.
      The groups shall be referred to collectively as the "Option Groups" and
      each may be referred to individually as an "Option Group".

      a.    INITIAL DEPOSIT: A refundable deposit of [*] per Option Aircraft
            is due and payable within [*]

      b.    BASIC PRICE: The unit basic price of each Option Aircraft shall be
            [*] provided that such Option Aircraft be delivered to Buyer
            in accordance with the chart above and in the same configuration,
            specification and installations specified in Attachment "A", as such
            attachment is written on the date of signature of this Amendment No.
            7 unless otherwise modified by the Parties and the costs for such
            changes shall be in addition to the Basic Price.

      c.    ESCALATION: The unit basic price of each relevant Option Aircraft
            shall be escalated according to Attachment "D". The escalation shall
            begin [*].

      d.    DEPOSIT AND PROGRESS PAYMENTS: The payment of the price specified in
            item "c" above, shall be made according to the following:

            1.    The initial deposit of [*]   per Option Aircraft, to be
                  made by Buyer according to Article 24.a., shall apply
                  toward the price of the relevant Option Aircraft.


- --------------------
* Confidential




            2.    A progress payment of [*] per exercised Option
                  Aircraft, less the [*] per exercised Option
                  Aircraft is due and payable [*] to each
                  exercised Option Aircraft contractual delivery date.

            3.    A progress payment of [*] of the unit basic
                  price defined in item "c" above is due and payable [*]
                  prior to each relevant exercised Option Aircraft
                  contractual delivery date.

            4.    A progress payment of [*] of the unit basic
                  price defined in item "c" above is due and payable [*]
                  prior to each exercised Option Aircraft contractual
                  delivery date.

            5.    The balance of each exercised Option Aircraft escalated price
                  is due and payable upon acceptance of each relevant Aircraft
                  by Buyer.

      e.    CONFIRMATION OF OPTIONS GROUPS: Buyer's options to purchase Option
            Groups shall be confirmed on or before [*] in each Option Group.
            At the time of such confirmation, the Initial Deposit with respect
            to the Option Aircraft in such Option Group shall become non
            refundable. In the event that Buyer fails to exercise its option
            with respect to any [*].

      f.    FAILURE TO CONFIRM; RETURN OF DEPOSIT: If Buyer fails to confirm an
            Option Group as provided in item "e", Buyer shall have no right to
            acquire the Option Aircraft in that Option Group and the relevant
            portion of the deposit made according to item "d.1" above, if any,
            shall be refunded to Buyer within five (5) Business Days after
            Buyer's failure to confirm, renunciation of, or failure to obtain,
            an option to purchase the Option Group, with interest at the five
            (5) year LIBOR commencing on the date such deposits were paid to
            Embraer, or at Buyer's option Embraer shall apply any amounts paid
            by Buyer to any amounts then due and owing to Embraer by Buyer. In
            the event Embraer fails to return the deposits with accumulated
            interest to Buyer as provided for herein, Embraer shall also pay to
            Buyer additional interest of [*] per month on such
            outstanding amounts not paid by Embraer from the date on which such
            payments were to have been made until receipt by Buyer.

      g.    SERVICES: The services Embraer will provide pursuant to Article 13
            in regard to the Option Aircraft which will be delivered pursuant to
            this Article 24 shall be in accordance with the services provided
            for Aircraft #31 - #45 under Article 13.e.1 through 3 above.

9.    ATTACHMENT "B":

      9.1   The quantity of publications described in paragraph 3 of Attachment
            B shall be


- --------------------
* Confidential



            [*].

      9.2   After the list of publications contained in paragraph 3 of
            Attachment B shall be included a new paragraph as follows:

            "Remark: The Maintenance sets number 9, 10, 11, 12, 14, 18, 20, 21
            and 22 are available in CD ROM format. Buyer shall inform Embraer by
            means of a written notice no later than sixty (60) days before the
            Aircraft #8 Contractual Delivery Date, which portion of the above
            described quantity of Maintenance Sets shall be supplied in hard
            copies or in CD ROM format, otherwise, the Maintenance Sets will be
            provided by Embraer in hard copies."

10.   ATTACHMENT "C":

      10.1  In Article "1.a" of Attachment C the terms [*]
            shall deleted and replaced with the terms [*].

      10.2  In Article "1.b" of Attachment C the terms [*]
            shall be deleted and replaced with the terms [*].

11.   ATTACHMENT "D":

      11.1  In Attachment D the description of indexes [*]
            shall be changed as follows:

      "..... of the period ending [*]

      11.2  The description of indexes [*] shall be changed to read as follows:

      "..... referring to the [*]

12.   NEW ATTACHMENT "I":
A new Attachment "I" shall be included in the Purchase Agreement in accordance
with Schedule "A" to this Amendment Number 7.

13.   NEW ATTACHMENT "J":
A new Attachment "J" shall be included in the Purchase Agreement in accordance
with Schedule "B" to this Amendment Number 7.

14.   MISCELLANEOUS
All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment No. 7 shall remain valid in full force and effect
without any change.


- --------------------
* Confidential



[The remainder of this page has been left blank intentionally.]














IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 7 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By     /s/ Frederico Fleury Curado               By     /s/ Kenneth A. Rubin
         --------------------------                   -------------------------
Name:  Frederico Fleury Curado                   Name:   Kenneth A. Rubin
Title: Exeuctive Vice President                  Title:  Vice President


By     /s/ Antonio L.P. Mariso                   Date:    3/13/00
         --------------------------              Place:   Greenwich, CT
Name:  Antonio L.P. Mariso
Title: Executive Vice-President and
       CFO


Date:  March 13, 2000
Place: Sao Jose dos Campos, Brazil





                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------


                               [*]


- --------------------
* Confidential



                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                                    [*]


- --------------------
* Confidential



                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                                [*]

- --------------------
* Confidential



                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                              [*]

- --------------------
* Confidential




                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                      [*]

- --------------------
* Confidential




- --------------------------------------------------------------------------------
                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------


                               [*]


- --------------------
* Confidential




                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                        [*]


- --------------------
* Confidential




                       SCHEDULE "A" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                              [*]


- --------------------
* Confidential



                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                 ATTACHMENT "J" - AIRCRAFT PERFORMANCE GUARANTEE

1.    GUARANTEES

      Embraer, subject to the conditions and limitations hereby expressed, and
      considering the Aircraft with a maximum takeoff weight of 48,501 pounds
      (22,000 kg) and equipped with EMBRAER furnished Rolls-Royce Allison AE
      3007A1 engines, guarantees each Aircraft as follows:

      a.    On the Aircraft Actual Delivery Date, the Aircraft will comply with
            the following performance:

            a.1   CRUISE SPECIFIC AIR RANGE

                  The cruise specific air range at a gross weight of 40,000
                  pounds (18,144 Kg) in a standard day (ISA), at an altitude of
                  35,000 feet, at 440 KTAS using not more than maximum cruise
                  thrust, shall not be less than the guarantee value:

                           NOMINAL:         .179 NAM/Pound
                           TOLERANCE:     - .005 NAM/Pound
                           GUARANTEE:       .174 NAM/Pound

            a.2   MISSION PAYLOAD

            a.    2.1   The payload for a stage length of 1000 nautical miles in
                        still air, shall not be less than the guarantee value:

                        GUARANTEE:                11,969 Pounds (5,430 kg)

                        Note: the above guaranteed value is subject to the same
                        tolerance applicable to the M.E.W. pursuant to Paragraph
                        a.3 below.

                        The above guarantee is based on the following conditions
                        and operating rules:

                        Stage Length: The stage is defined as the sum of the
                        distances for length climb, cruise and descent.

                        Takeoff: The airport altitude is at SEA LEVEL. The
                        takeoff weight is not limited by the airport conditions.
                        Maximum takeoff thrust is used for the takeoff.

                        Climbout Maneuver:





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                  Following the takeoff to 35 feet, the Aircraft accelerates to
                  245 KCAS while climbing to 1,500 feet above the departure
                  airport altitude and retracting flaps and landing gear.

                  Climb:

                  The Aircraft climbs from 1,500 feet above the departure
                  airport altitude to 10,000 feet altitude at 245 KCAS.
                  The Aircraft then accelerates to a speed of 270 KCAS.
                  The climb continues at 270 KCAS until 17,500 feet is reached.
                  The climb continues at 0.56 Mach number to cruise altitude.
                  The temperature is ISA during the climb.
                  Maximum climb thrust is used throughout the climb.

                  Cruise:

                  The Aircraft cruises at an average speed of 0.76 Mach number.
                  The cruise altitude is 35,000 feet.
                  The temperature is ISA during cruise.
                  The cruise thrust is not to exceed maximum cruise thrust.

                  Descent:

                  The Aircraft descends from the cruise altitude at 250 KCAS.
                  The descent continues at 250 KCAS to an altitude of 1,500
                  feet.
                  The temperature is ISA during descent.

                  Approach and Landing Maneuver:

                  The Aircraft decelerates to the final approach speed while
                  extending landing gear and flaps, then descends and lands. The
                  destination airport elevation is at sea level.

                  Fixed Allowances:

                  For the purpose of this guarantee and for the purpose of
                  establishing compliance with this guarantee, the following
                  shall be used as fixed quantities and allowances:

                  Taxi-out fuel: 46 Pounds, equivalent to 3 minutes.

                  Takeoff and Climbout Maneuver fuel: 99 Pounds.

                  Approach and Landing Maneuver fuel: 77 Pounds.

                  Taxi-in fuel (shall be consumed from the reserve fuel): 46
                  Pounds, equivalent to 3 minutes of taxi.

                  The usable reserve fuel remaining upon completion of the
                  landing: 2090 Pounds.





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

                  a.2.2 OPERATIONAL EMPTY WEIGHT BASIS

                        Operational empty weight (OEW) derived in accordance
                        with Paragraph a.2.3 shall be used as the basis for the
                        mission payload guarantees of Paragraph a.2.1.

                  a.2.3 EMB-145 WEIGHT SUMMARY



  ---------------------------------------------------------------------------------------------------
                      ITEMS                                          WEIGHT (kg)       WEIGHT (lb)
  ---------------------------------------------------------------------------------------------------
                                                                                    

  ---------------------------------------------------------------------------------------------------
      1 - M.E.W. Std. EMB-145 Aircraft Configuration                    11,200            24,692
  ---------------------------------------------------------------------------------------------------
      2 - Option to std EMB-145 Aircraft (*)                               593             1,307
  ---------------------------------------------------------------------------------------------------
      3 - M.E.W.  Customer Configuration                                11,793            25,999
  ---------------------------------------------------------------------------------------------------
      4 - Operating Items                                                  556             1,226
  ---------------------------------------------------------------------------------------------------
      a - Pilot and Copilot (180 Lb each) (**)                               164.0             361.6
  ---------------------------------------------------------------------------------------------------
      b - Stewardess (140 Lb each) (**)                                       64.0             141.1
  ---------------------------------------------------------------------------------------------------
      c - Engine oil                                                          24.0              52.9
  ---------------------------------------------------------------------------------------------------
      d - Hydraulic Fluid                                                     36.0              79.4
  ---------------------------------------------------------------------------------------------------
      e - Unusable Fuel                                                       44.0              97.0
  ---------------------------------------------------------------------------------------------------
      f - Apu Oil                                                              2.0               4.4
  ---------------------------------------------------------------------------------------------------
      g - Toilet Fluid                                                         7.0              15.4
  ---------------------------------------------------------------------------------------------------
      h - Water                                                               20.0              44.1
  ---------------------------------------------------------------------------------------------------
      i - Flight Kit                                                          10.0              22.0
  ---------------------------------------------------------------------------------------------------
      j - Crew Baggage                                                        20.4              45.0
  ---------------------------------------------------------------------------------------------------
      k - Catering Standard                                                  160.0             352.7
  ---------------------------------------------------------------------------------------------------
      l - Pass. Serv. Equip.                                                   4.5               9.9
  ---------------------------------------------------------------------------------------------------
      m - 2nd Attendant                                                        0.0               0.0
  ---------------------------------------------------------------------------------------------------
      5 - O. E. W.  Customer Configuration                              12,349            27,225
  ---------------------------------------------------------------------------------------------------


          REMARKS:

          (*) See Customer Options Table (Item a.5.4).
          (**) In accordance with Advisory Circular No: 120-27C (U.S. Depart.
               Of Transp./FAA)

                  a.2.4 CUSTOMER OPTIONS TABLE:





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------



       ------------------------------------------------------------------------------------------------------------------
                                              ITEMS                                  OPT          WEIGHT          WEIGHT
                                                                                                   (kg)            (lb)
       ------------------------------------------------------------------------------------------------------------------
                                                                                                            
            A) OPTIONS TO STD AVIONIC CONFIGURATION
       ------------------------------------------------------------------------------------------------------------------
               CAT-II                                                                 Y              0.0             0.0
               ----------------------------------------------------------------------------------------------------------
               2nd Radio Altimeter                                                    Y              4.1             9.0
               ----------------------------------------------------------------------------------------------------------
               2nd DME                                                                Y              1.5             3.3
               ----------------------------------------------------------------------------------------------------------
               2nd ADF                                                                Y              8.0            17.6
               ----------------------------------------------------------------------------------------------------------
               2nd Transponder Mode S                                                 Y              1.0             2.2
               ----------------------------------------------------------------------------------------------------------
               SELCAL - Trimble                                                       Y              3.5             7.7
               ----------------------------------------------------------------------------------------------------------
               Single FMS+GPS Honeywell                                               Y             23.0            50.7
               ----------------------------------------------------------------------------------------------------------
               EGPWS                                                                  Y              3.0             6.6
       ------------------------------------------------------------------------------------------------------------------
               VHF(1st and 2nd) 8.33 kHz spacing                                      Y              0.0             0.0
       ------------------------------------------------------------------------------------------------------------------

            B) OPTIONAL SYSTEM / OTHER EQUIPMENT
       ------------------------------------------------------------------------------------------------------------------
               Thrust Reversers                                                       Y            173.0           381.5
               ----------------------------------------------------------------------------------------------------------
               A1 Engine                                                              Y              6.0            13.2
               ----------------------------------------------------------------------------------------------------------
               Cockpit Floodlight                                                     Y              2.5             5.5
               ----------------------------------------------------------------------------------------------------------
               External Painting (with capability to be polished)                     Y             56.0           123.5
               ----------------------------------------------------------------------------------------------------------
               LR Version                                                             Y            169.0           372.6
               ----------------------------------------------------------------------------------------------------------
               Service door sill protection                                           Y              3.0             6.6
               ----------------------------------------------------------------------------------------------------------
               Cargo door sill protection                                             Y              3.5             7.7
               ----------------------------------------------------------------------------------------------------------
               Cargo Door Light                                                       Y              1.0             2.2
               ----------------------------------------------------------------------------------------------------------
               Provisions for JAA Certification (1)                                   Y              4.3             9.5
               ----------------------------------------------------------------------------------------------------------
               Plug Type Passenger Door                                               Y             -8.0           -17.6
       ------------------------------------------------------------------------------------------------------------------

            C) INTERIOR OPTIONAL ITEMS
       ------------------------------------------------------------------------------------------------------------------
               Interior Option 1   (2)                                                Y             12.0            26.5
               ----------------------------------------------------------------------------------------------------------
               Audio Entertainment                                                    Y              2.5             5.5
               ----------------------------------------------------------------------------------------------------------
               2nd Attendant kit (includes Handset/Craddle0                           Y             22.2            49.0
               ----------------------------------------------------------------------------------------------------------
               Blue Sterile Light                                                     Y              0.5             1.1
               ----------------------------------------------------------------------------------------------------------
               Baggage Compartment Class C                                            Y             33.0            72.8
               ----------------------------------------------------------------------------------------------------------
               Customized Version Top pax Seat w/ Ultra Leather                       Y             56.7           125.0
               ----------------------------------------------------------------------------------------------------------
               Baggage Restraint Net                                                  Y              8.0            17.6
               ----------------------------------------------------------------------------------------------------------
               Extra Oxygen Mask (3 masks for each double seat)                       Y              3.3             7.3
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
                                                      SUB-TOTAL  OPTIONS STD A/C)                    593            1307
       ------------------------------------------------------------------------------------------------------------------


      (1)   Provisions for JAA Certification:
            -     Wiring provision on the panel lamps for Filament Test
            -     Structural provision for 10(degree) rudder deflection
            -     Wiring provision for the nose landing gear door position
                  indication in the EICAS





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

            -     Provision for warning of the selection of Flaps 22(degree) to
                  take-off

            -     Provision for limitation of the hydraulic pressure on the
                  speed brake actuator when the aircraft is above 200 knots

      (2)   Galley inserts (Trolley, SU, Hot Jugs) and catering are not included

      a.3   WEIGHT

            The manufacturer's empty weight (M.E.W.), for Customer
            configuration, is guaranteed to be:

                  NOMINAL:     25,999 Pounds
                  TOLERANCE:      260 Pounds
                  GUARANTEE:   26,259 Pounds

2.    AIRCRAFT CONFIGURATION

      2.1   The guarantees stated above are based on the EMB-145 Basic Aircraft
            configuration as defined in the Technical Description TD-145/010
            dated January 1998, plus specific Buyer configuration options as
            defined at Attachment "A" to the Purchase Agreement, (hereinafter
            referred to as the Detail Specification). Appropriate adjustment to
            the guarantees shall be made for changes in such Detail
            Specification approved in writing by the Buyer and Embraer. Such
            adjustments shall be accounted for by Embraer in its evidence of
            compliance with the guarantees.

            In the event a change is made to any law, governmental regulation or
            requirement, or in the interpretation of any such law, governmental
            regulation or requirement that affects the certification basis for
            the Aircraft, and as a result thereof, a change is made to the
            configuration and/or the performance of the Aircraft in order to
            obtain certification, the guarantees set forth in this Aircraft
            Performance Guarantee shall be appropriately modified to reflect any
            such change.

      2.2   The mission payload guarantee of Paragraph 1.a.2 and the
            Manufacturer's Empty Weight guarantee of Section 1.a.3 shall be
            adjusted by Embraer for the following in its evidence of compliance
            with such guarantees:

            (1)   Changes to the Detail Specification including Change Requests,
                  Master Changes, Change Orders or any other changes mutually
                  agreed upon between the Buyer and Embraer.

            (2)   The difference between the component weight allowances given
                  in the appropriate section of the Detail Specification and the
                  actual weights.





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

3.    GUARANTEE CONDITIONS

      3.1   All guaranteed performance data are based on the ICAO International
            Standard Atmosphere (ISA) and specified variations therefrom;
            altitudes are pressure altitudes.

      3.2   The FAA Regulations (FAR) referred to in this Attachment are, unless
            otherwise specified, the EMB-145 Certification Basis regulations
            specified in the Type Certificate Data Sheet. The reference number
            for the Certificate Data Sheet and its date of issue will be
            provided to Buyer within fifteen (15) days of type approval.

      3.3   The cruise specific air range, speed and altitude capability, and
            the climb, cruise and descent portions of the mission guarantees
            include allowances for normal electrical power extraction and normal
            operation of the air conditioning system. Normal power extraction
            shall be defined as not less than a 37 kW total electrical and
            hydraulic loads. Normal operation of the air conditioning system
            shall be defined as operation in the automatic mode, with the
            temperature control set to maintain a nominal cabin temperature of
            75(Degree)F, and all air conditioning systems operating normally.
            This operation nominally allows a sea level cabin altitude to be
            maintained up to 19,500 feet and a maximum cabin pressure
            differential of 7.8 pounds per square inch at higher altitudes, with
            a nominal Aircraft cabin ventilation rate of 1,100 cubic feet per
            minute at 35,000 ft including passenger cabin recirculation (nominal
            recirculation is 42 percent not considering gasper flow). The APU is
            turned off unless otherwise specified.

      3.4   The cruise specific air range, speed and altitude capability, and
            the climb, cruise, and descent portions of the mission guarantees
            are based on an Aircraft center of gravity location of 26 percent of
            the mean aerodynamic chord.

      3.5   Performance, where applicable, is based on a fuel Lower Heating
            Value (LHV) of 18,580 BTU per pound and a fuel density of 6.70
            pounds per U.S. gallon.

4.    PARTIES' OBLIGATIONS ACCORDING TO THIS GUARANTEE

      RELATIVE TO THE GUARANTEES STATED IN PARAGRAPH 1.a above:

      4.1   During the Aircraft acceptance to be performed by Buyer in
            accordance with Article 7 of the Purchase Agreement, Buyer shall
            check the Aircraft performance specified in paragraph 1.a of this
            Attachment "J", by using the EMB-145 Aircraft Flight Manual (AFM)
            and by comparing the flight test data, at the atmospheric conditions
            prevailing during the flight, with the information presented in the
            EMB-145 Supplementary Performance





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

            Manual (SPM). All the performance guarantee under this Attachment
            "J" are in accordance with both manuals above mentioned, taking into
            consideration the established tolerances.

      4.2   Embraer's obligations in respect to the guarantees stated in
            Paragraph 1.a of this Attachment "J", are limited to Buyer's right
            to terminate the Purchase Agreement in respect to the relevant
            Aircraft, pursuant to Article 22.d. should it be reasonably verified
            that such Aircraft during the acceptance procedure specified in
            Article 7 of the Purchase Agreement, cannot comply with the
            performances guaranteed hereunder after Embraer has had a reasonable
            opportunity to cure such deficiencies in accordance with Article 7.

      4.3   In case during the above mentioned acceptance procedure, it is
            proven that the Aircraft performance does not comply with the
            performances specified in Paragraph 1.a of this Attachment "J", but
            Buyer considers it satisfactory by accepting delivery of such
            Aircraft, then Embraer shall not be liable to any claim or demand
            whatsoever from Buyer with respect to such performance guarantees.

      4.4   Upon acceptance of the Aircraft by Buyer, all obligations of Embraer
            regarding the Aircraft performance guarantees specified in Paragraph
            1.a, shall cease.

5.    GUARANTEE COMPLIANCE

      5.1   Compliance with the guarantees of Section 1.a shall be based on the
            conditions specified in that section, the Aircraft configuration of
            Section 2 and the guarantee conditions of Section 3.

      5.2   Compliance with the takeoff, landing, and TOW Climb limit guarantees
            shall be based on the FAA-approved Airplane Flight Manual for the
            EMB-145.

      5.3   Compliance with the cruise specific air range, speed, and the climb,
            cruise and descent portions of the mission guarantees shall be
            established by calculations based on the comparison mentioned in
            Section 4.1 above..

      5.4   The data derived from tests shall be adjusted as required by
            conventional methods of correction, interpolation or extrapolation
            in accordance with established engineering practices to show
            compliance with provisions of Section 1.a.

      5.5   Compliance with the Manufacturer's Empty Weight guarantee shall be
            based on information in the appropriate approved weight and balance





                       SCHEDULE "B" TO THE AMENDMENT No 7
- --------------------------------------------------------------------------------

            manual, or associated document or report.

      5.6   Compliance with the guarantees set forth in this Attachment does not
            depend on the engine meeting the performance requirements contained
            in the engine specification.

6.    EXCLUSIVE GUARANTEES

      6.1   The only performance guarantees applicable to the Aircraft are those
            set forth in this document. The performance guarantees set forth
            herein are established between Buyer and Embraer and may not be
            transferred or assigned to others, unless by previous written
            consent of Embraer.

      6.2   THE GUARANTEES, OBLIGATIONS AND LIABILITIES OF Embraer, AND REMEDIES
            OF Buyer SET FORTH IN THIS PERFORMANCE GUARANTEE ARE EXCLUSIVE AND
            IN SUBSTITUTION FOR, AND Buyer HEREBY WAIVES, RELEASES AND
            RENOUNCES, ALL OTHER RIGHTS, CLAIMS, DAMAGES AND REMEDIES OF Buyer
            AGAINST Embraer OR ANY ASSIGNED OF Embraer, EXPRESS OR IMPLIED,
            ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY ACHIEVED
            PERFORMANCE.

      6.3   The terms and conditions of this Performance Guarantee do not alter,
            modify or impair, in any way, the terms and conditions of Attachment
            C (EMB-145 AIRCRAFT WARRANTY CERTIFICATE) to this Agreement.

EX-10.13(H)

                                                                Exhibit 10-13(h)

               AMENDMENT NUMBER 8 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 8 to Purchase Agreement GCT-025/98, dated as of September
11, 2000 ("Amendment No. 8") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended by
Amendments No.1, 2, 3, 4, 5, 6 and 7 (collectively referred to herein as
"Agreement"). This Amendment No.8 is between Embraer and Buyer, collectively
referred to herein as the "Parties".

This Amendment No.8 sets forth certain additional agreement between Embraer and
Buyer relative to anticipation of dates on the firm Aircraft delivery schedule
in Article 5.a of the Purchase Agreement.

This Amendment No.8 constitutes an amendment and modification of the Purchase
Agreement. Except as otherwise provided for herein all terms of the Purchase
Agreement shall remain in full force and effect.

All terms defined in this Amendment No.8 which are not defined in the Purchase
Agreement shall have the meaning set forth in this Amendment No.8.

All capitalized terms used in this Amendment No.8 which are not defined herein
shall have the meaning given in the Purchase Agreement. In the event of any
conflict between this Amendment No.8 and the Purchase Agreement the terms,
conditions and provisions of this Amendment No.8 shall control.

WHEREAS, Buyer has confirmed its intention to accelerate the delivery of three
(3) Firm Aircraft;

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:

1.    AIRCRAFT DELIVERY SCHEDULE: The delivery schedule contained in Article
      "5.a" shall be deleted and replaced with the following:







     --------------------------------------------------------------------------------------------------------------------
         A/C #         DELIVERY MONTH        A/C #            DELIVERY MONTH            A/C #         DELIVERY MONTH
     --------------------------------------------------------------------------------------------------------------------
                                                                                         
          01              Apr-99*             16                30 Nov-00                31             24 Aug-01
     --------------------------------------------------------------------------------------------------------------------
          02              Jun-99*             17                30 Nov-00                32             31 Aug-01
     --------------------------------------------------------------------------------------------------------------------
          03              Aug-99*             18                15 Dec-00                33             21 Sep-01
     --------------------------------------------------------------------------------------------------------------------
          04              Nov-99*             19                19 Jan-01                34             28 Sep-01
     --------------------------------------------------------------------------------------------------------------------
          05              Jan-00*             20                24 JAN-01                35             12 Oct-01
     --------------------------------------------------------------------------------------------------------------------
          06              Feb-00*             21                31 Jan-01                36             26 Oct-01
     --------------------------------------------------------------------------------------------------------------------
          07              Mar-00*             22                28 Feb-01                37             16 Nov-01
     --------------------------------------------------------------------------------------------------------------------
          08              May-00*             23                30 Mar-01                38             30 Nov-01
     --------------------------------------------------------------------------------------------------------------------
          09              Jun-00*             24                27 Apr-01                39             20 Dec-01
     --------------------------------------------------------------------------------------------------------------------
          10              Jul-00*             25                30 APR-01                40             18 Jan-02
     --------------------------------------------------------------------------------------------------------------------
          11              Aug-00*             26                17 May-01                41             31 Jan-02
     --------------------------------------------------------------------------------------------------------------------
          12              Aug-00*             27                31 May-01                42             15 Feb-02
     --------------------------------------------------------------------------------------------------------------------
          13             29 Sep-00            28                29 Jun-01                43             28 Feb-02
     --------------------------------------------------------------------------------------------------------------------
          14             31 Oct-00            29                20 Jul-01                44             15 Mar-02
     --------------------------------------------------------------------------------------------------------------------
          15             17 Nov-00            30                27 Jul-01                45             28 Mar-02
     --------------------------------------------------------------------------------------------------------------------


     REMARKS:  *Delivered to Buyer as of the date hereof.

2.    MISCELLANEOUS: All other provisions of the Agreement which have not been
      specifically amended or modified by this Amendment No.8 shall remain valid
      in full force and effect without any change.


        [The remainder of this page has been left blank intentionally.]





IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No.8 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By  /s/ Frederico Fleury Curado                  By  /s/ Douglas J. Lambert
  ------------------------------                   --------------------------

Name:  Federico Fleury Curado                    Name:  Douglas J. Lambert

Title: Executive Vice President                  Title: Vice President
          Airline Market

By  /s/ Flavio Rimoli                            Date:  11-9-00
  ------------------------------

Name:  Flavio Rimoli                             Place: Greenwich, CT USA

Title: Director of Contracts

Date:  September 11, 2000

Place: Sao Jose Dos Campos, Brazil




                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

                 ATTACHMENT "J" - AIRCRAFT PERFORMANCE GUARANTEE

1.    GUARANTEES

      Embraer, subject to the conditions and limitations hereby expressed, and
      considering the Aircraft with a maximum takeoff weight of 48,501 pounds
      (22,000 kg) and equipped with EMBRAER furnished Rolls-Royce Allison AE
      3007A1 engines, guarantees each Aircraft as follows:

      a.    On the Aircraft Actual Delivery Date, the Aircraft will comply with
            the following performance:

            a.1   CRUISE SPECIFIC AIR RANGE

                  The cruise specific air range at a gross weight of 40,000
                  pounds (18,144 Kg) in a standard day (ISA), at an altitude of
                  35,000 feet, at 440 KTAS using not more than maximum cruise
                  thrust, shall not be less than the guarantee value:

                        NOMINAL:        .179 NAM/Pound
                        TOLERANCE:    - .005 NAM/Pound
                        GUARANTEE:      .174 NAM/Pound

            a.2   MISSION PAYLOAD

                  a.2.1 The payload for a stage length of 1000 nautical miles in
                        still air, shall not be less than the guarantee value:

                        GUARANTEE:       11,969 Pounds (5,430 kg)

                        Note: the above guaranteed value is subject to the same
                        tolerance applicable to the M.E.W. pursuant to Paragraph
                        a.3 below.

                        The above guarantee is based on the following conditions
                        and operating rules:

                        Stage Length:
                        The stage is defined as the sum of the distances for
                        length climb, cruise and descent.

                        Takeoff:
                        The airport altitude is at SEA LEVEL.
                        The takeoff weight is not limited by the airport
                        conditions.
                        Maximum takeoff thrust is used for the takeoff.

                        Climbout Maneuver:
                        Following the takeoff to 35 feet, the Aircraft
                        accelerates to 245 KCAS while climbing to 1,500 feet
                        above the departure airport altitude and retracting
                        flaps and landing gear.





                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

                        Climb:
                        The Aircraft climbs from 1,500 feet above the departure
                        airport altitude to 10,000 feet altitude at 245 KCAS.
                        The Aircraft then accelerates to a speed of 270 KCAS.
                        The climb continues at 270 KCAS until 17,500 feet is
                        reached.
                        The climb continues at 0.56 Mach number to cruise
                        altitude.
                        The temperature is ISA during the climb.
                        Maximum climb thrust is used throughout the climb.

                        Cruise:
                        The Aircraft cruises at an average speed of 0.76 Mach
                        number.
                        The cruise altitude is 35,000 feet.
                        The temperature is ISA during cruise.
                        The cruise thrust is not to exceed maximum cruise
                        thrust.

                        Descent:
                        The Aircraft descends from the cruise altitude at 250
                        KCAS.
                        The descent continues at 250 KCAS to an altitude of
                        1,500 feet.
                        The temperature is ISA during descent.

                        Approach and Landing Maneuver:
                        The Aircraft decelerates to the final approach speed
                        while extending landing gear and flaps, then descends
                        and lands. The destination airport elevation is at sea
                        level.

                        Fixed Allowances:
                        For the purpose of this guarantee and for the purpose of
                        establishing compliance with this guarantee, the
                        following shall be used as fixed quantities and
                        allowances:

                        Taxi-out fuel: 46 Pounds, equivalent to 3 minutes.

                        Takeoff and Climbout Maneuver fuel: 99 Pounds.

                        Approach and Landing Maneuver fuel: 77 Pounds.

                        Taxi-in fuel (shall be consumed from the reserve fuel):
                        46 Pounds, equivalent to 3 minutes of taxi.

                        The usable reserve fuel remaining upon completion of the
                        landing: 2090 Pounds.




                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

                  a.2.2 OPERATIONAL EMPTY WEIGHT BASIS

                        Operational empty weight (OEW) derived in accordance
                        with Paragraph a.2.3 shall be used as the basis for the
                        mission payload guarantees of Paragraph a.2.1.

                  a.2.3 EMB-145 WEIGHT SUMMARY



             ---------------------------------------------------------------------------------------------------
                                             ITEMS                               WEIGHT (kg)      WEIGHT (lb)
             ---------------------------------------------------------------------------------------------------
                                                                                              
             ---------------------------------------------------------------------------------------------------
                 1 - M.E.W. Std. EMB-145 Aircraft Configuration                    11,200           24,692
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 2 - Option to std EMB-145 Aircraft (*)                              593             1,307
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 3 - M.E.W.  Customer Configuration                                11,793           25,999
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 4 - Operating Items                                                 556             1,226
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 a - Pilot and Copilot (180 Lb each) (**)                                 164.0           361.6
             ---------------------------------------------------------------------------------------------------
                 b - Stewardess (140 Lb each) (**)                                         64.0           141.1
             ---------------------------------------------------------------------------------------------------
                 c - Engine oil                                                            24.0            52.9
             ---------------------------------------------------------------------------------------------------
                 d - Hydraulic Fluid                                                       36.0            79.4
             ---------------------------------------------------------------------------------------------------
                 e - Unusable Fuel                                                         44.0            97.0
             ---------------------------------------------------------------------------------------------------
                 f - Apu Oil                                                                2.0             4.4
             ---------------------------------------------------------------------------------------------------
                 g - Toilet Fluid                                                           7.0            15.4
             ---------------------------------------------------------------------------------------------------
                 h - Water                                                                 20.0            44.1
             ---------------------------------------------------------------------------------------------------
                 i - Flight Kit                                                            10.0            22.0
             ---------------------------------------------------------------------------------------------------
                 j - Crew Baggage                                                          20.4            45.0
             ---------------------------------------------------------------------------------------------------
                 k - Catering Standard                                                    160.0           352.7
             ---------------------------------------------------------------------------------------------------
                 l - Pass. Serv. Equip.                                                     4.5             9.9
             ---------------------------------------------------------------------------------------------------
                 m - 2nd Attendant                                                          0.0             0.0
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 5 - O. E. W.  Customer Configuration                              12,349           27,225
             ---------------------------------------------------------------------------------------------------

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

                  REM.:
                  (*)  See Customer Options Table (Item a.5.4).
                  (**) In accordance with Advisory Circular No: 120-27C
                       (U.S. Depart. Of Transp./FAA)





                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

                  a.2.4 CUSTOMER OPTIONS TABLE:



       ------------------------------------------------------------------------------------------------------------------
                                              ITEMS                                   OPT           WEIGHT         WEIGHT
                                                                                                     (kg)            (lb)
                                                                                                           
            A) OPTIONS TO STD AVIONIC CONFIGURATION
       ------------------------------------------------------------------------------------------------------------------
               CAT-II                                                                 Y              0.0             0.0
               ----------------------------------------------------------------------------------------------------------
               2nd Radio Altimeter                                                    Y              4.1             9.0
               ----------------------------------------------------------------------------------------------------------
               2nd DME                                                                Y              1.5             3.3
               ----------------------------------------------------------------------------------------------------------
               2nd ADF                                                                Y              8.0            17.6
               ----------------------------------------------------------------------------------------------------------
               2nd Transponder Mode S                                                 Y              1.0             2.2
               ----------------------------------------------------------------------------------------------------------
               SELCAL - Trimble                                                       Y              3.5             7.7
               ----------------------------------------------------------------------------------------------------------
               Single FMS+GPS Honeywell                                               Y             23.0            50.7
               ----------------------------------------------------------------------------------------------------------
               EGPWS                                                                  Y              3.0             6.6
       ------------------------------------------------------------------------------------------------------------------
               VHF(1st and 2nd) 8.33 kHz spacing                                      Y              0.0             0.0
       ------------------------------------------------------------------------------------------------------------------

            B) OPTIONAL SYSTEM / OTHER EQUIPMENT
       ------------------------------------------------------------------------------------------------------------------
               Thrust Reversers                                                       Y            173.0           381.5
               ----------------------------------------------------------------------------------------------------------
               A1 Engine                                                              Y              6.0            13.2
               ----------------------------------------------------------------------------------------------------------
               Cockpit Floodlight                                                     Y              2.5             5.5
               ----------------------------------------------------------------------------------------------------------
               External Painting (with capability to be polished)                     Y             56.0           123.5
               ----------------------------------------------------------------------------------------------------------
               LR Version                                                             Y            169.0           372.6
               ----------------------------------------------------------------------------------------------------------
               Service door sill protection                                           Y              3.0             6.6
               ----------------------------------------------------------------------------------------------------------
               Cargo door sill protection                                             Y              3.5             7.7
               ----------------------------------------------------------------------------------------------------------
               Cargo Door Light                                                       Y              1.0             2.2
               ----------------------------------------------------------------------------------------------------------
               Provisions for JAA Certification (1)                                   Y              4.3             9.5
               ----------------------------------------------------------------------------------------------------------
               Plug Type Passenger Door                                               Y             -8.0           -17.6
       ------------------------------------------------------------------------------------------------------------------

            C) INTERIOR OPTIONAL ITEMS
       ------------------------------------------------------------------------------------------------------------------
               Interior Option 1   (2)                                                Y             12.0            26.5
               ----------------------------------------------------------------------------------------------------------
               Audio Entertainment                                                    Y              2.5             5.5
               ----------------------------------------------------------------------------------------------------------
               2nd Attendant kit (includes Handset/Craddle0                           Y             22.2            49.0
               ----------------------------------------------------------------------------------------------------------
               Blue Sterile Light                                                     Y              0.5             1.1
               ----------------------------------------------------------------------------------------------------------
               Baggage Compartment Class C                                            Y             33.0            72.8
               ----------------------------------------------------------------------------------------------------------
               Customized Version Top PAX Seat with Ultra Leather                     Y             56.7           125.0
               ----------------------------------------------------------------------------------------------------------
               Baggage Restraint Net                                                  Y              8.0            17.6
               ----------------------------------------------------------------------------------------------------------
               Extra Oxygen Mask (3 masks for each double seat)                       Y              3.3             7.3
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
                                                   SUB-TOTAL   (OPTIONS STD A/C)                     593            1307
       ------------------------------------------------------------------------------------------------------------------


      (1)   Provisions for JAA Certification:
            -     Wiring provision on the panel lamps for Filament Test
            -     Structural provision for 10(degree) rudder deflection
            -     Wiring provision for the nose landing gear door position
                  indication in the EICAS
            -     Provision for warning of the selection of Flaps 22(degree) to
                  take-off
            -     Provision for limitation of the hydraulic pressure on the
                  speed brake actuator





                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

                  when the aircraft is above 200 knots

      (2)   Galley inserts (Trolley, SU, Hot Jugs) and catering are not included

      a.3   WEIGHT

            The manufacturer's empty weight (M.E.W.), for Customer
            configuration, is guaranteed to be:

                  NOMINAL:        25,999 Pounds
                  TOLERANCE:         260 Pounds
                  GUARANTEE:      26,259 Pounds

2.    AIRCRAFT CONFIGURATION

      2.1   The guarantees stated above are based on the EMB-145 Basic Aircraft
            configuration as defined in the Technical Description TD-145/010
            dated January 1998, plus specific Buyer configuration options as
            defined at Attachment "A" to the Purchase Agreement, (hereinafter
            referred to as the Detail Specification). Appropriate adjustment to
            the guarantees shall be made for changes in such Detail
            Specification approved in writing by the Buyer and Embraer. Such
            adjustments shall be accounted for by Embraer in its evidence of
            compliance with the guarantees.

            In the event a change is made to any law, governmental regulation or
            requirement, or in the interpretation of any such law, governmental
            regulation or requirement that affects the certification basis for
            the Aircraft, and as a result thereof, a change is made to the
            configuration and/or the performance of the Aircraft in order to
            obtain certification, the guarantees set forth in this Aircraft
            Performance Guarantee shall be appropriately modified to reflect any
            such change.

      2.2   The mission payload guarantee of Paragraph 1.a.2 and the
            Manufacturer's Empty Weight guarantee of Section 1.a.3 shall be
            adjusted by Embraer for the following in its evidence of compliance
            with such guarantees:

            (1)   Changes to the Detail Specification including Change Requests,
                  Master Changes, Change Orders or any other changes mutually
                  agreed upon between the Buyer and Embraer.

            (2)   The difference between the component weight allowances given
                  in the appropriate section of the Detail Specification and the
                  actual weights.

3.    GUARANTEE CONDITIONS

      3.1   All guaranteed performance data are based on the ICAO International
            Standard Atmosphere (ISA) and specified variations therefrom;
            altitudes are





                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

            pressure altitudes.

      3.2   The FAA Regulations (FAR) referred to in this Attachment are, unless
            otherwise specified, the EMB-145 Certification Basis regulations
            specified in the Type Certificate Data Sheet. The reference number
            for the Certificate Data Sheet and its date of issue will be
            provided to Buyer within fifteen (15) days of type approval.

      3.3   The cruise specific air range, speed and altitude capability, and
            the climb, cruise and descent portions of the mission guarantees
            include allowances for normal electrical power extraction and normal
            operation of the air conditioning system. Normal power extraction
            shall be defined as not less than a 37 kW total electrical and
            hydraulic loads. Normal operation of the air conditioning system
            shall be defined as operation in the automatic mode, with the
            temperature control set to maintain a nominal cabin temperature of
            75(Degree)F, and all air conditioning systems operating normally.
            This operation nominally allows a sea level cabin altitude to be
            maintained up to 19,500 feet and a maximum cabin pressure
            differential of 7.8 pounds per square inch at higher altitudes, with
            a nominal Aircraft cabin ventilation rate of 1,100 cubic feet per
            minute at 35,000 ft including passenger cabin recirculation (nominal
            recirculation is 42 percent not considering gasper flow). The APU is
            turned off unless otherwise specified.

      3.4   The cruise specific air range, speed and altitude capability, and
            the climb, cruise, and descent portions of the mission guarantees
            are based on an Aircraft center of gravity location of 26 percent of
            the mean aerodynamic chord.

      3.5   Performance, where applicable, is based on a fuel Lower Heating
            Value (LHV) of 18,580 BTU per pound and a fuel density of 6.70
            pounds per U.S. gallon.

4.    PARTIES' OBLIGATIONS ACCORDING TO THIS GUARANTEE

      RELATIVE TO THE GUARANTEES STATED IN PARAGRAPH 1.a above:

      4.1   During the Aircraft acceptance to be performed by Buyer in
            accordance with Article 7 of the Purchase Agreement, Buyer shall
            check the Aircraft performance specified in paragraph 1.a of this
            Attachment "J", by using the EMB-145 Aircraft Flight Manual (AFM)
            and by comparing the flight test data, at the atmospheric conditions
            prevailing during the flight, with the information presented in the
            EMB-145 Supplementary Performance Manual (SPM). All the performance
            guarantee under this Attachment "J" are in accordance with both
            manuals above mentioned, taking into consideration the established
            tolerances.

      4.2   Embraer's obligations in respect to the guarantees stated in
            Paragraph 1.a of this Attachment "J", are limited to Buyer's right
            to terminate the Purchase





                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

            Agreement in respect to the relevant Aircraft, pursuant to Article
            22.d. should it be reasonably verified that such Aircraft during the
            acceptance procedure specified in Article 7 of the Purchase
            Agreement, cannot comply with the performances guaranteed hereunder
            after Embraer has had a reasonable opportunity to cure such
            deficiencies in accordance with Article 7.

      4.3   In case during the above mentioned acceptance procedure, it is
            proven that the Aircraft performance does not comply with the
            performances specified in Paragraph 1.a of this Attachment "J", but
            Buyer considers it satisfactory by accepting delivery of such
            Aircraft, then Embraer shall not be liable to any claim or demand
            whatsoever from Buyer with respect to such performance guarantees.

      4.4   Upon acceptance of the Aircraft by Buyer, all obligations of Embraer
            regarding the Aircraft performance guarantees specified in Paragraph
            1.a, shall cease.

5.    GUARANTEE COMPLIANCE

      5.1   Compliance with the guarantees of Section 1.a shall be based on the
            conditions specified in that section, the Aircraft configuration of
            Section 2 and the guarantee conditions of Section 3.

      5.2   Compliance with the takeoff, landing, and TOW Climb limit guarantees
            shall be based on the FAA-approved Airplane Flight Manual for the
            EMB-145.

      5.3   Compliance with the cruise specific air range, speed, and the climb,
            cruise and descent portions of the mission guarantees shall be
            established by calculations based on the comparison mentioned in
            Section 4.1 above..

      5.4   The data derived from tests shall be adjusted as required by
            conventional methods of correction, interpolation or extrapolation
            in accordance with established engineering practices to show
            compliance with provisions of Section 1.a.

      5.5   Compliance with the Manufacturer's Empty Weight guarantee shall be
            based on information in the appropriate approved weight and balance
            manual, or associated document or report.

      5.6   Compliance with the guarantees set forth in this Attachment does not
            depend on the engine meeting the performance requirements contained
            in the engine specification.

6.    EXCLUSIVE GUARANTEES

      6.1   The only performance guarantees applicable to the Aircraft are those
            set





                       SCHEDULE "B" TO THE AMENDMENT No 8
- --------------------------------------------------------------------------------

            forth in this document. The performance guarantees set forth herein
            are established between Buyer and Embraer and may not be transferred
            or assigned to others, unless by previous written consent of
            Embraer.

      6.2   THE GUARANTEES, OBLIGATIONS AND LIABILITIES OF Embraer, AND REMEDIES
            OF Buyer SET FORTH IN THIS PERFORMANCE GUARANTEE ARE EXCLUSIVE AND
            IN SUBSTITUTION FOR, AND Buyer HEREBY WAIVES, RELEASES AND
            RENOUNCES, ALL OTHER RIGHTS, CLAIMS, DAMAGES AND REMEDIES OF Buyer
            AGAINST Embraer OR ANY ASSIGNED OF Embraer, EXPRESS OR IMPLIED,
            ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY ACHIEVED
            PERFORMANCE.

      6.3   The terms and conditions of this Performance Guarantee do not alter,
            modify or impair, in any way, the terms and conditions of Attachment
            C (EMB-145 AIRCRAFT WARRANTY CERTIFICATE) to this Agreement.

EX-10.13(I)

                                                                Exhibit 10.13(i)

               AMENDMENT NUMBER 9 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 9 to Purchase Agreement GCT-025/98, dated as of November
30, 2000 ("Amendment No. 9") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended from
time to time (collectively referred to herein as "Agreement"). This Amendment
No.9 is between Embraer and Buyer, collectively referred to herein as the
"Parties".

This Amendment No.9 sets forth certain additional agreement between Embraer and
Buyer relative to the change on the date of one Aircraft in the delivery
schedule in Article 5.a of the Purchase Agreement.

This Amendment No.9 constitutes an amendment and modification of the Purchase
Agreement. Except as otherwise provided for herein all terms of the Purchase
Agreement shall remain in full force and effect.

All terms defined in this Amendment No.9 which are not defined in the Purchase
Agreement shall have the meaning set forth in this Amendment No.9.

All capitalized terms used in this Amendment No.9 which are not defined herein
shall have the meaning given in the Purchase Agreement. In the event of any
conflict between this Amendment No.9 and the Purchase Agreement the terms,
conditions and provisions of this Amendment No.9 shall control.

WHEREAS, [*]

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:


- --------------------
* Confidential


1.    AIRCRAFT DELIVERY SCHEDULE: The delivery schedule contained in Article
      "5.a" shall be deleted and replaced with the following:



     --------------------------------------------------------------------------------------------------------------------
         A/C #         DELIVERY MONTH        A/C #            DELIVERY MONTH            A/C #         DELIVERY MONTH
     --------------------------------------------------------------------------------------------------------------------
                                                                                         
          01              Apr-99*             16                 Nov-00*                 31             24 Aug-01
     --------------------------------------------------------------------------------------------------------------------
          02              Jun-99*             17                 4 DEC-00                32             31 Aug-01
     --------------------------------------------------------------------------------------------------------------------
          03              Aug-99*             18                15 Dec-00                33             21 Sep-01
     --------------------------------------------------------------------------------------------------------------------
          04              Nov-99*             19                19 Jan-01                34             28 Sep-01
     --------------------------------------------------------------------------------------------------------------------
          05              Jan-00*             20                24 Jan-01                35             12 Oct-01
     --------------------------------------------------------------------------------------------------------------------
          06              Feb-00*             21                31 Jan-01                36             26 Oct-01
     --------------------------------------------------------------------------------------------------------------------
          07              Mar-00*             22                28 Feb-01                37             16 Nov-01
     --------------------------------------------------------------------------------------------------------------------
          08              May-00*             23                30 Mar-01                38             30 Nov-01
     --------------------------------------------------------------------------------------------------------------------
          09              Jun-00*             24                27 Apr-01                39             20 Dec-01
     --------------------------------------------------------------------------------------------------------------------
          10              Jul-00*             25                30 Apr-01                40             18 Jan-02
     --------------------------------------------------------------------------------------------------------------------
          11              Aug-00*             26                17 May-01                41             31 Jan-02
     --------------------------------------------------------------------------------------------------------------------
          12              Aug-00*             27                31 May-01                42             15 Feb-02
     --------------------------------------------------------------------------------------------------------------------
          13              Sep-00*             28                29 Jun-01                43             28 Feb-02
     --------------------------------------------------------------------------------------------------------------------
          14              Oct-00*             29                20 Jul-01                44             15 Mar-02
     --------------------------------------------------------------------------------------------------------------------
          15              Nov-00*             30                27 Jul-01                45             28 Mar-02
     --------------------------------------------------------------------------------------------------------------------


      REMARKS: *Delivered to Buyer as of the date hereof.

2.    MISCELLANEOUS: All other provisions of the Agreement which have not been
      specifically amended or modified by this Amendment No.9 shall remain valid
      in full force and effect without any change.


        [The remainder of this page has been left blank intentionally.]





IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No.9 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By    /s/ Satoshi Yokota                         By     /s/ Douglas J. Lambert

Name:  Satoshi Yokota                            Name:  Douglas J. Lambert

Title: Executive Vice-President                  Title: Vice President
        Industrial


By     /s/ Flavio Rimoli                         Date:  December 15, 2000

Name:  Flavio Rimoli                             Place: Greenwich, CT  USA

Title: Director of Contracts


Date:      December 20, 2000.

Place:     Sao Jose dos Campos, Brazil.

EX-10.13(J)

                                                                Exhibit 10.13(j)

              AMENDMENT NUMBER 10 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 10 to Purchase Agreement GCT-025/98, dated as of January
___, 2001 ("Amendment No. 10") relates to the Purchase Agreement GCT-025/98
between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("EMBRAER") and
Solitair Corp. ("BUYER") dated June 17, 1998 as amended from time to time
(together referred to herein as the "Agreement"). This Amendment No. 10 is
between EMBRAER and BUYER, collectively referred to herein as the "Parties".

This Amendment No. 10 constitutes an amendment and modification regarding the
confirmation of the first Option Group of five Option Aircraft, pursuant to
Article 24 of the Purchase Agreement. All terms defined in the Agreement and not
defined herein shall have the meaning given in the Agreement when used herein,
and in case of any conflict between this Amendment No.10 and the Agreement, this
Amendment No.10 shall control.

NOW, THEREFORE, in consideration of the foregoing, EMBRAER and BUYER do hereby
agree as follows:

1.    CONFIRMATION OF THE FIRST OPTION GROUP

The date for confirmation of the first Option Group shall be changed to February
5, 2001 and Article 24.e is hereby deleted and replaced to read as follows:

      "24.e. CONFIRMATION OF OPTION GROUPS: Buyer's options to purchase Option
Groups shall be confirmed on or before [*]. However, the confirmation for the
first Option Group is due on or before [*]. At the time of such confirmation,
the Initial Deposit with respect to the Option Aircraft in such Option Group
shall become non refundable.[*]

2.    PROGRESS PAYMENT FOR THE FIRST OPTION GROUP

Notwithstanding the provisions of Article 24.d.2 of the Purchase Agreement, the
progress payments due for the Option Aircraft related to the first Option Group
shall be due and payable on or before [*]

3.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment shall remain valid in full force and effect
without any change.


- --------------------
* Confidential



IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 10 to be effective as of the date
first written above.


EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By     /s/ Frederico Fleury Curado                By     /s/ Douglas J. Lambert

Name:  Frederico Fleury Curado                    Name:  Douglas J. Lambert

Title: Executive Vice President                   Title: Vice President
        Airline Market

By     /s/ Flavio Rimoli                          Date:   1-17-00

Name:  Flavio Rimoli                              Place:  Greenwich, CT U.S.A.

Title: Director of Contracts


Date:  January 19, 2001

Place: Sao Jose dos Campos, Brazil

EX-10.13(K)

                                                                Exhibit 10.13(k)

              AMENDMENT NUMBER 11 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 11 to Purchase Agreement GCT-025/98, dated as of May __,
2001 ("Amendment No. 11") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended from
time to time (collectively referred to herein as "Agreement"). This Amendment
No. 11 is between Embraer and Buyer, collectively referred to herein as the
"Parties".

This Amendment No. 11 sets forth certain additional agreements between Embraer
and Buyer relative to changes on the delivery schedule, interest on late
payments and non-excusable delays interest for payments with maturity date on
and after January 31st, 2001 and Buyer's exercise of Option Aircraft.

This Amendment No. 11 constitutes an amendment and modification of the Purchase
Agreement. Except as otherwise provided for herein all terms of the Purchase
Agreement shall remain in full force and effect. All terms defined in this
Amendment No. 11 which are not defined in the Purchase Agreement shall have the
meaning set forth in this Amendment No. 11. All capitalized terms used in this
Amendment No. 11 which are not defined herein shall have the meaning given in
the Purchase Agreement. In the event of any conflict between this Amendment No.
11 and the Purchase Agreement the terms, conditions and provisions of this
Amendment No. 11 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to amend the Purchase Agreement as provided for below:

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:

1.    In Article "4.c" - Late Payment and Termination for Failure to Make
      Payments, the interest Rate of [*] per month shall be deleted and
      replaced by [*] on the first and twenty-fifth lines of Article 4.c.

2.    AIRCRAFT DELIVERY SCHEDULE: The delivery schedule contained in Article
      "5.a" shall be deleted and replaced with the following:



- ----------
* Confidential





     --------------------------------------------------------------------------------------------------------------------
         A/C #         DELIVERY MONTH        A/C #            DELIVERY MONTH            A/C #         DELIVERY MONTH
     --------------------------------------------------------------------------------------------------------------------
                                                                                         
          01              Apr-99*             16                 Nov-00*                 31             27 Jul-01
     --------------------------------------------------------------------------------------------------------------------
          02              Jun-99*             17                 Dec-00*                 32             24 Aug-01
     --------------------------------------------------------------------------------------------------------------------
          03              Aug-99*             18                 Dec-00*                 33             31 Aug-01
     --------------------------------------------------------------------------------------------------------------------
          04              Nov-99*             19                 Jan-01*                 34             21 Sep-01
     --------------------------------------------------------------------------------------------------------------------
          05              Jan-00*             20                 Jan-01*                 35             28 Sep-01
     --------------------------------------------------------------------------------------------------------------------
          06              Feb-00*             21                 Jan-01*                 36             12 Oct-01
     --------------------------------------------------------------------------------------------------------------------
          07              Mar-00*             22                 Feb-01*                 37             26 Oct-01
     --------------------------------------------------------------------------------------------------------------------
          08              May-00*             23                 Mar-01*                 38             16 Nov-01
     --------------------------------------------------------------------------------------------------------------------
          09              Jun-00*             24                 Apr-01*                 39             30 Nov-01
     --------------------------------------------------------------------------------------------------------------------
          10              Jul-00*             25                 Apr-01*                 40             20 Dec-01
     --------------------------------------------------------------------------------------------------------------------
          11              Aug-00*             26                 May-01*                 41             18 Jan-02
     --------------------------------------------------------------------------------------------------------------------
          12              Aug-00*             27                31 May-01                42             31 Jan-02
     --------------------------------------------------------------------------------------------------------------------
          13              Sep-00*             28                29 Jun-01                43             15 Feb-02
     --------------------------------------------------------------------------------------------------------------------
          14              Oct-00*             29                29 JUN-01                44             15 Mar-02
     --------------------------------------------------------------------------------------------------------------------
          15              Nov-00*             30                20 Jul-01                45             28 Mar-02
     --------------------------------------------------------------------------------------------------------------------


REMARKS:  *Delivered to Buyer as of the date hereof.

3.    Article "9.b.1" shall be deleted and replaced with the following:

      "1.   If the delivery of an Aircraft or Spares is delayed, not as a result
            of an Excusable Delay, by more than [*] calendar days after
            the Contractual Delivery Date for such Aircraft or, in the case of
            Spares, the date for delivery as agreed between the Parties in
            accordance with Article 5.b., Buyer will be entitled to elect to
            receive in accordance with item "b.3" below from Embraer liquidated
            damages as compensation for such delay equal to [*] of each delayed
            Aircraft or the price of each Spares item, for each day of delay in
            excess of the above mentioned [*] calendar days, up to the
            date that the Aircraft is ready for delivery and available to Buyer
            by means of confirmation of the successful completion of ground and
            flight tests performed by Embraer, to be provided per Article 7.a,
            it being understood that such liquidated damages will not, in any
            event, [*] and that it will only be due and payable by Embraer to
            Buyer after Buyer pays to Embraer the total Aircraft Purchase Price
            and/or Spares items price as applicable. Such liquidated damages
            shall be paid at Buyer's option in cash or in the form of a credit
            for spare parts or other Embraer-provided services."

            3.1.  In Article 9.c - Delay Due to Loss or Structural Damage to the
                  Aircraft, the "...additional interest of [*]..." on
                  the sixteenth line shall be deleted and replaced by
                  "...additional interest of [*]...".


- ----------
* Confidential


4.    In the twenty seventh and twenty eighth lines of Article 23.b, eighteenth
      line of Article 23.b.1 and ninth and tenth lines of Article 23.d, the
      "...additional interest of [*]..." shall be deleted
      and replaced by "...additional interest of [*]...".

5.    The first paragraph of Article 24 shall be deleted and replaced with the
      following:

      "The Option Aircraft shall be divided into groups of a minimum of two (2)
      Aircraft. The groups shall be referred to collectively as the "Option
      Groups" and each may be referred to individually as an "Option Group".

      5.1.  Article 24.d.2 shall be deleted and replaced with the following;

      "2.   A progress payment of [*] defined in item "c" above, per exercised
            Option Aircraft, less the initial deposit of [*] is due and payable
            [*]

      5.2.  Article "24.e" shall be deleted and replaced with the following:

      "e.   CONFIRMATION OF OPTION GROUPS: Buyer's options to purchase Option
            Groups shall be confirmed on or before [*] in each Option Group.
            At the time of such confirmation, the Initial Deposit with respect
            to the Option Aircraft in such Option Group shall become non
            refundable. In the event that Buyer fails to exercise its option
            with respect to any [*]. The first Option Group shall be
            confirmed on or before [*]."

      5.3.  In Article 24.f - FAILURE TO CONFIRM: RETURN OF DEPOSIT, the
            "...additional interest of [*]..." on the eleventh line shall
            be deleted and replaced by "...additional interest of [*]...".

6.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment No. 11 shall remain valid in full force and effect
without any change.





IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 11 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By  /s/ Frederico Fleury Curado                  By  /s/ Douglas J. Lambert
  --------------------------------                 -----------------------------
Name:  Frederico Fleury Curado                   Name:  Douglas J. Lambert

Title: Executive Vice President                  Title: Vice President
           Airline Market

By  /s/ Flavio Rimoli                            Date:
  --------------------------------
Name:  Flavio Rimoli                             Place:

Title: Director of Contracts

Date:  June 29, 2001

Place: Sao Jose dos Campos

EX-10.13(L)

                                                                Exhibit 10.13(l)

                                  CONFIDENTIAL

              AMENDMENT NUMBER 12 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 12 to Purchase Agreement GCT-025/98, dated as of July __,
2001 ("Amendment No. 12") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended from
time to time (collectively referred to herein as "Agreement"). This Amendment
No. 12 is between Embraer and Buyer, collectively referred to herein as the
"Parties".

This Amendment No. 12 constitutes an amendment and modification regarding the
incorporation of Major Changes and other modifications, pursuant to Article 11.a
and 11.g of the Purchase Agreement. Except as otherwise provided for herein all
terms of the Purchase Agreement shall remain in full force and effect. All
capitalized terms used in this Amendment No. 12 which are not defined herein
shall have the meaning given in the Purchase Agreement. In the event of any
conflict between this Amendment No. 12 and the Purchase Agreement the terms,
conditions and provisions of this Amendment No. 12 shall control.

WHEREAS, Attachment A of the Purchase Agreement will be altered in order to
comply with the configuration modifications to the US Airways, Trans World
Express ("TWE") and America West requirements.

WHEREAS, the Aircraft configuration has been changed in order to include the
next generation passenger seats, new gust lock system, increase on galley weight
capacity, new cargo liners, new APU air intake net installation and alterations
in the aircraft passenger door, new AHARS, VOR system, which will affect the
Aircraft Performance Guarantee;

WHEREAS, the Aircraft configuration has been changed in order to include the
AFDAU equipment, A1P engines and exclude the specific emergency equipment items,
JAA provisions and matched skin panels, which will affect the Aircraft Basic
Price and the Performance Guarantee.

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:

1.    ATTACHMENT A ALTERATIONS:

1.1   Attachment "A" to Purchase Agreement will be replaced by Attachments
      "A-1", "A-2" and "A-3", attached to this Amendment No. 12, in order to
      comply with US Airways (Attachment "A-1"), TWE (Attachment "A-2") and
      America West (Attachment "A-3") requirements for certain Aircraft, as
      applicable.

1.2   All modifications identified on Section 2 of this Amendment No. 12 will be
      referred





                                  CONFIDENTIAL

      as changes to Attachment "A" and will alter simultaneously the Attachments
      "A-1", "A-2" and "A-3", unless when specifically mentioned.

1.3   Buyer shall inform Embraer the configuration for each Aircraft in
      accordance with Sections 3 and 4 of Attachment "A".

2.    EQUIPMENT CONFIGURATION CHANGES:

2.1.  For Aircraft #10 and all subsequent Aircraft:

      (i) item 2.2 of Attachments "A-2" and "A-3" to the Agreement, "OPTIONAL
      SYSTEM/OTHER EQUIPMENT" is hereby amended by replacing item "m" as
      follows:

            "...
            m) S tandard door"

      (ii) item 2.2 of Attachment "A" to the Agreement, "OPTIONAL SYSTEM/OTHER
      EQUIPMENT" is hereby amended by inserting after item "m" the following:

            "...
            n) New gust lock system"

      (iii) item 2.3 of Attachment "A" to the Agreement, "INTERIOR OPTIONAL
      ITEMS" is hereby amended by inserting after item "i" the following:

            "...
            j) Next generation passenger seats"

2.2.  For Aircraft #11 and all subsequent Aircraft, item 2.1 of Attachment "A"
      to the Agreement, "OPTIONS TO THE STANDARD AVIONICS CONFIGURATION" is
      hereby amended by inserting after item "i" the following:

            "...
            j) Auxiliary Flight Data Acquisition Unit (AFDAU)"

2.3.  For Aircraft #16 and all subsequent Aircraft, item 2.2 of Attachment "A"
      to the Agreement, "OPTIONAL SYSTEM / OTHER EQUIPMENT", is hereby amended
      by inserting after item "n" the following:

            "...
            o) Rolls Royce Allison AE3007A1P engines"

This modification will only apply for Aircraft to be operated by Chautauqua
Airlines, Inc.






                                  CONFIDENTIAL

2.4.  For Aircraft #18 and all subsequent Aircraft, item 2.2. of Attachment "A"
      to the Agreement, "OPTIONAL SYSTEM / OTHER EQUIPMENT", is hereby amended
      by deleting the following items "i", "j", "k" and "l":

            "...
            i) Structural provision for 10(degree)rudder deflection
            j) Wiring provision for the nose landing gear door position
            indication in the EICAS
            k) Provision for warning of the selection of Flaps 22(degree)to
            take-off
            l) Provision for limitation of the hydraulic pressure on the speed
            brake actuator when the aircraft is above 200 knots"

      And replacing them with the following:

            "...
            i) Intentionally deleted
            j) Intentionally deleted
            k) Intentionally deleted
            l) Intentionally deleted"

2.5.  For Aircraft #19, 21, 22, 23, 25 and all subsequent Aircraft, item 2.3 of
      Attachment "A" to the Agreement, "INTERIOR OPTIONAL ITEMS" is hereby
      amended by inserting after item "j" the following:

            "...
            k) New Galley Weight Capacity"

2.6.  For Aircraft #22 and all subsequent Aircraft, item 2.2 of Attachment "A"
      to the Agreement, "OPTIONAL SYSTEM / OTHER EQUIPMENT", is hereby amended
      by inserting after item "o" the following

            "...
            p ) New APU Air Inlet Installation"

2.7.  For Aircraft #23 and all subsequent Aircraft, item 2.2. of Attachment "A"
      to the Agreement, "OPTIONAL SYSTEM / OTHER EQUIPMENT", is hereby amended
      by deleting item "d" and replacing it with the following text, due to the
      change from the matched to the standard skin panels:

            "...
            d) Standard External Painting"

2.8.  For Aircraft #26 and all subsequent Aircraft:





                                  CONFIDENTIAL

      (i)   item 2.1 of Attachment "A" to the Agreement, "OPTIONS TO THE
            STANDARD AVIONICS CONFIGURATION" is hereby amended by inserting
            after item "j" the following:

            "...
            k) VOR system
            l) AHRS H900 Honeywell system"

      (ii)  item 2.2 of Attachment "A" to the Agreement "OPTIONAL SYSTEM/OTHER
            EQUIPMENT" is hereby amended by inserting after item "l" the
            following:

            "...
            q) New Corrosion Prevention component"

2.9.  For Aircraft #29 and all subsequent Aircraft, item 2.3 of Attachment "A"
      to the Agreement, "INTERIOR OPTIONAL ITEMS", is hereby amended by
      inserting after "k" the following:

            "...
            l) Improved Overhead Bins"

2.10. For Aircraft #30 and all subsequent Aircraft, item 2.3 of Attachment "A"
      to the Agreement, "INTERIOR OPTIONAL ITEMS", is hereby amended by
      inserting after item "l" the following:

            "...
            m) New Cargo Liners"

2.11. For Aircraft #30 and all subsequent Aircraft, item 2.3 of Attachment "A"
      to the Agreement, "INTERIOR OPTIONAL ITEMS", is hereby amended by
      inserting after item "m" the following Buyer Furnished Equipment ("BFE"),
      due to Buyer's request to supply such emergency equipment:

            "...
            n) BFE Emergency equipment supplied by Buyer:
                  n.1) PBE 119003 Puritan Bennett
                  n.2) PBE bracket 119063-01 Puritan Bennett
                  n.3) Smoke goggles 322-70 Scott Aviation
                  n.4) First aid kit 70004-00 Scott Aviation
                  n.5) Medical kit 4531 Medical Advisory Sys.
                  n.6) Fire ext. A352T HRD Aero Sys.
                  n.7) Fire ext. bracket 817 HRD Aero Sys."






                                  CONFIDENTIAL

3.    AIRCRAFT BASIC PRICES CHANGES

3.1   The changes referred to in items 2.1, 2.5, 2.6, 2.8, 2.9 and 2.10 will [*]


3.2   The changes referred to in item 2.2, 2.3, 2.4, 2.7 and 2.11 will change
      the Basic Price for [*]




  --------------------------------------------------------------------------------------------------------------
                                                                                         BASIC PRICE IN
    ITEM        AIRCRAFT #        BASIC PRICE CHANGE   TOTAL BASIC PRICE CHANGE           JANUARY 2000
  --------------------------------------------------------------------------------------------------------------
                                                                             
     2.2       11 through 15          [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------
     2.3         16 and 17            [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------
     2.4.      18 through 22          [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------
     2.7       23 through 27          [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------
                28 and 29*            [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------
    2.11       30 through 45          [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------
              Option Aircraft         [*]                      [*]                       [*]
  --------------------------------------------------------------------------------------------------------------


*     Prior to this Amendment, the Basic Price of Aircraft 28 through 45 was
      [*]

3.3   As a result of the changes described in 3.2 above, the Aircraft Basic
      Price table on Article "3.a.1" for Aircraft #11 and all subsequent
      Aircraft shall be deleted and replace with the following:



      --------------------------------------------------------------------------------------------------------------------
            Aircraft #                                         Price
      --------------------------------------------------------------------------------------------------------------------
                           
            "11 TO 15         [*]

      --------------------------------------------------------------------------------------------------------------------
            16 and 17         [*]

      --------------------------------------------------------------------------------------------------------------------
             18 to 22         [*]

      --------------------------------------------------------------------------------------------------------------------
             23 to 27         [*]

      --------------------------------------------------------------------------------------------------------------------
            28 and 29         [*]

      --------------------------------------------------------------------------------------------------------------------
          30 through 45       [*]

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




- ----------
* Confidential


                                  CONFIDENTIAL

4.    OPTION AIRCRAFT BASIC PRICE: Article 24.b shall be deleted and replaced
      with the following:

      "b.   BASIC PRICE: The unit basic price of each Option Aircraft shall be
            [*]), provided that such Option Aircraft be delivered to Buyer
            in accordance with the chart above and in the same configuration,
            specification and installations specified in Attachment "A",
            as such attachment is written on the date of signature of
            this Amendment No. 12 unless otherwise modified by the Parties
            and the costs for such changes shall be in addition to the
            Basic Price."

5.    CHANGES IN THE AIRCRAFT PERFORMANCE GUARANTEE: Attachment J to the
      Agreement is hereby amended as follows with respect to the specified
      Aircraft:

a.    AIRCRAFT #10 AND ALL SUBSEQUENT AIRCRAFT - INCLUSION OF NEW GUST LOCK
      SYSTEM AND NEXT GENERATION PASSENGER SEATS

      (i)   In section 1.a.2.1, the amount "11,969 Pounds (5,430 kg)" is deleted
            and replaced with "11,965 Pounds (5,428 kg)"

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:



        ----------------------------------------------------------------------------------------------
                                   ITEMS                              WEIGHT (kg)       WEIGHT (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            595             1,311
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,795           26,003
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,351           27,229
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", items B, and C shall
            be modified by added the following new provisions at the end of each
            section, and the "SUBTOTAL" shall be modified as follows:



        -------------------------------------------------------------------------------------------------------------
        ITEMS                                                                  OPT       WEIGHT (kg)    WEIGHT (lb)
        -------------------------------------------------------------------------------------------------------------
                                                                                                   
        B) OPTIONS SYSTEM/OTHER EQUIPMENT
        -------------------------------------------------------------------------------------------------------------
        New gust lock system                                                    Y            1.8            3.9
        -------------------------------------------------------------------------------------------------------------
        C) INTERIOR OPTIONAL ITEMS
        -------------------------------------------------------------------------------------------------------------
        Next generation passenger seats                                         Y             -              -
        -------------------------------------------------------------------------------------------------------------
                                              SUB-TOTAL (OPTIONS STD A/C)                    595           1,311
        -------------------------------------------------------------------------------------------------------------



- ----------
* Confidential



                                  CONFIDENTIAL

      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,003 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,263 Pounds"

b.    AIRCRAFT #11 AND ALL SUBSEQUENT AIRCRAFT - INCLUSION OF AFDAU

      (i)   in section 1.a.2.1, the amount "11,965 Pounds (5,428 kg)" is deleted
            and replaced with "11,944 Pounds (5,418 kg)"

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:



        ----------------------------------------------------------------------------------------------
                                   ITEMS                                 WEIGHT           WEIGHT
                                                                          (kg)             (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            605             1,332
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,805           26,024
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,361           27,250
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", item A shall be
            modified by added the following new provisions at the end of such
            and the "SUBTOTAL" shall be modified as follows:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)    WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                   
         A) OPTIONS TO STD AVIONIC CONFIGURATION
         ------------------------------------------------------------------------------------------------------------
         Auxiliary Flight Data Acquisition Unit (AFDAU)                         Y            9.6            21
         ------------------------------------------------------------------------------------------------------------
                                               SUB-TOTAL (OPTIONS STD A/C)                   605           1,332
         ------------------------------------------------------------------------------------------------------------


      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,024 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,284 Pounds"






                                  CONFIDENTIAL

c.    AIRCRAFT #16 AND ALL SUBSEQUENT AIRCRAFT - INCLUSION OF AE3007A1P ENGINES

      (i)   The first paragraph of Section 1 - GUARANTEES, shall be deleted and
            replaced by the following:

            "Embraer, subject to the conditions and limitations hereby
            expressed, and considering the Aircraft with a maximum takeoff
            weight of 48,501 pounds (22,000 kg) and equipped with EMBRAER
            furnished Rolls-Royce Allison AE 3007A1P engines, guarantees each
            Aircraft as follows:"

      (ii)  in section 1.a.2.1 and 1.a.2.3 will not be changed as there is no
            weight alteration;

      (iii) in section 1.a.2.4, "Customer Options Table", section B shall be
            modified by added the following new provision at the end of such
            section:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)    WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                    
         B) OPTIONS SYSTEM/OTHER EQUIPMENT
         ------------------------------------------------------------------------------------------------------------
         Rolls Royce Allison AE3007A1P engines                                  Y             -              -
         ------------------------------------------------------------------------------------------------------------


d.    AIRCRAFT #18 AND ALL SUBSEQUENT AIRCRAFT - EXCLUSION OF PROVISIONS FOR JAA
      CERTIFICATION

      (i)   in section 1.a.2.1, the amount "11,944 Pounds (5,418 kg)" is deleted
            and replaced with "11,949 Pounds (5,420 kg)"

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:



        ----------------------------------------------------------------------------------------------
                                   ITEMS                                WEIGHT            WEIGHT
                                                                         (kg)              (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            603             1,327
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,803           26,019
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,359           27,245
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", item B shall be
            modified changing the weight and observation (1) as indicated below:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)    WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                  
         B) OPTIONS SYSTEM/OTHER EQUIPMENT
         ------------------------------------------------------------------------------------------------------------
         Provisions for JAA Certification (1)                                   Y            2.0            4.5
         ------------------------------------------------------------------------------------------------------------
                                               SUB-TOTAL (OPTIONS STD A/C)                   603           1,327
         ------------------------------------------------------------------------------------------------------------
           (1) Provisions for JAA Certification:





                                  CONFIDENTIAL

            - Wiring provision on the panel lamps for Filament Test

      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,019 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,279 Pounds"

e.    AIRCRAFT #19, 21, 22, 23, 25 AND ALL SUBSEQUENT AIRCRAFT - INCLUSION OF
      GALLEY WEIGHT CAPACITY INCREASE

      (i)   in section 1.a.2.1, the amount "11,949 Pounds (5,420 kg)" is deleted
            and replaced with "11,944 Pounds (5,418 kg)".

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:



        ----------------------------------------------------------------------------------------------
                                   ITEMS                                 WEIGHT           WEIGHT
                                                                          (kg)             (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            605              1,332
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,805           26,024
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,361           27,250
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", item C shall be added
            with the following new provision at the end of such section:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)    WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                  
         C) INTERIOR OPTIONAL ITEMS
         ------------------------------------------------------------------------------------------------------------
         New Galley Weight Capacity                                             Y            2.3            5.0
         ------------------------------------------------------------------------------------------------------------
                                               SUB-TOTAL (OPTIONS STD A/C)                   605           1,332
         ------------------------------------------------------------------------------------------------------------


f.    AIRCRAFT #22 AND ALL SUBSEQUENT AIRCRAFT - NEW APU AIR INLET INSTALLATION

      (i)   in section 1.a.2.1, the amount "11,944 Pounds (5,418 kg)" is deleted
            and replaced with "11,943 Pounds (5,418 kg)".

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:






                                  CONFIDENTIAL



        ----------------------------------------------------------------------------------------------
                                   ITEMS                                 WEIGHT           WEIGHT
                                                                          (kg)             (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            605             1,333
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,805           26,025
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,361           27,251
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", section B shall be
            modified by added the following new provision at the end of such
            section:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                OPT       WEIGHT (kg)     WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                   
         B) OPTIONS SYSTEM/OTHER EQUIPMENT
         ------------------------------------------------------------------------------------------------------------
         New APU Air Inlet Installation                                        Y            0.3              0.7
         ------------------------------------------------------------------------------------------------------------
                                              SUB-TOTAL (OPTIONS STD A/C)                   605             1,333
         ------------------------------------------------------------------------------------------------------------


      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,025 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,285 Pounds"

g.    AIRCRAFT #23 AND ALL SUBSEQUENT AIRCRAFT - STANDARD EXTERNAL PAINTING

      (i)   in section 1.a.2.1 and 1.a.2.3 will not be changed as there is no
            weight alteration;

      (ii)  in section 1.a.2.4, "Customer Options Table", section B shall be
            modified by changing the item "External Painting (with capability to
            be polished) as follows:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)    WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                  
         B) OPTIONS SYSTEM/OTHER EQUIPMENT
         ------------------------------------------------------------------------------------------------------------
         Standard External Painting                                             Y           56.0           123.5
         ------------------------------------------------------------------------------------------------------------







                                  CONFIDENTIAL

h.    AIRCRAFT #26 AND ALL SUBSEQUENT AIRCRAFT - INCLUSION OF VOR, AHRS H900 AND
      NEW CORROSION PREVENTION COMPONENT

      (i)   In section 1.a.2.1, the amount "11,943 Pounds (5,418 kg)" is deleted
            and replaced with "11,934 Pounds (5,413 kg)"

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:



        ----------------------------------------------------------------------------------------------
                                   ITEMS                                 WEIGHT           WEIGHT
                                                                          (kg)             (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            610             1,342
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,810           26,034
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,366           27,260
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", sections A and B shall
            be modified by added the following new provisions at the end of such
            section:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                OPT       WEIGHT (kg)     WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                   
         A) OPTIONS TO STD AVIONIC CONFIGURATION
         ------------------------------------------------------------------------------------------------------------
         VOR system                                                            Y             -               -
         ------------------------------------------------------------------------------------------------------------
         AHRS H900 Honeywell system                                            Y             -               -
         ------------------------------------------------------------------------------------------------------------
           B) OPTIONS SYSTEM/OTHER EQUIPMENT
         ------------------------------------------------------------------------------------------------------------
         New Corrosion Prevention Component                                    Y            5.0             8.8
         ------------------------------------------------------------------------------------------------------------
                                              SUB-TOTAL (OPTIONS STD A/C)                   610            1,342
         ------------------------------------------------------------------------------------------------------------


      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,034 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,294 Pounds"

i.    AIRCRAFT #29 AND ALL SUBSEQUENT AIRCRAFT - IMPROVED OVERHEAD BINS

      (i)   In section 1.a.2.1, the amount "11,934 Pounds (5,413 kg)" is deleted
            and replaced with "11,949 Pounds (5,420 kg)"

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:




                                  CONFIDENTIAL



        ----------------------------------------------------------------------------------------------
                                   ITEMS                              WEIGHT (kg)         WEIGHT
                                                                                           (lb)
        ----------------------------------------------------------------------------------------------
                                                                                    
        2 - Option to Std EMB-145 Aircraft (*)                            603             1,327
        ----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                11,803           26,019
        ----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                12,359           27,245
        ----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", section C shall be
            modified by added the following new provision at the end of such
            section:



         ------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)    WEIGHT (lb)
         ------------------------------------------------------------------------------------------------------------
                                                                                                   
           C) INTERIOR OPTIONAL ITEMS
         ------------------------------------------------------------------------------------------------------------
         Improved Overhead bins                                                 Y           -7.0           -15.4
         ------------------------------------------------------------------------------------------------------------
                                               SUB-TOTAL (OPTIONS STD A/C)                   603           1,327
         ------------------------------------------------------------------------------------------------------------


      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,019 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,279 Pounds"

j.    AIRCRAFT #30 AND ALL SUBSEQUENT AIRCRAFT - INCLUSION OF NEW CARGO LINERS

      (i)   in section 1.a.2.1, the amount "11, 949 Pounds (5, 420 kg)" is
            deleted and replaced with "11, 944 Pounds (5, 418 kg)"

      (ii)  in section 1.a.2.3, "EMB-145 WEIGHT SUMMARY", items 2, 3, and 5
            shall be deleted and replaced with the following:



        -----------------------------------------------------------------------------------------------
                                   ITEMS                                  WEIGHT           WEIGHT
                                                                           (kg)             (lb)
        -----------------------------------------------------------------------------------------------
                                                                                     
        2 - Option to Std EMB-145 Aircraft (*)                               605            1,331
        -----------------------------------------------------------------------------------------------
        3 - M.E.W. Customer Configuration                                 11,805           26,023
        -----------------------------------------------------------------------------------------------
        5 - O.E.W. Customer Configuration                                 12,361           27,249
        -----------------------------------------------------------------------------------------------


      (iii) in section 1.a.2.4, "Customer Options Table", item C shall be
            modified by added the following new provision at the end of each
            section, and the "SUBTOTAL" shall be modified as follows:




                                  CONFIDENTIAL



         --------------------------------------------------------------------------------------------------------------
         ITEMS                                                                 OPT       WEIGHT (kg)     WEIGHT (lb)
         --------------------------------------------------------------------------------------------------------------
                                                                                                   
         C) INTERIOR OPTIONAL ITEMS
         --------------------------------------------------------------------------------------------------------------
         New Cargo Liners                                                       Y             2              4.5
         --------------------------------------------------------------------------------------------------------------
                                               SUB-TOTAL (OPTIONS STD A/C)                   605            1,331
         --------------------------------------------------------------------------------------------------------------


      (iv)  in section 1.a.3, "Weight" is hereby amended to read as follows:

                  "The manufacturer's empty weight (M.E.W.), for Customer
                  configuration, is guaranteed to be:

                          NOMINAL:       26,023 Pounds
                          TOLERANCE:        260 Pounds
                          GUARANTEE:     26,283 Pounds"

6.    MISCELLANEOUS: All other provisions of the Agreement which have not been
      specifically amended or modified by this Amendment No. 12 shall remain
      valid in full force and effect without any change.


         [The remainder of this page has been left blank intentionally.]





IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 12 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de                  Solitair Corp.
Aeronautica S.A.


By  /s/ Frederico Fleury Curado                  By  /s/ Jay Maymudes
  -------------------------------                   ---------------------------
Name:  Frederico Fleury Curado                   Name:  Jay Maymudes
  -------------------------------                   ---------------------------

Title: E.V.P. Airline Market                     Title: V. P.
  -------------------------------                   ---------------------------


By  /s/ Flavio Rimoli                            Date: 10/22/01
  -------------------------------                   ---------------------------

Name:  Flavio Rimoli                             Place: Greenwich, CT
  -------------------------------                   ---------------------------

Title: Director of Contracts
  -------------------------------

Date:  10/22/2001
  -------------------------------

Place: Sao Jose dos Campos
  -------------------------------






                   AIRCRAFT SPECIFIC CONFIGURATION, FINISHING
                             AND REGISTRATION MARKS

1.  STANDARD AIRCRAFT

     The Aircraft shall be manufactured according to the standard configuration
     specified in the Technical Description TD-145/010, dated January 1998
     (Appendix I) (the "Technical Description") and the optional equipment
     described in item 2 below.

2.  OPTIONAL EQUIPMENT

      2.1   OPTIONS TO THE STANDARD AVIONICS CONFIGURATION

            a)    CAT-II
            b)    2nd Radio Altimeter
            c)    2nd DME
            d)    2nd ADF
            e)    2nd Transponder Mode S
            f)    Selcal - Trimble
            g)    FMS/GPS - Honeywell
            h)    EGPWS
            i)    VHF (1st and 2nd) 8.33 khz spacing
            j)    Auxiliary Flight Data Acquisition Unit (AFDAU) (applicable for
                  Aircraft #11 and all subsequent Aircraft)
            k)    VOR system (applicable for Aircraft #26 and all subsequent
                  Aircraft)
            l)    AHRS H900 Honeywell system (applicable for Aircraft #26 and
                  all subsequent Aircraft)

      2.2   OPTIONAL SYSTEM / OTHER EQUIPMENT

            a)    Thrust Reversers
            b)    LR version
            c)    Cockpit Floodlight
            d)    Standard External Painting (for Aircraft #23 and all
                  subsequent Aircraft)
            e)    Service Door Sill Protection
            f)    Cargo Door Sill Protection
            g)    Cargo Door Light
            h)    Wiring provision on the panel lamps for Filament Test
            i)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            j)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            k)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            l)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            m)    Plug type passenger door
            n)    New Gust Lock System (applicable for Aircraft #10 and all
                  subsequent Aircraft)
            o)    Rolls Royce Allison AE3007A1P engines (1) (applicable for
                  Aircraft #16 and all subsequent Aircraft)
            p)    New APU Air Intake Net Installation (applicable for Aircraft
                  #22 and all subsequent Aircraft)






            q)    New Corrosion Prevention component (applicable for Aircraft
                  #26 and all subsequent Aircraft)

      2.3   INTERIOR OPTIONAL ITEMS

            a)    Interior Option 1
            b)    Audio Entertainment (CD player)
            c)    2nd Attendant kit (include Handset/Cradle)
            d)    Blue Sterile Light
            e)    Baggage Compartment Class C
            f)    Passenger Seats - Customized Cushion Version Top w/
                  Ultra-leather
            g)    Baggage Restraint Net
            h)    Extra Oxygen Mask (3 mask for each double seat)
            i)    Next Generation Passenger seats (applicable for Aircraft #10
                  and all subsequent Aircraft)
            j)    New Galley Weight Capacity (applicable for Aircraft #19, 21,
                  22, 23, 25 and all subsequent Aircraft)
            k)    Improved Overhead Bins (applicable for Aircraft #29 and all
                  subsequent Aircraft)
            l)    New Cargo Liners (applicable for Aircraft #30 and all
                  subsequent Aircraft)
            m)    Emergency equipment items supplied by Buyer (applicable for
                  Aircraft #30 and all subsequent Aircraft):
                  n.1) PBE   119003   Puritan Bennett
                  n.2) PBE bracket   119063-01   Puritan Bennett
                  n.3) Smoke goggles   322-70   Scott Aviation
                  n.4) First aid kit   70004-00   Scott Aviation
                  n.5) Medical kit   4531   Medical Advisory Sys.
                  n.6) Fire ext. A352T   HRD Aero Sys
                  n.7) Fire ext. bracket   817   HRD Aero Sys

NOTES:

      (1)   Rolls Royce Allison AE3007A1P engines, only for Aircraft to be
            operated by Chautauqua Airlines, Inc..

3.    FINISHING

      a.    EXTERIOR FINISHING:

      The Aircraft shall be painted according to Buyer's or a Designated
      Operator's color and paint scheme which shall be supplied to Embraer by
      Buyer no later than six (6) months prior to the relevant Aircraft
      Contractual Delivery Date.

      b.    INTERIOR FINISHING:

            Buyer shall inform Embraer no later than seven (7) months prior to
            the relevant Aircraft Contractual Delivery Date of its choice of
            materials and colors of all and any item of interior finishing such
            as seat covers, carpet, floor lining on galley areas, side walls and
            overhead lining, galley lining






            and curtain. The above mentioned schedule for definition of interior
            finishing shall only be applicable if Buyer selects its materials
            from the choices offered by and available at Embraer. In case Buyer
            elects to use different materials and or patterns, such schedule
            shall be agreed between the Parties at the time of signature of this
            Purchase Agreement.

      If Buyer does not supply Embraer with the information in the time period
      as described in Article 3.a and 3.b, the Aircraft will be produced and
      will be made available for Buyer's inspection in the same condition of
      exterior and interior finishing as the first Aircraft.

4.    REGISTRATION MARKS

      The Aircraft shall be delivered to Buyer with the registration marks
      painted on them, which shall be supplied to Embraer by Buyer no later than
      ninety (90) days before each relevant Aircraft Contractual Delivery Date.

IF THERE IS ANY CONFLICT BETWEEN THE TERMS OF THIS ATTACHMENT "A-1" AND THE
TERMS OF THE TECHNICAL DESCRIPTION, THE TERMS OF THIS ATTACHMENT "A-1" SHALL
PREVAIL.






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

                   AIRCRAFT SPECIFIC CONFIGURATION, FINISHING
                             AND REGISTRATION MARKS

1.    STANDARD AIRCRAFT

      The Aircraft shall be manufactured according to the standard configuration
      specified in the Technical Description TD-145/010, dated January 1998
      (Appendix I) (the "Technical Description") and the optional equipment
      described in item 2 below.

2.    OPTIONAL EQUIPMENT

      2.1   OPTIONS TO THE STANDARD AVIONICS CONFIGURATION

            a)    CAT-II
            b)    2nd Radio Altimeter
            c)    2nd DME
            d)    2nd ADF
            e)    2nd Transponder Mode S
            f)    Selcal - Trimble
            g)    FMS/GPS - Honeywell
            h)    EGPWS
            i)    VHF (1st and 2nd) 8.33 khz spacing
            j)    Auxiliary Flight Data Acquisition Unit (AFDAU) (applicable for
                  Aircraft #11 and all subsequent Aircraft)
            k)    VOR system (applicable for Aircraft #26 and all subsequent
                  Aircraft)
            l)    AHRS H900 Honeywell system (applicable for Aircraft #26 and
                  all subsequent Aircraft)

      2.2 OPTIONAL SYSTEM / OTHER EQUIPMENT

            a)    Thrust Reversers
            b)    LR version
            c)    Cockpit Floodlight
            d)    Standard External Painting (for Aircraft #23 and all
                  subsequent Aircraft)
            e)    Service Door Sill Protection
            f)    Cargo Door Sill Protection
            g)    Cargo Door Light
            h)    Wiring provision on the panel lamps for Filament Test
            i)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            j)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            k)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            l)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            m)    Standard door
            n)    New Gust Lock System (applicable for Aircraft #10 and all
                  subsequent Aircraft)
            o)    Rolls Royce Allison AE3007A1P engines (1) (applicable for
                  Aircraft #16 and all subsequent Aircraft)
            p)    New APU Air Intake Net Installation (applicable for Aircraft
                  #22 and all subsequent Aircraft)






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

            q)    New Corrosion Prevention component (applicable for Aircraft
                  #26 and all subsequent Aircraft)

      2.3   INTERIOR OPTIONAL ITEMS

            a)    Interior Option 1
            b)    Audio Entertainment (CD player)
            c)    2nd Attendant kit (include Handset/Cradle)
            d)    Blue Sterile Light
            e)    Baggage Compartment Class C
            f)    Standard main door with structural provisions for plug type
                  door
            g)    Passenger Seats - Customized Cushion Version Top w/
                  Ultra-leather
            h)    Baggage Restraint Net
            i)    Extra Oxygen Mask (3 mask for each double seat)
            j)    Next Generation Passenger seats (applicable for Aircraft #10
                  and all subsequent Aircraft)
            k)    New Galley Weight Capacity (applicable for Aircraft #19, 21,
                  22, 23, 25 and all subsequent Aircraft)
            l)    Improved Overhead Bins (applicable for Aircraft #29 and all
                  subsequent Aircraft)
            m)    New Cargo Liners (applicable for Aircraft #30 and all
                  subsequent Aircraft)
            n)    Emergency equipment items supplied by Buyer (applicable for
                  Aircraft #30 and all subsequent Aircraft):
                  n.1) PBE 119003 Puritan Bennett
                  n.2) PBE bracket 119063-01 Puritan Bennett
                  n.3) Smoke goggles 322-70 Scott Aviation
                  n.4) First aid kit 70004-00 Scott Aviation
                  n.5) Medical kit 4531 Medical Advisory Sys.
                  n.6) Fire ext. A352T HRD Aero Sys
                  n.7) Fire ext. bracket 817 HRD Aero Sys

            NOTES:

      (1)   Rolls Royce Allison AE3007A1P engines, only to Aircraft to be
            operated by Chautauqua Airlines, Inc..

3.    FINISHING

      a.    EXTERIOR FINISHING:

            The Aircraft shall be painted according to Buyer's or a Designated
            Operator's color and paint scheme which shall be supplied to Embraer
            by

      Buyer no later than six (6) months prior to the relevant Aircraft
      Contractual Delivery Date.

      b.    INTERIOR FINISHING:

            Buyer shall inform Embraer no later than seven (7) months prior to
            the relevant Aircraft Contractual Delivery Date of its choice of
            materials and colors of all and any item of interior finishing such
            as seat covers, carpet,






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

            floor lining on galley areas, side walls and overhead lining, galley
            lining and curtain. The above mentioned schedule for definition of
            interior finishing shall only be applicable if Buyer selects its
            materials from the choices offered by and available at Embraer. In
            case Buyer elects to use different materials and or patterns, such
            schedule shall be agreed between the Parties at the time of
            signature of this Purchase Agreement.

      If Buyer does not supply Embraer with the information in the time period
      as described in Article 3.a and 3.b, the Aircraft will be produced and
      will be made available for Buyer's inspection in the same condition of
      exterior and interior finishing as the first Aircraft.

4.    REGISTRATION MARKS

      The Aircraft shall be delivered to Buyer with the registration marks
      painted on them, which shall be supplied to Embraer by Buyer no later than
      ninety (90) days before each relevant Aircraft Contractual Delivery Date.

IF THERE IS ANY CONFLICT BETWEEN THE TERMS OF THIS ATTACHMENT "A-2" AND THE
TERMS OF THE TECHNICAL DESCRIPTION, THE TERMS OF THIS ATTACHMENT "A-2" SHALL
PREVAIL.






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

                   AIRCRAFT SPECIFIC CONFIGURATION, FINISHING
                             AND REGISTRATION MARKS

1.    STANDARD AIRCRAFT

      The Aircraft shall be manufactured according to the standard configuration
      specified in the Technical Description TD-145/010, dated January 1998
      (Appendix I) (the "Technical Description") and the optional equipment
      described in item 2 below.

2.    OPTIONAL EQUIPMENT

      2.1   OPTIONS TO THE STANDARD AVIONICS CONFIGURATION

            a)    CAT-II
            b)    2nd Radio Altimeter
            c)    2nd DME
            d)    2nd ADF
            e)    2nd Transponder Mode S
            f)    Selcal - Trimble
            g)    FMS/GPS - Honeywell
            h)    EGPWS
            i)    VHF (1st and 2nd) 8.33 khz spacing
            j)    Auxiliary Flight Data Acquisition Unit (AFDAU) (applicable for
                  Aircraft #11 and all subsequent Aircraft)
            k)    VOR system (applicable for Aircraft #26 and all subsequent
                  Aircraft)
            l)    AHRS H900 Honeywell system (applicable for Aircraft #26 and
                  all subsequent Aircraft)

      2.2   OPTIONAL SYSTEM / OTHER EQUIPMENT

            a)    Thrust Reversers
            b)    LR version
            c)    Cockpit Floodlight
            d)    Standard External Painting (for Aircraft #23 and all
                  subsequent Aircraft)
            e)    Service Door Sill Protection
            f)    Cargo Door Sill Protection
            g)    Cargo Door Light
            h)    Wiring provision on the panel lamps for Filament Test
            i)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            j)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            k)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft)
            l)    Intentionally deled (for Aircraft #18 and all subsequent
                  Aircraft) Standard door
            m)    New Gust Lock System (applicable for Aircraft #10 and all
                  subsequent Aircraft)
            n)    Rolls Royce Allison AE3007A1P engines (1) (applicable for
                  Aircraft #16 and all subsequent Aircraft)
            o)    New APU Air Intake Net Installation (applicable for Aircraft
                  #22 and all subsequent Aircraft)
            p)    New Corrosion Prevention component (applicable for Aircraft
                  #26 and all subsequent Aircraft)






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

      2.3   INTERIOR OPTIONAL ITEMS

            a)    Interior Option 1
            b)    Audio Entertainment (CD player)
            c)    Aft Attendant Handset/Cradle
            d)    Blue Sterile Light
            e)    Baggage Compartment Class C
            f)    Standard main door with structural provisions for plug type
                  door
            g)    Passenger Seats - Customized Cushion Version Top w/
                  Ultra-leather
            h)    Baggage Restraint Net
            i)    Extra Oxygen Mask (3 mask for each double seat)
            j)    Next Generation Passenger seats (applicable for Aircraft #10
                  and all subsequent Aircraft)
            k)    New Galley Weight Capacity (applicable for Aircraft #19, 21,
                  22, 23, 25 and all subsequent Aircraft)
            l)    Improved Overhead Bins (applicable for Aircraft #29 and all
                  subsequent Aircraft)
            m)    New Cargo Liners (applicable for Aircraft #30 and all
                  subsequent Aircraft)
            n)    Emergency equipment items supplied by Buyer (applicable for
                  Aircraft #30 and all subsequent Aircraft): n.1) PBE 119003
                  Puritan Bennett
                  n.2) PBE bracket 119063-01 Puritan Bennett
                  n.3) Smoke goggles 322-70 Scott Aviation
                  n.4) First aid kit 70004-00 Scott Aviation
                  n.5) Medical kit 4531 Medical Advisory Sys.
                  n.6) Fire ext. A352T HRD Aero Sys
                  n.7) Fire ext. bracket 817 HRD Aero Sys

NOTES:

(1)   Rolls Royce Allison AE3007A1P engines, only for Aircraft to be operated by
      Chautauqua Airlines, Inc..

3.    FINISHING

      a.    EXTERIOR FINISHING:

      The Aircraft shall be painted according to Buyer's or a Designated
      Operator's color and paint scheme which shall be supplied to Embraer by
      Buyer no later than six (6) months prior to the relevant Aircraft
      Contractual Delivery Date.

      b.    INTERIOR FINISHING:

            Buyer shall inform Embraer no later than seven (7) months prior to
            the relevant Aircraft Contractual Delivery Date of its choice of
            materials and colors of all and any item of interior finishing such
            as seat covers, carpet, floor lining on galley areas, side walls and
            overhead lining, galley lining and curtain. The above mentioned
            schedule for definition of interior finishing shall only be
            applicable if Buyer selects its materials from the choices offered
            by and available at Embraer. In case Buyer elects to use






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

            different materials and or patterns, such schedule shall be agreed
            between the Parties at the time of signature of this Purchase
            Agreement.

      If Buyer does not supply Embraer with the information in the time period
      as described in Article 3.a and 3.b, the Aircraft will be produced and
      will be made available for Buyer's inspection in the same condition of
      exterior and interior finishing as the first Aircraft.

4.    REGISTRATION MARKS

      The Aircraft shall be delivered to Buyer with the registration marks
      painted on them, which shall be supplied to Embraer by Buyer no later than
      ninety (90) days before each relevant Aircraft Contractual Delivery Date.

IF THERE IS ANY CONFLICT BETWEEN THE TERMS OF THIS ATTACHMENT "A-3" AND THE
TERMS OF THE TECHNICAL DESCRIPTION, THE TERMS OF THIS ATTACHMENT "A-3" SHALL
PREVAIL.

EX-10.13(M)

                                                                Exhibit 10.13(m)

              AMENDMENT NUMBER 13 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 13 to Purchase Agreement GCT-025/98, dated as of October
__, 2001 ("Amendment No. 13") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended from
time to time (collectively referred to herein as "Agreement"). This Amendment
No. 13 is between Embraer and Buyer, collectively referred to herein as the
"Parties".

This Amendment No. 13 sets forth additional agreements between Embraer and Buyer
relative to the conversion of EMB-145 Aircraft into EMB-140 Aircraft (as defined
below), configuration changes for the EMB-140 Aircraft in order to comply with
the American Eagle ("AMR Eagle") configuration, and the Performance Guarantee
for the EMB-140 Aircraft, a change the name of Wexford Management LLC to Wexford
Capital LLC, and changes on the delivery schedule and Buyer's exercise of Option
Aircraft.

Except as otherwise provided for herein all terms of the Purchase Agreement
shall remain in full force and effect. All capitalized terms used in this
Amendment No. 13, which are not defined herein shall have the meaning given in
the Purchase Agreement. In the event of any conflict between this Amendment No.
13 and the Purchase Agreement the terms, conditions and provisions of this
Amendment No. 13 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to amend the Purchase Agreement as provided for below:

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:

1.    DEFINITIONS:

1.1   Article "1.b" shall be deleted and replaced with the following:

      "b.   Aircraft - shall mean the EMB-145 Aircraft and/or the EMB-140
            Aircraft."

1.2   New Articles "1.b.1" and "1.b.2" shall be included as follows:

      "b.1. EMB-145 Aircraft - shall mean the EMB-145 LR Firm Aircraft and
            Option Aircraft or, where there is more than one of such Aircraft,
            each of such Aircraft, manufactured by Embraer, for sale to Buyer
            pursuant to this Agreement, according to the Technical Description
            number TD-145/010, dated January 1998 (Appendix I), the Aircraft
            Specific Configuration, Finishing and Registration Marks described
            in Attachments 'A-1', 'A-2' and 'A-3', as applicable, and as may be
            amended from time to time by Buyer at its expense as specified in
            Article 11. The Aircraft is composed entirely of vendor parts and
            parts manufactured by





            Embraer and Embraer subcontractors, and the parts manufactured by
            Embraer and Embraer subcontractors shall have Embraer part numbers.

      b.2.  EMB-140 Aircraft - shall mean the EMB-145, Model EMB-135 KL version
            Firm Aircraft and New Option Aircraft, or, where there is more than
            one of such Aircraft, each of such Aircraft, manufactured by
            Embraer, for sale to Buyer pursuant to this Agreement, according to
            Technical Description TD-140/002, dated April 2000, the Aircraft
            Specific Configuration, Finishing and Registration Marks described
            in Attachment 'A-4' as may be amended from time to time by Buyer at
            its expense as specified in Article 11. The Aircraft is composed
            entirely of vendor parts and parts manufactured by Embraer and
            Embraer subcontractors, and the parts manufactured by Embraer and
            Embraer subcontractors shall have Embraer part numbers."

2.    SUBJECT: Article "2.a" shall be deleted and replaced with the following:

      "a.   Embraer shall sell and Buyer shall purchase and take delivery of
            forty five (45) firm Aircraft ("Firm Aircraft"), and if Buyer so
            elects, up to twenty-eight (28) option Aircraft ("Option Aircraft"),
            upon the terms and conditions of this Agreement. Such Aircraft
            quantity distribution shall be as follows:

            a.1   Firm Aircraft: Thirty eight (38) EMB-145 Aircraft and seven
                  (7) EMB-140 Aircraft (also referred to as Aircraft #1 - #45);

            a.2   Option Aircraft: eight (8) EMB-140 Aircraft and twenty (20)
                  EMB-145 Aircraft (also referred to as Aircraft #46 - #73)."

3.    PRICE: Article "3.a.1" shall be deleted and replaced with the following:

      "1.   The per unit Aircraft Basic Prices for the Firm Aircraft shall be:



- --------------------------------------------------------------------------------
                                  Firm Aircraft
- --------------------------------------------------------------------------------
       "EMB-145 Aircraft #                 Aircraft Basic Price
- --------------------------------------------------------------------------------
                           
            11 to 15          Such Aircraft have already been delivered for [*]
- --------------------------------------------------------------------------------
            16 and 17         Such Aircraft have already been delivered for [*]
- --------------------------------------------------------------------------------
             18 and 22        Such Aircraft have already been delivered for [*]
- --------------------------------------------------------------------------------
             23 to 27         Such Aircraft have already been delivered for [*]
- --------------------------------------------------------------------------------



- ----------
* Confidential


- --------------------------------------------------------------------------------
            28 and 29         Such Aircraft have already been delivered for a
                              Basic Price of US$16,796,182 (sixteen million,
                              seven hundred ninety six thousand, one hundred
                              eighty two United States dollars) in January 2000
                              economic conditions.
- --------------------------------------------------------------------------------
      30 and all subsequent   US$16,794,145 (sixteen million, seven hundred
         EMB-145 Aircraft     ninety four thousand, one hundred forty five
                              United States dollars) in January 2000 economic
                              conditions."
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
    EMB-140 Aircraft #                    Aircraft Basic Price
- --------------------------------------------------------------------------------
      All EMB-140             [*]
        Aircraft
- --------------------------------------------------------------------------------

4.    DELIVERY SCHEDULE: The delivery schedule contained in Article "5.a" shall
      be deleted and replaced with the following:

      "



     ------------------------------------------------------------------------------------------------------------------
        A/C #          AIRCRAFT         DELIVERY MONTH          A/C #           AIRCRAFT            DELIVERY MONTH
     ------------------------------------------------------------------------------------------------------------------
                                                                                        
          01           EMB-145             Apr-99*               24             EMB-145                Apr-01*
     ------------------------------------------------------------------------------------------------------------------
          02           EMB-145             Jun-99*               25             EMB-145                Apr-01*
     ------------------------------------------------------------------------------------------------------------------
          03           EMB-145             Aug-99*               26             EMB-145                May-01*
     ------------------------------------------------------------------------------------------------------------------
          04           EMB-145             Nov-99*               27             EMB-145                May-01*
     ------------------------------------------------------------------------------------------------------------------
          05           EMB-145             Jan-00*               28             EMB-145                Jun-01*
     ------------------------------------------------------------------------------------------------------------------
          06           EMB-145             Feb-00*               29             EMB-145                Jun-01*
     ------------------------------------------------------------------------------------------------------------------
          07           EMB-145             Mar-00*               30             EMB-145                Jul-01*
     ------------------------------------------------------------------------------------------------------------------
          08           EMB-145             May-00*               31             EMB-145                Jul-01*
     ------------------------------------------------------------------------------------------------------------------
          09           EMB-145             Jun-00*               32             EMB-145                Aug-01*
     ------------------------------------------------------------------------------------------------------------------
          10           EMB-145             Jul-00*               33             EMB-145                Aug-01*
     ------------------------------------------------------------------------------------------------------------------
          11           EMB-145             Aug-00*               34             EMB-145                Sep-01*
     ------------------------------------------------------------------------------------------------------------------
          12           EMB-145             Aug-00*               35             EMB-145                Sep-01*
     ------------------------------------------------------------------------------------------------------------------
          13           EMB-145             Sep-00*               36             EMB-140               22 Oct-01
     ------------------------------------------------------------------------------------------------------------------
          14           EMB-145             Oct-00*               37             EMB-145               20 Dec-01
     ------------------------------------------------------------------------------------------------------------------
          15           EMB-145             Nov-00*               38             EMB-140               24 Oct-01
     ------------------------------------------------------------------------------------------------------------------
          16           EMB-145             Nov-00*               39             EMB-145               26 Oct-01
     ------------------------------------------------------------------------------------------------------------------
          17           EMB-145             Dec-00*               40             EMB-140               26 Nov-01
     ------------------------------------------------------------------------------------------------------------------
          18           EMB-145             Dec-00*               41             EMB-145               14 Nov-01
     ------------------------------------------------------------------------------------------------------------------
          19           EMB-145             Jan-01*               42             EMB-140               29 Nov-01
     ------------------------------------------------------------------------------------------------------------------
          20           EMB-145             Jan-01*               43             EMB-140               10 Dec-01
     ------------------------------------------------------------------------------------------------------------------
          21           EMB-145             Jan-01*               44             EMB-140               14 Dec-01
     ------------------------------------------------------------------------------------------------------------------
          22           EMB-145             Feb-01*               45             EMB-140               19 Dec-01
     ------------------------------------------------------------------------------------------------------------------
          23           EMB-145             Mar-01*
     -------------------------------------------------


      REMARKS: * Delivered to Buyer as of the date hereof.



- -----------
* Confidential


5.    CERTIFICATION: The first line of Article "6" shall be deleted and replaced
      with the following:

            "On the Actual Delivery Date of Aircraft, the EMB-145 and EMB-140
            Aircraft shall have valid and effective type certificates issued by
            the CTA and FAA."

6.    OPTION AIRCRAFT:

6.1   The first paragraph, delivery table, and second paragraph in Article "24"
      shall be deleted and replaced with the following:

      "Buyer shall have the option to purchase the Option Aircraft, to be
      delivered in accordance with the chart below, subject to the terms and
      conditions of this Article:



      --------------------------------------------------------------------------------------------------------------
                                                     OPTION AIRCRAFT
      --------------------------------------------------------------------------------------------------------------
        A/C #        AIRCRAFT           DELIVERY MONTH         A/C #          AIRCRAFT           DELIVERY MONTH
      --------------------------------------------------------------------------------------------------------------
                                                                                      
          01         EMB-140               Jul 02               15            EMB-145                Feb 03
      --------------------------------------------------------------------------------------------------------------
          02         EMB-140               Jul 02               16            EMB-145                Feb 03
      --------------------------------------------------------------------------------------------------------------
          03         EMB-140               Aug 02               17            EMB-145                Mar 03
      --------------------------------------------------------------------------------------------------------------
          04         EMB-140               Aug 02               18            EMB-145                Mar 03
      --------------------------------------------------------------------------------------------------------------
          05         EMB-140               Sep 02               19            EMB-145                Apr 03
      --------------------------------------------------------------------------------------------------------------
          06         EMB-140               Sep 02               20            EMB-145                Apr 03
      --------------------------------------------------------------------------------------------------------------
          07         EMB-140               Oct 02               21            EMB-145                May 03
      --------------------------------------------------------------------------------------------------------------
          08         EMB-140               Oct 02               22            EMB-145                May 03
      --------------------------------------------------------------------------------------------------------------
          09         EMB-145               Nov 02               23            EMB-145                Jun 03
      --------------------------------------------------------------------------------------------------------------
          10         EMB-145               Nov 02               24            EMB-145                Jun 03
      --------------------------------------------------------------------------------------------------------------
          11         EMB-145               Dec 02               25            EMB-145                Jul 03
      --------------------------------------------------------------------------------------------------------------
          12         EMB-145               Dec 02               26            EMB-145                Jul 03
      --------------------------------------------------------------------------------------------------------------
          13         EMB-145               Jan 03               27            EMB-145                Aug 03
      --------------------------------------------------------------------------------------------------------------
          14         EMB-145               Jan 03               28            EMB-145                Aug 03
      --------------------------------------------------------------------------------------------------------------


            "

6.2.  Article "24.a" shall be deleted and replaced with the following:

      "a.   INITIAL DEPOSIT: A refundable deposit of [*] is due and payable
            immediately after signature of this Amendment No. 13 and the
            outstanding amount already paid [*]), regarding initial deposits
            for the Option Aircraft shall be returned to Buyer promptly after
            signature of this Amendment No. 13, and the interest on the initial
            deposits of the cancelled Option Aircraft shall be paid in
            accordance with Article "24.f" to the Purchase Agreement. Interest
            on the [*] returned portion of each non-cancelled Option Aircraft
            deposit shall be due only if Buyer cancels such Option Aircraft. In
            that case, Embraer shall pay [*] amount of the original Initial
            Deposits for each such Option Aircraft in accordance with
            Article "24.f" to the Purchase Agreement, provided that interest


- ---------
* Confidential


            shall stop accruing on the previously returned [*] as of the
            date Embraer returned such amount to Buyer."

6.3.  Article "24.b" shall be deleted and replaced with the following, as
      applicable:

      "b.   [*], provided that such Option Aircraft be delivered to Buyer in
            accordance with the chart above and in the same configuration,
            specification and installations specified in Attachments 'A-1',
            'A-2' and 'A-3', as such attachment is written on the date of
            signature of this Amendment No. 13 unless otherwise modified by
            the Parties and the costs for such changes shall be in addition
            to the Basic Price."

      b.1   [*] provided that such Option Aircraft be delivered to Buyer in
            accordance with the chart above and in the same configuration,
            specification and installations specified in Attachment "A-4",
            as such attachment is written on the date of signature of this
            Amendment No. 13 unless otherwise modified by the Parties and
            the costs for such changes shall be in addition to the
            Basic Price"

6.4.  Article "24.d" shall be deleted and replaced with the following:

      "d.   DEPOSIT AND PROGRESS PAYMENTS: The payment of the price specified in
            item "b" above, shall be made according to the following:

            1.    The initial deposit of [*] to be made by Buyer according to
                  Article 24.a., shall apply toward the price of the relevant
                  Option Aircraft.

            2.    A progress payment of [*] of the unit basic price defined in
                  item "b" above, per exercised Option Aircraft, less the
                  initial deposit of [*] per exercised Option Aircraft is due
                  and payable [*] prior to each exercised Option Aircraft
                  contractual delivery date.

            3.    A progress payment of [*] item "b" above is due and payable
                  [*] prior to each relevant exercised Option Aircraft
                  contractual delivery date.

            4.    A progress payment of [*] of the unit basic price defined
                  in item "b" above is due and payable [*]

            5.    The balance of each exercised Option Aircraft escalated price
                  is due and


- ----------
* Confidential


                  payable upon acceptance of each relevant Aircraft by Buyer.

      6.5.  Article "24.e" shall be deleted and replaced with the following:

      "e.   CONFIRMATION OF OPTION GROUPS: The Option Groups (of two Aircraft
            each) shall be confirmed on or before the following dates:

                  First 4 Option Groups [*]
                  Next 4 Option Groups [*]
                  Next 2 Option Groups [*]
                  Next 2 Option Groups [*]
                  Last 2 Option Groups [*]

      At the time of each such confirmation, the Initial Deposit with respect to
      the Option Aircraft in such Option Group shall become non refundable. In
      the event that Buyer fails to exercise its option with respect to any five
      (5) Option Groups, Buyer shall lose its rights to said Option Groups, as
      well as all remaining Option Groups."

7.    ATTACHMENT A - CONFIGURATION CHANGES: Attachment A-4 to this Amendment
      No.13 shall be included in the Purchase Agreement, reflecting the
      configuration selected by Buyer for the EMB-140 Aircraft (to be delivered
      under the AMR Eagle configuration).

8.    ATTACHMENT B:

8.1.  On item 2.0 of Section 2 to Attachment B, the reference to "EMB-145
      Aircraft" shall be deleted and replaced with "EMB-145 and EMB-140
      Aircraft".

8.2   EMB-140 Additional Technical Publications: The following operational and
      technical publications to the EMB-140 Aircraft shall be supplied at no
      cost to Buyer and a new item 3.1 shall be included to the Attachment "B"
      to the Purchase Agreement as follows:

            "3.1. LIST OF PUBLICATIONS (EMB-140 Aircraft)

            As provided for in Article 15 of this Agreement, the technical
            publications covering operation and maintenance for the EMB-140
            Aircraft shall be delivered to Buyer in accordance with the
            following list:



                                                                   QTY
       TITLE                                                    (COPIES)
       -----                                                    --------
                                                                  
       OPERATIONAL

1. Airplane Flight Manual (AFM)(*)                                  [*]



- --------
* Confidential


                                                                  
2. Quick Reference Handbook (QRH)(*)                                 [*]
3. Supplementary Performance Manual (SPM)(*)                         [*]

       MAINTENANCE
4. Aircraft Maintenance Manual (AMM)                                 [*]
5. Illustrated Parts Catalog (IPC)                                   [*]
6. Wiring Manual (WM)                                                [*]

          MAINTENANCE SUPPLEMENTARY SET
7. System Schematic Manual (SSM)                                     [*]



            (*)   One extra copy on board each Aircraft

If Buyer elects not to take all or any one of the publications above mentioned,
or revisions thereof, no refund or other financial adjustment of the Basic Price
will be made since such publications are offered at no cost to Buyer as referred
to in Article 15.a of the Purchase Agreement.

10.   ATTACHMENTS C, D, E, F, G AND I: All references to "EMB-145 Aircraft" on
      Attachments C, D, E, F, G and I to Purchase Agreement shall be deleted and
      replaced by "EMB-145 or EMB-140 Aircraft".

11.   ATTACHMENT H AND NOTICES: All references to "Wexford Management LLC" on
      Attachment H and Notices to Purchase Agreement shall be deleted and
      replaced by "Wexford Capital LLC".

12.   PERFORMANCE GUARANTEE FOR EMB-140 AIRCRAFT IN AMR EAGLE CONFIGURATION:
      Attachment J-1 to this Amendment No.13 shall be included in the Purchase
      Agreement, reflecting the Performance Guarantee for the EMB-140 Aircraft
      to be delivered under the AMR Eagle configuration.

13.   MISCELLANEOUS: All other provisions of the Agreement which have not been
      specifically amended or modified by this Amendment No. 13 shall remain
      valid in full force and effect without any change.


         [The remainder of this page has been left blank intentionally.]





- ----------
* Confidential


IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 13 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de              Solitair Corp.
Aeronautica S.A.


By  /s/ Frederico Fleury Curado                  By  /s/ Jay Maymudes
   ----------------------------                     ---------------------------

Name:  Frederico Fleury Curado                   Name: Jay Maymudes
       ------------------------                        ------------------------

Title: E.V.P. Airline Market                     Title: V.P.
       ------------------------                        ------------------------

By  /s/ Flavio Rimoli                            Date:  10/22/01
    ---------------------------                        ------------------------

Name: Flavio Rimoli                              Place: Greenwich, CT
      -------------------------                         -----------------------

Title: Director of Contracts
       ------------------------

Date:  10/22/2001
       ------------------------

Place: Sao Jose dos Campos
       ------------------------




                                ATTACHMENT "A-4"
                            EMB-140 AIRCRAFT UNDER

                 AIRCRAFT SPECIFIC CONFIGURATION, FINISHING AND
                               REGISTRATION MARKS

1.    STANDARD 140 AIRCRAFT

      The Aircraft shall be manufactured according to the standard configuration
      specified in Embraer's Technical Description TD-140/002 dated as of April
      2000, Type Certification FAA, and including the following optional items:

2.    OPTIONAL EQUIPMENT:

      2.1   OPTIONS TO STANDARD AVIONICS CONFIGURATION
            a)    CAT II
            b)    2nd DME
            c)    2nd ADF
            d)    2nd Transponder Mode S
            e)    Weather Radar with Independent Selection
            f)    3rd VHF with 25 KHz spacing
            g)    Dual FMS+GPS (Universal)
            h)    ACARS (Unilink)
            i)    Printer
            j)    AFDAU
            k)    Single Potentiometer to control FA volume

      2.2   OPTIONAL SYSTEM/OTHER EQUIPMENT
            a)    Thrust Reversers
            b)    APU Silencer
            c)    Cockpit Floodlight
            d)    External Painting with capability to be polished
            e)    LR Version
            f)    Service Door Sill Protection
            g)    Baggage Door Sill Protection
            h)    Baggage Door Light
            i)    Optional Main Door (without steps)
            j)    Floor Covering in Cargo Compartment - GE Lexan
            k)    Provisions for Antenna for In-Flight Phone (antenna to be
                  provided as loose item)
            l)    Steering Disengage Outside Cockpit






      2.3   INTERIOR OPTIONAL ITEMS

            a)    Interior Option 3
            b)    Audio Entertainment
            c)    Aft Hand Set & Cradle
            d)    Blue Sterile Light
            e)    3rd Oxygen Mask on RH
            f)    Passenger Seats Customized (P/N140-86006-401 seat installation
                  kit)
            g)    Baggage Restraint Net
            h)    Vertical Baggage Barrier Net
            i)    Provisions for Defibrillator
            j)    Emergency equipment items supplied by Buyer (BFE);
                  j.1) PBE 119003 Puritan Bennett
                  j.2) PBE brackets 119063-01 Puritan Bennett
                  j.3) Smoke goggles 322-70 Scott Aviation
                  j.4) First Aid kit 70004-00 Scott Aviation
                  j.5) Medical kit 4531 Medical Advisory Sys
                  j.6) Fire Extinguisher A352T HRD Aero Sys
                  j.7) Fire extinguisher bracket 817 HRD Aero Sys.

3.    FINISHING

      a.    EXTERIOR FINISHING:

            The Aircraft shall be painted according to Buyer's color and paint
            scheme which shall be supplied to Embraer by Buyer on or before six
            (6) months prior to the relevant Aircraft Contractual Delivery Date.

      b.    INTERIOR FINISHING:

            Buyer shall inform Embraer on or before eight (8) months prior to
            the relevant Aircraft Contractual Delivery Date of its choice of
            materials and colors of all and any item of interior finishing such
            as seat covers, carpet, floor lining on galley areas, side walls and
            overhead lining, galley lining and curtain. The above mentioned
            schedule for definition of interior finishing shall only be
            applicable if Buyer selects its materials from the choices offered
            by and available at Embraer. If Buyer opts to use different
            materials and or patterns, such schedule shall be agreed between the
            Parties at the time of signature of this Purchase Agreement.

4.    REGISTRATION MARKS






      The Aircraft shall be delivered to Buyer with the registration marks
      painted on them, which shall be supplied to Embraer by Buyer no later than
      ninety (90) days before each relevant Aircraft Contractual Delivery Date.

IF THERE IS ANY CONFLICT BETWEEN THE TERMS OF THIS ATTACHMENT "A-4" AND THE
TERMS OF THE TECHNICAL DESCRIPTION TD-140/002, DATED APRIL 2000, THE TERMS OF
THIS ATTACHMENT "A-4" SHALL PREVAIL.





                                 ATTACHMENT J-1
- --------------------------------------------------------------------------------

                    EMB 140 - AIRCRAFT PERFORMANCE GUARANTEE

ATTACHMENT "J-1" - AIRCRAFT PERFORMANCE GUARANTEE

1.    GUARANTEES

      Embraer, subject to the conditions and limitations hereby expressed, and
      considering the Aircraft with a maximum takeoff weight of 46,517 pounds
      (21,100 kg) and equipped with EMBRAER furnished Rolls-Royce Allison AE
      3007A1/3 engines, guarantees each Aircraft as follows:

      a.    On the Aircraft Actual Delivery Date, the Aircraft will comply with
            the following performance:

            a.1   CRUISE SPECIFIC AIR RANGE

                        The cruise specific air range at a gross weight of
                        40,000 pounds (18,144 Kg) in a standard day (ISA), at an
                        altitude of 35,000 feet, at 440 KTAS using not more than
                        maximum cruise thrust, shall not be less than the
                        guarantee value:

                        NOMINAL:      .182  NAM/Pound
                        TOLERANCE:  - .006  NAM/Pound
                        GUARANTEE:    .176  NAM/Pound

            a.2   MISSION PAYLOAD

                  a.2.1 The payload for a stage length of 1000 nautical miles in
                        still air, shall not be less than the guarantee value:

                        GUARANTEE:   10,506 Pounds (4,765 kg)

      Note: The above guaranteed value is subject to the same tolerance
      applicable to the MEW pursuant to Paragraph a.3 below.

                        The above guarantee is based on the following conditions
                        and operating rules:

                        Stage Length:
                        The stage is defined as the sum of the distances for
                        length climb, cruise and descent.





                        Takeoff:
                        The airport altitude is at SEA LEVEL.
                        The takeoff weight is not limited by the airport
                        conditions.
                        Maximum takeoff thrust is used for the takeoff.

                        Climbout Maneuver:
                        Following the takeoff to 35 feet, the EMB-140 Aircraft
                        accelerates to 245 KCAS while climbing to 1,500 feet
                        above the departure airport altitude and retracting
                        flaps and landing gear.

                        Climb:
                        The EMB-140 Aircraft climbs from 1,500 feet above the
                        departure airport altitude to 10,000 feet altitude at
                        245 KCAS.
                        The EMB-140 Aircraft then accelerates to a speed of 270
                        KCAS.
                        The climb continues at 270 KCAS until 16,000 feet is
                        reached.
                        The climb continues at 0.56 Mach number to cruise
                        altitude.
                        The temperature is ISA during the climb.
                        Maximum climb thrust is used throughout the climb.

                        Cruise:
                        The EMB-140 Aircraft cruises at an average speed of 0.76
                        Mach number.
                        The cruise altitude is 37,000 feet. The temperature is
                        ISA during cruise.
                        The cruise thrust is not to exceed maximum cruise
                        thrust.

                        Descent:
                        The EMB-140 Aircraft descends from the cruise altitude
                        at 250 KCAS.
                        The descent continues at 250 KCAS to an altitude of
                        1,500 feet.
                        The temperature is ISA during descent.

                        Approach and Landing Maneuver:
                        The EMB-140 Aircraft decelerates to the final approach
                        speed while extending landing gear and flaps, then
                        descends and lands.
                        The destination airport elevation is at sea level.

                        Fixed Allowances:
                        For the purpose of this guarantee and for the purpose of
                        establishing compliance with this guarantee, the
                        following shall be used as fixed quantities and
                        allowances:

                        Taxi-out fuel: 109 Pounds, equivalent to 9 minutes.

                        Takeoff and Climbout Maneuver fuel: 99 Pounds.





                        Approach and Landing Maneuver fuel: 101 Pounds.

                        Taxi-in fuel (shall be consumed from the reserve fuel):
                        97 Pounds, equivalent to 8 minutes of taxi.

                        The usable reserve fuel remaining upon completion of the
                        landing: 2,350 Pounds.

                  A.2.2 OPERATIONAL EMPTY WEIGHT BASIS

                        Operational empty weight (OEW) derived in accordance
                        with Paragraph a.2.3 shall be used as the basis for the
                        mission payload guarantees of Paragraph a.2.1.

                  A.2.3 EMB-140 WEIGHT SUMMARY



             ---------------------------------------------------------------------------------------------------
                                               ITEMS                               WEIGHT (KG)    WEIGHT (LB)
             ---------------------------------------------------------------------------------------------------
                                                                                                
                 1 - M.E.W Std. EMB-140 Aircraft Configuration(*)                       11,100        24,471
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 2 - Option to std EMB-140 Aircraft (**)                                   677.7        1,495
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 3 - M.E.W.  Customer Configuration LR  version                         11,777.2       25,966
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 4 - Operating Items                                                       556          1,226
             ---------------------------------------------------------------------------------------------------
                 a - Pilot and Copilot (180 Lb each) (***)                                 164.0          361.6
             ---------------------------------------------------------------------------------------------------
                 b - Stewardess (140 Lb each) (***)                                         64.0          141.1
             ---------------------------------------------------------------------------------------------------
                 c - Engine oil                                                             24.0           52.9
             ---------------------------------------------------------------------------------------------------
                 d - Hydraulic Fluid                                                        36.0           79.4
             ---------------------------------------------------------------------------------------------------
                 e - Unusable Fuel                                                          44.0           97.0
             ---------------------------------------------------------------------------------------------------
                 f - Apu Oil                                                                 2.0            4.4
             ---------------------------------------------------------------------------------------------------
                 g - Toilet Fluid                                                            7.0           15.4
             ---------------------------------------------------------------------------------------------------
                 h - Water                                                                  20.0           44.1
             ---------------------------------------------------------------------------------------------------
                 i - Flight Kit                                                             10.0           22.0
             ---------------------------------------------------------------------------------------------------
                 j - Crew Baggage                                                           20.4           45.0
             ---------------------------------------------------------------------------------------------------
                 k - Catering Standard                                                     160.0          352.7
             ---------------------------------------------------------------------------------------------------
                 l - Pass. Serv. Equip.                                                      4.5            9.9
             ---------------------------------------------------------------------------------------------------
                 m - 2nd Attendant                                                           0.0            0.0
             ---------------------------------------------------------------------------------------------------

             ---------------------------------------------------------------------------------------------------
                 5 - O. E. W.  Customer Configuration LR version                       12,3334         27,191
             ---------------------------------------------------------------------------------------------------






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

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

                  REMARKS:

                  (*) See Customer Options Table (Item a.5.4).

                  (**) In accordance with Advisory Circular No: 120-27C (U.S.
                       Depart. Of Transp./FAA)

                  a.2.4 CUSTOMER OPTIONS TABLE:



       ------------------------------------------------------------------------------------------------------------------
                                              ITEMS                                  OPT           WEIGHT         WEIGHT
                                                                                                    (KG)           (LB)
       ------------------------------------------------------------------------------------------------------------------
                                                                                                          
            A) OPTIONS TO STD AVIONIC CONFIGURATION
       ------------------------------------------------------------------------------------------------------------------
               01. CAT-II                                                             Y              0.0             0.0
               ----------------------------------------------------------------------------------------------------------
               02. DME (2nd)                                                          Y              1.5             3.3
       ------------------------------------------------------------------------------------------------------------------
               03. ADF  (2nd)                                                         Y              8.0            17.6
       ------------------------------------------------------------------------------------------------------------------
               04. Transponder Mode S (2nd)                                           Y              1.0             2.2
       ------------------------------------------------------------------------------------------------------------------
               05. Weather Radar w/ Independent Selection                             Y              1.0             2.2
       ------------------------------------------------------------------------------------------------------------------
               06. VHF (3rd)                                                          Y              6.0            13.2
       ------------------------------------------------------------------------------------------------------------------
               07. FMS+GPS Dual Universal                                             Y             26.0            57.3
       ------------------------------------------------------------------------------------------------------------------
               08. Printer                                                            Y              5.0            11.0
       ------------------------------------------------------------------------------------------------------------------
               09. AFDAU                                                              Y              8.0            17.6
       ------------------------------------------------------------------------------------------------------------------
               10. Single Potentiometer to control FA volume                          Y              1.0             2.2
       ------------------------------------------------------------------------------------------------------------------
               11. ACARS                                                              Y              8.5            19.0
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
            B) OPTIONAL SYSTEM / OTHER EQUIPMENT
       ------------------------------------------------------------------------------------------------------------------
               01. Thrust Reversers                                                   Y            173.0           381.4
       ------------------------------------------------------------------------------------------------------------------
               02.  APU Silencer                                                      Y             13.0            28.7
       ------------------------------------------------------------------------------------------------------------------
               03. Cockpit Floodlight                                                 Y              2.5             5.5
       ------------------------------------------------------------------------------------------------------------------
               04. External Painting w/ capability to be polished                     Y             54.0           119.0
       ------------------------------------------------------------------------------------------------------------------
               05. LR Version                                                         Y            172.0           378.4
       ------------------------------------------------------------------------------------------------------------------
               06. Service door sill protection                                       Y              3.0             6.6
       ------------------------------------------------------------------------------------------------------------------
               07. Cargo door sill protection                                         Y              3.5             7.7
       ------------------------------------------------------------------------------------------------------------------
               08. Cargo Door Light                                                   Y              1.0             2.2
       ------------------------------------------------------------------------------------------------------------------
               09. Optional Main Door (without steps)                                 Y             -8.0           -17.6
       ------------------------------------------------------------------------------------------------------------------
               10. Gust Lock for Elevator Surfaces                                    Y              2.6             5.7
       ------------------------------------------------------------------------------------------------------------------
               11.  Floor Covering in Cargo Compartment - GE Lexan                    Y              3.3             7.3
       ------------------------------------------------------------------------------------------------------------------
               12.  Provisions for Antenna for In-Flight Phone (antenna to be
               provided as loose item)                                                Y              4.0             8.8
       ------------------------------------------------------------------------------------------------------------------
               13.  Steering Disengage Outside Cockpit                                Y              0.2             0.5
       ------------------------------------------------------------------------------------------------------------------
               14.  Floor Mat per AMR request                                         Y              1.2             2.6
       ------------------------------------------------------------------------------------------------------------------






                                                                                                          
            C) INTERIOR OPTIONAL ITEMS
       ------------------------------------------------------------------------------------------------------------------
               01. Interior Option 3   (1)                                            Y             71.0            156.5
       ------------------------------------------------------------------------------------------------------------------
               02. Audio Entertainment                                                Y              2.5             5.5
       ------------------------------------------------------------------------------------------------------------------
               03. Aft Hand Set & Cradle                                              Y              2.5             5.5
       ------------------------------------------------------------------------------------------------------------------
               04. Blue Sterile Light                                                 Y              0.5             1.1
       ------------------------------------------------------------------------------------------------------------------
               05. 3rd Oxygen Mask                                                    Y              1.5             3.3
       ------------------------------------------------------------------------------------------------------------------
               06. Customized Passenger Seat AMR Leather                              Y               86            190.0
       ------------------------------------------------------------------------------------------------------------------
               07. Baggage Restraint Net                                              Y              8.0            17.6
       ------------------------------------------------------------------------------------------------------------------
               08. Vertical Baggage Barrier Net                                       Y             10.0            22.0
       ------------------------------------------------------------------------------------------------------------------
               09. Provisions for Defibrillator                                       Y              4.5             9.9
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
                                                      SUB-TOTAL   (OPTIONS STD A/C)                677.7           1,495
       ------------------------------------------------------------------------------------------------------------------



      (1)   Galley inserts (Trolley, SU, Hot Jugs) and catering are not included

                  a.3 WEIGHT

                        a.3.1 The manufacturer's empty weight (M.E.W.), for
                              Customer configuration, is guaranteed to be:

                              NOMINAL:      25,966 POUNDS
                              TOLERANCE:       259 POUNDS
                              GUARANTEE:    26,225 POUNDS

2.    EMB-140 AIRCRAFT CONFIGURATION

      2.1   The guarantees stated above are based on the EMB-140 Basic Aircraft
            configuration as defined in the Technical Description TD-140/002
            dated April 2000, plus specific Buyer configuration options as
            defined at Attachment "A" to the Purchase Agreement, (hereinafter
            referred to as the Detail Specification). Appropriate adjustment to
            the guarantees shall be made for changes in such Detail
            Specification approved in writing by the Buyer and Embraer. Such
            adjustments shall be accounted for by Embraer in its evidence of
            compliance with the guarantees.

            In the event a change is made to any law, governmental regulation or
            requirement, or in the interpretation of any such law, governmental
            regulation or requirement that affects the certification basis for
            the EMB-140 Aircraft, and as a result thereof, a change is made to
            the configuration and/or the performance of the EMB-140 Aircraft in
            order to obtain certification, the guarantees set forth in this
            EMB-140





            Aircraft Performance Guarantee shall be appropriately modified to
            reflect any such change.

      2.2   The guarantee payloads of Paragraph 1.a.5 and the Manufacturer's
            Empty Weight guarantee of Section 1.a.6 shall be adjusted by Embraer
            for the following in its evidence of compliance with such
            guarantees:

            (1)   Changes to the Detail Specification including Change Requests,
                  Master Changes, Change Orders or any other changes mutually
                  agreed upon between the Buyer and Embraer.

            (2)   The difference between the component weight allowances given
                  in the appropriate section of the Detail Specification and the
                  actual weights.

3.    GUARANTEE CONDITIONS

      3.1   All guaranteed performance data are based on the ICAO International
            Standard Atmosphere (ISA) and specified variations there from;
            altitudes are pressure altitudes.

      3.2   The FAA Regulations (FAR) referred to in this Schedule are, unless
            otherwise specified, the EMB-140 Certification Basis regulations
            specified in the Type Certificate Data Sheet. The reference number
            for the Certificate Data Sheet and its date of issue will be
            provided to Buyer within fifteen (15) days of type approval.

      3.3   The takeoff and landing guarantees are based on hard surface, level
            and dry runways with no wind or obstacles, no clearway or stopway,
            and with automatic anti-skid operative unless otherwise specified.
            The takeoff performance is based on no engine bleed for air
            conditioning or thermal anti-icing and the Auxiliary Power Unit
            (APU) turned off unless otherwise specified. The improved climb
            performance procedure will be used for takeoff as required. The
            landing data is based on the use of automatic spoilers.

      3.4   The cruise specific air range, speed and altitude capability, and
            the climb, cruise and descent portions of the mission guarantees
            include allowances for normal electrical power extraction and normal
            operation of the air conditioning system. Normal power extraction
            shall be defined as not less than a 37 kW total electrical and
            hydraulic loads. Normal operation of the air conditioning system
            shall be defined as operation in the automatic mode, with the
            temperature control set to maintain a nominal cabin temperature of
            75(DEGREE)F, and all air conditioning systems operating normally.
            This operation nominally





            allows a sea level cabin altitude to be maintained up to 19,500 feet
            and a maximum cabin pressure differential of 7.8 pounds per square
            inch at higher altitudes, with a nominal EMB-140 Aircraft cabin
            ventilation rate of 1,100 cubic feet per minute at 35,000 ft
            including passenger cabin recirculation (nominal recirculation is 42
            percent not considering gasper flow). The APU is turned off unless
            otherwise specified.

      3.5   The cruise specific air range, speed and altitude capability, and
            the climb, cruise, and descent portions of the mission guarantees
            are based on an EMB-140 Aircraft center of gravity location of 26
            percent of the mean aerodynamic chord.

      3.6   Performance, where applicable, is based on a fuel Lower Heating
            Value (LHV) of 18,580 BTU per pound and a fuel density of 6.70
            pounds per U.S. gallon.

4.    PARTIES' OBLIGATIONS ACCORDING TO THIS GUARANTEE

      RELATIVE TO THE GUARANTEES STATED IN PARAGRAPH 1.a above:

      4.1   During the EMB-140 Aircraft acceptance to be performed by Buyer in
            accordance with Article 7 of the Purchase Agreement, Buyer shall
            check the EMB-140 Aircraft performance specified in paragraph 1.a of
            this Schedule A, by using the EMB-140 Aircraft Flight Manual (AFM)
            and by comparing the flight test data, at the atmospheric conditions
            prevailing during the flight, with the information presented in the
            EMB-140 Supplementary Performance Manual (SPM). All the performance
            guarantee under this Schedule A are in accordance with both manuals
            above mentioned, taking into consideration the established
            tolerances.

      4.2   Embraer's obligations in respect to the guarantees stated in
            Paragraph 1.a of this Schedule A, are limited to Buyer's right to
            terminate the Purchase Agreement in respect to the relevant EMB-140
            Aircraft, pursuant to Article 22.d. should it be reasonably verified
            that such EMB-140 Aircraft during the acceptance procedure specified
            in Article 7 of the Purchase Agreement, cannot comply with the
            performances guaranteed hereunder after Embraer has had a reasonable
            opportunity to cure such deficiencies in accordance with Article 7.

      4.3   In case during the above mentioned acceptance procedure, it is
            proven that the EMB-140 Aircraft performance does not comply with
            the performances specified in Paragraph 1.a of this Schedule A, but
            Buyer considers it satisfactory by accepting delivery of such
            EMB-140





            Aircraft, then Embraer shall not be liable to any claim or demand
            whatsoever from Buyer with respect to such performance guarantees.

      4.4   Upon acceptance of the EMB-140 Aircraft by Buyer, all obligations of
            Embraer regarding the Aircraft performance guarantees specified in
            Paragraph 1.a, shall cease.

5.    GUARANTEE COMPLIANCE

      5.1   Compliance with the guarantees of Section 1.a shall be based on the
            conditions specified in that section, the EMB-140 Aircraft
            configuration of Section 2 and the guarantee conditions of Section
            3.

      5.2   Compliance with the takeoff, landing, and TOW Climb limit guarantees
            shall be based on the FAA-approved Airplane Flight Manual for the
            EMB-140.

      5.3   Compliance with the cruise specific air range, speed, and the climb,
            cruise and descent portions of the mission guarantees shall be
            established by calculations based on the comparison mentioned in
            Section 4.1 above.

      5.4   The data derived from tests shall be adjusted as required by
            conventional methods of correction, interpolation or extrapolation
            in accordance with established engineering practices to show
            compliance with provisions of Section 1.a.

      5.5   Compliance with the Manufacturer's Empty Weight guarantee shall be
            based on information in the appropriate approved weight and balance
            manual, or associated document or report.

      5.6   Compliance with the guarantees set forth in this Schedule does not
            depend on the engine meeting the performance requirements contained
            in the engine specification.

6.    EXCLUSIVE GUARANTEES

      6.1   The only performance guarantees applicable to the EMB-140 Aircraft
            are those set forth in this document. The performance guarantees set
            forth herein are established between Buyer and Embraer and may not
            be transferred or assigned to others, unless by previous written
            consent of Embraer.

      6.2   THE GUARANTEES, OBLIGATIONS AND LIABILITIES OF Embraer, AND REMEDIES
            OF Buyer SET FORTH IN THIS




            PERFORMANCE GUARANTEE ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND
            Buyer HEREBY WAIVES, RELEASES AND RENOUNCES, ALL OTHER RIGHTS,
            CLAIMS, DAMAGES AND REMEDIES OF Buyer AGAINST Embraer OR ANY
            ASSIGNED OF Embraer, EXPRESS OR IMPLIED, ARISING BY LAW OR
            OTHERWISE, WITH RESPECT TO ANY ACHIEVED PERFORMANCE.

      6.3   The terms and conditions of this Performance Guarantee do not alter,
            modify or impair, in any way, the terms and conditions of Attachment
            C (EMB-140 AIRCRAFT WARRANTY CERTIFICATE) to this Agreement.

EX-10.13(N)

              AMENDMENT NUMBER 14 TO PURCHASE AGREEMENT GCT-025/98

This Amendment Number 14 to Purchase Agreement GCT-025/98, dated as of November
13, 2001 ("Amendment No. 14") relates to the Purchase Agreement GCT-025/98 (the
"Purchase Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A.
("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998 as amended from
time to time (collectively referred to herein as "Agreement"). This Amendment
No. 14 is between Embraer and Buyer, collectively referred to herein as the
"Parties".

This Amendment No. 14 sets forth additional agreements between Embraer and Buyer
relative to the exercise of [*]

Except as otherwise provided for herein all terms of the Purchase Agreement
shall remain in full force and effect. All capitalized terms used in this
Amendment No. 14, which are not defined herein shall have the meaning given in
the Purchase Agreement. In the event of any conflict between this Amendment No.
14 and the Purchase Agreement the terms, conditions and provisions of this
Amendment No. 14 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to amend the Purchase Agreement as provided for below:

      NOW, THEREFORE, for good and valuable consideration which is hereby
      acknowledged Embraer and Buyer hereby agree as follows:

1.    SUBJECT: Article 2.a shall be deleted and replaced with the following:

      a. Embraer shall sell and Buyer shall purchase and take delivery of [*]
      firm Aircraft ("Firm Aircraft"), and if Buyer so elects, up to [*] option
      Aircraft ("Option Aircraft"), upon the terms and conditions of this
      Agreement. Such Aircraft quantity distribution shall be as follows:

            a.1   Firm Aircraft:  [*] EMB-145 Aircraft and [*]
                  EMB-140 Aircraft (also referred to as Aircraft [*]);

            a.2   Option Aircraft: [*] EMB-145 Aircraft (also referred to as
                  Aircraft [*]).

2.    DELIVERY SCHEDULE: The delivery schedule contained in Article 5.a shall be
      deleted and replaced with the following:




- --------------------------------------------------------------------------------------------------------------------------------
    A/C #          AIRCRAFT          DELIVERY MONTH             A/C #               AIRCRAFT               DELIVERY MONTH
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                               
      01           EMB-145              [*]                      28                 EMB-145                   [*]
- --------------------------------------------------------------------------------------------------------------------------------
      02           EMB-145              [*]                      29                 EMB-145                   [*]
- --------------------------------------------------------------------------------------------------------------------------------
      03           EMB-145              [*]                      30                 EMB-145                   [*]
- --------------------------------------------------------------------------------------------------------------------------------
      04           EMB-145              [*]                      31                 EMB-145                   [*]
- --------------------------------------------------------------------------------------------------------------------------------
      05           EMB-145              [*]                      32                 EMB-145                   [*]
- --------------------------------------------------------------------------------------------------------------------------------
      06           EMB-145              [*]                      33                 EMB-145                   [*]
- --------------------------------------------------------------------------------------------------------------------------------




- --------------------
* Confidential



                                                                                               
- --------------------------------------------------------------------------------------------------------------------------------
      07           EMB-145              Mar-00*                  34                 EMB-145                   Sep-01*
- --------------------------------------------------------------------------------------------------------------------------------
      08           EMB-145              May-00*                  35                 EMB-145                   Sep-01*
- --------------------------------------------------------------------------------------------------------------------------------
      09           EMB-145              Jun-00*                  36                 EMB-140                  22-Oct-01
- --------------------------------------------------------------------------------------------------------------------------------
      10           EMB-145              Jul-00*                  37                 EMB-145                  20 Dec-01
- --------------------------------------------------------------------------------------------------------------------------------
      11           EMB-145              Aug-00*                  38                 EMB-140                  24 Oct-01
- --------------------------------------------------------------------------------------------------------------------------------
      12           EMB-145              Aug-00*                  39                 EMB-145                   Oct-01*
- --------------------------------------------------------------------------------------------------------------------------------
      13           EMB-145              Sep-00*                  40                 EMB-140                  26 Nov-01
- --------------------------------------------------------------------------------------------------------------------------------
      14           EMB-145              Oct-00*                  41                 EMB-145                  14 Nov-01
- --------------------------------------------------------------------------------------------------------------------------------
      15           EMB-145              Nov-00*                  42                 EMB-140                  29 Nov-01
- --------------------------------------------------------------------------------------------------------------------------------
     16            EMB-145              Nov-00*                  43                 EMB-140                  10 Dec-01
- --------------------------------------------------------------------------------------------------------------------------------
     17            EMB-145              Dec-00*                  44                 EMB-140                  14 Dec-01
- --------------------------------------------------------------------------------------------------------------------------------
     18            EMB-145              Dec-00*                  45                 EMB-140                  19 Dec-01
- --------------------------------------------------------------------------------------------------------------------------------
     19            EMB-145              Jan-01*                  46                 EMB-140                  27 Feb-02
- --------------------------------------------------------------------------------------------------------------------------------
     20            EMB-145              Jan-01*                  47                 EMB-140                  20 Mar-02
- --------------------------------------------------------------------------------------------------------------------------------
     21            EMB-145              Jan-01*                  48                 EMB-140                  29 Mar-02
- --------------------------------------------------------------------------------------------------------------------------------
     22            EMB-145              Feb-01*                  49                 EMB-140                  20 May-02
- --------------------------------------------------------------------------------------------------------------------------------
     23            EMB-145              Mar-01*                  50                 EMB-140                  20 Jun-02
- --------------------------------------------------------------------------------------------------------------------------------
      24           EMB-145              Apr-01*                  51                 EMB-140                  10 Jul-02
- --------------------------------------------------------------------------------------------------------------------------------
      25           EMB-145              Apr-01*                  52                 EMB-140                  19 Jul-02
- --------------------------------------------------------------------------------------------------------------------------------
      26           EMB-145              May-01*                  53                 EMB-140                  20 Aug-02
- --------------------------------------------------------------------------------------------------------------------------------
      27           EMB-145              May-01*
- ---------------------------------------------------------



      Remarks: * Delivered to Buyer as of the date hereof.

3.    OPTION AIRCRAFT:

      3.1 The first paragraph, delivery table, and second paragraph in Article
      24 shall be deleted and replaced with the following:

      Buyer shall have the option to purchase the Option Aircraft, to be
      delivered in accordance with the chart below, subject to the terms and
      conditions of this Article:



- --------------------------------------------------------------------------------------------------------------------------------
                                                        OPTION AIRCRAFT
- --------------------------------------------------------------------------------------------------------------------------------
   A/C #           AIRCRAFT              DELIVERY MONTH             A/C #             AIRCRAFT              DELIVERY MONTH
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                               
     01            EMB-145                  Nov 02                   11               EMB-145                  Apr 03
- --------------------------------------------------------------------------------------------------------------------------------
     02            EMB-145                  Nov 02                   12               EMB-145                  Apr 03
- --------------------------------------------------------------------------------------------------------------------------------
     03            EMB-145                  Dec 02                   13               EMB-145                  May 03
- --------------------------------------------------------------------------------------------------------------------------------
     04            EMB-145                  Dec 02                   14               EMB-145                  May 03
- --------------------------------------------------------------------------------------------------------------------------------
     05            EMB-145                  Jan 03                   15               EMB-145                  Jun 03
- --------------------------------------------------------------------------------------------------------------------------------
     06            EMB-145                  Jan 03                   16               EMB-145                  Jun 03
- --------------------------------------------------------------------------------------------------------------------------------
     07            EMB-145                  Feb 03                   17               EMB-145                  Jul 03
- --------------------------------------------------------------------------------------------------------------------------------
     08            EMB-145                  Feb 03                   18               EMB-145                  Jul 03
- --------------------------------------------------------------------------------------------------------------------------------
     09            EMB-145                  Mar 03                   19               EMB-145                  Aug 03
- --------------------------------------------------------------------------------------------------------------------------------
     10            EMB-145                  Mar 03                   20               EMB-145                  Aug 03
- --------------------------------------------------------------------------------------------------------------------------------





      3.2 Article 24.e shall be deleted and replaced with the following:

      e. CONFIRMATION OF OPTION GROUPS: The Option Groups (of two Aircraft each)
      shall be confirmed on or before the following dates:

             First 4 Option Groups:       [*]
             Next 2 Option Groups:        [*]
             Next 2 Option Groups:        [*]
             Last 2 Option Groups:        [*]

      At the time of each such confirmation, the Initial Deposit with respect to
      the Option Aircraft in such Option Group shall become non refundable. In
      the event that Buyer fails to exercise its option with respect to any five
      (5) Option Groups, Buyer shall lose its rights to said Option Groups, as
      well as all remaining Option Groups.

4.    MISCELLANEOUS: All other provisions of the Agreement which have not been
      specifically amended or modified by this Amendment No. 14 shall remain
      valid in full force and effect without any change.

         [The remainder of this page has been left blank intentionally.]


- --------------------
* Confidential



IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 14 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.     Solitair Corp.


By     /s/ Frederico Fleury Curado                 By     /s/ Douglas J. Lambert
Name:  Frederico Fleury Curado                     Name:  Douglas J. Lambert
Title: E.V.P. Airline Market                       Title: V. P.


By     /s/ Flavio Rimoli                           Date:  12-12-01
Name:  Flavio Rimoli                               Place: Greenwich, CT U.S.A.
Title: Director of Contracts

Date:
Place:

EX-10.14

                                                                   Exhibit 10.14

                                LETTER AGREEMENT
                                   GCT-026/98

This Letter of Agreement GCT-026/98 ("Agreement") dated June ___, 1998 is an
agreement between SOLITAIR CORP. ("Buyer") with its principal place of business
at Greenwich, Connecticut, and Embraer - Empresa Brasileira de Aeronautica S.A.
("Embraer"), with its principal place of business at Sao Jose dos Campos, Sao
Paulo, Brazil, relating to Purchase Agreement GCT-025/98 (the "Purchase
Agreement") for the purchase by Buyer of ten (10) new EMB-145 LR aircraft (the
"Aircraft").

This Agreement constitutes an amendment and modification of the Purchase
Agreement, and it sets forth additional agreements of the Parties with respect
to the matters set forth in the Purchase Agreement. All terms defined in the
Purchase Agreement shall have the same meaning when used herein, and in case of
any conflict between this Agreement and the Purchase Agreement, this Agreement
shall govern.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer agree as follows:

1.    [*]

      A. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
         CONFIDENTIAL TREATMENT]


- ----------
* Confidential





      B. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
         CONFIDENTIAL TREATMENT]

      C. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
         CONFIDENTIAL TREATMENT]




      D. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
         CONFIDENTIAL TREATMENT]

2.    [*]

      For a period beginning on the date of execution of the Purchase Agreement
      and ending [*] after delivery of the last Option Aircraft, [*] shall be
      permitted to purchase Aircraft or Option Aircraft from Embraer [*].

3.    AIRCRAFT TO BE OPERATED IN OTHER COUNTRIES

      Embraer shall manufacture Aircraft in accordance with the requirements of
      the United Kingdom's Civil Aeronautic Authority ("CAA"), subject to the
      conditions and limitations imposed by such authority, at no extra cost to
      Buyer, provided that Buyer gives Embraer notice of such requested change
      at least eight (8) months prior to the Contractual Delivery Date for each
      affected Aircraft. In the

- ----------
* Confidentiality


      event CAA requirements are modified after the date of execution of the
      Purchase Agreement, Buyer shall pay any and all additional costs and
      expenses actually and reasonable in incurred in manufacturing the Aircraft
      to comply with such modified CAA requirements in accordance with Article
      11(f) of the Purchase Agreement, but for costs and expenses associated
      with CAA mandatory ADs which are identical to FAA mandatory ADs, which
      shall be paid for in accordance with Article 11(e) of the Purchase
      Agreement.

      Embraer shall manufacture Aircraft in accordance with the requirements of
      the civil aeronautic authority of any other nation that has issued a type
      certificate for the EMB-145 LR aircraft for commercial passenger
      operations, subject to the conditions and limitations imposed by such
      authority, provided that (i) Buyer gives Embraer prior written notice of
      such requested change at least twelve (12) months prior to the Contractual
      Delivery Date for each affected Aircraft and (ii) pays any and all
      additional costs and expenses to Embraer associated with manufacturing
      such Aircraft to such requirements within five (5) days of receipt of a
      bill from Embraer.

4.

      [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
      SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
      CONFIDENTIAL TREATMENT]

5.

      A.    [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
            SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
            CONFIDENTIAL TREATMENT]

      B.    [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
            SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
            CONFIDENTIAL TREATMENT]




6.    [*]

      [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
      SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
      CONFIDENTIAL TREATMENT]

7.    YEAR 2000 COMPLIANT SOFTWARE

      Embraer guarantees that all software (and all upgrades and modifications
      thereto) Embraer supplies to Buyer pursuant to this Agreement shall be
      "Year 2000 Compliant" (i.e. shall be free of problems resulting from the
      change from year 1999 to year 2000). In the event any software is not Year
      2000 Compliant at the time of delivery to Buyer, Embraer shall modify such
      software to be Year 2000 Compliant or Embraer shall replace such
      non-compliant software with software that is Year 2000 Compliant. All such
      modifications and replacements shall be at no cost to Buyer and shall be
      delivered to Buyer and installed upon Buyer's computer software as soon as
      is reasonably practical, but in no event later than June 30, 1999.

8.    INTENTIONALLY DELETED

9.    [*]

      [*]

10.   MISCELLANEOUS

      All terms and conditions of the Purchase Agreement that have not been
      specifically altered or modified hereunder shall remain in full force and
      effect and time is of the essence under this Agreement.

      [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]


- ----------
* Confidentiality


IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and delivered by their proper and duly authorized officers and to be effective
as of the day and year first above written.

EMBRAER - Empresa Brasileira de Aeronautica S.A.    SOLITAIR CORP.

By: /s/ Frederico Fleury Curado                     By: /s/ Frederick Simon
    ---------------------------                         --------------------

Name: Frederico Fleury Curado                       Name: Frederick Simon
      -----------------------                            -------------------

Title: Executive Vice President--Commercial         Title: President
       -----------------------------------                ------------------


By: /s/ Antonio Mariso
    -------------------------

Name: Antonio Mariso
    -------------------------

Title: Executive V.P. and CFO
    -------------------------



Date: 6/17/98                                      Date: 6/17/98
     ------------------------                         ------------------------

Place: Brasil                                      Place: Greenwich, CT
     ------------------------                         ------------------------


Witness: /s/ Flavio Rimoni                          Witness: /s/ Arthur Amron
     ------------------------                         ------------------------

Name: Flavio Rimoni                                 Name: Arthur Amron
     ------------------------                         ------------------------

EX-10.14(A)

                                                                Exhibit 10.14(a)

                AMENDMENT NUMBER 1 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 1 to Letter Agreement GCT-026/98, dated as of March 13,
2000 ("Amendment No. 1") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("Embraer")
and Solitair Corp. ("Buyer") dated June 17, 1998, which concerns the Purchase
Agreement GCT-025/98 (the "Purchase Agreement"), as amended from time to time
(collectively referred to herein as the "Agreement"). This Amendment No. 1 is
between Embraer and Buyer, collectively referred to herein as the "Parties".

This Amendment No. 1 sets forth further agreements between Embraer and Buyer
relative to Buyer's exercise of its option to purchase the [*] Option
Aircraft as described in Article 24 of the Purchase Agreement and the
purchase of an additional [*] Firm Aircraft with an option for Buyer to
purchase another [*] Option Aircraft.

This Amendment No. 1 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 1 and the Agreement, the terms of this Amendment No.
1 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to modify several conditions described in the Purchase
Agreement and in the Letter Agreement as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    [*]: Article 1 of the Letter Agreement shall be deleted and replaced with
      the following:

      "A.   [*]



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* Confidential



      B.    [*]

            [*]

            B.1.  [*]

            B.2.  [*]

      C.    [*]

            [*]

2.    [*]

3.    [*]: Article 4 of the Letter Agreement shall be deleted and replaced
      with the following:

      "A.   [*]

- --------------
* Confidential




      B.    [*]

4.    INTENTIONALLY OMITTED

5.    [*]

      "5. [*]

- --------------
* Confidential



            [*]

            [*]

            a.    [*]

            b.    [*]

            [*]


6.    [*]: Article 6 of the Letter Agreement shall be deleted and replaced
      with the


- --------------
* Confidential


      following:

      "A.   [*]

      B.    [*]

            B.1   [*]

            B.2   [*]

            B.3   [*]

            B.4   The following terms shall have the definitions provided below:


- --------------
* Confidential



                  [*]

                  [*]

                  [*]

      C.    [*]

            C.1   [*]


- --------------
* Confidential



            C.2   [*]

            C.3   [*]

      D.    [*]

      E.    [*]

7.    AIRCRAFT [*]

      "10. [*]

      A.   [*]

      B.   [*]


- --------------
* Confidential



            [*]

      C.    [*]

      D.    The Purchase Price for such Aircraft shall be determined as follows:

            (i)   [*]

            (ii)  [*]

            (iii) [*]

      E.    [*]

8.    [*] a new Article 11 shall be included in the Letter Agreement
      as follows:

      "11.  [*]


- --------------
* Confidential



      A.    [*]

      B.    [*]

9.    [*]: a new Article 12 shall be included in the Letter Agreement
      as follows:

"12.  [*]

      [*]

10.   [*]

      [*]

11.   [*]

      Considering that, (i) the Purchase Price of Aircraft #5 paid by Buyer to
      Embraer by the time of its delivery was [*]


- --------------
* Confidential




      Considering that, (i) the Purchase Price of Aircraft #6 paid by Buyer to
      Embraer by the time of its delivery was [*]

12.   AIRCRAFT VALUATION CONDITIONS AND PROGRESS PAYMENTS:

      12.1  The effectiveness of this Amendment No. 1 and Amendment No. 7 to the
            Purchase Agreement shall be subject to Embraer and Buyer reaching
            agreement with regards to the terms and conditions of the Aircraft
            Valuation Conditions, which shall occur no later than [*]

      12.2  As a consequence of such condition, all deposits and progress
            payments otherwise due on or before March 24, 2000 shall be due on
            that day, or on the day Embraer and Buyer agree on the Aircraft
            Valuation Condition, whichever occurs first.

      12.3  If the Basic Price of any Aircraft is decreased pursuant to Article
            6 of the Letter Agreement or Article 13 of this Amendment No. 1,
            Embraer shall recalculate the progress payments due under this
            Agreement as if the Basic Price of such Aircraft were at such level
            from the date of execution of this Agreement, and the excess shall
            be applied to the next progress payment that may come due under the
            terms of the Purchase Agreement. Any excess remaining shall be
            returned to the Buyer, if no further deposits or progress payments
            will come due under the terms of the Purchase Agreement.

13.   CONVERSION OF THE OPTION AIRCRAFT:



- --------------
* Confidential



      a.    DECISION TO CONVERT

            Buyer may at Buyer's option, elect to convert each of the Firm
            Aircraft #31-45 and each of the Option Aircraft to EMB-145 model
            EMB-140 LR aircraft (the "EMB-140 Aircraft") in groups of [*]
            Aircraft ("Conversion Group"), provided that Buyer informs Embraer
            by means of a written notice ("Election Notice") no later than
            [*] prior to the Contractual Delivery Date of the first Aircraft
            of each relevant Conversion Group, of its intention to exercise
            such conversion right. Buyer may elect to convert any number of
            Aircraft within each Conversion Group to EMB-140 Aircraft.

            Any initial deposit or progress payment paid by Buyer with respect
            to any Aircraft which later becomes an EMB-140 Aircraft, shall be
            held and applied to the Purchase Price of the relevant EMB-140
            Aircraft in the same manner as to be held and applied to the
            Aircraft so converted.

      b.    APPLICATION OF PURCHASE AGREEMENT TO EMB-140 Aircraft:

            Except as provided in this paragraph "b", all terms and conditions
            applicable for the Aircraft shall also be applicable MUTATIS MUTANDI
            for the EMB-140 Aircraft.

            b.1.  [*] in the configuration, specification and installations
                  specified in Schedule "C" to this Letter Agreement, provided
                  that [*] In the event Buyer enters into a Debt
                  Commitment for any such EMB-140 Aircraft, [*]

            b.2.  [*]

14.   ALTERNATIVE CONFIGURATION

      Buyer has selected an alternative interior configuration for certain
      Aircraft to be operated in the livery of Trans World Airlines, Inc.
      Embraer shall not increase the Basic Prices of such Aircraft as a result
      of such configuration; provided that Buyer shall supply the following
      buyer-furnished materials (the "BFE Material"): (i) floor carpet for
      passenger cabin (P/N AY6003-001-MOHAWK), and (ii) tapestry for the
      bulkheads. Buyer shall supply the BFE Material for each Aircraft to
      Embraer's supplier C&D no later than one hundred and twenty (120) days
      before delivery of the relevant Aircraft. If Buyer fails to do so, Buyer
      shall accept the relevant Aircraft


- --------------
* Confidential



      without those materials installed and Embraer shall have no responsibility
      for retrofit costs for such Aircraft. Materials provided by Buyer pursuant
      to this Article shall not be warranted by Embraer in any way and the
      warranties in Attachment C to the Purchase Agreement shall not apply to
      such materials.

15.   MISCELLANEOUS

      All other provisions of the Agreement which have not been specifically
      amended or modified by this Amendment No. 1 shall remain valid in full
      force and effect without any change.

[The remainder of this page has been left blank intentionally.]





IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 1 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.      Solitair Corp.

By  /s/ Frederico Curado                              By /s/ Kenneth Rubin
   --------------------------                         ----------------------
Name:  Frederico Curado                               Name:  Kenneth Rubin
Title: E.V.P. Commercial                              Title: Vice President

By  /s/ Antonio Mariso
   --------------------------
Name:  Antonio Mariso                                 Date: 3/30/00
Title: E.V.P. and CFO                                 Place: Greenwich, CT.

Date:  3/13/00
Place: Sao Jose dos Campos, Brazil





                  SCHEDULE "A"


                  [CONFIDENTIAL MATERIAL OMITTED AND FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION PURSUANT TO A REQUEST FOR
                  CONFIDENTIAL TREATMENT]






                     SCHEDULE "B" -

                   [CONFIDENTIAL MATERIAL OMITTED AND
                   FILED SEPARATELY WITH THE SECURITIES
                   AND EXCHANGE COMMISSION PURSUANT TO
                   REQUEST FOR CONFIDENTIAL TREATMENT]



                      SCHEDULE "C" - EMB-140 CONFIGURATION

1.    STANDARD AIRCRAFT

      The EMB-140 Aircraft shall be manufactured according to the standard
      configuration specified in the Technical Description TD-140/001, dated
      October 1999 and the optional equipment described in item 2 below.

2.    EMB 140 OPTIONAL EQUIPMENT

    2.1 OPTIONS TO THE STANDARD AVIONICS CONFIGURATION:
            a. CAT-II
            b. 2nd Radio Altimeter
            c. 2nd DME
            d. 2nd ADF
            e. 2nd Transponder Mode S
            f. Selcal - Trimble
            g. Single FMS/GPS - Honeywell
            h. EGPWS
            i. VHF (1st and 2nd) 8,33 khz spacing

    2.2 OPTIONAL SYSTEM / OTHER EQUIPMENT
            a. Thrust Reversers
            C. LR version
            D. Cockpit Floodlight
            E. External Painting (with capability to be reverted to polished)
            F. Service Door Sill  Protection
            G. Cargo Door Sill Protection
            H. Cargo Door Light
            I. Provisions for JAA certification
            J. Plug in Type main door

    2.3 INTERIOR OPTIONAL ITEMS
            a. Standard Interior
            b. Audio Entertainment (CD player)
            c. Blue Sterile Light
            d. Baggage Compartment Class C
            e. Passenger Seats - Customized Cushion Version Top w/ Ultra-leather
            f. Baggage Restraint Net
            g. Extra Oxygen Mask (3 mask for each double seat)

EX-10.14(B)

                                                                Exhibit 10.14(b)

                AMENDMENT NUMBER 2 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 2 to Letter Agreement GCT-026/98, dated as of March 24,
2000 ("Amendment No. 2") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement"), dated June 17, 1998, as amended by Amendment No. 1, between EMBRAER
- - Empresa Brasileira de Aeronautica S.A. ("Embraer") and Solitair Corp.
("Buyer"), which concerns the Purchase Agreement GCT-025/98 (the "Purchase
Agreement"), as amended from time to time (collectively referred to herein as
the "Agreement"). This Amendment No. 2 is between Embraer and Buyer,
collectively referred to herein as the "Parties".

This Amendment No. 2 sets forth further agreements between Embraer and Buyer
relative to the extension of the date for effectiveness of Amendment No. 1 to
the Letter Agreement and Amendment No. 7 to the Purchase Agreement.

This Amendment No. 2 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 2 and the Agreement, the terms of this Amendment No.
2 shall control.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    Articles 12.1 and 12.2 of Amendment No. 1 to Letter Agreement shall be
      deleted and replaced with the following:

      "12.1 The effectiveness of this Amendment No. 1 and Amendment No. 7 to the
            Purchase Agreement shall be subject to Embraer and Buyer reaching
            agreement with regards to the terms and conditions of the [*]

      12.2  As a consequence of such condition, all deposits and progress
            payments otherwise due on or before [*] shall be due on that day,
            or on the day Embraer and Buyer agree [*]

- -----------------
* Confidential



IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 2 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.   Solitair Corp.

By     /s/ Frederico Fleury Curado                 By     /s/ Douglas J. Lambert
       ---------------------------                        ----------------------
Name:  Frederico Fleury Curado                     Name:  Douglas J. Lambert
Title: E.V.P. Commercial                           Title: V.P.

By     /s/ Satoshi Yokota
       ---------------------------
Name:  Satoshi Yokota                              Date:
Title: E.V.P. Industrial                           Place:

Date:  March 24, 2000
Place: Sao Jose dos Campos, Brasil

EX-10.14(C)

                                                                Exhibit 10.14(c)

                AMENDMENT NUMBER 3 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 3 to Letter Agreement GCT-026/98, dated as of March 28,
2000 ("Amendment No. 3") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement"), dated June 17, 1998, as amended from time to time, between EMBRAER
- - Empresa Brasileira de Aeronautica S.A. ("Embraer") and Solitair Corp.
("Buyer"), which concerns the Purchase Agreement GCT-025/98 (the "Purchase
Agreement"), as amended from time to time (collectively referred to herein as
the "Agreement"). This Amendment No. 3 is between Embraer and Buyer,
collectively referred to herein as the "Parties".

This Amendment No. 3 sets forth further agreements between Embraer and Buyer
relative to the modification of the definition of Arranging Commitment and the
extension of the date for effectiveness of Amendment No. 1 to the Letter
Agreement and Amendment No. 7 to the Purchase Agreement.

This Amendment No. 3 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 3 and the Agreement, the terms of this Amendment No.
3 shall control.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    In Article 6.B.4 the definition of Arranging Commitment shall be deleted
      and replaced with the following:


                                     [*]


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* Confidential




2.    Articles 12.1 and 12.2 of Amendment No. 1 to Letter Agreement shall be
      deleted and replaced with the following:

      "12.1 The effectiveness of this Amendment No. 1 and Amendment No. 7 to the
            Purchase Agreement shall be subject to Embraer and Buyer reaching
            agreement with regards to the terms and conditions of the  [*]

      12.2  As a consequence of such condition, all deposits and progress
            payments otherwise due on or before March 29, 2000 shall be due on
            that day, or on the day Embraer and Buyer agree on the [*]
            whichever occurs first. "

- -------------------
* Confidential



IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 3 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.      Solitair Corp.

By    /s/ Carlos Rocha Villela                   By    /s/ Douglas J. Lambert
    -----------------------------                     -------------------------
Name:  Carlos Rocha Villela                      Name:  Douglas J. Lambert
Title: E.V.P and General Counsel                 Title: V.P.

By   /s/ Flavio Rimoli
    -----------------------------
Name:  Flavio Rimoli                             Date:
Title: Director of Contracts                     Place:

Date:  3/28/2000
Place: Sao Jose dos Campos, Brazil

EX-10.14(D)

                                                                Exhibit 10.14(d)

                AMENDMENT NUMBER 4 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 4 to Letter Agreement GCT-026/98, dated as of June 1st,
2000 ("Amendment No. 4") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("Embraer")
and Solitair Corp. ("Buyer") dated June 17, 1998, which concerns the Purchase
Agreement GCT-025/98 (the "Purchase Agreement"), as amended from time to time
(collectively referred to herein as the "Agreement"). This Amendment No. 4 is
between Embraer and Buyer, collectively referred to herein as the "Parties".

This Amendment No. 4 sets forth further agreements between Embraer and Buyer
relative to Embraer's support in the financing structure of Aircraft #6, 8, 9,
10, 11 and 12 to be provided by General Electric Capital Corporation ("GE
Capital").

This Amendment No. 4 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 4 and the Agreement, the terms of this Amendment No.
4 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to modify some conditions described in the Letter Agreement
as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    [*]

2.    [*]


- ---------
* Confidential



      As a consequence of the [*] described in Article 1 above, the Basic
      Price of each of the Aircraft referred to in Section 1 shall be [*].
      In addition, referred to in Article 3 of the Amendment No. 1 to the
      Letter Agreement, shall be [*]. Due to such change, paragraph "B" of
      Article 3 of the Amendment No. 1 to the Letter Agreement shall be
      deleted and replaced with the following:

      "B.   [*]

3.    MISCELLANEOUS

      All other provisions of the Agreement which have not been specifically
      amended or modified by this Amendment No. 4 shall remain valid in full
      force and effect without any change.

IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 4 to be effective as of the date
first written above.


- ---------
Confidential


EMBRAER - Empresa Brasileira de Aeronautica S.A.      Solitair Corp.

By  /s/ Carlos Rocha Villela                      By  /s/ Douglas J. Lambert
    ------------------------------                    -------------------------
Name: Carlos Rocha Villela                             Name: Douglas J. Lambert
Title: E.V.P. and General Counsel                      Title: V.P.

By  /s/ Paulo Cesar Silva
    ------------------------------
Name: Paulo Cesar Silva                               Date:
Title: Director of Sales Financing                    Place:

Date:
Place:

EX-10.14(E)

                                                                Exhibit 10.14(e)

                AMENDMENT NUMBER 5 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 5 to Letter Agreement GCT-026/98, dated as of October ___,
2000 ("Amendment No. 5") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("Embraer")
and Solitair Corp. ("Buyer") dated June 17, 1998, which concerns the Purchase
Agreement GCT-025/98 (the "Purchase Agreement"), as amended from time to time
(collectively referred to herein as the "Agreement"). This Amendment No. 5 is
between Embraer and Buyer, collectively referred to herein as the "Parties".

This Amendment No. 5 sets forth further agreements between Embraer and Buyer
[*] of Aircraft #13 through 22 to be provided by General Electric Capital
Corporation ("GE Capital").

This Amendment No. 5 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 5 and the Agreement, the terms of this Amendment No.
5 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to modify some conditions described in the Letter Agreement
as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    [*]


2.    [*]



- ------------
* Confidential



3.    MISCELLANEOUS

      All other provisions of the Agreement which have not been specifically
      amended or modified by this Amendment No. 5 shall remain valid in full
      force and effect without any change.

IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 5 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.    Solitair Corp.

By  /s/ Frederico Fleury Curado                     By  /s/ Doug Lambert
    ----------------------------                       -----------------------
Name: Frederico Fleury Curado                       Name: Doug Lambert
Title: E.V.P.                                       Title: V.P.

By  /s/ Romualdo Monteiro de Barros
    -------------------------------
Name: Romualdo Monteiro de Barros                   Date:  10/18/00
Title: E.V.P.--Defense Market                       Place: Greenwich, CT USA

Date:  10-18-00
Place: Sao Jose dos Campos, Brazil

EX-10.14(F)

                                                                Exhibit 10.14(f)

                AMENDMENT NUMBER 6 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 6 to Letter Agreement GCT-026/98, dated as of June ___,
2001 ("Amendment No. 6") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("Embraer")
and Solitair Corp. ("Buyer") dated June 17, 1998, which concerns the Purchase
Agreement GCT-025/98 (the "Purchase Agreement"), as amended from time to time
(collectively referred to herein as the "Agreement"). This Amendment No. 6 is
between Embraer and Buyer, collectively referred to herein as the "Parties".

This Amendment No. 6 sets forth further agreements between Embraer and Buyer
[*] Firm and Option Aircraft to be acquired by Buyer.

This Amendment No. 6 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 6 and the Agreement, the terms of this Amendment No.
6 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to include new agreements and conditions described in the
Letter Agreement as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    PROGRESS PAYMENTS

      1.1.  FIRM AIRCRAFT

      A)    The progress payments for Aircraft #23 and all subsequent Firm
            Aircraft pursuant to Articles 4.a.2, 4.a.3 and 4.a.4 of the Purchase
            Agreement [*]

      B)    In order to compensate [*] from the date such progress payment is
            due until the Actual Delivery Date for each Aircraft. To the extent
            that Buyer has already made progress payments in respect of
            Aircraft#23 to #30 in excess of the amounts required under the
            provisions hereof, Embraer and Buyer agree that Embraer has
            retroactively credited the amount of such excess in satisfaction
            of Buyer's obligations to provide overdue progress payments to
            Embraer related to Aircraft


- ----------
* Confidential



            #23 to 45.

      C)    [*] referred to in items A and B above shall begin on January
            31, 2001, for each progress payment due on or before such date.

      1.2.  OPTION AIRCRAFT

      A)    Notwithstanding anything to the contrary in the Purchase Agreement,
            Buyer shall not be obligated to make any progress payments for an
            Option Aircraft until Buyer has confirmed its purchase of such
            Option Aircraft.

      B)    The progress payments for the Option Aircraft pursuant to Articles
            24.d.2, 24.d.3 and 24.d.4 of the Purchase Agreement [*] subject to
            Buyer's payment of interest pursuant to item B below.

      C)    [*] from the date such progress payment is due until the Actual
            Delivery Date for each Aircraft.

      D)    Items A and B shall not apply to Option Aircraft exercised by or for
            the benefit of any person other than Buyer.

      1.3.  GENERAL TERMS FOR INTEREST ON [*]

      A)    Amounts owed by Buyer pursuant to Articles 1.1 and 1.2 [*] and
            shall be paid by Buyer directly to Embraer upon delivery of each
            Aircraft through a separate invoice to be presented by Embraer.

      B)    Buyer shall not withhold or deduct any portion of [*] or, if it
            must do so, shall fully gross up such amounts; provided that
            Embraer shall cooperate reasonably with Buyer in executing any
            exemption forms requested by Buyer.

      1.4.  RETURN OF PROGRESS PAYMENTS

            Upon receipt of the Purchase Price for each Firm Aircraft, Embraer
            shall return the progress payments for such Aircraft, minus the
            amount of any progress payments due during the same calendar month
            for undelivered Firm Aircraft. Embraer shall apply this retained
            amount to the due progress payments.


- -----------
* Confidential


2.    CONVERSION OF THE OPTION AIRCRAFT

      2.1.  The first paragraph of item 13.a of Amendment No. 1 to Letter
            Agreement shall be deleted and replaced with the following:

            "a.   DECISION TO CONVERT

            Buyer may at Buyer's option, elect to convert each of the Firm
            Aircraft #31-45 and each of the Option Aircraft to EMB-145 model
            EMB-140 LR aircraft (the "EMB-140 Aircraft") in groups of two (2)
            Aircraft ("Conversion Group"), provided that Buyer informs Embraer
            by means of a written notice ("Election Notice") no later than
            fifteen (15) months prior to the Contractual Delivery Date of the
            first Aircraft of each relevant Conversion Group, of its intention
            to exercise such conversion right. Buyer may elect to convert any
            number of Aircraft within each Conversion Group to EMB-140
            Aircraft."

3.    [*]

      3.1.  [*]

      3.2.  [*]

4.    MISCELLANEOUS

      All other provisions of the Agreement, which have not been specifically
      amended or modified by this Amendment No. 6 shall remain valid in full
      force and effect without any change.


- ---------------
* Confidential


IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 6 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.      Solitair Corp.

By /s/ Frederico Fleury Curado                        By /s/ Jay Maymudes
   ----------------------------                          -----------------
Name: Frederico Fleury Curado                         Name: Jay Maymudes
Title: E.V.P.--Airline Market                         Title: V.P.

By /s/ Flavio Rimoli
  ----------------------------
Name: Flavio Rimoli                                   Date: 10/22/01
Title: Director of Contracts                          Place: Greenwich, CT

Date:  10/22/01
Place: Sao Jose dos Campos, Brazil

EX-10.14(G)

                                                                Exhibit 10.14(g)


                AMENDMENT NUMBER 7 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 7 to Letter Agreement GCT-026/98, date to be effective as
of July 31, 2001 ("Amendment No. 7") relates to the Letter Agreement GCT-026/98
(the "Letter Agreement") between EMBRAER - Empresa Brasileira de Aeronautica
S.A. ("Embraer") and Solitair Corp. ("Buyer") dated June 17, 1998, which
concerns the Purchase Agreement GCT-025/98 (the "Purchase Agreement"), as
amended from time to time (collectively referred to herein as the "Agreement").
This Amendment No. 7 is between Embraer and Buyer, collectively referred to
herein as the "Parties".

This Amendment No. 7 sets forth further agreements between Embraer and Buyer
[*] Aircraft #30 through 42 to be provided by General Electric Capital
Corporation ("GE Capital").

This Amendment No. 7 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 7 and the Agreement, the terms of this Amendment No.
7 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to modify some conditions described in the Letter Agreement
as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    ADDITIONAL [*]

                               [*]

2.    [*]


                               [*]


- -------------------
* Confidential




3.    [*] AIRCRAFT # 38

                             [*]


4.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment No. 7 shall remain valid in full force and effect
without any change.

IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 7 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.             Solitair Corp.

By      /s/ Frederico Fleury Curado             By    /s/ Jay Maymudes
     -------------------------------              ----------------------------
Name:   Frederico Fleury Curado                       Name:  Jay Maymudes
Title:  E.V.P. Airline Market                         Title: V.P.

By    /s/ Flavo Rimoli
     -------------------------------
Name:  Flavo Rimoli                                   Date:   10/22/01
Title: Director of Contracts                          Place:  Greenwich, CT

Date:   10/22/01
Place:  Sao Jose dos Campos


- -------------------
* Confidential

EX-10.14(H)

                                                                Exhibit 10.14(h)

                AMENDMENT NUMBER 8 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 8 to Letter Agreement GCT-026/98, dated as of October 19,
2001 ("Amendment No. 8") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("Embraer")
and Solitair Corp. ("Buyer") dated June 17, 1998, which concerns the Purchase
Agreement GCT-025/98 (the "Purchase Agreement"), as amended from time to time
(collectively referred to herein as the "Agreement"). This Amendment No. 8 is
between Embraer and Buyer, collectively referred to herein as the "Parties".

This Amendment No. 8 sets forth further agreements between Embraer and Buyer
relative to the conversion of seven (7) Firm EMB-145 Aircraft and eight (8)
Option EMB-145 Aircraft into EMB-140 Aircraft, as provided in Amendment No. 13
to the Purchase Agreement, dated as of the date hereof.

This Amendment No. 8 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 8 and the Agreement, the terms of this Amendment No.
8 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to modify the Letter Agreement as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    [*]

      [*]

2.    AIRCRAFT TO BE OPERATED IN OTHER COUNTRIES:

The reference to the "EMB-145 LR" Aircraft on the second paragraph of Article 3
to the Letter Agreement shall be deleted and replaced by "EMB-145 or EMB-140".

3.    [*]

      [*]

      "B.

- ----------
* Confidential


            [*]

4.    [*]

      4.1.  Article "6.B.3" of the Letter Agreement shall be deleted and
            replaced with the following:

            "B.3  [*]


- ----------
* Confidential



            4.2.  [*]

            4.3.  The first paragraph of Article "6.C" of the Letter Agreement
                  shall be deleted and replaced with the following:

                  "C.   [*]

      5.    CONVERSION OF THE OPTION AIRCRAFT:

            5.1.  Article "13" of Amendment No. 1 to Letter Agreement also
                  amended by Amendment No. 6 to Letter Agreement shall be
                  deleted and replaced with the following:

                  "a.   DECISION TO CONVERT

                  Buyer may at Buyer's option, elect to convert each of the EMB
                  145 Option


- -----------
* Confidential


                  Aircraft to EMB-140 Aircraft in groups of two (2) Aircraft
                  ("Conversion Group"), provided that Buyer informs Embraer by
                  means of a written notice ("Election Notice") no later than
                  the date which Buyer confirms the exercise of its option to
                  purchase such Option Aircraft, according to Section 6.5 to
                  Amendment No. 13 to Purchase Agreement, of its intention to
                  exercise such conversion right. Buyer may elect to convert any
                  number of Aircraft within each Conversion Group to EMB-140
                  Aircraft.

                  Any initial deposit or progress payment paid by Buyer pursuant
                  to Articles 4.a or 24.d of the Purchase Agreement with respect
                  to any Aircraft which later becomes an EMB-140 Aircraft, shall
                  be held and applied to the Purchase Price of the relevant
                  EMB-140 Aircraft in the same manner as to be held and applied
                  to the Aircraft so converted.

            b.    APPLICATION OF PURCHASE AGREEMENT TO EMB-140 AIRCRAFT:

                  Except as provided in this paragraph "b", all terms and
                  conditions applicable for the Aircraft shall also be
                  applicable MUTATIS MUTANDI for the EMB-140 Aircraft.

                  b.1.  [*]

                  b.2.  Attachments "I" and "J-1" to the Purchase Agreement
                        apply to the EMB-140 Aircraft."

      5.2. Schedule "C" to the Letter Agreement shall be deleted.

6.    PROGRESS PAYMENTS

Notwithstanding anything to the contrary in Amendment No. 8 to the Purchase
Agreement between Embraer and Buyer, dated as of the date hereof, the provisions
of Section 1 of Amendment No. 6 to the Letter Agreement between Embraer and
Buyer, dated as of July _, 2001 shall apply.


- ----------
* Confidential


7.    MISCELLANEOUS

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment No. 8 shall remain valid in full force and effect
without any change.





IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 8 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.      Solitair Corp.

By  /s/ Frederico Fleury Curado                       By  /s/ Jay Maymudes
    ---------------------------                           --------------------
Name: Frederico Fleury Curado                         Name: Jay Maymudes
Title: E.V.P.--Airline Market                         Title: V.P.

By  /s/ Flavio Rimoli
    ---------------------------
Name: Flavio Rimoli                                   Date:  10/22/01
Title: Director of Contracts                          Place: Greenwich, CT

Date:  10/22/01
Place: Sao Jose dos Campos, Brazil

EX-10.14(I)

                                                                Exhibit 10.14(i)

                AMENDMENT NUMBER 9 TO LETTER AGREEMENT GCT-026/98

This Amendment Number 9 to Letter Agreement GCT-026/98, dated as of November 13,
2001 ("Amendment No. 9") relates to the Letter Agreement GCT-026/98 (the "Letter
Agreement") between EMBRAER - Empresa Brasileira de Aeronautica S.A. ("Embraer")
and Solitair Corp. ("Buyer") dated June 17, 1998, which concerns the Purchase
Agreement GCT-025/98 (the "Purchase Agreement"), as amended from time to time
(collectively referred to herein as the "Agreement"). This Amendment No. 9 is
between Embraer and Buyer, collectively referred to herein as the "Parties".

This Amendment No. 9 sets forth further agreements between Embraer and Buyer
relative to the exercise of [*] Option Aircraft, as provided in Amendment
No. 14 to the Purchase Agreement, dated as of the date hereof.

This Amendment No. 9 constitutes an amendment and modification of the Letter
Agreement. All terms defined in the Agreement and not defined herein shall have
the meaning given in the Agreement when used herein, and in case of any conflict
between this Amendment No. 9 and the Agreement, the terms of this Amendment No.
9 shall control.

WHEREAS, in connection with the Parties' agreements as described above, the
Parties have agreed to modify the Letter Agreement as provided below;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Embraer and Buyer do hereby agree as follows:

1.    [*]

                 [*]


      "B.                   [*]

- -------------------
* Confidential




2.    COMPENSATION DUE TO [*].

In order to compensate Embraer [*] Amendment No. 13 to the Purchase Agreement
GCT-025/98, [*]. This amount shall not constitute part of the Aircraft
Purchase Price and shall be paid by Buyer directly to Embraer [*] after
delivery of such Aircraft through a separate invoice to be presented by
Embraer.

3.    MISCELLANEOUS:

All other provisions of the Agreement which have not been specifically amended
or modified by this Amendment No. 9 shall remain valid in full force and effect
without any change.


- -------------------
* Confidential



IN WITNESS WHEREOF, Embraer and Buyer, by their duly authorized officers, have
entered into and executed this Amendment No. 9 to be effective as of the date
first written above.

EMBRAER - Empresa Brasileira de Aeronautica S.A.      Solitair Corp.

By    /s/ Frederico Fleury Curado               By    /s/ Doug J. Lambert
      ---------------------------                   ------------------------
Name:   Frederico Fleury Curado                       Name:   Doug J. Lambert
Title:  Director Vice President                       Title:  Vice President

By    /s/ Flavio Rimoli
      ---------------------------
Name:  Flavio Rimoli                                  Date:  12/12/01
Title: Director of Contracts                          Place: Greenwich, CT

Date:
Place:

EX-10.15

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

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

                                 LEASE AGREEMENT

                           Dated as of August 15, 1988

                                     BETWEEN

                      McDonnell Douglas Finance Corporation
                                    (Lessor)

                                       AND

                            Chautauqua Airlines, Inc.
                                    (Lessee)

                                   Concerning

                         Two New Saab S-340A Airframes
                   Four General Electric Model CT7-5A2 Engines
              Four Dowty Rotol Model (c)R354/4-123-F/13 Propellers

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

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

0715G-1003G
0716G-1003G
8/04/88-JSW



                                TABLE OF CONTENTS



 ARTICLE                                                                                PAGE

                                                                                  
    1    Definitions                                                                    1-1

    2    Delivery and Acceptance                                                        2-1

    3    Term                                                                           3-1

    4    Rent                                                                           4-1
         4.01.   Basic Rent                                                             4-1
         4.02.   Supplemental Rent                                                      4-2
         4.03.   Place of Payment                                                       4-2
         4.04.   Prohibition Against Setoff,
                   Counterclaim, Etc.                                                   4-2
         4.05.   Waiver of Certain Rights of the Lessee                                 4-3

    5    Representations and Warranties                                                 5-1
         5.01.   No Representations and warranties                                      5-1
         5.02.   Lessee's Representations and Warranties                                5-2

    6    Possession, Use, Lawful Insured Operations,
           Maintenance, Registration and Insignia                                       6-1
         6.01.   Possession                                                             6-1
         6.02.   Assignment  by Lessee                                                  6-3
         6.03.   Use                                                                    6-3
         6.04.   Lawful Insured Operations                                              6-4
         6.05.   Maintenance                                                            6-5
         6.06.   Registration and Insignia                                              6-6
         6.07.   Records                                                                6-6

    7    Inspection: Financial Information                                              7-1

    8    Lessee's Covenants                                                             8-1
         8.01.   Maintenance of Corporate Existence                                     8-1
         8.02.   Notice of Litigation, Etc.                                             8-1
         8.03.   Payment of Taxes                                                       8-1
         8.04.   Consolidation, Merger or Sale                                          8-2

    9    Replacement of Parts;
           Alterations, Modifications and Additions                                     9-1
         9.01.   Replacement of Parts                                                   9-1
         9.02.   Title to Replaced Parts                                                9-1
         9.03.   Alterations, Modifications and Additions                               9-2
         9.04.   Title to Parts                                                         9-3
         9.05.   No Liability for Alteration, Modification
                  or Addition; Grounding                                                9-4


                                       (i)




ARTICLE                                                                                PAGE

                                                                                 
   10    General Tax Indemnity                                                         10-1
         10.01.  Indemnity                                                             10-1
         10.02.  After-Tax Nature of Indemnity                                         10-2
         10.03.  Contest                                                               10-3
         10.04   Survival                                                              10-5

   11    Damage. Destruction. Requisition
           or condemnation                                                             11-1
         11.01.  Event of Loss with Respect to an
                  Airframe or an Airframe and the
                  Engines Installed Thereon                                            11-1
         11.02.  With Respect to an Engine                                             11-2
         11.03.  Application of Payments from Governmental
                  Authorities for Requisition of Title                                 11-4

   12    Insurance                                                                     12-1
         12.01.  Public Liability and Property Damage
                  Liability Insurance                                                  12-1
         12.02.  Insurance Against Loss or Damage to
                  the Aircraft                                                         12-2
         12.03.  Application of Proceeds in an Event
                  of Loss                                                              12-5
         12.04.  Application of Proceeds in the Absence
                  of an Event of Loss                                                  12-6
         12.05.  Reports, Etc.                                                         12-6
         12.06.  Endorsements                                                          12-7
         12.07.  Lessor's Additional Insurance                                         12-7

   13    General Indemnification                                                       13-1

   14    Liens                                                                         14-1

   15    Recordation and Further Assurances                                            15-1

   16    Return of Aircraft and Records                                                16-1
         16.01.  Return                                                                16-1
         16.02.  Equivalency Charge                                                    16-3
         16.03.  Manuals                                                               16-4
         16.04.  Maintenance at Lessor's Request                                       16-4
         16.05.  Engines                                                               16-5
         16,06.  Storage                                                               16-6
         16.07.  Special Markings                                                      16-6
         16.08.  Survival                                                              16-6

   17    Events of Default                                                             17-1

   18    Remedies                                                                      18-1


                                      (ii)




ARTICLE                                                                                PAGE

                                                                                 
   19.   Miscellaneous                                                                 19-1
         19.01.  Construction and Applicable Law                                       19-1
         19.02.  Notices                                                               19-2
         19.03.  Lessor's Right to Perform for Lessee                                  19-2
         19.04.  Counterparts                                                          19-3
         19.05.  Quiet Enjoyment                                                       19-3
         19.06.  Legal fees and Other Expanses                                         19-3
         19,07.  Assignment by Lessor                                                  19-4
         19.08.  Survival                                                              19-6
         19.09.  Successors and Assigns                                                19-6

   20    Purchase option                                                               20-1

   21    Characterization as Lease and Tax Indemnity                                   21-1

         21.01.  Tax assumptions                                                       21-2
         21.02.  Tax Indemnity                                                         21-3
         21.03.  Contest                                                               21.6
         21.04.  Survival                                                              21-9
         21.05.  Consolidated  Return                                                  21-9

   22    True Lease Under Federal Aviation Act                                         22-1

   23    Truth In Leasing                                                              23-1

         EXHIBIT A - LEASE SUPPLEMENT NO.

         EXHIBIT B1- STIPULATED LOSS VALUE
                 B2- STIPULATED LOSS VALUE


                                      (iii)


                                 LEASE AGREEMENT

     THIS LEASE AGREEMENT ("Lease") dated as of August 15, 1988, is between
McDonnell Douglas Finance Corporation, a Delaware corporation ("Lessor"), and
Chautauqua Airlines, Inc., a New York corporation ("Lessee").

     WHEREAS, Lessee desires to lease from Lessor and Lessor is willing to lease
to Lessee the Aircraft described herein upon and subject to the terms of this
Lease;

     NOW, THEREFORE, in consideration of the mutual promises herein, the Lessor
and the Lessee agree as follows:

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

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



                                    ARTICLE 1

                                   DEFINITIONS

     Unless the context otherwise requires the following terms shall have the
following meanings for all purposes of this Lease Agreement and shall he equally
applicable to both the singular and the plural forms of the terms herein
defined:

     "AERONAUTICS AUTHORITY" shall mean, where applicable, the Department of
Transportation, the Federal Aviation Administration and/or the Administrator of
the Federal Aviation Administration ("FAA"), or any person, governmental
department, bureau, commission or agency succeeding to the functions of any of
the foregoing:

     "AIRCRAFT" means each of the Airframes to be delivered and leased hereunder
together with the Engines initially installed on such Airframes when delivered
and leased hereunder or any Engine as defined herein, all as more particularly
described and identified in the Lease Supplements pertaining thereto.

                                       1-1


     "AIRFRAME" means: (A) each of the new Saab SF340 aircraft designated in a
Lease Supplement (except the Engines and engines from time to time installed on
an Airframe), leased hereunder by the Lessor to the Lessee and having the
manufacturer's serial number and the Federal Aviation Authority registration
number as set forth in such Lease Supplement, and (B) except as otherwise
provided in Sections 9.02 and 9.04 hereof, any and all Parts so long as the same
shall be incorporated or installed in or attached to an Aircraft, or so long as
title thereto shall remain vested in the Lessor in accordance with the terms of
Article 9 hereof, after removal from an Aircraft.

     "BASIC RENT" means the rent payable throughout the Base Lease Term for an
Aircraft pursuant to Section 4.01 and any other provision of this Lease which
treats any payment by the Lessee as Basic Rent.

     "BUSINESS DAY" means any day other than a Saturday, Sunday or day on which
commercial banking institutions in Los Angeles, California are authorized by law
to be closed.

     "CERTIFIED AIR CARRIER" shall mean an air carrier certificated under part
298 by the Aeronautics Authority or in the event such certification is no longer
issued to any air carrier, a domestic air carrier engaged in regularly scheduled
air transportation of passengers within the United States.

                                       1-2


     "CODE" shall mean the Internal Revenue Code of 1986, as amended.

     "COMMENCEMENT DATE" shall mean the Delivery Date.

     "DEFAULT" shall mean any event or condition which with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.

     "DELIVERY DATE" for an Aircraft means the date of the Lease Supplement for
such Aircraft, which date shall be the date the Aircraft is delivered by the
Lessor and accepted by the Lessee, pursuant to the provisions of Article 2
hereof.

     "ENGINE" means: (A) any of the engines together with the propellers
attached thereto listed by manufacturer's serial number in a Lease Supplement
and installed on the Airframe covered by such Lease Supplement on the Delivery
Date therefor whether or not from time to time thereafter installed on the
Airframe or installed on any other airframe or any other aircraft; (B) any spare
engine described and identified in any Lease Supplement, or any engine which may
from time to time be substituted, or be a replacement or addition pursuant to
Article 11 or 16 hereof, for any such Engine; and (C) except as otherwise
provided in sections 9.02 anti 9.04 hereof, any and all Parts (other than
Engines or engines) incorporate: or installed in or attached thereto or any and
all Parts removed therefrom so long as title thereto shall

                                       1-3


remain vested in the Lessor in accordance with the terms of Article 9 hereof
after removal from any such Engine.

     "EQUIPMENT COST" or "Lessor's Cost" for an Item of Equipment means the
amount so described in the Lease Supplement for such Item of Equipment.

     "EVENT OF DEFAULT" has the meaning specified in Article 17 hereof.

     "EVENT OF LOSS" with respect to any Item of Equipment means any of the
following events with respect to such Item: (A) loss of such Item of Equipment
or the use thereof due to theft, disappearance for a period in excess of 30 days
(or such shorter period ending on the date on which an insurance settlement has
been reached on the basis of a total loss), destruction, damage beyond repair or
rendition of such Item permanently unfit for normal use for any reason
whatsoever; (B) any damage to such Item which results in an insurance settlement
with respect to such Item on the basis of a total loss; (C) the condemnation,
confiscation or seizure of, or requisition of title to, or requisition of use
(for a period in excess of 30 days) of, such Item by the Government of the
United States or any foreign government or any political subdivision of either;
or (D) as a result of any rule,

                                      1-4


regulation, order or other action by the Aeronautics Authority, or other
governmental body having jurisdiction, the use of such Item in the normal course
of air transportation of persons shall have been prohibited for a period of not
less than six months. An Event of Loss with respect to an Aircraft shall be
deemed to have occurred if an Event of Loss occurs with respect to the Airframe
which is part of such Aircraft.

     "FEDERAL AVIATION ACT" shall mean the Federal Aviation Act of 1958, as
amended, as in effect on the date of this Lease, or any successor or substituted
legislation at the time in effect and applicable.

     "INCENTIVE RATE" shall be equal to the Prime Rate plus 4%, or the maximum
rate permitted by applicable law, whichever is less.

     "ITEMS OF EQUIPMENT" or "ITEMS" means any or all of the Aircraft, the
Airframes, the Engines, and each Part, as such terms are defined herein.

                                      1-5


     "LEASE", "LEASE AGREEMENT", "THIS LEASE AGREEMENT", "THIS LEASE", "THIS
AGREEMENT" ",HEREIN", "HEREUNDER", "HEREBY" and other like words mean this
Lease, as it may be amended, modified or supplemented pursuant to the applicable
provisions hereof, including, without limitation, supplementation hereof by a
Lease Supplement entered into pursuant to the applicable provisions hereof.

     "LEASE SUPPLEMENT" means a Lease Supplement, substantially in the form of
Exhibit A hereto, entered into between the Lessor and the Lessee for the purpose
of leasing the Items of Equipment under and pursuant to the terms of this Lease
Agreement. Each Lease Supplement shall he deemed to have been incorporated into
this Lease Agreement to the same extent as if such Provisions were fully set
forth herein.

     "LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
exercise of rights, security interest or claim.

     "PARTS" means any and all appliances, parts, instruments, appurtenances,
accessories, furnishings, seats and other equipment of whatever nature (other
than Engines or engines), which (A) are from time to time incorporated or
installed in or attached to an Airframe or Engine, or (B) having been so
installed or attached, are later removed therefrom, so long as title thereto
remains

                                      1-6


vested in Lessor in accordance with Article 9 hereof after such removal from an
Airframe or Engine. "PART" means any one of the Parts.

     "PRIME RATE" means the interest rate charged by The Chase Manhattan Bank
(National Association), or any successor thereto, from time to time at its
principal office in New York City on 90-day loans to responsible and substantial
commercial borrowers; with each change in such rate to take effect immediately
under this Lease and any calculations performed in accordance herewith.

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

     "STIPULATED LOSS VALUE" for an Aircraft as of any particular date of
computation shall mean an amount determined by multiplying the Equipment Cost
for the Aircraft by the percentage specified in Exhibit 91 attached hereto for
purposes of Section 12.02 hereof and in connection with an Event of Loss, or
Exhibit B2 attached hereto for any other purpose, opposite the appropriate Basic
Rent installment for such date (PROVIDED, HOWEVER, that the Stipulated Loss
Value for an Event of Loss which occurs after payment of the final installment
of Basic Rent and before expiration of the storage period provided for in
Section 16.06 hereof shall be based upon the final amount set forth in Exhibit
B1), and the Stipulated Loss Value numbers in Exhibit B1 or B2 assume that all
prior Basic Rent installments have been timely made prior to such computation.

                                       1-7


     "SUPPLEMENTAL RENT" means all amounts, liabilities and obligations (other
than Basic Rent) which the Lessee assumes or agrees to pay under this Lease or
related documents to the Lessor or others, including, without limitation, (A)
Stipulated Loss Value payments; (B) all amounts required to be paid by the
Lessee under the agreements, covenants and indemnities contained in this Lease;
and (C) any and all liabilities, obligations, losses, damages, penalties, taxes,
claims, actions, suits, costs, expenses or disbursements (including without
limitation legal fees and expenses) of any kind and nature whatsoever which may
be imposed upon or incurred by the Lessor by reason of the failure of the Lessee
to duly perform its obligations under this Lease.

     "TERM" means the term for which an Aircraft is leased hereunder pursuant to
Article 3 hereof.

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

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

                                       1-8


                                    ARTICLE 2

                             DELIVERY AND ACCEPTANCE

     2.01 Lessor hereby agrees (subject to satisfaction of the conditions
hereinafter set forth) to lease to Lessee hereunder, and Lessee hereby agrees to
lease from Lessor hereunder, the Aircraft, as evidenced by the execution by
Lessor and Lessee of one or more appropriate Lease Supplements leasing the
Aircraft hereunder.

     2.02 At all times during the Term of this Lease, full legal title to the
Aircraft shall remain vested in Lessor to the exclusion of Lessee,
notwithstanding the delivery of the Aircraft to, and the possession and use
thereof by, Lessee.

     2.03 The Lessor hereby authorizes one or more persons designated by the
Lessee, who shall be an employee or employees of the Lessee, as the authorized
representative or representatives of the Lessor, to accept delivery of the
Aircraft. The Lessee hereby agrees that such acceptance of delivery of an
Aircraft by such authorized representative or representatives shall, without
further act, irrevocably constitute acceptance by the Lessee of such Aircraft
for all purposes of this Agreement.

                                      2-1


     2.04 Lessor's obligation to lease the Aircraft to Lessee hereunder shall be
subject to satisfaction on or before the Commencement Date for each Aircraft of
each and all of the following conditions precedent:

          (A) Lessor shall have received the following:

               (1) resolutions of the Board of Directors of Lessee or other
          written evidence of appropriate corporate action, certified by the
          Secretary of the Lessee, duly authorizing the lease of the Aircraft
          and the execution, delivery and performance of this Lease, together
          with an incumbency certificate as to the person or persons authorized
          to execute and deliver said documents on behalf of Lessee;

               (2) a Lease Supplement, duly authorized and executed by Lessee,
          covering the Aircraft, effective as of the Commencement Date;

               (3) certificates signed by independent aircraft insurance brokers
          as to the due compliance with the insurance provisions of Article 12
          hereof with respect to the Aircraft;

               (4) a favorable opinion of counsel for Lessee, dated the
          Commencement Date, to the effect that:

                                      2-2


               (a) Lessee has been duly incorporated, is validly existing as a
          corporation in good standing under the laws of the State of New York,
          and has full corporate power and authority to carry on its business in
          which it is presently engaged and to perform its obligations under the
          Lease, as supplemented by the Lease Supplement;

               (b) the execution and delivery of the Lease, the Lease
          Supplement, the consummation by the Lessee of the transactions therein
          contemplated and compliance by the Lessee with the terms and
          provisions thereof do not and will not result in the violation of the
          provisions of the articles of incorporation or the by-laws of the
          Lessee as in effect on the date of such opinion; and to the knowledge
          of such counsel, do not and will not conflict with or result in a
          breach of any terms or provisions of, or constitute a default under,
          or result in the creation or imposition of any lien, charge, or
          encumbrance upon, any property or assets of the Lessee under any
          indenture, mortgage, or other agreement or instrument to which the
          Lessee is a party or by which it or any of its properties are or may
          be bound, or any existing applicable law, rule or

                                      2-3


          regulation, or any judgment, order or decree then in effect, of any
          government, governmental instrumentality or court having jurisdiction
          over the Lessee or any of its activities or properties;

               (c) the Lease and the Lease Supplement have each been duly
          authorized, executed and delivered by the Lessee, and each such
          instrument is a legal, valid, enforceable and binding obligation of
          the Lessee, except as enforceability may be limited by bankruptcy,
          insolvency, reorganization or other laws of general, application
          affecting the enforcement of creditors' rights;

               (d) except for any filing or recording that may be required under
          the Federal Aviation Act (and except such other filings or recordings
          as such counsel shall specify have been duly effected), no filing or
          recording of any instrument or document (including the filing of any
          financing statement) is necessary under the laws of the United States
          or of the State of New York in order for the Lease to constitute a
          valid and perfected lease of record relating to the Aircraft;

                                      2-4


               (e) except as disclosed in the opinion, there are no suits or
          proceedings pending or, to the knowledge of such counsel, threatened
          against Lessee in any court or before any regulatory commission, board
          or other administrative governmental agency against or affecting
          Lessee, which if determined adversely to Lessee may have a material
          adverse effect on the financial condition or business of Lessee;

               (f) Lessee holds all licenses, certificates and permits from
          applicable governmental authorities in the United States of America
          necessary for the conduct of its business;

               (g) no authorization, approval, consent, license or order of, or
          registration with, or the giving of notice to the Aeronautics
          Authority or any other regulatory body or authority is required for
          the valid authorization, execution, delivery and performance by the
          Lessee of the Lease, including the Lease Supplement, except for any
          filings or recordings with the FAA; and

               (h) such other matters as Lessor may reasonably request.

                                      2-5


               (5) such other documents as Lessor may reasonably request, in
          form and substance satisfactory to Lessor.

          (B) On the Commencement Date the following statement shall be true and
     Lessor shall have received a certificate satisfactory to Lessor signed by a
     duly authorized officer of Lessee, dated the Commencement Date, stating
     that:

               (1) the representations and warranties contained in Section 5.02
          hereof are true and accurate on and as of the Commencement Date as
          though made on and as of such date (except to the extent that such
          representations and warranties relate solely to an earlier date); and

               (2) no Default or Event of Default has occurred and is
          continuing, or would result from the lease of the Aircraft.

     2.05. Concurrently with the delivery of an Aircraft, hereunder, Lessor and
Lessee will cause this Lease, if necessary, and a Lease Supplement substantially
in the form. of Exhibit A attached hereto, to be duly filed and recorded with
the Federal Aviation Administration at Lessee's expense.

                                      2-6


     2.06. On the Delivery Date for each Aircraft, Lessee shall have provided
Lessor with a favorable oral opinion of Crowe & Dunlevy, special counsel for
Federal Aviation Administration matters, to the effect that upon the filing for
registration and recordation of this Lease and the Lease Supplement, the
Aircraft (including the Engines) will be free and clear of any mortgage, lease,
pledge, lien, charge or encumbrance of record except the Lease, and the Aircraft
will he owned as a matter of record solely by Lessor. Additionally, as soon as
reasonably practicable following the Delivery Date, Lessee shall provide Lessor
with a favorable written opinion of Crowe & Dunlevy, confirming the oral opinion
referred to above in all respects.

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                                       2-7


                                    ARTICLE 3

                                      TERM

     The Term for each Aircraft shall consist of the "Interim Term" and the
"Base Lease Term". The "Interim Term" shall be defined for an Aircraft as the
period commencing on the Delivery Date therefor as set forth in a Lease
Supplement and ending on September 30, 1988. The "Base Lease Term" for each
Aircraft shall commence on October 1, 1988 and shall continue for a period of 14
years, terminating on September 30, 2002.

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

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

                                       3-1


                                    ARTICLE 4

                                      RENT

     4.01. (a) INTERIM RENT. The Lessee covenants and agrees to pay the Lessor
Interim Rent for each Aircraft throughout the Interim Term therefor in an amount
equal to $_________ for each day during the Interim Term, payable on October 1,
1988.

           (b) BASIC RENT. The Lessee covenants and agrees to pay the Lessor
Basic Rent for each Aircraft throughout the Base Lease Term in [*], payable in
advance, for each Aircraft commencing for each Aircraft on October 1, 1988
and continuing to be payable on the first day of each month throughout the
Base Lease Term.

     If any installment of Rent is due on a day other than a Business Day, such
installment shall be payable on the next succeeding Business Day.

     4.02. SUPPLEMENTAL RENT. The Lessee also agrees to pay to the Lessor, or at
the Lessor's direction to whomsoever shall be entitled thereto, any and all
Supplemental Rent promptly as the same shall become due and owing, and in the
event of any failure on the part of the Lessee to pay any Supplemental Rent the
Lessor shall have all rights, powers and remedies provided for herein or by law
or equity as in the case of non-payment of Basic Rent. The Lessee will also pay
to Lessor, as Supplemental Rent, interest at the Incentive Rate (all
computations of interest under this Lease

                                       4-1

- --------
* Confidential



to be made on the basis of a 365-day year) on any part of any installment of
Basic Rent not paid on the due date thereof for any period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due
hereunder for the period until the same shall be paid.

     4.03. PLACE OF PAYMENT. All Rent payable by the Lessee to the Lessor under
this Lease shall be paid by wire transfer of immediately available funds
consisting of lawful currency of the United States of America, in such manner
that the Lessor receives the full amount of such payments on the due dates at
the location to be designated or such other location as the Lessor may
designate in writing to the Lessee.

     4.04. PROHIBITION AGAINST SETOFF, COUNTERCLAIM, ETC. The Lessee's
obligation to pay all Rent payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation:
(A) any setoff, counterclaim, recoupment, defense or other right which the
Lessee may have against the Lessor, the manufacturers of the Items or anyone
else for any reason whatsoever, (B) any defect in the title, airworthiness,
condition, design, operation or fitness for use of, or any damage to or loss or
destruction of, any Item of Equipment or any interruption or cessation in the
use or possession thereof by the Lessee for any reason whatsoever, (C) any
insolvency, bankruptcy reorganization or similar proceedings by or against the
Lessor or the Lessee, (D) any breach by the Lessor of any representation,
warranty or covenant of the Lessor

                                       4-2


made herein or in connection herewith, or (E) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing. If for any
reason whatsoever this Lease shall be terminated in whole or in part by
operation of law or otherwise except pursuant to specific provisions of this
Lease, Lessee nonetheless agrees to pay or cause to be paid to Lessor an amount
equal to each installment of Basic Rent at the time such payment would have
become due and payable in accordance with the terms hereof had this Lease not
been terminated in whole or in part.

     4.05. WAIVER OF CERTAIN RIGHTS OF THE LESSEE. Except as expressly provided
hereunder, the Lessee hereby waives, to the extent permitted by applicable law,
all rights now or hereafter conferred upon it by statute or otherwise to
terminate or surrender this Lease or an Aircraft or any Part or to any
abatement, suspension, deferment, diminution or reduction of the Rent. Each
payment of Rent shall be absolutely final and net to the Lessor, so that this
Lease will yield to the Lessor the full amount of the installments of such Rent
throughout the Term without deduction.

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

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

                                       4-3


                                    ARTICLE 5

                         REPRESENTATIONS AND WARRANTIES

     5.01. NO REPRESENTATIONS AND WARRANTIES. (A) AS BETWEEN LESSOR AND LESSEE,
THE LESSOR LEASES THE ITEMS OF EQUIPMENT HEREUNDER "AS-IS", "WHERE-IS" AND THE
LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT, OR AS TO THE QUALITY Of THE
MATERIAL OR WORKMANSHIP OF THE AIRCRAFT OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT THERETO, and any risks with respect
thereto shall be assumed by the Lessee. So long as no Default or Event of
Default has occurred and is continuing the Lessor hereby authorizes the Lessee
to enforce in its own name such rights as the Lessor may have with respect to
any Item of Equipment under any warranty, service policy or product agreement of
the manufacturer thereof, the maintenance and overhaul agencies of the Aircraft
and the Engines, or any subcontractor or supplier or vendor thereof to the
extent that the same may be assigned or otherwise made available to the Lessee
and, to the extent that the same may not be so assigned or otherwise made
available to Lessee, Lessor agrees to exercise reasonable diligence at Lessee's
expense, to enforce such rights as Lessor may have with respect thereto for the
benefit of Lessee; provided, however, that upon

                                       5-1


a Default or any Event of Default all such rights shall immediately revert to
the Lessor including all claims thereunder whether or not perfected.

     5.02. LESSEE'S REPRESENTATIONS AND WARRANTIES. The Lessee represents,
warrants and covenants that:

     (A) the Lessee (i) is a corporation duly organized, validly existing and
   in good standing under the laws of the, State of New York, (ii) has duly
   qualified and is authorized to do business and is in good standing as a
   foreign corporation in each jurisdiction where the character of its
   properties or the nature of its activities (including the leasing and
   operation of the Aircraft) make such qualification necessary, and (iii) has
   the corporate power and authority to carry on its business as presently
   conducted and to perform its obligations under this Lease;

     (B) the Lessee holds all licenses, certificates, permits and franchises
   from the appropriate agencies of the United States of America and/or all
   other governmental authorities having jurisdiction, necessary to authorize
   the Lessee to engage in air transport and to carry on its business as
   presently conducted and to be conducted with the Aircraft;

                                       5-2


     (C) the execution, delivery and performance of this Lease (have been duly
   authorized by all necessary corporate action on the part of the Lessee, do
   not require any shareholder approval, or approval or consent of any trustee
   or holders of any indebtedness or obligations of the Lessee (except for
   approval or consent previously obtained) and do not and will not contravene
   any law, governmental rule, regulation or order binding on the Lessee or the
   articles of incorporation or bylaws of the Lessee or contravene the
   provisions of, or constitute a default under, or result in the creation of
   any Lien (other than as permitted under this Lease) upon the property of the
   Lessee under any indenture, mortgage, deed of trust, conditional sales
   contract, bank loan or credit agreement, contract or other agreement to
   which it may be a party or by which its property may he bound;

     (D) neither the execution and delivery by the Lessee of this Lease
   (including any Lease Supplements), nor the consummation of any of the
   transactions by the Lessee contemplated hereby requires the consent or
   approval of, the giving of notice to, or the registration with, or the taking
   of any other action in respect of, any Aeronautics Authority, or any other
   Federal or state governmental authority or agency, including any judicial
   body or any other person, entity or corporation, except for the registration
   and recordation of this Lease by the FAA;

     (E) this Lease has been duly authorized, executed and delivered by the
   Lessee and constitutes, and the Lease

                                       5-3


   Supplements when entered into and delivered will constitute, valid,
   enforceable and binding obligations of the Lessee in accordance with their
   respective terms;

     (F) except as disclosed in Lessee's opinion of counsel required by Section
   2.04(A)(4), there are no suits or proceedings pending or, to the knowledge of
   the Lessee, threatened against or affecting the Lessee in any court or before
   any regulatory commission, board or other administrative governmental agency,
   which if determined adversely to Lessee would have a material adverse effect
   on the financial condition or business of the Lessee or the ability of the
   Lessee to perform its obligations under this Lease;

     (G) except for the filing for registration and recordation of this Lease
   and the Lease Supplements with the FAA, no further filing or recording of
   this Lease or any Lease Supplement or of any other document is necessary
   under the Federal Aviation Act, or under the laws of any other jurisdiction
   in order to fully protect, establish and perfect in all applicable
   jurisdictions Lessor's title to, and Lessor's leasehold interest in, the
   Aircraft as against Lessee and any third parties;

     (H) for the purposes of Section 501 of the Federal Aviation Act, the
   Lessee is a "citizen of the United States" as defined is Section 101 of the
   Federal Aviation Act and the regulations pursuant to such Section.

                                       5-4


                                    ARTICLE 6

                   POSSESSION, USE, LAWFUL INSURED OPERATIONS,
                     MAINTENANCE, REGISTRATION AND INSIGNIA

     6.01. POSSESSION. The Lessee shall not sublease without the prior written
consent of Lessor, or otherwise in any manner deliver, relinquish or transfer
possession of any Item of Equipment; PROVIDED, however, that, so long as no
Default or Event of Default shall have occurred and be continuing and so long as
the Lessee shall comply with the provisions of Article 12 hereof, the Lessee may
deliver possession of an Item of Equipment for service, repair, maintenance or
overhaul work, or for alterations or modifications in or additions to an Item of
Equipment to the extent required or permitted by the terms hereof, and Lessee
may also:

     (A) install an Engine on an airframe owned by or leased to the Lessee or
   purchased by the Lessee subject to a conditional sale or other security
   agreement, PROVIDED that such airframe is free and clear of all Liens except
   the rights of the parties to the lease or conditional sale or other security
   agreement covering such airframe; and PROVIDED FURTHER, that the Lessor shall
   have received prior to such

                                       6-1


   installation (1) a certificate signed by an authorized officer of the Lessee
   to the effect that the lease or conditional sale or other security agreement
   covering such airframe by its terms provides that neither such lessor nor
   secured party nor its successor or assigns will acquire or may claim any
   right, title or interest in any Engine by reason of such Engine being
   installed on such airframe at any time while such Engine is subject to this
   Lease.

     (B) upon prior written notice to the Lessor, subject any Engine to normal
   interchange or pooling agreements or arrangements, in each case customary in
   the airline industry and entered into by the Lessee in the ordinary course of
   its business with any Certified Air Carrier PROVIDED that (1) no such
   agreement or arrangement contemplates or requires the transfer of title to
   any Engine, and (2) if the Lessor's title to any such Engine shall be
   divested under any such agreement or arrangement, such divestiture shall be
   deemed to be an Event of Loss with respect to such Engine and the Lessee,
   concurrently with such divestiture, shall comply with Article 11 in respect
   thereof; PROVIDED, that the rights of any transferee who receives possession
   by reason of a transfer permitted by this Section 6.01 (other than the
   transfer of an Engine which is deemed an Event of Loss) shall be subject and
   subordinate to all the terms of this Lease, including, without limitation,
   the restrictions on the use of an Aircraft contained in Section 6.03 and the
   Lessor's right to terminate

                                       6-2


   this Lease upon an Event of Default and to obtain possession of the Engine
   without regard to any such agreement, lease or sublease, and the Lessee shall
   remain primarily liable hereunder for the performance of all of the terms of
   this Lease to the same extent as if such transfer had not occurred. No
   interchange agreement or other relinquishment of possession of any Engine
   shall in any way discharge or diminish any of the Lessee's obligations to the
   Lessor hereunder.

     6.02. ASSIGNMENT BY LESSEE. Unless the Lessee fist obtains Lessor's prior
written consent, this Lease and all or any part of Lessee's rights hereunder or
in any Item of Equipment shall not be assigned, subleased or conveyed by Lessee
to any person, firm or corporation, and any such purported assignment, sublease
or conveyance shall be void AB INITIO except as permitted by Section 6.01
hereof.

     6.03. USE. Lessee shall use the Aircraft solely in commercial operations in
the United States of America and Canada for which Lessee is duly authorized by
the Aeronautics Authority and shall not use or permit the Aircraft to be used
outside of the United States or Canada without the prior written consent of
Lessor or for any purpose for which the Aircraft are not designated and
reasonably suitable. In no event shall Lessee operate or use the Aircraft or
permit the Aircraft to be operated or used outside the United States in such a
manner as to exclude the Aircraft from the term "Section 38 property" by reason
of

                                       6-3


Section 48(a)(2) of the Code (or any successor or similar provision thereto), or
which would otherwise cause loss of any other tax benefits available to Lessor.
Lessee shall pay for and provide all electric power, oil, fuel and lubricants
consumed by and required for the operation of the Aircraft, and all repairs,
parts and supplies necessary therefor.

     6.04. LAWFUL INSURED OPERATIONS. Lessee will not permit the Aircraft or any
Item to be maintained, used or operated in violation in any material respect
of any applicable law, treaty, statute, rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or foreign),
or contrary in any material respect to any manufacturer's operating manuals,
instructions, and airworthiness directives, or, in violation of any applicable
airworthiness certificate, license or registration relating to the Aircraft or
Engines issued by any such authority. In the event that any such laws, rules,
regulations or orders require alteration of any Item of Equipment, Lessee shall
conform thereto at its sole expense and shall maintain the Item of Equipment in
proper condition for operation under such laws and rules. Lessee agrees not to
operate any Item, or suffer such Item to be operated, (A) unless such Item is
covered by insurance as required by the provisions of Article 12 hereof, or (B)
contrary to the terms of such insurance as required by the provisions of Article
12 hereof.

                                       6-4


     6.05. MAINTENANCE. The Lessee, at its own cost and expense shall: (i)
service, repair, maintain and overhaul, test or cause the same to be done to
each Item of Equipment leased hereunder (A) so as to keep such Item in as good
an operating condition and appearance as when delivered to the Lessee hereunder,
ordinary wear and tear excepted, (B) so as to keep such Item in compliance with
all maintenance manuals initially furnished with the Aircraft, including any
subsequent amendments or supplements to such manuals issued by the manufacturer
from time to time, and all so-called "mandatory," "alert" and "highly
recommended" service bulletins and similar notices issued or supplied by or
available through the manufacturer of such Item, Airworthiness Directives (AD's)
and Federal Aviation Regulations revisions and similar notices issued or
supplied by or available through the manufacturer of such Item or Aeronautics
Authority; (C) so as to keep such Item's maintenance plan in accordance with the
Airframe, Engine and APU manufacturers' maintenance plans and the Maintenance
Review Board (MRB) document or in accordance with a maintenance program
developed by the Lessee, based on the above plans and documents, and approved by
the appropriate Aeronautics Authority; (D) so as to keep such Item in such
operating condition as may be necessary to enable the airworthiness
certification of such Item to be maintained in good standing at all times under
the applicable rules and regulations of the Aeronautics Authority, (E) so as to
ensure that all repairs are conducted in accordance with the Airframe, Engine,
or APU manufacturer's Structural Repair Manual (SRM) or repair procedures, as
applicable, or if not

                                      6-5


included, that the repair is eligible for U.S. FAA approval, if required, and is
accompanied by documentation providing methods of compliance; (ii) maintain all
records, logs and other materials required by the Aeronautics Authority to be
maintained in respect of such Item, and (iii) promptly furnish to the Lessor
upon the Lessor's request such information as may be required to enable the
Lessor to file any reports required to be filed with any governmental authority
because of the Lessor's interest in the Aircraft.

     6.06. REGISTRATION AND INSIGNIA. The Lessee, at its own expense, shall
cause the Aircraft registration in the name of Lessor to remain in effect at all
times during the Term of this Lease. On the Commencement Date or thereafter, the
Lessee, if given them by Lessor, shall permanently affix in the cockpit of each
Aircraft in a location reasonably adjacent to and not less prominent than the
airworthiness certificate for the Aircraft, and on each Engine in a prominent
location, a plate bearing the following legend:

                                  "Leased from

                      McDonnell Douglas Finance Corporation

                                 "Owner-Lessor"

The Lessee will not allow the name of any other person, association or
corporation to be placed on the Airframe or any Engine as a designation that
might be interpreted as a claim of ownership or of any interest therein;
PROVIDED, HOWEVER, that the

                                       6-6


Lessee may cause the Airframe to be lettered or otherwise marked in a customary
manner for convenience of identification of the interest of the Lessee therein,
including but not limited to the customary logo of the Lessee.

     6.07. RECORDS. Throughout the Term, Lessee shall keep accurate, complete
and current records (complying with the requirements of the Aeronautics
Authority, with the recommendations of suppliers of any part of the Aircraft and
with good commercial airline practice) of all maintenance carried out with
respect to an Aircraft and shall permit Lessor or any authorized representative
of Lessor to examine such records at any reasonable time.

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

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

                                       6-7


                                    ARTICLE 7

                        INSPECTION; FINANCIAL INFORMATION

     7.01. During the Term of this Lease, the Lessee shall furnish to the Lessor
such additional information concerning the location, condition, use and
operation of the Aircraft as the Lessor may reasonably request, and the Lessee
shall permit any person designated by the Lessor in writing, at the Lessor's
expense, to visit and inspect the Aircraft, their condition, use and operation
and the records maintained in connection therewith and to make copies of such
records at the Lessor's expense, and to visit and inspect the properties of the
Lessee and to discuss the affairs, finances and accounts of the Lessee with the
principal officers of the Lessee, all at such reasonable times and as often as
the Lessor may reasonably request. The Lessor shall have no duty to make any
such inspection and shall not incur any liability or obligation by reason of not
making any such inspection

     7.02. The Lessee also agrees to furnish the Lessor during the Term:

     (A) within 30 days after the end of each calendar quarter, copies of its
   financial statements, including a balance sheet and statement of income and
   expenses and within 60 days after the end of each calendar year its audited
   financial statements certified to by independent public accountants;

                                       7-1


     (B) From time to time, such other information as the lessor may reasonably
   request.

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                                       7-2


                                    ARTICLE 8

                               LESSEE'S COVENANTS

     The Lessee covenants and agrees that, during the Term hereof:

     8.01. MAINTENANCE OF CORPORATE EXISTENCE. The Lessee will preserve and
maintain (a) its corporate existence, and (b) all of its rights, privileges
and. franchises in every jurisdiction in which the character of the property
owned or the nature of the business transacted by it makes licensing or
qualification necessary.

     8.02. NOTICE OF LITIGATION, ETC. If not otherwise communicated pursuant to
Section 7.02, the Lessee will promptly give to the Lessor a notice in writing of
any proceeding involving a claim in excess of $1,000,000 before any governmental
agency which might, it determined adversely to Lessee, materially adversely
affect the Lessee's financial condition, affairs or operations.

     8.03. PAYMENT OF TAXES. The Lessee will pay or cause to be paid all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income and profits, or upon any property belonging to it, prior to the date on
which penalties attach thereto and a11 lawful claims, which, if not paid, might

                                       8-1


become a lien or charge upon the property of the Lessee, PROVIDED, HOWEVER, that
the Lessee shall not be required to pay any such tax, assessment, charge, levy
or claim the pavement of which is being contested in good faith and by
appropriate proceedings, but only so long as such proceedings do not involve any
danger of adverse impact on business interests of the Lessor or of the sale,
forfeiture or loss of an Aircraft or any Item or interest therein; PROVIDED
FURTHER, that the Lessee will pay or cause to be paid all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any Lien which attaches as security therefor.

     8.04. CONSOLIDATION, MERGER OR SALE. Lessee will not merge or consolidate
with or into any other corporation or entity (except to the extent Lessee is
successor, survivor or parent and, in such event, only if the net worth of the
successor, survivor or parent is, in, Lessor's reasonable judgment, equal to or
greater than the net worth of the Lessee as of the Delivery Date), or sell,
lease or otherwise dispose of all or substantially all of, its properties,
without the prior written consent thereto by the Lessor (which consent will not
be unreasonably withheld); provided, however, that Lessee may so merge,
consolidate or dispose of properties without Lessor's consent in contradiction
of the foregoing, however, in such event Lessor, at its option, may elect either
to continue the Lease or to require the Lessee to pay the Stipulated Loss Value
plus any accrued and unpaid Rent for the Aircraft and terminate this Lease.

                                       8-2


                                    ARTICLE 9

                              REPLACEMENT OF PARTS;

                    ALTERATIONS, MODIFICATIONS AND ADDITIONS

     9.01. REPLACEMENT OF PARTS. The Lessee, at its own cost and expense, will
promptly replace all Parts which may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. In addition, in the ordinary
course of maintenance, service, repair, overhaul or testing, the Lessee may
remove any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
PROVIDED that the Lessee shall replace such Parts as promptly as practicable.
All replacement Parts shall be free and clear of all Liens and shall be in as
good an operating condition as, and shall have a value and utility at least
equal to, the Parts replaced, assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof.

     9.02. TITLE TO REPLACED PARTS. All Parts owned and leased by the Lessor
hereunder at any time removed from any Item of Equipment shall remain the
property of the Lessor and subject to this Lease, no matter where located, until
such time as such Parts shall be replaced by Parts which have been incorporated
or

                                       9-1


installed in or attached to such Item and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to an Item as above provided,
without further act, (A) title to the replaced Part shall thereupon vest in the
Lessee, free and clear of all rights of the Lessor and shall no longer be deemed
a Part hereunder; (B) title to such replacement Part shall thereupon vest in the
Lessor; and (C) such replacement Part shall become subject to this Lease and be
deemed part of such Item for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to such Item.

     9.03. ALTERATIONS, MODIFICATIONS AND ADDITIONS. The Lessee, at its own
expense, shall make alterations and modifications in and additions to an Item of
Equipment as may be required from time to time under any law, rule, directive,
bulletin, regulation or order of the Aeronautics Authority, or other
governmental authority having jurisdiction or issued by the manufacturer of such
Item of Equipment. In addition, the Lessee, at its own expense, may from time to
time make such alterations and modifications in and additions to each Item as
the Lessee may deem desirable in the proper conduct of its business, PROVIDED
that no such alteration, modification or addition diminishes the value, utility,
condition or airworthiness of such Item below the value, utility, condition and
airworthiness thereof immediately prior to such alteration, modification or
addition, assuming such Item was then in the condition and airworthiness
required to be

                                       9-2


maintained by the terms of this Lease, PROVIDED FURTHER, that the Lessee shall
not convert an Aircraft to an all-cargo or primarily cargo configuration without
the prior written consent of the Lessor, and PROVIDED FURTHER, that any such
alteration, modification, or addition (a) must be U.S. FAA approved or eligible
for U.S. FAA approval, if required by Lessor, and is accompanied by
documentation providing methods of compliance and (b) shall be made in
compliance with Internal Revenue Service guidelines so that the Lessor will not
lose all or any part of the Tax Benefits as hereinafter defined.

     9.04. TITLE TO PARTS. Subject to the provisions hereof, title to all Parts
incorporated or installed in or attached or added to any Item as the result of
any alteration, modification or addition made as contemplated in Section 9.03
hereof shall, without further act, vest in the Lessor and become subject to this
Lease; PROVIDED, HOWEVER, that so long as no Default or Event of Default shall
have occurred and be continuing, at any time during the Term, the Lessee may
remove any Part from an Item of Equipment, provided that (A) such Part is in
addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such Item at the time of
delivery thereof hereunder or any Part in replacement of, or substitution for,
any such original Part; (B) such Part is not required to be incorporated or
installed in or attached or added to such Item pursuant to the terms of Section
6.05 hereof or the first sentence of Section 9.03; and (C) such Part can be
removed from such Item without diminishing or impairing the value, utility

                                       9-3


or airworthiness which such Item would have had at such time had such
alteration, modification or addition not occurred. Upon the removal by the
Lessee of any such Part as above provided, title thereto shall, without further
act, vest in the Lessee and such Part shall no longer be deemed a Part
hereunder. Any Part not removed by the Lessee as above provided prior to the
return of the Item to the Lessor hereunder shall remain the property of the
Lessor.

     9.05. NO LIABILITY FOR ALTERATION, MODIFICATION OR ADDITION; GROUNDING. In
no event shall the Lessor bear any liability or cost whatsoever for (A) any
alteration, modification, addition, or (B) any grounding of an Aircraft, or
suspension of certification of an Aircraft or for loss of revenue suffered by
the Lessee for any reason whatsoever.

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

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

                                       9-4


                                   ARTICLE 10

                              GENERAL TAX INDEMNITY

     10.01. (a) INDEMNITY. Whether or not any of the transactions contemplated
hereby are consummated, the Lessee agrees to pay and, on written demand, to
indemnify, protect, save and hold Lessor harmless from all license and
registration fees, sales and use taxes, personal property taxes and any and all
other taxes, levies, imposts, duties, charges, assessments or withholdings of
any nature whatsoever together with any penalties, additions to tax, fines or
interest thereon (collectively, "Taxes") imposed against Lessor, Lessee or any
Item of Equipment, by any Federal, state or local government or taxing authority
in the United States, or by any taxing authority or governmental subdivision of
a foreign country or international organization, upon or with respect to any
Item of Equipment, or upon the purchase, ownership, delivery, leasing,
possession, use, operation, return or other disposition thereof, or upon the
rentals, receipts or earnings arising therefrom, or upon or with respect to this
Lease or related documents.

          (b) LIMITATION ON INDEMNITY. Notwithstanding the provisions of
     paragraph (a) of this Section 10.01, Lessee shall

                                      10-1


have no obligation thereunder as to Taxes based on or measured by the net income
of Lessor imposed by the United States of America or by any state or local
taxing authorities, including any Taxes resulting from an amendment of the Code
enacted after March 1, 1988, or any Taxes imposed on Lessor by any state which
result from either Lessor's residency or Lessor's doing business in that state
which is business unrelated to any Item of Equipment; provided, however, Lessee
shall be liable for Taxes based on or measured by Lessor's net income if, but
only if, such taxes are taxes on Lessor's net income which would not have been
imposed but for the use or operation of any Item of Equipment within the
jurisdiction of such taxing authority by Lessee, at Lessee's direction, or with
Lessee's consent. Lessee shall not have any liability to indemnify Lessor for
any Taxes imposed by any taxing jurisdiction if the Taxes result from delivery,
use, storage, return or physical presence of any Item of Equipment after return
of the respective Item of Equipment to Lessor by Lessee under #16.01. If an
indemnification payment is made under Article 21 hereof, the same event giving
rise to such payment shall not also result in an indemnification payment under
this Article 10 for the taxes indemnified in Article 21.

     10.02. AFTER-TAX NATURE OF INDEMNITY. The Lessee further agrees that, with
respect to any payment or indemnity hereunder, such payment or indemnity shall
include any amount necessary to hold Lessor harmless on an after-tax basis from
all taxes required to be paid (or which would have been required to be paid by
Lessor with respect to such payment or indemnity had Lessor had

                                      10-2


sufficient gross income within the meaning of Section 61 of the Code, and the
applicable state and local law, actually to pay tax at the highest marginal
rate) by Lessor with respect to such payment or indemnity under the laws of any
Federal, state or local government or taxing authority in the United States, or
under the laws of any taxing authority or governmental subdivision of a foreign
country or international organization; PROVIDED that, if Lessor realizes a tax
benefit by reason of such payment or indemnity (whether such tax benefit shall
be by means of a depreciation deduction or otherwise), Lessor shall pay the
Lessee an amount equal to the net value to Lessor of such tax benefit when, as,
if and to the extent realized (such payments not to exceed in the aggregate the
amount of the related indemnity paid by Lessee); but not before the Lessee shall
have made all payments or indemnities to Lessor required pursuant to this
Article 10; PROVIDED FURTHER, however, that if Lessor loses such tax benefit
subsequent to any payment to the Lessee with respect thereto, the Lessee shall
indemnify Lessor with respect to such loss pursuant to the provisions of this
Article 10. Lessor shall in good faith use reasonable diligence in filing its
tax returns and in dealing with taxing authorities to seek and claim any such
tax benefit.

     10.03. CONTEST. If written claim is made against Lessor for any Taxes
referred to in this Article 10, Lessor shall promptly notify the Lessee. If
reasonably requested by the Lessee in writing within 30 days after such
notification, Lessor shall upon receipt of indemnity satisfactory to it and at
the expense of the Lessee (including, without limitation, all costs, expenses,
losses, legal and accountants' fees and disbursements, penalties

                                      10-3


and interest) in good faith contest the validity, applicability or amount of
such Taxes by either (i) resisting payment thereof if practicable, or (ii) if
payment is made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings; PROVIDED, HOWEVER, that
the Lessor shall not be required to take any action to contest a claim unless
Lessee provides with such written request an opinion of independent counsel,
satisfactory both as to counsel and substance, to the effect that there is a
meritorious basis for such contest. If Lessor determines to pay such Taxes and
seek a refund, Lessee will either pay such Taxes on Lessor's behalf or will
promptly indemnify Lessor for such Taxes pursuant to Sections 10.1 and 10.2. If
Lessor shall obtain a refund of all or any part of such Taxes paid by the
Lessee, Lessor shall pay the Lessee the amount of such refund; PROVIDED that
such amount shall not be payable before such time as the Lessee shall have made
all payments of indemnities to Lessor then due under this Article 10. If in
addition to such refund Lessor shall receive an amount representing interest on
the amount of such refund, the Lessee shall be paid that proportion of such
interest which is fairly attributable to the Taxes paid by the Lessee prior to
the receipt of such refund. In case any report or return is required to be made
with respect to any obligation of the Lessee under this Article 10 or arising
out of this Article 10 the Lessee will promptly notify Lessor of such
requirement and will inform Lessor whether Lessee (i) will file such report or
return in such manner as will show the ownership in Lessor of each Item of
Equipment and send a copy of such report or

                                      10-4


return to the Lessor or (ii) will make such report or return for filing by
Lessor in such manner as shall be satisfactory to the Lessor. In the event of a
contest of any Taxes hereunder, the Lessor shall apprise the Lessee of all
material developments with respect to such contest, shall forward copies of all
material submissions made in such contest, shall consider in good faith any
request concerning the conduct of any such contest and without waiving its right
to be indemnified hereunder with respect to such claim shall not settle or
concede any such contest without the written consent of the Lessee.

     10.04. SURVIVAL. The indemnification provided herein shall survive the
assignment, expiration or other termination of this Lease.

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

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

                                      10-5


                                   ARTICLE 11

                DAMAGE, DESTRUCTION, REQUISITION OR CONDEMNATION

     11.01. EVENT OF LOSS WITH RESPECT TO AN AIRFRAME OR AN AIRFRAME AND THE
ENGINES INSTALLED THEREON. Upon the occurrence of an Event of Loss with respect
to an Airframe or to an Airframe and the Engines then installed on such
Airframe, the Lessee shall forthwith (and in any event within 10 days after such
occurrence) give the Lessor written notice of such Event of Loss. The Lessee
shall pay or cause to be paid to the Lessor in immediately available funds on
the earlier to occur of (i) five days after the date Lessee receives insurance
proceeds from such Event of Loss or (ii) the next immediately succeeding date on
which a Basic Rent installment is to he paid (A) then due and unpaid Rent
(prorated to the date of payment) in respect of such Aircraft to and including
such date; and (B) an amount equal to the Stipulated Loss Value in respect of
such Aircraft determined as of the date of such Event of Loss and (C) interest
at the Incentive Rate on the unpaid balance of (A) and (B) above from the due
date until paid in full, PROVIDED, HOWEVER, that payment of the Stipulated Loss
Value shall be made within ten days if the Event of Loss occurs after the
payment by the Lessee of the final Basic Rent installment and before termination
of the storage period provided for in Section 16.06 hereof. At such time as the
Lessor has received the sum of (A), (B) and (C) above, the obligation of the
Lessee to pay all Basic rent hereunder with respect to such

                                      11-1


Aircraft shall terminate, and the Lessor stall transfer to the Lessee all the
Lessor's right, title, and interest, as-is, where-is, without recourse or
warranty, express or implied, in and to (1) such Airframe and Engines, (2) all
claims for damage to such Items, if any, against third persons arising from the
Event of Loss (unless any insurance carrier requires that such claims be
assigned to it), and (3) all rights to any insurance claims under all insurance
maintained by the Lessee hereunder except liability insurance, without
representation, recourse or warranty of any kind whatsoever.

     11.02. WITH RESPECT TO AN ENGINE. Upon the occurrence of an Event of Loss
with respect to an Engine not then installed on an Airframe, or an Event of Loss
with respect to an Engine installed on an Airframe not involving an Event of
Loss with respect to the Airframe, the Lessee shall give the Lessor prompt
written notice thereof and the Lessee shall replace such Engine as soon as
practicable after the occurrence of such Event of Loss by duly conveying to the
Lessor as a replacement for said Engine, title to another engine of the same
manufacturer and of the same or an improved model and suitable for installation
and use on the Airframe, which engine shall be free and clear of all Liens, and
shall have a value and utility at least equal to, and he in as good an operating
condition as, the Engine with respect to which such Event of Loss occurred,
assuming such replaced Engine was of the value and utility and in the condition
and repair as required by the terms hereof immediately prior to the occurrence
of such

                                      11-2


Event of Loss. Such replacement engine, after approval and acceptance by the
Lessor, shall be deemed an Engine as defined herein, for all purposes hereunder.
The Lessee agrees to take such action as the Lessor may reasonably request to
ensure that any such replacement Engine shall be duly and properly titled in the
name of Lessor and leased hereunder to the same extent as any Engine replaced
thereby. Prior to or at the time of any such conveyance, the Lessee, at its own
expense, will promptly (i) furnish the Lessor with a warranty bill of sale, in
form and substance satisfactory to the Lessor, with respect to such replacement
Engine, (ii) cause a supplement hereto, in form and substance satisfactory to
the Lessor, subjecting such replacement Engine to this Lease, to be duly
executed by the Lessee, and recorded pursuant to the Federal Aviation Act, and
(iii) furnish the Lessor with such evidence of title to such replacement Engine
and of compliance with the insurance provisions of Article 12 hereof with
respect to such replacement Engine as the Lessor may reasonably request. Upon
full compliance with this Section 11.02, the Lessor shall transfer to the Lessee
all the Lessor's right, title and interest, as-is, where-is, without recourse or
warranty, express or implied, in and to (1) the Engine with respect to which
such Event of Loss occurred, (2) all claims for damage to such Engine, if any,
against third persons arising from the Event of Loss (unless any insurance
carrier requires that such claims be assigned to it), and (3) all rights to any
insurance claims under all insurance maintained by the Lessee hereunder except
liability insurance. No Event of Loss with respect to such Engine under the

                                      11-3


circumstances contemplated by the terms of this Section 11.02 shall result in
any reduction in Rent or in the Lessee's obligation to pay Basic Rent hereunder.
The Lessee agrees that it shall at all times during the Term of this Lease
maintain the Engines or other engines of the same or improved model and suitable
for installation and use on the Airframes as the Engines on the Aircraft leased
hereunder. The Lessee agrees that it will indemnify the Lessor, pursuant to
Article 21 hereof, for any loss of tax benefits resulting from such Event of
Loss with respect to an Engine.

     11.03. APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR
REQUISITION OF TITLE. Any payments (other than insurance proceeds the
application of which is provided for in Article 12 hereof) received at any time
by the Lessor or the Lessee from any Governmental authority or other entity with
respect to an Event of Loss resulting from the condemnation, confiscation, theft
or seizure of, or requisition of title to or use of an Aircraft, Airframe or
Engines, will be applied as follows:

          (A) If such payments are received with respect to an Event of Loss
     relating to an Airframe and installed Engines, only so much of such
     payments as shall not exceed the amounts due under Section 11.01(A), (B)
     and (C) shall be applied in reduction of the Lessee's obligation to pay
     such amounts, if not already paid by the Lessee, or if already paid by the
     Lessee, shall be applied to reimburse the Lessee for its

                                      11-4


     payment of such amounts, and the balance, if any, of such payments
     remaining thereafter will he paid over to or retained by the Lessor; and

          (B) If such payments are received with respect to an Engine under the
     circumstances described in section 11.02, all such payments shall be paid
     over to the Lessee, at such time as the Lessee shall have replaced such
     Engine in accordance with the provisions of said Section 11.02.

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

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

                                      11-5


                                    ARTICLE 12

                                    INSURANCE

     12.01. PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE. The Lessee
will carry, at its own expense, third party aircraft liability insurance,
passenger legal liability insurance and property damage liability insurance
during the Term hereof in an amount not less than $75,000,000 for any one
accident, or series of accidents arising out of any one event, with respect to
each Aircraft. Any such liability insurance policy shall not contain a provision
for deductible or self-insurance amounts. In any event all such policies shall
be (A) in amounts which are not less than the public liability and property
damage insurance applicable to similar aircraft and engines which may at any
time during the Term hereof comprise the Lessee's fleet on which the Lessee
carries insurance; and (B) maintained in effect with insurers of recognized
reputation and responsibility, reasonably satisfactory to the Lessor. Any
policies of insurance carried in accordance with this Section 12.01 and any
policies taken out in substitution or replacement of any of such policies: (1)
shall name the Lessor as owner and as additional insured; (2) shall provide that
in respect of the interest of the Lessor such policies of insurance shall not be
invalidated by any action or inaction of the Lessee and shall insure Lessor

                                      12-1


regardless of any breach or violation of any warranty, declarations or
conditions contained in such policies by the Lessee; and (3) shall provide that
if the insurers cancel such insurance for any reason whatever, or the same is
allowed to lapse for nonpayment of premium, or if there is any material change
in policy terms or conditions, such cancellation, lapse or change shall not be
effective for thirty (30) days after receipt by the Lessor of written notice by
such insurers to the Lessor of such cancellation, lapse or change. Each
liability policy (i) shall be primary without right of contribution from any
insurance which is carried by the Lessor, (ii) shall expressly provide that all
of the provisions thereof, except the limits of liability, shall operate in the
same manner as if there were a separate policy covering each insured, and (iii)
shall waive any rights of set-off, counterclaim or other deduction against each
named insured. The Lessee shall arrange for evidence of appropriate coverage as
to each Aircraft and as to the satisfaction of the requirements set forth above
in this Section 12.01 to be furnished to the Lessor on or before the Delivery
Date for each Aircraft by Lessee's insurance broker.

     12.02. INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT. The Lessee shall
maintain in effect, at its own expense, with insurers of recognized reputation
and responsibility reasonably satisfactory to the Lessor: (A) all-risk ground
and

                                      12-2


flight aircraft hull insurance covering the Aircraft; (B) fire, transit and
extended coverage with respect to any Engines or Parts while removed from an
Aircraft; (C) at the request of Lessor, hijacking (air piracy) insurance
reasonably satisfactory to Lessor; and (D) at the request of Lessor, war risk,
governmental confiscation and expropriation and related insurance, but only to
the extent (i) such insurance is maintained by Lessee with respect to other
aircraft operated by Lessee on the same routes as the Aircraft, or (ii) the
custom in the United States airline industry is to carry such insurance with
respect to aircraft operated on the same routes as the Aircraft.

         All such insurance shall be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft, shall be payable in
dollars in the United States and be in substantially the amount usually carried
by corporations engaged in the same or similar business and similarly situated
with the Lessee; PROVIDED that all such insurance for each Aircraft shall during
the Term hereof be for an amount not less than the Stipulated Loss Value for
such Aircraft. Any hull insurance carried in accordance with this Section 12.02
may contain a provision for a deductible amount not to exceed, per occurrence,
$50,000. Any policies carried in accordance with this Section 12.02 covering the
Aircraft and any policies taken out in substitution or replacement for any such
policies: (1) shall name the Lessor as owner and as additional insured or loss
payee, as appropriate; (2) shall be made payable to all insureds as their

                                      12-3


respective interests may appear; (3) shall provide that if such insurance is
cancelled or materially changed for any reason whatever, or the same is allowed
to lapse for non-payment of premium, such cancellation, change or lapse shall
not be effective as to the Lessor for thirty (30) days after receipt by the
Lessor of written notice by such insurers of such cancellation or lapse or
material change in policy terms and conditions (other than war risk insurance,
in which case seven days' notice shall be given); (4) shall provide that losses
shall be adjusted with the Lessor and Lessee as their interests may appear and
be payable to Lessor in the event of any damage or loss resulting in a payment,
for any one occurrence, in excess of $250,000; (5) shall provide that in respect
of the interest of the Lessor in such policies the insurance shall not be
invalidated by any action or inaction of the Lessee or any other person and
shall insure the Lessor regardless of any breach or violation of any warranties,
declarations or conditions contained in such policies by the Lessee or any other
person; (6) shall waive any right of set-off, counterclaim or other deduction
against each named insured; and (7) shall contain such other customary
provisions as Lessor may reasonably require. The Lessee shall arrange for
evidence of appropriate coverage for each Aircraft and to the satisfaction of
the requirements set forth above to be given to the Lessor on or before the
Delivery Date for each Aircraft by its insurance broker.

                                      12-4


     12.03. APPLICATION OF PROCEEDS IN AN EVENT OF LOSS. Provided no Default or
Event of Default shall exist, it is agreed that all insurance payments received
as the result of the occurrence of an Event of Loss with respect to an Airframe
and installed Engines or any Engine will be applied as follows:

          (A) So much of such payments as shall not exceed the amount required
     to be paid by the Lessee pursuant to Section 11.01 shall to applied in
     reduction of the Lessee's obligation to pay such amount if not already paid
     by the Lessee or, if already paid by the Lessee, shall be applied to
     reimburse the Lessee for its payment of such amount, and the balance, if
     any, of such payment remaining thereafter will be paid over to, or retained
     by, the Lessee; and

          (B) If such payments are received with respect to an Engine under the
     circumstances contemplated by Section 11.02, such payments shall be paid
     over to, or retained by, the Lessee, PROVIDED that the Lessee shall have
     fully performed the terms of Section 11.02 with respect to the Event of
     Loss for which such payments are made.

          Any amount referred to in clause (A) or (B) above which is payable to
     Lessee shall not be paid to the Lessee if at the time of such payment a
     Default or an Event of Default shall have occurred and be continuing, but
     shall be held by the Lessor as security for the obligations of Lessee under
     this Lease and such amount shall be paid to Lessee at such time as there no
     longer exists any Default or Event of Default.

                                      12-5


     12.04. APPLICATION OF PROCEEDS IN THE ABSENCE OF AN EVENT OF LOSS. As
between Lessor and Lessee, the insurance payments of any property damage loss to
an Airframe or any Engine not constituting an Event of Loss with respect thereto
will be applied (or advanced as may be required by the repair facility) in
payment for repairs or for replacement property in accordance with the terms of
Articles 6 and 9, if not already paid for by the Lessee (or to reimburse the
Lessee for such repairs or replacements already paid for by the Lessee), and any
balance remaining after compliance with such Articles with respect to such loss
shall be paid to the Lessee. Any amount referred to in the preceding sentence
which is payable to Lessee shall not be paid to the Lessee if at the time of
such payment Lessee shall not be current in its payment of Rent hereunder, but
shall be held by the Lessor as security for the obligations of Lessee under this
Lease and such amount shall be paid to Lessee at such time as Lessor has
received all Rent then due.

     12.05. REPORTS, ETC. On the Delivery Date for each Aircraft and annually on
the anniversary date thereof, the Lessee shall furnish to the Lessor a report
from the Lessee's insurance broker describing in reasonable detail the insurance
then carried and maintained on the Aircraft, certifying that such insurance
complies with the terms hereof and stating the opinion of such broker that such
insurance is adequate for the protection of the interests of the Lessor and the
Lessee in accordance with the terms hereof. The Lessee will advise the Lessor in
writing promptly of any default in the payment of any premium and of any

                                      12-6


other act or omission on the part of the Lessee which might invalidate or render
unenforceable, in whole or in part, any insurance on an Aircraft. In the event
that the Lessee shall fail to maintain insurance as herein provided, the Lessor
may at its sole option provide such insurance and, in such event, the Lessee
shall thereupon reimburse the Lessor, as Supplemental Rent, for the cost
thereof; PROVIDED, HOWEVER, that no exercise by the Lessor of said option shall
affect the provisions of this Lease, including the provisions that failure by
the Lessee to maintain the prescribed insurance shall constitute an Event of
Default.

     12.06. ENDORSEMENTS. All policies of insurance required by this Lease shall
be in form and substance acceptable to Lessor.

     12.07. LESSOR'S ADDITIONAL INSURANCE. The Lessor may at its option and at
its sole expense carry insurance covering its interest in the Aircraft, in
addition to that required to be provided and maintained by the Lessee pursuant
to this Article 12, PROVIDED that no such insurance shall have the effect of
suspending, impairing, defeating, invalidating or rendering unenforceable or
reducing, in whole or part, the coverage of or the proceeds payable under any
insurance required to be provided and maintained by the Lessee pursuant to this
Article 12.

                                      12-7


                                   ARTICLE 13

                             GENERAL INDEMNIFICATION

     13.01. The Lessee agrees to assume liability for, and does hereby
indemnify, protect, save and keep harmless the Lessor and its successors,
assigns, agents and servants from and against any and all claims, damages,
losses, liabilities (including, but not limited to, any claim or liability for
strict liability in tort or otherwise imposed including, without limitation,
liability arising under any applicable environment or noise or pollution control
statute, rule or regulation), obligations, demands, suits, penalties, judgments
or causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses in connection
therewith including, without limitation, legal fees and, expenses of whatever
kind and nature (whether or not also indemnified against by any other person
under any other document), which may result from or grow or arise in any manner
out of the condition, ownership, manufacture, construction, design (including,
without limitation, latent and other defects whether or not discoverable by
Lessee or Lessor and any claim for patent, trademark or copyright infringement),
acceptance, non-acceptance, rejection, delivery, lease, possession, return,
disposition, use or operation (in each and every case) of the Aircraft or any
Item of Equipment either in the air or on the

                                      13-1


ground (except claims arising out of the gross negligence or willful misconduct
of the Lessor or its successors or assigns), or arising from the material or any
article used therein or from the design, testing or use thereof or from any
maintenance, service, repair, overhaul or testing of the Aircraft or any Item
regardless of when such defect shall be discovered, whether or not such Aircraft
or any Item is at the time in the possession of the Lessee and whether it is in
the United States of America or any other country. The indemnities contained in
this Section shall continue in full force and effect notwithstanding the
assignment, expiration or other termination of this Lease.

     13.02. The Lessee hereby waives and releases any claim now or hereafter
existing against the Lessor and its successors or assigns-agents and servants on
account of any and all claims, demands, suits, judgments or causes of action for
or on account of or arising or in any way connected with injury to or death of
personnel of the Lessee or loss or damage to property of the Lessee or the loss
of use of any property which may result from or grow or arise in any manner out
of the condition, use or operation of the Aircraft or any Item, either in the
air or on the ground during the Term hereof, or which may be caused during the
Term hereof by any defect (whether

                                      13-2


latent or patent) in the Aircraft or any Item from the material or, any article
used therein or from the design, testing or use thereof or from any maintenance,
service, repair, overhaul or testing of the Aircraft or any Item regardless of
when such defect shall be discovered, whether or not such Aircraft or any Item
is at the time in the possession of the Lessee and whether it is in the United
States of America or any other country.

     13.03. The Lessee further agrees that, with respect to any payment or
indemnity hereunder, such payment or indemnity shall include any amount
necessary to hold the recipient of the indemnity harmless on an after-tax basis
from all taxes required to be paid (or which would have been required to he paid
by Lessor with respect to such payment or indemnity had Lessor had sufficient
gross income within the meaning of Section 61 of the Code actually to pay tax at
the highest marginal rate) by such recipient with respect to such payment or
indemnity under the laws of any Federal, state or local government or taxing
authority in the United States, or under the laws of any taxing authority or
governmental subdivision of a foreign country; PROVIDED that, if any recipient
of a payment or indemnity realizes a tax benefit by reason of such payment or
indemnity (whether such tax benefit shall be by means of a depreciation
deduction or otherwise), such recipient shall pay the Lessee an amount equal to
the sum of such tax benefit plus any tax benefit realized as the result of any
payment made pursuant to this proviso, when, as, if and

                                      13-3


to the extent realized; but not before the Lessee shall have made all payments
or indemnities to such recipient with respect to such loss pursuant to the
provisions of this Article 13. Each such recipient shall in good faith use
reasonable efforts in filing its tax returns and in dealing with taxing
authorities to seek and claim any such tax benefit.

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

                                      13-4


                                           ARTICLE 14

                                      LIENS

     The Lessee shall not, directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to any Item of Equipment or title
thereto or any interest therein, or in this Lease, except (i) the respective
rights of the Lessor and the Lessee as herein provided; (ii) Liens which result
from the Lessor's own acts or from claims against the Lessor not to be paid or
indemnified against by the Lessee hereunder; (iii) Liens for taxes either not
yet due or being contested in accordance with Article 10 hereof; and (iv)
inchoate materialmen's, mechanics', workmen's, repairmen's, employees' or other
like liens arising in the ordinary course of business and for amounts the
payment of which is either not yet delinquent or is being contested in good
faith (and for the payment of which adequate reserves have been provided) by
appropriate proceedings so long as such proceedings do not involve any danger of
sale, forfeiture or loss of any Item of Equipment or any interest therein. The.
Lessee shall promptly, at its own expense, take such action as may be necessary
to duly discharge any such Lien not excepted above if the same shall arise at
any time with respect to an Item of Equipment leased hereunder.

                                      14-1


                                   ARTICLE 15

                       RECORDATION AND FURTHER ASSURANCES

     15.01. The Lessee shall, at its expense, cause this Lease, all Exhibits
hereto, the Lease Supplements and any and all additional instruments which shall
be executed pursuant to the terms hereof so far as permitted by applicable law
or regulations, to be kept, filed and recorded and to be re-executed, refiled,
and re-recorded at all times in the office of the Aeronautics Authority,
pursuant to the Federal Aviation Act, and in such other places or with such
other governmental authorities as the Lessor may reasonably request to perfect
and preserve the Lessor's rights hereunder, and the Lessee shall, as may be
reasonably requested by the Lessor, furnish to the Lessor an opinion of counsel
or other evidence satisfactory to the Lessor of each such filing or refiling and
recordation or re-recordation.

     15.02. Without limiting the foregoing, the Lessee shall do or cause to be
done, at the. Lessee's cost and expense, any and all acts and things which may
be required under the terms of the Convention for the International Recognition
of Rights in Aircraft, signed (ad referendum) at Geneva, Switzerland, on June
19, 1948, to perfect and preserve the Lessor's interest in and to the Aircraft
within the jurisdiction of any signatory State which

                                      15-1


has ratified said Convention and in the territory of which the Lessee may
operate the Aircraft as the Lessor may reasonably request. The Lessee shall also
do or cause to be done, at its own expense, any and all acts and things which
may be required under the terms of any other agreement, treaty, convention, pact
or by any practice, custom, or understanding recognized as having wide
application or control involving any jurisdiction in which the Lessee may
operate, or any and all other acts and things which the Lessor may reasonably
request and which are necessary, to perfect and preserve the rights of the
Lessor hereunder, in and to any Item of Equipment, within any such jurisdiction.

     15.03. In addition, the Lessee will promptly and duly execute and deliver
to the Lessor such further documents and assurances and take such further action
as the Lessor may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessor hereunder, including, without limitation, if requested by the Lessor,
at the expense of the Lessee, the execution and delivery of supplements or
amendments hereto, in recordable form, subjecting to this Lease any replacement
or substituted engine and the recording or filing of counterparts hereof, or of
financing statements with respect hereto, in accordance with the laws of such
jurisdictions as the Lessor may reasonably deem advisable.

                                      15-2


                                   ARTICLE 16

                         RETURN OF AIRCRAFT AND RECORDS

     16.01. RETURN. At the expiration of the Term for an Aircraft or upon the
termination of this Lease pursuant to Article 18, the Lessee, at its own
expense, shall return the Aircraft to the Jamestown, New York airport. As
requested by Lessor, Lessee shall at Lessee's expense ferry the Aircraft to the
Lessor at such location within the continental United States as may be
designated in writing by the Lessor. At the time of such return, the Airframe
shall have installed thereon two Engines, or improved model engines owned by the
Lessee suitable for installation and use on the Airframe. Lessee shall not be
relieved of any of its duties, obligations, covenants or agreements under this
Lease (including, without limitation, its obligation to pay Basic Rent) prior to
the return of the Aircraft in the manner and condition required with respect to
such return. The Aircraft, upon redelivery pursuant hereto, (i) shall be duly
certified by the Aeronautics Authority as an airworthy aircraft, (ii) shall be
free and clear of all liens, charges and encumbrances of every nature and
description whatever ("Liens"), other than this Lease and any Liens created or
granted by Lessor with respect to Lessor's purchase or financing of the Aircraft
or resulting from claims against Lessor not related to Lessor's ownership of the
Aircraft (such permitted liens collectively referred to as "Lessor's Liens"),
(iii) shall be in the same operating

                                      16-1


condition, ordinary wear and tear excepted, as when delivered to Lessee
hereunder and (iv) shall satisfy all the following conditions:

1.  CERTIFICATION

     The Aircraft shall have a valid Certificate of Airworthiness issued by the
U.S. FAA and shall have been continuously and currently maintained in compliance
with the requirements of the Airframe and Engine manufacturers' approved
maintenance programs or the Lessee's FAA approved maintenance program for
Airframe, Engines and Parts.

2.  OVERHAUL AND REPAIR

     All Parts and Engines shall be documented to have been repaired or
overhauled by certified U.S. FAA repair stations or by those approved by the
U.S. FAA through reciprocal agreements.

     All overhaul and repair procedures shall be further verified to meet all
U.S. FAA requirements for quality and documentation necessary to enable
immediate transferal to operation within the continental limits of the United
States under Federal Aviation Regulation Part 121.

                                      16-2


3.  REPAIRS

     The Lessee shall ensure that all major repairs performed since the Delivery
Date and which still are in existence on the Aircraft are in conformity with the
manufacturer's Structural Repair Manual (SRM) and have or are immediately
eligible to receive U.S. FAA approval, if so required by Lessor. All such
repairs shall be accompanied by all data and documentation necessary to
substantiate their certification and approval, as required by Lessor.

4.  MODIFICATIONS

     All modifications performed since the Delivery Date which deviate from the
certified configuration and which are still in existence on the Aircraft shall
have U.S. FAA approval or certification or be removed by Lessee unless otherwise
deemed acceptable in writing by Lessor in its sole discretion. All such
modifications shall be accompanied by complete data and documentation necessary
to substantiate their certification and approval.

5.  AIRWORTHINESS DIRECTIVES

     All U.S. FAA Airworthiness Directives and amendments or changes to the
Federal Aviation Regulations applicable to the Aircraft, Engines, or Parts shall
have been accomplished in compliance with the issuing agency's specific
instructions.

                                      16-3


     Airworthiness Directives which allow temporary compliance by inspection,
but require terminating compliance within the next year following return shall
have such terminating compliance complete.

6.  RECORDS

     All records necessary and required by the U.S. FAA to certify and place the
Aircraft on an FAA approved maintenance program shall be delivered with the
Aircraft. If hard, non-computerized, copies of maintenance records are not
available, then the Lessee shall take action with pertinent regulatory agencies
to ensure that the Lessor and the U.S. FAA are provided with all requested
guarantees of methods of compliance, component overhaul and management,
scheduling, quality control, serial number verification, etc. These records
shall be all inclusive to the Airframe, Engines and Parts, and as a minimum,
extend to include all activities associated with each of the last completed
maintenance checks, repairs, scheduled inspections and functional tests, and
overhauls performed to the Lessee's approved maintenance programs.

     All Parts identified with safe life limits shall be identified with their
service histories, accumulated cycles or flight hours as applicable and
remaining service lives on a separate listing.

                                      16-4


     All components and assemblies which are identified on the maintenance
records by part numbers and serial numbers other than the manufacturers' shall
be provided with interchange or cross reference listing necessary to establish
complete traceability.

     All documentation, flight, and maintenance records as specified by U.S.
Federal Aviation Regulations 91.173, 91.174, and each paragraph of 121.380 which
normally accompany the transferal of an aircraft which has been operating in
regulated commercial air service, shall be delivered to the Lessor with the
Aircraft.

     In the event of missing, incomplete, or unacceptable records, the Lessee
shall re-accomplish the tasks necessary to produce such records in accordance
with its approved maintenance programs prior to delivery of the Aircraft.

     All documentation and records shall be made available to the Lessor for
review at a central location a minimum of fifteen Business Days prior to the
required date of Aircraft delivery to the Lessor.

                                      16-5


7.  SCHEDULED MAINTENANCE - AIRFRAME

     The Lessee will be responsible for ensuring that the Aircraft meets the
following conditions to facilitate transference of the Certificate of
Airworthiness and establish a maintenance halftime Aircraft.

                 

     C Check:       The Aircraft shall have completed a full C Check per the
                    Lessee's approved maintenance, program within thirty (30) days
                    prior to delivery.

     Structure      The Aircraft shall not have accumulated more than one-half (1/2)
     Program:       time until the next scheduled structural program inspection.

                    In the event that this check is performed in phases in
                    conjunction with the C Check, the current phase shall be
                    performed with the required return condition C Check.

     Airworthiness  All airworthiness limitations checks shall  be current.
     Limitations:



     In the event that scheduled intervals change during the term of the Lease,
the Lessee shall insure that all major checks under Lessee's approved
maintenance program, structural inspection program, heavy maintenance visit, or
other designators current at the time of return to the Lessor are in a minimum
one-half time condition.

8.  SCHEDULED MAINTENANCE - ENGINES

     For the purpose of this Section, time remaining, with respect to any
Engine, shall mean the number of hours remaining before it shall be necessary to
replace any life-limited component contained in such Engine.

                                      16-6


     Each Engine shall have an aggregate of not less than one-half (1/2) time
remaining on all time/cycle limited components combined, based on the
manufacturer's recommended maintenance schedule at the time of return and each
Engine shall have not less than one-half (1/2) time/cycles remaining, based on
the first limiting item, to the next scheduled shop visit for inspection or
replacement of Engine components necessitated by the Lessee's maintenance
program, overhaul schedule, General Electric life limits, airworthiness
directives, hot section inspections, FOD, compulsory regulations, etc.

9.  SCHEDULED MAINTENANCE - COMPONENTS

     All cycle/hour/calendar controlled components installed on the Aircraft
shall be in a one-half time condition.

10. SAFE LIFE LIMITS

     All parts, components and assemblies identified with safe life limits shall
have a minimum of one-half of their scheduled lives remaining.

11. SCHEDULED MAINTENANCE - OTHER CHECKS

     Any scheduled maintenance or inspections, in addition to those specified in
items 7, 8, 9 and 10 shall have a minimum of one-half of their scheduled times
remaining; e.g., unequally loaded phase checks, airworthiness limitations,
corrosion control program, etc.

                                      16-7


12. DEFERRED MAINTENANCE

     There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, against the Aircraft including those identified in
pre-delivery inspections or test flights.

13. CORROSION

     The Lessee shall maintain corrosion control through its approved
maintenance program and provide a summary of specific corrosion correction of
the Aircraft.

     There shall be no untreated or uncorrected corrosion remaining on the
Aircraft including within the fuel tanks.

14. PRE-RETURN INSPECTIONS

     The Lessor shall be permitted to perform a minimum of two physical
inspections of the Aircraft exclusive of test flights. One inspection will be
performed immediately prior to return. The Aircraft interior, exterior, wheel
wells and wing spar areas shall be thoroughly cleaned to normal airline
maintenance standards prior to the inspection. The inspection shall include, but
not be limited to, ground evaluation and system functional tests including
engine runs if deemed necessary by the Lessor.

     In addition, one inspection shall be permitted during the maintenance check
which precedes return.

                                      16-8


15. ACCEPTANCE FLIGHT

     The Lessee shall provide for acceptance flights as necessary to demonstrate
the airworthiness of the Aircraft and the proper functioning of all systems and
components.

16. AIRCRAFT PHYSICAL CONDITION

     The Aircraft shall be complete and function and perform in accordance with
the manufacturers' specifications.

     Discrepancies noted during the pre-return inspections and acceptance
flights shall be corrected in accordance with the manufacturers' manuals.

17. GENERAL APPEARANCE

     The Aircraft shall be clean, cosmetically acceptable, interior complete and
prepared to place into U.S. scheduled revenue airline operations.

     16.02. EQUIVALENCY CHARGE. In the event that any of the Engines does not
meet the conditions set forth in Clause 8 of Section 16.01 above, Lessee shall
pay Lessor an amount for each such Engine equal to the product of (1) the ratio
that the time (or cycles) accumulated since allowable time (or cycles) bears to
the time (or cycles) allowable, and (2) the then current rates charged by
Lessee's Aeronautics Authority approved engine repair contractor for such
maintenance.

                                      16-9


     16.03. MANUALS. Upon the return of the Aircraft, in accordance with this
Article 16, Lessee shall deliver to Lessor all logs, manuals, certificates and
data, and inspection, modification and overhaul records required to be
maintained with respect to the Aircraft under applicable rules and regulations
of the Aeronautics Authority. All such records shall be made available to Lessor
for review a minimum of seven (7) days prior to the agreed date of return. In
the event logs are missing or incomplete, Lessor shall have the right to cause
the logs to be reconstructed at the expense of Lessee.

     16.04. MAINTENANCE AT LESSOR'S REQUEST. Upon receipt of written notice from
the Lessor not less than 60 (nor more than 120) days prior to any expiration or
termination of this Lease as to an Aircraft, the Lessee agrees to perform
maintenance to the Airframe and/or the Engines for such Aircraft. Such
maintenance shall be done in the same manner and with the same care as used by
the Lessee with similar airframes and engines of its own and shall be completed
as promptly as possible after any such termination of this Lease as to such
Airframe or Engines, and the Lessor shall reimburse the Lessee in an amount
equal to (1) the lesser of (x) the sum of the Lessee's direct costs for
materials plus the Lessee's direct labor costs incurred in connection with such
maintenance, or (y) the Lessee's standard contract rates, if any, therefor, or
(2) if such maintenance is performed by someone other than the Lessee, the
actual amount paid therefor by the Lessee.

                                      16-10


     16.05. ENGINES. In the event any engine not owned by the Lessor shall be
returned with the Airframe, such engine shall be of the same or improved model
as the Engines and suitable for installation and use on the Airframe and shall
have a value and utility at least equal to, and be in as good an operating
condition as, such Engines, assuming such Engines were in the condition and
repair as required by the terms hereof immediately prior to such termination,
and the Lessee will, at its own expense and concurrently with such return,
furnish the Lessor with a bill of sale, in form and substance satisfactory to
the Lessor, with respect to each such engine together with evidence of the
Lessee's title to such engine (including, if requested, an opinion of the
Lessee's counsel) and shall take such other action as the Lessor may reasonably
request in order that such engine shall be duly and properly titled in the name
of Lessor, and upon passage of title to such engine to the Lessor, such engine
shall be deemed to be an Engine for all purposes of this Lease. Upon full
compliance with the terms of this Section, the Lessor will transfer to the
Lessee the Lessor's interest in any Engine replaced by an engine pursuant to the
preceding sentence without any representation, warranty or recourse of any kind
whatsoever, express or implied.

     16.06. STORAGE. Upon any expiration or termination of this Lease for an
Aircraft, at the written request of the Lessor, the Lessee will arrange, or will
cause to be arranged, storage facilities for the Aircraft at the Lessee's
facilities for a period not exceeding 30 days without charge to the Lessor. The
Lessee will maintain in effect during such storage periods insurance covering
the Aircraft pursuant to Section 12.02 hereof

                                      16-11


to the extent such insurance is available at reasonable commercial rate and in
such amounts and against such risks as would be customarily carried in similar
circumstances by a reasonably prudent lessor, with such insurance being paid for
by Lessor.

     16.07. SPECIAL MARKINGS. 'Upon the termination or expiration of this Lease
for an Aircraft, the Lessee shall, at its cost, remove from the exterior of the
Aircraft all insignias and other distinctive markings. This provision shall not
require the Lessee to strip the paint off the Aircraft or require the Lessee, to
repaint the Aircraft.

     16.08. SURVIVAL. The provisions of this Article 16 shall survive the
expiration or other termination of this Lease and the return of the Aircraft.

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                                      16-12


                                   ARTICLE 17

                                EVENTS OF DEFAULT

     The following events shall constitute Events of Default (whether such
events 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 or
order of any court or any order, rule or regulation of any administrative or
governmental body):

     (a) Lessee Fails to make any payment of Basic Rent within five (5) days of
   the date due or, after Lessor gives written notice to Lessee that
   Supplemental Rent is due, fails to make any payment of Supplemental Rent to
   the Lessor when due under this Lease, and such failure to pay Supplemental
   Rent continues for a period of five (5) days; or

     (b) Lessee fails to procure and maintain any insurance required by Article
   12 hereof; or

     (c) Lessee fails to perform or observe any of the covenants, conditions or
   agreements to be performed or observed by it under Sections 6.01, 6.02, 6.03,
   6.04, 8.01(a) or 8.04 hereof; or

                                      17-1


     (d) Lessee fails to perform or observe in any material respect any other of
   the covenants, conditions, or agreements to be performed or observed by it
   hereunder and such failure continues for a period of thirty (30) days after
   written notice thereof from the Lessor to the Lessee; or

     (e) Any representation or warranty made by the Lessee herein or in any
   document or certificate furnished the Lessor in connection herewith or
   pursuant hereto proves to be incorrect in any material respect; or

     (f) Any obligation of the Lessee for the payment of borrowed money in
   excess of $500,000 (with respect to either principal or interest), or payment
   of the deferred purchase price of any property, or payment of any obligation
   under any lease of aircraft or aircraft-related equipment shall not be paid
   within 45 days of when the same becomes due whether by acceleration or
   otherwise after expiration of any applicable grace period or extension
   thereof, or the Lessee fails to perform or observe in any material respect
   any other provision (unless such provision has been waived) in any such
   obligation or in any agreement securing or relating to such obligation, and
   the effect of such failure is to cause such obligation to become due prior to
   its stated maturity; or

                                      17-2


     (g) Lessee consents to the appointment of a receiver, trustee or liquidator
   of itself or of a substantial part of its property, or Lessee admits in
   writing its inability to pay its debts generally as they become due, or makes
   a general assignment for the benefit of creditors, or Lessee files a
   voluntary petition in bankruptcy or a voluntary petition or an answer seeking
   reorganization in a proceeding under any bankruptcy laws (as now or hereafter
   in effect) or an answer admitting the material allegations of a petition
   filed against the Lessee in any such proceeding, or Lessee by voluntary
   petition, answer or consent seeks relief under the provisions of any other
   now existing or future bankruptcy or other similar law providing for the
   reorganization or winding-up of corporations, or providing for an agreement,
   composition, extension or adjustment with its creditors; or

     (h) An order, judgment or decree is entered in any proceedings by any court
   of competent jurisdiction appointing, with or without the consent of the
   Lessee, a receiver, trustee or liquidator of the Lessee or of any substantial
   part of its property, or any substantial part of the property of the Lessee
   is sequestered, and any such order, judgment or decree of appointment or
   sequestration remains in force undismissed, unstayed or unvacated for a
   period of thirty (30) days after the date of entry thereof; or

                                      17-3


     (i) A petition against the Lessee in a proceeding under the bankruptcy laws
   or other insolvency laws (as now or hereafter in effect) is filed, and any
   decree or order adjudging the Lessee a bankrupt or insolvent in such
   proceeding remains in force undismissed or unstayed for a period of thirty
   (30) days after such adjudication or, in case the approval of such petition
   by a court of competent jurisdiction is required, the petition as filed or
   amended shall be approved by such a court as properly filed and such approval
   shall not be withdrawn or the proceeding dismissed within thirty (30) days
   thereafter, or if, under the provisions of any law providing for
   reorganization or winding-up of corporations which may apply to the Lessee,
   any court of competent jurisdiction shall assume jurisdiction, custody or
   control of the Lessee or of any substantial part of its property and such
   jurisdiction, custody or control remains in force unrelinquished, unstayed or
   unterminated for a period of thirty (30) days; or

     (j) The Lessee voluntarily suspends all or substantially all of its
   commercial airline operations or the franchises, concessions, permits, rights
   or privileges required for the conduct of the business and operations of the
   Lessee are revoked, cancelled or otherwise terminated or the free and
   continued use and exercise thereof is curtailed or prevented, and as a result
   thereof the

                                      17-4


   preponderant business activity of the Lessee ceases to be that of a
   commercial airline; or

     (k) Judgment for the payment of money in excess of $100,000 is rendered
   against the Lessee and the same shall remain undischarged for a period of
   forty-five (45) days during which execution of such judgment shall not be
   effectively stayed, or an attachment or other Lien shall be issued against
   any of the property of Lessee for an amount in excess of $100,000 and shall
   remain undischarged or unbonded for forty-five (45) days.

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                                      17-5


                                   ARTICLE 18

                                    REMEDIES

     Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, the Lessor may, at its option, declare
this Lease to be in default and at any time thereafter, so long as the Lessee
shall not have remedied all outstanding Events of Default, the Lessor may
exercise one or more of the following remedies with respect to all or any part
of any Aircraft, Airframe or any Engine as the Lessor, in its sole discretion,
shall elect, to the extent available and permitted by applicable law then in
effect:

     18.01. Terminate this Lease and demand that the Lessee, and the Lessee
shal1 upon the written demand of the Lessor and at the Lessee's expense,
forthwith return the Aircraft and all Items of Equipment to the Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Article 16 hereof as if such Aircraft and Items were being
returned at the end of the Term; or the Lessor, at its option and to the extent
permitted by applicable law, may enter upon the premises where any Airframe, any
Engine or any Item of Equipment is located and take immediate possession of and
remove the same by summary proceedings or otherwise, all without liability
accruing to the Lessor for or by reason of

                                      18-1


such entry or taking of possession whether for the restoration of damage to
property caused by such taking or otherwise.

     18.02. Sell or cause to be sold any Airframe, any Engine or any Item of
Equipment at public or private sale, as the Lessor may determine, or otherwise
dispose of, hold use, operate, lease to others or keep idle the Aircraft or any
Item of Equipment as the Lessor in its sole discretion may determine, all free
and clear of any rights of the Lessee.

     18.03. Whether or not the Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under Section 18.01 or 18.02 above with
respect to the Aircraft or any Item, the Lessor, by written notice to the Lessee
specifying a payment date not earlier than ten (10) days from such written
notice, may demand that the Lessee pay to the Lessor and the Lessee shall pay to
the Lessor, on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent for the
Item due for periods commencing on or after the date specified for payment in
such notice), any unpaid Basic Rent for the Item due for periods prior to the
payment date specified in such notice plus whichever of the following amounts
the Lessor, in its sole discretion, shall specify in such notice: (A) an amount
equal to the excess, if any, of the

                                      18-2


present worth of the aggregate unpaid Rent due under this Lease for such Item
discounted at the rate of seven percent (7%) per annum to the date specified in
said notice over the aggregate fair market rental value (computed as hereafter
in this Article provided) of such Item for the remainder of the Term for such
Item after discounting such fair market rental value to present worth as of the
payment date specified in such notice at the rate of seven percent (7%) per
annum; or (B) an amount equal to the excess, if any, of the Stipulated Loss
Value for such Item computed as of the date specified for payment in such notice
over the fair market sales value (computed as hereafter in this Article
provided) as of the date specified in the notice. The amount specified in said
notice shall bear interest at the Incentive Rate from the payment date specified
in said notice until receipt of payment by the Lessor.

     18.04. In the event the Lessor, pursuant to Section 18.02 above, shall
have sold or caused to have sold, any Item, the Lessor in lieu of exercising its
rights under Section 18.03 above with respect to such Item, may, if it shall so
elect, demand that the Lessee pay the Lessor and the Lessee shall pay to the
Lessor, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of the Basic Rent for such Item due after such sale occurs), any unpaid
Basic Rent for such Item due for periods up to the time of sale plus the amount
by which the Stipulated Loss Value of such Item computed as of the date of such
sale exceeds the net cash proceeds (after deduction of all fees and expenses) of
such sale,

                                      18-3


together with interest at the Incentive Rate on the sum of such excess and such
unpaid Rent from date of sale to the date such payment is received by the
Lessor.

     18.05. Proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Lessee of the applicable covenants of this
Lease and to recover damages for the breach thereof, or to rescind this Lease as
to any Item.

     18.06. In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before or during the
exercise of any of the foregoing remedies and for all legal fees and other costs
and expenses incurred by reason of the occurrence of any Event of Default or the
exercise of the Lessor's remedies with respect thereto, including without
limitation all costs and expenses incurred in connection with the return of any
Item in accordance with the terms of Article 16 hereof or in placing such Item
in the condition and with airworthiness certificates as required by said
Article.

     18.07. For the purpose of Section 18.03 above, the "fair market rental
value" or the "fair market sales value" of any Item shall be as specified in an
appraisal by a recognized independent aircraft appraiser, chosen by the Lessor,
who shall determine such value(s) on the basis of the lesser of the

                                      18-4


actual location and condition of the Item or the location and condition required
upon the return thereof pursuant to this Lease. At any sale of any Item pursuant
to this Article 18, Lessor, or any assignee, successor or affiliate of Lessor,
may bid for and purchase such property.

     18.08. Except as otherwise expressly provided above, no remedy referred to
in this Article is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to the
Lessor at law or in equity; and the exercise or beginning of exercise by the
Lessor of any one or more of such remedies shall not preclude the simultaneous
or later exercise by the Lessor of any or all of such other remedies. No express
or implied waiver by the Lessor of any Event of Default shall in any way be, or
be construed to be, a waiver of any future or further Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any and all rights to
notice and to a judicial hearing with respect to the repossession of any Item by
the Lessor in the event of a Default by the Lessee and agrees that, except as
provided in this Article 18, any financing profit or savings accruing to the
Lessor by virtue of the Lessee's Default and subsequent sale, reletting or award
shall in no way reduce, offset or mitigate the damages for which the Lessee is
liable hereunder.

                                      18-5


     18.09. To the extent consistent with the provisions of 11 U.S.C. Section
1110 or any corresponding provisions of subsequent law, it is expressly agreed
and provided that the title of the Lessor to the Aircraft and any right of the
Lessor to take possession of the Aircraft in compliance with the provisions
hereof shall not be hindered by the provisions of Chapter 11 or corresponding
provisions of Title 11 U.S.C. as amended from time to time.

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                                      18-6


                                   ARTICLE 19

                                  MISCELLANEOUS

     19.01. CONSTRUCTION AND APPLICABLE LAW. Any provision of this Lease which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No term or
provision of this Lease may be changed, waived, discharged or terminated orally,
but only by a written instrument signed by the party against which the
enforcement of the change, waiver, discharge or termination is sought. This
Lease shall constitute an agreement of lease, and nothing herein shall be
construed as conveying to the Lessee any right, title or interest in any Item of
Equipment except as a lessee only. The captions in this Lease are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof. This Lease is being delivered in the State of New York and
shall in all respects be governed by, and construed in accordance with, the laws
of the State of New York, including all matters of construction, validity and
performance. This Lease shall be effective for all purposes as of the date first
above written.

                                      19-1


     19.02. NOTICES. All notices provided for herein shall be in writing and
shall be deemed to have been given (unless otherwise required by the specific
provisions hereof in respect of any matter) when delivered personally or after
being deposited in the United States mail, certified (return receipt requested),
postage prepaid, addressed as follows and received, as evidenced by the
signature of the addressee on the return receipt therefor:

         If to the Lessee:     Chautauqua Airlines, Inc.
                               Road 1 Airport Drive
                               Jamestown, New York 14701

                               Attn: President

         If to the Lessor:     McDonnell Douglas Finance Corporation
                               340 Golden Shore
                               Long Beach, CA 90802

                               Attn: Vice President-Domestic
                                     Airline Financing

or to any party at such other address as the party may designate by notice duly
given in accordance with this Section.

     19.03. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If the Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its


                                      19-2


agreements contained herein or in related documents, the Lessor may itself make
such payment or perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable expenses of the Lessor 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 Incentive
Rate, shall be deemed Supplemental Rent, payable by the Lessee upon demand.

     19.04 COUNTERPARTS. This Lease may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

     19.05. QUIET ENJOYMENT. The Lessor covenants that if, and as long as, the
Lessee keeps and performs each and every covenant and agreement to be performed
or observed by it hereunder, the Lessee shall quietly enjoy the Aircraft without
hindrance or disturbance by the Lessor or by any other person lawfully claiming
the Aircraft through the Lessor.

     19.06. LEGAL FEES AND OTHER EXPENSES. The Lessee shall pay or reimburse the
Lessor for all out-of-pocket expenses incurred by the Lessor, including but not
limited to, legal expenses, collection costs and reasonable attorneys' fees and
accounting fees incurred by or on behalf of the Lessor in connection with (A)
Section 15 hereof, or (B) any Event of

                                      19-3


Default or the exercise of the Lessor's remedies with respect thereto, including
all costs and expenses incurred in connection with the return of an Airframe. It
is understood and agreed that in any litigated action, proceeding, controversy
or dispute of any kind whatever in connection with the enforcement of rights
under this Lease, the prevailing party shall be entitled to recover its
expenses, including reasonable attorneys' fees, from the other party.

     19.07 ASSIGNMENT BY LESSOR. (a) Lessee acknowledges and agrees that Lessor
shall have the absolute right to transfer or assign to any person, firm,
corporation or other entity any or all of Lessor's rights, obligations, benefits
and interests under this Lease, including, without limitation, the right to
receive Rent or any other payment due under this Lease, the right to transfer or
assign title to any Item or to transfer or assign the right to purchase any Item
and the right to make all waivers and agreements, to give all notices, consents
and releases, to take all action upon the occurrence of an Event of Default, or
to do any and all other things which Lessor is or may become entitled to do
under this Lease. Lessee acknowledges that, if Lessor should sell or transfer to
a third party all of Lessor's interest under this Lease and in the Aircraft,
Lessor shall thereupon be relieved of all of its obligations hereunder and
Lessor's transferee shall succeed to all of Lessor's rights, interests and
obligations under this

                                      19-4


Lease as though Lessor's transferee had been the initial lessor hereunder.

     (b) Without limiting the generality of paragraph (a), Lessee acknowledges
and agrees that the terms and conditions of this Lease have been agreed to by
Lessor in anticipation of its being able to assign its rights under and
interests in this Lease and its rights in the Aircraft and/or its being able to
grant a security interest in all or any of its rights and interest under this
Lease and in the Aircraft or any Item to one or more lenders, to an agent or
trustee representing such lenders, or to any other party having an interest in
any Item or participation in the transaction which is the subject of this Lease,
any or all of which may rely on and shall he entitled to the benefit of the
provisions of this Section 19.07(b). Lessee shall, upon the reasonable written
instruction of Lessor: (a) recognize any such assignment, (b) accept the
directions or demands of such assignee (if such directions or demands would be
permissible from Lessor under the terms of this Lease) in place of those of
Lessor, (c) surrender any leased property only to such assignee, (d) pay all
Rent payable hereunder and do any and all things required of Lessee hereunder,
and not terminate this Lease, notwithstanding any default by Lessor or the
existence of any other liability or obligation of any kind or character on the
part of Lessor to Lessee whether or not arising hereunder, (e) not require any
assignee of this Lease to

                                      19-5


perform any duty, covenant or condition required to be performed by Lessor under
the terms of this Lease unless such assignee assumes all Lessor's interest in
the Aircraft and this Lease, all rights of Lessee in any such connection
aforesaid being hereby waived as to any and all such assignees (but not waived
as to Lessor), and (f) execute any documents which Lessor may reasonably request
in order to effectuate the foregoing.

     19.08. SURVIVAL. The representations, warranties, indemnities and
agreements of the Lessee provided for in this Lease, and the Lessee's
obligations under any and all provisions thereof, shall survive the expiration
or other termination of this Lease to the extent required for full performance
and satisfaction hereof.

     19.09. SUCCESSORS AND ASSIGNS. This Lease shall be binding on and shall
inure to the benefit of Lessee, Lessee's permitted successors and assigns,
Lessor and Lessor's successors and assigns.

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

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

                                      19-6


                                   ARTICLE 20

                                 PURCHASE OPTION

     20.1. PURCHASE OPTION. Provided no Event of Default shall have occurred and
be continuing hereunder, Lessee, by irrevocable written notice delivered to
Lessor not later than 180 days prior to the end of the Term, may, at the end of
the Term, purchase the Aircraft for a purchase price in cash equal to the then
fair market sales value of the Aircraft determined as hereinafter provided;
provided that in no event shall the purchase price exceed fifty three percent
(53%) of Lessor's Cost.

     The then fair market sales value for a purchase shall be determined by
agreement between Lessor and Lessee, such determination to be based upon the
assumption that the Aircraft is in at least as good a condition as required by
the return conditions in Article 16 hereof. In the event Lessor and Lessee have
not agreed on the fair market sales value of the Aircraft prior to 90 days
before the expiration date of this Lease, the Lessor shall choose a recognized,
independent aircraft appraisal company which it shall engage to determine the
fair market sales value of the Aircraft, such appraisal to be binding on both
parties and the cost of which is to be borne by Lessee.

                                      20-1


                                   ARTICLE 21

                   CHARACTERIZATION AS LEASE AND TAX INDEMNITY

     It is the intent of the parties that this Lease be a true lease and that
Lessor shall at all times be considered the owner of the Items for purposes of
all federal, state and local income or franchise taxes measured by net income,
and that this Lease conveys no right, title or interest in the Items to Lessee,
except as lessee. Lessee represents, warrants and covenants that neither it nor
any person controlled by it, in control of it, or under common control with it,
directly or indirectly, will at any time take any action or file any return or
other document inconsistent with the foregoing and that each of such persons
will file such  returns, take such actions and execute such documents as may be
reasonable and necessary to facilitate accomplishment of the intent hereof.

     21.01. TAX ASSUMPTIONS. The Lessor and the Lessee acknowledge that this
Lease has been entered into on the assumption that (i) for Federal income tax
purposes the Lease will be treated as a "true lease", (ii) for Federal income
tax purposes Lessor will be allowed to deduct as accelerated cost recovery
deductions under Section 168(b) of the Code commencing on the

                                      21-1


Delivery Date, with respect to each Item of Equipment, the Lessor's Cost over
seven years based on the 200 percent declining balance method, switching to the
straight-line method for the first taxable year of the Lessor for which using
the straight-line method with respect to the adjusted basis of each Item of
Equipment at the beginning of such year will yield a higher allowance and
utilizing a salvage value of zero percent (0%); (iii) for Federal income tax
purposes all items of income and deduction relating to the Items of Equipment
will be treated as being from sources within the United States, and (iv)
Lessee's payments of Basic Rent, with respect to each Item of Equipment, will
constitute income to the Lessor, for Tax purposes, in the amounts and for the
respective periods determined on the assumption that such amounts will be
includable in Lessor's income, for Tax purposes, as they accrue under the Lease
and that such amounts will be the only income to be realized by the Lessor, for
Tax Purposes, from or with respect to each Item of Equipment or this Lease
Agreement, except for indemnity payments made to Lessor pursuant to this Article
and Articles 10 and 13 hereof. Such tax assumptions are hereinafter referred to
as the "Tax Benefits".

                                      21-2


     21.02. TAX INDEMNITY. If for any taxable year of Lessor during which the
Lease is in effect Lessor shall lose (upon audit, by being unable to claim,
through recapture, or by not getting the benefit of, or otherwise) as a result
of Lessee's action or failure to act, excluding actions or failures to act
expressly required hereunder, all or any portion of any of the Tax Benefits, the
Lessee shall pay to Lessor an amount which, after deduction of all taxes
required to be paid (or which would have been required to be paid by Lessor had
Lessor had sufficient gross income within the meaning of Section 61 of the Code,
and the applicable state and local law, actually to pay tax) by Lessor in
respect of the receipt of such sum under the laws of any Federal, state or local
government or taxing authority in the United States (after giving credit for any
savings in respect to any such taxes by reason of deductions, credits or
allowances in respect of the payment or accrual of the amount indemnified
against), shall be equal to the sum of any additional Federal, state or local
income taxes payable by Lessor as a result of the loss of, such Tax Benefits (or
which would have been required to be paid by Lessor for such loss of Tax
Benefits had Lessor had sufficient gross income within the meaning of Section 61
of the Code, and the applicable state and local law, actually to pay tax or to
derive the benefit of such credit or deduction), plus the amount of any
interest, additions to tax (including, without limitation, an addition to tax by
reason of any underpayments of any estimated taxes), fines or penalties which

                                      21-3


are payable by Lessor in connection with the loss of such Tax Benefits,
PROVIDED that the Lessee shall not be required to make any of the foregoing
indemnity payments to the extent the loss of the Tax Benefits is the result of:
(a) any event whereby Lessee is required by the terms of the Lease to pay, and
shall have paid in full, the Stipulated Loss Value for the Item of Equipment
with respect to which the loss of Tax Benefits arose; (b) Lessor's voluntarily
or involuntarily transferring legal title to all or any part of the interest in
such Item of Equipment unless such transfer occurs by reason of exercise of
Lessor's remedies under the Lease upon an Event of Default; (c) the failure of
Lessor to have sufficient liability for tax against which to apply any Tax
Benefits which may be taken as a credit or to have sufficient gross income
against which to apply any Tax Benefit which may be taken as a deduction (but
only if and to the extent that such credit or deduction would not be lost if
Lessor had sufficient liability for tax or sufficient gross income); (d) the
failure of Lessor to claim any Tax Benefit in its income tax returns for the
appropriate year or to follow proper procedure in claiming any Tax Benefit in
such tax returns for such year, if such failure to claim or follow proper
procedure shall preclude Lessor from claiming such Tax Benefit unless (i) such
failure is due to the failure of Lessee to provide Lessor in a timely manner
with such information as was reasonably requested by Lessor pursuant to this
Lease, or (ii) in the opinion of independent tax

                                      21-4


counsel selected by Lessor, no substantial authority for such claim exists
or (iii) the matter in question is of a continuing nature and such matter
(although not in respect of the particular taxable year) has previously been
decided adversely to Lessor pursuant to the contest provisions of this Section;
(e) the failure of Lessor to take timely action in contesting a claim made by
any taxing authority with respect to the disallowance of any Tax Benefits if
such failure shall preclude the right of Lessor to contest such claim and if
such failure was not caused by Lessee's failure to request action by the Lessor
after receipt of notice from the Lessor or to otherwise comply with the
obligations under the contest provisions of this Section; (f) any act (whether
voluntary or involuntary), omission or misrepresentation of Lessor other than
any action or omission contemplated in the Lease Agreement or any related
agreements or otherwise taken by Lessor in the exercise of any. remedies or the
enforcement of any rights against Lessee under any of such agreements; (g) any
amendment to the laws of any Federal, state or local government or taxing
authority, which amendment is enacted after March 1, 1988; or (h) a
determination by any Federal, state or local government or taxing authority that
the Lease shall not be treated as a "true lease" unless such determination is a
result of Lessee's action or failure to act (excluding actions or failures to
act expressly required by this Lease).

     Except as otherwise provided in the immediately following paragraph, the
liability of the Lessee to make any indemnity

                                      21-5


payments hereunder shall become fixed at the time the Lessor makes payment of
the tax attributable to the portion of the Tax Benefits lost, or if the Lessor
is not required to make payment of tax with respect to the portion of the Tax
Benefits lost, the date on which the Lessor files its tax return for the taxable
year in which such loss occurs, and shall he due and payable within 15 days
after receipt by Lessee of written notice from Lessor as to the fixing of such
liability. Lessee shall pay interest at the Incentive Rate on any indemnity
payment not made when due.

     21.03. CONTEST.

     (A) In the event a claim shall be made by the Internal Revenue Service
which, if successful, would result in a loss for which Lessee would have
liability to Lessor pursuant to this Article 21 of the Lease, Lessor hereby
agrees to take such action, in good faith, in connection with contesting such
claim as the Lessee shall reasonably request in writing, provided, that: (i)
within thirty (30) days after notice by Lessor to the Lessee of such claim the
Lessee shall have requested that such claim be contested; (ii) Lessor at its
sole option, may forego any and all administrative appeals, proceedings,
hearings and conferences with the relevant taxing authority in respect to such
claim and may, at its sole option, either pay the tax claimed and sue for a
refund in the appropriate forum selected by Lessor or contest such claim in the
appropriate forum selected by Lessor; (iii) within thirty (30) days after notice
by Lessor to Lessee of such claim, the Lessee shall have

                                      21-6


furnished Lessor with an opinion of independent tax counsel chosen by the Lessee
and acceptable to Lessor, both as to counsel and substance, to the effect that
Lessor is more likely than not to prevail in contesting such claim; and (iv) the
Lessee shall have indemnified Lessor in a manner satisfactory to Lessor for any
cost, expenses or liability, which Lessor may incur as a result of contesting
such claim, and the Lessee shall agree to reimburse Lessor on demand, for all
costs, expenses and liability which Lessor may incur in contesting the claim,
and to pay all reasonable costs and expenses which Lessor may incur in
contesting the claim. These costs and expenses shall include, without
limitation, (a) reasonable attorneys' and accountants' fees and disbursements,
and (b) the amount of any interest, penalties or additions to tax indemnified
hereunder that may ultimately be payable as a result of contesting such claim.

     In the event that at any time Lessor shall pay the tax claimed and then
seek a refund, the Lessee shall pay to Lessor (as a "prior payment") the amount
of such tax and interest, additions to tax and penalties thereon, if any, but
not in excess of the amount which the Lessee would be obligated to pay in
respect of the related Loss under this Article of the Lease. Upon Final
Determination of the liabilities of Lessor, or the receipt of a refund by
Lessor, Lessor shall offset the amount of such prior payment against the full
amount due, if any, pursuant to the provisions of this Article and either (i)
the Lessee shall pay to Lessor within 15 days after notice

                                      21-7


thereof, any excess of such full amount due, if any, over such prior payment, or
(ii) Lessor shall repay to the Lessee within 15 days after the late of a
receipt of such refund or notice of such Final Determination, any excess of such
prior payment over such full amount due. Any interest received by Lessor in
connection with any refund which is allocable to the indemnified taxes paid by
Lessor in respect of which the Lessee had made a prior payment shall be for the
account of the Lessee.

     (B) In the case of any such claim, Lessor agrees to notify the Lessee
promptly in writing of such claim, agrees not to make payment of the tax or
other liability claimed for at least thirty (30) days after the giving of such
notice (unless specifically required to do so at an earlier date by the Internal
Revenue Service), and agrees to cooperate with the Lessee in good faith in order
that such claim may be contested effectively. The Lessee and its counsel shall
maintain confidentiality with respect to all such information insofar as is
possible, consistent with the conduct of a contest hereunder.

     (C) Lessor shall not enter into a settlement or other compromise with
respect to, or otherwise concede, any claim without the written consent of
Lessee, which consent shall not be unreasonably withheld, unless Lessor waives
its right to be indemnified with respect to such claim (but not with respect to
any future claims) under this Article of the Lease. Lessee shall not be
considered to have unreasonably withheld such consent if such consent shall be
withheld as a result of Lessee's reasonable evaluation of the merits of the
basis for

                                      21-8


contesting such claim and Lessee shall not be required to consider any issue or
dispute not directly related to such claim.

     (D) If Lessee requests Lessor to contest a claim and otherwise complies
with its obligations under this Section 21.03, it shall have no obligation to
pay any indemnity under this Article of the Lease resulting from such claim
until a Final Determination occurs regarding the liability of Lessor in respect
of the claim. Lessee's obligation to pay the indemnity shall become fixed upon
such Final Determination and unless otherwise provided in this Section 21.03
shall be payable within 15 days after receipt by Lessee of written notice from
Lessor as to the occurrence of a Final Determination. In all other cases, the
liability of Lessee shall become fixed and payable as provided in Section 21.02
of the Lease:

     (E) For purposes of this Section 21.03, "Final Determination" shall mean a
decision of a court of original jurisdiction with respect to such claim,
(provided that the time for filing an appeal of such decision has expired) or
other disposition of such claim in the manner contemplated herein.

     21.04. SURVIVAL. The indemnification provided herein shall survive the
assignment, expiration or other termination of this Lease.

     21.05. CONSOLIDATED RETURN. For purposes of this Article 21, the term
"Lessor" shall mean and include the affiliated group of corporations and each
member thereof,

                                      21-9


within the meaning of section 1504 of the Code, of which Lessor is a member, if
such group is filing a consolidated United States Federal income tax return, and
it shall also mean any consolidated or combined group of corporations of which
Lessor is a member which is treated as such for state franchise tax purposes.

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

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

                                     21-10


                                   ARTICLE 22

                      TRUE LEASE UNDER FEDERAL AVIATION ACT

     It is the intent of the parties to this Lease that it will be a true lease
and not a "conditional sale" as defined in 49 U.S.C. Section 1301 and that the
Lessor shall at all times be considered to be the owner of the Aircraft which
are the subject of this Lease for the purposes of 49 U.S.C. Section 1401 and for
all Federal, state, city and local income taxes or for franchise taxes measured
by net income, and that this Lease conveys to the Lessee no right, title or
interest in the Aircraft except as a lessee.

                                   ARTICLE 23

                                TRUTH IN LEASING

     Lessee agrees to carry a copy of this Lease in the Aircraft at all times.

     THE AIRCRAFT, AS EQUIPMENT, BECAME SUBJECT TO THE MAINTENANCE REQUIREMENTS
OF FEDERAL AVIATION REGULATION PART 135 UPON THE REGISTRATION OF THE AIRCRAFT
WITH THE FAA. THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FEDERAL
AVIATION REGULATION PART 135, OR, IF LATER APPLICABLE PART 121. UPON EXECUTION
OF THIS LEASE, THE LESSEE WILL BE RESPONSIBLE DURING THE TERM OF THIS LEASE FOR
THE OPERATIONAL CONTROL OF THE AIRCRAFT IDENTIFIED AND TO BE OPERATED HEREUNDER.



     AN EXPLANATION OF THE FACTORS BEARING ON OPERATING CONTROL AND PERTINENT
FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT
STANDARDS DISTRICT OFFICE.

     THE LESSEE CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATING CONTROL OF THE
AIRCRAFT AND THAT IT UNDERSTANDS IT IS RESPONSIBLE FOR COMPLIANCE WITH
APPLICABLE FEDERAL AVIATION REGULATIONS.

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

                                          MCDONNELL DOUGLAS FINANCE CORPORATION,
                                            as Lessor

                                          By: /s/ [ILLEGIBLE]
                                              ----------------------------------
                                          Its: Executive Vice President
                                              ----------------------------------

                                          CHAUTAUQUA AIRLINES, INC.,
                                            as Lessee

                                          By: /s/ [ILLEGIBLE]
                                              ----------------------------------
                                          Its: President
                                              ----------------------------------



                                   EXHIBIT A

                              LEASE SUPPLEMENT NO.

     THIS LEASE SUPPLEMENT NO._______, dated as of __________, 1988,
between McDonnell Douglas Finance Corporation ("Lessor") and Chautauqua
Airlines, Inc. ("Lessee");

                               W I T N E S S I T H

     WHEREAS, Lessor and Lessee have heretofore entered into that certain Lease
Agreement dated as of August 15, 1988 (herein called the, "Lease" and the terms
defined therein being herein used with the same meaning), which Lease provides
for the execution and delivery from time to time of Lease Supplements each
substantially in the form hereof for the purpose of leasing the Aircraft under
the Lease as and when delivered by the Lessor to the Lessee in accordance with
the terms thereof;

     NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Article 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

     1. The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease Agreement, as herein
supplemented, the following:

     (i) Airframe:____________________________________________________________

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

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

     (ii) Engines: General Electric model CT7-5A2, manufacturer's serial nos.
     ______________and ____________ (each of which engines has 750 or more rated
     takenoff horsepower);

     (iii) Propellers: Dowty Rotol model (c)R354/4-123-F/13, manufacturer's
     serial nos. ________ and ________ (each of which Propellers is capable of
     absorbing 750 or more rated takeoff shaft horsepower); and

     (iv) Such other further and additional equipment as may be specified in any
     attached invoices.

     All the foregoing is hereinafter referred to as the "Delivered Equipment."

                                       1


     2. The Delivery Date of the Delivered Equipment is the date of this Lease
supplement set forth in the opening paragraph hereof.

     3. Equipment Cost for each of the delivered Aircraft (including Airframe,
Engines, and Propellers) is $ ________

     4. Term for the Delivered Equipment shall commence on the Delivery Date
therefor and shall conclude on the close of business on September 30, 2002,
subject to any early termination provisions invoked in accordance with the
Lease.

     5. The Lessee hereby confirms its agreement to pay the Lessor Interim Rent,
Basic Rent and Supplemental Rent for the Delivered Equipment, throughout the
Term therefor in accordance with the Lease. The Interim Rent for the Delivered
Equipment shall be payable on October 1, 1988 in an amount equal to $___________
The Interim Rent shall be allocated, for Federal income tax purposes, to the
monthly periods immediately before the date it is due. The Basic Rent for the
Delivered Equipment shall be payable in 168 consecutive monthly installments,
payable in advance, the first installment of which is due and payable October 1,
1988, and subsequent installments shall be payable on the first day of each
month throughout the Term. Each such installment of Basic Rent shall be in an
amount equal to $ __________ Each installment of Basic Rent shall be allocated,
for Federal income tax. purposes, to the monthly period immediately after the
date it is due.

     All payments of Rent under the Lease shall be paid to Lessor by wire
transfer of immediately available funds on or before the due dates therefor to
the account of McDonnell Douglas Finance Corporation, Account No. 001-002-181 at
Security Pacific National Bank, 333 South Hope Street, Los Angeles, CA 90071.

     6. The Lessee hereby confirms to the Lessor that it will, as soon as
practicable, mark the Delivered Equipment as showing all interests thereto in
accordance with the terms of the Lease and that the Lessee has accepted the
Delivered Equipment for all purposes hereof and of the Lease, including its
being airworthy, in accordance with specifications, in good working order and
repair and without defect in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee on the date hereof, and free and
clear of all Liens, except for those contemplated by the Lease, provided,
however, that nothing contained herein or in the Lease shall in any way diminish
or otherwise affect any right the Lessee or the Lessor may have with respect to
the Delivered Equipment against the manufacturer thereof, or any subcontractor
or supplier of the manufacturer thereof.

                                       2


     7. This Lease Supplement shall in all respect' be governed by, and
construed in accordance with, the laws of the State of New York, including all
matters of construction, validity and performance.

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

                                          McDonnell Douglas Finance Corporation,
                                            as Lessor

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

                                          Its: ---------------------------------

                                          Chautauqua Airlines, Inc.
                                            as-Lessee

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

                                          Its: ---------------------------------

                                       3


                                   EXHIBIT B1

                              STIPULATED LOSS VALUE
    (FOR ALL ITEMS OF EQUIPMENT COVERED BY LEASE SUPPLEMENT NO. __________ )

BEFORE   S.L.V. AS A      BEFORE      S.L.V. AS A       BEFORE     S.L.V. AS A
PAYMENT   PERCENT OF      PAYMENT      PERCENT OF       PAYMENT     PERCENT OF
NUMBER   ORIGINAL COST    NUMBER      ORIGINAL COST     NUMBER     ORIGINAL COST
- --------------------------------------------------------------------------------



                                   EXHIBIT B2

                              STIPULATED LOSS VALUE
     (FOR ALL ITEMS OF EQUIPMENT COVERED BY LEASE SUPPLEMENT NO __________ )

BEFORE   S.L.V. AS A      BEFORE      S.L.V. AS A       BEFORE     S.L.V. AS A
PAYMENT   PERCENT OF      PAYMENT      PERCENT OF       PAYMENT     PERCENT OF
NUMBER   ORIGINAL COST    NUMBER      ORIGINAL COST     NUMBER     ORIGINAL COST
- --------------------------------------------------------------------------------



                             CERTIFICATE OF OFFICER

     The undersigned authorized officer of McDonnell Douglas Finance Corporation
("MDFC") hereby states to Chautauqua Airlines, Inc. ("Chautauqua") the
following:

     1. MDFC requests that Chautauqua execute the Purchase Agreement Assignment
        dated August 22, 1988 in connection with Aircraft N125CH.

     2. MDFC guarantees that all of the rights that Chautauqua is assigning to
        V.A.G pursuant to the Purchase Agreement Assignment other than title to
        and ownership of the aircraft have been returned to MDFC by V.A.G.
        through the Lease Agreement from V.A.G to MDFC and will be returned to
        Chautauqua pursuant to the Lease Agreement dated August 15, 1988 between
        MDFC and Chautauqua provided that no Default or Event of Default has
        occurred and is continuing under such Lease Agreement.

     3. MDFC will indemnify Chautauqua against any taxes or other reasonable out
        of pocket costs incurred by Chautauqua as a result of its assignment of
        the Saab Purchase Agreement to V.A.G which would not have been payable
        to Chautauqua pursuant to the Lease Agreement dated August 15, 1988
        between MDFC and Chautauqua.

     IN WITNESS WHEREOF, I have hereunto set my name this 25th day of August
1988.

                                         MCDONNELL DOUGLAS FINANCE  CORPORATION

                                         By: /s/ [ILLEGIBLE]
                                             -----------------------------------
                                                  V.P.
                                         Title: --------------------------------

CERT.JSW

EX-10.15(A)

                                                                Exhibit 10.15(a)


                             LEASE SUPPLEMENT N0. 1

     THIS LEASE SUPPLEMENT NO.1, dated as of AUG 25, 1998, between McDonnell
Douglas Finance Corporation ("Lessor") and ________ Chautauqua Airlines, Inc.
("Lessee");

                               W I T N E S S E T H

     WHEREAS, Lessor and Lessee have heretofore entered into that certain Lease
Agreement dated as of August 1, 1988 (herein called the "Lease" and the terms
defined therein being herein used with the same meaning), which Lease provides
for the execution and delivery from time to time of Lease Supplements each
substantially in the form hereof for the purpose of leasing the Aircraft under
the Lease as and when delivered by the Lessor to the Lessee in accordance with
the terms thereof;

     NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Article 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

     1.    The Lessor hereby delivers and leases to the Lessee, and the Lessee
     hereby accepts and leases from the Lessor, under the Lease Agreement, as
     herein supplemented, the following:

     (i)   Airframe: Saab Scania AB, Saab SF340A, FAA Registration N125CH,
     manufacturer's serial no, 340A-125.

     (ii)  Engines: General Electric model CT7--5A2, manufacturer's serial nos.
     GE-E-367421K and GE-E-367422K (each of which engines has 750 or more rated
     takeoff horsepower);

     (iii) Propellers: Dowty Rotol model (c)R354/4-123-F/13, manufacturer's
     serial nos. URG/2023/88 and DRG/4407/88 (each of which Propellers is
     capable of absorbing 750 or more rated takeoff shaft horsepower); and

     (iv)  Such other further and additional equipment as may be specified in
     any attached invoices.

     All the foregoing is hereinafter referred to as the "Delivered Equipment."

                                       1


          manufacturer's serial numbers DRG/5453/88 and DRG/5454/88 (the
          "Propellers"), to which were attached the Purchase Option Agreement
          dated September 29, 1988 (the "option Agreement") between the Lessor
          as grantor and the Lessee as grantee and the Assignment of Lease
          Agreement dated as of August 25, 1988 (the "Lease Assignment") between
          the Lessee as assignor and Manufacturers Hanover Trust Company of
          California, as Trustee (the "Trustee") under the Second Amended and
          Restated Trust Agreement dated as of June 25, 1987 (the "Trust
          Agreement"), were recorded as Conveyance No. D93469; and

     (c)  Lease Supplement No. 2 dated as of September 29, 1988 (the "Sublease
          Supplement") between the Trustee as sublessor and Chautauqua Airlines,
          Inc. as sublessee (the "Sublease"), which supplemented the Lease
          Agreement dated as of August 15, 1988 (the "Sublease") between the
          Lessee as sublessor and the Sublessee to cover the Aircraft, the
          Engines and the Propellers, which was assigned by the Lessee to the
          Trustee pursuant to the Assignment and Assumption of Lease Agreement
          dated as of August 25, 1988 (the "Sublease Assignment"), was recorded
          as Conveyance No. D93470.

     Subsequent to the recordations mentioned above, we examined the records
maintained by the FAA for the Aircraft and what were represented to us by FAA
personnel as being all of the encumbrance cross-reference index cards in
existence for the Engines and the Propellers. Based upon such examination, it is
our opinion that:

     (a)  the retained legal title to the Aircraft is vested in the Lessor, with
          a Certificate of Aircraft Registration duly issued to the Trustee
          pursuant to and in accordance with the provisions of the Federal
          Aviation Act of 1958, as amended (the "Act");

     (b)  the Aircraft, the Engines and the Propellers are free and clear of any
          Liens (as such term is defined in the Lease) except such as are
          created by the Lease, as supplemented by the option Agreement and as
          assigned by the Lease Assignment, and the Sublease, as assigned by the
          Sublease Assignment and as supplemented by the Sublease Supplement;
          and



     (c)  the FAA Bill of Sale, the Lease with the Option Agreement and the
          Lease Assignment attached and the Sublease supplement have been duly
          recorded by the FAA pursuant to and in accordance with the provisions
          of the Act.

          This opinion is subject to the same limitations and exceptions as were
set forth in the last paragraph of our opinion letter to you dated September 29,
1988, covering the Aircraft, the Engines and the Propellers.

                                             Very truly yours,
                                             /s/ Preston G. Gaddis II
                                             PRESTON G. GADDIS II
                                             For the Firm
PGG:RDJ:kh/130015
370PGG88

EX-10.15(B)

                                EXHIBIT 10.15(B)

                             LEASE SUPPLEMENT N0. 2

     THIS LEASE SUPPLEMENT N0. 2, dated as of September _, 1988, between
Manufacturers Hanover Trust Company of California, not in its individual
capacity but solely as owner trustee under the Second Amended and Restated Trust
Agreement dated as of June 25, 1987 ("Lessor") and Chautauqua Airlines, Inc.
("Lessee");

                               W I T N E S S E T H

     WHEREAS, Lessor (by assignment from McDonnell Douglas Finance Corporation
pursuant to an Assignment and Assumption of Lease Agreement dated as of August
15, 1988 which has been filed with the Federal Aviation Administration) and
Lessee are parties to that certain Tease Agreement dated as of August 15, 1988,
which Lease Agreement together with Lease Supplement No. 1 thereto (herein
collectively called the "Lease" and the terms defined therein being herein used
with the same meaning) was recorded by the Federal Aviation Administration on
August 26, 1988 as conveyance No. K80051 and which Lease provides for the
execution and delivery from time to time of Lease Supplements each substantially
in the form hereof for the purpose of leasing the Aircraft under the Lease as
and when delivered by the Lessor to the Lessee in accordance with the terms
thereof;

     NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Article 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

     1.    The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease Agreement, as herein
supplemented, the following:

     (i)   Airframe: Saab Scania AB, Saab SF340A, FAA Registration N128CH,
     manufacturer's serial no. 340A-128.

     (ii)  Engines: General Electric model CT7-5A2, manufacturer's serial. nos.
     GE-E-367409K and GE-E-367439K (each of which engines has 750 or more rated
     takeoff horsepower);

     (iii) Propellers: Dowty Rotol model (c)R354/4-123-F/13, manufacturer's
     serial nos. DRG/5453/88 and DRG/5454/88 (each of which Propellers is
     capable of absorbing 750 or more rated takeoff shaft horsepower); and

     (iv)  Such other further and additional equipment as may be specified in
     any attached invoices.

     All the foregoing is hereinafter referred to as the "Delivered Equipment."

                                       1


     2. The Delivery Date of the Delivered Equipment is the date of this Lease
Supplement set forth in the opening paragraph hereof.

     3. Equipment Cost for each of the delivered Aircraft (including Airframe,
Engines, and Propellers) is [*].

     4. Term for the Delivered Equipment shall commence on the Delivery Date
therefor and shall conclude on the close of business on September 30, 2002,
subject to any early termination provisions invoked in accordance with the
Lease.

     5. The Lessee hereby confirms its agreement to pay the Lessor Interim Rent,
Basic Rent and Supplemental Rent for the Delivered Equipment, throughout the
Term therefor in accordance with the Lease. The Interim Rent for the Delivered
Equipment shall be payable on October 1, 1988 in an amount equal to $________.
The Interim Rent shall be allocated, for Federal income tax purposes, to the
monthly periods immediately before the date it is due. The Basic Rent for the
Delivered Equipment shall be payable in 168 consecutive monthly installments,
payable in advance, the first installment of which is due and payable October 1,
1988, and subsequent installments shall be payable on the first day of each
month throughout the Term. [*] Each installment of Basic Rent shall be
allocated, for Federal income tax purposes, to the monthly period immediately
after the date it is due.

     All payments of Rent under the Lease shall he paid to Lessor by wire
transfer of immediately available funds on or before the due dates therefor to
Wells Fargo Bank, N.A., San Francisco Main Office, Credit: MANCAL-Trust Aid
Control, Account No. 0001-179936.

     6. The Lessee hereby confirms to the Lessor that it will, as soon as
practicable, mark the Delivered Equipment as showing all interests thereto in
accordance with the terms of the Lease and that the Lessee has accepted the
Delivered Equipment for all purposes hereof and of the Lease, including its
being airworthy, in accordance with specifications, in good working order and
repair and without defect in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee on the date hereof, and free and
clear of all Liens, except for those contemplated by the Lease, provided,
however, that nothing contained herein or in the Lease shall in any way diminish
or otherwise affect any right the Lessee or the Lessor may have with respect to
the Delivered Equipment against the manufacturer thereof, or any subcontractor
or supplier of the manufacturer thereof.

                                        2

- -------
* Confidential



     7. This Lease Supplement shall in all respects be governed by, and
construed in accordance with, the laws of the State of New York, including all
matters of construction, validity and performance.

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

                                       Manufacturers Hanover Trust Company of
                                           California,
                                       not in its individual capacity but solely
                                       as owner trustee under the Second Amended
                                       and Restated Trust Agreement dated as of
                                       June 25, 1987, AS AMENDED
                                       By:
                                            -----------------------------------
                                       Its:
                                            -----------------------------------

                                       Chautauqua Airlines, Inc.,
                                         as Lessee

                                       By:  /s/ Timothy Coon
                                            -----------------------------------
                                       Its: President
                                            -----------------------------------

                                        3


                                   EXHIBIT B1
                              STIPULATED LOSS VALUE
         (FOR ALL ITEMS OF EQUIPMENT COVERED BY LEASE SUPPLEMENT NO. 2)

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

EX-10.16

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

                         AIRCRAFT LEASE AGREEMENT NO. 1

                          dated as of February 1, 1995

                                     between

                             LAMBERT LEASING, INC.,
                                   as Lessor,

                                       and

                           CHAUTAUQUA AIRLINES, INC.,
                                   as Lessee.

                             One Saab 340A Aircraft
                         with General Electric Engines,
                             Dowty Rotol Propellers
                              and One Spare Engine
                       Manufacturer's Serial No. 340A-004
                          U.S. Registration No. N340CA

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



                                TABLE OF CONTENTS
                                                                           
Section 1.       DEFINITIONS......................................................1

Section 2.       [RESERVED].......................................................2

Section 3.       DELIVERY.........................................................2

Section 4.       ACCEPTANCE.......................................................2

Section 5.       CERTAIN AGREEMENTS OF LESSEE: LESSOR'S
                 REPRESENTATIONS AND WARRANTIES...................................2

Section 6.       CONDITIONS PRECEDENT TO DELIVERY AND ACCEPTANCE;
                 LEGAL OPINION....................................................5

Section 7.       REPRESENTATIONS AND WARRANTIES OF LESSEE.........................7

Section 8.       TERM............................................................10

Section 9.       RENT............................................................10

Section 10.      LIENS; NAMEPLATES...............................................12

Section 11.      REGISTRATION, MAINTENANCE AND OPERATION: POSSESSION
                        ETC .....................................................13

Section 12.      RISK OF LOSS: EVENT OF LOSS AND CONDEMNATION....................22

Section 13.      INSURANCE.......................................................30

Section 14.      INDEMNITY.......................................................36

Section 15.      TAXES...........................................................39

Section 16.      FURTHER ASSURANCES, RECORDATION, TITLE, REGISTRATION............46

Section 17.      INSPECTION, REPORTS, AUDITS.....................................47

Section l8.      DEFAULTS, REMEDIES, DAMAGES.....................................49

Section 19.      RETURN OF AIRCRAFT AND RECORDS..................................58

Section 20.      ASSIGNMENT, SUBLEASE............................................66

Section 21.      NOTICES.........................................................67



                                        i


                                                                           
Section 22.      SURVIVAL OF COVENANTS; SEVERABILITY ............................67

Section 23.      ENTIRE AGREEMENT, TITLES........................................68

Section 24.      NOTICES OF EVENTS.............................................. 68

Section 25.      EXECUTION AND COUNTERPARTS......................................69

Section 26.      CONFIDENTIALITY.................................................69

Section 27.      COVENANT OF QUIET ENJOYMENT.....................................69

Section 28.      GOVERNING LAW; SUBMISSION TO JURISDICTION.......................70

Annex I          Definitions

Exhibit A        Form of Lease Supplement No. 1
Exhibit B        Form of Insurance Endorsements

Schedule 1       Certain Proceedings



                                       ii



                         AIRCRAFT LEASE AGREEMENT NO. 1

          THIS AIRCRAFT LEASE AGREEMENT N0. 1 dated as of February 1, 1995
(hereinafter referred to as the "Lease") is made by and between LAMBERT LEASING,
INC., a Delaware corporation with principal offices at 21300 Ridgetop Circle,
Sterling, Virginia 20166 (hereinafter referred to as "Lessor"), and CHAUTAUQUA
AIRLINES, INC., a New York corporation with principal offices at 2500 South High
School Road, Indianapolis, Indiana 46251 (hereinafter referred to as "Lessee").

                                    RECITALS

          WHEREAS, this Lease relates to the one (1) used Saab 340A aircraft
("the Aircraft") and the one (1) used, spare General Electric Model CT7-5A
engine (the "Spare Engine"), each to be described in Lease Supplement No. 1
attached hereto; and

          WHEREAS, this Lease and a counterpart of Lease Supplement No. 1 hereto
will be filed for recordation with the Federal Aviation Administration as one
document;

          NOW, THEREFORE, in consideration of the foregoing premises and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, it is mutually agreed by and between Lessor and Lessee as
follows:

                              W I T N E S S E T H:

                               AGREEMENT TO LEASE

          Lessor hereby agrees to Lease the Aircraft to Lessee and Lessee hereby
agrees to rent and hire the Aircraft from Lessor subject to the terms and
conditions set forth herein.

                               TERMS AND CONDITION

Section 1.  DEFINITIONS.

          Unless the context otherwise requires, the capitalized terms used
herein shall have the respective meanings assigned thereto in Annex I for all
purposes hereof (such definitions to be



equally applicable to both the singular and the plural forms of the terms
defined).

Section 2.  [RESERVED].

Section 3.  DELIVERY.

          Delivery shall be made to Lessee at St. Louis, Missouri on the
Delivery Date or at such other date and place as shall be mutually agreed upon.
Tender of the Aircraft by Lessor shall be to a Responsible Officer of Lessee or
such other persons duly authorized and appointed by the President or a Vice
President of Lessee.

Section 4.  ACCEPTANCE.

          At the time of delivery of the Aircraft, Lessee, by and through its
President or one of its Vice Presidents or another duly appointed and authorized
representative, shall accept the Aircraft by executing Lease Supplement No. 1,
and upon such execution, said Lease Supplement No. 1 shall be delivered
immediately to Lessor. The date of execution of Lease Supplement No. 1 shall be
the "Delivery Date" as that term is used herein. Delivery and acceptance of the
Aircraft shall be conclusively deemed to have taken place and shall become
effective upon delivery of Lease Supplement No. 1 to Lessor as of the date of
such Lease Supplement No. 1 and the rights and obligations of each party hereto,
including Lessee's obligation to pay Rent under this Lease, shall become fully
effective with respect to the Aircraft on that date. Accordingly, the Aircraft
shall be deemed to be in good condition without defects, and Lessee's execution
of Lease Supplement No. 1 shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease.

Section 5.  CERTAIN AGREEMENTS OF LESSEE; LESSOR'S
            REPRESENTATIONS AND WARRANTIES.

          5.1 LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER OF THE
AIRCRAFT AND HAS NOT INSPECTED THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE
BY LESSEE. LESSEE (I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS A USED
AIRCRAFT AND IS BEING DELIVERED BY LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND
THAT NO CONDITION, WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR
IS GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR IN RELATION TO THE
AIRCRAFT EXCEPT AS SPECIFICALLY PROVIDED IN THIS

                                        2


LEASE, (II) HEREBY WAIVES AS BETWEEN ITSELF AND LESSOR ALL OF ITS RIGHTS,
EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AGAINST LESSOR IN THE
AIRCRAFT EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, RELATING TO (AND LESSOR
WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO) THE CAPACITY, AGE, QUALITY, DESCRIPTION, STATE,
CONDITION, VALUE, WORKMANSHIP, DESIGN, CONSTRUCTION, USE, OPERATION, PERFORMANCE
OR COMPLIANCE WITH SPECIFICATIONS THEREOF OR THE LEASING THEREOF BY LESSOR TO
LESSEE OR TO THE MERCHANTABILITY OR SUITABILITY OF THE AIRCRAFT OR ITS FITNESS
FOR ANY USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, OR
AS TO ITS AIRWORTHINESS OR AS TO THE QUALITY OF THE MATERIALS OR WORKMANSHIP
WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR AS TO THE ABSENCE OF LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, AND (III) AGREES THAT ALL RISKS
OF THE FOREGOING NATURE, WHETHER PATENT OR LATENT, ARE TO BE BORNE BY LESSEE
OTHER THAN RISKS (A) RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE
OF LESSOR, OR ANY SUCCESSOR, ASSIGNEE, DIRECTOR, OFFICER, AGENT OR EMPLOYEE OF
LESSOR (UNLESS SUCH WILLFUL MISCONDUCT OR GROSS NEGLIGENCE RESULTS FROM THE ACTS
OR OMISSIONS OF LESSEE ON BEHALF OF LESSOR), (B) WITH RESPECT TO THE AIRCRAFT,
THE AIRFRAME, ANY ENGINE OR PROPELLER, SO LONG AS NO DEFAULT OR EVENT OF DEFAULT
EXISTS, TO THE EXTENT ATTRIBUTABLE TO ACTS OR EVENTS (EXCEPT ACTS OR EVENTS
ATTRIBUTABLE TO OR DESCRIBED HEREUNDER AS A DEFAULT OR EVENT OF DEFAULT, WHETHER
OR NOT DECLARED) THAT OCCUR AFTER THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR
PROPELLER, AS THE CASE MAY BE, ARE NO LONGER LEASED UNDER THE LEASE AND AFTER
POSSESSION OF THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR PROPELLER, AS THE CASE
MAY BE, HAVE BEEN DELIVERED TO LESSOR, OR ANY OTHER PERSON ENTITLED TO RECEIVE
DELIVERY IN ACCORDANCE WITH THE LEASE, (C) WHICH ARE THE RESULT OF ANY FAILURE
OF LESSOR TO COMPLY WITH ANY COVENANT, OR ANY BREACH BY LESSOR OF ANY
REPRESENTATION CONTAINED IN THE LEASE OR ANY OTHER OPERATIVE DOCUMENT TO WHICH
LESSOR IS A PARTY, UNLESS SUCH FAILURE IS THE RESULT OF LESSEE'S FAILURE TO
COMPLY WITH ANY TERMS OR PROVISIONS OF THE LEASE OR ANY OTHER LESSEE DOCUMENT,
(D) TO THE EXTENT CAUSED BY ACTS OR OMISSIONS BY OR RELATING TO ANY PARTY OTHER
THAN LESSEE, OR EVENTS RELATING TO SUCH OTHER PARTY THAT OCCUR AFTER FULL AND
FINAL COMPLIANCE BY LESSEE WITH ALL THE TERMS OF THE LEASE AND THE LESSEE
DOCUMENTS, (E) TO THE EXTENT RELATED TO A LESSOR LIEN OR (F) RELATING TO A
DISPOSITION (VOLUNTARY OR INVOLUNTARY) BY LESSOR OF ALL OR ANY PART OF ITS
INTEREST IN THE AIRCRAFT, OTHER THAN AS PERMITTED BY THE LEASE AS A RESULT OF
THE OCCURRENCE OF AN EVENT OF LOSS OR AN EVENT OF DEFAULT UNDER THE LEASE, OR BY
ANY OTHER PERSON OF ALL OR ANY PART OF SUCH PERSON'S INTEREST IN THE AIRCRAFT;
EXCEPT THAT LESSOR HEREBY REPRESENTS AND WARRANTS TO LESSEE THAT ON THE DELIVERY
DATE THE AIRCRAFT SHALL BE FREE OF ALL LIENS OTHER THAN LIENS ARISING OUT OF ANY
ACTION OR INACTION BY LESSEE AND

                                        3


LESSOR LIENS. IN PARTICULAR AND WITHOUT PREJUDICE TO THE GENERALITY OF THE
FOREGOING (EXCEPT AS MENTIONED IN THE FIRST SENTENCE OF THIS SECTION 5.1),
LESSOR SHALL BE UNDER NO LIABILITY WHATSOEVER AND HOWSOEVER ARISING, WHETHER IN
CONTRACT OR TORT OR BOTH, IN RESPECT OF ANY LOSS, LIABILITY, DAMAGE OR DELAY OF
OR TO OR IN CONNECTION WITH THE AIRCRAFT OR ANY PERSON (WHICH EXPRESSION
INCLUDES, WITHOUT PREJUDICE TO THE GENERALITY THEREOF, ANY GOVERNMENTAL BODY) OR
PROPERTY WHATSOEVER, WHETHER ON BOARD THE AIRCRAFT OR ELSEWHERE IRRESPECTIVE OF
WHETHER SUCH LOSS, DAMAGE OR DELAY ARISES (X) FROM THE AIRCRAFT NOT BEING IN AN
AIRWORTHY CONDITION, OR (Y) FROM ANY ACT OR OMISSION OF LESSOR (OTHER THAN ANY
ACT OR OMISSION WHICH CONSTITUTES WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF
LESSOR), EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE. THE PROVISIONS OF THIS
SECTION 5.1 HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE THE COMPLETE EXCLUSION
AND NEGATION, EXCEPT AS OTHERWISE PROVIDED ABOVE, OF ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, BY LESSOR IN ANY CAPACITY, WITH RESPECT TO THE
AIRCRAFT, OR ANY PART THEREOF, WHETHER ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE.

          5.2 NONE OF THE PROVISIONS OF THIS SECTION 5 OR ANY OTHER PROVISION OF
THIS LEASE AMENDS, MODIFIES OR OTHERWISE AFFECTS THE EXPRESS REPRESENTATIONS,
WARRANTIES OR OTHER OBLIGATIONS OF SAAI OR ANY MANUFACTURER, SUBCONTRACTOR OR
SUPPLIER WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR RELEASES SAAI OR
ANY MANUFACTURER, SUBCONTRACTOR OR SUPPLIER FROM ANY SUCH REPRESENTATION,
WARRANTY OR OBLIGATION OR ANY RIGHTS OF LESSOR OR LESSEE. DURING THE TERM OF
THIS LEASE AND SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING HEREUNDER, LESSEE SHALL BE ENTITLED TO EXERCISE AND ENFORCE AND
ASSERT AT ITS SOLE EXPENSE ALL OF THE RIGHTS WHICH THE LESSOR HAS UNDER ANY
WARRANTY OR GUARANTY OF ANY VENDOR, MANUFACTURER, SUBCONTRACTOR OR SUPPLIER WITH
RESPECT TO THE AIRCRAFT.

          5.3 Lessor has the requisite corporate power, authority and legal
right to execute, deliver and perform each and every term of this Lease, Lease
Supplement No. 1 and all other Operative Documents, the same having been duly
authorized by all necessary corporate action of Lessor, and duly executed and
delivered by the authorized officers of Lessor and, assuming the due and proper
execution of the other party thereto, constitute legal, valid and binding
obligations of Lessor, enforceable against it in accordance with such terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and to general
principles of equity.

          5.4 Lessor is a corporation duly incorporated, validly existing in
good standing under the laws of the State of Delaware and is duly qualified and
authorized to do business as a foreign corporation in each jurisdiction where
the failure to so qualify or

                                       4


to be in good standing would have a material adverse effect on its ability to
carry on its business or to perform its obligations under this Lease.

          5.5 Lessor is, and during the Term will continue to be, a "citizen of
the United States" within the meaning of Section 40102(a)(15) of the
Transportation Code.

          5.6 No consent or approval of, giving of notice to, registration with
or other action in respect of or by any federal, state or local authority is
required with respect to Lessor's execution and delivery of this Lease,
consummation of the transactions contemplated hereby or performance of its
obligations hereunder, or if any such consent, approval, giving of notice or
registration is required, it has been duly given or obtained.

          5.7 The execution and delivery of this Lease, Lease Supplement No. 1
and all other Operative Documents and the performance by Lessor of its
obligations under this Lease will not contravene or violate any provision of its
charter or Articles or Certificate of Incorporation of By-Laws or any contract,
agreement, indenture or other instrument either binding upon Lessee or to which
it is subject.

          5.8 There is no United States federal or state law or governmental
regulation or order that would be contravened or violated by the execution,
delivery and performance of this Lease by Lessor or by the performance of any
term and condition contained herein, or in Lease Supplement No. 1 or in any of
the other Operative Documents by Lessor.

Section 6.  CONDITIONS PRECEDENT TO DELIVERY AND ACCEPTANCE;
            LEGAL OPINION.

          Lessor shall have no obligation to make delivery of the Aircraft or
any part thereof to Lessee unless and until all of the following conditions
precedent have been met, it being acknowledged that delivery by Lessor of the
Aircraft under the Lease and Lease Supplement No. 1 shall be deemed to signify
the fulfillment to the satisfaction of or waiver by Lessor of the conditions
precedent prior to or on the Delivery Date:

          6.1 All proceedings taken in connection with the transactions
contemplated hereby and all documents or papers relating thereto, including
without limitation the Operative Documents and this Lease, shall be satisfactory
to Lessor and its counsel, and Lessor and its counsel shall have received copies
of such documents and papers as Lessor or its counsel may reasonably request in
connection therewith or as basis for its counsel's

                                        5


closing opinion, all in the form and containing the substance reasonably
satisfactory to Lessor and its counsel;

          6.2 Lessee shall have delivered to Lessor a favorable opinion of
Lessee's counsel dated as of the Delivery Date in form and substance reasonably
acceptable to Lessor;

          6.3 Lessee shall not be in default of any payment obligation or in any
material non-payment default with respect to any material indebtedness, material
lease obligation or any material contract;

          6.4 All representations, warranties, covenants and assurances made by
Lessee hereunder shall remain true and correct on the Delivery Date and there
shall be no material adverse change in the assets, liabilities, business,
prospects, profits or condition, financial or otherwise, of Lessee ox of the
ability of Lessee to perform its obligations, duties and covenants under this
Lease from the time of such representations, warranties and assurances to the
Delivery Date;

          6.5 Lessee shall have delivered to Lessor an insurance broker's
opinion letter and a Certificate of Insurance issued in the form and containing
the substance required by SECTION 13 and containing the endorsements set forth
in Exhibit B hereof;

          6.6 Lessee shall have delivered to Lessor a certified copy of the
resolutions adopted by its Board of Directors authorizing the execution and
performance of this Lease setting forth the names of its officers authorized to
execute this Lease and all documents contemplated by the Lease to be executed by
Lessee; and

          6.7 FAA Counsel shall have confirmed that they will render an opinion
regarding filing and recording procedures required by this transaction, and on
or before the Delivery Date, the Lease and Lease Supplement No. 1 shall have
been recorded or filed for recording with the FAA Aircraft Registry pursuant to
the Transportation Code in the manner reflected in the opinion of such FAA
Counsel and in such other public offices as may be deemed necessary or
appropriate by such FAA Counsel or by Lessor or its counsel in order to protect
the rights and interest of Lessor thereunder and to perfect such rights and
interests of Lessor in and to the Lease, Lease Supplement No. 1, and the Rent
due and to become due hereunder. By such filing and recording, Lessor and Lessee
are not acknowledging or implying that the Lease constitutes a "security
agreement" or creates a "security interest" within the meaning of any applicable
version of the Uniform Commercial Code adopted by any jurisdiction.

                                        6


Section 7.  REPRESENTATIONS AND WARRANTIES OF LESSEE.

     Lessee hereby makes the following representations and warranties:

          7.1 Lessee is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York and is duly qualified and
authorized to do business as a foreign corporation in each jurisdiction where
the failure to so qualify or to be in good standing would have a material
adverse effect on its ability to carry on its business or to perform its
obligations under this Lease;

          7.2 Lessee has the requisite corporate power, authority and legal
right to execute, deliver and perform each and every term of this Lease, Lease
Supplement No. 1 and all other Lessee Documents, the same having been duly
authorized by all necessary corporate action of Lessee, and duly executed and
delivered by the authorized officers of Lessee and, assuming the due and proper
execution of the other party thereto, constitute legal, valid and binding
obligations of Lessee, enforceable against it in accordance with such terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and to general
principles of equity;

          7.3 The execution and delivery of this Lease, Lease Supplement No. 1
and all other Lessee Documents and the performance by Lessee of its obligations
under this Lease will not contravene or violate any provision of its charter or
Articles or Certificate of Incorporation or By-Laws or any contract, agreement,
indenture or other instrument either binding upon Lessee or to which it is
subject, nor will any such contract, agreement, indenture or other instrument
create a Lien (other than a Permitted Lien) with respect to this Lease or the
Aircraft;

          7.4 There is no United States federal or state law or governmental
regulation or order that would be contravened or violated by the execution,
delivery and performance of this Lease by Lessee or by the performance of any
term and condition contained herein, or in Lease Supplement No. 1 or in any of
the other Lessee Documents by Lessee;

          7.5 No consent of shareholders of Lessee or of any holders of
indebtedness of Lessee, and except for the registrations, recordings and filings
made or to be made with respect to the Aircraft under the Operative Documents
and except as required under FAR parts 125, 129, 135 or 91 (Section 91.54), no
consent or approval of, the giving of notice to, registration with, the
recording or filing of any document with, or the taking of any other action in
respect of any governmental authority, body,

                                        7


commission or agency or any other entity (except any such consents, approvals,
notices, registrations, recordings, filings or actions as have already been
accomplished by Lessee, and except for routine periodic and other reporting
requirements and renewals and extensions of exemptions, in each case to the
extent required to be given or obtained only after the date hereof), is or will
be required as a condition to the execution and validity of this Lease or as a
condition to or in connection with the authorization, execution, delivery or
performance hereof by Lessee, except those which have been duly made or
obtained, certified copies of which have been or will be delivered to Lessor,
prior to delivery of the Aircraft to Lessee. This Lease and its performance by
Lessee will not violate or contravene any law, regulation, order, judgment or
other similar obligation imposed by any government or regulatory agency, court,
administrative or legislative body applicable to Lessee or the Aircraft;

          7.6 Except as set forth in Schedule 1 hereto, there are no actions or
proceedings pending or, to Lessee's knowledge, threatened, against Lessee or any
of its subsidiaries or Affiliates before any court or administrative agency in
any jurisdiction that question Lessee's legal capacity to execute, deliver or
perform, or the binding effect or validity of, this Lease or any other Lessee
Document, or which might result in any material adverse effect on the assets,
liabilities, prospects, business, profit, condition or operations, financial or
otherwise, of Lessee or any of its subsidiaries or Affiliates;

          7.7 Lessee is fully familiar with all the covenants, terms,
conditions, agreements and warranties of this Lease and is not in default with
respect thereto;

          7.8 All Lessee's financial statements, other financial information and
tax returns that have heretofore been provided to Lessor in conjunction with
this transaction fairly and accurately represent the financial condition and
income of Lessee as of the dates given and, as of such dates, such financial
statements and other financial information did not contain any untrue statements
of a material fact, nor did they omit to state a material fact required to be
stated therein or necessary in order to prevent such financial statements or
other financial information from being misleading as of the dates thereof; and
except as otherwise has been disclosed in writing to Lessor, there is no fact,
situation or event, currently known to Lessee, which, so far as can be foreseen
by Lessee, (a) will materially adversely affect the properties, business,
assets, income, prospects or condition, financial or otherwise, of Lessee or (b)
has had a materially adverse effect on the properties, business, assets, income,
prospects or condition, financial or otherwise, of Lessee since the dates of
such financial statements, other financial information or tax returns;

                                        8


          7.9 All Federal income tax returns required to be filed by Lessee
have, in fact, been filed, and all taxes which are shown to be due and payable
in such returns have been paid. No material controversy in respect of additional
income taxes due is pending or to the knowledge of Lessee threatened, which
controversy if determined adversely would materially and adversely affect
Lessee's ability to perform its obligations hereunder. The provision for taxes
on the books of Lessee is adequate for all open years, and for its current
fiscal period;

          7.10 Lessee is not engaged in any transaction in connection with which
it could be subjected to either a civil penalty assessed pursuant to Section 502
(c) of ERISA or any tax imposed by Section 4975 of the Code; no material
liability of the Pension Benefit Guaranty Corporation has been or is expected by
Lessee to be incurred with respect to any employee pension benefit plan (as
defined in Section 3 of ERISA) maintained by Lessee; there has been no
reportable event (as defined in Section 4043 (b) of ERISA) with respect to any
such employee pension benefit plan. There has been no event of termination of
any such employee pension benefit plan by the Pension Benefit Guaranty
Corporation; and no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any such employee pension benefit plan;

          7.11 Lessee is an "air carrier" engaged in interstate air
transportation, as such term is used in Section 40102 (a)(2) of the
Transportation Code, and certificated under Section 44705 of the Transportation
code, is a "citizen of the United States" as such term is defined in Section
40102 (a)(15) of the Transportation Code, is authorized to operate Saab 340A
Aircraft pursuant to FAR Part 135 and possesses all necessary material
certificates, franchises, licenses, permits, authorizations, rights, concessions
and consents of or from all applicable governmental authorities or agencies of
the United States, including, without limitation, the FAA, that are required for
the operation of the Aircraft, routes flown by Lessee and the conduct of its
business as now being conducted;

          7.12 Lessee is not in material default and no condition exists that
with notice, or lapse of time or both would constitute a material default by
Lessee under any mortgage, deed of trust, indenture, security, loan agreement or
other instrument or agreement or evidence of any obligation for borrowed money,
to which Lessee is a party or by which any of its properties or assets may be
bound; and

          7.13 Lessee's chief executive office and the place where it keeps its
corporate records is at 2500 South High School Road, Indianapolis, Indiana
46251. The offices where it keeps its records

                                        9


concerning the Aircraft and all contracts relating thereto are located at 2500
South High School Road, Indianapolis, Indiana 46251 and at 5353 Massilon Road,
Route 241, Greensburg, Ohio 44232. The Aircraft will be based in either Akron,
Summit County, Ohio or Indianapolis, Marion County, Indiana, and the components
of the Aircraft which are not attached to or customarily installed on the
Aircraft, will be located in Indianapolis, Marion County, Indiana.

Section 8.  TERM.

     The Term of this Lease for the Aircraft shall commence on the Delivery Date
specified in Lease Supplement No. 1 and unless sooner terminated under the terms
hereof, shall extend through and expire on the first Business Day that occurs
prior to the tenth (10th) anniversary of the Delivery Date, as specified in
Paragraph E of Lease Supplement No. 1. The Term of this Lease is subject to
early termination pursuant to the provisions of SECTION 18 hereof, respecting
among other things, repossession of the Aircraft prior to the expiration of the
Term hereof.

Section 9.  RENT.

     9.1 Lessee covenants and agrees to pay Lessor, monthly in arrears, with
respect to the Aircraft, Base Rent for the Term on each Base Rent Payment Date
in the amounts set forth in the Lease Rent Schedule, which by this reference is
incorporated herein.

     9.2 Notwithstanding the expiration, cancellation or other termination of
Lessee's obligation to pay Base Rent hereunder, Lessee agrees to pay to Lessor,
or to any other Person entitled thereto, any and all Supplemental Rent promptly
as the same becomes due and owing. If Lessee fails to pay any Supplemental Rent,
Lessor or such other person entitled thereto shall have the rights, powers and
remedies provided for herein or in any other Lessee Document, or by law or in
equity or otherwise as if Lessee has failed to pay Base Rent.

     9.3 All payments of Rent as required by this SECTION 9 and any and all
other payments to Lessor shall be paid in immediately available funds without
Abatement on the date such Rent is due, by wire transfer to Lessor's account
with Skandinaviska Enskilda Banken, New York Branch, 245 Park Avenue, New York,
New York, 10167, account number 00004362, or such other place in the United
States as Lessor may, from time to time, designate.

     9.4 Any payment provided herein due on any day not a Business Day shall be
payable on the next preceding Business Day. No payment of Rent may be prepaid by
more than ten (10) days without the prior written consent of Lessor.

                                       10


          9.5 THIS LEASE IS A NET LEASE, AND LESSEE ACKNOWLEDGES AND AGREES THAT
LESSEE'S OBLIGATION TO PAY ALL RENT HEREUNDER, AND THE RIGHTS OF LESSOR IN AND
TO SUCH RENT, SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT TO
ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM OR RECOUPMENT
("ABATEMENTS") FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
ABATEMENTS DUE TO ANY PRESENT OR FUTURE CLAIMS OF LESSEE AGAINST LESSOR UNDER
THIS LEASE OR OTHERWISE, AGAINST SAAI OR ANY VENDOR OR MANUFACTURER, OR AGAINST
ANY OTHER PERSON FOR WHATEVER REASON, INCLUDING, WITHOUT LIMITATION: (A) any
default, misrepresentation, negligence, gross negligence, misconduct, willful
misconduct or other action or inaction of any kind by Lessor, any manufacturer
or seller of any component of the Aircraft or any other Person, or any set-off,
counterclaim, recoupment, defense or other right which Lessee may have against
Lessor, the manufacturers or anyone else for any reason whatsoever, (B) any
defect in the title, airworthiness, condition, design, operation or fitness for
use of, or any Lien or other restriction of any kind upon, all or any component
of the Aircraft, or any damage to or loss or destruction of, any part of the
Aircraft or any interruption or cessation in the use or possession thereof by
the Lessee for any reason whatsoever, (C) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessor, any manufacturer or
seller of any component of the Aircraft, Lessee or any other Person, (D) any
breach by Lessor of any representation, warranty or covenant of Lessor made
herein or in connection herewith, (E) the invalidity or lack of enforceability
or lack of due authorization or other infirmity of this Lease or the lack of
right, power or authority of Lessor to enter into this Lease, or (F) any other
circumstance, happening or event whatsoever, whether or not similar to any, of
the foregoing. Except as otherwise provided herein, Lessee hereby waives, to the
extent permitted by Applicable Law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease, except as herein
specifically provided or otherwise agreed between the parties hereto. If for any
reason whatsoever this Lease shall be terminated in whole or in part by
operation of law, except as specifically provided herein, Lessee nonetheless
agrees to pay to Lessor an amount equal to each installment of Base Rent at the
time such installment would have become due and payable in accordance with the
terms hereof had this Lease not been terminated in whole or in part. Each
payment of Rent made by Lessee shall be final and Lessee shall not seek to
recover all or any part of such payment from Lessor for any reason whatsoever.
Nothing in this SECTION 9.5 shall be construed to preclude Lessee from bringing
any suit at law or in equity which it would otherwise be entitled to bring for
breach of any representation, warranty, covenant or duty hereunder.

                                       11


          9.6 In the event Lessee shall fail to pay any Rent when due hereunder,
Lessee shall pay, to the extent permitted by law, to Lessor or to such other
Person entitled thereto, upon demand, as Supplemental Rent, interest on such
amount from the due date thereof to the date paid at a rate per annum (computed
on the basis of a 365- or 366-day year, as the case may be, and actual number of
days elapsed, including the first day but excluding the last day) equal to the
Overdue Rate.

Section 10. LIENS; NAMEPLATES.

          10.1 LIENS. Lessee and Lessor agree that for all purposes, this Lease
is, and is intended to be, a Lease, and that Lessee does not acquire any right,
title, interest or equity in or to the Aircraft, except the right to use it
under the terms provided herein. The Aircraft, excluding those additions to
which Lessee retains title, is and shall at all times, until released, remain
the sole and exclusive property of Lessor.

          Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, any part thereof,
title thereto or any interest therein, and in this Lease or in any Rent, except
(a) the rights of Lessee under the Operative Documents; (b) the rights under the
Operative Documents of the respective parties thereto; (c) the rights of others
under agreements or arrangements to the extent expressly permitted by SECTIONS
11.1 AND 11.2 hereof and similar arrangements for Parts owned by Lessee; (d) any
Lessor Liens; (e) Liens for taxes of Lessee either not yet delinquent or being
contested in good faith by appropriate and timely proceedings, so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of or interference with the use of the Aircraft, the Airframe or any Engine or
Propeller or any interest therein; PROVIDED, that Lessee shall maintain on its
books any reserves with respect thereto which may be required by GAAP; (f)
inchoate materialmen's, mechanics', workers', repairers', employees' or other
like Liens arising in the ordinary course of Lessee's business for amounts the
payment of which is either not yet delinquent or is being contested in good
faith by appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss or interference with the use of
the Aircraft, or any interest therein, PROVIDED, that Lessee shall maintain on
its books any reserves with respect thereto which may be required by GAAP; (g)
Liens arising out of the maintenance of court actions being defended in good
faith and on a timely basis and Liens arising out of judgments or awards against
Lessee with respect to which an appeal or proceeding for review is being
prosecuted in good faith and with respect to which there is secured a stay of
execution pending such appeal, or proceeding for review;

                                       12


and (h) any other Lien with respect to which Lessee provides a bond in an amount
and under such terms as are adequate in the reasonable opinion of Lessor;
PROVIDED, that the aggregate amount of liens which are not being contested and
are delinquent under paragraphs (e), (f), and (g) of this SECTION 10.1 for which
no bond or adequate (in the reasonable opinion of Lessor) security is provided
shall not at any time exceed $25,000.00. For the purpose hereof, the Liens set
forth in clauses (a) through (h) of this SECTION 10.1 shall be "Permitted
Liens". Lessee at its own cost and expense will protect and defend the Aircraft
and any interest therein against all Liens, other than Permitted Liens, and
legal processes of the creditors of the Lessee and other Persons, other than
Permitted Liens, and Lessee will promptly, at its own expense, take such action
as may be necessary to duly discharge any such Lien not permitted by the express
terms above if the same arises at any time.

          10.2 NAMEPLATE. Lessee shall attach to and keep upon the Airframe and
each Engine such labels, plates or markings furnished by Lessor as are deemed by
Lessor necessary or advisable to evidence Lessor's ownership thereof; and in any
event Lessee will cause to be affixed to and maintained on the Aircraft in a
location adjacent to and not less prominent than that of the Airworthiness
Certificate, and on each Engine a nameplate furnished by Lessor bearing the
following legend:

          "LEASED FROM LAMBERT LEASING, INC., AS FAA REGISTERED OWNER AND
          LESSOR"

such nameplate also to state, to the extent applicable, the type, manufacturer's
serial number and current registration number of the Airframe. Lessor and
Lessee agree that the nameplate shall be changed by Lessor to reflect any
transfer of the interests of Lessor in accordance with the Operative Documents.
Except as above provided, Lessee will not allow the name of any Person to be
placed on the Aircraft with any description that might be interpreted as a claim
of ownership or of security interest therein; PROVIDED, HOWEVER, that nothing
herein contained shall prohibit Lessee from placing its customary colors and
insignia and name on the Aircraft, or from substituting engines, propellers or
parts on the Aircraft in accordance with this Lease.

Section 11. REGISTRATION, MAINTENANCE AND OPERATION; POSSESSION, ETC.

          11. 1 REGISTRATION, MAINTENANCE, AND OPERATION.

                                       13


          At its own cost and expense (as between Lessee and Lessor), Lessee
shall:

     (i) forthwith upon delivery thereof, pursuant hereto, cooperate and take no
actions inconsistent with the actions of Lessor or any other Person to cause the
Aircraft to be duly registered under the laws of the United States of America at
all times in the name Lessor, and shall cooperate and take no actions
inconsistent with the actions of Lessor or any other Person to cause the
interest of Lessor, this Lease, Lease Supplement No.1 and supplements thereto
and hereto, to be duly recorded and maintained of record in each case until
release thereof pursuant to the Operative Documents, and to cooperate and not
interfere with Lessor or any other Person in causing any termination of the
Lease to be recorded at the FAA Aircraft Registry upon its expiration or
termination;

     (ii) promptly deliver to Lessor true copies of all applications made by
Lessee in relation to the Aircraft, of all certificates of registration issued
pursuant to such applications and of all notifications given pursuant to such
registrations (including without limitation, notification of changes in Lessee's
maintenance program) and shall not do, or permit to be done by any Person, any
act which might cause the Aircraft to be ineligible for registration with the
FAA, subject to Lessee obtaining such cooperation from Lessor and, to the extent
then so required, to Lessor remaining a "citizen of the United States" as
defined in Section 40102(a)(15) of the Transportation Code and not otherwise
taking any actions which cause the Aircraft to be ineligible for such
registration by reason of Lessor's interest therein;

     (iii) maintain, inspect, service, repair, overhaul and test the Aircraft
(including corrosion control) in compliance with the Maintenance Program, but in
any event so as to keep the Aircraft (A) in good operating condition, (B) in the
same condition as when delivered to Lessee hereunder, ordinary wear and tear
excepted, and in a condition suitable for airline commercial use (but with no
broken, damaged or missing items or components except obsolete parts and/or
parts undergoing replacement or scheduled to be replaced), (C) in such a manner
as may be necessary to maintain in full force all warranties of manufacturers
and suppliers of the Aircraft and its components, in accordance with their
respective terms, and (D) in such operating condition as may be necessary to
enable the airworthiness certification of the Aircraft to be maintained in good
standing at all times under the Transportation Code and the Aircraft to be
eligible for operation in regularly scheduled United States commercial passenger
service under FAR Part 135 or successor provisions, as may be applicable, but in
any event in a manner, to an extent and with a standard of care and frequency of
maintenance not less than that employed by Lessee with respect

                                       14


to similar aircraft and engines owned or leased by it and without regard to any
scheduled return of the Aircraft pursuant hereto, which practices shall at all
times be at or above the standard of the industry for maintenance of similar
aircraft; PROVIDED, HOWEVER, that Lessee shall not be deemed to be in violation
of its obligations under this clause (iii) with respect to any minor violation
which is cured promptly after Lessee becomes aware of it, and in any event not
later than sixty (60) days after Lessee becomes aware of it, so long as such
minor violations do not affect or impair the registration or eligibility for
registration of the Aircraft; and maintain all records, logs and other
materials required by the appropriate authorities of the jurisdiction where the
Aircraft is registered to be maintained in respect of the Aircraft, and permit
Lessor to examine such records at any reasonable time during normal business
hours;

     (iv) upon Lessor's request, promptly furnish to Lessor notification of any
material changes in the Lessee's Maintenance Program, and such other information
as may be required to enable Lessor to file any reports required by any
Governmental Body as a result of the interests of Lessor in the Aircraft;

     (v) pay and provide for all electric power, oil, fuel and lubricant
consumed by and required for the operation of the Aircraft, and all repairs,
parts and supplies necessary therefor;

     (vi) except as otherwise provided herein, comply with all applicable
mandatory (A) FAA airworthiness directives, orders and other requirements of FAR
Part 135 or successor provisions, as may be applicable, (B) manufacturer service
bulletins and service letters or similar requirements affecting the Aircraft,
and (C) rules and regulations of the FAA relating to the Aircraft, and take all
steps necessary so that the Aircraft at all times during the Term possesses a
valid FAA Airworthiness Certificate in good standing and that the Aircraft
remains eligible for operation in regularly scheduled United States commercial
passenger service under FAR Part 135 or successor provisions, as may be
applicable, except as provided for in SECTION 12.2 (vi);

     (vii) conform with any Applicable Law requiring alteration of the Aircraft
(or obtain a waiver of conformance therewith at no expense to Lessor) and
maintain the same in proper operating condition under such Applicable Law;
PROVIDED, HOWEVER, that Lessee may, with the consent of Lessor, in good faith
contest the validity or application of any such Applicable Law, after having
delivered to Lessor written notice stating the facts with respect thereto, and
so long as such contest does not subject Lessor to criminal liability and does
not subject the Aircraft or any interest therein to any material danger of sale,
forfeiture or loss;

                                       15


     (viii) cause the Aircraft to be operated only by duly-qualified, currently
certificated pilots having the minimum total pilot hours required by any policy
of insurance required to be carried hereunder and for such certification by the
FAA;

     (ix) not maintain, use, operate or locate the Aircraft (A) in violation of
any Applicable Law, or in violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any Governmental Body; (B) in
any area excluded from coverage by any insurance in effect or required to be
maintained by the terms of SECTION 13, except in the case of requisition by the
United States Government, where Lessee obtains, for the benefit of Lessor,
indemnity in lieu of such insurance from the United States Government against
the risks and in the amounts required by SECTION 13 covering such area; (C)
outside of, or to any destination outside of the United States, except (1) in
connection with the delivery of the Aircraft or any part thereof to the
Manufacturer for any service, repair, modification or alteration required or
permitted hereunder, to the extent not reasonably capable of being performed in
the United States, (2) when the Aircraft is operated or used under contract with
the United States Government under which contract the United States Government
assumes liability for any damage, loss, destruction or failure to return
possession of the Aircraft at the end of the term of such contract and for
injury to persons or damage to property of others, or (3) to destinations within
Canada, Mexico and the Caribbean, so long as the total annual operating time of
the Aircraft (on a calendar year basis) outside of the continental limits of the
United States shall not exceed fifty percent (50%) of the total annual operating
time of the Aircraft for any calendar year prior to January 1, 1999 and to the
extent that such use does not violate the restrictions set forth in SECTION 11.1
(xi) hereof;

     (x) perform in due course terminating actions with respect to any part of
the Aircraft affected by an FAA airworthiness directive if terminating action is
performed with respect to similar items of aircraft or equipment owned or leased
by Lessee, except for those airworthiness directives whose final compliance date
is later than twelve (12) months after the expiration of the Term of this Lease,
and not defer maintenance or replacement of parts, preventative maintenance
(including corrosion control) or implementation of FAA airworthiness directives
that Lessee in accordance with its ordinary practice would have performed
without regard to any scheduled return of the Aircraft pursuant hereto, or
install replacement components with excessive wear, or except as otherwise
provided in SECTION 19, exchange any Engine, Propeller, landing gear or any
other Part of the Aircraft about to be returned to Lessor for other aircraft
components in Lessee's possession for use on aircraft that will remain in
Lessee's or any Affiliate of

                                       16


Lessee's possession after such return in order to reduce or avoid future
maintenance requirements; and

     (xi) not allow the Aircraft Base for the Aircraft at any time to be a
location other than Indianapolis, Indiana or Akron, Ohio without thirty (30)
days' prior written notice to Lessor.

          11.2 POSSESSION. Except as provided in this SECTION 11 or SECTION 20,
Lessee will not, without the prior written consent of Lessor, sublease or
otherwise in any manner deliver, transfer or voluntarily relinquish possession,
or enter into any contract or arrangement obligating it to deliver, transfer or
relinquish possession of the Airframe, any part thereof, any Engine or Propeller
or install any part of the Airframe, any Engine or Propeller or permit any part
of the Airframe, any Engine or Propeller to be installed, on any airframe other
than the Airframe, except as provided in this SECTION 11 or SECTION 20, except
that so long as no Default or Event of Default exists, and so long as the action
to be taken does not affect Lessor's title to or interest in the Aircraft,
Lessee may, without the prior written consent of Lessor:

          (i) subject any Engine or Propeller to normal interchange or pooling
agreements or arrangements customary in the airline industry applicable to other
similar engines or propellers operated by Lessee and entered into by Lessee in
the ordinary course of its business; PROVIDED, (A) if Lessor's title to any such
Engine or Propeller is divested pursuant to any such agreement or arrangement or
(B) if Lessee relinquishes possession of such Engine or Propeller for a
continuous period of more than one hundred eighty (180) consecutive days, there
shall be deemed to be an Event of Loss with respect to such Engine or Propeller
and Lessee shall comply with SECTION 12.4 in respect thereof;

          (ii) deliver possession of the Aircraft, or any component thereof, to
the manufacturer thereof or its authorized representatives for testing or other
similar purpose or to any organization for service, repair, maintenance or
overhaul work on the Aircraft or any part thereof or for alterations or
modifications in or additions to the Aircraft to the extent required or
permitted by the terms of this Lease;

          (iii) install an Engine or a Propeller on an airframe owned by Lessee
free and clear of all Liens, except (A) Liens of the type permitted under
SECTIONS 10.1 (e), (f) AND (g), (B) the rights of other U.S. Certificated Air
Carriers under normal interchange agreements that are customary in the airline
industry and entered into by Lessee in the ordinary course of its business, so
long as such agreements do not contemplate, permit or require the transfer of
title to such airframe or the engines or the

                                       17


propellers installed thereon and (C) the Lien of any mortgage which expressly
and effectively provides that each Engine or Propeller shall not become subject
to the Lien thereof, notwithstanding the installation thereof on an airframe or
engine subject to the Lien of such mortgage, unless and until Lessee shall
become the owner of such Engine or Propeller free of the interests of Lessor
therein under this Lease.

          (iv) install an Engine or a Propeller on an airframe leased to Lessee
or purchased by Lessee subject to a conditional sale or other security
agreement, PROVIDED (A) such airframe is free and clear of all Liens except the
rights of the parties to the lease or conditional sale or other security
agreement and their purchasers, mortgagees and encumbrancers covering such
airframe and except Liens of the type permitted by clauses (A) and (B) of
subparagraph (iii) of this SECTION 11.2; and (B) such lease, conditional sale or
other security agreement expressly and effectively provides that each Engine or
Propeller shall not become subject to the Lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof on any
airframe subject to the Lien of such lease, conditional sale or other security
agreement, unless and until Lessee becomes the owner of such Engine or Propeller
free of the interests of Lessor therein under this Lease; or

          (v) transfer possession of the Airframe or any Engine or Propeller to
the United States Government pursuant to a sublease, a copy of which shall be
promptly furnished to Lessor, PROVIDED that such sublease (including, without
limitation, any option of the sublessee to renew or extend) shall not extend
beyond the end of the Term of the Lease.

          Notwithstanding anything to the contrary in this SECTION 11.2:

          (1) the rights of any transferee or sublessee who receives possession
by reason of a transfer permitted by this SECTION 11.2 (other than a transfer
of an Engine or Propeller which is deemed an Event of Loss) are and shall be
EXPRESSLY subject and subordinate to all the terms of this Lease during the
Term hereof, including without limitation, in each instance, Lessor's rights to
repossession pursuant to SECTION 18, and to avoid such transferee's or
sublessee's right to possession upon such repossession;

          (2) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if such transfer or
sublease had not occurred; and

                                       18


          (3) No interchange agreement, sublease or other relinquishment of
possession of the Airframe, any Engine or Propeller shall in any way affect the
registration of the Aircraft with the FAA, or discharge or diminish any of
Lessee's obligations to Lessor or constitute a waiver of any of Lessor's rights
and remedies hereunder. If a lease, conditional sale, or other security
agreement complies with clause (B) of subparagraph (iv) of this SECTION 11.2,
and the lease or conditional sale or other security agreement covering such
airframe also covers an engine or engines or propeller or propellers owned by
the lessor under such lease or subject to a security interest in favor of such
secured party under such conditional sale or other security agreement, Lessor
will not acquire or claim, as against such lessor or secured party, any right,
title or interest in any such engine or propeller as the result of such engine
or propeller being installed on the Airframe or any propeller being attached to
any Engine at any time while such engine or propeller is subject to such lease
or conditional sale or other security agreement and owned by such lessor or
subject to a security interest in favor of such secured party. Lessor also
hereby agrees for the benefit of the mortgagee under any mortgage complying with
clause (C) of subparagraph (iii) of this SECTION 11.2 that Lessor will not
acquire or claim, as against such mortgagee, any right, title or interest in any
engine or propeller subject to the lien of such mortgage as the result of such
engine being installed on the Airframe or such propeller being installed on the
Airframe or any Engine at any time while such engine or propeller is subject to
the lien of such mortgage.

          11.3 REPORTS AND RECORDS. Throughout the Term, Lessee shall keep
accurate, complete and current records in English complying with the
requirements of the FAA so as to enable operation of the Aircraft under FAR Part
135 or successor provisions, as may be applicable, and any other applicable
regulations from time to time in force; with recommendations of Manufacturer,
GE, Dowty or any other manufacturer or supplier of any Aircraft component; and
with good commercial airline practice of all maintenance carried out with
respect to the Aircraft, and subject to the terms and conditions in
SECTION 17.1, shall permit Lessor, or any authorized representative of Lessor,
to examine such records requested by them at any reasonable time.

          11.4 REPLACEMENT OF PARTS. Lessee, at its own cost and expense, will
promptly replace all Parts which are installed in or attached to the Aircraft
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever except as provided in SECTION 11.6. In addition, Lessee may,
in the ordinary course of maintenance, service, repair, overhaul or testing, at
its own cost and expense, remove any Parts, whether or not worn out, lost,
stolen, destroyed, seized,

                                       19


confiscated, damaged beyond repair or permanently rendered unfit for use;
PROVIDED that Lessee, except as provided in SECTION 11.6 shall, at its own cost
and expense, repair and reinstall or replace such Parts as promptly as possible.
All replacement Parts shall be free and clear of all Liens (except for
Permitted Liens and interchange and pooling arrangements to the extent permitted
by SECTIONS 10.1 AND 11.2); shall comply with the safety, general operating and
flight regulations of the FAA and other Governmental Bodies having jurisdiction
over the Lessee, the Aircraft or any component of the Aircraft; and shall be in
as good operating condition as, and shall have a value, utility and remaining
useful life at least equal to, the Parts replaced based upon the assumption
that such replaced Parts were in the condition and repair required to be
maintained by the terms hereof. Lessee shall maintain all required safety
equipment and instruments on the Aircraft and its component parts.

          All Parts at any time removed from the Airframe or any Engine or
Propeller shall remain the property of Lessor no matter where located, until
such time as such Parts are replaced by Parts that have been incorporated or
installed in or attached to the Airframe or any Engine or Propeller and that
meet the requirements for replacement Parts specified above. Immediately upon
any replacement Parts becoming incorporated or installed in or attached to the
Airframe or any Engine or Propeller as above provided, without further act, (i)
title to the replaced Part shall thereupon vest in Lessee, free and clear of the
rights of Lessor, and shall no longer be deemed a Part hereunder, (ii) title to
such replacement Part shall thereupon vest in Lessor (subject only to Permitted
Liens and interchange and pooling arrangements to the extent permitted by
SECTIONS 10.1 AND 11.2), and (iii) such replacement Part shall become subject to
this Lease and be deemed a part of the Airframe or any Engine or Propeller for
all purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Airframe or any Engine or Propeller.

          11.5 POOLING OF PARTS. Any Part removed from the Airframe or any
Engine or Propeller as provided in SECTION 11.2 may be subjected by Lessee to a
normal interchange or pooling arrangement customary in the airline industry
entered into in the ordinary course of Lessee's business with other U.S.
Certificated Air Carriers; PROVIDED that no such agreement or arrangement
contemplates or requires the transfer of title of such Part and PROVIDED that
the Part replacing such removed Part shall be incorporated or installed in or
attached to the Airframe or any Engine or Propeller in accordance with SECTION
11.4 as promptly as possible after the removal of such removed Part. In
addition, any replacement Part when incorporated or installed in or attached to
the Airframe or any Engine or Propeller in accordance with SECTION

                                       20


11.4 may be owned by a U.S. Certificated Air Carrier subject to such normal
pooling arrangement; PROVIDED that Lessee, at its expense, as promptly
thereafter as possible, either (i) causes title to the replacement Part to vest
in Lessor in accordance with SECTION.11.4, by Lessee acquiring title thereto and
transferring title thereto to Lessor, free and clear of all Liens except
Permitted Liens in accordance with the last sentence of SECTION 11.4, or (ii)
replaces such replacement Part by incorporating or installing in or attaching to
the Airframe, any Engine or Propeller, a further replacement Part owned by
Lessee, free and clear of all Liens except Permitted Liens and by causing title
to the replacement Part to vest in Lessor in accordance with SECTION 11.4.

          11.6 ALTERATIONS, MODIFICATIONS AND ADDITIONS. Except as otherwise
required by SECTION 11.1 or by this SECTION 11.6, Lessee shall not make any
alterations, modifications or additions to the Aircraft without the prior
written consent of Lessor which approval shall not be unreasonably withheld or
delayed, PROVIDED, HOWEVER Lessee shall make, or shall cause to be made, at no
expense to Lessor, such alterations and modifications in and additions to the
Aircraft as may be required from time to time by the FAA or other Governmental
Body having jurisdiction or as may be required by Applicable Law as a condition
to the use of the Aircraft in ordinary commercial passenger service; and
FURTHER, PROVIDED, Lessee may, at its own expense and subject to compliance with
the requirements of Revenue Procedure 79-48, 1979-2 C.B. 529 from time to time
make such alterations, modifications or additions to the Aircraft as Lessee may
deem desirable in the proper conduct of its business, so long as such
alteration, modification or addition does not diminish the value, utility or
remaining useful life of such item, or impair the condition and airworthiness
thereof, below the value, utility, remaining useful life, condition and
airworthiness thereof immediately prior to such alteration, modification or
addition based upon the assumption that such item was then of the value and
utility and in the condition and airworthiness required to be maintained by the
terms of this Lease; but if the cost of such alteration, modification or
improvement exceeds $75,000 and is not required by this SECTION 11 and is
neither safety-related nor severable as defined in Section 4(4).02 of Revenue
Procedure 75-21, as modified by Revenue Procedure 79-48, and is not described in
subparagraph (ii) of Section 4(4).03(C) of Revenue Procedure 75-21, 1975-1
C.B. 715 as modified by Revenue Procedure 79-48, such alteration, modification
or addition shall not be made without the prior written consent of Lessor, and
otherwise in compliance with the requirements of Section 4(4).03(C) of Revenue
Procedure 75-21, as modified by Revenue Procedure 79-48. Lessor may condition
such consent on the agreement by Lessee at its sole expense to remove such
alterations, modifications or additions and to restore the Aircraft to its
original condition upon the expiration or

                                       21


termination of this Lease. Title to all Parts incorporated in the Aircraft as
the result of any alteration, modification or addition made as contemplated in
this SECTION 11.6 shall, except as provided in Revenue Procedure 79-48, without
further act, vest in Lessor, and in either case, shall become subject to this
Lease. So long as no Default or Event of Default exists, or if such Default
exists but has not matured into an Event of Default and Lessor has not withheld
its consent (which Lessor agrees it will not unreasonably withhold), upon a
written request from Lessee, Lessee may remove any such Part if (i) such Part is
in addition to, and not in replacement of or in substitution for, any Part
originally incorporated or intended to be incorporated in the Aircraft at the
time of delivery thereof hereunder or any Part in replacement of, or
substitution for, any such original Part, unless such original Part is removed
and returned pursuant to SECTION 11, (ii) such Part is not required to be
incorporated in the Aircraft pursuant to SECTION 11 OR 19, and (iii) such Part
can be removed without diminishing or impairing the value, utility, appearance,
remaining useful life, condition or airworthiness which the Aircraft would have
had at such time had such alteration, modification or addition not occurred.
Upon any such removal, title to such Part shall, without further act, vest in
the Lessee, free of Lessor Liens, and such Part shall no longer be deemed to be
a Part hereunder. Any Part not so removed prior to the return to Lessor
hereunder of the Aircraft shall remain the property of Lessor and subject to
this Lease.

          Lessee shall provide Lessor not less than one hundred eighty (180)
days prior to the end of the Term, with a list of all Parts which Lessee
believes it is entitled to and intends to remove at such expiration date or
termination. Lessor shall have the option, exercisable upon written notice given
to Lessee not more than ninety (90) days and not less than thirty (30) days
prior to the expiration of this Lease, or upon termination of this Lease under
SECTION 18, to purchase for cash any and all such Parts which may be owned by
Lessee at the expiration or other termination of this Lease for an amount equal
to the Fair Market Sale Value thereof at such time.

          Lessee shall cause all Parts owned by it during the Term of this Lease
to remain free and clear of all Liens except Permitted Liens.

Section 12. RISK OF LOSS: EVENT OF LOSS AND CONDEMNATION.

          12.1 RISK OF LOSS. Upon execution and delivery of Lease Supplement No.
1 and commencing on the Delivery Date and continuing until the expiration or
earlier termination of this Lease and the earlier of either (i) the return by
Lessee of the Aircraft to

                                       22


Lessor subject to SECTION 19.1, or (ii) commencement of the storage period set
forth in SECTION 19.6, (except in connection with a cancellation pursuant to
SECTION 18), Lessee assumes the entire risk of loss of the Aircraft or any part
thereof or of any Event of Loss as defined below or any liability arising out of
the operation, maintenance, use, storage, overhaul, repair, transport or
possession of the Aircraft or any other cause whatsoever, and no Event of Loss
or liability shall relieve Lessee of its obligations hereunder except as
provided herein.

          12.2 EVENT OF LOSS - DEFINITION. For all purposes of this Lease, any
of the following events with respect to the Aircraft, Airframe, or any Engine or
Propeller Leased hereunder shall be an Event of Loss:

     (i) loss of such property or the use thereof due to theft or disappearance
for a period greater than forty-five (45) consecutive days or extending beyond
the end of the Term;

     (ii) loss of such property or the use thereof due to destruction, damage
beyond repair or rendition of such property permanently unfit for normal use by
Lessee for any reason whatsoever;

     (iii) any damage to such property which should or does result in the
receipt of insurance proceeds under the policies of insurance required to be
maintained pursuant to SECTION 13 hereof with respect to such property on the
basis of a total loss or constructive total loss;

     (iv) the condemnation, taking, confiscation or seizure of, or requisition
of title to such property by any Governmental Body;

     (v) the condemnation, taking, confiscation or seizure of the use of such
property for a period in excess of ninety (90) consecutive days or a period
extending beyond the end of the Term, other than a requisition for use by the
United States Government that does not continue beyond the end of the Term;
PROVIDED that pursuant to such requisition the United States Government agrees
to make payments sufficient in amount for the discharge of the obligations of
Lessee hereunder to pay Rent, or Lessee provides other security reasonably
acceptable to Lessor if the United States Government does not so agree to make
such payments, and PROVIDED, FURTHER, that the United States Government agrees
to maintain the Aircraft to a standard which is at least as rigorous as set
forth in this Lease;

     (vi) as a result of any rule, regulation, order or other action (generally
applicable to aircraft of the same type as the Aircraft) by the FAA, the
Department of Transportation or other

                                       23


Governmental Body (including any court) having jurisdiction, the use of such
property in the normal course of interstate air transportation of persons is
prohibited for a period of six (6) consecutive months or, if earlier, beyond the
end of the Term, unless Lessee, prior to the expiration of such six (6)
consecutive month period (or such shorter period extending beyond the end of the
Term), undertakes and is diligently carrying forward all steps necessary or
desirable to permit the normal use of such property by Lessee or, in any event,
if such use is prohibited for a period of twelve (12) consecutive months;

     (vii) with respect to the Aircraft, Airframe or any Engine or Propeller,
the operation or location thereof, while under requisition for use by the United
States Government, in any area excluded from coverage by any insurance policy in
effect with respect thereto required by SECTION 13 hereof if Lessee is unable to
obtain indemnity or insurance in lieu thereof in a manner reasonably
satisfactory to Lessor from the United States Government; or

     (viii) the FAA deregisters the Aircraft (other than as a result of (A) the
failure of Lessor to cooperate with Lessee to the extent reasonably required to
maintain United States registration of the Aircraft, (B) to the extent then so
required for the purpose of maintaining United States registration of the
Aircraft, the failure of Lessor to remain a "citizen of the United States" as
defined in Section 40102(a)(15) of the Transportation Code, or (C) Lessor
otherwise causing the Aircraft to be ineligible for such registration by reason
of its interest therein) and such deregistration continues for a period of one
hundred eighty (180) consecutive days.

          An Event of Loss with respect to the Aircraft shall also be deemed to
occur if an Event of Loss occurs with respect to the Airframe of the Aircraft.

          12.3 EVENT OF LOSS WITH RESPECT TO THE AIRFRAME. Upon the occurrence
of an Event of Loss with respect to the Airframe, or the Airframe and the
Engines or engines or Propellers or propellers then installed on the Airframe,
Lessee shall forthwith (and, in any event, within three days after such
occurrence) give Lessor written notice of such Event of Loss, and on or prior to
the earlier of (i) the ninetieth (90th) day following the day of occurrence of
such Event of Loss and (ii) the date of receipt of insurance payments in respect
of such occurrence, Lessee shall pay:

          (1) to Lessor the sum of (A) the Stipulated Loss Value for the
Aircraft as set forth in the Stipulated Loss Value Table computed using the Base
Rent Payment Date immediately preceding the date on which such Event of Loss
occurred (or, if such Event of

                                       24


Loss occurred on a Base Rent Payment Date, computed using such Base Rent Payment
Date or, if such Event of Loss occurs before the First Base Rent Payment Date,
computed using the Delivery Date), plus (B) interest on the amount determined
pursuant to clause (A) at an effective rate per annum equal to the Base Rate
computed for the actual number of days elapsed (on the basis of a 365-or 366-day
year as the case may be) from the date of the Event of Loss to the date of
payment of such Stipulated Loss Value, including the date of the Event of Loss
but excluding the date of payment; and

          (2) to Lessor the sum of any Supplemental Rent otherwise due and
payable on or before such payment date.

If all such Stipulated Loss Values and all such other amounts, including,
without limitation, any unpaid or accrued Rent, are paid in full, (x) the
obligation of Lessee to pay all succeeding payments of Base Rent after the Event
of Loss hereunder with respect to the Aircraft shall terminate on the Base Rent
Payment Date immediately preceding the date of such Event of Loss or as of the
Base Rent Payment Date if such Event of Loss occurs on the Base Rent Payment
Date, and (y) provided that if (or when) no Default or Event of Default exists,
Lessor will transfer or cause to be transferred to Lessee, Lessor's title to the
Aircraft, including the Engines and Propellers or a number of engines and
propellers equal to the number of engines and propellers (which are not Engines
and Propellers) installed on the Aircraft at the time such Event of Loss
occurred, free and clear of Lessor Liens, and Lessee shall be subrogated to all
claims, if any, of Lessor against third parties for damage to or loss of the
Aircraft subject to such Event of Loss (other than against insurers under
insurance policies paid for by Lessor). Such transfer to Lessee shall not affect
or limit in any way any obligations of Lessee hereunder unless specifically
discharged by such payment of Stipulated Loss Value and Rent.

          12.4 EVENT OF LOSS WITH RESPECT TO AN ENGINE OR PROPELLER. Upon the
occurrence of an Event of Loss with respect to an Engine or Propeller in any
case where the provisions of SECTION 12.3 are not applicable, Lessee shall give
Lessor prompt written notice thereof and shall, within thirty (30) days after
the occurrence of such Event of Loss, duly convey to Lessor, as replacement for
the Engine or Propeller with respect to which such Event of Loss occurred, title
to another engine or propeller of the same or improved make, model and
manufacturer (or engine or propeller of at least the equivalent utility, value
and remaining useful life and suitable for installation and use on the Airframe)
free and clear of all Liens whatsoever (except Permitted Liens) and having a
value, remaining useful life and utility at least equal to, and being in as good
operating condition as, the Engine or

                                       25


Propeller with respect to which such Event of Loss occurred, but in all events
in at least as good condition and repair as required by the terms hereof
immediately prior to the occurrence of such Event of Loss and of the same or
improved make, model and manufacturer as any other Engine or Propeller, as
applicable; PROVIDED, HOWEVER, that if Lessee does not then have reasonably
available a Replacement Engine or Replacement Propeller, as the case may be,
conforming to the requirements set forth in this SECTION 12.4, then Lessee shall
(x) within ninety (90) days after the occurrence of such Event of Loss, either
(i) notify Lessor that Lessee has made arrangements (which arrangements shall be
reasonably satisfactory to Lessor) to obtain a Replacement Engine or Replacement
Propeller, as the case may be, conforming to the requirements of this SECTION
12.4 and shall obtain such Replacement Engine or Replacement Propeller within
ninety (90) days after Lessee shall have notified Lessor of such arrangements,
or (ii) place an order for a Replacement Engine or Replacement Propeller
conforming to the requirements of this SECTION 12.4, from the manufacturer of
such Replacement Engine or Replacement Propeller, PROVIDED, that if Lessee
obtains a Replacement Engine or Replacement Propeller conforming to the
requirements of this SECTION 12.4 from another Person prior to the delivery of
the Replacement Engine or Replacement Propeller ordered from the manufacturer
thereof, Lessee may use the Replacement Engine or Replacement Propeller obtained
from such Person in lieu of the Replacement Engine or Replacement Propeller
ordered from the manufacturer, and (y) promptly upon obtaining such Replacement
Engine or Replacement Propeller from the manufacturer or other Person, duly
convey to Lessor, as replacement for the Engine or Propeller with respect to
which such Event of Loss occurred, title to such Replacement Engine or
Replacement Propeller (free and clear of all Liens whatsoever (except Permitted
Liens)). In such case, Lessee, at its own expense, will prior to or at the time
of any such conveyance (i) furnish to Lessor a warranty (as to title) bill of
sale, in form and substance reasonably satisfactory to Lessor, with respect to
such Replacement Engine or Replacement Propeller, (ii) cooperate in the
execution and delivery of a supplement hereto, in form and substance
satisfactory to Lessor, subjecting such Replacement Engine or Replacement
Propeller to this Lease, to be duly executed by Lessee and recorded pursuant to
the Transportation Code, (iii) furnish or cause to be furnished to Lessor such
evidence of Lessee's (or other party's) title to such Replacement Engine or
Replacement Propeller (including, if requested, an opinion of Lessee's (or other
party's) counsel and of compliance with the insurance provisions of SECTION 13
with respect to such Replacement Engine or Replacement Propeller as Lessor may
reasonably request, and with an opinion of Lessee's (or other party's) counsel
to the effect that title to such Replacement Engine or Propeller, has been duly
conveyed to Lessor free and clear of all Liens whatsoever (except any Lessor
Liens) and is duly leased hereunder (which legal opinions may contain

                                       26


qualifications and statements of reliance reasonably satisfactory to Lessor),
(iv) furnish Lessor a certificate signed by a duly authorized financial officer
or executive of Lessee certifying that, upon consummation of such replacement,
no Default or Event of Default will exist hereunder; (v) furnish such documents
and evidence as Lessor, or its counsel may reasonably request in order to
establish the consummation of the transactions contemplated by this SECTION
12.4, the taking of all corporate proceedings in connection therewith and
compliance with the conditions set forth in this SECTION 12.4, in each case in
form and substance satisfactory to such party, (vi) file and record such Uniform
Commercial Code financing statements covering such Replacement Engine or
Replacement Propeller as may be reasonably requested by Lessor, (vii) assign or
cause to be assigned to Lessor all existing warranties as of the date of
transfer to the extent such warranties are freely assignable, with respect to
such Replacement Engine or Replacement Propeller, subject to Lessee's right to
exercise these rights, so long as no Event of Default has occurred, and (viii)
take such other action as Lessor may reasonably request in order that such
Replacement Engine or Replacement Propeller be duly and properly subject to the
Lease and leased hereunder to the same extent as the Engine or Propeller
replaced thereby. Upon full compliance by Lessee with the terms of this SECTION
12.4, Lessor will cause the appropriate party to transfer to Lessee, at Lessee's
expense (i) title to the Engine or Propeller with respect to which such Event of
Loss occurred and (ii) all claims for damage to such Engine or Propeller, if
any, against third Persons (other than against insurers under insurance policies
paid for by Lessor) arising from the Event of Loss; and Lessor shall, at
Lessee's expense, execute and deliver appropriate bills of sale confirming such
transfer. Any such transfer of title shall be on an "AS-IS" and "WHERE-IS" basis
without recourse or warranty, express or implied except that such Engine or
Propeller is free and clear of all Lessor Liens. Lessee shall be subrogated to
all claims of Lessor, if any, against third parties (other than insurers under
insurance policies paid for by Lessor) for damage to or loss of the Engine or
Propeller being replaced. For all purposes hereof, each such Replacement Engine
or Replacement Propeller shall be deemed part of the property Leased hereunder,
shall be deemed an "Engine" or "Propeller" as defined herein and shall be deemed
part of the Aircraft to the same extent as the Engine or Propeller replaced
thereby. An Event of Loss covered by this SECTION 12.4 shall not result in any
reduction in Base Rent.

          12.5 APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES OR OTHERS.
Any payments (other than insurance proceeds the application of which is provided
for in SECTION 13) received at any time by Lessor or Lessee from any
Governmental Body or other person with respect to an Event of Loss, to the
extent of the then applicable Stipulated Loss Value set forth in the Stipulated
Loss

                                       27


Value Table whether resulting from the condemnation, confiscation, theft or
seizure of, or requisition of title to or use of, the Airframe, or any Engine or
Propeller (other than a requisition for use by the United States Government not
constituting an Event of Loss), or otherwise, if paid to Lessee shall be
immediately paid over to Lessor, PROVIDED that Lessee will endeavor to have such
payment made directly to Lessor, and in any event, such payment will be applied
as follows:

          (i) if any such payments are received with respect to the Airframe, or
the Airframe and the Engines or engines, Propellers or propellers then installed
on the Airframe, so much of such payments as shall not exceed the Stipulated
Loss Value required to be paid by Lessee pursuant to SECTION 12.3 shall be
applied in reduction of Lessee's obligation to pay such Stipulated Loss Value,
if not already paid by Lessee, or, if already paid by Lessee, shall be applied
to reimburse Lessee for its payment of such Stipulated Loss Value, and the
balance, if any, of such payments remaining thereafter will, after Lessee has
paid all other Rent due and owing, be paid to the order of Lessor if received
from a Governmental Body as a result of a requisition of title to the Airframe
or any Engine or Propeller, or from a Governmental Body other than the United
States Government with respect to a requisition of use of the Airframe or any
Engine or Propeller, and otherwise to Lessee; and

          (ii) if such payment is received with respect to an Engine or
Propeller under the circumstances contemplated by SECTION 12.4, all such
payments shall be paid over to Lessee, PROVIDED, Lessee has fully performed the
terms of this SECTION 12 with respect to the Event of Loss for which such
payments are made, and FURTHER PROVIDED, no Default or Event of Default exists
and such payments shall be applied (if not earlier paid to Lessee) to the
purchase price of such Replacement Engine or Propeller at delivery thereof to
Lessor under SECTION 12.4.

          12.6 REQUISITION FOR USE BY UNITED STATES GOVERNMENT WITH RESPECT TO
THE AIRFRAME AND ANY ENGINE OR PROPELLER INSTALLED THEREON. If the United States
Government requisitions the use of the Airframe, or the Airframe and the Engines
or engines and Propellers or propellers then installed on the Airframe, during
the Term, and such requisition does not constitute an Event of Loss, all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from the United States Government for the
use of the Airframe and Engines or engines and Propellers or propellers during
the Term shall be paid over to, or retained by, Lessee, PROVIDED no Default or
Event of Default exists. If the Airframe, or the Airframe and Engines or engines
and Propellers or propellers, are not scheduled

                                       28


to be returned by the United States Government prior to the end of the Term,
Lessor, upon notice given not less than thirty (30) days before the end of the
Term, may elect that an Event of Loss hereunder be deemed to have occurred on
the last day of the Term and Lessee shall, upon expiration of the Term, pay the
Stipulated Loss Value with respect to the Aircraft on such date. Upon receipt of
payment of Stipulated Loss Value and all Rent and other amounts due and payable
under the Lease, Lessor shall transfer or shall cause to be transferred to
Lessee title to the Aircraft free of all Lessor Liens. If Lessor has elected to
treat such requisition for use as an Event of Loss, upon payment by the Lessee
of the Stipulated Loss Value and all other Rent due and owing, all payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe, Engines and Propellers after expiration of the Term shall be paid
over to, or retained by, Lessee. If after expiration of the Term, Lessor has not
elected to treat such requisition for use as an Event of Loss, all payments
received by Lessor or Lessee from the United States Government for the use of
the Aircraft before the expiration of the Term, shall be paid to or retained by
Lessee, PROVIDED, HOWEVER, upon the expiration of the Term, Lessor shall give
notice to Lessee stating that this Lease shall terminate, expire and be
cancelled upon such date of expiration and the provisions of SECTION 19 shall be
deemed to have been satisfied, and subject to the provisions of this Lease
relating to the survival of any of Lessee's obligations hereunder, this Lease
shall terminate, expire and be cancelled, and upon such termination, expiration
and cancellation, all payments received by Lessor, Lessee or any other Person
from the United States Government for the use of the Aircraft after the
expiration of the Term shall be paid over or retained by Lessor. Lessee shall
promptly notify Lessor in writing of any such requisition. Upon any such
requisition for use, Lessee agrees to use its best efforts to obtain
reimbursement from the United States Government to Lessor for damages suffered
by Lessor as a result of such requisition for use. Lessee agrees to notify
Lessor promptly in writing in advance of the time when any negotiations between
Lessee and the United States Government with respect to any such requisition
shall commence and will consult with Lessor regarding methods or procedures that
are most appropriate to effect recovery from the United States Government for
any damages suffered by Lessor by reason of such requisition for use. This
SECTION 12.6 shall not be applicable to the Aircraft if an Event of Loss with
respect to the Aircraft has occurred, except in the case where Lessor has
declared an Event of Loss to have occurred as a result of a United States
Government requisition for use.

          12.7 REQUISITION FOR USE BY UNITED STATES GOVERNMENT OF AN ENGINE OR
PROPELLER IN A MANNER CONSTITUTING AN EVENT OF LOSS. If the United States
Government requisitions the use of any Engine or Propeller in a manner
constituting an Event of Loss, Lessee

                                       29


shall replace the Engine or Propeller hereunder by complying with the terms of
SECTION 12.4, and any payments received by Lessor or Lessee from the United
States Government with respect to such requisition shall be paid over to, or
retained by, Lessee, PROVIDED no Default or Event of Default exists.

          12.8 APPLICATION OF PAYMENTS OTHER THAN FOR AN EVENT OF LOSS. Any
payments received at any time by Lessor or Lessee from any Governmental Body,
insurer (other than under insurance paid for by Lessee) or other Person with
respect to loss or damage to or requisition for use of the Airframe, any Engine
or Propeller or any other Aircraft not constituting an Event of Loss and not
governed by SECTIONS 12.6 AND 12.7, shall be applied in payment for repairs or
for replacement property in accordance with SECTION 11 and any balance remaining
after compliance with such sections with respect to such damage or loss shall be
paid over to or retained by Lessee if Lessor receives from Lessee prior to
making any such payment, certification from Lessee that the property so damaged
or lost has been repaired or replaced in full and that the costs of such repairs
or replacement have been paid in full. if such repairs or replacements are made
pursuant to contracts requiring progress payments or are made by Lessee, such
proceeds shall be paid over to Lessee from time to time upon appropriate
certification by Lessee.

          12.9 APPLICATION OF PAYMENTS DURING DEFAULT. Any amount received by
Lessor referred to in SECTIONS 12.5, 12.6, 12.7 OR 12.8 that is payable to
Lessee shall not be paid to Lessee if at the time of such payment a Default or
an Event of Default exists, but shall be held by Lessor as security for the
obligations of Lessee under this Lease and at such time as any such Default or
Event of Default is not continuing, such amount, unless theretofore otherwise
applied in exercise of Lessor's remedies hereunder, shall be paid to Lessee.

Section 13. INSURANCE.

          13.1 PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE. Lessee shall
maintain in effect, at its own expense, public liability insurance and property
damage insurance (including, but not limited to, aviation general liability,
aircraft passenger liability, aircraft property damage liability, cargo/baggage
liability and contractual liability insurance) with respect to the Aircraft (i)
in amounts not less than One Hundred Million Dollars ($100,000,000.00) combined
single limit per occurrence for bodily injury and property damage, but in any
event in amounts not less than the public liability insurance and property
damage insurance applicable to similar aircraft, engines or propellers which
constitute Lessee's fleet, and (ii) otherwise of the type and in the amounts
usually carried by corporations engaged in the same or

                                       30


similar business similarly situated with Lessee and owning, leasing or operating
similar aircraft, engines and propellers and which otherwise cover risks of the
kind customarily insured against by such corporations, with no deductible in
excess of $100,000 per occurrence.

          13.2 INSURANCE AGAINST LOSS OR DAMAGE TO AIRCRAFT. Lessee shall
maintain in effect, at its own expense, (i) All Risk Aircraft Hull Insurance
covering the Aircraft at least against perils customarily included in such
insurance, including, without limitation, standard form hijacking coverage and
extended "all risk" ground, flight, ingestion and taxiing risks, including, but
not limited to, hijacking coverage and extended "all risk" coverage with respect
to all Engines, Propellers and Parts while removed from or not installed on the
Aircraft, and (ii) whenever the Aircraft is flown outside the United States and
Canada, in any recognized, or in Lessor's reasonable judgment, threatened area
of hostility, aircraft hull war and political risks insurance, on, or equivalent
to, the Lloyd's R.J.M. Airline One (1/1/77) wording, covering at least those
perils customarily included in such insurance, including without limitation,
risks excluded from the All Risks Aircraft Hull Insurance by the terms of
Lloyd's Aviation War Exclusion Clause AVN.48B except paragraphs (a) and (b)
thereof as in effect on the date hereof, and shall include coverage in respect
of hijacking, confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition of title or use by or under the order of any
Governmental Body. Such insurance shall at all times while the Aircraft is
subject to this Lease be on an "Agreed Value Basis" in each case in amounts not
less than the amounts set forth in the Stipulated Loss Value Table, as specified
in Schedule 1 to the Lease Rent Schedule for the Aircraft from time to time
(determined using the Base Rent Payment Date immediately preceding the date on
which said Event of Loss occurred, or if such Event of Loss occurred on the Base
Rent Payment Date, computed using such Base Rent Payment Date) with no
deductible, with respect to a loss which is not a total loss, arranged total
loss, or constructive total loss, in excess of $100,000 per occurrence,
PROVIDED, HOWEVER, that the Engines, Propellers and Parts while removed from or
not installed on the Aircraft shall be included in aircraft spares coverage in
an amount satisfactory to Lessor, subject to a deductible not greater than
$25,000. Any "fleet aggregate" deductible or sub-limits of liability applicable
to Lessee's fleet shall not apply to claims payable under the above insurance.

          13.3 POLICIES. (a) Lessee shall arrange for appropriate certification
of coverages and forms of endorsements to be made promptly to Lessor by the
underwriters or their agents of any policies carried in accordance with this
SECTION 13 covering the

                                       31


Aircraft and any policies taken out in substitution or replacement thereof.
Lessor and (until at least December 22, 1996) Security Pacific Equipment
Leasing, Inc. shall be named as "Additional Insureds" in all such liability
policies, and Lessor shall be named as "Loss Payee" in all such "all risk"
insurance.

          (b) A11 policies of insurance carried in accordance with this SECTION
13

     (1) shall be placed with insurers with recognized reputation and
responsibility reasonably satisfactory to Lessor;

     (2) shall be in full force and effect throughout any geographical areas at
any time traversed by the Aircraft;

     (3) shall be payable in lawful currency of the United States in the United
States;

     (4) shall be in amounts customary for airlines similarly situated to Lessee
but in no event less than the amounts specified in SECTIONS 13.1 AND 13.2
hereof;

     (5) shall not impose any liability on Lessor or any Additional Insured or
Loss Payee or any Covered Person (as defined hereinbelow) to pay premiums for
such insurance but shall provide for notice thereto of any nonpayment of premium
not less than thirty (30) days (seven (7) days or such shorter period as may
from time to time be the longest period obtainable in the industry, in the case
of war risk and allied perils coverage) opportunity to Lessor, each Additional
Insured and Loss Payee to pay such premium without impairing the policy;

     (6) shall (i) provide that as to Lessor and each Additional Insured or Loss
Payee and each Covered Person (as defined hereinbelow) the insurance shall not
be invalidated (A) by any action or inaction by Lessee and shall insure the
interest of such Persons regardless of any breach or violation by Lessee or any
other additional insured of any warranty, declaration or condition contained in
such policies, and if available at commercially reasonable cost such coverages
shall be provided otherwise than by way of endorsement with Lloyd's Form AVN67A;
PROVIDED HOWEVER, that with respect to secretion, embezzlement or conversion by
the Lessee, no coverage shall apply to any Person which is a willful party to
such secretion, embezzlement or conversion, or (B) because of a subjection of
the Aircraft to any condition, use or operation not permitted by the policy or
(C) because of any false statement with respect to the policy by Lessee or its
employees, agents or representatives, or any other Person except an Additional
Insured (and then such policy shall be impaired only as to such Person); (ii) be
primary without right of contribution from any other

                                       32


insurance which might be available to Lessor and each Additional Insured or Loss
Payee; (iii) waive any rights of subrogation, except with respect to the gross
negligence and/or willful misconduct of such Additional Insured, and any rights
of set-off, counterclaim or deduction against Lessor and each Additional Insured
or Loss Payee; (iv) provide notice of cancellation, non-renewal, expiration,
change or lapse not less than thirty (30) days after receipt thereof prior to
the effectiveness thereof against Lessor and each Additional Insured or Loss
Payee or Covered Person;

     (7) shall in the case of policies covering liability, (A) name each
Additional Insured as an additional insured, (B) cover the shareholders,
officers, directors, employees and agents of each Additional Insured as
additional insureds (each a "Covered Person"), (C) include the statement
"warranted to have no operational interest", (D) be endorsed to acknowledge and
include the contractual liability of Lessee herein and under the Lessee
Documents; (E) not operate so as to insure the Manufacturer of the Aircraft
against claims arising out of product liability; (F) provide notice of
cancellation, non-renewal, expiration, change or lapse not less than thirty (30)
days after receipt thereof prior to the effectiveness thereof against Lessor and
each Additional Insured or Loss Payee or Covered Person; and (G) provide that
each liability policy shall operate as a separate policy with respect to Lessor
and each Additional Insured and each Covered Person but nothing herein shall
operate to increase the liability of the underwriters as set forth in the
policies beyond the amount for which the underwriters would have been liable if
only one person or interest had been included as an insured;

      (8) shall in the case of policies covering loss or damage to the Aircraft,
to the extent of the then applicable Stipulated Loss Values set forth in the
Stipulated Loss Value Table, provide that all insurance proceeds received
hereunder as the result of the occurrence of an Event of Loss with respect to
the Airframe or any Engine or Propeller be made payable to Lessor, for an amount
up to the applicable Stipulated Loss Value, and thereafter any remaining amount
to Lessee. The foregoing notwithstanding, provided, that Lessor has not notified
the insurer that an Event of Default has occurred and is continuing hereunder,
any loss equal to or less than $100,000.00 (without giving effect to any
deductible provision), shall be paid directly to Lessee, and shall be endorsed
to provide the foregoing coverages in SECTION 13.3 and other endorsements
reasonably satisfactory to Lessor and each Loss Payee. It is further agreed that
all such insurance proceeds shall be applied as follows:

          (i) if insurance proceeds are received with respect to the Aircraft or
the Airframe and the Engines or engines or Propellers or propellers installed on
the Airframe, so much of such

                                       33


insurance proceeds remaining after reimbursement of Lessor for costs and
expenses, as shall not exceed the Stipulated Loss Value required to be paid by
Lessee pursuant to SECTION 12.3 and any past-due Rent shall be applied in
reduction of Lessee's obligation to pay such Stipulated Loss Value and all such
other amounts if not already paid by Lessee, or, if already paid by Lessee and
no Default or Event of Default exists hereunder, shall be applied to reimburse
Lessee for its payment of such Stipulated Loss Value and all such other amounts,
and the balance, if any, of such insurance proceeds remaining thereafter will be
paid over to or retained by Lessee;

          (ii) if such insurance proceeds are received with respect to an Engine
or Propeller under the circumstances contemplated by SECTION 12.4, so much of
the insurance proceeds remaining after reimbursement of Lessor for costs and
expenses, shall be paid to Lessee, provided that Lessee shall have fully
performed its obligations and complied with the terms of SECTION 12.4 hereof
with respect to the Event of Loss for which such insurance proceeds are paid,
such payments shall be applied to the purchase price of such Replacement Engine
or Replacement Propeller at delivery thereof to Lessor under SECTION 12.4;

          (iii) so long as no Event of Default shall have occurred and be
continuing, the proceeds of any insurance required to be maintained by Lessee
hereunder with respect to any property damage to the Airframe, any Engine or
Propeller shall, be applied in the manner described in SECTION 12.8 upon
evidence of completion of repairs, or if such repairs or replacements are made
pursuant to contracts requiring progress payments or are made by Lessee, upon
receipt of Lessee's certification referred to in SECTION 12.8, shall be paid
directly to Lessee; and

          (iv) any amount referred to in CLAUSES (i), (ii) OR (iii) immediately
above that is payable to Lessee shall not be paid to Lessee if at the time of
such payment a Default or Event of Default exists, but shall be held by Lessor,
as security for the obligations of Lessee under this Lease and at such time as
there is not continuing any such Default or Event of Default such amount, unless
theretofore otherwise applied in exercise of Lessor's remedies hereunder, shall
be paid to Lessee;

      (9) if the liability  policies are on a "claims-made  basis" and not on an
"occurrence  basis",  Lessee shall continue to carry such liability policies for
an additional  three (3) years after the expiration or termination of this Lease
and shall cause Lessor,  Lessor and each  Additional  Insured and Covered Person
(regardless  of whether or not the Lease has expired or been  terminated)  to be
named as additional insureds; and

                                       34


     (10) shall be endorsed to provide the foregoing coverages in the form of
the endorsements set forth in EXHIBIT B and other endorsements reasonably
satisfactory to Lessor.

          13.4 REPORTS, ETC. Lessee will cause its insurance broker to furnish
Lessor and each Additional Insured or Loss Payee (i) on the Delivery Date of the
Aircraft, (ii) on the policy anniversary date thereafter, and (iii) on the date
a Replacement Engine or Replacement Propeller is conveyed to Lessor pursuant to
SECTION 12.4, a report, dated the day of its delivery, signed by Lessee's
insurance broker, reasonably acceptable to Lessor, describing in reasonable
detail the insurance then carried and maintained on the Aircraft, certifying
that such insurance complies with the terms hereof and that the terms of this
SECTION 13 have been endorsed on such policies, and stating the opinion of such
broker that such insurance is in an amount deemed adequate, based upon normal
industry practice, for the protection of the respective interests of Lessor and
each Additional Insured or Loss Payee and each Covered Person, and is usual for
corporations operating similar aircraft and similarly situated with the Lessee,
PROVIDED, HOWEVER, such opinion shall not be deemed to be a guarantee or other
undertaking that such limits will be adequate under all circumstances. Lessee
will advise and will cause its insurance broker to advise Lessor and each
Additional Insured or Loss Payee in writing promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee
which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft. Lessee shall cause its insurance broker to furnish to
Lessor and each Additional Insured or Loss Payee on the Delivery Date or as soon
as available thereafter but not later than thirty (30) days after the Delivery
Date, copies of any insurance certificates required to be carried hereunder,
and within fifteen (15) days of replacement thereof, copies of such replacement
insurance certificates, or with respect to any Replacement Engine or Replacement
Propeller, within fifteen (15) days of replacement thereof, certificates
evidencing the insurance required to be carried hereunder. If Lessee fails to
maintain insurance as provided herein, Lessor, or any Additional Insured or
Loss Payee may, at its option, provide such insurance and in such event, Lessee
shall, upon demand, reimburse Lessor or such Additional Insured or Loss Payee,
as the case may be, as Supplemental Rent, for the cost thereof.

          13.5 INSURANCE FOR OWN ACCOUNT. Nothing in this SECTION 13 shall limit
or prohibit Lessor and each Additional Insured or Loss Payee and each Covered
Person, from obtaining insurance for its own account and any proceeds payable
thereunder shall be payable as provided in the insurance policy relating
thereto; PROVIDED that no such insurance may be obtained which would limit,
replace, or otherwise adversely affect the coverage of

                                       35


any insurance required to be obtained or maintained pursuant to this SECTION 13.

Section 14.  INDEMNITY.

          14.1. Lessee hereby assumes liability for, and shall indemnify,
protect, save and keep harmless each Indemnified Person, including, without
limitation, Lessor, from and against, any and all liabilities, obligations,
losses, damages, penalties, claims, actions, suits, costs, and expenses,
including legal fees and expenses, of whatsoever kind and nature (herein
collectively called "Liabilities") imposed on, incurred by or asserted against
such Indemnified Person in any way relating to or arising out of (i)
maintenance, overhaul, repair, acquisition, construction, manufacture,
installation, purchase, ownership, delivery, lease, sublease, possession,
rental, use, condition, operation, transportation, return, sale, replacement,
storage or disposition of the Aircraft or any part thereof (including, without
limitation, liabilities in any way relating to or arising out of the latent or
other defects, whether or not discoverable by Lessee or any other person, injury
to persons or property, patent, trademark, or invention rights, or strict
liability in tort), or (ii) this Lease or any of the other Lessee Documents or
any of the transactions, obligations and indemnities contemplated hereby or
thereby, or any other document or instrument hereafter required to be executed
and delivered by Lessee pursuant to the terms hereof or thereof, or the
enforcement against Lessee of any of the terms of this Lease or any of the other
Operative Documents, or (iii) the enforcement of any agreement, restriction or
legal requirement applicable to Lessee affecting the Aircraft or any part
thereof or the operation, maintenance, use or possession of the Aircraft or any
part thereof by Lessee; PROVIDED, HOWEVER, that Lessee shall not be required to
indemnify any Indemnified Person for (A) Liabilities resulting from the gross
negligence or willful misconduct of such Indemnified Person or a successor,
assignee, director, officer, agent or employee of such Indemnified Person
(unless such willful misconduct or gross negligence results from acts or
omissions of Lessee on behalf of such Indemnified Person); (B) Liabilities in
respect of the Aircraft which arise from acts or events that occurred prior to
the Delivery Date or occur after the Aircraft is no longer leased under this
Lease and after possession of the Aircraft has been delivered to Lessor, or any
other Person entitled to receive delivery in accordance with this Lease or upon
commencement of the storage period set forth in SECTION 19.7 (unless such
termination or repossession shall have occurred as a result of this Lease having
been declared in default pursuant to SECTION 18 hereof); (C) Liabilities
resulting solely from the breach of any representation, warranty or covenant
made by an Indemnified Person herein or in any other Operative Document to which
such Indemnified Person is a

                                       36


party (unless such breach is the result of Lessee's failure to comply with the
Lessee Documents); (D) Liabilities resulting from any violation by an
Indemnified Person of Section 5 of the Securities Act of 1933, as amended (or
any comparable successor thereto), or otherwise arising out of the transfer,
after the date of this Lease, of any Note or of the ownership interest in the
Aircraft not consented to by Lessee; (E) Liabilities which are or relate to an
Imposition described in SECTION 15 of this Lease except to the extent provided
therein, it being understood that all indemnities for impositions are covered by
SECTION 15; (F) Liabilities resulting from a voluntary disposition by Lessor or
any Indemnified Person, as the case may be, affecting in respect of or of all or
any part of its interest in the Aircraft, the Airframe, any Engine, any
Propeller, any Part, any Operative Document, the Collateral or any payment of
Rent, including any Liability arising as a result of acts of or claims against,
or which secure the obligations of Lessor (or Persons claiming through Lessor),
but excluding any other acts of such Persons in accordance with the terms of
this Lease or any other Lessee Document; or (G) Liabilities arising out of or
resulting solely from the construction, manufacture, installation or design of
the Aircraft by the Manufacturer, including any breach by the Manufacturer of
patent, trademark or invention rights in connection with the construction,
manufacture, installation or design of the Aircraft.

          14.2 Lessee shall be bound under this SECTION 14 irrespective of
whether such Indemnified Person shall also be indemnified with respect to such
Liabilities elsewhere under this Lease or under any other Operative Document or
by any other Person, and any Indemnified Person may proceed directly against
Lessee under this SECTION 14 without first resorting to any such other rights of
indemnification. With respect to any payment for indemnity hereunder, such
payment for indemnity shall include any amount necessary to hold each
Indemnified Person harmless on a net after-tax basis and taking into account any
tax benefit or detriment realized by such Indemnified Person as a result of such
payment from all taxes required to be paid by such Indemnified Person with
respect to such payment for indemnity under the laws of any Federal, state or
local government or taxing authority in the United States of America.

          14.3 Upon commencement of any proceeding (including the written threat
or written claim of any proceeding) against an Indemnified Person involving any
one or more Liabilities for which indemnity is provided hereunder, such
Indemnified Person shall promptly, upon receiving written notice thereof, give
notice of such commencement to Lessee, PROVIDED that, the failure by Indemnified
Person so to notify Lessee shall not release Lessee from any of its obligations
under this SECTION 14, unless such failure materially impairs Lessee's ability
to participate in such

                                       37


proceeding, but any payment by Lessee to any Indemnified Person pursuant to this
SECTION 14 shall not be deemed to constitute a waiver or release of any right or
remedy (including any remedy of damages) Lessee may have against such
Indemnified Person if, solely as a result of the failure by Indemnified Person
to give Lessee notice in accordance with the first sentence of this paragraph,
Lessee is unable to contest the Liability or other liability indemnified against
pursuant to this SECTION 14. Lessee shall be entitled (i) in any proceeding that
involves solely a claim for one or more Liabilities or other liabilities in
respect to which Lessee has an indemnity obligation pursuant to this SECTION 14,
to exercise and defend all rights of such Indemnified Person (PROVIDED that
Lessee furnishes such Indemnified Person with an opinion of counsel reasonably
satisfactory to such Indemnified Person to the effect that there exists a
meritorious basis for contesting such Liabilities or other liabilities unless
(x) such proceedings will, in the opinion of counsel for such Indemnified Person
involve any reasonable possibility of the sale, forfeiture or loss of the
Aircraft or any Engine or Propeller or any part thereof, or (y) such Liabilities
or other liabilities, in the opinion of counsel for Lessor, have a reasonable
possibility of otherwise compromising or jeopardizing any substantial interests
of Lessor in and to the Aircraft or any interest hereunder) or to require such
Indemnified Person to assume responsibility thereof and control thereof, (ii) in
any proceeding involving a claim for one or more such Liabilities or the
transactions contemplated by this Lease and the other Operative Documents, to
require such Indemnified Person to assume responsibility thereof and control
thereof to the extent that any of the same may be and is severed from such other
claims (so long as, in the opinion of counsel for the affected Indemnified
Person, such severance and assumption of responsibility and control by such
Indemnified Person does not have reasonable possibility of adversely affecting
the resolution of such other claims), or (iii) in any other case, to be
consulted by such Indemnified Person with respect to proceedings subject to the
control of such Indemnified Person. Notwithstanding any of the foregoing, Lessee
shall not be entitled to require Lessor or any other Indemnified Person to
assume responsibility for and control of any judicial proceeding if (A) the
Liabilities or other liabilities involved are less than $100,000 in the
aggregate, or such Liabilities are covered by insurance or Lessee is financially
capable of paying such claim or Liability or (B) an Event of Default hereunder
exists. In the event Lessor or any other Indemnified Person does not contest a
Liability in any judicial proceeding, Lessee shall have the right, to the extent
permitted by law, to contest, at its sole cost and expense, any such claim or
Liability by substituting itself for Lessor or such Indemnified Person in any
judicial proceeding that involves solely a claim or liability for one or more
Liabilities or other liabilities in respect to which Lessee has an indemnity
obligation pursuant to this SECTION 14. To the extent Lessee is

                                       38


entitled to defend any claim hereunder, the Indemnified Person with respect to
such claim may participate at its sole cost and expense.

          14.4 Each Indemnified Person claiming hereunder shall supply Lessee
with such information as Lessee shall reasonably request to defend or
participate in any proceeding to the extent permitted by this SECTION 14. Unless
an Event of Default has occurred and is continuing, such Indemnified Person
shall not enter into a settlement or other compromise or consent to a judgment
with respect to any Liability without the prior written consent of the Lessee
(which consent shall not be unreasonably withheld or delayed), unless such
Indemnified Person waives its right to be indemnified with respect to such
Liability under this SECTION 14.

          14.5 If an Indemnified Person shall obtain a repayment of any
Liabilities paid by Lessee pursuant to this SECTION 14, such Indemnified Person
shall promptly pay to Lessee the amount of such repayment, together with any
interest (other than interest for the period, if any, after such Liability was
paid by such indemnified Person until such Liability was paid or reimbursed by
Lessee) received by such indemnified Person on account of such repayment.

          14.6 Nothing in this SECTION 14 or in SECTION 15 shall be deemed to
constitute a guarantee by Lessee of the residual value of the Aircraft.

          14.7 In the event Lessee shall be obligated to indemnify any
Indemnified Person pursuant to this SECTION 14, Lessee shall be subrogated to
the rights of the Indemnified Person in respect of the matter as to which the
indemnity was paid.

          14.8 For purposes of this SECTION 14, "Indemnified Person" shall
include all corporations making a consolidated or combined return in which an
Indemnified Person is included and the agents, employees, servants, successors
and assigns of any thereof.

          14.9 The provisions of this SECTION 14 shall survive the expiration or
termination of this Lease.

Section 15. TAXES.

          15.1 Lessee hereby assumes liability for and shall pay, indemnify,
protect, save and keep each indemnified Person, including, without limitation,
Lessor, harmless on an after-tax basis from and against, any and all fees, taxes
(including, without limitation, income, franchise, excise, sales, use,
occupational, capital, value added, property and stamp taxes and taxes imposed
in respect of items of tax preference), levies, assessments, imposts, duties,
charges or withholdings of any nature whatsoever, together

                                       39


with any penalties, fines or interest thereon (all of the foregoing being herein
collectively called "Impositions") imposed against any Indemnified Person or the
Aircraft or any part thereof by any federal, state or local government or taxing
authority or by any foreign governmental subdivision or other foreign taxing
authority (i) upon or with respect to the Aircraft or any part thereof or any
interest in any thereof, (ii) upon or with respect to the manufacture,
acquisition, construction, installation, purchase, delivery, ownership, lease,
sublease, possession, rental, use, operation, transportation, return, sale,
replacement, storage, repossession, maintenance, repair, abandonment,
redelivery, modification, rebuilding, importation, exportation or disposition
(excluding any disposition of the Aircraft which occurs after the expiration of
the Term of this Lease unless such disposition results from the termination of
this Lease pursuant to a default under SECTION 18 hereof) of the Aircraft or any
part thereof, (iii) upon or with respect to the rentals, receipts, earnings or
gains arising from the Aircraft or any part thereof or the income or proceeds
with respect to the Aircraft or (iv) upon or with respect to this Lease or any
other Operative Document including the performance of any of the transactions,
obligations or indemnities contemplated hereby or thereby; PROVIDED, HOWEVER
that notwithstanding anything in this Lease or any other Operative Document to
the contrary, Lessee shall have no obligation to pay or to hold Lessor or any
other Indemnified Person harmless against any tax, claim or other Liability,
with respect to:

          15.1.1 Impositions which are based on, or measured by, the net income
of any Indemnified Person to the extent imposed by the United States of America,
including Impositions by the United States Federal Government expressly in lieu
of such taxes and any withholding taxes imposed by the United States federal
government in connection with such Impositions;

          15.1.2 Impositions which are based on, or measured by, the net income
of any Indemnified Person to the extent imposed by any foreign country, state,
city or municipality or by any political subdivision of such foreign country,
state, city or municipality or any similar franchise, net worth, right of an
Indemnified Person to exist, doing business, or employing capital tax, but only
to the extent that the amount of any such Imposition imposed by any such taxing
authority does not exceed the amount of Impositions to which such Indemnified
Person would have been subject if the Aircraft had not been used, operated,
stored or maintained in that taxing authority's jurisdiction;

          15.1.3 Impositions which are imposed with respect to any period, or
with respect to any act or omission, which occurred or failed to occur prior to
the Delivery Date with respect to the Aircraft or occurring after the
termination of this Lease

                                       40


and the return of the Aircraft to Lessor in accordance with SECTION 19 of this
Lease (unless such termination shall have occurred as a result of this Lease
having been declared in default pursuant to SECTION 18 hereof);

          15.1.4 Impositions resulting from a voluntary transfer or other
voluntary disposition or any involuntary transfer or involuntary disposition by
any Indemnified Person of any interest in the Aircraft or the Lease, unless such
transfer or other disposition occurs (A) while an Event of Default exists, if
such transfer or other disposition is pursuant to the exercise of one of
Lessor's remedies under the Lease as a result of such Event of Default, (B)
pursuant to or in accordance with a transfer or other event with respect to
which Stipulated Loss Value is required to be paid, unless such Stipulated Loss
value is paid in full, or (C) in the case of an involuntary transfer or
involuntary disposition, as a result of any acts, omissions or
misrepresentations of Lessee;

          15.1.5 Impositions imposed upon Lessor or any other Indemnified Person
by virtue of such Indemnified Person's failure to file proper and timely reports
or returns or to pay any taxes when due or the failure to claim an applicable
exemption, unless any of the foregoing failures results from any action or
omission by Lessee, including the failure to provide such Indemnified Person or
any other Person information in a proper and timely manner or otherwise to take
such actions as are required of Lessee hereunder with respect to such
Impositions;

          15.1.6 Impositions payable by any Indemnified Person as a direct and
primary result of such Indemnified Person's gross negligence or willful
misconduct or a breach or inaccuracy of a material representation or warranty or
covenant made by such Indemnified Person in any Operative Document or any
document required to be delivered under any Operative Document; or

          15.1.7 Impositions imposed upon an Indemnified Person to the extent
resulting from such Indemnified Person engaging in transactions other than those
contemplated by the Operative Documents;

PROVIDED, FURTHER, that Lessee agrees to pay any such Impositions referred to in
the foregoing clauses which are in substitution for or relieve Lessee from any
Impositions or indemnity therefor which Lessee would otherwise be obligated to
pay under the terms of this SECTION 15.

          15.2 With respect to any payment or indemnity under this SECTION 15,
such payment or indemnity shall include any amount necessary to hold each
Indemnified Person harmless on a net

                                       41


after-tax basis (taking into account any tax benefit or detriment realized as a
result of receipt of such payment) from all taxes required to be paid by such
Indemnified Person with respect to such payment or indemnity under the laws of
any Federal, state or local government or taxing authority in the United States
of America. In case any report or return is required to be filed with respect to
any obligation of Lessee under this SECTION 15 or arising out of this
SECTION 15, Lessee will either make such report or return in such manner as will
show the ownership of the Aircraft in Lessor or will notify Lessor or such other
Indemnified Person of such requirement and make such report or return in such
manner as shall be satisfactory to Lessor or such other Indemnified Person.

          15.3 (a) Upon the commencement of any proceeding (including the
written claim or written threat of any proceeding) against any Indemnified
Person involving one or more Impositions, such Indemnified Person shall
promptly, upon receiving written notice thereof, give notice of such
commencement to Lessee. If Lessee so requests in writing within thirty (30) days
after receipt of such notice, such Indemnified Person shall exercise on Lessee's
behalf or, upon Lessee's request, permit Lessee to exercise any contest rights
which such Indemnified Person may have; PROVIDED HOWEVER, that in no event shall
any Indemnified Person be required to exercise its contest rights or shall
Lessee be permitted (except with such Indemnified Person's sole consent) to
contest or to continue to contest any Imposition for which Lessee is obligated
pursuant to this SECTION 15 unless (s) no Default or Event of Default hereunder
has occurred and is continuing; (t) no amounts of Rent are past due under this
Lease; (u) the amount of such claim, together with all claims of a similar
nature (both present and reasonably expected to be asserted), are at least
$50,000 in the aggregate; (v) Lessee acknowledges its liability to such
Indemnified Person for an indemnity payment in accordance with the provisions of
this SECTION 15 as a result of such claim if and to the extent such Indemnified
Person or Lessee, as the case may be, does not prevail in the contest of such
claim; (w) such Indemnified Person receives from Lessee (i) an indemnity
satisfactory to such Indemnified Person for any liability, expenses or loss
arising out of or relating to such contest and (ii) an opinion of tax
counsel selected by the Lessee and reasonably acceptable to the affected
Indemnified Person to the effect that a reasonable basis exists for contesting
such claim, which opinion shall be in form and substance reasonably satisfactory
to such Indemnified Person and furnished at Lessee's sole expense; (x) Lessee
agrees to pay any expenses that any Indemnified Person may incur in connection
with contesting such claim (including, without limitation, all out-of-pocket
costs, expenses, losses, reasonable legal and accounting fees, disbursements,
penalties, interest and additions to tax); (y) such Indemnified Person obtains
at Lessee's cost an opinion of independent counsel selected by the Lessee and
approved by the

                                       42


affected Indemnified Person (which approval shall not be unreasonably withheld)
to the effect that the action to be taken will not result in any risk of sale,
forfeiture or loss of, or the creation of any Lien (except it Lessee adequately
bonds such Lien or otherwise makes provision to protect the interests of all
indemnified Persons in a manner reasonably satisfactory to each Indemnified
Person) on, the Aircraft, or any part or portion thereof or any interest therein
or in any way interfere with the timely payment of Rent from time to time
becoming due and payable; and (z) if such contest is conducted in a manner
requiring the payment of the claim, Lessee pays the amount required in order to
contest the claim. Any Imposition imposed on an indemnified Person as a result
of an advance by Lessee of a tax payment or other costs incurred by such
Indemnified Person, pursuant to this paragraph shall be indemnified under this
SECTION 15 without regard to the exclusions in SECTIONS 15.1.1 AND 15.1.2. An
Indemnified Person shall keep Lessee reasonably informed of and shall permit
Lessee to participate in any such proceedings that Lessee does not conduct
itself. If such Indemnified Person obtains a refund of all or any part of any
Imposition paid by Lessee, such Indemnified Person shall pay Lessee, but not
before Lessee makes all payments theretofore due such Indemnified Person
pursuant to this SECTION 15 and any other payments theretofore due under any of
the Operative Documents, an amount, which after taking into account all taxes
saved by such Indemnified Person as a result of the payment of such amount,
shall be equal to the amount of such refund net of reasonable expenses not
previously reimbursed and Impositions payable with respect to receipt thereof,
including interest received attributable thereto; PROVIDED, HOWEVER, that
notwithstanding the foregoing portions of this sentence, such Indemnified Person
shall not be obligated to make any payment to Lessee pursuant to this sentence
as long as a Default or an Event of Default exists hereunder, but such payment
shall be held by such Indemnified Person as security for the obligations of
Lessee under the Operative Documents, and at such time as such Default or Event
of Default is later cured, then such Indemnified Person shall make such payments
to Lessee.

          (b) Notwithstanding anything contained in this SECTION 15.3 to the
contrary, an Indemnified Person shall not be required to exercise its contest
rights on Lessee's behalf it the subject matter of any claim is of a continuing
nature and has previously been decided adversely (other than as a result of a
settlement) pursuant to the contest provisions of this SECTION 15 unless there
is a Change in Law (including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after such claim has
been so previously decided, and such Indemnified Person receives an opinion,
also addressed to Lessee, of tax counsel selected by the Lessee and approved by
such indemnified Person (which approval shall not be unreasonably

                                       43


withheld) and furnished at Lessee's sole expense to the effect that, as a result
of such change, it is more likely than not that the position which such
indemnified Person or Lessee, as the case may be, had asserted in such previous
contest, would prevail.

          (c) If, in the course of exercising its contest rights on Lessee's
behalf, an Indemnified Person learns that a taxing authority is willing to agree
to a settlement of a claim, such Indemnified Person shall notify Lessee of such
settlement proposal. If the settlement proposal is acceptable to Lessee, Lessee
shall so notify such Indemnified Person and such Indemnified Person shall agree
to the settlement proposal; PROVIDED, HOWEVER, that an indemnified Person
shall not be obligated to agree to the settlement proposal if such Indemnified
Person releases Lessee from any further obligations pursuant to this SECTION 15
with respect to such claim and if such Indemnified Person agrees that the amount
of any indemnity payment determined under this SECTION 15 in respect of such
claim, which Lessee shall be required to pay to such indemnified Person, shall
not exceed the amount of such indemnity payment that would have been required if
such Indemnified Person had agreed to the settlement proposal. If any such
settlement proposal is acceptable to such Indemnified Person but is unacceptable
to Lessee, Lessee shall inform such Indemnified Person of the amount for which
Lessee would be willing to settle such claim. If such Indemnified Person accepts
the settlement proposal, the amount of any indemnity payment determined under
this SECTION 15 in respect of such claim that Lessee shall be required to pay to
such Indemnified Person shall not exceed the amount for which Lessee would have
been willing to settle such claim.

          (d) Nothing contained in this SECTION 15 shall require any Indemnified
Person to exercise its contest rights or permit Lessee to contest a claim which
would otherwise require any Indemnified Person to exercise its contest rights if
such Indemnified Person waives payment by Lessee of any amount that might
otherwise be payable by Lessee under this SECTION 15 by way of indemnity in
respect of such claim. In the event of such waiver, such Indemnified Person
shall promptly return any amounts previously advanced by Lessee pursuant to this
SECTION 15.3, including, without limitation, payment of the Impositions which
were the subject of the claim and reimburse Lessee for amounts previously paid
to such indemnified Person in respect of expenses incurred in contesting such
claim.

          15.4 Each Indemnified Person shall supply Lessee with such information
as may be reasonably requested by Lessee as, in the reasonable opinion of
counsel of such Indemnified Person, will enable Lessee to participate in or
control and conduct any proceeding to the extent permitted by this SECTION 15.
In the event that an Indemnified Person enters into a settlement or other

                                       44


compromise with respect to any Imposition without prior written consent of
Lessee (which consent shall not be unreasonably withheld or delayed), such
Indemnified Person shall be deemed to have waived its right to be indemnified
with respect to such Imposition under this SECTION 15.

          15.5 If by reason of any Impositions paid or indemnified against by
Lessee under this SECTION 15 any Indemnified Person thereafter shall realize, in
its sole opinion, a tax benefit (whether by means of a credit, deduction or
otherwise) that results in a reduction in Impositions, then such Indemnified
Person shall, to the extent it can do so without prejudice to the retention of
the amount of such benefit, pay to Lessee the amount which (after adjustment for
any further tax savings or tax liability realized by such Indemnified Person as
a result of the payment thereof) such Indemnified Person, in its reasonable
business judgment, determines to equal the amount of such reduction in
Impositions (Such Indemnified Person's payment of such amount, absent manifest
error, being conclusive evidence of the amount so owing to Lessee), EXCEPT that
such Indemnified Person shall not be obligated to make any payment pursuant to
this sentence to the extent the amount of such payment would exceed (x) the
amount of all prior payments in respect of such Impositions by Lessee to such
Indemnified Person pursuant to this SECTION 15, less (y) the amount of all
prior payments in respect of such Impositions by such Indemnified Person to
Lessee pursuant to this SECTION 15.

          15.6 In the event Lessee shall fail to make any payment or to do any
act as provided in this SECTION 15, then Lessor shall have the right, but not
the obligation, without notice to or demand upon Lessee, and without releasing
Lessee from any obligation in this SECTION 15, to make or do the same, and to
pay, purchase, contest or compromise any encumbrance, charge or lien which in
Lessor's judgment places Lessor's title to the Aircraft, Lessor's interest in
the Aircraft, or Lessee's possession of the Aircraft in jeopardy and in
exercising any such rights, incur any liability and expend whatever reasonable
amounts Lessor, in its absolute discretion may deem necessary therefor. A11 sums
so incurred or expended by Lessor shall be, without demand, immediately due and
payable by Lessee and shall bear interest at the Base Rate or such lesser amount
as may represent the maximum rate permitted by Applicable Law.

          15.7 In the event Lessee shall be obligated to indemnify any
Indemnified Person pursuant to this SECTION 15, Lessee shall be subrogated to
the rights of the Person indemnified in respect of the matter as to which the
indemnity was paid.

          15.8 For purposes of this SECTION 15, "Indemnified Person" shall
include all corporations making a consolidated or

                                       45


combined return in which an Indemnified Person is included and the agents,
employees, servants, successors and assigns of any thereof.

          15.9 Lessee shall furnish Lessor within sixty (60) days after the end
of each calendar year included in the whole or in part of the Term, a report
with respect to the location of the Aircraft during such calendar year in
sufficient detail to enable Lessor to determine the portions of its income and
deductions with respect to the transaction contemplated by the Operative
Documents appropriately treated as attributable or allocable to sources within
and without the United States within the meaning of Section 861-863 of the Code.
Also, during the Term hereof, Lessee agrees to maintain or cause to be
maintained such reasonable and customary records, and provide or cause to be
provided such reasonable and customary information, to enable Lessor to fulfill
any of its tax filing obligations, including without limitation, copies of all
log books. Upon written request of Lessor, Lessee also will promptly and duly
execute and deliver or cause to be duly executed and delivered, to Lessor or
cooperate in filing with the appropriate governmental authority, such further
reasonable and customary documents and assurances and take such further
reasonable and customary action as Lessor may from time to time reasonably
request in order more effectively to carry out the intent and purpose of this
Lease and to protect Lessor's right to the anticipated income tax consequences
contemplated by the Operative Documents.

          15.10 The provisions of this SECTION 15 shall survive the expiration
or termination of this Lease and the other Operative Documents.

Section 16.     FURTHER ASSURANCES, RECORDATION, TITLE, REGISTRATION

          Lessee shall cooperate with Lessor in connection with the filing and
recording of this Lease and Lease Supplements thereto, including but not limited
to Lease Supplement No. 1, and any other document reasonably requested by
Lessor, and the maintenance of the recordation thereof under the Transportation
Code and in such other public offices as may be deemed necessary and appropriate
by FAA Counsel or by Lessor or Lessor's counsel in order to protect the rights
and interests of Lessor hereunder and to perfect such rights and interests of
Lessor in and to this Lease and the Rents due and to become due hereunder and
will not register nor permit the registration of the Aircraft under the laws of
any jurisdiction outside the United States. Lessee shall not do any act or take
or direct any Person to take any action which might cause the Aircraft to be
ineligible for registration under the Transportation Code. Lessee shall, at its
expense, cooperate and assist in accomplishing all recording, registrations and
filings of this Lease, and any of

                                       46


the operative Documents and any mortgage, security interest, waiver, license,
permit or certificate incident thereto, required by law or deemed reasonably
necessary by Lessor to protect its interest in the Aircraft, and shall furnish
Lessor with satisfactory evidence of each such recording, registration and
filing, including without limitation, evidence that continuation statements have
been filed with respect to all financing statements filed pursuant to this
SECTION 16. Lessee shall from time to time do and perform such other acts and
execute such other and further instruments as may be required by law or
reasonably be requested by Lessor, including such legal opinions as may
reasonably be required by Lessor, to establish, maintain and protect Lessor's
rights and remedies and to carry out the effect, intent and purpose of this
Lease.

Section 17. INSPECTION, REPORTS, AUDITS.

          17.1 Lessor and its authorized representatives may inspect (subject to
Lessee's reasonable requirements regarding security), at their own expense, the
Aircraft and the books and records of Lessee with respect thereto, and make
copies and extracts therefrom, and may discuss Lessee's affairs, finances, and
accounts relating to the Aircraft and Lessee's operation, with its officers, and
Lessee shall furnish to Lessor statements accurate in all material respects
regarding the condition and state of repair of the Aircraft, all upon such
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested and all at the expense of Person
requesting the same. Lessor shall have no duty to make any such inspection or
inquiry or incur any liability or obligation by reason of not making any such
inspection or inquiry. Lessee may condition any such inspection or inquiry upon
the agreement of the Person requesting inspection to maintain the same standard
of confidentiality with respect to information so obtained as customarily
applies to such Person's own confidential information.

          17.2 Lessee shall furnish to Lessor the following:

               (a) QUARTERLY STATEMENTS. As soon as practicable after the end of
          each quarterly  fiscal period in which a quarterly  report is prepared
          in each fiscal year of Lessee and in any event within  forty-five (45)
          days thereafter  (but in no event later than such  information is made
          generally  available to the shareholders of Lessee),  duplicate copies
          of:

                    (1)  A   consolidated   balance  sheet  of  Lessee  and  its
               consolidated subsidiaries as of the end of such quarter, and

                                       47


                         (2) Consolidated statements of income and if available,
                    cash flows of Lessee and its consolidated subsidiaries for
                    such quarter and (in the case of the second and third
                    quarters) for the portion of the fiscal year ending with
                    such quarter setting forth in comparative form the figures
                    for the corresponding periods in the previous fiscal year,
                    all in reasonable detail and certified as complete and
                    correct, subject to changes resulting from year-end
                    adjustments, by a principal financial officer of Lessee;

                    (b) ANNUAL STATEMENTS. As soon as practicable after the end
               of the fiscal year of Lessee, and in any event within one hundred
               twenty (120) days thereafter (but in no event later than such
               information is made generally available to the shareholders of
               Lessee), duplicate copies of:

                         (1) Consolidated balance sheet of Lessee and its
                    consolidated subsidiaries at the end of such year;

                         (2) Consolidated statements of income and if available,
                    cash flows of Lessee and its consolidated subsidiaries for
                    such year, setting forth in each case in comparative form
                    the figures for the previous fiscal year, all in reasonable
                    detail and accompanied by an opinion, if available, thereon
                    of independent certified public accountants of recognized
                    national standing selected by Lessee stating that such
                    financial statements fairly represent the financial
                    condition of the companies being reported upon, have been
                    prepared in accordance with generally accepted accounting
                    principles consistently applied (except for changes in
                    application described); and

                         (3) If an opinion from an independent certified public
                    accountant is not available for Lessee separately, this,
                    SECTION 17.2(b) is applicable for the consolidated
                    statements of its parent company;

                    (c) AUDIT REPORTS. Promptly upon receipt thereof one copy of
               each other report submitted to Lessee or any subsidiary thereof
               by independent accountants in connection with any annual, interim
               or special audit made by them of the books of the Lessee or of
               any subsidiary; and

                                       48


                    (d) CERTAIN OTHER REPORTS. As soon as practicable:

                         (1) after the end of each quarterly period as defined
                    in SECTION 17.2(a) or annual period as defined in SECTION
                    17.2(b), duplicate copies of any report or statement
                    required pursuant to the Securities Exchange Act of 1934 or
                    the rules or regulations promulgated thereunder,

                         (2) after it becomes available, any filing, statement,
                    report, registration, prospectus or other document prepared
                    pursuant to the Securities Act of 1933 or pursuant to the
                    rules and regulations thereunder,

                         (3) any other reports made publicly available to
                    shareholders of the Lessee,

                         (4) if requested by Lessor, any or all operating plans,
                    business plans, traffic reports, forecasts of business or
                    forecasts of traffic, and

                         (5) such information as may be readily obtainable by
                    Lessee which is required to enable Lessor to file any
                    reports required by any Governmental Body as a result of its
                    interests in the Aircraft.

          All of the reports described in SECTIONS 17.2(a), (b), (c) and (d)(4)
shall be treated as confidential by Lessor and not revealed to any party without
the prior written consent of Lessee, except that Lessor may disclose such
reports to potential purchasers of the Aircraft if it obtains and delivers to
Lessee the same agreement with respect to confidential treatment of such
reports, all in form and substance reasonably satisfactory to Lessee.

Section 18. DEFAULTS, REMEDIES, DAMAGES.

          18.1 Each of the following described events shall be an Event of
Default (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
Applicable Law of any Governmental Body):

               18.1.1 Lessee fails to make when due any payment of Base Rent or
Stipulated Loss Value or any other sum payable under this Lease and such failure
to pay continues for seventy-two (72) hours after the date when the same becomes
due;

                                       49


               18.1.2 Lessee fails at any time to procure or maintain or comply
with any insurance coverage prescribed herein or such insurance is for any
reason not in full effect; PROVIDED that any such failure shall not constitute
an Event of Default so long as the Aircraft shall not be operated at any time
when such insurance is not in effect, the Aircraft continues to be covered by
such insurance as is required when the aircraft is on the ground and such
failure to maintain insurance is for a period of not more than thirty (30) days;

               18.1.3 Lessee fails to observe or perform any of the covenants,
conditions, agreements or warranties to be performed or observed by Lessee under
the Lease or any other Lessee Document other than a covenant, condition, or
agreement specified in SECTIONS 18.1.1 OR 18.1.2 above, and such failure
continues for ten (10) days after the earlier of (a) Lessee obtaining actual
knowledge or such failure or (b) notice thereof from Lessor; PROVIDED, HOWEVER,
(i) removal of the Aircraft at any time from those locations permitted by this
Lease and (ii) except as provided for in SECTION 11.1 (iii) and SECTION 12.2
(vi), if the Aircraft is not in material compliance with the Maintenance Program
or is not in such operating condition as may be necessary to enable the
Airworthiness Certificate of the Aircraft to be maintained, or so as to permit
the uninterrupted use or operation of the Aircraft, after Lessee with reasonable
diligence should have obtained actual knowledge thereof and it is not remedied
immediately upon obtaining such knowledge, shall constitute an immediate Event
of Default;

               18.1.4 Any representation or warranty of Lessee contained
in this Lease, or in any document or certificate furnished by Lessee pursuant
hereto or thereto proves to be untrue or incorrect in any material respect when
made or repeated, and, if capable of being cured and Lessee is diligently
proceeding to so cure, such untruthfulness or incorrectness shall continue to be
unremedied for a period of fifteen (15) days after written notice thereof by
Lessor; provided, however, in no event shall Lessee have any cure rights
pursuant to this SECTION 18.1.4 if such untrue or incorrect representation or
warranty was knowingly made by Lessee;

               18.1.5 Lessee consents to the appointment of a receiver,
custodian, trustee, liquidator or other officer with similar powers, of itself
or of a substantial part of its property, is generally unable to pay debts as
they become due unless such debts are the subject of a bona fide dispute, or
admits in writing its insolvency or bankruptcy or its inability to pay its debts
generally as they become due or makes an assignment for the benefit of
creditors, or files a petition in bankruptcy or a petition or an answer seeking
reorganization in a proceeding under any bankruptcy laws (as now or hereafter in
effect) or a readjustment of its indebtedness or an answer admitting the
material allegations of a

                                       50


Petition filed against Lessee in any such proceeding, or petitions, answers or
consents to seek relief under the provision of any bankruptcy or other similar
law, or an agreement, composition, extension or adjustment with its creditors;

               18.1.6 An order, judgment or decree is entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a custodian,
receiver, trustee, liquidator or other officer with similar powers, with respect
to Lessee or of any substantial part of its property, or any substantial part of
the property of Lessee is sequestered, and any such order, judgment or decree of
appointment or sequestration remains undismissed, unstayed or unvacated, for a
period of sixty (60) days after the date of entry thereof;

               18.1.7 A petition against Lessee in a proceeding under the
bankruptcy laws or other insolvency laws as now or hereafter in effect, is
filed, and any decree or order adjudging Lessee a bankrupt or insolvent in such
proceedings, remains in force, unstayed for a period of sixty (60) days
thereafter, or, in the case where the approval of such a petition by the court
of competent jurisdiction is required by the petition as filed or amended is
approved as filed by such court and such approval is not withdrawn or the
proceedings dismissed within sixty (60) days thereafter, or if, under the
provision 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 any substantial part of its
property and such jurisdiction, custody or control remains in force
unrelinquished, unstayed or unterminated for a period of sixty (60) days;

               18.1.8 Lessee or any Affiliate of Lessee, is in default, and such
default continues unremedied for five (5) days, with respect to any material
indebtedness, lease obligation or material contract of Lessee or any Affiliate
of Lessee;

               18.1.9 Any uninsured final judgment far the payment of money
aggregating in excess of $150,000 is rendered against Lessee and the same
remains outstanding and unstayed or undischarged for a period of thirty (30)
days thereafter, during which period execution of such judgment is not
effectively stayed, bonded or insured;

               18.1.10 Any assertion by Lessee or through any other Person on
behalf of Lessee of the invalidity or unenforceability of all or any part of
this Lease (not including an assertion by Lessee that performance by Lessee is
not required due to a breach or a nonperformance by Lessor or any other Person
of its obligations hereunder or under any other Operative Documents);

                                       51


               18.1.11 Due to the act or omission by Lessee, any document or
instrument required to be filed or recorded in accordance with SECTION 11.1 or
SECTION 16 hereof is not duly filed or recorded at such time and at such place
or places as required under SECTION 11.1 or SECTION 16 to perfect or continue
the perfection of the interest of Lessor or any other Person in and to the
Aircraft; or

               18.1.12 Any transfer by Lessee of possession of the Airframe or
any Engine or Propeller to any Person other than in accordance with SECTIONS 11
OR 20 which continues unremedied for at least fifteen (15) days.

          18.2 upon the occurrence of any one or more of the above described
Events of Default and at any time thereafter so long as the same shall be
continuing, Lessor may, at its option, declare this Lease to be in default, and
at any time thereafter, Lessor may exercise, and Lessee shall comply with, any
or all of the following rights and remedies with respect to all or any part of
the Aircraft:

               18.2.1 Cause Lessee, upon the written demand of Lessor and at
Lessee's expense and risk, to assemble and return promptly or store, and Lessee
shall assemble and return promptly or store, all or such part of the Aircraft 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 19,
or Lessor, at its option, may enter upon the premises where all or any part of
the Aircraft is located and take immediate possession of and remove the same
together with any engine or propeller which is not an Engine or Propeller but
which is installed on the Airframe, subject to all of the rights of the owner,
lessor, lienor or secured party with respect to such engine or propeller, by
summary proceedings, by self-help, or otherwise.

               The return and storage of the Aircraft as hereinbefore and
hereinafter provided are of the essence of this Lease, and. upon application to
any court of equity having jurisdiction in the premises, Lessor shall be
entitled to a decree against Lessee requiring specific performance of the
covenants of Lessee so as to return and store the Aircraft as provided in this
SECTION 18.2.1 and in SECTION 19.

               18.2.2 Proceed by appropriate court action, of actions, either at
law or in equity, to enforce performance by Lessee of the applicable covenants
of this Lease or to recover damages for the breach thereof, and it is expressly
agreed that the right to resort to any such court action is a remedy given to
Lessor in addition to, and not in lieu of, any other remedies given

                                       52


to Lessor under this Lease other than those provided for in SECTION 18.2.5;

               18.2.3 Give notice to Lessee specifying the occurrence giving
rise to such Event of Default, and stating that this Lease shall expire and
terminate on the dates specified in such notice, and on the date so specified
(if any such event of Default shall be continuing), subject to the provisions
hereof relating to the survival of Lessee's obligation, this Lease shall expire
and terminate (hereinafter such expiration and termination sometimes being
referred to as "premature termination") and all rights of Lessee under this
Lease shall absolutely cease and terminate but Lessee shall return the Aircraft
in accordance with SECTION 18.2.1 above, PROVIDED, HOWEVER, in the event Lessee
fails to promptly return the Aircraft, Lessor may take or cause to be taken by
its agent or agents immediate possession of the Aircraft without any liability
to Lessor to return any Rent theretofore paid hereunder and free and clear of
any claims of Lessee whatsoever, and may remove the same from the possession and
use of the Lessee, and for such purpose may enter onto Lessee's premises where
the Aircraft may be located and may use and employ in connection with such
removal any supplies, services, means or other facilities of Lessee with or
without process of law, and Lessee hereby expressly agrees and consents to the
foregoing;

               18.2.4 With or without taking possession thereof sell, at one or
more public or private sales, at such times and places, to such persons
(including Lessor) and without notice, or otherwise dispose of, use, operate,
Lease or hold, all or any part of the Aircraft as Lessor may decide, free and
clear of any rights of Lessee, and without any duty to account to Lessee with
respect to such action for any proceeds thereof (except to the extent required
by the provisions of SECTION 18.2.5 below) and to hold the Lessee liable for any
installment of Rent due on or before the date of such sale to the extent such
Rent covers the period up to the date of such sale, or hold, use, operate, Lease
to others of keep idle all or any part of the Aircraft as Lessor may determine,
in each case free and clear or any rights of Lessee except as hereinafter set
forth in this SECTION 18 and without any duty to account to Lessee with respect
to such action or inaction;

               18.2.5 In order to preserve for Lessor the benefits intended by
the transactions contemplated by the Lease and the Lessee Documents, recover
from Lessee as liquidated damages for loss of bargain and not as a penalty,
which Lessor shall be deemed to have sustained by reason of Lessee's breach of
this Lease or any other Lessee Document, and to that end, Lessor, at its option
without prejudice to any other remedies to which it may be entitled, may
exercise any of the following remedies under either

                                       53


clause (i), (ii) or (iii) below, but not under more than one of such clauses:

               (i) Whether or not Lessor has exercised, or at any time
exercises, any of its rights under SECTIONS 18 2.1 OR 18.2.4 above with respect
to all or any part of the Aircraft, Lessor, by written notice to Lessee
specifying a payment date, which shall be a Base Rent Payment Date not earlier
than ten (10) days from the date of such notice, in order to preserve for Lessor
the benefits intended by the transactions contemplated by the Lease and the
Lessee Documents, shall demand that Lessee pay to Lessor, and Lessee shall pay
to Lessor, on the payment date specified in such notice, as liquidated damages
for loss of bargain and not as a penalty (in lieu only of Base Rent for the
Aircraft due after the payment date specified in such notice), any unpaid Rent
for the Aircraft due on or prior to the payment date specified in such notice,
plus whichever of the following amounts Lessor, in its sole discretion, shall
specify in such notice (together with interest, if any, at the overdue Rate on
the amount of any such unpaid Rent and on such specified amount from the
respective due dates to and including the actual date of payment): (A) an amount
equal to the excess, if any, of (1) the Stipulated Loss Value for the Aircraft
or part thereof, computed as of the payment date specified in such notice, plus
the unpaid accrued Base Rent as of such Base Rent Payment Date, over (2) the
aggregate Fair Market Rental Value of the Aircraft, or part thereof for the
remainder of its economic useful life after such specified payment date, after
discounting such aggregate Fair Market Rental Value quarterly to present worth
as of such specified payment date at a rate of six (6%) per annum; or (B) an
amount equal to the excess, if any, of (1) the sum of the Stipulated Loss Value
for the Aircraft or part thereof plus to the extent not otherwise payable under
this clause (i) the unpaid accrued Base Rent as of such Base Rent Payment Date,
over (2) the Fair Market Sale Value of the Aircraft or part thereof as of the
payment dated specified in such notice;

               (ii) If Lessor, pursuant to SECTION 18.2.4 above, sells all
or any part of the Aircraft, Lessor may, if it so elects, demand that Lessee pay
Lessor, and Lessee shall pay to Lessor, on the date of such sale, as liquidated
damages for loss of bargain and not as a penalty (in lieu only of Base Rent for
the Aircraft due after the date on which such sale occurs), any unpaid Rent for
the Aircraft due on or prior to the date on which such sale occurs plus the
amount of any excess of (A) the Stipulated Loss Value of the Aircraft or part
thereof, computed as of the Base Rent Payment Date immediately preceding the
date on which such sale occurs, or the first Base Rent Payment Date in the event
of a sale prior thereto, plus the unpaid accrued Base Rent as of such Base Rent
Payment Date, plus interest thereon at the Overdue Rate from such Base Rent
Payment Date to the date of such sale over (B) the net

                                       54


proceeds of such sale. Lessee shall also pay to Lessor interest at the overdue
Rate on the amount of any such deficiency from the respective due date to and
including the date of actual payment;

               (iii) By notice to Lessee, Lessor may, in lieu of exercising its
rights under SECTION 18.2.4 above, demand that Lessee pay on demand to Lessor,
and Lessee hereby agrees that it will so pay to Lessor, as liquidated damages
for loss of bargain and not as a penalty (in lieu only of Base Rent for the
Aircraft due or accrued after the payment date specified in such notice), any
unpaid Rent for the Aircraft due or accrued on or prior to the payment date
specified in such notice plus an amount equal to Stipulated Loss Value for the
Aircraft computed as of the immediately preceding Base Rent Payment Date;

and upon such payment of liquidated damages and the payment of all other Rent
then due hereunder, Lessor shall, or shall cause the appropriate party to,
convey forthwith to Lessee by bill of sale all of its right, title and interest
in and to the Aircraft on an "AS-IS", "WHERE-IS" basis and without recourse or
warranty, except that the Aircraft shall be free and clear of Lessor Liens,
including the Lien of the Loan Agreement, and with no obligation to deliver
possession if the Aircraft has not been returned to Lessor in accordance with
SECTION 18.2.1 above.

               18.2.6 OTHER REMEDIES. In lieu of or in addition to (to the
extent not inconsistent with) any of the foregoing remedies, Lessor may (i)
terminate this Lease as to the Aircraft, (ii) proceed by appropriate court
action to enforce the terms hereof or to recover damages for the breach hereof
as provided in SECTION 18.2.2, and (iii) exercise any other right or remedy
which may be available to it under Applicable Law.

               18.2.7 CONCERNING REMEDIES. In addition to the other obligations
of Lessee under this SECTION 18, Lessee shall be liable, except as otherwise
provided in this SECTION 18, and to the extent not paid, pursuant to the other
provisions of this SECTION 18, for any and all unpaid Rent due hereunder, after
or during the exercise of any of the foregoing remedies, .for any and all
Supplemental Rent due hereunder, and for all legal fees (including the allocated
time charges of internal counsel) and other reasonable costs and expenses
incurred by reason of the occurrence of any Event of Default, or the exercise of
Lessor's remedies with respect thereto, including all reasonable costs and
expenses incurred in connection with repossession, transportation, storage,
maintenance and insurance of the Aircraft and in placing the Aircraft in the
condition and airworthiness required by SECTION 19. At any sale of the Aircraft
or any part thereof pursuant to this SECTION 18, Lessor may bid cash for the
purchase of such property. Except as otherwise expressly provided above, no
remedy referred to

                                       55


in this SECTION 18 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity, and the exercise or beginning of exercise of any one
or more of such remedies shall not be deemed an election of such remedies and
shall not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies.

               18.2.8 WAIVERS. TO THE FULL EXTENT THAT LESSEE AND LESSOR MAY
LAWFULLY AGREE, LESSEE AND LESSOR HEREBY WAIVE THE BENEFIT OF ANY PROVISION OF
LAW NOW OR HEREAFTER IN EFFECT WHICH RENDERS ANY PROVISION HEREOF PROHIBITED OR
UNENFORCEABLE IN ANY RESPECT. NO EXPRESS OR IMPLIED WAIVER BY LESSOR OR LESSEE
OF ANY EVENT OF DEFAULT SHALL IN ANY WAY BE, OR BE CONSTRUED TO BE, A WAIVER OF
ANY FUTURE OR SUBSEQUENT EVENT OF DEFAULT.

          18.3 Whenever a determination of Fair Market Sale Value or Fair Market
Rental value is required by any provision of this Lease, Lessor shall appoint a
recognized independent aircraft appraiser selected by Lessor to determine the
Fair Market Sale Value or Fair Market Rental Value of the Aircraft and shall
advise Lessee of such appointment in its notice that Lessor has exercised its
rights and remedies in accordance with this Lease. Within fifteen (15) days
after receipt of such written notice from Lessor, Lessee shall deliver to
Lessor a written notice appointing a recognized independent aircraft appraiser
selected by Lessee to determine the Fair Market Sale Value or Fair Market Rental
Value of the Aircraft. If Lessee fails of refuses to appoint, for any reason
whatsoever, an appraiser to determine the Fair Market Sale Value or Fair Market
Rental Value of the Aircraft within fifteen (15) days after receipt of written
notice from Lessor advising Lessee of the appointment of an appraiser by Lessor,
the decision of the appraiser appointed by Lessor as to the Fair Market Sale
Value or Fair Market Rental Value of the Aircraft shall in all cases be binding
and conclusive on Lessor and Lessee. The appraisers appointed by Lessor and
Lessee pursuant to this SECTION 18.3 shall meet promptly to determine the Fair
Market Sale Value or Fair Market Rental Value of the Aircraft. If within fifteen
(15) days after Lessee selects its appraiser the two appraisers selected by
Lessor and Lessee, respectively, are unable to agree on the Fair Market Sale
Value or Fair Market Rental Value of the Aircraft, a third recognized
independent aircraft appraiser shall be chosen within fifteen (15) days
thereafter by the mutual agreement of such first two appraisers, or if such
first two appraisers fail to agree on the appointment of a third appraiser
within such fifteen (15) day period, such appointment shall be made by the
American Arbitration Association (or any organization which is successor
thereto). The decision of the appraisers so appointed and chosen shall be given
within fifteen (15) days after the selection of such third appraiser. Any
decision in which any two appraisers so

                                       56


appointed and acting hereunder concur shall in all cases be binding and
conclusive on Lessor and Lessee and, in the event that there are three
appraisers and no two of such appraisers shall be able to concur in the
decision, then the simple arithmetic average of the appraisals arrived at by the
three (3) appraisers shall in all cases be binding and conclusive on Lessor and
Lessee. Lessee shall pay the fees and expenses of appraisal. The Fair Market
Sale Value or Fair Market Rental Value of the Aircraft shall be determined by
the appraisers as of the date of premature termination on the assumption
(i) that the Aircraft will, on such date, be equipped with the Airframe, the
Engines and the Propellers, and that the Airframe, the Engines and the
Propellers will otherwise be in such condition as would be required by this
Lease and (ii) if the time remaining on the Airframe, the Engines, the
Propellers, the components and/or the Parts on the day of premature termination
is less than the time required to be remaining thereon in accordance with the
provisions of SECTION 19 hereof and/or the Airframe, the Engines, the
Propellers, and/or the Parts thereof otherwise do not meet the standards
contemplated and required under SECTION 19 hereof or if the condition of the
Aircraft does not fully comply with the requirements of this Lease, that the
Aircraft will fully comply with the requirements of this Lease.

          18.4 Lessor may, at its election, waive any Event of Default, and its
consequences, and rescind and annul any such notice of termination by notice to
Lessee in writing to that effect within sixty (60) days after delivery of any
such notice of termination, and thereupon the respective rights of the parties
shall be as they would have been if no Event of Default had occurred and no such
notice had been given. Notwithstanding the provisions of this SECTION 18.4, it
is expressly understood and agreed by Lessee that no express or implied waiver,
recision or annulment by Lessor shall in any way be, or be, construed to be, a
waiver of any other past, future or subsequent Event of Default, nor shall
any such express or implied waiver, recision, or annulment by Lessor extend to
or affect any other or subsequent default, or impair any rights or remedies
consequent thereto.

          18.5 Each and every power and remedy herein specifically given to
Lessor shall be in addition to every other power and remedy specifically so
given or now or hereafter existing at law or in equity, and each and every power
and remedy may be exercised from time to time or simultaneously as often as and
in such order as may be deemed expedient by Lessor. Lessor's acceptance of any
payment, whether partial or otherwise, after it shall become due hereunder shall
not be deemed to alter, affect or waive the obligations of Lessee or Lessor's
rights hereunder. All powers and remedies shall be cumulative and the exercise
of one shall not be deemed a waiver of the right to exercise any other or
others. No delay or omission of Lessor in the exercise of any right or remedy

                                       57


hereunder shall impair any power or remedy or shall be construed to be a waiver
of any Default or acquiescence therein. If any event of Default shall occur,
Lessor shall be entitled to recover reasonable costs and expenses, including,
without limitation, attorneys fees, as are incurred by Lessor in the enforcement
of any right or privilege hereunder, plus interest thereon at the Overdue Rate
from the date such costs and expenses were expended or incurred by Lessor until
paid by Lessee.

          18.6 To the fullest extent Lessee may lawfully agree, Lessee hereby
agrees in accordance with Section 1110 of the Bankruptcy Code as amended from
time to time (or any successor or superseding statute as amended) that legal
title to, and ownership by Lessor of, the Aircraft and each Engine and
Propeller, and any right of Lessor or any party designated by Lessor under the
Lease, to take possession of the Aircraft, the Engines and Propellers in
compliance with the provision of this Lease or the Lease shall not be affected
by and Lessee waives any rights under Sections 362 or 363 of the Bankruptcy Code
or any other analogous provisions of any succeeding or superseding statute, as
amended from time to time, or any similar provision, insolvency, reorganization
or similar law affecting the rights of creditors generally which are
inconsistent with section 1110 of the Bankruptcy Code. Lessee further agrees
that Lessor and each assignee of Lessor shall have the rights and benefits
given, to a lessor and/or a secured party under Section 1110 of the Bankruptcy
Code.

Section 19. RETURN OF AIRCRAFT AND RECORDS.

          19.1 RETURN OF AIRCRAFT. Upon the expiration or earlier cancellation
or termination of the Term of this Lease, (other than as a result of an Event of
Loss), or of any storage period provided for herein, Lessee shall return the
Aircraft to Lessor, free and clear of all Liens except Lessor Liens and any
other Liens created in accordance with the Operative Documents, and Liens not
created, incurred, assumed or existing through any action or inaction by Lessee,
in the same operating order, repair and condition, ordinary wear and tear
excepted, and appearance as when received. Lessee shall pay for any repairs and
refurbishing necessary to restore the Aircraft to such condition, ordinary wear
and tear excepted. At the expiration of the Term of this Lease or upon the
earlier cancellation or termination of this Lease pursuant to the terms hereof,
Lessee, at its own risk and expense, shall return the Aircraft by delivering the
same to Lessor at any airport designated by Lessor within the continental
confines of the United States that is situated within five hundred (500) miles
of any airport on Lessee's route system. The Aircraft shall, at that time,
satisfy all the following conditions:

                                       58


          (a) CERTIFICATION. The Aircraft shall have a valid Airworthiness
     Certificate and shall have been continuously and currently maintained in
     compliance with the requirements of the Airframe, Engine and Propeller
     manufacturers approved maintenance programs or Lessee's Maintenance
     Program for Airframe, Engines and Parts.

          (b) OVERHAUL AND REPAIR. With respect to repairs and overhaul of the
     Airframe and all Engines, Propellers and Parts (whether performed as
     required hereunder or otherwise), such repairs and overhaul shall be
     documented to have been repaired or overhauled by certified FAA repair
     stations or by those approved by the FAA through reciprocal agreements and
     such overhaul and repair shall also be consistent with the respective
     manufacturer's instructions for such Engines, Propellers and Parts, and in
     the case of the Airframe, in accordance with the latest Saab MRB Manual.

          All overhaul and repair procedures shall be further verified to meet
     all FAA requirements for quality and documentation necessary to enable
     immediate transferal to operation within the continental limits of the
     United States under FAR Part 135.

          (c) REPAIRS Lessee shall ensure that all major repairs performed since
     the Delivery Date and which still are in existence on the Aircraft are in
     conformity with the manufacturer's Structural Repair Manual ("SRM") and
     have or are immediately eligible to receive FAA approval, if so required by
     Lessor. All such repairs shall be accompanied by all data and documentation
     necessary to substantiate their certification and approval by the FAA, as
     required by lessor.

          (d) MODIFICATIONS. All modifications performed since the Delivery Date
     which deviate from the certified configuration and which are still in
     existence on the Aircraft shall have approval or certification by the FAA
     or Person(s) authorized by the FAA to grant such approval or certification
     or be removed by Lessee unless otherwise deemed acceptable in writing by
     Lessor in its sole discretion. All such modifications shall be accompanied
     by complete data and documentation necessary to substantiate their
     certification and approval by the FAA or Person(s) authorized by the FAA to
     grant such approval or certification.

          (e) AIRWORTHINESS DIRECTIVES. All FAA Airworthiness Directives and
     amendments or changes to the FARs applicable to the Aircraft, Engines,
     Propellers or Parts shall have been accomplished in compliance with the
     issuing agency's specific instructions of the FAA or Person(s) authorized
     by the FAA to

                                       59


     grant such approval or certification. Airworthiness Directives which allow
     temporary compliance by inspection, but have a mandatory terminating
     compliance within six (6) months following return (except that in the case
     of a cancellation or early termination of the Lease, such period shall
     instead be twelve (12) months) shall have such terminating compliance
     complete.

          (f) RECORDS. A11 records necessary and required by the FAA to certify
     and place the Aircraft on an FAA-approved maintenance program shall be
     delivered with the Aircraft. If hard, non-computerized, copies of
     maintenance records are not available, then Lessee shall take action with
     pertinent regulatory agencies to ensure that Lessor and the FAA are
     provided with all requested guarantees of methods of compliance, component
     overhaul and management, scheduling, quality control, serial number
     verification, etc. These records shall be all inclusive to the Airframe,
     Engine, Propellers and Parts.

          All Parts identified with safe life limits shall be identified with
     their service histories, accumulated cycles or flight hours as applicable
     and remaining service lives on a separate listing.

          All components and assemblies which are identified on the maintenance
     records by part numbers and serial numbers other than the manufacturer's
     shall be provided with interchange or cross reference listing necessary to
     establish complete traceability.

          All documentation, flight, and maintenance records as specified by
     FARs 91.173, 91.174, and each paragraph of 121.380 which normally accompany
     the transferal of an aircraft which has been operating in regulated
     commercial air service, shall be delivered to Lessor with the Aircraft.

          In the event of missing, incomplete, or unacceptable records, Lessee
     shall re-accomplish the tasks necessary to produce such records in
     accordance with its approved maintenance programs prior to delivery of the
     Aircraft.

          All documentation and records shall be made available to Lessor for
     review at a central location a minimum of thirty (30) Business Days prior
     to the required date of Aircraft delivery to Lessor.

          (g) SCHEDULED MAINTENANCE - AIRFRAME. Lessee will be responsible for
     ensuring that the Aircraft meets the following

                                       60


     conditions to facilitate transference of the Airworthiness Certificate and
     establish a maintenance halftime Aircraft:

     C Check:            A full C Check shall have been performed on the
                         Aircraft in compliance with Lessee's Maintenance
                         Program immediately prior to delivery, of the Aircraft
                         shall not have been used since the completion of such C
                         Check prior to delivery.

     Structure Program   The Aircraft shall have either (1) more than
                         one-half (1/2) time remaining until the next scheduled
                         structural program inspection, (2) at least two
                         thousand four hundred (2,400) hours remaining until the
                         next scheduled structural program inspection or (3) at
                         least three thousand (3,000) cycles remaining until the
                         next scheduled structural program inspection. In the
                         event that this check is performed in phases in
                         conjunction with the C Check, the current phase shall
                         be performed with the required return condition C
                         Check.

     Airworthiness       All airworthiness limitations checks shall Limitations:
     Limitations:        be current.

          In the event that scheduled intervals change during the term of the
     Lease, Lessee shall insure that all major checks under Lessee's Maintenance
     Program, structural inspection program, heavy maintenance visit, or other
     designators are (a) performed in accordance with the Saab MRH Manual, (b)
     are current at the time of return to Lessor and (c) shall either (1) be in
     at least one-half (1/2) time condition, (2) have at least two thousand four
     hundred (2,400) hours remaining or (3) have at least three thousand (3,000)
     cycles remaining.

          (h) SCHEDULED MAINTENANCE - ENGINES. Upon return of the Aircraft, each
     of the Engines attached to the Aircraft shall either be (a) current under a
     valid ECMP program, in which case each of such Engines shall be eligible
     for a successor ECMP program between General Electric Company and Lessor or
     a new lessee without any penalties or costs to Lessor, and Lessee shall use
     its best efforts to have Lessee's ECMP program assigned to Lessor or a new
     lessee without any penalties or costs to Lessor or (b) current under any
     alternative engine care and maintenance program that Lessee has
     established after review and approval by Lessor, in which case each of such
     Engines shall be eligible to continue under

                                       61


     such program or an ECMP program without any penalties or costs to Lessor or
     a new lessee.

          (i) SCHEDULED MAINTENANCE - PROPELLERS, PARTS, COMPONENTS AND
     ASSEMBLIES. All Propellers, Parts, components and assemblies that are
     subject to regulated life limits shall either (1) be in at least one-half
     (1/2) time condition, (2) have at least two thousand four hundred (2,400)
     hours remaining or (3) have at least three thousand (3,000) cycles
     remaining.

          (j) SCHEDULED MAINTENANCE - OTHER_CHECKS. Any scheduled maintenance or
     inspections, in addition to those specified in SECTIONS 19.1(g), 19.1(h)
     AND 19.1(i) (e.g., unequally loaded phase checks, airworthiness
     limitations, corrosion control program, etc.) shall. either (1) be in at
     least one-half (1/2) time condition, (2) have at least two thousand four
     hundred (2,400) hours remaining or (3) have at least three thousand (3,000)
     cycles remaining.

          (k) DEFERRED MAINTENANCE. There shall be no open, outstanding, or
     deferred maintenance items, scheduled or unscheduled, against the Aircraft
     including those identified in predelivery inspections or test flights.

          (1) CORROSION. Lessee shall maintain corrosion control through its
     Maintenance Program. There shall, to Lessee's knowledge, be no untreated
     corrosion remaining on the Aircraft.

          (m) PRE-RETURN INSPECTIONS. Lessor shall be permitted to perform a
     minimum of two physical inspections of the Aircraft including its records
     exclusive of test flights. One inspection will be performed immediately
     prior to return. The aircraft interior, exterior, wheel wells and wing spar
     areas shall be thoroughly cleaned to normal airline maintenance standards
     prior to the inspection. The inspection shall include, but not be limited
     to, ground evaluation and system functional tests including engine runs if
     deemed necessary by Lessor. In addition, one inspection shall be permitted
     during the maintenance check which precedes return. Lessor shall have the
     right to have up to two (2) people be present during the entire maintenance
     check.

          (n) ACCEPTANCE FLIGHT. Lessee shall provide for a minimum of one
     acceptance flight for a total duration not to exceed two (2) hours to
     demonstrate the airworthiness of the Aircraft and the proper functioning of
     all systems and components.

                                       62


          (o) AIRCRAFT PHYSICAL CONDITION. The Aircraft shall be complete and
     function and perform in accordance with the manufacturer's specifications.
     Discrepancies noted during the pre-return inspections and acceptance
     flights shall be corrected in accordance with the manufacturer's manuals.

          (p) GENERAL APPEARANCE. The Aircraft shall be clean, cosmetically
     acceptable, interior complete and prepared to place into U.S. scheduled
     revenue airline operations at a standard equal to or above U.S. standards.

          19.2 EQUIVALENCY AMOUNT. For any variance from the conditions set
forth in SECTIONS 19.1(g), 19.1(h), 19.1(i) and 19.1(j) above, Lessee shall pay
Lessor or Lessor shall pay Lessee (as appropriate) an amount for such variance
equal to the following formula: actual time (or number of cycles) for the item
minus the minimum time (or number of cycles) for the item times the
repair/overhaul cost per hour or cycle shall equal the "Equivalency Amount". For
purposes of calculating the Equivalency Amount, a third party mutually
acceptable to lessor and lessee shall determine the cost as described in the
preceding sentence. If the Equivalency Amount is a positive sum then Lessee
shall pay Lessor the Equivalency Amount and if the Equivalency Amount is a
negative sum then lessor shall pay Lessee the Equivalency Amount.

          19.3 MANUALS. Upon the return of the Aircraft in accordance with this
SECTION 19, Lessee shall deliver to lessor all logs, aircraft flight manuals,
certificates and data, and inspection, modification and overhaul records
required to be maintained with respect to the Aircraft under applicable rules
and regulations of the FAA. All such records shall be made available to Lessor
for review a minimum of thirty (30) days prior to the agreed date of return. In
the event logs are missing or incomplete, Lessor shall have the right to cause
the logs to be reconstructed of replaced at the expense of Lessee.

          19.4 MAINTENANCE AT LESSOR'S REQUEST. Upon receipt of written notice
from Lessor not less than sixty (60)(nor more than one hundred twenty (120))
days prior to any expiration or termination of this Lease, Lessee agrees to
perform maintenance to the Airframe and/or the Engines and/or the Propellers.
Such maintenance shall be done in the same manner and with the same care as used
by Lessee with similar airframes, engines and propellers of its sum and shall be
completed as promptly as possible after any such termination of this Lease as to
such Airframe, Engines or Propellers, and Lessor shall reimburse Lessee in an
amount equal to (1) the lesser of (x) the sum of Lessee's direct costs for
materials plus Lessee's direct labor costs incurred in connection with such
maintenance or (y) Lessee's standard contract rates for work for third parties,
if any, therefor or (2) if such maintenance

                                       63


is performed by someone other than Lessee, the actual amount paid therefor by
Lessee.

          19.5 ENGINES. In the event any engine not owned by Lessor shall be
returned with the Airframe, such engine shall be of the same or improved model
as the Engines and suitable for installation and use on the Airframe and shall
have a value and utility at least equal to, and be in as good an operating
condition as, such Engines, assuming such Engines were in the condition and
repair as required by the terms hereof immediately prior to such termination,
and Lessee will, at its own expense and concurrently with such return, furnish
Lessor with a bill of sale, in form and substance satisfactory to Lessor, with
respect to each such engine together with evidence of Lessee's title to such
engine (including, if requested, an opinion of Lessee's counsel) and shall take
such other action as Lessor may reasonably request in order that such engine
shall be duly and properly titled in the name of Lessor, and upon passage of
title to such engine to the Lessor, such engine shall be deemed to be an Engine
for all purposes of this Lease. Upon full compliance with the terms of this
Section, the Lessor will transfer to Lessee Lessor's interest in any Engine
replaced by an engine pursuant to the preceding sentence without any
representation, warranty or recourse of any kind whatsoever, express or implied.

          19.6 PROPELLERS. In the event any propeller not owned by the Lessor
shall be returned with the Airframe, such propeller shall be of the same or
improved model as the Propellers and suitable for installation and use on the
Airframe and shall have a value and utility at least equal to, and be in as good
an operating condition as, such Propellers, assuming such Propellers were in the
condition and repair as required by the terms hereof immediately prior to such
termination, and Lessee will, at its own expense and concurrently with such
return, furnish Lessor with a bill of sale, in form and substance satisfactory
to Lessor, with respect to each such propeller together with evidence of
Lessee's title to such propeller (including, if requested, an opinion of
Lessee's counsel) and shall take such other action as Lessor may reasonably
request in order that such propeller shall be duly and properly titled in the
name of Lessor, and upon passage of title to such propeller to the Lessor, such
propeller shall be deemed to be a Propeller for all purposes of this Lease. Upon
full compliance with the terms of this Section, the Lessor will transfer to
Lessee Lessor's interest in any Propeller replaced by a propeller pursuant to
the preceding sentence without any representation, warranty or recours of any
kind whatsoever, express or implied.

          19.7 STORAGE. Upon any expiration or termination of this Lease at the
written request of Lessor, Lessee will  arrange, or will cause to be
arranged, storage facilities for the Aircraft at

                                       64


Lessee's facilities for a period not exceeding thirty (30) days without charge
to Lessor and up to ninety (90) days, provided that Lessor pays for the
additional sixty (60) days. Lessee will maintain in effect during such storage
periods insurance covering the Aircraft pursuant to Section 13.2 to the extent
such insurance is available at reasonable commercial rates and in such amounts
and against such risks as would be customarily carried in similar circumstances
by a reasonably prudent lessor, with such insurance being paid for by Lessor and
any deductible being absorbed by Lessor in the event of a loss.

          19.8 SPECIAL MARKINGS. Upon the termination or expiration of this
Lease, Lessee shall, at its cost, remove from the exterior of the Aircraft all
insignia and other distinctive markings. This provision shall not require Lessee
to strip the paint off the Aircraft or require Lessee to repaint the Aircraft.

          19.9 RISK OF LOSS ETC. Upon return to Lessor of the Aircraft in
accordance with this SECTION 19 and the other provisions of this Lease, the
Lease will terminate and the risk of loss of such Aircraft shall pass to Lessor.
Notwithstanding the foregoing, Lessee shall pay to Lessor of reimburse Lessor
for the cost to Lessor of insuring the Aircraft during any period of repair or
overhaul subsequent to the termination of the Lease that is necessary to put the
Aircraft in the condition required hereby. If any required work, repairs or
services should delay the return of the Aircraft to Lessor beyond the scheduled
expiration or earlier termination of the Term hereof, or prevents the use of the
Aircraft thereafter, Lessee shall continue to pay Base Rent on a per diem basis
and all other Rent, bear the risk of loss under SECTION 12, maintain the
insurance required by SECTION 13, and provide the indemnities required under
SECTION 14 AND 15 in the same manner as if there had been no expiration or
termination of this Lease and otherwise exercise the care required hereunder
with respect to the Aircraft until  such required work, repair or servicing has
been completed and, in the case of delay in return, the Aircraft is returned to
Lessor as provided herein. Lessee's possession of the Aircraft during such
period shall be solely as a bailee for hire for Lessor and not as Lessee
hereunder. During such period, Stipulated Loss Value shall be an amount equal to
Stipulated Loss Value on the last day of the Term.

          19.10 INSTRUMENTS OF RELEASE. Lessee shall execute and deliver to
Lessor such instruments of release and termination of this Lease as to the
Aircraft, in form suitable for recording at the FAA Aircraft Registry and other
public offices, as Lessor may reasonably request, to make clear upon public
records that the Aircraft is free and clear of all rights of Lessor and Lessee
to the Aircraft under this Lease.

                                       65


Section 20. ASSIGNMENT SUBLEASE.

          20.1 Except as otherwise provided herein, Lessee will not and shall
have no power to, without the prior written consent of Lessor, assign any of its
rights or obligations hereunder. The terms and provisions of this Lease shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and assigns.

          20.2 (a) Lessee will not, without the prior written consent of Lessor,
except as otherwise provided in this Lease, sublease or otherwise in any manner
deliver, transfer or voluntarily relinquish possession, or enter into any
contract or arrangement obligating it to deliver, transfer or relinquish
possession of the Airframe or any Engine or Propeller, or install any Engine or
Propeller or permit any Engine or Propeller to be installed, on any airframe
other than the Airframe, or create a Lien not permitted under the terms hereof.

               (b) Notwithstanding anything to the contrary contained in this
Lease, Lessee may merge or consolidate with any Affiliate of Lessee or sell,
lease, or otherwise dispose of all or substantially all of its assets to any
Affiliate of Lessee, PROVIDED (A) that the rights and powers of Lessor shall not
be adversely affected by such merger, consolidation, sale, lease, or other
disposition and that immediately after any such transaction no Event of Default
shall have occurred and be continuing, and, (B) that any Affiliate of Lessee
which is to be the surviving or acquiring corporation in such transaction (i)
shall be a corporation duly organized and validly existing under the laws of the
United States of America or a state thereof, or the District of Columbia, and a
"citizen of the United States of America" as defined in Section 40102(a)(15) of
the Transportation Code, (ii) shall (unless Lessee is the surviving
corporation), by agreement in writing which shall be in form and substance
reasonably satisfactory to Lessor, expressly assume the due and punctual payment
of the Rent and other sums due and to become due under this Lease, and the due
and punctual performance and observance of all the covenants and provisions of
this Lease and each other Operative Document to which Lessee is a party, (iii)
shall not have a net worth subsequent to such action materially less than that
of Lessee prior to such action (taking into account any corporations whose net
worth is consolidated with such surviving corporation) and (C) that such
transaction shall not result in a material adverse effect with respect to the
assets, liabilities or operations of Lessee as consolidated in such survivor
corporation.

          20.3 Lessor covenants that, to the extent that any Lessor Liens exist
or interfere with Lessee's peaceful and quiet

                                       66


enjoyment and use of the Aircraft, Lessor will use all reasonable efforts to
seek removal or discharge of such Liens.

Section 21. NOTICES.

          All notices required under the terms and provisions hereof shall be in
writing, shall be effective on the earlier of the date such notice is actually
received or five (5) days after mailing by Certified Mail - Return Receipt
Requested confirmed on the date of mailing, shall be given by hand delivery, by
overnight delivery service (with such delivery service's delivery records
constituting proof of delivery), by telex or telecopy (with the answerback
constituting proof of receipt), or by any other electronic transmission which
produces a written record-showing receipt by the addressee, and shall be
addressed as provided below or to such other address as any such party shall
designate by notice to each other such party as provided below:

     (a)  If to Lessor:

          Lambert Leasing, Inc.
          21300 Ridgetop Circle
          Sterling, Virginia 20166
          Attention: Treasurer

          Telecopy: (703) 406-7309

     (b)  If to Lessee:

          Chautauqua Airlines, Inc.
          2500 South High School Road
          Indianapolis, Indiana 46251
          Attention: President

          Telecopy: (317) 484-6040

     with a copy to:

          Glenn W. Sturm, Esq.
          Nelson, Mullins, Riley and Scarborough
          400 Colony Square, Suite 2200
          1201 Peachtree Street
          Atlanta, Georgia 30361

          Telecopy: (404) 817-6050

Section 22. SURVIVAL OF COVENANTS: SEVERABILITY.

                                       67


          Any provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction be ineffective to the extent of
such prohibition or unenforceability without affecting or invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If one or more Sections or clauses contained in this Lease
or in any supplement or any part hereof or thereof is held by any court of law
to be invalid, this Lease and all supplements thereto shall be construed as if
such invalid clause or clauses or Section or Sections or part or parts thereof
had not been contained herein or therein. To the extent permitted by Applicable
Law, Lessee hereby waives any provision of law which renders any provision
hereof prohibited or unenforceable in any respect.

          Any other provisions contained in this Lease to the contrary
notwithstanding, it is hereby agreed that the provisions of SECTIONS 14, 15 AND
19 hereof shall survive the termination of this Lease to the extent required
thereby for their full and complete performance.

Section 23. ENTIRE AGREEMENT. TITLES.

          This Lease, including all appendices, annexes, exhibits, schedules,
Lease Supplement No. 1, and the other Sublessee Documents, constitute the entire
agreement between the parties. No term or provision of this Lease may be
changed, waived, discharged, amended or terminated except by a written agreement
signed by both parties hereto. The titles of the Sections and other headings in
this Lease, and the table of contents are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof,
and all reference herein to numbered sections unless otherwise indicated are to
Sections of this Lease.

Section 24. NOTICES OF EVENTS.

          Lessee shall promptly notify Lessor at the address shown in SECTION
21, in writing of any: (1) material accident connected with the use, operation
or malfunction of the Aircraft, including in such report the time, place and
nature of the accident, the damage caused to property, the names and addresses
of persons injured and of witnesses, and such other information as may be
pertinent to any such party's investigation of such accident, (2) Default or
Event of Default, (3) attachment, tax Lien, other Lien or other judicial process
other than Permitted Liens, that has attached to the knowledge of Lessee to the
Aircraft or any part

                                       68


thereof, or (4) its intention to operate the Aircraft in any other country other
than the United States and Canada.

Section 25. EXECUTION AND COUNTERPARTS.

          This Lease and Supplements hereto may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
counterparts, shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same Lease or Supplement
hereto. To the extent, if any, the counterpart of this Lease or Supplement
hereto containing the receipt therefore executed by Agent on the signature page
hereof constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no other
counterpart of this Lease or any Supplement hereto constitutes chattel paper (as
so defined), and no security interest in this Lease or any Supplement hereto may
be created by transfer or possession of any counterpart hereof.

Section 26. CONFIDENTIALITY.

          Lessor and Lessee agree that all negotiations, discussions,
correspondence, memoranda and other documents related to this Lease which are
not required to be filed publicly pursuant to this Lease or by any Applicable
Law shall remain and are intended to be confidential, and each of Lessor and
Lessee agrees not to disclose such information to any Person except to
Affiliates and their respective directors, officers, employees and
representatives or advisors (including their attorneys and accountants and the
Vice President-USAir Express Division of USAir Group, Inc.) who have a need to
know in the general conduct of Lessor's or Lessee's or such Affiliates's
business and agree to keep such information confidential, and except when
advisable or required by any rule, regulation or order of any Governmental Body
or any filing requirements relating thereto, or as compelled by any litigation
or investigation or as required to enforce the terms of this Agreement or as may
be required by Lessee in connection with any corporate transaction contemplated
by Lessee or an Affiliate.

Section 27. COVENANT OF QUIET ENJOYMENT.

          Lessor covenants and agrees with Lessee that so long as no Default or
Event of Default has occurred and is continuing hereunder, Lessee may possess
and use the Aircraft in accordance with the terms and conditions of this Lease
without disturbance or hindrance of its peaceful and quiet enjoyment during the
Term of this Lease.

                                       69


Section 28. GOVERNING LAW: SUBMISSION TO JURISDICTION.

          This Lease shall constitute an agreement of lease, and nothing herein
shall be construed as conveying to Lessee any right, title or interest in the
Aircraft except as a Lessee only. This Lease is being delivered in Virginia and
shall in all respects be governed by, and construed in accordance with, the
internal laws of the Commonwealth of Virginia, including all matters of
construction, validity and performance in accordance with Section 44108(c) of
the Transportation Code. If Lessor or any other person commences a suit in any
other jurisdiction, the parties agree that this Lease shall be construed in
accordance with the internal laws of Virginia without reference to such other
jurisdictions choice of law doctrines, including its conflict of laws.

          LESSEE (A) HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION
OF ANY FEDERAL COURT IN THE COMMONWEALTH OF VIRGINIA IN EACH CASE FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS LEASE, THE
LESSEE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF, AND (B) TO THE EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF
MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS INCONVENIENT OR OTHERWISE IMPROPER, OR THAT ANY OF
THE ABOVE-MENTIONED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE ENFORCED
IN OR BY SUCH COURTS. FINAL JUDGMENT AGAINST LESSEE IN ANY SUCH SUIT AFTER ALL
APPEALS BY LESSEE HAVE BEEN EXHAUSTED SHALL BE CONCLUSIVE, AND MAY BE ENFORCED
IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF
WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY
INDEBTEDNESS OR LIABILITY OF LESSEE THEREIN DESCRIBED.

                                       70


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

                                                 LAMBERT LEASING, INC.,
                                                 as Lessor

                                                 By: /s/ Gena H. Laurent
                                                    -------------------------
                                                    Gena H. Laurent
                                                    Vice President

                                                 By: /s/ Bengt Nilsson
                                                    -------------------------
                                                    Bengt Nilsson
                                                    Treasurer and Credit Manager

                                                 CHAUTAUQUA AIRLINES, INC.,
                                                 as Lessee

                                                 By: /s/ Timothy L. Coon
                                                    ---------------------------
                                                    Timothy L. Coon
                                                    Senior Vice President

                                       71


                                     ANNEX I
                                       TO
                                 LEASE AGREEMENT

                                   DEFINITIONS

     The following terms shall have the following meanings for all purposes of
the Lease Agreement unless otherwise defined or the context thereof shall
otherwise require. In the case any conflict between the provisions of these
definitions and the provisions of the main body of such document, the provisions
of the main body of such document shall control the construction of such
document.

     Unless the context otherwise requires, (i) references to agreements shall
be deemed to mean and include such agreements as the same may be amended and
supplemented from time to time, (ii) references to parties to agreements shall
be deemed to include the successors and permitted assigns of such parties, and
(iii) the definitions apply equally to both the singular and plural forms of the
terms defined.

          "ABATEMENT" - when used in relation to Rent, any abatement, reduction,
setoff, counterclaim, recoupment, defense or other right of Lessee against
Lessor or any other Person for any reason whatsoever.

          "ADDITIONAL INSUREDS" - as defined in Section 13.3(a) of the Lease.

          "AFFILIATE" - of any Person - any other Person directly or indirectly
controlling, controlled by, or under common control with such Person; PROVIDED
that, as long as Lessee is owned by Guarantee Reassurance Corporation,
"Affiliate" in respect of Lessee shall mean only Guarantee Reassurance
Corporation.

          "AIRCRAFT" - the Airframe delivered and leased under the Lease
together with the two (2) Engines, the Spare Engine and the two (2) Propellers
described in the Lease Supplement No. 1 executed and delivered with respect to
the Airframe (or any Replacement Engine or Replacement Propeller) whether or not
any of such initial or substituted Engines and Propellers may from time to time
be installed on the Airframe or may be installed on any other airframe

                                        1


and all logs, manuals and other records relating to such aircraft, and all
substitutions, replacements and renewals for any and all thereof.

          "AIRCRAFT BASE" - the Lessee's operational base or the operational
base of the Aircraft as specified in Lease Supplement No. 1.

          "AIRFRAME" - (i) the used Saab-Fairchild 340A commercial aircraft,
(except Engines or Propellers or engines or propellers from time to time
installed thereon), leased under the Lease by Lessor to Lessee pursuant to the
Lease, with manufacturer's serial number as set forth in Lease Supplement No. 1,
(ii) any and all Parts so long as the same are incorporated or installed in or
attached or belonging to such Airframe, and any and all Parts removed from the
Airframe of such Aircraft so long as title thereto and ownership thereof remains
vested in Lessor in accordance with the Lease; and (iii) insofar as legal title
thereto and ownership thereof is from time to time vested in Lessor, all
substitutions, replacements or renewals from time made in or to such Airframe or
to any of the items referred to in clauses (i) and (ii) above or to any part
thereof as required or permitted under the Lease.

          "AIRWORTHINESS CERTIFICATE" - the Standard Airworthiness Certificate
on FAA AC Form 8100-2 issued in respect of the Aircraft by the FAA under the
pertinent part of the FAR.

          "APPLICABLE LAW" - all applicable laws, rules, regulations, decrees,
injunctions, orders or judgments of any Governmental Body, now or hereafter in
effect.

          "APPLICATION FOR REGISTRATION" - an Application for Aircraft
Registration of an Aircraft on FAA AC Form 8050-1, or such other form as may be
approved by the FAA on the Delivery Date of the Aircraft (or any relevant
earlier date).

          "APPOINTMENT OF AUTHORIZED REPRESENTATIVE" - the appointment of
Authorized Representative by Lessee.

          "AUTHORIZED REPRESENTATIVE" - the Person appointed by the Lessee
pursuant the Lease as its agent to accept delivery of the Aircraft.

          "BANKRUPTCY CODE" - the Bankruptcy Reform Act of 1994, as amended.

          "BASE RATE" - the rate of interest published from time to time in
Federal Reserve statistical release H.15(19) "Selected Interest Rates" as the
"Bank prime loan" rate. Any change in the

                                        2


Base Rate shall take effect on the day specified in the public announcement of
such change.

          "BASE RENT" - the rent payable for the Aircraft pursuant to Section 9
of the Lease in the amount set forth in Lease Supplement No. 1 and the Lease
Rent Schedule.

          "BASE RENT PAYMENT DATE" - the same day of each full period as the
First Base Rent Payment Date during the Term, as more particularly set forth in
Section 9 of the Lease and Lease Supplement No. 1 and the Lease Rent Schedule.

          "BILLS OF SALE" - the FAA Bill of Sale and the Warranty Bill of Sale
for the Aircraft.

          "BUSINESS DAY" - any day (other than a Saturday or Sunday) on which
commercial banking institutions in New York, New York, or in any city in any
state or country to which Lessee is directed to make any payment under the
Lease, are generally open for business.

          "CHANGE IN LAW" - any change in any treaty, convention, law or
regulation or in the interpretation thereof by any governmental or regulatory
agency charged with the administration or interpretation thereof, or the
enactment of any law or regulation.

          "CODE" - the Internal Revenue Code of 1986, as amended, and any
successor statute then in effect.

          "COVERED PERSON" - as defined in Section 13.3(b)(7) of the Lease.

          "DEFAULT" - any event or occurrence which with the passing of time or
the giving of notice, or both, shall constitute an Event of Default under the
Lease.

          "DELIVERY DATE" - the date of Lease Supplement No. 1 describing the
Aircraft, which date shall be the date the Aircraft is delivered to, and
accepted by Lessee pursuant to the Lease as such date is set forth in the Lease
Supplement No. 1.

          "DEPARTMENT OF TRANSPORTATION" AND "DOT" - the United States
Department of Transportation or any successor thereto.

          "DOLLARS" and "$" - immediately available and freely transferable
lawful money of the United States of America.

          "DOWTY" - Dowty Rotol Limited, a limited liability company organized
under the laws of the United Kingdom.

                                        3


          "ECMP" - An agreement between General Electric Company and Lessee for
the Engine Care Maintenance Plan for Engines, reasonably acceptable to Lessor.

          "ENGINE" - with respect to an Aircraft - (i) each of the two (2)
General Electric Model CT7-5A engines installed on the Aircraft on the Delivery
Date and the Spare Engine, listed by manufacturer's serial numbers in Lease
Supplement No. 1, whether or not from time to time thereafter installed on the
Airframe of the Aircraft or any other airframe; (ii) any Replacement Engine;
(iii) any and all Parts incorporated or installed in or attached or belonging
thereto and any and all Parts removed therefrom so long as title thereto remains
vested in Lessor in accordance with the Lease after removal from such Engine;
and (iv) insofar as legal title thereto and ownership thereof is from time to
time vested in Lessor, all substitutions, replacements or renewals from time
made in or to such Engine or to any of the items referred to in clauses (i),
(ii) and (iii) above or to any part thereof as required or permitted under the
Lease. Except as otherwise set forth in the Lease, at such time as a Replacement
Engine is so substituted, such replaced Engine shall cease to be an Engine under
the Lease. The term "Engines" means, if the context so requires, as of any date
of determination, all Engines then leased under the Lease.

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

          "EVENT OF DEFAULT" - the term "Event of Default" shall have the
meaning specifically set forth in Section 18 of the Lease.

          "EVENT OF LOSS" - as defined in Section 12.2 of the Lease.

          "EXCEPTED PAYMENTS" - any payment under insurance maintained by
Lessor with respect to the Aircraft and not required by Section 10 of the Lease,
or maintained under liability insurance policies to or for the benefit of
Lessor on account of any loss suffered by Lessor, and any interest or late
charge thereon.

          "EXCEPTED RIGHTS" - The right of Lessor to demand, collect, sue for or
otherwise enforce or exercise its rights in respect of Excepted Payments;
PROVIDED, that such rights shall not include the exercise of any remedies other
than the right to sue for specified performance of any covenant to make an
Excepted Payment or to sue for damages or to enforce any judgment in respect of
the breach of such covenant.

          "FAA" - the United States Federal Aviation Administration or any
successor agency.

                                        4


          "FAA AIRCRAFT REGISTRY" - the registry maintained pursuant to the
Transportation Code for the registration of aircraft and the recordation of
instruments affecting interests in, among other things, aircraft and certain
engines and propellers.

          "FAA COUNSEL" - Crowe & Dunlevy or any other counsel specializing in
FAA filings and recordings, reasonably satisfactory to Lessor.

          "FAIR MARKET RENTAL VALUE" - as defined in Section 18.3 of the Lease.

          "FAIR MARKET SALE VALUE" - as defined in Section 18.3 of the Lease.

          "FAR" - the Federal Aviation Regulations promulgated under the
Transportation Code and any successor provisions.

          "FEDERAL RESERVE BOARD" - the Board of Governors of the Federal
Reserve System of the United States of America or any successor agency or board
at the relevant time performing the functions of the Federal Reserve Board.

          "GAAP" - generally accepted accounting principles, in the United
States, consistently applied.

          "GE" - General Electric Company, a New York corporation, and its
permitted successors and assigns, in its capacity as manufacturer of the
Engines.

          "GENEVA CONVENTION" - the Geneva Convention on the International
Recognition of Rights in Aircraft, opened for signature in June of 1948.

          "GOVERNMENTAL BODY" - any federal, state, municipal or other
governmental division, subdivision, department, commission, board, bureau,
court, legislature, agency, instrumentality or authority of any country
including, without limitation, the United States of America, domestic or, to the
extent binding under federal law on any Person or the Aircraft, international or
transnational.

          "IMPOSITION" - as defined in Section 15.1 of the Lease.

          "INDEMNIFIED PERSON" - Lessor, its Affiliates, successors, permitted
assigns, officers, directors, employees and agents.

          "INSURANCE ENDORSEMENT" - the Insurance Endorsements in the form
attached as Exhibit B to the Lease to be provided by the Lessee.

                                        5


          "LAMBERT LEASING, INC." or "LAMBERT" - Lambert Leasing, Inc., a
Delaware corporation and its successors and permitted assigns, as Lessor under
the Lease.

          "LEASE" - Aircraft Lease Agreement No. 1 dated as of February 1, 1995
between Chautauqua Airlines, Inc., as Lessee, and Lambert Leasing, Inc., as
Lessor, to which this Annex I is attached and as amended or supplemented from
time to time pursuant to the provisions thereof, including without limitation
Lease Supplement No. 1 and any Lease Supplement as may be executed
contemporaneously with or subsequent to the date of the Lease.

          "LEASE RENT SCHEDULE" - Lease Rent Schedule No. 1 dated March 9, 1995,
entered into between Lessor Leasing, Inc., as Lessor, and Chautauqua Airlines,
Inc., as Lessee, setting forth Base Rent and payment terms, Stipulated Loss
Values and other financial information.

          "LEASE SUPPLEMENT" - any supplement to the Lease, entered into between
Lessor and any Lessee for the purpose of leasing the Aircraft or any Replacement
Engine or Replacement Propeller under the Lease, including without limitation
any amendment thereto entered into subsequent to the Delivery Date.

          "LEASE SUPPLEMENT NO. 1" - Lease Supplement No. 1 dated March 9, 1995
in the form of Exhibit A to the Lease, entered into between Lessor and Lessee
for the purpose of leasing the Aircraft under the Lease, including without
limitation any amendment thereto entered into subsequent to the Delivery Date.

          "LESSEE" - Chautauqua Airlines, Inc., a New York corporation, and an
air carrier engaged in interstate air transportation and certificated under
Section 44705 of the Transportation Code, and its successors and permitted
assigns.

          "LESSEE DOCUMENTS" - the "Lessee Documents" shall be the Lease, Lease
Supplement No. 1 and any subsequent Lease Supplements, and the Lease Rent
Schedule.

          "LESSOR" - Lambert Leasing, Inc., a Delaware corporation, as Lessor
under this Lease, and its permitted successors and assigns.

          "LESSOR LIENS" - Liens or a disposition of title affecting or in
respect of the Aircraft, the Airframe, any Engine, any Propeller, any Part, the
Lease, or any payment of Rent, arising as a result of (i) claims or judgments
against or affecting Lessor not related to the transactions contemplated or
expressly permitted by the Operative Documents or not indemnified against by
Lessee; (ii) acts or omissions of Lessor not related to the transactions

                                        6


contemplated or expressly permitted by the operative Documents or not
indemnified against by Lessee; or (iii) claims against Lessor arising out of the
voluntary transfer by Lessor of its interest in the Aircraft, other than (A) the
transfer itself (if permitted by the Operative Documents), (B) claims
indemnified against by Lessee, and (C) transfers as a result of an Event of
Loss, Event of Default or exercise of a purchase option by Lessee; unless such
breach is the result of Lessor's failure to comply with any of Lessor's
obligations under the Operative Documents, or not indemnified against by Lessee.

          "LIABILITIES" - as defined in Section 14.1 of the Lease.

          "LIEN" - as applied to the property or assets (or the income or
profits therefrom) of any person, means (in each case, whether the same is
consensual or non-consensual or arises by contract, operation of law, legal
process or otherwise) any mortgage, lien, pledge, attachment, levy, lease,
charge, conditional sale, inscription on a public record, adverse claim or any
other type of security interest or encumbrance of any kind in respect of any
property of such Person, or upon the income or profits therefrom.

          "LOSS PAYEE" - as defined in Section 13(a) of the Lease.

          "MAINTENANCE PROGRAM" - Lessee's or its Affiliate's FAA approved
maintenance program in effect, from time to time, with respect to the Aircraft.

          "MANUFACTURER" - Saab Aircraft AB, a limited liability company
organized under the laws of the Kingdom of Sweden, and its successors and
permitted assigns.

          "MATERIALLY ADVERSE EFFECT" - (i) with respect to any Person, a
materially adverse effect on such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, (ii) with
respect to any contract or any other obligation (other than the Lease or any of
the other Operative Documents), a materially adverse effect, as to any party
thereto, upon the binding nature, validity or enforceability thereof, and (iii)
with respect to the Operative Documents an adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability thereof as
obligations of Lessor.

          "OFFICER'S CERTIFICATE" - with respect to any corporation or other
entity, a certificate of a Responsible officer of such corporation or entity.

                                        7


          "OPERATIVE DOCUMENTS" - the Lessee Documents to which Lessor is a
party.

          "OVERDUE RATE" - The Base Rate plus four (4) percent per annum, or
such lesser rate as may represent the maximum rate of interest permitted by
Applicable Law.

          "PARTS" - any and all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature,
(other than complete Engines or engines and Propellers or propellers), which may
from time to time be incorporated or installed in or attached to the Airframe,
any Engine or any Propeller.

          "PERMITTED LIENS" - as defined in Section 10.1 of the Lease.

          "PERSON" - any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Body.

          "PROPELLER" - (i) each of the two (2) Dowty Rotol Model
R354/4-123-F/13 four-blade aircraft propellers installed on the Aircraft on the
Delivery Date and listed by manufacturer's serial numbers in the Lease
Supplement describing the Aircraft whether or not from time to time thereafter
installed on the Aircraft or any other aircraft, (ii) any Replacement
Propeller; (iii) any and all Parts incorporated or installed thereon or
attached or belonging thereto and any and all Parts removed from such Propeller
so long as title thereto remains vested in Lessor in accordance with the Lease
after removal from such Propeller; and (iv) insofar as legal title thereto and
ownership thereof is from time to time vested in Lessor, all substitutions,
replacements or renewals from time made in or to such Propeller or to any of the
items referred to in clauses (i), (ii) and (iii) above or to any part thereof as
required or permitted under the Lease. Except as otherwise set forth in the
Lease, at such time as a Replacement Propeller is so substituted, such replaced
Propeller shall cease to be a Propeller under the Lease. The term "Propellers"
means, if the context so requires, as of any date of determination, all
Propellers then leased under the Lease.

          "REGULATIONS" - FAR.

          "RENT" - Base Rent and Supplemental Rent.

          "RENT PAYMENT DATE" - each rent payment date set forth in the Lease
Supplement and the Lease Rent Schedule.

                                        8


          "REPLACEMENT ENGINE" - each General Electric Model CT7-9B aircraft
engine (or aircraft engine of the same manufacturer of the same or an improved
model) substituted for an Engine under the Lease, together with all Parts
relating to such engine.

          "REPLACEMENT PROPELLER" - each Dowty Rotol Model R354/4-123-F/13
four-blade aircraft propeller (or aircraft propeller of the same manufacturer of
the same or an improved model) substituted for any Propeller under the Lease,
together with all Parts relating to such propeller.

          "RESPONSIBLE OFFICER" - in the case or any corporation or other
entity, the Chairman of the Board of Directors, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary.

          "SAAB MRB MANUAL" - the most recent revision of the Saab 340
Maintenance Review Board Document.

          "SAAI" - Saab Aircraft of America, Inc., a Delaware corporation, and
its successors and permitted assigns.

          "SPARE ENGINE" - the used General Electric Model CT7-5A engine listed
by manufacturer's serial number in Lease Supplement No. 1, whether or not from
time to time installed on the Airframe of the Aircraft or any other airframe;
(ii) any Replacement Engine substituted therefor; (iii) any and all Parts
incorporated or installed in or attached or belonging thereto and any and all
Parts removed therefrom so long as title thereto remains vested in Lessor in
accordance with the Lease after removal from such Engine; and (iv) insofar as
legal title thereto and ownership thereof is from time to time vested in Lessor,
all substitutions, replacements or renewals from time made in or to such Engine
or to any of the items referred to in clauses (i), (ii) and (iii) above or to
any part thereof as required or permitted under the Lease.

          "STIPULATED LOSS VALUE" - with respect to the Aircraft as of any date
of computation, the Stipulated Loss Value for the Aircraft as specified in the
table in Annex 1 to Lease Rent Schedule (the "Stipulated Loss Value Table"), for
the immediately preceding Base Rent Payment Date, or if the date of computation
is before the first Base Rent Payment Date, using the first Base Rent Payment
Date, or if the date of computation is on a Base Rent Payment Date using such
Base Rent Payment Date.

          "SUPPLEMENTAL RENT" - all amounts Lessee agrees to pay as Supplemental
Rent and all amounts, liabilities and obligations (other than Base Rent) which
Lessee assumes or agrees to pay under the Lease or under any Lessee Document
including, without limitation, Stipulated Lose Value, indemnities, any interest

                                        9


payable under the Lease or any Lessee Document, any insurance premium paid by
any Person in respect of insurance required to be carried by Lessee under the
Lease and damages for breach of any covenants, representations, or warranties of
Lessee under the Lease or under any other Lessee Document.

          "TAXES" or "TAX" - as defined in Section 15 of the Lease.

          "TERM" - the term of the Lease, as determined pursuant to Section 8 of
the Lease.

          "TRANSPORTATION CODE" - Title 49 of the United States Code, as amended
from time to time, or any similar legislation of the United States enacted in
substitution or replacement thereof.

          "UNITED STATES GOVERNMENT" - the government of the United States of
America or any agency or instrumentality thereof, including, without limitation,
the FAA.

          "U.S. CERTIFICATED AIR CARRIER" - any Person (except the United States
Government) that is an air carrier domiciled in the United States of America and
is certificated under Section 44705 of the Transportation Code, or any successor
provision thereto.

          "U.S. PERSON" - "United States person" within the meaning of Section
7701(a)(30) of the Code.

                                       10


                                                                       EXHIBIT A
                                                                              TO
                                                  AIRCRAFT LEASE AGREEMENT NO. 1

                             LEASE SUPPLEMENT NO. 1

          LEASE SUPPLEMENT NO. 1, dated March __, 1995 ("Lease Supplement No.
1") to Aircraft Lease Agreement No. 1 dated as of February 1, 1995 (the "Lease")
by and between CHAUTAUQUA AIRLINES, INC., as lessee ("Lessee"), and LAMBERT
LEASING, INC., as lessor ("Lessor").

                             I N T R O D U C T I O N

          WHEREAS, Lessor and Lessee have heretofore entered into the Lease
(defined terms therein being hereinafter used with the same meanings). The Lease
provides for the execution and delivery of a Lease Supplement for the purpose of
leasing the Aircraft under the Lease as and when delivered by Lessor to Lessee
in accordance with the terms thereof; and

          WHEREAS, a counterpart of the Lease, with this Lease Supplement No. 1
attached thereto, is being filed for recordation with the FAA Aircraft Registry
as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged Lessor and Lessee hereby agree as follows:

A. THE AIRCRAFT. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft and each Engine and Propeller described below for all purposes hereof
and of the Lease as being airworthy, in accordance with specifications, in good
working order and repair and without defect in condition, design, operation or
fitness for use, whether or not discoverable by Lessee as of the date hereof;
PROVIDED, HOWEVER, that nothing contained herein or in the Lease diminishes or
affects any right Lessor or Lessee may have with respect to the Aircraft against
the Manufacturer, GE, Dowty, any vendor or any subcontractor or supplier
thereof:

                                        1




AIRFRAME
MANUFACTURER         MODEL           SERIAL NUMBER             U.S. REG. NO.
                                                      
Saab-Fairchild       340A            340A-004                  N340CA

INSTALLED
ENGINES                                                        RATED
MANUFACTURER         MODEL           SERIAL NUMBER             TAKEOFF H/P
                                                      
General              CT7-5A          GE-E-367-146 (left)       Each of which
Electric                             GE-E-367-182 (right)      Engines has 750
                                                               or more rated
                                                               take off
                                                               horsepower or
                                                               the equivalent
                                                               thereof.

INSTALLED
PROPELLERS                                                     RATED TAKEOFF
MANUFACTURER         MODEL           SERIAL NUMBER             SHAFT H/P
                                                      
Dowty Rotol          R354/4-         DRG/7828/82 (left)        Each of which
                     123-F/13        DRG/3754/84 (right)       Propellers is
                                                               capable of
                                                               absorbing 750
                                                               or more rated
                                                               take off shaft
                                                               horsepower.

SPARE ENGINE                                                   RATED
MANUFACTURER         MODEL           SERIAL NUMBER             TAKEOFF H/P
                                                      
General              CT7-5A          GE-E-367-123              750 or more rated
Electric                                                       take off horse-
                                                               power or the
                                                               equivalent
                                                               thereof.


B. STIPULATED LOSS VALUE. Lessee hereby agrees to pay in accordance with and
when required by the Lease Stipulated Loss Value payments in the amounts set
forth in Annex 1 to the Lease Rent Schedule and incorporated herein by
reference.

C. REPRESENTATIONS BY LESSEE. Lessee hereby represents and warrants to Lessor
that on the above date:

(1) The representations and warranties of Lessee set forth in the Lease are true
    and correct in all material respects as though made on the date above;

                                        2


(2) Lessee has satisfied or complied with all requirements in the Lease, to be
    completed by it on or prior to the date hereof;
(3) No Default or Event of Default has occurred and is continuing on the date
    above; and

(4) Lessee has obtained, and there are in full force and effect, such insurance
    policies with respect to the Aircraft, as are required to be obtained under
    the terms of the Lease.

D. DELIVERY DATE:                     March __, 1995

E. TERM:                              The Term shall commence on the Delivery
                                      Date and expire on March __, 2005, unless
                                      terminated earlier pursuant to and in
                                      accordance with the Lease.

F. BASE RENT:                         Lessee agrees to pay Lessor, Base Rent
                                      monthly in arrears, in the amounts and
                                      on the dates, as set forth in the Lease
                                      Rent Schedule.

G. FIRST BASE RENT                    April __, 1995
   PAYMENT DATE:

H. BASE RENT                          Base Rent during the Term shall be
   PAYMENT DATE:                      paid on the same day of each month as
                                      the day of the month of the First Base
                                      Rent Payment Date.

I. AIRCRAFT BASE:                     Indianapolis, Indiana or Akron, Ohio.

J. DELIVERY SITE:                     St. Louis, Missouri

K. COUNTERPARTS:                      This Lease Supplement No. 1 may be
                                      executed in any number of counterparts
                                      and by the parties hereto on separate
                                      counterparts, each of which
                                      counterparts, shall for all purposes be
                                      deemed an original, and all such
                                      counterparts shall together constitute
                                      but one

                                        3


                                      and the same Lease  Supplement No. 1.

L. REFERENCE:                         All the terms and provisions of the
                                      Lease are hereby incorporated by
                                      reference in this Lease Supplement No. 1
                                      to the same extent as if fully set forth
                                      herein.

          IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement No. 1 to be duly executed by their authorized officers as of the day
and year first above written.

                                        LAMBERT LEASING, INC.,
                                        as Lessor

                                        By:
                                            ------------------------------------
                                            Gena H. Laurent
                                            Vice President

                                        By:
                                            ------------------------------------
                                            Bengt Nilsson
                                            Treasurer and Credit Manager

                                        CHAUTAUQUA AIRLINES, INC.,
                                        as Lessee

                                        By:
                                            ------------------------------------
                                            Timothy L. Coon
                                            Senior Vice President

                                        4


                                                                       EXHIBIT B
                                                                              TO
                                                  AIRCRAFT LEASE AGREEMENT NO. 1

                             INSURANCE ENDORSEMENTS

          It is understood and agreed that the Saab Fairchild 340A Aircraft,
MSN-340A-004, U.S. Registration No. N340CA with two General Electric CT7-5A
Engines, serial nos. GE-E-367-146 and GE-E-367-182, respectively, the General
Electric CT7-5A Spare Engine, serial no. GE-E-367-123, and two Dowty Rotol
R354/4-123-F/13 Propellers, serial nos. DRG/7828/82 and DRG/3754/84,
respectively, is leased by Lambert Leasing, Inc., a Delaware corporation, as
lessor ("Lessor"), under Lease Agreement No. 1 dated as of February 1, 1995 (the
"Lease") to Chautauqua Airlines, Inc., as Lessee ("Named Insured").

          As provided in Part B below, Lessor and (until at least December 22,
1996) Security Pacific Equipment Leasing, Inc., as their interests may appear,
shall be Additional Insureds with respect to each policy of liability insurance
to which these endorsements are attached, and Lessor shall be the Loss Payee
with respect to each policy of "all risks" insurance to which these endorsements
are attached. With respect to the interests of each Additional Insured or Loss
Payee in and with respect to the Aircraft as defined in Section 2 of the Lease
(the "Subject Property") insured under each policy by the insurers listed in
the Schedule of Insurers attached as Annex 1 hereto (collectively, the
"Company"), the Company hereby agrees that each "a11 risks" policy includes the
endorsements in Part A below; each liability policy includes the endorsements in
Part B below; and all policies include the endorsements in Part C below:

A. LOSS PAYABLE ENDORSEMENT (HULL POLICY)

          This "all risks" insurance is endorsed with respect to the Subject
Property, (A) to name Lessor as an additional insured, as its interests may
appear ("Additional Insured") and Lessor, as loss payee, as its interests may
appear ("Loss Payee").

1. Loss or damage, it any, to the Subject Property described in this policy to
   the extent of the Stipulated Loss Values set

                                        1


   forth in the Stipulated Loss Value Table attached as Schedule 1 hereto shall
   be payable as follows:

   (i)  loss or damage with respect to the Subject Property which does not
        constitute an Event of Loss (as defined in the Lease) shall be payable
        in United States Dollars solely to Lessor; except loss or damage with
        respect to the Aircraft of $ 100,000,00 or less shall be payable to
        Named Insured, unless prior to any loss or damage, Lessor notifies the
        Company that an Event of Default exists, in which case such amounts
        shall be payable to Lessor; and

   (ii) loss or damage with respect to the Subject Property described in this
        policy which constitutes an Event of Loss shall be payable by
        distributing (x) the amount set forth in Schedule 1 hereto ("SLV
        Amount") solely to Lessor, and (y) any remaining amounts solely to Named
        Insured.

2. Subject to paragraph 4 hereof, the insurance under this policy as to the
   interest only of the Loss Payee shall not be impaired in any way (i) by any
   action or inaction by Lessee and shall insure the interest of the Loss Payee
   regardless of any breach or violation by Lessee or any other additional
   insured of any warranty, declaration or condition contained in such policies,
   and if available at commercially reasonable cost such coverages shall be
   provided otherwise than by way of endorsement with Lloyd's Form AVN67A;
   PROVIDED HOWEVER, that with respect to secretion, embezzlement or conversion
   by Lessee, no coverage shall apply to any Person which is a willful party to
   such secretion, embezzlement or conversion, or (ii) because of a subjection
   of the Aircraft to any condition, use or operation not permitted by the
   policy or (iii) because of any false statement with respect to the policy by
   Lessee or its employees, agents or representatives, or any other Person
   except the Loss Payee (and then such policy shall be impaired only as to such
   Person), whether occurring before or after the attachment of this
   endorsement, or whether before or after the loss.

3. If the Named Insured fails to pay any premium or additional premium which
   shall be or become due under the terms of this policy, the Company agrees to
   give written notice to each Loss Payee of such nonpayment of premium and this
   policy shall continue in full force and effect if the Loss Payee when so
   notified in writing by the Company of the failure of the Named Insured to pay
   such premium, pays or causes to be paid the premium within thirty (30) days
   following receipt of the Company's written notice (seven (7) days, or such
   shorter period as may from time to time be the longest period

                                        2


     obtainable in the industry, in the case of any war risk and allied perils
     coverage). If no Loss Payee pays said premium or additional premium, the
     rights of Agent, Lessor, Lessee or the Loss Payee under this Loss Payable
     Endorsement may be terminated by the Company thirty (30) days after receipt
     o(pound) said written notice by the Loss Payee (seven (7) days, or such
     shorter period as may from time to time be the longest period obtainable in
     the industry, in the case of any war risk and allied perils coverage).

4.   If the Company elects to cancel. this policy in whole or in part for
     nonpayment of premium or for any other reason, the Company will forward a
     copy of the cancellation notice to the Loss Payee at its office specified
     hereinafter concurrently with the sending of notice to the Named Insured
     but in such case this policy shall continue in force for the benefit of the
     Loss Payee for thirty (30) days (seven (7) days, or such shorter period as
     may from time to time be the longest period obtainable in the industry, in
     the case of. any war risk and allied perils coverage) after written notice
     of such cancellation is received by the Loss Payee by a copy sent by
     certified or registered mail, return receipt requested. In no event, as to
     the interest only of the Loss Payee, shall cancellation, lapse or adverse
     material change of any insurance under this policy be effected at the
     request of the Named Insured before thirty (30) days (seven (7) days, or
     such shorter period as may from time to time be the longest period
     obtainable in the industry, in the case of any war risk and allied perils
     coverage) after written notice of request for cancellation shall have been
     received by the Loss Payee by a copy sent by certified or registered mail,
     return receipt requested. If this policy is cancelled, the unearned premium
     shall be paid to the Loss Payee that has advanced such premium.

5.   The coverage provided herein is primary without contribution from any other
     insurance which might be available to the Loss Payee. .

6.   Whenever the Company pays to Lessor or Named Insured any sum representing a
     total loss to the Subject Property insured under this policy, and claims
     that as to the Named Insured, no liability therefor exists, the Company, at
     its option, may pay to Lessor or Named Insured, as the case may be, the
     Stipulated Loss Value (as such term is defined in the Lease and the
     Schedules attached hereto, but in no event to exceed the Agreed Insured
     Value as stated in the policy), and the Company shall thereupon be
     subrogated to and receive a full assignment and transfer, without recourse,
     of said obligation and the security held as collateral therefor; but shall
     not exercise

                                        3


     such subrogation and assignment right until each Additional Insured has
     recovered in full the amount of its respective claims against the Named
     Insured.

7.   The coverage granted under this policy shall continue in full force and
     effect as to the interest of the Loss Payee if the Loss Payee agrees to pay
     the premium therefor, for a period of thirty (30) days after expiration of
     said policy unless an acceptable policy in renewal thereof with loss
     thereunder payable in accordance with the terms of this Loss Payable
     Endorsement shall have been issued by an insurance company acceptable to
     Lessor.

8.   Should this policy be continued for the term hereof for the benefit of the
     Lass Payee (with all incidents of ownership of the policy), Paragraphs 2, 6
     and 7 of Part A of this Loss Payable Endorsement shall no longer apply to
     the Loss Payee; PROVIDED, NEVERTHELESS, all privileges and endorsements
     which, by reason of the printed conditions of this policy, are or may be
     necessary to maintain the validity of the contract are hereby granted for a
     period of thirty (30) days, and all notices likewise required to be given
     to the Company by Named Insured are hereby waived for a period of thirty
     (30) days with the exception of requirements applying at the time of or
     subsequent to a loss.

9.   The Company waives any rights of subrogation against the Loss Payee, to the
     same extent as Lessee has waived its right against the Loss Payee, except
     with respect to the gross negligence and/or willful misconduct of the Loss
     Payee; PROVIDED, that with respect to liability and property damage
     coverages hereunder such waiver shall not operate to prejudice the
     Company's rights of recourse against Saab Aircraft AB and/or Saab Aircraft
     of America, Inc., and/or any subsidiary thereof and General Electric
     Company and/or any subsidiary thereof, as manufacturers, repairers,
     suppliers or servicing agents (other than financial services) where such
     rights of recourse would have existed had such waiver not been given; and
     'PROVIDED, FURTHER, that the exercise by the Company of rights of
     subrogation derived from rights retained by Named Insured shall not, in any
     way, delay payment of any claim that would otherwise be payable by the
     Company but for the existence of rights of subrogation derived from rights
     retained by Named Insured.

B.   LIABILITY POLICY ENDOSRSEMENTS

                                        4


          This liability insurance policy is endorsed, with respect to the
Subject Property:

(A)  To name Lessor and (until at least December 22, 1996) Security Pacific
     Equipment Leasing, Inc. as additional insureds as their respective
     interests may appear ("Additional Insureds") and shall cover (i) each of
     the shareholders of each Additional Insured, and (ii) officers, directors,
     employees, agents and representatives of each Additional insured (with
     respect to each Additional Insured, collectively, "Covered Persons");

(B)  To provide that if this policy is cancelled for any reason whatsoever, or
     any substantial change is made in the coverage which affects the interest
     of the Additional Insureds and Covered Persons, or if such insurance is
     cancelled for nonpayment of premium or allowed to lapse, such cancellation,
     change oar lapse shall not be effective as to the Additional Insureds and
     Covered Persons thirty (30) days (seven (7) days, or such shorter period as
     may from time to time be the longest period obtainable in the industry, in
     the case of war risk and allied perils coverage) after receipt by such
     Additional Insureds of written notice from the Company sent by certified or
     registered mail, return receipt requested, of such cancellation, change or
     lapse;

(C)  To provide that if the Named Insured fails to pay any premium or additional
     premium which shall be or become due under the terms of this policy, the
     Company agrees to give written notice to each Additional Insured of such
     nonpayment of premium and this policy shall continue in full force and
     effect if any one or more of the Additional. insureds when so notified in
     writing by the Company of the failure of the Named Insured to pay such
     premium, pays ox causes to be paid the premium due within thirty (30) days
     following receipt of the Company's written notice. If no Additional Insured
     pays said premium or additional premium, the rights of Lessor and other
     Additional Insureds and Covered Persons under this Liability Endorsement
     may be terminated by the Company thirty (30) days after receipt of said
     written notice by each Additional Insured;

(D)  To provide that the coverage granted under this policy shall continue in
     full force and effect as to the interest of each Additional Insured and
     Covered Person if any Additional Insured agrees to pay the premium
     therefor, for a period of thirty (30) days after expiration of said policy
     unless an acceptable policy in renewal thereof shall have been issued by an
     insurance company acceptable to Lessor;

                                        5


(E)  To provide that in respect of the interest of the Additional Insureds and
     Covered Persons, (i) this policy shall not be invalidated by any action of
     Named Insured and shall insure the respective interests of the Additional
     Insureds and Covered Persons named and covered under this Endorsement, as
     they appear, regardless of any breach or violation by Named Insured of any
     warranties, declarations or conditions contained in this policy or in the
     application therefor, if any, and (ii) severability of interest is
     included, PROVIDED nothing herein shall operate to increase the limits of
     liability and that coverage provided herein is primary without contribution
     from any other insurance which might be available to the Additional
     Insureds, and (iii) this insurance shall provide the same protection to
     each insured hereunder as would have been available had this policy been
     issued separately to each insured, except that in no event shall the
     Company's total. liability exceed $ 75,000,000.00;

(F)  the Company waives any rights of subrogation against any Additional Insured
     and the Covered Persons of such Additional Insured to the same extent as
     Lessee has waived its right against such Additional Insured and the Covered
     Persons of such Additional Insured, except with respect to the gross
     negligence and/or willful misconduct of such party; PROVIDED, that with
     respect to liability and property damage coverages hereunder such waiver
     shall not operate to prejudice the Company's rights of recourse against
     Saab Aircraft AB and/or Saab Aircraft of America, Inc., and/or any
     subsidiary thereof as manufacturers, repairers, suppliers or servicing
     agents (other than financial services) where such rights of recourse would
     have existed had such waiver not been given, and PROVIDED, FURTHER, that
     the exercise by the company of: rights of subrogation derived from rights
     retained by Named insured shall not, in any way, delay payment of any claim
     that would otherwise be payable by the Company but for the existence of
     rights of subrogation derived from rights retained by Named Insured; and

(G)  to insure the Additional Insureds and the Covered Persons with respect to
     liability for matters which are the subject of Named Insured's obligations
     under the Lease and Lessee Documents to the extent such insurance is
     provided under this policy; and to provide that such Additional Insureds
     and Covered Persons are warranted to have no operational interest.

          Nothing in these Insurance Endorsements shall be deemed or construed
to be an agreement by the Company to insure the Manufacturer of the Aircraft,
Saab Aircraft AB, or the manufacturer

                                        6


of the engines, General Electric Company, against claims arising out of product
liability.

          C. NOTICES

          All notices herein provided to be given by the Company to Lessor in
connection with this policy and these Endorsements shall be mailed to or
delivered to Lessor, Lambert Leasing, Inc., 21.300 Ridgetop Circle, Sterling,
Virginia 20166, Attention: Vice President, Telecopy No. (703) 406-7309; and to
Security Pacific Equipment Leasing, Inc. at Four Embarcadero Center, Suite 1200,
San Francisco, CA 94111, Attention: Equipment Management Unit #5824, Telecopy
No. (415) 765-7343.

                                        7


          Nothing herein contained shall be held to vary, alter, waive or extend
any of the terms, conditions, agreements or limitations of this policy, other
than as above stated.

          The insurance described herein is subject to the limitations,
conditions, definitions and exclusions of the policies.

                      [SEE ATTACHED "SCHEDULE OF INSURERS"]

                                                 The Company

                                              By
                                                 -------------------------
                                                 Authorized Representative

                                        8


                                                                   ANNEX 1
                                                                        TO
                                                    INSURANCE ENDORSEMENTS

                              SCHEDULE OF INSURERS

                                        9


                                                                SCHEDULE 1
                                                                        TO
                                                    INSURANCE ENDORSEMENTS

                           STIPULATED LOSS VALUE TABLE

          The Stipulated Loss Value computed using the immediately preceding
Base Rent Payment Date, or if on a Base Rent Payment Date, computing using such
Base Rent Payment Date.

DATE                                               TOTAL

                                       10


                                                                SCHEDULE 1
                                                                        TO
                                             AIRCRAFT LEASE AGREEMENT NO.1

                               CERTAIN PROCEEDINGS

Not applicable.

EX-10.16(A)

                              LEASE SUPPLEMENT NO.1

          LEASE SUPPLEMENT N0. 1, dated March 9, 1995 ("Lease Supplement No. 1")
to Aircraft Lease Agreement No. 1 dated as of February 1, 1995 (the "Lease") by
and between CHAUTAUQUA AIRLINES, INC., as lessee ("Lessee"), and LAMBERT
LEASING, INC., as lessor ("Lessor").

                             I N T R O D U C T I O N

          WHEREAS, Lessor and Lessee have heretofore entered into the Lease
(defined terms therein being hereinafter used with the same meanings). The Lease
provides for the execution and delivery of a Lease Supplement for the purpose of
leasing the Aircraft under the Lease as and when delivered by Lessor to Lessee
in accordance with the terms thereof; and

          WHEREAS, a counterpart of the Lease, with this Lease Supplement No. 1
attached thereto, is being filed for recordation with the FAA Aircraft Registry
as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are .hereby
acknowledged Lessor and Lessee hereby agree as follows:

A. THE AIRCRAFT. Lessee hereby confirms to Lessor that Lessee has accepted. the
Aircraft and each Engine and Propeller described below for all purposes hereof
and of the Lease as being airworthy, in accordance with specifications, in good
working order and repair and without defect in condition, design, operation ox
fitness for use, whether or not discoverable by Lessee as of the date hereof;
PROVIDED, HOWEVER, that nothing contained herein or in the Lease diminishes or
affects any right Lessor or Lessee may have with respect to the Aircraft against
the Manufacturer, GE, Dowty, any vendor or any subcontractor or supplier
thereof:

                                        1




AIRFRAME
MANUFACTURER       MODEL          SERIAL NUMBER          U.S. REG. NO.
                                                
Saab-Fairchild     340A           340A-004               N340CA


INSTALLED
ENGINES                                                  RATED
MANUFACTURER       MODEL          SERIAL NUMBER          TAKEOFF H/P
                                                
General            CT7-5A         GE-E-367-146 (left)    Each of which
Electric                          GE-E-367-182 (right)   Engines has 750
                                                         or more rated
                                                         take off
                                                         horsepower or
                                                         the equivalent
                                                         thereof

INSTALLED
PROPELLERS                                               RATED TAKEOFF
MANUFACTURER       MODEL          SERIAL NUMBER          SHAFT H/P
                                                
Dowty Rotol        R354/4-        DRG/7828/82 (left)     Each of which
                   123-F/13       DRG/3754/84 (right)    Propellers is
                                                         capable of
                                                         absorbing 750
                                                         or more rated
                                                         take off shaft
                                                         horsepower.

SPARE ENGINE                                             RATED
MANUFACTURER       MODEL          SERIAL NUMBER          TAKEOFF H/P
                                                
General            CT7-5A         GE-E-367-123           750 or more
rated                                                    take off horse-
Electric                                                 power or the
                                                         equivalent
                                                         thereof.


B. STIPULATED LOSS VALUE. Lessee hereby agrees to pay in accordance with and
when required by the Lease Stipulated Loss Value payments in the amounts set
forth in Annex 1 to the Lease Rent Schedule and incorporated herein by
reference.

C. REPRESENTATIONS BY LESSEE. Lessee hereby represents and warrants to Lessor
that on the above date:

(1)  The representations and warranties of Lessee set forth in the Lease are
     true and correct in all material respects as though made on the date above;

                                        2


(2)  Lessee has satisfied or complied with all requirements in the Lease, to be
     completed by it on or prior to the date hereof;
(3)  No Default or Event of Default has occurred and is continuing on the date
     above; and
(4)  Lessee has obtained, and there are in full force and effect, such insurance
     policies with respect to the Aircraft, as are required to be obtained under
     the terms of the Lease.

D.   DELIVERY DATE:                    March 9, 1995

E.   TERM:                             The Term shall commence on the
                                       Delivery Date and expire on March
                                       8, 2005, unless terminated earlier
                                       pursuant to and in accordance with
                                       the Lease.

F.   BASE RENT:                        Lessee agrees to pay Lessor, Base
                                       Rent monthly in arrears, in the
                                       amounts and on the dates, as set
                                       forth in the Lease Rent Schedule.

G.   FIRST BASE RENT                   April 9, 1995
     PAYMENT DATE:

H.   BASE RENT                         Base Rent during the Term shall be
     PAYMENT DATE                      paid on the same day of each month
                                       as the day of the month of the
                                       First Base Rent Payment Date:

I.   AIRCRAFT BASE:                    Indianapolis, Indiana or Akron, Ohio.

J.   DELIVERY SITE:                    St. Louis, Missouri

K.   COUNTERPARTS:                     This Lease Supplement No. 1 may be
                                       executed in any number of counterparts
                                       and by the parties hereto on separate
                                       counterparts, each of which counterparts,
                                       shall for all purposes be deemed an
                                       original, and all such counterparts shall
                                       together constitute but one
                                       and the same Lease Supplement No. 1.

                                        3


L.   REFERENCE:                        A11 the terms and provisions of the
                                       Lease are hereby incorporated by
                                       reference in this Lease Supplement
                                       No. 1 to the same extent as if fully
                                       set forth herein.

          IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement No. 1 to be duly executed by their authorized officers as of the day
and year first above written.

                                       LAMBERT LEASING, INC.,
                                       as Lessor

                                       By: /s/ Gena H. Laurent
                                          --------------------------------------
                                          Gena H. Laurent
                                          Vice President

                                       By: /s/ Bengt Nilsson
                                          --------------------------------------
                                          Bengt Nilsson
                                          Treasurer and Credit Manager

                                       CHAUTAUQUA AIRLINES, INC.,
                                       as Lessee

                                       By: /s/ Timothy L. Coon
                                          --------------------------------------
                                           Timothy L. Coon
                                           Senior Vice President

                                        4


                              Lease Rent Schedule
                         Aircraft Lease Agreement No. 1



                                  Basic Rent
     Date          PMT No.         Payment
                            

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]






                           Stipulated Loss Value Table      Schedule 1 to Lease
                                 SAAB 340A- 004                   Rent Schedule



     Date          PMT No.   Stipulated Loss Value
                                

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

EX-10.17

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

                         AIRCRAFT LEASE AGREEMENT NO. 2

                           dated as of March 15, 1995

                                     between

                             LAMBERT LEASING, INC.,
                                   as Lessor,

                                       and

                           CHAUTAUQUA AIRLINES, INC.,
                                   as Lessee.

                             One Saab 340A Aircraft
                        with General Electric Engines and
                             Dowty Rotol Propellers
                       Manufacturer's Serial No. 340A-006
                          U.S. Registration No. N360CA

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



                               TABLE OF CONTENTS
                                                                   
Section 1.    DEFINITION ................................................ 1

Section 2.    [RESERVED] ................................................ 2

Section 3.    DELIVERY .................................................. 2

Section 4.    ACCEPTANCE ................................................ 2

Section 5.    CERTAIN AGREEMENTS OF LESSE; LESSOR'S
              REPRESENTATIONS AND WARRANTIES ............................ 2

Section 6.    CONDITIONS PRECEDENT TO DELIVERY AND ACCEPTANCE;
              LEGAL OPINION ............................................. 5

Section 7.    REPRESENTATIONS AND WARRANTIES OF LESSEE .................. 7

Section 8.    TERM ......................................................10

Section 9.    RENT ......................................................10

Section 10.   LIENS; NAMEPLATES .........................................12

Section 11.   REGISTRATION, MAINTENANCE AND OPERATION; POSSESSION ETC ...13

Section 12.   RISK OF LOSS; EVENT OF LOSS AND CONDEMNATION ..............22

Section 13.   INSURANCE .................................................30

Section 14.   INDEMNITY .................................................36

Section 15.   TAXES .....................................................39

Section 16.   FURTHER ASSURANCE RECORDATION, TITLE REGISTRATION .........46

Section 17.   INSPECTION, REPORTS, AUDITS ...............................47

Section 18.   DEFAULTS, REMEDIES, DAMAGES ...............................49

Section 19.   RETURN OF AIRCRAFT AND RECORDS ............................58

Section 20.   ASSIGNMENT SUBLEASE .......................................66

Section 21.   NOTICES ...................................................67




                                        i


                                                                   
Section 22.   SURVIVAL OF COVENANTS; SEVERABILITY........................67

Section 23.   ENTIRE AGREEMENT. TITLES...................................68

Section 24.   NOTICES OF EVENTS..........................................68

Section 25.   EXECUTION AND COUNTERPARTS.................................69

Section 26.   CONFIDENTIALITY............................................65

Section 27.   COVENANT OF QUIET ENJOYMENT................................65

Section 28.   GOVERNING LAW: SUBMISSION TO JURISDICTION..................70

Annex I       Definitions

Exhibit A     Form of Lease Supplement No. 1
Exhibit B     Form of Insurance Endorsements

Schedule 1    Certain Proceedings



                                       ii


                         AIRCRAFT LEASE AGREEMENT NO. 2

          THIS AIRCRAFT LEASE AGREEMENT NO. 2 dated as of March 15, 1995
(hereinafter referred to as the "Lease") is made by and between LAMBERT LEASING,
INC., a Delaware corporation with principal offices at 21300 Ridgetop Circle,
Sterling, Virginia 20166 (hereinafter referred to as "Lessor"), and CHAUTAUQUA
AIRLINES, INC., a New York corporation with principal offices at 2500 South High
School Road, Indianapolis, Indiana 46251 (hereinafter referred to as "Lessee").

                                    RECITALS

          WHEREAS, this Lease relates to the one (1) used Saab 340A aircraft
("the Aircraft") to be described in Lease Supplement No. 1 attached hereto; and

          WHEREAS, this Lease and a counterpart of Lease Supplement No. 1 hereto
will be filed for recordation with the Federal Aviation Administration as one
document;

          NOW, THEREFORE, in consideration of the foregoing premises and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, it is mutually agreed by and between Lessor and Lessee as
follows:

                                   WITNESSETH:

                               AGREEMENT TO LEASE

          Lessor hereby agrees to lease the Aircraft to Lessee and Lessee hereby
agrees to rent and hire the Aircraft from Lessor subject to the terms and
conditions set forth herein.

                              TERMS AND CONDITIONS

Section 1. DEFINITIONS.

          Unless the context otherwise requires, the capitalized terms used
herein shall have the respective meanings assigned thereto in Annex I for all
purposes hereof (such definitions to be



equally applicable to both the singular and the plural forms of the terms
defined).

Section 2. [RESERVED].

Section 3. DELIVERY.

          Delivery shall be made to Lessee at St. Louis, Missouri on the
Delivery Date or at such other date and place as shall be mutually agreed upon.
Tender of the Aircraft by Lessor shall be to a Responsible Officer of Lessee or
such other persons duly authorized and appointed by the President or a Vice
President of Lessee.

Section 4. ACCEPTANCE.

          At the time of delivery of the Aircraft, Lessee, by and through its
President or one of its Vice Presidents or another duly appointed and authorized
representative, shall accept the Aircraft by executing Lease Supplement No. 1,
and upon such execution, said Lease Supplement No. 1 shall be delivered
immediately to Lessor. The date of execution of Lease Supplement No. 1 shall be
the "Delivery Date" as that term is used herein. Delivery and acceptance of the
Aircraft shall be conclusively deemed to have taken place and shall become
effective upon delivery of Lease Supplement No. 1 to Lessor as of the date of
such Lease Supplement No. 1 and the rights and obligations of each party hereto,
including Lessee's obligation to pay Rent under this Lease, shall become fully
effective with respect to the Aircraft on that date. Accordingly, the Aircraft
shall be deemed to be in good condition without defects, and Lessee's execution
of Lease Supplement No. 1 shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease.

Section 5. CERTAIN AGREEMENTS OF LESSEE: LESSOR'S REPRESENTATIONS AND
           WARRANTIES

          5.1  LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A MANUFACTURER OF THE
AIRCRAFT AND HAS NOT INSPECTED THE AIRCRAFT PRIOR TO DELIVERY TO AND ACCEPTANCE
BY LESSEE. LESSEE (I) ACKNOWLEDGES AND AGREES THAT THE AIRCRAFT IS A USED
AIRCRAFT AND IS BEING DELIVERED BY LESSOR TO LESSEE "AS IS" AND "WHERE IS" AND
THAT NO CONDITION, WARRANTY OR REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR
IS GIVEN BY OR IS TO BE IMPLIED ON THE PART OF LESSOR IN RELATION TO THE
AIRCRAFT EXCEPT AS SPECIFICALLY PROVIDED IN THIS

                                        2


LEASE, (II) HEREBY WAIVES AS BETWEEN ITSELF AND LESSOR ALL OF ITS RIGHTS,
EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AGAINST LESSOR IN THE
AIRCRAFT EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, RELATING TO (AND LESSOR
WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO) THE CAPACITY, AGE, QUALITY, DESCRIPTION, STATE,
CONDITION, VALUE, WORKMANSHIP, DESIGN, CONSTRUCTION, USE, OPERATION, PERFORMANCE
OR COMPLIANCE WITH SPECIFICATIONS THEREOF OR THE LEASING THEREOF BY LESSOR TO
LESSEE OR TO THE MERCHANTABILITY OR SUITABILITY OF THE AIRCRAFT OR ITS FITNESS
FOR ANY USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, OR
AS TO ITS AIRWORTHINESS OR AS TO THE QUALITY OF THE MATERIALS OR WORKMANSHIP
WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR AS TO THE ABSENCE OF LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, AND (III) AGREES THAT ALL RISKS
OF THE FOREGOING NATURE, WHETHER PATENT OR LATENT, ARE TO BE BORNE BY LESSEE
OTHER THAN RISKS (A) RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE
OF LESSOR, OR ANY SUCCESSOR, ASSIGNEE, DIRECTOR, OFFICER, AGENT OR EMPLOYEE OF
LESSOR (UNLESS SUCH WILLFUL MISCONDUCT OR GROSS NEGLIGENCE RESULTS FROM THE ACTS
OR OMISSIONS OF LESSEE ON BEHALF OF LESSOR), (B) WITH RESPECT TO THE AIRCRAFT,
THE AIRFRAME, ANY ENGINE OR PROPELLER, SO LONG AS NO DEFAULT OR EVENT OF DEFAULT
EXISTS, TO THE EXTENT ATTRIBUTABLE TO ACTS OR EVENTS (EXCEPT ACTS OR EVENTS
ATTRIBUTABLE TO OR DESCRIBED HEREUNDER AS A DEFAULT OR EVENT OF DEFAULT, WHETHER
OR NOT DECLARED) THAT OCCUR AFTER THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR
PROPELLER, AS THE CASE MAY BE, ARE NO LONGER LEASED UNDER THE LEASE AND AFTER
POSSESSION OF THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR PROPELLER, AS THE CASE
MAY BE, HAVE BEEN DELIVERED TO LESSOR, OR ANY OTHER PERSON ENTITLED TO RECEIVE
DELIVERY IN ACCORDANCE WITH THE LEASE, (C) WHICH ARE THE RESULT OF ANY FAILURE
OF LESSOR TO COMPLY WITH ANY COVENANT, OR ANY BREACH BY LESSOR OF ANY
REPRESENTATION CONTAINED IN THE LEASE OR ANY OTHER OPERATIVE DOCUMENT TO WHICH
LESSOR IS A PARTY, UNLESS SUCH FAILURE IS THE RESULT OF LESSEE'S FAILURE TO
COMPLY WITH ANY TERMS OR PROVISIONS OF THE LEASE OR ANY OTHER LESSEE DOCUMENT,
(D) TO THE EXTENT CAUSED BY ACTS OR OMISSIONS BY OR RELATING TO ANY PARTY OTHER
THAN LESSEE, OR EVENTS RELATING TO SUCH OTHER PARTY THAT OCCUR AFTER FULL AND
FINAL COMPLIANCE BY LESSEE WITH ALL THE TERMS OF THE LEASE AND THE LESSEE
DOCUMENTS, (E) TO THE EXTENT RELATED TO A LESSOR LIEN OR (F) RELATING TO A
DISPOSITION (VOLUNTARY OR INVOLUNTARY) BY LESSOR OF ALL OR ANY PART OF ITS
INTEREST IN THE AIRCRAFT, OTHER THAN AS PERMITTED BY THE LEASE AS A RESULT OF
THE OCCURRENCE OF AN EVENT OF LOSS OR AN EVENT OF DEFAULT UNDER THE LEASE, OR BY
ANY OTHER PERSON OF ALL OR ANY PART OF SUCH PERSON'S INTEREST IN THE AIRCRAFT;
EXCEPT THAT LESSOR HEREBY REPRESENTS AND WARRANTS TO LESSEE THAT ON THE DELIVERY
DATE THE AIRCRAFT SHALL BE FREE OF ALL LIENS OTHER THAN LIENS ARISING OUT OF ANY
ACTION OR INACTION BY LESSEE AND

                                        3


LESSOR LIENS. IN PARTICULAR AND WITHOUT PREJUDICE TO THE GENERALITY OF THE
FOREGOING (EXCEPT AS MENTIONED IN THE FIRST SENTENCE OF THIS SECTION 5.1),
LESSOR SHALL BE UNDER NO LIABILITY WHATSOEVER AND HOWSOEVER ARISING, WHETHER IN
CONTRACT OR TORT OR BOTH, IN RESPECT OF ANY LOSS, LIABILITY, DAMAGE OR DELAY OF
OR TO OR IN CONNECTION WITH THE AIRCRAFT OR ANY PERSON (WHICH EXPRESSION
INCLUDES, WITHOUT PREJUDICE TO THE GENERALITY THEREOF, ANY GOVERNMENTAL BODY) OR
PROPERTY WHATSOEVER, WHETHER ON BOARD THE AIRCRAFT OR ELSEWHERE IRRESPECTIVE OF
WHETHER SUCH LOSS, DAMAGE OR DELAY ARISES (X) FROM THE AIRCRAFT NOT BEING IN AN
AIRWORTHY CONDITION, OR (Y) FROM ANY ACT OR OMISSION OF LESSOR (OTHER THAN ANY
ACT OR OMISSION WHICH CONSTITUTES WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF
LESSOR), EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE. THE PROVISIONS OF THIS
SECTION 5.1 HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE THE COMPLETE EXCLUSION
AND NEGATION, EXCEPT AS OTHERWISE PROVIDED ABOVE, OF ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, BY LESSOR IN ANY CAPACITY, WITH RESPECT TO THE
AIRCRAFT, OR ANY PART THEREOF, WHETHER ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE.

          5.2  NONE OF THE PROVISIONS OF THIS SECTION 5 OR ANY OTHER PROVISION
OF THIS LEASE AMENDS, MODIFIES OR OTHERWISE AFFECTS THE EXPRESS REPRESENTATIONS,
WARRANTIES OR OTHER OBLIGATIONS OF SAAI OR ANY MANUFACTURER, SUBCONTRACTOR OR
SUPPLIER WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR RELEASES SAAI OR
ANY MANUFACTURER, SUBCONTRACTOR OR SUPPLIER FROM ANY SUCH REPRESENTATION,
WARRANTY OR OBLIGATION OR ANY RIGHTS OF LESSOR OR LESSEE. DURING THE TERM OF
THIS LEASE AND SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING HEREUNDER, LESSEE SHALL BE ENTITLED TO EXERCISE AND ENFORCE AND
ASSERT AT ITS SOLE EXPENSE ALL OF THE RIGHTS WHICH THE LESSOR HAS UNDER ANY
WARRANTY OR GUARANTY OF ANY VENDOR, MANUFACTURER, SUBCONTRACTOR OR SUPPLIER WITH
RESPECT TO THE AIRCRAFT.

          5.3  Lessor has the requisite corporate power, authority and legal
right to execute, deliver and perform each and every term of this Lease, Lease
Supplement No. 1 and all other Operative Documents, the same having been duly
authorized by all necessary corporate action of Lessor, and duly executed and
delivered by the authorized officers of Lessor and, assuming the due and proper
execution of the other party thereto, constitute legal, valid and binding
obligations of Lessor, enforceable against it in accordance with such terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and to general
principles of equity.

          5.4  Lessor is a corporation duly incorporated, validly existing in
good standing under the laws of the State of Delaware and is duly qualified and
authorized to do business as a foreign corporation in each jurisdiction where
the failure to so qualify or

                                        4


to be in good standing would have a material adverse effect on its ability to
carry on its business or to perform its obligations under this Lease.

          5.5  Lessor is, and during the Term will continue to be, a "citizen of
the United States" within the meaning of Section 40102(a)(15) of the
Transportation Code.

          5.6  No consent or approval of, giving of notice to, registration with
or other action in respect of or by any federal, state or local authority is
required with respect to Lessor's execution and delivery of this Lease,
consummation of the transactions contemplated hereby or performance, of its
obligations hereunder, or if any such consent, approval, giving of notice or
registration is required, it has been duly given or obtained.

          5.7  The execution and delivery of this Lease, Lease Supplement No. 1
and all other Operative Documents and the performance by Lessor of its
obligations under this Lease will not contravene or violate any provision of its
charter or Articles or Certificate of Incorporation of By-Laws or any contract,
agreement, indenture or other instrument either binding upon Lessee or to which
it is subject.

          5.8  There is no United States federal or state law or governmental
regulation or order that would be contravened or violated by the execution,
delivery and performance of this Lease by Lessor or by the performance of any
term and condition contained herein, or in Lease Supplement No. 1 or in any
other Operative Documents by Lessor.

Section 6. CONDITIONS PRECEDENT TO DELIVERY AND ACCEPTANCE; LEGAL OPINION.

          Lessor shall have no obligation to make delivery of the Aircraft or
any part thereof to Lessee unless and until all of the following conditions
precedent have been met, it being acknowledged that delivery by Lessor of the
Aircraft under the Lease and Lease Supplement No. 1 shall be deemed to signify
the fulfillment to the satisfaction of or waiver by Lessor of the conditions
precedent prior to or on the Delivery Date:

          6.1. All proceedings taken in connection with the transactions
contemplated hereby and all documents or papers relating thereto, including
without limitation the Operative Documents and this Lease, shall be satisfactory
to Lessor and its counsel, and Lessor and its counsel shall have received copies
of such documents and papers as Lessor or its counsel may reasonably request in
connection therewith or as basis for its counsel's

                                        5


closing opinion, all in the form and containing the substance reasonably
satisfactory to Lessor and its counsel;

          6.2  Lessee shall have delivered to Lessor a favorable opinion of
Lessee's counsel dated as of the Delivery Date in form and substance reasonably
acceptable to Lessor;

          6.3  Lessee shall not be in default of any payment obligation oar in
any material non-payment default with respect to any material indebtedness,
material lease obligation or any material contract;

          6.4  A11 representations, warranties, covenants and assurances made by
Lessee hereunder shall remain true and correct on the Delivery Date and there
shall be no material adverse change in the assets, liabilities, business,
prospects, profits or condition, financial or otherwise, of Lessee or of the
ability of Lessee to perform its obligations, duties and covenants under this
Lease from the time of such representations, warranties and assurances to the
Delivery Date;

          6.5  Lessee shall have delivered to Lessor an insurance brokers
opinion letter and a Certificate of Insurance  issued in the form and containing
the substance required; by.Section3 and containing the endorsements set forth in
Exhibit B hereof;

          6.6  Lessee shall have delivered to Lessor a certified copy of the
resolutions adopted by its Board of Directors authorizing the execution and
performance of this Lease setting forth the names of its officers authorized to
execute this Lease and all documents contemplated by the Lease to be executed
by Lessee; and

          6.7  FAA Counsel shall have confirmed that they will render an opinion
regarding filing and recording procedures required by this transaction, and on
or before the Delivery Date, the Lease and Lease Supplement No. 1 shall have
been recorded or filed for recording with the FAA Aircraft Registry pursuant to
the Transportation Code in the manner reflected in the opinion of such FAA
Counsel and in such other public offices as may be deemed necessary or
appropriate by such FAA Counsel or by Lessor or its counsel in order to protect
the rights and interest of Lessor thereunder and to perfect such rights and
interests of Lessor in and to the Lease, Lease Supplement No. 1, and the Rent
due and to become due hereunder. By such filing and recording, Lessor and Lessee
are not acknowledging or implying that the Lease constitutes a "security
agreement" or creates a "security interest" within the meaning of any applicable
version of the Uniform commercial Code adopted by any jurisdiction.

                                        6


Section 7 REPRESENTATION AND WARRANTIES OF LESSEE

     Lessee hereby makes the following representations and warranties:

          7.1  Lessee is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of New York and is duly qualified
and authorized to do business as a foreign corporation in each jurisdiction
where the failure to so qualify or to be in good standing would have a material
adverse effect on its ability to carry on its business or to perform its
obligations under this Lease;

          7.2  Lessee has the requisite corporate power, authority and legal
right to execute, deliver and perform each and every term of this Lease, Lease
Supplement No. 1 and all other Lessee Documents, the same having been duly
authorized by all necessary corporate action of Lessee, and duly executed and
delivered by the authorized officers of Lessee and, assuming the due and proper
execution of the other party thereto, constitute legal, valid and binding
obligations of Lessee, enforceable against it in accordance with such terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and to general
principles of equity;

          7.3  The execution and delivery of this Lease, Lease Supplement No. 1
and all other Lessee Documents and the performance by Lessee of its obligations
under this Lease will not contravene or violate any provision of its charter or
Articles or Certificate of Incorporation or By-Laws or any contract, agreement,
indenture or other instrument either binding upon Lessee or to which it is
subject, nor will any such contract, agreement, indenture or other instrument
create a Lien (other than a Permitted Lien) with respect to this Lease or the
Aircraft;

          7.4  There is no United States federal or state law or governmental
regulation or order that would be contravened or violated by the execution,
delivery and performance of this Lease by Lessee or by the performance of any
term and condition contained herein, or in Lease Supplement No. 1 or in any of
the other Lessee Documents by Lessee;

          7.5  No consent of shareholders of Lessee or of any holders of
indebtedness of Lessee, and except for the registrations, recordings and filings
made or to be made with respect to the Aircraft under the Operative Documents
and except as required under FAR Parts 125, 129, 135 or 91 (Section91.54), no
consent or approval of, the giving of notice to, registration with, the
recording or filing of any document with, or the taking of any other action in
respect of any governmental authority, body,

                                        7


commission or agency or any other entity (except any such consents, approvals,
notices, registrations, recordings, filings or actions as have already been
accomplished by Lessee, and except for routine periodic and other reporting
requirements and renewals and extensions of exemptions, in each case to the
extent required to be given or obtained only after the date hereof), is or will
be required as a condition to the execution and validity of this Lease or as a
condition to or in connection with the authorization, execution, delivery or
performance hereof by Lessee, except those which have been duly made or
obtained, certified copies of which have been or will be delivered to Lessor,
prior to delivery of the Aircraft to Lessee. This Lease and its performance by
Lessee will not violate or contravene any law, regulation, order, judgment or
other similar obligation imposed by any government or regulatory agency, court,
administrative or legislative body applicable to Lessee or the Aircraft;

          7.6  Except as set forth in schedule 1 hereto, there are no actions or
proceedings pending or, to Lessee's knowledge, threatened, against Lessee or any
of its subsidiaries or Affiliates before any court or administrative agency in
any jurisdiction that question Lessee's legal capacity to execute, deliver or
perform, or the binding effect or validity of, this Lease or any other Lessee
Document, or which might result in any material adverse effect on the assets,
liabilities, prospects, business, profit, condition or operations, financial or
otherwise, of Lessee or any of its subsidiaries or Affiliates;

          7.7  Lessee is fully familiar with all the covenants, terms,
conditions, agreements and warranties of this Lease and is not in default with
respect thereto;

          7.8  All Lessee's financial statements, other financial information
and tax returns that have heretofore been provided to Lessor in conjunction with
this transaction fairly and accurately represent the financial condition and
income of Lessee as of the dates given and, as of such dates, such financial
statements and other financial information did not contain any untrue statements
of a material fact, nor did they omit to state a material fact required to be
stated therein or necessary in order to prevent such financial statements or
other financial information from being misleading as of the dates thereof; and
except, as otherwise has been disclosed in writing to Lessor, there is no fact,
situation or event, currently known to Lessee, which, so far as can be foreseen
by Lessee, (a) will materially adversely affect the properties, business,
assets, income, prospects or condition, financial or otherwise, of Lessee or (b)
has had a materially adverse effect on the properties, business, assets, income,
prospects or condition, financial or otherwise, of Lessee since the dates of
such financial statements, other financial information or tax returns;

                                        8


          7.9  All Federal income tax returns required to be filed by Lessee
have, in fact, been filed, and all taxes which are shown to be due and payable
in such returns have been paid. No material controversy in respect of additional
income taxes due is pending or to the knowledge of Lessee threatened, which
controversy if determined adversely would materially and adversely affect
Lessee's ability to perform its obligations hereunder. The provision for taxes
on the books of Lessee is adequate for all open years, and for its current
fiscal period;

          7.10 Lessee is not engaged in any transaction in connection with which
it could be subjected to either a civil penalty assessed pursuant to section 502
(c) of ERISA or any tax imposed by Section 4975 of the Code; no material
liability of the Pension Benefit Guaranty Corporation has been or is expected by
Lessee to be incurred with respect to any employee pension benefit plan (as
defined in Section 3 of MSA) maintained by Lessee; there has been no reportable
event (as defined in Section 4043 (b) of ERISA) with respect to any such
employee pension benefit plan. There has been no event of termination of any
such employee pension benefit plan by the Pension Benefit Guaranty Corporation;
and no accumulated funding deficiency (as defined in Section 302 of ERISA or
Section 412 of the Code), whether or not waived, exists with respect to any such
employee pension benefit plan;

          7.11 Lessee is an "air carrier" engaged in interstate air
transportation, as such term is used in Section 40102 (a) (2) of the
Transportation Code, and certificated under Section 44705 of the Transportation
Code, is a "citizen of the United States" as such term is defined in Section
40102 (a)(15) of the Transportation Code, is authorized to operate Saab 340A
Aircraft pursuant to FAR Part 135 and possesses all necessary material
certificates, franchises, licenses, permits, authorizations, rights, concessions
and consents of or from all applicable governmental authorities or agencies of
the United States, including, without limitation, the FAA, that are required for
the operation of the Aircraft, routes flown by Lessee and the conduct of its
business as now being conducted;

          7.12 Lessee is not in material default and no condition exists that
with notice, or lapse of time or both would constitute a material default by
Lessee under any mortgage, deed of trust, indenture, security, loan agreement or
other instrument or agreement or evidence of any obligation for borrowed money,
to which Lessee is a party or by which any of its properties or assets may be
bound; and

          7.13 Lessee's chief executive office and the place where it keeps its
corporate records is at 2500 South High School Road, Indianapolis, Indiana
46251. The offices where it keeps its records

                                        9


concerning the Aircraft and all contracts relating thereto are located at 2500
South High School Road, Indianapolis, Indiana 46251 and at 5353 Massilon Road,
Route 241, Greensburg, Ohio 44232. The Aircraft will be based in either Akron,
Summit County, Ohio or Indianapolis, Marion County, Indiana, and the components
of the Aircraft which are not attached to or customarily installed on the
Aircraft, will be located in Indianapolis, Marion County, Indiana.

Section 8. TERM.

          The Term of this Lease for the Aircraft shall commence on the Delivery
Date specified in Lease Supplement No. 1 and unless sooner terminated under the
terms hereof, shall extend through and expire on the first Business Day that
occurs prior to the tenth (10th) anniversary of the Delivery Date, as specified
in Paragraph E of Lease Supplement No. 1. The Term of this Lease is subject to
early termination pursuant to the. provisions of SECTION 18 hereof, respecting
among other things, repossession of the Aircraft prior to the expiration of the
Term hereof.

Section 9. RENT.

          9.1  Lessee covenants and agrees to pay Lessor, monthly in arrears,
with respect to the Aircraft, Base Rent for the Term on each Base Rent Payment
Date in the amounts set forth in the. Lease Rent Schedule, which by this
reference is incorporated herein.

          9.2  Notwithstanding the expiration, cancellation or other termination
of Lessee's obligation to pay Base Rent hereunder, Lessee agrees to pay to
Lessor, or to any other Person entitled thereto, any and all Supplemental Rent
promptly as the same becomes due and owing. If Lessee fails to pay any
Supplemental Rent, Lessor or such other person entitled thereto shall have the
rights, powers and remedies provided for herein or in any other Lessee Document,
or by law or in equity or otherwise as if Lessee has failed to pay Base Rent.

          9.3  All payments of Rent as required by this SECTION 9 and any and
all other payments to Lessor shall be paid in immediately available funds
without Abatement on the date such Rent is due, by wire transfer to Lessor's
account with Skandinaviska Enskilda Banken, New York Branch, 245 Park Avenue,
New York, New York, 10167, account number 00004362, or such other place in the
United States as Lessor may, from time to time, designate.

          9.4  Any payment provided herein due on any day not a Business Day
shall be payable on the next preceding Business Day. No payment of Rent may be
prepaid by more than ten (10) days without the prior written consent of Lessor.

                                       10


          9.5  THIS LEASE IS A NET LEASE, AND LESSEE ACKNOWLEDGES AND AGREES
THAT LESSEE'S OBLIGATION TO PAY ALL RENT HEREUNDER, AND THE RIGHTS OF LESSOR IN
AND TO SUCH RENT, SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT
TO ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM OR RECOUPMENT
("ABATEMENTS") FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
ABATEMENTS DUE TO ANY PRESENT OR FUTURE CLAIMS OF LESSEE AGAINST LESSOR UNDER
THIS LEASE OR OTHERWISE, AGAINST SAAI OR ANY VENDOR OR MANUFACTURER, OR AGAINST
ANY OTHER PERSON FOR WHATEVER REASON, INCLUDING, WITHOUT LIMITATION: (A) any
default, misrepresentation, negligence, gross negligence, misconduct, willful
misconduct or other action or inaction of any kind by Lessor, any manufacturer
or seller of any component of the Aircraft or any other Person, or any set-off,
counterclaim, recoupment, defense or other right which Lessee may have against
Lessor, the manufacturers or anyone else for any reason whatsoever, (B) any
defect in the title, airworthiness, condition, design, operation or fitness for
use of, or any Lien or other restriction of any kind upon, all or any component
of the Aircraft, or any damage to or loss or destruction of, any part of the
Aircraft or any interruption or cessation in the use or possession thereof by
the Lessee for any reason whatsoever, (C) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessor, any manufacturer or
seller of any component of the Aircraft, Lessee or any other Person, (D) any
breach by Lessor of any representation, warranty or covenant of Lessor made
herein or in connection herewith, (E) the invalidity or lack of enforceability
or lack of due authorization or other infirmity of this Lease or the lack of
right, power or authority of Lessor to enter into this Lease, or (F) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. Except as otherwise provided herein, Lessee hereby waives, to the
extent permitted by Applicable Law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease, except as herein
specifically provided or otherwise agreed between the parties hereto. If for any
reason whatsoever this Lease shall be terminated in whole or in part by
operation of law, except as specifically provided herein, Lessee nonetheless
agrees to pay to Lessor an amount equal to each installment of Base Rent at the
time such installment would have become due and payable in accordance with the
terms hereof had this Lease not been terminated in whole or in part. Each
payment of Rent made by Lessee shall be final and Lessee shall not seek to
recover all or any part of such payment from Lessor for any reason whatsoever.
Nothing in this SECTION 9.5 shall be construed to preclude Lessee from bringing
any suit at law or in equity which it would otherwise be entitled to bring for
breach of any representation, warranty, covenant or duty hereunder.

                                       11


          9.6  In the event Lessee shall fail to pay any Rent when due
hereunder, Lessee shall pay, to the extent permitted by law, to Lessor or to
such other Person entitled thereto, upon demand, as Supplemental Rent, interest
on such amount from the due date thereof to the date paid at a rate per annum
(computed on the basis of a 365- or 366-day year, as the case may be, and actual
number of days elapsed, including the first day but excluding the last day)
equal to the Overdue Rate.

Section 10. LIENS, NAMEPLATES.

          10.1 LIENS. Lessee and Lessor agree that for all purposes, this Lease
is, and is intended to be, a Lease, and that Lessee does not acquire any right,
title, interest or equity in or to the Aircraft, except the right to use it
under the terms provided herein. The Aircraft, excluding those additions to
which Lessee retains title, is and shall at all times, until released, remain
the sole and exclusive property of Lessor.

          Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, any part thereof,
title thereto or any, interest therein, and in this Lease or in any Rent, except
(a) the rights of Lessee under the operative Documents; (b) the rights under the
Operative Documents of the respective parties thereto; (c) the rights of others
under agreements or arrangements to the extent expressly permitted by SECTIONS
11.1 AND 11.2 hereof and similar arrangements for Parts owned by Lessee; (d) any
Lessor Liens; (e) Liens for taxes of Lessee either not yet delinquent or being
contested in good faith by appropriate and timely proceedings, so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of or interference with the use of the Aircraft, the Airframe or any Engine or
Propeller or any interest therein; PROVIDED, that Lessee shall maintain on its
books any reserves with respect thereto which may be required by GAAP; (f)
inchoate materialmen's, mechanics', workers', repairers', employees' or other
like Liens arising in the ordinary course of Lessee's business for amounts the
payment of which is either not yet delinquent or is being contested in good
faith by appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss or interference with the use of
the Aircraft, or any interest therein, PROVIDED, that Lessee shall maintain on
its books any reserves with respect thereto which may be required by GAAP; (g)
Liens arising out of the maintenance of court actions being defended in good
faith and on a timely basis and Liens arising out of judgments or awards against
Lessee with respect to which an appeal or proceeding for review is being
prosecuted in good faith and with respect to which there is secured a stay of
execution pending such appeal, or proceeding for review;

                                       12


and (h) any other Lien with respect to which Lessee provides a bond in an amount
and under such terms as are adequate in the reasonable opinion of Lessor;
PROVIDED, that the aggregate amount of liens which are not being contested and
are delinquent under paragraphs (e), (f), and (g) of this SECTION 10.1 for which
no bond or adequate (in the reasonable opinion of Lessor) security is provided
shall not at any time exceed $25,000-00. For the purpose hereof, the Liens set
forth in clauses (a) through (h) of this SECTION 10.1 shall be "Permitted
Liens". Lessee at its own cost and expense will protect and defend the Aircraft
and any interest therein against all Liens, other than Permitted Liens, and
legal processes of the creditors of the Lessee and other Persons, other than
Permitted Liens, and Lessee will promptly, at its own expense, take such action
as may be necessary to duly discharge any such Lien not permitted by the express
terms above if the same arises at any time.

          10.2 NAMEPLATE. Lessee shall attach to and keep upon the Airframe and
each Engine such labels, plates or markings furnished by Lessor as are deemed by
Lessor necessary or advisable to evidence Lessor's ownership thereof; and in any
event Lessee will cause to be affixed to and maintained on the Aircraft in a
location adjacent to and not less prominent than that of the Airworthiness
Certificate, and on each Engine a nameplate furnished by Lessor bearing the
following legend:

          "LEASED FROM LAMBERT LEASING, INC., AS FAA REGISTERED OWNER AND
          LESSOR"

such nameplate also to state, to the extent applicable, the type, manufacturer's
serial number and current registration number of the Airframe. Lessor and Lessee
agree that the nameplate shall be changed by Lessor to reflect any transfer of
the interests of Lessor in accordance with the Operative Documents. Except as
above provided, Lessee will not allow the name of any Person to be placed on the
Aircraft with any description that might be interpreted as a claim of ownership
or of security interest therein; PROVIDED, HOWEVER, that nothing herein
contained shall prohibit Lessee from placing its customary colors and insignia
and name on the Aircraft, or from substituting engines, propellers or parts on
the Aircraft in accordance with this Lease.

Section 11. REGISTRATION, MAINTENANCE AND OPERATION: POSSESSION, ETC.

          11.1 REGISTRATION, MAINTENANCE, AND OPERATION.

                                       13


          At its own cost and expense (as between Lessee and Lessor), Lessee
shall:

     (i)  forthwith upon delivery thereof, pursuant hereto, cooperate and take
no actions inconsistent with the actions of Lessor or any other Person to cause
the Aircraft to be duly registered under the laws of the United States of
America at all times in the name of the Lessor, and shall cooperate and take no
actions inconsistent with the actions of Lessor or any other Person to cause the
interest of Lessor, this Lease, Lease Supplement No.1 and supplements thereto
and hereto, to be duly recorded and maintained of record in each case until
release thereof pursuant to the Operative Documents, and to cooperate and not
interfere with Lessor or any other Person in causing any termination of the
Lease to be recorded at the FAA Aircraft Registry upon its expiration or
termination;

     (ii) promptly deliver to Lessor true copies of all applications made by
Lessee in relation to the Aircraft, of all certificates of registration issued
pursuant to such applications and of all notifications given pursuant to such
registrations (including without limitation, notification of changes in Lessee's
maintenance program) and shall not do, or permit to be done by any Person, any
act which might cause the Aircraft to be ineligible for registration with the
FAA, subject to Lessee obtaining such cooperation from Lessor and, to the extent
then so required, to Lessor remaining a "citizen of the United States" as
defined in Section 40102(a)(15) of the Transportation Code and not otherwise
taking any actions which cause the Aircraft to be ineligible for such
registration by reason of Lessors interest therein;

    (iii) maintain, inspect, service, repair, overhaul and test the Aircraft
(including corrosion control) in compliance with the Maintenance Program, but in
any event so as to keep the Aircraft (A) in good operating condition, (B) in the
same condition as when delivered to Lessee hereunder, ordinary wear and tear
excepted, and in a condition suitable for airline commercial use (but with no
broken, damaged or missing items or components except obsolete parts and/or
parts undergoing replacement or scheduled to be replaced), (C) in such a manner
as may be necessary to maintain in full force all warranties of manufacturers
and suppliers of the Aircraft and its components, in accordance with their
respective terms, and (D) in such operating condition as may be necessary to
enable the airworthiness certification of the Aircraft to be maintained in good
standing at all times under the Transportation Code and the Aircraft to be
eligible for operation in regularly scheduled United States commercial passenger
service under FAR Part 135 or successor provisions, as may be applicable, but in
any event in a manner, to an extent and with a standard of care and frequency of
maintenance not less than that employed by Lessee with respect

                                       14


to similar aircraft and engines owned or leased by it and without regard to any
scheduled return of the Aircraft pursuant hereto, which practices shall at all
times be at or above the standard of the industry for maintenance of similar
aircraft; PROVIDED, HOWEVER, that Lessee shall not be deemed to be in violation
of its obligations under this clause (iii) with respect to any minor violation
which is cured promptly after Lessee becomes aware of it, and in any event not
later than sixty (60) days after Lessee becomes aware of it, so long as such
minor violations do not affect or impair the registration or eligibility for
registration of the Aircraft; and maintain all records, logs and other materials
required by the appropriate authorities of the jurisdiction where the Aircraft
is registered to be maintained in respect of the Aircraft, and permit Lessor to
examine such records at any reasonable time during normal business hours;

     (iv) upon Lessor's request, promptly furnish to Lessor notification of any
material changes in the Lessee's Maintenance Program, and such other information
as may be required to enable Lessor to file any reports required by any
Governmental Body as a result of the interests of Lessor in the Aircraft;

     (v)  pay and provide for all electric power, oil, fuel and lubricant
consumed by and required for the operation of the Aircraft, and all repairs,
parts and supplies necessary therefor;

     (vi) except as otherwise provided herein, comply with all applicable
mandatory (A) FAA airworthiness directives, orders and other requirements of FAR
Part 135 or successor provisions, as may be applicable, (B) manufacturer service
bulletins and service letters or similar requirements affecting the Aircraft,
and (C) rules and regulations of the FAA relating to the Aircraft, and take all
steps necessary so that the Aircraft at all times during the Term possesses a
valid FAA Airworthiness Certificate in good standing and that the Aircraft
remains eligible for operation in regularly scheduled United States commercial
passenger service under FAR Part 135 or successor provisions, as may be
applicable, except as provided for in SECTION 12.2 (vi);

    (vii) conform with any Applicable Law requiring alteration of the Aircraft
(or obtain a waiver of conformance therewith at no expense to Lessor) and
maintain the same in proper operating condition under such Applicable Law;
PROVIDED, HOWEVER, that Lessee may, with the consent of Lessor, in good faith
contest the validity or application of any such Applicable Law, after having
delivered to Lessor written notice stating the facts with respect thereto, and
so long as such contest does not subject Lessor to criminal liability and does
not subject the Aircraft or any interest therein to any material danger of sale,
forfeiture or loss;

                                       15


   (viii) cause the Aircraft to be operated only by duly qualified, currently
certificated pilots having the minimum total pilot hours required by any policy
of insurance required to be carried hereunder and for such certification by the
FAA;

    (ix)  not maintain, use, operate or locate the Aircraft (A) in violation of
any Applicable Law, or in violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any Governmental Body; (B) in
any area excluded from coverage by any insurance in effect or required to be
maintained by the terms of SECTION 13, except in the case of requisition by the
United States Government, where Lessee obtains, for the benefit of Lessor,
indemnity in lieu of such insurance from the United States Government against
the risks and in the amounts required by SECTION 13 covering such area; (C)
outside of, or to any destination outside of the United States, except (1) in
connection with the delivery of the Aircraft or any part thereof to the
Manufacturer far any service, repair, modification or alteration required or
permitted hereunder, to the extent not reasonably capable of being performed in
the United States, (2) when the Aircraft is operated or used under contract with
the United States Government under which contract the United States Government
assumes liability for any damage, loss, destruction or failure to return
possession of the Aircraft at the end of the term of such contract and for
injury to persons or damage to property of others, or (3) to destinations within
Canada, Mexico and the Caribbean, so long as the total annual operating time of
the Aircraft (on a calendar year basis) outside of the continental limits of the
United States shall not exceed fifty percent (50%) of the total annual operating
time of the Aircraft for any calendar year prior to January 1, 1999 and to the
extent that such use does not violate the restrictions set forth in SECTION (xi)
hereof;

     (x)  perform in due course terminating actions with respect to any part of
the Aircraft affected by an FAA airworthiness directive if terminating action is
performed with respect to similar items of aircraft or equipment owned or leased
by Lessee, except for those airworthiness directives whose final compliance date
is later than twelve (12) months after the expiration of the Term of this Lease,
and not defer maintenance or replacement of parts, preventative maintenance
(including corrosion control) or implementation of FAA airworthiness directives
that Lessee in accordance with its ordinary practice would have performed
without regard to any scheduled return of the Aircraft pursuant hereto, or
install replacement components with excessive wear, or except as otherwise
provided in SECTION 19, exchange any Engine, Propeller, landing gear or any
other Part of the Aircraft about to be returned to Lessor for other aircraft
components in Lessee's possession for use on aircraft that will remain in
Lessee's or any Affiliate of

                                       16


Lessee's possession after such return in order to reduce or avoid future
maintenance requirements; and

     (xi) not allow the Aircraft Base for the Aircraft at any time to be a
location other than Indianapolis, Indiana or Akron, Ohio without thirty (30)
days' prior written notice to Lessor.

          11.2 POSSESSION. Except as provided in this SECTION 11 or SECTION 20,
Lessee will not, without the prior written consent of Lessor, sublease or
otherwise in any manner deliver, transfer or voluntarily relinquish possession,
or enter into any contract or arrangement obligating it to deliver, transfer or
relinquish possession of the Airframe, any part thereof, any Engine or Propeller
or install any part of the Airframe, any Engine or Propeller or permit any part
of the Airframe, any Engine or Propeller to be installed, on any airframe other
than the Airframe, except as provided in this SECTION 11 or SECTION 20, except
that so long as no Default or Event of Default exists, and so long as the action
to be taken does not affect Lessor's title to or interest in the Aircraft,
Lessee may, without the prior written consent of Lessor:

          (i)  subject any Engine or Propeller to normal interchange or pooling
agreements or arrangements customary in the airline industry applicable to other
similar engines or propellers operated by Lessee and entered into by Lessee in
the ordinary course of its business; PROVIDED (A) if Lessor's title to any such
Engine or Propeller is divested pursuant to any such agreement or arrangement or
(B) if Lessee relinquishes possession of such Engine or Propeller for a
continuous period of more than one hundred eighty (180) consecutive days, there
shall be deemed to be an Event of Loss with respect to such Engine or Propeller
and Lessee shall comply with SECTION 12.4 in respect thereof;

          (ii) deliver possession of the Aircraft, or any component thereof, to
the manufacturer thereof or its authorized representatives for testing or other
similar purpose or to any organization for service, repair, maintenance or
overhaul work on the Aircraft or any part thereof or for alterations or
modifications in or additions to the Aircraft to the extent required or
permitted by the terms of this Lease;

          (iii) install an Engine or a Propeller on an airframe owned by Lessee
free and clear of all Liens, except (A) Liens of the type permitted under
SECTIONS 10.1 (e), (f) and (g), (B) the rights of other U.S. Certificated Air
Carriers under normal interchange agreements that are customary in the airline
industry and entered into by Lessee in the ordinary course of its business, so
long as such agreements do not contemplate, permit or require the transfer of
title to such airframe or the engines or the

                                       17


propellers installed thereon and (C) the Lien of any mortgage which expressly
and effectively provides that each Engine or Propeller shall not become subject
to the Lien thereof, notwithstanding the installation thereof on an airframe or
engine subject to the Lien of such mortgage, unless and until Lessee shall
become the owner of such Engine or Propeller free of the interests of Lessor
therein under this Lease.

          (iv) install an Engine or a Propeller on an airframe leased to Lessee
or purchased by Lessee subject to a conditional sale or other security
agreement, PROVIDED (A) such airframe is free and clear of all Liens except the
rights of the parties to the lease or conditional sale or other security
agreement and their purchasers, mortgagees and encumbrancers covering such
airframe and except Liens of the type permitted by clauses (A) and (B) of
subparagraph (iii) of this SECTION 11.2; and (B) such lease, conditional sale or
other security agreement expressly and effectively provides that each Engine or
Propeller shall not become subject to the Lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof on any
airframe subject to the Lien of such lease, conditional sale or other security
agreement, unless and until Lessee becomes the owner of such Engine or Propeller
free of the interests of Lessor therein under this Lease; or

          (v) transfer possession of the Airframe or any Engine or Propeller to
the United States Government pursuant to a sublease, a copy of which shall be
promptly furnished to Lessor, PROVIDED that such sublease (including, without
limitation, any option of the sublessee to renew or extend) shall not extend
beyond the end of the Term of the Lease.

          Notwithstanding anything to the contrary in this SECTION 11.2:

          (1)  the rights of any transferee or sublessee who receives possession
by reason of a transfer permitted by this SECTION 11.2 (other than a transfer
of an Engine or Propeller which is deemed an Event of Loss) are and shall be
EXPRESSLY subject and subordinate to all the terms of this Lease during the Term
hereof, including without limitation, in each instance, Lessor's rights to
repossession pursuant to SECTION 18, and to avoid such transferee's or
sublessee's right to possession upon such repossession;

          (2)  Lessee shall remain primarily liable hereunder for the
performance of all the terms of this Lease to the same extent as if such
transfer or sublease had not occurred; and

                                       18


          (3)  No interchange agreement, sublease or other relinquishment of
possession of the Airframe, any Engine or Propeller shall in any way affect the
registration of the Aircraft with the FAA, or discharge or diminish any of
Lessee's obligations to Lessor or constitute a waiver of any of Lessor's rights
and remedies hereunder. It a lease, conditional sale, or other security
agreement complies with clause (B) of subparagraph (iv) of this SECTION 11.2,
and the lease or conditional sale or other security agreement covering such
airframe also covers an engine or engines or propeller or propellers owned by
the lessor under such lease or subject to a security interest in favor of such
secured party under such conditional sale or other security agreement, Lessor
will not acquire or claim, as against such lessor or secured party, any right,
title or interest in any such engine or propeller as the result of such engine
or propeller being installed on the Airframe or any propeller being attached to
any Engine at any time while such engine or propeller is subject to such lease
or conditional sale or other security agreement and owned by such lessor or
subject to a security interest in favor of such secured party. Lessor also
hereby agrees for the benefit of the mortgagee under any mortgage complying with
clause (C) of subparagraph (iii) of this SECTION 11.2 that Lessor will not
acquire or claim, as against such mortgagee, any right, title or interest in any
engine or propeller subject to the lien of such mortgage as the result of such
engine being installed on the Airframe or such propeller being installed on the
Airframe or any Engine at any time while such engine or propeller is subject to
the lien of such mortgage.

          11.3 REPORTS AND RECORDS. Throughout the Term, Lessee shall keep
accurate, complete and current records in English complying with the
requirements of the FAA so as to enable operation of the Aircraft under FAR Part
135 or successor provisions, as may be applicable, and any other applicable
regulations from time to time in force; with recommendations of Manufacturer,
GE, Dowty or any other manufacturer or supplier of any Aircraft component; and
with good commercial airline practice of all maintenance carried out with
respect to the Aircraft, and subject to the terms and conditions in SECTION 17.1
shall permit Lessor, or any authorized representative of Lessor, to examine such
records requested by them at any reasonable time.

          11.4 REPLACEMENT OF PARTS. Lessee, at its own cost and expense, will
promptly replace all Parts which are installed in or attached to the Aircraft
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever except as provided in SECTION 11.6. In addition, Lessee may,
in the ordinary course of maintenance, service, repair, overhaul or testing, at
its own cost and expense, remove any Parts, whether or not worn out, lost,
stolen, destroyed, seized,

                                       19


confiscated, damaged beyond repair or permanently rendered unfit for use;
PROVIDED that Lessee, except as provided in SECTION 11.6 shall, at its own cost
and expense, repair and reinstall or replace such Parts as promptly as possible.
All replacement Parts shall be free and clear of all Liens (except for Permitted
Liens and interchange and pooling arrangements to the extent permitted by
SECTIONS 10.1 AND 11.2); shall comply with the safety, general operating and
flight regulations of the FAA and other Governmental Bodies having jurisdiction
over the Lessee, the Aircraft or any component of the Aircraft; and shall be in
as good operating condition as, and shall have a value, utility and remaining
useful life at least equal to, the Parts replaced based upon the assumption
that such replaced Parts were in the condition and repair required to be
maintained by the terms hereof Lessee shall maintain all required safety
equipment and instruments on the Aircraft and its component parts.

          All Parts at any time removed from the Airframe or any Engine or
Propeller shall remain the property of Lessor no matter where located, until
such time as such Parts are replaced by Parts that have been incorporated or
installed in or attached to the Airframe or any Engine or Propeller and that
meet the requirements for replacement Parts specified above. Immediately upon
any replacement Parts becoming incorporated or installed in or attached to the
Airframe or any Engine or Propeller as above provided, without further act, (i)
title to the replaced Part shall thereupon vest in Lessee, free and clear of the
rights of Lessor, and shall no longer be deemed a Part hereunder, (ii) title to
such replacement Part shall thereupon vest in Lessor (subject only to Permitted
Liens and interchange and pooling arrangements to the extent permitted by
SECTIONS 10.1 AND 11.2), and (iii) such replacement Part shall become subject to
this Lease and be deemed a part of the Airframe or any Engine or Propeller for
all purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Airframe or any Engine or Propeller.

          11.5 POOLING OF PARTS. Any Part removed from the Airframe or any
Engine or Propeller as provided in SECTION 11.2 may be subjected by Lessee to a
normal interchange or pooling arrangement customary in the airline industry
entered into in the ordinary course of Lessee's business with other U.S.
Certificated Air Carriers; PROVIDED that no such agreement or
arrangement contemplates or requires the transfer of title of such Part and
PROVIDED that the Part replacing such removed Part shall be incorporated or
installed in or attached to the Airframe or any Engine or Propeller in
accordance with SECTION 11.4 as promptly as possible after the removal of such
removed Part. In addition, any replacement Part when incorporated or installed
in or attached to the Airframe or any Engine or Propeller in accordance with
SECTION

                                       20


11.4 may be owned by a U.S. Certificated Air Carrier subject to such normal
pooling arrangement; PROVIDED that Lessee, at its expense, as promptly
thereafter as possible, either (i) causes title to the replacement Part to vest
in Lessor in accordance with SECTION 11.4, by Lessee acquiring title thereto and
transferring title thereto to Lessor, free and clear of all Liens except
Permitted Liens in accordance with the last sentence of SECTION 11.4, or (ii)
replaces such replacement Part by incorporating or installing in or attaching to
the Airframe, any Engine or Propeller, a further replacement Part owned by
Lessee, free and clear of all Liens except Permitted Liens and by causing title
to the replacement Part to vest in Lessor in accordance with SECTION 11.4.

          11.6 ALTERATIONS, MODIFICATIONS AND ADDITIONS. Except as otherwise
required by SECTION 11.1 or by this SECTION 11.6, Lessee shall not make any
alterations, modifications or additions to the Aircraft without the prior
written consent of Lessor which approval shall not be unreasonably withheld or
delayed, PROVIDED, HOWEVER Lessee shall make, or shall cause to be made, at no
expense to Lessor, such alterations and modifications in and additions to the
Aircraft as may be required from time to time by the FAA or other Governmental
Body having jurisdiction or as may be required by Applicable Law as a condition
to the use of the Aircraft in ordinary commercial passenger service; and
FURTHER, PROVIDED, Lessee may, at its own expense and subject to compliance with
the requirements of Revenue Procedure 79-48, 1979-2 C.B. 529 from time to time
make such alterations, modifications or additions to the Aircraft as Lessee may
deem desirable in the proper conduct of its business, so long as such
alteration, modification or addition does not diminish the value, utility or
remaining useful life of such item, or impair the condition and airworthiness
thereof, below the value, utility, remaining useful life, condition and
airworthiness thereof immediately prior to such alteration, modification or
addition based upon the assumption that such item was then of the value and
utility and in the condition and airworthiness required to be maintained by the
terms of this Lease; but if the cost of such alteration, modification or
improvement exceeds $75,000 and is not required by this SECTION 11 and is
neither safety-related nor severable as defined in Section 4(4).02 of Revenue
Procedure 75-21, as modified by Revenue Procedure 79-48, and is not described in
subparagraph (ii) of Section 4(4).03 (C) of Revenue Procedure 75-21, 1975-1 C.B.
715 as modified by Revenue Procedure 79-48, such alteration, modification or
addition shall not be made without the prior written consent of Lessor, and
otherwise in compliance with the requirements of Section 4(4).03 (C) of Revenue
Procedure 75-21, as modified by Revenue Procedure 79-48. Lessor may condition
such consent on the agreement by Lessee at its sole expense to remove such
alterations, modifications or additions and to restore the Aircraft to its
original condition upon the expiration or

                                       21


termination of this Lease. Title to all Parts incorporated in the Aircraft as
the result of any alteration, modification or addition made as contemplated in
this SECTION 11.6 shall, except as provided in Revenue Procedure 79-48, without
further act, vest in Lessor, and in either case, shall became subject to this
Lease. So long as no Default or Event of Default exists, or if such Default
exists but has not matured into an Event of Default and Lessor has not withheld
its consent (which Lessor agrees it will not unreasonably withhold), upon a
written request from Lessee, Lessee may remove any such Part if (i) such Part is
in addition to, and not in replacement of or in substitution for, any Part
originally incorporated or intended to be incorporated in the Aircraft at the
time of delivery thereof hereunder or any Part in replacement of, or
substitution for, any such original Part, unless such original Part is removed
and returned pursuant to SECTION 11, (ii) such Part is not required to be
incorporated in the Aircraft pursuant to SECTION 11 OR 19, and (iii) such Part
can be removed without diminishing or impairing the value, utility, appearance,
remaining useful life, condition or airworthiness which the Aircraft would have
had at such time had such alteration, modification or addition not occurred.
Upon any such removal, title to such Part shall, without further act, vest in
the Lessee, free of Lessor Liens, and such Part shall no longer be deemed to be
a Part hereunder. Any Part not so removed prior to the return to Lessor
hereunder of the Aircraft shall remain the property of Lessor and subject to
this Lease.

          Lessee shall provide Lessor not less than one hundred eighty (180)
days prior to the end of the Term, with a list of all Parts which Lessee
believes it is entitled to and intends to remove at such expiration date or
termination. Lessor shall have the option, exercisable upon written notice given
to Lessee not more than ninety (90) days and not less than thirty (30) days
prior to the expiration of this Lease, or upon termination of this Lease under
SECTION 18, to purchase for cash any and all such Parts which may be owned by
Lessee at the expiration or other termination of this Lease for an amount equal
to the Fair Market Sale Value thereof at such time.

          Lessee shall cause all Parts owned by it during the Term of this Lease
to remain free and clear of all Liens except Permitted Liens.

Section 12. RISK OF LOSS: EVENT OF TOSS AND CONDEMNATION.

          12.1 RISK OF LOSS. Upon execution and delivery of Lease Supplement No.
1 and commencing on the Delivery Date and continuing until the expiration or
earlier termination of this Lease and the earlier of either (i) the return by
Lessee of the Aircraft to

                                       22


Lessor subject to SECTION 19.1, or (ii) commencement of the storage period set
forth in SECTION 19.6, (except in connection with a cancellation pursuant to
SECTION 18), Lessee assumes the entire risk of loss of the Aircraft or any part
thereof or of any Event of Loss as defined below or any liability arising out of
the operation, maintenance, use, storage, overhaul, repair, transport or
possession of the Aircraft or any other cause whatsoever, and no Event of Loss
or liability shall relieve Lessee of its obligations hereunder except as
provided herein.

          12.2 EVENT OF LOSS - DEFINITION. For all purposes of this Lease, any
of the following events with respect to the Aircraft, Airframe, or any Engine or
Propeller Leased hereunder shall be an Event of Loss:

     (i) loss of such property or the use thereof due to theft or disappearance
for a period greater than forty-five (45) consecutive days or extending beyond
the end of the Term;

     (ii) loss of such property or the use thereof due to destruction, damage
beyond repair or rendition of such property permanently unfit for normal use by
Lessee for any reason whatsoever;

     (iii) any damage to such property which should or does result in the
receipt of insurance proceeds under the policies of insurance required to be
maintained pursuant to SECTION 13 hereof with respect to such property on the
basis of a total loss or constructive total loss;

     (iv) the condemnation, taking, confiscation or seizure of, or requisition
of title to such property by any Governmental Body;

     (v) the condemnation, taking, confiscation or seizure of the use of such
property for a period in excess of ninety (90) consecutive days or a period
extending beyond the end of the Term, other than a requisition for use by the
United States Government that does not continue beyond the end of the Term;
PROVIDED that pursuant to such requisition the United States Government agrees
to make payments sufficient in amount for the discharge of the obligations of
Lessee hereunder to pay Rent, or Lessee provides other security reasonably
acceptable to Lessor if the United States Government does not so agree to make
such payments, and PROVIDED, FURTHER, that the United States Government agrees
to maintain the Aircraft to a standard which is at least as rigorous as set
forth in this Lease;

     (vi) as a result of any rule, regulation, order or other action (generally
applicable to aircraft of the same type as the Aircraft) by the FAA, the
Department of Transportation or other

                                       23


Governmental Body (including any court) having jurisdiction, the use of such
property in the normal course of interestate air transportation of persons is
prohibited for a period of six (6) consecutive months or, if earlier, beyond the
end of the Term, unless lessee, prior to the expiration of such six (6)
consecutive month period (or such shorter period extending beyond the end of the
Term), undertakes and is diligently carrying forward all steps necessary or
desirable to permit the normal use of such property by Lessee or, in any event,
if such use is prohibited for a period of twelve (12) consecutive months;

     (vii) with respect to the Aircraft, Airframe or any Engine or Propeller,
the operation or location thereof, while under requisition for use by the United
States Government, in any area excluded from coverage by any insurance policy in
effect with respect thereto required by SECTION 13 hereof if Lessee is unable to
obtain indemnity or insurance in lieu thereof in a manner reasonably
satisfactory to Lessor from the United States Government; or

     (viii) the FAA deregisters the Aircraft (other than as a result of (A) the
failure of Lessor to cooperate with Lessee to the extent reasonably required to
maintain United States registration of the Aircraft, (B) to the extent then so
required for the purpose of maintaining United States registration of the
Aircraft, the failure of Lessor to remain a "citizen of the United States" as
defined in Section 40102(a) (15) of the Transportation Code, or (C) Lessor
otherwise causing the Aircraft to be ineligible for such registration by reason
of its interest therein) and such deregistration continues for a period of one
hundred eighty (180) consecutive days.

          An Event of Loss with respect to the Aircraft shall also be deemed to
occur if an Event of Loss occurs with respect to the Airframe of the Aircraft.

          12.3 EVENT OF LOSS WITH RESPECT TO THE AIRFRAME. Upon the occurrence
of an Event of Loss with respect to the Airframe, or the Airframe and the
Engines or engines or Propellers or propellers then installed on the Airframe,
Lessee shall forthwith (and, in any event, within three days after such
occurrence) give Lessor written notice of such Event of Loss, and on or prior to
the earlier of (i) the ninetieth (90th) day following the day of occurrence of
such Event of Loss and (ii) the date of receipt of insurance payments in respect
of such occurrence, Lessee shall pay:

          (1) to Lessor the sum of (A) the Stipulated Loss Value for the
Aircraft as set forth in the Stipulated Loss Value Table computed using the Base
Rent Payment Date immediately preceding the date on which such Event of Loss
occurred (or, if such Event of

                                       24


Loss occurred on a Base Rent Payment Date, computed using such Base Rent Payment
Date or, if such Event of Loss occurs before the First Base Rent Payment Date,
computed using the Delivery Date), plus (B) interest on the amount determined
pursuant to clause (A) at an effective rate per annum equal to the Base Rate
computed for the actual number of days elapsed (on the basis of a 365-or 366-day
year as the case may be) from the date of the Event of Loss to the date of
payment of such Stipulated Loss Value, including the date of the Event of Loss
but excluding the date of payment; and

          (2) to Lessor the sum of any Supplemental Rent otherwise due and
payable on or before such payment date.

If all such Stipulated Loss Values and all such other amounts, including,
without limitation, any unpaid or accrued Rent, are paid in full, (x) the
obligation of Lessee to pay all succeeding payments of Base Rent after the Event
of Loss hereunder with respect to the Aircraft shall terminate on the Base Rent
Payment Date immediately preceding the date of such Event of Loss or as of the
Base Rent Payment Date if such Event of Loss occurs on the Base Rent Payment
Date, and (y) provided that if (or when) no Default or Event of Default exists,
Lessor will transfer or cause to be transferred to Lessee, Lessor's title to the
Aircraft, including the Engines and Propellers or a number of engines and
propellers equal to the number of engines and propellers (which are not Engines
and Propellers) installed on the Aircraft at the time such Event of Loss
occurred, free and clear of Lessor Liens, and Lessee shall be subrogated to all
claims, if any, of Lessor against third parties for damage to or loss of the
Aircraft subject to such Event of Loss (other than against insurers under
insurance policies paid for by Lessor). Such transfer to Lessee shall not affect
or limit in any way any obligations of Lessee hereunder unless specifically
discharged by such payment of Stipulated Loss Value and Rent.

          12.4 EVENT OF LOSS WITH RESPECT TO AN ENGINE OR PROPELLER. Upon the
occurrence of an Event of Loss with respect to an Engine or Propeller in any
case where the provisions of SECTION 12.3 are not applicable, Lessee shall give
Lessor prompt written notice thereof and shall, within thirty (30) days after
the occurrence of such Event of Loss, duly convey to Lessor, as replacement for
the Engine or Propeller with respect to which such Event of Loss occurred, title
to another engine or propeller of the same or improved make, model and
manufacturer (or engine or propeller of at least the equivalent utility, value
and remaining useful life and suitable for installation and use on the Airframe)
free and clear of all Liens whatsoever (except Permitted Liens) and having a
value, remaining useful life and utility at least equal to, and being in as good
operating condition as, the Engine or

                                       25


Propeller with respect to which such Event of Loss occurred, but in all events
in at least as good condition and repair as required by the terms hereof
immediately prior to the occurrence of such Event of Loss and of the same or
improved make, model and manufacturer as any other Engine or Propeller, as
applicable; PROVIDED, HOWEVER, that if Lessee does not then have reasonably
available a Replacement Engine or Replacement Propeller, as the case may be,
conforming to the requirements set forth in this SECTION 12.4, then Lessee shall
(x) within ninety (90) days after the occurrence of such Event of Loss, either
(i) notify Lessor that Lessee has made arrangements (which arrangements shall be
reasonably satisfactory to Lessor) to obtain a Replacement Engine or Replacement
Propeller, as the case may be, conforming to the requirements of this SECTION
12.4 and shall obtain such Replacement Engine or Replacement Propeller within
ninety (90) days after Lessee shall have notified Lessor of such arrangements,
or (ii) place an order for a Replacement Engine or Replacement Propeller
conforming to the requirements of this SECTION 12.4, from the manufacturer
of such Replacement Engine or Replacement Propeller, PROVIDED, that if
Lessee obtains a Replacement Engine or Replacement Propeller conforming to the
requirements of this SECTION 12.4 from another Person prior to the delivery of
the Replacement Engine or Replacement Propeller ordered from the manufacturer
thereof, Lessee may use the Replacement Engine or Replacement Propeller obtained
from such Person in lieu of the Replacement Engine or Replacement Propeller
ordered from  the manufacturer, and (y) promptly upon obtaining such
Replacement Engine or Replacement Propeller from the manufacturer or other
Person, duly convey to Lessor, as replacement for the Engine or Propeller with
respect to which such Event of Loss occurred, title to such Replacement Engine
or Replacement Propeller (free and clear of all Liens whatsoever (except
Permitted Liens)). In such case, Lessee, at its own expense, will prior to or at
the time of any such conveyance (i) furnish to Lessor a warranty (as to title)
bill of sale, in form and substance reasonably satisfactory to Lessor, with
respect to such Replacement Engine or Replacement Propeller, (ii) cooperate in
the execution and delivery of a supplement hereto, in form and substance
satisfactory to Lessor, subjecting such Replacement Engine or Replacement
Propeller to this Lease, to be duly executed by Lessee and recorded pursuant to
the Transportation code, (iii) furnish or cause to be furnished to Lessor such
evidence of Lessee's (or other party's) title to such Replacement Engine or
Replacement Propeller (including, it requested, an opinion of Lessee's (or other
party's) counsel and of compliance with the insurance provisions of SECTION 13
with respect to such Replacement Engine or Replacement Propeller as Lessor may
reasonably request, and with an opinion of Lessee's (or other party's) counsel
to the effect that title to such Replacement Engine or Propeller, has been duly
conveyed to Lessor free and clear of all Liens whatsoever (except any Lessor
Liens) and is duly leased hereunder (which legal opinions may contain

                                       26


qualifications and statements of reliance reasonably satisfactory to Lessor),
(iv) furnish Lessor a certificate signed by a duly authorized financial officer
or executive of Lessee certifying that, upon consummation of such replacement,
no Default or Event of Default will exist hereunder; (v) furnish such documents
and evidence as Lessor, or its counsel may reasonably request in order to
establish the consummation of the transactions contemplated by this SECTION
12.4, the taking of all corporate proceedings in connection therewith and
compliance with the conditions set forth in this SECTION 12.4, in each case in
form and substance satisfactory to such party, (vi) file and record such Uniform
Commercial Code financing statements covering such Replacement Engine or
Replacement Propeller as may be reasonably requested by Lessor, (vii) assign or
cause to be assigned to Lessor all existing warranties as of the date of
transfer to the extent such warranties are freely assignable, with respect to
such Replacement Engine or Replacement Propeller, subject to Lessee's right to
exercise these rights, so long as no Event of Default has occurred, and (viii)
take such other action as Lessor may reasonably request in order that such
Replacement Engine or Replacement Propeller be duly and properly subject to the
Lease and leased hereunder to the same extent as the Engine or Propeller
replaced thereby. Upon full compliance by Lessee with the terms of this SECTION
12.4, Lessor will cause the appropriate party to transfer to Lessee, at Lessee's
expense (i) title to the Engine or Propeller with respect to which such Event of
Loss occurred and (ii) all claims for damage to such Engine or Propeller, if
any, against third Persons (other than against insurers under insurance policies
paid for by Lessor) arising from the Event of Loss; and Lessor shall, at
Lessee's expense, execute and deliver appropriate bills of sale confirming such
transfer. Any such transfer of title shall be on an "AS-IS" and "WHERE-IS" basis
without recourse or warranty, express or implied except that such Engine or
Propeller is free and clear of all Lessor Liens. Lessee shall be subrogated to
all claims of Lessor, if any, against third parties (other than insurers under
insurance policies paid for by Lessor) for damage to or loss of the Engine or
Propeller being replaced. For all purposes hereof, each such Replacement Engine
or Replacement Propeller shall be deemed part of the property Leased hereunder,
shall be deemed an "Engine" or "Propeller" as defined herein and shall be deemed
part of the Aircraft to the same extent as the Engine or Propeller replaced
thereby. An Event of Loss covered by this SECTION 12.4 shall not result in any
reduction in Base Rent.

          12.5 APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES OR OTHERS.
Any payments (other than insurance proceeds the application of which is provided
for in SECTION 13) received at any time by Lessor or Lessee from any
Governmental Body or other person with respect to an Event of Loss, to the
extent of the then applicable Stipulated Loss Value set forth in the Stipulated
Loss

                                       27


Value Table whether resulting from the condemnation, confiscation, theft or
seizure of, or requisition of title to or use of, the Airframe, or any Engine or
Propeller (other than a requisition for use by the United States Government not
constituting an Event of Loss), or otherwise, if paid to Lessee shall be
immediately paid over to Lessor, PROVIDED that Lessee will endeavor to have such
payment made directly to Lessor, and in any event, such payment will be applied
as follows:

          (i) if any such payments are received with respect to the Airframe, or
the Airframe and the Engines or engines, Propellers or propellers then installed
on the Airframe, so much of such payments as shall not exceed the Stipulated
Loss Value required to be paid by Lessee pursuant to SECTION 12.3  shall be
applied in reduction of Lessee's obligation to pay such Stipulated Loss Value,
if not already paid by Lessee, or, if already paid by Lessee, shall be applied
to reimburse Lessee for its payment of such Stipulated Loss Value, and the
balance, if any, of such payments remaining thereafter will, after Lessee has
paid all other Rent due and owing, be paid to the order of Lessor if received
from a Governmental Body as a result of a requisition of title to the Airframe
or any Engine or Propeller, or from a Governmental Body other than the United
States Government with respect to a requisition of use of the Airframe or any
Engine or Propeller, and otherwise to Lessee; and

          (ii) if such payment is received with respect to an Engine or
Propeller under the circumstances contemplated by SECTION 12.4, all such
payments shall be paid over to Lessee, PROVIDED, Lessee has fully performed the
terms of this SECTION 12 with respect to the Event of Loss for which such
payments are made, and FURTHER PROVIDED, no Default or Event of Default exists
and such payments shall be applied (if not earlier paid to Lessee) to the
purchase price of such Replacement Engine or Propeller at delivery thereof to
Lessor under SECTION 12.4.

          12.6 REQUISITION FOR USE BY UNITED STATES GOVERNMENT WITH RESPECT TO
THE AIRFRAME AND ANY ENGINE OR PROPELLER INSTALLED THEREON. If the United States
Government requisitions the use of the Airframe, or the Airframe and the Engines
or engines and Propellers or propellers then installed on the Airframe, during
the Term, and such requisition does not constitute an Event of Loss, all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from the United States Government for the
use of the Airframe and Engines or engines and Propellers or propellers during
the Term shall be paid over to, or retained by, Lessee, PROVIDED no Default or
Event of Default exists. If the Airframe, or the Airframe and Engines or engines
and Propellers or propellers, are not scheduled

                                       28


to be returned by the United States Government prior to the end of the Term,
Lessor, upon notice given not less than thirty (30) days before the end of the
Term, may elect that an Event of LOSS hereunder be deemed to have occurred on
the last day of the Term and Lessee shall, upon expiration of the Term, pay the
Stipulated Loss Value with respect to the Aircraft on such date. Upon receipt of
payment of Stipulated Loss Value and all Rent and other amounts due and payable
under the Lease, Lessor shall transfer or shall cause to be transferred to
Lessee title to the Aircraft free of all Lessor Liens. If Lessor has elected to
treat such requisition for use as an Event of Loss, upon payment by the Lessee
of the Stipulated Loss Value and all other Rent due and owing, all payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe, Engines and Propellers after expiration of the Term shall be
paid over to, or retained by, Lessee. If after expiration of the Term,
Lessor has not elected to treat such requisition for use as an Event of Loss,
all payments received by Lessor or Lessee from the United States Government for
the use of the Aircraft before the expiration of the Term, shall be paid to or
retained by Lessee, PROVIDED, HOWEVER, upon the expiration of the Term, Lessor
shall give notice to Lessee stating that this Lease shall terminate, expire and
be cancelled upon such date of expiration and the provisions of SECTION 19 shall
be deemed to have been satisfied, and subject to the provisions of this Lease
relating to the survival of any of Lessee's obligations hereunder, this Lease
shall terminate, expire and be cancelled, and upon. such termination, expiration
and cancellation, all payments received by Lessor, Lessee or any other Person
from the United States Government for the use of the Aircraft after the
expiration of the Term shall be paid over or retained by Lessor. Lessee shall
promptly notify Lessor in writing of any such requisition. Upon any such
requisition for use, Lessee agrees to use its best efforts to obtain
reimbursement from the United States Government to Lessor for damages suffered
by Lessor as a result of such requisition for use. Lessee agrees to notify
Lessor promptly in writing in advance of the time when any negotiations between
Lessee and the United States Government with respect to any such requisition
shall commence and will consult with Lessor regarding methods or procedures that
are most appropriate to effect recovery from the United States Government for
any damages suffered by Lessor by reason of such requisition for use. This
SECTION 12.6 shall not be applicable to the Aircraft if an Event of L0SS with
respect to the Aircraft has occurred, except in the case where Lessor has
declared an Event of Loss to have occurred as a result of a United States
Government requisition for use.

          12.7 REQUISITION FOR USE BY UNITED STATES GOVERNMENT OF AN ENGINE OR
PROPELLER IN A MANNER CONSTITUTING AN EVENT OF LOSS. If the United States
Government requisitions the use of any Engine or Propeller in a manner
constituting an Event of Loss, Lessee

                                       29


shall replace the Engine or Propeller hereunder by complying with the terms of
SECTION 12.4, and any payments received by Lessor or Lessee from the United
States Government with respect to such requisition shall be paid over to, or
retained by, Lessee, PROVIDED no Default or Event of Default exists.

          12.8 APPLICATION OF PAYMENTS OTHER THAN FOR AN EVENT OF LOSS. Any
payments received at any time by Lessor or Lessee from any Governmental Body,
insurer (other than under insurance paid for by Lessee) or other Person with
respect to loss or damage to or requisition for use of the Airframe, any Engine
or Propeller or any other Aircraft not constituting an Event of Loss and not
governed by SECTIONS 12.6 AND 12.7, shall be applied in payment for repairs or
for replacement property in accordance with SECTION 11 and any balance remaining
after compliance with such sections with respect to such damage or loss shall be
paid over to or retained by Lessee if Lessor receives from Lessee prior to
making any such payment, certification from Lessee that the property so damaged
or lost has been repaired or replaced in full and that the costs of such repairs
or replacement have been paid in full. If such repairs or replacements are made
pursuant to contracts requiring progress payments or are made by Lessee, such
proceeds shall be paid over to Lessee from time to tune upon appropriate
certification by Lessee.

          12.9 APPLICATION OF PAYMENTS DURING DEFAULT. Any amount received by
Lessor referred to in SECTION 12.5, 12.6, 12.7 OR 12.8 that is payable to Lessee
shall not be paid to Lessee if at the time of such payment a Default or an Event
of Default exists, but shall be held by Lessor as security for the obligations
of Lessee under this Lease and at such time as any such Default or Event of
Default is not continuing, such amount, unless theretofore otherwise applied in
exercise of Lessor's remedies hereunder, shall be paid to Lessee.

Section 13. INSURANCE

          13.1. PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE. Lessee shall
maintain in effect, at its own expense, public liability insurance and property
damage insurance (including, but not limited to, aviation general liability,
aircraft passenger liability, aircraft property damage liability, cargo/baggage
liability and contractual liability insurance) with respect to the Aircraft (i)
in amounts not less than One Hundred Million Dollars ($100,000,000.00) combined
single limit per occurrence for bodily injury and property damage, but in any
event in amounts not less than the public liability insurance and property
damage insurance applicable to similar aircraft, engines or propellers which
constitute Lessee's fleet, and (ii) otherwise of the type and in the amounts
usually carried by corporations engaged in the same or

                                       30


similar business similarly situated with Lessee and owning, leasing or operating
similar aircraft, engines and propellers and which otherwise cover risks of the
kind customarily insured against by such corporations, with no deductible in
excess of $100,000 per occurrence.

          13.2 INSURANCE AGAINST LOSS OR DAMAGE TO AIRCRAFT. Lessee shall
maintain in effect, at its own expense, (i) All Risk Aircraft Hull Insurance
covering the Aircraft at least against perils customarily included in such
insurance, including, without limitation, standard form hijacking coverage and
extended "all risk" ground, flight, ingestion and taxiing risks, including, but
not limited to, hijacking coverage and extended "all risk" coverage with respect
to all Engines, Propellers and Parts while removed from or not installed on the
Aircraft, and (ii) whenever the Aircraft is flown outside the United States and
Canada, in any recognized, or in Lessor's reasonable judgment, threatened area
of hostility, aircraft hull war and political risks insurance, on, or
equivalent to, the Lloyd's R.J.M. Airline one (1/1/77) wording, covering at
least those perils customarily included in such insurance, including without
limitation, risks excluded from the All Risks Aircraft Hull Insurance by the
terms of Lloyd's Aviation War Exclusion Clause AVN_48B except paragraphs (a) and
(b) thereof as in effect on the date hereof, and shall include coverage in
respect of hijacking, confiscation, nationalization, seizure, restraint,
detention, appropriation, requisition of title or use by or under the order of
any Governmental Body. Such insurance shall at all times while the Aircraft is
subject to this Lease be on an "Agreed Value Basis" in each case in amounts not
less than the amounts set forth in the Stipulated Loss Value Table, as specified
in Schedule 1 to the Lease Rent Schedule for the Aircraft from time to time
(determined using the Base Rent Payment Date immediately preceding the date on
which said Event of Loss occurred, or if such Event of Loss occurred on the Base
Rent Payment Date, computed using such Base Rent Payment Date) with no
deductible, with respect to a loss which is not a total loss, arranged total
loss, or constructive total loss, in excess of $100,000 per occurrence,
PROVIDED, HOWEVER, that the Engines, Propellers and Parts while removed from or
not installed on the Aircraft shall be included in aircraft spares coverage in
an amount satisfactory to Lessor, subject to a deductible not greater than
$25,000. Any "fleet aggregate" deductible or sub-limits of liability applicable
to Lessee's fleet shall not apply to claims payable under the above insurance.

          13.3 POLICIES. (a) Lessee shall arrange for appropriate certification
of coverages and forms of endorsements to be made promptly to Lessor by the
underwriters or their agents of any policies carried in accordance with this
SECTION 13 covering the

                                       31


Aircraft and any policies taken out in substitution or replacement thereof.
Lessor and (until at least December 22, 1996) Security Pacific Equipment
Leasing, Inc. shall be named as "Additional Insureds" in all such liability
policies, and Lessor shall be named as "Loss Payee" in all such "all risk"
insurance.

          (b) All policies of insurance carried in accordance with this SECTION
13:.

     (1)   shall be placed with insurers with recognized reputation and
responsibility reasonably satisfactory to Lessor;

     (2)   shall be in full force and effect throughout any geographical areas
at any time traversed by the Aircraft;

     (3)   shall be payable in lawful currency of the United States in the
United States;

     (4)   shall be in amounts customary for airlines similarly situated to
Lessee but in no event less than the amounts specified in SECTIONS 13.1 AND 13.2
hereof;

     (5)   shall not impose any liability on Lessor or any Additional Insured or
Loss Payee or any Covered Person (as defined hereinbelow) to pay premiums for
such insurance but shall provide for notice thereto of any nonpayment of premium
not less than thirty (30) days (seven (7) days or such shorter period as may
from time to time be the longest period obtainable in the industry, in the case
of war risk and allied perils coverage) opportunity to Lessor, each Additional
Insured and Loss Payee to pay such premium without impairing the policy;

     (6)   shall (i) provide that as to Lessor and each Additional insured or
Loss Payee and each Covered Person (as defined hereinbelow) the insurance shall
not be invalidated (A) by any action or inaction by Lessee and shall insure the
interest of such Persons regardless of any breach or violation by Lessee or any
other additional insured of any warranty, declaration or condition contained in
such policies, and if available at commercially reasonable cost such coverages
shall be provided otherwise than by way of endorsement with Lloyd's Form AVN67A;
PROVIDED HOWEVER, that with respect to secretion, embezzlement or conversion by
the Lessee, no coverage shall apply to any Person which is a willful party to
such secretion, embezzlement or conversion, or (B) because of a subjection of
the Aircraft to any condition, use or operation not permitted by the policy or
(C) because of any false statement with respect to the policy by Lessee or its
employees, agents or representatives, or any other Person except an Additional
Insured (and then such policy shall be impaired only as to such Person); (ii) be
primary without right of contribution from any other

                                       32


insurance which might be available to Lessor and each Additional Insured or Loss
Payee; (iii) waive any rights of subrogation, except with respect to the gross
negligence and/or willful misconduct of such Additional Insured, and any rights
of set-off, counterclaim or deduction against Lessor and each Additional Insured
or Loss Payee; (iv) provide notice of cancellation, nonrenewal, expiration,
change or lapse not less than thirty (30) days after receipt thereof prior to
the effectiveness thereof against Lessor and each Additional insured or Loss
Payee or Covered Person;

     (7)   shall in the case of policies covering liability, (A) name each
Additional Insured as an additional insured (B) cover the shareholders,
officers, directors, employees and agents of each Additional Insured as
additional insureds (each a "Covered Person"), (C) include the statement
"warranted to have no operational interest", (D) be endorsed to acknowledge and
include the contractual liability of Lessee herein and under the Lessee
Documents; (E) not operate so as to insure the Manufacturer of the Aircraft
against claims arising out of product liability; (F) provide notice of
cancellation, non-renewal, expiration, change or lapse not less than thirty (30)
days after receipt thereof prior to the effectiveness thereof against Lessor and
each Additional Insured or Loss Payee or Covered Person; and (G) provide that
each liability policy shall operate as a separate policy with respect to Lessor
and each Additional Insured and each Covered Person but nothing herein shall
operate to increase the liability of the underwriters as set forth in the
policies beyond the amount for which the underwriters would have been liable
if only one person or interest had been included as an insured;

     (8)   shall in the case of policies covering loss or damage to the
Aircraft, to the extent of the then applicable Stipulated Loss Values set forth
in the Stipulated Loss Value Table, provide that all insurance proceeds received
hereunder as the result of the occurrence of an Event of Loss with respect to
the Airframe or any Engine or Propeller be made payable to Lessor, for an amount
up to the applicable Stipulated Loss Value, and thereafter any remaining amount
to Lessee. The foregoing notwithstanding, PROVIDED, that Lessor has not notified
the insurer that an Event of Default has occurred and is continuing hereunder,
any loss equal to or less than $100,000.00 (without giving effect to any
deductible provision), shall be paid directly to Lessee, and shall be endorsed
to provide the foregoing coverages in SECTION 13.3 and other endorsements
reasonably satisfactory to Lessor and each Loss Payee. It is further agreed that
all such insurance proceeds shall be applied as follows:

          (i) if insurance proceeds are received with respect to the Aircraft or
the Airframe and the Engines or engines or Propellers or propellers installed
on the Airframe, so much of such

                                       33


insurance proceeds remaining after reimbursement of Lessor for costs and
expenses, as shall not exceed the Stipulated Loss Value required to be paid by
Lessee pursuant to SECTION 12.3 and any past-due Rent shall be applied in
reduction of Lessee's obligation to pay such Stipulated Loss Value and all such
other amounts if not already paid by Lessee, or, if already paid by Lessee and
no Default or Event of Default exists hereunder, shall be applied to reimburse
Lessee for its payment of such Stipulated Loss Value and all such other amounts,
and the balance, if any, of such insurance proceeds remaining thereafter will be
paid over to or retained by Lessee;

          (ii) if such insurance proceeds are received with respect to an Engine
or Propeller under the circumstances contemplated by SECTION 12.4, so much of
the insurance proceeds remaining after reimbursement of Lessor for costs and
expenses, shall be paid to Lessee, PROVIDED that Lessee shall have fully
performed its obligations and complied with the terms of SECTION 12.4 hereof
with respect to the Event of Loss for which such insurance proceeds are paid,
such payments shall be applied to the purchase price of such Replacement Engine
or Replacement Propeller at delivery thereof to Lessor under SECTION 12.4;

          (iii) so long as no Event of Default shall have occurred and be
continuing, the proceeds of any insurance required to be maintained by Lessee
hereunder with respect to any property damage to the Airframe, any Engine or
Propeller shall be applied in the manner described in SECTION 12.8 upon evidence
of completion of repairs, or if such repairs or replacements are made pursuant
to contracts requiring progress payments or are made by Lessee, upon receipt
of Lessee's certification referred to in SECTION 12.8, shall be paid
directly to Lessee; and

          (iv) any amount referred to in CLAUSES (I), (II) OR (III) immediately
above that is payable to Lessee shall not be paid to Lessee if at the time of
such payment a Default or Event of Default exists, but shall be held by Lessor,
as security for the obligations of Lessee under this Lease and at such time as
there is not continuing any such Default or Event of Default such amount, unless
theretofore otherwise applied in exercise of Lessor's remedies hereunder, shall
be paid to Lessee;

     (9)   if the liability policies are on a "claims-made basis" and not on an
"occurrence basis", Lessee shall continue to carry such liability policies for
an additional three (3) years after the expiration or termination of this Lease
and shall cause Lessor, Lessor and each Additional Insured and Covered Person
(regardless of whether or not the Lease has expired or been terminated) to be
named as additional insureds; and

                                       34


     (10)  shall be endorsed to provide the foregoing coverages in the form of
the endorsements set forth in EXHIBIT B and other endorsements reasonably
satisfactory to Lessor.

          13.4 REPORTS, ETC. Lessee will cause its insurance broker to furnish
Lessor and each Additional Insured or Loss Payee (i) on the Delivery Date of the
Aircraft, (ii) on the policy anniversary date thereafter, and (iii) on the date
a Replacement Engine or Replacement Propeller is conveyed to Lessor pursuant to
SECTION 12.4, a report, dated the day of its delivery, signed by Lessee's
insurance broker, reasonably acceptable to Lessor, describing in reasonable
detail the insurance then carried and maintained on the Aircraft, certifying
that such insurance complies with the terms hereof and that the terms of this
SECTION 13 have been endorsed on such policies, and stating the opinion of such
broker that such insurance is in an amount deemed adequate, based upon normal
industry practice, for the protection of the respective interests of Lessor and
each Additional Insured or Loss Payee and each Covered Person, and is usual for
corporations operating similar aircraft and similarly situated with the Lessee,
PROVIDED, HOWEVER, such opinion shall not be deemed to be a guarantee or other
undertaking that such limits will be adequate under all circumstances. Lessee
will advise and will cause its insurance broker to advise Lessor and each
Additional Insured or Loss Payee in writing promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee
which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft Lessee shall cause its insurance broker to furnish to
Lessor and each Additional Insured or Loss Payee on the Delivery Date or as soon
as available thereafter but not later than thirty (30) days after the Delivery
Date, copies of any insurance certificates required to be carried hereunder, and
within fifteen (15) days of replacement thereof, copies, (pound) such
replacement insurance certificates, or with respect to any Replacement Engine or
Replacement Propeller, within fifteen (15) days of replacement thereof,
certificates evidencing the insurance required to be carried hereunder. If
Lessee fails to maintain insurance as provided herein, Lessor, or any
Additional Insured or Loss Payee may, at its option, provide such insurance and
in such event, Lessee shall, upon demand, reimburse Lessor or such Additional
Insured or Loss Payee, as the case may be, as Supplemental Rent, for the cost
thereof.

          13.5 INSURANCE FOR OWN ACCOUNT. Nothing in this SECTION 13 shall
limit or prohibit Lessor and each Additional Insured or Loss Payee and each
Covered Person, from obtaining insurance for its own account and any proceeds
payable thereunder shall be payable as provided in the insurance policy relating
thereto; PROVIDED that no such insurance may be obtained which would limit,
replace, or otherwise adversely affect the coverage of

                                       35


any insurance required to be obtained or maintained pursuant to this SECTION 13.

Section 14. INDEMNITY

          14.1 Lessee hereby assumes liability for, and shall indemnify,
protect, save and keep harmless each indemnified Person, including, without
limitation, Lessor, from and against, any and all liabilities, obligations,
losses, damages, penalties, claims, actions, suits, costs, and expenses,
including legal fees and expenses, of whatsoever kind and nature (herein
collectively called "Liabilities") imposed on, incurred by or asserted against
such Indemnified Person in any way relating to or arising out of (i)
maintenance, overhaul, repair, acquisition, construction, manufacture,
installation, purchase, ownership, delivery, lease, sublease, possession,
rental, use, condition, operation, transportation, return, sale, replacement,
storage or disposition of the Aircraft or any part thereof (including,
without limitation, liabilities in any way relating to or arising out of the
latent or other defects, whether or not discoverable by Lessee or any other
person, injury to persons or property, patent, trademark, or invention rights,
or strict liability in tort), or (ii) this Lease or any of the other Lessee
Documents or any of the transactions, obligations and indemnities contemplated
hereby or thereby, or any other document or instrument hereafter required to be
executed and delivered by Lessee pursuant to the terms hereof or thereof, or the
enforcement against Lessee of any of the terms of this Lease or any of the other
Operative Documents, or (iii) the enforcement of any agreement, restriction or
legal requirement applicable to Lessee affecting the Aircraft or any part
thereof or the operation, maintenance, use or possession of the Aircraft or any
part thereof by Lessee; PROVIDED, HOWEVER, that Lessee shall not be required to
indemnify any Indemnified Person for (A) Liabilities resulting from the gross
negligence or willful misconduct of such Indemnified Person or a successor,
assignee, director, officer, agent or employee of such Indemnified Person
(unless such willful misconduct or gross negligence results from acts or
omissions of Lessee on behalf of such Indemnified Person); (B) Liabilities in
respect of the Aircraft which arise from acts or events that occurred prior to
the Delivery Date or occur after the Aircraft is no longer leased under this
Lease and after possession of the Aircraft has been delivered to Lessor, or any
other Person entitled to receive delivery in accordance with this Lease or upon
commencement of the storage period set forth in SECTION 19.7 (unless such
termination or repossession shall have occurred as a result of this Lease having
been declared in default pursuant to SECTION 18 hereof); (C) Liabilities
resulting solely frown the breach of any representation, warranty or covenant
made by an Indemnified Person herein or in any other Operative Document to which
such indemnified Person is a

                                       36


party (unless such breach is the result of Lessee's failure to comply with the
Lessee Documents): (D) Liabilities resulting from any violation by an
indemnified Person of Section 5 of the Securities Act of 1933, as amended (or
any comparable successor thereto), or otherwise arising out of the transfer,
after the date of this Lease, of any Note or of the ownership interest in the
Aircraft not consented to by Lessee; (E) Liabilities which are or relate to an
Imposition described in SECTION 15 of this Lease except to the extent provided
therein, it being understood that all indemnities for Impositions are covered by
SECTION 15; (F) Liabilities resulting from a voluntary disposition by Lessor or
any indemnified Person, as the case may be, affecting in respect of or of all or
any part of its interest in the Aircraft, the Airframe, any Engine, any
Propeller, any Part, any operative Document, the Collateral or any payment of
Rent, including any Liability arising as a result of acts of or claims against,
or which secure the obligations of Lessor (or Persons claiming through Lessor),
but excluding any other acts of such Persons in accordance with the terms of
this Lease or any other Lessee Document; or (G) Liabilities arising out of or
resulting solely from the construction, manufacture, installation or design of
the Aircraft by the Manufacturer, including any breach by the Manufacturer of
patent, trademark or invention rights in connection with the construction,
manufacture, installation or design of the Aircraft.

          14.2 Lessee shall be bound under, this SECTION 14 irrespective of
whether such Indemnified Person shall, also be indemnified with respect to such
Liabilities elsewhere under this Lease or under any other operative Document or
by any other Person, and any Indemnified Person may proceed directly against
Lessee under this SECTION 14 without first resorting to any such other rights of
indemnification. With respect to any payment for indemnity hereunder, such
payment for indemnity shall include any amount necessary to hold each
Indemnified Person harmless on a net after-tax basis and taking into account any
tax benefit or detriment realized by such Indemnified Person as a result of such
payment from all taxes required to be paid by such Indemnified Person with
respect to such payment for indemnity under the laws of any Federal, state or
local government or taxing authority in the United States of America.

          14.3 Upon commencement of any proceeding (including the written threat
or written claim of any proceeding) against an Indemnified Person involving any
one or more Liabilities four which indemnity is provided hereunder, such
Indemnified Person shall promptly, upon receiving written notice thereof, give
notice of such commencement to Lessee, PROVIDED that, the failure by Indemnified
Person so to notify Lessee shall not release Lessee from any of its obligations
under this SECTION 14, unless such failure materially impairs Lessee's ability
to participate in such

                                       37


proceeding, but any payment by Lessee to any Indemnified Person pursuant to
this SECTION 14 shall not be deemed to constitute a waiver or release of any
right or remedy (including any remedy of damages) Lessee may have against such
Indemnified Person if, solely as a result of the failure by Indemnified Person
to give Lessee notice in accordance with the first sentence of this paragraph,
Lessee is unable to contest the Liability or other liability indemnified against
pursuant to this SECTION 14. Lessee shall be entitled (i) in any proceeding that
involves solely a claim for one or more Liabilities or other liabilities in
respect to which Lessee has an indemnity obligation pursuant to this SECTION 14,
to exercise and defend all rights of such Indemnified Person (PROVIDED that
Lessee furnishes such Indemnified Person with an opinion of counsel reasonably
satisfactory to such Indemnified Person to the effect that there exists a
meritorious basis for contesting such Liabilities or other liabilities unless
(x) such proceedings will, in the opinion of counsel for such Indemnified Person
involve any reasonable possibility of the sale, forfeiture or loss of the
Aircraft or any Engine or Propeller or any part thereof, or (y) such
Liabilities or other. liabilities, in the opinion of counsel for Lessor, have a
reasonable possibility of otherwise compromising or jeopardizing any substantial
interests of Lessor in and to the Aircraft or any interest hereunder) or to
require such Indemnified Person to assume responsibility therefor and control
thereof, (ii) in any proceeding involving a claim for one or more such
Liabilities or the transactions contemplated by this Lease and the other
Operative Documents, to require such indemnified Person to assume responsibility
therefor and control thereof to the extent that any of the same may be and is
severed from such other claims (so long as, in the opinion of counsel for the
affected Indemnified Person, such severance and assumption of responsibility and
control by such Indemnified Person does not have reasonable possibility of
adversely affecting the resolution of such other claims), or (iii) in any other
case, to be consulted by such Indemnified Person with respect to proceedings
subject to the control of such indemnified Person. Notwithstanding any of the
foregoing, Lessee shall not be entitled to require Lessor or any other
Indemnified Person to assume responsibility for and control of any judicial
proceeding if (A) the Liabilities or other liabilities involved are less than
$100,000 in the aggregate, or such Liabilities are covered by insurance or
Lessee is financially capable of paying such claim or Liability or (B) an Event
of Default hereunder exists. In the event Lessor or any other Indemnified Person
does not contest a Liability in any judicial proceeding, Lessee shall have the
right, to the extent permitted by law, to contest, at its sole cost and expense,
any such claim or Liability by substituting itself for Lessor or such
Indemnified Person in any judicial proceeding that involves solely a claim or
liability for one or more Liabilities or other liabilities in respect to which
Lessee has an indemnity obligation pursuant to this SECTION 14. To the extent
Lessee is

                                       38


entitled to defend any claim hereunder, the Indemnified Person with respect to
such claim may participate at its sole cost and expense.

          14.4 Each Indemnified Person claiming hereunder shall supply Lessee
with such information as Lessee shall reasonably request to defend or
participate in any proceeding to the extent permitted by this SECTION 14. Unless
an Event of Default has occurred and is continuing, such Indemnified Person
shall not enter into a settlement or other compromise or consent to a judgment
with respect to any Liability without the prior written consent of the Lessee
(which consent shall not be unreasonably withheld or delayed), unless such
Indemnified Person waives its right to be indemnified with respect to such
Liability under this SECTION 14.

          14.5 If an Indemnified Person shall obtain a repayment of any
Liabilities paid by Lessee pursuant to this SECTION 14, such Indemnified Person
shall promptly pay to Lessee the amount of such repayment, together with any
interest (other than interest for the period, if any, after such Liability was
paid by such Indemnified Person until such Liability was paid or reimbursed by
Lessee) received by such Indemnified Person on account of such repayment.

          14.6 Nothing in this SECTION 14 or in SECTION 15 shall be deemed to
constitute a guarantee by Lessee of the residual value of the Aircraft.

          14.7 In the event Lessee shall be obligated to indemnify any
Indemnified Person pursuant to this SECTION 14, Lessee shall be subrogated to
the rights of the Indemnified Person in respect of the matter as to which the
indemnity was paid.

          14.8 For purposes of this SECTION 14, "Indemnified Person" shall
include all corporations making a consolidated or combined return in which an
Indemnified Person is included and the agents, employees, servants, successors
and assigns of any thereof.

          14.9 The provisions of this SECTION 14 shall survive the expiration or
termination of this Lease.

Section 15. TAXES.

          15.1 Lessee hereby assumes liability for and shall pay, indemnify,
protect, save and keep each Indemnified Person, including, without limitation,
Lessor, harmless on an after-tax basis from and against, any and all fees, taxes
(including, without limitation, income, franchise, excise, sales, use,
occupational, capital, value added, property and stamp taxes and taxes imposed
in respect of items of tax preference), levies, assessments, imposts, duties,
charges or withholdings of any nature whatsoever, together

                                       39


with any penalties, fines or interest thereon (all of the foregoing being herein
collectively called "Impositions") imposed against any Indemnified Person or the
Aircraft or any part thereof by any federal, state or local government or taxing
authority or by any foreign governmental subdivision or other foreign taxing
authority (i) upon or with respect to the Aircraft or any part thereof or any
interest in any thereof, (ii) upon or with respect to the manufacture,
acquisition, construction, installation, purchase, delivery, ownership, lease,
sublease, possession, rental, use, operation, transportation, return, sale,
replacement, storage, repossession, maintenance, repair, abandonment,
redelivery, modification, rebuilding, importation, exportation or disposition
(excluding any disposition of the Aircraft which occurs after the expiration of
the Term of this Lease unless such disposition results from the termination of
this Lease pursuant to a default under SECTION 18 hereof) of the Aircraft or any
part thereof, (iii) upon or with respect to the rentals, receipts, earnings or
gains arising from the Aircraft or any part thereof or the income or proceeds
with respect to the Aircraft or (iv) upon or with respect to this Lease or any
other Operative Document including the performance of any of the transactions,
obligations or indemnities contemplated hereby or thereby; PROVIDED, HOWEVER,
that notwithstanding anything in this Lease or any other Operative Document to
the contrary, Lessee shall have no obligation to pay or to hold Lessor or any
other Indemnified Person harmless against any tax, claim or other Liability,
with respect to:

               15.1.1 Impositions which are based on, or measured by, the net
income of any Indemnified Person to the extent imposed by the United States of
America, including Impositions by the United States Federal Government expressly
in lieu of such taxes and any withholding taxes imposed by the United States
federal government in connection with such Impositions;

               15.1.2 Impositions which are based on, or measured by, the net
income of any Indemnified Person to the extent imposed by any foreign country,
state, city or municipality or by any political subdivision of such foreign
country, state, city or municipality or any similar franchise, net worth, right
of an Indemnified Person to exist, doing business, or employing capital tax, but
only to the extent that the amount of any such Imposition imposed by any such
taxing authority does not exceed the amount of Impositions to which such
Indemnified Person would have been subject if the Aircraft had not been used,
operated, stored or maintained in that taxing authority's jurisdiction;

               15.1.3 Impositions which are imposed with respect to any period,
or with respect to any act or omission, which occurred or failed to occur prior
to the Delivery Date with respect to the Aircraft or occurring after the
termination of this Lease

                                       40


and the return of the Aircraft to Lessor in accordance with SECTION 19 of this
Lease (unless such termination shall have occurred as a result of this Lease
having been declared in default pursuant to SECTION 18 hereof);

               15.1.4 Impositions resulting from a voluntary transfer or other
voluntary disposition or any involuntary transfer or involuntary disposition by
any Indemnified Person of any interest in the Aircraft or the Lease, unless such
transfer or other disposition occurs (A) while an Event of Default exists, if
such transfer or other disposition is pursuant to the exercise of one of
Lessor's remedies under the Lease as a result of such Event of Default, (B)
pursuant to or in accordance with a transfer or other event with respect to
which Stipulated Loss Value is required to be paid, unless such stipulated Loss
Value is paid in full, or (C) in the case of an involuntary transfer or
involuntary disposition, as a result of any acts, omissions or
misrepresentations of Lessee;

               15.1.5 Impositions imposed upon Lessor or any other Indemnified
Person by virtue of such Indemnified Person's failure to file proper and timely
reports or returns or to pay any taxes when due or the failure to claim an
applicable exemption, unless any of the foregoing failures results from any
action or omission by Lessee, including the failure to provide such Indemnified
Person or any other Person information in a proper and timely manner or
otherwise to take such actions as are required of Lessee hereunder with respect
to such Impositions;

               15.1.6 Impositions payable by any Indemnified Person as a direct
and primary result of such Indemnified Person's gross negligence or willful
misconduct or a breach or inaccuracy of a material representation or warranty or
covenant made by such Indemnified Person in any Operative Document or any
document required to be delivered under any Operative Document; or

               15.1.7 Impositions imposed upon an Indemnified Person to the
extent resulting from such Indemnified Person engaging in transactions other
than those contemplated by the Operative Documents;

PROVIDED, FURTHER, that Lessee agrees to pay any such Impositions referred to in
the foregoing clauses which are in substitution for or relieve Lessee from any
Impositions or indemnity therefor which Lessee would otherwise be obligated to
pay under the terms of this SECTION 15,

          15.2 With respect to any payment or indemnity under this SECTION 15,
such payment or indemnity shall include any amount necessary to hold each
Indemnified Person harmless on a net

                                       41


after-tax basis (taking into account any tax benefit or detriment realized as a
result of receipt of such payment) from all taxes required to be paid by such
Indemnified Person with respect to such payment or indemnity under the laws of
any Federal, state or local government or taxing authority in the United States
of America. In case any report or return is required to be filed with respect to
any obligation of Lessee under this SECTION 15 or arising out of this
SECTION 15, Lessee will either make such report or return in such manner as
will show the ownership of the Aircraft in Lessor or will notify Lessor or such
other Indemnified Person of such requirement and make such report or return in
such manner as shall be satisfactory to Lessor or such other Indemnified Person.

          15.3 (a) Upon the commencement of any proceeding (including the
written claim or written threat of any proceeding) against any Indemnified
Person involving one or more impositions, such Indemnified Person shall
promptly, upon, receiving written notice thereof, give notice of such
commencement to Lessee. If Lessee so requests in writing within thirty (30) days
after receipt of such notice, such Indemnified Person shall exercise on Lessee's
behalf or, upon Lessee's request, permit Lessee to exercise any contest rights
which such Indemnified Person may have; PROVIDED, HOWEVER, that in no event
shall any Indemnified Person be required to exercise its contest rights or shall
Lessee be permitted (except with such Indemnified Person's sole consent) to
contest or to continue to contest any Imposition for which Lessee is obligated
pursuant to this SECTION 15 unless (s) no Default or Event of Default hereunder
has occurred and is continuing; (t) no amounts of Rent are past due under this
Lease; (u) the amount of such claim, together with all claims of a similar
nature (both present and reasonably expected to be asserted), are at least
$50,000 in the aggregate; (v) Lessee acknowledges its liability to such
Indemnified Person for an indemnity payment in accordance with the provisions of
this SECTION 15 as a result of such claim if and to the extent such Indemnified
Person or Lessee, as the case may be, does not prevail in the contest of such
claim; (w) such Indemnified Person receives from Lessee (i) an indemnity
satisfactory to such Indemnified Person for any liability, expenses or loss
arising out of or relating to such contest and (ii) an opinion of tax counsel
selected by the Lessee and reasonably acceptable to the affected Indemnified
Person to the effect that a reasonable basis exists for contesting such claim,
which opinion shall be in form and substance reasonably satisfactory to such
Indemnified Person and furnished at Lessee's sole expense; (x) Lessee agrees to
pay any expenses that any Indemnified Person may incur in connection with
contesting such claim (including, without limitation, all out-of-pocket costs,
expenses, losses, reasonable legal and accounting fees, disbursements,
penalties, interest and additions to tax); (y) such Indemnified Person obtains
at Lessee's cost an opinion of independent counsel selected by the Lessee and
approved by the

                                       42


affected Indemnified Person (which approval shall not be unreasonably withheld)
to the effect that the action to be taken will not result in any risk of sale,
forfeiture or loss of, or the creation of any Lien (except if Lessee adequately
bonds such Lien or otherwise makes provision to protect the interests of all
Indemnified Persons in a manner reasonably satisfactory to each Indemnified
Person) on, the Aircraft, or any part or portion thereof or any interest therein
or in any way interfere with the timely payment of Rent from time to time
becoming due and payable; and (z) if such contest is conducted in a manner
requiring the payment of the claim, Lessee pays the amount required in order to
contest the claim. Any imposition imposed on an Indemnified Person as a result
of an advance by Lessee of a tax payment or other costs incurred by such
Indemnified Person, pursuant to this paragraph shall be indemnified under this
SECTION 15 without regard to the exclusions in SECTION 15.1.1 and 15 1.2. An
Indemnified Person shall keep Lessee reasonably informed of and shall permit
Lessee to participate in any such proceedings that Lessee does not conduct
itself. If such Indemnified Person obtains a refund of all or any part of any
Imposition paid by Lessee, such Indemnified Person shall pay Lessee, but not
before Lessee makes all payments theretofore due such Indemnified Person
pursuant to this SECTION 15 and any other payments theretofore due under any of
the Operative Documents, an amount, which after taking into account all taxes
saved by such Indemnified Person as a result of the payment of such amount,
shall be equal to the amount of such refund net of reasonable expenses not
previously reimbursed and Impositions payable with respect to receipt thereof,
including interest received attributable thereto; PROVIDED HOWEVER, that
notwithstanding the foregoing portions of this sentence, such Indemnified Person
shall not be obligated to make any payment to Lessee pursuant to this sentence
as long as a Default or an Event of Default exists hereunder, but such payment
shall be held by such Indemnified Person as security for the obligations of
Lessee under the Operative Documents, and at such time as such Default or Event
of Default is later cured, then such Indemnified Person shall make such payments
to Lessee.

          (b) Notwithstanding anything contained in this SECTION 15.3 to the
contrary, an Indemnified Person shall not be required to exercise its contest
rights on Lessee's behalf if the subject matter of any claim is of a continuing
nature and has previously been decided adversely (other than as a result of a
settlement) pursuant to the contest provisions of this SECTION 15 unless there
is a Change in Law (including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after such claim has
been so previously decided, and such Indemnified Person receives an opinion,
also addressed to Lessee, of tax counsel selected by the Lessee and approved by
such Indemnified Person (which approval shall not be unreasonably

                                       43


withheld) and furnished at Lessee's sole expense to the effect that, as a result
of such change, it is more likely than not that the position which such
Indemnified Person or Lessee, as the case may be, had asserted in such previous
contest, would prevail.

          (c) If, in the course of exercising its contest rights on Lessee's
behalf, an Indemnified Person learns that a taxing authority is willing to agree
to a settlement of a claim, such indemnified Person shall notify Lessee of such
settlement proposal. If the settlement proposal is acceptable to Lessee, Lessee
shall so notify such Indemnified Person and such Indemnified Person shall agree
to the settlement proposal; PROVIDED, HOWEVER, that an Indemnified Person shall
not be obligated to agree to the settlement proposal if such Indemnified Person
releases Lessee from any further obligations pursuant to this SECTION 15 with
respect to such claim and if such Indemnified Person agrees that the amount of
any indemnity payment determined under this SECTION 15 in respect of such claim,
which Lessee shall be required to pay to such Indemnified Person, shall not
exceed the amount of such indemnity payment that would have been required if
such Indemnified Person had agreed to the settlement proposal. If any such
settlement proposal is acceptable to such Indemnified Person but is unacceptable
to Lessee, Lessee shall inform such indemnified Person of the amount for which
Lessee would be willing to settle such claim. If such indemnified Person accepts
the settlement proposal, the amount of any indemnity payment determined under
this SECTION 15 in respect of such claim that Lessee shall be required to pay to
such Indemnified Person shall not exceed the amount for which Lessee would have
been willing to settle such claim.

          (d) Nothing contained in this SECTION 15 shall require any Indemnified
Person to exercise its contest rights or permit Lessee to contest a claim which
would otherwise require any Indemnified Person to exercise its contest rights if
such Indemnified Person waives payment by Lessee of any amount that might
otherwise be payable by Lessee under this SECTION 15 by way of indemnity in
respect of such claim. In the event of such waiver, such Indemnified Person
shall promptly return any amounts previously advanced by Lessee pursuant to this
SECTION 15.3, including, without limitation, payment of the Impositions which
were the subject of the claim and reimburse Lessee for amounts previously paid
to such Indemnified Person in respect of expenses incurred in contesting such
claim.

          15.4 Each Indemnified Person shall supply Lessee with such information
as may be reasonably requested by Lessee as, in the reasonable opinion of
counsel of such Indemnified Person, will enable Lessee to participate in or
control and conduct any proceeding to the extent permitted by this SECTION 15.
In the event that an Indemnified Person enters into a settlement or other

                                       44


compromise with respect to any imposition without prior written consent of
Lessee (which consent shall not be unreasonably withheld or delayed), such
Indemnified Person shall be deemed to have waived its right to be indemnified
with respect to such Imposition under this SECTION 15.

          15.5 If by reason of any Impositions paid or indemnified against by
Lessee under this SECTION 15 any Indemnified Person thereafter shall realize, in
its sole opinion, a tax benefit (whether by means of a credit, deduction or
otherwise) that results in a reduction in Impositions, then such Indemnified
Person shall, to the extent it can do so without prejudice to the retention of
the amount of such benefit, pay to Lessee the amount which (after adjustment for
any further tax savings or tax liability realized by such Indemnified Person as
a result of the payment thereof) such Indemnified Person, in its reasonable
business judgment, determines to equal the amount of such reduction in
Impositions (such Indemnified Person's payment of such amount, absent manifest
error, being conclusive evidence of the amount so owing to Lessee), EXCEPT that
such Indemnified Person shall not be obligated to make any payment pursuant to
this sentence to the extent the amount of such payment would exceed (x) the
amount of all prior payments in respect of such. Impositions by Lessee to such
Indemnified Person pursuant to this SECTION 15, less (y) the amount of all prior
payments in respect of such Impositions by such Indemnified Person to Lessee
pursuant to this SECTION 15.

          15.6 In the event Lessee shall fail to make any payment or to do any
act as provided in this SECTION 15, then Lessor shall have the right, but not
the obligation, without notice to or demand upon Lessee, and without releasing
Lessee from any obligation in this SECTION 15, to make or do the same, and to
pay, purchase, contest or compromise any encumbrance, charge or lien which in
Lessor's judgment places Lessor's title to the Aircraft, Lessor's interest in
the Aircraft, or Lessee's possession of the Aircraft in jeopardy and in
exercising any such rights, incur any liability and expend whatever reasonable
amounts Lessor, in its absolute discretion may deem necessary therefor. All sums
so incurred or expended by Lessor shall be, without demand, immediately due and
payable by Lessee and shall bear interest at the Base Rate or such lesser amount
as may represent the maximum rate permitted by Applicable Law.

          15.7 In the event Lessee shall be obligated to indemnify any
Indemnified Person pursuant to this SECTION 15, Lessee shall be subrogated to
the rights of the Person indemnified in respect of the matter as to which the
indemnity was paid.

          15.8 For purposes of this SECTION 15, "Indemnified Person" shall
include all corporations making a consolidated or

                                       45


combined return in which an Indemnified Person is included and the agents,
employees, servants, successors and assigns of any thereof.

          15.9 Lessee shall furnish Lessor within sixty (60) days after the end
of each calendar year included in the whole or in part of the Term, a report
with respect to the location of the Aircraft during such calendar year in
sufficient detail to enable Lessor to determine the portions of its income and
deductions with respect to the transaction contemplated by the Operative
Documents appropriately treated as attributable or allocable to sources within
and without the United States within the meaning of Section 861-863 of the Code.
Also, during the Term hereof, Lessee agrees to maintain or cause to be
maintained such reasonable and customary records, and provide or cause to be
provided such reasonable and customary information, to enable Lessor to fulfill
any of its tax filing obligations, including without limitation, copies of all
log books. Upon written request of Lessor, Lessee also will promptly and duly
execute and deliver or cause to be duly executed and delivered, to Lessor or
cooperate in filing with the appropriate governmental authority, such further
reasonable and customary documents and assurances and take such further
reasonable and customary action as Lessor may from time to time reasonably
request in order more effectively to carry out the intent and purpose of this
Lease and to protect Lessor's right to the anticipated income tax consequences
contemplated by the Operative Documents.

          15.10 The provisions of this SECTION 15 shall survive the expiration
or termination of this Lease and the other Operative Documents.

Section 16. FURTHER ASSURANCES, RECORDATION, TITLE, REGISTRATION

          Lessee shall cooperate with Lessor in connection with the filing and
recording of this Lease and Lease Supplements thereto, including but not limited
to Lease Supplement No. 1, and any other document reasonably requested by
Lessor, and the maintenance of the recordation thereof under the Transportation
Code and in such other public offices as may be deemed necessary and appropriate
by FAA Counsel or by Lessor or Lessor's counsel in order to protect the rights
and interests of Lessor hereunder and to perfect such rights and interests of
Lessor in and to this Lease and the Rents due and to become due hereunder and
will not register nor permit the registration of the Aircraft under the laws of
any jurisdiction outside the United States. Lessee shall not do any act or take
or direct any Person to take any action which might cause the Aircraft to be
ineligible for registration under the Transportation Code. Lessee shall, at its
expense, cooperate and assist in accomplishing all recording, registrations and
filings of this Lease, and any of

                                       46


the Operative Documents and any mortgage, security interest, waiver, license,
permit or certificate incident thereto, required by law or deemed reasonably
necessary by Lessor to protect its interest in the Aircraft, and shall furnish
Lessor with satisfactory evidence of each such recording, registration and
filing, including without limitation, evidence that continuation statements have
been filed with respect to all financing statements filed pursuant to this
SECTION 16. Lessee shall from time to time do and perform such other acts and
execute such other and further instruments as may be required by law or
reasonably be requested by Lessor, including such legal opinions as may
reasonably be required by Lessor, to establish, maintain and protect Lessor's
rights and remedies and to carry out the effect, intent and purpose of this
Lease.

Section 17. INSPECTION, REPORTS, AUDITS.

          17.1 Lessor and its authorized representatives may inspect (subject to
Lessee's reasonable requirements regarding security), at their own expense, the
Aircraft and the books and records of Lessee with respect thereto, and make
copies and extracts therefrom, and may discuss Lessee's affairs, finances, and
accounts relating to the Aircraft and Lessee's operation, with its officers, and
Lessee shall furnish to Lessor statements accurate in all material respects
regarding the condition and state of repair of the Aircraft, all upon such
reasonable notice and at such reasonable times during normal business hours and
as often as may be reasonably requested and all at the expense of Person
requesting the same. Lessor shall have no duty to make any such inspection or
inquiry or incur any liability or obligation by reason of not making any such
inspection or inquiry. Lessee may condition any such inspection or inquiry upon
the agreement of the Person requesting inspection to maintain the same standard
of confidentiality with respect to information so obtained as customarily
applies to such Person's own confidential information.

          17.2 Lessee shall furnish to Lessor the following:

               (a) QUARTERLY STATEMENTS. As soon as practicable after the end of
          each quarterly fiscal period in which a quarterly report is prepared
          in each fiscal year of Lessee and in any event within forty-five (45)
          days thereafter (but in no event later than such information is made
          generally available to the shareholders of Lessee), duplicate copies
          of:

                    (1) A consolidated balance sheet of Lessee and its
               consolidated subsidiaries as of the end of such quarter, and

                                       47


                    (2) Consolidated statements of income and if available, cash
               flows of Lessee and its consolidated subsidiaries for such
               quarter and (in the case of the second and third quarters) for
               the portion of the fiscal year ending with such quarter setting
               forth in comparative form the figures for the corresponding
               periods in the previous fiscal year, all in reasonable detail and
               certified as complete and correct, subject to changes resulting
               from year-end adjustments, by a principal financial officer of
               Lessee;

               (b) ANNUAL STATEMENTS. As soon as practicable after the end of
          the fiscal year of Lessee, and in any event within one hundred twenty
          (120) days thereafter (but in no event later than such information is
          made generally available to the shareholders of Lessee), duplicate
          copies of:

                    (1) Consolidated balance sheet of Lessee and its
               consolidated subsidiaries at the end of such year;

                    (2) Consolidated statements of income and if available, cash
               flows of Lessee and its consolidated subsidiaries for such year,
               setting forth in each case in comparative form the figures for
               the previous fiscal year, all in reasonable detail and
               accompanied by an opinion, if available, thereon of independent
               certified public accountants of recognized national standing
               selected by Lessee stating that such financial statements fairly
               represent the financial condition of the companies being reported
               upon, have been prepared in accordance with generally accepted
               accounting principles consistently applied (except for changes in
               application described); and

                    (3) If an opinion from an independent certified public
               accountant is not available for Lessee separately, this SECTION
               17.2(b) is applicable for the consolidated statements of its
               parent company;

               (c) AUDIT REPORTS. Promptly upon receipt thereof one copy of each
          other report submitted to Lessee or any subsidiary thereof by
          independent accountants in connection with any annual, interim or
          special audit made by them of the books of the Lessee or of any
          subsidiary; and

                                       48


               (d) CERTAIN OTHER REPORTS. As soon as practicable:

                    (1) after the end of each quarterly period as defined in
               SECTION 17.2(a) or annual period as defined in SECTION 17.2(b),
               duplicate copies of any report or statement required pursuant to
               the Securities Exchange Act of 1934 or the rules or regulations
               promulgated thereunder,

                    (2) after it becomes available, any filing, statement,
               report, registration, prospectus or other document prepared
               pursuant to the Securities Act of 1933 or pursuant to the rules
               and regulations thereunder,

                    (3) any other reports made publicly available to
               shareholders of the Lessee,

                    (4) if requested by Lessor, any or all operating plans,
               business plans, traffic reports, forecasts of business or
               forecasts of traffic, and

                    (5) such information as may be readily obtainable by Lessee
               which is required to enable Lessor to file any reports required
               by any Governmental Body as a result of its interests in the
               Aircraft.

            All of the reports described in SECTIONS 17.2(a), (b), (c) and (d)
(4) shall be treated as confidential by Lessor and not revealed to any party
without the prior written consent of Lessee, except that Lessor may disclose
such reports to potential purchasers of the Aircraft if it obtains and delivers
to Lessee the same agreement with respect to confidential treatment of such
reports, all in form and substance reasonably satisfactory to Lessee.

Section 18. DEFAULTS, REMEDIES, DAMAGES.

            18.1 Each of the following described events shall be an Event of
Default (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
Applicable Law of any Governmental Body):

                 18.1.1 Lessee fails to make when due any payment of Base Rent
or Stipulated Loss Value or any other sum payable under this Lease and such
failure to pay continues for seventy-two (72) hours after the date when the same
becomes due;

                                       49


                 18.1.2 Lessee fails at any time to procure or maintain or
comply with any insurance coverage prescribed herein or such insurance is for
any reason not in full effect; PROVIDED that any such failure shall not
constitute an Event of Default so long as the Aircraft shall not be operated at
any time when such insurance is not in effect, the Aircraft continues to be
covered by such insurance as is required when the aircraft is on the ground and
such failure to maintain insurance is for a period of not more than thirty (30)
days;

                 18.1.3 Lessee fails to observe or perform any of the covenants,
conditions, agreements or warranties to be performed or observed by Lessee under
the Lease or any other Lessee Document other than a covenant, condition, or
agreement specified in SECTIONS 18.1.1 OR 18.1.2 above, and such failure
continues for ten (10) days after the earlier of (a) Lessee obtaining actual
knowledge or such failure or (b) notice thereof from Lessor; PROVIDED, HOWEVER,
(i) removal of the Aircraft at any time from those locations permitted by this
Lease and (ii) except as provided for in SECTION 11.1 (iii) and SECTION
12.2(VI), if the Aircraft is not in material compliance with the Maintenance
Program or is not in such operating condition as may be necessary to enable the
Airworthiness Certificate of the Aircraft to be maintained, or so as to permit
the uninterrupted use or operation of the Aircraft, after Lessee with reasonable
diligence should have obtained actual knowledge thereof and it is not remedied
immediately upon obtaining such knowledge, shall constitute an immediate Event
of Default;

                 18.1.4 Any representation or warranty of Lessee contained in
this Lease, or in any document or certificate furnished by Lessee pursuant
hereto or thereto proves to be untrue or incorrect in any material respect when
made or repeated, and, if capable of being cured and Lessee is diligently
proceeding to so cure, such untruthfulness or incorrectness shall continue to be
unremedied for a period of fifteen (15) days after written notice thereof by
Lessor; provided, however, in no event shall Lessee have any cure rights
pursuant to this Section 18.1.4 if such untrue or incorrect representation or
warranty was knowingly made by Lessee;

                 18.1.5 Lessee consents to the appointment of a receiver,
custodian, trustee, liquidator or other officer with similar powers, of itself
or of a substantial part of its property, is generally unable to pay debts as
they become due unless such debts are the subject of a bona fide dispute, or
admits in writing its insolvency or bankruptcy or its inability to pay its debts
generally as they become due or makes an assignment for the benefit of
creditors, or files a petition in bankruptcy or a petition or an answer seeking
reorganization in a proceeding under any bankruptcy laws (as now or hereafter in
effect) or a readjustment of its indebtedness or an answer admitting the
material allegations of a

                                       50


petition filed against Lessee in any such proceeding, or petitions, answers or
consents to seek relief under the provision of any bankruptcy or other similar
law, or an agreement, composition, extension or adjustment with its creditors;

                 18.1.6 An order, judgment or decree is entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a custodian,
receiver, trustee, liquidator or other officer with similar powers, with respect
to Lessee or of any substantial part of its property, or any substantial part of
the property of Lessee is sequestered, and any such order, judgment or decree of
appointment or sequestration remains undismissed, unstayed or unvacated, for a
period of sixty (60) days after the date of entry thereof;

                 18.1.7 A petition against Lessee in a proceeding under the
bankruptcy laws or other insolvency laws as now or hereafter in effect, is
filed, and any decree or order adjudging Lessee a bankrupt or insolvent in such
proceedings, remains in force, unstayed for a period of sixty (60) days
thereafter, or, in the case where the approval of such a petition by the court
of competent jurisdiction is required by the petition as filed or amended is
approved as filed by such court and such approval is not withdrawn or the
proceedings dismissed within sixty (60) days thereafter, or if, under the
provision 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 any substantial part of its
property and such jurisdiction, custody or control remains in force
unrelinquished, unstayed or unterminated for a period of sixty (60) days;

                 18.1.8 Lessee or any Affiliate of Lessee; is in default, and
such default continues unremedied for five (5) days, with respect to any
material indebtedness, lease obligation or material contract of Lessee or any
Affiliate of Lessee;

                 18.1.9 Any uninsured final judgment for the payment of money
aggregating in excess of $150,000 is rendered against Lessee and the same
remains outstanding and unstayed or undischarged for a period of thirty (30)
days thereafter, during which period execution of such judgment is not
effectively stayed, bonded or insured;

                 18.1.10 Any assertion by Lessee or through any other Person on
behalf of Lessee of the invalidity or unenforceability of all or any part of
this Lease (not including an assertion by Lessee that performance by Lessee is
not required due to a breach or a nonperformance by Lessor or any other Person
of its obligations hereunder or under any other Operative Documents);

                                       51


                 18.1.11 Due to the act or omission by Lessee, any document or
instrument required to be filed or recorded in accordance with SECTION 11.1 or
SECTION 16 hereof is not duly filed or recorded at such time and at such place
or places as required under SECTION 11.1 or SECTION 16 to perfect or continue
the perfection of the interest of Lessor or any other Person in and to the
Aircraft; or

                 18.1.12 Any transfer by Lessee of possession of the Airframe or
any Engine or Propeller to any Person other than in accordance with SECTIONS 11
OR 20 which continues unremedied for at least fifteen (15) days.

            18.2 Upon the occurrence of any one or more of the above
described Events of Default and at any time thereafter so long as the same shall
be continuing, Lessor may, at its option, declare this Lease to be in default,
and at any time thereafter, Lessor may exercise, and Lessee shall comply with,
any or all of the following rights and remedies with respect to all or any part
of the Aircraft:

                 18.2.1 Cause Lessee, upon the written demand of Lessor and at
Lessee's expense and risk, to assemble and return promptly or store, and Lessee
shall assemble and return promptly or store, all or such part of the Aircraft as
Lessor may so demand, to Lessor or its older in the manner and condition
required by, and otherwise in accordance with all the provisions of SECTION 19,
or Lessor, at its option, may enter upon the premises where all or any part of
the Aircraft is located and take immediate possession of and remove the same
together with any engine or propeller which is not an Engine or Propeller but
which is installed on the Airframe, subject to all of the rights of the owner,
lessor, lienor or secured party with respect to such engine or propeller, by
summary proceedings, by self-help, or otherwise.

                 The return and storage of the Aircraft as hereinbefore and
hereinafter provided are of the essence of this Lease, and upon application to
any court of equity having jurisdiction in the premises, Lessor shall be
entitled to a decree against Lessee requiring specific performance of the
covenants of Lessee so as to return and store the Aircraft as provided in this
SECTION 18.2.1 and in SECTION 19.

                 18.2.2 Proceed by appropriate court action, or actions, either
at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof, and it is
expressly agreed that the right to resort to any such court action is a remedy
given to Lessor in addition to, and not in lieu of, any other remedies given

                                       52


to Lessor under this Lease other than those provided for in SECTION 18.2.5;

                 18.2.3 Give notice to Lessee specifying the occurrence giving
rise to such Event of Default, and stating that this Lease shall expire and
terminate on the dates specified in such notice, and on the date so specified
(if any such Event of Default shall be continuing), subject to the provisions
hereof relating to the survival of Lessee's obligation, this Lease shall expire
and terminate (hereinafter such expiration and termination sometimes being
referred to as "premature termination") and all rights of Lessee under this
Lease shall absolutely cease and terminate but Lessee shall return the Aircraft
in accordance with SECTION 18.2.1 above, PROVIDED, HOWEVER, in the event Lessee
fails to promptly return the Aircraft, Lessor may take or cause to be taken by
its agent or agents immediate possession of the Aircraft without any liability
to Lessor to return any Rent theretofore paid hereunder and free and clear of
any claims of Lessee whatsoever, and may remove the same from the possession and
use of the Lessee, and for such purpose may enter onto Lessee's premises where
the Aircraft may be located and may use and employ in connection with such
removal any supplies, services, means or other facilities of Lessee with or
without process of law, and Lessee hereby expressly agrees and consents to the
foregoing;

                 18.2.4 With or without taking possession thereof sell, at one
or more public or private sales, at such times and places, to such persons
(including Lessor) and without notice, or otherwise dispose of, use, operate,
Lease or hold, all or any part of the Aircraft as Lessor may decide, free and
clear of any rights of Lessee, and without any duty to account to Lessee with
respect to such action for any proceeds thereof (except to the extent required
by the provisions of SECTION 18.2.5 below) and to hold the Lessee liable for any
installment of Rent due on or before the date of such sale to the extent such
Rent covers the period up to the date of such sale, or hold, use, operate, Lease
to others or keep idle all or any part of the Aircraft as Lessor may determine,
in each case free and clear or any rights of Lessee except as hereinafter set
forth in this SECTION 18 and without any duty to account to Lessee with respect
to such action or inaction;

                 18.2.5 In order to preserve for Lessor the benefits intended by
the transactions contemplated by the Lease and the Lessee Documents, recover
from Lessee as liquidated damages for loss of bargain and not as a penalty,
which Lessor shall be deemed to have sustained by reason of Lessee's breach of
this Lease or any other Lessee Document, and to that end, Lessor, at its option
without prejudice to any other remedies to which it may be entitled, may
exercise any of the following remedies under either

                                       53


clause (i), (ii) or (iii) below, but not under more than one of such clauses:

                    (i) Whether or not Lessor has exercised, or at any time
exercises, any of its rights under SECTIONS 18.2.1 OR 18.2.4 above with respect
to all or any part of the Aircraft, Lessor, by written notice to Lessee
specifying a payment date, which shall be a Base Rent Payment Date not earlier
than ten (10) days from the date of such notice, in order to preserve for Lessor
the benefits intended by the transactions contemplated by the Lease and the
Lessee Documents, shall demand that Lessee pay to Lessor, and Lessee shall pay
to Lessor, on the payment date specified in such notice, as liquidated damages
for loss of bargain and not as a penalty (in lieu only of Base Rent for the
Aircraft due after the payment date specified in such notice), any unpaid Rent
for the Aircraft due on or prior to the payment date specified in such notice,
plus whichever of the following amounts Lessor, in its sole discretion, shall
specify in such notice (together with interest, if any, at the Overdue Rate on
the amount of any such unpaid Rent and on such specified amount from the
respective due dates to and including the actual date of payment): (A) an amount
equal to the excess, if any, of (1) the Stipulated Loss Value for the Aircraft
or part thereof, computed as of the payment date specified in such notice, plus
the unpaid accrued Base Rent as of such Base Rent Payment Date, over (2) the
aggregate Fair Market Rental Value of the Aircraft, or part thereof fox the
remainder of its economic useful life after such specified payment date, after
discounting such aggregate Fair Market Rental Value quarterly to present worth
as of such specified payment date at a rate of six (6%) per annum; or (B) an
amount equal to the excess, if any, of (1) the sum of the Stipulated Loss Value
for the Aircraft or part thereof plus to the extent not otherwise payable under
this clause (i) the unpaid accrued Base Rent as of such Base Rent Payment Date,
over (2) the Fair Market Sale Value of the Aircraft or part thereof as of the
payment dated specified in such notice;

                    (ii) If Lessor, pursuant to SECTION 18.2.4 above, sells all
or any part of the Aircraft, Lessor may, if it so elects, demand that Lessee pay
Lessor, and Lessee shall pay to Lessor, on the date of such sale, as liquidated
damages for loss of bargain and not as a penalty (in lieu only of Base Rent for
the Aircraft due after the date on which such sale occurs), any unpaid Rent for
the Aircraft due on or prior to the date on which such sale occurs plus the
amount of any excess of (A) the Stipulated Loss Value of the Aircraft or part
thereof, computed as of the Base Rent Payment Date immediately preceding the
date on which such sale occurs, or the first Base Rent Payment Date in the event
of a sale prior thereto, plus the unpaid accrued Base Rent as of such Base Rent
Payment Date, plus interest thereon at the Overdue Rate from such Base Rent
Payment Date to the date of such sale over (B) the net

                                       54


proceeds of such sale. Lessee shall also pay to Lessor interest at the Overdue
Rate on the amount of any such deficiency from the respective due date to and
including the date of actual payment;

                    (iii) By notice to Lessee, Lessor may, in lieu of exercising
its rights under SECTION 18.2.4 above, demand that Lessee pay on demand to
Lessor, and Lessee hereby agrees that it will so pay to Lessor, as liquidated
damages for loss of bargain and not as a penalty (in lieu only of Base Rent for
the Aircraft due or accrued after the payment date specified in such notice),
any unpaid Rent for the Aircraft due or accrued on or prior to the payment date
specified in such notice plus an amount equal to Stipulated Loss Value for the
Aircraft computed as of the immediately preceding Base Rent Payment Date;

and upon such payment of liquidated damages and the payment of all other Rent
then due hereunder, Lessor shall, or shall cause the appropriate party to,
convey forthwith to Lessee by bill of sale all of its right, title and interest
in and to the Aircraft on an "AS-IS", "WHERE-IS" basis and without recourse or
warranty, except that the Aircraft shall be free and clear of Lessor Liens,
including the Lien of the Loan Agreement, and with no obligation to deliver
possession if the Aircraft has not been returned to Lessor in accordance with
SECTION 18.2.1 above.

                    18.2.6 OTHER REMEDIES. In lieu of or in addition to (to the
extent not inconsistent with) any of the foregoing remedies, Lessor may (i)
terminate this Lease as to the Aircraft, (ii) proceed by appropriate court
action to enforce the terms hereof or to recover damages for the breach hereof
as provided in SECTION 18.2.2, and (iii) exercise any other right or remedy
which may be available to it under Applicable Law.

                    18.2.7 CONCERNING REMEDIES. In addition to the other
obligations of Lessee under this SECTION 18, Lessee shall be liable, except as
otherwise provided 1n this SECTION 18, and to the extent not paid pursuant to
the other provisions of this SECTION 18, for any and all unpaid Rent due
hereunder, after or during the exercise of any of the foregoing remedies, for
any and all Supplemental Rent due hereunder, and for all legal fees (including
the allocated time charges of internal counsel) and other reasonable costs and
expenses incurred by reason of the occurrence of any Event of Default, or the
exercise of Lessor's remedies with respect thereto, including all reasonable
costs and expenses incurred in connection with repossession, transportation,
storage, maintenance and insurance of the Aircraft and in placing the Aircraft
in the condition and airworthiness required by SECTION 19. At any sale of the
Aircraft or any part thereof pursuant to this SECTION 18, Lessor may bid cash
for the purchase of such property. Except as otherwise expressly provided above,
no remedy referred to

                                       55


in this SECTION 18 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity, and the exercise or beginning of exercise of any one
or more of such remedies shall not be deemed an election of such remedies and
shall not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies.

                    18.2.8 WAIVERS. TO THE FULL EXTENT THAT LESSEE AND LESSOR
MAY LAWFULLY AGREE, LESSEE AND LESSOR HEREBY WAIVE THE BENEFIT OF ANY PROVISION
OF LAW NOW OR HEREAFTER IN EFFECT WHICH RENDERS ANY PROVISION HEREOF PROHIBITED
OR UNENFORCEABLE IN ANY RESPECT. NO EXPRESS OR IMPLIED WAIVER BY LESSOR OR
LESSEE OF ANY EVENT OF DEFAULT SHALL IN ANY WAY BE, OR BE CONSTRUED TO BE, A
WAIVER OF ANY FUTURE OR SUBSEQUENT EVENT OF DEFAULT.

               18.3 Whenever a determination of Fair Market Sale Value or
Fair Market Rental Value is required by any provision of this Lease, Lessor
shall appoint a recognized independent aircraft appraiser selected by Lessor to
determine the Fair Market Sale Value or Fair Market Rental Value of the Aircraft
and shall advise Lessee of such appointment in its notice that Lessor has
exercised its rights and remedies in accordance with this Lease. Within fifteen
(15) days after receipt of such written notice from Lessor, Lessee shall deliver
to Lessor a written notice appointing a recognized independent aircraft
appraiser selected by Lessee to determine the Fair Market Sale Value or Fair
Market Rental Value of the Aircraft. If Lessee fails or refuses to appoint, for
any reason whatsoever, an appraiser to determine the Fair Market Sale Value or
Fair Market Rental Value of the Aircraft within fifteen (15) days after receipt
of written notice from Lessor advising Lessee of the appointment of an appraiser
by Lessor, the decision of the appraiser appointed by Lessor as to the Fair
Market Sale Value or Fair Market Rental Value of the Aircraft shall in all cases
be binding and conclusive on Lessor and Lessee. The appraisers appointed by
Lessor and Lessee pursuant to this SECTION 18.3 shall meet promptly to determine
the Fair Market Sale Value or Fair Market Rental Value of the Aircraft. If
within fifteen (15) days after Lessee selects its appraiser the two appraisers
selected by Lessor and Lessee, respectively, are unable to agree on the Fair
Market Sale Value or Fair Market Rental Value of the Aircraft, a third
recognized independent aircraft appraiser shall be chosen within fifteen (15)
days thereafter by the mutual agreement of such first two appraisers, or if such
first two appraisers fail to agree on the appointment of a third appraiser
within such fifteen (15) day period, such appointment shall be made by the
American Arbitration Association (or any organization which is successor
thereto). The decision of the appraisers so appointed and chosen shall be given
within fifteen (15) days after the selection of such third appraiser. Any
decision in which any two appraisers so

                                       56


appointed and acting hereunder concur shall in all cases be binding and
conclusive on Lessor and Lessee and, in the event that there are three
appraisers and no two of such appraisers shall be able to concur in the
decision, then the simple arithmetic average of the appraisals arrived at by the
three (3) appraisers shall in all cases be binding and conclusive on Lessor and
Lessee. Lessee shall pay the fees and expenses of appraisal. The Fair Market
Sale Value or Fair Market Rental Value of the Aircraft shall be determined by
the appraisers as of the date of premature termination on the assumption (i)
that the Aircraft will, on such date, be equipped with the Airframe, the Engines
and the Propellers, and that the Airframe, the Engines and the Propellers will
otherwise be in such condition as would be required by this Lease and (ii) if
the time remaining on the Airframe, the Engines, the Propellers, the components
and/or the Parts on the day of premature termination is less than the time
required to be remaining thereon in accordance with the provisions of SECTION 19
hereof and/or the Airframe, the Engines, the Propellers, and/or the Parts
thereof otherwise do not meet the standards contemplated and required under
SECTION 19 hereof or if the condition of the Aircraft does not fully comply with
the requirements of this Lease, that the Aircraft will fully comply with the
requirements of this Lease.

               18.4 Lessor may, at its election, waive any Event of Default, and
its consequences, and rescind and annul any such notice of termination by notice
to Lessee in writing to that effect within sixty (60) days after delivery of any
such notice of termination, and thereupon the respective rights of the parties
shall be as they would have been if no Event of Default had occurred and no such
notice had been given. Notwithstanding the provisions of this SECTION 18.4, it
is expressly understood and agreed by Lessee that no express or implied waiver,
recision or annulment by Lessor shall in any way be, or be construed to be, a
waiver of any other past, future or subsequent Event of Default, nor shall any
such express or implied waiver, recision, or annulment by Lessor extend to or
affect any other or subsequent default or impair any rights or remedies
consequent thereto.

               l8.5 Each and every power and remedy herein specifically given to
Lessor shall be in addition to every other power and remedy specifically so
given or now or hereafter existing at law or in equity, and each and every power
and remedy may be exercised from time to time or simultaneously as often as and
in such order as may be deemed expedient by Lessor. Lessor's acceptance of any
payment, whether partial or otherwise, after it shall become due hereunder shall
not be deemed to alter, affect or waive the obligations of Lessee or Lessor's
rights hereunder. All powers and remedies shall be cumulative and the exercise
of one shall not be deemed a waiver of the right to exercise any other or
others. No delay or omission of Lessor in the exercise of any right or remedy

                                       57


hereunder shall impair any power or remedy or shall be construed to be a waiver
of any Default or acquiescence therein. If any Event of Default shall occur,
Lessor shall be entitled to recover reasonable costs and expenses, including,
without limitation, attorneys fees, as are incurred by Lessor in the enforcement
of any right or privilege hereunder, plus interest thereon at the Overdue Rate
from the date such costs and expenses were expended or incurred by Lessor until
paid by Lessee.

               18.6 To the fullest extent Lessee may lawfully agree, Lessee
hereby agrees in accordance with Section 1110 of the Bankruptcy Code as amended
from time to time (or any successor or superseding statute as amended) that
legal title to, and ownership by Lessor of, the Aircraft and each Engine and
Propeller, and any right of Lessor or any party designated by Lessor under the
Lease, to take possession of the Aircraft, the Engines and Propellers in
compliance with the provision of this Lease or the Lease shall not be affected
by and Lessee waives any rights under Sections 362 or 363 of the Bankruptcy Code
or any other analogous provisions of any succeeding or superseding statute, as
amended from time to time, or any similar provision, insolvency, reorganization
or similar law affecting the rights of creditors generally which are
inconsistent with Section 1110 of the Bankruptcy Code. Lessee further agrees
that Lessor and each assignee of Lessor shall have the rights and benefits given
to a lessor and/or a secured party under Section 1110 of the Bankruptcy Code.

Section 19. RETURN OF AIRCRAFT AND RECORDS.

               19.1 RETURN OF AIRCRAFT. Upon the expiration or earlier
cancellation or termination of the Term of this Lease, (other than as a result
of an Event of Loss), or of any storage period provided for herein, Lessee shall
return the Aircraft to Lessor, free and clear of all Liens except Lessor Liens
and any other Liens created in accordance with the Operative Documents, and
Liens not created, incurred, assumed or existing through any action or inaction
by Lessee, in the same operating order, repair and condition, ordinary wear and
tear excepted, and appearance as when received. Lessee shall pay for any repairs
and refurbishing necessary to restore the Aircraft to such condition, ordinary
wear and tear excepted. At the expiration of the Term of this Lease or upon the
earlier cancellation or termination of this Lease pursuant to the terms hereof,
Lessee, at its own risk and expense, shall return the Aircraft by delivering the
same to Lessor at any airport designated by Lessor within the continental
confines of the United States that is situated within five hundred (500) miles
of any airport on Lessee's route system. The Aircraft shall, at that time,
satisfy all the following conditions:

                                       58


      (a) CERTIFICATION. The Aircraft shall have a valid Airworthiness
   Certificate and shall have been continuously and currently maintained in
   compliance with the requirements of the Airframe, Engine and Propeller
   manufacturers' approved maintenance programs or Lessee's Maintenance Program
   for Airframe, Engines and Parts.

      (b) OVERHAUL AND REPAIR. With respect to repairs and overhaul of the
   Airframe and all Engines, Propellers and Parts (whether performed as required
   hereunder or otherwise), such repairs and overhaul shall be documented to
   have been repaired or overhauled by certified FAA repair stations or by those
   approved by the FAA through reciprocal agreements and such overhaul and
   repair shall also be consistent with the respective manufacturer's
   instructions for such Engines, Propellers and Parts, and in the case of the
   Airframe, in accordance with the latest Saab MRB Manual.

      All overhaul and repair procedures shall be further verified to meet all
   FAA requirements for quality and documentation necessary to enable immediate
   transferal to operation within the continental limits of the United States
   under FAR Part 135.

      (c) REPAIRS. Lessee shall ensure that all major repairs performed since
   the Delivery Date and which still are in existence on the Aircraft are in
   conformity with the manufacturer's Structural Repair Manual ("SRM") and have
   or are immediately eligible to receive FAA approval, if so required by
   Lessor. All such repairs shall be accompanied by all data and documentation
   necessary to substantiate their certification and approval by the FAA, as
   required by Lessor.

      (d) MODIFICATIONS. A11 modifications performed since the Delivery Date
   which deviate from the certified configuration and which are still in
   existence on the Aircraft shall have approval or certification by the FAA or
   Person(s) authorized by the FAA to grant such approval or certification or be
   removed by Lessee unless otherwise deemed acceptable in writing by Lessor in
   its sole discretion. All such modifications shall be accompanied by complete
   data and documentation necessary to substantiate their certification and
   approval by the FAA or Person(s) authorized by the FAA to grant such approval
   or certification.

      (e) AIRWORTHINESS DIRECTIVES. All FAA Airworthiness Directives and
   amendments or changes to the FARs applicable to the Aircraft, Engines,
   Propellers or Parts shall have been accomplished in compliance with the
   issuing agency's specific instructions of the FAA or Person(s) authorized by
   the FAA to

                                       59


   grant such approval or certification. Airworthiness Directives which allow
   temporary compliance by inspection, but have a mandatory terminating
   compliance within six (6) months following return (except that in the case of
   a cancellation or early termination of the Lease, such period shall instead
   be twelve (12) months) shall have such terminating compliance complete.

      (f) RECORDS. All records necessary and required by the FAA to certify and
   place the Aircraft on an FAA-approved maintenance program shall be delivered
   with the Aircraft. If hard, non-computerized, copies of maintenance records
   are not available, then Lessee shall take action with pertinent regulatory
   agencies to ensure that Lessor and the FAA are provided with all requested
   guarantees of methods of compliance, component overhaul and management,
   scheduling, quality control, serial number verification, etc. These records
   shall be all inclusive to the Airframe, Engine, Propellers and Parts.

      All Parts identified with safe life limits shall be identified with their
   service histories, accumulated cycles or flight hours as applicable and
   remaining service lives on a separate listing.

      All components and assemblies which are identified on the maintenance
   records by part numbers and serial numbers other than the manufacturers'
   shall be provided with interchange or cross reference listing necessary to
   establish complete traceability.

      All documentation, flight, and maintenance records as specified by FARs
   91.173, 91.174, and each paragraph of 121.380 which normally accompany the
   transferal of an aircraft which has been operating in regulated commercial
   air service, shall be delivered to Lessor with the Aircraft.

      In the event of missing, incomplete, or unacceptable records, Lessee shall
   re-accomplish the tasks necessary to produce such records in accordance with
   its approved maintenance programs prior to delivery of the Aircraft.

      All documentation and records shall be made available to Lessor for review
   at a central location a minimum of thirty (30) Business Days prior to the
   required date of Aircraft delivery to Lessor.

      (g) SCHEDULED MAINTENANCE - AIRFRAME. Lessee will be responsible for
   ensuring that the Aircraft meets the following

                                       60


   conditions to facilitate transference of the Airworthiness Certificate and
   establish a maintenance halftime Aircraft:

   C Check:          A full C Check shall have been performed on the Aircraft
                     in compliance with Lessee's Maintenance Program immediately
                     prior to delivery, or the Aircraft shall not have been used
                     since the completion of such C Check prior to delivery.

   Structure Program The Aircraft shall have either (1) more than one-half
                     (1/2) time remaining until the next scheduled
                     structural program inspection, (2) at least two
                     thousand four hundred (2,400) hours remaining until the
                     next scheduled structural program inspection or (3) at
                     least three thousand (3,000) cycles remaining until the
                     next scheduled structural program inspection. In the
                     event that this check is performed in phases in
                     conjunction with the C Check, the current phase shall
                     be performed with the required return condition C
                     Check.

   Airworthiness     All airworthiness limitations checks shall
   Limitations:      be  current

      In the event that scheduled intervals change during the term of the Lease,
   Lessee shall insure that all major checks under Lessee's Maintenance Program,
   structural inspection program, heavy maintenance visit, or other designators
   are (a) performed in accordance with the Saab MRB Manual, (b) are current at
   the time of return to Lessor and (c) shall either (1) be in at least one-half
   (1/2) time condition, (2) have at least two thousand four hundred (2,400)
   hours remaining or (3) have at least three thousand (3,000) cycles remaining.

      (h) SCHEDULED MAINTENANCE - ENGINES. Upon return of the Aircraft, each of
   the Engines attached to the Aircraft shall either be (a) current under a
   valid ECMP program, in which case each of such Engines shall be eligible for
   a successor ECMP program between General Electric Company and Lessor or a new
   lessee without any penalties or costs to Lessor, and Lessee shall use its
   best efforts to have Lessee's ECMP program assigned to Lessor or a new lessee
   without any penalties or costs to Lessor or (b) current under any alternative
   engine care and maintenance program that Lessee has established after review
   and approval by Lessor, in which case each of such Engines shall be eligible
   to continue under

                                       61


   such program or an ECMP program without any penalties or costs to Lessor
   or a new lessee.

      (i) SCHEDULED MAINTENANCE - PROPELLERS, PARTS, COMPONENTS AND ASSEMBLIES.
   All Propellers, Parts, components and assemblies that are subject to
   regulated life limits shall either (1) be in at least one-half (1/2) time
   condition, (2) have at least two thousand four hundred (2,400) hours
   remaining or (3) have at least three thousand (3,000) cycles remaining.

      (j) SCHEDULED MAINTENANCE - OTHER CHECKS. Any scheduled maintenance or
   inspections, in addition to those specified in SECTION 19.1(g). 19.1(h) AND
   19.1(i).(e.g., unequally loaded phase checks, airworthiness limitations,
   corrosion control program, etc.) shall either (1) be in at least one-half
   (1/2) time condition, (2) have at least two thousand four hundred (2,400)
   hours remaining or (3) have at least three thousand (3,000) cycles remaining.

      (k) DEFERRED MAINTENANCE. There shall be no open, outstanding, or deferred
   maintenance items, scheduled or unscheduled, against the Aircraft including
   those identified in predelivery inspections ox test flights.

      (1) CORROSION. Lessee shall maintain corrosion control through its
   Maintenance Program. There shall, to Lessee's knowledge, be no untreated
   corrosion remaining on the Aircraft.

      (m) PRE-RETURN INSPECTIONS. Lessor shall be permitted to perform a minimum
   of two physical inspections of the Aircraft including its records exclusive
   of test flights'. One inspection will be performed immediately prior to
   return. The aircraft interior, exterior, wheel wells and wing spar areas
   shall be thoroughly cleaned to normal airline maintenance standards prior to
   the inspection. The inspection shall include, but not be limited to, ground
   evaluation and system functional tests including engine runs if deemed
   necessary by Lessor. In addition, one inspection shall be permitted during
   the maintenance check which precedes return. Lessor shall have the right to
   have up to two (2) people be present during the entire maintenance check.

      (n) ACCEPTANCE FLIGHT. Lessee shall provide for a minimum of one
   acceptance flight for a total duration not to exceed two (2) hours to
   demonstrate the airworthiness of the Aircraft and the proper functioning of
   all systems and components.

                                       62


      (o) AIRCRAFT PHYSICAL CONDITION. The Aircraft shall be complete and
   function and perform in accordance with the manufacturers' specifications.
   Discrepancies noted during the pre-return inspections and acceptance flights
   shall be corrected in accordance with the manufacturers' manuals.

      (p) GENERAL APPEARANCE. The Aircraft shall be clean, cosmetically
   acceptable, interior complete and prepared to place into U.S. scheduled
   revenue airline operations at a standard equal to or above U.S. standards.

     19.2 EQUIVALENCY AMOUNT. For any variance from the conditions set forth in
SECTIONS 19.1(g), 19.1(h), 19.1(i) AND 19.1(j) above, Lessee shall pay Lessor or
Lessor shall pay Lessee (as appropriate) an amount for such variance equal to
the following formula: actual time (or number of cycles) for the item minus the
minimum time (or number of cycles) for the item times the repair/overhaul cost
per hour or cycle shall equal the "Equivalency Amount". For purposes of
calculating the Equivalency Amount, a third party mutually acceptable to lessor
and lessee shall determine the cost as described in the preceding sentence. If
the Equivalency Amount is a positive sum then Lessee shall pay Lessor the
Equivalency Amount and if the Equivalency Amount is a negative sum then lessor
shall pay Lessee the Equivalency Amount.

     19.3 MANUALS. Upon the return of the Aircraft in accordance with this
SECTION 19, Lessee shall deliver to lessor all logs, aircraft flight manuals,
certificates and data, and inspection, modification and overhaul records
required to be maintained with respect to the Aircraft under applicable rules
and regulations of the FAA. All such records shall be made available to Lessor
for review a minimum of thirty (30) days prior to the agreed date of return. In
the event logs are missing or incomplete. Lessor shall have the right to cause
the logs to be reconstructed or replaced at the expense of Lessee.

     19.4 MAINTENANCE AT LESSOR'S REQUEST. Upon receipt of written notice from
Lessor not less than sixty (60)(nor more than one hundred twenty (120)) days
prior to any expiration or termination of this Lease, Lessee agrees to perform
maintenance to the Airframe and/or the Engines and/or the Propellers. Such
maintenance shall be done in the same manner and with the same care as used by
Lessee with similar airframes, engines and propellers of its own and shall be
completed as promptly as possible after any such termination of this Lease as to
such Airframe, Engines or Propellers, and Lessor shall reimburse Lessee in an
amount equal to (1) the lesser of (x) the sum of Lessee's direct costs for
materials plus Lessee's direct labor costs incurred in connection with such
maintenance or (y) Lessee's standard contract rates for work for third parties,
if any, therefor or (2) if such maintenance

                                       63


is performed by someone other than Lessee, the actual amount paid therefor by
Lessee.

     19.5 ENGINES. In the event any engine not owned by Lessor shall be returned
with the Airframe, such engine shall be of the same or improved model as the
Engines and suitable for installation and use on the Airframe and shall have a
value and utility at least equal to, and be in as good an operating condition
as, such Engines, assuming such Engines were in the condition and repair as
required by the terms hereof immediately prior to such termination, and Lessee
will, at its own expense and concurrently with such return, furnish Lessor with
a bill of sale, in form and substance satisfactory to Lessor, with respect to
each such engine together with evidence of Lessee's title to such engine
(including, if requested, an opinion of Lessee's counsel) and shall take such
other action as Lessor may reasonably request in order that such engine shall be
duly and properly titled in the name of Lessor, and upon passage of title to
such engine to the Lessor, such engine shall be deemed to be an Engine for all
purposes of this Lease. Upon full compliance with the terms of this Section, the
Lessor will transfer to Lessee Lessor's interest in any Engine replaced by an
engine pursuant to the preceding sentence without any representation, warranty
or recourse of any kind whatsoever, express or implied.

     19.6 PROPELLERS In the event any propeller not owned by the Lessor shall
be returned with the Airframe, such propeller shall be of the same or improved
model as the Propellers and suitable for installation and use on the Airframe
and shall have a value and utility at least equal to, and be in as good an
operating condition as, such Propellers, assuming such Propellers were in the
condition and repair as required by the terms hereof immediately prior to such
termination, and Lessee will, at its own expense and concurrently with such
return, furnish Lessor with a bill of sale, in form and substance satisfactory
to Lessor, with respect to each such propeller together with evidence of
Lessee's title to such propeller (including, if requested, an opinion of
Lessee's counsel) and shall take such other action as Lessor may reasonably
request in order that such propeller shall be duly and properly titled in the
name of Lessor, and upon passage of title to such propeller to the Lessor, such
propeller shall be deemed to be a Propeller for all purposes of this Lease. Upon
full compliance with the terms of this Section, the Lessor will transfer to
Lessee Lessor's interest in any Propeller replaced by a propeller pursuant to
the preceding sentence without any representation, warranty or recours of any
kind whatsoever, express or implied.

     19.7 STORAGE. Upon any expiration or termination of this Lease at the
written request of Lessor, Lessee will arrange, or will cause to be arranged,
storage facilities for the Aircraft at

                                       64


Lessee's facilities for a period not exceeding thirty (30) days without charge
to Lessor and up to ninety (90) days, provided that Lessor pays for the
additional sixty (60) days. Lessee will maintain in effect during such storage
periods insurance covering the Aircraft pursuant to Section 13.2 to the extent
such insurance is available at reasonable commercial rates and in such amounts
and against such risks as would be customarily carried in similar circumstances
by a reasonably prudent lessor, with such insurance being paid for by Lessor and
any deductible being absorbed by Lessor in the event of a loss.

     19.8 SPECIAL MARKINGS. Upon the termination or expiration of this Lease,
Lessee shall, at its cost, remove from the exterior of the Aircraft all insignia
and other distinctive markings. This provision shall not require Lessee to strip
the paint off the Aircraft or require Lessee to repaint the Aircraft.

     19.9 RINK OF LOSS, ETC. Upon return to Lessor of the Aircraft in accordance
with this SECTION 19 and the other provisions of this Lease, the Lease will
terminate and the risk of loss of such Aircraft shall pass to Lessor.
Notwithstanding the foregoing, Lessee shall pay to Lessor or reimburse Lessor
for the cost to Lessor of insuring the Aircraft during any period of repair or
overhaul subsequent to the termination of the Lease that is necessary to put the
Aircraft in the condition required hereby. If any required work, repairs or
services should delay the return of the Aircraft to Lessor beyond the scheduled
expiration or earlier termination of the Term hereof, or prevents the use of the
Aircraft thereafter, Lessee shall continue to pay Base Rent on a per diem basis
and all other Rent, bear the risk of loss under SECTION 12, maintain the
insurance required by SECTION 13, and provide the indemnities required under
Sections 14 and 15; in the same manner as if there had been no expiration or
termination of this Lease and otherwise exercise the care required hereunder
with respect to the Aircraft until such required work, repair or servicing has
been completed and, in the case of delay in return, the Aircraft is returned to
Lessor as provided herein. Lessee's possession of the Aircraft during such
period shall be solely as a bailee four hire for Lessor and not as Lessee
hereunder. During such period, Stipulated Loss Value shall be an amount equal to
Stipulated Loss Value on the last day of the Term.

     19.10 INSTRUMENTS OF RELEASE. Lessee shall execute and deliver to Lessor
such instruments of release and termination of this Lease as to the Aircraft, in
form suitable for recording at the FAA Aircraft Registry and other public
offices, as Lessor may reasonably request, to make clear upon public records
that the Aircraft is free and clear of all rights of Lessor and Lessee to the
Aircraft under this Lease.

                                       65


Section 20. ASSIGNMENT- SUBLEASE.

     20.1 Except as otherwise provided herein, Lessee will not and shall have no
power to, without the prior written consent of Lessor, assign any of its rights
or obligations hereunder. The terms and provisions of this Lease shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and assigns.

     20.2 (a) Lessee will not, without the prior written consent of Lessor,
except as otherwise provided in this Lease, sublease or otherwise in any manner
deliver, transfer or voluntarily relinquish possession, or enter into any
contract or arrangement obligating it to deliver, transfer or relinquish
possession of the Airframe or any Engine or Propeller, or install any Engine or
Propeller or permit any Engine or Propeller to be installed, on any airframe
other than the Airframe, or create a Lien not permitted under the terms hereof.

          (b) Notwithstanding anything to the contrary contained in this Lease,
Lessee may merge or consolidate with any Affiliate of Lessee or sell, lease, or
otherwise dispose of all or substantially all of its assets to any Affiliate of
Lessee, PROVIDED (A) that the rights and powers of Lessor shall not be adversely
affected by such merger, consolidation, sale, lease, or other disposition and
that immediately after any such transaction no Event of Default shall have
occurred and be continuing, and, (B) that any Affiliate of Lessee which is to be
the surviving or acquiring corporation in such transaction (i) shall be a
corporation duly organized and validly existing under the laws of the United
States of America or a state thereof, or the District of Columbia, and a
"citizen of the United States of America" as defined in Section 40102 (a)(15) of
the Transportation Code', (ii) shall (unless Lessee is the surviving
corporation), by agreement in writing which shall be in form and substance
reasonably satisfactory to Lessor, expressly assume the due and punctual payment
of the Rent and other sums due and to become due under this Lease, and the due
and punctual performance and observance of all the covenants and provisions of
this Lease and each other Operative Document to which Lessee is a party, (iii)
shall not have a net worth subsequent to such action materially less than that
of Lessee prior to such action (taking into account any corporations whose net
worth is consolidated with such surviving corporation) and (C) that such
transaction shall not result in a material adverse effect with respect to the
assets, liabilities or operations of Lessee as consolidated in such survivor
corporation.

     20.3 Lessor covenants that, to the extent that any Lessor Liens exist or
interfere with Lessees peaceful and quiet

                                       66


enjoyment and use of the Aircraft, Lessor will use all reasonable efforts to
seek removal or discharge of such Liens.

Section 21. NOTICES.

          All notices required under the terms and provisions hereof shall be in
writing, shall be effective on the earlier of the date such notice is actually
received or five (5) days after mailing by Certified Mail - Return Receipt
Requested confirmed on the date of mailing, shall be given by hand delivery, by
overnight delivery service (with such delivery service's delivery records
constituting proof of delivery), by telex or telecopy (with the answerback
constituting proof of receipt), or by any other electronic transmission which
produces a written record showing receipt by the addressee, and shall be
addressed as provided below or to such other address as any such party shall
designate by notice to each other such party as provided below:

     (a)  If to Lessor:

          Lambert Leasing, Inc.
          21300 Ridgetop Circle
          Sterling, Virginia 20166
          Attention: Treasurer

          Telecopy: (703) 406-7309

     (b)  If to Lessee:

          Chautauqua Airlines, Inc.
          2500 South High School Road
          Indianapolis, Indiana 46251
          Attention: President

          Telecopy: (317) 484-6040

     with a copy to:

          Glenn W. Sturm, Esq.
          Nelson, Mullins, Riley and Scarborough
          400 Colony Square, Suite
          2200 1201 Peachtree Street
          Atlanta, Georgia 30361

          Telecopy: (404) 817-6050

Section 22. SURVIVAL OF COVENANTS: SEVERABILITY.

                                       67


          Any provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction be ineffective to the extent of
such prohibition or unenforceability without affecting or invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If one or more Sections or clauses contained in this Lease
or in any supplement or any part hereof or thereof is held by any court of law
to be invalid, this Lease and all supplements thereto shall be construed as if
such invalid clause or clauses or Section or Sections or part or parts thereof
had not been contained herein or therein. To the extent permitted by Applicable
Law, Lessee hereby waives any provision of law which renders any provision
hereof prohibited or unenforceable in any respect.

          Any other provisions contained in this Lease to the contrary
notwithstanding, it is hereby agreed that the provisions of SECTIONS 14. 15 AND
19.hereof shall survive the termination of this Lease to the extent required
thereby for their full and complete performance.

Section 23. ENTIRE AGREEMENT, TITLES.

          This Lease, including all appendices, annexes, exhibits, schedules,
Lease Supplement No. 1, and the other Sublessee Documents, constitute the entire
agreement between the parties. No term or provision of this Lease may be
changed, waived, discharged, amended or terminated except by a written agreement
signed by both parties hereto. The titles of the Sections and other headings in
this Lease, and the table of contents are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions
hereof, and all reference herein to numbered sections unless otherwise indicated
are to Sections of this Lease.

Section 24. NOTICES OF EVENTS.

          Lessee shall promptly notify Lessor at the address shown in
SECTION 21, in writing of any: (1) material accident connected with the use,
operation or malfunction of the Aircraft, including in such report the time,
place and nature of the accident, the damage caused to property, the names and
addresses of persons injured and of witnesses, and such other information as
may be pertinent to any such party's investigation of such accident, (2) Default
or Event of Default, (3) attachment, tax Lien, other Lien or other judicial
process other than Permitted Liens, that has attached to the knowledge of Lessee
to the Aircraft or any part

                                       68


thereof, or (4) its intention to operate the Aircraft in any other country other
than the United States and Canada.

Section 25. EXECUTION AND COUNTERPARTS.

     This Lease and Supplements hereto may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
counterparts, shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same Lease or Supplement
hereto. To the extent, if any, the counterpart of this Lease or Supplement
hereto containing the receipt therefor executed by Agent on the signature page
hereof constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no other
counterpart of this Lease or any Supplement hereto constitutes chattel paper (as
so defined), and no security interest in this Lease or any Supplement hereto may
be created by transfer or possession of any counterpart hereof.

Section 26. CONFIDENTIALITY.

     Lessor and Lessee agree that all negotiations, discussions, correspondence,
memoranda and other documents related to this Lease which are not required to
be filed publicly pursuant to this Lease or by any Applicable Law shall remain
and are intended to be confidential, and each of Lessor and Lessee agrees not to
disclose such information to any Person except to Affiliates and their
respective directors, officers; employees and representatives or advisors
(including their attorneys and accountants and the Vice President-USAir Express
Division of USAir Group, Inc.) who have a need to know in the general conduct of
Lessor's or Lessee's or such Affiliates's business and agree to keep such
information confidential, and except when advisable or required by any rule,
regulation or order of any Governmental Body or any filing requirements relating
thereto, or as compelled by any litigation or investigation or as required to
enforce the terms of this Agreement or as may be required by Lessee in
connection with any corporate transaction contemplated by Lessee or an
Affiliate.

Section 27. COVENANT OF QUIET ENJOYMENT.

     Lessor covenants and agrees with Lessee that so long as no Default or Event
of Default has occurred and is continuing hereunder, Lessee may possess and use
the Aircraft in accordance with the terms and conditions of this Lease without
disturbance or hindrance of its peaceful and quiet enjoyment during the Term of
this Lease.

                                       69


Section 28. GOVERNING LAW: SUBMISSION TO JURISDICTION.

     This Lease shall constitute an agreement of lease, and nothing herein shall
be construed as conveying to Lessee any right, title or interest in the Aircraft
except as a Lessee only. This Lease is being delivered in Virginia and shall in
all respects be governed by, and construed in accordance with, the internal laws
of the Commonwealth of Virginia, including all matters of construction, validity
and performance in accordance with Section 44108 (C) of the Transportation Code.
If Lessor or any other Person commences a suit in any other jurisdiction, the
parties agree that this Lease shall be construed in accordance with the internal
laws of Virginia without reference to such other jurisdiction's choice of law
doctrines, including its conflict of laws.

     LESSEE (A) HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY FEDERAL COURT IN THE COMMONWEALTH OF VIRGINIA IN EACH CASE FOR THE PURPOSES
OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS LEASE, THE LESSEE
DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF, AND (B) TO THE EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF
MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS INCONVENIENT OR OTHERWISE IMPROPER, OR THAT ANY
OF THE ABOVE-MENTIONED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE
ENFORCED IN OR BY SUCH COURTS. FINAL JUDGMENT AGAINST LESSEE IN ANY SUCH SUIT
AFTER ALL APPEALS BY LESSEE HAVE BEEN EXHAUSTED SHALL BE CONCLUSIVE, AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT, A CERTIFIED OR TRUE
COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY
INDEBTEDNESS OR LIABILITY OF LESSEE THEREIN DESCRIBED.

                                       70


                                     ANNEX I
                                       TO
                                 LEASE AGREEMENT

                                   DEFINITIONS

     The following terms shall have the following meanings for all purposes of
the Lease Agreement unless otherwise defined or the context thereof shall
otherwise require. In the case of any conflict between the provisions of these
definitions and the provisions of the main body of such document, the provisions
of the main body of such document shall control the construction of such
document.

     Unless the context otherwise requires, (i) references to agreements shall
be deemed to mean and include such agreements as the same may be amended and
supplemented from time to time, (ii) references to parties to agreements shall
be deemed to include the successors and permitted assigns of such parties, and
(iii) the definitions apply equally to both the singular and plural forms of
the terms defined.

          "ABATEMENT" - when used in relation to Rent, any abatement, reduction,
setoff, counterclaim, recoupment, defense or other right of Lessee against
Lessor or any other Person for any reason whatsoever.

          "ADDITIONAL INSUREDS" - as defined in Section 13.3 (a) of the Lease.

          "AFFILIATE" - of any Person - any other Person directly or indirectly
controlling, controlled by, or under common control with such Person; PROVIDED
that, as long as Lessee is owned by Guarantee Reassurance Corporation,
"Affiliate" in respect of Lessee shall mean only Guarantee Reassurance
Corporation.

          "AIRCRAFT" - the Airframe delivered and leased under the Lease
together with the two (2) Engines and the two (2) Propellers described in the
Lease Supplement No. 1 executed and delivered with respect to the Airframe (or
any Replacement Engine or Replacement Propeller) whether or not any of such
initial or substituted Engines and Propellers may from time to time be installed
on the Airframe or may be installed on any other airframe and all logs,

                                        1


manuals and other records relating to such aircraft, and all substitutions,
replacements and renewals far any and all thereof.

          "AIRCRAFT BASE" - the Lessee's operational base or the operational
base of the Aircraft as specified in Lease Supplement No. 1.

          "AIRFRAME" - (i) the used Saab-Fairchild 340A commercial aircraft,
(except Engines or Propellers or engines or propellers from time to time
installed thereon), leased under the Lease by Lessor to Lessee pursuant to the
Lease, with manufacturer's serial number as set forth in Lease Supplement No. 1,
(ii) any and all Parts so long as the same are incorporated or installed in or
attached or belonging to such Airframe, and any and all Parts removed from the
Airframe of such Aircraft so long as title thereto and ownership thereof remains
vested in Lessor in accordance with the Lease; and (iii) insofar as legal title
thereto and ownership thereof is from time to time vested in Lessor, all
substitutions, replacements or renewals from time made in or to such Airframe or
to any of the items referred to in clauses (i) and (ii) above or to any part
thereof as required or permitted under the Lease.

          "AIRWORTHINESS CERTIFICATE" - the Standard Airworthiness Certificate
on FAA AC Form 8100-2 issued in respect of the Aircraft by the FAA under the
pertinent part of the FAR.

          "APPLICATION LAW" - all applicable laws, rules, regulations, decrees,
injunctions, orders or judgments of any Governmental Body, now or hereafter in
effect.

          "APPOINTMENT FOR REGISTRATION" - an Application for Aircraft
Registration of an Aircraft on FAA AC Form 8050-1, or such other form as may be
approved by the FAA on the Delivery Date of the Aircraft (or any relevant
earlier date).

          "APPLICATION OF AUTHORIZED REPRESENTATIVE" - the appointment of
Authorized Representative by Lessee.

          "AUTHORIZED REPRESENTATIVE" - the Person appointed by the Lessee
pursuant the Lease as its agent to accept delivery of the Aircraft.

          "BANKRUPTCY CODE" - the Bankruptcy Reform Act of 1994, as amended.

          "BASE RATE" - the rate of interest published from tame to time in
Federal Reserve statistical release H.15(19) "Selected Interest Rates" as the
"Bank prime loan" rate. Any change in the Base Rate shall take effect on the day
specified in the public announcement of such change.

                                        2


          "BASE RENT" - the rent payable for the Aircraft pursuant to Section 9
of the Lease in the amount set forth in Lease Supplement No. 1 and the Lease
Rent Schedule.

          "BASE RENT PAYMENT DATE" - the same day of each full period as the
First Base Rent Payment Date during the Term, as more particularly set forth in
Section 9 of the Lease and Lease Supplement No. 1 and the Lease Rent Schedule.

          "BILLS OF SALE" - the FAA Bill of Sale and the Warranty Bill of Sale
for the Aircraft.

          "BUSINESS DAY" - any day (other than a Saturday or Sunday) on which
commercial banking institutions in New York, New York, or in any city in any
state or country to which Lessee is directed to make any payment under the
Lease, are generally open for business.

          "CHANGE IN LAW" - any change in any treaty, convention, law or
regulation or in the interpretation thereof by any governmental or regulatory
agency charged with the administration or interpretation thereof, or the
enactment of any law or regulation.

          "CODE" - the Internal Revenue Code of 1986, as amended, and any
successor statute then in effect.

          "COVERED PERSON" - as defined in Section 13.3(b)(7) of the Lease.

          "DEFAULT" - any event or occurrence which with the passing of time or
the giving of notice, or both, shall constitute an Event of Default under the
Lease.

          "DELIVERY DATE" - the date of Lease Supplement No. 1 describing the
Aircraft, which date shall be the date the Aircraft is delivered to, and
accepted by Lessee pursuant to the Lease as such date is set forth in the Lease
Supplement No. 1.

          "DEPARTMENT OF TRANSPORTATION" AND "DOT" - the United States
Department of Transportation or any successor thereto.

          "DOLLARS" and "$" - immediately available and freely transferable
lawful money of the United States of America.

         "DOWTY" - Dowty Rotol Limited, a limited liability company organized
under the laws of the United Kingdom.

                                        3


          "ECMP" - An agreement between General Electric Company and Lessee for
the Engine Care Maintenance Plan for Engines, reasonably acceptable to Lessor.

          "ENGINE" - with respect to an Aircraft - (i) each of the two (2)
General Electric Model CT7-5A engines installed on the Aircraft on the Delivery
Date, listed by manufacturer's serial numbers in Lease Supplement No. 1, whether
or not from time to time thereafter installed on the Airframe of the Aircraft or
any other airframe; (ii) any Replacement Engine; (iii) any and all Parts
incorporated or installed in or attached or belonging thereto and any and all
Parts removed therefrom so long as title thereto remains vested in Lessor in
accordance with the Lease after removal from such Engine; and (iv) insofar as
legal title thereto and ownership thereof is from time to time vested in Lessor,
all substitutions, replacements or renewals from time made in or to such Engine
or to any of the items referred to in clauses (i), (ii) and (iii) above or to
any part thereof as required or permitted under the Lease. Except as otherwise
set forth in the Lease, at such time as a Replacement Engine is so substituted,
such replaced Engine shall cease to be an Engine under the Lease. The term
"Engines" means, if the context so requires, as of any date of determination,
all Engines then leased under the Lease.

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

          "EVENT OF DEFAULT" - the term "Event of Default" shall have the
meaning specifically set forth in Section 18 of the Lease.

          "EVENT OF LOSS" - as defined in Section 12.2 of the Lease.

          "EXCEPTED PAYMENT" - any payment under insurance maintained by Lessor
with respect to the Aircraft and not required by Section 10 of the Lease, or
maintained under liability insurance policies to or for the benefit of Lessor on
account of any loss suffered by Lessor, and any interest or late charge thereon.

          "EXCEPTED RIGHTS" - The right of Lessor to demand, collect, sue for or
otherwise enforce or exercise its rights in respect of Excepted Payments;
PROVIDED, that such rights shall not include the exercise of any remedies other
than the right to sue for specified performance of any covenant to make an
Excepted Payment or to sue for damages or to enforce any judgment in respect of
the breach of such covenant.

          "FAA" - the United States Federal Aviation Administration or any
successor agency.

                                        4


          "FAA AIRCRAFT REGISTRY" - the registry maintained pursuant to the
Transportation Code for the registration of aircraft and the recordation of
instruments affecting interests in, among other things, aircraft and certain
engines and propellers.

          "FAA COUNSEL" - Crowe & Dunlevy or any other counsel specializing in
FAA filings and recordings, reasonably satisfactory to Lessor.

          "FAIR MARKET RENTAL Value" - as defined in Section 18.3 of the
Lease.

          "FAIR MARKET SALE VALUE" - as defined in Section 18.3 of the Lease.

          "FAR" - the Federal Aviation Regulations promulgated under the
Transportation Code and any successor provisions.

          "FEDERAL RESERVE BOARD" - the Board of Governors of the Federal
Reserve System of the United States of America or any successor agency or board
at the relevant time performing the functions of the Federal Reserve Board.

          "GAAP"- generally accepted accounting principles, in the United
States, consistently applied.

          "GE" - General Electric Company, a New York corporation, and its
permitted successors and assigns, in its capacity as manufacturer of the
Engines.

          "GENEVA CONVENTION" - the Geneva Convention on the International
Recognition of Rights in Aircraft, opened for signature in June of 1948.

          "GOVERNMENTAL BODY" - any federal, state, municipal or other
governmental division, subdivision, department, commission, board, bureau,
court, legislature, agency, instrumentality or authority of any country
including, without limitation, the United States of America, domestic or, to the
extent binding under federal law on any Person or the Aircraft, international or
transnational.

          "IMPOSITION" - as defined in Section 15.1 of the Lease.

          "INDEMNIFIED PERSON"- Lessor, its Affiliates, successors, permitted
assigns, officers, directors, employees and agents.

          "INSURANCE ENDORSEMENTS" - the Insurance Endorsements in the form
attached as Exhibit B to the Lease to be provided by the Lessee.

                                        5


          "LAMBERT LEASING, INC." or "LAMBERT" - Lambert Leasing, Inc., a
Delaware corporation and its successors and permitted assigns, as Lessor under
the Lease.

          "LEASE" - Aircraft Lease Agreement No. 2 dated as of March 15, 1995
between Chautauqua Airlines, Inc., as Lessee, and Lambert Leasing, Inc.,
as Lessor, to which this Annex I is attached and as amended or supplemented from
time to time pursuant to the provisions thereof, including without limitation
Lease Supplement No. 1 and any Lease Supplement as may be executed
contemporaneously with or subsequent to the date of the Lease.

          "LEASE RENT SCHEDULE" - Lease Rent Schedule No. 1 dated March ___,
1995, entered into between Lessor Leasing, Inc., as Lessor, and Chautauqua
Airlines, Inc., as Lessee, setting forth Base Rent axed payment terms,
Stipulated Loss Values and other financial information.

          "LEASE SUPPLEMENT" - any supplement to the Lease, entered into between
Lessor and any Lessee for the purpose of leasing the Aircraft or any Replacement
Engine or Replacement Propeller under the Lease, including without limitation
any amendment thereto entered into subsequent to the Delivery Date.

          "LEASE SUPPLEMENT NO. 1" - Lease Supplement No. 1 dated March ___,
1995 in the form of Exhibit A to the Lease, entered into between Lessor and
Lessee for the purpose of leasing the Aircraft under the Lease, including
without limitation any amendment thereto entered into subsequent to the
Delivery Date.

          "LESSEE" - Chautauqua Airlines, Inc., a New York corporation, and an
air carrier engaged in interstate air transportation and certificated under
Section 49705 of the Transportation Code, and its successors and permitted
assigns.

          "LESSEE DOCUMENTS" - the "Lessee Documents" shall be the Lease, Lease
Supplement No. 1 and any subsequent Lease Supplements, and the Lease Rent
Schedule.

          "LESSOR" - Lambert Leasing, Inc., a Delaware corporation, as Lessor
under this Lease, and its permitted successors and assigns.

          "LESSOR LIENS" - Liens or a disposition of title affecting or in
respect of the Aircraft, the Airframe, any Engine, any Propeller, any Part, the
Lease, or any payment of Rent, arising as a result of (i) claims or judgments
against or affecting Lessor not related to the transactions contemplated or
expressly permitted by the Operative Documents or not indemnified against by
Lessee; (ii) acts or omissions of Lessor not related to the transactions

                                        6


contemplated or expressly permitted by the Operative Documents or not
indemnified against by Lessee; or (iii) claims against Lessor arising out of the
voluntary transfer by Lessor of its interest in the Aircraft, other than (A) the
transfer itself (if permitted by the Operative Documents), (B) claims
indemnified against by Lessee, and (C) transfers as a result of an Event of
Loss, Event of Default or exercise of a purchase option by Lessee; unless such
breach is the result of Lessor's failure to comply with any of Lessor's
obligations under the Operative Documents, or not indemnified against by Lessee.

          "LIABILITIES" - as defined in Section 14.1 of the Lease.

          "LIEN" - as applied to the property or assets (or the income or
profits therefrom) of any Person, means (in each case, whether the same is
consensual or non-consensual or arises by contract, operation of law, legal
process or otherwise) any mortgage, lien, pledge, attachment, levy, lease,
charge, conditional sale, inscription on a public record, adverse claim or any
other type of security interest or encumbrance of any kind in respect of any
property of such Person, or upon the income or profits therefrom.

          "LOSS PAYEE" - as defined in Section 13(a) of the Lease.

          "MAINTENANCE PROGRAM" - Lessee's or its Affiliate's FAA approved
maintenance program in effect, from time to time, with respect to the Aircraft.

          "MANUFACTURER" - Saab Aircraft AB, a limited liability company
organized under the laws of the Kingdom of Sweden, and its successors and
permitted assigns.

          "MATERIALLY ADVERSE EFFECT" - (i) with respect to any Person, a
materially adverse effect on such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, (ii) with
respect to any contract or any other obligation (other than the Lease or any of
the other Operative Documents), a materially adverse effect, as to any party
thereto, upon the binding nature, validity or enforceability thereof, and (iii)
with respect to the Operative Documents an adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability thereof as
obligations of Lessor.

          "OFFICER'S CERTIFICATE" - with respect to any corporation or other
entity, a certificate of a Responsible officer of such corporation or entity.

                                        7


          "OPERATIVE DOCUMENTS" - the Lessee Documents to which Lessor is a
party.

          "OVERDUE RATE" - The Base Rate plus four (4) percent per annum, or
such lesser rate as may represent the maximum rate of interest permitted by
Applicable Law.

          "PARTS" - any and all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature,
(other than complete Engines or engines and Propellers or propellers), which may
from time to time be incorporated or installed in or attached to the Airframe,
any Engine or any Propeller.

          "PERMITTED LIENS" - as defined in Section 10.1 of the Lease.

          "PERSON" - any individual, corporation, partnership, joint venture,-
association, joint-stock company, trust, unincorporated organization or
Governmental Body.

          "PROPELLER" - (i) each of the two (2) Dowty Rotol Model
R354/4-123-F/13 four-blade aircraft propellers installed on the Aircraft on
the Delivery Date and listed by manufacturer's serial numbers in the Lease
Supplement describing the Aircraft whether or not from time to time thereafter
installed on the Aircraft or any other aircraft, (ii) any Replacement Propeller;
(iii) any and all Parts incorporated or installed thereon or attached or
belonging thereto and any and all Parts removed from such Propeller so long as
title thereto remains vested in Lessor in accordance with the Lease after
removal from such Propeller; and (iv) insofar as legal title thereto and
ownership thereof is from time to time vested in Lessor, all substitutions,
replacements or renewals from time made in or to such Propeller or to any of
the items referred to in clauses (i), (ii) and (iii) above or to any part
thereof as required or permitted under the Lease. Except as otherwise set forth
in the Lease, at such time as a Replacement Propeller is so substituted, such
replaced Propeller shall cease to be a Propeller under the Lease. The term
"Propellers" means, if the context so requires, as of any date of
determination, all Propellers then leased under the Lease.

          "REGULATIONS" - FAR.

          "RENT" - Base Rent and Supplemental Rent.

          "RENT PAYMENT DATE" - each rent payment date set forth in the Lease
Supplement and the Lease Rent Schedule.

                                       8


          "REPLACEMENT ENGINE" - each General Electric Model CT7-9B aircraft
engine (or aircraft engine of the same manufacturer of the same or an improved
model) substituted for an Engine under the Lease, together with all Parts
relating to such engine.

          "REPLACEMENT PROPELLER" - each Dowty Rotol Model R354/4-123-F/13
four-blade aircraft propeller (or aircraft propeller of the same manufacturer of
the same or an improved model) substituted for any Propeller under the Lease,
together with all Parts relating to such propeller.

          "RESPONSIBLE OFFICER" - in the case of any corporation or other
entity, the Chairman of the Board of Directors, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary.

          "SAAB MRB MANUAL" - the most recent revision of the Saab 340
Maintenance Review Board Document.

          "SAAI" - Saab Aircraft of America, Inc., a Delaware corporation, and
its successors and permitted assigns.

          "STIPULATED LOSS VALUE" - with respect to the Aircraft as of any date
of computation, the Stipulated Loss Value for the Aircraft as specified in the
table in Annex 1 to Lease Rent Schedule (the "Stipulated Loss Value Table"), for
the immediately preceding Base Rent Payment Date, or if the date of computation
is before the first Base Rent Payment Date, using the first Base Rent Payment
Date, or if the date of computation is on a Base Rent Payment Date using such
Base Rent Payment Date.

          "SUPPLEMENTAL RENT" - all amounts Lessee agrees to pay as Supplemental
Rent and all amounts, liabilities and obligations (other than Base Rent) which
Lessee assumes or agrees to pay under the Lease or under any Lessee Document
including, without limitation, Stipulated Loss Value, indemnities, any interest
payable under the Lease or any Lessee Document, any insurance premium paid by
any Person in respect of insurance required to be carried by Lessee under the
Lease and damages for breach of any covenants, representations, or warranties of
Lessee under the Lease or under any other Lessee Document.

          "TAXES" or "TAX" - as defined in Section 15 of the Lease.

          "TERM" - the term of the Lease, as determined pursuant to Section 8 of
the Lease.

                                       9


          "TRANSPORTATION CODE" - Title 49 of the United States Code, as amended
from time to time, or any similar legislation of the United States enacted in
substitution or replacement thereof.

          "UNITED STATES GOVERNMENT" - the government of the United States of
America or any agency or instrumentality thereof, including, without limitation,
the FAA.

          "U.S. CERTIFICATED AIR CARRIER" - any Person (except the United States
Government) that is an air carrier domiciled in the United States of America and
is certificated under Section 44705 of the Transportation Code, or any successor
provision thereto.

          "U.S. PERSON" - "United States person": within the meaning of Section
7701 (a) (30) of the Code.

                                       10


NOTE TO EXHIBIT 10.17

The five additional Aircraft Lease Agreements are substantially identical in all
material respects to the filed Aircraft Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N35CQ                                            April, 1995              Lambert Leasing Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N43CQ                                            June, 1995               Lambert Leasing Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N121CQ                                          August, 1995              Lambert Leasing Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N19CQ                                           October, 1995             Lambert Leasing Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N40CQ                                            July, 1995               Lambert Leasing Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.17(A)

                                                                       EXHIBIT A
                                                                              TO
                                                  AIRCRAFT LEASE AGREEMENT N0. 2

                             LEASE SUPPLEMENT N0. 1

          LEASE SUPPLEMENT NO. 1, dated March__, 1995 ("Lease Supplement No. 1")
to Aircraft Lease Agreement No. 2 dated as of March 15, 1995 (the "Lease") by
and between CHAUTAUQUA AIRLINES, INC., as lessee ("Lessee"), and LAMBERT
LEASING, INC., as lessor ("Lessor").

                             I N T R O D U C T I O N

          WHEREAS, Lessor and Lessee have heretofore entered into the Lease
(defined terms therein being hereinafter used with the same meanings). The Lease
provides for the execution and delivery of a Lease Supplement for the purpose of
leasing the Aircraft under the Lease as and when delivered by Lessor to Lessee
in accordance with the terms thereof; and

          WHEREAS, a counterpart of the Lease, with this Lease Supplement No. 1
attached thereto, is being filed for recordation with the FAA Aircraft Registry
as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged Lessor and Lessee hereby agree as follows:

A. THE AIRCRAFT. Lessee hereby confirms to Lessor that Lessee has accepted
the Aircraft and each Engine and Propeller described below for all purposes
hereof and of the Lease as being airworthy, in accordance with specifications,
in good working order and repair and without defect in condition, design,
operation or fitness for use, whether or not discoverable by Lessee as of the
date hereof; PROVIDED, HOWEVER, that nothing contained herein or in the Lease
diminishes or affects any right Lessor or Lessee may have with respect to the
Aircraft against the Manufacturer, GE, Dowty, any vendor or any subcontractor or
supplier thereof:

                                        1




AIRFRAME
MANUFACTURER         MODEL       SERIAL NUMBER          U.S. REG. NO.
                                               
Saab-Fairchild       340A        340A-006               N360CA


INSTALLED
ENGINES                                                 RATED
MANUFACTURER         MODEL       SERIAL NUMBER          TAKEOFF H/P
                                               
General              CT7-5A      GE-E-367-122 (left)    Each of which
Electric                         GE-E--367-141 (right)  Engines has 750
                                                        or more rated
                                                        take off
                                                        horsepower or
                                                        the equivalent
                                                        thereof.


INSTALLED
PROPELLERS                                              RATED TAKEOFF
MANUFACTURER         MODEL       SERIAL NUMBER          SHAFT H/P
                                               
Dowty Rotol          R354/4-     DRG/7827/82 (left)     Each of which
                     123-F/13    DRG/1727/84 (right)    propellers is
                                                        capable of
                                                        absorbing 750
                                                        or more rated
                                                        take off shaft
                                                        horsepower.


B. STIPULATED LOSS VALUE. Lessee hereby agrees to pay in accordance with and
when required by the Lease Stipulated Loss Value payments in the amounts set
forth in Annex 1 to the Lease Rent Schedule and incorporated herein by
reference.

C. REPRESENTATIONS BY LESSEE. Lessee hereby represents and warrants to Lessor
that on the above date:

(1) The representations and warranties of Lessee set forth in the Lease are true
    and correct in all material respects as though made on the date above;

(2) Lessee has satisfied or complied with all requirements in the Lease, to be
    completed by it on or prior to the date hereof;

(3) No Default or Event of Default has occurred and is continuing on the date
    above; and

                                        2

(4) Lessee has obtained, and there are in full force and effect, such insurance
    policies with respect to the Aircraft, as are required to be obtained under
    the terms of the Lease.

D.  DELIVERY DATE:             March___, 1995

E.  TERM:                      The Term shall commence on the
                               Delivery Date and expire on March
                               ___, 2005, unless terminated earlier
                               pursuant to and in accordance with
                               the Lease.

F.  BASE RENT:                 Lessee agrees to pay Lessor, Base
                               Rent monthly in arrears, in the
                               amounts and on the dates, as set
                               forth in the Lease Rent Schedule.

G.  FIRST BASE RENT            April___, 1995
    PAYMENT DATE:

H.  BASE RENT                  Base Rent during the Term shall be
    PAYMENT DATE:              paid on the same day of each month as
                               the day of the month of the First
                               Base Rent Payment Date.

I.  AIR CRAFT BASE:            Indianapolis, Indiana or Akron,
                               Ohio.

J.  DELIVERY SITE:             St. Louis, Missouri

K.  COUNTERPARTS:              This Lease Supplement No. 1 may be
                               executed in any number of
                               counterparts and by the parties
                               hereto on separate counterparts,
                               each of which counterparts, shall
                               for all purposes be deemed an
                               original, and all such counterparts
                               shall together constitute but one
                               and the same Lease Supplement No. 1.

L.  REFERENCE:                 All the terms and provisions of the
                               Lease are hereby incorporated by

                                        3


                               reference in this Lease Supplement
                               No. 1 to the same extent as if fully
                               set forth herein.

          IN WITNESS WHEREOF. Lessor and Lessee have caused this Lease
Supplement No. 1 to be duly executed by their authorized officers as of the day
and year first above written.

                               LAMBERT LEASING, INC.,
                               as Lessor

                               By:  /s/ Gena H. Laurent
                                   ---------------------------------
                                   Gena H. Laurent
                                   Vice President

                               By:  /s/ Bengt Nilsson
                                   ---------------------------------
                                   Bengt Nilsson
                                   Treasurer and Credit Manager

                               CHAUTAUQUA AIRLINES, INC.,
                               as Lessee

                               By:  /s/ Timothy L. Coon
                                   ---------------------------------
                                   Timothy L. Coon
                                   Senior Vice President

                                        4


                                                                       EXHIBIT B
                                                                              TO
                                                  AIRCRAFT LEASE AGREEMENT N0. 2

                             INSURANCE ENDORSEMENTS

          It is understood and agreed that the Saab Fairchild 340A Aircraft,
MSN-340A-006, U.S. Registration No. N360CA with two General Electric CT7-5A
Engines, serial nos. GE-E-367-122 and GE-E-367-141, respectively, and two Dowty
Rotol R354/4-123-F/13 Propellers, serial nos. DRG/7827/82 and DRG/1727/84,
respectively, is leased by Lambert Leasing, Inc., a Delaware corporation, as
lessor ("Lessor"), under Lease Agreement No. 2 dated as of March 15, 1995 (the
"Lease") to Chautauqua Airlines, Inc., as Lessee ("Named Insured").

          As provided in Part B below, Lessor and (until at least December 22,
1996) Security Pacific Equipment Leasing, Inc., as their interests may appear,
shall be Additional Insureds with respect to each policy of liability insurance
to which these endorsements are attached, and Lessor shall be the Loss Payee
with respect to each policy of "all risks" insurance to which these endorsements
are attached. With respect to the interests of each Additional Insured or Loss
Payee in and with respect to the Aircraft as defined in Section 2 of the Lease
(the "Subject Property") insured under each policy by the insurers listed in the
Schedule of Insurers attached as Annex 1 hereto (collectively, the "Company"),
the Company hereby agrees that each "all risks" 'policy includes the
endorsements in Part A below; each liability policy includes the endorsements in
Part B below; and all policies include the endorsements in Part C below:

A. LOSS PAYABLE ENDORSEMENTS (HULL POLICY)

          This "all risks" insurance is endorsed with respect to the Subject
Property, (A) to name Lessor as an additional insured, as its interests may
appear ("Additional Insured") and Lessor, as loss payee, as its interests may
appear ("Loss Payee").

1. Loss or damage, if any, to the Subject Property described in this policy to
   the extent of the Stipulated Loss Values set forth in the Stipulated Loss
   Value Table attached as Schedule 1 hereto shall be payable as follows:

                                        1


   (i) loss or damage with respect to the Subject Property which does not
       constitute an Event of Loss (as defined in the Lease) shall be payable
       in United States Dollars solely to Lessor; except loss or damage with
       respect to the Aircraft of $ 100,000.00 or less shall be payable to Named
       Insured, unless prior to any loss or damage, Lessor notifies the Company
       that an Event of Default exists, in which case such amounts shall be
       payable to Lessor; and

   (ii) loss or damage with respect to the Subject Property described in this
       policy which constitutes an Event of Loss shall be payable by
       distributing (x) the amount set forth in Schedule 1 hereto ("SLV Amount^)
       solely to Lessor, and (y) any remaining amounts solely to Named insured.

2. Subject to paragraph 4 hereof, the insurance under this policy as to the
   interest only of the Loss Payee shall not be impaired in any way (i) by any
   action or inaction by Lessee and shall insure the interest of the Loss Payee
   regardless of any breach or violation by Lessee or any other additional
   insured of any warranty, declaration or condition contained in such policies,
   and if available at commercially reasonable cost such coverages shall be
   provided otherwise than by way of endorsement with Lloyd's Form AVN67A;
   PROVIDED HOWEVER, that with respect to secretion, embezzlement or conversion
   by Lessee, no coverage shall apply to any Person which is a willful party to
   such secretion, embezzlement or conversion, or (ii) because of a subjection
   of the Aircraft to any condition, use or operation not permitted by the
   policy or (iii) because of any false statement with respect to the policy by
   Lessee or its employees, agents or representatives, or any other Person
   except the Loss Payee (and then such policy shall be impaired only as to such
   Person), whether occurring before or after the attachment of this
   endorsement, or whether before or after the loss.

3. If the Named Insured fails to pay any premium or additional premium which
   shall be or become due under the terns of this policy, the Company agrees to
   give written notice to each Loss Payee of such nonpayment of premium and this
   policy shall continue in full force and effect if the Loss Payee when so
   notified in writing by the Company of the failure of the Named Insured to pay
   such premium, pays or causes to be paid the premium within thirty (30) days
   following receipt of the Company's written notice (seven (7) days, or such
   shorter period as may from time to time be the longest period obtainable in
   the industry, in the case of any war risk and allied perils coverage). If no
   Loss Payee pays said premium or additional premium, the rights of Agent,
   Lessor, Lessee or

                                        2


   the Loss Payee under this Loss Payable Endorsement may be terminated by the
   Company thirty (30) days after receipt of said written notice by the Loss
   Payee (seven (7) days, or such shorter period as may from time to time be the
   longest period obtainable in the industry, in the case of any war risk and
   allied perils coverage).

4. If the Company elects to cancel this policy in whole or in part for
   nonpayment of premium or for any other reason, the Company will forward a
   copy of the cancellation notice to the Loss Payee at its office specified
   hereinafter concurrently with the sending of notice to the Named Insured but
   in such case this policy shall continue in force for the benefit of the Loss
   Payee for thirty (30) days (seven (7) days, or such shorter period as may
   from time to time be the longest period obtainable in the industry, in the
   case of any war risk and allied perils coverage) after written notice of such
   cancellation is received by the Loss Payee by a copy sent by certified or
   registered mail, return receipt requested. In no event, as to the interest
   only of the Loss Payee, shall cancellation, lapse or adverse material change
   of any insurance under this policy be effected at the request of the Named
   Insured before thirty (30) days (seven (7) days, or such shorter period as
   may from time to time be the longest period obtainable in the industry, in
   the case of any war risk and allied perils coverage) after written notice of
   request for cancellation shall have been received by the Loss Payee by a copy
   sent by certified or registered mail, return receipt requested. If this
   policy is cancelled, the unearned premium shall be paid to the Loss Payee
   that has advanced such premium.

5. The coverage provided herein is primary without contribution from any other
   insurance which might be available to the Loss Payee.

6. Whenever the Company pays to Lessor or Named Insured any sum representing a
   total loss to the Subject Property insured under this policy, and claims that
   as to the Named Insured, no liability therefor exists, the Company, at its
   option, may pay to Lessor or Named Insured, as the case may be, the
   Stipulated Loss Value (as such term is defined in the Lease and the Schedules
   attached hereto, but in no event to exceed the Agreed Inured Value as stated
   in the policy), and the Company shall thereupon be subrogated to and receive
   a full assignment and transfer, without recourse, of said obligation and the
   security held as collateral therefor; but shall not exercise such subrogation
   and assignment right until each Additional Insured has recovered in full the
   amount of its respective claims against the Named Insured.

                                        3


7. The coverage granted under this policy shall continue in full force and
   effect as to the interest of the Loss Payee if the Loss Payee agrees to pay
   the premium therefor, for a period of thirty (30) days after expiration of
   said policy unless an acceptable policy in renewal thereof with loss
   thereunder payable in accordance with the terms of this Loss Payable
   Endorsement shall have been issued by an insurance company acceptable to
   Lessor.

8. Should this policy be continued for the term hereof for the benefit of the
   Loss Payee (with all incidents of ownership of the policy), Paragraphs 2, 6
   and 7 of Part A of this Loss Payable Endorsement shall no longer apply to the
   Loss Payee; PROVIDED, NEVERTHELESS, all privileges and endorsements which, by
   reason of the printed conditions of this policy, are or may be necessary to
   maintain the validity of the contract are hereby granted for a period of
   thirty (30) days, and all notices likewise required to be given to the
   company by Named Insured are hereby waived for a period of thirty (30) days
   with the exception of requirements applying at the time of or subsequent to a
   loss.

9. The Company waives any rights of subrogation against the Loss Payee, to the
   same extent as Lessee has waived its right against the Loss Payee, except
   with respect to the gross negligence and/or willful misconduct of the Loss
   Payee; PROVIDED, that with respect to liability and property damage coverages
   hereunder such waiver shall not operate to prejudice the Company's rights of
   recourse against Saab Aircraft AB and/or Saab Aircraft of America, Inc.,
   and/or any subsidiary thereof and General Electric Company and/or any
   subsidiary thereof, as manufacturers, repairers, suppliers or servicing
   agents (other than financial services) where such rights of recourse would
   have existed had such waiver not been given; and PROVIDED, FURTHER, that the
   exercise by the Company of rights of subrogation derived from rights retained
   by Named Insured shall not, in any way, delay payment of any claim that would
   otherwise be payable by the Company but for the existence of rights of
   subrogation derived from rights retained by Named Insured.

B. LIABILITY POLICY ENDORSEMENTS

          This liability insurance policy is endorsed, with respect to the
Subject Property:

(A) To name Lessor and (until at least December 22, 1996) Security Pacific
    Equipment Leasing, Inc. as additional insureds as

                                        4


    their respective interests may appear ("Additional Insureds") and shall
    cover (i) each of the shareholders of each Additional insured, and (ii)
    officers, directors, employees, agents and representatives of each
    Additional insured (with respect to each Additional Insured, collectively,
    "Covered Persons");

(B) To provide that if this policy is cancelled for any reason whatsoever, or
    any substantial change is made in the coverage which affects the interest of
    the Additional Insureds and Covered Persons, or if such insurance is
    cancelled for nonpayment of premium or allowed to lapse, such cancellation,
    change or lapse shall not be effective as to the Additional Insureds and
    Covered Persons thirty (30) days (seven (7) days, or such shorter period as
    may from time to time be the longest period obtainable in the industry, in
    the case of war risk and allied perils coverage) after receipt by such
    Additional Insureds of written notice from the Company sent by certified or
    registered mail, return receipt requested, of such cancellation, change or
    lapse;

(C) To provide that if the Named Insured fails to pay any premium or additional
    premium which shall be or become due under the terms of this policy, the
    Company agrees to give written notice to each Additional Insured of such
    nonpayment of premium and this policy shall continue in full force and
    effect if any one or more of the Additional Insureds when so notified in
    writing by the Company of the failure of the Named Insured to pay such
    premium, pays or causes to be paid the premium due within thirty (30) days
    following receipt of the Company's written notice. If no Additional Insured
    pays said premium or additional premium, the rights of Lessor and other
    Additional Insureds and Covered Persons under this Liability Endorsement may
    be terminated by the Company thirty (30) days after receipt of said written
    notice by each Additional Insured;

(D) To provide that the Coverage granted under this policy shall continue in
    full force and effect as to the interest of each Additional Insured and
    Covered Person if any Additional Insured agrees to pay the premium therefor,
    for a period of thirty (30) days after expiration of said policy unless an
    acceptable policy in renewal thereof shall have been issued by an insurance
    company acceptable to Lessor;

(E) To provide that in respect of the interest of the Additional Insureds and
    Covered Persons, (i) this policy shall not be invalidated by any action of
    Named Insured and shall insure the respective interests of the Additional
    Insureds and Covered Persons named and covered under this Endorsement, as

                                        5


    they appear, regardless of any breach or violation by Named Insured of any
    warranties, declarations or conditions contained in this policy or in the
    application therefor, if any, and (ii) severability of interest is included,
    PROVIDED nothing herein shall operate to increase the limits of liability
    and that coverage provided herein is primary without contribution from any
    other insurance which might be available to the Additional Insureds, and
    (iii) this insurance shall provide the same protection to each insured
    hereunder as would have been available had this policy been issued
    separately to each insured, except that in no event shall the Company's
    total liability exceed $100,000,000.00;

(F) the Company waives any rights of subrogation against any Additional Insured
    and the Covered Persons of such Additional Insured to the same extent as
    Lessee has waived its right against such Additional Insured and the Covered
    Persons of such Additional insured, except with respect to the gross
    negligence and/or willful misconduct of such party; PROVIDED, that with
    respect to liability and property damage coverages hereunder such waiver
    shall not operate to prejudice the Company's rights of recourse against Saab
    Aircraft AB and/or Saab Aircraft of America, Inc., and/or any subsidiary
    thereof as manufacturers, repairers, suppliers or servicing agents (other
    than financial services) where such rights of recourse would have existed
    had such waiver not been given, and PROVIDED, FURTHER, that the exercise by
    the Company of rights of subrogation derived from rights retained by Named
    Insured shall not, in any way, delay payment of any claim that would
    otherwise be payable by the Company but for the existence of rights of
    subrogation derived from rights retained by Named Insured; and

(G) to insure the Additional Insureds and the Covered Persons with respect to
    liability for matters which are the subject of Named Insured's obligations
    under the Lease and Lessee Documents to the extent such insurance is
    provided under this policy; and to provide that such Additional Insureds and
    Covered Persons are warranted to have no operational interest.

          Nothing in these Insurance Endorsements shall be deemed or construed
to be an agreement by the Company to insure the Manufacturer of the Aircraft,
Saab Aircraft AB, or the manufacturer of the engines, General Electric Company,
against claims arising out of product liability.

          C. NOTICES

                                        6


          All notices herein provided to be given by the Company to Lessor in
connection with this policy and these Endorsements shall be mailed to or
delivered to Lessor, Lambert Leasing, Inc., 21300 Ridgetop Circle, Sterling,
Virginia 20166, Attention: Vice President, Telecopy No. (703) 406-7309; and to
security Pacific Equipment Leasing, Inc. at Four Embarcadero Center, Suite 1200,
San Francisco, CA 94111, Attention: Equipment Management Unit #5824, Telecopy
No. (415) 765-7343.

                                        7


          Nothing herein contained shall be held to vary, alter, waive or extend
any of the terms, conditions, agreements or limitations of this policy, other
than as above stated.

          The insurance described herein is subject to the limitations,
conditions, definitions and exclusions of the policies.

                      [SEE ATTACHED "SCHEDULE OF INSURERS"]

                                    The Company

                               By
                                   -------------------------
                                   Authorized Representative

                                        8


                                                                         ANNEX 1
                                                                              TO
                                                          INSURANCE ENDORSEMENTS

                              SCHEDULE OF INSURERS

                                        9


                                                                      SCHEDULE 1
                                                                              TO
                                                          INSURANCE ENDORSEMENTS

                           STIPULATED LOSS VALUE TABLE

          The Stipulated Lose Value computed using the immediately preceding
Base Rent Payment Date, or if on a Base Rent Payment Date, computing using such
Base Rent Payment Date.




DATE                                            TOTAL
- ----                                            -----
                                             
[*]                                             [*]






- -------
* Confidential



                                       10


                                                                      SCHEDULE 1
                                                                              TO
                                                   AIRCRAFT LEASE AGREEMENT NO.2

                              CERTAIN PROCEEDINGS

Not applicable



                              Lease Rent Schedule




Date                     Payment Number                 Amount
- ----                     --------------                 ------
                                                  
[*]                           [*]                          [*]



- ------
* Confidential



NOTE TO EXHIBIT 10.17(a)

The five additional Lease Supplements No. 1 are substantially identical
in all material respects to the filed Lease Supplement No. 1 except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N35                                            April, 1995                Lambert Leasing, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N43                                            June, 1995                 Lambert Leasing, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N121CQ                                         August, 1995               Lambert Leasing, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N19CQ                                         October, 1995               Lambert Leasing, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N40CQ                                          July, 1995                 Lambert Leasing, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.19

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

                       AIRCRAFT SUBLEASE AGREEMENT N0. 8

                           dated as of March 1, 1996

                                    between

                            FAIRBROOK LEASING, INC.,
                                  as Sublessor,

                                      and

                           CHAUTAUQUA AIRLINES, INC.,
                                 as Sublessee.

                             One Saab 340A Aircraft
                         with General Electric Engines,
                             Dowty Rotol Propellers
                       Manufacturer's Serial No. 340A-123
                          U.S. Registration No. N123MQ
                           (being changed to N123CQ)

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

THIS AIRCRAFT SUBLEASE AGREEMENT N0. 8 IS SUBORDINATE TO THE AIRCRAFT LEASE
AGREEMENT DATED AS OF JULY 15, 1987 BETWEEN SUBLESSOR AS LESSEE AND WILMINGTON
TRUST COMPANY, AS OWNER TRUSTEE AND LESSOR. CERTAIN RIGHTS OF LESSOR UNDER SUCH
LEASE AGREEMENT AND IN THE AIRCRAFT COVERED THEREBY HAVE BEEN ASSIGNED TO, AND
ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF, MELLON FINANCIAL
CORPORATION SERVICES #3, UNDER THE LOAN AND SECURITY AGREEMENT DATED AS OF JULY
15, 1987, AS AMENDED. THIS AIRCRAFT SUBLEASE AGREEMENT NO. 8 HAS BEEN EXECUTED
IN COUNTERPARTS. TO THE EXTENT, IF ANY, THIS AIRCRAFT SUBLEASE AGREEMENT NO. 8
CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL
CODE AS IN EFFECT IN ANY APPLICABLE UNITED STATES JURISDICTION), NO SECURITY
INTEREST IN THIS AIRCRAFT SUBLEASE AGREEMENT NO. 8 MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED
COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY MELLON FINANCIAL
SERVICES CORPORATION #3 ON THE SIGNATURE PAGE HEREOF.



                                TABLE OF CONTENTS

                                                                                                           
Section 1.        DEFINITIONS.....................................................................................2

Section 2.        [RESERVED]......................................................................................2

Section 3.        DELIVERY........................................................................................2

Section 4.        ACCEPTANCE......................................................................................2

Section 5.        CERTAIN AGREEMENTS OF SUBLESSEE; SUBLESSOR'S REPRESENTATIONS AND WARRANTIES.....................2

Section 6.        CONDITIONS PRECEDENT TO DELIVERY AND ACCEPTANCE; LEGAL OPINION..................................5

Section 7.        REPRESENTATIONS AND WARRANTIES OF SUBLESSEE.....................................................7

Section 8.        TERM...........................................................................................10

Section 9.        RENT...........................................................................................10

Section 10.       INTEREST OF LESSOR: LIENS: NAMEPLATES..........................................................12

Section 11.       REGISTRATION, MAINTENANCE AND OPERATION; POSSESSION, ETC.......................................14

Section 12        RISK OF LOSS: EVENT OF LOSS AND CONDEMNATION...................................................23

Section 13.       INSURANCE......................................................................................31

Section 14.       INDEMNITY......................................................................................37

Section 15.       TAXES AGAINST LESSOR OR AIRCRAFT...............................................................40

Section 16.       FURTHER ASSURANCES, RECORDATION, TITLE, REGISTRATION...........................................47

Section 17.       INSPECTION, REPORTS, AUDITS....................................................................48
`
Section 18.       DEFAULTS, REMEDIES, DAMAGES....................................................................51

Section 19.       RETURN OF AIRCRAFTS, RECORDS, REPOSSESSION.....................................................60

Section 20.       ASSIGNMENT, SUB-SUBLEASE, SUBORDINATION........................................................67

Section 21.       NOTICES........................................................................................69

Section 22        SURVIVAL OF COVENANTS: SEVERABILITY............................................................70



                                        i


                                                                                                           
Section 23.       ENTIRE AGREEMENT, TITLES.......................................................................70

Section 24.       NOTICES OF EVENTS..............................................................................71

Section 25.       EXECUTION AND COUNTERPARTS.....................................................................71

Section 26.       CONFIDENTIALITY................................................................................71

Section 27.       COVENANT OF QUIET ENJOYMENT....................................................................72

Section 28.       SUBLESSOR'S RIGHT TO PERFORM FOR SUBLESSEE.....................................................72

Section 29.       GOVERNING LAW: SUBMISSION TO JURISDICTION......................................................72

Annex 1           Definitions

Exhibit A         Form of sublease supplement No.1

Exhibit B         Form of Insurance Endorsements

Schedule 1        Certain Proceedings



                                       ii


                       AIRCRAFT SUBLEASE AGREEMENT NO. 8

     THIS AIRCRAFT SUBLEASE AGREEMENT NO. 8 dated as of March 1, 1996
(hereinafter referred to as the "Sublease") is made by and between FAIRBROOK
LEASING, INC., a Delaware corporation with principal offices at 21300 Ridgetop
Circle, Sterling, Virginia 20166 (hereinafter referred to as "Sublessor"), and
CHAUTAUQUA AIRLINES, INC., a New York corporation with principal offices at 2500
South High School Road, Indianapolis, Indiana 46251 (hereinafter referred to as
"Sublessee").

                                    RECITALS

     WHEREAS, this Sublease relates to the one (1) used Saab 340A aircraft ("the
Aircraft") described in Sublease Supplement No. 1 attached hereto; and

     WHEREAS, Lessor, Sublessor and Lender are parties to a Participation
Agreement dated as of July 15, 1987 (the "Participation Agreement"), providing
for, INTER ALIA, the lease financing of the Aircraft; and

     WHEREAS, pursuant to the Lease, Lessor has leased the Aircraft to
Sublessor; and

     WHEREAS, this Sublease and a counterpart of Sublease Supplement No. 1
hereto will be filed for recordation with the Federal Aviation Administration as
one document;

     NOW, THEREFORE, in consideration of the foregoing premises and of other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, it is mutually agreed by and between Sublessor and Sublessee as
follows:

                              W I T N E S S E T H:

                             AGREEMENT TO SUBLEASE

     Sublessor hereby agrees to Sublease the Aircraft to Sublessee and Sublessee
hereby agrees to rent and hire the Aircraft from Sublessor subject to the terms
and conditions set forth herein.

                                        1


                              TERMS AND CONDITIONS

Section 1.  DEFINITIONS.

     Unless the context otherwise requires, the capitalized terms used herein
shall have the respective meanings assigned thereto in Annex I for all purposes
hereof (such definitions to be equally applicable to both the singular and the
plural forms of the terms defined).

Section 2.  [RESERVED].

Section 3.  DELIVERY.

     Delivery shall be made to Sublessee at Indianapolis, Indiana on the
Delivery Date or at such other date and place as shall be mutually agreed upon.
Tender of the Aircraft by Sublessor shall be to a Responsible Officer of
Sublessee or such other persons duly authorized and appointed by the President
or a Vice President of Sublessee.

Section 4.  ACCEPTANCE.

     At the time of delivery of the Aircraft, Sublessee, by and through its
President or one of its Vice Presidents or another duly appointed and
authorized representative, shall accept the Aircraft by executing Sublease
Supplement No. 1, and upon such execution, said. Sublease Supplement No. 1
shall be delivered immediately to Sublessor and an original counterpart of the
Sublease and Sublease Supplement No. 1 constituting chattel paper shall be
delivered immediately to Lender. The date of execution of Sublease Supplement
No. 1 shall be the "Delivery Date" as that term is used herein. Delivery and
acceptance of the Aircraft shall be conclusively deemed to have taken place and
shall become effective upon delivery of Sublease Supplement No. 1 to Sublessor
as of the date of such Sublease Supplement No. 1 and the rights and obligations
of each party hereto, including Sublessee's obligation to pay Rent under this
Sublease, shall become fully effective with respect to the Aircraft on that
date. Accordingly, the Aircraft shall be deemed to be in good condition without
defects, and Sublessee's execution of Sublease Supplement No. 1 shall, without
further act, irrevocably constitute acceptance by Sublessee of the Aircraft for
all purposes of this Sublease.

Section 5.  CERTAIN AGREEMENTS OF SUBLESSEE; SUBLESSOR'S REPRESENTATIONS AND
            WARRANTIES.

     SUBLESSEE ACKNOWLEDGES THAT NONE OF SUBLESSOR, LESSOR, OR LENDER IS A
MANUFACTURER OF THE AIRCRAFT OR A DEALER IN SIMILAR AIRCRAFT AND NONE OF THEM
HAS INSPECTED THE AIRCRAFT PRIOR TO

                                        2


DELIVERY TO AND ACCEPTANCE BY SUBLESSEE. SUBLESSEE (I) ACKNOWLEDGES AND AGREES
THAT THE AIRCRAFT IS A USED AIRCRAFT AND IS BEING DELIVERED BY SUBLESSOR TO
SUBLESSEE "AS IS" AND "WHERE IS" AND THAT NO CONDITION, WARRANTY OR
REPRESENTATION OF ANY KIND WHATSOEVER HAS BEEN OR IS GIVEN BY OR IS TO BE
IMPLIED ON THE PART OF SUBLESSOR, LESSOR OR LENDER IN RELATION TO THE AIRCRAFT
EXCEPT AS SPECIFICALLY PROVIDED IN THIS SUBLEASE, (II) HEREBY WAIVES AS BETWEEN
ITSELF AND SUBLESSOR, LESSOR, AND LENDER, ALL OF ITS RIGHTS, EXPRESS OR IMPLIED
(WHETHER STATUTORY OR OTHERWISE) AGAINST SUBLESSOR, LESSOR OR LENDER IN THE
AIRCRAFT EXCEPT AS SPECIFICALLY PROVIDED IN THIS SUBLEASE, RELATING TO (AND EACH
WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO) THE CAPACITY, AGE, QUALITY, DESCRIPTION, STATE,
CONDITION, VALUE, WORKMANSHIP, DESIGN, CONSTRUCTION, USE, OPERATION, PERFORMANCE
OR COMPLIANCE WITH SPECIFICATIONS THEREOF OR THE SUBLEASING THEREOF BY SUBLESSOR
TO SUBLESSEE OR TO THE MERCHANTABILITY OR SUITABILITY OF THE AIRCRAFT OR ITS
FITNESS FOR ANY USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART
THEREOF, OR AS TO ITS AIRWORTHINESS OR AS TO THE QUALITY OF THE MATERIALS OR
WORKMANSHIP WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, OR AS TO THE
ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, AND (III) AGREES
THAT ALL RISKS OF THE FOREGOING NATURE, WHETHER PATENT OR LATENT, ARE TO BE
BORNE BY SUBLESSEE OTHER THAN RISKS (A) RESULTING FROM THE WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF SUBLESSOR, LESSOR OR LENDER, OR ANY SUCCESSOR, ASSIGNEE,
DIRECTOR, OFFICER, LENDER OR EMPLOYEE OF EACH OF THEM (UNLESS SUCH WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE RESULTS FROM THE ACTS OR OMISSIONS OF SUBLESSEE
ON BEHALF OF SUBLESSOR, LESSOR OR LENDER), (B) WITH RESPECT TO THE AIRCRAFT, THE
AIRFRAME, ANY ENGINE OR PROPELLER, SO LONG AS NO DEFAULT OR EVENT OF DEFAULT
EXISTS, TO THE EXTENT ATTRIBUTABLE TO ACTS OR EVENTS (EXCEPT ACTS OR EVENTS
ATTRIBUTABLE TO OR DESCRIBED HEREUNDER AS A DEFAULT OR EVENT OF DEFAULT, WHETHER
OR NOT DECLARED) THAT OCCUR AFTER THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR
PROPELLER, AS THE CASE MAY BE, ARE NO LONGER SUBLEASED UNDER THE SUBLEASE AND
AFTER POSSESSION OF THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR PROPELLER, AS THE
CASE MAY BE, HAVE BEEN DELIVERED TO SUBLESSOR, LESSOR OR LENDER OR ANY OTHER
PERSON ENTITLED TO RECEIVE DELIVERY IN ACCORDANCE WITH THE SUBLEASE, (C) WHICH
ARE THE RESULT OF ANY FAILURE OF SUBLESSOR OR LESSOR TO COMPLY WITH ANY
COVENANT, OR ANY BREACH BY SUBLESSOR OR LESSOR OF ANY REPRESENTATION CONTAINED
IN THE PARTICIPATION AGREEMENT, LEASE OR ANY OTHER OPERATIVE DOCUMENT TO WHICH
SUBLESSOR OR LESSOR IS A PARTY, UNLESS SUCH FAILURE IS THE RESULT OF SUBLESSEE'S
FAILURE TO COMPLY WITH ANY TERMS OR PROVISIONS OF THE SUBLEASE OR ANY OTHER
SUBLESSEE DOCUMENT, (D) TO THE EXTENT CAUSED BY ACTS OR OMISSIONS BY OR RELATING
TO ANY PARTY OTHER THAN SUBLESSEE, OR EVENTS RELATING TO SUCH OTHER PARTY THAT
OCCUR AFTER FULL AND FINAL COMPLIANCE BY SUBLESSEE WITH ALL THE TERMS OF THE
SUBLEASE AND THE SUBLESSEE DOCUMENTS, (E) TO THE EXTENT RELATED TO A SUBLESSOR
LIEN, LESSOR

                                        3


LIEN OR LENDER LIEN, INCLUDING THE LIEN OF THE LOAN AGREEMENT, (F) FOR A PAYMENT
REQUIRED TO BE MADE BY LESSOR TO LENDER, AND (G) RELATING TO A DISPOSITION
(VOLUNTARY OR INVOLUNTARY) BY LESSOR OF ALL OR ANY PART OF ITS INTEREST IN THE
AIRCRAFT, OTHER THAN AS PERMITTED BY THE SUBLEASE OR THE LOAN AGREEMENT AS A
RESULT OF THE OCCURRENCE OF AN EVENT OF LOSS OR AN EVENT OF DEFAULT UNDER THE
SUBLEASE, OR BY ANY OTHER PERSON OF ALL OR ANY PART OF SUCH PERSON'S INTEREST
IN THE AIRCRAFT, ANY NOTE OR IN THE OPERATIVE DOCUMENTS, EXCEPT IN THE CASE OF
LENDER, ANY SUCH DISPOSITION REQUIRED BY THE SUBLEASE OR AS A RESULT OF THE
OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER; EXCEPT THAT SUBLESSOR HEREBY
REPRESENTS AND WARRANTS TO SUBLESSEE THAT ON THE DELIVERY DATE SUBLESSOR HAS THE
RIGHT AND AUTHORITY UNDER THE LEASE NECESSARY TO SUBLEASE THE AIRCRAFT TO
SUBLESSEE UNDER THE TERMS OF THIS SUBLEASE AND THAT THE AIRCRAFT SHALL BE FREE
OF ALL LIENS OTHER THAN LIENS ARISING OUT OF ANY ACTION OR INACTION BY
SUBLESSEE, LESSOR LIENS, SUBLESSOR LIENS AND LENDER LIENS, INCLUDING THE LIEN OF
THE LOAN AGREEMENT. IN PARTICULAR AND WITHOUT PREJUDICE TO THE GENERALITY OF THE
FOREGOING (EXCEPT AS MENTIONED IN THE FIRST SENTENCE OF THIS SECTION 5.1), NONE
OF SUBLESSOR, LESSOR, LENDER SHALL BE UNDER ANY LIABILITY WHATSOEVER AND
HOWSOEVER ARISING, WHETHER IN CONTRACT OR TORT OR BOTH, IN RESPECT OF ANY LOSS,
LIABILITY, DAMAGE OR DELAY OF OR TO OR IN CONNECTION WITH THE AIRCRAFT OR ANY
PERSON (WHICH EXPRESSION INCLUDES, WITHOUT PREJUDICE TO THE GENERALITY THEREOF,
ANY GOVERNMENTAL BODY) OR PROPERTY WHATSOEVER, WHETHER ON BOARD THE AIRCRAFT OR
ELSEWHERE IRRESPECTIVE OF WHETHER SUCH LOSS, DAMAGE OR DELAY ARISES (X) FROM
THE AIRCRAFT NOT BEING IN AN AIRWORTHY CONDITION, OR (Y) FROM ANY ACT OR
OMISSION OF SUBLESSOR, LESSOR, OR LENDER (OTHER THAN ANY ACT OR OMISSION WHICH
CONSTITUTES WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUBLESSOR, LESSOR, OR
LENDER) EXCEPT AS OTHERWISE PROVIDED IN THIS SUBLEASE. THE PROVISIONS OF THIS
SECTION 5.1 HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE THE COMPLETE EXCLUSION
AND NEGATION, EXCEPT AS OTHERWISE PROVIDED ABOVE, OF ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, BY SUBLESSOR, LESSOR OR LENDER IN ANY CAPACITY,
WITH RESPECT TO THE AIRCRAFT, OR ANY PART THEREOF, WHETHER ARISING PURSUANT TO
THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR
OTHERWISE.

     5.2 NONE OF THE PROVISIONS OF THIS SECTION 5 OR ANY OTHER PROVISION OF
THIS SUBLEASE AMENDS, MODIFIES OR OTHERWISE AFFECTS THE EXPRESS
REPRESENTATIONS, WARRANTIES OR OTHER OBLIGATIONS OF SAAI OR ANY MANUFACTURER,
SUBCONTRACTOR OR SUPPLIER WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR
RELEASES SAAI OR ANY MANUFACTURER, SUBCONTRACTOR OR SUPPLIER FROM ANY SUCH
REPRESENTATION, WARRANTY OR OBLIGATION OR ANY RIGHTS OF SUBLESSOR OR SUBLESSEE.
DURING THE TERM OF THE SUBLEASE AND SO LONG AS NO DEFAULT OR EVENT OF DEFAULT
HAS OCCURRED AND IS CONTINUING HEREUNDER, SUBLESSEE SHALL BE ENTITLED TO
EXERCISE AND ENFORCE AND ASSERT AT ITS SOLE EXPENSE ALL OF THE RIGHTS WHICH
SUBLESSOR HAS UNDER ANY WARRANTY OR GUARANTY OF ANY VENDOR, MANUFACTURER,
SUBCONTRACTOR OR SUPPLIER WITH RESPECT TO THE AIRCRAFT.

                                        4


     5.3 Sublessor has the requisite corporate power, authority and legal right
to execute, deliver and perform each and every term of this Sublease, Sublease
Supplement No. 1 and all other Operative Documents, the same having been duly
authorized by all necessary corporate action of Sublessor, and duly executed and
delivered by the authorized officers of Sublessor and, assuming the due and
proper execution of the other party thereto, constitute legal, valid and binding
obligations of Sublessor, enforceable against it in accordance with such terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and to general
principles of equity.

     5.4 Sublessor is a corporation duly incorporated, validly existing in good
standing under the laws of the State of Delaware and is duly qualified and
authorized to do business as a foreign corporation in each jurisdiction where
the failure to so qualify or to be in good standing would have a material
adverse effect on its ability to carry on its business or to perform its
obligations under this Sublease.

     5.5 No consent or approval of, giving of notice to, registration with or
other action in respect of or by any federal, state or local authority is
required with respect to Sublessor's execution and delivery of this Sublease,
consummation of the transactions contemplated hereby or performance of its
obligations hereunder, or if any such consent, approval, giving of notice or
registration is required, it has been duly given or obtained.

     5.6 The execution and delivery of this Sublease, Sublease Supplement No. 1
and all other Operative Documents and the performance by Sublessor of its
obligations under this Sublease will not contravene or violate any provision of
its charter or Articles or Certificate of Incorporation or, By-Laws or any
contract, agreement, indenture or other instrument either binding upon Sublessor
or to which it is subject.

     5.7 There is no United States federal or state law or governmental
regulation or order that would be contravened or violated by the execution,
delivery and performance of this Sublease by Sublessor or by the performance of
any term and condition contained herein, or in Sublease Supplement No. 1 or in
any of the other Operative Documents by Sublessor.

Section 6.  CONDITIONS PRECEDENT TO DELIVERY AND ACCEPTANCE: LEGAL OPINION.

     Sublessor shall have no obligation to make delivery of the Aircraft or any
part thereof to Sublessee unless and until all of the following conditions
precedent have been met, it being acknowledged that delivery by Sublessor of the
Aircraft under the Sublease and Sublease Supplement No. 1 shall be deemed to
signify

                                        5


the fulfillment to the satisfaction of or waiver by Sublessor of the conditions
precedent prior to or on the Delivery Date:

     6.1 A11 proceedings taken in connection with the transactions contemplated
hereby and all documents or papers relating thereto, including without
limitation the Operative Documents and this Sublease, shall be satisfactory to
Sublessor and its counsel, and Sublessor and its counsel shall have received
copies of such documents and papers as Sublessor or its counsel may reasonably
request in connection therewith or a basis for its counsel's closing opinion,
all in the form and containing the substance reasonably satisfactory to
Sublessor and its counsel;

     6.2 Sublessee shall have delivered to Sublessor a favorable opinion of
Sublessee's counsel dated as of the Delivery Date in form and substance
reasonably acceptable to Sublessor.

     6.3 Sublessee shall not be in default of any payment obligation or in any
material nonpayment default with respect to any material indebtedness, material
lease obligation or any material contract;

     6.4 All representations, warranties, covenants and assurances made by
Sublessee hereunder shall remain true and correct on the Delivery Date and there
shall be no material adverse change in the assets, liabilities, business,
prospects, profits or condition, financial or otherwise, of Sublessee or of the
ability of Sublessee to perform its obligations, duties and covenants under this
Sublease from the time of such representations, warranties and assurances to the
Delivery Date;

     6.5 Sublessee shall have delivered to Sublessor an insurance broker's
opinion letter and a Certificate of Insurance issued in the form and containing
the substance required by SECTION 13 and containing the endorsements set forth
in Exhibit B hereof;

     6.6 Sublessee shall have delivered to Sublessor a certified copy of the
resolutions adopted by its Board of Directors authorizing the execution and
performance of this Sublease setting forth the names of its officers authorized
to execute this Sublease and all documents contemplated by the Sublease to be
executed by Sublessee; and

     6.7 FAA Counsel shall have confirmed that they will render an opinion
regarding filing and recording procedures required by this transaction, and on
or before the Delivery Date, the Sublease and Sublease Supplement No. 1 shall
have been recorded or filed for recording with the office of the FAA Aircraft
Registry pursuant to the Transportation Code in the manner reflected in the
opinion of such FAA Counsel and in such other public offices as may be deemed
necessary or appropriate by such FAA Counsel or by Sublessor or its counsel in
order to protect the rights and

                                        6


interest of Sublessor thereunder and to perfect such rights and interests of
Sublessor in and to the Sublease, Sublease Supplement No. 1, and the Rent due
and to become due hereunder. By such filing and recording, Sublessor and
Sublessee are not acknowledging or implying that the Sublease constitutes a
"security agreement" or creates a "security interest" within the meaning of any
applicable version of the Uniform Commercial Code adopted by any jurisdiction.

Section 7.  REPRESENTATIONS AND WARRANTIES OF SUBLESSEE.

     Sublessee hereby makes the following representations and warranties:

     7.1 Sublessee is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York and is duly qualified and
authorized to do business as a foreign corporation in each jurisdiction where
the failure to so qualify or to be in good standing would have a material
adverse effect on its ability to carry on its business or to perform its
obligations under this Sublease;

     7.2 Sublessee has the requisite corporate power, authority and legal right
to execute, deliver and perform each and every term of this Sublease, Sublease
Supplement No. 1 and all other Sublessee Documents, the same having been duly
authorized by all necessary corporate action of Sublessee, and duly executed and
delivered by the authorized officers of Sublessee and, assuming the due and
proper execution of the other party thereto, constitute legal, valid and binding
obligations of Sublessee, enforceable against it in accordance with such terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and to general
principles of equity;

     7.3 The execution and delivery of this Sublease, Sublease Supplement No. 1
and all other Sublessee Documents and the performance by Sublessee of its
obligations under this Sublease will not contravene or violate any provision of
its charter or Articles or Certificate of Incorporation or By-Laws or any
contract, agreement, indenture or other instrument either binding upon Sublessee
or to which it is subject, nor will any such contract, agreement, indenture or
other instrument create a Lien (other than a Permitted Lien) with respect to
this Sublease or the Aircraft;

     7.4 There is no United States federal or state law or governmental
regulation or order that would be contravened or violated by the execution,
delivery and performance of this Sublease by Sublessee or by the performance of
any term and condition contained herein, or in Sublease Supplement No. 1 or in
any of the other Sublessee Documents by Sublessee;

                                        7


     7.5 No consent of shareholders of Sublessee or of any holders of
indebtedness of Sublessee, and except for the registrations, recordings and
filings made or to be made with respect to the Aircraft under the Operative
Documents and except as required under FAR Parts 125, 129, 135 or 91
(Section 91.54), no consent or approval of, the giving of notice to,
registration with, the recording or filing of any document with, or the taking
of any other action in respect of any governmental authority, body, commission
or agency or any other entity (except any such consents, approvals, notices,
registrations, recordings, filings or actions as have already been accomplished
by Sublessee, and except for routine periodic and other reporting requirements
and renewals and extensions of exemptions, in each case to the extent required
to be given or obtained only after the date hereof), is or will be required as a
condition to the execution and validity of this Sublease or as a condition to or
in connection with the authorization, execution, delivery or performance hereof
by Sublessee, except those which have been duly made or obtained, certified
copies of which have been or will be delivered to Sublessor, prior to delivery
of the Aircraft to Sublessee. This Sublease and its performance by sublessee
will not violate or contravene any law, regulation, order, judgment or other
similar obligation imposed by any government or regulatory agency, court,
administrative or legislative body applicable to Sublessee or the Aircraft;

     7.6 Except as set forth in Schedule 1 hereto, there are no actions or
proceedings pending or, to Sublessee's knowledge, threatened, against Sublessee
or any of its subsidiaries or Affiliates before any court or administrative
agency in any jurisdiction that question Sublessee's legal capacity to execute,
deliver or perform, or the binding effect or validity of, this Sublease or any
other Sublessee Document, or which might result in any material adverse effect
on the assets, liabilities, prospects, business, profit, condition or
operations, financial or otherwise, of Sublessee or any of its subsidiaries or
Affiliates;

     7.7 Sublessee is fully familiar with all the covenants, terms, conditions,
agreements and warranties of this Sublease and is not in default with respect
thereto;

     7.8 All Sublessee financial statements, other financial information and tax
returns that have heretofore been provided to Sublessor in conjunction with this
transaction fairly and accurately represent the financial condition and income
of Sublessee as of the dates given and, as of such dates, such financial
statements and other financial information do not contain any untrue statements
of a material fact, nor did they omit to state a material fact required to be
stated therein or necessary in order to prevent such financial statements or
other financial information from being misleading as of the dates thereof; and
except as otherwise has been disclosed in writing to Sublessor,

                                        8


there is no fact, situation or event, currently known to Sublessee, which, so
far as can be foreseen by Sublessee, will (a) materially adversely affect the
properties, business, assets, income, prospects or condition, financial or
otherwise, of Sublessee or (b) has had a materially adverse effect on the
properties, business, assets, income, prospects or condition, financial or
otherwise, of Sublessee since the dates of such financial statements, other
financial information or tax returns;

     7.9 All Federal income tax returns required to be filed by Sublessee have,
in fact, been filed, and all taxes which are shown to be due and payable in
such returns have been paid. No material controversy in respect of additional
income taxes due is pending or to the knowledge of Sublessee threatened, which
controversy if determined adversely would materially and adversely affect
Sublessee's ability to perform its obligations hereunder. The provision for
taxes on the books of Sublessee is adequate for all open years, and for its
current fiscal period;

     7.10 Sublessee is not engaged in any transaction in connection with which
it could be subjected to either a civil penalty assessed pursuant to Section 502
(c) of ERISA or any tax imposed by Section 4975 of the Code; no material
liability of the Pension Benefit Guaranty Corporation has been or is expected by
Sublessee to be incurred with respect to any employee pension benefit plan (as
defined in Section 3 of ERISA) maintained by Sublessee; there has been no
reportable event (as defined in Section 4043(b) of ERISA) with respect to any
such employee pension benefit plan. There has been no event of termination of
any such employee pension benefit plan by the Pension Benefit Guaranty
Corporation; and no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any such employee pension benefit plan;

     7.11 Sublessee is an "air carrier" engaged in interstate air
transportation, as such term is used in Section 40102(a)(2) of the
Transportation code, and certificated under Section 44705 of the Transportation
Code, is a "citizen of the United States" as such term is defined in Section
40102(a)(15) of the Transportation Code, is authorized to operate Saab 340A
Aircraft pursuant to FAR Part 135 and possesses all necessary material
certificates, franchises, licenses, permits, authorizations, rights, concessions
and consents of or from all applicable governmental authorities or agencies of
the United States, including, without limitation, the FAA, that are required for
the operation of the Aircraft, routes flown by Sublessee and the conduct of its
business as now being conducted;

     7.12 Sublessee is not in material default and no condition exists that with
notice, or lapse of time or both would constitute a material default by
Sublessee under any mortgage, deed

                                        9


of trust, indenture, security, loan agreement or other instrument or agreement
or evidence of any obligation for borrowed money, to which Sublessee is a party
or by which any of its properties or assets may be bound; and

     7.13 Sublessee's chief executive office and the place where it keeps its
corporate records is at 2500 South High School Road, Indianapolis, Indiana
46251. The offices where it keeps its records concerning the Aircraft and all
contracts relating thereto are located at 2500 South High School Road,
Indianapolis, Indiana 46251 and at 5353 Massilon Road, Route 241, Greensburg,
Ohio 44232. The Aircraft will be based in either Akron, Summit County, Ohio or
Indianapolis, Marion County, Indiana, and the components of the Aircraft which
are not attached to or customarily installed on the Aircraft, will be located in
Indianapolis, Marion County, Indiana.

Section 8.  TERM.

     The Term of this sublease for the Aircraft shall commence on the Delivery
Date specified in Sublease Supplement No. 1 and unless sooner terminated under
the terms hereof, shall extend through and expire on the date specified in
Paragraph E of Sublease Supplement No. 1. The Term of this Sublease and
Sublease Supplement No. 1 attached hereto is subject to early termination
pursuant to the provisions of SECTIONS 18 AND 20 hereof, respecting among other
things, repossession of the Aircraft prior to the expiration of the Term
hereof.

Section 9.  RENT.

     9.1 Sublessee covenants and agrees to pay Sublessor, monthly in arrears,
with respect to the Aircraft, Base Rent for the Term on each Base Rent Payment
Date in the amounts set forth in the Sublease Rent Schedule, which by this
reference is incorporated herein.

     9.2 Notwithstanding the expiration, cancellation or other termination of
Sublessee's obligation to pay Base Rent hereunder, Sublessee agrees to pay to
Sublessor, or in the case of a Lease Event of Default of which Sublessee has
received written notice from Lender or, after delivery of the Release Notice,
Lessor, and a demand therefor, to Lender or, after delivery of the Release
Notice, to Lessor, or to any other Person entitled thereto, any and all
Supplemental Rent promptly as the same becomes due and owing. If Sublessee fails
to pay any Supplemental Rent, Sublessor or such other person entitled thereto
shall have the rights, powers and remedies provided for herein or in any other
Sublessee Document, or by law or in equity or otherwise as if Sublessee has
failed to pay Base Rent.

     9.3 All payments of Rent as required by this SECTION 9 and any and all
other payments to Sublessor shall be paid in

                                       10


immediately available funds without Abatement on the date such Rent is due, by
wire transfer to Sublessor's account with Skandinaviska Enskilda Banken, New
York Branch, 245 Park Avenue, New York, New York, 10167, account number
00005661, or such other place in the United States as Sublessor may, from time
to time, designate.

     9.4 Any payment provided herein due on any day not a Business Day shall be
payable on the next preceding Business Day. No payment of Rent may be prepaid by
more than ten (10) days without the prior written consent of Sublessor.

     9.5 THIS SUBLEASE IS A NET LEASE, AND SUBLESSEE ACKNOWLEDGES AND AGREES
THAT SUBLESSEE'S OBLIGATION TO PAY ALL RENT HEREUNDER, AND THE RIGHTS OF
SUBLESSOR IN AND TO SUCH RENT, SHALL HE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT
BE SUBJECT TO ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM OR
RECOUPMENT ("ABATEMENTS") FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, ABATEMENTS DUE TO ANY PRESENT OR FUTURE CLAIMS OF SUBLESSEE AGAINST
SUBLESSOR UNDER THIS SUBLEASE OR OTHERWISE, AGAINST SAAI OR ANY VENDOR OR
MANUFACTURER, OR AGAINST ANY OTHER PERSON FOR WHATEVER REASON, INCLUDING,
WITHOUT LIMITATION: (A) any default, misrepresentation, negligence, gross
negligence, misconduct, willful misconduct or other action or inaction of any
kind by Sublessor, Lessor, Lender, any manufacturer or seller of any component
of the Aircraft or any other Person, or any set-off, counterclaim, recoupment,
defense or other right which Sublessee may have against Sublessor, the
manufacturers or anyone else for any reason whatsoever, (B) any defect in the
title, airworthiness, condition, design, operation or fitness for use of, or any
Lien or other restriction of any kind upon, all or any component of the
Aircraft, or any damage to or loss or destruction of, any part of the Aircraft
or any interruption or cessation in the use or possession thereof by the
Sublessee for any reason whatsoever, (C) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Sublessor, Lessor, Lender,
any manufacturer or seller of any component of the Aircraft, Sublessee or any
other Person, (D) any breach by Sublessor of any representation, warranty or
covenant of Sublessor made herein or in connection herewith, (E) the invalidity
or lack of enforceability or lack of due authorization or other infirmity of
this Sublease or the lack of right, power or authority of Sublessor to enter
into this Sublease, or (F) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. Except as otherwise
provided herein, Sublessee hereby waives, to the extent permitted by Applicable
Law, any and all rights which it may now have or which at any time hereafter may
be conferred upon it, by statute or otherwise, to terminate, cancel, quit or
surrender this Sublease, except as herein specifically provided or otherwise
agreed between the parties hereto. If for any reason whatsoever this Sublease
shall be terminated in whole or in part by operation of law, except as
specifically provided herein, Sublessee nonetheless agrees to pay to Sublessor
an amount equal to each

                                       11


installment of Base Rent at the time such installment would have become due and
payable in accordance with the terms hereof had this sublease not been
terminated in whole or in part. Each payment of Reset made by Sublessee shall be
final and Sublessee shall not seek to recover all or any part of such payment
from Sublessor four any reason whatsoever. Nothing in this SECTION 9.5 shall be
construed to preclude sublessee from bringing any suit at law or in equity which
it would otherwise be entitled to bring for breach of any representation,
warranty, covenant or duty hereunder.

     9.6 In the event Sublessee shall fail to pay any Rent when due hereunder,
Sublessee shall pay, to the extent permitted by law, to Sublessor or to such
other Person entitled thereto, upon demand, as Supplemental Rent, interest on
such amount from the due date thereof to the date paid at a rate per annum
(computed on the basis of a 365- or 366-day year, as the case may be, and actual
number of days elapsed, including the first day but excluding the last day)
equal to the Overdue Rate.

Section 10. INTEREST OF LESSOR: LIENS; NAMEPLATES.

     10.1 LIENS. Sublessee and Sublessor agree that for all purposes, this
Sublease is, and is intended to be, a Sublease, and that Sublessee does not
acquire any right, title, interest or equity in or to the Aircraft, except the
right to use it under the terms provided herein. The Aircraft, excluding those
additions to which Sublessee retains title, is and shall at all times, until
released, remain the sole and exclusive property of Lessor, subject only, FIRST,
to the Lien of the Loan Agreement, and SECOND, to the interest of Sublessor
under the Lease (and subject to any other Permitted Liens). The only interest
Sublessee shall have in the Aircraft is that of a sublessee hereunder.

     Sublessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to the Aircraft, any part thereof, title
thereto or any interest therein, and in this Sublease or in any Rent, except (a)
the respective rights of Lessor, Sublessor, Guarantor or Lender or Sublessee
under the Operative Documents; (b) the rights under the Operative Documents of
the respective parties thereto; (c) the rights of others under agreements or
arrangements to the extent expressly permitted by SECTIONS 11.1 AND 11.2 hereof
and similar arrangements for Parts owned by Sublessee; (d) any Lessor Liens,
Sublessor Liens or Lender Liens, including the Lien of the Loan Agreement; (e)
Liens for taxes of Sublessee either not yet delinquent or being contested in
good faith by appropriate and timely proceedings, so long as such proceedings do
not involve any material danger of the sale, forfeiture or loss of or
interference with the use of the Aircraft, the Airframe or any Engine or
Propeller or any interest therein; PROVIDED, that Sublessee shall maintain on
its books any reserves with respect thereto which may be required by GAAP; (f)
inchoate materialmen's, mechanics', workers', repairers',

                                       12


employees' or other like Liens arising in the ordinary course of Sublessee's
business for amounts the payment of which is either not yet delinquent or is
being contested in good faith by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
or interference with the use of the Aircraft, or any interest therein; PROVIDED,
that Sublessee shall maintain on its books any reserves with respect thereto
which may be required by GAAP; (g) Liens arising out of the maintenance of court
actions being defended in good faith and on a timely basis and Liens arising out
of judgments or awards against Sublessee with respect to which an appeal or
proceeding for review is being prosecuted in good faith and with respect to
which there is secured a stay of execution pending such appeal, or proceeding
for review; and (h) any other Lien with respect to which Sublessee provides a
bond in an amount and under such terms as are adequate in the reasonable
opinion of Sublessor; PROVIDED, that the aggregate amount of liens which are not
being contested and are delinquent under paragraphs (e), (f), and (g) of this
SECTION 10.1 for which no bond or adequate (in the reasonable opinion of
Sublessor) security is provided shall not at any time exceed $25,000.00. For the
purpose hereof, the Liens set forth in clauses (a) through (h) of this SECTION
10.1 shall be "Permitted Liens". Sublessee at its own cost and expense will
protect and defend the Aircraft and any interest therein against all Liens,
other than Permitted Liens, and legal processes of the creditors of the
Sublessee and other Persons, other than Permitted Liens, and Sublessee will
promptly, at its own expense, take such action as may be necessary to duly
discharge any such Lien not permitted by the express terms above if the same
arises at any time.

     10.2 NAMEPLATE. Sublessee shall attach to and keep upon the Airframe and
each Engine such labels, plates or markings furnished by Sublessor as are deemed
by Sublessor necessary or advisable to evidence Lessor's ownership thereof; and
in any event Sublessee will cause to be affixed to and maintained on the
Aircraft in a location adjacent to and not less prominent than that of the
Airworthiness Certificate, and on each Engine a nameplate furnished by Sublessor
bearing the following legend:

     "LEASED FROM WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE AND LESSOR; SUBJECT
     TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF MELLON FINANCIAL SERVICES
     CORPORATION #3 AND SUBLEASED FROM FAIRBROOK LEASING, INC.",

such nameplate also to state, to the extent applicable, the type, manufacturer's
serial number and current registration number of the Airframe. Sublessor and
Sublessee agree that the nameplate shall be changed by Sublessor to reflect any
transfer of the interests of Lessor or Lender in accordance with the Operative
Documents. Except as above provided, Sublessee will not allow the name of any
Person to be placed on the Aircraft with any description that might be
interpreted as a claim of ownership or of security interest

                                       13


therein; PROVIDED, HOWEVER, that nothing herein contained shall prohibit
Sublessee from placing its customary colors and insignia and name an the
Aircraft, or from substituting engines, propellers or parts an the Aircraft in
accordance with this Sublease.

Section 11. REGISTRATION, MAINTENANCE AND OPERATION; POSSESSION, ETC.

          11.1 REGISTRATION, MAINTENANCE, AND OPERATION.

          At its own cost and expense (as between sublessee and Sublessor),
     Sublessee shall:

          (i) forthwith upon delivery thereof, pursuant hereto, cooperate and
     take no actions inconsistent with the actions of Sublessor or any other
     Person to cause the Aircraft to be duly registered under the laws of the
     United States of America at all times in the name of the Lessor, and shall
     cooperate and take no actions inconsistent with the actions of Sublessor or
     any other Person to cause the interest of Lessor, the Lease Supplement, the
     Loan Agreement, any Loan Agreement Supplement, this Sublease, Sublease
     Supplement No. 1 and supplements thereto and hereto, to be duly recorded
     and maintained of record and the Lien of the Loan Agreement to be first
     lien of record on every part of the Aircraft that may legally be registered
     at the FAA Aircraft Registry, in each case until release thereof pursuant
     to the Operative Documents, and to cooperate and not interfere with
     Sublessor or any other Person in causing any termination of the Lease to be
     recorded at the FAA Aircraft Registry upon its expiration or termination;

          (ii) promptly deliver to Sublessor, Lessor and Lender true copies of
     all applications made by Sublessee in relation to the Aircraft, of all
     certificates of registration issued pursuant to such applications and of
     all notifications given pursuant to such registrations (including without
     limitation, notification of changes in Sublessee's maintenance program) and
     shall not do, or permit to be done by any Person, any act which might cause
     the Aircraft to be ineligible for registration with the FAA, subject to
     Sublessee obtaining such cooperation from Lessor, Sublessor, Lender and any
     other Person as may reasonably be required and, to the extent then so
     required, to Lessor remaining a "citizen of the United States" as defined
     in Section 40102(a)(15) of the Transportation Code and not otherwise taking
     any actions which cause the Aircraft to be ineligible for such registration
     by reason of Lessor's interest therein;

          (iii) maintain, inspect, service, repair, overhaul and test the
     Aircraft (including corrosion control) in compliance with the Maintenance
     Program, but in any event so as to keep

                                       14


     the Aircraft (A) in good operating condition, (B) in the same condition as
     when delivered to Sublessee hereunder, ordinary wear and tear excepted, and
     in a condition suitable for airline commercial use (but with no broken,
     damaged or missing items or components except obsolete parts and/or parts
     undergoing replacement or scheduled to be replaced), (C) in such a manner
     as may be necessary to maintain in full force all warranties of
     manufacturers and suppliers of the Aircraft and its components, in
     accordance with their respective terms, and (D) in such operating condition
     as may be necessary to enable the airworthiness certification of the
     Aircraft to be maintained in good standing at all times under the
     Transportation Code and the Aircraft to be eligible for operation in
     regularly scheduled United States commercial passenger service under FAR
     Part 135 or successor provisions, as may be applicable, but in any event in
     a manner, to an extent and with a standard of care and frequency of
     maintenance not less than that employed by Sublessee with respect to
     similar aircraft and engines owned or leased by it and without regard to
     any scheduled return of the Aircraft pursuant hereto, which practices shall
     at all times be at or above the standard of the industry for maintenance of
     similar aircraft; PROVIDED, HOWEVER, that Sublessee shall not be deemed to
     be in violation of its obligations under this clause (iii) with respect to
     any minor violation which is cured promptly after Sublessee becomes aware
     of it, and in any event not later than sixty (60) days after Sublessee
     becomes aware of it, so long as such minor violations do not affect or
     impair the registration or eligibility for registration of the Aircraft;
     and maintain all records, logs and other materials required by the
     appropriate authorities of the jurisdiction where the Aircraft is
     registered to be maintained in respect of the Aircraft, and permit
     Sublessor, Lessor and, until the earlier of (A) delivery of the Release
     Notice (B) return of the Aircraft to Sublessor or Lessor or (C) the sale of
     the Aircraft pursuant to any provision hereof, Lender, to examine such
     records at any reasonable time during normal business hours;

          (iv) upon their request, promptly furnish to Lessor or Sublessor
     notification of any material changes in the Sublessee's Maintenance
     Program, and such other information as may be required to enable Sublessor,
     Lessor or Lender to file any reports required by any Governmental Body as a
     result of the interests of Sublessor, Lessor or Lender in the Aircraft;

          (v) pay and provide for all electric power, oil, fuel and lubricant
     consumed by and required for the operation of the Aircraft, and all
     repairs, parts and supplies necessary therefor;

                                       15


          (vi) except as otherwise provided herein, comply with all applicable
     mandatory (A) FAA airworthiness directives, orders and other requirements
     of FAR Part 135 or successor provisions, as may be applicable, (B)
     manufacturer service bulletins and service letters or similar requirements
     affecting the Aircraft, and (C) rules and regulations of the FAA relating
     to the Aircraft, and take all steps necessary so that the Aircraft at all
     times during the Term possesses a valid FAA Airworthiness Certificate in
     good standing and that the Aircraft remains eligible for operation in
     regularly scheduled United States commercial passenger service under FAR
     Part 135 or successor provisions, as may be applicable, except as provided
     for in SECTION 12.2 (vi);

          (vii) conform with any Applicable Law requiring alteration of the
     Aircraft (or obtain a waiver of conformance therewith at no expense to
     Lessor or Sublessor) and maintain the same in proper operating condition
     under such Applicable Law; PROVIDED, HOWEVER, that Sublessee may, with the
     consent of Sublessor, in good faith contest the validity or application of
     any such Applicable Law, after having delivered to Sublessor written notice
     stating the facts with respect thereto, and so long as such contest does
     not subject Sublessor, Lessor or Lender to criminal liability and does not
     subject the Aircraft or any interest therein to any material danger of
     sale, forfeiture or loss;

          (viii) cause the Aircraft to be operated only by duly-qualified,
     currently certificated pilots having the minimum total pilot hours required
     by any policy of insurance required to be carried hereunder and for such
     certification by the FAA;

          (ix) not maintain, use, operate or locate the Aircraft (A) in
     violation of any Applicable Law, or in violation of any airworthiness
     certificate, license or registration relating to the Aircraft issued by any
     Governmental Body; (B) in any area excluded from coverage by any insurance
     in effect or required to be maintained by the terms of SECTION 13, except
     in the case of requisition by the United States Government, where Sublessee
     obtains, for the benefit of Lessor, Sublessor, Lender and each Bank,
     indemnity in lieu of such insurance from the United States Government
     against the risks and in the amounts required by SECTION 13 covering such
     area; (C) outside of, or to any destination outside of the United States,
     except (1) in connection with the delivery of the Aircraft or any part
     thereof to the Manufacturer for any service, repair, modification or
     alteration required or permitted hereunder, to the extent not reasonably
     capable of being performed in the United States, (2) when the Aircraft is
     operated or used under contract with the United States Government under
     which contract the United States Government assumes liability for

                                       16


     any damage, loss, destruction or failure to return possession of the
     Aircraft at the end of the term of such contract and for injury to persons
     or damage to property of others, or (3) to destinations within Canada,
     Mexico and the Caribbean, so long as the total annual operating time of the
     Aircraft (on a calendar year basis) outside of the continental limits of
     the United States shall not exceed fifty percent (50%) of the total annual
     operating time of the Aircraft for any calendar year prior to January 1,
     1999 and to the extent that such use does not violate the restrictions set
     forth in SECTION 11.1(xi)hereof;

          (x) perform in due course terminating actions with respect to any part
     of the Aircraft affected by an FAA airworthiness directive if terminating
     action is performed with respect to similar items of aircraft or equipment
     owned or leased by Sublessee, except for those airworthiness directives
     whose final compliance date is later than twelve (12) months after the
     expiration of the Term of this Sublease, and not defer maintenance or
     replacement of parts, preventative maintenance (including corrosion
     control) or implementation of FAA airworthiness directives that Sublessee
     in accordance with its ordinary practice would have performed without
     regard to any scheduled return of the Aircraft pursuant hereto, or install
     replacement components with excessive wear, or except as otherwise provided
     in SECTION 19, exchange any Engine, Propeller, landing gear or any other
     Part of the Aircraft about to be returned to Sublessor for other aircraft
     components in Sublessee's possession for use on aircraft that will remain
     in Sublessee's or any Affiliate of Sublessee's possession after such return
     in order to reduce or avoid future maintenance requirements; and

          (xi) not allow the Aircraft Base for the Aircraft at any time to be a
     location other than Indianapolis, Indiana or Akron, Ohio without thirty
     (30) days' prior written notice to Lessor, Sublessor and, until the Release
     Notice is delivered, Lender.

          11.2 POSSESSION. Except as provided in this SECTION 11 or SECTION 20,
Sublessee will not, without the prior written consent of Sublessor, sub-sublease
or otherwise in any manner deliver, transfer or voluntarily relinquish
possession, or enter into any contract or arrangement obligating it to deliver,
transfer or relinquish possession of the Airframe, any part thereof, any Engine
or Propeller or install any part of the Airframe, any Engine or Propeller or
permit any part of the Airframe, any Engine or Propeller to be installed, on any
airframe other than the Airframe, except as provided in this SECTION 11 or
SECTION 20, except that so long as no Default or Event of Default exists, and so
long as the action to be taken does not affect the Lien of the Loan Agreement
with respect to, Lessor's title to or interest in, or Sublessor's

                                       17


interest in, the Aircraft, Sublessee may, without the prior written consent of
Sublessor:

          (i) subject any Engine or Propeller to normal interchange or pooling
agreements or arrangements customary in the airline industry applicable to other
similar engines or propellers operated by Sublessee and entered into by
Sublessee in the ordinary course of its business; PROVIDED, (A) if Lessor's
title to any such Engine or Propeller is divested pursuant to any such agreement
or arrangement or (B) if Sublessee relinquishes possession of such Engine or
Propeller for a continuous period of more than one hundred eighty (180)
consecutive days, there shall be deemed to be an Event of Loss with respect to
such Engine or Propeller and Sublessee shall comply with SECTION 12.4 in respect
thereof;

          (ii) deliver possession of the Aircraft, or any component thereof, to
the manufacturer thereof or its authorized representatives for testing or other
similar purpose or to any organization for service, repair, maintenance or
overhaul work on the Aircraft or any part thereof or for alterations or
modifications in or additions to the Aircraft to the extent required or
permitted by the terms of this Sublease;

          (iii) install an Engine or a Propeller on an airframe owned by
Sublessee free and clear of all Liens, except (A) Liens of the type permitted
under SECTIONS 10.1 (e), (f) AND (g), (B) the rights of other U.S. Certificated
Air Carriers under normal interchange agreements that are customary in the
airline industry and entered into by Sublessee in the ordinary course of its
business, so long as such agreements do not contemplate, permit or require the
transfer of title to such airframe or the engines or the propellers installed
thereon and (C) the Lien of any mortgage which expressly and effectively
provides that each Engine or Propeller shall not become subject to the Lien
thereof, notwithstanding the installation thereof on an airframe or engine
subject to the Lien of such mortgage, unless and until Sublessee shall become
the owner of such Engine or Propeller free of the respective interests of
Lessor, Sublessor and Sublessee therein under this Sublease and the Lien of the
Loan Agreement;

          (iv) install an Engine or a Propeller on an airframe leased to
Sublessee or purchased by Sublessee subject to a conditional sale or other
security agreement, PROVIDED (A) such airframe is free and clear of all Liens
except the rights of the parties to the lease or conditional sale or other
security agreement and their purchasers, mortgagees and encumbrancers covering
such airframe and except Liens of the type permitted by clauses (A) and (B) of
subparagraph (iii) of this SECTION 11.2; and (B) such lease, conditional sale or
other security agreement expressly and effectively provides that each Engine or
Propeller shall not become subject to the Lien of such lease, conditional sale
or other security agreement, notwithstanding the installation

                                       18


thereof on any airframe subject to the Lien of such lease, conditional sale or
other security agreement, unless and until Sublessee becomes the owner of such
Engine or Propeller free of the respective interests of Lessor, Sublessor and
Sublessee therein under this Sublease and the Lien of the Loan Agreement; or

          (v) transfer possession of the Airframe or any Engine or Propeller to
the United States Government pursuant to a sub-sublease, a copy of which shall
be promptly furnished to Sublessor; PROVIDED, that such sub-sublease (including,
without limitation, any option of the sub-sublessee to renew or extend) shall
not extend beyond the end of the Term for the Aircraft of which such Airframe
or Engine or Propeller is part.

          Notwithstanding anything to the contrary in this SECTION 11.2:

          (1) the rights of any transferee or sub-sublessee who receives
possession by reason of a transfer permitted by this SECTION 11.2 (other than a
transfer of an Engine or Propeller which is deemed an Event of Loss) are and
shall be EXPRESSLY subject and subordinate to all the terms of this Sublease
during the Term hereof, to the Lease and to the Lien of the `Loan Agreement,
including without limitation, in each instance, Sublessor's rights to
repossession pursuant to SECTION 18, and Lender's or Lessor's rights to
possession pursuant to SECTION 20.4, and to avoid such transferee's or
sub-sublessee's right to possession upon such repossession;

          (2) Sublessee shall remain primarily liable hereunder for the
performance of all the terms of this Sublease to the same extent as if such
transfer or sub-sublease had not occurred; and

          (3) No interchange agreement, sub-sublease or other relinquishment of
possession of the Airframe, any Engine or Propeller shall in any way affect the
registration of the Aircraft with the FAA, or discharge or diminish any of
Sublessee's obligations to Sublessor or constitute a waiver of any of
Sublessor's rights and remedies hereunder, Lessor's rights and remedies under
the Lease, and Lessor's and Lender's rights and remedies under the Operative
Documents. If a lease, conditional sale, or other security agreement complies
with clause (B) of subparagraph (iv) of this SECTION 11.2, and the lease or
conditional sale or other security agreement covering such airframe also covers
an engine or engines or propeller or propellers owned by the lessor under such
lease or subject to a security interest in favor of such secured party under
such conditional sale or other security agreement, neither Sublessor nor Lessor
will acquire or claim, as against such lessor or secured party, any right, title
or interest in any such engine or propeller as the result of such engine or
propeller being installed on the Airframe or any

                                       19


propeller being attached to any Engine at any time while such engine or
propeller is subject to such lease or conditional sale or other security
agreement and owned by such lessor or subject to a security interest in favor of
such secured party. Sublessor also hereby agrees for the benefit of the
mortgagee under any mortgage complying with clause (C) of subparagraph (iii) of
this SECTION 11.2 that Lessor will not acquire or claim, as against such
mortgagee, any right, title or interest in any engine or propeller subject to
the lien of such mortgage as the result of such engine being installed on the
Airframe or such propeller being installed on the Airframe or any Engine at any
time while such engine or propeller is subject to the lien of such mortgage.

          11.3 REPORTS AND RECORDS. Throughout the Term, Sublessee shall keep
accurate, complete and current records in English complying with the
requirements of the FAA, so as to enable operation of the Aircraft under FAR
Part 135 or successor provisions, as may be applicable, and any other applicable
regulations from time to time in force; with recommendations of Manufacturer,
GE, Dowty or any other manufacturer or supplier of any Aircraft component; and
with good commercial airline practice of all maintenance carried out with
respect to the Aircraft, and subject to the terms and conditions in SECTION
17.1, shall permit Sublessor, Lessor, and until delivery of the Release Notice,
Lender, or any authorized representative of Sublessor, Lessor or, until delivery
of the Release Notice, Lender to examine such records requested by them at any
reasonable time.

          11.4 REPLACEMENT OF PARTS. Sublessee, at its own cost and expense,
will promptly replace all Parts which are installed in or attached to the
Aircraft which may from time to time become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for use
for any reason whatsoever except as provided in SECTION 11.6. In addition,
Sublessee may, in the ordinary course of maintenance, service, repair, overhaul
or testing, at its own cost and expense, remove any Parts, whether or not worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use; PROVIDED that Sublessee, except as provided
in SECTION 11.6 shall, at its own cost and expense, repair and reinstall or
replace such Parts as promptly as possible. All replacement Parts shall be free
and clear of all Liens (except for Permitted Liens and interchange and pooling
arrangements to the extent permitted by SECTIONS 10.1 AND 11.2); shall comply
with the safety, general operating and flight regulations of the FAA and other
Governmental Bodies having jurisdiction over the Sublessee, the Aircraft or any
component of the Aircraft; and shall be in as good operating condition as, and
shall have a value, utility and remaining useful life at least equal to, the
Parts replaced based upon the assumption that such replaced Parts were in the
condition and repair required to be maintained by the terms hereof. Sublessee
shall maintain all required safety equipment and instruments on the

                                       20


Aircraft and its component parts.

          All Parts at any time removed from the Airframe or any Engine or
Propeller shall remain the property of Lessor and subject to the Lien of the
Loan Agreement no matter where located, until such time as such Parts are
replaced by Parts that have been incorporated or installed in or attached to the
Airframe or any Engine or Propeller and that meet the requirements for
replacement Parts specified above. Immediately upon any replacement Parts
becoming incorporated or installed in or attached to the Airframe or any Engine
or Propeller as above provided, without further act, (i) title to the replaced
Part shall thereupon vest in Sublessee, free and clear of the rights of Lessor,
Lender, and Sublessor and shall no longer be deemed a Part hereunder, (ii) title
to such replacement Part shall thereupon vest in Lessor (subject only to
Permitted Liens and interchange and pooling arrangements to the extent permitted
by SECTIONS 10.1 AND 11.2), and (iii) such replacement Part shall become subject
to this Sublease and be deemed a part of the Airframe or any Engine or Propeller
for all purposes hereof to the same extent as the Parts originally incorporated
or installed in or attached to the Airframe or any Engine or Propeller.

          11.5 POOLING OF PARTS. Any Part removed from the Airframe or any
Engine or Propeller as provided in SECTION 11.2 may be subjected by Sublessee to
a normal interchange or pooling arrangement customary in the airline industry
entered into in the ordinary course of Sublessee's business with other U.S.
Certificated Air Carriers; PROVIDED that no such agreement or arrangement
contemplates or requires the transfer of title of such Part and PROVIDED that
the Part replacing such removed Part shall be incorporated or installed in or
attached to the Airframe or any Engine or Propeller in accordance with SECTION
11.4 as promptly as possible after the removal of such removed Part. In
addition, any replacement Part when incorporated or installed in or attached to
the Airframe or any Engine or Propeller in accordance with SECTION 11.4 may be
owned by a U.S. Certificated Air Carrier subject to such normal pooling
arrangement; PROVIDED that Sublessee, at its expense, as promptly thereafter as
possible, either (i) causes title to the replacement Part to vest in Lessor in
accordance with SECTION 11.4, by Sublessee acquiring title thereto and
transferring title thereto to Lessor, free and clear of all Liens except
Permitted Liens in accordance with the last sentence of SECTION 11.4, or (ii)
replaces such replacement Part by incorporating or installing in or attaching to
the Airframe, any Engine or Propeller, a further replacement Part owned by
Sublessee, free and clear of all Liens except Permitted Liens and by causing
title to the replacement Part to vest in Lessor in accordance with SECTION 11.4.

          11.6 ALTERATIONS, MODIFICATIONS AND ADDITIONS. Except as otherwise
required by SECTION 11.1 or by this SECTION 11.6,

                                       21


Sublessee shall not make any alterations, modifications or, additions to the
Aircraft without the prior written consent of Sublessor which approval shall not
be unreasonably withheld or delayed, PROVIDED, HOWEVER Sublessee shall make, or
shall cause to be made, at no expense to Sublessor or Lessor, such alterations
and modifications in and additions to the Aircraft as may be required from time
to time by the FAA or other Governmental Body having jurisdiction or as may be
required by Applicable Law as a condition to the use of the Aircraft in ordinary
commercial passenger service, and FURTHER, PROVIDED, Sublessee may, at its own
expense and subject to compliance with the requirements of Revenue Procedure
79-48, 1979-2 C.B. 529 from time to time make such alterations, modifications or
additions to the Aircraft as Sublessee may deem desirable in the proper conduct
of its business, so long as such alteration, modification or addition does not
diminish the value, utility or remaining useful life of such item, or impair the
condition and airworthiness thereof, below the value, utility, remaining useful
life, condition and airworthiness thereof immediately prior to such alteration,
modification or addition based upon the assumption that such item was then of
the value and utility and in the condition and airworthiness required to be
maintained by the terms of this Sublease; but if the cost of such alteration,
modification or improvement exceeds $75,000 and is not required by this SECTION
11 and is neither safety-related nor, severable as defined in SECTION 4(4). 02
of Revenue Procedure 75-21, as modified by Revenue Procedure 79-48; and is not
described in subparagraph (ii) of SECTION 4(4).03 (c) of Revenue Procedure
75-21, 1975-1 C.B. 715 as modified by Revenue Procedure 79-48, such alteration,
modification or addition shall not be made without the prior written consent of
Sublessor which shall not be given without receipt by Sublessor of written
consent of Lessor and Lender, and otherwise in compliance with the requirements
of SECTION 4(4).03(c) of Revenue Procedure 75-21, as modified by Revenue
Procedure 79-48. Sublessor may condition such consent on the agreement by
Sublessee at its sole expense to remove such alterations, modifications or
additions and to restore the Aircraft to its original condition upon the
expiration or termination of this Sublease. Title to all Parts incorporated in
the Aircraft as the result of any alteration, modification or addition made as
contemplated in this SECTION 11.6 shall, except as provided in Revenue Procedure
79-48, without further act, vest in Lessor, and in either case, shall become
subject to this Sublease. So long as no Default or Event of Default exists, or
if such Default exists but has not matured into an Event of Default and
Sublessor has not withheld its consent (which Sublessor agrees it will not
unreasonably withhold), upon a written request from Sublessee, Sublessee may
remove any such Part if (i) such part is in addition to, and not in replacement
of or in substitution for, any Part originally incorporated or intended to be
incorporated in the Aircraft at the time of delivery thereof hereunder or any
Part in replacement of, or substitution for, any such original Part, unless such
original Part is removed and returned pursuant to SECTION 11, (ii) such Part is
not required to

                                       22


be incorporated in the Aircraft pursuant to SECTION 11 OR 19, and (iii) such
Part can be removed without diminishing or impairing the value, utility,
appearance, remaining useful life, condition or airworthiness which the Aircraft
would have had at such time had such alteration, modification or addition not
occurred. Upon any such removal, title to such Part shall, without further act,
vest in the Sublessee, free of the Lien of the Loan Agreement, Lessor Liens and
Sublessor Liens, and such Part shall no longer be deemed to be a Part hereunder.
Any Part not so removed prior to the return to Sublessor hereunder of the
Aircraft shall remain the property of Lessor and subject to this Sublease.

          Sublessee shall provide Sublessor and Lessor not less than one hundred
eighty (180) days prior to the end of the Term, with a list of all Parts which
Sublessee believes it is entitled to and intends to remove at such expiration
date or termination. Sublessor or Lessor shall have the option, exercisable upon
written notice given to Sublessee not more than ninety (90) days and not less
than thirty (30) days prior to the expiration of this Sublease, or upon
termination of this Sublease under SECTION 18, to purchase for cash any and all
such Parts which may be owned by Sublessee at the expiration or other
termination of this Sublease for an amount equal to the Fair Market Sale Value
thereof at such time.

          Sublessee shall cause all Parts owned by it during the Term of this
Sublease to remain free and clear of all Liens except Permitted Liens.

SECTION 1.2.  RISK OF LOSS: EVENT OF LOSS AND CONDEMNATION.

          12.1 RISK OF LOSS. Upon execution and delivery of Sublease Supplement
No.1 and commencing on the Delivery Date and continuing until the expiration or
earlier termination of this Sublease and the earlier of either (i) the return by
Sublessee of the Aircraft to Sublessor subject to SECTION 19.1, or (ii)
commencement of the storage period set forth in SECTION l9.6,(except in
connection with a cancellation pursuant to SECTION 18), Sublessee assumes the
entire risk of loss of the Aircraft or any part thereof or of any Event of Loss
as defined below or any liability arising out of the operation, maintenance,
use, storage, overhaul, repair, transport or possession of the Aircraft or any
other cause whatsoever, and no Event of Loss or liability shall relieve
Sublessee of its obligations hereunder except as provided herein.

          12.2 EVENT LOSS - DEFINITION. For all purposes of this Sublease, any
of the following events with respect to the Aircraft, Airframe, or any Engine or
Propeller subleased hereunder shall be an Event of Loss:

     (i) loss of such property or the use thereof due to theft or

                                       23


disappearance for a period greater than forty-five (45) consecutive days or
extending beyond the end of the Term;

     (ii) loss of such property or the use thereof due to destruction, damage
beyond repair or rendition of such property permanently unit for normal use by
Sublessee for any reason whatsoever;

     (iii) any damage to such property which should or does result in the
receipt of insurance proceeds under the policies of insurance required to be
maintained pursuant to SECTION 13 hereof with respect to such property on the
basis of a total loss or constructive total loss;

     (iv) the condemnation, taking, confiscation or seizure of, or requisition
of title to such property by any Governmental Body;

     (v) the condemnation, taking, confiscation or seizure of the use of such
property for a period in excess of ninety (90) consecutive days or a period
extending beyond the end of the Term, other than a requisition for use by the
United States Government that does not continue beyond the end of the Term;
PROVIDED that pursuant to such requisition the United States Government agrees
to make payments sufficient in amount for the discharge of the obligations of
Sublessee hereunder to pay Rent, or Sublessee provides other security reasonably
acceptable to Sublessor (which consent shall not be given without the consent of
the Lender until delivery of the Release Notice) if the United States Government
does not so agree to make such payments, and PROVIDED, FURTHER, that the United
States Government agrees to maintain the Aircraft to a standard which is at
least as rigorous as set forth in this Sublease;

     (vi) as a result of any rule, regulation, order or other action (generally
applicable to aircraft of the same type as the Aircraft) by the FAA, the
Department of Transportation or other Governmental Body (including any court)
having jurisdiction, the use of such property in the normal course of interstate
air transportation of persons is prohibited for a period of six (6) consecutive
months or, if earlier, beyond the end of the Term, unless Sublessee, prior to
the expiration of such six (6) consecutive month period (or such shorter period
extending beyond the end of the Term), undertakes and is diligently carrying
forward all steps necessary or desirable to permit the normal use of such
property by Sublessee or, in any event, if such use is prohibited for a period
of twelve (12) consecutive months;

     (vii) with respect to the Aircraft, Airframe or any Engine or Propeller,
the operation or location thereof, while under requisition for use by the United
States Government, in any area excluded from coverage by any insurance policy in
effect with respect thereto required by SECTION 13 hereof if Sublessee is

                                       24


unable to obtain indemnity or insurance in lieu thereof in a manner reasonably
satisfactory to Sublessor from the United States Government; or

     (viii) the FAA deregisters the Aircraft (other than as a result of (A) the
failure of Lessor to cooperate with Sublessee to the extent reasonably required
to maintain United States registration of the Aircraft, (B) to the extent then
so required for the purpose of maintaining United States registration of the
Aircraft, the failure of Lessor to remain a "citizen of the United States" as
defined in SECTION 40102 (a)(15) of the Transportation Code, or (C) Lessor
otherwise causing the Aircraft to be ineligible for such registration by reason
of its interest therein) and such deregistration continues for a period of one
hundred eighty (180) consecutive days.

          An Event of Loss with respect to the Aircraft shall also be deemed to
occur if an Event of Loss occurs with respect to the Airframe of the Aircraft.

     12:3 EVENT OF LOSS WITH RESPECT TO THE AIRFRAME. Upon the occurrence of an
Event of Loss with respect to the Airframe, or the Airframe and the Engines or
engines or Propellers or propellers then installed on the Airframe, Sublessee
shall forthwith (and; in any event, within three days after such occurrence)
give Sublessor, Guarantor, Lessor, and until delivery of the Release Notice,
Lender, written notice of such Event of Loss, and on or prior to the earlier of
(i) the ninetieth (90th) day following the day of occurrence of such Event of
Loss and (ii) the date of receipt of insurance payments in respect of such
occurrence, Sublessee shall pay:

          (1) to Lender (or, after delivery of the Release Notice, Lessor) the
sum of (A) the Stipulated Loss Value for the Aircraft as set forth in the
Stipulated Loss Value Table computed using the Base Rent Payment Date
immediately preceding the date on which such gent of Loss occurred (or, if such
Event of Loss occurred on a Base Rent Payment Date, computed using such Base
Rent Payment Date or, if such Event of Loss occurs before the First Base Rent
Payment Date, computed using the Delivery Date), plus (B) interest on the amount
determined pursuant to clause (A) at an effective rate per annum equal to the
Base Rate computed for the actual number of days elapsed (on the basis of a 365
or 366 day year as the case may be) from the date of the Event of Loss to the
date of payment of such Stipulated Loss Value, including the date of the Event
of Loss but excluding the date of payment; and

          (2) to Sublessor, or to Lender or Lessor, as the case may be, in
accordance with SECTION 9.2 hereof, the sum of any Supplemental Rent otherwise
due and payable on or before such payment date.

                                       25


If all such Stipulated Loss values and all such other amounts, including,
without limitation, any unpaid or accrued Rent, are paid in full, (x) the
obligation of Sublessee to pay all succeeding payments of Base Rent after the
Event of Loss hereunder with respect to the Aircraft shall terminate on the Base
Rent Payment Date immediately preceding the date of such Event of Loss or as of
the Base Rent Payment Date if such Event of Loss occurs on the Base Rent Payment
Date, and (y) provided that if (or when) no Default or Event of Default exists,
Sublessor will transfer or cause to be transferred to Sublessee, Lessor's title
to the Aircraft, including the Engines and Propellers or a number of engines and
propellers equal to the number of engines and propellers (which are not Engines
and Propellers) installed on the Aircraft at the time such Event of Loss
occurred, free and clear of Lessor Liens, Sublessor Liens and Lender Liens,
including the Lien of the Loan Agreement, and Sublessee shall be subrogated to
all claims, if any, of Sublessor or Lessor, as the case may be, against third
parties for damage to or loss of the Aircraft subject to such Event of Loss
(other than against insurers under insurance policies paid for by Sublessor,
Lessor, Lender or any Bank). Such transfer to Sublessee shall not affect or
limit in any way any obligations of Sublessee hereunder unless specifically
discharged by such payment of Stipulated Loss Value and Rent.

          12.4 EVENT OF LOSS WITH RESPECT TO AN ENGINE OR PROPELLER. Upon the
occurrence of an Event of Loss with respect to an Engine or Propeller in any
case where the provisions of SECTION 12.3 are not applicable, Sublessee shall
give Sublessor, Lessor, and until delivery of the Release Notice, Lender, prompt
written notice thereof and shall, within thirty (30) days after the occurrence
of such Event of Loss, duly convey to Lessor, as replacement for the Engine or
Propeller with respect to which such Event of Loss occurred, title to another
engine or propeller of the same or improved make, model and manufacturer (or
engine or propeller of at least the equivalent utility, value and remaining
useful life and suitable for installation and use on the Airframe) free and
clear of all Liens whatsoever (except Permitted Liens) and having a value,
remaining useful life and utility at least equal to, and being in as good
operating condition as, the Engine or propeller with respect to which such Event
of Loss occurred, but in all events in at least as good condition and repair as
required by the terms hereof immediately prior to the occurrence of such Event
of Loss and of the same or improved make, model and manufacturer as any other
Engine or Propeller, as applicable; PROVIDED, HOWEVER, that if Sublessee does
not then have reasonably available a Replacement Engine or Replacement
Propeller, as the case may be, conforming to the requirements set forth in this
SECTION 12.4, then Sublessee shall (x) within ninety (90) days after the
occurrence of such Event of Loss, either (i) notify Sublessor, Lessor and Lender
that Sublessee has made arrangements (which arrangements shall be reasonably
satisfactory to Sublessor, Lessor and Lender) to obtain a Replacement Engine or
Replacement Propeller, as the case may be,

                                       26


conforming to the requirements of this SECTION 12.4 and shall obtain such
Replacement Engine or Replacement Propeller within ninety (90) days after
Sublessee shall have notified Sublessor and Lessor of such arrangements, or (ii)
place an order for a Replacement Engine or Replacement Propeller conforming to
the requirements of this SECTION 12.4, from the manufacturer of such Replacement
Engine or Replacement Propeller, PROVIDED, that if Sublessee obtains a
Replacement Engine or Replacement Propeller conforming to the requirements of
this SECTION 12.4 from another Person prior to the delivery of the Replacement
Engine or Replacement Propeller ordered from the manufacturer thereof, Sublessee
may use the Replacement Engine or Replacement Propeller obtained from such
Person in lieu of the Replacement Engine or Replacement Propeller ordered from
the manufacturer, and (y) promptly upon obtaining such Replacement Engine or
Replacement Propeller from the manufacturer or other Person, duly convey to
Lessor, as replacement for the Engine or Replacement Propeller with respect to
which such Event of Loss occurred, title to such Replacement Engine or
Replacement Propeller (free and clear of all Liens whatsoever (except Permitted
Liens)). In such case, Sublessee, at its own expense, will prior to or at the
time of any such conveyance (i) furnish to Lessor a warranty (as to title) bill
of sale, in form and substance reasonably satisfactory to Lessor, with respect
to such Replacement Engine or Replacement Propeller, (ii) cooperate in the
execution and delivery of a supplement hereto, in form and substance
satisfactory to Sublessor and Lessor, subjecting such Replacement Engine or
Replacement Propeller to this Sublease, to be duly executed by Sublessee and
recorded pursuant to the Transportation Code, (iii) furnish or cause to be
furnished to Sublessor, Lessor, and, until delivery of the Release Notice,
Lender, such evidence of Sublessee's (or other party's) title to such
Replacement Engine or Replacement Propeller (including, if requested, an opinion
of Sublessee's (or other party's) counsel and of compliance with the insurance
provisions of SECTION 13 with respect to such Replacement Engine or Replacement
Propeller as Lessor, Sublessor or Lender may reasonably request, and with an
opinion of Sublessee's (or other party's) counsel to the effect that title to
such Replacement Engine or Replacement Propeller, has been duly conveyed to
Lessor free and clear of all Liens whatsoever (except any Lessor Liens,
Sublessor Liens, Lender Liens and the Lien of Loan Agreement) and is duly
subleased hereunder (which legal opinions may contain qualifications and
statements of reliance reasonably satisfactory to Lessor, Sublessor and Lender),
(iv) furnish Sublessor a certificate signed by a duly authorized financial
officer or executive of Sublessee certifying that, upon consummation of such
replacement, no Default or Event of Default will exist hereunder; (v) furnish
such documents and evidence as Sublessor, Lessor or Lender, respectively, or
their respective counsel may reasonably request in order to establish the
consummation of the transactions contemplated by this SECTION 12.4, the taking
of all corporate proceedings in connection therewith and compliance with the
conditions set forth in this SECTION 12.4, in

                                       27


each case in form and substance satisfactory to such party, (vi) file and record
such Uniform Commercial Code financing statements covering such Replacement
Engine or Replacement Propeller as may be reasonably requested by Sublessor,
Lessor and Lender, respectively, (vii) assign or cause to be assigned to Lessor
all existing warranties as of the date of transfer to the extent such warranties
are freely assignable, with respect to such Replacement Engine or Replacement
Propeller, subject to Sublessee's right to exercise these rights, so long as no
Event of Default has occurred, and (viii) take such other action as Sublessor,
Lessor or Lender may reasonably request in order that such Replacement Engine or
Replacement Propeller be duly and properly subject to the Lease and leased
thereunder; the Sublease and subleased hereunder, and the Lien of the Loan
Agreement, to the same extent as the Engine or Propeller replaced thereby. Upon
full compliance by Sublessee with the terms of this SECTION 12.4, Sublessor will
cause the appropriate party to transfer to Sublessee, at Sublessee's expense (i)
title to the Engine or Propeller with respect to which such Event of Loss
occurred and (ii) all claims for damage to such Engine or Propeller, if any,
against third Persons (other than against insurers under insurance policies paid
for by Sublessor, Lessor, Lender or any Bank) arising from the Event of Loss;
and Sublessor shall at Sublessee's expense, cause Lessor to execute and deliver
appropriate, bills of sale confirming such transfer. Any such transfer of title
shall be on an "AS-IS" and "WHERE-IS" basis without recourse or warranty,
express or implied except that such Engine or Propeller is free and clear of all
Lessor Liens, Lender Liens and Sublessor Liens, and shall release such Engine or
Propeller from the Lien of the Loan Agreement. Sublessee shall be subrogated to
all claims of Sublessor or Lessor, if any, against third parties (other than
insurers under insurance policies paid for by Sublessor, Lessor, Lender or any
Bank) for damage to or loss of the Engine or Propeller being replaced. For all
purposes hereof, each such Replacement Engine or Replacement Propeller shall be
deemed part of the property subleased hereunder, shall be deemed an "Engine" or
"Propeller" as defined herein and shall be deemed part of the Aircraft to the
same extent as the Engine or Propeller replaced thereby. An Event of Loss
covered by this SECTION 12.4 shall not result in any reduction in Base Rent.

          12.5 APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES OR OTHERS.
Any payments (other than insurance proceeds the application of which is provided
for in SECTION 13) received at any time by Lessor, Sublessor or Sublessee from
any Governmental Body or other person with respect to an Event of Loss, to the
extent of the then applicable Stipulated Loss Value set forth in the Stipulated
Loss Value Table whether resulting from the condemnation, confiscation, theft or
seizure of, or requisition of title to or use of, the Airframe, or any Engine or
Propeller (other than a requisition for use by the United States Government not
constituting an Event of Loss), or otherwise, if paid to Sublessee shall be
immediately paid over to Lender, until delivery of the

                                       28


Release Notice, and thereafter to Lessor, PROVIDED that Sublessee will endeavor
to have such payment made directly to Lender, until delivery of the Release
Notice, and in any event, such payment will be applied as follows:

          (i) if any such payments are received with respect to the Airframe,
or the Airframe and the Engines or engines, Propellers or propellers then
installed on the Airframe, so much of such payments as shall not exceed the
Stipulated Loss value required to be paid by Sublessee pursuant to SECTION 12.3
shall be applied in reduction of Sublessee's obligation to pay such Stipulated
Loss Value, if not already paid by Sublessee, or, if already paid by Sublessee,
shall be applied to reimburse Sublessee for its payment of such Stipulated Loss
Value, and the balance, if any, of such payments remaining thereafter will,
after Sublessee has paid all other Rent due and owing, be paid to the order of
Sublessor if received from a Governmental Body as a result of a requisition of
title to the Airframe or any Engine or Propeller, or from a Governmental Body
other than the United States Government with respect to a requisition of use of
the Airframe or any Engine or Propeller, and otherwise to Sublessee; and

          (ii) if such payment is received with respect to an Engine or
Propeller under the circumstances contemplated by SECTION 12.4, all such
payments shall be paid over to Sublessee, PROVIDED, Sublessee has fully
performed the terms of this SECTION 12 with respect to the Event of Loss for
which such payments are made, and FURTHER PROVIDED, no Default or Event of
Default exists and such payments shall be applied (if not earlier paid to
Sublessee) to the purchase price of such Replacement Engine or Propeller at
delivery thereof to Lessor under SECTION 12.4.

          12.6 REQUISITION FOR USE BY UNITED STATES GOVERNMENT WITH RESPECT
TO THE AIRFRAME AND ANY ENGINE OR PROPELLER INSTALLED THEREON. If the United
States Government requisitions the use of the Airframe, or the Airframe and the
Engines or, engines and Propellers or propellers then installed on the Airframe,
during the Term, and such requisition does not constitute an Event of Loss, all
of Sublessee's obligations under this Sublease with respect to the Aircraft
shall continue to the same extent as if such requisition had not occurred. All
payments received by Sublessor or Sublessee from the United States Government
for the use of the Airframe and Engines or engines and Propellers or propellers
during the Term shall be paid over to, or retained by, Sublessee, PROVIDED no
Default or Event of Default exists. If the Airframe, or the Airframe and Engines
or engines and Propellers or propellers, are not scheduled to be returned by the
United States Government prior to the end of the Term, Sublessor, upon notice
given not less than thirty (30) days before the end of the Term, may elect that
an Event of Loss hereunder be deemed to have occurred on the last day of the
Term and Sublessee shall, upon expiration of the Term, pay the Stipulated Loss
Value with respect to the Aircraft on such

                                       29


date. Upon receipt of payment of Stipulated Loss value and all Rent and other
amounts due and payable under the Sublease, Sublessor shall transfer or shall
cause to be transferred to Sublessee title to the Aircraft free of all Sublessor
Liens, Lessor Liens and Lender Liens, including the Lien of the Loan Agreement.
If Sublessor has elected to treat such requisition for use as an Event of Loss,
upon payment by the Sublessee of the Stipulated Loss value and all other Rent
due and owing, all payments received by Sublessor or Sublessee from the United
States Government for the use of the Airframe, Engines and Propellers after
expiration of the Term shall be paid over to, or retained by, Subleasee. If
after expiration of the Term, Sublessor has not elected to treat such
requisition for use as an Event of Loss, all payments received by Sublessor or
Sublessee from the United States Government for the use of the Aircraft before
the expiration of the Term, shall be paid to or retained by Sublessee, PROVIDED,
HOWEVER, upon the expiration of the Term, Sublessor shall give notice to
Sublessee stating that this Sublease shall terminate, expire and be canceled
upon such date of expiration and the provisions of SECTION 19 shall be deemed to
have been satisfied, and subject to the provisions of this Sublease relating to
the survival of any of Sublessee's obligations hereunder, this Sublease shall
terminate, expire and be cancelled, and upon such termination, expiration and
cancellation, all payments received by Sublessor, Sublessee or any other Person
from the United States Government for the use of the Aircraft after the
expiration of the Term shall be paid over or retained: by Sublessor. Sublessee
shall promptly notify Sublessor in writing of any such requisition. Upon any
such requisition for use, Sublessee agrees to use its best efforts to obtain
reimbursement from the United States Government to Sublessor for damages
suffered by Sublessor as a result of such requisition for use. Sublessee agrees
to notify Sublessor promptly in writing in advance of the time when any
negotiations between Sublessee and the United States Government with respect to
any such requisition shall commence and will consult with Sublessor regarding
methods or procedures that are most appropriate to effect recovery from the
United States Government for any damages suffered by Sublessor, Lessor, Lender
or any Bank, by reason of such requisition for use. This SECTION 12.6 shall not
be applicable to the Aircraft if an Event of Loss with respect to the Aircraft
has occurred, except in the case where Sublessor has declared an Event of Loss
to have occurred as a result of a United States Government requisition for use.

          12.7 REQUISITION FOR USE BY UNITED STATES GOVERNMENT OF AN ENGINE OR
PROPELLER IN A MANNER CONSTITUTING AN EVENT OF LOSS. If the United States
Government requisitions the use of any Engine or Propeller in a manner
constituting an Event of Loss, Sublessee shall replace the Engine or Propeller
hereunder by complying with the terms of SECTION 12.4, and any payments received
by Sublessor or Sublessee from the United States Government with respect to such
requisition shall be paid over to, or retained by, Sublessee, PROVIDED no
Default or Event of Default exists.

                                       30


          12.8 APPLICATION OF PAYMENTS OTHER THAN FOR AN EVENT OF LOSS. Any
payments received at any time by Sublessor or Sublessee from any Governmental
Body, insurer (other than under insurance paid for by Sublessee) or other Person
with respect to loss or damage to or requisition for use of the Airframe, any
Engine or Propeller or any other Aircraft not constituting an Event of Loss and
not governed by SECTIONS 12.6 AND 12.7, shall be applied in payment for repairs
or for replacement property in accordance with SECTION 11 and any balance
remaining after compliance with such sections with respect to such damage or
loss shall be paid over to or retained by Sublessee if Sublessor receives from
Sublessee prior to making any such payment, certification from Sublessee that
the property so damaged or lost has been repaired or replaced in full and that
the costs of such repairs or replacement have been paid in full. If such repairs
or replacements are made pursuant to contracts requiring progress payments or
are made by Sublessee, such proceeds shall be paid over to Sublessee from time
to time upon appropriate certification by Sublessee.

          12.9 APPLICATION OF PAYMENTS DURING DEFAULT.  Any amount received by
Sublessor referred to in SECTIONS 12.5, 12.6, 12.7 OR 12.8 that is payable to
Sublessee shall not be paid to Sublessee if at the time of such payment a
Default or an Event of Default exists, but shall be held by Lender, or if the
Release Notice has been delivered, by Lessor or Sublessor as security for the
obligations of Sublessee under this Sublease and at such time as any such
Default or Event of Default is not continuing, such amount, unless theretofore
otherwise applied in exercise of Sublessor's remedies hereunder, shall be paid
to Sublessee.

SECTION 13.      INSURANCE.

          13.1 PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE. Sublessee shall
maintain in effect, at its own expense, public liability insurance and property
damage insurance (including, but not limited to, aviation general liability,
aircraft passenger liability, aircraft property damage liability, cargo/baggage
liability and contractual liability insurance) with respect to the Aircraft (i)
in amounts not less than One Hundred Million Dollars ($100,000,000.00) combined
single limit per occurrence for bodily injury and property damage, but in any
event in amounts not less than the public liability insurance and property
damage insurance applicable to similar aircraft, engines or propellers which
constitute Sublessee's fleet, and (ii) otherwise of the type and in the amounts
usually carried by corporations engaged in the same or similar business
similarly situated with Sublessee and owning, leasing or operating similar
aircraft, engines and propellers and which otherwise cover risks of the kind
customarily insured against by such corporations, with no deductible in excess
of $100,000 per occurrence.

          13.2 INSURANCE AGAINST LOSS OR DAMAGE TO AIRCRAFT.

                                       31


Sublessee shall maintain in effect, at its own expense, (i) All Risk Aircraft
Hull insurance covering the Aircraft at least against perils customarily
included in such insurance, including, without limitation, standard form
hijacking coverage and extended "all risk" ground, flight, ingestion and taxiing
risks, including, but not limited to, hijacking coverage and extended "all risk"
coverage with respect to all Engines, Propellers and Parts while removed from or
not installed on the Aircraft, and (ii) whenever the Aircraft is flown outside
the United States and Canada, in any recognized, or in Sublessor's, and until
delivery of the Release Notice, Lender's, reasonable judgment, threatened area
of hostility, aircraft hull war and political risks insurance, on, or equivalent
to, the Lloyd's R.J.M. Airline One (1/1/77) wording, covering at least those
perils customarily included in such insurance, including without limitation,
risks excluded from the All Risks Aircraft Hull Insurance by the terms of
Lloyd's Aviation War Exclusion Clause AVN.48B except paragraphs (a) and (b)
thereof as in effect on the date hereof, and shall include coverage in respect
of hijacking, confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition of title or use by or under the order of any
Governmental Body. Such insurance shall at all times while the Aircraft is
subject to this Sublease be on an "Agreed Value Basis" in each case in amounts
not less than the amounts set forth in the Stipulated Loss Value Table, as
specified in Schedule 1 to the Sublease Rent Schedule for the Aircraft from time
to time (determined using the Base Rent Payment Date immediately preceding the
date on which said Event of Loss, occurred, or if such Event of Loss occurred on
the Base Rent Payment Date, computed using such Base Rent Payment Date) with no
deductible, with respect to a loss which is not a total loss, arranged total
loss, or constructive total loss, in excess of $100,000 per occurrence,
PROVIDED, HOWEVER, that the Engines, Propellers and Parts while removed from or
not installed on the Aircraft shall be included in aircraft spares coverage in
an amount satisfactory to Sublessor, Lessor, and until delivery of the Release
Notice, Lender, subject to a deductible not greater than $25,000. Any "fleet
aggregate" deductible or sub-limits of liability applicable to Sublessee's fleet
shall not apply to claim payable under the above insurance.

          13.3 POLICIES. (a) Sublessee shall arrange for appropriate
certification of coverages and forms of endorsements to be made promptly to:

          (i)   Lessor;

          (ii)  Sublessor and Guarantor: and

          (iii) Until delivery of the Release Notice, Lender,

by the underwriters or their agents of any policies carried in accordance with
this SECTION 13 covering the Aircraft and any

                                       32


policies taken out in substitution or replacement thereof. Each of the parties
referred to in clauses (i), (ii) and (iii) above (and, until March 31, 1998 AMR
Leasing Corporation, Simmons Airlines, Inc., Executive Airlines, Inc., American
Airlines, Inc. and AMR Corporation) shall be named as "Additional Insureds" in
all such liability policies, and "Additional Insureds", and Lender, and
following delivery of the Release Notice, Lessor, shall be named as "Loss Payee"
in all such "all risk" insurance.

       (b) A11 policies of insurance carried in accordance with this SECTION 13:

     (1) shall be placed with insurers with recognized reputation and
responsibility satisfactory to Sublessor;

     (2) shall be in full force and effect throughout any geographical areas at
any time traversed by the Aircraft;

     (3) shall be payable in lawful currency of the United States in the United
States;

     (4) shall be in amounts customary for airlines similarly situated to
Sublessee but in no event less than the amounts specified in SECTIONS 13.1 AND
13.2 hereof;

     (5) shall not impose any liability on Sublessor, Lessor or any Additional
Insured or Loss Payee or any Covered Person (as defined hereinbelow) to pay
premiums for such insurance but shall provide for notice thereto of any
nonpayment of premium not less than thirty (30) days (seven (7) days or such
shorter period as may from time to time be the longest period obtainable in the
industry, in the case of war risk and allied perils coverage) opportunity to
Sublessor, Lessor and each Additional Insured or Loss Payee to pay such premium
without impairing the policy;

     (6) shall (i) provide that as to Sublessor, Lessor and each Additional
Insured or Loss Payee and each Covered Person (as defined hereinbelow) the
insurance shall not be invalidated (A) by any action or inaction by Sublessee
and shall insure the interest of such Persons regardless of any breach or
violation by Sublessee or any other additional insured of any warranty,
declaration or condition contained in such policies, and if available at
commercially reasonable cost such coverages shall be provided otherwise than by
way of endorsement with Lloyd's Form AVN67A; PROVIDED HOWEVER, that with respect
to secretion, embezzlement or conversion by Sublessee, no coverage shall apply
to any Person which ~is a willful party to such secretion, embezzlement or
conversion, or (B) because of a subjection of the Aircraft to any condition, use
or operation not permitted by the policy or (C) because of any false statement
with respect to the policy by Sublessee or its employees, agents or
representatives, or any other Person except an Additional Insured (and then such
policy shall be

                                       33


impaired only as to such Person); (ii) be primary without right of contribution
from any other insurance which might be available to Sublessor, Lessor and each
Additional Insured or Loss Payee; (iii) waive any rights of subrogation, except
with respect to the gross negligence and/or willful misconduct of such
Additional insured, and any rights of set-off, counterclaim or deduction against
Sublessor, Lessor and each Additional Insured or Loss Payee; (iv) provide notice
of cancellation, non-renewal, expiration, change or lapse not less than thirty
(30) days after receipt thereof prior to the effectiveness thereof against
Sublessor, Lessor and each Additional Insured or Loss Payee or Covered Person;

     (7) shall in the case of policies covering liability, (A) name each
Additional Insured as an additional insured, (B) cover the shareholders,
officers, directors, employees and agents of each Additional Insured as
additional insureds (each a "Covered Person"), (C) include the statement
"warranted to have no operational interest", (D) be endorsed to acknowledge and
include the contractual liability of Subleasee herein and under the Sublessee
Documents; (E) not operate so as to insure the Manufacturer of the Aircraft
against claims arising out of product liability; (F) provide notice of
cancellation, non-renewal, expiration, change or lapse not less than thirty (30)
days after receipt thereof prior to the effectiveness thereof against Sublessor,
Lessor and each Additional Insured or Loss Payee or Covered Person; and (G)
provide that each liability policy shall operate as a separate policy with
respect to Sublessor, Lessor and each Additional Insured and each Covered Person
but nothing herein shall operate to increase the liability of the underwriters
as set forth in the policies beyond the amount for which the underwriters would
have been liable if only one person or interest had been included as an insured;

     (8) shall in the case of policies covering loss or damage to the Aircraft,
to the extent of the then applicable Stipulated Loss Values set forth in the
Stipulated Loss Value Table, provide that all insurance proceeds received
hereunder as the result of the occurrence of an Event of Loss with respect to
the Airframe or any Engine or Propeller be made payable solely to Lender until
delivery of the Release Notice to the underwriters, and thereafter to Lessor,
for an amount up to the applicable Stipulated Loss Value, and thereafter any
remaining amount to Sublessee. The foregoing notwithstanding, PROVIDED, that the
Loss Payee has not notified the insurer that a Lease Default has occurred and is
continuing or Sublessor has not notified the insurer that an Event of Default
has occurred and is continuing hereunder, any loss equal to or less than
$100,000.00 (without giving effect to any deductible provision), shall be paid
directly to Sublessee, and shall be endorsed to provide the foregoing coverages
in, SECTION 13.3 and other endorsements reasonably satisfactory to Lessor,
Lender, Sublessor and each Loss Payee it is further agreed that all such
insurance proceeds shall be applied as follows:

                                       34


          (i) if insurance proceeds are received with respect to the Aircraft or
the Airframe and the Engines or engines or Propellers or propellers installed on
the Airframe, so much of such insurance proceeds remaining after reimbursement
of Lessor, Sublessor, and until delivery of the Release Notice, Lender, for
costs and expenses, as shall not exceed the Stipulated Loss value required to be
paid by Sublessee pursuant to SECTION 12.3 and any past-due Rent shall be
applied in reduction of Sublessee's obligation to pay such Stipulated Loss Value
and all such other amounts if not already paid by Sublessee, or, if already paid
by Sublessee and no Default or Event of Default exists hereunder, shall be
applied to reimburse Sublessee for its payment, of such Stipulated Loss value
and all such other amounts, and the balance, if any, of such insurance proceeds
remaining thereafter will be paid over, to or retained by Sublessee;

          (ii) if such insurance proceeds are received with respect to an Engine
or Propeller under the circumstances contemplated by SECTION 12.4, so much of
the insurance proceeds remaining after reimbursement of Lessor, Sublessor, and
until delivery of the Release Notice, Lender for costs and expenses, shall be
paid to Sublessee, provided that Sublessee shall have fully performed its
obligations and complied with the terms of SECTION 12.4 hereof with respect to
the Event of Loss for which such insurance proceeds are paid, such payments
shall be applied to the purchase price of such Replacement Engine or Propeller
at delivery thereof to Lessor under SECTION 12.4;

          (iii) so long as no Event of Default shall have occurred and be
continuing, the proceeds of any insurance required to be maintained by Sublessee
hereunder with respect to any property damage to the Airframe, any Engine or
Propeller shall be applied in the manner described in SECTION 12.8 upon evidence
of completion of repairs, or if such repairs or replacements are made pursuant
to contracts requiring progress payments or are made by Sublessee, upon receipt
of Sublessee's certification referred to in SECTION 12.8, shall be paid directly
to Sublessee; and

          (iv) any amount referred to in CLAUSES (i) (ii) OR (iii) immediately
above that is payable to Sublessee shall not be paid to Sublessee if at the time
of such payment a Default or Event of Default exists, but shall be held by
Sublessor, as security for the obligations of Sublessee under this Sublease and
at such time as there is not continuing any such Default or Event of Default
such amount, unless theretofore otherwise applied in exercise of
Sublessor's remedies hereunder, shall be paid to Sublessee;

     (9) if the liability policies are on a "claims-made basis" and not on an
"occurrence basis", Sublessee shall continue to carry such liability policies
for an additional three (3) years after the expiration or termination of this
Sublease and shall cause Lessor,

                                       35


Sublessor and each Additional Insured and Covered Person (regardless of whether
or not the Sublease has expired or been terminated) to be named as additional
insureds; and

     (10) shall be endorsed to provide the foregoing coverages in the form of
the endorsements set forth in EXHIBIT B and other endorsements reasonably
satisfactory to Sublessor, Lessor and Lender.

          13.4 REPORTS, ETC. Sublessee will cause its insurance broker to
furnish Sublessor, Lessor, Lender and each Additional Insured or Loss Payee (i)
on the Delivery Date of the Aircraft, (ii) on the policy anniversary date
thereafter, and (iii) on the date a Replacement Engine or Replacement Propeller
is conveyed to Lessor pursuant to SECTION 12.4, a report, dated the day of its
delivery, signed by Sublessee's insurance broker, reasonably acceptable to
Sublessor, Lessor and Lender, describing in reasonable detail the insurance then
carried and maintained on the Aircraft, certifying that such insurance complies
with the terms hereof and that the terms of this SECTION 13 have been endorsed
on such policies, and stating the opinion of such broker that such insurance is
in an amount deemed adequate, based upon normal industry practice, for the
protection of the respective interests of Sublessor, Lessor, Lender and each
Additional insured or Loss. Payee and each Covered Person, and is usual for
corporations operating similar aircraft and similarly situated with the
Sublessee, PROVIDED, HOWEVER, such opinion shall not be deemed to be a guarantee
or other undertaking that such limits will be adequate under all circumstances.
Sublessee will advise and will cause its insurance broker to advise Sublessor,
Lessor, Lender and each Additional Insured or Loss Payee in writing promptly 'of
any default in the payment of any premium and of any other act or omission on
the part of Sublessee which might invalidate or reader unenforceable, in whole
or in part, any insurance on the Aircraft. Sublessee shall cause its insurance
broker to furnish to Sublessor, Lessor and each Additional insured or Loss Payee
on the Delivery Date or as soon as available thereafter but not later than
thirty (30) days after the Delivery Date, copies of any insurance certificates
required to be carried hereunder, and within fifteen (15) days of replacement
thereof, copies of such replacement insurance certificates, or with respect to
any Replacement Engine or Replacement Propeller, within fifteen (15) days of
replacement thereof, certificates evidencing the insurance required to be
carried hereunder. If Sublessee fails to maintain insurance as provided herein,
Sublessor, Lessor or any Additional insured or Loss payee may, at its option,
provide such insurance and in such event, Sublessee shall, upon demand,
reimburse Sublessor, Lessor or such Additional Insured or Loss Payee, as the
case may be, as Supplemental Rent, for the cost thereof.

          13.5 INSURANCE FOR OWN ACCOUNT. Nothing in this SECTION 13 shall limit
or prohibit Sublessor, Lessor and each

                                       36


Additional Insured or Loss Payee and each Covered Person, from obtaining
insurance for its own account and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; PROVIDED that no
such insurance may be obtained which would limit, replace, or otherwise
adversely affect the coverage of any insurance required to be obtained or
maintained pursuant to this SECTION 13.

SECTION 14.   INDEMNITY.

          14.1 Sublessee hereby assumes liability for, and shall indemnify,
protect, save and keep harmless each Indemnified Person, including, without
limitation, Sublessor, Lessor, Lender and Guarantor, from and against, any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, and expenses, including legal fees and expenses, of whatsoever
kind and nature (herein collectively called "Liabilities^) imposed on, incurred
by or asserted against such Indemnified Person in any way relating to or arising
out of (i) maintenance, overhaul, repair, acquisition, construction,
manufacture, installation, purchase, ownership, delivery, lease, sublease,
possession, rental, use, condition, operation, transportation, return, sale,
replacement, storage or disposition of the Aircraft or any part thereof
(including, without limitation, liabilities in any way relating to or arising
out of the latent or other defects, whether or not discoverable by Sublessee or
any other person, injury to persons or property, patent, trademark, or invention
rights, or strict liability in tort), or (ii) this Sublease or any of the other
Operative Documents to which Sublessee is a party or any of the transactions,
obligations and indemnities contemplated hereby or thereby, or any other
document or instrument hereafter required to be executed and delivered by
Sublessee pursuant to the terms hereof or thereof, or the enforcement against
Sublessee of any of the terms of this Sublease or any of the other Operative
Documents, or (iii) the enforcement of any agreement, restriction or legal
requirement applicable to Sublessee affecting the Aircraft or any part thereof
or the operation, maintenance, use or possession of the Aircraft or any part
thereof by Sublessee; PROVIDED, HOWEVER, that Sublessee shall not be required to
indemnify any Indemnified Person for (A) Liabilities resulting from the gross
negligence or willful misconduct of such Indemnified Person or a successor,
assignee, director, officer, agent or employee of such Indemnified Person
(unless such willful misconduct or gross negligence results from acts or
omissions of Sublessee on behalf of such Indemnified Person); (B) Liabilities in
respect of the Aircraft which arise from acts or events that occurred prior to
the Delivery Date or occurring after the earlier of (x) the return of the
Aircraft under this Sublease and compliance by Sublessee with all of the
provisions of SECTION 19, and (y) the expiration or earlier termination of this
Sublease under circumstances not requiring the return of the Aircraft, except in
the case of any such return, expiration or termination occurring in connection
with the exercise

                                       37


of rights pursuant to SECTION 18; (C) Liabilities to the extent resulting from
the breach of any representation, warranty or covenant made by an Indemnified
Person herein or in any other Operative Document to which such Indemnified
Person is a party (unless such breach is the result of Sublessee's failure to
comply with the Sublessee Documents); (D) Liabilities resulting from any
violation by an Indemnified Person of Section 5 of the Securities Act of 1933,
as amended (or any comparable successor thereto), or otherwise arising out of
the transfer, after the date of this Sublease, of any Note or of the ownership
interest in the Aircraft not consented to by Sublessee; (E) Liabilities which
are or relate to an Imposition described in SECTION 15 of this Sublease except
to the extent provided therein, it being understood that all indemnities for
Impositions are covered by SECTION 15; (F) Liabilities resulting from a
voluntary disposition by Lessor or any Indemnified Person, as the case may be,
affecting in respect of or of all or any part of its interest in the Aircraft,
the Airframe, any Engine, any Propeller, any Part, any Operative Document, the
Collateral or any payment of Rent, including any Liability arising as a result
of acts of or claims against, or which secure the obligations of Sublessor,
Lessor or Lender (or Persons claiming through Sublessor, Lessor or Lender), but
excluding any other acts of such Persons in accordance with the terms of this
Sublease or any other Sub lessee Document; or (G) Liabilities to the extent
arising out of or resulting from the construction, manufacture, installation or
design of the Aircraft by the Manufacturer, including any breach by the
Manufacturer of patent, trademark or invention rights in connection with the
construction, manufacture, installation or design of the Aircraft.

          14.2 Sublessee shall be bound under this SECTION 14 irrespective of
whether such Indemnified Person shall also be indemnified with respect to such
Liabilities elsewhere under this Sublease or under any other Operative Document
or by any other Person, and any Indemnified Person may proceed directly against
Sublessee under this SECTION 14 without first resorting to any such other rights
of indemnification. With respect to any payment for indemnity hereunder, such
payment for indemnity shall include any amount necessary to hold each
Indemnified Person harmless on a net after-tax basis and taking into account any
tax benefit or detriment realized by such Indemnified Person as a result of such
payment from all taxes required to be paid by such Indemnified Person with
respect to such payment for indemnity under the laws of any Federal, state or
local government or taxing authority in the United States of America.

          14.3 Upon commencement of any proceeding (including the written threat
or written claim of any proceeding) against an indemnified Person involving any
one or more Liabilities for which indemnity is provided hereunder, such
Indemnified Person shall promptly, upon receiving written notice thereof, give
notice of such commencement to Sublessee, PROVIDED that, the failure by

                                       38


Indemnified Person so to notify Sublessee shall not release Sublessee from any
of its obligations under this SECTION 14, unless such failure materially impairs
Sublessee's ability to participate in such proceeding, but any payment by
Sublessee to any Indemnified Person pursuant to this SECTION 14 shall not be
deemed to constitute a waiver or release of any right or remedy (including any
remedy of damages) Sublessee may have against such Indemnified Person if, solely
as a result of the failure by indemnified Person to give Sublessee notice in
accordance with the first sentence of this paragraph, Sublessee is unable to
contest the Liability or other liability indemnified against pursuant to this
SECTION 14. Sublessee shall be entitled (i) in any proceeding that involves
solely a claim for one or more Liabilities or other liabilities in respect to
which Sublessee has an indemnity obligation pursuant to this SECTION 14, to
exercise and defend all rights of such Indemnified Person (PROVIDED that
Sublessee furnishes such Indemnified Person with an opinion of counsel
reasonably satisfactory to such Indemnified Person to the effect that there
exists a meritorious basis for contesting such liabilities or other liabilities
unless (x) such proceedings will, in the opinion of counsel for such
Indemnified Person involve any reasonable possibility of the sale, forfeiture or
loss of the Aircraft or any Engine or Propeller or any part thereof, or (y) such
Liabilities or other liabilities, in the opinion of counsel for Lessor, have
a reasonable possibility of otherwise compromising or jeopardizing any
substantial interests of Lessor in and to the Aircraft or any interest
hereunder) or to require such Indemnified Person to assume responsibility
therefor and control thereof, (ii) in any proceeding involving a claim fox one
or more such Liabilities or the transactions contemplated by this Sublease and
the other Operative Documents, to require such Indemnified Person to assume
responsibility therefor and control thereof to the extent that any of the same
may be and is severed from such other claims (so long as, in the opinion of
counsel for the affected Indemnified Person, such severance and assumption of
responsibility and control by such Indemnified Person does not have reasonable
possibility of adversely affecting the resolution of such other claims), or
(iii) in any other case, to be consulted by such Indemnified Person with respect
to proceedings subject to the control of such indemnified Person.
Notwithstanding any of the foregoing, Sublessee shall not be entitled to require
Sublessor or any other Indemnified Person to assume responsibility for and
control of any judicial proceeding if (A) the Liabilities or other liabilities
involved are less than $100,000 in the aggregate, or such Liabilities are
covered by insurance or Sublessee is financially capable of paying such claim or
Liability or (B) an Event of Default hereunder exists. In the event Sublessor
or any other Indemnified Person does not contest a Liability in any judicial
proceeding, Sublessee shall have the right, to the extent permitted by law, to
contest, at its sole cost and expense, any such claim or Liability by
substituting itself for Sublessor or such Indemnified Person in any judicial
proceeding that involves solely a claim or liability for one or more

                                       39


Liabilities or other liabilities in respect to which Sublessee has an indemnity
obligation pursuant to this SECTION 14. To the extent Sublessee is entitled to
defend any claim hereunder, the Indemnified Person with respect to such claim
may participate at its sole cost and expense.

          14.4 Each Indemnified Person claiming hereunder shall supply Sublessee
with such information as Sublessee shall reasonably request to defend or
participate in any proceeding to the extent permitted by this SECTION 14. Unless
an Event of Default has occurred and is continuing, such Indemnified Person
shall not enter into a settlement or other compromise or consent to a judgment
with respect to any Liability without the prior written consent of the
Sublessee, (which consent shall not be unreasonably withheld or delayed), unless
such Indemnified Person waives its right to be indemnified with respect to such
Liability under this SECTION 14.

          14.5 If an Indemnified Person shall obtain a repayment of any
Liabilities paid by Sublessee pursuant to this SECTION 14, such Indemnified
Person shall promptly pay to Sublessee the amount of such repayment, together
with any interest (other than interest for the period, if any; after such
Liability was paid by such Indemnified Person until such Liability was paid or
reimbursed by Sublessee) received by such Indemnified Person on account of such
repayment.

          14.6 Nothing in this SECTION14 or in SECTION 15 shall be deemed to
constitute a guarantee by Sublessee of the residual value of the Aircraft or of
the payment of the Notes.

          14.7 In the event Sublessee shall be obligated to indemnify any
Indemnified Person pursuant to this SECTION 14, Sublessee shall be subrogated to
the rights of the Indemnified Person in respect of the matter as to which the
 indemnity was paid.

          14.8 For purposes of this SECTION 14, "Indemnified Person" shall
include all corporations making a consolidated or combined return in which an
Indemnified Person is included and the agents, employees, servants, successors
and assigns of any thereof.

          14.9 The provisions of this SECTION 14 shall survive the expiration
or termination of this Sublease.

Section 15.   TAXES AGAINST LESSOR OR AIRCRAFT.

          15.1 Sublessee hereby assumes liability for and shall pay, indemnify,
protect, save and keep each Indemnified Person, including, without limitation,
Sublessor, Guarantor, Lessor and Lender, harmless on an after-tax basis from and
against, any and all fees, taxes (including, without limitation, income,
franchise, excise, sales, use, occupational, capital, value added, property

                                       40


and stamp taxes and taxes imposed in respect of items of tax preference),
levies, assessments, imposts, duties, charges or withholdings of any nature
whatsoever, together with any penalties, fines or interest thereon (all of the
foregoing being herein collectively called "Impositions") imposed against any
Indemnified Person, Sublessee or the Aircraft or any part thereof by any
federal, state or local government or taxing authority or by any foreign
governmental subdivision or other foreign taxing authority (i) upon or with
respect to the Aircraft or any part thereof or any interest in any thereof, (ii)
upon or with respect to the manufacture, acquisition, construction,
installation, purchase, delivery, ownership, lease, sublease, possession,
rental, use, operation, transportation, return, sale, replacement, storage,
repossession, maintenance, repair, abandonment, redelivery, modification,
rebuilding, importation, exportation or disposition (excluding any disposition
of the Aircraft which occurs after the expiration of the Term of this Sublease
unless such disposition results from the termination of this Sublease pursuant
to a default under SECTION 18 hereof) of the Aircraft or any part thereof, (iii)
upon or with respect to the rentals, receipts, earnings or gains arising from
the Aircraft or any part thereof or the income or proceeds with respect to the
Aircraft, including, without limitation, principal, interest and. other amounts
payable on the Notes, (iv) upon or with respect to this Sublease or any other
Operative Document including the performance of any of the transactions,
obligations or indemnities contemplated hereby or thereby, or the issuance,
acquisition or transfer of the Notes, or (v) with respect to liabilities arising
under the Tax Indemnity Agreement solely as a result of acts or omissions of
Sublessee; PROVIDED, HOWEVER, that notwithstanding anything in this Sublease,
the Tax Indemnity Agreement, the Lease or any other Operative Document to the
contrary, Sublessee shall have no obligation to pay or to hold Sublessor or any
other Indemnified Person harmless against any tax, claim or other Liability,
with respect to:

               15.1.1 Impositions which are based on, or measured by, the net
income of any Indemnified Person to the extent imposed by the United States of
America, including Impositions by the United States Federal Government expressly
in lieu of such taxes and any withholding taxes imposed by the United States
federal government in connection with such Impositions;

               15.1.2 Impositions which are based on, or measured by, the net
income of any Indemnified Person to the extent imposed by any foreign country,
state, city or municipality or by any political subdivision of such foreign
country, state, city or municipality or any similar franchise, net worth, right
of an Indemnified Person to exist, doing business, or employing capital tax, but
only to the extent that the amount of any such Imposition imposed by any such
taxing authority does not exceed the amount of Impositions to which such
Indemnified Person would have been subject if the Aircraft had not been used,
operated, stored or

                                       41


maintained in that taxing authority's jurisdiction;

               15.1.3 Impositions which are imposed with respect to any period,
or with respect to any act or omission, which occurred or failed to occur prior
to the Delivery Date with respect to the Aircraft or occurring after the earlier
of (x) the return of the Aircraft under this Sublease and compliance by
Sublessee with all of the provisions of SECTION 19, and (y) the expiration
or earlier termination of this Sublease under circumstances not requiring the
return of the Aircraft, except in the case of any such return, expiration or
termination occurring in Connection with the exercise of rights pursuant to
SECTION 18;

               15.1.4 Impositions resulting from a voluntary transfer or other
voluntary disposition or any involuntary transfer or involuntary disposition by
any Indemnified Person of any interest in the Aircraft, the Lease, the Sublease,
the Notes or the Collateral, unless such transfer or other disposition occurs
(A) while a Sublease Event of Default exists, if such transfer or other
disposition is pursuant to the exercise of one of Sublessor's remedies under the
Sublease as a result of such Sublease Event of Default, (B) pursuant to or in
accordance with a transfer or other event with respect to which Stipulated Loss
Value is required to be paid, unless such Stipulated Loss Value is paid in full,
or (C) in the case of an involuntary transfer or involuntary disposition, as a
result of any acts, omissions or misrepresentations of Sublessee;

               15.1.5 Impositions imposed upon Sublessor or any other
Indemnified Person by virtue of such Indemnified Person's failure to file
proper and timely reports or returns or to pay any taxes when due, failure to
claim an applicable exemption or failure to register with any governmental
entity having jurisdiction over Impositions, unless any of the foregoing
failures results from any action or omission by Sublessee, including the failure
to provide such Indemnified Person or any other Person information in a proper
and timely manner or otherwise to take such actions as are required of Sublessee
hereunder with respect to such Impositions;

               15.1.6 Impositions payable by any Indemnified Person as a direct
and primary result of such Indemnified Person's gross negligence or willful
misconduct or a breach or inaccuracy of a material representation or warranty or
covenant made by such Indemnified Person in any Operative Document or any
document required to be delivered under any Operative Document;

               15.1.7 Impositions imposed upon an Indemnified Person to the
extent resulting from such Indemnified Person engaging in transactions other
than those contemplated by the Operative Documents; or

               15.1.8 Impositions in the nature of an intangible tax imposed by
the Federal, state or local government or taxing

                                       42


authority in the United States or any foreign country, upon or with respect to
the value of the interest of the Lender in the Notes or the Loan Agreement, but
only to the extent that (i) such Person would have been subject to such tax in
the absence of the use, operation, storage or maintenance of the Aircraft in
such jurisdiction or Sublessee's presence therein, or (ii) such Imposition is
described in any other clause of this SECTION 15.1;

PROVIDED, that Sublessee agrees to pay any such Impositions referred to in the
foregoing clauses which are in substitution for or relieve Sublessee from any
Impositions or indemnity therefor which Sublessee would otherwise be obligated
to pay under the terms of this SECTION 15.

          15.2 With respect to any payment or indemnity under this SECTION 15,
such payment or indemnity shall include any amount necessary to hold each
Indemnified Person harmless on a net after-tax basis (taking into account any
tax benefit or detriment realized as a result of receipt of such payment) from
all taxes required to be paid by such Indemnified Person with respect to such
payment or indemnity under the laws of any Federal, state or local government or
taxing authority in the United States of America. In case any report or return
is required to be filed with respect to any obligation of Sublessee under this
SECTION 15 or arising out of this SECTION 15, Sublessee will either make such
report or return in such manner as will show the ownership of the Aircraft in
Lessor or will notify Sublessor or such other Indemnified Person of such
requirement and make such report or return in such manner as shall be
satisfactory to Sublessor or such other Indemnified Person.

          15.3 (a) Upon the commencement of any proceeding (including the
written claim or written threat of any proceeding) against any Indemnified
Person involving one or more Impositions, such Indemnified Person shall
promptly, upon receiving written notice thereof, give notice of such
commencement to Sublessee. If Sublessee so requests in writing within thirty
(30) days after receipt of such notice, such Indemnified Person shall exercise
on Sublessee's behalf or, upon Sublessee's request, permit Sublessee to exercise
any contest rights which such Indemnified Person may have PROVIDED, HOWEVER,
that in no event shall any Indemnified Person be required to exercise its
contest rights or shall Sublessee be permitted (except with such Indemnified
Person's sole consent) to contest or to continue to contest any Imposition for
which Sublessee is obligated pursuant to this SECTION 15, unless (s) no Default
or Event of Default hereunder has occurred and is continuing; (t) no amounts of
Rent are past due under this Sublease; (u) the amount of such claim, together
with all claims of a similar nature (both present and reasonably expected to be
asserted), are at least $50,000 in the aggregate; (v) Sublessee acknowledges its
liability to such Indemnified Person for an indemnity payment in accordance with
the provisions of this SECTION

                                       43


15 as a result of such claim if and to the extent such Indemnified Person or
Sublessee, as the case may be, does not prevail in the contest of such claim;
(w) such indemnified Person receives from Sublessee (i) an indemnity
satisfactory to such Indemnified Person for any liability, expenses or loss
arising out of or relating to such contest and (ii) an opinion of tax counsel
selected by Sublessee and reasonably acceptable to the affected Indemnified
Person to the effect that a reasonable basis exists for contesting such claim,
which opinion shall be in form and substance reasonably satisfactory to such
Indemnified Person and furnished at Sublessee's sole expense; (x) Sublessee
agrees to pay any expenses that any Indemnified Person may incur in connection
with contesting such claim (including, without limitation, all out-of-pocket
costs, expenses, losses, reasonable legal and accounting fees, disbursements,
penalties, interest and additions to tax); (y) such Indemnified Person obtains
at Sublessee's cost an opinion of independent counsel selected by the Sublessee
and approved by the affected Indemnified Person (which approval shall not be
unreasonably withheld) to the effect that the action to be taken will not result
in any risk of sale, forfeiture or loss of, or the creation of any Lien (except
if Sublessee adequately bonds such Lien or otherwise makes provision to protect
the interests of all Indemnified Persons in a manner reasonably satisfactory to
each Indemnified Person) on, the Aircraft, or any part or portion thereof or any
interest therein or in any way interfere with the timely payment of Rent or any
amount of the Loans from time to time becoming due and payable; and (z) if such
contest is conducted in a manner requiring the payment of the claim, Sublessee
pays the amount required in order to contest the claim. Any Imposition imposed
on an Indemnified Person as a result of an advance by Sublessee of a tax payment
or other costs incurred by such Indemnified Person, pursuant to this paragraph
shall he indemnified under this SECTION 15 without regard to the exclusions in
SECTION 15.1.1 and 15.1.2. An Indemnified Person shall keep Sublessee reasonably
informed of and shall permit Sublessee to participate in any such proceedings
that Sublessee does not conduct itself. if such Indemnified Person obtains a
refund of all or any part of any Imposition Paid by Sublessee, such Indemnified
Person shall pay Sublessee, but not before Sublessee makes all payments
theretofore due such Indemnified Person pursuant to this SECTION 15 and any
other payments theretofore due under any of the Operative Documents, an amount,
which after taking into account all taxes saved by such Indemnified Person as a
result of the payment of such amount, shall be equal to the amount of such
refund net of reasonable expenses not previously reimbursed and Impositions
payable with respect to receipt thereof, including interest received
attributable thereto; PROVIDED, HOWEVER, that notwithstanding the foregoing
portions of this sentence, such Indemnified Person shall not be obligated to
make any payment to Sublessee pursuant to this sentence as long as a Default or
an Event of Default exists hereunder, but such payment shall be held by such
Indemnified Person as security for the obligations of

                                       44


Sublessee under the Operative Documents, and at such time as such Default or
Event of Default is later cured, then such Indemnified Person shall make such
payments to Sublessee.

          (b) Notwithstanding anything contained in this SECTION 15.3 to the
contrary, an Indemnified Person shall not be required to exercise its contest
rights on Sublessee's behalf if the subject matter of any claim is of a
continuing nature and has previously been decided adversely (other than as a
result of a settlement) pursuant to the contest provisions of this SECTION 15,
unless there is a Change in Law (including, without limitation, amendments to
statutes or regulations, administrative rulings and court decisions) after such
claim has been so previously decided, and such Indemnified Person receives an
opinion, also addressed to Sublessee, of tax counsel selected by the Sublessee
and approved by such Indemnified Person (which approval shall not be
unreasonably withheld) and furnished at Sublessee's sole expense to the effect
that, as a result of such change, it is more likely than not that the position
which such Indemnified Person or Sublessee, as the case may be, had asserted in
such previous contest, would prevail.

          (c) If, in the course of exercising its contest rights on Sublessee's
behalf, an Indemnified Person learns that a taxing authority is willing to agree
to a settlement of a claim, such Indemnified Person shall notify Sublessee of
such settlement proposal. If the settlement proposal is acceptable to Sublessee,
Sublessee shall so notify such Indemnified Person and such Indemnified Person
shall agree to the settlement proposal; PROVIDED, HOWEVER, that an Indemnified
Person shall not be obligated to agree to the settlement proposal if such.
Indemnified Person releases Sublessee from any further obligations pursuant to
this SECTION 15 with respect to such claim and if such Indemnified Person agrees
that the amount of any indemnity payment determined under this SECTION 15 in
respect of such claim, which Sublessee shall be required to pay to such
Indemnified Person, shall not exceed the amount of such indemnity payment that
would have been required if such Indemnified Person had agreed to the settlement
proposal. If any such settlement proposal is acceptable to such Indemnified
Person but is unacceptable to Sublessee, Sublessee shall inform such Indemnified
Person of the amount for which Sublessee would be willing to settle such claim.
If such Indemnified Person accepts the settlement proposal, the amount of any
indemnity payment determined under this SECTION 15 in respect of such claim that
Sublessee shall be required to pay to such Indemnified Person shall not exceed
the amount for which Sublessee would have been willing to settle such claim.

          (d) Nothing contained in this SECTION 15 shall require any Indemnified
Person to exercise its contest rights or permit Sublessee to contest a claim
which would otherwise require any Indemnified Person to exercise its contest
rights if such Indemnified Person waives payment by Sublessee of any amount that

                                       45


might otherwise be payable by Sublessee under this SECTION 15 and the Tax
Indemnity Agreement by way of indemnity in respect of such claim. In the event
of such waiver, such Indemnified Person shall promptly return any amounts
previously advanced by Sublessee pursuant to this SECTION 15.3, including,
without limitation, payment of the impositions which were the subject of the
claim and reimburse Sublessee for amounts previously paid to such Indemnified
Person in respect of expenses incurred in contesting such claim.

          15.4 Each Indemnified Person shall supply Sublessee with such
information as may be reasonably requested by Sublessee as, in the reasonable
opinion of counsel of such Indemnified Person, will enable Sublessee to
participate in or control and conduct any proceeding to the extent permitted by
this SECTION 15. In the event that an Indemnified Person enters into a
settlement or other compromise with respect to any Imposition without prior
written consent of Sublessee (which consent shall not be unreasonably withheld
or delayed), such Indemnified Person shall be deemed to have waived its right to
be indemnified with respect to such Imposition under this SECTION 15.

          15.5 If by reason of any Impositions paid or indemnified against by
Sublessee under this SECTION 15 or the Tax indemnity Agreement any Indemnified
Person thereafter shall realize, in its sole opinion, a tax benefit (whether by
means of a credit, deduction or otherwise) that results in a reduction in
Impositions, then such Indemnified Person shall, to the extent it can do so
without prejudice to the retention of the amount of such benefit, pay to
Sublessee the amount which (after adjustment for any further tax savings
realized by such Indemnified Person as a result of the payment thereof) such
Indemnified Person, in its reasonable business judgment, determines to equal the
amount of such reduction in Impositions (such Indemnified Person's payment of
such amount, absent manifest error, being conclusive evidence of the amount So
owing to Sublessee), EXCEPT that such Indemnified Person shall not be obligated
to make any payment pursuant to this sentence to the extent the amount of such
payment would exceed (x) the amount of all prior payments in respect of such
Impositions by Sublessee to such Indemnified Person pursuant to this SECTION 15,
less (y) the amount of all prior payments in respect of such Impositions by such
Indemnified Person to Sublessee pursuant to this SECTION 15.

          15.6 In the event Sublessee shall fail to make any payment or to do
any act as provided in this SECTION 15, then Sublessor, Lessor or Lender shall
have the right, but not the obligation, without notice to or demand upon
Sublessee, and without releasing Sublessee from any obligation in this
SECTION 15, to make or do the same, and to pay, purchase, contest or compromise
any encumbrance, charge or lien which in Sublessor's, Lessor's or Lender's
judgment, as the case may be, places Lessor's title to the Aircraft, Lender's
security interest in the Aircraft, Lessor's interest in the Aircraft,
Sublessor's interest in the Aircraft, or

                                       46


Sublessee's possession of the Aircraft in jeopardy and in exercising any such
rights, incur any liability and expend whatever reasonable amounts Sublessor,
Lessor or Lender in their respective absolute discretion may deem necessary
therefor. All sums so incurred or expended by Sublessor, Lessor or Lender shall
be, without demand, immediately due and payable by Sublessee and shall bear
interest at the Base Rate or such lesser amount as may represent the maximum
rate permitted by Applicable Law.

          15.7 In the event Sublessee shall be obligated to indemnify any
Indemnified Person pursuant to this SECTION 15 or the Tax Indemnity Agreement,
Sublessee shall be subrogated to the rights of the Person indemnified in
respect of the matter as to which the indemnity was paid.

          15.8 For purposes of this SECTION 15, "Indemnified Person" shall
include all corporations making a consolidated or combined return in which an
Indemnified Person is included and the agents, employees, servants, successors
and assigns of any thereof.

          15.9 Sublessee shall furnish Sublessor within sixty (60) days after
the end of each calendar year included in the whole or in part of the Term; a
report with respect to the location of the Aircraft during such calendar year in
sufficient detail to enable Sublessor and Lessor to determine the portions of
its income and deductions with respect to the transaction contemplated by the
Operative Documents appropriately treated as attributable or allocable to
sources within and without the United States within the meaning of Section
861-863 of the Code. Also, during the Term hereof, Sublessee agrees to maintain
or cause to be maintained such reasonable and customary records, and provide or
cause to be provided such reasonable and customary information, as Lessor may
reasonably require from Sublessor to enable Lessor to fulfill any of its tax
filing obligations, including without limitation, copies of all log books. Upon
written request of Sublessor, Sublessee also will promptly and duly execute and
deliver or cause to be duly executed and delivered, to Lessor or cooperate in
filing with the appropriate governmental authority, such further reasonable and
customary documents and assurances and take such further reasonable and
customary action as Sublessor may from time to time reasonably request in order
more effectively to carry out the intent and purpose of this Sublease and to
protect Lessor's right to the anticipated income tax consequences contemplated
by the Operative Documents.

          15.10 The provisions of this SECTION 15 shall survive the expiration
or termination of this Sublease and the other Operative Documents.

Section 16. FURTHER ASSURANCES, RECORDATION, TITLE, REGISTRATION.

          Sublessee shall cooperate with Sublessor in connection

                                       47


with the filing and recording of this Sublease and Sublease Supplements thereto,
including but not limited to Sublease Supplement No. 1, and any other document
reasonably requested by Sublessor, and the maintenance of the recordation
thereof under the Transportation Code and in such other public offices as may be
deemed necessary and appropriate by FAA Counsel or by Sublessor or Sublessor's
counsel in order to protect the rights and interests of Sublessor hereunder and
to perfect such rights and interests of Sublessor in and to this Sublease and
the Rents due and to become due hereunder and will not register nor permit the
registration of the Aircraft under the laws of any jurisdiction outside the
United States. Sublessee shall not do any act or take or direct any Person to
take any action which might cause the Aircraft to be ineligible for registration
under the Transportation Code. Sublessee shall, at its expense, cooperate and
assist in accomplishing all recording, registrations and filings of this
Sublease, and any of the Operative Documents and any mortgage, security
interest, waiver, license, permit or certificate incident thereto, required by
law or deemed reasonably necessary by Sublessor, Lessor or Lender to protect
their respective interests, in the Aircraft, and shall furnish Sublessor with
satisfactory evidence of each such recording, registration and filing, including
without limitation, evidence that continuation statements have been filed with
respect to all financing statements filed pursuant to this SECTION 16. Sublessee
shall from time to time do and perform such other acts and execute such other
and further instruments as may be required by law or reasonably be requested by
Sublessor, including such legal opinions as may reasonably be required by
Sublessor, to establish, maintain and protect Sublessor's rights and remedies
and to carry out the effect, intent and purpose of this Sublease.

Section 17. INSPECTION, REPORTS, AUDITS.

          17.1 Sublessor, Lessor and, until delivery of the Release Notice,
Lender, and their respective authorized representatives may inspect (subject to
Sublessee's reasonable requirements regarding security), at their own expense,
the Aircraft and the books and records of Sublessee with respect thereto, and
make copies and extracts therefrom, and may discuss Sublessee's affairs,
finances, and accounts relating to the Aircraft and Sublessee's operation, with
its officers, and Sublessee shall furnish to Sublessor statements accurate in
all material respects regarding the condition and state of repair of the
Aircraft, all upon such reasonable notice and at such reasonable times during
normal hours and as often as may be reasonably requested and all at the expense
of Person requesting the same. None of Sublessor, Guarantor, Lessor nor Lender
shall have any duty to make any such inspection or inquiry or incur any
liability or obligation by reason of not making any such inspection or inquiry.
Sublessee may condition any such inspection or inquiry upon the agreement of the
Person requesting inspection to maintain

                                       48


the same standard of confidentiality with respect to information so obtained as
customarily applies to such Person's own confidential information.

          17.2 Sublessee shall furnish to Sublessor the following:

               (a) QUARTERLY STATEMENTS. As soon as practicable after the end
          of each quarterly fiscal period in which a quarterly report is
          prepared in each fiscal year of Sublessee and in any event within
          forty-five (45) days thereafter (but in no event later than such
          information is made generally available to the shareholders of
          Sublessee), duplicate copies of:

                   (1) A consolidated balance sheet of Sublessee and its
               consolidated subsidiaries as of the end of such quarter, and

                   (2) Consolidated statements of income and if available, cash
               flows of Sublessee and its consolidated subsidiaries for such
               quarter and (in the case of the second and third quarters) for
               the portion of the fiscal year ending with such quarter setting
               forth in comparative form the figures for the corresponding
               periods in the previous fiscal year, all in reasonable detail and
               certified as complete and correct, subject to changes resulting
               from year-end adjustments, by a principal financial officer of
               Sublessee;

               (b) ANNUAL STATEMENTS. As soon as practicable after the end of
          the fiscal year of Sublessee, and in any event within one hundred
          twenty (120) days thereafter (but in no event later than such
          information is made generally available to the shareholders of
          Sublessee), duplicate copies of:

                   (1) Consolidated balance sheet of Sublessee and its
               consolidated subsidiaries at the end of such year;

                   (2) Consolidated statements of income and if available, cash
               flows of Sublessee and its consolidated subsidiaries for such
               year, setting forth in each case in comparative form the figures
               for the previous fiscal year, all in reasonable detail and
               accompanied by an opinion, if available, thereon of independent
               certified public accountants of recognized national standing
               selected by Sublessee stating that such financial statements
               fairly represent the financial condition of the

                                       49


               companies being reported upon, have been prepared in accordance
               with generally accepted accounting principles consistently
               applied (except for changes in application described); and

                   (3) If an opinion from an independent certified public
               accountant is not available for Sublessee separately, this
               SECTION 17.2(b) is applicable for the consolidated statements of
               its parent company;

               (c) AUDIT REPORTS. Promptly upon receipt thereof one copy of each
          other report submitted to Sublessee or any subsidiary thereof by
          independent accountants in connection with any annual, interim or
          special audit made by them of the books of the Sublessee or of any
          subsidiary; and

               (d) CERTAIN OTHER REPORT. As soon as practicable:

                   (1) after the end of each quarterly period as defined in
               SECTION 17.2(a) or annual period as defined in SECTION 17.2(b),
               duplicate copies of any report or statement required pursuant to
               the Securities Exchange Act of 1934 or the rules or regulations
               promulgated thereunder,

                   (2) after it becomes available, any filing, statement,
               report, registration, prospectus or other document prepared
               pursuant to the Securities Act of 1933 or pursuant to the rules
               and regulations thereunder,

                   (3) any other reports made publicly available to shareholders
               of the Sublessee,

                   (4) if requested by Sublessor, any or all operating plans,
               business plans, traffic reports, forecasts of business or
               forecasts of traffic, and

                   (5) such information as may be readily obtainable by
               Sublessee which is required to enable Lessor, Lender or Sublessor
               to file any reports required by any Governmental Body as a result
               of their respective interests in the Aircraft.

          All of the reports described in SECTION 17.2(a), (b), (c) AND (d) (4)
shall be treated as confidential by Sublessor and may be shared with Guarantor
and not revealed to any party without

                                       50


the prior written consent of Sublessee, except that Sublessor may disclose such
reports to Guarantor, Lessor and Lender if it obtains and delivers to Sublessee
the same agreement with respect to confidential treatment of such reports, all
in form and substance reasonably satisfactory to Sublessee.

Section 18. DEFAULTS, REMEDIES, DAMAGES.

          18.1 Each of the following described events shall be an Event of
Default (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
Applicable Law of any Governmental Body):

               18.1.1 Sublessee fails to make when due any payment of Base Rent
or Stipulated Loss Value or any other sum payable under this Sublease and such
failure to pay continues for seventytwo (72) hours after the date when the same
becomes due;

               18.1.2 Sublessee fails at any time to procure or maintain or
comply with any insurance coverage prescribed herein or such insurance is for
any reason not in full effect; PROVIDED that any such failure shall not
constitute an Event of Default so long as the Aircraft shall not be operated at
any time when such insurance is not in effect, the Aircraft continues to be
coveted by such insurance as is required when the Aircraft is on the ground and
such failure to maintain insurance is fox a period of not more than thirty (30)
days;

               18.1.3 Sublessee fails to observe or perform any of the
covenants, conditions, agreements or warranties to be performed or observed by
Sublessee under the Sublease or any other Sublessee Document other than a
covenant, condition, or agreement specified in SECTIONS 18.1.1 OR 18.1.2 above,
and such failure continues for ten (10) days after the earlier of (a) Sublessee
obtaining actual knowledge or such failure or (b) notice thereof from Sublessor;
PROVIDED, HOWEVER, (i) removal of the Aircraft at any time from those locations
permitted by this Sublease and (ii) except as provided for in SECTION 11.1
(iii) and SECTION 12 .2 (vi), if the Aircraft is not in material compliance with
the Maintenance Program or is not in such operating condition as may be
necessary to enable the Airworthiness Certificate of the Aircraft to be
maintained, or so as to permit the uninterrupted use or operation of the
Aircraft, after Sublessee with reasonable diligence should have obtained actual
knowledge thereof and it is not remedied immediately upon obtaining such
knowledge, shall constitute an immediate Event of Default;

               18.1.4 Any representation or warranty of Sublessee contained in
this Sublease, or in any document or certificate furnished by Sublessee pursuant
hereto or thereto proves to be untrue or incorrect in any material respect when
made or repeated

                                       51


and, if capable of being cured and Sublessee is diligently proceeding to so
cure, such untruthfulness or incorrectness shall continue to be unremedied for a
period of fifteen (15) days after written notice thereof by Sublessor; PROVIDED,
HOWEVER, in no event shall Sublessee have any cure rights pursuant to this
Section 18.1.4 if such untrue or incorrect representation or warranty was
knowingly made by Sublessee;

               18.1.5 Sublessee consents to the appointment of a receiver,
custodian, trustee, liquidator or other officer with similar powers, of itself
or of a substantial part of its property, is generally unable to pay debts as
they become due unless such debts are the subject of a bona fide dispute, or
admits in writing its insolvency or bankruptcy or its inability to pay its debts
generally as they become due or makes an assignment for the benefit of
creditors, or files a petition in bankruptcy or a petition or an answer seeking
reorganization in a proceeding under any bankruptcy laws (as now or hereafter in
effect) or a readjustment of its indebtedness or an answer admitting the
material allegations of a petition filed against Sublessee in any such
proceeding, or petitions, answers or consents to seek relief under the provision
of any bankruptcy or other similar law, or an agreement, composition, extension
or adjustment with its creditors;

               18.1.6 An order, judgment or decree is entered by any court of
competent jurisdiction appointing, without the consent of Sublessee, a
custodian, receiver, trustee, liquidator or other officer with similar powers,
with respect to Sublessee or of any substantial part of its property, or any
substantial part of the property of Sublessee is sequestered, and any such
order, judgment or decree of appointment or sequestration remains undismissed,
unstayed or unvacated, for a period of sixty (60) days after the date of entry
thereof;

               18.1.7 A petition against Sublessee in a proceeding under the
bankruptcy laws or other insolvency laws as now or hereafter in effect, is
filed, and any decree or order adjudging Sublessee a bankrupt or insolvent in
such proceedings, remains in force, unstayed for a period of sixty (60) days
thereafter, or, in the case where the approval of such a petition by the court
of competent jurisdiction is required by the petition as filed or amended is
approved as filed by such court and such approval is not withdrawn or the
proceedings dismissed within sixty (60) days thereafter, or if, under the
provision of any law providing for reorganization or winding up of corporations
which may apply to Sublessee, any court of competent jurisdiction assumes
jurisdiction, custody or control of Sublessee or of any substantial part of
its property and such jurisdiction, custody or control remains in force
unrelinquished, unstayed or unterminated for a period of sixty (60) days;

               18.1.8 Sublessee or any Affiliate of Sublessee, is

                                       52


in default, and such default continues unremedied for five (5) days, with
respect to any material indebtedness, lease obligation or material contract of
Sublessee or any Affiliate of Sublessee;

               18.1.9 Any uninsured final judgment for the payment of money
aggregating in excess of $150,000 is rendered against Sublessee and the same
remains outstanding and unstayed or undischarged for a period of thirty (30)
days thereafter, during which period execution of such judgment is not
effectively stayed, bonded or insured;

               18.1.10 Any assertion by Sublessee or through any other Person
on behalf of Sublessee of the invalidity or unenforceability of all or any part
of this Sublease (not including an assertion by Sublessee that performance by
Sublessee is not required due to a breach or a nonperformance by Sublessor or
any other Person of its obligations hereunder or under any other Operative
Documents);

               18.1.11 Due to the act or omission by Sublessee, any document or
instrument required to be filed or recorded in accordance with SECTION 11.1 or
SECTION 16 hereof is not duly filed or recorded at such time and at such place
or places as required under SECTION 11.1 or SECTION 16 to perfect or continue
the perfection of the interest of Lessor, Lender or Sublessor or any other.
Person in and to the Aircraft;

               18.1.12 Any transfer by Sublessee of possession of the Airframe
or any Engine or Propeller to any Person other than in accordance with SECTIONS
11 OR 20 which continues unremedied for at least fifteen (15) days; or

               18.1.13 Any act or omission of Sublessee which would be or would
result in an Event of Default under the Lease, whether or not immediately or
with the passage of time, shall be and become an Event of Default hereunder at
the same time and under the same circumstances as established by the Lease;
PROVIDED, HOWEVER, that upon the occurrence of any act or omission of Sublessee
which would result in an Event of Default under the Lease but is not otherwise
an Event of Default hereunder, the Sublessee shall have thirty (30) days from
the date upon which it receives actual knowledge thereof, to cure the Lease
Event of Default.

          18.2 Upon the occurrence of any one or more of the above described
Events of Default and at any time thereafter so long as the same shall be
continuing, Sublessor may, at its option, declare this Sublease to be in
default, and at any time thereafter, Sublessor may exercise, and Sublessee shall
comply with, any or all of the following rights and remedies with respect to all
or any part of the Aircraft:

               18.2.1 Cause Sublessee, upon the written demand of

                                       53


Sublessor and at Sublessee's expense and risk, to assemble and return promptly
or store, and Sublessee shall assemble and return promptly or store, all or such
part of the Aircraft as Sublessor may so demand, to Sublessor or its order in
the manner and condition required by, and otherwise in accordance with all the
provisions of SECTION 19, or Sublessor, at its option, may enter upon the
premises where all or any part of the Aircraft is located and take immediate
possession of and remove the same together with any engine or propeller which is
not an Engine or propeller but which is installed on the Airframe, subject to
all of the rights of the owner, lessor, lienor or secured party with respect to
such engine or propeller, by summary proceedings, by self-help, or otherwise.

          The return and storage of the Aircraft as hereinbefore and hereinafter
provided are of the essence of this Sublease, and upon application to any court
of equity having jurisdiction in the premises, Sublessor shall be entitled to a
decree against Sublessee requiring specific performance of the covenants of
Sublessee so as to return and store the Aircraft as provided in this SECTION
18.2.1 and in SECTION 19.

               18.2.2 Proceed by appropriate court action, or actions, either at
law or in equity, to enforce performance by Sublessee of the applicable
covenants of this Sublease or to recover damages for the breach thereof, and it
is expressly agreed that the right to resort to any such court action is a
remedy given to Sublessor in addition to, and not in lieu of, any other remedies
given to Sublessor under this Sublease other than those provided for in SECTION
18.2.5;

               18.2.3 Give notice to Sublessee specifying the occurrence giving
rise to such Event of Default, and stating that this Sublease shall expire and
terminate on the dates specified in such notice, and on the date so specified
(if any such Event of Default shall be continuing), subject to the provisions
hereof relating to the survival of Sublessee's obligation, this Sublease shall
expire and terminate (hereinafter such expiration and termination sometimes
being referred to as "premature termination") and all rights of Sublessee under
this Sublease shall absolutely cease and terminate but Sublessee shall return
the Aircraft in accordance with SECTION 18.2.1 above, PROVIDED, HOWEVER, in the
event Sublessee fails to promptly return the Aircraft, Sublessor may take or
cause to be taken by its agent or agents immediate possession of the Aircraft
without any liability to Sublessor to return any Rent theretofore paid hereunder
and free and clear of any claims of Sublessee whatsoever, and may remove the
same from the possession and use of the Sublessee, and for such purpose may
enter onto Sublessee's premises where the Aircraft may be located and may use
and employ in connection with such removal any supplies, services, means or
other facilities of Sublessee with or without process of law, and Sublessee
hereby expressly agrees and

                                       54


consents to the foregoing;

               18.2.4 With or without taking possession thereof sell, at one or
more public or private sales, at such times and places, to such persons
(including Sublessor) and without notice, or otherwise dispose of, use, operate,
sublease or hold, all or any part of the Aircraft as Sublessor may decide, free
and clear of any rights of Sublessee, and without any duty to account to
Sublessee with respect to such action for any proceeds thereof (except to the
extent required by the provisions of SECTION 18.2.5 below) and to hold the
Sublessee liable for any installment of Rent due on or before the date of such
sale to the extent such Rent covers the period upto the date of such sale, or
hold, use, operate, sublease to others or keep idle all or any part of the
Aircraft as Sublessor may determine, in each case free and clear or any rights,
of Sublessee except as hereinafter set forth in this SECTION 18 and without any
duty to account to Sublessee with respect to such action or inaction;

               18.2.5 In order to preserve for Sublessor the benefits intended
by the transactions contemplated by the Sublease and the Sublessee Documents,
recover from Sublessee as liquidated damages for loss of bargain and not as a
penalty, which Sublessor shall be deemed to have sustained by reason of
Sublessee's breach of this Sublease or any other Sublessee Document, and to that
end, Sublessor, at its option without prejudice to any other remedies to which
it may be entitled, may exercise any of the following remedies under either
clause (i), (ii) or (iii) below, but not under more than one of such clauses:

               (i) Whether or not Sublessor has exercised, or at any time
exercises, any of its rights under SECTIONS 18.2.1 or 18.2.4 above with respect
to all or any part of the Aircraft, Sublessor, by written notice to Sublessee
specifying a payment date, which shall be a Base Rent Payment Date not earlier
than ten (10) days from the date of such notice, in order to preserve for
Sublessor the benefits intended by the transactions contemplated by the Sublease
and the Sublessee Documents, shall demand that Sublessee pay to Sublessor, and
Sublessee shall pay to Sublessor, on the payment date specified in such notice,
as liquidated damages for loss of bargain and not as a penalty (in lieu only of
Base Rent for the Aircraft due after the payment date specified in such notice),
any unpaid Rent for the Aircraft due on or prior to the payment date specified
in such notice, plus whichever of the following amounts Sublessor, in its sole
discretion, shall specify in such notice (together with interest, if any, at the
Overdue Rate on the amount of any such unpaid Rent and on such specified amount
from the respective due dates to and including the actual date of payment): (A)
an amount equal to the excess, if any, of (1) the Stipulated Loss Value for the
Aircraft or part thereof, computed as of the payment date specified in such
notice, plus the unpaid accrued Base Rent as of such Base Rent Payment Date,
over (2) the

                                       55


aggregate Fair Market Rental Value of the Aircraft, or part thereof for the
remainder of its economic useful life after such specified payment date, after
discounting such aggregate Fair Market Rental Value quarterly to present worth
as of such specified payment date at a rate of six (6%) per annum; or (B) an
amount equal to the excess, if any, of (1) the sum of the stipulated Loss Value
for the Aircraft or part thereof plus to the extent not otherwise payable under
this clause (i) the unpaid accrued Base Rent as of such Base Rent Payment Date,
over (2) the Fair Market Sale Value of the Aircraft or part thereof as of the
payment dated specified in such notice;

               (ii) If sublessor, pursuant to SECTION 18.2.4 above, sells all or
any part of the Aircraft, Sublessor may, if it so elects, demand that Sublessee
pay Sublessor, and Sublessee shall pay to Sublessor, on the date of such sale,
as liquidated damages for loss of bargain and not as a penalty (in lieu only of
Base Rent for the Aircraft due after the date on which such sale occurs), any
unpaid Rent for the Aircraft due on or prior to the date on which such sale
occurs plus the amount of any excess of (A) the Stipulated Loss Value of the
Aircraft or part thereof, computed as of the Base Rent Payment Date immediately
preceding the date on which such sale occurs, or the first Base Rent Payment
Date in the event of a sale prior thereto, plus the unpaid accrued Base Rent as
of such Base Rent Payment Date, plus interest thereon at the Overdue Rate from
such Base Rent Payment Date to the date of such sale over (B) the net proceeds
of such sale. Sublessee shall also pay to Sublessor interest at the overdue Rate
on the amount of any such deficiency from the respective due date to and
including the date of actual payment;

               (iii) By notice to Sublessee, Sublessor may, in lieu of
exercising its rights under SECTION 18.2.4 above, demand that Sublessee pay on
demand to Sublessor, and Sublessee hereby agrees that it will so pay to
Sublessor, as liquidated damages for loss of bargain and not as a penalty (in
lieu only of Base Rent for the Aircraft due or accrued after the payment date
specified in such notice), any unpaid Rent for the Aircraft due or accrued on or
prior to the payment date specified in such notice plus an amount equal to
Stipulated Loss Value for the Aircraft computed as of the immediately preceding
Base Rent Payment Date;

and upon such payment of liquidated damages and the payment of all other Rent
then due hereunder, Sublessor shall, or shall cause the appropriate party to,
convey forthwith to Sublessee by bill of sale all of its right, title and
interest in and to the Aircraft on an "AS-IS", "WHERE-IS" basis and without
recourse or warranty, except that the Aircraft shall be free and clear of Lessor
Liens, Sublessor Liens and Lender Liens, including the Lien of the Loan
Agreement, and with no obligation to deliver possession if the Aircraft has not
been returned to Sublessor in accordance with SECTION 18.2.1 above.

                                       56


               18.2.6 OTHER REMEDIES. In lieu of or in addition to (to the
extent not inconsistent with) any of the foregoing remedies, Sublessor may (i)
terminate this Sublease as to the Aircraft, (ii) proceed by appropriate court
action to enforce the terms hereof or to recover damages for the breach hereof
as provided in, SECTION 18.2.2, and (iii) exercise any other right or remedy
which may be available to it under Applicable Law.

               18.2.7 CONCERNING REMEDIES. In addition to the other obligations
of Sublessee under this SECTION 18, Sublessee shall be liable, except as
otherwise provided in this SECTION 18, and to the extent not paid pursuant to
the other provisions of this SECTION 18, for any and all unpaid Rent due
hereunder, after or during the exercise of any of the foregoing remedies, for
any and all Supplemental Rent due hereunder, and for all legal fees (including
the allocated time charges of internal counsel) and other reasonable costs and
expenses incurred by reason of the occurrence of any Event of Default, or the
exercise of Sublessor's remedies with respect thereto, including all reasonable
costs and expenses incurred in connection with repossession, transportation,
storage, maintenance and insurance of the Aircraft and in placing the Aircraft
in the condition and airworthiness required by SECTION 19. At any sale of the
Aircraft or any part thereof pursuant to this SECTION 18, Lender, Lessor or
Sublessor may bid cash or the unpaid balance of any or all Loans (including all
other amounts secured by the Loan Agreement) or any combination thereof, for the
purchase of such property. Except as otherwise expressly provided above, no
remedy referred to in this SECTION 18 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Sublessor at law or in equity, and the exercise or
beginning of exercise of any one or more of such remedies shall not be deemed an
election of such remedies and shall not preclude the simultaneous or later
exercise by Sublessor of any or all of such other remedies.

               18.2.8 WAIVERS. TO THE FULL EXTENT THAT SUBLESSEE AND SUBLESSOR
MAY LAWFULLY AGREE, SUBLESSEE AND SUBLESSOR HEREBY WAIVE THE BENEFIT OF ANY
PROVISION OF LAW NOW OR HEREAFTER IN EFFECT WHICH RENDERS ANY PROVISION HEREOF
PROHIBITED OR UNENFORCEABLE IN ANY RESPECT. NO EXPRESS OR IMPLIED WAIVER BY
SUBLESSOR OR SUBLESSEE OF ANY EVENT OF DEFAULT SHALL IN ANY WAY BE, OR BE
CONSTRUED TO BE, A WAIVER OF ANY FUTURE OR SUBSEQUENT EVENT OF DEFAULT.

          18.3 Whenever a determination of Fair Market Sale Value or Fair Market
Rental value is required by any provision of this Sublease, Sublessor shall
appoint a recognized independent aircraft appraiser selected by Sublessor to
determine the Fair Market Sale Value or Fair Market Rental Value of the Aircraft
and shall advise Sublessee of such appointment in its notice that Sublessor has
exercised its rights and remedies in accordance with this Sublease. Within
fifteen (15) days after receipt of such written notice from

                                       57


Sublessor, Sublessee shall deliver to Sublessor a written notice appointing a
recognized independent aircraft appraiser selected by Sublessee to determine the
Fair Market Sale Value or Fair Market Rental Value of the Aircraft. If Sublessee
fails or refuses to appoint, for any reason whatsoever, an appraiser to
determine the Fair Market Sale Value or Fair Market Rental value of the Aircraft
within fifteen (15) days after receipt of written notice from Sublessor advising
Sublessee of the appointment of an appraiser by Sublessor, the decision of the
appraiser appointed by Sublessor as to the Fair Market Sale Value or Fair
Market Rental Value of the Aircraft shall in all cases be binding and conclusive
on Sublessor and Sublessee. The appraisers appointed by Sublessor and Sublessee
pursuant to this SECTION 18.3 shall meet promptly to determine the Fair Market
Sale Value or Fair Market Rental Value of the Aircraft. If within fifteen (15)
days after Sublessee selects its appraiser the two appraisers selected by
Sublessor and Sublessee, respectively, are unable to agree on the Fair
Market Sale Value or Fair Market Rental Value of the Aircraft, a third
recognized independent aircraft appraiser shall be chosen within fifteen (15)
days thereafter by the mutual agreement of such first two appraisers, or if such
first two appraisers fail to agree on the appointment of a third appraiser
within such fifteen (15) day period, such appointment shall be made by the
American Arbitration Association (or any organization which is successor
thereto). The decision of the appraisers so appointed and chosen shall be given
within fifteen (15) days after the selection of such, third appraiser. Any
decision in which any two appraisers so appointed and acting hereunder concur
shall in all cases be binding and conclusive on Sublessor and Sublessee and, in
the event that there are three appraisers and no two of such appraisers shall be
able to concur in the decision, then the simple arithmetic average of the
appraisals arrived at by the three (3) appraisers shall in all cases be binding
and conclusive on Sublessor and Sublessee. Sublessee shall pay the fees and
expenses of appraisal. The Fair Market Sale Value or Fair Market Rental Value of
the Aircraft shall be determined by the appraisers as of the date of premature
termination on the assumption (i) that the Aircraft will, on such date, be
equipped with the Airframe, the Engines and the Propellers, and that the
Airframe, the Engines and the Propellers will otherwise be in such condition as
would be required by this Sublease and (ii) if the time remaining on the
Airframe, the Engines, the Propellers, the components and/or the Parts on the
day of premature termination is less than the time required to be remaining
thereon in accordance with the provisions of SECTION 19 hereof and/or the
Airframe, the Engines, the Propellers, and/or the Parts thereof otherwise do not
meet the standards contemplated and required under SECTION 19 hereof or if the
condition of the Aircraft does not fully comply with the requirements of this
Sublease, that the Aircraft will fully comply with the requirements of this
Sublease.

          18.4 Sublessor may, at its election, waive any Event of

                                       58


Default, and its consequences, and rescind and annul any such notice of
termination by notice to Sublessee in writing to that effect within sixty (60)
days after delivery of any such notice of termination, and thereupon the
respective rights of the parties shall be as they would have been if no Event
of Default had occurred and no such notice had been given. Notwithstanding the
provisions of this SECTION 18.4, it is expressly understood and agreed by
Sublessee that no express or implied waiver, recision or annulment by Sublessor
shall in any way be, or be construed to be, a waiver of any other past, future
or subsequent Event of Default, nor shall any such express or implied waiver,
recision, or annulment by Sublessor extend to or affect any other or subsequent
default or impair any rights or remedies consequent thereto.

          18.5 Each and every power and remedy herein specifically given to
Sublessor shall be in addition to every other power and remedy specifically so
given or now or hereafter existing at law or in equity, and each and every power
and remedy may be exercised from time to time or simultaneously as often as and
in such order as may be deemed expedient by Sublessor. Sublessor's acceptance of
any payment, whether partial or otherwise, after it shall become due hereunder
shall not be deemed to alter, affect or waive the obligations of Sublessee or
Sublessor's rights hereunder. All powers and remedies shall be cumulative and
the exercise of one shall not be deemed a waiver of the right to exercise any
other or others. No delay or omission of Sublessor in the exercise of any right
or remedy hereunder shall impair any power or remedy or shall be construed to be
a waiver of any Default or acquiescence therein. If any Event of Default shall
occur, Sublessor shall be entitled to recover reasonable costs and expenses,
including, without limitation, attorneys fees, as are incurred by Sublessor in
the enforcement of any right or privilege hereunder, plus interest thereon at
the Overdue Rate from the date such costs and expenses were expended or incurred
by Sublessor until paid by Sublessee

          18.6 To the fullest extent Sublessee may lawfully agree, Sublessee
hereby agrees in accordance with Section 1110 of the Bankruptcy Code as amended
from time to time (or any successor or superseding statute as amended) that
legal title to, and ownership by Lessor of, the Aircraft and each Engine and
Propeller, and any right of Sublessor, Lessor or Lender, or any party designated
by Sublessor under the Sublease, to take possession of the Aircraft, the Engines
and Propellers in compliance with the provision of this Sublease or the Lease
shall not be affected by and Sublessee waives any rights under Sections 362 or
363 of the Bankruptcy Code or any other analogous provisions of any succeeding
or superseding statute, as amended from time to time, or any similar provision,
insolvency, reorganization or similar law affecting the rights of creditors
generally which are inconsistent with Section 1110 of the Bankruptcy Code.
Sublessee further agrees that Lessor, Lender and each other assignee of Lessor
shall have the rights and benefits given to a lessor and/or a secured party
under Section 1110 of the

                                       59


Bankruptcy Code.

Section 19. RETURN OF AIRCRAFT, RECORDS. REPOSSESSION.

          19.1 RETURN OF AIRCRAFT. Upon the expiration or earlier cancellation
or termination of the Term of this Sublease, (other than as a result of an Event
of Loss), or of any storage period provided for herein, Sublessee shall return
the Aircraft to Sublessor, free and clear of all Liens except Lessor Liens,
Lender Liens, including the Lien of the Loan Agreement, Sublessor Liens and any
other Liens created in accordance with the Operative Documents, and Liens not
created, incurred, assumed or existing through any action or inaction by
Subleasee in the same operating order, repair and condition, ordinary wear and
tear excepted, and appearance as when received. Sublessee shall pay for any
repairs and refurbishing necessary to restore the Aircraft to such condition,
ordinary wear and tear excepted. At the expiration of the Term of this Sublease
or upon the earlier cancellation or termination of this Sublease pursuant to the
terms hereof, Sublessee, at its own risk and expense, shall return the Aircraft
by delivering the same to Sublessor at any airport designated by Sublessor
within the continental confines of the United States that is situated within
five hundred (500) miles of any airport on Sublessee's route system. The
Aircraft shall, at that time, satisfy all the following conditions:

          (a) CERTIFICATION. The Aircraft shall have a valid Airworthiness
     Certificate and shall have been continuously and currently maintained in
     compliance with the requirements of the Airframe, Engine and Propeller
     manufacturers' approved maintenance programs or Sublessee's Maintenance
     Program for Airframe, Engines and Parts.

          (b) OVERHAUL AND REPAIR. With respect to repairs and overhaul of the
     Airframe and all Engines, Propellers and Parts (whether performed as
     required hereunder or otherwise), such repairs and overhaul shall be
     documented to have been repaired or overhauled by certified FAA repair
     stations or by those approved by the FAA through reciprocal agreements and
     such overhaul and repair shall also be consistent with the respective
     manufacturer's instructions for such Engines, Propellers and Parts, and in
     the case of the Airframe, in accordance with the latest Saab MRB Manual.

          All overhaul and repair procedures shall be further verified to meet
     all FAA requirements for quality and documentation necessary to enable
     immediate transferal to operation within the continental limits of the
     United States under FAR Part 135.

          (c) REPAIRS. Sublessee shall ensure that all major repairs performed
     since the Delivery Date and which still are

                                       60


     in existence on the Aircraft are in conformity with the manufacturer's
     Structural Repair Manual ("SRM") and have or are immediately eligible to
     receive FAA approval, if so required by Sublessor. All such repairs shall
     be accompanied by all data and documentation necessary to substantiate
     their certification and approval by the FAA, as required by Sublessor.

          (d) MODIFICATIONS. All modifications performed since the Delivery Date
     which deviate from the certified configuration and which are still in
     existence on the Aircraft shall have approval or certification by the FAA
     or Person(s) authorized by the FAA to grant such approval or certification
     or be removed by Sublessee unless otherwise deemed acceptable in writing by
     Sublessor in its sole discretion. All such modifications shall be
     accompanied by complete data and documentation necessary to substantiate
     their certification and approval by the FAA or Person(s) authorized by the
     FAA to grant such approval or certification.

          (e) AIRWORTHINESS DIRECTIVES. All FAA Airworthiness Directives and
     amendments or changes to the FARs applicable to the Aircraft, Engines,
     Propellers or Parts shall have been accomplished in compliance with the
     issuing agency's specific instructions of the FAA or Person(s) authorized
     by the FAA to grant such approval or certification. Airworthiness
     Directives which allow temporary compliance by inspection, but have a
     mandatory terminating compliance within six (6) months following return
     (except that in the case of a cancellation or early termination of the
     Sublease, such period shall instead be twelve (12) months) shall have such
     terminating compliance complete.

          (f) RECORDS. All records necessary and required by the FAA to certify
     and place the Aircraft on an FAA-approved maintenance program shall be
     delivered with the Aircraft. If hard, non-computerized, copies of
     maintenance records are not available, then Sublessee shall take action
     with pertinent regulatory agencies to ensure that Sublessor and the FAA
     are provided with all requested guarantees of methods of compliance,
     component overhaul and management, scheduling, quality control, serial
     number verification, etc. These records shall be all inclusive to the
     Airframe, Engine, Propellers and Parts.

          All Parts identified with safe life limits shall be identified with
     their service histories, accumulated cycles or flight hours as applicable
     and remaining service lives on a separate listing.

          All components and assemblies which are identified on the maintenance
     records by part numbers and serial numbers other

                                       61


     than the manufacturers' shall be provided with interchange or cross
     reference listing necessary to establish complete traceability.

          All documentation, flight, and maintenance records as specified by
     FARs 91.173, 91.174, and each paragraph of 121.380 which normally
     accompany the transferal of an aircraft which has been operating in
     regulated commercial air service, shall be delivered to Sublessor with the
     Aircraft.

          In the event of missing, incomplete, or unacceptable records,
     Sublessee shall re-accomplish the tasks necessary to produce such records
     in accordance with its approved maintenance programs prior to delivery of
     the Aircraft.

          All documentation and records shall be made available to Sublessor for
     review at a central location a minimum of thirty (30) Business Days prior
     to the required date of Aircraft delivery to Sublessor.

          (g) SCHEDULED MAINTENANCE - AIRFRAME. Sublessee will be responsible
     for ensuring that the Aircraft meets the following conditions to facilitate
     transference of the Airworthiness Certificate and establish a maintenance
     halftime Aircraft:

     C Check:            A full C Check shall have been performed on the
                         Aircraft in compliance with Sublessee's Maintenance
                         Program immediately prior to delivery, or the Aircraft
                         shall not have been used since the completion of such C
                         Check prior to delivery.

     Structure Program   The Aircraft shall have either (1) more than one-half
                         (1/2) time remaining until the next scheduled
                         structural program inspection, (2) at least two
                         thousand four hundred (2,400) hours remaining until the
                         next scheduled structural program inspection or (3) at
                         least three thousand (3,000) cycles remaining until the
                         next scheduled structural program inspection. In the
                         event that this check is performed in phases in
                         conjunction with the C Check, the current phase shall
                         be performed with the required return condition C
                         Check.

     Airworthiness       All airworthiness limitations checks shall be current.
     Limitations:

          In the event that scheduled intervals change during the

                                       62


     term of the Sublease, Sublessee shall insure that all major checks under
     Sublessee's Maintenance Program, structural inspection program, heavy
     maintenance visit, or other designators are (a) performed in accordance
     with the Saab MRB Manual, (b) are current at the time of return to
     Sublessor and (c) shall either (1) be in at least one-half (1/2) time
     condition, (2) have at least two thousand four hundred (2,400) hours
     remaining or (3) have at least three thousand. (3,000) cycles remaining.

          (h) SCHEDULED MAINTENANCE - ENGINES. Upon return of the Aircraft, each
     of the Engines attached to the Aircraft shall either be (a) current under a
     valid ECMP program, in which case each of such Engines shall be eligible
     for a successor ECMP program between General Electric Company and Sublessor
     or a new lessee without any penalties or costs to Sublessor, and Sublessee
     shall use its best efforts to have Sublessee's ECMP program assigned to
     Sublessor or a new lessee without any penalties or costs to Sublessor or
     (b) current under any alternative engine care and maintenance program that
     Sublessee has established after review and approval by Sublessor, in which
     case each of such Engines shall be eligible to continue under such program
     or an ECMP program without any penalties or costs to Sublessor or a new
     lessee.

          (i) SCHEDULED MAINTENANCE - PROPELLERS, PARTS, COMPONENTS AND
     ASSEMBLIES. All Propellers, Parts, components and assemblies that are
     subject to regulated life limits shall either (1) be in at least one-half
     (1/2) time condition, (2) have at least two thousand four hundred (2,400)
     hours remaining or (3) have at least three thousand (3,000) cycles
     remaining.

          (j) SCHEDULED MAINTENANCE - OTHER CHECKS. Any scheduled maintenance or
     inspections, in addition to those specified in SECTIONS 19.1(g), 19.1(h)
     and 19.1(i) (e.g., unequally loaded phase checks, airworthiness
     limitations, corrosion control program, etc.) shall either (1) be in at
     least one-half (1/2) time condition, (2) have at least two thousand four
     hundred (2,400) hours remaining or (3) have at least three thousand (3,000)
     cycles remaining.

          (k) DEFERRED MAINTENANCE. There shall be no open, outstanding, or
     deferred maintenance items, scheduled or unscheduled, against the Aircraft
     including those identified in predelivery inspections or test flights.

          (1) CORROSION. Sublessee shall maintain corrosion control through its
     Maintenance Program. There shall, to Sublessee's knowledge, be no untreated
     corrosion remaining on the Aircraft.

                                       63


          (m) PRE-RETURN INSPECTIONS. Sublessor shall be permitted to perform a
     minimum of two physical inspections of the Aircraft including its records
     exclusive of test flights. One inspection will be performed immediately
     prior to return. The aircraft interior, exterior, wheel wells and wing spar
     areas shall be thoroughly cleaned to normal airline maintenance standards
     prior to the inspection. The inspection shall include, but not be limited
     to, ground evaluation and system functional tests including engine runs if
     deemed necessary by Sublessor. In addition, one inspection shall be
     permitted during the maintenance check which precedes return. Sublessor
     shall have the right to have up to two (2) people be present during the
     entire maintenance check.

          (n) ACCEPTANCE FLIGHT. Sublessee shall provide for a minimum of one
     acceptance flight for a total duration not to exceed two (2) hours to
     demonstrate the airworthiness of the Aircraft and the proper functioning of
     all systems and components.

          (o) AIRCRAFT PHYSICAL CONDITION. The Aircraft shall be complete and
     function and perform in accordance with the manufacturers specifications.
     Discrepancies noted during the pre-return inspections and acceptance
     flights shall be corrected in accordance with the manufacturers' manuals.

          (p) GENERAL APPEARANCE. The Aircraft shall be clean, cosmetically
     acceptable, interior complete and prepared to place into U.S. scheduled
     revenue airline operations at a standard equal to or above U.S. standards.

          19.2 EQUIVALENCY AMOUNT. For any variance from the conditions set
forth in SECTIONS 19.1(g), 19.1(h), 19.1(i) AND 19.1(j) above, Sublessee
shall pay Sublessor or Sublessor shall pay Sublessee (as appropriate) an amount
for such variance equal to the following formula: actual time (or number of
cycles) for the item minus the minimum time (or number of cycles) for the item
times the repair/overhaul cost per hour or cycle shall equal the "Equivalency
Amount". For purposes of calculating the Equivalency Amount, a third party
mutually acceptable to Sublessor and Sublessee shall determine the cost as
described in the preceding sentence. If the Equivalency Amount is a positive sum
then Sublessee shall pay Sublessor the Equivalency Amount and if the Equivalency
Amount is a negative sum then lessor shall pay Sublessee the Equivalency Amount.

          19.3 MANUALS. Upon the return of the Aircraft in accordance with this
SECTION 19, Sublessee shall deliver to Sublessor all logs, aircraft flight
manuals, certificates and data, and inspection, modification and overhaul
records required to be maintained with respect to the Aircraft under applicable
rules and regulations of the FAA. All such records shall be made available to

                                       64


Sublessor for review a minimum of thirty (30) days prior to the agreed date of
return. In the event logs are missing or incomplete, Sublessor shall have the
right to cause the logs to be reconstructed or replaced at the expense of
Sublessee.

          19.4 MAINTENANCE AT SUBLESSOR'S REQUEST. upon receipt of written
notice from Sublessor not less than sixty (60)(nor more than one hundred twenty
(120)) days prior to any expiration or termination of this Sublease, Sublessee
agrees to perform maintenance to the Airframe and/or the Engines and/or the
Propellers. Such maintenance shall be done in the same manner and with the same
care as used by Sublessee with similar airframes, engines and propellers of its
own and shall be completed as promptly as possible after any such termination of
this Sublease as to such Airframe, Engines or Propellers, and Sublessor shall
reimburse Sublessee in an amount equal to (1) the lesser of (x) the sum of
Sublessee's direct costs for materials plus Sublessee's direct labor costs
incurred in connection with such maintenance or (y) Sub lessee's standard
contract rates for work for third parties, if any, therefor or (2) if such
maintenance is performed by someone other than Sublessee, the actual amount paid
therefor by Sublessee.

          19.5 ENGINES. In the event any engine not owned by Lessor shall be
returned with the Airframe, such engine shall be of the same or improved model
as the Engines and suitable for installation and use on the Airframe and shall
have a value and utility at least equal to, and be in as good an operating
condition as, such Engines, assuming such Engines were in the condition and
repair as required by the terms hereof immediately prior to such termination,
and Sublessee will, at its own expense and concurrently with such return,
furnish Lessor with a bill of sale, in form and substance satisfactory to
Lessor, with respect to each such engine together with evidence of Sublessee's
title to such engine (including, if requested, an opinion of Sublessee's
counsel) and shall take such other action as Sublessor may reasonably request in
order that such engine shall be duly and properly titled in the name of Lessor,
and upon passage of title to such engine to the Lessor, such engine shall be
deemed to be an Engine for all purposes of this Sublease. Upon full compliance
with the terms of this Section, Sublessor will transfer or cause to be
transferred to Sublessee Lessor's interest in any Engine replaced by an engine
pursuant to the preceding sentence without any representation, warranty or
recourse of any kind whatsoever, express or implied.

          19.6 PROPELLERS. In the event any propeller not owned by Lessor shall
be returned with the Airframe, such propeller shall be of the same or improved
model as the Propellers and suitable for installation and use on the Airframe
and shall have a value and utility at least equal to, and be in as good an
operating condition as, such Propellers, assuming such Propellers were in the
condition and repair as required by the terms hereof immediately prior to such
termination, and Sublessee will, at its own expense and

                                       65


concurrently with such return, furnish Lessor with a bill of sale, in form and
substance satisfactory to Lessor, with respect to each such propeller together
with evidence of Sublessee's title to such propeller (including, if requested,
an opinion of Sublessee's counsel) and shall take such other action as Sublessor
may reasonably request in order that such propeller shall be duly and properly
titled in the name of Lessor, and upon passage of title to such propeller to the
Lessor, such propeller shall be deemed to be a Propeller for all purposes of
this Sublease. Upon full compliance with the terms of this Section, Sublessor
will transfer or cause to be transferred to Sublessee Lessor's interest in any
Propeller replaced by a propeller pursuant to the preceding sentence without any
representation, warranty or recourse of any kind whatsoever, express or implied.

          19.7 STORAGE. Upon any expiration or termination of this Sublease, at
the written request of Sublessor, Sublessee will arrange, or will cause to be
arranged, storage facilities for the Aircraft at Sublessee's facilities for a
period not exceeding thirty (30) days without charge to Sublessor and up to
ninety (90) days, provided that Lessor pays for the additional sixty (60) days.
Sublessee will maintain in effect during such storage periods insurance covering
the Aircraft pursuant to Section 13.2 to the extent such insurance is available.
at reasonable commercial rates and in such amounts and against such risks as
would be customarily carried in similar circumstances by a reasonably prudent
lessor, with such insurance being paid for by Sublessor and any deductible being
absorbed by Sublessor in the event of a loss.

          19.8 SPECIAL MARKINGS. Upon the termination or expiration of this
Sublease, Sublessee shall, at its cost, remove from the exterior of the Aircraft
all insignia and other distinctive markings. This provision shall not require
Sublessee to strip the paint off the Aircraft or require Sublessee to repaint
the Aircraft.

          19.9 RISK OF LOSS, ETC. Upon return to Sublessor of the Aircraft in
accordance with this SECTION 19 and the other provisions of this Sublease, the
Sublease will terminate and the risk of loss of such Aircraft shall pass to
Sublessor. Notwithstanding the foregoing, Sublessee shall pay to Sublessor or
reimburse Sublessor for the cost to Sublessor of insuring the Aircraft during
any period of repair or overhaul subsequent to the termination of the Sublease
that is necessary to put the Aircraft in the condition required hereby. If any
required work, repairs or services should delay the return of the Aircraft to
Sublessor beyond the scheduled expiration or earlier termination of the Term
hereof, or prevents the use of the Aircraft thereafter, Sublessee shall continue
to pay Base Rent on a per diem basis and all other Rent, bear the risk of loss
under SECTION 12, maintain the insurance required by SECTION 13, and provide the
indemnities required under SECTIONS 14 AND 15 in the same manner as if there

                                       66


had been no expiration or termination of this Sublease and otherwise exercise
the care required hereunder with respect to the Aircraft until such required
work, repair or servicing has been completed and, in the case of delay in
return, the Aircraft is returned to Sublessor as provided herein. Sublessee's
possession of the Aircraft during such period shall be solely as a bailee for
hire for Sublessor and not as Sublessee hereunder. During such period,
Stipulated Loss Value shall be an amount equal to Stipulated Loss Value on the
last day of the Term.

          19.10 INSTRUMENTS OF RELEASE. Sublessee shall execute and deliver to
Sublessor such instruments of release and termination of this Sublease as to the
Aircraft, in form suitable for recording at the FAA Aircraft Registry and other
public offices, as Sublessor may reasonably request, to make clear upon public
records that the Aircraft is free and clear of all rights of Sublessor and
Sublessee to the Aircraft under this Sublease.

Section 20. ASSIGNMENT, SUB-SUBLEASE, SUBORDINATION.

          20.1 Except as otherwise provided herein, Sublessee will not and shall
have no power to, without the prior written consent of Sublessor, assign any of
its rights or obligations hereunder. The terms and provisions of this Sublease
shall be binding upon and inure to the benefit of Sublessor and Sublessee and
their respective successors and assigns and shall inure, to the extent expressly
herein provided, to the direct benefit of, and shall be enforceable, subject to
the terms of the Loan Agreement by Lender, subject to the terms of the Lease by
Lessor, and their respective successors and assigns.

          20.2 (a) Sublessee will not, without the prior written consent of
Sublessor (which will not be given without the prior written consent of Lessor
and Lender), except as otherwise provided in this Sublease, sub-sublease or
otherwise in any manner deliver, transfer or voluntarily relinquish possession,
or enter into any contract or arrangement obligating it to deliver, transfer or
relinquish possession of the Airframe or any Engine or Propeller, or install any
Engine or Propeller or permit any Engine or Propeller to be installed, on any
airframe other than the Airframe, or create a Lien not permitted under the terms
hereof.

          (b) Notwithstanding anything to the contrary contained in this
Sublease, Sublessee may merge or consolidate with any Affiliate of Sublessee or
sell, lease, or otherwise dispose of all or substantially all of its assets to
any Affiliate of Sublessee, PROVIDED (A) that the rights and powers of
Sublessor, Lessor and Lender shall not be adversely affected by such merger,
consolidation, sale, lease, or other disposition and that immediately after any
such transaction no Event of Default shall have occurred and be continuing, and,
(B) that any Affiliate of Sublessee which is to be the surviving or acquiring
corporation in

                                       67


such transaction (i) shall be a corporation duly organized and validly existing
under the laws of the United States of America or a state thereof, or the
District of Columbia, and a "citizen of the United States of America" as defined
in Section 40102(a)(15) of the Transportation code, (ii) shall (unless
Sublessee is the surviving corporation), by agreement in writing which shall be
in form and substance satisfactory to Sublessor, expressly assume the due and
punctual payment of the Rent and other sums due and to become due under this
Sublease, and the due and punctual performance and observance of all the
covenants and provisions of this Sublease and each other Operative Document to
which Sublessee is a party, (iii) shall not have a net worth subsequent to such
action materially less than that of Sublessee prior to such action (taking into
account any corporations whose net worth is consolidated with such surviving
corporation), and (C) that such transaction shall not result in a material
adverse effect with respect to the assets, liabilities or operations of
Sublessee as consolidated in such survivor corporation.

          20.3 This Sublease and Sublessee's rights hereunder to the
possession, use and enjoyment of the Aircraft are subject and subordinate to all
of the rights of Lesser under the Lease including, without limitation, Lessor's
rights to repossession under the Lease and to avoid, cancel or terminate this
Sublease, for any reason upon such repossession or after an event of default by
the Lessee under the Lease (a "Repossession Event"), and Sublessee agrees upon a
Repossession Event to surrender possession of the Aircraft upon written demand
therefor by or on behalf of Lessor. Nothing in this section 20.3 shall be
construed to limit Sublessee's rights as against Sublessor hereunder if
Sublessee's right to possess the Aircraft hereunder is terminated because of a
Repossession Event. Sublessee has the right, following any actual or threatened
termination of this Sublease upon the occurrence of a Repossession Event (as
defined above), to inform Lessor of its desire to attorn to Lessor, and to
request that Lessor accept Sublessee as a direct lessee. Under the terms of any
such attornment, if accepted by Lessor, Sublessee will be required to perform
all of its obligations under this Sublease directly to and for the benefit of
Lessor and to also perform any obligations under the Lease not subsumed
hereunder. In no event shall any such attornment occur without the prior written
consent of Lessor, and Lessor may refuse such substitution for any reason in its
sole discretion.

          20.4 Sublessor covenants that, to the extent that any Lessor Liens,
Sublessor Liens or Lender Liens exist or interfere with Sublessee's peaceful and
quiet enjoyment and use of the Aircraft, Sublessor will use all reasonable
efforts, including the exercise of any rights it may have under any Operative
Document, to seek removal or discharge of such Liens. During the term of this
Sublease and so long as no Default or Event of Default has occurred and is
continuing hereunder, Sublessee shall be entitled to

                                       68


exercise and enforce and assert at its sole expense all of the rights which the
Lessor has under any warranty or guaranty of any manufacturer with respect to
the Aircraft.

Section 21. NOTICES.

          All notices required under the terms and provisions hereof shall be in
writing, shall be effective on the earlier of the date such notice is actually
received or five (5) days after mailing by certified Mail - Return Receipt
Requested confirmed on the date of mailing, shall be given by hand delivery, by
overnight delivery service (with such delivery service's delivery records
constituting proof of delivery), by telex or telecopy (with the answerback
constituting proof of receipt), or by any other electronic transmission which
produces a written record showing receipt by the addressee, and shall be
addressed as provided below or to such other address as any such party shall
designate by notice to each other such party as provided below:

     (a) If to Sublessor:

         Fairbrook Leasing, Inc.
         21300 Ridgetop Circle
         Sterling, Virginia 20166
         Attention: Treasurer

         Telecopy: (703) 406-7309

     (b) If to Sublessee:

         Chautauqua Airlines, Inc.
         2500 South High School Road
         Indianapolis, Indiana 46251
         Attention: President

         Telecopy: (317) 484-6060

     with a copy to:

         Glenn W. Sturm, Esq.
         Nelson, Mullins, Riley and Scarborough
         400 Colony Square, Suite 2200
         1201 Peachtree Street
         Atlanta, Georgia 30361

         Telecopy: (404) 817-6050

     (c) If to Lessor:

         Wilmington Trust Company
         Rodney Square North

                                       69


         Wilmingtorn, DE 19890
         Attention: Corporate Trust Administration

         Telecopy: (302) 651-8882

     (d) If to Lender:

         Mellon Financial Services Corporation #3
         Suite 4444
         One Mellon Bank Center
         Pittsburgh, PA 15258-0001
         Attention: President

         Telecopy: (412) 234-3948

     (e) If to Guarantor:

         Saab AB
         S-581 88 Linkoping
         Sweden
         Attention: General Counsel

         Telecopy: 01146 13 18 71 11

Section 22. SURVIVAL OF COVENANTS: SEVERABILITY.

          Any provision of this Sublease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction be ineffective to the extent of
such prohibition or unenforceability without affecting or invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If one or more Sections or clauses contained in this
Sublease or in any supplement or any part hereof or thereof is held by any court
of law to be invalid, this Sublease and all supplements thereto shall be
construed as if such invalid clause or clauses or Section or Sections or part or
parts thereof had not been contained herein or therein. To the extent permitted
by Applicable Law, Sublessee hereby waives any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.

          Any other provisions contained in this Sublease to the contrary
notwithstanding, it is hereby agreed that the provisions of SECTIONS 14, 15 AND
19 hereof shall survive the termination of this Sublease to the extent requires
thereby for their full and complete performance.

Section 23. ENTIRE AGREEMENT, TITLES.

          This Sublease, including all appendices, annexes,

                                       70


exhibits, schedules, Sublease Supplement No. 1, and the. other Sublessee
Documents and documents contemplated thereby constitute the entire agreement
between the parties, except as otherwise set forth in the Used Saab 340A Program
Agreement dated as of February 1, 1995 between Sublessor and Sublessee. No term
or provision of this Sublease may be changed, waived, discharged, amended or
terminated except by a written agreement signed by both parties hereto. The
titles of the Sections and other headings in this Sublease, and the table of
contents are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof, and all reference herein
to numbered sections unless otherwise indicated are to Sections of this
Sublease.

Section 24. NOTICES OF EVENTS.

          Sublessee shall promptly notify Sublessor at the address shown in
SECTION 21, in writing of any: (1) material accident connected with the use,
operation or malfunction of the Aircraft, including in such report the time,
place and nature of the accident, the damage caused to property, the names and
addresses of persons injured and of witnesses, and such other information as may
be pertinent to any such party's investigation of such accident, (2) Default or
Event of Default, (3) attachment, tax Lien, other Lien or other judicial process
other than Permitted Liens, that has attached to the knowledge of Sublessee to
the Aircraft or any part thereof, or (4) its intention to operate the Aircraft
in any other country other than the United States and Canada.

Section 25. EXECUTION AND COUNTERPARTS.

          This Sublease and Supplements hereto may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
counterparts, shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same Sublease or
Supplement hereto. To the extent, if any, the counterpart of this Sublease or
Supplement hereto containing the receipt therefor executed by Lender on the
signature page hereof constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no other
counterpart of this Sublease or any Supplement hereto constitutes chattel paper
(as so defined), and no security interest in this Sublease or any Supplement
hereto may be created by transfer or possession of any counterpart hereof other
than the counterpart containing the receipt therefor executed by Lender on the
signature page thereof.

Section 26. CONFIDENTIALITY.

          Sublessor and Sublessee agree that all negotiations, discussions,
correspondence, memoranda and other documents related to this Sublease which are
not required to be filed publicly

                                       71


pursuant to this Sublease or by any Applicable Law shall remain and are intended
to be confidential, and each of Sublessor and Sublessee agrees not to disclose
such information to any Person except to Affiliates and their respective
directors, officers, employees and representatives or advisors (including their
attorneys and accountants and the Vice President-USAir Express Division of
USAir Group, Inc.) who have a need to know in the general conduct of Sublessor's
or Sublessee's or such Affiliate's business and agree to keep such information
confidential, and except when advisable or required by any rule, regulation or
order of any Governmental Body or any filing requirements relating thereto, or
as compelled by any litigation or investigation or as required to enforce the
terms of this Agreement or as may be required by Sublessee in connection with
any corporate transaction contemplated by Sublessee or an Affiliate.

Section 27. COVENANT OF QUIET ENJOYMENT.

          Sublessor covenants and agrees that so long as no Default or Event of
Default shall have occurred and be continuing under this Sublease, Sublessee's
use of the Aircraft prior to the expiration date of the Term shall not be
interrupted by Sublessor, Lesser, Lender or any Person claiming by or through
Sublessor, Lesser or Lender, and Sublessee shall be entitled to the quiet
possession, enjoyment and use of the Aircraft and the revenues, profits and
income therefrom prior to the expiration date of the Term (or, if the Lease
should expire by its terms and provisions prior to the expiration of the Term, a
substitute for the Aircraft as provided in Sublease Supplement No. 1 hereto).

Section 28. SUBLESSOR'S RIGHT TO PERFORM FOR SUBLESSEE.

          If Sublessee fails to make any payment of Rent required to be made by
it hereunder or fails to perform or comply with any of its agreements contained
herein, Sublessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the reasonable
expenses of Sublessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, including,
without limitation, reasonable legal fees and expenses, together with interest,
to the extent permitted by Applicable Law, thereon, at the Overdue Rate from the
date of the making of such payment or the incurring of such expenses by
Sublessor to the date of payment of such Supplemental Rent by Sublessee, shall
be deemed Supplemental Rent payable by Sublessee upon demand.

Section 29. GOVERNING LAW: SUBMISSION TO JURISDICTION.

          This Sublease shall constitute an agreement of lease, and nothing
herein shall be construed as conveying to Sublessee any right, title or interest
in the Aircraft except as a sublessee only. This Sublease is being delivered in
Virginia and shall in

                                       72


all respects be governed by, and construed in accordance with, the internal laws
of the Commonwealth of Virginia, including all matters of construction, validity
and performance in accordance with Section 44108(c) of the Transportation Code.
If Sublessor or any other Person commences a suit in any other jurisdiction, the
parties agree that this Sublease shall be construed in accordance with the
internal laws of Virginia without reference to such other jurisdiction's choice
of law doctrines, including its conflict of laws.

          SUBLESSEE (A) HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT IN THE COMMONWEALTH OF VIRGINIA IN EACH CASE
FOR THE PURPOSES OF ANY SUIT ACTION OR OTHER PROCEEDING ARISING OUT OF THIS
SUBLEASE, THE SUBLESSEE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF, AND
(B) TO THE EXTENT PERMITTED BY APPLICABLE LAW, HEREBY WAIVES, AND AGREES NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM EXECUTION,
THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT
THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS INCONVENIENT OR OTHERWISE
IMPROPER, OR THAT ANY OF THE ABOVE-MENTIONED DOCUMENTS OR THE SUBJECT MATTER
THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURTS. FINAL JUDGMENT AGAINST
SUBLESSEE IN ANY SUCH SUIT AFTER ALL APPEALS BY SUBLESSEE HAVE BEEN EXHAUSTED
SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE
FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR LIABILITY OF SUBLESSEE THEREIN
DESCRIBED.

                                       73


          IN WITNESS WHEREOF, the parties hereto have each caused this Aircraft
Sublease Agreement to be duly executed as of the day and year first written
above.

                                                FAIRBROOK LEASING, INC.,
                                                as Sublessor

                                                By: /s/ Mark D. Pugliese
                                                    ---------------------------
                                                    Mark D. Pugliese
                                                    Vice President and
                                                    General Counsel

                                                By: /s/ Gena H. Laurent
                                                    ---------------------------
                                                    Gena H. Laurent
                                                    Assistant Vice President

                                                CHAUTAUQUA AIRLINES, INC.,
                                                as Sublessee

                                                By: /s/ Timothy L. Coon
                                                    ---------------------------
                                                    Timothy L. Coon
                                                    Senior Vice President

                                       74


                                    ANNEX I
                                       TO
                               SUBLEASE AGREEMENT

                                  DEFINITIONS

          The following terms shall have the following meanings for all purposes
of the Sublease unless otherwise defined or the context thereof shall otherwise
require. In the case of any conflict between the provisions of these definitions
and the provisions of the main body of such document, the provisions of the main
body of such document shall control the construction of such document.

          Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended
and supplemented from time to time, (ii) references to parties to agreements
shall be deemed to include the successors arid permitted assigns of such
parties, and (iii) the definitions apply equally to both the singular and
plural forms of the terms defined.

          "ABATEMENT" - when used in relation to Rent, any abatement, reduction,
setoff, counterclaim, recoupment, defense or other right of Sublessee against
Sublessor or any other Person for any reason whatsoever.

          "ADDITIONA1 INSUREDS" - as defined in Section 13.3(a) of the Lease.

          "AFFILIATE" - of any Person - any other Person directly or indirectly
controlling, controlled by, or under common control with such Person; provided
that, as long as Sublessee is owned by Guarantee Reassurance Corporation,
"Affiliate" in respect of Sublessee shall mean only Guarantee Reassurance
Corporation.

          "AIRCRAFT" - the Airframe delivered and leased under the Sublease
together with the two (2) Engines and two (2) Propellers described in the
Sublease Supplement No. 1 executed and delivered with respect to the Airframe
(or any Replacement Engine or Replacement Propeller) whether or not any of such
initial or substituted Engines and Propellers may from time to time be installed
on the Airframe or may be installed on any other airframe and all logs, manuals
and other records relating to such aircraft, and all substitutions, replacements
and renewals for any and all thereof.

          "AIRCRAFT BASE" - Sublessee's operational base or the operational base
of the Aircraft as specified in sublease Supplement No. 1.

                                        1


          "AIRFRAME" - (i) the used Saab-Fairchild 340A commercial aircraft
(except Engines or Propellers or engines or propellers from time to time
installed thereon), subleased under the Sublease by Sublessor to Sublessee
pursuant to the Sublease, with manufacturer's serial number as set forth in
Sublease Supplement No. 1, (ii) any and all Parts so long as the same are
incorporated or installed in or attached or belonging to such Airframe, and any
and all Parts removed from the Airframe of such Aircraft so long as title
thereto and ownership thereof remains vested in Lesser in accordance with the
Sublease; and (iii) insofar as legal title thereto and ownership thereof is from
time to time vested in Lesser, all substitutions, replacements or renewals from
time made in or to such Airframe or to any of the items referred to in clauses
(i) and (ii) above or to any part thereof as required or permitted under the
Sublease.

          "AIRWORTHINESS CERTIFICATE" - the Standard Airworthiness Certificate
on FAA AC Form 8100-2 issued in respect of the Aircraft by the FAA under the
pertinent part of the FAR.

          "APPLICABLE LAW" - all applicable laws, rules, regulations, decrees,
injunctions, orders or judgments of any Governmental Body, now or hereafter in
effect.

          "APPLICATION FOR REGISTRATION" - an Application for Aircraft
Registration of an Aircraft on FAA AC Form 8050-1, or such other form as may be
approved by the FAA on the Delivery Date of the Aircraft (or any relevant
earlier date).

          "APPOINTMENT OF AUTHORIZED REPRESENTATIVE" - the appointment of
Authorized Representative by Lessor, Sublessor and Sublessee.

          "AUTHORIZED REPRESENTATIVE" - the Person appointed by the Sublessee
pursuant to the Sublease as its agent to accept delivery of the Aircraft.

          "BANKRUPTCY CODE" - the Bankruptcy Reform Act of 1994, as amended.

          "BASE RATE" - the rate of interest published from time to time in
Federal Reserve statistical release H.15(19) "Selected Interest Rates" as the
"Bank prime loan" rate. Any change in the Base Rate shall take effect on the
day specified in the public announcement of such change.

          "BASE RENT" - the rent payable for the Aircraft pursuant to Section 9
of the Sublease in the amount set forth in Sublease Supplement No. 1 and the
Sublease Rent Schedule.

          "BASE RENT PAYMENT DATE" - the same day of each full period as the
First Base Rent Payment Date during the Term, as more

                                        2


particularly set forth in Section 9 of the Sublease and Sublease Supplement No.
1 and the Sublease Rent Schedule.

          "BUSINESS DAY" - any day (other than a Saturday or Sunday) on which
commercial banking institutions in New York, New York, or in any city in any
state or country to which Sublessee is directed to make any payment under the
Sublease, are generally open for business.

          "CODE" - the internal Revenue Code of 1986, as amended, and any
successor statute then in effect.

          "COVERED PERSON" - as defined in Section 13.3 (b) (7) of the Sublease.

          "DEFAULT" - any event or occurrence which with the passing of time or
the giving of notice, or both, shall constitute an Event of Default under the
Sublease.

          "DELIVERY DATE" - the date of Sublease Supplement No. 1 describing the
Aircraft, which date shall be the date the Aircraft is delivered to, and
accepted by Sublessee pursuant to the Sublease as such date is set forth in the
Sublease Supplement No. 1.

          "DEPARTMENT OF TRANSPORTATION " AND "DOT" the United States
Department of Transportation or any successor thereto.

          "DOLLARS" and "S" - immediately available and freely transferable
lawful money of the United States of America.

          "DOWTY" - Dowty Rotol Limited, a limited liability company organized
under the laws of the United Kingdom.

          "ECMP" - Agreement between General Electric Company and Sublessee for
the Engine Care Maintenance Plan for Engines, reasonably acceptable to Sublessor
and Lessor.

          "ENGINE" - with respect to an Aircraft - (i) each of the two General
Electric Model CT7-5A engines installed on the Aircraft on the Delivery Date,
listed by manufacturer's serial numbers in Sublease Supplement No. l executed
and delivered with respect to the Aircraft whether or not from time to time
thereafter installed on the Airframe of the Aircraft or any other airframe; (ii)
any Replacement Engine; (iii) any and all Parts incorporated or installed in or
attached or belonging thereto and any and all Parts removed therefrom so long as
title thereto remains vested in Lessor in accordance with the Sublease-after
removal from such Engine; and (iv) insofar as legal title thereto and ownership
thereof is from time to time vested in Lessor, all substitutions, replacements
or renewals from time made in or to such Engine or to any of the items referred
to in clauses (i), (ii) and (iii) above or to any part thereof as required or
permitted under the Sublease. Except as

                                        3


otherwise set forth in the Sublease, at such time as a Replacement Engine is so
substituted and the Engine for which the substitution is made is released from
the Lien of the Loan Agreement, such replaced Engine shall cease to be an Engine
under the Sublease. The term "Engines" means, if the context so requires, as of
any date of determination, all Engines then leased under the Sublease.

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

          "EVENT OF DEFAULT" - the term "Event of Default" shall have the
meaning specifically set forth in Section 18 of the Sublease.

          "EVENT OF LOSS" - as defined in Section 12.2 of the Sublease.

          "EXCEPTED PAYMENTS" - (a) any indemnity or other payment payable to
Lessor under the Tax Indemnity Agreement or Section 8 of the Participation
Agreement, whether or not included in the definition of Supplemental Rent, (b)
any payment under insurance maintained by Sublessor or Lessor with respect to
the Aircraft and not required by Section 7 of the Lease, or maintained under
liability insurance policies (whether maintained by Sublessor as required under
the Lease or otherwise) to or for the benefit of Sublessor or Lessor on account
of any loss suffered by Sublessor or Lessor, (c) any interest or late charge on
any amount payable under (a) or (b) above, (d) any payment under the Guaranty
with respect to any obligation described in (a), (b) or (c) above, and (e) all
rights of Lessor reserved pursuant to Section 5.8 of the Loan Agreement.

          "EXCEPTED RIGHTS" - all rights (i) of Lessor of every kind and nature
under the Tax Indemnity Agreement, and (ii) the right of Lessor or Sublessor to
demand, collect, sue for or otherwise enforce or exercise its rights in respect
of Excepted Payments; PROVIDED, that in the case of Lessor's oar Sublessor's
rights reserved in (ii) above such rights shall not include the exercise of any
remedies (including, without limitation, the exercise of any remedies under the
Lease) other than the right to sue for specified performance of any covenant to
make an Excepted Payment or to sue for damages or to enforce any judgment in
respect of the breach of such covenant.

          "FAA" - the United States Federal Aviation Administration or any
successor agency.

          "FAA AIRCRAFT REGISTRY" - the registry maintained pursuant to the
Transportation Code for the registration of aircraft and the recordation of
instruments affecting interests in, among other things, aircraft and certain
engines and propellers.

                                        4


          "FAA COUNSEL" - Crowe & Dunlevy or any other counsel specializing in
FAA filings and recordings, reasonably satisfactory to Lessor, Sublessor,
Guarantor and Lender.

          "FAIR MARKET RENTAL VALUE" - as defined in Section 18.3 of the
Sublease.

          "FAIR MARKET SALE VALUE" - as defined in Section 18.3 of the Sublease.

          "FAR" - the Federal Aviation Regulations promulgated under the
Transportation Code and any successor provisions.

          "FEDERAL RESERVE BOARD" - the Board of Governors of the Federal
Reserve System of the United States of America or any successor agency or board
at the relevant time performing the functions of the Federal Reserve Board.

          "GAAP" - generally accepted accounting principles, in the United
States, consistently applied.

          "GE" - General Electric Company, a New York corporation, and its
permitted successors and assigns, in its capacity as manufacturer of the
Engines.

          "GENEVA CONVENTION" - the Geneva Convention on the International
Recognition of Rights in Aircraft, opened for signature in June of 1948.

          "GOVERNMENTAL BODY" - any federal, state, municipal or other
governmental division, subdivision, department, commission, board, bureau,
court, legislature, agency, instrumentality or authority' of any country
including, without limitation, the United States of America, domestic or, to the
extent binding under federal law on any person or the Aircraft, international or
transnational.

          "GUARANTOR" - Saab AB and its successors and permitted assigns.

          "GUARANTY" - The Guaranty made as of July 15, 1987 and executed and
delivered by Guarantor.

          "INDEMNIFIED PERSON" - Lessor, Lender, Guarantor and Sublessor and
their respective Affiliates, successors, permitted assigns, officers, directors,
employees and Lenders.

          "INSURANCE ENDORSEMENTS" - the Insurance Endorsements in the form
attached as Exhibit B to the Sublease to be provided by Sublessee.

          "LEASE" - The Aircraft Lease Agreement dated as of July 15, 1987
between Lessor and Sublessor, as from time to time amended

                                        5


or supplemented in accordance with the Operative Documents, including as
supplemented, without limitation, by any Lease Supplement.

          "LEASE DEFAULT" - an event or condition which, with notice or lapse of
time or both, would constitute a Lease Event of Default.

          "LEASE EVENT OF DEFAULT" - any "Lease Event of Default" as defined in
Section 22 of the Lease.

          "LEASE SUPPLEMENT" - Lease Supplement No. 14 dated June 30, 1988 and
any other Lease Supplement entered into between Lessor and Sublessor for the
purpose of leasing the Aircraft or any Replacement Engine or Replacement
Propeller under the Lease, as from time to time amended or supplemented in
accordance with the terms of the Operative Documents.

          "LENDER" - Mellon Financial Services Corporation #3, a Delaware
corporation, and its successors and permitted assigns.

          "LENDER LIENS" - Liens arising as a result of (i) claims or judgments
against or affecting Lender not related to the transactions contemplated or
expressly permitted by the Operative Documents or not indemnified against by
Sublessee; (ii) acts or omissions of Lender not related to the transactions
contemplated or expressly permitted by the Operative Documents or not
indemnified against by Sublessee; (iii) Taxes imposed against Lender not
indemnified against by Sublessor pursuant to the Participation Agreement or by
Sublessee; (iv) claims against Lender arising out of the voluntary transfer by
such Person of its interest in the Aircraft, other than claims indemnified
against by Sublessor pursuant to the Participation Agreement or by Sublessee and
other than the Lien of the Loan Agreement, or (v) breach by Lender of any of its
duties and obligations under any Operative Document, unless such breach is the
result of Lessor's or Sublessor's failure to comply with any of its respective
obligations under the Operative Documents, or not indemnified against by
Sublessee.

          "LESSEE" - Fairbrook Leasing, Inc., a Delaware corporation, and its
successors and permitted assigns.

          "LESSOR" - Wilmington Trust Company, as Owner Trustee, a Delaware
banking corporation, as Lessor under the Lease, and its successors and permitted
assigns.

          "LESSOR LIENS" - Liens or a disposition of title affecting or in
respect of the Aircraft, the Airframe, any Engine, any Propeller, any Part, the
Lease, the Collateral or any payment of Rent, arising as a result of (i) claims
or judgments against or affecting Lessor not related to the transactions
contemplated or

                                        6


expressly permitted by the Operative Documents or not indemnified against by
Sublessee; (ii) acts or omissions of Lessor not related to the transactions
contemplated or expressly permitted by the Operative Documents or not
indemnified against by Sublessee; (iii) Taxes imposed against Lessor not
indemnified against by Sublessor pursuant to the Participation Agreement or the
Tax Indemnity Agreement or by Sublessee; (iv) claims against Lessor arising out
of the voluntary transfer by Lessor of its interest in the Aircraft, other than
(A) the transfer itself (if permitted by the Operative Documents), (B) claims
indemnified against by Lessee pursuant to the Participation Agreement or by
Sublessee, (C) the Lien of Loan Agreement, and (D) transfers as a result of an
Event of Loss, Lease Event of Default or exercise of a purchase option by
Lessee; or (v) breaches by Lessor of any of its duties and obligations under
any. Operative Document, (Liens under the Loan Agreement or the Lease arising
from such a breach being included in this clause (v)), unless such breach is the
result of Sublessor's failure to comply with any of Sublessor's obligations
under the Operative Documents, or not indemnified against by Sublessee.

          "LIEN" - as applied to the property or assets (or the income or
profits therefrom) of any Person, means (in each case, whether the same is
consensual or non-consensual or arises by contract, operation of law, legal
process or otherwise) any mortgage, lien, pledge, attachment, levy, lease,
charge, conditional sale, inscription on a public record, adverse claim or any
other type of security interest or encumbrance of any kind in respect of any
property of such Person, or upon the income or profits therefrom.

          "LOAN" - the loan made by the Lender to the Lessor under the Loan
Agreement and the Participation Agreement.

          "LOAN AGREEMENT" - The Loan and Security Agreement dated as of July
15, 1987 between Lender and Lessor, as from time to time amended or supplemented
in accordance with the terms of the Operative Documents, including, without
limitation, by any Loan Agreement Supplement.

          "LOAN AGREEMENT SUPPLEMENT" - Loan and Security Agreement No. 14 dated
June 30, 1988 and entered into between Lender and Lessor, which particularly
describes the Aircraft included in the Collateral covered by the Loan Agreement
and which confirms and creates a security interest in the Aircraft and assigns
and pledges to Agent the Lease and Lease Supplement relating to the Aircraft as
part of the Collateral.

          "LOSS PAYEE" - as defined in Section 13(a) of the Sublease.

          "MAINTENANCE PROGRAM" - Sublessee's or its Affiliate's FAA approved
maintenance program in effect, from time to time, with

                                        7


respect to the Aircraft.

          "MANUFACTURER" - Saab Aircraft AB, a limited liability company
organized under the laws of the Kingdom of Sweden, and its successors and
permitted assigns.

          "MATERIALLY ADVERSE EFFECT" - (i) with respect to any Person, a
materially adverse effect on such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, (ii) with
respect to any contract or any other obligation (other than the Lease or any of
the other Operative Documents), a materially adverse effect, as to any party
thereto, upon the binding nature, validity or enforceability thereof, and (iii)
with respect to the Operative Documents an adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability thereof as
obligations of the Borrower or the Sublessor, as the case may be.

          "NOTE" - Promissory Note No. Fourteen dated June 30, 1988 delivered by
Lessor to Lender, including any note delivered in exchange therefor or in
replacement thereof pursuant to Section 2.10 of the Loan Agreement.

          "OBLIGATIONS" - as defined in Section 3.1 of the Loan Agreement.

          "OFFICER'S CERTIFICATE" - with respect to any corporation or other
entity, a certificate of a Responsible Officer of such corporation or entity.

          "OPERATIVE DOCUMENTS" - the Participation Agreement, the Lease
(including any Lease Supplements), the Loan Agreement (including any Loan
Agreement Supplements), any Notice of Assignment, the Guaranty, the Tax
Indemnity Agreement, any Note, the Sublease (including any Sublease
Supplements), the Lease Rent Schedule and the Sublease Rent Schedule.

          "OVERDUE RATE" - The Base Rate plus four (4) percent per annum, or
such lesser rate as may represent the maximum rate of interest permitted by
Applicable Law.

          "PARTICIPANTS" - Lender and Metlife Capital, Limited Partnership, (as
Owner Participant).

          "PARTICIPATION AGREEMENT" - The Participation Agreement dated as of
July 15, 1987 among Lessor, Sublessor and the Participants, as from time to time
amended or supplemented in accordance with the terms of the Operative Documents.

          "PARTS" - any and all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature,
(other than complete Engines or

                                        8


engines and Propellers or propellers), which may from time to time be
incorporated or installed in or attached to the Airframe, any Engine or any
Propeller.

          "PERMITTED LIENS" - as defined in Section 10.1 of the Sublease.

          "PERSON" - any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Body.

          "PROPELLER" - (i) each of the two (2) Dowty Rotol Model
R354/4-123-F/13 or R389/4-123-F/25 four-blade aircraft propellers installed on
the Aircraft and listed by manufacturer's serial numbers in the Sublease
Supplement describing the Aircraft whether or not from time to time thereafter
installed on the Aircraft or any other aircraft, (ii) any Replacement
Propeller; (iii) any and all Parts incorporated or installed thereon or attached
or belonging thereto and any and all Parts removed from such Propeller so long
as title thereto remains vested in Lessor in accordance with the Sublease after
removal from such Propeller; and (iv) insofar as legal title thereto and
ownership thereof is from time to time vested in Lessor, all substitutions,
replacements or renewals from time made in or to such Propeller or to any of
the items referred to in clauses (i), (ii) and (iii) above or to any part
thereof as required or permitted under the Sublease. Except as otherwise set
forth in the Sublease, at such time as a Replacement Propeller is so
substituted and the Propeller for which the substitution is made is released
from the Lien of the Loan Agreement, such replaced Propeller shall cease to be
a Propeller under the Sublease. The term "Propellers" means, if the context so
requires, as of any date of determination, all Propellers then leased under the
Sublease.

          "REGULATIONS" - FAR.

          "RELEASE NOTICE" - the notice by Agent pursuant to Section 10 of the
Loan Agreement that all amounts and all other Obligations owing to Lender under
the Loan Agreement, under the Notes and under all other Operative Documents have
been finally and irrevocably paid and performed in full and the Lien of the Loan
Agreement has been released.

          "RENT" - Base Rent and Supplemental Rent.

          "RENT PAYMENT DATE" - each rent payment date set forth in the Sublease
Supplement and the Sublease Rent Schedule.

          "REPLACEMENT ENGINE" - each General Electric Model CT7-5A aircraft
engine (or aircraft engine of the same manufacturer of the same or an improved
model) substituted for an Engine under the Sublease, together with all Parts
relating to such engine.

                                        9


          "REPLACEMENT PROPELLER" - each Dowty Rotol Model R354/4-123-F/13 or
R389/4-123-F/25 four-blade aircraft propeller (or aircraft propeller of the same
manufacturer of the same or an improved model) substituted for any Propeller
under the Sublease, together with all Parts relating to such propeller.

          "RESPONSIBLE OFFICER" - in the case of any corporation or other
entity, the Chairman of the Board of Directors, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary.

          "SAAB MRB MANUAL" - the most recent revision of the Saab 340
Maintenance Review Board Document.

          "SAAI" - Saab Aircraft of America, Inc., a Delaware corporation, and
its successors and permitted assigns.

          "STIPULATED LOSS VALUE" - with respect to the Aircraft as of any date
of computation, the Stipulated Loss Value for the Aircraft as specified in the
table in Annex 1 to Sublease Rent Schedule (the "Stipulated Loss Value Table"),
for the immediately preceding Base Rent Payment Date, or if the date of
computation is before the first Base Rent Payment Date, using the first Base
Rent Payment Date, or if the date of computation is on a Base Rent Payment Date
using such Base Rent Payment Date.

          "SUBLEASE" - Aircraft Sublease Agreement No. 8 dated as of March 1,
1996 between Chautauqua Airlines, Inc., as Sublessee, and Fairbrook Leasing,
Inc., as Sublessor, to which this Annex I is attached and as amended or
supplemented from time to time pursuant to the provisions thereof, including
without limitation Sublease Supplement No. 1 and any Sublease Supplement as may
be executed contemporaneously with or subsequent to the date of this Sublease.

          "SUBLEASE RENT SCHEDULE" - Sublease Rent Schedule No. 1 dated the
Delivery Date, entered into between Fairbrook Leasing, Inc., as Sublessor, and
Chautauqua Airlines, Inc., as Sublessee, setting forth Base Rent and payment
terms, Stipulated Loss Values and other financial information.

          "SUBLEASE SUPPLEMENT" - any supplement to any Sublease, entered into
between Sublessor and any Sublessee for the purpose of subleasing the Aircraft
or any Replacement Engine or Replacement Propeller under the Sublease, including
without limitation any amendment thereto entered into subsequent to the Delivery
Date.

          "SUBLEASE SUPPLEMENT NO. 1" - Sublease Supplement No. 1 dated the
Delivery Date, in the form of Exhibit A to the Sublease, entered into between
Sublessor and Sublessee for the purpose of subleasing the Aircraft under the
Sublease, including without limitation any amendment thereto entered into
subsequent to the Delivery Date.

                                       10


          "SUBLESSEE" - Chautauqua Airlines, Inc., a New York corporation, and
an air carrier engaged in interstate air transportation and certificated under
Section 44705 of the Transportation Code, and its successors and permitted
assigns.

          "SUBLESSEE DOCUMENTS" - the Sublease, Sublease Supplement No. 1 and
any subsequent Sublease Supplements, and the Sublease Rent Schedule.

          "SUBLESSOR" - Fairbrook Leasing, Inc., a Delaware corporation, as
sublessor under this Sublease, and its permitted successors and assigns.

          "SUBLESSOR LIENS" - Liens arising as a result of (i) claims or
judgments against or affecting Sublessor not related to the transactions
contemplated or expressly permitted by the Operative Documents as of the date
hereof or not indemnified against by Sublessee; (ii) acts or omissions of
Sublessor not related to the transactions contemplated or expressly permitted by
the Operative Documents as of the date hereof or not indemnified against by
Sublessee; (iii) Taxes imposed against Sublessor not indemnified against by
Sublessee; (iv) claims against Sublessor arising out of the voluntary transfer
by Sublessor of its interest in the Aircraft, other than claims indemnified
against by Sublessee; or (v) breach by Sublessor of any of its duties and
obligations under any Operative Document as of the date hereof or not
indemnified against by Sublessee.

          "SUPPLEMENTAL RENT" - all amounts Sublessee agrees to pay as
Supplemental Rent and all amounts, liabilities and obligations (other than Base
Rent) which Sublessee assumes or agrees to pay under the Sublease or under any
Sublessee Document including, without limitation, Stipulated Loss Value,
indemnities, any interest payable under the Sublease or any Sublessee Document,
any insurance premium paid by any Person in respect of insurance required to be
carried by Sublessee under the Sublease and damages for breach of any covenants,
representations, or warranties of Sublessee under the Sublease or under any
other Sublessee Document.

          "TAX INDEMNITY AGREEMENT" - The Federal Tax Indemnity Agreement dated
as of July 15, 1987 between Lessor and Sublessor, as from time to time amended
or supplemented in accordance with the terms of the Operative Documents.

          "TAXES or TAX" - as defined in Section 15 of the Sublease.

          "TERM" - the term of the Sublease, as determined pursuant to Section 8
of the Sublease.

          "UNITED STATES GOVERNMENT" - the government of the United States of
America or any agency or instrumentality thereof,

                                       11


including, without limitation, the FAA.

          "U.S. CERTIFICATED AIR CARRIER" - any person (except the United States
Government) that is an air carrier, domiciled in the United States of America
and is certificated under Section 44705 of the Transportation Code, or any
successor provision thereto.

          "U.S. PERSON" - "United States person" within the meaning of Section
7701 (a) (30) of the Code.

                                       12


                                                                       EXHIBIT A
                                                                              TO
                                               AIRCRAFT SUBLEASE AGREEMENT NO. 8

THIS SUBLEASE SUPPLEMENT NO. 1 HAS BEEN EXECUTED IN COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS SUBLEASE SUPPLEMENT NO. 1 CONSTITUTES CHATTEL PAPER (AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
UNITED STATES JURISDICTION), NO SECURITY INTEREST IN THIS SUBLEASE SUPPLEMENT
NO. 1 MAY HE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER
THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED
BY MELLON FINANCIAL SERVICES CORPORATION #3, AS LENDER ON THE SIGNATURE PAGE
HEREOF.

                            SUBLEASE SUPPLEMENT NO. 1

          SUBLEASE SUPPLEMENT N0. 1, dated March ___, 1996 ("Sublease Supplement
No. 1") to Aircraft Sublease Agreement No. 8 dated as of March 1, 1996 (the
"Sublease") by and between CHAUTAUQUA AIRLINES, INC., as sublessee
("Sublessee"), and FAIRBROOK LEASING, INC., as sublessor ("Sublessor").

                             I N T R O D U C T I O N

          WHEREAS, Sublessor and Sublessee have heretofore entered into the
Sublease (defined terms therein being hereinafter used with the same meanings).
The Sublease provides for the execution and delivery of a Sublease Supplement
for the purpose of leasing the Aircraft under the Sublease as and when
delivered by Sublessor to Sublessee in accordance with the terms thereof; and

          WHEREAS, a counterpart of the Sublease, with this Sublease Supplement
No. 1 attached thereto, is being filed for recordation with the FAA Aircraft
Registry as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged Sublessor and Sublessee hereby agree as follows:

A.   THE AIRCRAFT. Sublessee hereby confirms to Sublessor that Subleases has
accepted the Aircraft and each Engine and Propeller described below for all
purposes hereof and of the Sublease as being airworthy in accordance with
specifications, in good working

                                        1


order and repair and without defect in condition, design, operation or fitness
for use, whether or not discoverable by Sublessee as of the date hereof;
PROVIDED, HOWEVER, that nothing contained herein or in the Sublease diminishes
or affects any right Sublessor or Sublessee may have with respect to the
Aircraft against the Manufacturer, GE, Dowty, any vendor or any subcontractor or
supplier thereof:



AIRFRAME
MANUFACTURER    MODEL      SERIAL NUMBER           U.S. REG. NO.
- ------------    -----      -------------           -------------
                                          
Saab-Fairchild  340A       340A-123                N123MQ
                                                   (being changed to
                                                   N123CQ)


INSTALLED
ENGINES                                            RATED
MANUFACTURER    MODEL      SERIAL NUMBER           TAKEOFF H/P
- ------------    -----      -------------           -----------

                                          
General         CT7-5A     GE-E-367-401 (left)     Each of which
Electric                   GE-E-367-426 (right)    Engines has 750
                                                   or more rated
                                                   take off
                                                   horsepower or
                                                   the equivalent
                                                   thereof.


INSTALLED
PROPELLERS                                         RATED TAKEOFF
MANUFACTURER    MODEL      SERIAL NUMBER           SHAFT H/P
- ------------    -----      -------------           -------------

                                          
Dowty Rotol     R354/4-    DRG/1789/87 (left)      Each of which
                123-F/13                           Propellers is
                                                   capable of
                R389/4-    DRG/1792/87 (right)     absorbing 750 or
                123-F/25                           more rated take
                                                   off shaft
                                                   horsepower.


B.   STIPULATED LOSS VALUE. Sublessee hereby agrees to pay in accordance with
and when required by the Sublease Stipulated Loss Value payments in the amounts
set forth in Annex 1 to the Sublease Rent Schedule and incorporated herein by
reference.

C.   REPRESENTATIONS BY SUBLESSEE. Sublessee hereby represents and warrants to
Sublessor that on the above date:

(1)  The representations and warranties of Sublessee set forth in the Sublease
     are true and correct in all material respects as though made on the date
     above;

                                        2


(2)  Sublessee has satisfied or complied with all requirements in the sublease,
     to be completed by it on or prior, to the date hereof;

(3)  No Sublease Default or Event of Default has occurred and is continuing on
     the date above; and

(4)  Sublessee has obtained, and there are in full force and effect, such
     insurance policies with respect to the Aircraft, as are required to be
     obtained under the terms of the Sublease.

D.   DELIVERY DATE                       March ___, 1996

E.   TERM:                               The Term shall commence on the
                                         Delivery Date and expire on August
                                         ___, 2006, unless terminated earlier
                                         pursuant to and in accordance with
                                         the Sublease; PROVIDED, however,
                                         that if Sublessor is unable to renew
                                         the Lease beyond its current
                                         termination date of July 11, 2002,
                                         then the Sublease will terminate on
                                         July 11, 2002 and Sublessor shall
                                         lease or sublease a Saab 340A
                                         aircraft to Sublessee through August
                                         28, 2006 on the same terms and
                                         conditions as those of the Sublease.

F.   BASE RENT:                          Sublessee agrees to pay Sublessor,
                                         Base Rent monthly in arrears, in the
                                         amounts and on the dates, as set
                                         forth in the Sublease Rent Schedule.

G.   FIRST BASE RENT
     PAYMENT DATE:                       April ___, 1996.

H.   BASE RENT
     PAYMENT DATES:                      Base Rent during the Term shall be
                                         paid on the same day of each month
                                         as the day of the month of the First
                                         Base Rent Payment Date.

I.   AIRCRAFT BASE:                      Indianapolis, Indiana or Akron,
                                         Ohio.

J.   DELIVERY SITE:                      Indianapolis, Indiana.

K.   COUNTERPARTS:                       This Sublease Supplement No. 1 may
                                         be executed in any number of
                                         counterparts and by the parties
                                         hereto on separate counterparts,

                                        3


                                         each of which counterparts, shall
                                         for all purposes be deemed an
                                         original, and all such counterparts
                                         shall together constitute but one
                                         and the same Sublease Supplement
                                         No. 1; PROVIDED that, to the extent, if
                                         any, that this Sublease Supplement
                                         No. 1 constitutes chattel paper (as
                                         such term is defined in the Uniform
                                         Commercial Code as in effect in any
                                         applicable jurisdiction) no security
                                         interest may be created through the
                                         transfer or possession of any
                                         counterpart other than the
                                         counterpart containing the receipt
                                         therefor executed by Mellon
                                         Financial Services Corporation #3,
                                         as Lender on the signature page
                                         hereof.

L.   REFERENCE                           All the terms and provisions of the
                                         Sublease are hereby incorporated by
                                         reference in this Sublease
                                         Supplement No. 1 to the same extent
                                         as if fully set forth herein.

          IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease
Supplement No. 1 to be duly executed by their authorized officers as of the day
and year first above written.

                             FAIRBROOK LEASING, INC.,
                             as Sublessor

                             By:  /s/ Mark D. Pugliese
                                 ------------------------------
                                 Mark D. Pugliese
                                 Vice President and
                                 General Counsel

                             By:  /s/ Gena H. Laurent
                                 ------------------------------
                                 Gena H. Laurent
                                 Assistant Vice President

                             CHAUTAUQUA AIRLINES, INC.,
                             as Sublessee

                             By:  /s/ Timothy L. Coon
                                 ------------------------------
                                 Timothy L. Coon
                                 Senior vice President

                                        4


                                                                      EXHIBIT  B
                                                                              TO
                                               AIRCRAFT SUBLEASE AGREEMENT NO. 8

                             INSURANCE ENDORSEMENTS

          It is understood and agreed that the Saab Fairchild 340A Aircraft,
MSN-340A-123, U.S. Registration No. N123MQ with two General Electric CT7-5A
Engines, serial nos. GE-E-367401 and GE-E-367426, respectively, and two Dowty
Rotol Propellers, model R354/4-123-F/13, serial no. DRG/1789/87 and model
R389/4-123-F/25 with serial no. DRG/1792/87, respectively, is (i) encumbered by
a lien in favor of Lender, (ii) is leased by Wilmington Trust Company, Owner,
as lessor ("Lessor") to Fairbrook Leasing, Inc., a Delaware corporation, as
lessee ("Lessee"), under The Aircraft Lease Agreement dated as of July 15, 1987
(the "Lease"), and (iii) is subleased by Lessee to Chautauqua Airlines, Inc. as
Sublessee ("Named Insured") under Aircraft Sublease Agreement No. 8 dated as of
March 1, 1996 (the "Sublease"), and certain obligations of Lessee under the
Lease are guaranteed by Saab AB, as guarantor ("Guarantor").

          As provided in Part B below, each of Lessor, Lender, Guarantor, Lessee
and (until at least March 1, 1998) AMR Leasing Corporation, AMR Corporation,
American Airlines, Inc., Simmons Airlines, Inc. and Executive Airlines, Inc. as
their respective interests may appear, shall be an Additional Insured with
respect to each policy of liability insurance to which these endorsements are
attached, and Lender, and following delivery of the Release Notice, Lessor, as
the Loss Payee with respect to each policy of "all risks" insurance to which
these endorsements are attached. With respect to the interests of each
Additional Insured or Loss Payee in and with respect to the Aircraft as
defined in Section 2 of the Sublease (the "Subject Property") insured under each
policy by the insurers listed in the Schedule of Insurers attached as Annex 1
hereto (collectively, the "Company"), the Company hereby agrees that each "all
risks" policy includes the endorsements in Part A below; each liability policy
includes the endorsements in Part B below; and all policies include the
endorsements in Part C below:

A.   LOSS PAYABLE ENDORSEMENTS (HULL POLICY)

          This "all risks" insurance is endorsed with respect to the Subject
Property, (A) to name Lessor, Lender, Lessee and Guarantor as additional
insureds, as their respective interests may

                                        1


appear ("Additional Insureds") and Lender, and following the

delivery of the Release Notice, Lessor, as loss payee, as their respective
interests may appear ("Loss Payee").

1.   Loss or damage, if any, to the Subject Property described in this policy to
     the extent of the Stipulated Loss Values set forth in the Stipulated Loss
     Value Table attached as Schedule 1 hereto shall be payable as follows:

     (i)  loss or damage with respect to the Subject Property which does not
          constitute an Event of Loss (as defined in the Sublease) shall be
          payable in United States Dollars solely to Lender (until Lender
          notifies Company in writing its lien is released, thereafter to
          Lessor); except loss or damage with respect to the Aircraft of
          $100,000.00 or less shall be payable to Named Insured, unless (A)
          prior to any loss or damage, Lender (or after Lender notifies Company
          in writing its lien is released, Lessor) notifies the Company that a
          Lease Event of Default exists, in which case such amounts shall be
          payable to Lender (or after Lender notifies Company in writing its
          lien is released, Lessor), or (B) prior to any loss or damage, Lessee
          notifies the Company that a Sublease Event of Default exists, in which
          case such amounts shall be payable to Lessee; and

     (ii) loss or damage with respect to the Subject Property described in this
          policy which constitutes an Event of Loss sha11 be payable by
          distributing (x) the amount set forth in Schedule 1 hereto ("SLV
          Amount") solely to Lender (until Lender notifies Company in writing
          its lien is released, thereafter to Lessor), and (y) any remaining
          amounts solely to Named Insured.

2.   Subject to paragraph 4 hereof, the insurance under this policy as to the
     interest only of the Loss Payee shall not be impaired in any way (i) by any
     action or inaction by Sublessee and shall insure the interest of the Loss
     Payee regardless of any breach or violation by Sublessee or any other
     additional insured of any warranty, declaration or condition contained in
     such policies, and if available at commercially reasonable cost such
     coverages shall be provided otherwise than by way of endorsement with
     Lloyd's Form AVN67A; PROVIDED HOWEVER, that with respect to secretion,
     embezzlement or conversion by Sublessee, no coverage shall
     apply to any Person which is a willful party to such secretion,
     embezzlement or conversion, or (ii) because of a subjection of the Aircraft
     to any condition, use or operation not permitted by the policy or (iii)
     because of any false statement with respect to the policy by Sublessee or
     its employees, agents or

                                        2


     representatives, or any other Person except the Loss Payee (and then such
     Named Insured or its employees, agents or representatives, or any other
     person (except an Additional Insured, and then such policy will be
     impaired only as to such Person), whether occurring before or after the
     attachment of this endorsement, or whether before or after the loss.

3.   If the Named Insured fails to pay any premium or additional premium which
     shall be or become due under the terms of this policy, the Company agrees
     to give written notice to each Loss Payee of such nonpayment of premium and
     this policy shall continue in full force and effect if the Loss Payee when
     so notified in writing by the Company of the failure of the Named Insured
     to pay such premium, pays or causes to be paid the premium within thirty
     (30) days following receipt of the Company's written notice (seven (7)
     days, or such shorter period as may from time to time be the longest period
     obtainable in the industry, in the case of any war risk and allied perils
     coverage). If no Loss Payee pays said premium or additional premium, the
     rights of Lender, Lessor, Lessee or the Loss Payee under this Loss Payable
     Endorsement may be terminated by the Company thirty (30) days after receipt
     of said written notice by the Loss Payee (seven (7) days, or such shorter
     period as may from time to time be the longest period obtainable in the
     industry, in the case of any war risk and allied perils coverage).

4.   If the Company elects to cancel this policy in whole or in part for
     nonpayment of premium or for any other reason, the Company will forward a
     copy of the cancellation notice to the Loss Payee at its office specified
     hereinafter concurrently with the sending of notice to the Named Insured
     but in such case this policy shall continue in force for the benefit of the
     Loss Payee for thirty (30) days (seven (7) days, or such shorter period as
     may from time to time be the longest period obtainable in the industry, in
     the case of any war risk and allied perils coverage) after written notice
     of such cancellation is received by the Loss Payee by a copy sent by
     certified or registered mail, return receipt requested. In no event, as to
     the interest only of the Loss Payee, shall cancellation, lapse or adverse
     material change of any insurance under this policy be effected at the
     request of the Named Insured before thirty (30) days (seven (7) days, or
     such shorter period as may from time to time be the longest period
     obtainable in the industry, in the case of any war risk and allied perils
     coverage) after written notice of request for cancellation shall have been
     received by the Loss Payee by a copy sent by certified or registered mail,
     return receipt requested. If this policy is cancelled, the unearned premium
     shall be paid to the Loss Payee that has advanced such premium.

                                       3


5.   The coverage provided herein is primary without contribution from any
     other insurance which might be available to the Loss Payee.

6.   Whenever the Company pays to Lender, Lessor, Lessee or Named Insured, any
     sum representing a total loss to the Subject Property insured under this
     policy, and claims that as to the Named Insured, no liability therefor
     exists, the Company, at its option, may pay to Lender, Lessor, Lessee
     or Named Insured, as the case may be, the Stipulated Loss Value (as such
     term is defined in the Sublease and the Schedules attached hereto, but in
     no event to exceed the Agreed Insured Value as stated in the policy), and
     the Company shall thereupon be subrogated to and receive a full assignment
     and transfer, without recourse, of said obligation and the security held as
     collateral therefor; but shall not exercise such subrogation and assignment
     right until each Additional Insured has recovered in full the amount of
     its respective claims against the Named Insured.

7.   The coverage granted under this policy shall continue in full force and
     effect as to the interest of the Loss Payee if the Loss Payee agrees to pay
     the premium therefor, for a period of thirty (30) days after expiration of
     said policy unless an acceptable policy in renewal thereof with loss
     thereunder payable in accordance with the terms of this Loss Payable
     Endorsement shall have been issued by an insurance company acceptable to
     Lender, Lessor and Lessee.

8.   Should this policy be continued for the term hereof for the benefit of the
     Loss Payee (with all incidents of ownership of the policy), Paragraphs 2, 6
     and 7 of Part A of this Loss Payable Endorsement shall no longer apply to
     the Loss Payee; PROVIDED, NEVERTHELESS, all privileges and endorsements
     which, by reason of the printed conditions of this policy, are or may be
     necessary to maintain the validity of the contract are hereby granted for
     a period of thirty (30) days, and all notices likewise required to be given
     to the Company by Named Insured are hereby waived for a period of thirty
     (30) days with the exception of requirements applying at the time of or
     subsequent to a loss.

9.   The Company waives any rights of subrogation against the Loss Payee, to the
     same extent as Sublessee has waived its right against the Loss Payee,
     except with respect to the gross negligence and/or willful misconduct of
     the Loss Payee; PROVIDED, that with respect to liability and property
     damage coverages hereunder such waiver shall not operate to prejudice the
     Company's rights of recourse against Saab Aircraft AB and/or Saab Aircraft
     of America, Inc., and/or any subsidiary thereof and General Electric
     Company and/or any subsidiary thereof, as manufacturers, repairers,
     suppliers or servicing

                                        4


     agents (other than financial services) where such rights of recourse would
     have existed had such waiver not been given, and PROVIDED, FURTHER, that
     the exercise by the Company of rights of subrogation derived from rights
     retained by Named Insured shall not, in any way, delay payment of any claim
     that would otherwise be payable by the Company but far the existence of
     rights of subrogation derived from rights retained by Named Insured.

B.   LIABILITY POLICY ENDORSEMENTS

          This liability insurance policy is endorsed, with respect to the
Subject Property:

(A)  To name Lessor, Guarantor, Lender, Lessee and (until at least March 1,
     1998, AMR Leasing Corporation, AMR Corporation, American Airlines, Inc.,
     Simmons Airlines, Inc. and Executive Airlines, Inc.) as additional insureds
     as their respective interests may appear ("Additional Insureds") and shall
     cover (i) each of the shareholders of each Additional Insured, and (ii)
     officers, directors, employees, agents and representatives of each
     Additional Insured (with respect to each Additional Insured, collectively,
     "Covered Persons");

(B)  To provide that if this policy is cancelled for any reason whatsoever, or
     any substantial change is made in the coverage which affects the interest
     of the Additional Insureds and Covered Persons, or if such insurance is
     cancelled for nonpayment of premium or allowed to lapse, such cancellation,
     change or lapse shall not be effective as to the Additional Insureds and
     Covered Persons thirty (30) days (seven (7) days, or such shorter period as
     may from time to time be the longest period obtainable in the industry, in
     the case of war risk and allied perils coverage) after receipt by such
     Additional Insureds of written notice from the Company sent by certified or
     registered mail, return receipt requested, of such cancellation, change or
     lapse;

(C)  To provide that if the Named Insured fails to pay any premium or additional
     premium which shall be or become due under the terms of this policy, the
     Company agrees to give written notice to each Additional Insured of such
     nonpayment of premium and this policy shall continue in full force and
     effect if any one or more of the Additional Insureds when so notified in
     writing by the Company of the failure of the Named Insured to pay such
     premium, pays or causes to be paid the premium due within thirty (30) days
     following receipt of the Company's written notice. If no Additional Insured
     pays said premium or additional premium, the rights of Lender, Lessor,

                                        5


     Lessee and other Additional Insureds and Covered Persons under this
     Liability Endorsement may be terminated by the Company thirty (30) days
     after receipt of said written notice by each Additional Insured;

(D)  To provide that the coverage granted under this policy shall continue in
     full force and effect as to the interest of each Additional Insured and
     Covered Person if any Additional Insured agrees to pay the premium
     therefor, for a period of thirty (30) days after expiration of said policy
     unless an acceptable policy in renewal thereof shall have been issued by
     an insurance company acceptable to Lender, Lessor and Lessee;

(E)  To provide that in respect of the interest of the Additional Insureds and
     Covered Persons, (i) this policy shall not be invalidated by any action of
     Named Insured and shall insure the respective interests of the Additional
     Insureds and Covered Persons named and covered under this Endorsement, as
     they appear, regardless of any breach or violation by Named Insured of any
     warranties, declarations or conditions contained in this policy or in the
     application therefor, if any, and (ii) severability of interest is
     included, PROVIDED nothing herein shall operate to increase the limits of
     liability and that coverage provided herein is primary without contribution
     from any other insurance which might be available to the Additional
     Insureds, and (iii) this insurance shall provide the same protection to
     each insured hereunder as would have been available had this policy been
     issued separately to each insured, except that in no event shall the
     Company's total liability exceed $100,000,000.00;

(F)  the Company waives any rights of subrogation against any Additional Insured
     and the Covered Persons of such Additional Insured to the same extent as
     Sublessee has waived its right against such Additional Insured and the
     Covered Persons of such Additional Insured, except with respect to the
     gross negligence and/or willful misconduct of such party; PROVIDED, that
     with respect to liability and property damage coverages hereunder such
     waiver shall not operate to prejudice the Company's rights of recourse
     against Saab Aircraft AB and/or Saab Aircraft of America, Inc., and/or any
     subsidiary thereof as manufacturers, repairers, suppliers or servicing
     agents (other, than financial services) where such rights of recourse would
     have existed had such waiver not been given, and PROVIDED, FURTHER, that
     the exercise by the Company of rights of subrogation derived from rights
     retained by Named Insured shall not, in any way, delay payment of any claim
     that would otherwise be payable by the company but for the existence of
     rights of subrogation derived from rights retained by Named Insured;
     and

(G)  to insure the Additional Insureds and the Covered Persons with

                                        6


     respect to liability for matters which are the subject of Named Insured's
     obligations under the Sublease and Sublease Documents to the extent such
     insurance is provided under this policy; and to provide that such
     Additional Insureds and Covered Persons are warranted to have no
     operational interest.

        Nothing in these insurance Endorsements shall be deemed or construed to
be an agreement by the Company to insure the Manufacturer of the Aircraft, Saab
Aircraft AB, or the manufacturer of the engines, General Electric Company,
against claims arising out of product liability.

C. NOTICES

        All notices herein provided to be given by the Company to Lender,
Guarantor, Lessor, Lessee and for a period of two (2) years, Simmons Airlines,
Inc., AMR Leasing Corporation, Executive Airlines, Inc., American Airlines, Inc.
and AMR Corporation, in connection with this policy and these Endorsements shall
be mailed to or delivered to Lender at Suite 4444, One Mellon Bank Center,
Pittsburgh, PA 15258-0001, Attn: President, Telecopy: (412) 2343948, to Lessor
at Rodney Square North, Wilmington, DR 19890, Attn. Corporate Trust
Administration, Telecopy: (302) 657.-8882; to Guarantor at S-581 88 Linkoping,
Sweden, Attn: General Counsel; Telecopy: 01146-13-18 77. 11; to Lessee at
Fairbrook Leasing, Inc., 21300 Ridgetop Circle, Sterling, Virginia 20166,
Attention: Treasurer, Telecopy No. (703) 406-7309; and to AMR Leasing
Corporation at 4333 Amon Carter Boulevard, MD 5675, Fort Worth, Texas 76155,
Attn: Corporate Secretary and AMR Eagle, Inc., 4333 Amon Carter Boulevard, MD
5494, Fort Worth, Texas 76155, Attn: President.

                                       7


        Nothing herein contained shall be held to vary, alter, waive or extend
any of the terms, conditions, agreements or limitations of this policy, other
than as above stated.

        The insurance described herein is subject to the limitations,
conditions, definitions and exclusions of the policies.

                      [SEE ATTACHED "SCHEDULE OF INSURERS"]

                                                    The Company

                                               By
                                                  ----------------------------
                                                   Authorized Representative

                                       8


                                                                         ANNEX 1
                                                                              TO
                                                          INSURANCE ENDORSEMENTS

                              SCHEDULE OF INSURERS

                                       9


                                                                      SCHEDULE 1
                                                                              TO
                                                          INSURANCE ENDORSEMENTS

                           STIPULATED LOSS VALUE TABLE

          The Stipulated Loss Value computed using the immediately preceding
Base Rent Payment Date, or if on a Base Rent Payment Date, computing using such
Base Rent Payment Date.

DATE                                                           TOTAL

                                       10


NOTE TO EXHIBIT 10.19

The 14 additional Aircraft Sublease Agreements are substantially identical in
all material respects to the filed Aircraft Sublease Agreement except as
follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N118CQ                                           July, 1996               Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N140CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N152CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N148CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N157CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N146CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N158CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N101CN                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N138CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N104CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N96CN                                           October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N108CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N149CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N150CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

EX-10.19(A)

                        AIRCRAFT SUBLEASE AGREEMENT N0. 8

THIS SUBLEASE SUPPLEMENT NO. 1 HAS BEEN EXECUTED IN COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS SUBLEASE SUPPLEMENT NO, 1 CONSTITUTES CHATTEL PAPER (AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
UNITED STATES JURISDICTION), NO SECURITY INTEREST IN THIS SUBLEASE SUPPLEMENT
NO. 1 MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER
THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED
BY MELLON FINANCIAL SERVICES CORPORATION #3, AS LENDER ON THE SIGNATURE PAGE
HEREOF.

                           SUBLEASE SUPPLEMENT NO. 1

        SUBLEASE SUPPLEMENT NO.1., dated March 29, 1996 ("Sublease Supplement
No. 1") to Aircraft Sublease Agreement No. 8 dated as of March 1, 1996 (the
"Sublease") by and between CHAUTAUQUA AIRLINES, INC., as sublessee
("Sublessee"), and FAIRBROOK LEASING, INC., as sublessor ("Sublessor").

                            I N T R O D U C T I O N

        WHEREAS, Sublessor and Sublessee have heretofore entered into the
Sublease (defined terms therein being hereinafter used with the same meanings).
The Sublease provides for the execution and delivery of a Sublease Supplement
for the purpose of leasing the Aircraft under the Sublease as and when delivered
by Sublessor to Sublessee in accordance with the terms thereof; and

        WHEREAS, a counterpart of the Sublease, with this Sublease Supplement
No. 1 attached thereto, is being filed for recordation with the FAA Aircraft
Registry as one document;

        NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged Sublessor and Sublessee hereby agree as follows:

A.   THE AIRCRAFT. Sublessee hereby confirms to Sublessor that Sublessee has
accepted the Aircraft and each Engine and Propeller described below for all
purposes hereof and of the Sublease as being airworthy, in accordance with
specifications, in good working order and repair and without defect in
condition, design, operation or fitness for use, whether or not discoverable by
Sublessee as of



                                                                      SCHEDULE 1
CE CERTIFICATE                                                                TO
                                                  CRAFT SUBLEASE AGREEMENT NO. 8

as Sublessor

                                                    EEDINGS

as Sublessee, hereby acknowledges
tance of the Saab 340A Aircraft
end at the time and place set forth
Aircraft Sublease Agreement No. 8
i Sublease Supplement No. 1 thereto
by and between FAIRBROOK LEASING,
UQUA AIRLINES, INC., as sublessee.

                340A-123

                N123MQ, to be changed to
                N123CQ

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

March 29,1996
- ----------------------------

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

CHAUTAUQUA AIRLINES, INC.

By /s/ Timothy L. Coon
   -------------------------

Name   Timothy L. Coon
     -----------------------

Title  VICE PRESIDENT
      ----------------------



the date hereof; PROVIDED, HOWEVER, that nothing contained herein or in the
Sublease diminishes or affects any right. Sublessor or Sublessee may have with
respect to the Aircraft against the Manufacturer, GE, Dowty, any vendor or any
subcontractor or supplier thereof:



AIRFRAME
MANUFACTURER          MODEL        SERIAL  NUMBER            U.S. REG. NO
                                                    
Saab-Fairchild        340A         340A -123                 N123MQ
                                                             (being changed to
                                                             N123CQ)


INSTALLED
ENGINES
MANUFACTURER          MODEL        SERIAL NUMBER             RATED  TAKEOFF H/P
                                                    
General               CT7-5A       GE-E-367-401 (left)       Each of which
Electric                           GE-E-367-426 (right)      Engines has 750
                                                             or more rated
                                                             take off
                                                             horsepower or
                                                             the equivalent
                                                             thereof.


INSTALLED
PROPELLERS                                                   RATED TAKEOFF
MANUFACTURER          MODEL        SERIAL NUMBER             SHAFT H/P
                                                    
Dowty Rotol           R354/4-      DRG/1789/87 (left)        Each of which
                      123-F/13                               Propellers is
                      R389/4-      DRG/1792/87 (right)       capable of
                      123-F/25                               absorbing 750 or
                                                             more rated take
                                                             off shaft
                                                             horsepower.


B.  STIPULATED LOSS VALUE Sublessee hereby agrees to pay in accordance with and
when required by the Sublease Stipulated Loss Value payments. in the amounts set
forth in Annex 1 to the Sublease Rent Schedule and incorporated herein by
reference.

C.  REPRESENTATIONS BY SUBLESSEE. Sublessee hereby represents and warrants to
Sublessor that on the above date:

(1) The representations and warranties of Sublessee set forth in the Sublease
    are true and correct in all material respects as though made on the date
    above;

(2) Sublessee has satisfied or complied with all requirements in

                                       2


    the Sublease, to be completed by it on or prior to the date hereof;

(3) No Sublease Default or Event of Default has occurred and is continuing on
    the date above; and

(4) Sublessee has obtained, and there are in full force and effect, such
    insurance policies with respect to the Aircraft, as are required to be
    obtained under the terms of the Sublease.

D.  DELIVERY DATE:                        March 29, 1996

E.  TERM                                  The Term shall commence on the
                                          Delivery Date and expire on August
                                          28, 2006, unless terminated earlier
                                          pursuant to and in accordance with
                                          the Sublease: PROVIDED, however,
                                          that if Sublessor is unable to renew
                                          the Lease beyond its current
                                          termination date of July 11, 2002,
                                          then the Sublease will terminate on
                                          July 11, 2002 and Sublessor shall
                                          lease or sublease a Saab 340A
                                          aircraft to Sublessee through August
                                          28, 2006 on the same terms and
                                          conditions as those of the Sublease.

F.   BASE RENT:                           Sublessee agrees to pay Sublessor,
                                          Base Rent monthly in arrears, in the
                                          amounts and on the dates, as set
                                          forth in the Sublease Rent Schedule.

G.   FIRST BASE RENT PAYMENT DATE         April 29, 1996

H.   BASE RENT PAYMENT DATES:             Base Rent during the Term shall be
                                          paid on the same day of each month
                                          as the day of the month of the First
                                          Base Rent Payment Date,

I.   AIRCRAFT BASE:                       Indianapolis, Indiana or Akron,
                                          Ohio.

J.   DELIVERY SITE:                       Indianapolis, Indiana.

K.   COUNTERPARTS                         This Sublease Supplement No. 1 may
                                          be executed in any number of
                                          counterparts and by the parties hereto
                                          on separate counterparts,

                                       3


                                          each of which counterparts, shall for
                                          all purposes be deemed an original,
                                          and all such counterparts shall
                                          together constitute but one and the
                                          same Sublease Supplement No. 1;
                                          PROVIDED that, to the extent, if any,
                                          that this Sublease Supplement No. 1
                                          constitutes chattel paper (as such
                                          term is defined in the Uniform
                                          Commercial Code as in effect in any
                                          applicable jurisdiction) no security
                                          interest may be created through the
                                          transfer or possession of any
                                          counterpart other than the counterpart
                                          containing the receipt therefor
                                          executed by Mellon Financial Services
                                          Corporation #3, as Lender on the
                                          signature page hereof.

L. REFERENCE:                             All the terms and provisions of the
                                          Sublease are hereby incorporated by
                                          reference in this Sublease Supplement
                                          No. 1 to the same extent as if fully
                                          set forth herein.


        IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease
Supplement No.1 to be duly executed by their authorized officers as of the day
and year first above written.

                                          FAIRBROOK LEASING, INC.,
                                          as Sublessor or

                                          By: /s/ Mark D. Pugliese
                                              --------------------
                                              Mark D. Pugliese
                                              Vice President and
                                              General Counsel

                                          By: /s/ Gena H. Laurent
                                              -------------------
                                              Gena H. Laurent
                                              Assistant Vice President

                                          CHAUTAUQUA AIRLINES, INC.,
                                          as Sublessee

                                          By: /s/ Timothy L. Coon
                                              -------------------
                                              Timothy L. Coon
                                              Senior vice President

                                       4


                               Lease Rent Schedule
                         Aircraft Lease Agreement No. 8



                                                         Basic Rent
Date                        PMT No.                        Payment
                                                    

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]







                                              Stipulated Loss Value
                                                      SAAB 340A-123



Date                        PMT No.           Stipulated Loss Value
                                                 

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]





NOTE TO EXHIBIT 10.19(a)

The 14 additional Sublease Supplements No. 1 are substantially identical in all
material respects to the filed Sublease Supplement No. 1 except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N118CQ                                           July, 1996               Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N140CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N152CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N148CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N157CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N146CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N158CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N101CN                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N138CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N104CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N96CN                                           October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N108CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N149CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------
N150CQ                                          October, 1996             Fairbrook Leasing
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

EX-10.20

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

                        PARTICIPATION AGREEMENT [N281SK]

                          Dated as of February 23, 2001

                                      among

                           CHAUTAUQUA AIRLINES, INC.,
                                    as Lessee

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                              as Owner Participant,

                                       and

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
               not in its individual capacity (except as otherwise
                     expressly set forth herein) but solely
                                as Owner Trustee

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

                  COVERING ONE EMBRAER MODEL EMB-145LR AIRCRAFT
                  AIRCRAFT BEARING U.S. REGISTRATION NO. N281SK
                     AND MANUFACTURER'S SERIAL NUMBER 145391



     PARTICIPATION AGREEMENT [N281SK] dated as of February 23, 2001 (this
"Agreement") among CHAUTAUQUA AIRLINES, INC., a New York corporation (herein,
together with its successors and permitted assigns, the "Lessee"), FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, except as otherwise expressly stated herein, but solely as
owner trustee under the Trust Agreement referred to below (in such capacity as
trustee, together with its successors and permitted assigns, the "Owner
Trustee"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
(together with its successors and permitted assigns, the "Owner Participant").

                              W I T N E S S E T H:

          WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof; and

          WHEREAS, pursuant to the Embraer Purchase Agreement, the Manufacturer
agreed to manufacture and sell to Seller and Seller agreed to purchase from the
Manufacturer the Aircraft; and

          WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant and First Security Bank, National Association,
are entering into the Trust Agreement whereby, among other things, First
Security Bank, National Association, is appointed as Owner Trustee and has
undertaken to acquire and hold the Trust Estate in trust for the benefit of the
Owner Participant; and

          WHEREAS, pursuant to the Embraer Purchase Agreement the Manufacturer
has delivered the Aircraft to the Seller and subject to the terms and conditions
of this Agreement, the Owner Trustee is willing to purchase the Aircraft from
the Seller pursuant to the Aircraft Purchase Agreement for immediate lease to
the Lessee pursuant to the Lease; and

          WHEREAS, subject to the terms and conditions of this Agreement and the
Trust Agreement, the Owner Participant is willing to make the equity investment
provided for herein to fund such purchase by the Owner Trustee; and

          WHEREAS, Seller has agreed to assign the Assigned Warranties to the
Owner Trustee and the Manufacturer has consented to such assignment, upon the
terms and conditions contained in the Embraer Warranty Assignment and Consent;
and

          WHEREAS, Seller has agreed to assign the Engine Warranties to the
Owner Trustee and the Engine Manufacturer has consented to such assignment, upon
the terms and conditions contained in the Engine Warranty Assignment and
Consent; and



          WHEREAS, to induce the Owner Participant to make the equity investment
provided for herein to fund the purchase of the Aircraft by the Owner Trustee
from the Seller, the Manufacturer has agreed to enter into the Residual Value
Guarantee Agreement (MSN145391/N281SK), dated as of February 23, 2001 (the
"Residual Value Guarantee Agreement") with the Owner Participant and to
undertake the obligations provided therein; and

          WHEREAS, to induce the Owner Trustee to purchase the Aircraft and to
enter into the Lease, the Manufacturer has agreed to enter into the Guarantee
Agreement (MSN145391/N281SK), dated February 23, 2001 (the "Guarantee
Agreement") with the Owner Trustee and the Owner Participant and to undertake
the obligations provided therein;

          NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration and receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:

                                   ARTICLE 1.
                                 INTERPRETATION

          Section 1.01. DEFINITIONS. Capitalized terms used herein and defined
in Appendix A shall, except as such definitions may be specifically modified in
the body of this Agreement for the purposes of a particular section, paragraph
or clause, have the meanings given such terms in Appendix A.

          Section 1.02. REFERENCES. References in this Agreement to sections,
paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.

          Section 1.03. HEADINGS. The headings of the various sections,
paragraphs and clauses of this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.

          Section 1.04. APPENDICES SCHEDULES AND EXHIBITS. The appendices,
schedules and exhibits hereto are part of this Agreement.

                                   ARTICLE 2.
                          SALE AND LEASING TRANSACTIONS

          Section 2.01. PARTICIPATION. Subject to all of the terms and
conditions of this Agreement, the parties agree to participate in the sale and
leasing transactions with respect to the Aircraft provided for in this
Article 2.

          (a) SALE AND PURCHASE. The Owner Trustee agrees to purchase the
Aircraft from the Seller on the Delivery Date for a purchase price equal to
Lessor's Cost pursuant to the Aircraft Purchase Agreement.

                                        2


          (b) LEASING. The Owner Trustee agrees to lease to the Lessee, and the
Lessee agrees to lease from the Owner Trustee, the Aircraft pursuant to the
Lease, such leasing to take place concurrently with the purchase of the Aircraft
by the Owner Trustee on the Delivery Date.

          (c) OWNER PARTICIPANT'S EQUITY INVESTMENT. The Owner Participant
agrees to provide immediately available funds in an amount equal to the Lessor's
Cost (the "Commitment") (i) by paying such amount to the Owner Trustee prior to
the time of closing on the Delivery Date at the account specified by the Owner
Trustee on or prior to the Delivery Date, such amount to be held and applied
toward the Owner Trustee's payment of Lessor's Cost for the Aircraft on the
Delivery Date (and if not so applied, to be promptly returned to the Owner
Participant) or (ii) by paying such amount at the time of the closing on the
Delivery Date directly to the Seller's account specified by the Seller prior to
the closing to be applied toward the payment of Lessor's Cost. Such funds, once
so applied, shall constitute an equity investment by the Owner Participant in
the Trust Estate.

          (d) DELIVERY DATE. The "Delivery Date" shall be the date fixed by
the Lessee in accordance with this Section 2.01(d) for the closing of the
sale and leasing transactions with respect to the Aircraft contemplated
hereby, except that following such closing the "Delivery Date" shall mean the
date on which such transactions actually closed. The Lessee shall give at
least two Business Days' notice to each other party hereto of the Delivery
Date, which notice shall also specify the amount of the Commitment. The
Lessee may postpone a scheduled Delivery Date from time to time, for any
reason by notice given to the other parties hereto not later than 2:00 p.m.
on the date last scheduled as the Delivery Date, such notice to specify a new
Delivery Date. In the event that the Owner Participant shall have provided
the amount of the Commitment to the Owner Trustee prior to such a
postponement, the Owner Trustee shall return such amount to the Owner
Participant by 2:00 p.m. on the scheduled Delivery Date unless the Owner
Participant shall have agreed otherwise in writing. Absent such an agreement,
in the event that the Commitment is not returned to the Owner Participant by
2:00 p.m. on a scheduled Delivery Date on which the closing does not occur,
the Lessee shall pay interest to the Owner Participant at a rate equal to the
rate per annum announced from time to time by Citibank, N.A. as its prime
rate plus [*] for each day that such commitment is not returned to the Owner
Participant by 2:00 p.m.. The making available by the Owner Participant of
the Commitment at the closing shall be deemed a waiver of notice of the
Delivery Date by the Owner Participant and the Owner Trustee.

          Section 2.02. CLOSING PROCEDURE.

          (a) TIME AND PLACE. The closing shall take place at 11:00 a.m. New
York City local time on the Delivery Date at the offices of Fulbright & Jaworski
L.L.P., 666 Fifth Avenue, New York, New York or at such other time and place as
the parties may agree. The closing shall be preceded by a pre-closing at the
same place, the time for which shall be fixed by the Lessee, at which the forms
of the Operative Agreements to be executed, the certificates and other documents
to be delivered and the forms of the legal opinions to be delivered at the
closing by each party or its counsel pursuant to this Agreement shall be
available for inspection by the parties and their respective counsel.

- ----------
* Confidential
                                        3


          (b) ACTIONS OF THE OWNER TRUSTEE. Upon receipt in full by the Owner
Trustee of the Commitment of the Owner Participant together with instructions
(which may be oral) from the Owner Participant or its special counsel that the
applicable conditions precedent set forth in Section 3.01 have been satisfied or
waived by the Owner Participant, the Owner Trustee on the Delivery Date shall
purchase the Aircraft from the Seller and lease the Aircraft to the Lessee. To
accomplish such transactions, the Owner Trustee shall, concurrently with the
actions of the Lessee pursuant to Section 2.02(c), take the following actions:

               (i) pay or cause to be paid an amount equal to Lessor's Cost to
     the Seller for the purchase of the Aircraft by transferring such amount in
     immediately available funds to the account specified by the Seller on or
     prior to the Delivery Date;

               (ii) authorize its representative or representatives, who shall
     be a person or persons designated by the Lessee and acceptable to the Owner
     Trustee, to accept delivery of the Aircraft pursuant to this Agreement;

               (iii) accept the Bills of Sale for the Aircraft;

               (iv) execute and deliver the Lease and the Lease Supplement;

               (v) deliver the Aircraft to the Lessee pursuant to the Lease;

               (vi) execute and deliver all other documents or certificates and
     take such other actions as may be required of the Owner Trustee on or
     before the Delivery Date pursuant to any Operative Agreement; and

               (vii) take such actions as may be requested by the Seller and
     Lessee to effect the due registration of the Aircraft with the FAA in the
     name of the Owner Trustee.

          (c) ACTIONS OF THE LESSEE. Upon satisfaction or waiver by the Lessee
of the conditions precedent set forth in Section 3.02, the Lessee shall on the
Delivery Date lease the Aircraft from the Owner Trustee pursuant to the Lease.
To accomplish such transactions the Lessee shall, concurrently with the actions
of the Owner Trustee pursuant to Section 2.02(b), take the following actions:

               (i) execute and deliver the Lease and the Lease Supplement;

               (ii) authorize its representative or representatives (who shall
     be the same person or persons designated by the Lessee for purposes of
     clause (ii) of Section 2.02(b)), to accept delivery of the Aircraft from
     the Owner Trustee pursuant to the Lease; and

               (iii) execute and deliver all other documents or certificates and
     take such other actions as may be required of the Lessee on or before the
     Delivery Date pursuant to any Operative Agreement.

                                        4


                                   ARTICLE 3.
                              CONDITIONS PRECEDENT

          Section 3.01. CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER
PARTICIPANT. The obligation of the Owner Participant to make the Commitment
available for payment as directed by the Owner Trustee on the Delivery Date is
subject to satisfaction or waiver by the Owner Participant, on or prior to the
Delivery Date, of the conditions precedent set forth below in this Section 3.01;
PROVIDED, that it shall not be a condition precedent to the obligation of the
Owner Participant that any document be produced or action taken that is to be
produced or taken by the Owner Participant or by a Person within the Owner
Participant's control:

          (a) NOTICE. The Owner Participant shall have received the notice of
the Delivery Date as provided in Section 2.01(d), or shall have waived such
notice.

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

               (i) the Lease;

               (ii) Lease Supplement No. 1;

               (iii) the Tax Indemnity Agreement;

               (iv) the Trust Agreement;

               (v) the Guarantee Agreement;

               (vi) the Residual Value Guarantee Agreement;

               (vii) the Aircraft Purchase Agreement;

               (viii) the Embraer Warranty Assignment and Consent;

               (ix) the Engine Warranty Assignment and Consent;

               (x) the Bills of Sale;

               (xi) the broker's report and insurance certificates required by
     Section 9 of the Lease;

               (xii) an appraisal or appraisals from Avitas, which appraisal or
     appraisals shall be satisfactory in form and substance to Owner
     Participant;

               (xiii) (A) a copy of the Certificate of Incorporation and By-Laws
     of Lessee and resolutions of the board of directors of Lessee, in each case
     certified as of the Delivery Date, by the Secretary or an Assistant
     Secretary of Lessee, duly authorizing the

                                        5


     execution, delivery and performance by Lessee of the Operative Agreements
     required to be executed and delivered by Lessee on or prior to the Delivery
     Date in accordance with the provisions hereof and thereof; (B) an
     incumbency certificate of Lessee and Trust Company as to the person or
     persons authorized to execute and deliver the relevant Operative Agreements
     on behalf of such party; and (C) a copy of the Certificate of Incorporation
     or Articles of Incorporation or Articles of Association and By-Laws and
     general authorizing resolutions of the boards of directors (or executive
     committees) or other satisfactory evidence of authorization of Trust
     Company, certified as of the Delivery Date by the Secretary or an Assistant
     Secretary of Trust Company, which authorize the execution, delivery and
     performance by Trust Company of each of the Operative Agreements to which
     it is a party, together with such other documents and evidence with respect
     to it as Owner Participant may reasonably request in order to establish the
     consummation of the transactions contemplated by this Agreement and the
     taking of all corporate proceedings in connection therewith;

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

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

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

               (A) Arthur Amron, Principal and General Counsel of the Lessee
     substantially in the form of Exhibit A-1 hereto and addressed to the Owner
     Participant and the Owner Trustee.

               (B) Fulbright & Jaworski, L.L.P. special counsel for the Lessee
     substantially in the form of Exhibit A-2 hereto addressed to the Owner
     Participant, the Owner Trustee and the Lessee;

               (C) Ray, Quinney & Nebeker, special counsel for the Owner Trustee
     substantially in the form of Exhibit A-3 hereto addressed to the Owner
     Participant and the Lessee;

               (D) Daugherty, Fowler, Peregrin & Haught, a Professional
     Corporation, special aviation counsel, substantially in the form of Exhibit
     A-4 hereto and addressed to the Owner Participant, the Owner Trustee and
     the Lessee;

               (E) special counsel for the Manufacturer, in a form reasonably
     acceptable to the Owner Participant and addressed to the Owner Participant,
     the Owner Trustee and the Lessee;

                                        6


               (F) in the case of the Owner Participant only, Holland & Knight
     LLP, tax counsel to the Owner Participant, addressed to the Owner
     Participant, with respect to tax matters;

               (G) Holland & Knight LLP, special counsel for the Owner
     Participant, substantially in the forms of Exhibits A-5, addressed to the
     Lessee and the Owner Trustee;

               (H) Ray Warman, Senior Vice President and Associate General
     Counsel to GE Capital Aviation Services, Inc., an Affiliate of the Owner
     Participant, substantially in the form of Exhibit A-6, addressed to the
     Lessee and the Owner Trustee;

               (I) Arthur Amron, General Counsel of Seller, in a form reasonably
     acceptable to the Owner Participant and addressed to the Owner Participant,
     the Owner Trustee and the Lessee;

               (J) Fulbright & Jaworski, L.L.P., relating to the Aircraft
     Purchase Agreement, in a form reasonably acceptable to the Owner
     Participant and addressed to the Owner Participant, the Owner Trustee and
     the Lessee;

               (xvii) the Guarantee Agreement shall be in full force and effect;
     and

               (xviii) the Residual Value Guarantee Agreement shall be in full
     force and effect.

          (c) AIRWORTHINESS. Owner Participant shall receive a copy of a
current, valid Standard Certificate of Airworthiness for the Aircraft duly
issued by the FAA.

          (d) VIOLATION OF LAW. No change shall have occurred after the date of
this Agreement in any Applicable Law that makes it a violation of law for (a)
Lessee, Owner Participant, or Owner Trustee to execute, deliver and perform the
Operative Agreements to which any of them is a party or (b) Owner Participant to
make the Commitment available.

          (e) NO EVENT OF DEFAULT. On the Delivery Date, no event shall have
occurred and be continuing, or would result from the sale, mortgage or lease of
the Aircraft, which constitutes a Default or Event of Default.

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

          (g) TITLE. Owner Trustee shall have good title (subject to filing and
recordation of the FAA Bill of Sale with the FAA) to the Aircraft, free and
clear of Liens, except Permitted Liens.

          (h) CERTIFICATION. The Aircraft shall have been duly certificated by
the FAA as to type and airworthiness as required by the terms of the Lease.

                                        7


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

          (j) FILINGS. On the Delivery Date (i) application for registration of
the Aircraft in the name of the Owner Trustee shall have been duly made with the
FAA in compliance with the provisions of the Transportation Code; and (ii) the
Trust Agreement, the Lease, Lease Supplement No. 1 and the FAA Bill of Sale
shall have been duly filed for recordation (or shall be in the process of being
so duly filed for recordation) with the FAA in accordance with the
Transportation Code.

          (k) PRECAUTIONARY FINANCING STATEMENTS. A Uniform Commercial Code
"precautionary" financing statement or statements describing the Lease as a
lease but covering any security interest in favor of the Owner Trustee which may
be created thereby, shall have been executed and delivered by the Lessee and the
Owner Trustee (naming the Owner Trustee as Lessor and secured party), and shall
have been duly filed in all places necessary or desirable within the State of
Indiana.

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

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

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

          Section 3.02. CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE. The
obligation of Lessee to lease the Aircraft on the Delivery Date is subject to
the satisfaction or waiver by Lessee, on or prior to the Delivery Date, of the
conditions precedent set forth below in this Section 3.02.

                                        8


          (a) DOCUMENTS. Executed originals of the agreements, instruments,
certificates, documents and opinions described in Section 3.01(b) shall have
been received by Lessee, except as specifically provided therein, and shall be
satisfactory to Lessee, unless the failure to receive any such agreement,
instrument, certificate or document is the result of any action or inaction by
Lessee.

          (b) CORPORATE DOCUMENTS. (A) An incumbency certificate of Owner
Participant as to the person or persons authorized to execute and deliver the
relevant Operative Agreements on behalf of Owner Participant; and (B) a copy of
the Certificate of Incorporation or Articles of Incorporation or Articles of
Association and By-Laws and general authorizing resolutions of the boards of
directors (or executive committees) or other satisfactory evidence of
authorization of Owner Participant, certified as of the Delivery Date by the
Secretary or an Assistant Secretary of Owner Participant which authorize the
execution, delivery and performance by Owner Participant of each of the
Operative Agreements to which it is a party, together with such other documents
and evidence with respect to it as Lessee may reasonably request in order to
establish the consummation of the transactions contemplated by this Agreement
and the taking of all corporate proceedings in connection therewith;

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

          (d) OTHER CONDITIONS PRECEDENT. Each of the conditions set forth in
Sections 3.01(c), (d), (f), (g), (h), (i), (j), (l) and (n) shall have been
satisfied or waived by Lessee, unless the failure of any such condition to be
satisfied is the result of any action or inaction by Lessee.

          Section 3.03. POST-REGISTRATION OPINION. Promptly upon the
registration of the Aircraft and the recordation of the documents referenced in
Section 3.01(j)(ii), Lessee will direct Daugherty, Fowler, Peregrin & Haught, a
Professional Corporation, special counsel in Oklahoma City, Oklahoma, to deliver
to Lessee, Owner Participant and Owner Trustee a favorable opinion or opinions
addressed to each of them with respect to such registration and recordation.

                                   ARTICLE 4.
               LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 4.01. LESSEE'S REPRESENTATIONS AND WARRANTIES. The Lessee
represents and warrants that, as of the Delivery Date (unless any such
representation and warranty is specifically made as of an earlier date, in which
case the Lessee represents and warrants as of such earlier date):

          (a) the Lessee is a corporation duly organized and validly existing
and is in good standing under the laws of the State of New York, has its
principal place of business and chief executive office (as such terms are used
in Article 9 of the Uniform Commercial Code) in Indianapolis, Indiana at the
address set forth in Section 12.01(a), and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
failure to

                                        9


be so qualified or in good standing would have a materially adverse effect on
its business or would impair its ability to perform its obligations under the
Lessee Documents;

          (b) the Lessee has full power, authority and legal right to conduct
its business and operations as currently conducted and to own or hold under
lease its properties and to enter into and perform its obligations under the
Lessee Documents;

          (c) the Lessee is a Certificated Air Carrier;

          (d) the Lessee possesses all necessary certificates, franchises,
licenses, permits, rights and concessions and consents (collectively "permits")
which are necessary to the operation of the routes flown by it and the conduct
of its business and operations as currently conducted and each such permit is in
full force and effect, except for any such permits the failure to have or
maintain which would not have a material adverse effect on the Lessee or its
ability to perform its obligations under the Lessee Documents;

          (e) the execution, delivery and performance of the Lessee Documents by
the Lessee have been duly authorized by all necessary corporate action on the
part of the Lessee and do not require any stockholder approval, or approval or
consent of any trustee or holder of any indebtedness or obligations of the
Lessee, and each such Lessee Documents has been duly executed and delivered and
constitutes the legal, valid and binding obligations of the Lessee enforceable
against it in accordance with the terms thereof except as such enforceability
may be limited by bankruptcy, insolvency, or other similar laws or by general
equitable principles;

          (f) no authorization, consent or approval of or other action by, and
no notice to or filing with, any United States federal or state governmental
authority or regulatory body is required for the execution, delivery or
performance by the Lessee of the Lessee Documents except for such registrations,
applications and recordings referred to in the opinion of Daugherty, Fowler,
Peregrin & Haught, a Professional Corporation delivered pursuant to Section
3.01(b)(xvi)(D) and the filings referred to in Section 3.01(j)(ii);

          (g) neither the execution, delivery or performance by the Lessee of
the Lessee Documents nor compliance with the terms and provisions hereof or
thereof, conflicts or will conflict with or results or will result in a breach
or violation of any of the terms, conditions or provisions of, or will require
any consent (other than the Embraer Warranty Assignment and Consent and the
Engine Warranty Assignment and Consent) or approval under, any Applicable Law or
the charter documents, as amended, or bylaws, as amended, of the Lessee or any
order, writ, injunction or decree of any court or governmental authority against
the Lessee or by which it or any of its properties is bound or any indenture,
mortgage or contract or other agreement or instrument to which the Lessee is a
party or by which it or any of its properties is bound, or constitutes or will
constitute a default thereunder or results or will result in the imposition of
any Lien upon the Aircraft or any of its properties (other than Permitted
Liens), except for any such conflict, breach or default which would not have a
material adverse effect on the Lessee or its ability to perform its obligations
under the Lessee Documents;

          (h) except as disclosed in any of the financial statements referred to
in Section 4.01(p) or as otherwise disclosed in writing to the Owner
Participant, there are no pending or, to

                                       10


the knowledge of the Lessee, threatened actions, suits, investigations or
proceedings against or affecting the Lessee or any of its properties before or
by any court, governmental agency, arbitration board, tribunal or other
administrative agency which, (A) may reasonably be expected to have a materially
adverse effect on the Lessee's consolidated financial condition, business, or
operations, or (B) would materially adversely affect the ability of the Lessee
to consummate the transactions contemplated by the Operative Agreements or
perform its obligations under the Lessee Documents;

          (i) except for (A) the registration in the Owner Trustee's name of the
Aircraft pursuant to the Transportation Code, (B) the filing with and, where
appropriate, recordation by the FAA pursuant to the Transportation Code of the
Lease (including Lease Supplement No. 1) and (C) the filing of the financing
statement referred to in Section 3.01(k), no further action, including any
filing or recording of any document, is necessary or advisable in order to
establish the Owner Trustee's title to and interest in the Aircraft and the
Lessor's Estate as against the Lessee and any third parties;

          (j) the Owner Trustee has received good and marketable title to the
Aircraft, free and clear of all Liens, except Permitted Liens;

          (k) all premiums which have become due with respect to the insurance
required to be provided by the Lessee on or prior to the Delivery Date under
Section 9 of the Lease have been paid by the Lessee;

          (l) no Default or Event of Default exists and no Event of Loss, or
event which with the passage of time would constitute an Event of Loss, exists;

          (m) the Aircraft is in such condition so as to enable the
airworthiness certificate of such Aircraft to be in good standing under the
Transportation Code; the Aircraft has been duly certificated by the FAA as to
type and airworthiness; there is in effect with respect to the Aircraft a
current and valid airworthiness certificate issued by the FAA pursuant to the
Transportation Code;

          (n) neither the Lessee nor any subsidiary of the Lessee is an
"investment company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended;

          (o) there are no broker's or underwriter's fees payable on behalf of
the Lessee in connection with the transactions contemplated in the Operative
Agreements, other than those of the Lessee Advisor (as defined in
Section 8.01(a)) referred to in Article 8 hereof;

          (p) the audited consolidated balance sheet of Lessee as of December
31, 1999 and the related consolidated statements of operations and cash flows
for the period then ended have been prepared in accordance with generally
accepted accounting principles in the United States and fairly present in all
material respects the financial condition of Lessee and its consolidated
subsidiaries as of such date and the results of its operations and cash flows
for such period, and since December 31, 1999, there has been no material adverse
change in such financial condition or operations of Lessee, except for matters
disclosed in (a) the financial

                                       11


statements referred to above or (b) otherwise disclosed in writing by Lessee to
the Owner Participant;

          (q) to the best of Lessee's knowledge, Lessee is not in default under,
or in violation of, any Applicable Law, the violation of which would give rise
to a Material Adverse Change to Lessee;

          (r) neither the Lessee nor any Person authorized by the Lessee to act
on its behalf has directly or indirectly offered any beneficial interest in the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement, or in any similar security relating to the Aircraft, the Lease,
the Trust Estate or the Trust Agreement, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any Person in violation of the Securities Act or any applicable
state securities laws; and

          (s) Owner Trustee, as lessor under the Lease, is entitled to the
benefits of Section 1110 (as currently in effect) with respect to the Aircraft.

          Section 4.02. CERTAIN COVENANTS OF LESSEE. The Lessee covenants and
agrees as follows:

          (a) FILINGS AND RECORDINGS. The Lessee will cause to be done,
executed, acknowledged and delivered at the Lessee's cost and expense all such
further acts, conveyances and assurances as the Owner Trustee or the Owner
Participant shall reasonably require for accomplishing the purposes of the
Operative Agreements. Without limiting the generality of this Section 4.02(a),
the Lessee will promptly take, or cause to be taken, at the Lessee's cost and
expense, such action with respect to the recording, filing, re-recording and
re-filing of the Lease (including each supplement thereto), and any financing
statements or other instruments as may be reasonably requested by the Owner
Trustee and appropriate, to maintain the Owner Trustee's title to and interest
in the Aircraft and the Lessor's Estate, as against the Lessee and any third
parties, or if the Lessee cannot itself take, or cause to be taken, such action,
will furnish to the Owner Trustee timely notice of the necessity of such action,
together with such instruments, in execution form, and such other information as
may be required to enable either of them to take such action at the Lessee's
cost and expense in a timely manner.

          (b) REGISTRATION. From and after the Delivery Date, the Lessee shall
cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Owner Trustee (PROVIDED, that the Owner Trustee
and the Owner Participant shall be and remain Citizens of the United States),
under the Transportation Code, and shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make application
for such registration; PROVIDED, HOWEVER, that the Lessee may, at any time cause
the Aircraft to be appropriately re-registered under the laws of a country with
which at the time of such registration the United States maintains normal
diplomatic relations and is listed on Exhibit E to the Lease; PROVIDED that:

               (i) at the time of re-registration, no Specified Default exists
     or would occur as a result of such re-registration;

                                       12


               (ii) the Lessee shall pay all fees and expenses (including the
     reasonable fees and expenses of local counsel in such country) relating to
     such re-registration;

               (iii) the Lessee shall, at its cost, cause the interest of the
     Owner Trustee as owner of the Aircraft to be duly registered or recorded
     under the laws of such country and at all times thereafter to remain so
     duly registered or recorded unless and until the registration of the
     Aircraft is changed as provided herein, and shall, at its cost, cause to be
     done at all times all other acts including the filing, recording and
     delivery of any document or instrument and the payment of any sum necessary
     or, by reference to prudent industry practice in such country, advisable in
     order to create, preserve and protect such interest in the Aircraft as
     against the Lessee or any third parties in such jurisdiction, and the laws
     of such country would give effect to the Owner Trustee's title to and
     ownership interest in the Aircraft;

               (iv) the obligations of the Lessee (and of the Permitted
     Sublessee under a Sublease) and the rights and remedies of the Lessor and
     the Owner Participant under the Operative Agreements shall remain or be, as
     the case may be, legal, valid, binding and enforceable in such country;

               (v) the Lessee shall ensure that all insurance required by
     Section 9 of the Lease shall be in full force and effect prior to, at the
     time of, and after such change in registration and the Owner Participant
     and the Owner Trustee shall receive a certificate of Lessee's insurance
     broker to such effect;

               (vi) the country of such re-registration imposes aircraft
     maintenance standards approved by, or at least as stringent as those
     approved by, the FAA or the central civil aviation authority of the United
     Kingdom, France, Germany, Japan, the Netherlands or Canada;

               (vii) it shall not be necessary by reason of such re-registration
     or for purposes of enforcing remedies contained in the Lease or the related
     Sublease for the Owner Trustee or the Owner Participant to register or
     qualify to do business in such country;

               (viii) no Liens (except Permitted Liens) shall arise by reason of
     such re-registration;

               (ix) none of the Owner Trustee and the Owner Participant shall be
     subjected to any risk of adverse tax consequences as a result of such
     re-registration for which the Lessee does not then indemnify or cause to be
     indemnified such Person in a manner satisfactory in form and substance to
     such Person;

               (x) any export licenses and certificate of deregistration
     required in connection with any repossession or return of the Aircraft will
     be readily obtainable in the normal course without material delay or
     material burden on the Owner Trustee, it being agreed that the Lessee shall
     be responsible for the cost thereof;

                                       13


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

               (xii) unless Lessee shall have agreed to provide insurance
     reasonably satisfactory to the Owner Participant covering the risk of
     requisition of use of or title to the Aircraft by the government of such
     country (so long as the Aircraft is registered under the laws of such
     country), the laws of such country require fair compensation by the
     government of such country payable in currency freely convertible into
     Dollars and freely removable from such country (without license or permit,
     unless Lessee prior to such proposed reregistration has obtained such
     license or permit or such license or permit will be readily obtainable in
     the normal course without material delay or material burden on the Owner
     Participant) for the taking or requisition by such government of such use
     or title;

               (xiii) the courts of such proposed country of registry will
     respect the choice of New York law to govern the Lease;

               (xiv) such re-registration may not be effected until after the
     Recovery Period unless the Lessee prepays on a lump sum basis any liability
     due under the Tax Indemnity Agreement as a result of such re-registration;

               (xv) the Owner Participant and the Owner Trustee shall have
     received opinions in scope, form and substance reasonably satisfactory to
     them, of counsel, expert in the laws of such country, to the effect set
     forth in clauses (iii), (iv) (with respect to the obligations of the Lessee
     under the Lease), (vii), (ix), (x), (xi), (xii) and (xiii) of this
     Section 4.02(b);

               (xvi) such proposed change in registration is made in connection
     with a Sublease to a Permitted Air Carrier and such Permitted Sublessee is
     domiciled in such country; and

               (xvii) Lessee shall deliver such request to Lessor and Owner
     Participant in writing at least 20 days in advance of the date of any such
     proposed change in registration.

Lessee agrees to pay on an After Tax Basis all reasonable out-of-pocket costs
and expenses (including, without limitation, reasonable counsel fees and
disbursements) of the Owner Participant and the Owner Trustee in connection with
any re-registration pursuant to this Section.

          (c) INFORMATION. The Lessee shall promptly furnish to the Owner
Trustee and the Owner Participant such information as may be required to enable
the Owner Trustee and the Owner Participant timely to file any reports required
to be filed by the Owner Trustee as the Lessor and the Owner Participant under
the Lease with any governmental authority as a result of the Owner Trustee's
ownership interest in the Aircraft.

                                       14


          (d) CORPORATE EXISTENCE. The Lessee shall at all times maintain its
corporate existence, except as permitted by Section 4.02(e) hereof, and all of
its rights, privileges and franchises necessary in the normal conduct of its
business, except for any corporate right, privilege or franchise that it
determines is no longer necessary or desirable in the conduct of its business.

          (e) MERGER AND CONSOLIDATION. The Lessee shall not, during the Term,
enter into any merger with or into or consolidation with, or sell, convey,
transfer, lease or otherwise dispose of in one or a series of transactions all
or substantially all of its assets as an entirety to any Person, unless the
surviving corporation or Person which acquires by purchase, conveyance, transfer
or lease all or substantially all of the assets of the Lessee as an entirety (i)
is a domestic corporation organized and existing under the laws of the United
States or any State of the United States, (ii) is a Citizen of the United
States, (iii) is a Section 1110 Person, so long as such status is a condition to
the availability of Section 1110, (iv) if not the Lessee, executes a duly
authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Trustee and Owner Participant,
containing an effective assumption of all of the Lessee's, as applicable,
obligations hereunder and under the other Operative Agreements, and each other
document contemplated hereby or thereby and delivers such instrument to the
Owner Participant and the Owner Trustee, (v) provides an opinion from counsel
(which counsel may be the Lessee's General Counsel) delivered to the Owner
Trustee and the Owner Participant, which opinion shall be reasonably
satisfactory to the Owner Participant, and an officer's certificate (which may
rely, as to legal matters, on such legal opinion), each stating that such
merger, consolidation, conveyance, transfer, lease or other disposition and the
instrument noted in clause (iv) above comply with this Section 4.02(e), that
such instrument is a legal, valid and binding obligation of, and is enforceable
against, such survivor or Person, and that all conditions precedent herein
provided for relating to such transaction have been complied with, and (vi) such
survivor or Person makes such filings and recordings with the FAA as may be
required pursuant to part A of subtitle VII of Title 49, United States Code to
evidence such merger or consolidation; PROVIDED THAT, no such merger,
consolidation or conveyance, transfer or lease shall be permitted if (1)
immediately after giving effect to such consolidation, merger, purchase,
conveyance, transfer, lease or other disposition, an Event of Default shall have
occurred and be continuing or (2) the surviving Person in such transaction has a
tangible net worth, as determined in accordance with generally accepted
accounting principles immediately following such transaction, of less than
seventy-five percent (75%) of Lessee, as measured immediately prior to such
transaction.

          Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Lessee and the satisfaction of
the conditions specified in this Section 4.02(e), the successor corporation
formed by such consolidation or into which the Lessee is merged or the Person to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Lessee under
this Agreement and the Lease and each other Operative Agreement and any other
document contemplated hereby and thereby to which the Lessee is a party with the
same effect as if such successor corporation had been named as the Lessee herein
and therein. No such consolidation or merger, or sale, conveyance, transfer or
lease of all or substantially all of the assets of the Lessee as an entirety
shall have the effect of releasing the Lessee or any successor corporation which
shall theretofore have become the Lessee hereunder in the manner prescribed in
this Section 4.02(e) from its

                                       15


liability hereunder or under the other Operative Agreements. Nothing contained
herein shall permit any lease, sublease, or other arrangement for the use,
operation or possession of the Aircraft except in compliance with the applicable
provisions of the Lease.

          (f) CHANGE OF LOCATION. The Lessee agrees to give prompt written
notice (but in any event within 30 days prior to the expiration of the period of
time specified under Applicable Law to prevent lapse of perfection) to the Owner
Participant and the Owner Trustee of any change in the address of its chief
executive office (as such term is used in Article 9 of the Uniform Commercial
Code) or of any change in its corporate name.

          (g) FINANCIAL STATEMENTS. The Lessee agrees to furnish to the Owner
Participant during the Term:

               (i) within 60 days after the end of each of the first three
     fiscal quarters in each fiscal year of the Lessee, unaudited consolidated
     balance sheets of the Lessee and its subsidiaries (if any) as of the end of
     such quarter and related consolidated statements of income, shareholder's
     equity and cash flows of the Lessee and its subsidiaries (if any) for the
     period commencing at the end of the previous fiscal year and ending with
     the end of such quarter;

               (ii) within 120 days after the end of each fiscal year of the
     Lessee, a copy of the annual report for such year for the Lessee or the
     affiliated group of which the Lessee is a member (on a consolidated basis,
     if applicable) and a balance sheet of the Lessee and its subsidiaries (if
     any) as of the end of such fiscal year and related statements of income,
     shareholder's equity and cash flows of the Lessee for such fiscal year, in
     comparative form with the preceding fiscal year, in each case certified by
     independent certified public accountants of national standing as having
     been prepared in accordance with generally accepted accounting principles
     in the United States;

               (iii) within 120 days after the end of each fiscal year of the
     Lessee, an Officer's Certificate of the Lessee, to the effect that the
     signer is familiar with or has reviewed the relevant terms of the Lease and
     has made, or caused to be made under his supervision, a review of the
     transactions and conditions of the Lessee during the preceding fiscal year
     and that such review has not disclosed the existence during such period,
     nor does the signer have knowledge of the existence as of the date of such
     certificate, of any condition or event which constituted or constitutes a
     Default or Event of Default, or, if any such condition or event existed or
     exists, specifying the nature and period of existence thereof and what
     action the Lessee has taken or is taking or proposes to take with respect
     thereof; and

               (iv) from time to time, such other non-confidential financial
     information as the Lessor or the Owner Participant may reasonably request.

          (h) FILING OF DOCUMENTS. Lessee, at its sole cost and expense, will
cause the documents filed with the FAA pursuant to Section 3.01(j), the
financing statements required pursuant to Section 3.01(k) and all continuation
statements (and any amendments necessitated by any combination, consolidation or
merger pursuant to Section 4.02(e), or any relocation of its

                                       16


chief executive office) in respect of such financing statements to be prepared
and, subject only to the execution and delivery thereof by Owner Trustee, duly
and timely filed and recorded, or filed for recordation, to the extent permitted
under the Transportation Code (with respect to such documents filed with the
FAA) or the Uniform Commercial Code or similar law of any other applicable
jurisdiction (with respect to such other documents).

          (i) ANNUAL FOREIGN OPINION. If the Aircraft has been registered in a
country other than the United States pursuant to Section 4.02(b), Lessee will
furnish to Owner Trustee and Owner Participant annually after such registration
is effected, an opinion of special counsel reasonably satisfactory to Owner
Participant stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, rerecording and
refiling of the Operative Agreements and any supplements and amendments thereof
as is necessary to establish, perfect and protect Owner Trustee's right, title
and interest in and to the Aircraft and the Operative Agreements, reciting the
details of such actions, or (ii) no such action is necessary to maintain the
perfection of such right, title and interest.

          Section 4.03. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Lessee provided in Section 4.01 and in any
other Operative Agreement shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.

                                   ARTICLE 5.
            OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 5.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OWNER
PARTICIPANT.

          (a) REPRESENTATIONS AND WARRANTIES. The Owner Participant represents
and warrants that, as of the Delivery Date (unless any such representation and
warranty is specifically made as of an earlier date, in which case the Owner
Participant represents and warrants as of such earlier date):

               (i) it is a corporation duly incorporated and validly existing in
     good standing under the laws of State of New York and it has full corporate
     power, authority and legal right to carry on its present business and
     operations, to own or lease its properties and to enter into and to carry
     out the transactions contemplated by this Agreement and the other Operative
     Agreements to which it is party;

               (ii) the execution, delivery and performance by it of this
     Agreement and the other Operative Agreements to which it is party have been
     duly authorized by all necessary corporate action on its part;

               (iii) neither the execution, delivery or performance by the Owner
     Participant of the Operative Agreements to which it is party, nor
     compliance with the terms and provisions hereof or thereof, conflicts or
     will conflict with or results or will result in a breach or violation of
     any of the terms, conditions or provisions of, under any law, governmental
     rule or regulation applicable to the Owner Participant or the charter
     documents, as amended, or bylaws, as amended, of the Owner Participant or
     any order,

                                       17


     writ, injunction or decree of any court or governmental authority against
     the Owner Participant or by which it or any of its properties is bound or
     any indenture, mortgage or contract or other agreement or instrument to
     which the Owner Participant is a party or by which it or any of its
     properties is bound, or constitutes or will constitute a default thereunder
     or results or will result in the imposition of any Lien upon any of its
     properties, except for any such conflict, breach or default which would not
     have a material adverse effect on the Owner Participant or its ability to
     perform its obligations under the Operative Agreements;

               (iv) the Operative Agreements to which it is party have been duly
     executed and delivered by the Owner Participant and constitute the legal,
     valid and binding obligations of the Owner Participant enforceable against
     it in accordance with their terms except as such enforceability may be
     limited by bankruptcy, insolvency, or other similar laws or general
     equitable principles;

               (v) there are no pending or, to the knowledge of the Owner
     Participant, threatened actions, suits, investigations or proceedings
     against the Owner Participant before any court, administrative agency or
     tribunal which are expected to materially adversely affect the ability of
     the Owner Participant to perform its obligations under this Agreement and
     the other Operative Agreements to which it is or is to be a party and the
     Owner Participant knows of no pending or threatened actions or proceedings
     before any court, administrative agency or tribunal involving it in
     connection with the transactions contemplated by the Operative Agreements;

               (vi) neither the execution and delivery by it of this Agreement
     or the other Operative Agreements to which it is a party nor the
     performance of obligations hereunder or thereunder requires the consent or
     approval of or the giving of notice to, the registration with, or the
     taking of any other action in respect of, any governmental authority or
     agency that would be required to be obtained or taken by the Owner
     Participant except for filings contemplated by this Agreement;

               (vii) the funds to be used by the Owner Participant to acquire
     its interests under this Agreement do not constitute assets (within the
     meaning of ERISA and any applicable rules and regulations) of an ERISA
     Plan;

               (viii) the Owner Participant is a bank, trust company, insurance
     company, financial institution or corporation with a combined capital and
     surplus or net worth of at least $50,000,000;

               (ix) the Owner Participant acknowledges that the Residual Value
     Guarantee Agreement and the Guarantee Agreement have not been disclosed to
     or reviewed by the Lessee;

               (x) the Owner Participant has not granted any right to the
     Manufacturer under the Residual Value Guarantee Agreement or the Guarantee
     Agreement which is inconsistent with the rights of the Lessee under the
     Operative Agreements; and

                                       18


               (xi) the amount guaranteed by the Manufacturer under the Residual
     Value Guarantee Agreement is the Guaranteed Amount.

          Notwithstanding the foregoing or anything else contained in this
Agreement, the Owner Participant makes no representation or warranty in this
Agreement with respect to laws, rules or regulations relating to aviation or to
the nature or use of the equipment owned by the Owner Trustee, including,
without limitation, the airworthiness, value, condition, workmanship, design,
patent or trademark infringement, operation, merchantability or fitness for use
of the Aircraft, other than such laws, rules or regulations relating to the
citizenship requirements of the Owner Participant under applicable aviation law.

          (b) LESSOR'S LIENS. The Owner Participant represents, warrants and
covenants that on the Delivery Date there are no Lessor's Liens attributable to
it (or an Affiliate thereof). The Owner Participant agrees with and for the
benefit of the Lessee and the Owner Trustee that the Owner Participant will, at
its own cost and expense, take such action as may be necessary to duly discharge
and satisfy in full, promptly after the same first becomes known to the Owner
Participant, any Lessor's Lien attributable to the Owner Participant (or an
Affiliate thereof), PROVIDED, HOWEVER, that the Owner Participant shall not be
required to discharge or satisfy such Lessor's Lien which is being contested by
the Owner Participant in good faith and by appropriate proceedings so long as
such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Aircraft or the Lessor's Estate or any interest in any thereof.

          (c) ASSIGNMENT OF INTERESTS OF OWNER PARTICIPANT. At any time after
the Delivery Date and subject to satisfaction of the conditions set forth in
this Section 5.01(c), the Owner Participant may assign, convey or otherwise
transfer to a single Person all (but not less than all) of the Beneficial
Interest, PROVIDED that (i) the Owner Participant gives the Lessee at least 10
days' notice of such assignment, conveyance or other transfer, (ii) the Owner
Participant and any Owner Participant Guarantor shall remain liable for all
obligations of the Owner Participant under the Trust Agreement and the other
Operative Agreements to which the Owner Participant is a party to the extent
(but only to the extent) relating to the period on or before the date of such
transfer, (iii) the transferee agrees by a written instrument substantially in
the form attached hereto as Exhibit B-1 (or otherwise in form and substance
reasonably satisfactory to Lessee) to assume liability for, and undertake
performance of, all obligations of the Owner Participant under the Trust
Agreement and the other Operative Agreements to which such Owner Participant is
a party relating to the period after the date of transfer, (iv) the transferee
shall make a representation to the effect that the funds to be used by the
transferee to acquire the Beneficial Interest do not constitute the assets of an
ERISA Plan, (v) at or prior to the time of such transfer, the transferee shall
furnish an opinion of counsel substantially in the form attached hereto as
Exhibit B-3 (or otherwise in form and substance reasonably satisfactory to
Lessee) (which counsel may be in-house counsel) to the effect that such
transferee and any guarantor of the payment and performance obligations of such
transferee, as the case may be, shall have requisite power and authority and
legal right to enter into and carry out the transactions contemplated hereby;
and that such agreement and any guaranty of the transferee's obligations has
been duly authorized, executed and delivered by the transferee or the guarantor
of the payment and performance obligations of such transferee, as the case may
be, and is a valid and binding agreement of the transferee or the guarantor of
the payment and performance obligations of such transferee enforceable in
accordance with its terms, subject to customary exceptions for such

                                       19


opinions and that the transfer does not violate the Applicable Law of the
jurisdiction in which such counsel is located, and (vi) the Lessee shall have
received an opinion from counsel selected by Owner Participant and reasonably
acceptable to Lessee that no withholding tax will be imposed by the U.S. on
Basic Rent, assuming that the Lessee is a U.S. Person. Any such transferee shall
(a) be (i) a bank, savings institution, finance company, leasing company or
trust company, national banking association acting for its own account or in a
fiduciary capacity as trustee or agent under any pension, retirement, profit
sharing or similar trust or fund, insurance company, financial institution,
fraternal benefit society or a corporation acting for its own account having a
combined capital and surplus (or, if applicable, consolidated net worth or its
equivalent) of not less than $50,000,000, (ii) a subsidiary of any Person
described in clause (i) where such Person provides (A) support for the
obligations assumed by such transferee subsidiary reasonably satisfactory to the
Lessee and the Owner Trustee or (B) a guaranty of such transferee subsidiary's
obligations substantially in the form attached hereto as Exhibit B-2 (or
otherwise in form and substance reasonably satisfactory to Lessee and Owner
Trustee), or (iii) an Affiliate of the transferring Owner Participant, so long
as such Affiliate has a combined capital and surplus (or, if applicable,
consolidated net worth or its equivalent) of not less than $50,000,000 (unless
the Owner Participant remains liable for the obligations of such Affiliate under
the Operative Agreements, in which case there shall be no such net worth
requirement), (b) be legally capable of binding itself to the obligations of the
Owner Participant and shall expressly agree to assume all obligations of the
Owner Participant under the Trust Agreement and this Agreement and (c) provide
representations, warranties, and covenants substantially similar to those
contained in clauses (a) and (c) of this Section 5.01; PROVIDED that, without
the prior written consent of the Lessee, such transferee shall not be an airline
or other aircraft operator or competitor of the Lessee in the business of air
transportation or an Affiliate of any thereof unless such Affiliate is (i)
General Electric Company, International Lease Finance Corporation, GPA, GATX
Corporation or Bouillon Aviation, (ii) any wholly-owned subsidiary of an entity
listed in the foregoing clause (i) that is (X) a special purpose corporation
limited to holding Owner Participant's interest in the transactions or (Y)
primarily engaged in the business of owning and leasing assets to third-party
lessees and which is not engaged in the business of an airline, other commercial
aircraft operation or freight forwarder or (iii) an entity from which Lessee has
leased an aircraft directly (or through a trust) and not as a result of the
transfer to such entity of any aircraft subject to an existing lease with
Lessee; PROVIDED that Lessee's consent shall not be required if an Event of
Default shall have occurred and be continuing at the time of such transfer; and
PROVIDED FURTHER that neither such transferee nor any Affiliate thereof shall
(x) be a party to any material litigation or arbitration (whether as plaintiff
or defendant) with the Lessee or any Affiliate of the Lessee or (y) be
attempting a hostile takeover of the Lessee or any Affiliate of the Lessee. A
transferee hereunder shall be a Citizen of the United States or has established
a voting trust, voting powers or other arrangement reasonably satisfactory to
the Owner Trustee and the Lessee to permit the Owner Trustee to be the
registered owner of the Aircraft under the Transportation Code, without in any
way restricting the Lessee's use and operation of the Aircraft. The Owner
Trustee shall not be on notice of or otherwise bound by any such assignment,
conveyance or transfer unless and until it shall have received an executed
counterpart of the instrument of such assignment, conveyance or transfer. Upon
any such disposition by the Owner Participant to a transferee as above provided,
the transferee shall be deemed the "Owner Participant" for all purposes of the
Operative Agreements, and shall be deemed to have acquired the same interest in
the Lessor's Estate as theretofore held by its

                                       20


transferor; and each reference therein to the "Owner Participant" shall
thereafter be deemed a reference to such transferee and the transferring Owner
Participant shall be released from all of its obligations under the Operative
Agreements to the extent such obligations are assumed by such transferee. All
reasonable fees and expenses incurred by Lessee, Owner Participant or Owner
Trustee in connection with any transfer by the Owner Participant permitted by
this Section 5.01(c) will be reimbursed by the Owner Participant, unless an
Event of Default has occurred and is continuing, in which case any fees and
expenses incurred by Lessee shall not be so reimbursed; PROVIDED, HOWEVER, that
in each case bills shall be submitted to the Owner Participant prior to payment.
Each of the parties hereto agree, to the extent so requested by the Owner
Participant, to use reasonable efforts to cooperate with the Owner Participant
in effecting any assignment, conveyance or other transfer permitted pursuant to
this Section 5.01(c), including providing its written consent and
acknowledgement to any such assignment, conveyance or other transfer and, in the
case of the Lessee, providing new insurance certificates that reflect the
interest of the transferee. After the expiration or termination of the Term of
the Lease, the Owner Participant may freely assign, convey or otherwise transfer
all or any part of the Beneficial Interest without compliance with this
Section 5.01(c), provided that no such transfer shall release the Owner
Participant from its obligations under the Operative Agreements accrued prior to
the end of the Term.

          (d) ACTIONS WITH RESPECT TO LESSOR'S ESTATE, ETC. The Owner
Participant agrees that it will not take any action to subject the Lessor's
Estate or the trust established by the Trust Agreement, as debtor, to the
reorganization or liquidation provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statute.

          (e) CITIZENSHIP. The Owner Participant agrees, solely for the benefit
of the Lessee and the Owner Trustee, that if at any time on or after the
Delivery Date when the Aircraft is registered or the Lessee proposes to register
the Aircraft in the United States (i) either the Owner Participant shall cease
to be, or an event which has been publicly disclosed has occurred of which the
Owner Participant has knowledge and which will cause the Owner Participant to
cease to be, a Citizen of the United States, and (ii) the Aircraft shall or
would therefore become ineligible for registration in the name of the Owner
Trustee under the Transportation Code and regulations then applicable thereunder
(such eligibility to be determined without regard to any provision of law that
permits the U.S. registration of the Aircraft by restricting where it is based
or used), then the Owner Participant shall give notice thereof to the Lessee and
the Owner Trustee and shall (at its own expense and without any reimbursement or
indemnification from the Lessee) immediately (and in any event within a period
of 20 days) promptly (x) effect a voting trust or other similar arrangement, (y)
transfer in accordance with the terms of this Agreement and the Trust Agreement
all its rights, title and interest in and to such Trust Agreement, the Lessor's
Estate and this Agreement, or (z) take any other alternative action that would
prevent any deregistration, or maintain or permit the United States
registration, of the Aircraft (determined without regard to any provision of law
that permits the U.S. registration of the Aircraft by restricting where it is
based or used). Each party hereto agrees, upon the request and at the sole
expense of the Owner Participant, to cooperate with the Owner Participant in
complying with its obligations under the provisions of the first sentence of
this Section 5.01(e), but without any obligation on the part of such other party
to take any action believed by it in good faith to be unreasonably burdensome to
such party or materially adverse to its business interests.

                                       21


          (f) GUARANTEES. The Owner Participant agrees for the benefit of the
Lessee that it shall not make or consent to any changes to the Residual Value
Guarantee Agreement or the Guarantee Agreement that would make the
representation in Section 5.01(a)(x) incorrect at the time of such change or
that would increase the Guaranteed Amount and the Owner Participant agrees to
provide notice to the Lessee of any decrease in the Guaranteed Amount and the
amount of such decrease.

          Section 5.02. CITIZENSHIP.

          (a) GENERALLY. The Owner Trustee, in its individual capacity,
represents and warrants that it is and on the Delivery Date will be a Citizen of
the United States. If the Owner Trustee in its individual capacity does not
comply with the requirements of this Section 5.02, the Owner Trustee and the
Lessee hereby agree that no Default shall be deemed to exist due to
non-compliance by the Lessee with the registration requirements in the Lease or
in Section 4.02(b) hereof occasioned solely by such noncompliance of the Owner
Trustee.

          (b) OWNER TRUSTEE. The Owner Trustee, in its individual capacity,
covenants that if at any time on or after the Delivery Date any of its
Responsible Officers shall have actual knowledge that it has ceased to be a
Citizen of the United States, it will resign immediately as the Owner Trustee if
such citizenship is necessary for registration of the Aircraft in the Owner
Trustee's name under the Transportation Code as in effect at such time (such
necessity to be determined without regard to any provision of law that permits
the U.S. registration of the Aircraft by restricting where it is based or used)
or, if it is not necessary for such registration, if the Owner Trustee is
informed in writing by the Lessee or the Owner Participant that such lack of
United States citizenship would have any adverse effect on the Lessee or the
Owner Participant. The Owner Trustee, in its individual capacity, further
covenants that if at any time it appears reasonably probable that it will cease
to be a Citizen of the United States based on information that is (i) known to a
Responsible Officer of the Owner Trustee or (ii) generally known to the public,
it will promptly so notify, to the extent permitted by law, all parties to this
Agreement.

          Section 5.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUST
COMPANY AND THE OWNER TRUSTEE.

          (a) REPRESENTATIONS AND WARRANTIES. In addition to and without
limiting its other representations and warranties provided for in this Article
5, Trust Company represents and warrants, in its individual capacity with
respect to items (i), (ii), (iii)(A), (iv), (v), (vi), (vii), (viii), (ix) and
(x) below, and as the Owner Trustee with respect to items (iii)(B) and (iv), on
the Delivery Date that:

               (i) it is a national banking association duly organized and
     validly existing in good standing under the laws of the United States with
     its principal place of business and chief executive office (as such terms
     are used in Article 9 of the Uniform Commercial Code) in the State of Utah
     at the address set forth in Section 12.01(b), and has full corporate power
     and authority, in its individual capacity or (assuming the Trust Agreement
     has been duly authorized, executed and delivered by the Owner Participant)
     as the Owner Trustee, as the case may be, to carry on its business as now
     conducted, and

                                       22


     to execute, deliver and perform this Agreement and the Operative Agreements
     to which it is or is to be a party;

               (ii) the execution, delivery and performance by Trust Company,
     either in its individual capacity or as the Owner Trustee, as the case may
     be, of this Agreement and the Operative Agreements to which it is or is to
     be party have been duly authorized by all necessary corporate action on its
     part, and do not contravene its articles of association or by-laws or other
     constitutional documents; each of this Agreement and the other Operative
     Agreements to which it is or is to be a party has been duly authorized, and
     has been duly executed and delivered by Trust Company, either in its
     individual capacity or as the Owner Trustee, as the case may be, and
     neither the execution and delivery thereof nor Trust Company performance of
     or compliance with any of the terms and provisions thereof will violate any
     federal or Utah law or regulation governing Trust Company's banking or
     trust powers;

               (iii) (A) assuming due authorization, execution and delivery by
     each other party thereto, each of the Operative Agreements to which it is
     or is to be party when duly executed and delivered will, to the extent each
     such document is entered into by Trust Company in its individual capacity,
     constitute the legal, valid and binding obligation of Trust Company in its
     individual capacity enforceable against it in such capacity in accordance
     with its respective terms, except as such enforceability may be limited by
     bankruptcy, insolvency, reorganization or other similar laws or equitable
     principles of general application to or affecting the enforcement of
     creditors' rights (regardless of whether enforceability is considered in a
     proceeding in equity or at law), and the performance by Trust Company in
     its individual capacity of any of its obligations thereunder does not
     contravene any lease, regulation or contractual restriction binding on
     Trust Company in its individual capacity;

               (B) assuming due authorization, execution and delivery by each
     other party thereto, each of the Operative Agreements to which it is or is
     to be party when duly executed and delivered will, to the extent each such
     document is entered into by the Owner Trustee in its trust capacity,
     constitute the legal, valid and binding obligation of the Owner Trustee
     enforceable against it in such capacity in accordance with its respective
     terms, except as such enforceability may be limited by bankruptcy,
     insolvency, reorganization or other similar laws or general equitable
     principles, and the performance by the Owner Trustee of any of its
     obligations thereunder does not contravene any lease, regulation or
     contractual restriction binding on the Owner Trustee;

               (iv) there are no pending or, to its knowledge, threatened
     actions or proceedings against Trust Company before any court or
     administrative agency which would materially adversely affect the ability
     of Trust Company, either in its individual capacity or as the Owner
     Trustee, as the case may be, to perform its obligations under the Operative
     Agreements to which it is or is to be party;

               (v) its chief executive office (as such term is defined in
     Article 9 of the Uniform Commercial Code) is 79 South Main Street, Salt
     Lake City, Utah 84111 and it

                                       23


     shall give the Lessee and the Owner Participant at least 30 days' prior
     written notice in the event of any change in its chief executive office or
     name;

               (vi) neither the execution and delivery by it, either in its
     individual capacity or as the Owner Trustee, as the case may be, of any of
     the Operative Agreements to which it is or is to be a party, requires on
     the part of Trust Company in its individual capacity or any of its
     Affiliates the consent or approval of or the giving of notice to, the
     registration with, or the taking of any other action in respect of, any
     federal or governmental authority or agency governing its banking or trust
     powers;

               (vii) the Owner Trustee holds whatever title to the Aircraft as
     was conveyed to it by the Seller and the Aircraft is free of Lessor's Liens
     attributable to Trust Company in its individual capacity;

               (viii) Trust Company is a Citizen of the United States;

               (ix) Trust Company has made a filing with the New York State
     Banking Department under Section 131(3) of the New York State Banking Law
     with respect to the trust formed by the Trust Agreement; and

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

          (b) LESSOR'S LIENS. Trust Company, in its individual capacity, further
represents, warrants and covenants that there are no Lessor's Liens attributable
to it in its individual capacity on the Delivery Date. The Owner Trustee, in its
trust capacity, and at the cost and expense of the Lessee, covenants that it
will in its trust capacity promptly, and in any event within 30 days after the
same shall first become known to it, take such action as may be necessary to
discharge duly any Lessor's Liens (other than a Permitted Security Interest)
attributable to it in its trust capacity. Trust Company, in its individual
capacity, covenants and agrees that it will at its own expense take such action
as may be necessary to duly discharge and satisfy in full, promptly, and in any
event within 30 days after the same shall first become known to it, any Lessor's
Liens attributable to it in its individual capacity which may arise at any time
after the date of this Agreement.

          (c) INDEMNITY FOR LESSOR'S LIENS. Trust Company, in its individual
capacity, agrees to indemnify and hold harmless the Lessee, the Owner
Participant and the Owner Trustee from and against any loss, cost, expense or
damage which may be suffered by the Lessee, the Owner Participant or the Owner
Trustee as a result of the failure of Trust Company to discharge

                                       24


and satisfy any Lessor's Liens attributable to it in its individual capacity, as
described in Section 5.03(b) hereof.

          (d) SECURITIES ACT. None of Trust Company, the Owner Trustee or any
Person authorized by either of them to act on its behalf has directly or
indirectly offered any interest in the Lessor's Estate, or in any similar
security relating to the Lessor's Estate, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any Person in violation of the Securities Act or any applicable
state securities laws.

          (e) ACTIONS WITH RESPECT TO LESSOR'S ESTATE, ETC. Neither Trust
Company, in its individual capacity, nor the Owner Trustee will take any action
to subject the Lessor's Estate or the trust established by the Trust Agreement,
as debtor, to the reorganization or liquidation provisions of the Bankruptcy
Code or any other applicable bankruptcy or insolvency statute.

          (f) OTHER BUSINESS. Owner Trustee will not enter into any business or
other activity except as contemplated by the Operative Agreements.

          (g) PERFORMANCE OF AGREEMENTS. Owner Trustee shall perform its
obligations under the Operative Agreements to which it is a party in accordance
with the terms thereof.

          Section 5.04. THE LESSEE'S RIGHT OF QUIET ENJOYMENT. Notwithstanding
any other provision of any of the Operative Agreements, each other party to this
Agreement agrees, severally and as to its own actions only, that it will not, so
long as no Event of Default shall have occurred and be continuing, take or cause
to be taken any action contrary to the Lessee's rights under the Lease,
including, without limitation, its rights to possession, use and quiet enjoyment
of the Aircraft during the Term, PROVIDED that nothing contained herein shall
affect any of the rights of the Owner Participant or the Owner Trustee expressly
granted to such Person under any Operative Agreement.

          Section 5.05. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Representations, warranties and covenants of the Owner Participant and the Owner
Trustee (in its individual or trust capacity) provided for in this Article 5,
and their respective obligations under any and all of them, shall survive the
delivery of the Aircraft and the expiration or other termination of this
Agreement and the other Operative Agreements.

          Section 5.06. COMPLIANCE WITH TRUST AGREEMENT, ETC. Each of the Owner
Participant, Trust Company, and the Owner Trustee agrees with the Lessee that so
long as the Lease shall be in effect it will (i) comply with all of the terms of
the Trust Agreement applicable to it in its respective capacity, the
noncompliance with which would materially adversely affect any such party and
(ii) not take any action, or cause any action to be taken, to amend, modify or
supplement any other provision of the Trust Agreement in a manner that would
materially adversely affect any such party without the prior written consent of
such party. The Owner Trustee confirms for the benefit of the Lessee that it
will comply with the provisions of Article 2 of the Trust Agreement.
Notwithstanding anything else to the contrary in the Trust Agreement, so long as
the Lease remains in effect, the Owner Participant agrees not to terminate or
revoke the trust created by the Trust Agreement without the consent of
the Lessee.

                                       25


                                   ARTICLE 6.
                                      TAXES

          Section 6.01. LESSEE'S OBLIGATION TO PAY TAXES.

          (a) GENERALLY. The Lessee agrees promptly to pay when due, and to
indemnify on an After Tax Basis and hold each Tax Indemnitee harmless from all
license, recording, documentary, registration and other fees and all taxes
(including, without limitation, income, gross receipts, sales, rental, use,
value added, property (tangible and intangible), AD VALOREM, excise and stamp
taxes), fees, levies, imposts, recording duties, duties, charges, assessments or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax or interest thereon (individually, a "Tax," and
collectively called "Taxes"), however imposed or asserted (whether imposed upon
any Tax Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any
Engine or any Part or the Lessor's Estate, Rent, or otherwise upon or with
respect to any Operative Agreement or any transactions contemplated thereunder
or any payments thereunder or otherwise in connection therewith), by any
Federal, state or local government or taxing authority in the United States, or
by any government or taxing authority of a foreign country or of any political
subdivision or taxing authority thereof or by a territory or possession of the
United States or an international taxing authority, in any such case as relating
to or measured by:

               (i) the construction, purchase, charter, rental, assignment,
     presence, overhaul, control, acceptance, rejection, delivery, nondelivery,
     transport, location, ownership, registration, reregistration,
     deregistration, insuring, assembly, possession, repossession, operation,
     use, non-use, condition, maintenance, repair, improvement, conversion,
     sale, return, abandonment, preparation, installation, storage, redelivery,
     replacement, manufacture, leasing, subleasing, sub-subleasing,
     modification, alteration, rebuilding, importation, transfer of title,
     transfer of registration, exportation or other application or disposition
     of, or the imposition of any Lien (or the incurrence of any liability to
     refund or pay over any amount as a result of any Lien) on, the Aircraft,
     the Airframe, any Engine or any Part or any interest therein;

               (ii) amounts payable under the Operative Agreements;

               (iii) the Aircraft, or the income or other proceeds (x) received
     with respect to the Aircraft attributable to the transactions contemplated
     by the Operative Agreements or (y) held by the Owner Trustee under the
     Trust Agreement or after an Event of Default under the Lease;

               (iv) with respect to any Operative Agreement, any interest
     therein or by reason of the transactions described in or contemplated by
     the Operative Agreements;

               (v) the Aircraft, the Airframe, any Engine or any Part;

               (vi) the rentals (including Basic Rent and Supplemental Rent),
     receipts, earnings, principal, interest, fees, proceeds and any other
     income or amounts payable, whether actual or deemed, arising upon, under or
     in connection with any of the Operative Agreements;

                                       26


               (vii) in the case of the Owner Participant, any "prohibited
     transaction," within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code, arising out of or in connection with the
     acquisition or holding of the Owner Participant's interest in the
     Trust Estate.

          (b) EXCEPTIONS. The indemnity provided for in Section 6.01(a) shall
not extend to any of the following:

               (i) With respect to a Tax Indemnitee, Taxes, whether imposed by
     withholding or otherwise, based upon, measured by or with respect to the
     net or gross income, items of tax preference or minimum tax or excess
     profits, alternative minimum taxes, receipts, capital, franchise, net worth
     (whether, denominated income, excise, capital stock, or doing business
     taxes) or other similarly-based taxes (other than taxes that are in the
     nature of, sales, use, transfer, ad valorem, stamp, property, or similar
     taxes) ("Income Taxes") imposed by the United States or by any state, local
     or foreign jurisdiction, PROVIDED, HOWEVER, that this clause shall not
     exclude from the indemnity described in Section 6.01(a) above any such
     Income Taxes to be imposed by any such jurisdiction (other than the United
     States or any state or local taxing authority in any state in the United
     States) as a result of (I) the operation, registration, location, presence,
     or use of the Aircraft, Airframe, any Engine or any Part thereof, by the
     Lessee or any Affiliate thereof or any Sublessee within the jurisdiction of
     the taxing authority imposing such Tax, (II) the presence or activities of
     the Lessee or any Affiliate thereof or any Sublessee within the
     jurisdiction of the taxing authority imposing such Tax, (III) the status of
     the Lessee or any Affiliate thereof or any Sublessee as a foreign entity or
     as an entity owned in whole or in part by foreign persons, or (IV) the
     Lessee or any Affiliate thereof or any Sublessee having made (or having
     been deemed to have made) payments to such Tax Indemnitee from the
     jurisdiction of the taxing authority imposing such Tax,;

               (ii) Taxes imposed with respect to any period beginning after the
     earlier of (A) the discharge in full of the Lessee's obligation, if any, to
     pay Termination Value under and in accordance with the Lease, (B) the
     expiration of the Term of the Lease or (C) the termination of the Lease in
     accordance with the applicable provisions of the Lease thereof;

               (iii) As to the Owner Trustee, Taxes imposed against the Owner
     Trustee upon or with respect to any fees for services rendered in its
     capacity as Owner Trustee under the Trust Agreement;

               (iv) With respect to any Tax Indemnitee, Taxes resulting from the
     willful misconduct or gross negligence of such Tax Indemnitee or a Related
     Tax Indemnitee;

               (v) Taxes imposed on the Owner Trustee or the Owner Participant
     or any successor, assign or Affiliate thereof which became payable by
     reason of any mortgage, pledge, financing, voluntary transfer or
     disposition by such Tax Indemnitee subsequent to the Delivery Date,
     including revocation of the Trust, of any interest in some or all of the
     Aircraft, Airframe, Engines or Parts thereof or its interest in the

                                       27


     Lessor's Estate or a transfer or disposition of shares or other interests
     in the Owner Trustee or the Owner Participant or a disposition in
     connection with a bankruptcy or similar proceedings involving either the
     Lessor or the Owner Participant or a transfer or disposition of shares or
     other interests in the Owner Trustee or the Owner Participant in each case
     other than (A) transfers resulting from a loss, substitution or
     modification of the Aircraft, Engines or any Part, (B) transfers pursuant
     to the Lessor's exercise of remedies in accordance with Section 17 of the
     Lease, (C) termination of the Lease upon the Lessee's exercise of Lessee's
     options pursuant to Section 14 of the Lease, or (D) a transfer to Lessee
     pursuant to Section 13(b) of the Lease; the parties agree to cooperate to
     minimize any such Taxes covered by this provision;

               (vi) Taxes subject to indemnification by the Lessee pursuant to
     the Tax Indemnity Agreement;

               (vii) Taxes imposed on a successor, assign or other transferee of
     any interest of a Tax Indemnitee in the Aircraft, any Engine or any Part or
     any Operative Agreement or any proceeds thereunder to the extent that the
     aggregate amount of such Taxes exceeds the aggregate amount of Taxes that
     would have been imposed on the transferor (determined at the time of the
     transfer) and that would have been indemnifiable pursuant to
     Section 6.01(a) hereof, provided that the exclusion in this clause (vii)
     shall not apply in the case of any such sale, assignment, transfer or
     disposition that occurs in connection with an Event of Default or in
     connection with a bankruptcy, insolvency or other proceeding for the relief
     of debtors in which the Lessee is a debtor;

               (viii) Any Taxes which have been properly included in the
     Purchase Price;

               (ix) Any Taxes imposed on the Owner Trustee or Owner Participant
     which would not have been imposed but for a Lessor's Lien;

               (x) In the case of the Owner Participant, any Taxes relating to,
     resulting from, arising out of or in connection with a "prohibited
     transaction" within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code resulting from the direct or indirect use of
     assets of any ERISA Plan to acquire or hold Owner Participant's interest in
     the Trust Estate or in the case of any transferee of the Owner Participant
     referred to in Section 5.01(c), to purchase the Beneficial Interest
     pursuant to Section 5.01(c);

               (xi) Taxes that are being contested in accordance with the
     provisions hereof;

               (xii) United States withholding Taxes imposed on the Owner
     Participant as a result of the Owner Participant not being a U.S. Person;
     or

               (xiii) interest, penalties, fines or additions to tax to the
     extent they relate to Taxes for which no indemnity would be payable by
     Lessee pursuant to this Section 6.01(b).

                                       28


          Section 6.02. AFTER TAX BASIS. The amount which the Lessee shall be
required to pay with respect to any Tax indemnified against under Section 6.01
(an "Indemnifiable Tax") shall be an amount sufficient to restore the Tax
Indemnitee, on an After Tax Basis, to the same position such party would have
been in had such Tax not been incurred, taking into account any tax benefits
recognized by such Tax Indemnitee as a result of the Indemnifiable Tax. If any
Tax Indemnitee actually realizes a tax benefit (whether by credit, deduction or
otherwise), or would have realized such a benefit as to which it has been given
notice if properly claimed, and with respect to Owner Participant, the Owner
Participant has not determined in good faith that claiming such benefit would
have a material adverse impact on the Owner Participant or an Affiliate thereof,
by reason of the payment of any Tax paid or indemnified against by the Lessee,
provided that an Event of Default has not occurred and is not continuing, such
Tax Indemnitee shall promptly pay to the Lessee, to the extent such tax benefit
was not previously taken into account in computing such payment or indemnity,
but not before the Lessee shall have made all payments then due to such Tax
Indemnitee under this Agreement, the Tax Indemnity Agreement and any other
Operative Agreement, an amount equal to the lesser of (x) the sum of such tax
benefit plus any other tax benefit realized by such Tax Indemnitee that would
not have been realized but for any payment made by such Tax Indemnitee pursuant
to this sentence and not already paid to the Lessee, or (y) the amount of the
payment made under Section 6.01 hereof and this Section 6.02 by the Lessee to
such Tax Indemnitee plus the amount of any other payments by the Lessee to such
Tax Indemnitee theretofore required to be made under this Section 6.02 and
Sections 6.01 and 6.05 hereof (and the excess, if any, of the tax benefit over
the applicable amount described in clause (x) over the amount described in
clause (y) above shall be carried forward and applied to reduce PRO TANTO any
subsequent obligations of the Lessee to make payments to such Tax Indemnitee
pursuant to Section 6.01 hereof). If an amount payable by any Tax Indemnitee to
the Lessee pursuant to this Section 6.02 is not paid when due because of the
occurrence and continuation of any Event of Default, such amount shall be
payable by any Tax Indemnitee to the Lessee upon the Lessee's curing all Events
of Default. The Lessee shall reimburse on an After Tax Basis such Tax Indemnitee
(subject to Section 6.01(b), but only insofar as subsections (iv), (vi), (vii),
(ix), (x), (xi), (xii) and (xiii) thereof would apply) for any payment of a tax
benefit pursuant to the preceding sentence (or a tax benefit otherwise taken
into account in calculating the Lessee's indemnity obligation hereunder) to the
extent that such tax benefit is subsequently disallowed or reduced.

          In determining the order in which any Tax Indemnitee utilizes
withholding or other foreign taxes as a credit against such Tax Indemnitee's
United States income taxes, such Tax Indemnitee shall be deemed to utilize (i)
first, all foreign taxes other than those described in clause (ii) below; and
(ii) then, on a pro rata basis, all foreign taxes with respect to which such Tax
Indemnitee is entitled to obtain indemnification pursuant to an indemnification
provision contained in any lease, loan agreement, or other financing document
(including this Agreement) that is similar to the indemnification provision in
this Article 6.

          Section 6.03. TIME OF PAYMENT. Any amount payable to a Tax Indemnitee
pursuant to this Article 6 shall be paid promptly, but in any event within 30
days after receipt of a written demand therefor from such Tax Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable, PROVIDED that in
the case of amounts which are being contested by the Lessee in good faith or by
the Tax Indemnitee in either case pursuant to Section 6.04 hereof, or subject to

                                       29


verification proceedings pursuant to Section 6.11 hereof, such amount shall be
payable within 30 days after the time such contest or verification proceeding,
as the case may be, is finally resolved. In no event shall any amount be payable
under Section 6.01 until two Business Day prior to the due date for Tax
in issue.

          Section 6.04. CONTESTS.

          (a) NOTICE OF CLAIM. If a written claim is made against any Tax
Indemnitee for Taxes with respect to which the Lessee is liable for a payment or
indemnity hereunder, such Tax Indemnitee shall promptly (but in any event within
30 days of receipt thereof) give the Lessee notice in writing of such claim and
shall furnish the Lessee with copies of any written requests for information
sent to such Tax Indemnitee from any taxing authority to the extent relating to
such Taxes with respect to which the Lessee may be required to indemnify
hereunder; PROVIDED, HOWEVER, that the failure of a Tax Indemnitee to give such
notice or furnish such copy shall not terminate any of the rights of such Tax
Indemnitee under this Article 6, except (A) to the extent that the Lessee's
contest rights have been materially and adversely impaired by the failure to
provide such notice or copy or (B) to the extent that such failure results in
the imposition of, or an increase in the amount of, any penalties, interest or
additions to Tax related to the Tax which is the subject of such claim
or proceeding.

          (b) REQUEST FOR CONTEST. If a written claim shall be made against any
Tax Indemnitee for any Tax, other than an Income Tax, for which the Lessee may
be obligated to indemnify pursuant to Section 6.01 hereunder, and under
applicable law of the taxing jurisdiction the Lessee is allowed to contest
directly such Tax and the Tax to be contested is not reflected in a report or
return with other Taxes of any Tax Indemnitee (as confirmed in writing by such
Tax Indemnitee) and if the Tax Indemnitee determines in good faith that it will
not suffer any adverse consequences as a result and that no tax return of the
Tax Indemnitee will be kept open as a result of such contest beyond the
applicable statute of limitations period (as confirmed in writing by such Tax
Indemnitee), then the Lessee shall be permitted, at its expense and in its own
name, or, if consented to in writing by the Tax Indemnitee, in the name of such
Tax Indemnitee, to contest the imposition of such Tax (a " Lessee Controlled
Contest"); PROVIDED, HOWEVER, that the Lessee shall not be permitted or entitled
to contest any Tax unless (A) such contest will not result in the risk of an
imposition of criminal penalties or a more than de minimis risk of a sale,
forfeiture or loss of the Aircraft, the Airframe, the Engines or any part
thereof or the creation of any Lien other than Liens for Taxes of the Lessee (x)
either not yet due or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve the risk of an imposition of criminal
penalties or a more than de minimis risk of any sale, forfeiture or loss of the
Aircraft (unless the Lessee has provided a bond or other sufficient protection
against any such risk reasonably satisfactory to the Tax Indemnitee), and (y)
for the payment of which such reserves, if any, as required to be provided under
generally accepted accounting principles have been provided and, to the extent
permitted by law, the Lessee shall be entitled to withhold payment during
pendency of such contest, (B) if an Event of Default shall have occurred and be
continuing, the Lessee shall have provided security for its obligations
hereunder reasonably satisfactory to the Owner Participant by placing in escrow
funds to cover any such obligations, (C) the Lessee shall have agreed to pay
such Tax Indemnitee on demand and on an After Tax Basis all costs and expenses
that such Tax Indemnitee actually incurs in connection with contesting such
claim (including, without limitation, all costs, expenses, losses, reasonable
legal

                                       30


and accounting fees, disbursements, or penalties, interest and addition to tax),
(D) if such contest shall be conducted in a manner requiring the payment of the
claim in advance, the Lessee shall have advanced sufficient funds, on an
interest free basis, to make the payment required (or the Lessee shall have paid
the amount required directly to the appropriate taxing authority), and agreed to
indemnify the Tax Indemnitee against any additional net adverse tax consequences
on an After Tax Basis to such Tax Indemnitee of such advance, and (E) if
requested by the Owner Participant, independent tax counsel selected by Owner
Participant and reasonably acceptable to the Lessee has rendered an opinion
within 30 days of the Owner Participant providing notice of the claim to the
Lessee that a Reasonable Basis exists for contesting such claim.

          If the Lessee shall so request within 30 days after receipt of such
notice from a Tax Indemnitee under this Section 6.04 hereof and with respect to
a Tax for which the Lessee may be obligated to indemnify pursuant to
Section 6.01 and which does not satisfy the requirements to constitute a Lessee
Controlled Contest, such Tax Indemnitee shall in good faith at the Lessee's
after-tax expense contest the imposition of such Tax; PROVIDED, HOWEVER, that
such Tax Indemnitee, after considering in good faith any advice of the Lessee
and the Lessee's counsel concerning the forum in which the adjustment is most
likely to be favorably resolved, may in its sole discretion select the manner
and forum for such contest and determine whether any such contest shall be made
by (a) resisting payment thereof if lawful and practicable or not paying the
same except under protest if protest is necessary and proper in each case so
long as non-payment will not result in a more than de minimis risk of the sale,
forfeiture or loss of, or the creation of a Lien other than a Permitted Lien on
the Aircraft, Airframe or any Engine or any risk of criminal liability; or (b)
if the payment be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and/or judicial proceedings; PROVIDED FURTHER,
HOWEVER, that at such Tax Indemnitee's option, such contest shall be conducted
by the Lessee in the name of such Tax Indemnitee if such Tax Indemnitee so
requests in writing and that in no event shall such Tax Indemnitee be required
or the Lessee permitted to contest under this paragraph the imposition of any
Tax for which the Lessee may be obligated pursuant to this Section 6.01 unless:

               (i) in the case of an Income Tax, the Lessee shall have furnished
     at the Lessee's expense an opinion of counsel selected by the Lessee and
     reasonably satisfactory to such Tax Indemnitee to the effect that a
     Reasonable Basis exists for pursuing such contest;

               (ii) the Lessee shall have agreed to pay such Tax Indemnitee on
     demand and on an After Tax Basis all reasonable costs and expenses that
     such Tax Indemnitee may incur in connection with contesting such claim
     (including, without limitation, all costs expenses, losses, reasonable
     legal and accounting fees, disbursements, penalties, interest and additions
     to tax);

               (iii) such Tax Indemnitee shall have determined that the action
     to be taken will not result in any more than de minimis danger of sale,
     forfeiture or loss of, or the creation of any Lien other the Liens for
     Taxes of the Lessee (or any Sublessee) either not yet due or being
     contested in good faith by appropriate proceedings so long as such
     proceedings do not involve any more than de minimis risk of the sale,
     forfeiture or loss of the Aircraft, the Airframe or any Engine or any
     interest therein (unless the Lessee has

                                       31


     provided a bond or other sufficient protection against any such risk
     reasonably satisfactory to the Tax Indemnitee) and for the payment of
     which such reserves, if any, as are required to be provided under generally
     accepted accounting principles have been provided;

               (iv) if an Event of Default shall have occurred and be
     continuing, the Lessee shall have provided security for its obligations
     hereunder reasonably satisfactory to the Owner Participant by placing in
     escrow sufficient funds to cover any such obligations;

               (v) Lessee shall have acknowledged its liability for such claims;

               (vi) such contest and related contests involving other equipment
     involve potential payments and/or indemnities by the Lessee (whether or not
     such indemnity is pursuant to this Agreement) of at least $25,000 in the
     aggregate; and

               (vii) if such contest shall be conducted in a manner requiring
     the payment of the claim in advance, the Lessee shall have advanced
     sufficient funds, on an interest free basis, to make the payment required,
     and agreed to indemnify the Tax Indemnitee against any additional net
     adverse tax consequences on an After Tax Basis to such Tax Indemnitee of
     such advance.

          In the case of a contest which is not a Lessee Controlled Contest, if
requested by the Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to appeal any adverse decision to the United States Supreme Court
provided that with respect to an appeal of an adverse judicial decision a
substantial basis in law and fact must exist that such appeal will be
successful. If the Lessee is permitted under applicable law to contest a Tax
asserted against the Lessee and the same or similar Tax is also asserted against
the Tax Indemnitee, subject to the conditions herein, each of the Lessee and
such Tax Indemnitee shall conduct its contest in its own name and the Lessee and
such Tax Indemnitee will cooperate in a reasonable manner with respect to the
respective contests of such Tax.

          (c) DECLINING TO CONTEST; SETTLEMENT.

               (i) If, after the Lessee has properly requested a contest in
     accordance with this Section 6.04 and Lessee is then complying with the
     terms of this Section 6.04, any Tax Indemnitee shall at any time decline to
     take any action required under Section 6.04 with respect to such contest,
     then, if such failure shall cause the contest to be determined adversely or
     shall preclude such contest as a matter of law, the Lessee shall not be
     obligated to indemnify such Tax Indemnitee for such Tax and such Tax
     Indemnitee shall reimburse the Lessee for all amounts previously advanced
     by the Lessee in connection with such contest (other than costs and
     expenses of such contest).

               (ii) No Tax Indemnitee shall settle a contest of any indemnified
     Tax without requesting the Lessee's written consent (which consent will not
     be unreasonably withheld, as determined in the Lessee's good faith
     judgment). If any Tax Indemnitee shall settle a contest for any Tax without
     receiving the Lessee's written consent, then the

                                       32


     Lessee shall not be obligated to indemnify such Tax Indemnitee for such Tax
     and the Tax Indemnitee shall reimburse the Lessee for all amounts
     previously advanced with respect to such contest (other than costs and
     expenses of such contest). Notwithstanding the preceding two sentences, no
     Tax Indemnitee shall be required to take or continue any action unless the
     Lessee shall have agreed to pay the Tax Indemnitee on a current and After
     Tax Basis all reasonable fees and expenses (including reasonable attorney's
     and accountant's fees) which such Tax Indemnitee may incur as a result of
     contesting such Taxes.

          (d) CONTINUING CLAIMS. Notwithstanding anything contained in this
Section 6.04 to the contrary, no Tax Indemnitee shall be required to contest any
claim if the subject matter thereof shall be of a continuing nature and shall
have previously been adversely decided pursuant to the contest provisions of
this Section 6.04 unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings and court decisions) or the Lessee shall have provided new facts after
such claim shall have been so previously decided, and such Tax Indemnitee shall
have received an opinion of independent tax counsel selected by it and
reasonably approved by the Lessee and furnished at the Lessee's sole expense to
the effect that, as a result of such change or new facts, it is more likely than
not that the position which such Tax Indemnitee or the Lessee, as the case may
be, had asserted in such previous contest, would prevail.

          (e) CLAIMS BARRED. If (A) any Tax Indemnitee fails to give the Lessee
written notice pursuant to this Section 6.04 of any claim by any government or
taxing authority for any Tax for which the Lessee is obligated pursuant to this
Section 6.01, (B) as a direct result of such failure the contest of such claim
has been materially and adversely impaired and (C) the Lessee furnishes, at the
Lessee's expense, an opinion of counsel selected by the Lessee and reasonably
satisfactory to such Tax Indemnitee to the effect that, had the contest of such
claim not been materially and adversely impaired, a Reasonable Basis would have
existed for pursuing such contest, such Tax Indemnitee shall be deemed to have
waived its right to any payment by the Lessee that would otherwise be payable by
the Lessee pursuant to this Section 6.01 in respect of such claim.

          Section 6.05. REFUNDS. When a Tax Indemnitee becomes entitled to
receive a refund or credit against Tax of all or any part of any Taxes which the
Lessee shall have paid for such Tax Indemnitee or for which the Lessee shall
have reimbursed or indemnified such Tax Indemnitee, such Tax Indemnitee shall
pay, provided an Event of Default has not occurred and is not continuing, to the
Lessee an amount equal to the amount of such refund or credit, together with any
interest attributable thereto, less (x) all payments then due to such Tax
Indemnitee under this Article 6, and (y) Taxes imposed with respect to the
accrual or receipt thereof, including interest received attributable thereto,
plus any tax benefit realized by such Tax Indemnitee as a result of any payment
by such Tax Indemnitee made pursuant to this sentence; PROVIDED, HOWEVER, that
such amount shall not be payable (a) before such time as the Lessee shall have
made all payments or indemnities then due and payable to such Tax Indemnitee
under this Article 6 and (b) to the extent that the amount of such payment
(without regard to any interest component thereof) would exceed (i) the amount
of all prior payments by the Lessee to such Tax Indemnitee pursuant to this
Article 6 less (ii) the amount of all prior payments by such Tax Indemnitee to
the Lessee pursuant to this Article 6 (any such excess shall be carried forward
to

                                       33


reduce PRO TANTO any subsequent obligations of the Lessee to make payments to
such Tax Indemnitee pursuant to Section 6.01 hereof). If an amount payable by
any Tax Indemnitee to the Lessee pursuant to this Section 6.02 is not paid when
due because of the occurrence and continuation of an Event of Default, such
amount shall be payable by any Tax Indemnitee to the Lessee upon the Lessee's
curing all Events of Default.

          Any subsequent loss of such refund or tax benefit shall be treated as
a Tax subject to indemnification under the provisions of this Article 6 (in the
case of any such tax benefit, subject to Section 6.01(b) but only insofar as
subsections (iv), (vi), (vii), (ix),(x), (xi), (xii) and (xiii) thereof would
apply).

          Section 6.06. REPORTS. In case any report or return is required to be
made with respect to any Taxes (other than Income Taxes) against which the
Lessee is or may be obligated to indemnify the Indemnitees under this Article 6,
the Lessee shall, to the extent it has knowledge thereof, make such report or
return, except for any such report or return that the Tax Indemnitee has
notified the Lessee that it intends to file, in such manner as will show the
ownership of the Aircraft in the Owner Trustee (unless the ownership of the
Aircraft is not shown on such report or return) and, upon request, shall send a
copy of the applicable portions of such report or return to the Tax Indemnitee
and the Owner Trustee or will notify the Tax Indemnitee of such requirement and
make such report or return in such manner as shall be satisfactory to such Tax
Indemnitee and the Owner Trustee. The Lessee will provide such information
within the possession or control of the Lessee as the Tax Indemnitee may
reasonably request in writing from the Lessee to enable the Tax Indemnitee to
fulfill its tax filing requirements with respect to the transactions
contemplated by the Operative Agreements (without duplication of any comparable
requirements of the Tax Indemnity Agreement) and any audit information request
arising from any such filing. The Tax Indemnitee will provide such information
within its possession or control as the Lessee may reasonably require from such
Tax Indemnitee to enable the Lessee to fulfill its tax filing requirements with
respect to the transactions contemplated by the Operative Agreements and any
audit information request arising from such filing; PROVIDED that in no event
shall any Tax Indemnitee be required to provide copies of any of its
tax returns.

          Section 6.07. SURVIVAL OF OBLIGATIONS. The representations,
warranties, indemnities and agreements of the Lessee provided for in this
Article 6 and the Lessee's obligations under any and all of them, in each case,
with respect to events or periods prior to the expiration or termination of the
Lease shall survive the expiration or other termination of the Operative
Agreements.

          Section 6.08. PAYMENT OF TAXES. With respect to any Tax otherwise
indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe,
any Engine or Parts, to the extent permitted by the applicable federal, state,
local or foreign law, the Lessee shall pay such tax directly to the relevant
Taxing authority and file any returns or reports required with respect thereto
to the extent legally entitled to do so in its own name; PROVIDED, HOWEVER, that
the Lessee shall not make any statements or take any action which would indicate
that the Lessee or any Person other than the Owner Trustee or Owner Participant
is the owner of the Aircraft, the Airframe, any Engine or any Part or which
would otherwise be inconsistent with

                                       34


the terms of the Lease or the Tax Indemnity Agreement and the position
thereunder of the Owner Trustee and the Owner Participant.

          Section 6.09. REIMBURSEMENTS BY INDEMNITEES GENERALLY. To the extent
the Lessee is required to pay or withhold any Tax imposed on or with respect to
a Tax Indemnitee in respect of the transactions contemplated by the Operative
Agreements, which Tax is not otherwise the responsibility of the Lessee under
the Operative Agreements, or any other written agreements between the Lessee and
such Tax Indemnitee, then such Tax Indemnitee shall pay to the Lessee within 30
days of the Lessee's demand therefor an amount which equals the amount actually
paid by the Lessee with respect to such Taxes.

          Section 6.10. FORMS. Each Tax Indemnitee agrees to furnish from time
to time to Lessee or to such other person as Lessee may designate, at Lessee's
request, such duly executed and properly completed forms as may be necessary or
appropriate in order to claim any reduction of or exemption from any withholding
or other Tax imposed by any taxing authority, if (x) such reduction or exemption
is available to such Tax Indemnitee, (y) Lessee has provided such Tax Indemnitee
with any information necessary to complete such form not otherwise reasonably
available to such Tax Indemnitee, and (z) with respect to Owner Participant, the
Owner Participant has determined in good faith that furnishing such form could
not have a material adverse impact on the Owner Participant or an Affiliate
thereof.

          Section 6.11. VERIFICATION. At the Lessee's request, the accuracy of
any calculation of amount(s) payable pursuant to this Article 6 shall be
verified by independent public accountants selected by the applicable Tax
Indemnitee and reasonably satisfactory to the Lessee, and such verification
shall bind the applicable Tax Indemnitee and the Lessee. In order, and to the
extent necessary, to enable such independent accountants to verify such amounts,
such Tax Indemnitee shall provide to such independent accountants (for their
confidential use and not to be disclosed to the Lessee or any other person) all
information reasonably necessary for such verification. Verification shall be at
the expense of the Lessee, unless such verification results in an adjustment in
the Lessee's favor of $10,000 or more of the amount of the payment as computed
by such Tax Indemnitee, in which case the verification shall be at the expense
of the Tax Indemnitee.

          Section 6.12. NON-PARTIES. If a Tax Indemnitee is not a party to this
Agreement, Lessee may require the Tax Indemnitee to agree in writing, in a form
reasonably acceptable to Lessee, to the terms of this Article 6 prior to making
any payment to such Tax Indemnitee hereunder.

                                   ARTICLE 7.
                                GENERAL INDEMNITY

          Section 7.01. GENERALLY.

          (a) INDEMNITY. The Lessee agrees to indemnify each Indemnitee against
and agrees to protect, defend, save and keep harmless each Indemnitee from and
against and in respect of, and will pay on an After Tax Basis, any and all
liabilities, obligations, losses, damages, settlements, penalties, claims,
actions, suits, costs, disbursements and expenses,

                                       35


demands or judgments (including reasonable legal fees and expenses) of every
kind and nature, whether or not any of the transactions contemplated by this
Agreement are consummated and whether arising before, on or after the Delivery
Date (individually, an "Expense," collectively, "Expenses"), which may be
imposed on, incurred or suffered by or asserted against any Indemnitee, in any
way relating to, arising out of or in connection with, any one or more of the
following:

               (i) any Operative Agreement, Sublease or any transaction
     contemplated thereby;

               (ii) the operation, possession, use, non-use, maintenance,
     storage, overhaul, delivery, non-delivery, control, condition, alteration,
     modification, addition, improvement, airworthiness, replacement,
     substitution, return, abandonment, redelivery or other disposition, repair
     or testing of the Aircraft, Airframe, or any Engine or any engine used in
     connection with the Airframe, or any Part thereof by the Lessee, any
     sublessee or any other Person whatsoever, whether or not such operation,
     possession, use, non-use, maintenance, storage, overhaul, delivery,
     non-delivery, control, condition, alteration, modification, addition,
     improvement, airworthiness, replacement, substitution, return, abandonment,
     redelivery or other disposition, repair or testing is in compliance with
     the terms of the Lease, including, without limitation, claims for death,
     personal injury or property damage or other loss or harm to any Person
     whatsoever, including, without limitation, any passengers, shippers or
     other Persons wherever located, claims or penalty relating to any laws,
     rules or regulations, including, without limitation, environmental control,
     noise and pollution laws, rules or regulation and any Liens in respect of
     the Aircraft, any Engine or any Part;

               (iii) the manufacture, design, sale, return, purchase,
     acceptance, nonacceptance, rejection, delivery, non-delivery, condition,
     repair, modification, servicing, rebuilding, airworthiness, registration,
     reregistration, deregistration, ownership, financing, import, export,
     performance, non-performance, lease, sublease, transfer, merchantability,
     fitness for use, alteration, substitution or replacement of any Airframe,
     Engine, or Part or other transfer of use or possession, or other
     disposition of the Aircraft, the Airframe, any Engine or any Part
     including, without limitation, latent and other defects, whether or not
     discoverable, tort liability, whether or not arising out of the negligence
     of any Indemnitee (whether active, passive or imputed and including strict
     liability without fault), and any claims for patent, trademark or copyright
     infringement;

               (iv) any breach of or failure to perform or observe, or any other
     non-compliance with, any condition, covenant or agreement to be performed,
     or other obligations of the Lessee under any of the Operative Agreements,
     or the falsity or inaccuracy of any representation or warranty of the
     Lessee in any of the Operative Agreements (other than representations and
     warranties in the Tax Indemnity Agreement) or the occurrence of any Default
     or Event of Default;

               (v) the enforcement of the terms of the Operative Agreements
     (including this Section 7.01(a));

                                       36


               (vi) any interest in the Lessor's Estate or the Trust Agreement
     or any similar interest; and

               (vii) in the case of the Owner Participant, any "prohibited
     transaction," within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code, arising out of or in connection with the
     acquisition or holding of the Owner Participant's interest in the Trust
     Estate.

          (b) EXCEPTIONS. The indemnity provided for in Section 7.01(a) shall
not extend to any Expense of any Indemnitee to the extent it:

               (i) is attributable to the willful misconduct or gross negligence
     of such Indemnitee (other than gross negligence or willful misconduct
     imputed to such person by reason of its interest in the Aircraft or any
     transaction documents);

               (ii) except to the extent fairly attributable to acts or events
     occurring prior thereto, is attributable to acts or events (other than the
     performance by Lessee of its obligations pursuant to the terms of the
     Operative Agreements) which occur after the Aircraft is no longer part of
     the Lessor's Estate or, if the Aircraft remains a part of the Lessor's
     Estate, after the expiration of the Term (unless the Aircraft is being
     returned at such time, in which case after return of physical possession;
     PROVIDED that if the Lease has been terminated pursuant to Section 17
     thereof, the indemnity provided in Section 7.01(a) hereof shall survive for
     so long as Lessor shall be exercising remedies under such Section 17), or
     to acts or events which occur after return of possession of the Aircraft by
     the Lessee in accordance with the provisions of the Lease (subject to the
     foregoing proviso if the Lessor has terminated the Lease pursuant to
     Section 17 of the Lease); PROVIDED that nothing in this clause (ii) shall
     be deemed to exclude or limit any claim that any Indemnitee may have under
     Applicable Law by reason of an Event of Default or for damages from Lessee
     for breach of Lessee's covenants contained in the Lessee Documents or to
     release Lessee from any of its obligations under the Lessee Documents that
     expressly provide for performance after termination of the Term;

               (iii) other than as expressly provided herein or in the other
     Operative Agreements, is a Tax or loss of a Tax benefit, whether or not the
     Lessee is required to indemnify therefor pursuant to Article 6 hereof or
     pursuant to the Tax Indemnity Agreement;

               (iv) is a cost or expense expressly required to be paid by such
     Indemnitee or its permitted transferees (and not by the Lessee) pursuant to
     this Agreement or any other Operative Agreement and for which the Lessee is
     not otherwise obligated to reimburse such Indemnitee, directly or
     indirectly pursuant to the terms of this Agreement or such other Operative
     Agreement;

               (v) is attributable to the incorrectness or breach by such
     Indemnitee of its representations or warranties, under any of the Operative
     Agreements except to the extent such incorrectness or breach was caused by
     a breach by Lessee of any

                                       37


     representation or warranty or by any failure of Lessee to perform any
     obligation under an Operative Agreement;

               (vi) is attributable to the failure by such Indemnitee to perform
     any of its obligations under any of the Operative Agreements except to the
     extent such failure was caused by a breach by Lessee of any representation
     or warranty or by any failure of Lessee to perform any obligation under an
     Operative Agreement;

               (vii) is, in the case of the Owner Participant, Lessor's Liens
     attributable to the Owner Participant; in the case of the Owner Trustee,
     Lessor's Liens to the extent attributable to the Owner Trustee; in the case
     of Trust Company, Lessor's Liens to the extent attributable to Trust
     Company;

               (viii) is, in the case of the Owner Participant or the Owner
     Trustee, attributable to the offer or sale by such Indemnitee of any
     interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any
     similar interest (including an offer or sale resulting from bankruptcy or
     other proceedings for the relief of debtors in which such Indemnitee is the
     debtor), unless in each case such offer or sale shall occur pursuant to the
     exercise of remedies under Section 17 of the Lease;

               (ix) in the case of the Owner Participant, is an Expense relating
     to, resulting from, arising out of or in connection with a "prohibited
     transaction" within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code resulting from the direct or indirect use of
     assets of any ERISA Plan to acquire or hold Owner Participant's interest in
     the Trust Estate or in the case of any transferee of the Owner Participant
     referred to in Section 5.01(c), to purchase the Beneficial Interest
     pursuant to Section 5.01(c);

               (x) except during the continuation of an Event of Default, is
     attributable to any amendment to any of the Operative Agreements which is
     not requested, or consented to, by the Lessee or is not required or made
     pursuant to the terms of any of the Operative Agreements;

               (xi) is attributable to the exercise by any Indemnitee of any
     right to inspect the Aircraft except with respect to any such inspection
     conducted while an Event of Default is continuing; and

               (xii) constitutes the loss of future profits of such Indemnitee
     or losses attributable to such Indemnitee's overhead.

          Section 7.02. NOTICE AND PAYMENT. Each Indemnitee shall give prompt
written notice to the Lessee of any liability as to which an officer of such
Indemnitee has actual knowledge, for which the Lessee is, or may be, liable
under this Article 7; PROVIDED, HOWEVER, that failure to give such notice shall
not terminate any of the rights of an Indemnitee under this Article 7 and shall
not release Lessee from any of its obligations to indemnify such Indemnitee
hereunder, except to the extent that such failure adversely affects any
applicable defense or counterclaim, otherwise increases the amount the Lessee
would have been liable for in the

                                       38


absence of such failure to provide such notice or adversely affects the ability
of Lessee's insurers to defend such claim.

          Section 7.03. DEFENSE OF CLAIMS. The Lessee or its insurers shall have
the right (in each such case at the Lessee's sole expense) to investigate,
defend (and control the defense of) any such claim for which indemnification is
sought pursuant to this Article 7 (so long as Lessee has agreed in writing
reasonably acceptable to the relevant Indemnitee that Lessee is liable to such
Indemnitee for any Expenses relating to or arising out of the claim for which
indemnification is sought, provided that Lessee will not be so liable to the
extent that it is reasonably determined that one or more of the exclusions
contained in Section 7.01(b) would be applicable to such claim) and each
Indemnitee shall cooperate with the Lessee or its insurers with respect thereto,
PROVIDED THAT, without limiting the right of the Lessee's insurers to assume and
control the defense of or to compromise, any such claim, the Lessee shall not be
entitled to assume and control the defense of or compromise any such claim (A)
during the continuance of any Event of Default arising under Sections 16(a),
(b), (f), (g) or (h) of the Lease, (B) if an actual or potential material
conflict of interest exists making it advisable in the good faith opinion of
such Indemnitee (on the basis of prevailing standards of professional
responsibility) for such Indemnitee to be represented by separate counsel or if
such proceeding involves the potential imposition of criminal liability on such
Indemnitee or (C) if such proceeding will involve any non-de minimis risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than Permitted
Liens) on the Aircraft or the Trust Estate (unless the Lessee posts a bond or
other security reasonably acceptable in form and substance to such Indemnitee)
or involve any risk of criminal liability to such Indemnitee. Subject to the
immediately foregoing sentence, where the Lessee or the insurers under a policy
of insurance maintained by the Lessee undertake the defense of an Indemnitee
with respect to such a claim, no additional legal fees or expenses of such
Indemnitee in connection with the defense of such claim shall be indemnified
hereunder unless the fees or expenses were incurred at the written request of
the Lessee or such insurers. Subject to the requirement of any policy of
insurance applicable to a claim, an Indemnitee may participate at its own
expense at any judicial proceeding controlled by the Lessee or its insurers
pursuant to the preceding provisions, to the extent that such party's
participation does not, in the reasonable opinion of the independent counsel
appointed by the Lessee or its insurers to conduct such proceedings, interfere
with the defense of such claim (it being agreed that the making of copies,
giving notice of proceedings and the like shall not be considered interference);
and such participation shall not constitute a waiver of the indemnification
provided in this Section 7.03. No Indemnitee shall enter into any settlement or
other compromise with respect to any claim described in this Section 7.03 (other
than any claim involving potential criminal liability) without the prior written
consent of the Lessee, unless such Indemnitee waives its right to be indemnified
under this Article 7 with respect to such claim or unless an Event of Default
under Section 16(a), 16(f), 16(g) or 16(h) of the Lease is continuing. The
Lessee shall not enter into any settlement or compromise with respect to which
the Lessee has not agreed to indemnify such Indemnitee to such Indemnitee's
satisfaction or which admits any criminal violation, gross negligence or willful
misconduct on the part of any Indemnitee without the prior written consent of
such Indemnitee.

          Section 7.04. INSURED CLAIMS. Notwithstanding any other provision of
this Article 7 to the contrary, in the case of any claim indemnified by the
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee pursuant to Section 9 of the Lease or

                                       39


otherwise, it shall be a condition of such indemnity with respect to any
particular Indemnitee that such Indemnitee shall cooperate with the insurers in
the exercise of their rights to investigate, defend or compromise such claim as
may be required to retain the benefits of such insurance with respect to such
claim.

          Section 7.05. SUBROGATION. To the extent that an Expense indemnified
by the Lessee under this Article 7 is in fact paid in full by the Lessee and/or
an insurer under a policy of insurance maintained by the Lessee, the Lessee
and/or such insurer as the case may be shall be subrogated to the extent of such
payment to the rights and remedies of the Indemnitee on whose behalf such
Expense was paid with respect to the transaction or event giving rise to such
Expense (other than the rights and remedies in respect of insurance policies
maintained by such Indemnitee and other than the rights of the Trust Company or
the Owner Trustee and remedies against the Owner Participant under the Trust
Agreement). Should an Indemnitee receive any refund, in whole or in part, with
respect to any Expense paid in full by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not an amount in excess of the amount Lessee
and/or such insurer has paid to such Indemnitee in respect of such Expense) to
the Lessee unless a Specified Default or an Event of Default shall have occurred
and be continuing (or would have occurred and be continuing if the Owner
Participant had given the notice specified in Section 16(a) of the Lease), in
which case, provided that Lessee shall have paid such Indemnitee all amounts
required under this Article 7 or under any other Operative Agreement, such
amounts shall be paid over to Owner Trustee to hold as security for Lessee's
obligations under the Lessee Documents or, if requested by Lessee, applied to
satisfy such obligations.

          Section 7.06. INFORMATION. Subject to Section 7.04, Lessee will
provide the relevant Indemnitee with such information, not within the control of
such Indemnitee, as is in Lessee's control or is reasonably available to Lessee,
which such Indemnitee may reasonably request, and will otherwise cooperate with
such Indemnitee, so as to enable such Indemnitee to fulfill its obligations
under Section 7.03 and to control or participate in any proceeding to the extent
permitted by Section 7.03. The Indemnitee shall supply Lessee with such
information, not within the control of Lessee, as is in such Indemnitee's
control or is reasonably available to such Indemnitee, which Lessee may
reasonably request to control or participate in any proceeding to the extent
permitted by Section 7.03.

          Section 7.07. SURVIVAL OF OBLIGATIONS. The indemnities and agreements
of the Lessee provided for in this Article 7 shall survive the expiration or
other termination of this Agreement.

          Section 7.08. EFFECT OF OTHER INDEMNITIES. The Lessee's obligations
under this Article 7 shall be those of a primary obligor whether or not the
Person indemnified shall also be indemnified with respect to the same matter
under the terms of this Agreement, or any other document or instrument, and the
Person seeking indemnification from the Lessee pursuant to any provision of this
Agreement may proceed directly against the Lessee without first seeking to
enforce any other right of indemnification.

          Section 7.09. WAIVER OF CERTAIN CLAIMS. The Lessee hereby waives and
releases any Expense now or hereafter existing against any Indemnitee arising
out of death or personal injury to personnel of the Lessee, loss or damage to
property of the Lessee, or the loss of use of

                                       40


any property of the Lessee, which results from or arises out of the condition,
use or operation of the Aircraft during the Term, including, without limitation,
any latent or patent defect whether or not discoverable.

          Section 7.10. CERTAIN LIMITATIONS. The Lessee does not guarantee and
nothing in the general indemnification provisions of this Article 7 shall be
construed as a guarantee (or an indemnification) by the Lessee with respect to
the residual value of the Aircraft or any part thereof.

                                   ARTICLE 8.
                                TRANSACTION COSTS

          Section 8.01. TRANSACTION COSTS AND OTHER COSTS.

          (a) TRANSACTION COSTS. If the transactions contemplated by this
Agreement to occur on the Delivery Date are consummated, the Owner
Participant shall pay (or reimburse the Lessee if the Lessee shall have
previously made such payment) all fees and expenses of the following persons
relating to the transactions contemplated hereby up to an aggregate maximum
amount of [*] following receipt by the Owner Participant of appropriate
invoices with respect thereto: (i) the reasonable fees and expenses of
counsel for Owner Participant; (ii) the reasonable fees and expenses of the
respective counsel for the Lessee, the Owner Trustee, the Manufacturer, the
Engine Manufacturer and the Seller; (iii) the reasonable fees and expenses of
special aviation counsel; (iv) the initial fees and expenses of the Owner
Trustee; (v) the fees and expenses of Seabury Securities, LLC (the "Lessee
Advisor"); (vi) any amounts paid in connection with any appraisal report
prepared for the Owner Participant; and (vii) any other amounts approved by
the Lessee and the Owner Participant. The fees and expenses described in
clauses (ii) through (v) of this paragraph shall be allocable to the Owner
Participant under this Agreement in such manner as is agreed to by the Owner
Participant and the Lessee.

          (b) CONTINUING EXPENSES. The Lessee agrees to pay, as Supplemental
Rent, the continuing fees, expenses and disbursements (including reasonable
counsel fees and expenses) of Trust Company and the Owner Trustee, with respect
to the administration of the Lease and the Lessor's Estate.

          (c) AMENDMENTS AND SUPPLEMENTS. Without limitation of the foregoing,
the Lessee agrees to pay, as Supplemental Rent, to the Owner Trustee and the
Owner Participant all costs and expenses (including reasonable legal fees and
expenses) incurred by any of them in connection with any amendment, supplement,
waiver or consent (whether or not entered into) under this Agreement or any
other Operative Agreement or document or instrument delivered pursuant to any of
them, which amendment, supplement, waiver or consent is required by any
provision of any Operative Agreement (including any adjustment pursuant to
Section 3(d) of the Lease) or is requested by the Lessee or necessitated by the
action or inaction of the Lessee; PROVIDED, HOWEVER, that the Lessee shall not
be responsible for fees or expenses incurred in connection with the offer, sale
or other transfer (whether pursuant to Section 5.01(c) hereof or otherwise) by
the Owner Participant or the Owner Trustee of any interest in the Aircraft, the
Lessor's Estate, the Beneficial Interest or the Trust Agreement or any similar
interest (and the

- -----------
* Confidential
                                       41


offeror, seller, or transferor shall be responsible for all such fees and
expenses), unless such offer, sale or transfer shall occur (A) pursuant to the
exercise of remedies under Section 17 of the Lease, or (B) in connection with
the termination of the Lease or action or direction of the Lessee pursuant to
Section 8, 13 or 14 of the Lease.

                                   ARTICLE 9.
                             SUCCESSOR OWNER TRUSTEE

          Section 9.01. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE.

          (a) RESIGNATION AND REMOVAL. The Owner Trustee or any successor Owner
Trustee may resign or may be removed (with the consent of the Lessee) by the
Owner Participant, and a successor Owner Trustee may be appointed and a Person
may become Owner Trustee under the Trust Agreement only in accordance with the
provisions of Section 8.01 of the Trust Agreement and the provisions of
paragraphs (b) and (c) of this Section 9.01.

          (b) CONDITIONS TO APPOINTMENT. The appointment in any manner of a
successor Owner Trustee pursuant to Section 8.01 of the Trust Agreement shall be
subject to the following conditions:

               (i) such successor Owner Trustee shall be a Citizen of the United
     States;

               (ii) such successor Owner Trustee shall be a bank or a trust
     company having combined capital, surplus and undivided profits of at least
     $100,000,000 or a bank or trust company fully guaranteed by a direct or
     indirect parent thereof having a combined capital, surplus and undivided
     profits of at least $100,000,000;

               (iii) such appointment shall not violate any provisions of the
     Transportation Code or any applicable rule or regulation of the applicable
     regulatory agency or body of any other jurisdiction in which the Aircraft
     may then be registered or create a relationship which would be in violation
     of the Transportation Code or any applicable rule or regulation of the
     applicable regulatory agency or body of any other jurisdiction in which the
     Aircraft may then be registered;

               (iv) such successor Owner Trustee shall enter into an agreement
     or agreements, in form and substance reasonably satisfactory to the Lessee
     and the Owner Participant whereby such successor Owner Trustee confirms
     that it shall be deemed a party to this Agreement and each other Operative
     Agreement to which the Owner Trustee is a party and agrees to be bound by
     all the terms of such documents applicable to the Owner Trustee and makes
     the representations and warranties contained in Section 5.03 hereof (except
     that it may be duly incorporated, validly existing and in good standing
     under the laws of the United States of America or any State thereof); and

               (v) all filings of Uniform Commercial Code financing and
     continuation statements, filings in accordance with the Transportation Code
     and amendments thereto shall be made and all further actions taken in
     connection with such

                                       42


     appointment as may be necessary in connection with maintaining the valid
     and continued registration of the Aircraft in accordance with the
     Transportation Code.

                                  ARTICLE 10.
                      LIABILITIES OF THE OWNER PARTICIPANT

          Section 10.01. LIABILITIES OF THE OWNER PARTICIPANT. The Owner
Participant shall not have any obligation or duty to the Lessee with respect to
the transactions contemplated by this Agreement, except those obligations or
duties expressly set forth in this Agreement or (to the Lessee only) the Tax
Indemnity Agreement or in any other Operative Agreement to which the Owner
Participant is a party and the Owner Participant shall not be liable for the
performance by any other party hereto of such other party's obligations or
duties hereunder.

                                  ARTICLE 11.
                                 OTHER DOCUMENTS

          Section 11.01. CONSENT OF LESSEE TO OTHER DOCUMENTS. The Lessee hereby
consents in all respects to the execution and delivery of the Trust Agreement.

          Section 11.02. CONSENT OF OWNER PARTICIPANT TO OTHER DOCUMENTS. The
Owner Participant hereby consents in all respects to the execution and delivery
of the Lease and hereby agrees to follow the terms of the Lease which are
applicable to it.

                                  ARTICLE 12.
                                     NOTICES

          Section 12.01. NOTICES. Except as otherwise specifically provided
herein, all notices, requests, approvals or consents required or permitted by
the terms hereof 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). Any notice shall be effective
when received. Any notice shall either be sent by overnight courier service or
overnight delivery service or by hand, or sent in the form of a telecopy,
PROVIDED that there is receipt of such notice the next Business Day from an
overnight courier service, or by overnight delivery service or delivered by
hand. Any notice shall be directed to the Lessee, the Lessor, the Owner
Participant or any other party hereto to the respective addresses set forth
below or to such other address or telecopy number as any such party may
designate pursuant to this Section 12.01:

          (a) if to the Lessee, to its office at 2500 S. High School Road,
Indianapolis, Indiana 46241, Attention: President; telephone (317) 484-6047,
facsimile (317) 484-6060, with a copy to c/o Wexford Management, LLC, 411 West
Putnam Avenue, Greenwich, Connecticut 06830, Attention: Jay Maymudes and Arthur
Amron, telephone (203) 862-7050 (Jay Maymudes) and (203) 862-7012 (Arthur
Amron), facsimile (203) 862-7350 (Jay Maymudes) and (203) 862-7312 (Arthur
Amron); or to such other address as the Lessee shall from time to time designate
in writing to the Lessor and any Owner Participant;

                                       43


          (b) if to the Lessor or the Owner Trustee, to its office at 79 South
Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department,
telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as
the Lessor shall from time to time designate in writing to the Lessee, with a
copy to the Owner Participant;

          (c) if to the Owner Participant to its office at 201 High Ridge Road,
Stamford, Connecticut 06927-4900, Attention: Contracts Manager, telephone (203)
357-3773 facsimile (203) 357-3201; or to such other address as the Owner
Participant shall from time to time designate in writing to the Lessee and the
Owner Trustee;

                                   ARTICLE 13.
                                  MISCELLANEOUS

          Section 13.01. COUNTERPARTS. This Agreement may be executed by the
parties 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.

          Section 13.02. NO ORAL MODIFICATIONS. Neither this Agreement nor any
of its terms may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification is sought. No such written termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy shall have been
delivered to and executed by the Owner Trustee. A copy of each such termination,
amendment, supplement, waiver or modification shall also be delivered to each
other party to this Agreement.

          Section 13.03. CAPTIONS.

     The table of contents preceding this Agreement and the headings of the
various Articles and Sections of this Agreement are for convenience of reference
only and shall not modify, define, expand or limit any of the terms or
provisions of this Agreement.

          Section 13.04. SUCCESSORS AND ASSIGNS. The terms of this Agreement
shall be binding upon, and shall inure to the benefit of, the Lessee and its
successors and permitted assigns, the Owner Participant and its successors and
permitted assigns, the Owner Trustee and its successors as Owner Trustee (and
any additional owner trustee appointed) under the Trust Agreement.

          Section 13.05. CONCERNING THE OWNER TRUSTEE. Trust Company is entering
into this Agreement solely in its capacities (except to the extent otherwise
expressly indicated), not in its individual capacity but solely as Owner Trustee
under the Trust Agreement, and except as otherwise expressly provided in this
Agreement or in the Lease or the Trust Agreement, Trust Company shall not be
personally liable for or on account of its statements, representations,
warranties, covenants or obligations under this Agreement; PROVIDED, HOWEVER,
that Trust Company accepts the benefits running to it under this Agreement, and
agrees that (except as otherwise expressly provided in this Agreement or any
other Operative Agreement to which it is a party) it shall be liable in its
individual capacity for (a) its own gross negligence or willful

                                       44


misconduct (whether in its capacity as trustee or in its individual capacity),
(b) any breach of representations and warranties or any breach of covenants made
in its individual capacity pursuant to or in connection with this Agreement or
the other Operative Agreements to which it is a party, (c) the failure to use
ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens
attributable to it in its individual capacity, and (e) taxes, fees or other
charges on, or based on, or measured by, any fees, commissions or compensation
received by it in connection with the transactions contemplated by the Operative
Agreements.

          Section 13.06. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          Section 13.07. GOVERNING LAW. (a) THIS AGREEMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.

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

          (c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 12.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 13.07(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

                                       45


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) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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.

          Section 13.08. SECTION 1110 COMPLIANCE. The parties hereto agree that
the transactions contemplated by the Operative Agreements are expressly intended
to be, shall be, and should be construed so as to be entitled to the benefits
and protection of Section 1110.

          Section 13.09. ASSIGNMENT.

          (a) The Owner Trustee may make a security assignment of or grant a
security interest in some or all of the Lessor's Estate ("Permitted Security
Interest"), as security for the Owner Trustee's obligations in connection with
any financing by the Owner Trustee pursuant to documents reasonably acceptable
to Lessee and otherwise in compliance with this Section 13.09, to a lender
("Lessor's Lender") which (x) shall be a bank, savings institution, finance
company, leasing company, or trust company or national banking association or
other financial institution acting for its own account or in a fiduciary
capacity as trustee or agent for other financial institutions or funds, (y)
shall not be an airline or other aircraft operator or competitor of the Lessee
in the business of air transportation or an Affiliate of any thereof; and (z)
shall not be a party to any material current or overtly threatened litigation or
arbitration (whether as plaintiff or defendant) with the Lessee or any Affiliate
of the Lessee.

          The Owner Trustee will give Lessee at least ten (10) days prior
written notice of a Permitted Security Interest and Lessee agrees to execute and
deliver in connection with any Permitted Security Interest such documents and
assurances (including an acknowledgment of the Permitted Security Interest and a
certificate as to the absence of any Default under the Lease) and to take such
further action as the Owner Trustee may reasonably request in connection with
the Permitted Security Interest. A Lessor's Lender shall be entitled to be an
Indemnitee and an Additional Insured.

          (b) In connection with a Permitted Security Interest of the Lessor's
Estate by the Owner Trustee:

               (i) as a condition precedent to such Permitted Security Interest
     becoming effective, the Owner Trustee will procure that the Lessor's Lender
     shall execute and deliver to Lessee a letter of quiet enjoyment reasonably
     acceptable to Lessee in respect of Lessee's use and possession of the
     Aircraft;

               (ii) the Owner Trustee shall reimburse to Lessee its reasonable
     out-of-pocket expenses (including reasonable legal fees and expenses)
     actually incurred in connection with any such Permitted Security Interest
     referred to in this Section 13.09,

                                       46


     provided that such expenses are substantiated to the Owner Trustee's
     reasonable satisfaction; and

               (iii) no such Permitted Security Interest shall impair the rights
     and benefits, or increase the burdens or obligations, of Lessee hereunder
     or under the Lease, including, without limitation, obligations with respect
     to the payment of Rent or under Section 6.01 or 7.01 hereof.

               [The remainder of this page is intentionally left blank.]

                                       47


          IN WITNESS WHEREOF, the parties have caused this Participation
Agreement to be executed by their respective, duly authorized officers as of the
day and year first written above.

                                       CHAUTAUQUA AIRLINES, INC.,
                                       as Lessee

                                       By: /s/ Robert H. Cooper
                                          --------------------------------------
                                          Name:  Robert H. Cooper
                                          Title: Vice President

                                       GENERAL ELECTRIC CAPITAL CORPORATION,
                                       as Owner Participation

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

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

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

                                       48


                                TABLE OF CONTENTS



                                                                                          PAGE
                                                                                          
ARTICLE 1. INTERPRETATION....................................................................2
     Section 1.01. Definitions...............................................................2
     Section 1.02. References................................................................2
     Section 1.03. Headings..................................................................2
     Section 1.04. Appendices Schedules and Exhibits.........................................2

ARTICLE 2. SALE AND LEASING TRANSACTIONS.....................................................2
     Section 2.01. Participation.............................................................2
          (a) Sale and Purchase..............................................................2
          (b) Leasing........................................................................3
          (c) Owner Participant's Equity Investment..........................................3
          (d) Delivery Date..................................................................3
     Section 2.02. Closing Procedure.........................................................3
          (a) Time and Place.................................................................3
          (b) Actions of the Owner Trustee...................................................4
          (c) Actions of the Lessee..........................................................4

ARTICLE 3. CONDITIONS PRECEDENT..............................................................5
     Section 3.01. Conditions Precedent to Obligations of Owner Participant..................5
          (a) Notice.........................................................................5
          (b) Delivery of Documents..........................................................5
          (c) Airworthiness..................................................................7
          (d) Violation of Law...............................................................7
          (e) No Event of Default............................................................7
          (f) No Event of Loss...............................................................7
          (g) Title..........................................................................7
          (h) Certification..................................................................7
          (i) Section 1110...................................................................8
          (j) Filings........................................................................8
          (k) Precautionary Financing Statements.............................................8
          (l) No Proceedings.................................................................8
          (m) Governmental Action............................................................8
          (n) Representations and Warranties.................................................8
     Section 3.02. Conditions Precedent to Obligations of Lessee.............................8
          (a) Documents......................................................................9
          (b) Corporate Documents............................................................9
          (c) Officer's Certificate..........................................................9
          (d) Other Conditions Precedent.....................................................9
     Section 3.03. Post-Registration Opinion.................................................9


                                       i


                                                                                         
ARTICLE 4. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS................................9
     Section 4.01. Lessee's Representations and Warranties...................................9
     Section 4.02. Certain Covenants of Lessee..............................................12
          (a) Filings and Recordings........................................................12
          (b) Registration..................................................................12
          (c) Information...................................................................14
          (d) Corporate Existence...........................................................15
          (e) Merger and Consolidation......................................................15
          (f) Change of Location............................................................16
          (g) Financial Statements..........................................................16
          (h) Filing of Documents...........................................................16
          (i) Annual Foreign Opinion........................................................17
     Section 4.03. Survival of Representations and Warranties...............................17

ARTICLE 5. OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND
           COVENANTS........................................................................17
     Section 5.01. Representations, Warranties and Covenants of Owner Participant...........17
          (a) Representations and Warranties................................................17
          (b) Lessor's Liens................................................................19
          (c) Assignment of Interests of Owner Participant..................................19
          (d) Actions with Respect to Lessor's Estate, Etc..................................21
          (e) Citizenship...................................................................21
          (f) Guarantees....................................................................22
     Section 5.02. Citizenship..............................................................22
          (a) Generally.....................................................................22
          (b) Owner Trustee.................................................................22
     Section 5.03. Representations, Warranties and Covenants of Trust Company and
                   the Owner Trustee........................................................22
          (a) Representations and Warranties................................................22
          (b) Lessor's Liens................................................................24
          (c) Indemnity for Lessor's Liens..................................................24
          (d) Securities Act................................................................25
          (e) Actions With Respect to Lessor's Estate, Etc..................................25
          (f) Other Business................................................................25
          (g) Performance of Agreements.....................................................25
     Section 5.04. The Lessee's Right of Quiet Enjoyment....................................25
     Section 5.05. Survival of Representations, Warranties and Covenants....................25
     Section 5.06. Compliance with Trust Agreement, Etc.....................................25

ARTICLE 6. TAXES............................................................................26
     Section 6.01. Lessee's Obligation to Pay Taxes.........................................26
          (a) Generally.....................................................................26
          (b) Exceptions....................................................................27
     Section 6.02. After Tax Basis..........................................................29
     Section 6.03. Time of Payment..........................................................29
     Section 6.04. Contests.................................................................30
          (a) Notice of Claim...............................................................30



                                       ii


                                                                                         
          (b) Request for Contest...........................................................30
          (c) Declining to Contest; Settlement..............................................32
          (d) Continuing Claims.............................................................33
          (e) Claims Barred.................................................................33
     Section 6.05. Refunds..................................................................33
     Section 6.06. Reports..................................................................34
     Section 6.07. Survival of Obligations..................................................34
     Section 6.08. Payment of Taxes.........................................................34
     Section 6.09. Reimbursements by Indemnitees Generally..................................35
     Section 6.10. Forms....................................................................35
     Section 6.11. Verification.............................................................35
     Section 6.12. Non-Parties..............................................................35

ARTICLE 7. GENERAL INDEMNITY................................................................35
     Section 7.01. Generally................................................................35
          (a) Indemnity.....................................................................35
          (b) Exceptions....................................................................37
     Section 7.02. Notice and Payment.......................................................38
     Section 7.03. Defense of Claims........................................................39
     Section 7.04. Insured Claims...........................................................39
     Section 7.05. Subrogation..............................................................40
     Section 7.06. Information..............................................................40
     Section 7.07. Survival of Obligations..................................................40
     Section 7.08. Effect of Other Indemnities..............................................40
     Section 7.09. Waiver of Certain Claims.................................................40
     Section 7.10. Certain Limitations......................................................41

ARTICLE 8. TRANSACTION COSTS................................................................41
     Section 8.01. Transaction Costs and Other Costs........................................41
          (a) Transaction Costs.............................................................41
          (b) Continuing Expenses...........................................................41
          (c) Amendments and Supplements....................................................41

ARTICLE 9. SUCCESSOR OWNER TRUSTEE..........................................................42
     Section 9.01. Appointment of Successor Owner Trustee...................................42
          (a) Resignation and Removal.......................................................42
          (b) Conditions to Appointment.....................................................42

ARTICLE 10. LIABILITIES OF THE OWNER PARTICIPANT............................................43
     Section 10.01. Liabilities of the Owner Participant....................................43

ARTICLE 11. OTHER DOCUMENTS.................................................................43
     Section 11.01. Consent of Lessee to Other Documents....................................43
     Section 11.02. Consent of Owner Participant to Other Documents.........................43

ARTICLE 12. NOTICES.........................................................................43
     Section 12.01. Notices.................................................................43



                                      iii


                                                                                         
ARTICLE 13. MISCELLANEOUS...................................................................44
     Section 13.01. Counterparts............................................................44
     Section 13.02. No Oral Modifications...................................................44
     Section 13.03. Captions................................................................44
     Section 13.04. Successors and Assigns..................................................44
     Section 13.05. Concerning the Owner Trustee............................................44
     Section 13.06. Severability............................................................45
     Section 13.07. GOVERNING LAW...........................................................45
     Section 13.08. Section 1110 Compliance.................................................46
     Section 13.09. Assignment..............................................................46



Appendix A    Definitions

Exhibit A-1   Form of Opinion of General Counsel of Lessee

Exhibit A-2   Form of Opinion of Fulbright & Jaworski L.L.P.

Exhibit A-3   Form of Opinion of Ray, Quinney & Nebeker, as special counsel
              to the Owner Trustee

Exhibit A-4   Form of Opinion of Daugherty, Fowler, Peregrin & Haught, a
              Professional Corporation

Exhibit A-5   Form of Opinion of Holland & Knight LLP, special counsel for the
              Owner Participant

Exhibit A-6   Form of Opinion of General Counsel to the Owner Participant

Exhibit B-1   Form of Assignment and Assumption Agreement

Exhibit B-2   Form of Owner Participant Guaranty

Exhibit B-3   Form of Opinion of counsel to the Owner Participant in respect of
              the Assignment and Assumption Agreement

                                       iv


NOTE TO EXHIBIT 10.20

The 15 additional Participation Agreements are substantially identical in all
material respects to the filed Participation Agreement except as follows:




- ------------------------------------- ----------------------------------- ------------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- ------------------------------------
                                                                    
N265SK                                           June, 2000               General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N267SK                                           June, 2000               General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N268SK                                           June, 2000               General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N269SK                                          August, 2000              General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N270SK                                          August, 2000              General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N271SK                                         September, 2000            General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N272SK                                         September, 2000            General Electric Capital Corporation
- ------------------------------------- ----------------------------------- ------------------------------------
N273SK                                          November, 2000            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N274SK                                          December, 2000            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N275SK                                          December, 2000            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N276SK                                          December, 2000            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N277SK                                          December, 2000            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N278SK                                          February, 2001            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N279SK                                           January, 2001            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------
N280SK                                          February, 2001            Aircraft Services Corp.
- ------------------------------------- ----------------------------------- ------------------------------------

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

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

EX-10.21

                                                                  Exhibit 10.21
                                     N281SK

                            Chautauqua Airlines, Inc.
                           2500 South High School Road
                           Indianapolis, Indiana 46241

February 23, 2001

First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111

General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927

Re:   Participation Agreement [N281SK], dated as of February 23, 2001 (the
      "Participation Agreement"), among Chautauqua Airlines, Inc. (the
      "Lessee"), General Electric Capital Corporation ("GECC") and First
      Security Bank, National Association, as Owner Trustee (the "Owner
      Trustee"). Capitalized terms used and not defined herein shall be given
      the meanings assigned in the Participation Agreement.

Dear Madams/Sirs:

The parties hereto agree that this letter shall be an Operative Agreement and
that for all purposes of the Participation Agreement and other Operative
Agreements, the first paragraph of Section 4.02(e) of the Participation
Agreement shall be deemed to be amended by adding at the end thereof:

      "In addition to the foregoing requirements, so long as GECC or an
      Affiliate of GECC is the Owner Participant, (x) during the first five
      (5) years of the Term, the Lessee shall not enter into any merger with
      or into or consolidation with, or sell, convey, transfer, lease or
      otherwise dispose of in one or a series of transactions all or
      substantially all of its assets to any Person nor shall Wexford Air
      Holdings, Inc. (the "Wexford Shareholder") sell any of its shares of
      common stock in the Lessee (collectively, a "Transaction") without the
      prior written consent of the Lessee, such consent not to be
      unreasonably withheld, unless: (a) following such Transaction, the
      Wexford Shareholder is the shareholder owning the greatest number of
      shares of common stock of the Lessee or other surviving entity; or (b)
      the acquiring or successor entity in such Transaction is a Certificated
      Air Carrier with a tangible net worth of not less than $50,000,000 or a
      Group III air carrier as determined under 14 CFR 241, Section 04 (or,
      if such determination has not been made, an air carrier with annual
      operating revenues of $1,000,000,000) or (c)



      immediately following the Transaction, Lessee receives and retains net
      proceeds of at least $25,000,000; and (y) clause (2) of the proviso in the
      immediately preceding sentence shall not apply during the first five (5)
      years of the Term with respect to any Transaction that otherwise fully
      satisfies any one of the conditions set forth in subclauses (a), (b) or
      (c) in clause (x) of this paragraph.

      The agreement stated in this letter is for the sole benefit of GECC and
      its Affiliates and shall terminate if at any time GECC or an Affiliate
      ceases to be the Owner Participant. Each party agrees that it will not
      disclose the terms of this letter (other than to its accountants,
      attorneys, agents or consultants), including to potential assignees,
      except as required by law.

      If you agree with the terms of this letter, please so indicate by
      executing the letter where indicated below.

                            [SIGNATURE PAGE FOLLOWS]



Very truly yours,

CHAUTAUQUA AIRLINES, INC.

By:  /s/ Robert H. Cooper
     ----------------------------
     Name:  Robert H. Cooper
     Title: Vice President

ACCEPTED AND AGREED:

FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Owner Trustee

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

GENERAL ELECTRIC CAPITAL CORPORATION

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





NOTE TO EXHIBIT 10.21

The 15 additional Letter Agreements are substantially identical in all
material respects to the filed Letter Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N265SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N267SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N268SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N269SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N270SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N271SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N272SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N273SK                           November, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N274SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N275SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N276SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N277SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N278SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N279SK                           January, 2001               Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N280SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

EX-10.22

                                                                   Exhibit 10.22
================================================================================

                            TRUST AGREEMENT [N281SK]

                          Dated as of February 23, 2001

                                     between

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                              as Owner Participant

                                       and

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                as Owner Trustee

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

                  Covering One Embraer Model EMB-145LR Aircraft
                      Bearing U.S. Registration No. N281SK
                     and Manufacturer's Serial Number 145391

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



                                TABLE OF CONTENTS



                                                                                            PAGE

                                                                                           
ARTICLE I       DEFINITIONS AND TERMS..........................................................1
     Section 1.1.   Definitions................................................................1

ARTICLE II      AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS; DECLARATION OF TRUST........1
     Section 2.1.   Authority to Execute Documents.............................................1
     Section 2.2.   Declaration of Trust.......................................................1

ARTICLE III     ACCEPTANCE AND DELIVERY OF AIRCRAFT; LEASE OF AIRCRAFT; REPLACEMENT............2
     Section 3.1.   Authorization..............................................................2
     Section 3.2.   Conditions Precedent.......................................................3
     Section 3.3.   Postponement of Delivery Date..............................................3
     Section 3.4.   Authorization in Respect of a Replacement Airframe or Replacement Engines..3
     Section 3.5.   Trust Agreement Remaining in Full Force and Effect.........................4
     Section 3.6.   Authorization in Respect of Return of an Engine............................4

ARTICLE IV      RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE..........4
     Section 4.1.   Distribution of Payments...................................................4
     Section 4.2.   Method of Payments.........................................................4

ARTICLE V       DUTIES OF THE OWNER TRUSTEE....................................................5
     Section 5.1.   Notice of Event of Default.................................................5
     Section 5.2.   Action Upon Instructions...................................................5
     Section 5.3.   Indemnification............................................................6
     Section 5.4.   No Duties Except as Specified in Trust Agreement or Instructions...........6
     Section 5.5.   No Action Except Under Specified Documents or Instructions.................7

ARTICLE VI      THE OWNER TRUSTEE..............................................................7
     Section 6.1.   Acceptance of Trusts and Duties............................................7
     Section 6.2.   Absence of Certain Duties..................................................7
     Section 6.3.   No Representations or Warranties as to Certain Matters.....................8
     Section 6.4.   No Segregation of Monies Required; Investment Thereof......................9
     Section 6.5.   Reliance Upon Certificates, Counsel and Agents.............................9
     Section 6.6.   Not Acting in Individual Capacity..........................................9
     Section 6.7.   Fees; Compensation.........................................................9
     Section 6.8.   Tax Returns...............................................................10
     Section 6.9.   Fixed Investment Trust....................................................10

ARTICLE VII     INDEMNIFICATION OF THE OWNER TRUSTEE BY THE OWNER PARTICIPANT.................10
     Section 7.1.   The Owner Participant to Indemnify the Owner Trustee......................10






                                                                                            PAGE

                                                                                           
ARTICLE VIII    SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES.........................................11
     Section 8.1.   Resignation of the Owner Trustee; Appointment of Successor................11
     Section 8.2.   Co-Trustees and Separate Trustees.........................................12

ARTICLE IX      SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT  AND OTHER DOCUMENTS............14
     Section 9.1.   Supplements and Amendments................................................14
     Section 9.2.   Discretion as to Execution of Documents...................................14
     Section 9.3.   Absence of Requirements as to Form........................................14
     Section 9.4.   Distribution of Documents.................................................14

ARTICLE X       MISCELLANEOUS.................................................................14
     Section 10.1.  Termination of Trust Agreement............................................14
     Section 10.2.  The Owner Participant Has No Legal Title in Trust Estate..................15
     Section 10.3.  Assignment, Sale, etc., of Aircraft.......................................15
     Section 10.4.  Trust Agreement for Benefit of Certain Parties Only.......................15
     Section 10.5.  Notices...................................................................15
     Section 10.6.  Severability..............................................................16
     Section 10.7.  Waivers, etc..............................................................16
     Section 10.8.  Counterparts..............................................................16
     Section 10.9.  Binding Effect, etc.......................................................16
     Section 10.10. Headings; References......................................................16
     Section 10.11. GOVERNING LAW.............................................................16
     Section 10.12. Administration of Trust...................................................17




                            TRUST AGREEMENT [N281SK]

          This TRUST AGREEMENT [N281SK], dated as of February 23, 2001 between
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (together with its
successors and permitted assigns, the "Owner Participant"), and FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association (in its individual
capacity, "FSB") and otherwise not in its individual capacity but solely as
trustee hereunder (herein in such capacity with its permitted successors and
assigns called the "Owner Trustee") (as hereafter from time to time supplemented
or amended, this or the "Trust Agreement").

                              W I T N E S S E T H :

                                   ARTICLE I

                              DEFINITIONS AND TERMS

          Section 1.1. DEFINITIONS. Capitalized terms used herein and defined in
Appendix A shall, except as such definitions may be specifically modified in the
body of this Trust Agreement for the purposes of a particular section, paragraph
or clause, have the meanings given such terms in Appendix A and, unless
otherwise specified, such meanings shall be equally applicable to both the
singular and the plural forms of such terms.

                                   ARTICLE II

               AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
                              DECLARATION OF TRUST

          Section 2.1. AUTHORITY TO EXECUTE DOCUMENTS. The Owner Participant
hereby authorizes and directs the Owner Trustee to do the following, and the
Owner Trustee agrees for the benefit of the Owner Participant that it will do
the following (i) to execute and deliver the Participation Agreement, the Lease,
the Lease Supplement covering the Aircraft, the Embraer Warranty Assignment and
Consent, the Engine Warranty Assignment and Consent and any other agreements,
instruments or documents, to which the Owner Trustee is a party in the
respective forms thereof in which delivered from time to time by the Owner
Participant to the Owner Trustee for execution and delivery and (ii) subject to
the terms hereof, to exercise its rights (upon instructions received from the
Owner Participant) and perform its duties under the documents referred to in
this Section in accordance with the terms thereof.

          Section 2.2. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Trust Estate upon the trusts hereinafter set forth for the
use and benefit of the Owner Participant, subject, however, to the provisions of
the Lease. This Trust Agreement is not intended by the Owner Participant to
create, and the trust created hereby is not intended by the Owner Participant
and the other parties interested herein to constitute a business trust for the
purposes of the Bankruptcy Code.



                                  ARTICLE III

                      ACCEPTANCE AND DELIVERY OF AIRCRAFT;
                         LEASE OF AIRCRAFT; REPLACEMENT

          Section 3.1. AUTHORIZATION. (a) The Owner Participant hereby
authorizes and directs the Owner Trustee to, and the Owner Trustee agrees for
the benefit of the Owner Participant that, on the Delivery Date it will, subject
to due compliance with the terms of Section 3.02 hereof:

               (i) authorize a representative or representatives of the Owner
          Trustee to accept delivery of the Aircraft and the Bills of Sale
          pursuant to the Participation Agreement;

               (ii) execute and deliver each of the Operative Agreements to
          which the Owner Trustee is to be a party;

               (iii) purchase the Aircraft pursuant to the Participation
          Agreement;

               (iv) pay an amount equal to Lessor's Cost to, or at the direction
          of, the Lessee pursuant to the Participation Agreement in
          consideration of the sale of the Aircraft to the Owner Trustee
          thereunder;

               (v) make application to the FAA for registration of the Aircraft
          in the name of the Owner Trustee by filing or causing to be filed with
          the FAA (i) the FAA Bill of Sale, (ii) the FAA Aircraft Registration
          Application in the name of the Owner Trustee (including, without
          limitation, an affidavit from the Owner Trustee stating that it is a
          "citizen of the United States" within the meaning of
          Section 40102(a)(15) of the Transportation Code), and (iii) this Trust
          Agreement;

               (vi) take such other action as may reasonably be required of the
          Owner Trustee hereunder or under the Participation Agreement or the
          Lease to effectuate the transactions contemplated thereby; and

               (vii) execute and deliver all such other instruments, documents
          or certificates and take all such other actions in accordance with the
          directions of the Owner Participant, as the Owner Participant may
          reasonably deem necessary or advisable in connection with the
          transactions contemplated hereby and by the other Operative
          Agreements.

          (b) The Owner Participant hereby authorizes and directs the Owner
     Trustee to, and the Owner Trustee agrees for the benefit of the Owner
     Participant that it will:

               (i) immediately after the delivery of the Aircraft to the Owner
          Trustee, cause the Aircraft to be leased to Lessee under the Lease;
          and

               (ii) execute and deliver a Lease Supplement covering the
          Aircraft.

                                        2


          Section 3.2. CONDITIONS PRECEDENT. The right and obligation of the
Owner Trustee to take the action required by Section 3.01 hereof shall be
subject to the following conditions precedent:

          (a) the Owner Participant shall have made the full amount of the
     Commitment with respect to the Aircraft available to the Owner Trustee, in
     immediately available funds, in accordance with Section 2.01(c) of the
     Participation Agreement; and

          (b) the terms and conditions of Section 3.01 of the Participation
     Agreement shall have been waived by the Owner Participant or complied with
     in a manner satisfactory to the Owner Participant. The Owner Participant
     shall, by instructing Owner Trustee to release the full amount of the
     Commitment then held by Owner Trustee as provided in Section 2.01 of the
     Participation Agreement, be deemed to have found satisfactory to it, or
     waived, all such conditions precedent.

          Section 3.3. POSTPONEMENT OF DELIVERY DATE. The Owner Trustee, upon
instructions from the Owner Participant, shall take all action specified in
Section 2.01 of the Participation Agreement as action to be taken by the Owner
Trustee.

          Section 3.4. AUTHORIZATION IN RESPECT OF A REPLACEMENT AIRFRAME OR
REPLACEMENT ENGINES. The Owner Trustee agrees for the benefit of the Owner
Participant that, upon the receipt by a Responsible Officer of Owner Trustee of
an authorization and direction from the Owner Participant, it will, in the event
of a Replacement Airframe or Replacement Engines, if any, being substituted
pursuant to Section 8(a)(i) of the Lease, or a Replacement Engine being
substituted pursuant to Section 7(e) of the Lease, subject to due compliance
with the terms of Sections 8(d) and 7(e) of the Lease, as the case may be:

          (a) to the extent not previously accomplished by a prior
     authorization, authorize a representative or representatives of the Owner
     Trustee to accept delivery of the Replacement Airframe or Replacement
     Engines, if any, or the Replacement Engine;

          (b) accept from Lessee or other vendor of the Replacement Airframe or
     Replacement Engines, if any, or the Replacement Engine, a bill of sale or
     bills of sale (if tendered) and the invoice, if any, with respect to the
     Replacement Airframe and Replacement Engines, if any, or the Replacement
     Engine being furnished pursuant to Section 8(a)(i) or 7(e) of the Lease;

          (c) in the case of a Replacement Airframe, make application to the FAA
     (or the Aeronautical Authority of any jurisdiction other than the United
     States of America in which the Replacement Airframe is then registered in
     accordance with the terms of the Lease) for registration in the name of the
     Owner Trustee of the Aircraft of which such Replacement Airframe is a part;

          (d) execute and deliver a Lease Supplement covering (i) the Aircraft
     of which such Replacement Airframe is part of and, (ii) such Replacement
     Engine, as the case may be;

                                        3


          (e) transfer its interest in (without recourse except as to
     obligations in respect of Lessor's Liens) and to the Airframe and Engines
     (if any) or the Engine being replaced to or at the direction of Lessee; and

          (f) take such further action as may be contemplated by Sections 8(d)
     or 7(e) of the Lease, as the case may be.

          Section 3.5. TRUST AGREEMENT REMAINING IN FULL FORCE AND EFFECT. In
the event of the substitution of a Replacement Airframe for the Airframe or the
substitution of a Replacement Engine for any Engine or engine all provisions of
this Trust Agreement relating to such replaced Airframe or Engine or engine
shall be applicable to such Replacement Airframe or Replacement Engine, with the
same force and effect as if such Replacement Airframe or Replacement Engine were
the same airframe or engine as the Airframe or Engine being replaced but for the
Event of Loss with respect to such Airframe or Engine.

          Section 3.6. AUTHORIZATION IN RESPECT OF RETURN OF AN ENGINE. The
Owner Trustee agrees for the benefit of the Owner Participant that, upon the
receipt by a Responsible Officer of the Owner Trustee of an authorization and
direction from the Owner Participant, it will, in the event of an engine being
transferred to the Owner Trustee pursuant to Section 12(b) of the Lease, subject
to due compliance with the terms of such Section 12(b):

          (a) accept from Lessee or other vendor the bill of sale contemplated
     by such Section 12(b) with respect to such engine being transferred to the
     Owner Trustee; and

          (b) transfer its right, title and interest in (without recourse or
     warranty except a warranty against Lessor's Liens) and to an Engine to or
     at the direction of Lessee as contemplated by such Section 12(b).

                                   ARTICLE IV

                      RECEIPT, DISTRIBUTION AND APPLICATION
                         OF INCOME FROM THE TRUST ESTATE

          Section 4.1. DISTRIBUTION OF PAYMENTS. All Basic Rent, Supplemental
Rent, insurance proceeds and requisition, indemnity or other payments of any
kind included in the Trust Estate and any other amounts received as part of the
Trust Estate and for the application or distribution of which no provision is
made herein, shall be distributed forthwith upon receipt by the Owner Trustee in
the following order of priority: first, so much of such payment as shall be
required to pay or reimburse the Owner Trustee for any fees or expenses not
otherwise paid or reimbursed as to which the Owner Trustee is entitled to be so
paid or reimbursed pursuant to the provisions hereof shall be retained by the
Owner Trustee; and second, the balance, if any, shall be paid to the Owner
Participant.

          Section 4.2. METHOD OF PAYMENTS. The Owner Trustee shall make
distributions or cause distributions to be made to the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds the amount to be distributed to such account or accounts of the
Owner Participant as it may designate from time to time by written notice to the
Owner Trustee (and the Owner Trustee shall use reasonable efforts to cause such

                                        4


funds to be transferred by wire transfer on the same day as received, but in any
case not later than the next succeeding Business Day); provided, however, that
the Owner Trustee shall use its best efforts to invest overnight, for the
benefit of the Owner Participant, in investments that would be permitted by
Section 15 of the Lease (but only to the extent such investments are available
and, if such investments are not available, then in such other investments
available to the Owner Trustee which, after consultation with the Owner
Participant, the Owner Participant shall direct), all funds not transferred by
the Owner Trustee by wire transfer on the same day as they were received.
Notwithstanding the foregoing, the Owner Trustee will, if so requested by the
Owner Participant by written notice, pay any and all amounts payable by the
Owner Trustee hereunder to the Owner Participant either (i) by crediting such
amount or amounts to an account or accounts maintained by the Owner Participant
as it may designate from time to time by written notice to the Owner Trustee, in
immediately available funds, (ii) by payment at the trust office of the Owner
Trustee (the trust office of the Owner Trustee shall be the principal corporate
trust office of the Owner Trustee at 79 South Main Street, Salt Lake City, Utah
84111, Attention: Corporate Trust Department, or the principal corporate trust
office of any successor Owner Trustee), in immediately available funds, or (iii)
by mailing an official bank check or checks in such amount or amounts payable to
the Owner Participant at such address as the Owner Participant shall have
designated in writing to the Owner Trustee.

                                    ARTICLE V

                           DUTIES OF THE OWNER TRUSTEE

          Section 5.1. NOTICE OF EVENT OF DEFAULT. If the Owner Trustee shall
have knowledge of a Default or an Event of Default, the Owner Trustee shall give
to the Owner Participant and the Lessee prompt telephonic or telecopied notice
thereof followed by prompt confirmation thereof by certified mail, postage
prepaid. Subject to the terms of Section 5.03, the Owner Trustee shall take such
action or shall refrain from taking such action, not inconsistent with the
provisions of the Operative Agreements, with respect to such Default or Event of
Default as the Owner Trustee shall be directed in writing by the Owner
Participant. For all purposes of this Trust Agreement and the Lease, the Owner
Trustee shall not be deemed to have knowledge of a Default or an Event of
Default unless notified in writing thereof in the manner and at the address set
forth in Section 10.05 or unless an officer in the Corporate Trust Department
who has responsibility for, or familiarity with, the transactions contemplated
hereunder, under the Participation Agreement or any Vice President in the
Corporate Trust Department of the Owner Trustee has actual knowledge thereof.

          Section 5.2. ACTION UPON INSTRUCTIONS. Subject in all respects to the
terms of Sections 5.01 and 5.03 and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following actions
as may be specified in such instructions: (i) give such notice or direction or
exercise such right, remedy or power hereunder or under any of the Operative
Agreements to which the Owner Trustee is a party, or in respect of all or any
part of the Trust Estate, as shall be specified in such instructions; (ii) take
such action to preserve or protect the Trust Estate (including the discharge of
any Liens or encumbrances) as may be specified in such instructions; (iii)
approve as satisfactory to it all matters required by the terms of the Lease to
be satisfactory to the Owner Trustee, it being understood that without written
instructions of the

                                        5


Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) after the expiration or earlier termination of the
Lease, convey all of the Owner Trustee's right, title and interest in and to the
Aircraft for such amount, on such terms and to such purchaser or purchasers as
shall be designated in such instructions, or retain, lease or otherwise dispose
of, or from time to time take such action with respect to, the Aircraft on such
terms as shall be set forth in such instructions or deliver the Aircraft to the
Owner Participant in accordance with such instructions; and (v) take or refrain
from taking such other action or actions as may be specified in such
instructions. In the event that the Owner Trustee is unsure of the application
of any provision of this Trust Agreement or any other agreement relating to the
transactions contemplated hereby, the Owner Trustee may request and rely upon
instructions of the Owner Participant.

          Section 5.3. INDEMNIFICATION. The Owner Trustee shall not be required
to take or refrain from taking any action under Section 5.01 (other than the
giving of notices referred to therein) or 5.02 unless the Owner Trustee shall
have been indemnified by the Owner Participant, in manner and form satisfactory
to the Owner Trustee, against any liability, cost or expense (including
reasonable counsel fees and disbursements) which may be incurred in connection
therewith; and, if the Owner Participant shall have directed the Owner Trustee
to take or refrain from taking any such action, the Owner Participant agrees to
furnish such indemnity as shall be required and in addition to pay the
reasonable fees and charges of the Owner Trustee for the services performed or
to be performed by it pursuant to such direction. The Owner Trustee shall not be
required to take any action under Section 5.01 or 5.02 if the Owner Trustee
shall reasonably determine, or shall have been advised by counsel, that such
action is contrary to the terms of any of the Operative Agreements to which the
Owner Trustee is a party, or is otherwise contrary to Applicable Law.

          Section 5.4. NO DUTIES EXCEPT AS SPECIFIED IN TRUST AGREEMENT OR
INSTRUCTIONS.
          The Owner  Trustee  shall not have any duty or  obligation  to manage,
control,  use, sell, dispose of or otherwise deal with the Aircraft or any other
part of the Trust Estate, or otherwise to take or refrain from taking any action
under, or in connection with any of the Operative  Agreements to which the Owner
Trustee  is a party,  except as  expressly  required  by the terms of any of the
Operative  Agreements  to which the Owner  Trustee is a party,  or as  expressly
provided  by  the  terms  hereof  or in  written  instructions  from  the  Owner
Participant  received  pursuant  to the terms of  Section  5.01 or 5.02,  and no
implied duties or obligations  shall be read into this Trust Agreement or any of
the Operative Agreements to which the Owner Trustee is a party against the Owner
Trustee.  The Owner Trustee  nevertheless agrees that it will, in its individual
capacity  and at its own cost and expense (but without any right of indemnity in
respect of any such cost or  expense  under  Section  7.01)  promptly  take such
action  as may be  necessary  duly to  discharge  and  satisfy  in full  (i) all
Lessor's Liens  attributable  to the Owner Trustee in its  individual  capacity,
(ii) any Liens (other than Lessor's Liens  attributable  to it in its individual
capacity) created as a result of its breach of any of its obligations under this
Trust  Agreement  (subject  to the  limitations  on the  liability  of the Owner
Trustee in its individual capacity set forth in Section 6.01) on any part of the
Trust Estate,  or on any  properties of the Owner Trustee  assigned,  pledged or
mortgaged  as part of the  Trust  Estate,  which  arise  from  acts of the Owner
Trustee in its individual capacity, the rights of Lessee under the Lease and the
rights  of the  Owner  Participant  hereunder,  and  (iii)  any  other  Liens or
encumbrances attributable to the Owner Trustee in its individual capacity on any
part of the Trust Estate which result from claims

                                        6


against the Owner Trustee in its individual capacity unrelated to the ownership
of the Aircraft, the administration of the Trust Estate or the transactions
contemplated by the Operative Agreements.

          Section 5.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS.
          The Owner  Trustee  shall have no power or authority to, and the Owner
Trustee  agrees that it will not,  manage,  control,  use,  sell,  dispose of or
otherwise  deal with the Aircraft or any other part of the Trust  Estate  except
(i) as expressly  required by the terms of any of the  Operative  Agreements  to
which the Owner  Trustee is a party,  (ii) as  expressly  provided  by the terms
hereof,  or (iii) as expressly  provided in written  instructions from the Owner
Participant pursuant to Section 5.01 or 5.02.

                                   ARTICLE VI

                                THE OWNER TRUSTEE

          Section 6.1. ACCEPTANCE OF TRUSTS AND DUTIES. FSB accepts the trusts
hereby created and agrees to perform the same but only upon the terms hereof
applicable to it. FSB also agrees to receive and disburse all monies received by
it constituting part of the Trust Estate upon the terms hereof. FSB shall not be
answerable or accountable under any circumstances, except for (i) its own
willful misconduct or gross negligence, (ii) its performance of the terms of the
last sentence of Section 5.04, (iii) its failure to use ordinary care in
receiving or disbursing funds or to comply with the first sentence of
Section 6.08, (iv) liabilities that may result from the inaccuracy of any
representation or warranty of the Owner Trustee in its individual capacity (or
from the failure by the Owner Trustee in its individual capacity to perform any
covenant made in its individual capacity) in Section 6.03 or in any of the
Operative Agreements to which the Owner Trustee is a party, (v) taxes, fees or
other charges on, based on or measured by any fees, commissions or other
compensation received by FSB as compensation for its services rendered as the
Owner Trustee, and (vi) its failure (in its individual capacity or as Owner
Trustee) to use ordinary care in connection with its obligations to invest funds
pursuant to Section 15 of the Lease or Section 4.02 hereof; PROVIDED, HOWEVER,
that the failure to act or perform in the absence of instructions after the
Owner Trustee has requested instructions from the Owner Participant pursuant to
the last sentence of Section 5.02 shall not constitute willful misconduct or
gross negligence for purposes of clause (i) of this Section 6.01.

          Section 6.2. ABSENCE OF CERTAIN DUTIES. Except in accordance with
written instructions furnished pursuant to Sections 5.01 and 5.02 and except as
provided in, and without limiting the generality of, Sections 3.01, 5.04 and
5.05 and the last sentence of Section 8.01(b), the Owner Trustee shall have no
duty (i) to see to any registration of the Aircraft or any recording or filing
of the Lease, this Trust Agreement, any financing or continuation statement or
of any supplement to any thereof or to see to the maintenance of any such
registration, rerecording or refiling, except that of Owner Trustee to comply
with the FAA reporting requirements set forth in 14 C.F.R. Section 47.45 and 14
C.F.R. Section 47.51 or any successor provisions, and that the Owner Trustee
shall upon written request furnished by Lessee take such action as may be
required of the Owner Trustee to maintain the registration of the Aircraft in
the name of the Owner Trustee under the Act or, to the extent the Aircraft is
registered in a country other than the United States of America pursuant to
Section 4.02 of the Participation Agreement, other

                                        7


Applicable Law, and to the extent that information for that purpose is supplied
by Lessee pursuant to any of the Operative Agreements, complete and timely
submit any and all reports relating to the Aircraft which may from time to time
be required by the FAA or any government or governmental authority having
jurisdiction, (ii) to see to any insurance on the Aircraft or to effect or
maintain any such insurance, whether or not Lessee shall be in default with
respect thereto, (iii) to see to the payment or discharge of any tax, assessment
or other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust Estate except as
provided by Section 5.04 hereof or Section 5.03(b) of the Participation
Agreement, (iv) to confirm or verify any financial statements of Lessee or (v)
to inspect the Aircraft or the books and records of Lessee with respect to the
Aircraft. Notwithstanding the foregoing, the Owner Trustee will furnish to Owner
Participant, promptly upon receipt thereof, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and other
instruments furnished to Owner Trustee under the Lease or any other Operative
Agreement except to the extent to which a Responsible Officer of Owner Trustee
reasonably believes (and confirms by telephone call with Owner Participant) that
duplicates or copies thereof have already been furnished to Owner Participant by
some other Person.

          Section 6.3. NO REPRESENTATIONS OR WARRANTIES AS TO CERTAIN MATTERS.
THE OWNER TRUSTEE IN ITS INDIVIDUAL CAPACITY OR AS THE OWNER TRUSTEE DOES NOT
MAKE AND SHALL NOT BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, ANY
ENGINE THEREOF, ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE)
OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY
ENGINE WHATSOEVER, except that the Owner Trustee in its individual capacity
warrants that on the Delivery Date the Owner Trustee shall have received and
shall hold whatever title to the Aircraft was conveyed to it by Seller free and
clear of Lessor's Liens attributable to the Owner Trustee in its individual
capacity, shall be in compliance with the last sentence of Section 5.04 hereof
and that the Aircraft shall during the Lease Term be free of Lessor's Liens
attributable to it in its individual capacity, or (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any other Operative Agreement to which the Owner Trustee in its individual
capacity or as Owner Trustee is a party, or any other document or instrument, or
as to the correctness of any statement contained in any thereof except to the
extent that any such statement is expressly made herein or therein as a
representation by the Owner Trustee in its individual capacity and except that
the Owner Trustee in its individual capacity hereby represents and warrants that
it has all corporate power and authority to execute, deliver and perform this
Trust Agreement and that this Trust Agreement has been, and (assuming the due
authorization, execution and delivery of the Trust Agreement by the Owner
Participant) the other Operative Agreements to which the Owner Trustee is a
party have been (or at the time of execution and delivery of any such instrument
by the Owner Trustee hereunder or pursuant to the terms of the Participation
Agreement that such an instrument will be) duly executed and delivered by one of
its officers who is or will be, as the case may be, duly authorized to execute
and deliver such instruments on behalf of the Owner Trustee and that this Trust
Agreement has been duly authorized, executed and delivered by FSB and
constitutes the legal, valid and binding obligation of FSB enforceable against
it in accordance with its terms, except as such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium or

                                        8


other similar laws affecting the rights of creditors generally and by general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

          Section 6.4. NO SEGREGATION OF MONIES REQUIRED; INVESTMENT THEREOF.
Monies received by the Owner Trustee hereunder need not be segregated in any
manner except to the extent required by Applicable Law, and may be deposited
under such general conditions as may be prescribed by Applicable Law, and shall
be invested as provided in Section 4.02 hereof or Section 15 of the Lease.

          Section 6.5. RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS. The Owner
Trustee shall incur no liability to anyone in acting in reliance upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it to be
genuine and reasonably believed by it to be signed by the proper party or
parties. Unless other evidence in respect thereof is specifically prescribed
herein, any request, direction, order or demand of the Owner Participant or
Lessee mentioned herein or in any of the other Operative Agreements to which the
Owner Trustee is a party shall be sufficiently evidenced by written instruments
signed by a person purporting to be a Responsible Officer of the Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors of Lessee or the Owner Participant, as
the case may be, certified by the Secretary or an Assistant Secretary of Lessee
or the Owner Participant, as the case may be, as duly adopted and in full force
and effect, as conclusive evidence that such resolution has been duly adopted by
said Board and that the same is in full force and effect. As to any fact or
matter the manner of ascertainment of which is not specifically described
herein, the Owner Trustee may, absent actual knowledge to the contrary, for all
purposes hereof rely on a certificate signed by a Responsible Officer of Lessee
or the Owner Participant, as the case may be, as to such fact or matter, and
such certificate shall constitute full protection to the Owner Trustee for any
action taken or omitted to be taken by it in good faith in reliance thereon.

          In the administration of the trusts hereunder, the Owner Trustee may
exercise its powers and perform its duties hereunder directly or through agents
or attorneys and the Owner Trustee shall not be liable for the default or
misconduct of any agents or attorneys selected by it with reasonable care. In
the administration of the trusts hereunder, the Owner Trustee may consult with
counsel, accountants and other skilled persons and the Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such counsel, accountants or other
skilled persons selected by it with reasonable care.

          Section 6.6. NOT ACTING IN INDIVIDUAL CAPACITY. In acting hereunder,
the Owner Trustee acts solely as trustee and not in its individual capacity
except as otherwise expressly provided herein; and, except as may be otherwise
expressly provided in this Trust Agreement, including without limitation,
Section 6.01, the Lease or the Participation Agreement, all Persons having any
claim against the Owner Trustee by reason of the transactions contemplated
hereby shall look only to the Trust Estate for payment or satisfaction thereof.

          Section 6.7. FEES; COMPENSATION. Except as provided in Section 5.03 or
7.01, the Owner Trustee agrees that it shall have no right against the Owner
Participant or the Trust Estate for any fee as compensation for its services
hereunder.

                                        9


          Section 6.8. TAX RETURNS. The Owner Trustee shall be responsible for
the keeping of all appropriate books and records relating to the receipt and
disbursement of all monies under this Trust Agreement or any agreement
contemplated hereby. The Owner Trustee agrees, without expense to the Owner
Participant, to file an application with the Internal Revenue Service for a
taxpayer identification number with respect to the trust created by this Trust
Agreement. The Owner Participant shall be responsible for causing to be prepared
and filed all income tax returns required to be filed by the Owner Participant.
The Owner Trustee shall be responsible for causing to be prepared, at the
request of the Owner Participant and the expense of the Lessee, all income tax
returns required to be filed with respect to the trust created hereby and shall
execute and file such returns; provided, however the Owner Trustee shall send a
completed copy of such return to the Owner Participant not more than 60 nor less
than 30 days prior to the due date of the return provided that the Owner Trustee
shall have timely received all necessary information to complete and deliver to
the Owner Participant such return. The Owner Participant or the Owner Trustee,
as the case may be, upon request, will furnish the Owner Trustee or the Owner
Participant, as the case may be, with all such information as may be reasonably
required from the Owner Participant or the Owner Trustee, as the case may be, in
connection with the preparation of such income tax returns.

          Section 6.9. FIXED INVESTMENT TRUST. Notwithstanding anything herein
to the contrary, the Owner Trustee shall not be authorized and shall have no
power to "vary the investment" of the Owner Participant within the meaning of
section 301.7701-4(c) of the Treasury Regulations.

                                   ARTICLE VII

                      INDEMNIFICATION OF THE OWNER TRUSTEE
                            BY THE OWNER PARTICIPANT

          Section 7.1. THE OWNER PARTICIPANT TO INDEMNIFY THE OWNER TRUSTEE. The
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and does
hereby indemnify, protect, save, defend and hold harmless the Owner Trustee in
its individual capacity, and its successors, assigns (but not security assigns),
directors, officers, representatives, agents, employees and servants, from and
against any and all liabilities, obligations, losses, damages, penalties, taxes
(excluding any taxes payable by the Owner Trustee on or measured by any
compensation received by the Owner Trustee for its services hereunder), claims,
actions, suits, costs, expenses or disbursements (including, without limitation,
reasonable legal fees, but excluding internal costs and expenses such as
salaries and overhead) and expenses of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against the Owner Trustee in its
individual capacity (whether or not also indemnified against by Lessee under the
Lease or under the Participation Agreement or also indemnified against by any
other Person; PROVIDED that Owner Participant shall be subrogated to the rights
of Owner Trustee against Lessee or any other indemnitor) in any way relating to
or arising out of this Trust Agreement or any of the other Operative Agreements
or the enforcement of any of the terms of any thereof, or in any way relating to
or arising out of the manufacture, purchase, acceptance, nonacceptance,
rejection, ownership, delivery, lease, possession, use, operation, condition,
sale, return or other disposition of the Airframe, any Engine or any Part of the
foregoing (including, without limitation, latent and other defects,

                                       10


whether or not discoverable, and any claim for patent, trademark or copyright
infringement), or in any way relating to or arising out of the administration of
the Trust Estate or the action or inaction of the Owner Trustee hereunder,
except (a) in the case of willful misconduct or gross negligence on the part of
the Owner Trustee either as trustee or in its individual capacity in the
performance or nonperformance of its duties hereunder or under any of the other
Operative Agreements to which it is a party or (b) those resulting from the
inaccuracy of any representation or warranty of the Owner Trustee in its
individual capacity (or from the failure of the Owner Trustee in its individual
capacity to perform any covenant) in Section 6.03, or in any of the Operative
Agreements, or (c) those arising or resulting from any of the matters described
in the last sentence of Section 6.01, or (d) those resulting from its failure to
perform the terms of the last sentence of Section 5.04 hereof or from its
failure to use ordinary care in the receipt and disbursement of funds or in
connection with its obligation to invest funds pursuant to Section 15 of the
Lease or Section 4.02 hereof or in compliance with the first Section of
Section 6.08, or (e) any liability on the part of Owner Trustee arising out of
its negligence or willful or negligent misconduct in connection with its
obligations under Section 5.01, 6.08 or 8.02 hereof, or (f) those arising under
any circumstances or upon any terms where Lessee would not have been required to
indemnify Owner Trustee, in its individual capacity, pursuant to Section 6.01 or
7.01 of the Participation Agreement disregarding for purposes of this
Section 7.01, Sections 6.01(ii), 6.01(v) and 7.01(b)(ii) of the Participation
Agreement; PROVIDED, that before asserting its right to indemnification, if any,
pursuant to this Section 7.01, Owner Trustee shall first demand its
corresponding right to indemnification pursuant to Section 6.01 or 7.01 of the
Participation Agreement (but need not exhaust any or all remedies available
thereunder). The indemnities contained in this Section 7.01 extend to the Owner
Trustee only in its individual capacity and shall not be construed as
indemnities of the Trust Estate. The indemnities contained in this Section 7.01
shall survive the termination of this Trust Agreement and the resignation or
removal of the Owner Trustee. In addition, if necessary, the Owner Trustee shall
be entitled to indemnification from the Trust Estate for any liability,
obligation, loss, damage, penalty, tax, claim, action, suit, cost, expense or
disbursement indemnified against pursuant to this Section 7.01 to the extent not
reimbursed by Lessee, the Owner Participant or others, but without releasing any
of them from their respective agreements of reimbursement.

                                  ARTICLE VIII

                      SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES

          Section 8.1. RESIGNATION OF THE OWNER TRUSTEE; APPOINTMENT OF
SUCCESSOR. (a) RESIGNATION OR REMOVAL. The Owner Trustee or any successor Owner
Trustee (i) shall resign if required to do so pursuant to Section 5.02(b) of the
Participation Agreement and (ii) may resign at any time without cause by giving
at least 60 days prior written notice to the Owner Participant and Lessee, such
resignation to be effective upon the acceptance of appointment by the successor
Owner Trustee under Section 8.01(b). In addition, the Owner Participant may at
any time remove the Owner Trustee, or revoke the trusts created by this Trust
Agreement, in either case with or without cause by a notice in writing delivered
to the Owner Trustee and Lessee. Any such removal shall be effective upon the
acceptance of appointment by the successor Owner Trustee under Section 8.01(b).
In the case of the resignation or removal of the Owner Trustee, the Owner
Participant may appoint a successor Owner Trustee by an instrument in writing.
If a successor Owner Trustee shall not have been appointed within 30 days after
such notice of

                                       11


resignation or removal, the Owner Trustee may apply to any court of competent
jurisdiction to appoint a successor Owner Trustee to act until such time, if
any, as a successor shall have been appointed as above provided. Any successor
Owner Trustee so appointed by such court shall immediately and without further
act be superseded by any successor Owner Trustee appointed as above provided
within one year from the date of the appointment by such court.

          (b) EXECUTION AND DELIVERY OF DOCUMENTS, ETC. Any successor Owner
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee, with a copy to Owner Participant and Lessee, an instrument accepting
such appointment and assuming the obligations of Owner Trustee, in its
individual capacity and as Owner Trustee, under the Operative Agreements to
which Owner Trustee is a party, and thereupon such successor Owner Trustee,
without further act, shall become vested with all the estates, properties,
rights, powers, duties and trusts of the predecessor Owner Trustee in the trust
hereunder with like effect as if originally named the Owner Trustee herein; but
nevertheless, upon the written request of such successor Owner Trustee, such
predecessor Owner Trustee shall execute and deliver an instrument transferring
to such successor Owner Trustee upon the trusts herein expressed, all the
estates, properties, rights, powers and trusts of such predecessor Owner
Trustee, and such predecessor Owner Trustee shall duly assign, transfer, deliver
and pay over to such successor Owner Trustee all monies or other property then
held by such predecessor Owner Trustee upon the trusts herein expressed. Upon
the appointment of any successor Owner Trustee hereunder, the predecessor Owner
Trustee will complete, execute and deliver to the successor Owner Trustee such
documents as are necessary to cause registration of the Aircraft included in the
Trust Estate to be transferred upon the records of the FAA or other governmental
authority having jurisdiction, into the name of the successor Owner Trustee.

          (c) QUALIFICATION. Any successor Owner Trustee, however appointed,
shall be a Citizen of the United States, shall be qualified to act as a trustee
in Utah (if the trust created hereby is to remain in such state) and shall also
be a bank or trust company organized under the laws of the United States of
America or any state thereof having a combined capital and surplus of at least
$100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
and customary terms.

          (d) MERGER, ETC. Any corporation into which the Owner Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation to which substantially all the
corporate trust business of the Owner Trustee may be transferred, shall, subject
to the terms of Section 8.01(c), be the Owner Trustee hereunder without further
act.

          Section 8.2. CO-TRUSTEES AND SEPARATE TRUSTEES. If at any time or
times it shall be necessary or prudent in order to conform to any Applicable Law
of any jurisdiction in which all or any part of the Trust Estate is located, or
the Owner Trustee shall be advised by counsel that it is so necessary or prudent
in the interest of the Owner Participant or the Owner Trustee, or the Owner
Trustee shall have been directed to do so by the Owner Participant, the Owner
Trustee and the Owner Participant shall execute and deliver an agreement
supplemental hereto and all other instruments and agreements necessary or proper
to constitute another bank or trust company or one or more Persons (any and all
of which shall be a Citizen of the United States)

                                       12


approved by the Owner Trustee and the Owner Participant, either to act as
co-trustee or co-trustees, jointly with the Owner Trustee, or to act as separate
trustee or trustees hereunder (any such co-trustee or separate trustee being
herein sometimes referred to as an "additional trustee"). In the event the Owner
Participant shall not have joined in the execution of such agreements
supplemental hereto within ten days after the receipt of a written request from
the Owner Trustee so to do, the Owner Trustee may act under the foregoing
provisions of this Section 8.02 without the concurrence of the Owner
Participant; and the Owner Participant hereby appoints the Owner Trustee its
agent and attorney-in-fact to act for it under the foregoing provisions of this
Section 8.02 in either of such contingencies.

          Every additional trustee hereunder shall, to the extent permitted by
Applicable Law, be appointed and act, and the Owner Trustee and its successors
shall act, subject to the following provisions and conditions:

          (a) all powers, duties, obligations and rights conferred upon the
     Owner Trustee in respect of the custody, control and management of monies,
     the Aircraft or documents authorized to be delivered hereunder or under the
     Participation Agreement shall be exercised solely by the corporation
     designated as the Owner Trustee in the first paragraph of this Trust
     Agreement, or its successors as the Owner Trustee hereunder;

          (b) all other rights, powers, duties and obligations conferred or
     imposed upon the Owner Trustee and any limitations thereon shall be
     conferred or imposed upon and exercised or performed by the corporation
     designated as the Owner Trustee in the first paragraph of this Trust
     Agreement or its successors as the Owner Trustee, and such additional
     trustee or trustees jointly, except to the extent that under any Applicable
     Law of any jurisdiction in which any particular act or acts are to be
     performed (including the holding of title to the Trust Estate), the Owner
     Trustee shall be incompetent or unqualified to perform such act or acts, in
     which event such rights, powers, duties and obligations shall be exercised
     and performed by such additional trustee or trustees;

          (c) no power given to, or which it is provided hereby may be exercised
     by, any such additional trustee or trustees shall be exercised hereunder by
     such additional trustee or trustees, except jointly with, or with the
     consent in writing of, the corporation designed as the Owner Trustee in
     this Trust Agreement or its successor as the Owner Trustee, anything herein
     contained to the contrary notwithstanding;

          (d) no trustee hereunder shall be personally liable by reason of any
     act or omission of any other trustee hereunder; and

          (e) the Owner Participant, at any time, by an instrument in writing
     may remove any such additional trustee. In the event that the Owner
     Participant shall not have joined in the execution of any such instrument
     within ten days after the receipt of a written request from the Owner
     Trustee so to do, the Owner Trustee shall have the power to remove any such
     additional trustee without the concurrence of the Owner Participant; and
     the Owner Participant hereby appoints the Owner Trustee its agent and
     attorney-in-fact to act for it in such connection in such contingency.

                                       13


          In case any separate trustee under this Section 8.02 shall die, become
incapable of acting, resign or be removed, the title to the Trust Estate and all
rights and duties of such separate trustee shall, so far as permitted by
Applicable Law, vest in and be exercised by Owner Trustee, without the
appointment of a successor to such separate trustee.

                                   ARTICLE IX

                  SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT
                               AND OTHER DOCUMENTS

          Section 9.1. SUPPLEMENTS AND AMENDMENTS. At any time and from time to
time, upon the written request of the Owner Participant, (i) the Owner Trustee,
together with the Owner Participant, shall execute a supplement to this Trust
Agreement for the purpose of adding provisions to, or changing or eliminating
provisions of, this Trust Agreement (except Section 10.11) as specified in such
request, and (ii) the Owner Trustee shall enter into such written amendment of
or supplement to any other Operative Agreement to which the Owner Trustee is a
party as Lessee may agree to and as may be specified in such request, or execute
and deliver such written waiver or modification of or consent under the terms of
any such Operative Agreement as Lessee may agree to and as may be specified in
such request.

          Section 9.2. DISCRETION AS TO EXECUTION OF DOCUMENTS. If in the
opinion of the Owner Trustee any document required to be executed pursuant to
the terms of Section 9.01 adversely affects any right, duty, immunity or
indemnity in favor of the Owner Trustee hereunder or under any other Operative
Agreement to which the Owner Trustee is a party, the Owner Trustee may in its
discretion decline to execute such document unless Owner Trustee is furnished
with indemnification from Lessee or any other party upon terms and in amounts
reasonably satisfactory to Owner Trustee to protect the Trust Estate and Owner
Trustee against any and all liabilities, costs and expenses arising out of the
execution of such documents.

          Section 9.3. ABSENCE OF REQUIREMENTS AS TO FORM. It shall not be
necessary for any written request furnished pursuant to Section 9.01 to specify
the particular form of the proposed documents to be executed pursuant to such
Section, but it shall be sufficient if such request shall indicate the substance
thereof.

          Section 9.4. DISTRIBUTION OF DOCUMENTS. Promptly after the execution
by the Owner Trustee of any document entered into pursuant to Section 9.01, the
Owner Trustee shall mail, by certified mail, postage prepaid, a conformed copy
thereof to the Owner Participant, but the failure of the Owner Trustee to mail
such conformed copy shall not impair or affect the validity of such document.

                                    ARTICLE X

                                  MISCELLANEOUS

          Section 10.1. TERMINATION OF TRUST AGREEMENT. This Trust Agreement and
the trusts created hereby shall terminate and this Trust Agreement shall be of
no further force or effect upon the earliest of (a) the later of (x) the sale or
other final disposition by the Owner

                                       14


Trustee of all property constituting part of the Trust Estate and the final
distribution by the Owner Trustee of all monies or other property or proceeds
constituting part of the Trust Estate in accordance with Article IV hereof,
provided that at such time Lessee shall have fully complied with all of the
terms of the Participation Agreement and the Lease, and (y) the expiration or
termination of the Lease in accordance with its terms or (b) twenty-one (21)
years less one day after the death of the last survivor of all of the
descendants of the grandparents of Joseph P. Kennedy living on the date of the
earliest execution of this Trust Agreement by either party hereto, otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the terms hereof.

          Notwithstanding the foregoing, this Trust Agreement and trust created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Trust Agreement shall be of no further force and effect,
upon the election of the Owner Participant by notice to the Owner Trustee, if
such notice shall be accompanied by the written agreement (in form and substance
satisfactory to the Owner Trustee) of the Owner Participant assuming all
obligations of the Owner Trustee under or contemplated by the Operative
Agreements or incurred by it as trustee hereunder and releasing the Owner
Trustee therefrom; provided, however, that such notice may be given only after
the Lease shall no longer be in effect.

          Section 10.2. THE OWNER PARTICIPANT HAS NO LEGAL TITLE IN TRUST
ESTATE. The Owner Participant does not have legal title to any part of the Trust
Estate. No transfer, by operation of law or otherwise, of any right, title and
interest of the Owner Participant in and to the Trust Estate hereunder shall
operate to terminate this Trust Agreement or the trusts hereunder or entitle any
successors or transferees of the Owner Participant to an accounting or to the
transfer of legal title to any part of the Trust Estate.

          Section 10.3. ASSIGNMENT, SALE, ETC., OF AIRCRAFT. Any assignment,
sale, transfer or other conveyance of the Aircraft, any Engine, any Part or any
interest therein by the Owner Trustee made pursuant to the terms hereof or of
the Lease or the Participation Agreement shall bind the Owner Participant and
shall be effective to transfer or convey all right, title and interest of the
Owner Trustee and the Owner Participant in and to the Aircraft, such Engine,
such Part or interest therein. No purchaser or other grantee shall be required
to inquire as to the authorization, necessity, expediency or regularity of such
assignment, sale, transfer or conveyance or as to the application of any sale or
other proceeds with respect thereto by the Owner Trustee.

          Section 10.4. TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY.
Except for the terms of Section 4.01, Articles V and VIII, Sections 9.01, 10.01
and 10.03 hereof, nothing herein, whether express or implied, shall be construed
to give any Person other than the Owner Trustee, FSB, the Lessee and the Owner
Participant any legal or equitable right, remedy or claim under or in respect of
this Trust Agreement; but this Trust Agreement shall be held to be for the sole
and exclusive benefit of the Owner Trustee, FSB, the Lessee and the Owner
Participant.

          Section 10.5. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be given in the manner set
forth in Section 12.01 of the Participation Agreement.

                                       15


          Section 10.6. SEVERABILITY. Any provision hereof which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          Section 10.7. WAIVERS, ETC. No term or provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing entered into in compliance with the terms of Article IX hereof; and any
waiver of the terms hereof shall be effective only in the specified instance and
for the specific purpose given.

          Section 10.8. COUNTERPARTS. This Trust Agreement 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.

          Section 10.9. BINDING EFFECT, ETC. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee and its successors and permitted assigns, and the Owner Participant, its
successors and permitted assigns. Any request, notice, direction, consent,
waiver or other instrument or action by the Owner Participant or Owner Trustee
shall bind their respective successors and permitted assigns.

          Section 10.10. HEADINGS; REFERENCES. The headings of the various
Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.

          Section 10.11. GOVERNING LAW. (a) THIS TRUST AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

          (b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 TRUST AGREEMENT.

          (c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 REFERRED TO IN
SECTION 10.05. EACH PARTY HERETO HEREBY AGREES THAT SERVICE UPON IT IN
ACCORDANCE WITH THIS SECTION 10.11(c) SHALL CONSTITUTE VALID AND EFFECTIVE
PERSONAL SERVICE UPON SUCH PARTY.

                                       16


          (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 TRUST AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR
BY SUCH COURTS.

          (e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 TRUST AGREEMENT.

          Section 10.12. ADMINISTRATION OF TRUST. The principal place of
administration of the trust created by this Trust Agreement shall be in the
State of Utah.

            [The remainder of this page is intentionally left blank.]

          IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.

                                    AIRCRAFT SERVICES CORPORATION

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

                                    FIRST SECURITY BANK, NATIONAL ASSOCIATION

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

                                       17




NOTE TO EXHIBIT 10.22

The 15 additional Trust Agreements are substantially identical in all
material respects to the filed Trust Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N265SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N267SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N268SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N269SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N270SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N271SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N272SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N273SK                           November, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N274SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N275SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N276SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N277SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N278SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N279SK                           January, 2001               Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N280SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

EX-10.23

                                                                   Exhibit 10.23
================================================================================

                            LEASE AGREEMENT [N281SK]

                          dated as of February 23, 2001

                                     between

                    FIRST SECURITY BANK, NATIONAL ASSOCIATION

                                 Owner Trustee,

                                                                         Lessor,

                                       and

                            CHAUTAUQUA AIRLINES, INC.

                                                                         Lessee.

                  Covering One Embraer Model EMB-145LR Aircraft
                           Registration Number N281SK
                       Manufacturer's Serial Number 145391

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

                      THIS IS ORIGINAL COUNTERPART NO. 1.
TO THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT [N281SK] CONSTITUTES CHATTEL
PAPER (AS THE TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT [N281SK]
MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN
THE ORIGINAL COUNTERPART MARKED COUNTERPART NO.1



          THIS LEASE AGREEMENT [N281SK], dated as of February 23, 2001, between
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not
in its individual capacity but solely as Owner Trustee, the Lessor, and
CHAUTAUQUA AIRLINES, INC., a New York corporation, the Lessee.

                              W I T N E S S E T H:

          WHEREAS, the Lessor intends to purchase the Aircraft pursuant to the
terms of the Participation Agreement;

          WHEREAS, the Lessee desires to lease from the Lessor and the Lessor is
willing to lease to the Lessee the Aircraft upon and subject to the terms and
conditions of this Lease; and

          WHEREAS, the parties intend this Lease to constitute a true lease and
not a security agreement;

          NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration the receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:

Section 1.INTERPRETATION.

          (a) DEFINITIONS.

          Capitalized terms used herein and defined in Appendix A shall, except
as such definitions may be specifically modified in the body of this Lease for
the purposes of a particular section, paragraph or clause, have the meanings
given such terms in Appendix A and, unless otherwise specified, such meanings
shall be equally applicable to both the singular and the plural forms of such
terms.

          (b) REFERENCES.

          References in this Lease to sections, paragraphs, clauses, appendices,
schedules and exhibits are to sections, paragraphs, clauses, appendices,
schedules and exhibits in and to this Lease unless otherwise specified.
Paragraphs identified with a letter and clauses identified with a number or
letter within a section may be referred to either by section reference (for
example, this is Section l(b)) or by paragraph and clause reference (for
example, this is also paragraph (b) of Section 1) with the same meaning.

          (c) HEADINGS.

          The headings of the various sections, paragraphs and clauses of this
Lease and the table of contents are for convenience of reference only and shall
not modify, define, expand or limit any of the terms or provisions hereof.

          (d) APPENDICES, SCHEDULES AND EXHIBITS.

          The appendices, schedules and exhibits hereto are part of this Lease.



Section 2. DELIVERY AND LEASING OF THE AIRCRAFT.

          (a) LEASING OF THE AIRCRAFT.

          Subject to the satisfaction or waiver of the conditions precedent
stated in the Participation Agreement, the Lessor agrees to lease to the Lessee,
and the Lessee agrees to lease from the Lessor, the Aircraft on the terms and
conditions set forth herein, such leasing to be evidenced by the execution and
delivery by the Lessor and the Lessee on the Delivery Date of a Lease
Supplement.

          (b) DELIVERY AND ACCEPTANCE OF THE AIRCRAFT UNDER THE LEASE.

          The Lessor hereby authorizes one or more persons designated by the
Lessee as the authorized representative or representatives of the Lessor to
accept delivery of the Aircraft from the Seller. By executing and delivering
Lease Supplement No. 1, the Lessee confirms to the Lessor that the Lessee has
duly and irrevocably accepted delivery of the Aircraft for all purposes of this
Lease.

Section 3. TERM AND RENT.

          (a) TERM.

          The Aircraft is leased for a Term which shall comprise the Basic Term
and, at the option of the Lessee exercised in accordance with Section 13(a), one
or more Renewal Terms. The Basic Term shall commence on the Delivery Date and
continue through the Expiration Date; and each Renewal Term, if any, shall be
for the applicable period provided in Section 13(a), except that the Term
(including the Basic Term or any Renewal Term, as the case may be) shall end
upon any earlier termination of this Lease according to its terms.

          (b) BASIC RENT.

          The Lessee shall pay Basic Rent in consecutive monthly installments on
each Basic Rent Payment Date during the Basic Term, each such installment to be
in an amount determined by multiplying Lessor's Cost by the percentage set forth
in Exhibit C-1 for the applicable Basic Rent Payment Date. The Lessee shall pay
Basic Rent during a Renewal Term in the amounts and at the times provided in
Section 13(a) for such Renewal Term. For the avoidance of doubt, and
notwithstanding any provision to the contrary in this Lease, the amount of Basic
Rent that the Lessee is required to pay to the Lessor for the use of the
Aircraft for each Basic Rent Period listed in column (1) of Exhibit C-2 hereof
shall be the amount determined by multiplying Lessor's Cost by the percentage
set forth in column (2) of Exhibit C-2 beside such Basic Rent Period. "Basic
Rent Period" means each of (x) the period commencing on and including the
Delivery Date and ending on but excluding the first Basic Rent Payment Date
following the Delivery Date, and (y) each period commencing on and including a
Basic Rent Payment Date and ending on but excluding the next subsequent Basic
Rent Payment Date.

                                       -2-


          (c) SUPPLEMENTAL RENT.

          The Lessee shall pay to the Lessor, or to whoever shall be entitled
thereto, any and all Supplemental Rent when the same shall become due and owing.
Without limiting the foregoing, the Lessee shall pay as Supplemental Rent:

               (i) to the Lessor, on demand, interest at the Past Due Rate on
          any part of any installment of Basic Rent not paid when due for the
          period for which the same shall be overdue; and

               (ii) to whoever shall have been entitled to receive the relevant
          payment of Supplemental Rent, on demand, interest at the Past Due Rate
          on any payment of Supplemental Rent (other than interest payable under
          this clause (ii)) not paid when due for the period for which the same
          shall be overdue.

          The obligations of the Lessee to pay Supplemental Rent provided for in
this Section 3(c) shall survive the expiration or other termination of this
Lease.

          (d) ADJUSTMENTS TO BASIC RENT AND TERMINATION VALUES.

          All installments of Basic Rent remaining to be paid during the Basic
Term shall be recalculated and adjusted, upwards or downwards as the case may be
(and corresponding adjustments shall be made to the EBO Amount and the
Termination Values applicable during the remaining Basic Term) to maintain the
Net Economic Return through the EBO Date as well as the end of the Basic Term
and, to the greatest extent consistent with such maintenance of such Net
Economic Return, to minimize the net present value (calculated at a discount
rate equal to the Applicable Rate or such other rate as may be specified by the
Lessee to the Owner Participant) of the remaining Basic Rent payments (or, if
the Lessee shall have so specified to the Owner Participant, the remaining Basic
Rent Payments to the EBO Date together with the EBO Amount), if:

               (i) the Delivery Date shall not be February 23, 2001;

               (ii) the Transaction Costs payable by the Owner Participant
          pursuant to Section 8.01(a) of the Participation Agreement shall be
          greater or less than the percentage of Lessor's Cost set forth on
          Exhibit B; or

               (iii) there shall be an adjustment of Termination Values as
          provided in Section 16 of the Tax Indemnity Agreement.

Adjustments to the installments of Basic Rent (expressed as percentages of
Lessor's Cost) set forth in Exhibit C-1 and conforming adjustments to the EBO
Amount and the amounts of Termination Values (expressed as percentages of
Lessor's Cost) set forth in Exhibit D shall be calculated by the Owner
Participant in accordance with the terms of this Section 3(d), and the Owner
Participant shall deliver to the Lessee and the Lessor schedules setting forth
the revised EBO Amount and the revised percentages that the Owner Participant
proposes to include in Exhibits C and D, subject to review by the Lessee and
verification as provided herein. In the event of a dispute regarding any such
adjustment which is not resolved by agreement of the

                                       -3-


Lessee and the Owner Participant, the adjustments, at the request of the Lessee
delivered to the Owner Participant within 30 days after receipt of the Owner
Participant's proposed adjustments, shall be subjected to verification by a
lease advisory firm or a nationally recognized firm of accountants in each case
to be selected by the Owner Participant and reasonably acceptable to the Lessee.
The Owner Participant shall provide to such firm, but not, in any circumstances,
to Lessee or any representatives of Lessee, on a confidential basis such
information as such firm may reasonably require, including, without limitation,
a true copy of this Lease and a full description of the methodology and
assumptions employed by the Owner Participant in calculating the EBO Amount or
Basic Rent or Termination Value set forth in Exhibits C and D as in effect on
the Delivery Date and a true copy of the calculations of the same performed by
the Owner Participant at the time, to enable such firm to determine whether the
adjustments proposed by the Owner Participant are mathematically accurate, apply
the same methodology and assumptions (except to the extent changed by the events
giving rise to such recalculation or any prior recalculation pursuant to this
Section 3(d)) as were employed in the calculations of the Basic Rent, EBO Amount
and Termination Values in effect on the Delivery Date, and are otherwise in
conformity with the provisions of this Lease. The Lessee and its financial
advisors shall be entitled to submit such data and views as the Lessee may elect
to such firm concerning the proposed adjustments. The firm shall be requested to
deliver to each of the Owner Participant, the Lessee and the Lessor within 30
days after its appointment its determination as to the changes, if any, that are
appropriate with respect to the adjustments proposed by the Owner Participant.
The adjustments proposed by the Owner Participant, if not disputed by the Lessee
as provided above, or the determination of the firm as provided above, as the
case may be, shall be conclusive, final and binding upon the Lessor, the Lessee
and the Owner Participant, and the EBO Amount and Exhibits C and D shall be
amended to reflect them. No dispute concerning any adjustment shall release the
Lessee from its obligation to pay the EBO Amount or Basic Rent or Termination
Value as then set forth in Exhibits C and D. All reasonable fees and expenses
payable to a firm pursuant to this paragraph shall be paid by the Lessee except
that such fees and expenses shall be paid entirely by the Owner Participant if,
as a result of changes determined by the firm, the net present value, discounted
at the Applicable Rate or such other rate as the Lessee may have specified as
provided above in this paragraph, of Basic Rent remaining to be paid is ten
basis points (0.10%) or more lower than it would have been under the adjustments
proposed by the Owner Participant.

Any adjustments made pursuant to this Section 3(d) shall (i) be made so as to
avoid characterization of this Lease as a "disqualified leaseback or long-term
agreement" within the meaning of Section 467 of the Code and/or regulations
thereunder (or any successor or relevant Code provision or regulations) and (ii)
be in compliance with the requirements of Sections 4.02(5) and 4.07(l) of the
Revenue Procedure 75-28 (or any successor relevant procedure), except to the
extent that on the Delivery Date the Lease constituted such a "disqualified
leaseback or long-term agreement" or was not in compliance with the revenue
procedure referred to in clause (ii). In addition, notwithstanding any other
provisions herein, in no event shall the EBO Amount be adjusted to an amount
that is less than the greater of (A) the adjusted Termination Value as of the
applicable EBO Date, (B) the estimated fair market value of the Aircraft on the
applicable EBO Date (as set forth in the appraisal received pursuant to Section
3.01(b)(xiii) of the Participation Agreement), and (C) the present value as of
the applicable EBO Date of (x) the remaining scheduled Basic Rent through the
end of the Basic Term plus (y) Estimated Value (as identified on Exhibit B) (the
present value calculation described in this

                                       -4-


clause (C) shall utilize a monthly compounded discount rate no lower than the
rate per annum identified on Exhibit B as the Compounded Discount Rate). All
adjustments required pursuant to this Section 3(d) shall be set forth in a Lease
Supplement or in an amendment to this Lease.

          (e) MANNER OF PAYMENT.

          All Rent payable by the Lessee to the Lessor hereunder shall be paid
to the Lessor at the following account or at such other account as the Lessor
shall specify in a notice to the Lessee, in Dollars in immediately available
funds, so that the Lessor receives the full amount of each payment not later
than 12:00 noon Eastern Time on the due date thereof:

               Bank: Bankers Trust Company
               ABA No.: 021 001 033
               Account no.: 50 255 888
               Account Name: GECC T&I Air Depository Account
               Ref: Chautauqua N281SK Rent Payment

If any Rent is due on a day that is not a Business Day, such Rent shall be paid
on the next succeeding Business Day with the same force and effect as if paid on
the scheduled date of payment and (if paid on such next succeeding Business Day)
no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of payment on such next succeeding Business Day.

          (f) RENT OBLIGATIONS UNCONDITIONAL.

          The Lessee's obligations to pay all Rent due and owing under the terms
hereof shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever including, without limitation, (i) any setoff,
counterclaim, recoupment or other right which the Lessee may have against the
Lessor, the Owner Participant, or anyone else 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, or any
interference, interruption or cessation in or prohibition of the use or
possession thereof by the Lessee for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority or any violation by the
Lessor of Section 4 hereof, (iii) any Liens, encumbrances or rights of others
with respect to the Aircraft, (iv) the invalidity or unenforceability or lack of
due authorization or other infirmity or disaffirmance of this Lease or any
provision hereof or any other Operative Agreement or any lack of right, power or
authority of the Lessor or the Lessee to enter into this Lease or any other
Operative Agreement, (v) any insolvency, bankruptcy, reorganization or similar
proceedings by or against the Lessee, or any other Person, or (vi) any other
cause whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason other than manifest error in the calculation thereof or
the documentation of this Lease. To the extent permitted by Applicable Law, the
Lessee waives any rights which it may now have or which may be conferred upon it
by statute or otherwise to terminate, cancel, quit or surrender this Lease

                                       -5-


except in accordance with the terms hereof. 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 in Sections 8, 13, 14 and 17, Lessee nonetheless
agrees to pay to Lessor an amount equal to the Rent payment at the time such
payment would have become due and payable in accordance with the terms hereof
had this Lease not been terminated in whole or in part. Subject to the following
sentence, each payment of Rent made by Lessee to Lessor shall be final as to
Lessor and Lessee and Lessee will not seek to recover all or any part of such
payment of Rent for any reason whatsoever. Nothing herein shall be construed as
a waiver by the Lessee of any claim it may have against any Person arising under
any of the Operative Agreements or otherwise, including, without limitation, any
claim that Rent payments demanded from or paid by the Lessee are or were not
due, are or were erroneous or were paid under mistake or protest, or be
construed as a limitation on any rights of the Lessee to assert any claim in any
proceeding at law, in equity or otherwise against the Lessor or any other Person
and to pursue and obtain relief on such claim in such manner as the Lessee shall
deem appropriate other than by setoff against Rent payments due under the terms
hereof.

Section 4. THE LESSOR'S REPRESENTATIONS AND WARRANTIES.

          (a) REPRESENTATION AND WARRANTIES. THE LESSOR LEASES THE AIRCRAFT
HEREUNDER "AS-IS", "WHERE IS" AND NEITHER THE LESSOR, TRUST COMPANY INDIVIDUALLY
NOR THE OWNER PARTICIPANT SHALL BE DEEMED TO HAVE MADE, AND HEREBY DISCLAIMS,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION, MERCHANTABILITY, COMPLIANCE
WITH SPECIFICATIONS, CONSTRUCTION, PERFORMANCE OR FITNESS FOR USE OR FOR ANY
PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR
OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON LIABILITY IN TORT, STRICT OR OTHERWISE, AS TO FREEDOM FROM
INTERFERENCE IN POSSESSION OR USE, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE AIRCRAFT OR ANY PART THEREOF OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except that the Lessor warrants that on the Delivery Date the
Lessor shall have received whatever title was conveyed to it by the Seller and
the Lessor warrants that the Aircraft shall be free of Lessor's Liens (other
than Liens arising as a result of a Permitted Security Interest) during the
Term.

          (b) QUIET ENJOYMENT. The Lessor covenants that during the Term, as
long as no Event of Default has occurred and is continuing, the Lessee's
possession, use and quiet enjoyment of the Aircraft leased hereunder shall not
be interrupted by the Lessor (or any Person lawfully claiming through the
Lessor).

          (c) MANUFACTURER'S WARRANTIES. Lessor hereby assigns to Lessee all
rights Lessor has under any warranty, express or implied, with respect to the
Aircraft and the Engines or any Parts thereof made by the Manufacturer, the
Engine Manufacturer, or any other Person, and all proceeds thereof and
recoveries thereunder under the Embraer Purchase Agreement,

                                       -6-


Embraer Warranty Assignment and Consent, Engine Warranty Agreement and Engine
Warranty Assignment and Consent and otherwise, to the extent that such
warranties exist or may be assigned or otherwise made available to Lessee;
provided, however, that upon the occurrence of an Event of Default and any
termination of this Lease under Section 17 hereof, all such rights shall,
without further action or notice, immediately revert to Lessor including all
claims thereunder whether or not perfected. In the event any such warranties are
not assignable to Lessee, Lessor shall use commercially reasonable efforts at
Lessee's expense to enforce such warranties on Lessee's behalf.

Section 5.Possession, Operation and Use,
          MAINTENANCE, REGISTRATION AND INSIGNIA.

          (a) GENERAL.

          Except as otherwise expressly provided herein, the Lessee (and any
Permitted Sublessee) shall be entitled during the Term to operate, use, locate,
employ or otherwise utilize or not utilize the Airframe, Engines and Parts
leased hereunder in any lawful manner or place in accordance with the Lessee's
(or such Permitted Sublessee's) business judgment.

          (b) POSSESSION.

          The Lessee shall not sublease, or otherwise in any manner deliver,
relinquish or transfer possession of the Airframe or any Engine leased hereunder
to any Person or install any Engine, or permit any Engine to be installed, on
any airframe other than the Airframe, during the Term, without the prior consent
of the Lessor, which consent may be withheld in its sole discretion, PROVIDED,
HOWEVER, that so long as (A) only in the case of clause (x) below, no Default of
the type referred to in Section 16(a), (b), (f), (g) or (h) hereof shall have
occurred and be continuing, (B) no Event of Default shall have occurred and be
continuing, and (C) all approvals, consents or authorizations required from the
Aeronautical Authority in connection with any such sublease or such delivery,
transfer or relinquishment of possession have been obtained and remain in full
force and effect, the Lessee (or, except in the case of clause (x) below, any
Permitted Sublessee) may, without the prior consent of the Lessor:

               (i) enter into a charter or wet lease or other similar
          arrangement under which the Lessee (or such Permitted Sublessee) has
          operational control of the Airframe and any Engines installed thereon
          in the course of the Lessee's business (which shall not be considered
          a transfer of possession hereunder), provided that the Lessee's
          obligations under this Lease and such Permitted Sublessee's
          obligations under the relevant Sublease shall continue in full force
          and effect notwithstanding any such charter or wet lease or other
          similar arrangement;

               (ii) deliver possession of the Airframe or any Engine or any Part
          to the manufacturer thereof or to any organization for testing,
          service, repair, maintenance, overhaul work or other similar purposes
          or for alterations or modifications or additions required or permitted
          by the terms of this Lease;

               (iii) subject the Airframe and any Engines installed thereon to
          interchange agreements (provided that (x) any such interchange
          agreement with

                                       -7-


          respect to the Airframe shall not result in the Lessee (or a Permitted
          Sublessee) being out of possession of the Airframe for a period of
          more than two (2) consecutive days at any one time; (y) such
          interchange agreement is entered into with a Permitted Sublessee; and
          (z) the party to such interchange agreement is not then subject to a
          proceeding or final order under applicable bankruptcy, insolvency or
          reorganization laws on the date such interchange agreement is entered
          into) or any Engine to interchange or pooling agreements or
          arrangements which are applicable to other similar property owned by
          or leased to the Lessee (or such Permitted Sublessee) and are entered
          into by the Lessee (or such Permitted Sublessee) in the course of its
          airline business with any air carrier, provided, that (A) no such
          agreement or arrangement shall under any circumstances result in,
          contemplate or require the transfer of title to the Aircraft, Airframe
          or any Engine and (B) if the Lessor's title to any Engine shall
          nevertheless be divested under any such agreement or arrangement, such
          divestiture shall be deemed to be an Event of Loss with respect to
          such Engine and the Lessee shall comply with Section 7(e) hereof in
          respect thereof;

               (iv) install an Engine on an airframe owned by the Lessee (or
          such Permitted Sublessee) free and clear of all Liens except (A)
          Permitted Liens, (B) those which apply only to the engines (other than
          the Engines), appliances, parts, instruments, appurtenances,
          accessories, furnishings and other equipment (other than Parts)
          installed on such airframe, and (C) those created by the rights of
          other air carriers under interchange or pooling agreements or other
          arrangements customary in the airline industry which do not
          contemplate, permit or require the transfer of title to such airframe
          or engines installed thereon;

               (v) install an Engine on an airframe, leased to the Lessee (or
          such Permitted Sublessee) or purchased by the Lessee (or such
          Permitted Sublessee) subject to a conditional sale or other security
          agreement, 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 Section 5(b)(iv) and (B) Lessee (or such
          Permitted Sublessee) 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, in the case of such
          Permitted Sublessee, the relevant Sublease) or is owned by Lessor;

               (vi) install an Engine on an airframe, owned by the Lessee (or
          such Permitted Sublessee), leased by the Lessee (or such Permitted
          Sublessee) or purchased by the Lessee (or such Permitted Sublessee)
          subject to a conditional sale or other security agreement under
          circumstances where neither clause (iv) nor clause (v) above is
          applicable, provided that any such installation (so long as the

                                       -8-


          same shall be continuing) shall be deemed an Event of Loss with
          respect to such Engine and the Lessee shall comply with Section 7(e)
          hereof;

               (vii) transfer possession of the Airframe or Engine to the United
          States of America or any instrumentality thereof pursuant to the Civil
          Reserve Air Fleet Program (as established and administered pursuant to
          Executive Order 11490, as amended, as superseded by United States
          Executive Order No. 12656) or any similar or substitute program ("CRAF
          Program"), in which event Lessee (or such Permitted Sublessee) shall
          promptly notify Lessor in writing of any such transfer of possession
          and, in the case of any transfer pursuant to the CRAF Program, in such
          notification shall identify by name, address and telephone numbers the
          Contracting Office Representatives of 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 the
          CRAF Program;

               (viii) transfer possession of the Airframe or any Engine to the
          United States of America, or to a foreign government, when required by
          Applicable Law (it being understood that nothing in this clause (viii)
          shall relieve the Lessee from its obligations under Section 8(a) if
          such transfer becomes an Event of Loss), in which event Lessee shall
          promptly notify Lessor in writing of any such transfer of possession;

               (ix) [Reserved];

               (x) subject to the provisions of this Section 5(b), enter into a
          sublease with respect to any Engine or the Airframe and Engines or
          engines then installed on the Airframe to any Permitted Sublessee if
          (A) Lessee shall provide written notice to Lessor and Owner
          Participant at least 10 days prior to entering into any such sublease,
          (B) in any such case, the sublessee under such sublease is not subject
          to a proceeding or final order under applicable bankruptcy, insolvency
          or reorganization laws on the date such sublease is entered into, (C)
          in the event that the sublessee under such sublease is a foreign air
          carrier or Person based in a country other than the United States, the
          United States maintains normal diplomatic relations with the country
          in which such proposed sublessee is principally based at the time such
          sublease is entered into and (D) in the event that the sublessee under
          such sublease is a foreign air carrier or Person based in a country
          other than the United States, prior to the effectiveness of such
          sublease Lessor shall have received an opinion (in form and substance
          reasonably acceptable to Lessor) of counsel to Lessee (reasonably
          acceptable to Lessor) to the effect that (I) the terms of the proposed
          sublease will be legal, valid, binding and (subject to customary
          exceptions) enforceable against the proposed sublessee in the country
          in which the proposed sublessee is principally based, (II) there exist
          no possessory rights in favor of the sublessee under such sublease
          under the laws of such sublessee's country of domicile that would,
          upon bankruptcy or insolvency of or other default by the Lessee and
          assuming that at such time such sublessee is not insolvent or
          bankrupt, prevent the return or repossession of the Aircraft in
          accordance with and when permitted by the terms of Section 17(a)

                                       -9-


          upon the exercise by Lessor of its remedies under Section 17(a), (III)
          the laws of such sublessee's country of domicile require fair
          compensation by the government of such jurisdiction payable in
          currency freely convertible into Dollars for the loss of use of or
          title to such Engine or the Airframe in the event of the requisition
          by such government of such use or title (it being understood that in
          the event such opinion cannot be given in a form reasonably
          satisfactory to the Owner Participant, such opinion will be waived if
          insurance reasonably satisfactory to the Owner Participant is provided
          to cover such requisition), (IV) the laws of such sublessee's country
          of domicile would give recognition to Lessor's title to such Engine or
          the Airframe, to the registry of such Engine or the Airframe in the
          name of Lessor (or Lessee, as "lessee", or the proposed sublessee, as
          appropriate), (V) all filings, if any, required to be made in such
          jurisdiction in connection with the execution of such sublease in
          order to protect the interest of Lessor in such Engine or the Airframe
          have been made, (VI) it is not necessary for the Owner Participant or
          Lessor 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, (VII) the agreement of such Permitted
          Sublessee that its rights under the sublease are subject and
          subordinate to all the terms of this Lease is enforceable against such
          Permitted Sublessee under Applicable Law of such country, and (VIII)
          there is no tort liability for owners not in possession of aircraft in
          such country more onerous than under the laws of the United States or
          any state thereof (it being agreed that in the event such opinion
          cannot be given in a form reasonably satisfactory to the Owner
          Participant, such opinion will be waived if insurance reasonably
          satisfactory to the Owner Participant is provided to cover the risk of
          such tort liability); provided that no such sublease shall be made to
          a Permitted Sublessee of the type described in clause (b) of the
          definition thereof that is not domiciled in the United States or of
          the type described in clause (b) of the definition of Permitted Air
          Carrier or to any tax exempt entity within the meaning of Section
          168(h) of the Code prior to the end of the Recovery Period, unless the
          Lessee prepays on a lump sum basis any liability due under the Tax
          Indemnity Agreement as a result of such sublease based upon the
          assumption that such sublease will continue for the full term of such
          sublease;

PROVIDED that (1) the rights of any transferee who receives possession by reason
of a transfer permitted by this Section 5(b) (other than by a transfer of an
Engine which is deemed an Event of Loss) shall be subject and subordinate to all
the terms of this Lease; (2) the Lessee shall remain primarily liable hereunder
for the performance of all the terms and conditions of this Lease and all of the
terms and conditions of this Lease and the other applicable Operative Agreements
shall remain in effect; (3) no sublease or transfer of possession otherwise in
compliance with this Section 5(b) shall (A) result in any registration or
re-registration of the Aircraft except to the extent permitted by Section 5(e)
or the maintenance, operation or use thereof except in compliance with Sections
5(c) and 5(d), (B) permit any action not permitted to the Lessee hereunder, (C)
extend beyond the end of the Term (except to the extent that the Lessee shall
have irrevocably committed to exercise a purchase option in accordance with the
terms hereof) or (D) contain any purchase option exercisable at an earlier date
or at a lower price than such date or price, as the case may be, as permitted
under Section 13(b) hereof; (4) if any such sublease or transfer of possession
shall, in the reasonable opinion of the Owner Participant, result in any risk

                                      -10-


of adverse tax consequences, the Lessee shall, prior to entering into the same,
provide an indemnity satisfactory in form and substance to the Owner Participant
against any such adverse tax consequences; (5) the Lessee shall provide evidence
reasonably satisfactory to Lessor and Owner Participant that the insurance
required by Section 9 remains in effect and for the purpose of Lessor's and
Owner Participant's review of such insurance requirements, the Lessee shall, at
least five (5) days prior to the date of any sublease permitted under this
Section 5(b), provide to Lessor and Owner Participant, forms of the broker's
report and insurance certificates required by Section 9(g); (6) all necessary
documents shall have been duly filed or recorded in applicable public offices as
may be required to preserve the title of Lessor to the Airframe and Engines; and
(7) Lessee shall reimburse Lessor and Owner Participant, on an After Tax Basis,
for all of their reasonable out-of-pocket expenses (including fees and
disbursements of counsel) in connection with any such sublease or transfer.

          In the case of any sublease permitted under this Section 5(b), the
Lessee will include in such sublease appropriate provisions which (a) make such
sublease expressly subject and subordinate to all of the terms of this Lease,
including the rights of the Lessor to avoid such sublease in the exercise of its
rights to repossession of the Airframe and Engines hereunder and thereunder; (b)
expressly prohibit any further subleasing of the Airframe and Engines; (c)
require that the Airframe and Engines be maintained in accordance with a
maintenance program approved by the Aeronautical Authority applicable thereto;
(d) require the sublessee to comply with the terms of Section 9 hereof; (e)
limit the term of such sublease (including renewal rights) to a period not
beyond the end of the Term unless the Lessee shall then have irrevocably
committed to exercise a purchase option in accordance with the terms hereof; (f)
require that the Airframe and Engines be used in accordance with the limitations
applicable to the Lessee's possession and use provided in this Lease and (g)
shall include provisions for the maintenance, operation, possession and
inspection of the Aircraft that are the same in all material respects as the
applicable provisions of this Lease.

          The Lessor hereby agrees for the benefit of the lessor or secured
party of any engine or of any airframe (other than the Airframe) leased to the
Lessee or purchased by the Lessee subject to a conditional sale or other
security agreement, which lease or conditional sale or other security agreement
(in the case of any such airframe) also covers an engine or engines owned by the
lessor under such lease or subject to a security interest in favor of the
secured party under such conditional sale or other security agreement, that the
Lessor will not acquire or claim, as against such lessor or secured party, any
right, title or interest in any such engine as the result of such engine being
installed on the Airframe at any time while such engine is owned by such lessor
or is subject to such conditional sale or other security agreement or security
interest in favor of such secured party.

          (c) OPERATION AND USE.

          The Lessee shall not operate, use or locate the Airframe or any
Engine, or suffer such Airframe or any Engine to be operated, used or located
(i) in any area excluded from coverage by any insurance required by the terms of
Section 9 hereof, except in the case of a requisition by the United States of
America where the Lessee obtains (and provides evidence of) indemnity from the
Government for the benefit of the Additional Insureds against substantially the
same risks and for at least the amounts of the insurance required by Section 9
hereof covering

                                      -11-


such area, or (ii) outside the United States or Canada in any recognized or, in
the Lessee's reasonable judgment, threatened area of hostilities unless covered
by war risk insurance, or in either case unless the Airframe or such Engine is
operated or used under contract with the Government under which contract the
Government assumes liability for substantially the same risks in at least the
same amounts as would be covered by such insurance. The Lessee shall not permit
the Airframe or any Engine to be used or operated during the Term in violation
of any Applicable Law or in violation of any airworthiness certificate, license
or registration relating to the Aircraft or such Engines issued by any competent
governmental authority, unless (i) the validity thereof is being contested in
good faith and by appropriate proceedings which do not involve a non-de minimis
danger of the sale, forfeiture or loss of the Airframe or such Engine or the
interest of Owner Participant therein, any risk of criminal liability or any
material risk of civil liability against Lessor or Owner Participant, or (ii) it
is not possible for the Lessee (or a Permitted Sublessee) to comply with the
laws of a jurisdiction other than the United States (or other than any
jurisdiction in which the Aircraft is then registered) because of a conflict
with the applicable laws of the United States (or such jurisdiction in which the
Aircraft is then registered).

          (d) MAINTENANCE.

          The Lessee, at its own cost and expense, shall during the Term
service, repair, maintain, overhaul and test the Aircraft, the Airframe and each
Engine or cause the same to be done in accordance with (1)(i) a maintenance
program approved by the Aeronautical Authority and (ii) maintenance standards
required by, or substantially equivalent to those required by, the FAA or the
central civil aviation authority of Canada, France, Germany, Japan, The
Netherlands or the United Kingdom, and shall keep or cause to be kept the
Aircraft, the Airframe and each Engine in as good operating condition as
originally delivered hereunder, ordinary wear and tear excepted, and shall keep
or cause to be kept the Aircraft, the Airframe and each Engine in such operating
condition as may be necessary to enable the airworthiness certification of the
Aircraft to be maintained in good standing at all times under the applicable
rules and regulations of the Aeronautical Authority, except when aircraft of the
same type, model or series as the Airframe (powered by engines of the same type
as those with which the Airframe shall be equipped at the time of grounding)
registered in the same country have been grounded by the Aeronautical Authority,
PROVIDED, HOWEVER, that if the airworthiness certificate of the Aircraft shall
be withdrawn, then, subject to Section 8 hereof, so long as the Lessee (or a
Permitted Sublessee) is taking or causing to be taken all necessary action to
promptly correct the condition which caused such withdrawal, no Event of Default
shall arise from such withdrawal and (2) except during periods when a Sublease
is in effect, the same standards Lessee uses with respect to similar aircraft of
similar size in its fleet operated (whether owned or leased) by Lessee in
similar circumstances and during any period in which a Sublease is in effect,
the same standards the Permitted Sublessee uses with respect to similar aircraft
of similar size in its fleet and operated (whether owned or leased) by the
Permitted Sublessee in similar circumstances. Nothing herein shall be deemed to
prevent the Lessee (or a Permitted Sublessee) from taking the Aircraft out of
service for maintenance or modifications permitted hereunder or storage in
accordance with applicable Aeronautical Authority requirements and sound
practice for such storage. The Lessee shall maintain or cause to be maintained
all records, logs and other documents required by the Aeronautical Authority to
be maintained in respect of the Aircraft in English. Lessee further agrees that
the Aircraft, Airframe and Engines will be maintained, used, serviced, repaired,
overhauled or inspected in compliance with Applicable Law with respect to the
maintenance of

                                      -12-


the Aircraft and compliance with each applicable airworthiness certificate,
license and registration relating to the Aircraft, Airframe or any Engine issued
by the Aeronautical Authority.

          (e) REGISTRATION.

          Except as otherwise permitted by Section 4.02(b) of the Participation
Agreement, or as otherwise required by the Transportation Code or rules,
regulations, or orders promulgated thereunder, or to the extent that such
registration cannot be effected or continued due to the Lessor's or the Owner
Participant's failure to comply with the citizenship or other eligibility
requirements for registration of commercial aircraft under the Transportation
Code or any rule, regulation or order promulgated thereunder, the Aircraft shall
be duly registered in the name of the Lessor under the Transportation Code at
all times during the Term; provided that the Lessor shall execute and deliver
all such documents as the Lessee may reasonably request for the purpose of
effecting, continuing or (as provided in this Section 5(e) hereof and Section
4.02(b) of the Participation Agreement) changing such registration.

Section 6. INSPECTION.

           At all reasonable times during the Term, but upon at least 15 days'
prior notice to the Lessee (unless an Event of Default shall have occurred and
be continuing, in which event a prior written notice of at least one (1)
Business Day is required) and at a time and place reasonably acceptable to the
Lessee, the Lessor and the Owner Participant or their authorized representatives
(which may include the Manufacturer) may at their own expense (unless an Event
of Default shall have occurred and be continuing, in which event the Lessee
shall bear such expense) and risk conduct a visual walk-around inspection of the
Aircraft and any Engine (including a visual walk-around inspection of the
Aircraft during any "C" check or other heavy maintenance) and may inspect the
books and records of the Lessee relating to the operation and maintenance
thereof and the Lessee shall provide copies of such books and records to the
Lessor and the Owner Participant or their authorized representatives at its or
their reasonable request; provided that (a) such representatives shall be fully
insured to the reasonable satisfaction of the Lessee by the Lessor or the Owner
Participant with respect to any risks incurred in connection with any such
inspection, (b) any such inspection shall be subject to the safety, security and
workplace rules applicable at the location where such inspection is conducted
and any applicable governmental rules or regulations, (c) in the case of an
inspection during a maintenance visit, such inspection shall not interfere with
the normal conduct of such maintenance visit or extend the time required for
such maintenance visit or, in any event, at any time interfere with the use or
operation of the Airframe or any Engine or with the normal conduct of the
Lessee's or a Permitted Sublessee's business, and (d) the Lessee shall not be
required to undertake or incur any additional liabilities in connection with any
such inspection. All information obtained in connection with any such inspection
shall be held confidential by the Lessor and the Owner Participant and shall not
be furnished or disclosed by them to anyone other than each other, their bank
examiners, auditors, accountants, agents and legal counsel and any Person with
whom the Owner Participant is in good faith conducting negotiations relating to
the possible transfer and sale of the Owner Participant's interest in the Trust
Estate or the Aircraft, if such Person shall have entered into an agreement
similar to that contained in this Section 6 whereby such Person agrees to hold
such information confidential, and except as may be required by an order of any

                                      -13-


court or administrative agency or by any statute, rule, regulation or order of
any governmental authority or as may be necessary to enforce the terms of this
Lease, provided, however, that the Lessor or the Owner Participant may during
any time it is offering the Aircraft for sale make customary disclosures to
prospective purchasers of the Aircraft as to the then current flight and
maintenance status of the Aircraft. The Lessor and the Owner Participant shall
have no duty to make any such inspection and shall not incur any liability or
obligation by reason of not making any such inspection.

          In addition to any inspection as provided hereunder, upon each request
of Owner Participant to Lessee made not more than four times in a calendar year,
Lessee will make available to Owner Participant information with respect to the
cycles and hours of operation of the Airframe and Engines and the status of the
time controlled components of the Engines.

          If requested by Lessor or Owner Participant, Lessee shall provide, or
shall cause any Permitted Sublessee to provide, the date (if then scheduled)
upon which the Airframe undergoes its next scheduled major check and, with
respect to any Engine, the next scheduled off the Airframe maintenance, and
shall advise Lessor and Owner Participant of the name and location (if then
known) of the relevant maintenance performer.

Section 7. Replacement and Pooling of Parts; Alterations,
           MODIFICATIONS AND ADDITIONS; SUBSTITUTION OF ENGINES.

          (a) REPLACEMENT OF PARTS.

          Except as otherwise provided in the proviso to the third sentence of
Section 7(d) or if the Airframe or an Engine to which a Part relates has
suffered an Event of Loss, the Lessee, at its own cost and expense, will during
the Term promptly replace all Parts that may from time to time become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition, in
the ordinary course of maintenance, service, repair, overhaul or testing, the
Lessee (or a Permitted Sublessee), at its own cost and expense, may remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided that the
Lessee (or such Permitted Sublessee), at its own cost and expense, shall, except
as otherwise provided in the proviso to the third sentence of Section 7(d),
replace such Parts as promptly as practicable with replacement Parts or
temporary replacement parts as provided in Section 7(c) hereof. All replacement
Parts shall be free and clear of all Liens except for pooling arrangements to
the extent permitted by Section 7(c) and Permitted Liens and shall be in as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced assuming such replaced Parts were in the condition and repair
required to be maintained by the terms hereof.

          (b) TITLE TO PARTS.

          Except in respect of any Part as to which title vests in Lessee upon
removal as provided in the proviso to the third sentence of Section 7(d) and the
fourth sentence of Section 7(d), all Parts at any time removed from the Airframe
or any Engine shall remain the property of the Lessor and subject to this Lease,
no matter where located, until such time as such Parts shall

                                      -14-


be replaced by Parts that have been incorporated or installed in or attached to
such Airframe or Engine and that meet the requirements for replacement Parts
specified in Section 7(a). Immediately upon any replacement Part becoming
incorporated or installed in or attached to an Airframe or Engine as provided in
Section 7(a), without further act, (i) title to the replaced Part shall
thereupon vest in the Lessee (or the relevant Permitted Sublessee), in "as-is,
where-is" condition, free and clear of all rights of the Lessor and any Lessor's
Liens and shall no longer be deemed a Part hereunder; (ii) title to such
replacement Part shall thereupon vest in the Lessor (subject only to Permitted
Liens); and (iii) such replacement Part shall become subject to this Lease and
be deemed part of such Airframe or Engine, as the case may be, for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to such Airframe or Engine.

          (c) POOLING OR PARTS LEASING.

          Any Part removed from the Airframe or from any Engine as provided in
Section 7(a) may be subjected by the Lessee (or a Permitted Sublessee) to a
pooling or parts leasing agreement or arrangement of a type customary in the
airline industry entered into in the ordinary course of the Lessee's (or such
Permitted Sublessee's) business, provided the part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Sections 7(a) and 7(b) as promptly as practicable after the
removal of such removed Part. In addition, any replacement part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 7(a) may be owned by another airline or vendor as
customary in the airline industry, subject to a pooling or parts leasing
arrangement, PROVIDED that the Lessee (or a Permitted Sublessee), at its expense
as promptly thereafter as reasonably practicable, either (i) causes title to
such temporary replacement part to vest in the Lessor in accordance with Section
7(b) by the Lessee (or such Permitted Sublessee) acquiring title thereto for the
benefit of the Lessor free and clear of all Liens except Permitted Liens, at
which time such temporary replacement part shall become a Part and become
subject to this Lease or (ii) replaces such temporary replacement part by
incorporating or installing in or attaching to such Airframe or Engine a further
replacement Part owned by the Lessee (or such Permitted Sublessee) free and
clear of all Liens except Permitted Liens and by causing title to such further
replacement Part to vest in the Lessor in accordance with Section 7(b).

          (d) ALTERATIONS, MODIFICATIONS AND ADDITIONS.

          The Lessee, at its own expense, shall make (or cause to be made)
alterations and modifications in and additions to the Airframe and any Engine as
may be required to be made from time to time during the Term by Applicable Law
or in order to maintain the insurance required under Section 9 regardless of
upon whom such requirements are, by their terms, nominally imposed; PROVIDED,
that the Lessee may, in good faith and by appropriate procedure, contest the
validity or application of any such standard in any reasonable manner which does
not materially adversely affect the interests of the Lessor and does not involve
any non-de minimis risk of sale, forfeiture or loss of the Aircraft or the
interest of Owner Participant therein, any material risk of civil penalty or any
risk of criminal liability being imposed on Lessor or Owner Participant. In
addition, the Lessee (or a Permitted Sublessee), at its own expense, may from
time to time make or cause to be made such alterations and modifications in and
additions to the Airframe and any Engine as the Lessee (or such Permitted
Sublessee) may deem desirable in the

                                      -15-


proper conduct of its business including, without limitation, removal of Parts
which Lessee (or such Permitted Sublessee) deems are obsolete or no longer
suitable or appropriate for use in the Aircraft, Airframe or such Engine so long
as the aggregate value of such removed Parts (based on their value as of the
Delivery Date) does not exceed $200,000, PROVIDED further that no such
alteration, modification or addition (i) diminishes the value, utility,
estimated residual value (with respect to the Airframe only), condition,
remaining useful life or airworthiness of such Airframe or Engine below the
value, utility, estimated residual value, condition, remaining useful life or
airworthiness thereof immediately prior to such alteration, modification or
addition, assuming such Airframe or Engine was then in the condition required to
be maintained by the terms of this Lease or (ii) causes the Aircraft to be
limited use property, except that the value (but not the utility, estimated
residual value, condition, remaining useful life or airworthiness) of the
Aircraft may be reduced by the value of Parts which the Lessee (or such
Permitted Sublessee) has removed as permitted above. Title to all Parts
incorporated or installed in or attached or added to the Airframe or any Engine
as the result of any alteration, modification or addition effected by the Lessee
(or a Permitted Sublessee) shall, without further act, vest in the Lessor free
and clear of any Liens except Permitted Liens and become subject to this Lease;
provided that the Lessee (or such Permitted Sublessee) may, at any time during
the Term, remove any such Part from the Airframe or an Engine if (i) such Part
is in addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such Airframe or Engine
at the time of delivery thereof hereunder or any Part in replacement of, or in
substitution for, any such original Part, (ii) such Part is not required to be
incorporated or installed in or attached or added to such Airframe or Engine
pursuant to the terms of Section 5(d) or the first sentence of this Section 7(d)
or pursuant to the terms of any insurance policies required to be carried
hereunder or under any Applicable Law and (iii) such Part can be removed from
such Airframe or Engine without diminishing or impairing the value, condition,
utility, estimated residual value, remaining useful life or airworthiness which
such Airframe or Engine would have had at the time of removal had such
alteration, modification or addition not been effected by the Lessee (or such
Permitted Sublessee) assuming the Aircraft was otherwise maintained in the
condition required by this Lease. Upon the removal by the Lessee (or such
Permitted Sublessee) of any such Part as above provided, title thereto shall,
without further act, vest in the Lessee (or such Permitted Sublessee), in
"as-is, where-is" condition, free and clear of all rights of the Lessor and any
Lessor's Liens and such Part shall no longer be deemed a Part hereunder. Any
Part not removed by the Lessee (or a Permitted Sublessee) as above provided
prior to the return of the Airframe or respective Engine to the Lessor hereunder
shall remain the property of the Lessor; provided that nothing in this Section
7(d) shall prohibit the Lessee (or a Permitted Sublessee) from removing any
seats from the Aircraft (which seats while so removed shall remain in the
possession of the Lessee (or such Permitted Sublessee)) so long as the Aircraft
when returned to the Lessor pursuant to Section 12 hereof shall be in the
condition required thereby.

          (e) SUBSTITUTION OF ENGINES.

          So long as no Specified Default shall have occurred and be continuing,
the Lessee (or a Permitted Sublessee) shall have the right at its option at any
time, on at least 30 days' prior notice to the Lessor and the Owner Participant,
to substitute, and if an Event of Loss shall have occurred with respect to an
Engine under circumstances in which there has not occurred an Event of Loss with
respect to the Airframe, shall within 90 days of the occurrence of such Event of

                                      -16-


Loss and on at least five days' prior notice to the Lessor substitute, a
Replacement Engine for any Engine not then installed or held for use on the
Airframe. In such event, immediately upon the effectiveness of such substitution
on the date set forth in such notice and without further act, (i) title to the
Replacement Engine shall thereupon vest in the Lessor free and clear of all
Liens (other than Permitted Liens), (ii) title to the replaced Engine shall
thereupon vest in the Lessee (or its designee), in "as-is, where-is" condition,
free and clear of all rights of the Lessor and any Lessor's Liens and shall no
longer be deemed an Engine hereunder, and (iii) such Replacement Engine shall
become subject to this Lease and be deemed part of the Aircraft for all purposes
hereof to the same extent as the Engine originally installed on or attached to
the Airframe. Upon the substitution of a Replacement Engine, the following
conditions shall be satisfied at the Lessee's sole cost and expense and the
parties agree to cooperate with the Lessee to the extent necessary to enable it
to timely satisfy such conditions:

               (i) the following documents shall be duly authorized, executed
          and delivered by the respective party or parties thereto, and an
          executed counterpart of each shall be delivered to the Lessor and the
          Owner Participant:

                    (A) a Lease Supplement covering the Replacement Engine,
               which shall have been duly filed for recordation with the FAA;

                    (B) a full warranty bill of sale (as to title), in form and
               substance satisfactory to the Lessor and the Owner Participant,
               covering the Replacement Engine, executed by the owner thereof in
               favor of the Lessor;

                    (C) "precautionary" Uniform Commercial Code financing
               statements as are deemed necessary or desirable by counsel for
               the Owner Participant to protect the ownership interests of the
               Owner Trustee in the Replacement Engine;

                    (D) an Officer's Certificate of the Lessee certifying that
               (i) in the case of a voluntary replacement only, no Specified
               Default shall have occurred and be continuing and (ii) (x) in the
               case of a voluntary replacement, the Replacement Engine has at
               least the same number of hours or cycles (whichever is
               applicable) of operation on such Replacement Engine remaining
               until the next scheduled life limited part replacement as the
               Engine it replaces, assuming such Engine had been maintained in
               the condition required hereunder; or (y) in the case of a
               mandatory replacement, the Lessee has not discriminated in its
               selection of the Replacement Engine (based on the leased status
               of the Aircraft);

                    (E) an opinion of qualified FAA counsel as to the due
               recordation of the Lease Supplement and all other documents or
               instruments the recordation of which is necessary to perfect and
               protect the rights of the Lessor in the Replacement Engine;

                                      -17-


                    (F) to the extent that an engine warranty in respect of such
               Replacement Engine is available to the Lessee, an engine warranty
               assignment covering such Replacement Engine and a consent to such
               engine warranty assignment, in substantially the form of the
               Engine Warranty Assignment and Consent or otherwise in such form
               and substance satisfactory to the Lessor and the Owner
               Participant; and

                    (G) evidence that the insurance requirements of Section 9
               with respect to an Engine are satisfied and that the insurance
               covering such Replacement Engine shall be of the type usually
               carried by the Lessee (or, in the case of a voluntary
               replacement, such Permitted Sublessee) with respect to similar
               engines, and covering risks of the kind customarily insured
               against by the Lessee (or, in the case of a voluntary
               replacement, such Permitted Sublessee);

               (ii) the Lessee shall furnish (or cause to be furnished to) the
          Lessor and the Owner Participant with an opinion, reasonably
          satisfactory in form and substance to the Lessor and the Owner
          Participant, of the Lessee's counsel, which may be the Lessee's
          General Counsel or Associate General Counsel, to the effect that (x)
          such bills of sale or other documents reasonably requested by the
          Lessor or the Owner Participant are sufficient to convey title to such
          Replacement Engine to the Lessor and, (y) the Lessor is entitled to
          the benefits of Section 1110 with respect to such Replacement Engine
          to the same extent as with respect to the replaced Engine immediately
          preceding such replacement; and

               (iii) either (x) the Owner Participant shall have received an
          opinion of independent tax counsel (selected by the Owner Participant
          and reasonably acceptable to the Lessee), reasonably satisfactory to
          the Owner Participant, to the effect that there shall be no risk of
          adverse tax consequences resulting from such replacement (and the
          Owner Participant shall use its best efforts to cause a timely opinion
          to be delivered) or (y) the Lessee shall have provided, or caused to
          be provided, an indemnity in respect of any adverse tax consequences
          reasonably satisfactory (or, in the case of any voluntary
          substitution, satisfactory) in form and substance to the Owner
          Participant.

          Upon satisfaction of all conditions to such substitution, (x) the
Lessor shall, at the expense of the Lessee, execute and deliver to the Lessee
such bills of sale and other documents and instruments as the Lessee shall
reasonably request to evidence the transfer to the Lessee and vesting of all
right, title and interest in and to the replaced Engine in the Lessee, in
"as-is, where-is" condition, free and clear of all right, title and interest of
the Lessor and any Lessor's Liens; (y) the Lessor shall, at the request and
expense of the Lessee, assign to the Lessee all claims it may have against any
other Person relating to an Event of Loss giving rise to such substitution
(other than those in respect of insurance maintained by the Owner Participant
pursuant to Section 9(f)) and (z) the Lessee shall be entitled to receive all
insurance proceeds (other than those reserved to others under Section 9(f)
hereof) and proceeds in respect of any Event of Loss giving rise to such
replacement to the extent not previously applied to the purchase price of the
Replacement Engine as provided in Sections 9(e)(i) and 8(e)(ii).

                                      -18-


Section 8. LOSS, DESTRUCTION OR REQUISITION.

          (a) EVENT OF LOSS WITH RESPECT TO THE AIRFRAME.

          Upon the occurrence of an Event of Loss with respect to the Airframe,
the Lessee shall forthwith (and in any event within 15 days after such
occurrence) give the Lessor and the Owner Participant notice of such Event of
Loss. The Lessee shall, within 60 days after such occurrence, give the Lessor
and the Owner Participant written notice of its election to perform one of the
following options (it being agreed that if the Lessee shall not have given the
Lessor such notice of such election, the Lessee shall be deemed to have elected
to perform the option identified in the following clause (ii)):

               (i) subject to the satisfaction of the conditions contained in
          Section 8(d), on a date not more than 150 days after the occurrence of
          the Event of Loss (or, if earlier, the last day of the Term), convey
          or cause to be conveyed to the Lessor, and to be leased by the Lessee
          hereunder in replacement of the Airframe and Engines with respect to
          which the Event of Loss occurred, a Replacement Airframe (together
          with the same number of Replacement Engines as the number of Engines,
          if any, which were subject to such Event of Loss), such Replacement
          Airframe and Replacement Engines to be free and clear of all Liens
          except Permitted Liens and to have a remaining useful life, estimated
          residual value, value and utility at least equal to the Airframe and
          Engines, if any, so replaced (assuming such Airframe and Engines were
          in the condition and repair required by the terms hereof) and to be an
          airframe that is the same model and same or later vintage as the
          Airframe to be replaced thereby, or an improved model; PROVIDED THAT,
          if the Lessee shall not perform its obligation to effect such
          replacement under this clause (i) during the 150-day period of time
          provided herein (or, if earlier, the last day of the Term), it shall
          give the Lessor and the Owner Participant notice to such effect upon
          or before the expiration of such period of time and shall promptly pay
          on the first Termination Date next following the thirtieth (30th) day
          after the date of such notice to the Lessor (or, if earlier, the last
          day of the Term), in immediately available funds, the amount specified
          in clause (ii) below; or

               (ii) pay or cause to be paid to the Lessor in immediately
          available funds, on a date specified at least 30 days in advance by
          the Lessee, which date shall be a Termination Date not later than the
          earlier to occur of 150 days after the occurrence of the Event of Loss
          or 3 days following receipt of insurance proceeds in respect of such
          Event of Loss, an amount equal to (A) the arrears portion, if any, of
          Basic Rent payable on such Termination Date, together with all unpaid
          Basic Rent, if any, payable before such Termination Date, plus (B) all
          unpaid Supplemental Rent (other than Termination Value) due on or
          before such payment date, plus (C) the Termination Value for the
          Aircraft determined as of such Termination Date or, if such
          Termination Date is beyond the end of the Term, the Termination Value
          as of the last Termination Date of the Term plus (D) all reasonable
          out-of-pocket expenses (including reasonable attorneys' fees) incurred
          by the Lessor or the Owner Participant in connection with such Event
          of

                                      -19-


          Loss plus (E) if such Termination Date is beyond the end of the Term,
          interest on the amount of such payment, at a rate per annum equal to
          the Past Due Rate identified on Exhibit B, for the period from and
          including the last day of the Term to but excluding such Termination
          Date.

          (b) EFFECT OF REPLACEMENT.

          Should the Lessee have provided a Replacement Aircraft as provided for
in Section 8(a)(i), (i) this Lease shall continue with respect to such
Replacement Aircraft as though no Event of Loss had occurred; (ii) the Lessor
shall, at the expense of Lessee, convey "as-is, where-is", without recourse or
warranty except for a warranty against Lessor's Liens, to the Lessee all right,
title and interest of the Lessor, in and to the Airframe and the Engine or
Engines, if any, installed on the Airframe upon the occurrence of the Event of
Loss by executing and delivering to the Lessee such bills of sale and other
documents and instruments as the Lessee may reasonably request to evidence such
conveyance; (iii) the Lessor shall, at the request and expense of Lessee, assign
to the Lessee all claims it may have against any other Person arising from the
Event of Loss (except with respect to insurance obtained in accordance with
Section 9(f)) and (iv) the Lessee shall be entitled to receive all insurance
proceeds (other than those reserved to others under Section 9(f)) and proceeds
from any award in respect of condemnation, confiscation, seizure or requisition,
including any investment interest thereon, to the extent not previously applied
to the purchase price of the Replacement Aircraft as provided in Sections
9(e)(iii) and 8(e)(i).

          (c) EFFECT OF TERMINATION VALUE PAYMENT.

          In the event of a payment in full of the Termination Value for the
Aircraft and other Rent payable as provided in Section 8(a)(ii), (i) this Lease
and the obligations of the Lessee to pay Rent (except for Supplemental Rent
obligations which survive pursuant to Section 3(c) and Articles 6 and 7 of the
Participation Agreement or the Tax Indemnity Agreement or which have accrued but
have not otherwise been paid as of the date of such payment) shall terminate and
the Term shall end, (ii) any remaining insurance proceeds (other than those
reserved to others under Section 9(f)), including any investment interest
thereon, shall be promptly paid over to the Lessee; and (iii) the Lessor, at the
expense of Lessee, shall convey, "as-is, where-is" without recourse or warranty,
except for a warranty against Lessor's Liens attributable to Lessor and Owner
Participant, to the Lessee all right, title and interest of the Lessor in and to
the Airframe and Engines and shall execute and deliver to the Lessee such bills
of sale and other documents and instruments as the Lessee may reasonably request
to evidence such conveyance.

          (d) CONDITIONS TO AIRFRAME REPLACEMENT.

          The Lessee's right to substitute a Replacement Aircraft as provided in
Section 8(a)(i) shall be subject to the fulfillment, at the Lessee's sole cost
and expense, in addition to the conditions contained in such Section 8(a)(i), of
the following conditions precedent:

               (i) On the date when the Replacement Aircraft is delivered to the
          Lessor (such date being referred to in this Section 8(d) as the
          "Replacement Closing Date"), no Specified Default shall have occurred
          and be continuing and

                                      -20-


          the Lessor and the Owner Participant shall have received an Officer's
          Certificate so certifying;

               (ii) On the Replacement Closing Date the following documents
          shall have been duly authorized, executed and delivered by the
          respective party or parties thereto and shall be in full force and
          effect, and an executed counterpart of each thereof (or, in the case
          of the FAA Bills of Sale (or a comparable document, if any, of another
          Aeronautical Authority, if applicable) referred to below, a photocopy
          thereof) shall have been delivered to the Lessor and the Owner
          Participant:

                    (A) a Lease Supplement covering the Replacement Aircraft,
               which shall have been duly filed for recordation with the FAA;

                    (B) an FAA Bill of Sale (or a comparable document, if any,
               of another Aeronautical Authority, if applicable) covering the
               Replacement Aircraft, executed by the owner thereof in favor of
               the Lessor, and dated the Replacement Closing Date;

                    (C) a full warranty (as to title) bill of sale, in form and
               substance satisfactory to the Owner Participant and the Lessor,
               covering the Replacement Aircraft, executed by the owner thereof
               in favor of the Lessor, dated the Replacement Closing Date and
               guaranteed by the Lessee;

                    (D) such "precautionary" Uniform Commercial Code financing
               statements as are deemed necessary or desirable by counsel for
               the Owner Participant to protect the ownership interests of the
               Owner Trustee in the Replacement Aircraft; and

                    (E) an Officer's Certificate of the Lessee certifying that
               (i) the Replacement Aircraft is an Embraer model EMB-145LR
               aircraft of a more advanced model, is in as good operating
               condition as, and has a value, remaining useful life, estimated
               residual value and utility at least equal to, the Aircraft it
               replaces, assuming such Aircraft had been maintained in the
               condition required hereunder and (ii) in the event the Event of
               Loss occurs after the fifth anniversary of the Delivery Date, the
               Replacement Airframe shall have no more than 105% of the total
               hours of operation, as compared to the Airframe it replaces;

               (iii) On or before the Replacement Closing Date, the Lessor and
          the Owner Participant (acting directly or by authorization to their
          respective special counsel) shall have received such documents and
          evidence with respect to the Lessee, the Lessor, the Owner Participant
          or the owner of such Replacement Aircraft, as the Lessor or its
          special counsel may reasonably request in order to establish the
          consummation of the transactions contemplated by Section 8(a)(i) and
          this Section 8(d), the taking of all necessary corporate action in
          connection

                                      -21-


          therewith and compliance with the conditions set forth in this Section
          8(d), in each case in form and substance reasonably satisfactory to
          the Lessor and the Owner Participant;

               (iv) The Lessor and the Owner Participant (acting directly or by
          authorization to their respective special counsel) shall each have
          received satisfactory evidence as to the compliance with Section 9
          hereof with respect to the Replacement Aircraft;

               (v) On the Replacement Closing Date, (A) the Lessor shall receive
          good title to the Replacement Aircraft free and clear of Liens (other
          than Permitted Liens), (B) the Replacement Aircraft shall have been
          duly certified by the Aeronautical Authority as to type and
          airworthiness in accordance with the terms of this Lease, and (C)
          application for registration of the Replacement Aircraft in accordance
          with Section 5(e) shall have been duly made with the Aeronautical
          Authority;

               (vi) The Owner Participant shall have received an appraisal
          reasonably satisfactory to it with respect to the Replacement
          Aircraft;

               (vii) The Lessor and the Owner Participant shall have received
          (acting directly or by authorization to its special counsel) (A) an
          opinion, satisfactory in form and substance to the Lessor and the
          Owner Participant, of counsel to the Lessee (which may be the Lessee's
          General Counsel) to the effect that (x) the bill of sale referred to
          in clause (ii)(D) above constitutes an effective instrument for the
          conveyance of title to the Replacement Airframe and Replacement
          Engines, if any, to the Lessor, (y) all documents executed and
          delivered by the Lessee pursuant to this Section 8(d) have been duly
          authorized, executed and delivered by the Lessee and constitute legal,
          valid and binding obligations of, and are enforceable against, the
          Lessee in accordance with their respective terms, and (z) the Lessor
          is entitled to the benefits of Section 1110 with respect to such
          Replacement Aircraft to the same extent as with respect to the
          replaced Aircraft immediately preceding such replacement; and (B) an
          opinion of qualified FAA counsel (or counsel in such jurisdiction
          outside of the United States where the Aircraft may be registered in
          accordance with Section 5(e)), as to, in the case of FAA counsel, the
          due recordation of the Lease Supplement and all other documents or
          instruments the recordation of which is necessary to perfect and
          protect the rights of the Lessor in the Replacement Aircraft or, in
          the case of counsel in another jurisdiction, the taking of all action
          necessary in such jurisdiction for such purposes;

               (viii) the Lessor shall be entitled to the benefits of Section
          1110 with respect to such Replacement Aircraft to the same extent as
          with respect to the replaced Aircraft immediately preceding such
          replacement; and

               (ix) Either(1) the Owner Participant shall have received an
          opinion of independent tax counsel (selected by the Owner Participant
          and reasonably

                                      -22-


          acceptable to the Lessee), reasonably satisfactory to the Owner
          Participant, to the effect that there shall be no risk of adverse tax
          consequences resulting from such replacement (and the Owner
          Participant shall use its best efforts to cause a timely opinion to be
          delivered) or (2) the Lessee shall have provided, or caused to be
          provided, an indemnity in respect of any adverse tax consequences in
          form and substance satisfactory to the Owner Participant.

          Lessee shall reimburse the Lessor and the Owner Participant for all
reasonable out-of-pocket costs (including reasonable attorneys' fees) incurred
by them in connection with any substitution of a Replacement Aircraft pursuant
to this Section 8.

          (e) NON-INSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS.

          As between the Lessor and the Lessee, any payments on account of an
Event of Loss (other than insurance proceeds or other payments the application
of which is provided for in this Section 8 or elsewhere in this Lease, as the
case may be, or payments in respect of damage to the business or property of the
Lessee) with respect to the Aircraft, an Engine or any Part received at any time
by the Lessor or by the Lessee from any governmental authority or other Person
will be applied as follows:

               (i)   if such payments are received with respect to an Event of
          Loss as to the Aircraft, and the Airframe or the Airframe and the
          Engines or engines installed thereon are being replaced by the Lessee
          pursuant to Section 8(a)(i), such payments shall be paid over to, or
          retained by, the Lessee, PROVIDED that if the Lessee has not completed
          such replacement, such payments shall be paid over to, or retained by,
          the Lessor as security, and upon completion of, or in connection with
          a closing for, such replacement, be paid over to or retained by the
          Lessee;

               (ii)  if such payments are received with respect to an Event of
          Loss to an Engine that has been or is being replaced by the Lessee
          pursuant to the terms hereof, such payments shall be paid over to, or
          retained by, the Lessee, PROVIDED that if the Lessee has not completed
          such replacement, such payments shall be paid over to, or retained by,
          the Lessor as security, and upon completion of, or in connection with
          a closing for, such replacement, be paid over to or retained by the
          Lessee; and

               (iii) if such payments are received with respect to an Event of
          Loss as to the Aircraft, and if the Airframe or the Airframe and the
          Engines or engines installed thereon have not been and will not be
          replaced as contemplated by Section 8(a), (x) so much of such payments
          as shall not exceed the Termination Value required to be paid by the
          Lessee pursuant to Section 8(a) hereof shall be applied in reduction
          of the Lessee's obligation to pay such Termination Value and other
          amounts, to the extent not already paid by the Lessee, and, after the
          Termination Value and all amounts required to be paid to the Lessor
          pursuant to Section 8(a)(ii) above shall be paid in full, shall be
          applied to reimburse the Lessee for such Termination Value up to the
          full amount thereof, and (y) the balance, if any, of such payment
          remaining thereafter shall be applied to

                                      -23-


          reimburse the Lessee, the Owner Participant and the Lessor for their
          reasonable costs (including attorney's fees), if any, of procuring
          such payments, and (z) the balance remaining, if any, shall then be
          distributed between the Lessor and the Lessee as their interests may
          appear.

          (f) REQUISITION FOR USE.

          In the event of a requisition for use by any government during the
Term of the Airframe and the Engines, if any, or engines installed on the
Airframe (including the Government pursuant to the CRAF Program), the Lessee
shall promptly notify the Lessor and the Owner Participant of such requisition
and, if the same does not constitute an Event of Loss, all of the Lessee's
obligations under this Lease shall continue to the same extent as if such
requisition had not occurred except to the extent that the performance or
observance of any obligation by the Lessee shall have been prevented or delayed
by such requisition, provided that the Lessee's obligations for the payment of
money and under Section 9 (except, in the case of Section 9, while an assumption
of liability by the government of the United States of the scope referred to in
Section 5(c) is in effect) and Section 12 shall not be reduced, delayed or
affected by such requisition. Any payments received by the Lessor or the Lessee
from such government with respect to the use of such Airframe or Engines during
the Term shall be paid over to, or retained by, the Lessee and any payments
received by the Lessor or Lessee from such government with respect to the use of
the Airframe or Engines after the Term shall be paid over to, or retained by,
Lessor. In the event of an Event of Loss of an Engine resulting from the
requisition for use by a government of such Engine (but not the Airframe), the
Lessee will replace such Engine hereunder by complying with the terms of Section
7(e) and any payments received by the Lessor or the Lessee from such government
with respect to such requisition shall be paid over to, or retained by, the
Lessee.

          (g) CERTAIN PAYMENTS TO BE HELD AS SECURITY.

          Any amount referred to in this Section 8 or Section 9 hereof which is
payable to the Lessee shall not be paid to the Lessee, or, if it has been
previously paid directly to the Lessee, shall not be retained by the Lessee, if
at the time of such payment a Specified Default shall have occurred and be
continuing, but shall be paid to and held by the Lessor as security for the
obligations of the Lessee under this Lease, unless and until applied by Lessor
to Lessee's obligations and at such time as there shall not be continuing any
such Specified Default, such amount and any gain realized as a result of
Permitted Investments required to be made pursuant to Section 15 shall to the
extent not so applied be paid over to the Lessee.

Section 9. INSURANCE.

          (a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE.

          Subject to the rights of the Lessee under Section 9(d), the Lessee
shall, without expense to the Lessor, maintain or cause to be maintained in
effect at all times during the Term with insurers of nationally or
internationally recognized responsibility public liability insurance (including,
without limitation, aircraft third party, passenger legal liability, property
damage, general third party legal liability and product liability coverage but
excluding manufacturer's

                                      -24-


product liability coverage) with respect to the Aircraft in an amount not less
than the greater of (i) the amount which Lessee may carry from time to time on
other similar aircraft in its fleet (whether owned or leased) and (ii) the
Minimum Liability Amount; provided that an agreement of the Government for the
benefit of the Additional Insureds to insure against or indemnify for
substantially the same risks to at least the same amount shall satisfy the
requirements of this Section 9(a), PROVIDED that on or prior to the date of such
agreement, the Lessee shall provide an Officer's Certificate of the Lessee
certifying that any such insurance or indemnity provides protection no less
favorable than insurance coverage that would comply with this Section 9. Such
insurance shall be of the type usually carried by the Lessee with respect to
similar aircraft and engines, and covering risks of the kind customarily insured
against by the Lessee.

          During any period that the Aircraft is grounded and not in operation,
the Lessee may modify the insurance required by this Section 9(a) to modify the
amounts of public liability and property damage insurance, the scope of the
risks covered and the type of insurance, in all circumstances to conform to such
insurance customary in the United States airlines industry for regional air
carriers similarly situated with the Lessee in respect of similar aircraft which
are grounded, not in operation, and stored or hangared, except that in all
instances, the amounts of coverage and scope of risk covered and the type of
insurance shall be at a minimum no less favorable than the insurance as from
time to time applicable to aircraft owned or leased by Lessee on the ground, not
in operation, and stored or hangared.

          (b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT AND ENGINES.

          Subject to the rights of the Lessee under Section 9(d), the Lessee
shall, without expense to the Lessor or the Owner Participant, maintain or cause
to be maintained in effect at all times during the Term with insurers of
nationally recognized responsibility (i) all risk, agreed value, ground and
flight hull insurance, which may, except as provided below, exclude war risks
and allied perils, covering the Aircraft for an amount at all times (even when
the Aircraft is grounded or in storage) not less than the Termination Value from
time to time; PROVIDED THAT, neither the Lessee nor any Permitted Sublessee
shall be required to maintain all-risk flight aircraft hull insurance with
respect to any period in which the Aircraft is grounded and properly stored or
hangared. Such insurance shall not provide insurers with a right to replace the
Airframe or any Engine with another airframe or Engine. Such hull insurance or
other personal property insurance of the Lessee (or a Permitted Sublessee) shall
cover Engines or engines and Parts temporarily removed from the Airframe,
pending replacement by installation of the same or similar Engines, engines or
Parts on the Airframe. Such insurance shall be of the type usually carried by
the Lessee with respect to similar aircraft and engines, and covering risks of
the kind customarily insured against by the Lessee. If and to the extent that
the Lessee or a Permitted Sublessee operates the Aircraft (A) on routes where it
maintains war risk, hijacking or allied perils insurance in effect with respect
to other similar owned or leased aircraft in its fleet, (B) on routes (other
than routes within the United States, Canada, Mexico, Bermuda and islands other
than Cuba in the Caribbean Basin) where the custom in the industry is to carry
war risk insurance or (C) in any area of recognized hostilities, the Lessee or
such Permitted Sublessee shall maintain or cause to be maintained such insurance
in effect with respect to the Aircraft in the amount at least equal to
Termination Value from time to time. An agreement by the Government to insure
against or indemnify for substantially the same risks to at least the same
amount will satisfy any of the requirements of this Section 9(b).

                                      -25-


          (c) ADDITIONAL INSUREDS; LOSS PAYMENT.

          The Lessee shall cause all policies of insurance carried in accordance
with this Section 9 to name the Additional Insureds as their respective
interests may appear as additional insureds. Such policies shall provide with
respect to such Additional Insureds that (i) none of their respective interests
in such policies shall be invalidated by any act or omission or breach of
warranty or condition contained in such policies by the Lessee or, in the case
of any particular Additional Insured, any other Additional Insured; (ii) no
cancellation or lapse of coverage for nonpayment of premium or otherwise, and no
substantial change of coverage which adversely affects the interests of any such
Additional Insured, shall be effective as to such Additional Insured until 30
days (or such lesser period as may be applicable in the case of any war risk
coverage) after receipt by such Additional Insured of written notice from the
insurers of such cancellation, lapse or change; (iii) they shall have no
liability for premiums, commissions, calls, assessments or advances with respect
to such policies; (iv) such policies will be primary without any right of
contribution from any other insurance carried by such Additional Insureds; (v)
the insurers waive any rights of set-off, counterclaim, deduction or subrogation
against such Additional Insureds; (vi) shall apply worldwide and have no
territorial restrictions or limitations (except, in the case of war, hijacking
or related perils insurance, as otherwise permitted hereunder); and (vii) shall
contain a 50/50% Clause per Lloyd's Aviation Underwriter's Association Standard
Policy Form AVS 103. Each liability policy shall provide that all the provisions
thereof, except the limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured and provide that the exercise
by the insurer of rights of subrogation derived from rights retained by the
Lessee will not delay payment of any claim that would otherwise be payable but
for such rights of subrogation. Each hull policy shall name the Lessor as loss
payee; provided that, so long as the insurers shall not have received written
notice that a Specified Default has occurred and is continuing, if insurance
proceeds in the aggregate equal $1,250,000 or less become payable, then such
proceeds shall be payable to the Lessee and, notwithstanding the foregoing, any
amounts up to Termination Value (i) of any proceeds which in the aggregate
exceed $1,250,000, (ii) of any proceeds in respect of an Event of Loss or (iii)
if the insurers shall have received written notice that an Event of Default has
occurred and is continuing, any proceeds with respect to any single loss, shall
be payable to such loss payee.

          (d) DEDUCTIBLES AND SELF-INSURANCE.

          Beginning five (5) years after the Delivery Date, the Lessee may from
time to time self-insure, by way of deductible or premium adjustment provisions
in insurance policies or otherwise, the risks required to be insured against
pursuant to this Section 9 in such amounts as are then self-insured with respect
to similar owned or leased aircraft in the Lessee's fleet but in no case shall
such self-insurance in the aggregate exceed, on a per occurrence or on fleetwide
basis, an amount equal to 5% of the Lessee's tangible net worth, calculated as
at the end of the Lessee's immediately preceding fiscal year (but in no event to
exceed $10,000,000). A deductible per occurrence that is not in excess of the
prevailing standard market deductible for similar aircraft shall be permitted,
for each aircraft in the Lessee's fleet, in addition to such self-insurance.

                                      -26-


          (e) APPLICATION OF HULL INSURANCE PROCEEDS.

          Subject to Section 8(g), as between the Lessor and the Lessee, any
payments received under policies of hull or other property insurance required to
be maintained by the Lessee pursuant to Section 9(b), shall be applied as
follows:

               (i)  if such payments are received with respect to loss or damage
          (including an Event of Loss with respect to an Engine) not
          constituting an Event of Loss with respect to the Airframe, payments
          in the aggregate of $1,250,000 or less shall be paid over to or
          retained by the Lessee and, subject to Section 9(c), any payments
          which in the aggregate are greater than $1,250,000 shall be paid over
          to or retained by the Lessor for payment to the Lessee only upon
          performance of its repair or replacement obligation;

               (ii)  if such payments are received with respect to an Event of
          Loss with respect to the Airframe and the Airframe is not being
          replaced by the Lessee pursuant to Section 8(a)(i), so much of such
          payments as shall not exceed the Termination Value and other amounts
          required to be paid by the Lessee pursuant to Section 8(a)(ii) shall
          be applied in reduction of the Lessee's obligation to pay such amounts
          if not already paid by the Lessee, and to reimburse the Lessee if such
          amounts shall have been paid, and the balance, if any, of such
          payments shall be promptly paid over to or retained by the Lessee; and

               (iii) if such payments are received with respect to the Airframe
          or the Airframe and Engines or engines installed thereon and the
          Airframe is being replaced by the Lessee pursuant to Section 8(a)(i),
          such payments shall be paid over to, or retained by the Lessee,
          provided that if the Lessee has not completed such replacement and the
          performance of all other obligations under Section 8(d), such payments
          shall be paid over to, or retained by, the Lessor as security, and
          upon completion of, or in connection with a closing for, such
          replacement, be paid over to or retained by the Lessee.

          (f) INSURANCE FOR OWN ACCOUNT.

          Nothing in this Section 9 shall prohibit the Lessor, the Owner
Participant, the Lessee or any Additional Insured from obtaining insurance with
respect to the Aircraft for its own account (including, without limitation, in
the case of the Lessee, hull insurance under the same policies maintained
pursuant to this Section 9 in amounts in excess of those required to be
maintained pursuant to this Section 9) and any proceeds payable thereunder shall
be payable as provided in the insurance policy relating thereto, provided that
no such insurance may be obtained which would limit or otherwise adversely
affect the availability of coverage or payment of any insurance required to be
obtained or maintained pursuant to this Section 9, it being understood that all
salvage rights to the Airframe or the Engines shall remain with the Lessee's
insurers at all times.

                                      -27-


          (g) REPORTS, ETC.

          Lessee will furnish to the Lessor and the Owner Participant (A) on or
prior to the Delivery Date, insurance certificates describing in reasonable
detail the insurance maintained by Lessee as required pursuant to this Section
9, (B) prior to the cancellation, lapse or expiration of the insurance policies
required pursuant to this Section 9, evidence of renewal of such insurance
policies, and (C) on or prior to the Delivery Date and on or before the renewal
dates of the insurance policies carried by the Lessee pursuant to this Section
9, a report signed by a firm of aircraft insurance brokers, not affiliated with
the Lessee, appointed by the Lessee and reasonably satisfactory to the Lessor,
stating the opinion of such firm that all premiums in connection with the
insurance then due have been paid and the insurance then carried and maintained
on the Aircraft complies with the terms hereof and, in the case of renewal
insurance, that such renewal insurance will on and after the effective date
thereof so comply with the terms hereof, PROVIDED that all information contained
in such report shall be held confidential by the Lessor and the Owner
Participant, and shall not be furnished or disclosed by them to anyone except
their legal counsel, insurance brokers or advisors, bona fide prospective
transferees of the Owner Participant and their respective agents (PROVIDED that
they shall agree for the benefit of the Lessee to hold all such information
similarly confidential) or as may be required by Applicable Law. The Lessee will
instruct such firm to give prompt written advice to the Lessor and the Owner
Participant of any default in the payment of any premium and of any other act or
omission on the part of the Lessee of which it has knowledge and which would in
such firm's opinion invalidate or render unenforceable, in whole or in any
material part, any insurance on the Aircraft. The Lessee will also instruct such
firm to advise the Lessor and the Owner Participant in writing at least 30 days
prior to the termination or cancellation of, or material adverse change in, such
insurance carried and maintained on the Aircraft pursuant to this Section 9 (or
such lesser period as may be applicable in the case of war risk coverage).

          (h) RIGHT TO PAY PREMIUMS.

          The Additional Insureds shall have the rights but not the obligations
of an additional named insured. None of Lessor, Owner Participant and the other
Additional Insureds shall have any obligation to pay any premium, commission,
assessment or call due on any such insurance (including reinsurance).
Notwithstanding the foregoing, in the event of cancellation of any insurance due
to the nonpayment of premiums, each of Lessor, Owner Participant and the other
Additional Insureds shall have the option, in its sole discretion, to pay any
such premium in respect of the Aircraft that is due in respect of the coverage
pursuant to this Lease and to maintain such coverage, as Lessor, Owner
Participant or the other Additional Insureds may require, until the scheduled
expiry date of such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, Owner Participant and the other Additional Insureds for
amounts so paid by them.

Section 10. LIENS.

          The Lessee shall not during the Term directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
Airframe, any Engine or any Part or title thereto or any interest therein or in
this Lease except (a) the respective rights of the Lessor and the Lessee as
provided herein and the rights of the parties to the other Operative

                                      -28-


Agreements; (b) the rights of others under agreements or arrangements to the
extent expressly permitted in Sections 5(b) and 7(c); (c) Liens for Taxes either
not yet due or being contested in good faith by appropriate proceedings so long
as such proceedings do not involve any non-de minimis risk of the sale,
forfeiture or loss of the Aircraft, Airframe or an Engine or the interest of
Owner Participant therein or any risk of criminal liability or any material risk
of civil penalty against Lessor or Owner Participant; (d) Liens of suppliers,
mechanics, workers, repairers, employees, airport operators, air traffic control
authorities or other like Liens arising in the ordinary course of business and
for amounts the payment of which is either not yet delinquent or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings, so long as such proceedings do not
involve a non-de minimis risk of the sale, forfeiture or loss of the Airframe or
an Engine or the interest of Owner Participant therein or any risk of criminal
liability or any material risk of civil penalty against Lessor or Owner
Participant; (e) Liens arising out of judgments or awards against the Lessee so
long as there shall be in effect with respect to which a stay of execution; (f)
Lessor's Liens; (g) salvage and similar rights of insurers under policies of
insurance maintained with respect to the Aircraft; (h) Liens with respect to
which the Lessee (or any sublessee) has provided a bond or other security
adequate in the good faith opinion of the Lessor and the Owner Participant; and
(i) a Permitted Security Interest. Liens described in clauses (a) through (i)
above are referred to herein as "Permitted Liens." The Lessee shall promptly, at
its own expense, take such action as may be necessary to duly discharge (by
bonding or otherwise) any Lien other than a Permitted Lien arising at any time
during the Term.

Section 11. RECORDATION AND FURTHER ASSURANCES.

          (a) RECORDATION OF LEASE.

          The Lessee shall cause this Lease, any Lease Supplements, and any and
all additional instruments which shall be executed pursuant to the terms hereof
to be kept, filed and recorded and to be re-executed, refiled and re-recorded at
all times during the Term with the FAA or other Aeronautical Authority to the
extent required to perfect and preserve the Lessor's interest in the Aircraft.

          (b) FURTHER ASSURANCES.

          The Lessee and the Lessor will each promptly and duly execute and
deliver to the other such further documents and assurances and take such further
action as the other may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessor and the Lessee hereunder, including, without limitation, if requested
by the Lessor or the Lessee, the execution and delivery of supplements or
amendments hereto, in recordable form, subjecting any replacement or substituted
aircraft or engine to this Lease and the recording or filing of counterparts
hereof, or of financing statements with respect hereto.

          (c) 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, in a

                                      -29-


clearly visible location (it being understood that the location of such placard,
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 below:

                                   Leased from
                   First Security Bank, National Association,
                         not in its individual capacity
                  but solely as Owner Trustee, Owner and Lessor

          Such placard may be removed temporarily, if necessary, in the course
of maintenance of the Airframe. If such placard is damaged or becomes illegible,
Lessee shall promptly replace it with a placard complying with the requirements
of this Section 11(c).

Section 12. RETURN OF AIRCRAFT AND RECORDS.

          (a) RETURN OF AIRCRAFT.

          Upon the termination of this Lease at the expiration of the Term or
upon the earlier termination of this Lease pursuant to the terms hereof, unless
the Lessee shall purchase the Aircraft or there shall have been an Event of Loss
with respect to the Aircraft, the Lessee, at its own expense, shall, except as
otherwise expressly provided herein, return the Airframe by delivering the same
to the Lessor in the continental United States of America at a location on the
Lessee's jet route system chosen by the Lessor, and otherwise in compliance with
conditions required by the provisions of this Section 12, fully equipped with
two Engines or other engine meeting the requirements of Replacement Engines duly
installed thereon.

          (b) RETURN OF OTHER ENGINES.

          In the event any engine not owned by the Lessor shall be returned with
the Airframe, such engine shall satisfy the requirements for a Replacement
Engine (and, in any event, the two engines returned shall be of the same model),
shall be free and clear of all Liens other than Lessor's Liens and shall have a
value, remaining useful life, utility and condition at least as great as the
Engine replaced (assuming such Engine was maintained in accordance with the
terms hereof) and the Lessee shall, at its own expense and concurrently with
such return, furnish the Lessor with (i) a full warranty bill of sale guaranteed
by Lessee, in form and substance reasonably satisfactory to the Lessor and the
Owner Participant, (ii) an Officer's Certificate as described in Section
7(e)(i)(D), and (iii) an opinion of counsel to the Lessee as described in
Section 7(e)(ii), with respect to each such engine and shall take such other
action as required by Section 7(e) to cause such engine to be a Replacement
Engine or as the Lessor may reasonably request in order that such engine shall
be duly and properly titled in the Lessor free and clear of all Liens other than
Lessor's Liens. Upon passage of title such engine shall be deemed to be an
Engine for all purposes hereof and thereupon the Lessor will transfer to the
Lessee, in "as-is, where is" condition, without recourse or warranty except a
warranty against Lessor's Liens, all right, title and interest of the Lessor or
any Affiliate in and to an Engine not installed on the Airframe at the time of
the return thereof.

                                      -30-


          (c) FUEL; RECORDS.

          Upon the return of the Aircraft, (i) the Lessor shall have no
obligation with respect to the amount of fuel or oil contained in the Airframe
and (ii) the Lessee shall deliver to the Lessor all logs, manuals, certificates
and inspection, modification and overhaul records which are required to be
maintained with respect thereto under applicable rules and regulations of the
FAA and DOT.

          (d) CONDITION OF AIRCRAFT.

          The Aircraft when returned to the Lessor shall be in the operating
condition required by Exhibit F-1 or F-2, as applicable.

          (e) FAILURE TO RETURN. If Lessee shall, for any reason whatsoever,
fail to return the Aircraft and the documents referred to in Section 12(c)(ii)
at the time and place and in the condition specified herein, all obligations of
Lessee under this Lease shall continue in effect with respect to the Aircraft
until the Aircraft is so returned to Lessor and Lessee shall pay to Lessor an
amount equal to the average daily Basic Rent payable by Lessee during the Term
for each day after the end of the Term to but excluding the day of such return;
PROVIDED, HOWEVER, that this Section 12(e) shall not be construed as permitting
Lessee to fail to meet its obligations to return the Aircraft or the documents
referred to in Section 12(c)(ii) in accordance with the requirements hereof or
constitute, or be deemed to constitute, a waiver of any Event of Default
resulting from Lessee's failure to return the Aircraft or such documents or
otherwise; and PROVIDED, FURTHER, that Lessee shall not be responsible for
Lessor's failure to accept return of the Aircraft and the documents referred to
in Section 12(c)(ii) in accordance with the requirements hereof in a timely
manner or for any rent with respect to periods after Lessee has tendered the
Aircraft and the documents referred to in Section 12(c)(ii) for return in
accordance with this Lease, provided however that if Lessor's inspection of the
Aircraft and the documents referred to in Section 12(c)(ii), which inspection
shall be conducted in good faith and timely manner, reveals any discrepancy from
the condition required by the provisions of this Section 12, Lessee shall
continue to pay rent in accordance with this Section 12(e) until the Aircraft
and the documents referred to in Section 12(c)(ii) are returned to the Lessor in
accordance with this Lease. Any rent owed to Lessor pursuant to this Section
12(e) shall be payable upon acceptance of the Aircraft and the documents
referred to in Section 12(c)(ii) by Lessor.

          (f) STORAGE AND RELATED MATTERS.

          If Lessor gives written notice to Lessee not less than 60 days nor
more than 180 days prior to the end of the Term requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with outdoor parking facilities for the Aircraft at the airport
where the Aircraft is returned for a period up to 60 days, commencing on the
date of such return at Lessor's expense; provided, that if such termination
occurs as a result of an Event of Default, such storage shall be at the Lessee's
expense. Lessee shall maintain in effect during such storage period insurance
covering the Aircraft to the extent such insurance is available at reasonable
commercial rates, and in such amounts and against such risks as would be
customarily carried in similar circumstances by a reasonably prudent lessor,
with such insurance being paid for by the Lessor; provided, that if such
termination occurs as a result

                                      -31-


of an Event of Default, the Lessee will cooperate with the Lessor in obtaining
such insurance at the Lessee's expense.

Section 13. RENEWAL OPTION AND PURCHASE OPTIONS.

          (a) RENEWAL TERMS.

          Subject to the final sentence of this Section 13(a), upon expiration
of the Basic Term, the Lessee shall have the right to extend this Lease for
successive periods of one year each (each a "Fixed Renewal Term"), but for not
more than an aggregate of two years. Subject to the final sentence of this
Section 13(a), at the end of the second Fixed Renewal Term (provided that the
Lessee shall have elected to extend this Lease for such Fixed Renewal Term), the
Lessee shall have the right to extend this Lease for up to two successive
periods of one year each (each a "Fair Market Value Renewal Term"; each Fixed
Renewal Term and each Fair Market Value Renewal Term, being hereinafter
sometimes called a "Renewal Term") provided that the aggregate term of all
Renewal Terms shall not exceed four years. A Fixed Renewal Term will commence at
the end of the Basic Term or the preceding Fixed Renewal Term, as the case may
be and a Fair Market Value Renewal Term will commence at the end of the second
Fixed Renewal Term (provided that the Lessee shall have elected to extend this
Lease for such Fixed Renewal Term) or at the end of the first Fair Market Value
Renewal Term, as the case may be. Such right to extend this Lease shall be
exercised upon notice to the Lessor, specifying the nature of the Renewal Term,
not less than 210 days nor more than 365 days before the expiration of the Basic
Term or the preceding Renewal Term, as the case may be. Such notice shall be
irrevocable except that in the event the Lessee gives such notice to the Lessor
240 or more days before the end of the Basic Term or the Renewal Term then in
effect, as the case may be, the Lessee may revoke its election to extend this
Lease within 15 days following the determination of the Fair Market Rental Value
of the Aircraft but in no event later than 210 days prior to the end of the
Basic Term or the preceding Renewal Term, as the case may be. If the Lessee
requests a determination of Fair Market Rental Value at least 240 days before
the expiration of the Basic Term or a Renewal Term, as the case may be, the
Lessor and the Lessee shall comply in a timely manner with their respective
obligations under the definition of "Fair Market Rental Value" to allow any
appraisal of Fair Market Rental Value to be completed in sufficient time to
permit the Lessee to exercise the revocation right provided above. If no
Specified Default shall have occurred and be continuing on the date of such
notice or on the date of the commencement of any Renewal Term, then this Lease
shall be extended for the additional period of such Renewal Term as specified in
such notice on the same conditions as provided for herein. The Basic Rent
payable per annum during any Fixed Renewal Term shall be the Renewal Rental Rate
identified on Exhibit B. The rental payable per annum during any Fair Market
Value Renewal Term shall be the then Fair Market Rental Value for the Aircraft.
Such rental during each Renewal Term shall be payable monthly. The Termination
Value of the Aircraft during each Renewal Term shall be the Fair Market Sales
Value for the Aircraft at the beginning of such Renewal Term declining on a
straight line basis to the projected Fair Market Sales Value for the Aircraft at
the end of such Renewal Term, but in both cases determined prior to the
commencement of such Renewal Term. If Lessee gives notice to Lessor that it will
exercise its right to renew this Lease at the end of the Basic Term,
notwithstanding such notice Lessee may not exercise such right if, not later
than 150 days prior to the end of the Basic Term, Owner Participant notifies
Lessee that it is demanding payment of a deficiency amount under the Residual
Value Guarantee Agreement

                                      -32-


and certifies to Lessee the appraised fair market sales value of the Aircraft as
determined under the Residual Value Guarantee Agreement that is the basis for
such claim and the amount of the deficiency so claimed.

          (b) LESSEE'S PURCHASE OPTIONS.

               (i) RIGHTS TO PURCHASE.

          The Lessee shall have the right upon notice as provided herein to
purchase the Aircraft (A) on the EBO Date for a price equal to the EBO Amount;
(B) upon the termination of the Basic Term a price equal to the then Fair Market
Sales Value of the Aircraft; or (C) at the end of any Renewal Term for a price
equal to the then Fair Market Sales Value of the Aircraft in each case as long
as no Event of Default of the type referred to in Section 16(f), (g) or (h)
hereof shall have occurred and be continuing on the date of purchase. Upon the
payment by the Lessee of the purchase price for the Aircraft and the Basic Rent,
if any, payable in arrears on the date of purchase, together with all unpaid
Basic Rent, if any, payable before such date and all Supplemental Rent then due
and payable hereunder, the Term shall end and the obligations of the Lessee to
pay Rent hereunder (except for Supplemental Rent obligations surviving pursuant
to Section 3(c), Articles 6 and 7 of the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not been paid as of the
date of such payment) shall cease, and the Lessor shall convey to the Lessee all
right, title and interest of the Lessor in and to the Aircraft on an "as-is,
where is" basis, without recourse or warranty except a warranty against Lessor's
Liens.

               (ii) NOTICE OF EXERCISE OF OPTION.

          The Lessee's right to purchase provided for in clause (B) or (C) of
Section 13(b)(i) shall be exercised upon written notice to the Lessor not more
than 365 days before the applicable date of purchase provided in such clause (B)
or (C) as the case may be and not less than 210 days before the applicable date
of purchase in the case of clause (B) and 180 days before the applicable date of
purchase in the case of clause (C). Such notice shall be irrevocable, except
that where the purchase price is or may be measured by the Fair Market Sales
Value of the Aircraft the Lessee may revoke its exercise of an option to
purchase the Aircraft as provided in Section 13(b)(iii) in the case of such
clause (B) or within 15 days following the determination of such Fair Market
Sales Value but in no event later than 180 days prior to the applicable date of
purchase in the case of such clause (C). The Lessee's right to purchase provided
for in clause (A) of Section 13(b)(i) shall be exercised upon written notice to
the Lessor not less than 120 days nor more than 365 days before the EBO Date and
shall be irrevocable when given.

               (iii) APPRAISAL PROCEDURE.

          If Lessee provides notice of its right to purchase provided for in
clause (B) of Section 13(b)(i), then not later than 180 days prior to the end of
the Basic Term, the Owner Participant shall notify Lessee (such notice, a
"Residual Notice") if it has notified the Manufacturer that it will require an
appraised value of the Aircraft to be determined under the Residual Value
Guarantee Agreement. If the Owner Participant provides a Residual Notice, Fair
Market Sales Value shall be determined pursuant to the Appraisal Procedure.
Otherwise, Fair

                                      -33-


Market Sales Value shall be determined as provided in the definition thereof. If
Fair Market Sales Value is determined pursuant to the Appraisal Procedure (x)
and is less than the Guaranteed Amount, the Manufacturer shall notify Lessee and
Owner Participant within 30 days after the determination of Fair Market Sales
Value but in no event later than 120 days prior to the end of the Basic Term
whether it will exercise its Fair Market Sales Value purchase option under the
Residual Value Guarantee Agreement, in which case Lessee's purchase option will
be revoked and (y) unless the Lessee's purchase option is revoked under the
preceding clause (x), Lessee shall have the option of revoking its purchase
option within 45 days after the determination of Fair Market Sales Value but in
no event later than 105 days prior to the end of the Basic Term. If Fair Market
Sales Value is not determined in accordance with the Appraisal Procedure, Lessee
may revoke its exercise of an option to purchase the Aircraft within 15 days
following the determination of Fair Market Sales Value but in any event not
later than 105 days prior to the end of the Basic Term.

Section 14. VOLUNTARY TERMINATION FOR OBSOLESCENCE.

          (a) TERMINATION BY SALE OF AIRCRAFT.

          So long as no Specified Default shall have occurred and be continuing,
the Lessee shall have the right at its option five years or more after
commencement of the Basic Term on at least 180 days', but not more than 365
days, prior written notice (which notice shall be irrevocable, except as
provided below) to the Lessor, specifying a proposed date of termination which
shall be a Termination Date, to terminate this Lease if the chief financial
officer of the Lessee shall have certified in writing to the Lessor that the
Aircraft shall have become obsolete or shall be surplus to the Lessee's
equipment requirements. Subject to the Lessor's preemptive election under
Section 14(c), during the period following the giving of such notice of
termination until the Termination Date, the Lessee, as agent for the Lessor,
shall endeavor to sell the Aircraft "as is", without any warranty by the Lessor
or the Lessee except as to the Lessor's title, on behalf of the Lessor. If
Lessee receives any bid, it shall at least 10 Business Days prior to the
proposed day of sale, certify to Lessor in writing the amount and terms of such
bid, such proposed date of sale and the name and address of the potential buyer
(which shall not be Lessee or any Affiliate or any Person with whom Lessee or
any Affiliate has any arrangement or understanding for the future purchase,
lease, operation or use of the Aircraft). Lessor may also solicit bids directly
or through agents other than Lessee. So long as the Lessor has not exercised its
preemptive election under Section 14(c), the Lessee may, by notice to the
Lessor, withdraw its notice of termination at any time on or before the date 10
days prior to the proposed Termination Date (unless such withdrawal is due to
the cancellation of the proposed purchase of the Aircraft by the potential buyer
in which event such notice may be given at any time on or prior to the proposed
Termination Date), and thereupon this Lease shall continue in full force and
effect. Withdrawal of notice of termination shall not exhaust the Lessee's right
to give a further notice of termination as provided herein; provided that Lessee
shall not be entitled to give more than two such notices (excluding one notice
of termination which has been withdrawn due to the cancellation of the proposed
purchase of the Aircraft by the potential buyer). Unless the Lessee shall
withdraw its notice of termination as stated above or the Lessor shall have made
a preemptive election to take possession of the Aircraft in accordance with
Section 14(c), on the Termination Date, or such other date of sale as shall be
consented to in writing by the Lessor and the Lessee, which date shall
thereafter be deemed the Termination Date, the Lessee shall, upon

                                      -34-


payment in full of the amounts described in Section 14(b), deliver the Airframe
and Engines or engines installed thereon to the party which shall have prior to
such date submitted the highest bona fide cash bid to close such sale and
purchase of the same, in the same manner as if delivery were being made to the
Lessor pursuant to Section 12, and shall duly transfer to such party title to
any engines which are not Engines delivered with the Airframe in accordance with
the terms of Section 12. The Lessor shall, in "as-is, where-is" condition,
without recourse or warranty (except a warranty as to the absence of Lessor's
Liens), simultaneously therewith sell and convey title to the Airframe and the
Engines or engines conveyed to the Lessor as provided in Section 12 for cash to
such party. Upon the sale of the Airframe and the Engines or engines conveyed to
the Lessor as provided in Section 12 pursuant to this Section 14 and receipt by
the Lessor of all amounts referred to in Section 14(b), the Lessor will transfer
to the Lessee, in "as-is, where-is" condition, without recourse or warranty
(except a warranty as to the absence of Lessor's Liens), all right, title and
interest of the Lessor in and to any Engines constituting part of the Aircraft
but which were not delivered to the purchaser with the Airframe. The Lessee
shall pay all out of pocket expenses of the Lessor and Owner Participant in
connection with any termination or proposed termination of this Lease except
that Lessee shall not be responsible for such expenses of the Lessor or the
Owner Participant in the event the Lessor exercises its preemptive election
under Section 14(c) and thereafter fails to perform its obligations under such
Section.

          (b) PAYMENTS DUE UPON SALE OF AIRCRAFT.

          The total selling price realized at any sale of the Airframe and
Engines or engines installed thereon in accordance with this Section 14 shall be
retained by the Lessor and, in addition, on the Termination Date, the Lessee
shall pay to the Lessor or, in the case of Supplemental Rent, to the Persons
entitled thereto, in immediately available funds, an amount equal to the sum of
(A) the excess, if any, of (x) the Termination Value as of the Termination Date,
over (y) the net proceeds of the sale of the Aircraft, plus (B) all unpaid
Supplemental Rent due on or before the Termination Date, plus (C) the arrears
portion, if any, of Basic Rent payable on such Termination Date, together with
all unpaid Basic Rent, if any, payable before the Termination Date, plus (D) the
reasonable fees and expenses of the Owner Participants and Lessor in connection
therewith, plus (E) any sales, transfer or similar Taxes incurred on such sale.

          (c) PREEMPTIVE ELECTION BY LESSOR.

          Notwithstanding the foregoing provisions of this Section 14, the
Lessor may, not later than 90 days prior to the proposed Termination Date,
notify the Lessee of its preemptive election to take possession of the Aircraft
and following delivery of such notice, the Lessee shall have no obligation to
pay Termination Value or any amount with respect to Termination Value under this
Section 14. On the Termination Date, if the Lessor shall have exercised its
preemptive election to retain the Aircraft in accordance with the terms of this
Section 14(c), the Lessee shall deliver the Airframe and Engines or engines
installed thereon to the Lessor in accordance with Section 12 and shall pay all
unpaid Basic Rent, if any, payable before the Termination Date, together with
all Basic Rent (if payable in arrears) due on such Termination Date, all unpaid
Supplemental Rent due on or before or after the Termination Date, and the Lessor
shall transfer

                                      -35-


to the Lessee title to any Engines constituting part of the Airframes but which
were not then installed on the Aircraft as provided in Section 12(b).

          (d) TERMINATION OF LEASE.

          Upon delivery by the Lessee of the Airframe and Engines or engines
installed thereon and payment by the Lessee of all amounts payable by the Lessee
under either Section 14(b) or 14(c), as the case may be, the obligations of the
Lessee to pay Rent (except for Supplemental Rent obligations surviving pursuant
to Section 3(c) and Articles 6 and 7 of the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not paid as of the
Termination Date) shall cease and the Term shall end.

          (e) EFFECT OF NO SALE OR PREEMPTIVE DELIVERY TO LESSOR.

          If on the Termination Date no sale of the Aircraft shall have occurred
and the Lessee has not delivered the Aircraft to the Lessor pursuant to Section
14(c), the Lessee's notice given pursuant to Section 14(a) shall be deemed to be
withdrawn as of such date and this Lease shall continue in full force and
effect.

          (f) NO DUTY ON PART OF LESSOR.

          Lessor shall be under no duty to solicit bids, to inquire into the
efforts of Lessee to obtain bids or otherwise to take any action in connection
with any such sale other than to cooperate with such efforts as Lessee may
reasonably request and to make the transfers described in Section 14(a).

Section 15. INVESTMENT OF SECURITY FUNDS.

          Any monies paid to or retained by the Lessor which are required to be
paid to the Lessee or applied for the benefit of the Lessee (including, without
limitation, amounts payable to the Lessee under Sections 8 and 9), but which the
Lessor is entitled to hold under the terms hereof pending the occurrence of some
event or the performance of some act (including, without limitation, the
remedying of an Event of Default), shall, until paid to the Lessee or applied as
provided herein, be invested by the Lessor from time to time at the direction,
risk and expense of the Lessee in Permitted Investments. There shall be promptly
remitted to the Lessee any gain (including interest received) realized as the
result of any such investment (net of any fees, commissions and other expenses,
if any, incurred in connection with such investment) unless a Specified Default
shall have occurred and be continuing, in which case such gains shall be held or
applied in accordance with the preceding sentence. The Lessee will promptly pay
to the Lessor, on demand, the amount of any loss realized as the result of any
such investment (together with any fees, commissions and other expenses, if any,
incurred in connection with such investment).

Section 16. EVENTS OF DEFAULT.

          The following events shall constitute Events of Default and each such
Event of Default shall be deemed to exist and continue so long as, but only so
long as, it shall not have been remedied:

                                      -36-


          (a) The Lessee shall fail to make any payment of (i) Basic Rent or
     Termination Value when due and such failure shall continue for a period of
     10 days or (ii) Supplemental Rent (other than Termination Value) within 30
     days after receipt by the Lessee of a written demand therefor from the
     Lessor;

          (b) The Lessee shall fail to procure and maintain insurance required
     pursuant to Section 9 or such insurance shall be cancelled or lapse;
     PROVIDED that such lapse or cancellation shall not constitute an Event of
     Default until the earlier of 30 days after receipt by the Lessor of notice
     of such lapse or cancellation or the date that the lapse or cancellation is
     effective as to the Lessor or the Owner Participant;

          (c) The Lessee shall operate the Aircraft after having received notice
     that the public liability insurance required by Section 9(a) has lapsed or
     has been cancelled;

          (d) The Lessee shall fail to perform or observe any other covenant or
     condition to be performed or observed by it hereunder or under any other
     Operative Agreement (other than the Tax Indemnity Agreement), and such
     failure shall continue unremedied for a period of 30 days after delivery of
     notice of such failure from the Lessor to the Lessee, unless such failure
     is curable and the Lessee shall, after the delivery of such notice, be
     diligently proceeding to correct such failure and shall in fact correct
     such failure 120 days after delivery of such notice;

          (e) Any representation or warranty made by the Lessee herein or in any
     Operative Agreement or in any certificate required to be delivered by the
     Lessee pursuant thereto (other than the Tax Indemnity Agreement) shall
     prove to have been incorrect in any material respect when made and shall
     remain material at the time in question and shall not be remedied within 30
     days after notice thereof has been given to the Lessee by the Lessor,
     unless such incorrectness is curable and Lessee shall, after delivery of
     such notice, be diligently proceeding to correct such failure and shall in
     fact correct such failure 120 days after the delivery of such notice;

          (f) The Lessee shall consent to the appointment of or taking
     possession by a receiver, assignee, custodian, sequestrator, trustee or
     liquidator (or other similar official) of itself or of a substantial part
     of its property, or the Lessee shall admit in writing its inability to pay
     its debts generally as they come due (as provided in 11 U.S.C.
     Section303(h)(1)), or shall make a general assignment for the benefit of
     its creditors, or the Lessee shall file a voluntary petition in bankruptcy
     or a voluntary petition or answer seeking liquidation, reorganization or
     other relief with respect to itself or its debts under the Federal
     bankruptcy laws, as now or hereafter constituted or any other applicable
     Federal or State bankruptcy, insolvency or other similar law or shall
     consent to the entry of an order for relief in an involuntary case under
     any such law or the Lessee shall file an answer admitting the material
     allegations of a petition filed against the Lessee in any such proceeding,
     or otherwise seek relief under the provisions of any now existing or future
     Federal or State bankruptcy, insolvency or other similar law providing for
     the reorganization or winding-up of corporations, or providing for an
     agreement, composition, extension or adjustment with its creditors;

                                      -37-


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

          (h) A petition against the Lessee in a proceeding under the Federal
     bankruptcy laws or other insolvency laws as now or hereafter in effect
     shall be filed and shall not be withdrawn or dismissed within 90 days
     thereafter, or, under the provisions of any law providing for
     reorganization or winding-up of corporations which may apply to the Lessee,
     any court of competent jurisdiction shall assume jurisdiction, custody or
     control of the Lessee or of any substantial part of its property and such
     jurisdiction, custody or control shall remain in force unrelinquished,
     unstayed or unterminated for a period of 90 days;

          (i) So long as GECC or an Affiliate of GECC is the Owner Participant,
     any "event of default" occurs under a Related Lease;

          (j) Lessee shall receive notice of default or exercise of remedies
     with respect to the payment or performance of any indebtedness or other
     obligation to any third party and any such default or exercise of remedies
     results in an acceleration of such indebtedness or obligation; provided,
     however, that the aggregate amount of any such indebtedness or obligation
     is in excess of $5,000,000 (determined in the case of borrowed money by the
     amount outstanding under the agreement pursuant to which such borrowed
     money was borrowed, in the case of a deferred purchase price by the
     remaining balance and in the case of a lease by the present value of the
     remaining rent payable thereunder); or

          (k) The Lessee shall cease to be a Certificated Air Carrier and such
     circumstance results in the Owner Trustee no longer being entitled to the
     benefits of Section 1110 of the Bankruptcy Code,

PROVIDED that, notwithstanding anything to the contrary contained in this Lease,
any failure of the Lessee to perform or observe any covenant, condition, or
agreement herein shall not constitute an Event of Default under clause (d) above
if such failure is caused solely by reason of an event referred to in the
definition of "EVENT OF LOSS" so long as the Lessee is continuing to comply with
the applicable terms of Section 8.

Section 17. REMEDIES.

          Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, the Lessor may, at its option, declare
this Lease to be in default by a notice to the Lessee (PROVIDED that this Lease
shall be deemed to have been declared in default without the necessity of such
notice upon the occurrence of any Event of Default described in paragraph (f),
(g) or (h) of Section 16 hereof); and at any time thereafter so long as the
Lessee shall not have remedied all outstanding Events of Default, the Lessor may
do, and the Lessee

                                      -38-


shall comply with, one or more of the following with respect to the Airframe and
all or any part of the Engines, as the Lessor in its sole discretion shall
elect, to the extent permitted by, and subject to compliance with any mandatory
requirements of, Applicable Law then in effect; PROVIDED that during any period
the Aircraft is subject to the Civil Reserve Air Fleet Program in accordance
with the provisions of Section 5(b) and in the possession of the United States
government or an instrumentality or agency thereof, the Lessor shall not, on
account of any Event of Default, be entitled to do any of the following in such
manner as to limit the Lessee's control under this Lease (or any sublessee's
control under any Sublease permitted by the terms of this Lease) of any Airframe
or any Engines, unless at least 60 days' (or such lesser period, if any, as may
then be applicable under the Military Airlift Command Program of the United
States Government) prior notice of default hereunder shall have been given by
the Lessor by registered or certified mail to the Lessee (or any sublessee) with
a copy addressed to the Contracting Office Representative for the Military
Airlift Command of the United States Air Force under any contract with Lessee
(or any sublessee) relating to the Aircraft:

          (a) Cause the Lessee, upon the written demand of the Lessor and at the
     Lessee's expense to, and the Lessee shall, promptly return the Airframe and
     all or such part of the Engines as the Lessor may demand to the Lessor in
     the manner and condition required by, and otherwise in accordance with all
     of the provisions of, Section 12 as if the Airframe and such Engines were
     being returned at the end of the Term; or the Lessor, at its option, may
     cause public officials acting pursuant to judicial order obtained in
     summary proceedings or otherwise to enter upon the premises where the
     Airframe or any or all Engines are located or reasonably believed to be
     located and take immediate possession of and remove such Airframe or
     Engines, and the Lessee shall comply therewith, all without liability to
     the Lessor for or by reason of such entry or taking possession, whether for
     the restoration of damage to property caused by such taking or otherwise;
     and the Lessee shall promptly execute and deliver to the Lessor such
     instruments of title or other documents as the Lessor may deem necessary or
     advisable to enable the Lessor or its agent to obtain possession of the
     Airframe or the Engines, provided that if the Lessee shall for any reason
     fail to execute and deliver such instruments and documents after such
     request, the Lessor shall be entitled, in a proceeding to which the Lessee
     shall be a necessary party, to a judgment for specific performance,
     conferring the right to immediate possession upon the Lessor and requiring
     the Lessee to execute and deliver such instruments and documents to the
     Lessor;

          (b) Sell or otherwise dispose of all or any part of the Aircraft, at
     public or private sale, as the Lessor may determine, or hold, use, operate,
     lease to others or keep idle all or any part of the Aircraft, Airframe or
     any Engine as the Lessor, in its sole discretion, may determine, in any
     such case free and clear of any rights of the Lessee except as hereinafter
     set forth in this Section 17 and without any duty to account to the Lessee
     with respect to such action or inaction or for any proceeds with respect
     thereto except to the extent required by paragraph (d) below in the event
     the Lessor elects to exercise its rights under said paragraph in lieu of
     its rights under paragraph (c) below;

          (c) Whether or not the Lessor shall have exercised, or shall
     thereafter at any time exercise, any of its rights under paragraph (a) or
     paragraph (b) above with respect to the Aircraft, the Lessor, by written
     notice to the Lessee specifying a payment date (which

                                      -39-


shall be a Termination Date) not earlier than 10 days from the date of such
notice, may require the Lessee to pay to the Lessor, and the Lessee shall pay to
the Lessor, on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty, any installment of Basic Rent due on
or before such payment date plus an amount equal to the excess, if any, of (i)
Termination Value for the Aircraft, determined as of such payment date over (ii)
the Fair Market Sales Value for the Aircraft, computed as of the payment date
specified pursuant to this paragraph (c), together with interest, to the extent
permitted by Applicable Law, at the Past Due Rate on the amount of such excess,
if any, from such payment date specified pursuant to this paragraph (c), to the
date of actual payment of such amount PROVIDED THAT, in any such instance in
which the Lessor is unable to repossess the Aircraft due to circumstances not
relating to or caused by any Lessee Person and the Fair Market Sales Value
thereof is deemed to be zero, upon receipt of any such payment under this clause
(c) and all other amounts due hereunder, the Lessor shall convey, as-is,
where-is, without recourse or warranty, other than a warranty against Lessor's
Liens, to the Lessee all right, title and interest of the Lessor in and to the
Airframe and Engines, and execute and deliver to the Lessee such bills of sale
and other documents and instruments as the Lessee may reasonably request to
evidence such conveyance;

          (d) In the event the Lessor, pursuant to paragraph (b) above, shall
     have sold the Aircraft upon reasonable notice to the Lessee, the Lessor in
     lieu of exercising its rights under paragraph (c) above with respect to the
     Aircraft, may, if it shall so elect, require the Lessee to pay the Lessor,
     and the Lessee shall pay to the Lessor, on the date of such sale, as
     liquidated damages for loss of a bargain and not as a penalty (in lieu of
     the Basic Rent due after the date on which such sale occurs but in addition
     to any installment of Basic Rent due on or up to the date on which such
     sale occurs), the amount of any deficiency of the net proceeds of such sale
     below the Termination Value of the Aircraft, determined as of the
     Termination Date immediately preceding the date of such sale, together with
     interest, to the extent permitted by Applicable Law, at the Past Due Rate
     on the amount of such deficiency from such Termination Date to the date of
     actual payment; and

          (e) Rescind, cancel or terminate this Lease or exercise any other
     right or remedy which may be available under Applicable Law or proceed by
     appropriate court action to enforce the terms hereof or to recover damages
     for the breach hereof.

In addition, the Lessee shall be liable for any unpaid Supplemental Rent due
hereunder before or after any termination hereof, including all reasonable costs
and expenses including attorney's fees and disbursements incurred by the Lessor
or the Owner Participant by reason of the occurrence of any Event of Default or
the exercise of the Lessor's remedies with respect thereto including without
limitation all costs and expenses incurred in connection with the return of the
Airframe or any Engine in accordance with, and in the condition required by, the
terms of Section 12 or any appraisal of the Aircraft required for purposes of
this Section 17. At any sale of the Aircraft, the Airframe or any Engine, or
portion thereof pursuant to this Section 17, the Lessor or the Owner Participant
may bid for and purchase such property. Except as otherwise expressly provided
above, no remedy referred to in this Section 17 is intended to be exclusive (but
0the liquidation of damages provided in this Section 17 shall be exclusive to
the extent

                                      -40-


permitted by Applicable Law), but each shall be cumulative and in addition to
any other remedy referred to above or otherwise available to the Lessor for the
Event of Default at law or in equity; and the exercise or beginning of exercise
by the Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by the Lessor of any or all such other remedies.
No express or implied waiver by the Lessor of any Event of Default hereunder
shall in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default.

Section 18. LESSOR'S RIGHT TO PERFORM FOR THE LESSEE.

          If the Lessee fails to make any payment of Rent required to be made by
it hereunder or fails to perform or comply with any of its agreements contained
herein the Lessor may, upon prior notice to the Lessee, itself make such payment
or perform or comply with such agreement, and the amount of such payment and the
amount of the reasonable expenses of the Lessor 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 Past Due Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand; PROVIDED that no such
payment or performance by the Lessor shall be deemed to cure any Default or
Event of Default under this Lease or relieve the Lessee of any of its
obligations hereunder; PROVIDED further that nothing in this Section 18 shall be
deemed to permit the Lessor to exercise any control over the operation or
maintenance of the Aircraft or any part thereof while it is being utilized in
the air transportation services of the Lessee or any Permitted Sublessee without
the consent of the Lessee; PROVIDED further that the provisions of this Section
18 shall not affect Lessor's right to exercise its remedies under Section 17
upon the occurrence and continuance of an Event of Default.

Section 19. BANKRUPTCY.

          It is the intention of the parties that the Lessor shall be entitled
to the benefits of 11 U.S.C. Section 1110 with respect to the right to repossess
the Airframe, Engines and Parts as provided herein, and in any circumstances
where more than one construction of the terms and conditions of this Lease is
possible, a construction which would preserve such benefits shall control over
any construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. Section 1110
or any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed and provided that, notwithstanding any other
provisions of the Federal bankruptcy laws, as amended from time to time, any
right of the Lessor to take possession of the Aircraft in compliance with the
provisions of this Lease shall not be affected by the provisions of 11 U.S.C.
Section 362 or 363, as amended from time to time, or any analogous provisions of
any superseding statute or any power of the bankruptcy court to enjoin such
taking of possession.

Section 20. ASSIGNMENT: BENEFIT AND BINDING EFFECT.

          (a) ASSIGNMENT BY THE LESSEE.

          The Lessee may not, without the prior written consent of the Lessor
and the Owner Participant, assign any of its rights hereunder except as
otherwise expressly provided herein.

                                      -41-


          (b) ASSIGNMENT BY THE LESSOR.

          The Lessor may not, without the prior consent of the Lessee, assign
any of its rights under or interest in this Lease except to a successor Owner
Trustee or additional trustee referred to in Section 9.01 of the Participation
Agreement and Section 8.01 of the Trust Agreement and except as set forth in
Section 13.09 of the Participation Agreement or as otherwise expressly provided
herein.

          (c) BENEFIT AND BINDING EFFECT.

          The terms and provisions of this Lease shall be binding upon and,
subject to the limitations on assignment of rights hereunder, inure to the
benefit of the Lessor and the Lessee and their respective successors and
permitted assigns. Nothing herein shall be construed as creating rights in any
other Person except, to the extent provided herein, the Owner Participant.

          (d) SUBLESSEE'S PERFORMANCE AND RIGHTS.

          Any obligation imposed on the Lessee in this Lease shall require only
that the Lessee perform or cause to be performed such obligation, even if stated
herein as a direct obligation, and the performance of any such obligation by any
sublessee or transferee of the Airframe or any Engine or Part permitted by the
terms hereof under a sublease or transfer agreement then in effect shall
constitute performance by the Lessee and to the extent of such performance
discharges such obligation by the Lessee.

Section 21. OWNER TRUSTEE'S LIMITATION ON LIABILITY.

          Trust Company is entering into this Lease solely as Owner Trustee
under the Trust Agreement and not in its individual capacity and neither Trust
Company nor any entity acting as successor Owner Trustee or additional Owner
Trustee under the Trust Agreement shall be personally liable for, or for any
loss in respect of, any of the statements, representations, warranties,
agreements or obligations stated to be those of the Lessor hereunder, as to
which all interested parties shall look solely to the Trust Estate, except to
the extent expressly provided otherwise in any other Operative Agreement,
PROVIDED, HOWEVER, that nothing in this Section 21 shall be construed to limit
in scope or substance the liability of Trust Company or any entity acting as
successor Owner Trustee or additional Owner Trustee under the Trust Agreement in
its individual capacity for the consequences of its own willful misconduct or
gross negligence or (in receiving, handling or remitting funds) its simple
negligence, or the inaccuracy or breach of its representations, warranties or
covenants made in such capacity in any other Operative Agreement.

Section 22. CERTAIN AGREEMENTS OF LESSEE.

          The Lessee will take, or cause to be taken, at the Lessee's cost and
expense, such action with respect to the recording, filing, re-recording and
re-filing of this Lease, each Lease Supplement, the Trust Agreement and any
financing statements or other instruments as are necessary or requested by the
Owner Participant and appropriate, to maintain any security interest that may be
claimed to have been created by this Lease and the ownership interest of the
Owner Trustee in the Aircraft, and will furnish to the Owner Trustee and the
Owner Participant

                                      -42-


timely notice of the necessity of such action, together with such instruments,
in execution form, and such other information as may be required to enable them
to take such action.

Section 23. MISCELLANEOUS.

          (a) NOTICES.

          Except as otherwise specifically provided herein, all notices,
requests, approvals or consents required or permitted by the terms hereof 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). Any notice shall be effective when received.
Any notice shall either be sent by overnight courier service or overnight
delivery service or by hand, or sent in the form of a telecopy, provided that
there is receipt of such notice the next Business Day from an overnight courier
service, or by overnight delivery service or delivered by hand. Any notice shall
be directed to the Lessee, the Lessor or any other party to the Participation
Agreement to the respective addresses set forth in Section 12.01 to the
Participation Agreement or to such other address or telecopy number as any such
party may designate pursuant to Section 12.01 of the Participation Agreement.

          (b) COUNTERPARTS.

          This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall, subject to the
next sentence and the legend appearing on the cover hereof, be an original, but
all such counterparts shall together constitute but one and the same instrument.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS THE TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART
MARKED COUNTERPART NO. 1.

          (c) AMENDMENTS.

          Neither this Lease nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified orally, but only by an instrument in
writing signed by the Lessor and the Lessee.

          (d) AGREEMENT TO LEASE.

          It is the intent of the parties to this Lease that for all purposes
(including, without limitation, U.S. Federal income tax purposes) this Lease
will be a true lease, and that this Lease conveys to the Lessee no right, title
or interest in the Aircraft except as a lessee.

          (e) GOVERNING LAW.

               (i) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF

                                      -43-


CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LEASE HAS BEEN DELIVERED IN THE
STATE OF NEW YORK.

               (ii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
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 LEASE.

               (iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 12.01 OF THE PARTICIPATION AGREEMENT. EACH PARTY
HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN
ACCORDANCE WITH THIS SECTION 23(e)(iii), 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.

               (iv) 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 LEASE OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS.

               (v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 LEASE.

          (f) SEVERABILITY.

          Any provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

                                      -44-


          (g) SURVIVAL.

          The representations, warranties, indemnities and covenants set forth
herein shall survive the delivery of the Aircraft, the transfer of any interest
of Owner Participant in this Lease, the other Operative Agreements, the Trust
Estate and the Trust Agreement.

          (h) ARTICLE 2A.

          The Lessor and the Lessee agree that this Lease is a "finance lease"
for purposes of Article 2A of, and as defined in Section 2-A-103 of the Uniform
Commercial Code. The Lessee agrees that no right or remedy granted solely by
reason of Article 2A of the Uniform Commercial Code shall be available to the
Lessee as against the Lessor unless expressly provided in this Lease.

            [The remainder of this page is intentionally left blank.]

                                      -45-


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

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

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

                                        CHAUTAUQUA AIRLINES, INC.

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

                                      -46-


                                                                       Exhibit A
                                                              TO LEASE AGREEMENT

                         LEASE SUPPLEMENT NO. 1 [N281SK]

          THIS LEASE SUPPLEMENT NO. 1 [N281SK] dated __________, 2001, between
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee, except as otherwise provided herein, the Lessor, and
CHAUTAUQUA AIRLINES, INC., a New York corporation, the Lessee;

                              W I T N E S S E T H :

          WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Lease Agreement [N281SK], dated as of February 23, 2001 (the "Lease",
the terms defined therein being herein used with the same meaning), which Lease
provides, among other things, for the execution and delivery of Lease
Supplements in substantially the form hereof for the purpose of leasing a
specific Aircraft under the Lease when delivered by the Lessor to the Lessee in
accordance with the terms thereof;

          WHEREAS, the Lease, a counterpart of which is attached hereto and made
a part hereof, relates to the Aircraft and Engines described in Schedule I
hereto and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

          1. The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease as herein
supplemented, the Aircraft, described in Schedule I hereto.

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

          3. The Basic Term shall commence on the Delivery Date and continue
through __________, ____ (the "Expiration Date"), unless terminated earlier as
provided in the Lease.

          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 Documents.

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

          6. This Lease Supplement may be executed by the parties hereto in
separate counterparts and all such counterparts shall together constitute but
one and the same instrument.



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 or the
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart of each thereof marked Counterpart No. 1.

          7. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

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

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

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

                                      CHAUTAUQUA AIRLINES, INC.

                                      By:  /s/ Robert H. Cooper
                                          -------------------------------------
                                          Name:  Robert H. Cooper
                                          Title: Vice President



                                                                      SCHEDULE I
                                                                    TO EXHIBIT A

                       DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME



                                   Manufacturer's              FAA Registration             Manufacturer's
      Manufacturer                     Model                          No.                     Serial No.
- -------------------------  -----------------------------  ---------------------------  ------------------------
                                                                                       
        Embraer                      EMB-145LR                      N281SK                      145391


                                     ENGINES


                                              Manufacturer's                     Manufacturer's
           Manufacturer                           Model                            Serial No.
- ----------------------------------  ----------------------------------  -------------------------------
                                                                             
   Allison Engine Company, Inc.                AE 3007A1P                          CAE 311697

                                                                                   CAE 311698


          Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.



                                                                      SCHEDULE I
                                                                    TO EXHIBIT A

                       DESCRIPTION OF AIRFRAME AND ENGINES



                                                                       Exhibit B

                          CERTAIN ECONOMIC INFORMATION

                                     [*]



- ------------------
    * Confidential





                                                                     Exhibit C-1
                           BASIC RENT PAYMENT SCHEDULE

BASIC RENT PAYMENT DATE               AMOUNT

                                       [*]



- ------------------
    * Confidential





                                                                     Exhibit C-2

                         BASIC RENT ALLOCATION SCHEDULE


                  (1)                                          (2)
              Basic Rent                               Basic Rent Allocated
            Payment Period                             To Basic Rent Period
            --------------                             --------------------

From (and             To (and
Including             Excluding)
- ---------             ----------
                                                 

[*]                   [*]                              [*]






- ------------------
    * Confidential





                                                                       Exhibit D

                               TERMINATION VALUES

TERMINATION DATE                            TERMINATION VALUE

[*]                                             [*]




- ------------------
    * Confidential



                                                                       Exhibit E

        LISTS OF COUNTRIES - PERMITTED FOR RE-REGISTRATION AND SUBLEASING

Australia                                           Italy

Austria                                             Japan

Belgium                                             Luxembourg

Canada                                              Netherlands

Denmark                                             New Zealand

Finland                                             Norway

France                                              Portugal

Germany                                             Sweden

Iceland                                             Switzerland

Ireland                                             United Kingdom




                                TABLE OF CONTENTS



                                                                                            PAGE
                                                                                       
Section 1.      Interpretation................................................................1
       (a)      Definitions...................................................................1
       (b)      References....................................................................1
       (c)      Headings......................................................................1
       (d)      Appendices, Schedules and Exhibits............................................1

Section 2.      Delivery and Leasing of the Aircraft..........................................2
       (a)      Leasing of the Aircraft.......................................................2
       (b)      Delivery and Acceptance of the Aircraft Under the Lease.......................2

Section 3.      Term and Rent.................................................................2
       (a)      Term..........................................................................2
       (b)      Basic Rent....................................................................2
       (c)      Supplemental Rent.............................................................3
       (d)      Adjustments to Basic Rent and Termination Values..............................3
       (e)      Manner of Payment.............................................................5
       (f)      Rent Obligations Unconditional................................................5

Section 4.      The Lessor's Representations and Warranties...................................6
       (a)      Representation and Warranties.................................................6
       (b)      Quiet Enjoyment...............................................................6
       (c)      Manufacturer's Warranties.....................................................6

Section 5.      Possession, Operation and Use,   Maintenance, Registration and Insignia.......7
       (a)      General.......................................................................7
       (b)      Possession....................................................................7
       (c)      Operation and Use............................................................11
       (d)      Maintenance..................................................................12
       (e)      Registration.................................................................13

Section 6.      Inspection...................................................................13

Section 7.      Replacement and Pooling of Parts; Alterations,    Modifications and
                Additions; Substitution of Engines...........................................14
       (a)      Replacement of Parts.........................................................14
       (b)      Title to Parts...............................................................14
       (c)      Pooling or Parts Leasing.....................................................15
       (d)      Alterations, Modifications and Additions.....................................15
       (e)      Substitution of Engines......................................................16

Section 8.      Loss, Destruction or Requisition.............................................19
       (a)      Event of Loss with Respect to the Airframe...................................19


                                       -i-




                                                                                            PAGE
                                                                                       
       (b)      Effect of Replacement........................................................20
       (c)      Effect of Termination Value Payment..........................................20
       (d)      Conditions to Airframe Replacement...........................................20
       (e)      Non-Insurance Payments Received on Account of an Event of Loss...............23
       (f)      Requisition for Use..........................................................24
       (g)      Certain Payments to be Held As Security......................................24

Section 9.      Insurance....................................................................24
       (a)      Public Liability and Property Damage Insurance...............................24
       (b)      Insurance Against Loss or Damage to the Aircraft and Engines.................25
       (c)      Additional Insureds; Loss Payment............................................26
       (d)      Deductibles and Self-Insurance...............................................26
       (e)      Application of Hull Insurance Proceeds.......................................27
       (f)      Insurance for Own Account....................................................27
       (g)      Reports, etc.................................................................28
       (h)      Right to Pay Premiums........................................................28

Section 10.     Liens........................................................................28

Section 11.     Recordation and Further Assurances...........................................29
       (a)      Recordation of Lease.........................................................29
       (b)      Further Assurances...........................................................29
       (c)      Markings.....................................................................29

Section 12.     Return of Aircraft and Records...............................................30
       (a)      Return of Aircraft...........................................................30
       (b)      Return of Other Engines......................................................30
       (c)      Fuel; Records................................................................31
       (d)      Condition of Aircraft........................................................31
       (e)      Failure to Return............................................................31
       (f)      Storage and Related Matters..................................................31

Section 13.     Renewal Option and Purchase Options..........................................32
       (a)      Renewal Terms................................................................32
       (b)      Lessee's Purchase Options....................................................33

Section 14.     Voluntary Termination for Obsolescence.......................................34
       (a)      Termination by Sale of Aircraft..............................................34
       (b)      Payments Due Upon Sale of Aircraft...........................................35
       (c)      Preemptive Election by Lessor................................................35
       (d)      Termination of Lease.........................................................36
       (e)      Effect of No Sale or Preemptive Delivery to Lessor...........................36
       (f)      No Duty on Part of Lessor....................................................36

Section 15.     Investment of Security Funds.................................................36

Section 16.     Events of Default............................................................36






                                                                                            PAGE
                                                                                       
Section 17.     Remedies.....................................................................38

Section 18.     Lessor's Right to Perform for the Lessee.....................................41

Section 19.     Bankruptcy...................................................................41

Section 20.     Assignment: Benefit and Binding Effect.......................................41
       (a)      Assignment by the Lessee.....................................................41
       (b)      Assignment by the Lessor.....................................................42
       (c)      Benefit and Binding Effect...................................................42
       (d)      Sublessee's Performance and Rights...........................................42

Section 21.     Owner Trustee's Limitation on Liability......................................42

Section 22.     Certain Agreements of Lessee.................................................42

Section 23.     Miscellaneous................................................................43
       (a)      Notices......................................................................43
       (b)      Counterparts.................................................................43
       (c)      Amendments...................................................................43
       (d)      Agreement to Lease...........................................................43
       (e)      Governing Law................................................................43
       (f)      Severability.................................................................44
       (g)      Survival.....................................................................45
       (h)      Article 2A...................................................................45


Appendix A      Definitions
Exhibit A       Form of Lease Supplement
Exhibit B       Certain Economic Information
Exhibit C-1     Basic Rent Payment Schedule
Exhibit C-2     Basic Rent Allocation Schedule
Exhibit D       Termination Values
Exhibit E       List of Countries
Exhibit F-1     Return Conditions
Exhibit F-2     Return Conditions



                                   APPENDIX A

                              DEFINITIONS [N281SK]
GENERAL PROVISIONS

          The following terms shall have the following meanings for all purposes
of the Operative Agreements (as defined below), unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require. In the case
of any conflict between the provisions of this Appendix and the provisions of
any Operative Agreement, the provisions of such Operative Agreement shall
control the construction of such Operative Agreement.

          Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean such agreements as amended and supplemented from time to
time, and any agreement, instrument or document entered into in substitution or
replacement therefor, and (ii) references to parties to agreements shall be
deemed to include the successors and permitted assigns of such parties.

     "ADDITIONAL INSUREDS" means the Owner Trustee (in its individual and trust
capacities) and the Owner Participant.

     "AERONAUTICAL AUTHORITY" means as of any time of determination, the FAA or
other governmental airworthiness authority having jurisdiction over the Aircraft
or the Airframe and Engines or engines attached thereto under the laws of the
country in which the Airframe is then registered.

     "AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling 50% or more of any class of voting securities of such
Person or otherwise controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" (including "controlled
by" and "under common control with") shall mean 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.

     "AFTER TAX BASIS" means a basis such that any payment to be received or
deemed to be received by a Person shall be supplemented by a payment to such
Person so that the sum of such payments, after deduction of all Taxes (taking
into account any related credits or deductions) resulting from the actual or
constructive receipt or accrual of such payments, shall be equal to the payment
to be received.

     "AIRCRAFT" means the Airframe together with the Engines, whether or not any
of the Engines may at the time of determination be installed on the Airframe or
installed on any other airframe or on any other aircraft.



     "AIRCRAFT PURCHASE AGREEMENT" means the Aircraft Purchase Agreement
[N281SK] dated as of February 23, 2001, among the Seller, the Owner Trustee and
GECC, as amended and supplemented from time to time.

     "AIRFRAME" means (i) the Embraer model EMB-145LR aircraft (excluding the
Engines and any other engines which may from time to time be installed thereon,
but including any and all Parts which may from time to time be incorporated in,
installed on or attached to such aircraft, and including any and all such Parts
removed therefrom so long as title to such removed Parts remains vested in the
Lessor under the terms of Section 7 of the Lease) originally delivered and
leased under the Lease, identified by national registration number and
manufacturer's serial number in the Lease Supplement executed and delivered on
the Delivery Date, so long as a Replacement Airframe shall not have been
substituted therefor pursuant to Section 8 of the Lease, and (ii) a Replacement
Airframe, so long as another Replacement Airframe shall not have been
substituted therefor pursuant to Section 8 of the Lease.

     "APPRAISAL PROCEDURE" has the meaning specified in Exhibit F-2 to the
Lease.

     "APPLICABLE LAW" means all applicable laws, treaties, judgments, decrees,
injunctions, writs and orders of any court, governmental agency or authority and
rules, regulations, orders, directives, licenses and permits of any governmental
body, instrumentality, agency or authority.

     "APPLICABLE RATE" has the meaning specified in Exhibit B to the Lease.

     "ASSIGNED WARRANTIES" has the meaning specified in the Embraer Warranty
Assignment and Consent.

     "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended, and
any successor thereto.

     "BASIC RENT" means the rent payable on Basic Rent Payment Dates throughout
the Basic Term for the Aircraft pursuant to Section 3(b) of the Lease and rent
payable during any Renewal Term pursuant to Section 13(a) of the Lease.

     "BASIC RENT PAYMENT DATE" means each date listed under the heading "Basic
Rent Payment Date" in Exhibit C to the Lease.

     "BASIC TERM" means the period commencing at the beginning of the day on the
Delivery Date and ending at end of the day on the Expiration Date, or such
earlier date on which the Lease shall be terminated as provided therein.

     "BENEFICIAL INTEREST" means the interest of the Owner Participant under the
Trust Agreement.

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

     "BUSINESS DAY" means any day other than a Saturday or Sunday or other day
on which commercial banks are authorized or required by law to close in New York
City, New York, Indianapolis, Indiana and Salt Lake City, Utah.

                                        2


     "CERTIFICATED AIR CARRIER" means an "air carrier" within the meaning of the
Transportation Code and a "citizen of the United States" within the meaning of
Section 40102(a)(15) (or any successor provision) of the Transportation Code
holding an "air carrier operating certificate" issued under Chapter 447 (or any
successor provision) of the Transportation Code for aircraft capable of carrying
ten or more individuals or 6,000 pounds or more of cargo, with each such
certificate in full force and effect.

     "CITIZEN OF THE UNITED STATES" means a citizen of the United States as
defined in Section 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.

     "CODE" means the United States Federal Internal Revenue Code of 1986, as
amended from time to time, or any similar legislation of the United States
enacted to supersede, amend, or supplement such Code (and any reference to a
provision of the Code shall refer to any successor provision(s), however
designated).

     "COMMITMENT" shall have the meaning given such term in Section 2.01(c) of
the Participation Agreement.

     "CRAF PROGRAM" has the meaning specified in Section 5(b)(vii) of the Lease.

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

     "DELIVERY DATE" means the date on which the Aircraft is delivered and sold
to the Lessor and leased by the Lessor to the Lessee under the Lease, which date
shall be the date of the initial Lease Supplement.

     "DOLLARS", "DOLLAR" and "$" means dollars in lawful currency of the United
States.

     "DOT" means the United States Department of Transportation or any successor
thereto.

     "EBO DATE" has the meaning given to such term in Exhibit B to the Lease.

     "EBO AMOUNT" has the meaning given to such term in Exhibit B to the Lease.

     "EMBRAER PURCHASE AGREEMENT" means the EMB-145 Purchase Agreement Number
GCT-025/98 dated June 17, 1998, between the Manufacturer and Seller, as amended
and supplemented from time to time.

     "EMBRAER WARRANTY ASSIGNMENT AND CONSENT" means the Warranty Assignment
Agreement and Consent [N281SK], dated as of February 23, 2001, between Seller
and Owner Trustee and consented to by the Manufacturer.

     "ENGINE" means (A) each of the two Allison model AE3007A1P engines
originally delivered and leased under the Lease, identified by manufacturer's
serial number in the Lease Supplement executed and delivered on the Delivery
Date, so long as a Replacement Engine shall not have been substituted therefor
pursuant to Section 7(e) of the Lease, and (B) a Replacement

                                        3


Engine, so long as another Replacement Engine shall not have been substituted
therefor pursuant to Section 7(e) of the Lease, whether or not such engine or
Replacement Engine, as the case may be, is from time to time installed on the
Airframe or installed on any other aircraft, and including in each case all
Parts incorporated or installed in or attached thereto and any and all Parts
removed therefrom so long as title to such Parts remains vested in the Lessor
under the terms of Section 7 of the Lease. The term "ENGINES" means, as of any
date of determination, the two engines each of which is an Engine on that date.

     "ENGINE MANUFACTURER" means Allison Engine Company, Inc. a subsidiary of
the Rolls-Royce Corporation, and its successors and permitted assigns.

     "ENGINE WARRANTIES" has the meaning specified in the Engine Warranty
Assignment and Consent.

     "ENGINE WARRANTY AGREEMENT" means the Rolls-Royce AE3007A Series Engine
Warranty Agreement made effective as of April 30, 1999, among the Engine
Manufacturer, Seller and the Lessee, as amended and supplemented from time to
time.

     "ENGINE WARRANTY ASSIGNMENT AND CONSENT" means the Engine Warranty
Assignment Agreement and Consent [N281SK], dated as of February 23, 2001,
between Seller and Owner Trustee and consented to by the Engine Manufacturer.

     "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.

     "ERISA PLAN" means, individually or collectively, an employee benefit plan,
as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or any
applicable regulation thereunder or a plan or individual retirement account
which is subject to Section 4975(c) of the Code;

     "EVENT OF DEFAULT" has the meaning given to such term in Section 16 of the
Lease.

     "EVENT OF LOSS" means any of the following events with respect to the
Aircraft, the Airframe or any Engine:

          (i) any theft, hijacking or disappearance of such property for a
     period of 60 consecutive days or more or, if earlier for a period that
     extends until the end of the Term;

          (ii) destruction, damage beyond economic repair or rendition of such
     property permanently unfit for normal use for any reason whatsoever;

          (iii) any event which results in an insurance settlement with respect
     to such property on the basis of an actual, constructive or compromised
     total loss;

          (iv) condemnation, confiscation or seizure of, or requisition of title
     to or use of such property by any foreign government or purported
     government (or in the case of any such requisition of title, by the
     Government) or any agency or instrumentality thereof, for a period in
     excess of (A) in the case of any requisition of use, 180 consecutive days
     (for

                                        4


     countries listed in Exhibit E to the Lease) or 30 consecutive days (for any
     other country) or (B) in the case of any condemnation, confiscation or
     seizure of, or requisition of title, 10 consecutive days, or, in any of the
     cases in this clause (iv), such shorter period ending on the expiration of
     the Term;

          (v) condemnation, confiscation or seizure of, or requisition of use of
     such property by the Government for a period extending beyond the Term;

          (vi) as a result of any law, rule, regulation, order or other action
     by the Aeronautical Authority, the use of the Aircraft or Airframe in the
     normal course of air transportation shall have been prohibited by virtue of
     a condition affecting all Embraer model EMB-145LR aircraft equipped with
     engines of the same make and model as the Engines for a period of 180
     consecutive days (or beyond the end of the Term), unless the Lessee, prior
     to the expiration of such 180-day period, shall be diligently carrying
     forward all necessary and desirable steps to permit normal use of the
     Aircraft and shall within 12 months have conformed at least one Embraer
     model EMB-145LR aircraft (but not necessarily the Aircraft) to the
     requirements of any such law, rule, regulation, order or action, and shall
     be diligently pursuing conformance of the Aircraft in a non-discriminatory
     manner provided that, notwithstanding the foregoing, if such normal use of
     such property subject to the Lease shall be prohibited at the end of the
     Term, or if such normal use of such property shall be prohibited for a
     period of eighteen (18) consecutive months, an Event of Loss shall be
     deemed to have occurred; and

          (vii) with respect to an Engine only, the requisition or taking of use
     thereof by any government, and any divestiture of title or ownership deemed
     to be an Event of Loss with respect to an Engine under Section 5(b)(iii) or
     5(b)(vi) of the Lease.

The date of such Event of Loss shall be (aa) the 31st day following loss of such
property or its use due to theft or disappearance or the 91st day following such
loss if such period shall have been extended (or the end of the Term if
earlier); (bb) the date of any destruction, damage beyond economic repair or
rendition of such property permanently unfit for normal use; (cc) the date of
any insurance settlement on the basis of an actual, constructive or compromised
total loss; (dd) the 181st day (for countries listed in Exhibit E to the Lease)
or 31st day (for any other country) following condemnation, confiscation,
seizure or requisition of title to such property by a foreign government
referred to in clause (iv) above (or the 11th day in the case of appropriation
of title), or the end of the Term if earlier than such 181st, 31st or 11th day;
(ee) the last day of the Term in the case of requisition of title to or use of
such property by the Government; and (ff) the last day of the applicable period
referred to in clause (vi) above (or if earlier, the end of the Term without the
Lessee's having conformed at least one Embraer model EMB-145LR aircraft to the
applicable requirements). An Event of Loss with respect to the Aircraft shall be
deemed to have occurred if any Event of Loss occurs with respect to the
Airframe.

     "EXPENSES" has the meaning given to such term in Section 7.01(a) of the
Participation Agreement.

     "EXPIRATION DATE" means the date specified as such in the Lease Supplement
executed and delivered on the Delivery Date.

                                        5


     "FAA BILL OF SALE" means (A) the bill of sale for the Airframe on AC Form
8050-2, or such other form as may be approved by the Aeronautical Authority,
executed by the Seller in favor of the Owner Trustee and to be dated the
Delivery Date, and (B) a bill of sale for a Replacement Airframe on AC Form
8050-2, or such other form as may be approved by the Aeronautical Authority,
executed by the seller thereof in favor of the Owner Trustee.

     "FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" of the Airframe or
any Engine shall mean the value that would be obtained in an arms'-length
transaction between an informed and willing lessee-user or buyer-user (other
than a lessee currently in possession or a used equipment dealer) under no
compulsion to lease or buy, as the case may be, and an informed and willing
lessor or seller, as the case may be, under no compulsion to lease or sell, as
the same shall be specified by agreement between the Lessor and the Lessee or,
if not agreed to by the Lessor and the Lessee within a period of 15 days after
either party requests a determination, then as specified in an appraisal
prepared and delivered in New York City mutually agreed to by two recognized
independent aircraft appraisers, one of which shall be appointed by the Lessor
and the other of which shall be appointed by the Lessee, or, if such appraisers
cannot agree on such appraisal, an appraisal arrived at by a third independent
recognized appraiser chosen by the mutual consent of the two aircraft
appraisers. If either party should fail to appoint an appraiser within 15 days
of receiving notice of the appointment of an appraiser by the other party, then
such appraisal shall be made by the appraiser appointed by the first party. If
the two appraisers cannot agree on such appraisal and fail to appoint a third
independent recognized aircraft appraiser within 15 days after the appointment
of the second appraiser, then either party may apply to the American Arbitration
Association to make such appointment. The appraisal shall be completed within 30
days of the appointment of the last appraiser appointed. In determining Fair
Market Rental Value or Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe or Engine is in the condition,
location and overhaul status in which it is required to be returned to the
Lessor pursuant to Section 12 of the Lease and that the Lessee has removed all
Parts which it is entitled to remove pursuant to Section 7 of the Lease and that
the Aircraft is not encumbered by the Lease. Except as otherwise expressly
provided in the Lease, all appraisal costs will be shared equally by the Lessor
and the Lessee; PROVIDED that if the Lessee elects not to renew the Lease or
purchase the Aircraft following the conclusion of such appraisal, the Lessee
shall pay all appraisal costs. Notwithstanding the foregoing, for purposes of
Section 17 of the Lease, the "Fair Market Rental Value" or "Fair Market Sales
Value" of the Aircraft, the Airframe or any Engine, shall be determined on an
"as is, where is" basis and shall take into account customary brokerage and
other out-of-pocket fees and expenses which typically would be incurred in
connection with a re-lease or sale of the Aircraft, the Airframe or any Engine.
Any such determination pursuant to Section 17 of the Lease shall be made by a
recognized independent aircraft 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 Section 17
of the Lease, in which case an appraiser shall not be appointed and Fair Market
Rental Value and Fair Market Sales Value for purposes of Section 17 of the Lease
shall be zero. If the Owner Participant provides a Residual Notice pursuant to
Section 13(b)(iii) of the Lease, Fair Market Sales Value will be determined as
provided in the definition of Appraisal Procedure.

     "FAIR MARKET VALUE RENEWAL TERM" has the meaning given to such term in
Section 13(a) of the Lease.

                                        6


     "FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States Federal
Aviation Administration and any successor agency or agencies thereto.

     "FIXED RENEWAL TERM" has the meaning given to such term in Section 13(a) of
the Lease.

     "GECC" means General Electric Capital Corporation, a New York corporation.

     "GOVERNMENT" means the United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and credit
of the United States of America.

     "GUARANTEE AGREEMENT" has the meaning given to such term in the recitals of
the Participation Agreement.

     "GUARANTEED AMOUNT" has the meaning specified in Exhibit B to the Lease.

     "INDEMNITEE" means each of Trust Company, in its individual capacity and as
Owner Trustee, the Owner Participant, and each Affiliate, officer, director,
employee, agent, servant, successor and permitted assigns of any of the
foregoing Persons.

     "LEASE" means the Lease Agreement [N281SK], dated as of February 23, 2001
between the Owner Trustee and the Lessee.

     "LEASE SUPPLEMENT" means any Lease Supplement, substantially in the form of
Exhibit A to the Lease, entered into between the Lessor and the Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
including any amendment thereto entered into subsequent to the Delivery Date.

     "LESSEE" means Chautauqua Airlines, Inc., a New York corporation, and its
successors and permitted assigns.

     "LESSEE DOCUMENTS" means the Operative Agreements to which the Lessee is a
party.

     "LESSOR" means First Security Bank, National Association, a national
banking association, not in its individual capacity but solely as Owner Trustee
under the Trust Agreement, and its successors and permitted assigns.

     "LESSOR'S COST" has the meaning given to such term in Exhibit B of the
Lease.

     "LESSOR'S ESTATE" means all estate, right, title and interest of the Owner
Trustee in and to the Aircraft, and Engines and the Operative Agreements (other
than the Tax Indemnity Agreement) including, without limitation, all amounts of
Rent, insurance proceeds and requisition, indemnity or other payments of any
kind.

     "LESSOR'S LENDER" has the meaning given to such term in Section 13.09 of
the Participation Agreement.

     "LESSOR'S LIENS" means Liens against, on or with respect to the Aircraft,
any Engine, the Lessor's Estate or any part thereof, title thereto or any
interest therein arising as a result of (i)

                                        7


claims against or affecting the Lessor, in its individual capacity or as Owner
Trustee, or the Owner Participant, in each case not related to the Operative
Agreements or the transactions contemplated thereby, (ii) acts or omissions of
the Lessor in its individual capacity or as Owner Trustee, or of the Owner
Participant not contemplated or permitted under the terms of the Operative
Agreements, (iii) Taxes or Expenses imposed against the Lessor, in its
individual capacity or as Owner Trustee, Owner Participant, Lessor's Estate or
the trust created by the Trust Agreement which are not required to be
indemnified against by the Lessee pursuant to Articles 6 or 7 of the
Participation Agreement and which are not required to be indemnified against by
the Lessee pursuant to the Tax Indemnity Agreement, or (iv) claims against the
Lessor, in its individual capacity or as Owner Trustee, or the Owner Participant
arising from the transfer by the Lessor or the Owner Participant of its
interests in the Aircraft or any Engine other than a transfer of the Aircraft or
any other portion of the Lessor's Estate pursuant to Section 5(b), 7(b), 7(c),
7(d), 7(e), 8, 12(b), 13(b), 14(a) or 17 of the Lease and other than a transfer
pursuant to the exercise of the remedies set forth in Section 17 of the Lease;
PROVIDED that any Lien that is attributable solely to Owner Participant or
Lessor, in its individual capacity or as Owner Trustee, and would otherwise be
included as part of Lessor's Liens hereunder shall not constitute part of
Lessor's Liens hereunder, so long as (A) the existence of such Lien poses no
material risk of the sale, forfeiture or loss of the Aircraft, Airframe, any
Engine, the Lessor's Estate or any interest of Lessee or any other Person
therein or interference with any of Lessee's rights under any Operative
Agreement, (B) the existence of such Lien does not constitute a default by Owner
Participant or Lessor, in its individual capacity or as Owner Trustee, of its
respective obligations under the Lease, and (C) Owner Participant or Lessor, in
its individual capacity or as Owner Trustee, is diligently contesting such Lien
by appropriate proceedings.

     "LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
security interest, claim, or other similar interest of any nature whatsoever.

     "MANUFACTURER" means EMBRAER - Empresa Brasileira de Aeronautica S.A., a
Brazilian corporation, and its successors and permitted assigns.

     "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.

     "MINIMUM LIABILITY AMOUNT" has the meaning given to such term in Exhibit B
to the Lease.

     "NET ECONOMIC RETURN" means the Owner Participant's nominal after-tax book
yield (utilizing the multiple investment sinking fund method of analysis),
computed through the EBO Date and the Expiration Date on the basis of the same
methodology, constraints and assumptions as were utilized by the initial Owner
Participant in determining Basic Rent percentages and Termination Value
percentages as of the Delivery Date; 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.

     "NON-U.S. PERSON" means any Person other than a U.S. Person.

                                        8


     "OFFICER'S CERTIFICATE" means as to any company a certificate signed by a
Responsible Officer of such company.

     "OPERATIVE AGREEMENTS" means the Participation Agreement, the Trust
Agreement, the FAA Bill of Sale, the Warranty Bill of Sale, the Embraer Warranty
Assignment and Consent, the Engine Warranty Assignment and Consent, the Lease,
each Lease Supplement, any Owner Participant Guaranty and the Tax Indemnity
Agreement.

     "OWNER PARTICIPANT" means General Electric Capital Corporation, a New York
corporation and its successors and permitted transferees and assigns.

     "OWNER PARTICIPANT GUARANTOR" means the provider of an Owner Participant
Guaranty.

     "OWNER PARTICIPANT GUARANTY" means any guaranty delivered or to be
delivered to support the obligations of the Owner Participant under the
Operative Agreements in connection with the transfer by the Owner Participant of
the Beneficial Interest.

     "OWNER TRUSTEE" means the Trust Company, not in its individual capacity
except as otherwise expressly stated, but solely as trustee under the Trust
Agreement, and its successors and permitted assigns.

     "PARTICIPATION AGREEMENT" means the Participation Agreement [N281SK], dated
as of February 23, 2001, among the Lessee, the Owner Trustee not in its
individual capacity except as otherwise expressly provided therein, but solely
as owner trustee and the Owner Participant.

     "PARTS" means any and all appliances, parts, instruments, components,
appurtenances, accessories, furnishings, seats, and other equipment of whatever
nature (other than complete Engines or engines and temporary replacement parts
as provided in Section 8 of the Lease and cargo containers) which may from time
to time be incorporated or installed in or attached to any Airframe or any
Engine, exclusive of any items leased by the Lessee from third parties and not
required in the navigation of the Aircraft.

     "PAST DUE RATE" means a rate per annum identified in Exhibit B to the
Lease.

     "PERMITTED AIR CARRIER" means (a) any Section 1110 Person and (b) any
foreign air carrier that is principally based in any foreign country listed on
Exhibit E to the Lease, except those that do not maintain normal diplomatic
relations with the United States.

     "PERMITTED INVESTMENTS" means (a) direct obligations of the United States
of America or any agency or instrumentality thereof, (b) obligations fully
guaranteed by the United States of America or any agency or instrumentality
thereof, (c) any mutual fund the portfolio of which is limited to obligations of
the type described in clauses (a) and (b), (d) certificates of deposit issued
by, or bankers' acceptances of, or time deposits or a deposit account with, any
bank, trust company, or national banking association incorporated or doing
business under the laws of the United States of America or one of the states
thereof, having a combined capital and surplus of at least $100,000,000 and
having a rating of "A" or better from the Keefe Bank Watch Service, (e)
commercial paper issued by companies in the United States which directly issue
their own commercial paper and which are doing business under the laws of the
United States of America

                                        9


or one of the states thereof and in each case having a rating assigned to such
commercial paper by a nationally recognized rating organization in the United
States of America equal to the highest rating assigned by such organization, or
(f) obligations of the type described in clauses (a), (b), (d), or (e) above,
purchased from any bank, trust company, or banking association referred to in
clause (d) above pursuant to repurchase agreements obligating such bank, trust
company, or banking association to repurchase any such obligation not later than
30 days after the purchase of any such obligation. Unless otherwise specified in
writing by the Owner Trustee, all such Permitted Investments shall mature not
later than 30 days from the date of purchase.

     "PERMITTED LIEN" has the meaning given to such term in Section 10 of the
Lease.

     "PERMITTED SECURITY INTEREST" has the meaning given to such term in Section
13.09 of the Participation Agreement.

     "PERMITTED SUBLESSEE" means (a) any Permitted Air Carrier, (b) any airframe
or engine manufacturer, or Affiliate of such a manufacturer, who is domiciled in
the United States of America or a country listed on Exhibit E to the Lease or
(c) the United States of America or any instrumentality or agency thereof.

     "PERSON" means any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, limited liability company or government (federal,
state, local, foreign or any agency, instrumentality, division or body thereof)
or other entity of whatever nature.

     "PURCHASE PRICE" means an amount equal to Lessor's Cost.

     "REASONABLE BASIS" means that a realistic possibility of success, within
the meaning of ABA Formal Opinion No. 85-352, exists for pursuing such contest.

     "RECOVERY PERIOD" means "Tax Attribute Period" as defined in the Tax
Indemnity Agreement.

     "RELATED LEASE" means the fifteen aircraft lease agreements of Embraer
model EMB-145LR aircraft that have been or shall be entered into in years 2000
and 2001 between the Trust Company as trustee of a trust the beneficiary of
which is GECC or an Affiliate of GECC, as lessor, and the Lessee, as lessee, in
substantially the form of the Lease, each when executed and delivered by such
parties.

     "RELATED TAX INDEMNITEE" means any Affiliate of any Tax Indemnitee.

     "RENEWAL TERM" has the meaning given to such term in Section 13(a) of the
Lease.

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

     "REPLACEMENT AIRCRAFT" means any Aircraft of which a Replacement Airframe
is part.

                                       10


     "REPLACEMENT AIRFRAME" means an Embraer model EMB-145LR aircraft or a
comparable or improved model of such aircraft of the Manufacturer (except
Engines or engines from time to time installed thereon) which shall have become
subject to the Lease pursuant to Section 8 thereof.

     "REPLACEMENT CLOSING DATE" has the meaning given such term in Section 8(d)
of the Lease.

     "REPLACEMENT ENGINE" means an Allison model AE3007A1P engine (or engine of
the same manufacturer of a comparable or an improved model and suitable for
installation and use on the Airframe), which has a value, utility and remaining
useful life at least equal to, and which is in good operating condition as, the
Engine to be replaced thereby (assuming that such Engine being replaced was in
the condition required to be maintained in accordance with the Lease), and which
shall have become subject to the Lease pursuant to Section 7(e) thereof.

     "RESIDUAL VALUE GUARANTEE AGREEMENT" has the meaning given to such term in
the recitals of the Participation Agreement.

     "RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any officer
in its Corporate Trust Administration, as the case may be, designated by such
Person to perform obligations under the Operative Agreements, and with respect
to any other party, any corporate officer of a party who, in the normal
performance of his or her operational responsibilities, with respect to the
subject matter of any covenant, agreement or obligation of such party pursuant
to any Operative Agreement, would have responsibility for and knowledge of such
matter and the requirements of any Operative Agreement with respect thereto.

     "SEC" means the Securities and Exchange Commission of the United States and
any successor agencies or authorities.

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

     "SECTION 1110 PERSON" means a Citizen of the United States who is an air
carrier holding a valid air carrier operating certificate issued pursuant to 49
U.S.C. ch. 447 for aircraft capable of carrying 10 or more individuals or 6,000
pounds or more of cargo.

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

     "SELLER" means Solitair Corp., a Delaware corporation, and its successors
and permitted assigns.

     "SPECIFIED DEFAULT" means (a) an event or condition described in Section
16(a), (f), (g) or (h) of the Lease that, after the giving of notice or lapse of
time, or both, would become an Event of Default, or (b) any Event of Default.

     "SUBLEASE" means any sublease agreement between the Lessee and a Permitted
Sublessee as permitted by Section 5(b) of the Lease.

                                       11


     "SUPPLEMENTAL RENT" means all amounts, liabilities, indemnities and
obligations which the Lessee assumes or agrees to perform or pay under the Lease
or under the Participation Agreement or Tax Indemnity Agreement or any other
Operative Agreement to the Lessor, the Owner Participant, or others, including
payments of Termination Value, EBO Amount, and amounts calculated by reference
to Termination Value, all other amounts payable under Section 3(c) of the Lease,
and all amounts required to be paid by Lessee under the agreements, covenants,
and indemnities contained in the Lease or in the Participation Agreement or the
Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic
Rent.

     "TAX" or "TAXES" has the meaning set forth in Section 6.01(a) of the
Participation Agreement.

     "TAX INDEMNITEE" means each of Trust Company, individually and as Owner
Trustee, the Owner Participant and any Affiliate thereof.

     "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement [N281SK], dated
as of February 23, 2001 between the Lessee and the Owner Participant.

     "TERM" has the meaning given to such term in Section 3(a) of the Lease.

     "TERMINATION DATE" means each date listed in the column entitled
"Termination Date" in Exhibit D to the Lease or, during a Renewal Term or
otherwise during any period following the last day of the Term, the second day
of each month.

     "TERMINATION VALUE" means (a) as of any Termination Date during the Basic
Term, the amount determined as set forth in Exhibit D to the Lease for that
Termination Date, and (b) during any Renewal Term, the amount for the date
involved, determined in accordance with Section 13(a) of the Lease, in either
case adjusted as required by Section 3(d) of the Lease.

     "TRANSACTION COSTS" means those costs and expenses set forth in
Section 8.01(a) of the Participation Agreement.

     "TRANSPORTATION CODE" means Title 49 of the United States Code, subtitle
VII, as amended and in effect on the date of the Lease or as subsequently
amended, or any successor or substituted legislation at the time in effect and
applicable, and the regulations promulgated pursuant thereto.

     "TRUST AGREEMENT" means the Trust Agreement [N281SK], dated as of February
23, 2001, between the Owner Participant and the Trust Company.

     "TRUST COMPANY" means First Security Bank, National Association, a national
banking association, and its successors and permitted assigns.

     "TRUST ESTATE" means the Lessor's Estate.

     "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect
from time to time in any relevant jurisdiction.

                                       12


     "UNITED STATES", "U.S." or "US" means the United States of America.

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

     "WARRANTY BILL OF SALE" means (A) the full warranty bill of sale covering
the Aircraft (and specifically referring to each Engine) executed by the Seller
in favor of the Owner Trustee and to be dated the Delivery Date, and (B) a full
warranty bill of sale covering a Replacement Aircraft (and specifically
referring to each Engine) executed by the seller thereof in favor of the Owner
Trustee.

                                       13


                                                                     Exhibit F-1

                                RETURN CONDITIONS

This Exhibit shall apply unless Exhibit F-2 applies in accordance with its
terms, in which case Exhibit F-2 shall supercede this Exhibit.

1.       General Conditions.

         At the time of return, the Aircraft shall (i) be in compliance with the
         Maintenance Program and (ii) meet the following requirements:

         (a)      Operating Condition - The Aircraft shall be in good operating
                  condition, ordinary wear and tear excepted, with all of the
                  Aircraft equipment, components, and systems functioning in
                  accordance with their intended use. All replacement equipment,
                  parts, components or items installed on the Aircraft shall be
                  manufactured by the original manufacturer approved by the
                  Manufacturer or a manufacturer holding requisite authority of
                  the FAA, and in case of used, rotable parts, have an
                  FAA-approved serviceable tag.

         (b)      Configuration - The Aircraft shall be in the same passenger
                  configuration with all equipment installed therein as the
                  Aircraft was when delivered under the Embraer Purchase
                  Agreement, ordinary wear and tear excepted, including
                  replacements and substitute parts and equipment. The Aircraft
                  shall not suffer any modification or alteration (hereinafter
                  "Modifications") after the Delivery Date provided however that
                  Lessee may make Modifications to the Aircraft as long as they
                  are included as factory-installed features in EMB-145 aircraft
                  delivered to the Lessee subsequent to the delivery of the
                  Aircraft or otherwise in accordance with Section 7(d) of the
                  Lease. The term Modifications shall be deemed to include, but
                  not be limited to (i) changes to the Aircraft structure,
                  performance, weight and balance, (ii) changes which materially
                  adversely affect the Aircraft's flight qualities, operational
                  characteristics, operational safety, ease or cost of
                  maintenance, spare parts interchangeability or replaceability,
                  and (iii) substitution of different types of equipment or
                  accessories which are not equivalent in cost value and/or
                  operation capability to the equipment or accessories being
                  replaced, and shall exclude (x) changes pursuant to service
                  bulletins issued by the Manufacturer or the OEMs, and (y)
                  mandatory changes required to be accomplished by Lessee
                  hereunder. All permitted Modifications made to the Aircraft
                  shall be in accordance with FAA-approved data, and Lessee
                  shall provide complete data and documentation to substantiate
                  their certification, approval, and methods of compliance
                  (including, without limitation, a copy of the Aircraft
                  Illustrated Parts Catalog and a copy of the Aircraft Interior
                  Configuration document). A complete listing of all
                  modifications and repairs performed shall be supplied together
                  with the Aircraft. Modifications, other than permitted ones,
                  shall be removed


                                                                          Page 1





                  and the appropriate repairs to the Aircraft made prior to the
                  day of return of the Aircraft.

         (c)      Certification - The Aircraft shall have, a valid and effective
                  Certificate of Airworthiness of the type "Transport, Category
                  (Passengers)" issued by the FAA, and shall be in full
                  compliance with, and capable of registration under, the
                  provisions of Part 121 of the U.S. Federal Aviation
                  Regulations (or any successor legislation) and other US
                  regulations applicable to the Aircraft's operation and
                  continued airworthiness, without any restrictions,
                  corrections, repairs, limitations, modifications or
                  alterations or overhauls having to be performed to meet such
                  standards.

         (d)      General Appearance - The Aircraft shall be clean by commercial
                  passenger airline standards, cosmetically acceptable, interior
                  complete, and prepared to be placed into scheduled revenue
                  airline operations. Interior items which may be broken shall
                  be repaired or replaced. All decals, signs and placards shall
                  be clean, secure and legible in the English language. The
                  Aircraft shall meet the following minimum requirements:

                  (i)      Fuselage, Wings and Empennage - The fuselage shall be
                           within Maintenance Program approved limits regarding
                           dents and abrasions and loose or pulled rivets; all
                           leading edges shall be within Maintenance Program
                           approved limits regarding damage occurring since
                           delivery; the airframe, Engines and wings shall be
                           free of fuel, oil and hydraulic leaks so as to allow
                           unrestricted operation; all leading edges and
                           fuselage areas which are aerodynamically critical
                           shall be free of any scab patches other than those
                           required by the Manufacturer and shall be repaired
                           with repairs which are permanent in nature in
                           accordance with the SRM, or are made in accordance
                           with the Manufacturer's approval.

                  (ii)     Interior - Ceilings, sidewalls, bulkhead panels shall
                           be clean, free of cracks and within Maintenance
                           Program approved limits regarding dents; all carpets
                           and seat covers shall be in good condition and clean
                           and meet FAR fire resistance regulations; all seats
                           shall be serviceable and in good condition. All
                           safety equipment shall be installed at the correct
                           stations, a loose equipment check list and location
                           drawings shall accompany the Aircraft and a loose
                           equipment inventory shall be drawn up on the Delivery
                           Date and checked on the day of return of the
                           Aircraft.

                  (iii)    Cockpit - All fairing panels shall be free of cracks
                           and shall be clean; all floor coverings shall be
                           clean and effectively sealed and secured, all seat
                           covers and cushions shall be in good condition and
                           clean and shall, as applicable, conform to FAA fire
                           resistance regulations. All seats shall be fully
                           serviceable and in good condition. All instruments
                           and light panels shall be

                                                                          Page 2





                           clean, secure and legible, function in accordance
                           with their intended purpose and have all lighting
                           operating properly.

                  (iv)     Landing, Gear and Wheel Wells - The landing gear and
                           all wheel wells shall be clean, free of leaks, and
                           repaired as necessary. The main and nose landing gear
                           components and their associated actuators and parts
                           shall be in a good operating condition.

                  (v)      Cargo Compartment, Galleys and Toilets - All cargo
                           compartment panels shall be installed and be in good
                           condition so as to comply with extended range
                           operations requirements. The cargo compartments,
                           galleys and toilet of the Aircraft shall be in a
                           clean and presentable condition and all cargo
                           securing system components shall be serviceable; all
                           galley inserts (to the extent delivered with the
                           Aircraft) shall be redelivered with the Aircraft.

                  (vi)     Windows - Any delamination, and crazing of the
                           windshields and cabin windows of the Aircraft shall
                           be within approved limits of the Maintenance Program
                           and shall be properly sealed.

                  (vii)    Doors - All the doors of the Aircraft shall be free
                           moving, correctly rigged and properly sealed and all
                           door assist mechanisms shall be charged in accordance
                           with the AMM.

         (e)      Airworthiness Directives and Service Bulletins - All FAA
                  Airworthiness Directives and amendments or changes to Aviation
                  Regulations issued by the FAA and applicable to the Aircraft
                  which require compliance within a period of six (06) months
                  following the day of return of the Aircraft (or the equivalent
                  hours or cycles, based on the Lessee's or Permitted
                  Sublessee's EMB-145 last 4 (four) years of operation average
                  monthly utilization) shall have been accomplished on a
                  Terminating Action basis and in compliance with the issuing
                  agency's and the manufacturer's associated service bulletins,
                  regardless of any operator-specific waiver, deferral, or
                  deviation from such directive or regulation. The Aircraft
                  shall have installed on it all Manufacturer and OEM service
                  bulletin kits requested by Lessee and actually received by
                  Lessee in respect of the Aircraft, and if not installed,
                  Lessee shall deliver them together with the Aircraft at no
                  charge.

         (f)      Deferred Maintenance - The Aircraft shall be free of all
                  deferred or carried over maintenance items, including without
                  limitation, any pilot log book reports, maintenance reports,
                  and the Aircraft's Central Maintenance Computer reports. Any
                  such deferred or carried over maintenance shall be promptly
                  accomplished in a terminating manner prior to the return of
                  the Aircraft at the end of the term of the Lease.

                                                                          Page 3





         (g)      Corrosion - The Maintenance Program shall include a corrosion
                  control program based on the corrosion prevention, treatment
                  and correction criteria recommended by the Manufacturer in the
                  CPCP. The Aircraft shall be free from corrosion or shall have
                  been adequately treated in compliance with the Maintenance
                  Program. Complete details of the corrosion control program, as
                  well as a summary of specific corrosion correction, of the
                  Aircraft in accordance with the Maintenance Program shall be
                  available for delivery together with the Aircraft. This
                  summary shall include Lessee's identifying the Manufacturer's
                  task identifier and cross referencing, Lessee's identifier
                  indicating status of accomplishment and findings and
                  incorporation status relative to all recommended corrective
                  and preventative actions. The hydraulic system and fuel tanks
                  shall be free from contamination as demonstrated by a
                  laboratory report to be performed after the Aircraft is
                  removed from service and delivered together with the Aircraft.

         (h)      Leased Components - The Aircraft shall be free and clear of
                  all Liens other than any Lessor's Liens or any Permitted
                  Security Interest and at return shall not have installed
                  thereon any equipment, components and/or parts which are
                  leased or loaned or otherwise owned by a third party.

         (i)      Records - The Aircraft shall be accompanied by all Aircraft
                  Documents (as defined below). The Aircraft Documents shall be
                  provided in English, and be in good condition, readable and
                  capable of being reproduced.

                  (i)      "Aircraft Document" shall mean, all technical data,
                           manuals, log books and weight and balance sheets, and
                           all inspection, modification and overhaul records and
                           other service, repair, maintenance, and technical
                           records that are maintained with respect to the
                           Aircraft, Airframe, Engines, APU, landing gears or
                           parts (including, without limitation, all additions,
                           renewals, revisions, and replacements of any such
                           materials from time to time made, or required to be
                           made, in accordance with the Maintenance Program
                           and/or FAA regulations, and in each case in whatever
                           form and by whatever means or medium such materials
                           may be maintained or retained by or on behalf of
                           Lessee (provided however that all such material shall
                           be maintained in the English language).

                  (ii)     All Parts, components and assemblies identified with
                           safe-life, hard time or condition monitored limits
                           (to the extent that such condition monitored items
                           are to be tracked in accordance with the Maintenance
                           Program) shall be provided with part number, serial
                           number, their service histories, accumulated cycles
                           and flight hours, safe-life, hard time or condition
                           monitored limits and remaining service lives on a
                           separate listing and where practicable, be physically
                           verified as installed and have hard copy
                           documentation (i.e., appropriate overhaul or
                           serviceable vendor tags and work orders) to verify
                           their service histories.

                                                                          Page 4






                  (iii)    All components and assemblies which are identified on
                           the maintenance records by part numbers and/or serial
                           numbers other than the Manufacturer's or other
                           manufacturer's shall be provided with two-way
                           cross-reference listing necessary to establish
                           complete traceability.

                  (iv)     All documentation, flight records, and maintenance
                           records as specified herein and as specified by
                           Federal Aviation Regulations Sections 121.380, and,
                           as applicable, Section 91.417 and 91.419 (or FAR's as
                           amended), and which normally accompany the transfer
                           of an aircraft or engine shall be delivered together
                           with the Aircraft. In the event of missing or
                           incomplete records, the tasks necessary to produce
                           such complete records shall be accomplished in
                           accordance with the Maintenance Program prior to
                           return of the Aircraft.

                  (v)      All documentation and records shall be in English and
                           shall be made available for inspection in the
                           location they are normally kept which location shall
                           permit direct access to the Aircraft, at least 14
                           business days before the day of return of the
                           Aircraft.

                  (vi)     Any and all documentation, data, drawings, records
                           and manuals as required to be maintained by the FAA
                           and SMRD, shall be provided, regardless of whether
                           such information is considered proprietary.

                  (vii)    Hard Landing inspection reports, Lightning Strike
                           inspection reports or High Intensity Radiated Field
                           (HIRF) check reports as may be required should
                           Aircraft records show evidence of any occurrence
                           indicating such inspections or checks to be
                           necessary.

                  (viii)   Corrosion Prevention & Control Program (CPCP)
                           inspection findings and correction reports, as
                           required by the Maintenance Program.

                  The head of Lessee's quality control department shall sign a
                  statement certifying that the data and information contained
                  in the documentation and records are true and correct.

         (j)      Exterior Markings - At time of return of the Aircraft, Lessee
                  shall, at its cost remove from the exterior and interior of
                  the Aircraft Lessee's operator specific exterior and interior
                  markings. The area where such markings were removed or painted
                  over shall be refurbished by Lessee as necessary to blend in
                  with the surrounding surface in a good and workmanlike manner.

         (k)      Overhaul and Repair - All components, rotables, and assemblies
                  (including the Engines, APU, and landing gears) shall be
                  documented with work orders, vendor

                                                                          Page 5




                  serviceable tags, 8130 tags, form 337, etc. to have been
                  repaired or overhauled by FAA-certified repair stations in
                  such manner so that such components, rotables, assemblies,
                  Engines, APU, and landing gears are approved by the FAA for
                  use on United States-registered and certified aircraft. All
                  overhaul and repair procedures shall have met all FAA
                  requirements necessary to transfer to a new operator under
                  Part 121 of the U.S. Federal Aviation Regulations.

         (l)      Structural Repairs - All repairs that were performed since the
                  Delivery Date and that then exist on the Aircraft shall
                  conform to the SRM and the AMM and shall have FAA approval if
                  required, including without limitation repairs related to
                  impact damage to the Aircraft caused by ground handling
                  equipment or foreign objects. All repairs not covered by the
                  SRM or the AMM shall have been made in accordance with the
                  Manufacturer's approval if required, which approval shall not
                  be unreasonablly be withheld and shall be provided with
                  complete data and documentation to verify and substantiate
                  their certification and methods of compliance. A complete
                  listing of all repairs performed shall be supplied together
                  with the Aircraft.

2.       Condition of Airframe.

         Upon its return the Aircraft shall comply with the following
conditions:

         (a)      C Check Inspection - The Airframe shall have completed, within
                  100 flight hours of return, the next sequential "C" check or
                  any multiple thereof. If the Aircraft has logged more than 100
                  flight hours since the last "C" check or any multiple thereof,
                  then Lessee shall perform the next scheduled "C" check or any
                  multiple thereof, as applicable. All observed defects observed
                  during such C check shall be rectified at Lessee's expense, in
                  accordance with the Maintenance Program;

         (b)      Structural and other scheduled Inspections - The Airframe
                  shall have at least twelve (12) months, or two thousand
                  (2,000) flight hours or cycles, whichever is applicable,
                  remaining before any scheduled structural tasks or maintenance
                  inspections which are not included in (a) above. In the event
                  that a structural task or maintenance inspection interval is
                  less than the above, Lessee shall, at its expense, perform all
                  such tasks immediately prior to return of the Aircraft;

         (c)      Landing Gear Life - The main Landing Gear and the nose Landing
                  Gear shall have at least fifty percent (50%) of the cycles
                  remaining prior to removal for overhaul in accordance with the
                  Maintenance Program, and the landing gear total cycles since
                  new ("TCSN") shall be no more than ten percent (10%) greater
                  than the airframe TCSN;

         (d)      Brakes - The brakes shall be serviceable.

                                                                          Page 6



3.       Condition of Controlled Components.

         Aircraft and Engine hour or cycle controlled components or parts, at
         time of return to Lessor, shall have remaining, as a minimum, one half
         life and/or fifty percent (50%) of the Lessee's approved hour or cycle
         limit, whichever is applicable, before any scheduled removals for
         overhaul, test, disassembly or replacement. All components or parts
         controlled on a calendar basis shall have at least twelve (12) months
         or fifty percent (50%) of its total approved life in hours or cycles,
         if greater remaining before scheduled removal for testing, overhaul or
         replacement.

         However, if a component or part has a life, overhaul or check interval
         limit that is less than the above, Lessee shall, at its expense,
         perform all such tasks immediately prior to return. All such hour/cycle
         or calendar controlled components or parts are defined as those
         components or parts controlled under the Maintenance Program.

4.       Condition of Installed Engines and APU.

         At time of return, each Engine shall be capable of certificated, full
         rated performance and its life limited parts ("LLP") will have at least
         fifty percent (50%) of cycles remaining before replacement.

         (a)      Time remaining - Each Engine shall have completed no more than
                  two thousand five hundred (2500) flight hours since new or
                  since its last full performance restoration shop visit at
                  which it was subject to a full engine management program
                  rework, based on the reliability goals set out in Rolls-Royce
                  Alison workscope guide, which currently state that the
                  workscope is designed to give 30 degrees centigrade of exhaust
                  gas temperature margin and 5,000 flight hours of on-wing life.
                  To the extent that the shop workscope guide is amended in the
                  future to include different reliability goals then the engine
                  shall have at least fifty percent (50%) of the on-wing hours
                  remaining in accordance with such amended shop workscope
                  guide.

         (b)      Borescope Inspection - On each installed Engine an external
                  visual inspection, accessory inventory check and video-taped
                  borescope inspection in accordance with the requirements of
                  the Maintenance Program shall be performed by Lessee or a
                  designated representative as mutually agreed between Lessee
                  and Lessor during the ground inspection per Section 7(a) of
                  this Exhibit accompanied by a written report on the findings
                  of such inspection herein and satisfactory evidence shall be
                  provided to Lessor reflecting the correction of any
                  discrepancies found during such inspection.

         (c)      Adverse Trend Data - Complete engine records, including but
                  not limited to (i) Group A (Lifed) components (as listed in
                  Engine Manufacturer's Time Limits Manual) as approved by the
                  FAA and (ii) in flight performance data and (iii) shop visit
                  reports from all shop visits, shall be made available to
                  Lessor for review and evaluation. If the Aircraft and/or
                  engine historical and maintenance records and/or

                                                                          Page 7



                  trend monitoring indicate a rate of acceleration in
                  performance deterioration or oil consumption on any installed
                  engine beyond the limits of the Maintenance Program, the
                  causes of such conditions shall have been corrected prior to
                  the return date.

         (d)      Oil spectrum analysis - an oil spectrum analysis shall be made
                  on the installed Engines after the Aircraft is removed from
                  service and a written report shall be made available together
                  with the Aircraft. Any discrepancy found in the engine's
                  lubrication system shall have been corrected prior to the
                  return date.

         (e)      APU Life -The installed APU shall have remaining at least
                  fifty percent (50%) of the expected mean time before removal
                  as evidenced by the Lessee's demonstrated on- wing last two
                  years average for APU hours, before scheduled removal for
                  overhaul, heavy maintenance, or replacement of hour limited or
                  LCF parts at the time of return. The APU shall have a video
                  taped borescope inspection and magnetic plug inspection during
                  the ground inspection per Section 7(a) of this Exhibit.

5.       Provision for "Power-By-The Hour Agreements".

         If the Engines, APU, or any other hour or cycle controlled components
         on the day of return are maintained under valid Power-By-The-Hour
         Agreements (the "PBH Agreements") (and either have been maintained
         throughout the Term under PBH Agreements, or Lessee has made payments
         to the maintenance provider to cover the period in which such
         components where not under such PBH Agreements), under which the Lessee
         is current on all payments and otherwise in good standing, then, in
         lieu of the relevant requirements in Sections 2(c), 2(d), 3, 4(a) or
         4(e) hereof, the Lessee shall return each such component in such
         condition as shall make it eligible for continued maintenance under PBH
         Agreements, without additional costs, start-up charges, or overhaul
         requirements. For the purposes hereof, a PBH Agreement shall mean a
         maintenance program, provided by the Engines, APU or component
         manufacturer or its successor or designee, providing full maintenance
         (other than routine day-to-day maintenance; provided, that
         foreign-object damage and abuse may be excluded or separately charged)
         for the such components at no cost other than standard per-cycle rates
         (i.e., excluding charges based on the current maintenance status of
         such component), all benefits of which program, including but not
         limited to the payments made by Lessee under such PBH Agreements while
         operating the Aircraft, shall be assignable or otherwise transferable
         to any other carrier without restrictions of any kind.

6.       Return Condition Adjustment.

         (a)      If the Lessee does not meet the conditions set forth for an
                  item referred to in Sections 2, 3, the first two lines of
                  Section 4 and in Section 4(a) and 4(e) (each such item, an
                  "Adjustable Item" and each such section, an "Adjustable Return
                  Condition") then Lessee shall pay to Lessor (for deficient
                  condition) an equivalency payment (the "Equivalency Payment")
                  in accordance with the following formula:


                                                                          Page 8




                                      [*]


                  The components of the formula above shall be as agreed between
                  Lessor and Lessee. If Lessor and Lessee fail to reach
                  agreement on any components of the above formula, such amount
                  will be determined as the average price that would be charged
                  by a third party to restore the Aircraft to the conditions
                  required under the Lease and this Exhibit, based on one
                  quotation obtained by Lessor and one quotation obtained by
                  Lessee, both from a reputable, FAA and Manufacturer-approved
                  EMB-145 repair station in the United States. If the prices of
                  such quotations differ by more than ten percent (10%), Lessor
                  and Lessee shall obtain a third quotation from another
                  reputable, FAA and Manufacturer-approved EMB-145 repair
                  station in the United States, the quotation which is farthest
                  from the average of all three quotations shall be disregarded
                  and the average of the two remaining quotations shall be
                  binding upon Lessor and Lessee as the components of the
                  formula.

         (b)      The Equivalency Payment for each return condition of each
                  Adjustable Item in the relevant Section referred to in the
                  first paragraph of this Section 6, whether positive or
                  negative, shall be aggregated in order to determine the total
                  Equivalency Payment due from Lessee. For clarification, items
                  in more than the required condition shall be netted against
                  items in less than the required condition when determining the
                  amount of the total payment due, provided however that such
                  netting is only applicable to the following major components:
                  Engines, APU and landing gear. If the cumulative

- ---------
* Confidential

                                                                          Page 9



                  Equivalency Payment after such netting is negative, it shall
                  be deemed to be zero.

7.       Inspection Upon Return

         Lessor shall have the right to inspect the Aircraft upon return, and
         the following conditions shall apply:

         (a)      Ground Inspection - The Aircraft including the Aircraft
                  Documents shall be made available to Lessor for ground
                  inspection by Lessor or its designee at Lessee's facilities.
                  Such inspection shall commence no later than fourteen (14)
                  business days prior to the date of return of the Aircraft.
                  Lessee shall remove the Aircraft from scheduled service and
                  open the areas of the Aircraft as required to perform the
                  necessary checks as specified in Section 2 hereof. In
                  addition, Lessee shall allow Lessor to accomplish its
                  inspection to determine that the Aircraft, including the
                  Aircraft Documents are in the condition set forth in Sections
                  1, 2, 3 and 4 hereof. During such checks, Lessor's personnel
                  shall have the right to reasonably request that adjacent
                  additional panels or areas be opened in order to allow further
                  inspection by Lessor's personnel.

         (b)      Operational Ground Check - Lessee shall conduct an operations
                  ground check on the Aircraft in accordance with the
                  Maintenance Program manual criteria for the purpose of
                  demonstrating to Lessor the satisfactory operation of the
                  systems, including a full fuel tank leak check, pilot and
                  static systems check and hydraulic system internal leak check.

         (c)      Operational Test Flight - The Aircraft shall be test flown by
                  Lessee, using qualified flight test personnel, for the amount
                  of time necessary to satisfactorily demonstrate the
                  airworthiness of the Aircraft and the proper functioning of
                  all systems and components in accordance with the agreed check
                  flight procedures. During such test flight command, care,
                  custody and control of the Aircraft shall remain at all times
                  with Lessee. Up to five (5) of Lessor's designated
                  representatives (or more if mutually agreed) may participate
                  in such flight as observers. Upon completion of such
                  operational flight-testing, the representatives of Lessee and
                  Lessor participating in such testing shall agree in writing
                  upon any discrepancies required to be corrected by Lessee in
                  order to comply with the conditions required hereunder.

         (d)      If requested by Lessor in writing, all discrepancies which are
                  noted during the inspection and acceptance flight(s) shall be
                  corrected at Lessee's expense. If such discrepancies are
                  substantiated by the Maintenance Program and Lessor determines
                  that repairs, modifications or other work items are required
                  to cause the Aircraft to comply with the requirements provided
                  herein, including, without limitation, any maintenance
                  required so that the Engines will meet all Engine parameters
                  and trends specified by the Maintenance Program, Lessee shall
                  cause such repairs and other work items to be commenced and
                  completed prior to return.


                                                                         Page 10


8.       Definitions.

         For the purpose of this Exhibit, the following terms have the following
meanings:

         APU shall mean the auxiliary power unit bearing serial number
         SP-E004330, and any substitute APU which may from time to time be
         substituted therefor pursuant to the terms of the Lease.

         MAINTENANCE PROGRAM: means the Lessee's maintenance program as
         originally agreed between the Manufacturer and Lessee, as such program
         may be from time to time amended and supplemented by Lessee and which
         (i) shall have been approved by the FAA, (ii) shall fully comply with
         the requirements of the FAA for the EMB-145 and Rolls-Royce Allison
         AE3007A1 aero engines (or an improved model, as the case may be)
         installed thereon, and (iii) shall incorporate the requirements of the
         EMB-145 Scheduled Maintenance Requirements Document Part 1 ("SMRD"),
         the Aircraft Maintenance Manual ("AMM"), the Structural Repair Manual
         ("SRM"), the Corrosion Prevention and Correction Program ("CPCP") and
         the Original Equipment Manufacturers' ("OEMs") maintenance manuals,
         (all of the foregoing as from time to time amended or supplemented),
         the Service Newsletters and the service bulletins issued by the
         Manufacturer and all OEMs.

         CALENDAR CONTROLLED COMPONENTS OR PARTS: those components or parts
         identified in the MRB Report which have maintenance tasks at specific
         calendar-time intervals.

         CYCLE-CONTROLLED COMPONENTS OR PARTS: those components or parts
         identified in the MRB Report which have maintenance tasks at specific
         flight-cycle intervals.

         HOUR-CONTROLLED COMPONENTS OR PARTS: those components or parts
         identified in the MRB Report which have maintenance tasks at specific
         flight-hour intervals.

         LIFE CYCLE FATIGUE ("LCF") PARTS: those rotating parts which have
         specific cycle limits as specified by the manufacturer to preclude
         cycle fatigue failures.

         MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT"): the report published by
         the maintenance review board detailing the intervals and description of
         the maintenance tasks and, where applicable, the life limits required
         for continued airworthiness of the Aircraft. Where the intervals
         specified in the MRB Report differ from the limit specified by the
         component manufacturer, the MRB Report shall take precedence.

         TERMINATING ACTION: the alteration or modification of the Aircraft in
         accordance with mandatory service bulletins, orders, airworthiness
         directives, and instructions required to eliminate repetitive
         inspections or maintenance action.


                                                                         Page 11


                                                                     Exhibit F-2

                                RETURN CONDITIONS

This Exhibit shall apply only if Owner Participant notifies Lessee not later
than 150 days prior to the end of the Basic Term that it is demanding payment of
a deficiency amount under the Residual Value Guarantee Agreement and certifies
to Lessee the appraised fair market sales value of the Aircraft as determined
under the Residual Value Guarantee Agreement that is the basis for such claim
and the amount of the deficiency so claimed except that this Exhibit shall be
assumed to apply for the purposes stated in the definition of "Appraisal
Procedure".

1.       General Conditions.

         At the time of return, the Aircraft shall (i) have been continuously
         and currently maintained in accordance with the Maintenance Program as
         authorized by the FAA, as if the Aircraft were to be kept in further
         commercial passenger service by Lessee and (ii) meet the following
         requirements:

         (a)      Operating Condition - The Aircraft shall be in good operating
                  condition, ordinary wear and tear excepted, with all of the
                  Aircraft equipment, components, and systems functioning in
                  accordance with their intended use irrespective of variations
                  or deviations authorized by the Minimum Equipment List or
                  Configuration Deviation List. All replacement equipment,
                  parts, components or items installed on the Aircraft shall be
                  manufactured by the original manufacturer approved by the
                  Manufacturer or a manufacturer holding requisite authority of
                  the FAA, and in case of used, rotable parts, have an
                  FAA-approved serviceable tag.

         (b)      Configuration - The Aircraft shall be in the same passenger
                  configuration with all equipment installed therein as the
                  Aircraft was when delivered under the Embraer Purchase
                  Agreement, ordinary wear and tear excepted, including
                  replacements and substitute parts and equipment. The Aircraft
                  shall not suffer any modification or alteration (hereinafter
                  "Modifications") after the Delivery Date provided however that
                  Lessee may make Modifications to the Aircraft as long as they
                  are included as factory-installed features in EMB-145 aircraft
                  delivered to the Lessee subsequent to the delivery of the
                  Aircraft. The term Modifications shall be deemed to include,
                  but not be limited to (i) changes to the Aircraft structure,
                  performance, weight and balance, (ii) changes which materially
                  adversely affect the Aircraft's flight qualities, operational
                  characteristics, operational safety, ease or cost of
                  maintenance, spare parts interchangeability or replaceability,
                  and (iii) substitution of different types of equipment or
                  accessories which are not equivalent in cost value and/or
                  operation capability to the equipment or accessories being
                  replaced, and shall exclude (x) changes pursuant to service
                  bulletins issued by the Manufacturer or the OEMs, and (y)
                  mandatory changes required to be accomplished by Lessee
                  hereunder. All permitted Modifications made to the Aircraft
                  shall be in accordance with FAA-

                                                                          Page 1





                  approved data, and Lessee shall provide complete data and
                  documentation to substantiate their certification, approval,
                  and methods of compliance (including, without limitation, a
                  copy of the Aircraft Illustrated Parts Catalog and a copy of
                  the Aircraft Interior Configuration document). A complete
                  listing of all modifications and repairs performed shall be
                  supplied together with the Aircraft. Modifications, other than
                  permitted ones, shall be removed and the appropriate repairs
                  to the Aircraft made prior to the day of return of the
                  Aircraft.

         (c)      Certification - The Aircraft shall have, a valid and effective
                  Certificate of Airworthiness of the type "Transport, Category
                  (Passengers)" issued by the FAA, and shall be in full
                  compliance with, and capable of registration under, the
                  provisions of Part 121 of the U.S. Federal Aviation
                  Regulations (or any successor legislation) and other US
                  regulations applicable to the Aircraft's operation and
                  continued airworthiness, without any restrictions,
                  corrections, repairs, limitations, modifications or
                  alterations or overhauls having to be performed to meet such
                  standards.

         (d)      General Appearance - The Aircraft shall be clean by commercial
                  passenger airline standards, cosmetically acceptable, interior
                  complete, and prepared to be placed into scheduled revenue
                  airline operations. Interior items which may be broken shall
                  be repaired or replaced. All decals, signs and placards shall
                  be clean, secure and legible in the English language. The
                  Aircraft shall meet the following minimum requirements:

                  (i)      Fuselage, Wings and Empennage - The fuselage shall be
                           within Maintenance Program approved limits regarding
                           dents and abrasions and loose or pulled rivets; all
                           leading edges shall be within Maintenance Program
                           approved limits regarding damage occurring since
                           delivery; the airframe, Engines and wings shall be
                           free of fuel, oil and hydraulic leaks so as to allow
                           unrestricted operation; all leading edges and
                           fuselage areas which are aerodynamically critical
                           shall be free of any scab patches other than those
                           required by the Manufacturer and shall be repaired
                           with repairs which are permanent in nature in
                           accordance with the SRM, or are made in accordance
                           with the Manufacturer's approval.

                  (ii)     Interior - Ceilings, sidewalls, bulkhead panels shall
                           be clean, free of cracks and within Maintenance
                           Program approved limits regarding dents; all carpets
                           and seat covers shall be in good condition and clean
                           and meet FAR fire resistance regulations; all seats
                           shall be serviceable and in good condition. All
                           safety equipment shall be installed at the correct
                           stations, a loose equipment check list and location
                           drawings shall accompany the Aircraft and a loose
                           equipment inventory shall be drawn up on the Delivery
                           Date and checked on the day of return of the
                           Aircraft.

                  (iii)    Cockpit - All fairing panels shall be free of cracks
                           and shall be clean; all floor coverings shall be
                           clean and effectively sealed and secured, all seat
                           covers

                                                                          Page 2





                           and cushions shall be in good condition and clean and
                           shall, as applicable, conform to FAA fire resistance
                           regulations. All seats shall be fully serviceable and
                           in good condition. All instruments and light panels
                           shall be clean, secure and legible, function in
                           accordance with their intended purpose and have all
                           lighting operating properly.

                  (iv)     Landing, Gear and Wheel Wells - The landing gear and
                           all wheel wells shall be clean, free of leaks, and
                           repaired as necessary. The main and nose landing gear
                           components and their associated actuators and parts
                           shall be in a good operating condition.

                  (v)      Cargo Compartment, Galleys and Toilets - All cargo
                           compartment panels shall be installed and be in good
                           condition so as to comply with extended range
                           operations requirements. The cargo compartments,
                           galleys and toilet of the Aircraft shall be in a
                           clean and presentable condition and all cargo
                           securing system components shall be serviceable; all
                           galley inserts (to the extent delivered with the
                           Aircraft) shall be redelivered with the Aircraft.

                  (vi)     Windows - Any delamination, and crazing of the
                           windshields and cabin windows of the Aircraft shall
                           be within approved limits of the Maintenance Program
                           and shall be properly sealed.

                  (vii)    Doors - All the doors of the Aircraft shall be free
                           moving, correctly rigged and properly sealed and all
                           door assist mechanisms shall be charged in accordance
                           with the AMM.

         (e)      Airworthiness Directives and Service Bulletins - All FAA
                  Airworthiness Directives and amendments or changes to Aviation
                  Regulations issued by the FAA and applicable to the Aircraft
                  which require compliance within a period of six (06) months
                  following the day of return of the Aircraft (or the equivalent
                  hours or cycles, based on the Lessee's EMB-145 last 4 (four)
                  years of operation average monthly utilization) shall have
                  been accomplished on a Terminating Action basis and in
                  compliance with the issuing agency's and the manufacturer's
                  associated service bulletins, regardless of any
                  operator-specific waiver, deferral, or deviation from such
                  directive or regulation. The Aircraft shall have installed on
                  it all Manufacturer and OEM service bulletin kits requested by
                  Lessee and actually received by Lessee in respect of the
                  Aircraft, and if not installed, Lessee shall deliver them
                  together with the Aircraft at no charge.

         (f)      Deferred Maintenance - The Aircraft shall be free of all
                  deferred or carried over maintenance items, including without
                  limitation, any pilot log book reports, maintenance reports,
                  and the Aircraft's Central Maintenance Computer reports. Any
                  such deferred or carried over maintenance shall be promptly
                  accomplished in a

                                                                          Page 3





                  terminating manner prior to the return of the Aircraft at the
                  end of the term of the Lease.

         (g)      Corrosion - The Maintenance Program shall include a corrosion
                  control program based on the corrosion prevention, treatment
                  and correction criteria recommended by the Manufacturer in the
                  CPCP. The Aircraft shall be free from corrosion or shall have
                  been adequately treated in compliance with the Maintenance
                  Program. Complete details of the corrosion control program, as
                  well as a summary of specific corrosion correction, of the
                  Aircraft in accordance with the Maintenance Program shall be
                  available for delivery together with the Aircraft. This
                  summary shall include Lessee's identifying the Manufacturer's
                  task identifier and cross referencing, Lessee's identifier
                  indicating status of accomplishment and findings and
                  incorporation status relative to all recommended corrective
                  and preventative actions. The hydraulic system and fuel tanks
                  shall be free from contamination as demonstrated by a
                  laboratory report to be performed after the Aircraft is
                  removed from service and delivered together with the Aircraft.

         (h)      Leased Components - The Aircraft shall be free and clear of
                  all Liens and at return shall not have installed thereon any
                  equipment, components and/or parts which are leased or loaned
                  or otherwise owned by a third party.

         (i)      Records - The Aircraft shall be accompanied by all Aircraft
                  Documents (as defined below). The Aircraft Documents shall be
                  provided in English, and be in good condition, readable and
                  capable of being reproduced.

                  (i)      "Aircraft Document" shall mean, all technical data,
                           manuals, log books and weight and balance sheets, and
                           all inspection, modification and overhaul records and
                           other service, repair, maintenance, and technical
                           records that are maintained with respect to the
                           Aircraft, Airframe, Engines, APU, landing gears or
                           parts (including, without limitation, all additions,
                           renewals, revisions, and replacements of any such
                           materials from time to time made, or required to be
                           made, in accordance with the Maintenance Program
                           and/or FAA regulations, and in each case in whatever
                           form and by whatever means or medium such materials
                           may be maintained or retained by or on behalf of
                           Lessee (provided however that all such material shall
                           be maintained in the English language).

                  (ii)     All Parts, components and assemblies identified with
                           safe-life, hard time or condition monitored limits
                           (to the extent that such condition monitored items
                           are to be tracked in accordance with the approved
                           Maintenance Program) shall be provided with part
                           number, serial number, their service histories,
                           accumulated cycles and flight hours, safe-life, hard
                           time or condition monitored limits and remaining
                           service lives on a separate listing and where
                           practicable, be physically verified as installed and
                           have hard copy

                                                                          Page 4





                           documentation (i.e., appropriate overhaul or
                           serviceable vendor tags and work orders) to verify
                           their service histories.

                  (iii)    All components and assemblies, which are, identified
                           on the maintenance records by part numbers and/or
                           serial numbers other than the Manufacturer's or other
                           manufacturer's shall be provided with two-way
                           cross-reference listing necessary to establish
                           complete traceability.

                  (iv)     All documentation, flight records, and maintenance
                           records as specified herein and as specified by
                           Federal Aviation Regulations Sections 121.380, and,
                           as applicable, Section 91.417 and 91.419 (or FAR's as
                           amended), and which normally accompany the transfer
                           of an aircraft or engine shall be delivered together
                           with the Aircraft. In the event of missing or
                           incomplete records, the tasks necessary to produce
                           such complete records shall be accomplished in
                           accordance with the Maintenance Program prior to
                           return of the Aircraft.

                  (v)      All documentation and records shall be in English and
                           shall be made available for inspection in the
                           location they are normally kept which location shall
                           permit direct access to the Aircraft, at least 14
                           business days before the day of return of the
                           Aircraft.

                  (vi)     Any and all documentation, data, drawings, records
                           and manuals as required to be maintained by the FAA
                           and SMRD, shall be provided, regardless of whether
                           such information is considered proprietary.

                  (vii)    Hard Landing inspection reports, Lightning Strike
                           inspection reports or High Intensity Radiated Field
                           (HIRF) check reports as may be required should
                           Aircraft records show evidence of any occurrence
                           indicating such inspections or checks to be
                           necessary.

                  (viii)   Corrosion Prevention & Control Program (CPCP)
                           inspection findings and correction reports, as
                           required by the Maintenance Program.

                  The head of Lessee's quality control department shall sign a
                  statement certifying that the data and information contained
                  in the documentation and records are true and correct.

         (j)      Exterior Markings - At time of return of the Aircraft, Lessee
                  shall, at its cost remove from the exterior and interior of
                  the Aircraft Lessee's operator specific exterior and
                  interior markings. The area where such markings were removed
                  or painted over shall be refurbished by Lessee as necessary to
                  blend in with the surrounding surface in a good and
                  workmanlike manner.


                                                                          Page 5



         (k)      Overhaul and Repair - All components, rotables, and assemblies
                  (including the Engines, APU, and landing gears) shall be
                  documented with work orders, vendor serviceable tags, 8130
                  tags, form 337, etc. to have been repaired or overhauled by
                  FAA-certified repair stations in such manner so that such
                  components, rotables, assemblies, Engines, APU, and landing
                  gears are approved by the FAA for use on United
                  States-registered and certified aircraft. All overhaul and
                  repair procedures shall have met all FAA requirements
                  necessary to transfer to a new operator under Part 121 of the
                  U.S. Federal Aviation Regulations.

         (l)      Structural Repairs - All repairs that were performed since the
                  Delivery Date and that then exist on the Aircraft shall
                  conform to the SRM and the AMM and shall have FAA approval if
                  required, including without limitation repairs related to
                  impact damage to the Aircraft caused by ground handling
                  equipment or foreign objects. All repairs not covered by the
                  SRM or the AMM shall have been made in accordance with the
                  Manufacturer's approval if required, which approval shall not
                  be unreasonablly be withheld and shall be provided with
                  complete data and documentation to verify and substantiate
                  their certification and methods of compliance. A complete
                  listing of all repairs performed shall be supplied together
                  with the Aircraft.

2.       Condition of Airframe.

         On the day of return, the Aircraft shall be as follows:

         (a)      C Check Inspection - The Airframe shall have completed, within
                  100 flight hours of return, the next sequential "C" check or
                  any multiple thereof. If the Aircraft has logged more than 100
                  flight hours since the last "C" check or any multiple thereof,
                  then Lessee shall perform the next scheduled "C" check or any
                  multiple thereof, as applicable. All observed defects observed
                  during such C check shall be rectified at Lessee's expense, in
                  accordance with the Maintenance Program;

         (b)      Structural and other scheduled Inspections - The Airframe
                  shall have at least twelve (12) months, or two thousand
                  (2,000) flight hours or cycles, whichever is applicable or
                  most limiting, remaining before any scheduled structural tasks
                  or maintenance inspections which are not included in (a)
                  above. In the event that a structural task or maintenance
                  inspection interval is less than the above, Lessee shall, at
                  its expense, perform all such tasks immediately prior to
                  return of the Aircraft;

         (c)      Landing Gear Life - The main Landing Gear and the nose Landing
                  Gear shall have at least fifty percent (50%) of the cycles
                  remaining prior to removal for overhaul in accordance with the
                  Maintenance Program, and the landing gear total cycles since
                  new ("TCSN") shall be no more than ten percent (10%) greater
                  than the airframe TCSN;

                                                                          Page 6



         (d)      Brakes - The brakes shall have no less than the C check brake
                  wear limits with the brakes set at normal parking break
                  pressure. The tires shall have a remaining useful life of at
                  least fifty percent (50%).

3.       Condition of Controlled Components.

         Aircraft and Engine hour or cycle controlled components or parts, at
         time of return to Lessor, shall have remaining, as a minimum, one half
         life and/or fifty percent (50%) of the Lessee's approved hour or cycle
         limit, whichever is applicable or most limiting, before any scheduled
         removals for overhaul, test, disassembly or replacement. All components
         or parts controlled on a calendar basis shall have at least twelve (12)
         months or fifty percent (50%) of its total approved life in hours or
         cycles, if greater remaining before scheduled removal for testing,
         overhaul or replacement.

         However, if a component or part has a life, overhaul or check interval
         limit that is less than the above, Lessee shall, at its expense,
         perform all such tasks immediately prior to return. All such hour/cycle
         or calendar controlled components or parts are defined as those
         components or parts controlled under the Maintenance Program.

4.       Condition of Installed Engines and APU.

         At time of return, each Engine shall be capable of certificated, full
         rated performance and its life limited parts ("LLP") will have at least
         fifty percent (50%) of cycles remaining before replacement.

         (a)      Time remaining - Each Engine shall have completed no more than
                  two thousand five hundred (2500) flight hours since new or
                  since its last full performance restoration shop visit at
                  which it was subject to a full engine management program
                  rework, based on the reliability goals set out in RR Alison
                  workscope guide, which currently state that the workscope is
                  designed to give 30 degrees centigrade of exhaust gas
                  temperature margin and 5,000 flight hours of on-wing life. To
                  the extent that the shop workscope guide is amended in the
                  future to include different reliability goals then the engine
                  shall have at least fifty percent (50%) of the on-wing hours
                  remaining in accordance with such amended shop workscope
                  guide.

         (b)      Borescope Inspection - On each installed Engine an external
                  visual inspection, accessory inventory check and video-taped
                  borescope inspection in accordance with the requirements of
                  the Maintenance Program shall be performed by Lessee or a
                  designated representative as mutually agreed between Lessee
                  and Lessor during the ground inspection per Section 7(a) of
                  this Exhibit accompanied by a written report on the findings
                  of such inspection herein and satisfactory evidence shall be
                  provided to Lessor reflecting the correction of any
                  discrepancies found during such inspection.

                                                                          Page 7



         (c)      Adverse Trend Data - Complete engine records, including but
                  not limited to (i) Group A (Lifed) components (as listed in
                  Engine Manufacturer's Time Limits Manual) as approved by the
                  FAA and (ii) in flight performance data and (iii) shop visit
                  reports from all shop visits, shall be made available to
                  Lessor for review and evaluation. If the Aircraft and/or
                  engine historical and maintenance records and/or trend
                  monitoring indicate a rate of acceleration in performance
                  deterioration or oil consumption on any installed engine
                  beyond the limits of the Maintenance Program, the causes of
                  such conditions shall have been corrected prior to the return
                  date.

         (d)      Oil spectrum analysis - an oil spectrum analysis shall be made
                  on the installed Engines after the Aircraft is removed from
                  service and a written report shall be made available together
                  with the Aircraft. Any discrepancy found in the engine's
                  lubrication system shall have been corrected prior to the
                  return date.

         (e)      APU Life -The installed APU shall have remaining at least
                  fifty percent (50%) of the expected mean time before removal
                  as evidenced by the Lessee's demonstrated on- wing last two
                  years average for APU hours, before scheduled removal for
                  overhaul, heavy maintenance, or replacement of hour limited or
                  LCF parts at the time of return. The APU shall have a video
                  taped borescope inspection and magnetic plug inspection during
                  the ground inspection per Section 7(a) of this Exhibit.

5.       Provision for "Power-By-The Hour Agreements".

         If the Engines, APU, or any other hour or cycle controlled components
         on the day of return are maintained under valid Power-By-The-Hour
         Agreements (the "PBH Agreements") (and either have been maintained
         throughout the Term under PBH Agreements, or Lessee has made payments
         to the maintenance provider to cover the period in which such
         components where not under such PBH Agreements), under which the Lessee
         is current on all payments and otherwise in good standing, then, in
         lieu of the relevant requirements in Sections 2(c), 2(d), 3, 4(a) or
         4(e) hereof, the Lessee shall return each such component in such
         condition as shall make it eligible for continued maintenance under PBH
         Agreements, without additional costs, start-up charges, or overhaul
         requirements. For the purposes hereof, a PBH Agreement shall mean a
         maintenance program, provided by the Engines, APU or component
         manufacturer or its successor or designee, providing full maintenance
         (other than routine day-to-day maintenance; provided, that
         foreign-object damage and abuse may be excluded or separately charged)
         for the such components at no cost other than standard per-cycle rates
         (i.e., excluding charges based on the current maintenance status of
         such component), all benefits of which program, including but not
         limited to the payments made by Lessee under such PBH Agreements while
         operating the Aircraft, shall be assignable or otherwise transferable
         to any other carrier without restrictions of any kind.

6.       Return Condition Adjustment.


                                                                          Page 8



         (a)      Each item referred to in Sections 2(c), 2(d), 3, the first two
                  lines of Section 4 and in Section 4(a) and 4(e) (each such
                  item, an "Adjustable Item" and each such section, an
                  "Adjustable Return Condition") may be returned with less than
                  the required limits, subject, however, to the minimum
                  requirements set forth in item (e) below.

         (b)      If the Lessee does not meet the conditions set forth for an
                  Adjustable Item in the relevant Adjustable Return Condition
                  then Lessee shall pay to the Lessor (for deficient condition)
                  an Equivalency Payment in accordance with the following
                  formula:

                                                [*]


                  The components of the formula above shall be as agreed between
                  Lessor and the Lessee. If Lessor and the Lessee fail to reach
                  agreement on any components of the above formula, such amount
                  will be determined as the average price that would be charged
                  by a third party to restore the Aircraft to the conditions
                  required under the Lease and this Exhibit, based on one
                  quotation obtained by Lessor and one quotation obtained by
                  Lessee, both from a reputable, FAA and Manufacturer-approved
                  EMB- 145 repair station in the United States. If the prices of
                  such quotations differ by more than ten percent (10%), Lessor
                  and Lessee shall obtain a third quotation from another
                  reputable, FAA and Manufacturer-approved EMB-145 repair
                  station in the United States, the quotation which is farthest
                  from the average of all three quotations shall be disregarded
                  and the average of the two

- ----------
* Confidential

                                                                          Page 9




                  remaining quotations shall be binding upon Lessor and Lessee
                  as the components of the formula.

         (c)      The Equivalency Payment for each return condition of each
                  Adjustable Item in the relevant Section referred to in the
                  first paragraph of this Section 6, whether positive or
                  negative, shall be aggregated in order to determine the total
                  Equivalency Payment due from Lessee. (For clarification, items
                  in more than the required condition shall be netted against
                  items in less than the required condition when determining the
                  amount of the total payment due, provided however that such
                  netting is only applicable to the following major components:
                  Engines, APU and landing gear). If the cumulative Equivalency
                  Payment after such netting is negative, it shall be deemed to
                  be zero.

         (d)      In no event shall the Equivalency Payment due from the Lessee
                  to the Manufacturer exceed the aggregate amount of any payment
                  and expenses that the Manufacturer may make under the Residual
                  Value Guarantee Agreement.

         (e)      Notwithstanding the equivalency charges that may be otherwise
                  payable or available under this Section 6, if:

                  (i)      Any installed Engine has completed more than 3,750
                           flight hours since new or since its last full
                           performance restoration shop visit at which it was
                           subject to a full engine management program rework
                           (or less than twenty-five percent (25%) of the
                           on-wing hours remaining in accordance with an amended
                           RR Allison shop workscope guide),

                  (ii)     Any Engine life limited part has a remaining useful
                           life until the next scheduled replacement of less
                           than twenty five percent (25%),

                  (iii)    The APU has remaining less than twenty five (25%) of
                           the expected mean time before removal,

                  (iv)     The main landing gear or the nose landing gear has
                           less than twenty five percent (25%) of the cycles
                           remaining prior to removal for overhaul, or the
                           cycles exceed one hundred and ten percent (110%) of
                           the airframe, or

                  (v)      The brakes have less than the C check brake wear
                           limits with the brakes set at normal parking break
                           pressure, or the tires have a remaining useful life
                           of less than twenty five percent (25%),

                  then, in any such case, Lessee shall, at its own cost and
                  expense, overhaul, refurbish and/or replace each non-complying
                  item so that it meets the applicable level specified in items
                  (i) through (v) above.


                                                                         Page 10



7.       Inspection Upon Return

         Lessor shall have the right to inspect the Aircraft upon return, and
         the following conditions shall apply:

         (a)      Ground Inspection - The Aircraft including the Aircraft
                  Documents shall be made available to Lessor for ground
                  inspection by Lessor or its designee at Lessee's facilities.
                  Such inspection shall commence no later than fourteen (14)
                  business days prior to the date of return of the Aircraft.
                  Lessee shall remove the Aircraft from scheduled service and
                  open the areas of the Aircraft as required to perform the
                  necessary checks as specified in Section 2 hereof. In
                  addition, Lessee shall allow Lessor to accomplish its
                  inspection to determine that the Aircraft, including the
                  Aircraft Documents are in the condition set forth in Sections
                  1, 2, 3 and 4 hereof. During such checks, Lessor's personnel
                  shall have the right to reasonably request that adjacent
                  additional panels or areas be opened in order to allow further
                  inspection by Lessor's personnel.

         (b)      Operational Ground Check - Lessee shall conduct an operations
                  ground check on the Aircraft in accordance with the
                  Maintenance Program manual criteria for the purpose of
                  demonstrating to Lessor the satisfactory operation of the
                  systems, including a full fuel tank leak check, pilot and
                  static systems check and hydraulic system internal leak check.

         (c)      Operational Test Flight - The Aircraft shall be test flown by
                  Lessee, using qualified flight test personnel, for the amount
                  of time necessary to satisfactorily demonstrate the
                  airworthiness of the Aircraft and the proper functioning of
                  all systems and components in accordance with the agreed check
                  flight procedures. During such test flight command, care,
                  custody and control of the Aircraft shall remain at all times
                  with Lessee. Up to five (5) of Lessor's designated
                  representatives (or more if mutually agreed) may participate
                  in such flight as observers. Upon completion of such
                  operational flight-testing, the representatives of Lessee and
                  Lessor participating in such testing shall agree in writing
                  upon any discrepancies required to be corrected by Lessee in
                  order to comply with the conditions required hereunder.

         (d)      If requested by Lessor in writing, all discrepancies, which
                  are noted during the inspection and acceptance flight(s),
                  shall be corrected at Lessee's expense. If such discrepancies
                  are substantiated by the Maintenance Program and Lessor
                  determines that repairs, modifications or other work items are
                  required to cause the Aircraft to comply with the requirements
                  provided herein, including, without limitation, any
                  maintenance required so that the Engines will meet all Engine
                  parameters and trends specified by the Maintenance Program,
                  Lessee shall cause such repairs and other work items to be
                  commenced and completed prior to return.


                                                                         Page 11



8.       Definitions.

         APPRAISAL PROCEDURE: this procedure shall apply only if Owner
         Participant provides a Residual Notice pursuant to Section 13(b)(iii)
         of the Lease and shall be used in such case to determine the Fair
         Market Sales Value of the Aircraft as herein provided. Manufacturer,
         Owner Participant and Lessee shall, within thirty (30) calendar days
         after Owner Participant has delivered a Residual Notice, each obtain
         appraisal values from a recognized independent appraiser (one to be
         selected by Manufacturer, one by Owner Participant, and one by Lessee),
         and the average value as determined by the appraisers shall be binding
         on Manufacturer, Owner Participant and Lessee; provided that if the
         value or values determined by one or more of the appraisers differs
         from the average of the values determined by all three appraisers by
         more than five percent (5%) of such average, the value which differs
         the most from such average shall be excluded, and the average of the
         values determined by the other two appraisers shall be binding on
         Manufacturer, Owner Participant and Lessee. Manufacturer, Owner
         Participant and Lessee shall each pay its own appraiser. Each appraiser
         must be associated with a professional organization of aircraft
         appraisers and each appraisal shall be conducted pursuant to ISTAT 1994
         (or any successor) appraisal methods, definitions and assumptions. Fair
         Market Sales Value as determined hereunder shall mean the value that
         would be obtained in an arms'-length transaction between an informed
         and willing buyer-user (other than a lessee currently in possession or
         a used equipment dealer) under no compulsion to buy and an informed and
         willing seller under no compulsion to sell. In determining Fair Market
         Sales Value, it will be assumed that the Aircraft is in the condition,
         location and overhaul status in which it is required to be returned to
         the Lessor pursuant to Section 12 of the Lease, that Exhibit F-2 of the
         Lease will apply, that the Lessee has removed all Parts which it is
         entitled to remove pursuant to Section 7 of the Lease and that the
         Aircraft is not encumbered by the Lease or any Lien.

         APU shall mean the auxiliary power unit bearing serial number
         SP-E004330, and any substitute APU which may from time to time be
         substituted therefor pursuant to the terms of the Lease.

         MAINTENANCE PROGRAM: means the Lessee's maintenance program as
         originally agreed between the Manufacturer and Lessee, as such program
         may be from time to time amended and supplemented by Lessee and which
         (i) shall have been approved by the FAA, (ii) shall fully comply with
         the requirements of the FAA for the EMB-145 and Rolls-Royce Allison
         AE3007A1 aero engines (or an improved model, as the case may be)
         installed thereon, and (iii) shall incorporate the requirements of the
         EMB-145 Scheduled Maintenance Requirements Document Part 1 ("SMRD"),
         the Aircraft Maintenance Manual ("AMM"), the Structural Repair Manual
         ("SRM"), the Corrosion Prevention and Correction Program ("CPCP") and
         the Original Equipment Manufacturers' ("OEMs") maintenance manuals,
         (all of the foregoing as from time to time amended or supplemented),
         the Service Newsletters and the service bulletins issued by the
         Manufacturer and all OEMs.

         CALENDAR CONTROLLED COMPONENTS OR PARTS: those components or parts,
         which are identified in

                                                                         Page 12




         the MRB Report which have maintenance tasks at specific calendar-time
         intervals.

         CYCLE-CONTROLLED COMPONENTS OR PARTS: those components or parts, which
         are identified in the MRB Report which have maintenance tasks at
         specific flight-cycle intervals.

         HOUR-CONTROLLED COMPONENTS OR PARTS: those components or parts, which
         are identified in the MRB Report which have maintenance tasks at
         specific flight-hour intervals.

         LIFE CYCLE FATIGUE ("LCF") PARTS: those rotating parts which have
         specific cycle limits as specified by the manufacturer to preclude
         cycle fatigue failures.

         MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT"): the report published by
         the maintenance review board detailing the intervals and description of
         the maintenance tasks and, where applicable, the life limits required
         for continued airworthiness of the Aircraft. Where the intervals
         specified in the MRB Report differ from the limit specified by the
         component manufacturer, the MRB Report shall take precedence.

         TERMINATING ACTION: the alteration or modification of the Aircraft in
         accordance with mandatory service bulletins, orders, airworthiness
         directives, and instructions required to eliminate repetitive
         inspections or maintenance action.



                                                                         Page 13





NOTE TO EXHIBIT 10.23

The 15 additional Lease Agreements are substantially identical in all
material respects to the filed Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N265SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N267SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N268SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N269SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N270SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N271SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N272SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N273SK                           November, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N274SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N275SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N276SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N277SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N278SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N279SK                           January, 2001               Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N280SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

EX-10.23(A)

                                                                 Exhibit 10.23a

                         LEASE SUPPLEMENT NO. 1 [N281SK]

          THIS LEASE SUPPLEMENT NO. 1 [N281SK] dated February 23, 2001, between
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but
solely as Owner Trustee, except as otherwise provided herein, the Lessor, and
CHAUTAUQUA AIRLINES, INC., a New York corporation, the Lessee;

                              W I T N E S S E T H :

          WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Lease Agreement [N281SK], dated as of February 23, 2001 (the "Lease",
the terms defined therein being herein used with the same meaning), which Lease
provides, among other things, for the execution and delivery of Lease
Supplements in substantially the form hereof for the purpose of leasing a
specific Aircraft under the Lease when delivered by the Lessor to the Lessee in
accordance with the terms thereof;

          WHEREAS, the Lease, a counterpart of which is attached hereto and made
a part hereof, relates to the Aircraft and Engines described in Schedule I
hereto and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

          1. The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease as herein
supplemented, the Aircraft, described in Schedule I hereto.

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

          3. The Basic Term shall commence on the Delivery Date and continue
through August 23, 2017 (the "Expiration Date"), unless terminated earlier as
provided in the Lease.

          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 Documents.

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

          6. This Lease Supplement may be executed by the parties hereto in
separate counterparts and all such counterparts shall together constitute but
one and the same instrument.



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 or the
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart of each thereof marked Counterpart No. 1.

          7. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

            [The remainder of this page is intentionally left blank.]



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

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

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

                                             CHAUTAUQUA AIRLINES, INC.

                                             By:  /s/ Robert H. Cooper
                                                 -------------------------------
                                                 Name:  Robert H. Cooper
                                                 Title: Vice President



                                                                      SCHEDULE I
                                                             TO LEASE SUPPLEMENT

                       DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME


Manufacturer        Manufacturer's    FAA Registration        Manufacturer's
                        Model              Number               Serial no.
                                                      
Embraer             EMB-145LR          N281SK                  145391


                                     ENGINES



Manufacturer                        Manufacturer's              Manufacturer's
                                        Model                     Serial No.
                                                          
Allison Engine Company, Inc.        AE 3007A1P                  CAE 311697
                                                                CAE 311698


          Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.




NOTE TO EXHIBIT 10.23(a)

The 15 additional Lease Supplements No. 1 are substantially identical in all
material respects to the filed Lease Supplement No. 1 except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N265SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N267SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N268SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N269SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N270SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N271SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N272SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N273SK                           November, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N274SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N275SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N276SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N277SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N278SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N279SK                           January, 2001               Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N280SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

EX-10.24

                                                                   Exhibit 10.24

               WARRANTY ASSIGNMENT AGREEMENT AND CONSENT (N281SK)

     THIS WARRANTY ASSIGNMENT AGREEMENT AND CONSENT (N281SK) (this "Assignment")
is dated as of the 23rd day of February, 2001, and is among SOLITAIR CORP., a
Delaware corporation ("Seller"), as assignor, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity but solely as Owner Trustee under a
Trust Agreement dated as of February 23, 2001 between such Owner Trustee and
General Electric Capital Corporation (the "Buyer Trust Agreement") (such Owner
Trustee hereinafter referred to as "Buyer"), as assignee, CHAUTAUQUA AIRLINES,
INC., a New York corporation, as operator under a Lease Agreement ("Operator"),
and ROLLS-ROYCE CORPORATION ("Rolls-Royce"), as consenting party.

                              W I T N E S S E T H:

     WHEREAS, Seller, Operator, and Rolls-Royce have entered into that certain
Rolls-Royce AE3007A Series Engine Warranty Agreement ("Warranty Agreement")
dated as of April 30, 1999 pursuant to which Rolls-Royce granted to Seller and
Operator certain Warranties as defined therein for the Engines and Supplies; and

     WHEREAS, Seller owns an Embraer model EMB-145LR aircraft, Embraer's serial
number 145391, United States Registration Number N281SK (the "Aircraft") with
two (2) installed Allison AE3007A1P engines (serial numbers CAE311697 and
CAE311698), manufactured by Allison Engine Company, Inc., a subsidiary of
Rolls-Royce, including Supplies as defined in the Warranty Agreement (the
"Engines"); and

     WHEREAS, pursuant to that certain Aircraft Purchase Agreement (N281SK) (the
"New Purchase Agreement") dated as of February 23, 2001 between Seller and
Buyer, Seller has agreed to sell, and Buyer has agreed to buy, the Aircraft with
the installed Engines; and

     WHEREAS, the sale of the Aircraft to Buyer pursuant to the New Purchase
Agreement is conditioned upon Seller assigning to Buyer (as consented to by
Rolls-Royce) all of the assignable warranties granted by Rolls-Royce to Seller
pursuant to the Warranty Agreement with respect to the Engines; and

Rolls-Royce Warranty Assignment
And Consent (N281SK)

                                        1


     WHEREAS, in accordance with the Warranty Agreement, Rolls-Royce must
consent to any assignment of the Warranties; and

     WHEREAS, pursuant to that certain Lease Agreement [N281SK] dated as of
February 23, 2001 ("Lease Agreement", capitalized terms not defined herein being
assigned the meanings given therein) between Buyer and Operator, Buyer shall
lease the Aircraft and assign the Assigned Warranties (as that term is defined
herein) to Operator subject to conditions; and

     WHEREAS, Seller and Buyer wish to accomplish such assignments pursuant to
the terms and conditions of this Assignment, and Rolls-Royce wishes to consent
to such assignments.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the New Purchase Agreement and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer hereby agree (and Rolls-Royce hereby consents) as follows:

1. Seller hereby assigns and transfers to Buyer and Buyer hereby accepts such
assignments and transfer of, the Warranties and indemnitees under the Warranty
Agreement to the extent that they relate to the Engines described above.

2. Rolls-Royce hereby consents to the assignment of the Warranties by Seller
to Buyer under and pursuant to the terms and conditions of this Agreement and
further consents to the assignment of the Warranties by Buyer to Operator.
Notwithstanding anything in this Assignment to the contrary, so long Operator's
right to possess and use the Aircraft under the Lease Agreement has not been
terminated, Operator may, to the exclusion of Buyer, exercise in Operator's name
the right to obtain any recovery or benefit resulting from the enforcement of
any of the Warranties under the Warranty Agreement in respect of the Engines and
may exercise all other rights and powers of the Buyer with respect to the
Warranties, and may without the consent of Buyer, enter into amendments or
modifications thereof or terminate some or all of the Warranties and replace
them with power by the hour agreements (which agreements will not be assigned to
the Buyer). Rolls-Royce shall not be deemed to have knowledge of, and need not
recognize the occurrence or discontinuance of, any termination of the Lease
Agreement, unless and until Rolls-Royce has received written notice thereof from
Buyer (including by telex or telecopy) addressed to Rolls-Royce Corporation at
2001 South Tibbs Avenue S30, Indianapolis, Indiana 46241, Attention: Vice
President Commercial, and, in acting in accordance with the terms and conditions
of the Warranty Agreement and this Assignment, Rolls-Royce may act with
acquittance and conclusively rely upon any such notice. If Rolls-Royce so
receives notice from Buyer that Operator's right to possess and use the Aircraft
under the Lease Agreement has been terminated, Rolls-Royce will perform all the
duties and obligations under the Warranty

Rolls-Royce Warranty Assignment
And Consent (N281SK)

                                        2


Agreement with respect to the Warranties for the benefit of Buyer and will
make any and all payments that it thereafter is required to make in respect of
the Warranties directly to Buyer at the account or location as Buyer from time
to time notifies Rolls-Royce in writing.

3. Anything herein contained to the contrary notwithstanding:

   (a) Except with respect to the Engines specifically assigned hereunder,
Buyer shall have no obligation or liability under the Warranty Agreement by
reason of, or arising out of, this Assignment, or be obligated to perform any of
Seller's duties or obligations under the Warranty Agreement, to make any
payment, to present or file any claim, or to take any other action to collect or
enforce any claim for any payment assigned hereunder;

   (b) Buyer confirms, for Rolls-Royce's benefit, that in exercising any
rights under the Warranty Agreement or in making any claim with respect to the
Engines or other goods and services delivered or to be delivered pursuant to the
Warranty Agreement, the terms and conditions of the Warranty Agreement shall
apply to and bind Buyer (and any assignee of Buyer) to the same extent as
Seller; and

   (c) Except as expressly stated herein, nothing contained herein shall
subject Rolls-Royce or Seller to any liability to which it, as the case may be,
would not otherwise be subject under the Warranty Agreement or modify in any
respect the rights of Rolls-Royce or Seller thereunder.

   (d) Rolls-Royce shall have no obligation or liability to Seller with
respect to the Engines specifically assigned hereunder after the date of closing
and the transfer of title.

5. This Assignment (and the acknowledgement and consent to be signed by
Rolls-Royce) may be executed in separate counterparts, each of which when so
executed and delivered shall be an original and all such counterparts shall
together constitute one and the same instrument.

6. This Assignment shall be governed by and construed in accordance with the
laws of the State of New York without reference to any choice of law rules
thereof that would result in a choice of law other than that of New York.

7. First Security Bank, National Association is entering into this Assignment
solely as Owner Trustee under the Trust Agreement and not in its individual
capacity and neither First Security Bank, National Association nor any entity
acting as successor Owner Trustee or additional Owner Trustee under the Trust
Agreement shall be personally liable for, or for any loss in respect of, any of
the statements, representations, warranties, agreements or obligations stated to
be those of the Buyer hereunder, as to which all interested parties shall look
solely to

Rolls-Royce Warranty Assignment
And Consent (N281SK)

                                        3


the Trust Estate, except to the extent expressly provided otherwise in
the other Operative Agreements, PROVIDED HOWEVER, that nothing in this paragraph
7 shall be construed to limit in scope or substance the liability of First
Security Bank, National Association or any entity acting as successor Owner
Trustee or additional Owner Trustee under the Trust Agreement in its individual
capacity for the consequences of its own willful misconduct or gross negligence
or (in receiving, handling or remitting funds) its simple negligence, or the
inaccuracy or breach of its representations, warranties or covenants made in
such capacity in any other Operative Agreements.

                            [SIGNATURE PAGE FOLLOWS]

Rolls-Royce Warranty Assignment
And Consent (N281SK)

                                        4


IN WITNESS WHEREOF, the parties hereto have caused this Warranty Assignment
Agreement and Consent (N281SK) to be duly executed as of the date and year first
above written.

                            SOLITAIR CORP., A DELAWARE CORPORATION

                            BY: /s/ Doug Lambert
                                ------------------------------------------------

                            NAME: Doug Lambert
                                 -----------------------------------------------

                            TITLE: Vice President
                                   ---------------------------------------------

                            FIRST SECURITY BANK, NATIONAL
                            ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY
                            BUT SOLELY AS OWNER TRUSTEE UNDER THE BUYER
                            TRUST AGREEMENT

                            By: /s/ Greg A. Hawley
                                ------------------------------------------------

                            Name: Greg A. Hawley
                                 -----------------------------------------------

                            Title: Vice President
                                   ---------------------------------------------

                            CHAUTAUQUA AIRLINES, INC., A NEW YORK
                            CORPORATION

                            By: /s/ Robert H. Cooper
                                ------------------------------------------------

                            Name: Robert H. Cooper
                                 -----------------------------------------------

                            Title: Vice President
                                   ---------------------------------------------

                            CONSENTED TO BY ROLLS-ROYCE CORPORATION

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

                            Name: Peter Turner
                                 -----------------------------------------------

                            Title: Authorized Officer
                                   ---------------------------------------------

Rolls-Royce Warranty Assignment
And Consent (N281SK)

                                        5


1079291

                                        6
Rolls-Royce Warranty Assignment
And Consent (N281SK)






NOTE TO EXHIBIT 10.24

The 15 additional Warranty Assignment Agreements are substantially identical
in all material respects to the filed Warranty Assignment Agreement except as
follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N265SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N267SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N268SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N269SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N270SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N271SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N272SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N273SK                           November, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N274SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N275SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N276SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N277SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N278SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N279SK                           January, 2001               Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N280SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

EX-10.25

                                                                   Exhibit 10.25

          TAX INDEMNITY AGREEMENT N281SK dated as of February 23, 2001
          (the "Tax Indemnity Agreement") between CHAUTAUQUA AIRLINES,
          INC. (the "Lessee") and GENERAL ELECTRIC CAPITAL CORPORATION
          (the "Owner Participant").

                                     RECITAL

          As inducement to the Owner Participant to enter into the transactions
contemplated by that certain Participation Agreement N281SK dated as of February
23, 2001 among Lessee, Owner Participant and First Security Bank, National
Association, as Owner Trustee, (the "Participation Agreement"), and in
consideration of the mutual covenants contained herein and in the Participation
Agreement and other documents contemplated thereby, the Lessee and the Owner
Participant hereby agree as follows:

          SECTION 1. DEFINITIONS.

          (a) The term "Owner Participant" shall include each member of the
affiliated group (within the meaning of Section 1504 of the Code (or any
successor provision thereto)) of which the Owner Participant is a member and
each entity which joins the Owner Participant in filing a combined, unitary or
consolidated state income tax return.

          (b) "Tax Attribute Period" shall mean the period beginning on the
Delivery Date and ending on December 31, 2008; PROVIDED that in the event the
depreciation period for the Aircraft is other than the period specified in Tax
Assumption 2(d)(i) as a result of a Lessee Act, such Tax Attribute Period shall
end on the last day of the last taxable year in which a depreciation deduction
for the Aircraft is allowed to General Electric Capital Corporation.

          (c) "Reasonable Basis" for a position exists if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association.

          (d) "Permitted Percentage" shall mean 10% during the Tax Attribute
Period.

          (e) Except as otherwise provided herein, capitalized terms used herein
without definition shall have the meanings ascribed thereto in Appendix A to the
Participation Agreement.

          SECTION 2. TAX ASSUMPTIONS

          The transactions described in the Participation Agreement have been
entered into on the assumptions (the "Tax Assumptions") that for federal income
tax purposes:

          (a) the entity created by the Trust Agreement will be treated either
as a "grantor trust" under Sections 671 ET SEQ. of the Code (and any successor
provisions thereto) or



as an agent or nominee of the Owner Participant, and the Owner Participant will
be treated as the owner of the entire trust and be required and entitled to take
into account in computing its taxable income all items of income, gain, loss,
deduction and credit of the trust in accordance with the accrual method of
accounting;

          (b) at all times during the period beginning on the Delivery Date and
ending at the end of the Term, the Lease will constitute a "true lease", the
Owner Participant will be treated as the purchaser, sole owner and lessor of the
Aircraft and the Lessee will be treated as the lessee of the Aircraft;

          (c) the Owner Participant's taxable year is the calendar year;

          (d) the Owner Participant, as the owner of the Aircraft for federal
income tax purposes, will be entitled to the following federal income tax
benefits:

              (i) cost recovery deductions equal to 14.29% of Lessor's Cost in
2001, 24.49% of Lessor's Cost in 2002, 17.49% of Lessor's Cost in 2003, 12.49%
of Lessor's Cost in 2004, 8.93% of Lessor's Cost in 2005, 8.92% of Lessor's Cost
in 2006, 8.93% of Lessor's Cost in 2007 and 4.46% of Lessor's Cost in 2008 (the
"MACRS Deductions"); and

              (ii) amortization deductions for Transaction Expenses paid or
incurred by the Owner Participant in connection with the transactions
contemplated by the Operative Agreements computed on a straight-line basis over
the period commencing on the first day and ending on the last day of the Basic
Term of the Lease (the "Amortization Deductions", and together with the MACRS
Deductions, the "Assumed Tax Benefits");

          (e) no amount will be includible in the gross income of the Owner
Participant for income tax purposes with respect to the transactions
contemplated by the Operative Agreements at or at any time prior to the
expiration or earlier termination of the Lease other than (i) Basic Rent and
Renewal Rent in the amounts and at the times required pursuant to the Lease,
accrued and allocated in the manner provided by the Lease, (ii) any payment of
Termination Value (or the payment of amounts calculated by reference thereto) or
sales proceeds pursuant to Section 13 or 14 of the Lease, (iii) any amount paid
to or for the benefit of the Owner Participant and specifically identified or
calculated as interest, (iv) amounts to the extent they are offset by deductions
in the same taxable year to the Owner Participant arising out of the event
causing the inclusion of income (other than the Assumed Tax Benefits), (v) all
amounts payable on a grossed up or after-tax basis to, or for the benefit of,
the Owner Participant, and (vi) amounts received by or for the benefit of the
Owner Participant pursuant to a warranty claim or as insurance proceeds with
respect to a loss or damage to the Aircraft, to the extent the Owner Participant
actually receives and retains and is not required to pay over such amounts to a
Lessee Person or some other Person unrelated to the Owner Participant;

          (f) the Owner Participant will be a domestic corporation subject to a
federal income tax rate of 35% (the "Assumed Federal Rate") and a state and
local income tax rate (before taking into account the deductibility of state and
local income taxes for Federal income tax purposes) of 4.615% (the "Assumed
State and Local Rate"), resulting in a combined rate (after giving effect to the
deductibility of such state and local income taxes for federal income tax

                                        2


purposes) of 38% (the "Assumed Tax Rate") in 2001 and in each year thereafter,
and the Owner Participant will have sufficient taxable income to fully utilize
the Assumed Tax Benefits against income taxable at the Assumed Tax Rate;

          (g) the Aircraft will be deemed to be placed in service by the Owner
Participant within the meaning of Section 168 of the Code on the Delivery Date;

          (h) none of the Owner Participant, the Lessee or any sublessee is, or
at any time during the Term will be, a "tax exempt entity" within the meaning of
Section 168(h) of the Code;

          (i) the Owner Participant will not be subject to the alternative
minimum tax under Section 55 of the Code;

          (j) no portion of the MACRS Deductions will be recaptured under
Section 1245 of the Code or otherwise during the Term;

          (k) the Lease will not be a "disqualified leaseback or long-term
agreement" within the meaning of Section 467(b) of the Code; and

          (l) for each taxable year of the Owner Participant during the Tax
Attribute Period not more than the Permitted Percentage of any item of income,
deduction or loss with respect to the transactions contemplated by the Operative
Agreements will be treated for federal income tax purposes as derived from, or
allocable to, sources outside the United States;

          The foregoing assumptions will be appropriately modified or adjusted
from time to time to reflect the occurrence of an event for which an indemnity
has been paid pursuant to this Agreement.

          SECTION 3. RECORDS AND STATEMENTS.

          The Lessee shall, at its expense, maintain such information or records
(including details of the use or operation of the Aircraft outside the United
States) relating to the Aircraft as are regularly maintained by the Lessee or as
may be required by law to be maintained (including, but not limited to, flight
logs). The Lessee shall, at the Lessee's expense, maintain and provide any such
records or information, and such other information customarily maintained by
comparable airlines, as the Owner Participant may reasonably request from the
Lessee to enable the Owner Participant and the Owner Trustee to fulfill their
respective tax filing, tax audit and tax litigation obligations.

          SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE.

          The Lessee represents, warrants and covenants that:

          (a) During the Tax Attribute Period the Aircraft is not and will not
be subject to Section 168(g) of the Code, assuming that the Owner Participant is
not a "tax-exempt entity" within the meaning of Section 168(h)(2) of the Code
and that the Owner Participant has not made an election under Section
168(g)(1)(E) of the Code;

                                        3


          (b) neither Lessee nor any Person controlled by it, in control of it,
or under common control with it, directly or indirectly, nor any Person claiming
by, through or under the Lessee, nor any sublessee or other user or person in
possession of the Aircraft (or any Parts) during the Term, nor any Affiliate of
any of the foregoing (but excluding the Lessor or the Owner Participant or any
Person claiming by, through or under the Lessor or the Owner Participant but not
so excluding any Person claiming directly or indirectly through or under the
Lease or the Lessee) (each such Person not so excluded, a "Lessee Person") has
claimed or will claim the MACRS Deductions or the Amortization Deductions or any
other depreciation or cost recovery deduction or interest deduction with respect
to the Aircraft for federal, state, local or foreign income tax purposes, or
will claim to be the owner of the Aircraft in respect of any period during the
Term, or has taken or will take any action or position (not required by the
Operative Agreements) inconsistent with the Tax Assumptions or the status of the
Owner Participant as the sole owner of the Aircraft for federal, state, local
and foreign tax purposes;

          (c) as of the Delivery Date (i) the Aircraft will not require any
improvements, modifications or additions (other than ancillary items of
removable equipment of a kind that customarily are selected and furnished by
purchasers or lessees of similar aircraft) in order to be rendered complete for
its intended use by the Lessee and (ii) Lessee has no present intention to make
any material nonseverable improvement, modification or addition to the Aircraft;

          (d) neither Lessee nor any member of the "lessee group" (as defined in
Rev. Proc. 75-21, 1975-1 C.B. 715, as modified by Rev. Proc. 79-48, 1979-2 C.B.
529) of which Lessee is a member has, on the Delivery Date (assuming
consummation of the transaction described in Section 2.01(a) of the
Participation Agreement), any investment in the Aircraft within the meaning of
Section 4(4) of Rev. Proc. 75-21, as modified;

          (e) intentionally omitted;

          (f) any written information supplied by the Lessee (or its agents) to
the Appraiser and relied on by such Appraiser in making the appraisal and
identified to the Lessee in a letter from the Appraiser attached hereto as
Schedule 4(f) was accurate and complete at the time given and as of the Delivery
Date, and the Lessee did not withhold any information in connection with any
request by the Appraiser for information that would render the information
actually provided misleading; and

          (g) if at the time of the transfer of title of the Aircraft to the
Lessor on the Closing Date the Aircraft were instead acquired by the Lessee, the
Aircraft would constitute "7 year property" within the meaning of Section
168(e)(1) of the Code in the hands of the Lessee.

          SECTION 5. FEDERAL INCOME TAX INDEMNITY.

          (a) If for any taxable year, (i) as a result of (A) any act or
omission on the part of the Lessee or any Lessee Person (other than (I) the
execution and delivery of the Operative Agreements or (II) any act permitted or
required under the Operative Agreements, except for any alteration,
modification, addition or improvement to, or any repair, maintenance,
substitution, replacement, pooling, interchange or temporary or permanent
removal from service or retirement of, the Aircraft, any Engine or any Parts by
any Lessee Person), (B) the inaccuracy or breach of

                                        4


any representation, agreement, covenant or warranty of the Lessee contained
herein or in any other Operative Agreement or (C) the receipt of any refunds,
damages, insurance, warranty or similar proceeds or requisition, condemnation or
similar proceeds attributable to the Aircraft, any Engine or any Parts, by any
person other than the Owner Participant (or if received by the Owner
Participant, not retained by the same) (each such act, omission, inaccuracy,
breach or event described in clause (A), (B) or (C), a "Lessee Act"), the Owner
Participant shall suffer a loss, disallowance, reduction, elimination,
disqualification or deferral of, shall suffer a delay in claiming, shall not
have the right to claim, or shall be required to recapture (a "Recapture"), all
or any portion of the Assumed Tax Benefits, or (ii) the Owner Participant shall
be required to include in its gross income for federal income tax purposes any
amount other than the amounts described in Section 2(e) hereof (an "Inclusion")
as a result of (A) any alteration, modification, addition or improvement to, or
any repair, maintenance, substitution, replacement, pooling, interchange or
temporary or permanent removal from service or retirement of, the Aircraft, any
Engines or any Parts by any Lessee Person, (B) any payment by the Lessee of Rent
in an amount greater than due, or at a time earlier than at the time required,
pursuant to the Lease, (C) except to the extent such Inclusion constitutes a
Recapture, any receipt of any refunds, damages, insurance, warranty or similar
proceeds or requisition, condemnation or similar proceeds with respect to the
Aircraft, any Engines or any Parts by any person other than the Owner
Participant (or if received by the Owner Participant, not retained by the same),
(D) the Owner Participant's actual or constructive receipt of payments of
Supplemental Rent that are not made on an after-tax basis to the Owner
Participant, (E) any receipt of earnings on funds held as security for Lessee's
obligations that are not retained by the Owner Participant, or (F) except to the
extent such Inclusion constitutes a Recapture, any Lessee Act described in
Section 5(a)(i)(A) or (B) hereof that results in a disposition of the Aircraft,
any Engine or any Parts for federal income tax purposes (any such event in
clause (i) or (ii) hereinafter being referred to as a "Tax Loss"), then the
Lessee shall pay to the Owner Participant, on an After Tax Basis, an indemnity
in a lump-sum amount computed in accordance with the following sentence. The
lump-sum amount shall be an amount which, taking into account the other payments
under the Operative Agreements and the various increases and decreases in
federal, state and local taxes (and in the case of an Inclusion, foreign taxes),
preserves the yield portion of the Owner Participant's Net Economic Return and
compensates the Owner Participant for the amount of any related interest,
penalties, and additions to tax payable by the Owner Participant. The
computation of such lump-sum amount shall be made by the Owner Participant
utilizing the methodology and assumptions, including the Tax Assumptions,
utilized by the Owner Participant in determining its Net Economic Return, except
as such assumptions shall be varied to take into account such Tax Loss or any
previous Tax Loss for which an indemnity was paid under this Agreement;
PROVIDED, HOWEVER, that in the case of a Tax Loss resulting from an Inclusion,
the computation of such lump-sum amount shall be made on the basis of the Owner
Participant's actual-tax detriments and benefits incurred or anticipated as of
the time of such Tax Loss (including any unavailability of a net operating loss
carryover of the Owner Participant). Further, for purposes of determining the
amounts of the increase and reduction in income taxes as a result of a Tax Loss,
the applicable tax rate shall be the Assumed Tax Rate, except with respect to a
Tax Loss resulting from an Inclusion, the increased and reduced federal, state,
local and foreign income taxes payable by (or not refundable to) the Owner
Participant as a result of such Tax Loss shall be computed by utilizing the
actual rates for federal, state, local and foreign taxes applicable to the Owner
Participant at the time of such Tax Loss. Any Tax Loss attributable to an
Inclusion which

                                        5


does not actually result in an increase in the Owner Participant's federal,
state, local or foreign income tax liability (or a decrease in the Owner
Participant's refund of such income taxes) in the year of such inclusion but
which reduces any net operating loss, business credit, foreign tax credit
carryover or other tax attribute of the Owner Participant shall be treated as
giving rise to an actual increase in federal, state, local or foreign income tax
liability in the year for which such tax attribute if not reduced thereby would
have given rise to a reduction in the Owner Participant's federal, state, local
or foreign tax liability.

          Each payment by the Lessee pursuant to this Section 5(a) shall be made
within 30 days after receipt of a written demand certifying that there has been
a Tax Loss, describing in reasonable detail the Tax Loss in question, the amount
of additional income tax, interest, penalties and additions to tax and the
calculation of the payment due in respect thereof and describing the event or
condition that the Owner Participant claims gives rise to an obligation by the
Lessee to indemnify hereunder (but in no event earlier that two (2) Business
Days prior to the date on which the Owner Participant is required to pay
additional federal, income taxes as a result of the Tax Loss); PROVIDED THAT, if
a contest of the Tax Loss is being conducted pursuant to Section 7 hereof,
payment (other than payments required under Section 7(b)), shall not be required
from the Lessee until 30 days after the Final Determination of such contest.

          (b) If, as the result of a Tax Loss or a change of facts that gave
rise to a Tax Loss, the amount of federal, and as regards any Inclusion, state,
local and foreign income taxes payable by the Owner Participant for any taxable
year shall be less than the amount of such taxes which would have been payable
by the Owner Participant had such Tax Loss or such change not occurred (or as
the result thereof the Owner Participant shall receive a refund of such income
taxes, which shall be greater than the amount of such refund, if any, which the
Owner Participant would have received had such Tax Loss or change not occurred)
(any such tax savings (other than savings already taken into account in
determining the indemnity pursuant to Section 5(a)), a "Correlative Benefit"),
then the Owner Participant shall pay to the Lessee the amount of any actual
resulting reduction in taxes (or increased refund, including any actual interest
(net of any taxes payable with respect to such refund or interest) received or
credited thereon), plus any net additional federal, state, local or foreign tax
benefits or savings actually realized by the Owner Participant as the result of
any payment made pursuant to this sentence (such actual reduction in or
increased refund of income taxes to be determined, with respect to a Tax Loss or
change other than as a result of an Inclusion, on a hypothetical basis, i.e.,
assuming the Owner Participant can utilize any additional tax benefits resulting
from the Tax Loss or change at the Assumed Tax Rate, and with respect to a Tax
Loss resulting from an Inclusion, to be determined on an actual basis, i.e., by
using the actual federal, state, local and foreign income tax rates (and, to the
extent that the Owner Participant utilizes the additional tax benefits as a
reduction or refund of state, local and foreign income taxes otherwise payable
by the Owner Participant, the actual composite state, local and foreign income
tax rates applicable to such reduction or refund) applicable to the Owner
Participant for the year in which such additional benefits arise); PROVIDED,
HOWEVER, that the amount payable by the Owner Participant pursuant to this
sentence shall not exceed the sum of the amounts previously paid by the Lessee
to the Owner Participant pursuant to Section 5(a), less the aggregate amount of
all prior payments by the Owner Participant to the Lessee under this sentence,
with any excess amount otherwise payable being carried forward and available to
reduce PRO TANTO any subsequent obligation of Lessee to Owner Participant
pursuant to Section 5(a); PROVIDED, FURTHER, that the Owner Participant shall
not be obligated to make any payment

                                        6


pursuant to this sentence while a Special Default or Lease Event of Default
shall have occurred and be continuing. If an amount payable by the Owner
Participant to the Lessee pursuant to this Section 5(b) is not paid when due
because of the occurrence and continuation of any Special Default or Lease Event
of Default, such amount shall be payable by the Owner Participant to the Lessee
upon the Lessee's curing all Special Defaults or Lease Events of Default.
Subject to the provisions above, each payment made by the Owner Participant to
the Lessee pursuant to this Section 5(b) shall be made within 30 days after the
Owner Participant files a tax return or receives a refund or adjustment from the
Internal Revenue Service which reflects such reduction in federal income tax.
For purposes of calculating indemnity obligations pursuant to Section 5(a) and
amounts due to Lessee pursuant to this Section 5(b), it shall be assumed that
the Owner Participant suffers a Tax Loss or is entitled to Correlative Benefits
for state, local and foreign income tax purposes if and only if the Owner
Participant suffers a corresponding Tax Loss or realizes a corresponding benefit
for federal income tax purposes.

          (c) Any taxes that are imposed on the Owner Participant as a result of
the subsequent disallowance of all or any portion of a reduction (or refund) of
the Owner Participant's tax liability for which the Owner Participant has paid
the Lessee pursuant to Section 5(b), shall be treated as a Tax Loss subject to
indemnification under this Agreement without regard to Sections 6 or 7 hereof.

          (d) (i) If, as a result of the use or operation or location of the
Aircraft outside the United States by any Lessee Person, the Tax Assumption set
forth in Section 2(l) hereof shall be inaccurate during any taxable year of the
Owner Participant included in whole or in part within the Tax Attribute Period
(an "Excess Foreign Allocation"), and if as a result thereof the amount of the
foreign tax credits available for utilization by the Owner Participant for any
taxable year shall be less than the amount of the foreign tax credits that would
have been available for utilization by the Owner Participant if such Tax
Assumption had been accurate (such event being referred to herein as a "Foreign
Tax Credit Loss"), then the Lessee shall pay to the Owner Participant as an
indemnity and on an After Tax Basis an amount which is equal to the actual
increase in the federal income taxes payable by (or not refundable to) the Owner
Participant for such taxable year as a result of such Foreign Tax Credit Loss,
plus the amount of any interest, penalties and additions to tax payable by the
Owner Participant as a result of such Foreign Tax Credit Loss. The amounts of
any increase in federal income taxes payable by (or not refundable to) the Owner
Participant as a result of a Foreign Tax Credit Loss shall be computed on the
assumption that any reduced amount of foreign tax credits of the Owner
Participant is attributable to an Excess Foreign Allocation and foreign source
losses arising from other equipment leasing transactions that provided the Owner
Participant with indemnification for the loss of foreign tax credits, on a PRO
RATA basis, prior to being attributable to any other foreign source deductions
or losses of the Owner Participant.

              (ii) If, as a result of (A) a Foreign Tax Credit Loss or an
Excess Foreign Allocation or (B) the usage or location of the Aircraft outside
the United States so that more than the Permitted Percentage of any item of
income or gain with respect to the transactions contemplated by the Operative
Agreements during any taxable year is treated as derived from sources outside
the United States, the amount of the foreign tax credits that the Owner
Participant utilizes against its tax liability for a taxable year exceeds the
amount of such foreign tax credits to which the Owner Participant would have
otherwise been entitled, and

                                        7


provided that no Special Default or any Lease Event of Default shall have
occurred and be continuing (in which event such amounts shall become payable
upon the Lessee's curing such Special Default or Lease Event of Default), then
the Owner Participant shall pay to the Lessee the amount of any actual reduction
in its Federal income tax liability (or actual increase in a refund of Federal
income taxes owing to the Owner Participant) as a result of such increase in
foreign tax credits, plus any net additional Federal, state, local and foreign
income tax benefits actually realized by the Owner Participant as the result of
such payment; PROVIDED, HOWEVER, that the sum of the amounts payable by the
Owner Participant pursuant to this sentence shall not exceed the sum of the
amounts previously paid by the Lessee to the Owner Participant pursuant to
Section 5(d)(i) to the extent not previously taken into account under this
provision (with any excess amount otherwise payable being carried forward and
available to reduce PRO TANTO any subsequent obligation of Lessee to Owner
Participant pursuant to this Section 5(d)) and PROVIDED, FURTHER, HOWEVER, that
no payment shall be required with respect to clause (B) above unless and until
the usage or location outside the United States has resulted in an aggregate
amount of increased foreign tax credits being available to the Owner Participant
equal to the aggregate amount of unindemnified tax increases suffered by the
Owner Participant resulting from the application of the Permitted Percentages
during the Tax Attribute Period. For purposes of this Section 5(d)(ii), in
determining the order in which the Owner Participant utilizes any foreign tax
credits against the Owner Participant's federal income taxes, the Owner
Participant shall be deemed to utilize (A) first, all foreign tax credits other
than those described in clause (B) of this sentence, and (B) then, on a PRO RATA
basis, all foreign tax credits, the utilization of which by the Owner
Participant results from either (x) the carryover or the carryforward of foreign
tax credits which were unutilized due to foreign source losses arising from
equipment leasing transactions that provided the Owner Participant with
indemnification for the loss of foreign tax credits (including this transaction)
or (y) foreign source income or gain generated by such transactions to the
extent such foreign source income or gain is sufficient-to give rise to a
payment obligation to the Lessee thereunder.

          Once a foreign tax is deemed to be utilized pursuant to the ordering
rules set forth above, it shall not subsequently be recharacterized as not
having been utilized as a result of a foreign tax liability arising in a
subsequent year.

               (iii) Each payment by the Lessee pursuant to this Section 5(d)
shall be made within 30 days after receipt of a written demand therefor
accompanied by a written statement describing in reasonable detail the Foreign
Tax Credit Loss in question, the amount of additional Federal income tax,
interest, penalties and additions to tax and the calculation of the payment due
in respect thereof (but in no event earlier than two (2) Business Days prior to
the date such additional Federal income taxes are due); PROVIDED THAT, if a
contest of the Foreign Tax Credit Loss is being conducted pursuant to Section 7
hereof, payment (other than payments required under Section 7(b)) shall not be
required from the Lessee until 30 days after the Final Determination of such
contest. Each payment by the Owner Participant to the Lessee pursuant to this
Section 5(d) in respect of an actual increase in available foreign tax credits
shall be made within 30 days after the Owner Participant files a tax return (or
receives a refund or adjustment) which reflects the utilization of such
increased foreign tax credit. Notwithstanding anything herein to the contrary,
any taxes that are imposed on the Owner Participant as a result of the
subsequent disallowance of the reduction of the Owner Participant's tax
liability, for which reduction the Owner Participant has paid the Lessee
pursuant to this Section 5(d), shall be treated

                                       8


as a Foreign Tax Credit Loss subject to indemnification under this Agreement
without regard to Section 6 or 7.

          (e) Upon request of the Lessee, the accuracy of the Owner
Participant's calculation of the amount or amounts payable to either the Owner
Participant or the Lessee pursuant to this Section 5 and any recomputations of
Termination Values pursuant to Section 3(d) of the Lease shall be verified by a
lease advisory firm or a nationally recognized firm of accountants to be
selected by the Owner Participant and reasonably acceptable to the Lessee and,
in order to enable such firm to verify such adjustments, the Owner Participant
shall provide to such firm (for their own confidential use and not to be
disclosed to the Lessee or any other person) all information reasonably
necessary for such verification, including any computer analyses used by the
Owner Participant to calculate such amount or amounts. The results of such
verification shall be binding on the parties hereto. The cost of such
verification shall be borne by the Lessee unless it is the determination of such
verification that the actual amount payable deviates, in a manner favorable to
the Lessee, by more than 10% from the amount originally determined by the Owner
Participant, in which case such cost shall be borne by the Owner Participant.

          SECTION 6. EXCLUDED EVENTS.

          The Owner Participant shall not be entitled to any payment from the
Lessee under Section 5 hereof in respect of any Tax Loss to the extent such Tax
Loss is a result of one or more of the following events:

          (a) (i) any voluntary sale, assignment, transfer or other disposition
by the Owner Participant or the Lessor (at the direction of the Owner
Participant) of, the Aircraft, any Engine or any Parts, or of any interest in
the transaction, the Trust, the Trust Estate, the Rent or any Operative
Agreement; or (ii) any involuntary sale, assignment, transfer or disposition of
the Aircraft, any Engine or any Parts or any such interest resulting from the
bankruptcy or insolvency of, or proceedings for the relief of debtors, or
foreclosure proceedings, against the Owner Participant or the Lessor, unless, in
each case, such voluntary or involuntary sale, assignment, transfer or
disposition occurs in connection with the exercise of remedies in connection
with a Lease Event of Default that has occurred and is continuing or in
connection with any substitution or replacement of the Aircraft, any Engine or
any Parts by a Lessee Person;

          (b) any event whereby the Lessee is required to pay Termination Value,
or an amount determined by reference thereto, to the extent that such amount has
been paid and such Value properly reflects the timing of the tax consequences to
the Owner Participant of such payment and/or the event giving rise to Lessee's
obligation to make such payment;

          (c) without the written concurrence of the Lessee, the failure of the
Owner Participant to properly claim or make appropriate elections with respect
to any of the Assumed Tax Benefits, the inclusion by the Owner Participant of
any Recapture or Inclusion in the Owner Participant's gross income as reported
on its federal income tax return (including any amended return) or other tax
filing or document, or the taking of a position by the Owner Participant on a
Federal income tax return (or amended return) that would result in a Foreign Tax
Credit Loss, unless, in any such case, the Owner Participant shall have received
a written opinion of

                                        9


independent tax counsel selected by the Owner Participant and reasonably
acceptable to the Lessee that no Reasonable Basis exists for making such claim
or election, failing to so include in gross income, or failing to take such
position with respect to a Foreign Tax Credit Loss (and for this purpose such
counsel may take into account the Lessee's failure to provide accurate and
timely information pursuant to the Lessee's obligations under Section 3 of this
Agreement to furnish information to the Owner Participant);

          (d) except in the case of a Tax Loss resulting from a substitution or
replacement of the Aircraft or an Inclusion any amendment or addition to, or
change in the Code or other federal statutes relating to taxation or regulations
promulgated thereunder, which is enacted, adopted or promulgated after the
Delivery Date; PROVIDED that a change in federal income tax rates shall be taken
into account in determining Gross-ups;

          (e) the failure of the trust created by the Trust Agreement to qualify
as a grantor trust under Section 671 ET SEQ. of the Code, or as a nominee, agent
or partnership for federal income tax purposes, but only to the extent of a
resulting increase in the Lessee's indemnity obligations hereunder;

          (f) a determination that the Lease is not a "true lease," or that the
Owner Participant is not the purchaser, owner or lessor of the Aircraft, for
federal income tax purposes, unless, in either case, as a result of a Lessee
Act;

          (g) any failure of the Owner Participant to contest a claim in
accordance with the contest provisions in Section 7 hereof, to the extent
Lessee's ability to contest is materially adversely affected;

          (h) the willful misconduct or gross negligence by the Owner
Participant;

          (i) any amendment or modification to any Operative Agreement not
requested by, or with the written consent of, Lessee unless in connection with
an Event of Default;

          (j) the application of Section 168(f), Section 168(g)(7), Section 183,
Section 465, Section 469 of the Code or regulations thereunder but, in each
case, only to the extent of a resulting increase in the Lessee's indemnity
obligations hereunder;

          (k) the inability of the Owner Participant to include in its original
tax basis in the Aircraft all or any portion of an amount equal to the Lessor's
Cost, other than as a result of a Lessee Act;

          (l) the application of any minimum tax, including the alternative
minimum tax imposed under Section 55 ET SEQ. of the Code but only to the
extent of a resulting increase in the Lessee's indemnity obligations hereunder;

          (m) application of the mid-quarter convention described in Section
168(d)(4)(C) of the Code but only to the extent of a resulting increase in the
Lessee's indemnity obligations hereunder;

                                       10


          (n) application of Section 467(b)(2) of the Code or the relevant
Treasury Regulations promulgated thereunder (other than as a result of any
adjustment of Basic Rent in connection with an Event of Default);

          (o) the treatment of less than the Permitted Percentage of any item of
income, gain, loss, deduction or credit with respect to the Aircraft or the
transactions contemplated by the Operative Agreements as from sources outside
the United States; or

          (p) the failure of the Owner Participant to have sufficient taxable
income or tax liability to benefit from the Assumed Tax Benefits;

          (q) the status of the Owner Participant as a "tax exempt entity"
within the meaning of Section 168(h) of the Code or as a Person that is not a
"United States person" within the meaning of section 7701(a)(30) of the Code;

          (r) a change in the Owner Participant's taxable year from a calendar
year;

          (s) the existence or exercise in accordance with the Lease by the
Lessee of an option to renew the Lease set forth in Section 13(a) of the Lease
or to purchase the Aircraft set forth in Section 13(b) of the Lease or to
terminate the Lease set forth in Section 14 of the Lease;

          (t) any event occurring after the expiration or earlier termination of
the Lease and, if required, the return of the Aircraft to Lessor or placement in
storage of the Aircraft in accordance with the terms of the Lease; or

          (u) the inclusion of any amount in income of the Lessor or the Owner
Participant with respect to any period upon or after termination of the Lease as
a consequence of any substitution, improvement or modification of the Airframe
or of any Engine.

          SECTION 7. CONTEST PROVISIONS.

          (a) The Owner Participant shall notify the Lessee within 30 days of
receipt from the Internal Revenue Service of a written proposed or final revenue
agent's report, a 30-day letter or a notice of deficiency (as described in
Section 6212 of the Code), in which an adjustment is proposed to the federal
income taxes of the Owner Participant for which the Lessee would be required to
indemnify the Owner Participant pursuant to this Agreement. The failure of the
Owner Participant to promptly notify the Lessee pursuant to the preceding
sentence shall not relieve the Lessee of its obligation to indemnify the Owner
Participant pursuant to this Agreement, except to the extent such failure
materially adversely impairs the Lessee's ability to contest such adjustment.
If, within 15 days of receipt of notice from the Owner Participant, Lessee
requests, in writing, the Owner Participant to do so, the Owner Participant
shall contest the proposed adjustment, shall consider in good faith any
suggestions made by the Lessee as to the method of pursuing such contest, and,
provided the Lessee is complying with its obligations under this Section 7,
shall not, without the consent of the Lessee, except as provided in this Section
7(a), settle such proposed adjustment; PROVIDED, HOWEVER, that the Owner
Participant shall not be obligated to contest such adjustment unless (i) Owner
Participant shall have received

                                       11


a written opinion of independent tax counsel selected by the Owner Participant
and reasonably acceptable to the Lessee ("Tax Counsel") that there is a
Reasonable Basis for contesting the matter in question, (ii) the amount of the
indemnity potentially payable by Lessee in respect of such adjustment is in
excess of $75,000, (iii) no Lease Event of Default shall have occurred and be
continuing (PROVIDED, HOWEVER, that if a Lease Event of Default other than as a
result of a payment default or bankruptcy shall exist, the foregoing restriction
shall not apply if the Lessee posts a bond to secure payment of amounts that
will fall due in the event of an adverse resolution of the controversy), (iv)
the Owner Participant has determined, in good faith, that the contest shall not
result in a material risk of the loss or forfeiture of the Aircraft (unless the
Lessee has provided to the Owner Participant a bond or other sufficient
protection against such risk of loss or forfeiture reasonably satisfactory to
the Owner Participant) or the imposition of criminal penalties and (v) the
Lessee shall have acknowledged, in writing, that the contest is with respect to
a liability that is the Lessee's responsibility pursuant to this Agreement
except that the Lessee shall not be bound by its acknowledgment of liability to
the extent that the Final Determination articulates conclusions of law and fact
that clearly and unambiguously demonstrate that the Lessee is not liable under
this Agreement for the contested amounts hereunder. The Owner Participant shall
afford Lessee reasonable opportunities to consult with Owner Participant and
shall keep Lessee reasonably informed regarding communications from the Internal
Revenue Service, or in connection with any judicial proceeding, and the nature
of all actions proposed to be taken to contest such proposed adjustment and
consider in good faith such requests as the Lessee shall make concerning the
most appropriate forum and manner in which to proceed, including (w) the
arguments to be made in contesting the proposed adjustment, (x) whether any
action to contest such proposed adjustment will initially be by way of judicial
or administrative proceedings, or both, (y) whether any such proposed adjustment
will be contested by resisting payment thereof or by paying the same and seeking
a refund thereof and (z) if the Owner Participant shall undertake judicial
action with respect to such proposed adjustment, the court or other judicial
body before which such action will be commenced; but in all cases the Owner
Participant shall have ultimate discretion to determine the nature (and forum)
of, and shall control the prosecution of, all such actions. The Owner
Participant shall, if requested by the Lessee in a timely written request, seek
judicial review of any adverse administrative determination and shall, if Tax
Counsel is of the opinion that such appeal is more likely than not to prevail,
appeal an adverse determination by any judicial court; PROVIDED, HOWEVER, that
the Owner Participant shall not be required to appeal, or seek leave to appeal,
an adverse determination to the United States Supreme Court. At any time,
whether before or after commencing to take the action set forth in this Section
7, the Owner Participant may decline to contest or appeal all or any portion of
a proposed adjustment, or may compromise or settle any such proposed adjustment,
by notifying the Lessee in writing that the Lessee is relieved of its obligation
to indemnify the Owner Participant with respect to such adjustment or such
portion, as the case may be; PROVIDED, HOWEVER, that the Lessee shall not be
obligated to indemnify the Owner Participant hereunder with respect to any other
Tax Loss for which a successful contest or appeal is foreclosed as a result of
the failure to take action with respect to such contest or appeal (or the
settlement or compromise of such contest or appeal without the consent of the
Lessee), and the Owner Participant shall repay to the Lessee such amounts
theretofore advanced or paid by the Lessee related to such adjustment, contest
or appeal (other than amounts described in the first sentence of Section 7(b)).
Notwithstanding the foregoing, if the Owner Participant notifies the Lessee that
it does not wish to contest an issue which the Owner Participant has previously

                                       12


contested in accordance with this Section 7 and which was resolved adversely to
the Owner Participant for an earlier taxable year in a judicial proceeding, then
unless the Owner Participant shall have received an opinion of Tax Counsel that
as a result of a change in law, it is more likely than not that a contest of the
matter in question will be successful, the Owner Participant shall not be
required to contest such issue.

          (b) The Owner Participant shall not be required to take any action
pursuant to this Section 7 unless and until the Lessee shall have agreed in
writing to reimburse the Owner Participant in a manner reasonably satisfactory
to Owner Participant (on demand and on a basis grossed-up for all applicable
federal, state, local and foreign taxes) for all reasonable out-of-pocket fees
and expenses, any statutory or regulatory penalties, interest, additions to tax,
or other similar liabilities, costs or losses which the Owner Participant may
incur as a result of contesting the validity of any proposed adjustment
(including, without limitation, any reasonable fees and disbursements of outside
counsel incurred in connection with taking any action or rendering any opinion
described in Section 7(a)). If the Owner Participant determines to contest any
adjustment by paying the additional tax and suing for a refund, the Lessee shall
timely lend to the Owner Participant on an interest-free basis an amount equal
to the sum of any tax, interest, penalties and additions to tax required to be
paid and shall indemnify the Owner Participant in a manner reasonably
satisfactory to the Owner Participant against any adverse tax consequences
resulting from such advance. Upon receipt by the Owner Participant of a refund
(or upon application of an amount otherwise refundable against another tax
liability of the Owner Participant) of any amount paid by it, in respect of
which amount the Owner Participant shall have been paid or advanced an
equivalent amount by the Lessee, the Owner Participant shall pay to the Lessee
the amount of such refund (plus any amounts otherwise refundable but applied
against another tax liability of the Owner Participant) (which, in the case of
any contest in which a loan has been advanced pursuant to this paragraph, shall
be deemed to be in repayment of the loan advanced by the Lessee to the extent
fairly attributable thereto), together with any interest received (including by
way of credit or offset) by the Owner Participant on such refund or application
that is fairly attributable to the amount and the period of such payment or
advance by the Lessee (net of any taxes incurred by the Owner Participant with
respect to the receipt or accrual of such interest), plus any net additional
federal, state, local and foreign tax benefits actually realized by the Owner
Participant as the result of such payment (or any payment under this paragraph);
and, upon disallowance of any such refund, the Lessee shall forgive the amount
of the loan fairly attributable thereto and shall pay to the Owner Participant
the balance of the amount of its indemnity obligation hereunder (including such
amount as shall be equal to the sum, on an after-tax basis, of any tax,
interest, penalties or additions to tax payable with respect to the forgiveness
of such loan) or if such advance exceeds the amount of such indemnity
obligation, the Owner Participant shall pay such excess to the Lessee. Any
subsequent loss of such refund shall be treated as a Tax Loss subject to
indemnification pursuant to Section 5 hereof without regard to Section 6 (other
than Sections 6(c) or (h)) hereof of this Section 7.

          (c) If any adjustment referred to in this Section 7 shall be proposed
and the Lessee shall have requested the Owner Participant to contest such
adjustment as above provided and the Lessee shall have duly complied with its
obligations under this Section 7, then notwithstanding any provision to the
contrary in Section 5 hereof, the Lessee's liability with respect to such
adjustment shall become fixed upon a "Final Determination" of such adjustment;
PROVIDED, HOWEVER, that if the opinion of Tax Counsel provided pursuant to
paragraph (a) of this

                                       13


Section 7 is to the effect that there is not a Reasonable Basis for a contest or
the required basis for an appeal, as the case may be, then the Lessee's
obligation to pay such indemnity within 30 days shall become fixed upon receipt
of such opinion by the Lessee. A "Final Determination" with respect to a Tax
Loss shall mean (i) a decision, judgment, decree or other order by any court of
competent jurisdiction, which decision, judgment, decree or other order has
become final after all allowable appeals (in the case of the Owner Participant
as required under this Section 7) by either party to the action have been
exhausted or the time for filing such appeal has expired, (ii) a closing
agreement entered into under Section 7121 of the Code, or any other settlement
agreement entered into in connection with an administrative or judicial
proceeding and with the consent of the Lessee where required, (iii) the
expiration of the time for instituting suit with respect to a notice of
deficiency or (iv) the expiration of the time for instituting a claim for
refund, or if such a claim was filed, the expiration of the time for instituting
suit with respect thereto.

          SECTION 8. SURVIVAL OF AGREEMENT.

          The obligations and liabilities of the Lessee and the Owner
Participant arising under this Agreement shall continue in full force and
effect, notwithstanding the expiration or other termination of the Lease or the
Participation Agreement, until all such obligations under this Agreement have
been met and all such liabilities under this Agreement have been paid in full.
This Agreement shall inure to the benefit of any successor or assign to the
Owner Participant or the Lessee permitted pursuant to the Participation
Agreement and the Lease; PROVIDED, HOWEVER, that (a) such successor or assign
shall have specifically agreed in writing to be bound by the terms and
conditions of this Agreement to perform the obligations imposed hereunder on the
Owner Participant or the Lessee, as the case may be, in accordance with the
interest of such successor or assign in the Trust or in the Aircraft, the Lease
and the Operative Agreements and (b) in applying the terms hereof to such
successor or assign, the terms "Owner Participant" and "Lessee" as used herein
shall mean such respective successor or assign.

          SECTION 9. NOTICES.

          Any notice provided for in this Agreement shall be given in the manner
provided in the Participation Agreement.

          SECTION 10. PAYMENTS.

          Any payments required to be made by the Lessee pursuant to this
Agreement shall be made directly by the Lessee to the Owner Participant, and no
such payment shall constitute part of the corpus of the Trust Estate. Payments
made by the Lessee or the Owner Participant pursuant to this Agreement shall be
made by wire transfer of immediately available funds to such bank and/or account
in the continental United States as specified by the other party in written
directions to the paying party, and if no such direction shall have been given,
by check payable in immediately available funds to the order of such payee and
mailed to such payee by certified mail, postage prepaid, at its address provided
for purposes of the Participation Agreement.

                                       14


          SECTION 11. NO SETOFF.

          No payment required to be made by the Lessee pursuant to this
Agreement shall be subject to any right of setoff, counterclaim, defense,
abatement, suspension, deferment or reduction, and, except in accordance with
the express terms hereof, the Lessee shall have no right to terminate this
Agreement or to be released, relieved or discharged from any obligation or
liability under this Agreement for any reason whatsoever.

          SECTION 12. LATE PAYMENTS, INTEREST.

          Any late payment by any party hereto of any of its obligations under
this Agreement shall bear interest at the Past Due Rate.

          SECTION 13. EXCLUSIVE REMEDY.

          The indemnities and other rights provided to the Owner Participant in
this Agreement shall be the sole remedy of the Owner Participant for a breach or
inaccuracy of any representation, warranty or covenant contained herein or for
loss of income tax benefits, or for Tax Loss resulting from any Inclusion.

          SECTION 14. GOVERNING LAW.

          This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed entirely within such state.

          SECTION 15. COUNTERPARTS.

          This Agreement may be simultaneously executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
such counterparts together shall constitute and be one and the same instrument.

          SECTION 16. CERTAIN ADJUSTMENTS.

          If the Lessee has made payments under this Tax Indemnity Agreement,
the Owner Participant shall, if appropriate, make adjustments to the schedule of
Termination Values (if applicable) to preserve the Owner Participant's Net
Economic Return and to prevent any duplication of payments or any payment for
Tax Losses previously paid. If an event giving rise to the payment of an amount
determined by reference to a schedule of Termination Values shall occur and the
date as of which the Owner Participant shall be affected for tax purposes shall
be earlier or later than the date taken into account in computing such schedule,
such values shall be appropriately adjusted based otherwise on the same
assumptions previously used by the Owner Participant in calculating such
schedule.

                                       15


          IN WITNESS WHEREOF, the Lessee and the Owner Participant have caused
this Tax Indemnity Agreement to be duly executed as of the day and year first
above written.

                                             CHAUTAUQUA AIRLINES, INC.

                                             By: /s/ Robert H. Cooper
                                                 -------------------------------
                                                 Name: Robert H. Cooper
                                                 Title: Vice President

                                            GENERAL ELECTRIC CAPITAL
                                            CORPORATION

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

                                       16


SCHEDULE 4(f) [letter from Appraiser to Lessee]

                                       17



NOTE TO EXHIBIT 10.25

The 15 additional Tax Indemnity Agreements are substantially identical in all
material respects to the filed Tax Indemnity Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N265SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N267SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N268SK                           June, 2000                  General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N269SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N270SK                           August, 2000                General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N271SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N272SK                           September, 2000             General Electric Capital Corporation
- ------------------------------------- ----------------------------------- -----------------------------------
             N273SK                           November, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N274SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N275SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N276SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N277SK                           December, 2000              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N278SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N279SK                           January, 2001               Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
             N280SK                           February, 2001              Aircraft Services Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

EX-10.26

                                                                   Exhibit 10.26

                                                               EXECUTION VERSION

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

                            LEASE AGREEMENT [N296SK]

                          dated as of December 20, 2001

                                     between

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

                                 Owner Trustee,

                                                                         Lessor,

                                       and

                            CHAUTAUQUA AIRLINES, INC.

                                                                         Lessee.

                  Covering One Embraer Model EMB-145LR Aircraft
                           Registration Number N296SK
                       Manufacturer's Serial Number 145514

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

                       THIS IS ORIGINAL COUNTERPART NO. 1.
TO THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT [N296SK] CONSTITUTES CHATTEL
PAPER (AS THE TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT [N296SK]
MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN
THE ORIGINAL COUNTERPART MARKED COUNTERPART NO.1



          THIS LEASE AGREEMENT [N296SK], dated as of December 20, 2001, between
WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Owner Trustee, the
Lessor, and CHAUTAUQUA AIRLINES, INC., a New York corporation, the Lessee.

                              W I T N E S S E T H:

          WHEREAS, the Lessor intends to purchase the Aircraft pursuant to the
terms of the Participation Agreement;

          WHEREAS, the Lessee desires to lease from the Lessor and the Lessor is
willing to lease to the Lessee the Aircraft upon and subject to the terms and
conditions of this Lease; and

          WHEREAS, the parties intend this Lease to constitute a true lease and
not a security agreement;

          NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration the receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:

Section 1. INTERPRETATION.

          (a) DEFINITIONS.

          Capitalized terms used herein and defined in Appendix A shall, except
as such definitions may be specifically modified in the body of this Lease for
the purposes of a particular section, paragraph or clause, have the meanings
given such terms in Appendix A and, unless otherwise specified, such meanings
shall be equally applicable to both the singular and the plural forms of such
terms.

          (b) REFERENCES.

          References in this Lease to sections, paragraphs, clauses, appendices,
schedules and exhibits are to sections, paragraphs, clauses, appendices,
schedules and exhibits in and to this Lease unless otherwise specified.
Paragraphs identified with a letter and clauses identified with a number or
letter within a section may be referred to either by section reference (for
example, this is Section l(b)) or by paragraph and clause reference (for
example, this is also paragraph (b) of Section 1) with the same meaning.

          (c) HEADINGS.

          The headings of the various sections, paragraphs and clauses of this
Lease and the table of contents are for convenience of reference only and shall
not modify, define, expand or limit any of the terms or provisions hereof.

          (d) APPENDICES, SCHEDULES AND EXHIBITS.

          The appendices, schedules and exhibits hereto are part of this Lease.



Section 2. DELIVERY AND LEASING OF THE AIRCRAFT.

          (a) LEASING OF THE AIRCRAFT.

          Subject to the satisfaction or waiver of the conditions precedent
stated in the Participation Agreement, the Lessor agrees to lease to the Lessee,
and the Lessee agrees to lease from the Lessor, the Aircraft on the terms and
conditions set forth herein, such leasing to be evidenced by the execution and
delivery by the Lessor and the Lessee on the Delivery Date of a Lease
Supplement.

          (b) DELIVERY AND ACCEPTANCE OF THE AIRCRAFT UNDER THE LEASE.

          The Lessor hereby authorizes one or more persons designated by the
Lessee as the authorized representative or representatives of the Lessor to
accept delivery of the Aircraft from the Seller. By executing and delivering
Lease Supplement No. 1, the Lessee confirms to the Lessor that the Lessee has
duly and irrevocably accepted delivery of the Aircraft for all purposes of this
Lease.

Section 3. TERM AND RENT.

          (a) TERM.

          The Aircraft is leased for a Term which shall comprise the Basic Term
and, at the option of the Lessee exercised in accordance with Section 13(a), one
or more Renewal Terms. The Basic Term shall commence on the Delivery Date and
continue through the Expiration Date; and each Renewal Term, if any, shall be
for the applicable period provided in Section 13(a), except that the Term
(including the Basic Term or any Renewal Term, as the case may be) shall end
upon any earlier termination of this Lease according to its terms.

          (b) BASIC RENT.

          The Lessee shall pay Basic Rent in consecutive monthly installments on
each Basic Rent Payment Date during the Basic Term, each such installment to be
in an amount determined by multiplying Lessor's Cost by the percentage set forth
in Exhibit C-1 for the applicable Basic Rent Payment Date. The Lessee shall pay
Basic Rent during a Renewal Term in the amounts and at the times provided in
Section 13(a) for such Renewal Term. For the avoidance of doubt, and
notwithstanding any provision to the contrary in this Lease, the amount of Basic
Rent that the Lessee is required to pay to the Lessor for the use of the
Aircraft for each Basic Rent Period listed in column (1) of Exhibit C-2 hereof
shall be the amount determined by multiplying Lessor's Cost by the percentage
set forth in column (2) of Exhibit C-2 beside such Basic Rent Period. "Basic
Rent Period" means each of (x) the period commencing on and including the
Delivery Date and ending on but excluding the first Basic Rent Payment Date
following the Delivery Date, and (y) each period commencing on and including a
Basic Rent Payment Date and ending on but excluding the next subsequent Basic
Rent Payment Date.

                                       -2-


          (c) SUPPLEMENTAL RENT.

          The Lessee shall pay to the Lessor, or to whoever shall be entitled
thereto, any and all Supplemental Rent when the same shall become due and owing.
Without limiting the foregoing, the Lessee shall pay as Supplemental Rent:

               (i)  to the Lessor, on demand, interest at the Past Due Rate on
          any part of any installment of Basic Rent not paid when due for the
          period for which the same shall be overdue; and

               (ii) to whoever shall have been entitled to receive the relevant
          payment of Supplemental Rent, on demand, interest at the Past Due Rate
          on any payment of Supplemental Rent (other than interest payable under
          this clause (ii)) not paid when due for the period for which the same
          shall be overdue.

          The obligations of the Lessee to pay Supplemental Rent provided for in
this Section 3(c) shall survive the expiration or other termination of this
Lease.

          (d) ADJUSTMENTS TO BASIC RENT AND TERMINATION VALUES.

          All installments of Basic Rent remaining to be paid during the Basic
Term and the Basic Rent allocations set forth in Exhibit C-2 shall be
recalculated and adjusted, upwards or downwards as the case may be (and
corresponding adjustments shall be made to the EBO Amount and the Termination
Values applicable during the remaining Basic Term) to maintain the Net Economic
Return through the EBO Date as well as the end of the Basic Term and, to the
greatest extent consistent with such maintenance of such Net Economic Return, to
minimize the net present value (calculated at a discount rate equal to the
Applicable Rate or such other rate as may be specified by the Lessee to the
Owner Participant) of the remaining Basic Rent payments (or, if the Lessee shall
have so specified to the Owner Participant, the remaining Basic Rent Payments to
the EBO Date together with the EBO Amount), if:

               (i)   the Delivery Date shall not be December 20, 2001;

               (ii)  [Reserved]; or

               (iii) there shall be an adjustment of Termination Values as
          provided in Section 16 of the Tax Indemnity Agreement.

Adjustments to the installments of Basic Rent (expressed as percentages of
Lessor's Cost) set forth in Exhibit C-1 and to the Basic Rent allocations set
forth in Exhibit C-2 and conforming adjustments to the EBO Amount and the
amounts of Termination Values (expressed as percentages of Lessor's Cost) set
forth in Exhibit D shall be calculated by the Owner Participant in accordance
with the terms of this Section 3(d), and the Owner Participant shall deliver to
the Lessee and the Lessor schedules setting forth the revised EBO Amount and the
revised percentages that the Owner Participant proposes to include in Exhibits
C-1, C-2 and D, subject to review by the Lessee and verification as provided
herein. In the event of a dispute regarding any such adjustment which is not
resolved by agreement of the Lessee and the Owner Participant, the adjustments,
at the request of the Lessee delivered to the Owner Participant within 30 days
after

                                       -3-


receipt of the Owner Participant's proposed adjustments, shall be subjected to
verification by a lease advisory firm or a nationally recognized firm of
accountants in each case to be selected by the Owner Participant and reasonably
acceptable to the Lessee. The Owner Participant shall provide to such firm, but
not, in any circumstances, to Lessee or any representatives of Lessee, on a
confidential basis such information as such firm may reasonably require,
including, without limitation, a true copy of this Lease and a full description
of the methodology and assumptions employed by the Owner Participant in
calculating the EBO Amount or Basic Rent payments and allocations or Termination
Value set forth in Exhibits C-1, C-2 and D as in effect on the Delivery Date and
a true copy of the calculations of the same performed by the Owner Participant
at the time, to enable such firm to determine whether the adjustments proposed
by the Owner Participant are mathematically accurate, apply the same methodology
and assumptions (except to the extent changed by the events giving rise to such
recalculation or any prior recalculation pursuant to this Section 3(d)) as were
employed in the calculations of the Basic Rent payments and allocations, EBO
Amount and Termination Values in effect on the Delivery Date, and are otherwise
in conformity with the provisions of this Lease. The Lessee and its financial
advisors shall be entitled to submit such data and views as the Lessee may elect
to such firm concerning the proposed adjustments. The firm shall be requested to
deliver to each of the Owner Participant, the Lessee and the Lessor within 30
days after its appointment its determination as to the changes, if any, that are
appropriate with respect to the adjustments proposed by the Owner Participant.
The adjustments proposed by the Owner Participant, if not disputed by the Lessee
as provided above, or the determination of the firm as provided above, as the
case may be, shall be conclusive, final and binding upon the Lessor, the Lessee
and the Owner Participant, and the EBO Amount and Exhibits C-1, C-2 and D shall
be amended to reflect them. No dispute concerning any adjustment shall release
the Lessee from its obligation to pay the EBO Amount or Basic Rent or
Termination Value as then set forth in Exhibits C-1 and D. All reasonable fees
and expenses payable to a firm pursuant to this paragraph shall be paid by the
Lessee except that such fees and expenses shall be paid entirely by the Owner
Participant if, as a result of changes determined by the firm, the net present
value, discounted at the Applicable Rate or such other rate as the Lessee may
have specified as provided above in this paragraph, of Basic Rent remaining to
be paid is ten basis points (0.10%) or more lower than it would have been under
the adjustments proposed by the Owner Participant.

Any adjustments made pursuant to this Section 3(d) shall (i) be made so as to
avoid characterization of this Lease as a "disqualified leaseback or long-term
agreement" within the meaning of Section 467 of the Code and/or regulations
thereunder (or any successor or relevant Code provision or regulations) and (ii)
be in compliance with the requirements of Sections 4.02(5) and 4.07(l) of the
Revenue Procedure 2001-29 (or any successor revenue procedure), except to the
extent that on the Delivery Date the Lease constituted such a "disqualified
leaseback or long-term agreement" or was not in compliance with the revenue
procedure referred to in clause (ii). In addition, notwithstanding any other
provisions herein, in no event shall the EBO Amount be adjusted to an amount
that is less than the greater of (A) the adjusted Termination Value as of the
applicable EBO Date, (B) the estimated fair market value of the Aircraft on the
applicable EBO Date (as set forth in the appraisal received pursuant to Section
3.01(b)(xiii) of the Participation Agreement), and (C) the present value as of
the applicable EBO Date of (x) the remaining scheduled Basic Rent through the
end of the Basic Term plus (y) Estimated Value (as identified on Exhibit B) (the
present value calculation described in this clause (C) shall utilize a monthly
compounded discount rate no lower than the rate per annum

                                       -4-


identified on Exhibit B as the Compounded Discount Rate). All adjustments
required pursuant to this Section 3(d) shall be set forth in a Lease Supplement
or in an amendment to this Lease. In connection with any such adjustment to
Basic Rent payments pursuant to this Section 3(d), appropriate corresponding
adjustments shall be made to the percentages set forth in Exhibit D in the
columns with the headings "Deferred Basic Rent Amount" or "Prepaid Basic Rent
Amount", as the case may be, and such corresponding adjustments shall also be
set forth in such Lease Supplement or amendment to this Lease.

          (e) MANNER OF PAYMENT.

          All Rent payable by the Lessee to the Lessor hereunder shall be paid
to the Lessor at the following account or at such other account as the Lessor
shall specify in a notice to the Lessee, in Dollars in immediately available
funds, so that the Lessor receives the full amount of each payment not later
than 12:00 noon Eastern Time on the due date thereof:

               Bank: Bankers Trust Company
               ABA No.: 021 001 033
               Account no.: 50 255 888
               Account Name: GECC T&I Air Depository Account
               Ref: Chautauqua N296SK Rent Payment

If any Rent is due on a day that is not a Business Day, such Rent shall be paid
on the next succeeding Business Day with the same force and effect as if paid on
the scheduled date of payment and (if paid on such next succeeding Business Day)
no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of payment on such next succeeding Business Day.

          (f) RENT OBLIGATIONS UNCONDITIONAL.

          The Lessee's obligations to pay all Rent due and owing under the terms
hereof shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever including, without limitation, (i) any setoff,
counterclaim, recoupment or other right which the Lessee may have against the
Lessor, the Owner Participant, or anyone else 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, or any
interference, interruption or cessation in or prohibition of the use or
possession thereof by the Lessee for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority or any violation by the
Lessor of Section 4 hereof, (iii) any Liens, encumbrances or rights of others
with respect to the Aircraft, (iv) the invalidity or unenforceability or lack of
due authorization or other infirmity or disaffirmance of this Lease or any
provision hereof or any other Operative Agreement or any lack of right, power or
authority of the Lessor or the Lessee to enter into this Lease or any other
Operative Agreement, (v) any insolvency, bankruptcy, reorganization or similar
proceedings by or against the Lessee, or any other Person, or (vi) any other
cause whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the

                                       -5-


payments thereof shall not be subject to any setoff or any reduction for any
reason other than manifest error in the calculation thereof or the documentation
of this Lease. To the extent permitted by Applicable Law, the Lessee waives any
rights which it may now have or which may be conferred upon it by statute or
otherwise to terminate, cancel, quit or surrender this Lease except in
accordance with the terms hereof. 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 in Sections 8, 13, 14 and 17, Lessee nonetheless agrees to
pay to Lessor an amount equal to the Rent payment at the time such payment would
have become due and payable in accordance with the terms hereof had this Lease
not been terminated in whole or in part. Subject to the following sentence, each
payment of Rent made by Lessee to Lessor shall be final as to Lessor and Lessee
and Lessee will not seek to recover all or any part of such payment of Rent for
any reason whatsoever. Nothing herein shall be construed as a waiver by the
Lessee of any claim it may have against any Person arising under any of the
Operative Agreements or otherwise, including, without limitation, any claim that
Rent payments demanded from or paid by the Lessee are or were not due, are or
were erroneous or were paid under mistake or protest, or be construed as a
limitation on any rights of the Lessee to assert any claim in any proceeding at
law, in equity or otherwise against the Lessor or any other Person and to pursue
and obtain relief on such claim in such manner as the Lessee shall deem
appropriate other than by setoff against Rent payments due under the terms
hereof.

Section 4. THE LESSOR'S REPRESENTATIONS AND WARRANTIES.

          (a) REPRESENTATION AND WARRANTIES. THE LESSOR LEASES THE AIRCRAFT
HEREUNDER "AS-IS", "WHERE IS" AND NEITHER THE LESSOR, TRUST COMPANY INDIVIDUALLY
NOR THE OWNER PARTICIPANT SHALL BE DEEMED TO HAVE MADE, AND HEREBY DISCLAIMS,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION, MERCHANTABILITY, COMPLIANCE
WITH SPECIFICATIONS, CONSTRUCTION, PERFORMANCE OR FITNESS FOR USE OR FOR ANY
PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR
OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON LIABILITY IN TORT, STRICT OR OTHERWISE, AS TO FREEDOM FROM
INTERFERENCE IN POSSESSION OR USE, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE AIRCRAFT OR ANY PART THEREOF OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except that the Lessor warrants that on the Delivery Date the
Lessor shall have received whatever title was conveyed to it by the Seller and
the Lessor warrants that the Aircraft shall be free of Lessor's Liens (other
than Liens arising as a result of a Permitted Security Interest) during the
Term.

          (b) QUIET ENJOYMENT. The Lessor covenants that during the Term, as
long as no Event of Default has occurred and is continuing, the Lessee's
possession, use and quiet enjoyment of the Aircraft leased hereunder shall not
be interrupted by the Lessor (or any Person lawfully claiming through the
Lessor).

                                       -6-


          (c) MANUFACTURER'S WARRANTIES. Lessor hereby assigns to Lessee all
rights Lessor has under any warranty, express or implied, with respect to the
Aircraft and the Engines or any Parts thereof made by the Manufacturer, the
Engine Manufacturer, or any other Person, and all proceeds thereof and
recoveries thereunder under the Embraer Purchase Agreement, Embraer Purchase
Agreement Assignment, Airframe Warranty Assignment and Consent, Engine Warranty
Agreement and Engine Warranty Assignment and Consent and otherwise, to the
extent that such warranties exist or may be assigned or otherwise made available
to Lessee; provided, however, that upon the occurrence of an Event of Default
and any termination of this Lease under Section 17 hereof, all such rights
shall, without further action or notice, immediately revert to Lessor including
all claims thereunder whether or not perfected. In the event any such warranties
are not assignable to Lessee, Lessor shall use commercially reasonable efforts
at Lessee's expense to enforce such warranties on Lessee's behalf.

Section 5. Possession, Operation and Use,
           MAINTENANCE, REGISTRATION AND INSIGNIA.

          (a) GENERAL.

          Except as otherwise expressly provided herein, the Lessee (and any
Permitted Sublessee) shall be entitled during the Term to operate, use, locate,
employ or otherwise utilize or not utilize the Airframe, Engines and Parts
leased hereunder in any lawful manner or place in accordance with the Lessee's
(or such Permitted Sublessee's) business judgment.

          (b) POSSESSION.

          The Lessee shall not sublease, or otherwise in any manner deliver,
relinquish or transfer possession of the Airframe or any Engine leased hereunder
to any Person or install any Engine, or permit any Engine to be installed, on
any airframe other than the Airframe, during the Term, without the prior consent
of the Lessor, which consent may be withheld in its sole discretion, PROVIDED,
HOWEVER, that so long as (A) only in the case of clause (x) below, no Default of
the type referred to in Section 16(a), (b), (f), (g) or (h) hereof shall have
occurred and be continuing, (B) no Event of Default shall have occurred and be
continuing, and (C) all approvals, consents or authorizations required from the
Aeronautical Authority in connection with any such sublease or such delivery,
transfer or relinquishment of possession have been obtained and remain in full
force and effect, the Lessee (or, except in the case of clause (x) below, any
Permitted Sublessee) may, without the prior consent of the Lessor:

               (i) enter into a charter or wet lease or other similar
          arrangement under which the Lessee (or such Permitted Sublessee) has
          operational control of the Airframe and any Engines installed thereon
          in the course of the Lessee's business (which shall not be considered
          a transfer of possession hereunder), provided that the Lessee's
          obligations under this Lease and such Permitted Sublessee's
          obligations under the relevant Sublease shall continue in full force
          and effect notwithstanding any such charter or wet lease or other
          similar arrangement;

               (ii) deliver possession of the Airframe or any Engine or any Part
          to the manufacturer thereof or to any organization for testing,
          service, repair,

                                       -7-


          maintenance, overhaul work or other similar purposes or for
          alterations or modifications or additions required or permitted by the
          terms of this Lease;

               (iii) subject the Airframe and any Engines installed thereon to
          interchange agreements (provided that (x) any such interchange
          agreement with respect to the Airframe shall not result in the Lessee
          (or a Permitted Sublessee) being out of possession of the Airframe for
          a period of more than two (2) consecutive days at any one time; (y)
          such interchange agreement is entered into with a Permitted Sublessee;
          and (z) the party to such interchange agreement is not then subject to
          a proceeding or final order under applicable bankruptcy, insolvency or
          reorganization laws on the date such interchange agreement is entered
          into) or any Engine to interchange or pooling agreements or
          arrangements which are applicable to other similar property owned by
          or leased to the Lessee (or such Permitted Sublessee) and are entered
          into by the Lessee (or such Permitted Sublessee) in the course of its
          airline business with any air carrier, provided, that (A) no such
          agreement or arrangement shall under any circumstances result in,
          contemplate or require the transfer of title to the Aircraft, Airframe
          or any Engine and (B) if the Lessor's title to any Engine shall
          nevertheless be divested under any such agreement or arrangement, such
          divestiture shall be deemed to be an Event of Loss with respect to
          such Engine and the Lessee shall comply with Section 7(e) hereof in
          respect thereof;

               (iv) install an Engine on an airframe owned by the Lessee (or
          such Permitted Sublessee) free and clear of all Liens except (A)
          Permitted Liens, (B) those which apply only to the engines (other than
          the Engines), appliances, parts, instruments, appurtenances,
          accessories, furnishings and other equipment (other than Parts)
          installed on such airframe, and (C) those created by the rights of
          other air carriers under interchange or pooling agreements or other
          arrangements customary in the airline industry which do not
          contemplate, permit or require the transfer of title to such airframe
          or engines installed thereon;

               (v) install an Engine on an airframe, leased to the Lessee (or
          such Permitted Sublessee) or purchased by the Lessee (or such
          Permitted Sublessee) subject to a conditional sale or other security
          agreement, 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 Section 5(b)(iv) and (B) Lessee (or such
          Permitted Sublessee) 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, in the case of such
          Permitted Sublessee, the relevant Sublease) or is owned by Lessor;

                                       -8-


               (vi) install an Engine on an airframe, owned by the Lessee (or
          such Permitted Sublessee), leased by the Lessee (or such Permitted
          Sublessee) or purchased by the Lessee (or such Permitted Sublessee)
          subject to a conditional sale or other security agreement under
          circumstances where neither clause (iv) nor clause (v) above is
          applicable, provided that any such installation (so long as the same
          shall be continuing) shall be deemed an Event of Loss with respect to
          such Engine and the Lessee shall comply with Section 7(e) hereof;

               (vii) transfer possession of the Airframe or Engine to the United
          States of America or any instrumentality thereof pursuant to the Civil
          Reserve Air Fleet Program (as established and administered pursuant to
          Executive Order 11490, as amended, as superseded by United States
          Executive Order No. 12656) or any similar or substitute program ("CRAF
          Program"), in which event Lessee (or such Permitted Sublessee) shall
          promptly notify Lessor in writing of any such transfer of possession
          and, in the case of any transfer pursuant to the CRAF Program, in such
          notification shall identify by name, address and telephone numbers the
          Contracting Office Representatives of 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 the
          CRAF Program;

               (viii) transfer possession of the Airframe or any Engine to the
          United States of America, or to a foreign government, when required by
          Applicable Law (it being understood that nothing in this clause (viii)
          shall relieve the Lessee from its obligations under Section 8(a) if
          such transfer becomes an Event of Loss), in which event Lessee shall
          promptly notify Lessor in writing of any such transfer of possession;

               (ix) [Reserved];

               (x) subject to the provisions of this Section 5(b), enter into a
          sublease with respect to any Engine or the Airframe and Engines or
          engines then installed on the Airframe to any Permitted Sublessee if
          (A) Lessee shall provide written notice to Lessor and Owner
          Participant at least 10 days prior to entering into any such sublease,
          (B) in any such case, the sublessee under such sublease is not subject
          to a proceeding or final order under applicable bankruptcy, insolvency
          or reorganization laws on the date such sublease is entered into, (C)
          in the event that the sublessee under such sublease is a foreign air
          carrier or Person based in a country other than the United States, the
          United States maintains normal diplomatic relations with the country
          in which such proposed sublessee is principally based at the time such
          sublease is entered into and (D) in the event that the sublessee under
          such sublease is a foreign air carrier or Person based in a country
          other than the United States, prior to the effectiveness of such
          sublease Lessor shall have received an opinion (in form and substance
          reasonably acceptable to Lessor) of counsel to Lessee (reasonably
          acceptable to Lessor) to the effect that (I) the terms of the proposed
          sublease will be legal, valid, binding and (subject to customary
          exceptions) enforceable against the proposed sublessee in the country
          in which the proposed sublessee is principally based, (II) there exist

                                       -9-


          no possessory rights in favor of the sublessee under such sublease
          under the laws of such sublessee's country of domicile that would,
          upon bankruptcy or insolvency of or other default by the Lessee and
          assuming that at such time such sublessee is not insolvent or
          bankrupt, prevent the return or repossession of the Aircraft in
          accordance with and when permitted by the terms of Section 17(a) upon
          the exercise by Lessor of its remedies under Section 17(a), (III) the
          laws of such sublessee's country of domicile require fair compensation
          by the government of such jurisdiction payable in currency freely
          convertible into Dollars for the loss of use of or title to such
          Engine or the Airframe in the event of the requisition by such
          government of such use or title (it being understood that in the event
          such opinion cannot be given in a form reasonably satisfactory to the
          Owner Participant, such opinion will be waived if insurance reasonably
          satisfactory to the Owner Participant is provided to cover such
          requisition), (IV) the laws of such sublessee's country of domicile
          would give recognition to Lessor's title to such Engine or the
          Airframe, to the registry of such Engine or the Airframe in the name
          of Lessor (or Lessee, as "lessee", or the proposed sublessee, as
          appropriate), (V) all filings, if any, required to be made in such
          jurisdiction in connection with the execution of such sublease in
          order to protect the interest of Lessor in such Engine or the Airframe
          have been made, (VI) it is not necessary for the Owner Participant or
          Lessor 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, (VII) the agreement of such Permitted
          Sublessee that its rights under the sublease are subject and
          subordinate to all the terms of this Lease is enforceable against such
          Permitted Sublessee under Applicable Law of such country, and (VIII)
          there is no tort liability for owners not in possession of aircraft in
          such country more onerous than under the laws of the United States or
          any state thereof (it being agreed that in the event such opinion
          cannot be given in a form reasonably satisfactory to the Owner
          Participant, such opinion will be waived if insurance reasonably
          satisfactory to the Owner Participant is provided to cover the risk of
          such tort liability); provided that no such sublease shall be made to
          a Permitted Sublessee of the type described in clause (b) of the
          definition thereof that is not domiciled in the United States or of
          the type described in clause (b) of the definition of Permitted Air
          Carrier or to any tax exempt entity within the meaning of Section
          168(h) of the Code prior to the end of the Recovery Period, unless the
          Lessee prepays on a lump sum basis any liability due under the Tax
          Indemnity Agreement as a result of such sublease based upon the
          assumption that such sublease will continue for the full term of such
          sublease;

PROVIDED that (1) the rights of any transferee who receives possession by reason
of a transfer permitted by this Section 5(b) (other than by a transfer of an
Engine which is deemed an Event of Loss) shall be subject and subordinate to all
the terms of this Lease; (2) the Lessee shall remain primarily liable hereunder
for the performance of all the terms and conditions of this Lease and all of the
terms and conditions of this Lease and the other applicable Operative Agreements
shall remain in effect; (3) no sublease or transfer of possession otherwise in
compliance with this Section 5(b) shall (A) result in any registration or
re-registration of the Aircraft except to the extent permitted by Section 5(e)
or the maintenance, operation or use thereof except in compliance with Sections
5(c) and 5(d), (B) permit any action not permitted to the Lessee

                                      -10-


hereunder, (C) extend beyond the end of the Term (except to the extent that the
Lessee shall have irrevocably committed to exercise a purchase option in
accordance with the terms hereof) or (D) contain any purchase option exercisable
at an earlier date or at a lower price than such date or price, as the case may
be, as permitted under Section 13(b) hereof; (4) if any such sublease or
transfer of possession shall, in the reasonable opinion of the Owner
Participant, result in any risk of adverse tax consequences, the Lessee shall,
prior to entering into the same, provide an indemnity satisfactory in form and
substance to the Owner Participant against any such adverse tax consequences;
(5) the Lessee shall provide evidence reasonably satisfactory to Lessor and
Owner Participant that the insurance required by Section 9 remains in effect and
for the purpose of Lessor's and Owner Participant's review of such insurance
requirements, the Lessee shall, at least five (5) days prior to the date of any
sublease permitted under this Section 5(b), provide to Lessor and Owner
Participant, forms of the broker's report and insurance certificates required by
Section 9(g); (6) all necessary documents shall have been duly filed or recorded
in applicable public offices as may be required to preserve the title of Lessor
to the Airframe and Engines; and (7) Lessee shall reimburse Lessor and Owner
Participant, on an After Tax Basis, for all of their reasonable out-of-pocket
expenses (including fees and disbursements of counsel) in connection with any
such sublease or transfer.

          In the case of any sublease permitted under this Section 5(b), the
Lessee will include in such sublease appropriate provisions which (a) make such
sublease expressly subject and subordinate to all of the terms of this Lease,
including the rights of the Lessor to avoid such sublease in the exercise of its
rights to repossession of the Airframe and Engines hereunder and thereunder; (b)
expressly prohibit any further subleasing of the Airframe and Engines; (c)
require that the Airframe and Engines be maintained in accordance with a
maintenance program approved by the Aeronautical Authority applicable thereto;
(d) require the sublessee to comply with the terms of Section 9 hereof; (e)
limit the term of such sublease (including renewal rights) to a period not
beyond the end of the Term unless the Lessee shall then have irrevocably
committed to exercise a purchase option in accordance with the terms hereof; (f)
require that the Airframe and Engines be used in accordance with the limitations
applicable to the Lessee's possession and use provided in this Lease and (g)
shall include provisions for the maintenance, operation, possession and
inspection of the Aircraft that are the same in all material respects as the
applicable provisions of this Lease.

          The Lessor hereby agrees for the benefit of the lessor or secured
party of any engine or of any airframe (other than the Airframe) leased to the
Lessee or purchased by the Lessee subject to a conditional sale or other
security agreement, which lease or conditional sale or other security agreement
(in the case of any such airframe) also covers an engine or engines owned by the
lessor under such lease or subject to a security interest in favor of the
secured party under such conditional sale or other security agreement, that the
Lessor will not acquire or claim, as against such lessor or secured party, any
right, title or interest in any such engine as the result of such engine being
installed on the Airframe at any time while such engine is owned by such lessor
or is subject to such conditional sale or other security agreement or security
interest in favor of such secured party.

                                      -11-


          (c) OPERATION AND USE.

          The Lessee shall not operate, use or locate the Airframe or any
Engine, or suffer such Airframe or any Engine to be operated, used or located
(i) in any area excluded from coverage by any insurance required by the terms of
Section 9 hereof, except in the case of a requisition by the United States of
America where the Lessee obtains (and provides evidence of) indemnity from the
Government for the benefit of the Additional Insureds against substantially the
same risks and for at least the amounts of the insurance required by Section 9
hereof covering such area, or (ii) outside the United States or Canada in any
recognized or, in the Lessee's reasonable judgment, threatened area of
hostilities unless covered by war risk insurance, or in either case unless the
Airframe or such Engine is operated or used under contract with the Government
under which contract the Government assumes liability for substantially the same
risks in at least the same amounts as would be covered by such insurance. The
Lessee shall not permit the Airframe or any Engine to be used or operated during
the Term in violation of any Applicable Law or in violation of any airworthiness
certificate, license or registration relating to the Aircraft or such Engines
issued by any competent governmental authority, unless (i) the validity thereof
is being contested in good faith and by appropriate proceedings which do not
involve a non-de minimis danger of the sale, forfeiture or loss of the Airframe
or such Engine or the interest of Owner Participant therein, any risk of
criminal liability or any material risk of civil liability against Lessor or
Owner Participant, or (ii) it is not possible for the Lessee (or a Permitted
Sublessee) to comply with the laws of a jurisdiction other than the United
States (or other than any jurisdiction in which the Aircraft is then registered)
because of a conflict with the applicable laws of the United States (or such
jurisdiction in which the Aircraft is then registered).

          (d) MAINTENANCE.

          The Lessee, at its own cost and expense, shall during the Term
service, repair, maintain, overhaul and test the Aircraft, the Airframe and each
Engine or cause the same to be done in accordance with (1)(i) a maintenance
program approved by the Aeronautical Authority and (ii) maintenance standards
required by, or substantially equivalent to those required by, the FAA or the
central civil aviation authority of Canada, France, Germany, Japan, The
Netherlands or the United Kingdom, and shall keep or cause to be kept the
Aircraft, the Airframe and each Engine in as good operating condition as
originally delivered hereunder, ordinary wear and tear excepted, and shall keep
or cause to be kept the Aircraft, the Airframe and each Engine in such operating
condition as may be necessary to enable the airworthiness certification of the
Aircraft to be maintained in good standing at all times under the applicable
rules and regulations of the Aeronautical Authority, except when aircraft of the
same type, model or series as the Airframe (powered by engines of the same type
as those with which the Airframe shall be equipped at the time of grounding)
registered in the same country have been grounded by the Aeronautical Authority,
PROVIDED, HOWEVER, that if the airworthiness certificate of the Aircraft shall
be withdrawn, then, subject to Section 8 hereof, so long as the Lessee (or a
Permitted Sublessee) is taking or causing to be taken all necessary action to
promptly correct the condition which caused such withdrawal, no Event of Default
shall arise from such withdrawal and (2) except during periods when a Sublease
is in effect, the same standards Lessee uses with respect to similar aircraft of
similar size in its fleet operated

                                      -12-


(whether owned or leased) by Lessee in similar circumstances and during any
period in which a Sublease is in effect, the same standards the Permitted
Sublessee uses with respect to similar aircraft of similar size in its fleet and
operated (whether owned or leased) by the Permitted Sublessee in similar
circumstances. Nothing herein shall be deemed to prevent the Lessee (or a
Permitted Sublessee) from taking the Aircraft out of service for maintenance or
modifications permitted hereunder or storage in accordance with applicable
Aeronautical Authority requirements and sound practice for such storage. The
Lessee shall maintain or cause to be maintained all records, logs and other
documents required by the Aeronautical Authority to be maintained in respect of
the Aircraft in English. Lessee further agrees that the Aircraft, Airframe and
Engines will be maintained, used, serviced, repaired, overhauled or inspected in
compliance with Applicable Law with respect to the maintenance of the Aircraft
and compliance with each applicable airworthiness certificate, license and
registration relating to the Aircraft, Airframe or any Engine issued by the
Aeronautical Authority.

          (e) REGISTRATION.

          Except as otherwise permitted by Section 4.02(b) of the Participation
Agreement, or as otherwise required by the Transportation Code or rules,
regulations, or orders promulgated thereunder, or to the extent that such
registration cannot be effected or continued due to the Lessor's or the Owner
Participant's failure to comply with the citizenship or other eligibility
requirements for registration of commercial aircraft under the Transportation
Code or any rule, regulation or order promulgated thereunder, the Aircraft shall
be duly registered in the name of the Lessor under the Transportation Code at
all times during the Term; provided that the Lessor shall execute and deliver
all such documents as the Lessee may reasonably request for the purpose of
effecting, continuing or (as provided in this Section 5(e) hereof and Section
4.02(b) of the Participation Agreement) changing such registration.

Section 6. INSPECTION.

          At all reasonable times during the Term, but upon at least 15 days'
prior notice to the Lessee (unless an Event of Default shall have occurred and
be continuing, in which event a prior written notice of at least one (1)
Business Day is required) and at a time and place reasonably acceptable to the
Lessee, the Lessor and the Owner Participant or their authorized representatives
(which may include the Manufacturer) may at their own expense (unless an Event
of Default shall have occurred and be continuing, in which event the Lessee
shall bear such expense) and risk conduct a visual walk-around inspection of the
Aircraft and any Engine (including a visual walk-around inspection of the
Aircraft during any "C" check or other heavy maintenance) and may inspect the
books and records of the Lessee relating to the operation and maintenance
thereof and the Lessee shall provide copies of such books and records to the
Lessor and the Owner Participant or their authorized representatives at its or
their reasonable request; provided that (a) such representatives shall be fully
insured to the reasonable satisfaction of the Lessee by the Lessor or the Owner
Participant with respect to any risks incurred in connection with any such
inspection, (b) any such inspection shall be subject to the safety, security and
workplace rules applicable at the location where such inspection is conducted
and any applicable governmental rules or regulations, (c) in the case of an
inspection during a maintenance visit, such inspection shall not interfere with
the normal conduct of such maintenance visit or extend the time required for
such maintenance visit or, in any event, at any time interfere with the use or
operation of the Airframe or any Engine or with the normal conduct of the
Lessee's or a Permitted Sublessee's business, and (d) the Lessee shall not be
required to undertake or incur any

                                      -13-


additional liabilities in connection with any such inspection. All information
obtained in connection with any such inspection shall be held confidential by
the Lessor and the Owner Participant and shall not be furnished or disclosed by
them to anyone other than each other, their bank examiners, auditors,
accountants, agents and legal counsel and any Person with whom the Owner
Participant is in good faith conducting negotiations relating to the possible
transfer and sale of the Owner Participant's interest in the Trust Estate or the
Aircraft, if such Person shall have entered into an agreement similar to that
contained in this Section 6 whereby such Person agrees to hold such information
confidential, and except as may be required by an order of any court or
administrative agency or by any statute, rule, regulation or order of any
governmental authority or as may be necessary to enforce the terms of this
Lease, provided, however, that the Lessor or the Owner Participant may during
any time it is offering the Aircraft for sale make customary disclosures to
prospective purchasers of the Aircraft as to the then current flight and
maintenance status of the Aircraft. The Lessor and the Owner Participant shall
have no duty to make any such inspection and shall not incur any liability or
obligation by reason of not making any such inspection.

          In addition to any inspection as provided hereunder, upon each request
of Owner Participant to Lessee made not more than four times in a calendar year,
Lessee will make available to Owner Participant information with respect to the
cycles and hours of operation of the Airframe and Engines and the status of the
time controlled components of the Engines.

          If requested by Lessor or Owner Participant, Lessee shall provide, or
shall cause any Permitted Sublessee to provide, the date (if then scheduled)
upon which the Airframe undergoes its next scheduled major check and, with
respect to any Engine, the next scheduled off the Airframe maintenance, and
shall advise Lessor and Owner Participant of the name and location (if then
known) of the relevant maintenance performer.

Section 7. Replacement and Pooling of Parts; Alterations,
           MODIFICATIONS AND ADDITIONS; SUBSTITUTION OF ENGINES.

          (a) REPLACEMENT OF PARTS.

          Except as otherwise provided in the proviso to the third sentence of
Section 7(d) or if the Airframe or an Engine to which a Part relates has
suffered an Event of Loss, the Lessee, at its own cost and expense, will during
the Term promptly replace all Parts that may from time to time become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition, in
the ordinary course of maintenance, service, repair, overhaul or testing, the
Lessee (or a Permitted Sublessee), at its own cost and expense, may remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided that the
Lessee (or such Permitted Sublessee), at its own cost and expense, shall, except
as otherwise provided in the proviso to the third sentence of Section 7(d),
replace such Parts as promptly as practicable with replacement Parts or
temporary replacement parts as provided in Section 7(c) hereof. All replacement
Parts shall be free and clear of all Liens except for pooling arrangements to
the extent permitted by Section 7(c) and Permitted Liens and shall be in as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced

                                      -14-


assuming such replaced Parts were in the condition and repair required to be
maintained by the terms hereof.

          (b) TITLE TO PARTS.

          Except in respect of any Part as to which title vests in Lessee upon
removal as provided in the proviso to the third sentence of Section 7(d) and the
fourth sentence of Section 7(d), all Parts at any time removed from the Airframe
or any Engine shall remain the property of the Lessor and subject to this Lease,
no matter where located, until such time as such Parts shall be replaced by
Parts that have been incorporated or installed in or attached to such Airframe
or Engine and that meet the requirements for replacement Parts specified in
Section 7(a). Immediately upon any replacement Part becoming incorporated or
installed in or attached to an Airframe or Engine as provided in Section 7(a),
without further act, (i) title to the replaced Part shall thereupon vest in the
Lessee (or the relevant Permitted Sublessee), in "as-is, where-is" condition,
free and clear of all rights of the Lessor and any Lessor's Liens and shall no
longer be deemed a Part hereunder; (ii) title to such replacement Part shall
thereupon vest in the Lessor (subject only to Permitted Liens); and (iii) such
replacement Part shall become subject to this Lease and be deemed part of such
Airframe or Engine, as the case may be, for all purposes hereof to the same
extent as the Parts originally incorporated or installed in or attached to such
Airframe or Engine.

          (c) POOLING OR PARTS LEASING.

          Any Part removed from the Airframe or from any Engine as provided in
Section 7(a) may be subjected by the Lessee (or a Permitted Sublessee) to a
pooling or parts leasing agreement or arrangement of a type customary in the
airline industry entered into in the ordinary course of the Lessee's (or such
Permitted Sublessee's) business, provided the part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Sections 7(a) and 7(b) as promptly as practicable after the
removal of such removed Part. In addition, any replacement part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 7(a) may be owned by another airline or vendor as
customary in the airline industry, subject to a pooling or parts leasing
arrangement, PROVIDED that the Lessee (or a Permitted Sublessee), at its expense
as promptly thereafter as reasonably practicable, either (i) causes title to
such temporary replacement part to vest in the Lessor in accordance with Section
7(b) by the Lessee (or such Permitted Sublessee) acquiring title thereto for the
benefit of the Lessor free and clear of all Liens except Permitted Liens, at
which time such temporary replacement part shall become a Part and become
subject to this Lease or (ii) replaces such temporary replacement part by
incorporating or installing in or attaching to such Airframe or Engine a further
replacement Part owned by the Lessee (or such Permitted Sublessee) free and
clear of all Liens except Permitted Liens and by causing title to such further
replacement Part to vest in the Lessor in accordance with Section 7(b).

          (d) ALTERATIONS, MODIFICATIONS AND ADDITIONS.

          The Lessee, at its own expense, shall make (or cause to be made)
alterations and modifications in and additions to the Airframe and any Engine as
may be required to be made from time to time during the Term by Applicable Law
or in order to maintain the insurance

                                      -15-


required under Section 9 regardless of upon whom such requirements are, by their
terms, nominally imposed; PROVIDED, that the Lessee may, in good faith and by
appropriate procedure, contest the validity or application of any such standard
in any reasonable manner which does not materially adversely affect the
interests of the Lessor and does not involve any non-de minimis risk of sale,
forfeiture or loss of the Aircraft or the interest of Owner Participant therein,
any material risk of civil penalty or any risk of criminal liability being
imposed on Lessor or Owner Participant. In addition, the Lessee (or a Permitted
Sublessee), at its own expense, may from time to time make or cause to be made
such alterations and modifications in and additions to the Airframe and any
Engine as the Lessee (or such Permitted Sublessee) may deem desirable in the
proper conduct of its business including, without limitation, removal of Parts
which Lessee (or such Permitted Sublessee) deems are obsolete or no longer
suitable or appropriate for use in the Aircraft, Airframe or such Engine so long
as the aggregate value of such removed Parts (based on their value as of the
Delivery Date) does not exceed $200,000, PROVIDED further that no such
alteration, modification or addition (i) diminishes the value, utility,
estimated residual value (with respect to the Airframe only), condition,
remaining useful life or airworthiness of such Airframe or Engine below the
value, utility, estimated residual value, condition, remaining useful life or
airworthiness thereof immediately prior to such alteration, modification or
addition, assuming such Airframe or Engine was then in the condition required to
be maintained by the terms of this Lease or (ii) causes the Aircraft to be
limited use property, except that the value (but not the utility, estimated
residual value, condition, remaining useful life or airworthiness) of the
Aircraft may be reduced by the value of Parts which the Lessee (or such
Permitted Sublessee) has removed as permitted above. Title to all Parts
incorporated or installed in or attached or added to the Airframe or any Engine
as the result of any alteration, modification or addition effected by the Lessee
(or a Permitted Sublessee) shall, without further act, vest in the Lessor free
and clear of any Liens except Permitted Liens and become subject to this Lease;
provided that the Lessee (or such Permitted Sublessee) may, at any time during
the Term, remove any such Part from the Airframe or an Engine if (i) such Part
is in addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such Airframe or Engine
at the time of delivery thereof hereunder or any Part in replacement of, or in
substitution for, any such original Part, (ii) such Part is not required to be
incorporated or installed in or attached or added to such Airframe or Engine
pursuant to the terms of Section 5(d) or the first sentence of this Section 7(d)
or pursuant to the terms of any insurance policies required to be carried
hereunder or under any Applicable Law and (iii) such Part can be removed from
such Airframe or Engine without diminishing or impairing the value, condition,
utility, estimated residual value, remaining useful life or airworthiness which
such Airframe or Engine would have had at the time of removal had such
alteration, modification or addition not been effected by the Lessee (or such
Permitted Sublessee) assuming the Aircraft was otherwise maintained in the
condition required by this Lease. Upon the removal by the Lessee (or such
Permitted Sublessee) of any such Part as above provided, title thereto shall,
without further act, vest in the Lessee (or such Permitted Sublessee), in
"as-is, where-is" condition, free and clear of all rights of the Lessor and any
Lessor's Liens and such Part shall no longer be deemed a Part hereunder. Any
Part not removed by the Lessee (or a Permitted Sublessee) as above provided
prior to the return of the Airframe or respective Engine to the Lessor hereunder
shall remain the property of the Lessor; provided that nothing in this Section
7(d) shall prohibit the Lessee (or a Permitted Sublessee) from removing any
seats from the Aircraft (which seats while so removed shall remain in the
possession of the Lessee (or such Permitted Sublessee)) so long as the

                                      -16-


Aircraft when returned to the Lessor pursuant to Section 12 hereof shall be in
the condition required thereby.

          (e) SUBSTITUTION OF ENGINES.

          So long as no Specified Default shall have occurred and be continuing,
the Lessee (or a Permitted Sublessee) shall have the right at its option at any
time, on at least 30 days' prior notice to the Lessor and the Owner Participant,
to substitute, and if an Event of Loss shall have occurred with respect to an
Engine under circumstances in which there has not occurred an Event of Loss with
respect to the Airframe, shall within 90 days of the occurrence of such Event of
Loss and on at least five days' prior notice to the Lessor substitute, a
Replacement Engine for any Engine not then installed or held for use on the
Airframe. In such event, immediately upon the effectiveness of such substitution
on the date set forth in such notice and without further act, (i) title to the
Replacement Engine shall thereupon vest in the Lessor free and clear of all
Liens (other than Permitted Liens), (ii) title to the replaced Engine shall
thereupon vest in the Lessee (or its designee), in "as-is, where-is" condition,
free and clear of all rights of the Lessor and any Lessor's Liens and shall no
longer be deemed an Engine hereunder, and (iii) such Replacement Engine shall
become subject to this Lease and be deemed part of the Aircraft for all purposes
hereof to the same extent as the Engine originally installed on or attached to
the Airframe. Upon the substitution of a Replacement Engine, the following
conditions shall be satisfied at the Lessee's sole cost and expense and the
parties agree to cooperate with the Lessee to the extent necessary to enable it
to timely satisfy such conditions:

               (i) the following documents shall be duly authorized, executed
          and delivered by the respective party or parties thereto, and an
          executed counterpart of each shall be delivered to the Lessor and the
          Owner Participant:

                    (A) a Lease Supplement covering the Replacement Engine,
               which shall have been duly filed for recordation with the FAA;

                    (B) a full warranty bill of sale (as to title), in form and
               substance satisfactory to the Lessor and the Owner Participant,
               covering the Replacement Engine, executed by the owner thereof in
               favor of the Lessor;

                    (C) "precautionary" Uniform Commercial Code financing
               statements as are deemed necessary or desirable by counsel for
               the Owner Participant to protect the ownership interests of the
               Owner Trustee in the Replacement Engine;

                    (D) an Officer's Certificate of the Lessee certifying that
               (i) in the case of a voluntary replacement only, no Specified
               Default shall have occurred and be continuing and (ii) (x) in the
               case of a voluntary replacement, the Replacement Engine has at
               least the same number of hours or cycles (whichever is
               applicable) of operation on such Replacement Engine remaining
               until the next scheduled life limited part replacement as the
               Engine it replaces, assuming such Engine had been

                                      -17-


               maintained in the condition required hereunder; or (y) in the
               case of a mandatory replacement, the Lessee has not discriminated
               in its selection of the Replacement Engine (based on the leased
               status of the Aircraft);

                    (E) an opinion of qualified FAA counsel as to the due
               recordation of the Lease Supplement and all other documents or
               instruments the recordation of which is necessary to perfect and
               protect the rights of the Lessor in the Replacement Engine;

                    (F) to the extent that an engine warranty in respect of such
               Replacement Engine is available to the Lessee, an engine warranty
               assignment covering such Replacement Engine and a consent to such
               engine warranty assignment, in substantially the form of the
               Engine Warranty Assignment and Consent or otherwise in such form
               and substance satisfactory to the Lessor and the Owner
               Participant; and

                    (G) evidence that the insurance requirements of Section 9
               with respect to an Engine are satisfied and that the insurance
               covering such Replacement Engine shall be of the type usually
               carried by the Lessee (or, in the case of a voluntary
               replacement, such Permitted Sublessee) with respect to similar
               engines, and covering risks of the kind customarily insured
               against by the Lessee (or, in the case of a voluntary
               replacement, such Permitted Sublessee);

               (ii) the Lessee shall furnish (or cause to be furnished to) the
          Lessor and the Owner Participant with an opinion, reasonably
          satisfactory in form and substance to the Lessor and the Owner
          Participant, of the Lessee's counsel, which may be the Lessee's
          General Counsel or Associate General Counsel, to the effect that (x)
          such bills of sale or other documents reasonably requested by the
          Lessor or the Owner Participant are sufficient to convey title to such
          Replacement Engine to the Lessor and, (y) the Lessor is entitled to
          the benefits of Section 1110 with respect to such Replacement Engine
          to the same extent as with respect to the replaced Engine immediately
          preceding such replacement; and

               (iii) either (x) the Owner Participant shall have received an
          opinion of independent tax counsel (selected by the Owner Participant
          and reasonably acceptable to the Lessee), reasonably satisfactory to
          the Owner Participant, to the effect that there shall be no risk of
          adverse tax consequences resulting from such replacement (and the
          Owner Participant shall use its best efforts to cause a timely opinion
          to be delivered) or (y) the Lessee shall have provided, or caused to
          be provided, an indemnity in respect of any adverse tax consequences
          reasonably satisfactory (or, in the case of any voluntary
          substitution, satisfactory) in form and substance to the Owner
          Participant.

          Upon satisfaction of all conditions to such substitution, (x) the
Lessor shall, at the expense of the Lessee, execute and deliver to the Lessee
such bills of sale and other documents and instruments as the Lessee shall
reasonably request to evidence the transfer to the Lessee and

                                      -18-


vesting of all right, title and interest in and to the replaced Engine in the
Lessee, in "as-is, where-is" condition, free and clear of all right, title and
interest of the Lessor and any Lessor's Liens; (y) the Lessor shall, at the
request and expense of the Lessee, assign to the Lessee all claims it may have
against any other Person relating to an Event of Loss giving rise to such
substitution (other than those in respect of insurance maintained by the Owner
Participant pursuant to Section 9(f)) and (z) the Lessee shall be entitled to
receive all insurance proceeds (other than those reserved to others under
Section 9(f) hereof) and proceeds in respect of any Event of Loss giving rise to
such replacement to the extent not previously applied to the purchase price of
the Replacement Engine as provided in Sections 9(e)(i) and 8(e)(ii).

Section 8. LOSS, DESTRUCTION OR REQUISITION.

          (a) EVENT OF LOSS WITH RESPECT TO THE AIRFRAME.

          Upon the occurrence of an Event of Loss with respect to the Airframe,
the Lessee shall forthwith (and in any event within 15 days after such
occurrence) give the Lessor and the Owner Participant notice of such Event of
Loss. The Lessee shall, within 60 days after such occurrence, give the Lessor
and the Owner Participant written notice of its election to perform one of the
following options (it being agreed that if the Lessee shall not have given the
Lessor such notice of such election, the Lessee shall be deemed to have elected
to perform the option identified in the following clause (ii)):

               (i) subject to the satisfaction of the conditions contained in
          Section 8(d), on a date not more than 150 days after the occurrence of
          the Event of Loss (or, if earlier, the last day of the Term), convey
          or cause to be conveyed to the Lessor, and to be leased by the Lessee
          hereunder in replacement of the Airframe and Engines with respect to
          which the Event of Loss occurred, a Replacement Airframe (together
          with the same number of Replacement Engines as the number of Engines,
          if any, which were subject to such Event of Loss), such Replacement
          Airframe and Replacement Engines to be free and clear of all Liens
          except Permitted Liens and to have a remaining useful life, estimated
          residual value, value and utility at least equal to the Airframe and
          Engines, if any, so replaced (assuming such Airframe and Engines were
          in the condition and repair required by the terms hereof) and to be an
          airframe that is the same model and same or later vintage as the
          Airframe to be replaced thereby, or an improved model; PROVIDED THAT,
          if the Lessee shall not perform its obligation to effect such
          replacement under this clause (i) during the 150-day period of time
          provided herein (or, if earlier, the last day of the Term), it shall
          give the Lessor and the Owner Participant notice to such effect upon
          or before the expiration of such period of time and shall promptly pay
          on the first Termination Date next following the thirtieth (30th) day
          after the date of such notice to the Lessor (or, if earlier, the last
          day of the Term), in immediately available funds, the amount specified
          in clause (ii) below; or

               (ii) pay or cause to be paid to the Lessor in immediately
          available funds, on a date specified at least 30 days in advance by
          the Lessee, which date shall be a Termination Date not later than the
          earlier to occur of 150 days after the

                                      -19-


          occurrence of the Event of Loss or 3 days following receipt of
          insurance proceeds in respect of such Event of Loss, an amount equal
          to (A) the Basic Rent, if any, payable on such Termination Date,
          together with all unpaid Basic Rent, if any, payable before such
          Termination Date plus (B) all unpaid Supplemental Rent (other than
          Termination Value) due on or before such Termination Date plus (C) the
          Termination Value for the Aircraft determined as of such Termination
          Date or, if such Termination Date is beyond the end of the Term, the
          Termination Value as of the last Termination Date of the Term plus (D)
          the amount, if any, set forth opposite such Termination Date in
          Exhibit D in the column with the heading "Deferred Basic Rent Amount"
          or, if such Termination Date is beyond the end of the Term, the
          amount, if any, set forth opposite the last Termination Date of the
          Term in Exhibit D in the column with the heading "Deferred Basic Rent
          Amount" less (E) the amount, if any, set forth opposite such
          Termination Date in Exhibit D in the column with the heading "Prepaid
          Basic Rent Amount" or, if such Termination Date is beyond the end of
          the Term, the amount, if any, set forth opposite the last Termination
          Date of the Term in Exhibit D in the column with the heading "Prepaid
          Basic Rent Amount" plus (F) all reasonable out-of-pocket expenses
          (including reasonable attorneys' fees) incurred by the Lessor or the
          Owner Participant in connection with such Event of Loss plus (G) if
          such Termination Date is beyond the end of the Term, interest on the
          amount of such payment, at a rate per annum equal to the Past Due Rate
          identified on Exhibit B, for the period from and including the last
          day of the Term to but excluding such Termination Date.

          (b) EFFECT OF REPLACEMENT.

          Should the Lessee have provided a Replacement Aircraft as provided for
in Section 8(a)(i), (i) this Lease shall continue with respect to such
Replacement Aircraft as though no Event of Loss had occurred; (ii) the Lessor
shall, at the expense of Lessee, convey "as-is, where-is", without recourse or
warranty except for a warranty against Lessor's Liens, to the Lessee all right,
title and interest of the Lessor, in and to the Airframe and the Engine or
Engines, if any, installed on the Airframe upon the occurrence of the Event of
Loss by executing and delivering to the Lessee such bills of sale and other
documents and instruments as the Lessee may reasonably request to evidence such
conveyance; (iii) the Lessor shall, at the request and expense of Lessee, assign
to the Lessee all claims it may have against any other Person arising from the
Event of Loss (except with respect to insurance obtained in accordance with
Section 9(f)) and (iv) the Lessee shall be entitled to receive all insurance
proceeds (other than those reserved to others under Section 9(f)) and proceeds
from any award in respect of condemnation, confiscation, seizure or requisition,
including any investment interest thereon, to the extent not previously applied
to the purchase price of the Replacement Aircraft as provided in Sections
9(e)(iii) and 8(e)(i).

          (c) EFFECT OF TERMINATION VALUE PAYMENT.

          In the event of a payment in full of the Termination Value for the
Aircraft and other Rent payable as provided in Section 8(a)(ii), (i) this Lease
and the obligations of the Lessee to pay Rent (except for Supplemental Rent
obligations which survive pursuant to Section 3(c)

                                      -20-


and Articles 6 and 7 of the Participation Agreement or the Tax Indemnity
Agreement or which have accrued but have not otherwise been paid as of the date
of such payment) shall terminate and the Term shall end, (ii) any remaining
insurance proceeds (other than those reserved to others under Section 9(f)),
including any investment interest thereon, shall be promptly paid over to the
Lessee; and (iii) the Lessor, at the expense of Lessee, shall convey, "as-is,
where-is" without recourse or warranty, except for a warranty against Lessor's
Liens attributable to Lessor and Owner Participant, to the Lessee all right,
title and interest of the Lessor in and to the Airframe and Engines and shall
execute and deliver to the Lessee such bills of sale and other documents and
instruments as the Lessee may reasonably request to evidence such conveyance.

          (d) CONDITIONS TO AIRFRAME REPLACEMENT.

          The Lessee's right to substitute a Replacement Aircraft as provided in
Section 8(a)(i) shall be subject to the fulfillment, at the Lessee's sole cost
and expense, in addition to the conditions contained in such Section 8(a)(i), of
the following conditions precedent:

               (i) On the date when the Replacement Aircraft is delivered to the
          Lessor (such date being referred to in this Section 8(d) as the
          "Replacement Closing Date"), no Specified Default shall have occurred
          and be continuing and the Lessor and the Owner Participant shall have
          received an Officer's Certificate so certifying;

               (ii) On the Replacement Closing Date the following documents
          shall have been duly authorized, executed and delivered by the
          respective party or parties thereto and shall be in full force and
          effect, and an executed counterpart of each thereof (or, in the case
          of the FAA Bills of Sale (or a comparable document, if any, of another
          Aeronautical Authority, if applicable) referred to below, a photocopy
          thereof) shall have been delivered to the Lessor and the Owner
          Participant:

                    (A) a Lease Supplement covering the Replacement Aircraft,
               which shall have been duly filed for recordation with the FAA;

                    (B) an FAA Bill of Sale (or a comparable document, if any,
               of another Aeronautical Authority, if applicable) covering the
               Replacement Aircraft, executed by the owner thereof in favor of
               the Lessor, and dated the Replacement Closing Date;

                    (C) a full warranty (as to title) bill of sale, in form and
               substance satisfactory to the Owner Participant and the Lessor,
               covering the Replacement Aircraft, executed by the owner thereof
               in favor of the Lessor, dated the Replacement Closing Date and
               guaranteed by the Lessee;

                    (D) such "precautionary" Uniform Commercial Code financing
               statements as are deemed necessary or desirable by counsel for
               the Owner Participant to protect the ownership interests of the
               Owner Trustee in the Replacement Aircraft; and

                                      -21-


                    (E) an Officer's Certificate of the Lessee certifying that
               (i) the Replacement Aircraft is an Embraer model EMB-145LR
               aircraft of a more advanced model, is in as good operating
               condition as, and has a value, remaining useful life, estimated
               residual value and utility at least equal to, the Aircraft it
               replaces, assuming such Aircraft had been maintained in the
               condition required hereunder and (ii) in the event the Event of
               Loss occurs after the fifth anniversary of the Delivery Date, the
               Replacement Airframe shall have no more than 105% of the total
               hours of operation, as compared to the Airframe it replaces;

               (iii) On or before the Replacement Closing Date, the Lessor and
          the Owner Participant (acting directly or by authorization to their
          respective special counsel) shall have received such documents and
          evidence with respect to the Lessee, the Lessor, the Owner Participant
          or the owner of such Replacement Aircraft, as the Lessor or its
          special counsel may reasonably request in order to establish the
          consummation of the transactions contemplated by Section 8(a)(i) and
          this Section 8(d), the taking of all necessary corporate action in
          connection therewith and compliance with the conditions set forth in
          this Section 8(d), in each case in form and substance reasonably
          satisfactory to the Lessor and the Owner Participant;

               (iv) The Lessor and the Owner Participant (acting directly or by
          authorization to their respective special counsel) shall each have
          received satisfactory evidence as to the compliance with Section 9
          hereof with respect to the Replacement Aircraft;

               (v) On the Replacement Closing Date, (A) the Lessor shall receive
          good title to the Replacement Aircraft free and clear of Liens (other
          than Permitted Liens), (B) the Replacement Aircraft shall have been
          duly certified by the Aeronautical Authority as to type and
          airworthiness in accordance with the terms of this Lease, and (C)
          application for registration of the Replacement Aircraft in accordance
          with Section 5(e) shall have been duly made with the Aeronautical
          Authority;

               (vi) The Owner Participant shall have received an appraisal
          reasonably satisfactory to it with respect to the Replacement
          Aircraft;

               (vii) The Lessor and the Owner Participant shall have received
          (acting directly or by authorization to its special counsel) (A) an
          opinion, satisfactory in form and substance to the Lessor and the
          Owner Participant, of counsel to the Lessee (which may be the Lessee's
          General Counsel) to the effect that (x) the bill of sale referred to
          in clause (ii)(D) above constitutes an effective instrument for the
          conveyance of title to the Replacement Airframe and Replacement
          Engines, if any, to the Lessor, (y) all documents executed and
          delivered by the Lessee pursuant to this Section 8(d) have been duly
          authorized, executed and delivered by the Lessee and constitute legal,
          valid and binding obligations of, and are enforceable against, the
          Lessee in accordance with their respective terms, and (z)

                                      -22-


          the Lessor is entitled to the benefits of Section 1110 with respect to
          such Replacement Aircraft to the same extent as with respect to the
          replaced Aircraft immediately preceding such replacement; and (B) an
          opinion of qualified FAA counsel (or counsel in such jurisdiction
          outside of the United States where the Aircraft may be registered in
          accordance with Section 5(e)), as to, in the case of FAA counsel, the
          due recordation of the Lease Supplement and all other documents or
          instruments the recordation of which is necessary to perfect and
          protect the rights of the Lessor in the Replacement Aircraft or, in
          the case of counsel in another jurisdiction, the taking of all action
          necessary in such jurisdiction for such purposes;

               (viii) the Lessor shall be entitled to the benefits of Section
          1110 with respect to such Replacement Aircraft to the same extent as
          with respect to the replaced Aircraft immediately preceding such
          replacement; and

               (ix) Either (1) the Owner Participant shall have received an
          opinion of independent tax counsel (selected by the Owner Participant
          and reasonably acceptable to the Lessee), reasonably satisfactory to
          the Owner Participant, to the effect that there shall be no risk of
          adverse tax consequences resulting from such replacement (and the
          Owner Participant shall use its best efforts to cause a timely opinion
          to be delivered) or (2) the Lessee shall have provided, or caused to
          be provided, an indemnity in respect of any adverse tax consequences
          in form and substance satisfactory to the Owner Participant.

          Lessee shall reimburse the Lessor and the Owner Participant for all
reasonable out-of-pocket costs (including reasonable attorneys' fees) incurred
by them in connection with any substitution of a Replacement Aircraft pursuant
to this Section 8.

          (e) NON-INSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS.

          As between the Lessor and the Lessee, any payments on account of an
Event of Loss (other than insurance proceeds or other payments the application
of which is provided for in this Section 8 or elsewhere in this Lease, as the
case may be, or payments in respect of damage to the business or property of the
Lessee) with respect to the Aircraft, an Engine or any Part received at any time
by the Lessor or by the Lessee from any governmental authority or other Person
will be applied as follows:

               (i) if such payments are received with respect to an Event of
          Loss as to the Aircraft, and the Airframe or the Airframe and the
          Engines or engines installed thereon are being replaced by the Lessee
          pursuant to Section 8(a)(i), such payments shall be paid over to, or
          retained by, the Lessee, PROVIDED that if the Lessee has not completed
          such replacement, such payments shall be paid over to, or retained by,
          the Lessor as security, and upon completion of, or in connection with
          a closing for, such replacement, be paid over to or retained by the
          Lessee;

               (ii) if such payments are received with respect to an Event of
          Loss to an Engine that has been or is being replaced by the Lessee
          pursuant to the terms

                                      -23-


          hereof, such payments shall be paid over to, or retained by, the
          Lessee, PROVIDED that if the Lessee has not completed such
          replacement, such payments shall be paid over to, or retained by, the
          Lessor as security, and upon completion of, or in connection with a
          closing for, such replacement, be paid over to or retained by the
          Lessee; and

               (iii) if such payments are received with respect to an Event of
          Loss as to the Aircraft, and if the Airframe or the Airframe and the
          Engines or engines installed thereon have not been and will not be
          replaced as contemplated by Section 8(a), (x) so much of such payments
          as shall not exceed the amounts required to be paid by the Lessee
          pursuant to Section 8(a) hereof shall be applied in reduction of the
          Lessee's obligation to pay such amounts, to the extent not already
          paid by the Lessee, and, after such amounts required to be paid to the
          Lessor pursuant to Section 8(a)(ii) above shall be paid in full, shall
          be applied to reimburse the Lessee for such amounts up to the full
          amount thereof, and (y) the balance, if any, of such payment remaining
          thereafter shall be applied to reimburse the Lessee, the Owner
          Participant and the Lessor for their reasonable costs (including
          attorney's fees), if any, of procuring such payments, and (z) the
          balance remaining, if any, shall then be distributed between the
          Lessor and the Lessee as their interests may appear.

          (f) REQUISITION FOR USE.

          In the event of a requisition for use by any government during the
Term of the Airframe and the Engines, if any, or engines installed on the
Airframe (including the Government pursuant to the CRAF Program), the Lessee
shall promptly notify the Lessor and the Owner Participant of such requisition
and, if the same does not constitute an Event of Loss, all of the Lessee's
obligations under this Lease shall continue to the same extent as if such
requisition had not occurred except to the extent that the performance or
observance of any obligation by the Lessee shall have been prevented or delayed
by such requisition, provided that the Lessee's obligations for the payment of
money and under Section 9 (except, in the case of Section 9, while an assumption
of liability by the government of the United States of the scope referred to in
Section 5(c) is in effect) and Section 12 shall not be reduced, delayed or
affected by such requisition. Any payments received by the Lessor or the Lessee
from such government with respect to the use of such Airframe or Engines during
the Term shall be paid over to, or retained by, the Lessee and any payments
received by the Lessor or Lessee from such government with respect to the use of
the Airframe or Engines after the Term shall be paid over to, or retained by,
Lessor. In the event of an Event of Loss of an Engine resulting from the
requisition for use by a government of such Engine (but not the Airframe), the
Lessee will replace such Engine hereunder by complying with the terms of Section
7(e) and any payments received by the Lessor or the Lessee from such government
with respect to such requisition shall be paid over to, or retained by, the
Lessee.

          (g) CERTAIN PAYMENTS TO BE HELD AS SECURITY.

          Any amount referred to in this Section 8 or Section 9 hereof which is
payable to the Lessee shall not be paid to the Lessee, or, if it has been
previously paid directly to the Lessee,

                                      -24-


shall not be retained by the Lessee, if at the time of such payment a Specified
Default shall have occurred and be continuing, but shall be paid to and held by
the Lessor as security for the obligations of the Lessee under this Lease,
unless and until applied by Lessor to Lessee's obligations and at such time as
there shall not be continuing any such Specified Default, such amount and any
gain realized as a result of Permitted Investments required to be made pursuant
to Section 15 shall to the extent not so applied be paid over to the Lessee.

Section 9. INSURANCE.

          (a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE.

          Subject to the rights of the Lessee under Section 9(d), the Lessee
shall, without expense to the Lessor, maintain or cause to be maintained in
effect at all times during the Term with independent insurers of internationally
recognized reputation and responsibility public liability insurance (including,
without limitation, aircraft third party, passenger legal liability, property
damage, general third party legal liability and product liability coverage but
excluding manufacturer's product liability coverage) with respect to the
Aircraft in an amount not less than the greater of (i) the amount which Lessee
may carry from time to time on other similar aircraft in its fleet (whether
owned or leased) and (ii) the Minimum Liability Amount; provided that an
agreement of the Government for the benefit of the Additional Insureds to insure
against or indemnify for substantially the same risks to at least the same
amount shall satisfy the requirements of this Section 9(a), PROVIDED that on or
prior to the date of such agreement, the Lessee shall provide an Officer's
Certificate of the Lessee certifying that any such insurance or indemnity
provides protection no less favorable than insurance coverage that would comply
with this Section 9. Such insurance shall be of the type usually carried by the
Lessee with respect to similar aircraft and engines, and covering risks of the
kind customarily insured against by the Lessee. In addition, without limitation
of the requirements of the preceding sentence (and notwithstanding anything to
the contrary contained in the preceding sentence), the Lessee shall in all
events maintain in effect, at all times during the Term, war risk and allied
perils liability insurance in accordance with the London form AVN52C (as in
effect on September 1, 2001) or its equivalent form reasonably acceptable to
Lessor (or an agreement of the Government to insure against or indemnify for
substantially the same risks), from time to time, with respect to the Aircraft,
(I) in an amount not less than the greater of (x) the amount of war risk and
allied perils liability insurance from time to time applicable to similar
aircraft owned or operated by the Lessee and (y) $350,000,000 per occurrence,
and (II) maintained with independent insurers of internationally recognized
reputation and responsibility.

          During any period that the Aircraft is grounded and not in operation,
the Lessee may, so long as the Lessee takes reasonable measures to protect the
Aircraft, modify the insurance required by this Section 9(a) to modify the
amounts of public liability and property damage insurance, the scope of the
risks covered and the type of insurance, in all circumstances to conform to such
insurance as is customary in the United States airlines industry for regional
air carriers similarly situated with the Lessee in respect of similar aircraft
which are grounded, not in operation, and stored or hangared, provided that in
all instances, the amounts of coverage and scope of risk covered and the type of
insurance shall be at a minimum no less favorable than the insurance as from
time to time applicable to aircraft owned or leased by Lessee on the ground, not
in operation, and stored or hangared.

                                      -25-


          (b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT AND ENGINES.

          Subject to the rights of the Lessee under Section 9(d), the Lessee
shall, without expense to the Lessor or the Owner Participant, maintain or cause
to be maintained in effect at all times during the Term with insurers of
nationally recognized responsibility (i) all risk, agreed value, ground and
flight hull insurance covering the Aircraft for an amount at all times (even
when the Aircraft is grounded or in storage) not less than the Termination Value
from time to time; PROVIDED THAT, neither the Lessee nor any Permitted Sublessee
shall be required to maintain all-risk flight aircraft hull insurance with
respect to any period in which the Aircraft is grounded and properly stored or
hangared. Such insurance shall not provide insurers with a right to replace the
Airframe or any Engine with another airframe or Engine. Such hull insurance or
other personal property insurance of the Lessee (or a Permitted Sublessee) shall
cover Engines or engines and Parts while not installed on the Airframe. Such
insurance shall be of the type usually carried by the Lessee with respect to
similar aircraft and engines, and covering risks of the kind customarily insured
against by the Lessee. An agreement by the Government for the benefit of the
Additional Insureds to insure against or indemnify for substantially the same
risks to at least the same amount will satisfy any of the requirements of this
Section 9(b), PROVIDED that on or prior to the date of such agreement, the
Lessee shall provide an Officer's Certificate of the Lessee certifying that any
such insurance or indemnity provides protection no less favorable than insurance
coverage that would comply with this Section 9(b). Lessee (or any Permitted
Sublessee) shall in any event maintain at all times during the Term, with
independent insurers of internationally recognized reputation and responsibility
hull war risks and allied perils insurance in accordance with the London form
LSW555B or its equivalent form reasonably acceptable to the Lessor (or an
agreement of the Government to insure against or indemnify for substantially the
same risks) from time to time covering the Aircraft in an amount not less than
the Termination Value from time to time.

          (c) ADDITIONAL INSUREDS; LOSS PAYMENT.

          The Lessee shall cause all policies of insurance carried in accordance
with this Section 9 to name the Additional Insureds as their respective
interests may appear as additional insureds. Such policies shall provide with
respect to such Additional Insureds that (i) none of their respective interests
in such policies shall be invalidated by any act or omission or breach of
warranty or condition contained in such policies by the Lessee or, in the case
of any particular Additional Insured, any other Additional Insured; (ii) no
cancellation or lapse of coverage for nonpayment of premium or otherwise, and no
substantial change of coverage which adversely affects the interests of any such
Additional Insured, shall be effective as to such Additional Insured until 30
days (or such lesser period as may be applicable in the case of any war risk
coverage) after receipt by such Additional Insured of written notice from the
insurers of such cancellation, lapse or change; (iii) they shall have no
liability for premiums, commissions, calls, assessments or advances with respect
to such policies; (iv) such policies will be primary without any right of
contribution from any other insurance carried by such Additional Insureds; (v)
the insurers waive any rights of set-off, counterclaim, deduction or subrogation
against such Additional Insureds; (vi) shall apply worldwide and have only such
territorial restrictions or limitations as may be reasonably acceptable to
Lessor; and (vii) shall contain a 50/50% Clause per Lloyd's Aviation
Underwriter's Association Standard Policy Form AVS 103. Each liability policy
shall provide that all the provisions thereof, except the limits of liability,
shall operate in

                                      -26-


the same manner as if there were a separate policy covering each insured and
provide that the exercise by the insurer of rights of subrogation derived from
rights retained by the Lessee will not delay payment of any claim that would
otherwise be payable but for such rights of subrogation. Each hull policy shall
name the Lessor as loss payee; provided that, so long as the insurers shall not
have received written notice that a Specified Default has occurred and is
continuing, if insurance proceeds in the aggregate equal $1,250,000 or less
become payable, then such proceeds shall be payable to the Lessee and,
notwithstanding the foregoing, any amounts up to Termination Value (i) of any
proceeds which in the aggregate exceed $1,250,000, (ii) of any proceeds in
respect of an Event of Loss or (iii) if the insurers shall have received written
notice that an Event of Default has occurred and is continuing, any proceeds
with respect to any single loss, shall be payable to such loss payee.

          (d) DEDUCTIBLES AND SELF-INSURANCE.

          Beginning five (5) years after the Delivery Date, the Lessee may from
time to time self-insure, by way of deductible or premium adjustment provisions
in insurance policies or otherwise, the risks required to be insured against
pursuant to this Section 9 in such amounts as are then self-insured with respect
to similar owned or leased aircraft in the Lessee's fleet but in no case shall
such self-insurance in the aggregate exceed, on a per occurrence or on fleetwide
basis, an amount equal to 5% of the Lessee's tangible net worth, calculated as
at the end of the Lessee's immediately preceding fiscal year (but in no event to
exceed $10,000,000). A deductible per occurrence that is not in excess of the
prevailing standard market deductible for similar aircraft shall be permitted,
for each aircraft in the Lessee's fleet, in addition to such self-insurance.

          (e) APPLICATION OF HULL INSURANCE PROCEEDS.

          Subject to Section 8(g), as between the Lessor and the Lessee, any
payments received under policies of hull or other property insurance required to
be maintained by the Lessee pursuant to Section 9(b), shall be applied as
follows:

               (i) if such payments are received with respect to loss or damage
          (including an Event of Loss with respect to an Engine) not
          constituting an Event of Loss with respect to the Airframe, payments
          in the aggregate of $1,250,000 or less shall be paid over to or
          retained by the Lessee and, subject to Section 9(c), any payments
          which in the aggregate are greater than $1,250,000 shall be paid over
          to or retained by the Lessor for payment to the Lessee only upon
          performance of its repair or replacement obligation;

               (ii) if such payments are received with respect to an Event of
          Loss with respect to the Airframe and the Airframe is not being
          replaced by the Lessee pursuant to Section 8(a)(i), so much of such
          payments as shall not exceed the Termination Value and other amounts
          required to be paid by the Lessee pursuant to Section 8(a)(ii) shall
          be applied in reduction of the Lessee's obligation to pay such amounts
          if not already paid by the Lessee, and to reimburse the Lessee if such
          amounts shall have been paid, and the balance, if any, of such
          payments shall be promptly paid over to or retained by the Lessee; and

                                      -27-


               (iii) if such payments are received with respect to the Airframe
          or the Airframe and Engines or engines installed thereon and the
          Airframe is being replaced by the Lessee pursuant to Section 8(a)(i),
          such payments shall be paid over to, or retained by the Lessee,
          provided that if the Lessee has not completed such replacement and the
          performance of all other obligations under Section 8(d), such payments
          shall be paid over to, or retained by, the Lessor as security, and
          upon completion of, or in connection with a closing for, such
          replacement, be paid over to or retained by the Lessee.

          (f) INSURANCE FOR OWN ACCOUNT.

          Nothing in this Section 9 shall prohibit the Lessor, the Owner
Participant, the Lessee or any Additional Insured from obtaining insurance with
respect to the Aircraft for its own account (including, without limitation, in
the case of the Lessee, hull insurance under the same policies maintained
pursuant to this Section 9 in amounts in excess of those required to be
maintained pursuant to this Section 9) and any proceeds payable thereunder shall
be payable as provided in the insurance policy relating thereto, provided that
no such insurance may be obtained which would limit or otherwise adversely
affect the availability of coverage or payment of any insurance required to be
obtained or maintained pursuant to this Section 9, it being understood that all
salvage rights to the Airframe or the Engines shall remain with the Lessee's
insurers at all times.

          (g) REPORTS, ETC.

          Lessee will furnish to the Lessor and the Owner Participant (A) on or
prior to the Delivery Date, insurance certificates describing in reasonable
detail the insurance maintained by Lessee as required pursuant to this Section
9, (B) prior to the cancellation, lapse or expiration of the insurance policies
required pursuant to this Section 9, evidence of renewal of such insurance
policies, and (C) on or prior to the Delivery Date and on or before the renewal
dates of the insurance policies carried by the Lessee pursuant to this Section
9, a report signed by a firm of aircraft insurance brokers, not affiliated with
the Lessee, appointed by the Lessee and reasonably satisfactory to the Lessor,
stating the opinion of such firm that all premiums in connection with the
insurance then due have been paid and the insurance then carried and maintained
on the Aircraft complies with the terms hereof and, in the case of renewal
insurance, that such renewal insurance will on and after the effective date
thereof so comply with the terms hereof, PROVIDED that all information contained
in such report shall be held confidential by the Lessor and the Owner
Participant, and shall not be furnished or disclosed by them to anyone except
their legal counsel, insurance brokers or advisors, bona fide prospective
transferees of the Owner Participant and their respective agents (PROVIDED that
they shall agree for the benefit of the Lessee to hold all such information
similarly confidential) or as may be required by Applicable Law. The Lessee will
instruct such firm to give prompt written advice to the Lessor and the Owner
Participant (X) if such firm ceases to be the insurance broker to Lessee, (Y) of
any default in the payment of any premium and (Z) of any other act or omission
on the part of the Lessee of which it has knowledge and which would in such
firm's opinion invalidate or render unenforceable, in whole or in any material
part, any insurance on the Aircraft. The Lessee will also instruct such firm to
advise the Lessor and the Owner Participant in writing at least 30 days prior to
the termination or cancellation of, or material adverse change in, such
insurance carried

                                      -28-


and maintained on the Aircraft pursuant to this Section 9 (or such lesser period
as may be applicable in the case of war risk coverage).

          (h) RIGHT TO PAY PREMIUMS.

          The Additional Insureds shall have the rights but not the obligations
of an additional named insured. None of Lessor, Owner Participant and the other
Additional Insureds shall have any obligation to pay any premium, commission,
assessment or call due on any such insurance (including reinsurance).
Notwithstanding the foregoing, in the event of cancellation of any insurance due
to the nonpayment of premiums, each of Lessor, Owner Participant and the other
Additional Insureds shall have the option, in its sole discretion, to pay any
such premium in respect of the Aircraft that is due in respect of the coverage
pursuant to this Lease and to maintain such coverage, as Lessor, Owner
Participant or the other Additional Insureds may require, until the scheduled
expiry date of such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, Owner Participant and the other Additional Insureds for
amounts so paid by them.

Section 10. LIENS.

          The Lessee shall not during the Term directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
Airframe, any Engine or any Part or title thereto or any interest therein or in
this Lease except (a) the respective rights of the Lessor and the Lessee as
provided herein and the rights of the parties to the other Operative Agreements;
(b) the rights of others under agreements or arrangements to the extent
expressly permitted in Sections 5(b) and 7(c); (c) Liens for Taxes either not
yet due or being contested in good faith by appropriate proceedings so long as
such proceedings do not involve any non-de minimis risk of the sale, forfeiture
or loss of the Aircraft, Airframe or an Engine or the interest of Owner
Participant therein or any risk of criminal liability or any material risk of
civil penalty against Lessor or Owner Participant; (d) Liens of suppliers,
mechanics, workers, repairers, employees, airport operators, air traffic control
authorities or other like Liens arising in the ordinary course of business and
for amounts the payment of which is either not yet delinquent or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings, so long as such proceedings do not
involve a non-de minimis risk of the sale, forfeiture or loss of the Airframe or
an Engine or the interest of Owner Participant therein or any risk of criminal
liability or any material risk of civil penalty against Lessor or Owner
Participant; (e) Liens arising out of judgments or awards against the Lessee so
long as there shall be in effect with respect to which a stay of execution; (f)
Lessor's Liens; (g) salvage and similar rights of insurers under policies of
insurance maintained with respect to the Aircraft; (h) Liens with respect to
which the Lessee (or any sublessee) has provided a bond or other security
adequate in the good faith opinion of the Lessor and the Owner Participant; and
(i) a Permitted Security Interest. Liens described in clauses (a) through (i)
above are referred to herein as "Permitted Liens." The Lessee shall promptly, at
its own expense, take such action as may be necessary to duly discharge (by
bonding or otherwise) any Lien other than a Permitted Lien arising at any time
during the Term.

                                      -29-


Section 11. RECORDATION AND FURTHER ASSURANCES.

          (a) RECORDATION OF LEASE.

          The Lessee shall cause this Lease, any Lease Supplements, and any and
all additional instruments which shall be executed pursuant to the terms hereof
to be kept, filed and recorded and to be re-executed, refiled and re-recorded at
all times during the Term with the FAA or other Aeronautical Authority to the
extent required to perfect and preserve the Lessor's interest in the Aircraft.

          (b) FURTHER ASSURANCES.

          The Lessee and the Lessor will each promptly and duly execute and
deliver to the other such further documents and assurances and take such further
action as the other may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessor and the Lessee hereunder, including, without limitation, if requested
by the Lessor or the Lessee, the execution and delivery of supplements or
amendments hereto, in recordable form, subjecting any replacement or substituted
aircraft or engine to this Lease and the recording or filing of counterparts
hereof, or of financing statements with respect hereto.

          (c) 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, in a clearly visible location (it being understood that
the location of such placard, 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
below:

                                   Leased from
                Wells Fargo Bank Northwest, National Association,
                         not in its individual capacity
                  but solely as Owner Trustee, Owner and Lessor

          Such placard may be removed temporarily, if necessary, in the course
of maintenance of the Airframe. If such placard is damaged or becomes illegible,
Lessee shall promptly replace it with a placard complying with the requirements
of this Section 11(c).

                                      -30-


Section 12. RETURN OF AIRCRAFT AND RECORDS.

          (a) RETURN OF AIRCRAFT.

          Upon the termination of this Lease at the expiration of the Term or
upon the earlier termination of this Lease pursuant to the terms hereof, unless
the Lessee shall purchase the Aircraft or there shall have been an Event of Loss
with respect to the Aircraft, the Lessee, at its own expense, shall, except as
otherwise expressly provided herein, return the Airframe by delivering the same
to the Lessor in the continental United States of America at a location on the
Lessee's jet route system chosen by the Lessor, and otherwise in compliance with
conditions required by the provisions of this Section 12, fully equipped with
two Engines or other engine meeting the requirements of Replacement Engines duly
installed thereon.

          (b) RETURN OF OTHER ENGINES.

          In the event any engine not owned by the Lessor shall be returned with
the Airframe, such engine shall satisfy the requirements for a Replacement
Engine (and, in any event, the two engines returned shall be of the same model),
shall be free and clear of all Liens other than Lessor's Liens and any Permitted
Security Interest and shall have a value, remaining useful life, utility and
condition at least as great as the Engine replaced (assuming such Engine was
maintained in accordance with the terms hereof) and the Lessee shall, at its own
expense and concurrently with such return, furnish the Lessor with (i) a full
warranty bill of sale guaranteed by Lessee, in form and substance reasonably
satisfactory to the Lessor and the Owner Participant, (ii) an Officer's
Certificate as described in Section 7(e)(i)(D), and (iii) an opinion of counsel
to the Lessee as described in Section 7(e)(ii), with respect to each such engine
and shall take such other action as required by Section 7(e) to cause such
engine to be a Replacement Engine or as the Lessor may reasonably request in
order that such engine shall be duly and properly titled in the Lessor free and
clear of all Liens other than Lessor's Liens and any Permitted Security
Interest. Upon passage of title such engine shall be deemed to be an Engine for
all purposes hereof and thereupon the Lessor will transfer to the Lessee, in
"as-is, where is" condition, without recourse or warranty except a warranty
against Lessor's Liens, all right, title and interest of the Lessor or any
Affiliate in and to an Engine not installed on the Airframe at the time of the
return thereof.

          (c) FUEL; RECORDS.

          Upon the return of the Aircraft, (i) the Lessor shall have no
obligation with respect to the amount of fuel or oil contained in the Airframe
and (ii) the Lessee shall deliver to the Lessor all logs, manuals, certificates
and inspection, modification and overhaul records which are required to be
maintained with respect thereto under applicable rules and regulations of the
FAA and DOT.

          (d) CONDITION OF AIRCRAFT.

          The Aircraft when returned to the Lessor shall be in the operating
condition required by Exhibit F-1 or F-2, as applicable.

                                      -31-


          (e) FAILURE TO RETURN. If Lessee shall, for any reason whatsoever,
fail to return the Aircraft and the documents referred to in Section 12(c)(ii)
at the time and place and in the condition specified herein, all obligations of
Lessee under this Lease shall continue in effect with respect to the Aircraft
until the Aircraft is so returned to Lessor and Lessee shall pay to Lessor an
amount equal to the average daily Basic Rent payable by Lessee during the Term
for each day after the end of the Term to but excluding the day of such return;
PROVIDED, HOWEVER, that this Section 12(e) shall not be construed as permitting
Lessee to fail to meet its obligations to return the Aircraft or the documents
referred to in Section 12(c)(ii) in accordance with the requirements hereof or
constitute, or be deemed to constitute, a waiver of any Event of Default
resulting from Lessee's failure to return the Aircraft or such documents or
otherwise; and PROVIDED, FURTHER, that Lessee shall not be responsible for
Lessor's failure to accept return of the Aircraft and the documents referred to
in Section 12(c)(ii) in accordance with the requirements hereof in a timely
manner or for any rent with respect to periods after Lessee has tendered the
Aircraft and the documents referred to in Section 12(c)(ii) for return in
accordance with this Lease, provided however that if Lessor's inspection of the
Aircraft and the documents referred to in Section 12(c)(ii), which inspection
shall be conducted in good faith and timely manner, reveals any discrepancy from
the condition required by the provisions of this Section 12, Lessee shall
continue to pay rent in accordance with this Section 12(e) until the Aircraft
and the documents referred to in Section 12(c)(ii) are returned to the Lessor in
accordance with this Lease. Any rent owed to Lessor pursuant to this Section
12(e) shall be payable upon acceptance of the Aircraft and the documents
referred to in Section 12(c)(ii) by Lessor.

          (f) STORAGE AND RELATED MATTERS.

          If Lessor gives written notice to Lessee not less than 60 days nor
more than 180 days prior to the end of the Term requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with outdoor parking facilities for the Aircraft at the airport
where the Aircraft is returned for a period up to 60 days, commencing on the
date of such return at Lessor's expense; provided, that if such termination
occurs as a result of an Event of Default, such storage shall be at the Lessee's
expense. Lessee shall maintain in effect during such storage period insurance
covering the Aircraft to the extent such insurance is available at reasonable
commercial rates, and in such amounts and against such risks as would be
customarily carried in similar circumstances by a reasonably prudent lessor,
with such insurance being paid for by the Lessor; provided, that if such
termination occurs as a result of an Event of Default, the Lessee will cooperate
with the Lessor in obtaining such insurance at the Lessee's expense.

Section 13. RENEWAL OPTION AND PURCHASE OPTIONS.

          (a) RENEWAL TERMS.

          Subject to the final sentence of this Section 13(a), upon expiration
of the Basic Term, the Lessee shall have the right to extend this Lease for
successive periods of one year each (each a "Fixed Renewal Term"), but for not
more than an aggregate of two years. Subject to the final sentence of this
Section 13(a), at the end of the second Fixed Renewal Term (provided that the
Lessee shall have elected to extend this Lease for such Fixed Renewal Term), the
Lessee shall have the right to extend this Lease for up to two successive
periods of one year each (each a

                                      -32-


"Fair Market Value Renewal Term"; each Fixed Renewal Term and each Fair Market
Value Renewal Term, being hereinafter sometimes called a "Renewal Term")
provided that the aggregate term of all Renewal Terms shall not exceed four
years. A Fixed Renewal Term will commence at the end of the Basic Term or the
preceding Fixed Renewal Term, as the case may be and a Fair Market Value Renewal
Term will commence at the end of the second Fixed Renewal Term (provided that
the Lessee shall have elected to extend this Lease for such Fixed Renewal Term)
or at the end of the first Fair Market Value Renewal Term, as the case may be.
Such right to extend this Lease shall be exercised upon notice to the Lessor,
specifying the nature of the Renewal Term, not less than 210 days nor more than
365 days before the expiration of the Basic Term or the preceding Renewal Term,
as the case may be. Such notice shall be irrevocable except that in the event
the Lessee gives such notice to the Lessor 240 or more days before the end of
the Basic Term or the Renewal Term then in effect, as the case may be, the
Lessee may revoke its election to extend this Lease within 15 days following the
determination of the Fair Market Rental Value of the Aircraft but in no event
later than 210 days prior to the end of the Basic Term or the preceding Renewal
Term, as the case may be. If the Lessee requests a determination of Fair Market
Rental Value at least 240 days before the expiration of the Basic Term or a
Renewal Term, as the case may be, the Lessor and the Lessee shall comply in a
timely manner with their respective obligations under the definition of "Fair
Market Rental Value" to allow any appraisal of Fair Market Rental Value to be
completed in sufficient time to permit the Lessee to exercise the revocation
right provided above. If no Specified Default shall have occurred and be
continuing on the date of such notice or on the date of the commencement of any
Renewal Term, then this Lease shall be extended for the additional period of
such Renewal Term as specified in such notice on the same conditions as provided
for herein. The Basic Rent payable per annum during any Fixed Renewal Term shall
be the Renewal Rental Rate identified on Exhibit B. The rental payable per annum
during any Fair Market Value Renewal Term shall be the then Fair Market Rental
Value for the Aircraft. Such rental during each Renewal Term shall be payable
monthly. The Termination Value of the Aircraft during each Renewal Term shall be
the Fair Market Sales Value for the Aircraft at the beginning of such Renewal
Term declining on a straight line basis to the projected Fair Market Sales Value
for the Aircraft at the end of such Renewal Term, but in both cases determined
prior to the commencement of such Renewal Term. If Lessee gives notice to Lessor
that it will exercise its right to renew this Lease at the end of the Basic
Term, notwithstanding such notice Lessee may not exercise such right if, not
later than 150 days prior to the end of the Basic Term, Owner Participant
notifies Lessee that it is demanding payment of a deficiency amount under the
Residual Value Guarantee Agreement and certifies to Lessee the appraised fair
market sales value of the Aircraft as determined under the Residual Value
Guarantee Agreement that is the basis for such claim and the amount of the
deficiency so claimed.

          (b) LESSEE'S PURCHASE OPTIONS.

               (i) RIGHTS TO PURCHASE.

          The Lessee shall have the right upon notice as provided herein to
purchase the Aircraft (A) on the EBO Date for a price equal to the EBO Amount;
(B) upon the termination of the Basic Term for a price equal to the then Fair
Market Sales Value of the Aircraft; or (C) at the end of any Renewal Term for a
price equal to the then Fair Market Sales Value of the Aircraft in each case as
long as no Event of Default of the type referred to in Section 16(f), (g) or (h)
hereof

                                      -33-


shall have occurred and be continuing on the date of purchase. In the event the
Lessee elects to purchase the Aircraft pursuant to clause (A) of this Section
13(b)(i), then upon the payment by the Lessee of (I) the EBO Amount plus (II)
the amount, if any, set forth opposite the EBO Date in Exhibit D in the column
with the heading "Deferred Basic Rent Amount" plus (III) the Basic Rent, if any,
payable on the EBO Date plus (IV) all unpaid Basic Rent, if any, payable before
the EBO Date plus (V) all Supplemental Rent then due and payable hereunder
(including any Supplemental Rent then due and payable hereunder) less (VI) the
amount, if any, set forth opposite the EBO Date in Exhibit D in the column with
the heading "Prepaid Basic Rent Amount", the Term shall end and the obligations
of the Lessee to pay Rent hereunder (except for Supplemental Rent obligations
surviving pursuant to Section 3(c), Articles 6 and 7 of the Participation
Agreement or the Tax Indemnity Agreement or which have otherwise accrued but not
been paid as of the date of such payment) shall cease, and the Lessor shall
convey to the Lessee all right, title and interest of the Lessor in and to the
Aircraft on an "as-is, where is" basis, without recourse or warranty except a
warranty against Lessor's Liens. In the event the Lessee elects to purchase the
Aircraft pursuant to clause (B) or (C) of this Section 13(b)(i), then upon the
payment by the Lessee of the purchase price for the Aircraft and the Basic Rent,
if any, payable on the date of purchase, together with all unpaid Basic Rent, if
any, payable before such date and all Supplemental Rent then due and payable
hereunder, the Term shall end and the obligations of the Lessee to pay Rent
hereunder (except for Supplemental Rent obligations surviving pursuant to
Section 3(c), Articles 6 and 7 of the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not been paid as of the
date of such payment) shall cease, and the Lessor shall convey to the Lessee all
right, title and interest of the Lessor in and to the Aircraft on an "as-is,
where is" basis, without recourse or warranty except a warranty against Lessor's
Liens.

               (ii) NOTICE OF EXERCISE OF OPTION.

          The Lessee's right to purchase provided for in clause (B) or (C) of
Section 13(b)(i) shall be exercised upon written notice to the Lessor not more
than 365 days before the applicable date of purchase provided in such clause (B)
or (C) as the case may be and not less than 210 days before the applicable date
of purchase in the case of clause (B) and 180 days before the applicable date of
purchase in the case of clause (C). Such notice shall be irrevocable, except
that where the purchase price is or may be measured by the Fair Market Sales
Value of the Aircraft the Lessee may revoke its exercise of an option to
purchase the Aircraft as provided in Section 13(b)(iii) in the case of such
clause (B) or within 15 days following the determination of such Fair Market
Sales Value but in no event later than 180 days prior to the applicable date of
purchase in the case of such clause (C). The Lessee's right to purchase provided
for in clause (A) of Section 13(b)(i) shall be exercised upon written notice to
the Lessor not less than 120 days nor more than 365 days before the EBO Date and
shall be irrevocable when given.

               (iii) APPRAISAL PROCEDURE.

          If Lessee provides notice of its right to purchase provided for in
clause (B) of Section 13(b)(i), then not later than 180 days prior to the end of
the Basic Term, the Owner Participant shall notify Lessee (such notice, a
"Residual Notice") if it has notified the Manufacturer that it will require an
appraised value of the Aircraft to be determined under the Residual Value
Guarantee Agreement. If the Owner Participant provides a Residual Notice, Fair

                                      -34-


Market Sales Value shall be determined pursuant to the Appraisal Procedure.
Otherwise, Fair Market Sales Value shall be determined as provided in the
definition thereof. If Fair Market Sales Value is determined pursuant to the
Appraisal Procedure (x) and is less than the Guaranteed Amount, the Manufacturer
shall notify Lessee and Owner Participant within 30 days after the determination
of Fair Market Sales Value but in no event later than 120 days prior to the end
of the Basic Term whether it will exercise its Fair Market Sales Value purchase
option under the Residual Value Guarantee Agreement, in which case Lessee's
purchase option will be revoked and (y) unless the Lessee's purchase option is
revoked under the preceding clause (x), Lessee shall have the option of revoking
its purchase option within 45 days after the determination of Fair Market Sales
Value but in no event later than 105 days prior to the end of the Basic Term. If
Fair Market Sales Value is not determined in accordance with the Appraisal
Procedure, Lessee may revoke its exercise of an option to purchase the Aircraft
within 15 days following the determination of Fair Market Sales Value but in any
event not later than 105 days prior to the end of the Basic Term.

Section 14. VOLUNTARY TERMINATION FOR OBSOLESCENCE.

          (a) TERMINATION BY SALE OF AIRCRAFT.

          So long as no Specified Default shall have occurred and be continuing,
the Lessee shall have the right at its option five years or more after
commencement of the Basic Term on at least 180 days', but not more than 365
days, prior written notice (which notice shall be irrevocable, except as
provided below) to the Lessor, specifying a proposed date of termination which
shall be a Termination Date, to terminate this Lease if the chief financial
officer of the Lessee shall have certified in writing to the Lessor that the
Aircraft shall have become obsolete or shall be surplus to the Lessee's
equipment requirements. Subject to the Lessor's preemptive election under
Section 14(c), during the period following the giving of such notice of
termination until the Termination Date, the Lessee, as agent for the Lessor,
shall endeavor to sell the Aircraft "as is", without any warranty by the Lessor
or the Lessee except as to the Lessor's title, on behalf of the Lessor. If
Lessee receives any bid, it shall at least 10 Business Days prior to the
proposed day of sale, certify to Lessor in writing the amount and terms of such
bid, such proposed date of sale and the name and address of the potential buyer
(which shall not be Lessee or any Affiliate or any Person with whom Lessee or
any Affiliate has any arrangement or understanding for the future purchase,
lease, operation or use of the Aircraft). Lessor may also solicit bids directly
or through agents other than Lessee. So long as the Lessor has not exercised its
preemptive election under Section 14(c), the Lessee may, by notice to the
Lessor, withdraw its notice of termination at any time on or before the date 10
days prior to the proposed Termination Date (unless such withdrawal is due to
the cancellation of the proposed purchase of the Aircraft by the potential buyer
in which event such notice may be given at any time on or prior to the proposed
Termination Date), and thereupon this Lease shall continue in full force and
effect. Withdrawal of notice of termination shall not exhaust the Lessee's right
to give a further notice of termination as provided herein; provided that Lessee
shall not be entitled to give more than two such notices (excluding one notice
of termination which has been withdrawn due to the cancellation of the proposed
purchase of the Aircraft by the potential buyer). Unless the Lessee shall
withdraw its notice of termination as stated above or the Lessor shall have made
a preemptive election to take possession of the Aircraft in accordance with
Section 14(c), on the Termination Date, or such other date of sale as shall be
consented to in writing by the Lessor and

                                      -35-


the Lessee, which date shall thereafter be deemed the Termination Date, the
Lessee shall, upon payment in full of the amounts described in Section 14(b),
deliver the Airframe and Engines or engines installed thereon to the party which
shall have prior to such date submitted the highest bona fide cash bid to close
such sale and purchase of the same, in the same manner as if delivery were being
made to the Lessor pursuant to Section 12, and shall duly transfer to such party
title to any engines which are not Engines delivered with the Airframe in
accordance with the terms of Section 12. The Lessor shall, in "as-is, where-is"
condition, without recourse or warranty (except a warranty as to the absence of
Lessor's Liens), simultaneously therewith sell and convey title to the Airframe
and the Engines or engines conveyed to the Lessor as provided in Section 12 for
cash to such party. Upon the sale of the Airframe and the Engines or engines
conveyed to the Lessor as provided in Section 12 pursuant to this Section 14 and
receipt by the Lessor of all amounts referred to in Section 14(b), the Lessor
will transfer to the Lessee, in "as-is, where-is" condition, without recourse or
warranty (except a warranty as to the absence of Lessor's Liens), all right,
title and interest of the Lessor in and to any Engines constituting part of the
Aircraft but which were not delivered to the purchaser with the Airframe. The
Lessee shall pay all out of pocket expenses of the Lessor and Owner Participant
in connection with any termination or proposed termination of this Lease except
that Lessee shall not be responsible for such expenses of the Lessor or the
Owner Participant in the event the Lessor exercises its preemptive election
under Section 14(c) and thereafter fails to perform its obligations under such
Section.

          (b) PAYMENTS DUE UPON SALE OF AIRCRAFT.

          The total selling price realized at any sale of the Airframe and
Engines or engines installed thereon in accordance with this Section 14 shall be
retained by the Lessor and, in addition, on the Termination Date, (1) the Lessee
shall pay to the Lessor or, in the case of Supplemental Rent, to the Persons
entitled thereto, in immediately available funds, an amount equal to the sum of
(A) the excess, if any, of (x) the Termination Value as of the Termination Date,
over (y) the net proceeds of the sale of the Aircraft, plus (B) all unpaid
Supplemental Rent due on or before the Termination Date, plus (C) an amount
equal to the Basic Rent, if any, payable on the Termination Date, plus (D) the
amount, if any, set forth opposite the Termination Date in Exhibit D in the
column with the heading "Deferred Basic Rent Amount", plus (E) all unpaid Basic
Rent, if any, payable before the Termination Date, plus (F) the reasonable fees
and expenses of the Owner Participant and Lessor in connection therewith, plus
(G) any sales, transfer or similar Taxes incurred on such sale, and (2) the
Lessor shall pay to the Lessee the amount of prepaid Basic Rent, if any, as of
such Termination Date as set forth in Exhibit D in the column with the heading
"Prepaid Basic Rent Amount". In the event of any sale of the Aircraft by the
Lessor pursuant to Section 14(a), the Lessee shall be entitled to offset amounts
payable by the Lessee under clause (1) of this Section 14(b) against any amounts
owed to it by Lessor under clause (2) of this Section 14(b).

          (c) PREEMPTIVE ELECTION BY LESSOR.

          Notwithstanding the foregoing provisions of this Section 14, the
Lessor may, not later than 90 days prior to the proposed Termination Date,
notify the Lessee of its preemptive election to take possession of the Aircraft
and following delivery of such notice, the Lessee shall have no obligation to
pay Termination Value or any amount with respect to Termination Value

                                      -36-


under this Section 14. On the Termination Date, if the Lessor shall have
exercised its preemptive election to retain the Aircraft in accordance with the
terms of this Section 14(c), (1) the Lessee shall deliver the Airframe and
Engines or engines installed thereon to the Lessor in accordance with Section 12
and shall pay the Lessor or, in the case of Supplemental Rent, to the Persons
entitled thereto, (A) all unpaid Basic Rent, if any, payable on or before the
Termination Date, plus (B) an amount equal to the Basic Rent, if any, payable on
the Termination Date, plus (C) the amount, if any, set forth opposite the
Termination Date in Exhibit D in the column with the heading "Deferred Basic
Rent Amount", plus (D) all unpaid Supplemental Rent due on or before or after
the Termination Date, and (2) the Lessor shall transfer to the Lessee title to
any Engines constituting part of the Airframes but which were not then installed
on the Aircraft as provided in Section 12(b) and pay to the Lessee the amount of
prepaid Basic Rent, if any, as of such Termination Date as set forth in Exhibit
D in the column with the heading "Prepaid Basic Rent Amount". In the event the
Lessee delivers the Aircraft to the Lessor on the Termination Date pursuant to
this Section 14(c), the Lessee shall be entitled to offset amounts payable by
the Lessee under clause (1) of this Section 14(c) against any amounts owed to it
by Lessor under clause (2) of this Section 14(c).

          (d) TERMINATION OF LEASE.

          Upon delivery by the Lessee of the Airframe and Engines or engines
installed thereon and payment by the Lessee of all amounts payable by the Lessee
under either Section 14(b) or 14(c), as the case may be, the obligations of the
Lessee to pay Rent (except for Supplemental Rent obligations surviving pursuant
to Section 3(c) and Articles 6 and 7 of the Participation Agreement or the Tax
Indemnity Agreement or which have otherwise accrued but not paid as of the
Termination Date) shall cease and the Term shall end.

          (e) EFFECT OF NO SALE OR PREEMPTIVE DELIVERY TO LESSOR.

          If on the Termination Date no sale of the Aircraft shall have occurred
and the Lessee has not delivered the Aircraft to the Lessor pursuant to Section
14(c), the Lessee's notice given pursuant to Section 14(a) shall be deemed to be
withdrawn as of such date and this Lease shall continue in full force and
effect.

          (f) NO DUTY ON PART OF LESSOR.

          Lessor shall be under no duty to solicit bids, to inquire into the
efforts of Lessee to obtain bids or otherwise to take any action in connection
with any such sale other than to cooperate with such efforts as Lessee may
reasonably request and to make the transfers described in Section 14(a).

Section 15. INVESTMENT OF SECURITY FUNDS.

          Any monies paid to or retained by the Lessor which are required to be
paid to the Lessee or applied for the benefit of the Lessee (including, without
limitation, amounts payable to the Lessee under Sections 8 and 9), but which the
Lessor is entitled to hold under the terms hereof pending the occurrence of some
event or the performance of some act (including, without limitation, the
remedying of an Event of Default), shall, until paid to the Lessee or applied as
provided herein, be invested by the Lessor from time to time at the direction,
risk and expense of

                                      -37-


the Lessee in Permitted Investments. There shall be promptly remitted to the
Lessee any gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless a Specified Default shall have occurred
and be continuing, in which case such gains shall be held or applied in
accordance with the preceding sentence. The Lessee will promptly pay to the
Lessor, on demand, the amount of any loss realized as the result of any such
investment (together with any fees, commissions and other expenses, if any,
incurred in connection with such investment).

Section 16. EVENTS OF DEFAULT.

          The following events shall constitute Events of Default and each such
Event of Default shall be deemed to exist and continue so long as, but only so
long as, it shall not have been remedied:

          (a) The Lessee shall fail to make any payment of (i) Basic Rent or
     Termination Value when due and such failure shall continue for a period of
     10 days or (ii) Supplemental Rent (other than Termination Value) within 30
     days after receipt by the Lessee of a written demand therefor from the
     Lessor;

          (b) The Lessee shall fail to procure and maintain insurance required
     pursuant to Section 9 or such insurance shall be cancelled or lapse;
     PROVIDED that such lapse or cancellation shall not constitute an Event of
     Default until the earlier of 30 days after receipt by the Lessor of notice
     of such lapse or cancellation or the date that the lapse or cancellation is
     effective as to the Lessor or the Owner Participant;

          (c) The Lessee shall operate the Aircraft after having received notice
     that the public liability insurance required by Section 9(a) has lapsed or
     has been cancelled;

          (d) The Lessee shall fail to perform or observe any other covenant or
     condition to be performed or observed by it hereunder or under any other
     Operative Agreement (other than the Tax Indemnity Agreement), and such
     failure shall continue unremedied for a period of 30 days after delivery of
     notice of such failure from the Lessor to the Lessee, unless such failure
     is curable and the Lessee shall, after the delivery of such notice, be
     diligently proceeding to correct such failure and shall in fact correct
     such failure 120 days after delivery of such notice;

          (e) Any representation or warranty made by the Lessee herein or in any
     Operative Agreement or in any certificate required to be delivered by the
     Lessee pursuant thereto (other than the Tax Indemnity Agreement) shall
     prove to have been incorrect in any material respect when made and shall
     remain material at the time in question and shall not be remedied within 30
     days after notice thereof has been given to the Lessee by the Lessor,
     unless such incorrectness is curable and Lessee shall, after delivery of
     such notice, be diligently proceeding to correct such failure and shall in
     fact correct such failure 120 days after the delivery of such notice;

          (f) The Lessee shall consent to the appointment of or taking
     possession by a receiver, assignee, custodian, sequestrator, trustee or
     liquidator (or other similar official)

                                      -38-


     of itself or of a substantial part of its property, or the Lessee shall
     admit in writing its inability to pay its debts generally as they come due
     (as provided in 11 U.S.C.Section303(h)(1)), or shall make a general
     assignment for the benefit of its creditors, or the Lessee shall file a
     voluntary petition in bankruptcy or a voluntary petition or answer seeking
     liquidation, reorganization or other relief with respect to itself or its
     debts under the Federal bankruptcy laws, as now or hereafter constituted or
     any other applicable Federal or State bankruptcy, insolvency or other
     similar law or shall consent to the entry of an order for relief in an
     involuntary case under any such law or the Lessee shall file an answer
     admitting the material allegations of a petition filed against the Lessee
     in any such proceeding, or otherwise seek relief under the provisions of
     any now existing or future Federal or State bankruptcy, insolvency or other
     similar law providing for the reorganization or winding-up of corporations,
     or providing for an agreement, composition, extension or adjustment with
     its creditors;

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

          (h) A petition against the Lessee in a proceeding under the Federal
     bankruptcy laws or other insolvency laws as now or hereafter in effect
     shall be filed and shall not be withdrawn or dismissed within 90 days
     thereafter, or, under the provisions of any law providing for
     reorganization or winding-up of corporations which may apply to the Lessee,
     any court of competent jurisdiction shall assume jurisdiction, custody or
     control of the Lessee or of any substantial part of its property and such
     jurisdiction, custody or control shall remain in force unrelinquished,
     unstayed or unterminated for a period of 90 days;

          (i) So long as GECC or an Affiliate of GECC (including, for the
     avoidance of doubt, Silvermine) is the Owner Participant, any "event of
     default" occurs under a Related Lease;

          (j) Lessee shall receive notice of default or exercise of remedies
     with respect to the payment or performance of any indebtedness or other
     obligation to any third party and any such default or exercise of remedies
     results in an acceleration of such indebtedness or obligation; provided,
     however, that the aggregate amount of any such indebtedness or obligation
     is in excess of $5,000,000 (determined in the case of borrowed money by the
     amount outstanding under the agreement pursuant to which such borrowed
     money was borrowed, in the case of a deferred purchase price by the
     remaining balance and in the case of a lease by the present value of the
     remaining rent payable thereunder); or

          (k) The Lessee shall cease to be a Certificated Air Carrier and such
     circumstance results in the Owner Trustee no longer being entitled to the
     benefits of Section 1110 of the Bankruptcy Code,

                                      -39-


PROVIDED that, notwithstanding anything to the contrary contained in this Lease,
any failure of the Lessee to perform or observe any covenant, condition, or
agreement herein shall not constitute an Event of Default under clause (d) above
if such failure is caused solely by reason of an event referred to in the
definition of "EVENT OF LOSS" so long as the Lessee is continuing to comply with
the applicable terms of Section 8.

Section 17. REMEDIES.

          Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, the Lessor may, at its option, declare
this Lease to be in default by a notice to the Lessee (PROVIDED that this Lease
shall be deemed to have been declared in default without the necessity of such
notice upon the occurrence of any Event of Default described in paragraph (f),
(g) or (h) of Section 16 hereof); and at any time thereafter so long as the
Lessee shall not have remedied all outstanding Events of Default, the Lessor may
do, and the Lessee shall comply with, one or more of the following with respect
to the Airframe and all or any part of the Engines, as the Lessor in its sole
discretion shall elect, to the extent permitted by, and subject to compliance
with any mandatory requirements of, Applicable Law then in effect; PROVIDED that
during any period the Aircraft is subject to the Civil Reserve Air Fleet Program
in accordance with the provisions of Section 5(b) and in the possession of the
United States government or an instrumentality or agency thereof, the Lessor
shall not, on account of any Event of Default, be entitled to do any of the
following in such manner as to limit the Lessee's control under this Lease (or
any sublessee's control under any Sublease permitted by the terms of this Lease)
of any Airframe or any Engines, unless at least 60 days' (or such lesser period,
if any, as may then be applicable under the Military Airlift Command Program of
the United States Government) prior notice of default hereunder shall have been
given by the Lessor by registered or certified mail to the Lessee (or any
sublessee) with a copy addressed to the Contracting Office Representative for
the Military Airlift Command of the United States Air Force under any contract
with Lessee (or any sublessee) relating to the Aircraft:

          (a) Cause the Lessee, upon the written demand of the Lessor and at the
     Lessee's expense to, and the Lessee shall, promptly return the Airframe and
     all or such part of the Engines as the Lessor may demand to the Lessor in
     the manner and condition required by, and otherwise in accordance with all
     of the provisions of, Section 12 as if the Airframe and such Engines were
     being returned at the end of the Term; or the Lessor, at its option, may
     cause public officials acting pursuant to judicial order obtained in
     summary proceedings or otherwise to enter upon the premises where the
     Airframe or any or all Engines are located or reasonably believed to be
     located and take immediate possession of and remove such Airframe or
     Engines, and the Lessee shall comply therewith, all without liability to
     the Lessor for or by reason of such entry or taking possession, whether for
     the restoration of damage to property caused by such taking or otherwise;
     and the Lessee shall promptly execute and deliver to the Lessor such
     instruments of title or other documents as the Lessor may deem necessary or
     advisable to enable the Lessor or its agent to obtain possession of the
     Airframe or the Engines, provided that if the Lessee shall for any reason
     fail to execute and deliver such instruments and documents after such
     request, the Lessor shall be entitled, in a proceeding to which the Lessee
     shall be a necessary party, to a judgment for specific

                                      -40-


     performance, conferring the right to immediate possession upon the Lessor
     and requiring the Lessee to execute and deliver such instruments and
     documents to the Lessor;

          (b) Sell or otherwise dispose of all or any part of the Aircraft, at
     public or private sale, as the Lessor may determine, or hold, use, operate,
     lease to others or keep idle all or any part of the Aircraft, Airframe or
     any Engine as the Lessor, in its sole discretion, may determine, in any
     such case free and clear of any rights of the Lessee except as hereinafter
     set forth in this Section 17 and without any duty to account to the Lessee
     with respect to such action or inaction or for any proceeds with respect
     thereto except to the extent required by paragraph (d) below in the event
     the Lessor elects to exercise its rights under said paragraph in lieu of
     its rights under paragraph (c) below;

          (c) Whether or not the Lessor shall have exercised, or shall
     thereafter at any time exercise, any of its rights under paragraph (a) or
     paragraph (b) above with respect to the Aircraft, the Lessor, by written
     notice to the Lessee specifying a payment date (which shall be a
     Termination Date) not earlier than 10 days from the date of such notice,
     may require the Lessee to pay to the Lessor, and the Lessee shall pay to
     the Lessor, on the payment date specified in such notice, as liquidated
     damages for loss of a bargain and not as a penalty, (i) any installment of
     Basic Rent due before such payment date, plus (ii) an amount equal to the
     sum of (A) the amount, if any, set forth opposite such payment date in
     Exhibit D in the column with the heading "Deferred Basic Rent Amount" plus
     (B) if such payment date is a Basic Rent Payment Date, the Basic Rent, if
     any, payable on such Basic Rent Payment Date, plus (iii) an amount equal to
     the excess, if any, of (A) Termination Value for the Aircraft, determined
     as of such payment date over (B) the Fair Market Sales Value for the
     Aircraft, computed as of such payment date, together with interest, to the
     extent permitted by Applicable Law, at the Past Due Rate on the amounts
     specified in the foregoing clauses (i), (ii) and (iii) of this paragraph
     (c), from such payment date, to the date of actual payment of such amounts;
     PROVIDED THAT, in any such instance in which the Lessor is unable to
     repossess the Aircraft due to circumstances not relating to or caused by
     any Lessee Person and the Fair Market Sales Value thereof is deemed to be
     zero, upon receipt of any such payment under this paragraph (c) and all
     other amounts due hereunder, the Lessor shall convey, as-is, where-is,
     without recourse or warranty, other than a warranty against Lessor's Liens,
     to the Lessee all right, title and interest of the Lessor in and to the
     Airframe and Engines, and execute and deliver to the Lessee such bills of
     sale and other documents and instruments as the Lessee may reasonably
     request to evidence such conveyance;

          (d) In the event the Lessor, pursuant to paragraph (b) above, shall
     have sold the Aircraft upon reasonable notice to the Lessee, the Lessor in
     lieu of exercising its rights under paragraph (c) above with respect to the
     Aircraft, may, if it shall so elect, require the Lessee to pay the Lessor,
     and the Lessee shall pay to the Lessor, on the date of such sale, as
     liquidated damages for loss of a bargain and not as a penalty (in lieu of
     the Basic Rent due after the date on which such sale occurs but in addition
     to any installment of Basic Rent due up to the date on which such sale
     occurs, (i) the amount of any deficiency of the net proceeds of such sale
     below the Termination Value of the Aircraft, determined as of the
     Termination Date immediately preceding the date of such sale (or the
     Termination Date coinciding with the date of such sale if the date of such
     sale is a

                                      -41-


     Termination Date), together with interest, to the extent permitted by
     Applicable Law, at the Past Due Rate on the amount of such deficiency from
     such Termination Date to the date of actual payment, plus (ii) an amount
     equal to the sum of (A) the amount, if any, set forth opposite such
     Termination Date in Exhibit D in the column with the heading "Deferred
     Basic Rent Amount" plus (B) if such Termination Date is a Basic Rent
     Payment Date, the Basic Rent, if any, payable on such Basic Rent Payment
     Date, together with interest, to the extent permitted by Applicable Law, at
     the Past Due Rate on the amount specified in the foregoing clause (ii) of
     this paragraph (d) from such Termination Date to the date of actual
     payment; and

          (e) Rescind, cancel or terminate this Lease or exercise any other
     right or remedy which may be available under Applicable Law or proceed by
     appropriate court action to enforce the terms hereof or to recover damages
     for the breach hereof.

In addition, the Lessee shall be liable for any unpaid Supplemental Rent due
hereunder before or after any termination hereof, including all reasonable costs
and expenses including attorney's fees and disbursements incurred by the Lessor
or the Owner Participant by reason of the occurrence of any Event of Default or
the exercise of the Lessor's remedies with respect thereto including without
limitation all costs and expenses incurred in connection with the return of the
Airframe or any Engine in accordance with, and in the condition required by, the
terms of Section 12 or any appraisal of the Aircraft required for purposes of
this Section 17. At any sale of the Aircraft, the Airframe or any Engine, or
portion thereof pursuant to this Section 17, the Lessor or the Owner Participant
may bid for and purchase such property. Except as otherwise expressly provided
above, no remedy referred to in this Section 17 is intended to be exclusive (but
the liquidation of damages provided in this Section 17 shall be exclusive to the
extent permitted by Applicable Law), but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to the
Lessor for the Event of Default at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all such
other remedies. No express or implied waiver by the Lessor of any Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default.

          If the Lessor by written notice specifies a payment date under Section
17(c), then subject to Section 23(j) hereof, upon payment by the Lessee on such
payment date of all amounts specified in Section 17(c) to be paid by the Lessee,
the Lessor shall pay to the Lessee the amount, if any, set forth in Exhibit D
beside the Termination Date specified in the Lessor's written notice in the
column with the heading "Prepaid Basic Rent Amount".

          If the Lessor shall have sold the Aircraft and shall exercise its
rights under Section 17(d), then subject to Section 23(j) hereof, upon payment
by the Lessee on the date of such sale of all amounts specified therein to be
paid by the Lessee, the Lessor shall pay to the Lessee the amount, if any, set
forth in Exhibit D beside the Termination Date specified in Section 17(d) in the
column with the heading "Prepaid Basic Rent Amount".

                                      -42-


Section 18. LESSOR'S RIGHT TO PERFORM FOR THE LESSEE.

          If the Lessee fails to make any payment of Rent required to be made by
it hereunder or fails to perform or comply with any of its agreements contained
herein the Lessor may, upon prior notice to the Lessee, itself make such payment
or perform or comply with such agreement, and the amount of such payment and the
amount of the reasonable expenses of the Lessor 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 Past Due Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand; PROVIDED that no such
payment or performance by the Lessor shall be deemed to cure any Default or
Event of Default under this Lease or relieve the Lessee of any of its
obligations hereunder; PROVIDED further that nothing in this Section 18 shall be
deemed to permit the Lessor to exercise any control over the operation or
maintenance of the Aircraft or any part thereof while it is being utilized in
the air transportation services of the Lessee or any Permitted Sublessee without
the consent of the Lessee; PROVIDED further that the provisions of this Section
18 shall not affect Lessor's right to exercise its remedies under Section 17
upon the occurrence and continuance of an Event of Default.

Section 19. BANKRUPTCY.

          It is the intention of the parties that the Lessor shall be entitled
to the benefits of 11 U.S.C. Section 1110 with respect to the right to repossess
the Airframe, Engines and Parts as provided herein, and in any circumstances
where more than one construction of the terms and conditions of this Lease is
possible, a construction which would preserve such benefits shall control over
any construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. Section 1110
or any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed and provided that, notwithstanding any other
provisions of the Federal bankruptcy laws, as amended from time to time, any
right of the Lessor to take possession of the Aircraft in compliance with the
provisions of this Lease shall not be affected by the provisions of 11 U.S.C.
Section 362 or 363, as amended from time to time, or any analogous provisions of
any superseding statute or any power of the bankruptcy court to enjoin such
taking of possession.

Section 20. ASSIGNMENT; BENEFIT AND BINDING EFFECT.

          (a) ASSIGNMENT BY THE LESSEE.

          The Lessee may not, without the prior written consent of the Lessor
and the Owner Participant, assign any of its rights hereunder except as
otherwise expressly provided herein.

                                      -43-


          (b) ASSIGNMENT BY THE LESSOR.

          The Lessor may not, without the prior consent of the Lessee, assign
any of its rights under or interest in this Lease except to a successor Owner
Trustee or additional trustee referred to in Section 9.01 of the Participation
Agreement and Section 8.01 of the Trust Agreement and except as set forth in
Section 13.09 of the Participation Agreement or as otherwise expressly provided
herein.

          (c) BENEFIT AND BINDING EFFECT.

          The terms and provisions of this Lease shall be binding upon and,
subject to the limitations on assignment of rights hereunder, inure to the
benefit of the Lessor and the Lessee and their respective successors and
permitted assigns. Nothing herein shall be construed as creating rights in any
other Person except, to the extent provided herein, the Owner Participant.

          (d) SUBLESSEE'S PERFORMANCE AND RIGHTS.

          Any obligation imposed on the Lessee in this Lease shall require only
that the Lessee perform or cause to be performed such obligation, even if stated
herein as a direct obligation, and the performance of any such obligation by any
sublessee or transferee of the Airframe or any Engine or Part permitted by the
terms hereof under a sublease or transfer agreement then in effect shall
constitute performance by the Lessee and to the extent of such performance
discharges such obligation by the Lessee.

Section 21. OWNER TRUSTEE'S LIMITATION ON LIABILITY.

          Trust Company is entering into this Lease solely as Owner Trustee
under the Trust Agreement and not in its individual capacity and neither Trust
Company nor any entity acting as successor Owner Trustee or additional Owner
Trustee under the Trust Agreement shall be personally liable for, or for any
loss in respect of, any of the statements, representations, warranties,
agreements or obligations stated to be those of the Lessor hereunder, as to
which all interested parties shall look solely to the Trust Estate, except to
the extent expressly provided otherwise in any other Operative Agreement,
PROVIDED, HOWEVER, that nothing in this Section 21 shall be construed to limit
in scope or substance the liability of Trust Company or any entity acting as
successor Owner Trustee or additional Owner Trustee under the Trust Agreement in
its individual capacity for the consequences of its own willful misconduct or
gross negligence or (in receiving, handling or remitting funds) its simple
negligence, or the inaccuracy or breach of its representations, warranties or
covenants made in such capacity in any other Operative Agreement.

Section 22. CERTAIN AGREEMENTS OF LESSEE.

          The Lessee will take, or cause to be taken, at the Lessee's cost and
expense, such action with respect to the recording, filing, re-recording and
re-filing of this Lease, each Lease Supplement, the Trust Agreement and any
financing statements or other instruments as are necessary or requested by the
Owner Participant and appropriate, to maintain any security interest that may be
claimed to have been created by this Lease and the ownership interest of the
Owner Trustee in the Aircraft, and will furnish to the Owner Trustee and the
Owner Participant

                                      -44-


timely notice of the necessity of such action, together with such instruments,
in execution form, and such other information as may be required to enable them
to take such action.

Section 23. MISCELLANEOUS.

          (a) NOTICES.

          Except as otherwise specifically provided herein, all notices,
requests, approvals or consents required or permitted by the terms hereof 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). Any notice shall be effective when received.
Any notice shall either be sent by overnight courier service or overnight
delivery service or by hand, or sent in the form of a telecopy, provided that
there is receipt of such notice the next Business Day from an overnight courier
service, or by overnight delivery service or delivered by hand. Any notice shall
be directed to the Lessee, the Lessor or any other party to the Participation
Agreement to the respective addresses set forth in Section 12.01 to the
Participation Agreement or to such other address or telecopy number as any such
party may designate pursuant to Section 12.01 of the Participation Agreement.

          (b) COUNTERPARTS.

          This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall, subject to the
next sentence and the legend appearing on the cover hereof, be an original, but
all such counterparts shall together constitute but one and the same instrument.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS THE TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART
MARKED COUNTERPART NO. 1.

          (c) AMENDMENTS.

          Neither this Lease nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified orally, but only by an instrument in
writing signed by the Lessor and the Lessee.

          (d) AGREEMENT TO LEASE.

          It is the intent of the parties to this Lease that for all purposes
(including, without limitation, U.S. Federal income tax purposes) this Lease
will be a true lease, and that this Lease conveys to the Lessee no right, title
or interest in the Aircraft except as a lessee.

                                      -45-


          (e) GOVERNING LAW.

               (i) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK.

               (ii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
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 LEASE.

               (iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 12.01 OF THE PARTICIPATION AGREEMENT. EACH PARTY
HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN
ACCORDANCE WITH THIS SECTION 23(e)(iii), 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.

               (iv) 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 LEASE OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS.

               (v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 LEASE.

                                      -46-


          (f) SEVERABILITY.

          Any provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

          (g) SURVIVAL.

          The representations, warranties, indemnities and covenants set forth
herein shall survive the delivery of the Aircraft, the transfer of any interest
of Owner Participant in this Lease, the other Operative Agreements, the Trust
Estate and the Trust Agreement.

          (h) ARTICLE 2A.

          The Lessor and the Lessee agree that this Lease is a "finance lease"
for purposes of Article 2A of, and as defined in Section 2-A-103 of the Uniform
Commercial Code. The Lessee agrees that no right or remedy granted solely by
reason of Article 2A of the Uniform Commercial Code shall be available to the
Lessee as against the Lessor unless expressly provided in this Lease.

          (i) EXHIBIT D.

          When the provisions of the Participation Agreement or this Lease refer
to an amount, if any, set forth opposite a date in Exhibit D in the column with
the heading "Deferred Basic Rent Amount" or "Prepaid Basic Rent Amount", as the
case may be, such amount shall be equal to Lessor's Cost multiplied by the
percentage, if any, set forth opposite such date in Exhibit D under the column
with the heading "Deferred Basic Rent Amount" or "Prepaid Basic Rent Amount", as
the case may be.

          (j) LESSOR'S RIGHTS.

          The Lessor shall be entitled to set off or withhold from any sum or
sums expressed in this Lease or the Participation Agreement to be due and
payable by the Lessor to the Lessee any amounts due or expressed to be due and
payable by the Lessee to the Lessor in this Lease or any of the other Operative
Agreements.

            [The remainder of this page is intentionally left blank.]

                                      -47-


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

                                      WELLS FARGO BANK NORTHWEST,
                                      NATIONAL ASSOCIATION
                                      not in its individual capacity, but solely
                                      as Owner Trustee

                                      By: /s/ Brett R. King
                                          --------------------------------------
                                          Name: Brett R. King
                                          Title: Vice President

                                      CHAUTAUQUA AIRLINES, INC.

                                      By: /s/ Robert H. Cooper
                                          --------------------------------------
                                          Name: Robert H. Cooper
                                          Title: Vice President

                                      -48-


                                                                       Exhibit A
                                                              TO LEASE AGREEMENT

                         LEASE SUPPLEMENT NO. 1 [N296SK]

          THIS LEASE SUPPLEMENT NO. 1 [N296SK] dated __________, 2001, between
WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee, except as otherwise provided herein, the
Lessor, and CHAUTAUQUA AIRLINES, INC., a New York corporation, the Lessee;

                              W I T N E S S E T H :

          WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Lease Agreement [N296SK], dated as of December 20, 2001 (the "Lease",
the terms defined therein being herein used with the same meaning), which Lease
provides, among other things, for the execution and delivery of Lease
Supplements in substantially the form hereof for the purpose of leasing a
specific Aircraft under the Lease when delivered by the Lessor to the Lessee in
accordance with the terms thereof;

          WHEREAS, the Lease, a counterpart of which is attached hereto and made
a part hereof, relates to the Aircraft and Engines described in Schedule I
hereto and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

          1. The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease as herein
supplemented, the Aircraft, described in Schedule I hereto.

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

          3. The Basic Term shall commence on the Delivery Date and continue
through __________, ____ (the "Expiration Date"), unless terminated earlier as
provided in the Lease.

          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 Documents.

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

          6. This Lease Supplement may be executed by the parties hereto in
separate counterparts and all such counterparts shall together constitute but
one and the same instrument.



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 or the
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart of each thereof marked Counterpart No. 1.

          7. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

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

                                      WELLS FARGO BANK NORTHWEST,
                                      NATIONAL ASSOCIATION
                                      not in its individual capacity, but solely
                                      as Owner Trustee

                                      By: /s/ Brett R. King
                                          --------------------------------------
                                          Name: Brett R. King
                                          Title: Vice President

                                      CHAUTAUQUA AIRLINES, INC.

                                      By: /s/ Robert H. Cooper
                                          --------------------------------------
                                          Name: Robert H. Cooper
                                          Title: Vice President



                                                                      SCHEDULE I
                                                                    TO EXHIBIT A

                       DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME



                          Manufacturer's        FAA Registration          Manufacturer's
    Manufacturer              Model                    No.                  Serial No.
- --------------------  ----------------------  ---------------------  -----------------------
                                                                   
      Embraer              EMB-145LR               N296SK                   145514


                                     ENGINES



                                 Manufacturer's               Manufacturer's
      Manufacturer                  Model                      Serial No.
- -----------------------   ---------------------------    ----------------------
                                                         
       Rolls Royce                AE 3007A1P                   CAE 311970

                                                               CAE 311958


          Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.



                                                                      SCHEDULE I
                                                                    TO EXHIBIT A

                       DESCRIPTION OF AIRFRAME AND ENGINES



                                                                       Exhibit B

                          CERTAIN ECONOMIC INFORMATION

                                      [*]




- --------
* Confidential





                                                                     Exhibit C-1

                           BASIC RENT PAYMENT SCHEDULE

                                       [*]


- ---------
* Confidential



                                                                     Exhibit C-2

                         BASIC RENT ALLOCATION SCHEDULE

                                                        Allocation of Basic
                                                        Rent (expressed as a
From (but not including)            Through         percentage of Lessor's Cost)
- ------------------------            -------         ----------------------------

         [*]                                                      [*]



- ---------
* Confidential



                                                                       Exhibit D

                               TERMINATION VALUES



                    Termination Value     Deferred Basic Rent      Prepaid Basic Rent
                     (expressed as a     Amount (expressed as     Amount (expressed as
                      percentage of         a percentage of          a percentage of
Termination Date      Lessor's Cost)         Lessor's Cost)           Lessor's Cost)
- ----------------      --------------         --------------           --------------
                                                         

       [*]                  [*]                    [*]                       [*]





                                                                       Exhibit E

        LISTS OF COUNTRIES - PERMITTED FOR RE-REGISTRATION AND SUBLEASING

Australia                                                     Italy

Austria                                                       Japan

Belgium                                                       Luxembourg

Canada                                                        Netherlands

Denmark                                                       New Zealand

Finland                                                       Norway

France                                                        Portugal

Germany                                                       Sweden

Iceland                                                       Switzerland

Ireland                                                       United Kingdom




                                TABLE OF CONTENTS



                                                                                                       PAGE
                                                                                                       ----

                                                                                                   
Section 1.      Interpretation............................................................................1
       (a)      Definitions...............................................................................1
       (b)      References................................................................................1
       (c)      Headings..................................................................................1
       (d)      Appendices, Schedules and Exhibits........................................................1

Section 2.      Delivery and Leasing of the Aircraft......................................................2
       (a)      Leasing of the Aircraft...................................................................2
       (b)      Delivery and Acceptance of the Aircraft Under the Lease...................................2

Section 3.      Term and Rent.............................................................................2
       (a)      Term......................................................................................2
       (b)      Basic Rent................................................................................2
       (c)      Supplemental Rent.........................................................................3
       (d)      Adjustments to Basic Rent and Termination Values..........................................3
       (e)      Manner of Payment.........................................................................5
       (f)      Rent Obligations Unconditional............................................................5

Section 4.      The Lessor's Representations and Warranties...............................................6
       (a)      Representation and Warranties.............................................................6
       (b)      Quiet Enjoyment...........................................................................6
       (c)      Manufacturer's Warranties.................................................................7

Section 5.      Possession, Operation and Use, Maintenance, Registration and Insignia.....................7
       (a)      General...................................................................................7
       (b)      Possession................................................................................7
       (c)      Operation and Use........................................................................12
       (d)      Maintenance..............................................................................12
       (e)      Registration.............................................................................13

Section 6.      Inspection...............................................................................13

Section 7.      Replacement and Pooling of Parts; Alterations,    Modifications and
                Additions; Substitution of Engines.......................................................14
       (a)      Replacement of Parts.....................................................................14
       (b)      Title to Parts...........................................................................15
       (c)      Pooling or Parts Leasing.................................................................15
       (d)      Alterations, Modifications and Additions.................................................15
       (e)      Substitution of Engines..................................................................17

Section 8.      Loss, Destruction or Requisition.........................................................19
       (a)      Event of Loss with Respect to the Airframe...............................................19

                                       -i-



                                                                                                   
       (b)      Effect of Replacement....................................................................20
       (c)      Effect of Termination Value Payment......................................................20
       (d)      Conditions to Airframe Replacement.......................................................21
       (e)      Non-Insurance Payments Received on Account of an Event of Loss...........................23
       (f)      Requisition for Use......................................................................24
       (g)      Certain Payments to be Held As Security..................................................24

Section 9.      Insurance................................................................................25
       (a)      Public Liability and Property Damage Insurance...........................................25
       (b)      Insurance Against Loss or Damage to the Aircraft and Engines.............................26
       (c)      Additional Insureds; Loss Payment........................................................26
       (d)      Deductibles and Self-Insurance...........................................................27
       (e)      Application of Hull Insurance Proceeds...................................................27
       (f)      Insurance for Own Account................................................................28
       (g)      Reports, etc.............................................................................28
       (h)      Right to Pay Premiums....................................................................29

Section 10.     Liens....................................................................................29

Section 11.     Recordation and Further Assurances.......................................................30
       (a)      Recordation of Lease.....................................................................30
       (b)      Further Assurances.......................................................................30
       (c)      Markings.................................................................................30

Section 12.     Return of Aircraft and Records...........................................................31
       (a)      Return of Aircraft.......................................................................31
       (b)      Return of Other Engines..................................................................31
       (c)      Fuel; Records............................................................................31
       (d)      Condition of Aircraft....................................................................31
       (e)      Failure to Return........................................................................32
       (f)      Storage and Related Matters..............................................................32

Section 13.     Renewal Option and Purchase Options......................................................32
       (a)      Renewal Terms............................................................................32
       (b)      Lessee's Purchase Options................................................................33

Section 14.     Voluntary Termination for Obsolescence...................................................35
       (a)      Termination by Sale of Aircraft..........................................................35
       (b)      Payments Due Upon Sale of Aircraft.......................................................36
       (c)      Preemptive Election by Lessor............................................................36
       (d)      Termination of Lease.....................................................................37
       (e)      Effect of No Sale or Preemptive Delivery to Lessor.......................................37
       (f)      No Duty on Part of Lessor................................................................37

Section 15.     Investment of Security Funds.............................................................37

Section 16.     Events of Default........................................................................38




                                                                                                   
Section 17.     Remedies.................................................................................40

Section 18.     Lessor's Right to Perform for the Lessee.................................................43

Section 19.     Bankruptcy...............................................................................43

Section 20.     Assignment: Benefit and Binding Effect...................................................43
       (a)      Assignment by the Lessee.................................................................43
       (b)      Assignment by the Lessor.................................................................44
       (c)      Benefit and Binding Effect...............................................................44
       (d)      Sublessee's Performance and Rights.......................................................44

Section 21.     Owner Trustee's Limitation on Liability..................................................44

Section 22.     Certain Agreements of Lessee.............................................................44

Section 23.     Miscellaneous............................................................................45
       (a)      Notices..................................................................................45
       (b)      Counterparts.............................................................................45
       (c)      Amendments...............................................................................45
       (d)      Agreement to Lease.......................................................................45
       (e)      Governing Law............................................................................46
       (f)      Severability.............................................................................47
       (g)      Survival.................................................................................47
       (h)      Article 2A...............................................................................47
       (i)      Exhibit D................................................................................46
       (j)      Lessor's Rights..........................................................................46


Appendix A      Definitions
Exhibit A       Form of Lease Supplement
Exhibit B       Certain Economic Information
Exhibit C-1     Basic Rent Payment Schedule
Exhibit C-2     Basic Rent Allocation Schedule
Exhibit D       Termination Values
Exhibit E       List of Countries
Exhibit F-1     Return Conditions
Exhibit F-2     Return Conditions



                         LEASE SUPPLEMENT NO. 1 [N296SK]

          THIS LEASE SUPPLEMENT NO. 1 [N296SK] dated December 20, 2001, between
WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee, except as otherwise provided herein, the
Lessor, and CHAUTAUQUA AIRLINES, INC., a New York corporation, the Lessee;

                              W I T N E S S E T H :

          WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Lease Agreement [N296SK], dated as of December 20, 2001 (the "Lease",
the terms defined therein being herein used with the same meaning), which Lease
provides, among other things, for the execution and delivery of Lease
Supplements in substantially the form hereof for the purpose of leasing a
specific Aircraft under the Lease when delivered by the Lessor to the Lessee in
accordance with the terms thereof;

          WHEREAS, the Lease, a counterpart of which is attached hereto and made
a part hereof, relates to the Aircraft and Engines described in Schedule I
hereto and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:

          1. The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease as herein
supplemented, the Aircraft, described in Schedule I hereto.

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

          3. The Basic Term shall commence on the Delivery Date and continue
through June 20, 2018 (the "Expiration Date"), unless terminated earlier as
provided in the Lease.

          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 Documents.

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

          6. This Lease Supplement may be executed by the parties hereto in
separate counterparts and all such counterparts shall together constitute but
one and the same instrument.



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 or the
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart of each thereof marked Counterpart No. 1.

          7. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

            [The remainder of this page is intentionally left blank.]



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

                                    WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION
                                    not in its individual capacity, but solely
                                    as Owner Trustee

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

                                    CHAUTAUQUA AIRLINES, INC.

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



                                                                      SCHEDULE I
                                                             TO LEASE SUPPLEMENT

                       DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME



Manufacturer     Manufacturer's      FAA Registration     Manufacturer's
                    Model                 Number          Serial No.

                                                    
Embraer           EMB-145LR               N296SK             145514


                                     ENGINES



Manufacturer                Manufacturer's                Manufacturer's
                                Model                       Serial No.

                                                      
Rolls Royce                   AE 3007A1P                    CAE 311970
                                                            CAE 311958


          Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.



                                   APPENDIX A

                              DEFINITIONS [N296SK]

GENERAL PROVISIONS

          The following terms shall have the following meanings for all purposes
of the Operative Agreements (as defined below), unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require. In the case
of any conflict between the provisions of this Appendix and the provisions of
any Operative Agreement, the provisions of such Operative Agreement shall
control the construction of such Operative Agreement.

          Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean such agreements as amended and supplemented from time to
time, and any agreement, instrument or document entered into in substitution or
replacement therefor, and (ii) references to parties to agreements shall be
deemed to include the successors and permitted assigns of such parties.

          "ADDITIONAL INSUREDS" means the Owner Trustee (in its individual and
trust capacities) and the Owner Participant.

          "AERONAUTICAL AUTHORITY" means as of any time of determination, the
FAA or other governmental airworthiness authority having jurisdiction over the
Aircraft or the Airframe and Engines or engines attached thereto under the laws
of the country in which the Airframe is then registered.

          "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling 50% or more of any class of voting securities
of such Person or otherwise controlling, controlled by or under common control
with such Person. For the purposes of this definition, "control" (including
"controlled by" and "under common control with") shall mean 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.

          "AFTER TAX BASIS" means a basis such that any payment to be received
or deemed to be received by a Person shall be supplemented by a payment to such
Person so that the sum of such payments, after deduction of all Taxes (taking
into account any related credits or deductions) resulting from the actual or
constructive receipt or accrual of such payments, shall be equal to the payment
to be received.

          "AIRCRAFT" means the Airframe together with the Engines, whether or
not any of the Engines may at the time of determination be installed on the
Airframe or installed on any other airframe or on any other aircraft.

          "AIRFRAME" means (i) the Embraer model EMB-145LR aircraft (excluding
the Engines and any other engines which may from time to time be installed
thereon, but including any and all Parts which may from time to time be
incorporated in, installed on or attached to such aircraft, and including any
and all such Parts removed therefrom so long as title to such removed



Parts remains vested in the Lessor under the terms of Section 7 of the Lease)
originally delivered and leased under the Lease, identified by national
registration number and manufacturer's serial number in the Lease Supplement
executed and delivered on the Delivery Date, so long as a Replacement Airframe
shall not have been substituted therefor pursuant to Section 8 of the Lease, and
(ii) a Replacement Airframe, so long as another Replacement Airframe shall not
have been substituted therefor pursuant to Section 8 of the Lease.

          "APPRAISAL PROCEDURE" has the meaning specified in Exhibit F-2 to the
Lease.

          "APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any court, governmental agency or
authority and rules, regulations, orders, directives, licenses and permits of
any governmental body, instrumentality, agency or authority.

          "APPLICABLE RATE" has the meaning specified in Exhibit B to the Lease.

          "ASSIGNED WARRANTIES" means all warranty rights arising under the
Embraer Purchase Agreement in respect of the Aircraft.

          "ASSUMED TRANSACTION COSTS" has the meaning specified in Exhibit B to
the Lease.

          "BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended, and any successor thereto.

          "BASIC RENT" means the rent payable on Basic Rent Payment Dates
throughout the Basic Term for the Aircraft pursuant to Section 3(b) of the Lease
and rent payable during any Renewal Term pursuant to Section 13(a) of the Lease.

          "BASIC RENT PAYMENT DATE" means each date listed under the heading
"Basic Rent Payment Date" in Exhibit C-1 to the Lease or, during a Renewal Term,
such dates as are provided for in Section 13(a) of the Lease.

          "BASIC TERM" means the period commencing at the beginning of the day
on the Delivery Date and ending at end of the day on the Expiration Date, or
such earlier date on which the Lease shall be terminated as provided therein.

          "BENEFICIAL INTEREST" means the interest of the Owner Participant
under the Trust Agreement.

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

          "BUSINESS DAY" means any day other than a Saturday or Sunday or other
day on which commercial banks are authorized or required by law to close in New
York City, New York, Indianapolis, Indiana and Salt Lake City, Utah.

          "CERTIFICATED AIR CARRIER" means an "air carrier" within the meaning
of the Transportation Code and a "citizen of the United States" within the
meaning of Section 40102(a)(15) (or any successor provision) of the
Transportation Code holding an "air carrier operating certificate" issued under
Chapter 447 (or any successor provision) of the Transportation Code for aircraft

                                        2


capable of carrying ten or more individuals or 6,000 pounds or more of cargo,
with each such certificate in full force and effect.

          "CITIZEN OF THE UNITED STATES" means a citizen of the United States as
defined in Section. 40102(a)(15) of the Transportation Code, or any analogous
part of any successor or  substituted  legislation  or regulation at the time in
effect.

          "CODE" means the United States Federal Internal Revenue Code of 1986,
as amended from time to time, or any similar legislation of the United States
enacted to supersede, amend, or supplement such Code (and any reference to a
provision of the Code shall refer to any successor provision(s), however
designated).

          "COMMITMENT" shall have the meaning given such term in Section 2.01(c)
of the Participation Agreement.

          "CRAF PROGRAM" has the meaning specified in Section 5(b)(vii) of the
Lease.

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

          "DELIVERY DATE" means the date on which the Aircraft is delivered and
sold to the Lessor and leased by the Lessor to the Lessee under the Lease, which
date shall be the date of the initial Lease Supplement.

          "DOLLARS", "DOLLAR" and "$" means dollars in lawful currency of the
United States.

          "DOT" means the United States Department of Transportation or any
successor thereto.

          "EBO DATE" has the meaning given to such term in Exhibit B to the
Lease.

          "EBO AMOUNT" has the meaning given to such term in Exhibit B to the
Lease.

          "EMBRAER PURCHASE AGREEMENT" means the EMB-145 Purchase Agreement
Number GCT-025/98 dated June 17, 1998, between the Manufacturer and Solitair, as
amended and supplemented from time to time.

          "EMBRAER ASSIGNMENT DOCUMENTS" means (i) that certain Purchase
Agreement Assignment No. 1 [N296SK] dated as of the Delivery Date, between
Solitair, as assignor, and Seller, as assignee, (ii) the Consent and Agreement
No. 1 [N296SK] dated as of the Delivery Date, relating thereto executed by the
Manufacturer, and (iii) the Warranty Bill of Sale dated the Delivery Date from
the Manufacturer to the Seller.

          "ENGINE" means (A) each of the two Rolls Royce model AE3007A1P engines
originally delivered and leased under the Lease, identified by manufacturer's
serial number in the Lease Supplement executed and delivered on the Delivery
Date, so long as a Replacement Engine shall not have been substituted therefor
pursuant to Section 7(e) of the Lease, and (B) a Replacement Engine, so long as
another Replacement Engine shall not have been substituted therefor pursuant to
Section 7(e) of the Lease, whether or not such engine or Replacement Engine, as
the case may

                                        3


be, is from time to time installed on the Airframe or installed on any other
aircraft, and including in each case all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom so long as title to
such Parts remains vested in the Lessor under the terms of Section 7 of the
Lease. The term "ENGINES" means, as of any date of determination, the two
engines each of which is an Engine on that date.

          "ENGINE MANUFACTURER" means Rolls-Royce Corporation, a Delaware
corporation, and its successors and permitted assigns.

          "ENGINE WARRANTIES" has the meaning specified in the Engine Warranty
Assignment and Consent.

          "ENGINE WARRANTY AGREEMENT" means the Rolls-Royce AE3007A Series
Engine Warranty Agreement made effective as of April 30, 1999, among the Engine
Manufacturer, Solitair and the Lessee, as amended and supplemented from time to
time.

          "ENGINE WARRANTY ASSIGNMENT AND CONSENT" means the Engine Warranty
Assignment Agreement and Consent [N296SK], dated as of the Delivery Date,
between Solitair and Owner Trustee and consented to by the Engine Manufacturer.

          "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.

          "ERISA PLAN" means, individually or collectively, an employee benefit
plan, as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA
or any applicable regulation thereunder or a plan or individual retirement
account which is subject to Section 4975(c) of the Code;

          "EVENT OF DEFAULT" has the meaning given to such term in Section 16 of
the Lease.

          "EVENT OF LOSS" means any of the following events with respect to the
Aircraft, the Airframe or any Engine:

               (i)  any theft, hijacking or disappearance of such property for a
          period of 60 consecutive days or more or, if earlier for a period that
          extends until the end of the Term;

               (ii)  destruction, damage beyond economic repair or rendition of
          such property permanently unfit for normal use for any reason
          whatsoever;

               (iii) any event which results in an insurance settlement with
          respect to such property on the basis of an actual, constructive or
          compromised total loss;

               (iv)  condemnation, confiscation or seizure of, or requisition of
          title to or use of such property by any foreign government or
          purported government (or in the case of any such requisition of title,
          by the Government) or any agency or instrumentality thereof, for a
          period in excess of (A) in the case of any requisition of use, 180
          consecutive days (for countries listed in Exhibit E to the Lease) or
          30 consecutive days (for any other country) or (B) in the case of any
          condemnation, confiscation or seizure of, or requisition of title,

                                        4


          10 consecutive days, or, in any of the cases in this clause (iv), such
          shorter period ending on the expiration of the Term;

               (v) condemnation, confiscation or seizure of, or requisition of
          use of such property by the Government for a period extending beyond
          the Term;

               (vi) as a result of any law, rule, regulation, order or other
          action by the Aeronautical Authority, the use of the Aircraft or
          Airframe in the normal course of air transportation shall have been
          prohibited by virtue of a condition affecting all Embraer model
          EMB-145LR aircraft equipped with engines of the same make and model as
          the Engines for a period of 180 consecutive days (or beyond the end of
          the Term), unless the Lessee, prior to the expiration of such 180-day
          period, shall be diligently carrying forward all necessary and
          desirable steps to permit normal use of the Aircraft and shall within
          12 months have conformed at least one Embraer model EMB-145LR aircraft
          (but not necessarily the Aircraft) to the requirements of any such
          law, rule, regulation, order or action, and shall be diligently
          pursuing conformance of the Aircraft in a non-discriminatory manner
          provided that, notwithstanding the foregoing, if such normal use of
          such property subject to the Lease shall be prohibited at the end of
          the Term, or if such normal use of such property shall be prohibited
          for a period of eighteen (18) consecutive months, an Event of Loss
          shall be deemed to have occurred; and

               (vii) with respect to an Engine only, the requisition or taking
          of use thereof by any government, and any divestiture of title or
          ownership deemed to be an Event of Loss with respect to an Engine
          under Section 5(b)(iii) or 5(b)(vi) of the Lease.

The date of such Event of Loss shall be (aa) the 61st day following loss of such
property or its use due to theft or disappearance or the end of the Term if
earlier; (bb) the date of any destruction, damage beyond economic repair or
rendition of such property permanently unfit for normal use; (cc) the date of
any insurance settlement on the basis of an actual, constructive or compromised
total loss; (dd) the 181st day (for countries listed in Exhibit E to the Lease)
or 31st day (for any other country) following condemnation, confiscation,
seizure or requisition of title to such property by a foreign government
referred to in clause (iv) above (or the 11th day in the case of appropriation
of title), or the end of the Term if earlier than such 181st, 31st or 11th day;
(ee) the last day of the Term in the case of requisition of title to or use of
such property by the Government; and (ff) the last day of the applicable period
referred to in clause (vi) above (or if earlier, the end of the Term without the
Lessee's having conformed at least one Embraer model EMB-145LR aircraft to the
applicable requirements). An Event of Loss with respect to the Aircraft shall be
deemed to have occurred if any Event of Loss occurs with respect to the
Airframe.

          "EXPENSES" has the meaning given to such term in Section 7.01(a) of
the Participation Agreement.

          "EXPIRATION DATE" means the date specified as such in the Lease
Supplement executed and delivered on the Delivery Date.

                                        5


          "FAA BILL OF SALE" means (A) the bill of sale for the Airframe on AC
Form 8050-2, or such other form as may be approved by the Aeronautical
Authority, executed by the Seller in favor of the Owner Trustee and to be dated
the Delivery Date, and (B) a bill of sale for a Replacement Airframe on AC Form
8050-2, or such other form as may be approved by the Aeronautical Authority,
executed by the seller thereof in favor of the Owner Trustee.

          "FAIR MARKETRENTAL VALUE" or "FAIR MARKET SALES VALUE" of the Airframe
or any Engine shall mean the value that would be obtained in an arms'-length
transaction between an informed and willing lessee-user or buyer-user (other
than a lessee currently in possession or a used equipment dealer) under no
compulsion to lease or buy, as the case may be, and an informed and willing
lessor or seller, as the case may be, under no compulsion to lease or sell, as
the same shall be specified by agreement between the Lessor and the Lessee or,
if not agreed to by the Lessor and the Lessee within a period of 15 days after
either party requests a determination, then as specified in an appraisal
prepared and delivered in New York City mutually agreed to by two recognized
independent aircraft appraisers, one of which shall be appointed by the Lessor
and the other of which shall be appointed by the Lessee, or, if such appraisers
cannot agree on such appraisal, an appraisal arrived at by a third independent
recognized appraiser chosen by the mutual consent of the two aircraft
appraisers. If either party should fail to appoint an appraiser within 15 days
of receiving notice of the appointment of an appraiser by the other party, then
such appraisal shall be made by the appraiser appointed by the first party. If
the two appraisers cannot agree on such appraisal and fail to appoint a third
independent recognized aircraft appraiser within 15 days after the appointment
of the second appraiser, then either party may apply to the American Arbitration
Association to make such appointment. The appraisal shall be completed within 30
days of the appointment of the last appraiser appointed. In determining Fair
Market Rental Value or Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe or Engine is in the condition,
location and overhaul status in which it is required to be returned to the
Lessor pursuant to Section 12 of the Lease and that the Lessee has removed all
Parts which it is entitled to remove pursuant to Section 7 of the Lease and that
the Aircraft is not encumbered by the Lease. Except as otherwise expressly
provided in the Lease, all appraisal costs will be shared equally by the Lessor
and the Lessee; PROVIDED that if the Lessee elects not to renew the Lease or
purchase the Aircraft following the conclusion of such appraisal, the Lessee
shall pay all appraisal costs. Notwithstanding the foregoing, for purposes of
Section 17 of the Lease, the "Fair Market Rental Value" or "Fair Market Sales
Value" of the Aircraft, the Airframe or any Engine, shall be determined on an
"as is, where is" basis and shall take into account customary brokerage and
other out-of-pocket fees and expenses which typically would be incurred in
connection with a re-lease or sale of the Aircraft, the Airframe or any Engine.
Any such determination pursuant to Section 17 of the Lease shall be made by a
recognized independent aircraft 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 Section 17
of the Lease, in which case an appraiser shall not be appointed and Fair Market
Rental Value and Fair Market Sales Value for purposes of Section 17 of the Lease
shall be zero. If the Owner Participant provides a Residual Notice pursuant to
Section 13(b)(iii) of the Lease, Fair Market Sales Value will be determined as
provided in the definition of Appraisal Procedure.

          "FAIR MARKET VALUE RENEWAL TERM" has the meaning given to such term in
Section 13(a) of the Lease.

                                        6


          "FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration and any successor agency or agencies thereto.

          "FIXED RENEWAL TERM" has the meaning given to such term in
Section 13(a) of the Lease.

          "GECC" means General Electric Capital Corporation, a Delaware
corporation, the successor to General Electric Capital Corporation, a New York
corporation.

          "GOVERNMENT" means the United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and credit
of the United States of America.

          "GUARANTEE AGREEMENT" has the meaning given to such term in the
recitals of the Participation Agreement.

          "GUARANTEED AMOUNT" has the meaning specified in Exhibit B to the
Lease.

          "INDEMNITEE" means each of Trust Company, in its individual capacity
and as Owner Trustee, the Owner Participant, and each Affiliate, officer,
director, employee, agent, servant, successor and permitted assigns of any of
the foregoing Persons.

          "LEASE" means the Lease Agreement [N296SK], dated as of the Delivery
Date between the Owner Trustee and the Lessee.

          "LEASE SUPPLEMENT" means any Lease Supplement, substantially in the
form of Exhibit A to the Lease, entered into between the Lessor and the Lessee
for the purpose of leasing the Aircraft under and pursuant to the terms of the
Lease, including any amendment thereto entered into subsequent to the Delivery
Date.

          "LESSEE" means Chautauqua Airlines, Inc., a New York corporation, and
its successors and permitted assigns.

          "LESSEE DOCUMENTS" means the Operative Agreements to which the Lessee
is a party.

          "LESSOR" means Wells Fargo Bank Northwest, National Association, a
national banking association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement, and its successors and permitted assigns.

          "LESSOR'S COST" has the meaning given to such term in Exhibit B of the
Lease.

          "LESSOR'S ESTATE" means all estate, right, title and interest of the
Owner Trustee in and to the Aircraft, and Engines and the Operative Agreements
(other than the Tax Indemnity Agreement) including, without limitation, all
amounts of Rent, insurance proceeds and requisition, indemnity or other payments
of any kind.

          "LESSOR'S LENDER" has the meaning given to such term in Section 13.09
of the Participation Agreement.

                                        7


          "LESSOR'S LIENS" means Liens against, on or with respect to the
Aircraft, any Engine, the Lessor's Estate or any part thereof, title thereto or
any interest therein arising as a result of (i) claims against or affecting the
Lessor, in its individual capacity or as Owner Trustee, or the Owner
Participant, in each case not related to the Operative Agreements or the
transactions contemplated thereby, (ii) acts or omissions of the Lessor in its
individual capacity or as Owner Trustee, or of the Owner Participant not
contemplated or permitted under the terms of the Operative Agreements, (iii)
Taxes or Expenses imposed against the Lessor, in its individual capacity or as
Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the
Trust Agreement which are not required to be indemnified against by the Lessee
pursuant to Articles 6 or 7 of the Participation Agreement and which are not
required to be indemnified against by the Lessee pursuant to the Tax Indemnity
Agreement, or (iv) claims against the Lessor, in its individual capacity or as
Owner Trustee, or the Owner Participant arising from the transfer by the Lessor
or the Owner Participant of its interests in the Aircraft or any Engine other
than a transfer of the Aircraft or any other portion of the Lessor's Estate
pursuant to Section 5(b), 7(b), 7(c), 7(d), 7(e), 8, 12(b), 13(b), 14(a) or 17
of the Lease and other than a transfer pursuant to the exercise of the remedies
set forth in Section 17 of the Lease; PROVIDED that any Lien that is
attributable solely to Owner Participant or Lessor, in its individual capacity
or as Owner Trustee, and would otherwise be included as part of Lessor's Liens
hereunder shall not constitute part of Lessor's Liens hereunder, so long as (A)
the existence of such Lien poses no material risk of the sale, forfeiture or
loss of the Aircraft, Airframe, any Engine, the Lessor's Estate or any interest
of Lessee or any other Person therein or interference with any of Lessee's
rights under any Operative Agreement, (B) the existence of such Lien does not
constitute a default by Owner Participant or Lessor, in its individual capacity
or as Owner Trustee, of its respective obligations under the Lease, and (C)
Owner Participant or Lessor, in its individual capacity or as Owner Trustee, is
diligently contesting such Lien by appropriate proceedings.

          "LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
security interest, claim, or other similar interest of any nature whatsoever.

          "MANUFACTURER" means EMBRAER - Empresa Brasileira de Aeronautica S.A.,
a Brazilian corporation, and its successors and permitted assigns.

          "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.

          "MINIMUM LIABILITY AMOUNT" has the meaning given to such term in
Exhibit B to the Lease.

          "NET ECONOMIC RETURN" means the Owner Participant's nominal after-tax
book yield (utilizing the multiple investment sinking fund method of analysis),
computed through the EBO Date and the Expiration Date on the basis of the same
methodology, constraints and assumptions as were utilized by the initial Owner
Participant in determining Basic Rent percentages and Termination Value
percentages as of the Delivery Date; 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.

                                        8


          "NON-U.S. PERSON" means any Person other than a U.S. Person.

          "OFFICER'S CERTIFICATE" means as to any company a certificate signed
by a Responsible Officer of such company.

          "OPERATIVE AGREEMENTS" means the Participation Agreement, the Trust
Agreement, the FAA Bill of Sale, the Warranty Bill of Sale, the Embraer
Assignment Documents, the Seller Assignment Documents, the Engine Warranty
Assignment and Consent, the Lease, each Lease Supplement, any Owner Participant
Guaranty and the Tax Indemnity Agreement.

          "OWNER PARTICIPANT" means Silvermine River Finance Two, Inc., a
Delaware corporation and its successors and permitted transferees and assigns.

          "OWNER PARTICIPANT GUARANTOR" means the provider of an Owner
Participant Guaranty.

          "OWNER PARTICIPANT GUARANTY" means any guaranty delivered or to be
delivered to support the obligations of the Owner Participant under the
Operative Agreements in connection with the transfer by the Owner Participant of
the Beneficial Interest.

          "OWNER TRUSTEE" means the Trust Company, not in its individual
capacity except as otherwise expressly stated, but solely as trustee under the
Trust Agreement, and its successors and permitted assigns.

          "PARTICIPATION AGREEMENT" means the Participation Agreement [N296SK],
dated as of the Delivery Date, among the Lessee, the Owner Trustee not in its
individual capacity except as otherwise expressly provided therein, but solely
as owner trustee and the Owner Participant.

          "PARTS" means any and all appliances, parts, instruments, components,
appurtenances, accessories, furnishings, seats, and other equipment of whatever
nature (other than complete Engines or engines and temporary replacement parts
as provided in Section 8 of the Lease and cargo containers) which may from time
to time be incorporated or installed in or attached to any Airframe or any
Engine, exclusive of any items leased by the Lessee from third parties and not
required in the navigation of the Aircraft.

          "PAST DUE RATE" means a rate per annum identified in Exhibit B to the
Lease.

          "PERMITTED AIR CARRIER" means (a) any Section 1110 Person and (b) any
foreign air carrier that is principally based in any foreign country listed on
Exhibit E to the Lease, except those that do not maintain normal diplomatic
relations with the United States.

          "PERMITTED INVESTMENTS" means (a) direct obligations of the United
States of America or any agency or instrumentality thereof, (b) obligations
fully guaranteed by the United States of America or any agency or
instrumentality thereof, (c) any mutual fund the portfolio of which is limited
to obligations of the type described in clauses (a) and (b), (d) certificates of
deposit issued by, or bankers' acceptances of, or time deposits or a deposit
account with, any bank, trust company, or national banking association
incorporated or doing business under the laws of the United States of America or
one of the states thereof, having a combined capital and surplus of at least
$100,000,000 and having a rating of "A" or better from the Keefe Bank Watch
Service, (c)

                                        9


commercial paper issued by companies in the United States which directly issue
their own commercial paper and which are doing business under the laws of the
United States of America or one of the states thereof and in each case having a
rating assigned to such commercial paper by a nationally recognized rating
organization in the United States of America equal to the highest rating
assigned by such organization, or (f) obligations of the type described in
clause (a), (b), (d), or (e) above, purchased from any bank, trust company, or
banking association referred to in clause (d) above pursuant to repurchase
agreements obligating such bank, trust company, or banking association to
repurchase any such obligation not later than 30 days after the purchase of any
such obligation. Unless otherwise specified in writing by the Owner Trustee, all
such Permitted Investments shall mature not later than 30 days from the date of
purchase.

          "PERMITTED LIEN" has the meaning given to such term in Section 10 of
the Lease.

          "PERMITTED SECURITY INTEREST" has the meaning given to such term in
Section 13.09 of the Participation Agreement.

          "PERMITTED SUBLESSEE" means (a) any Permitted Air Carrier, (b) any
airframe or engine manufacturer, or Affiliate of such a manufacturer, who is
domiciled in the United States of America or a country listed on Exhibit E to
the Lease or (c) the United States of America or any instrumentality or agency
thereof.

          "PERSON" means any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, limited liability company or government (federal,
state, local, foreign or any agency, instrumentality, division or body thereof)
or other entity of whatever nature.

          "PURCHASE PRICE" means an amount equal to Lessor's Cost.

          "REASONABLE BASIS" means that a realistic possibility of success,
within the meaning of ABA Formal Opinion No. 85-352, exists for pursuing such
contest.

          "RECOVERY PERIOD" means "Tax Attribute Period" as defined in the Tax
Indemnity Agreement.

          "RELATED LEASE" means the twenty nine (29) aircraft lease agreements
of Embraer model EMB-145LR or Embraer EMB-145, Model EMB-135 KL Version (a/k/a
EMB 135 KL Version) aircraft that have been or shall be entered into in years
2000 and 2001 between the Trust Company (or its predecessor, First Security
Bank, National Association) as trustee of a trust the beneficiary of which is
GECC or an Affiliate of GECC (including, for the avoidance of doubt,
Silvermine), as lessor, and the Lessee, as lessee, in substantially the form of
the Lease, each when executed and delivered by such parties.

          "RELATED TAX INDEMNITEE" means any Affiliate of any Tax Indemnitee.

          "RENEWAL TERM" has the meaning given to such term in Section 13(a) of
the Lease.

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

                                       10


          "REPLACEMENT AIRCRAFT" means any Aircraft of which a Replacement
Airframe is part.

          "REPLACEMENT AIRFRAME" means an Embraer model EMB-145LR aircraft or a
comparable or improved model of such aircraft of the Manufacturer (except
Engines or engines from time to time installed thereon) which shall have become
subject to the Lease pursuant to Section 8 thereof.

          "REPLACEMENT CLOSING DATE" has the meaning given such term in
Section 8(d) of the Lease.

          "REPLACEMENT ENGINE" means an Rolls Royce model AE3007A1P engine (or
engine of the same manufacturer of a comparable or an improved model and
suitable for installation and use on the Airframe), which has a value, utility
and remaining useful life at least equal to, and which is in good operating
condition as, the Engine to be replaced thereby (assuming that such Engine being
replaced was in the condition required to be maintained in accordance with the
Lease), and which shall have become subject to the Lease pursuant to
Section 7(e) thereof.

          "RESIDUAL  VALUE  GUARANTEE  AGREEMENT"  has the meaning given to such
term in the recitals of the Participation Agreement.

          "RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any
officer in its Corporate Trust Administration, as the case may be, designated by
such Person to perform obligations under the Operative Agreements, and with
respect to any other party, any corporate officer of a party who, in the normal
performance of his or her operational responsibilities, with respect to the
subject matter of any covenant, agreement or obligation of such party pursuant
to any Operative Agreement, would have responsibility for and knowledge of such
matter and the requirements of any Operative Agreement with respect thereto.

          "SEC" means the Securities and Exchange Commission of the United
States and any successor agencies or authorities.

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

          "SECTION 1110 PERSON" means a Citizen of the United States who is an
air carrier holding a valid air carrier operating certificate issued pursuant to
49 U.S.C. ch. 447 for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo.

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

          "SELLER" means Aero Ltd, a Cayman Islands corporation, and its
successors and permitted assigns.

          "SELLER ASSIGNMENT DOCUMENTS" means (i) that certain Purchase
Agreement Assignment No. 2 [N296SK] dated as of the Delivery Date between
Seller, as assignor, and Lessor, as assignee, and (ii) the Consent and Agreement
No. 2 [N296SK] dated as of the Delivery Date related thereto executed by the
Manufacturer.

                                       11


          "SELLER GUARANTY" means the guarantee dated as of the Delivery Date
executed and delivered by the Manufacturer in favor of Lessor, Lessee and
Solitair of Seller's obligations under the Embraer Assignment Documents and the
Seller Assignment Documents to which Seller is a party.

          "SILVERMINE" means Silvermine River Finance Two, Inc., a Delaware
corporation.

          "SOLITAIR" means Solitair Corp., a Delaware corporation, and its
successors and permitted assigns.

          "SPECIFIED DEFAULT" means (a) an event or condition described in
Section 16(a), (f), (g) or (h) of the Lease that, after the giving of notice or
lapse of time, or both, would become an Event of Default, or (b) any Event of
Default.

          "SUBLEASE" means any sublease agreement between the Lessee and a
Permitted Sublessee as permitted by Section 5(b) of the Lease.

          "SUPPLEMENTAL RENT" means all amounts, liabilities, indemnities and
obligations which the Lessee assumes or agrees to perform or pay under the Lease
or under the Participation Agreement or Tax Indemnity Agreement or any other
Operative Agreement to the Lessor, the Owner Participant, or others, including
payments of Termination Value, EBO Amount, and amounts calculated by reference
to Termination Value, all other amounts payable under Section 3(c) of the Lease,
and all amounts required to be paid by Lessee under the agreements, covenants,
and indemnities contained in the Lease or in the Participation Agreement or the
Tax Indemnity Agreement or any other Operative Agreement, but excluding Basic
Rent.

          "TAX" or "TAXES" has the meaning set forth in Section 6.01(a) of the
Participation Agreement.

          "TAX INDEMNITEE" means each of Trust Company, individually and as
Owner Trustee, the Owner Participant and any Affiliate thereof.

          "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement [N296SK],
dated as of the Delivery Date between the Lessee and the Owner Participant.

          "TERM" has the meaning given to such term in Section 3(a) of the
Lease.

          "TERMINATION DATE" means (i) each date listed in the column entitled
"Termination Date" in Exhibit D to the Lease, (ii) during any period following
the last day of the Basic Term (other than any period during or following a
Renewal Term), the first day of each calendar month, and (iii) during any
Renewal Term or any period following the last day of a Renewal Term, each day
during each calendar month occurring in whole or in part during or following
such Renewal Term which numerically corresponds to the day of the month on which
the Expiration Date occurs, unless there is no such corresponding day in such
calendar month, in which case the Termination Date during such calendar month
shall be the last day of such calendar month.

          "TERMINATION VALUE" means (a) as of any Termination Date during the
Basic Term, the amount determined as set forth in Exhibit D to the Lease for
that Termination Date, and (b)

                                       12


during any Renewal Term, the amount for the date involved, determined in
accordance with Section 13(a) of the Lease, in either case adjusted as required
by Section 3(d) of the Lease.

          "TRANSACTION COSTS" means those costs and expenses set forth in
Section 8.01(a) of the Participation Agreement.

          "TRANSPORTATION CODE" means Title 49 of the United States Code,
subtitle VII, as amended and in effect on the date of the Lease or as
subsequently amended, or any successor or substituted legislation at the time in
effect and applicable, and the regulations promulgated pursuant thereto.

          "TRUST AGREEMENT" means the Trust Agreement [N296SK], dated as of the
Delivery Date, between the Owner Participant and the Trust Company.

          "TRUST COMPANY" means Wells Fargo Bank Northwest, National
Association, a national banking association, and its successors and permitted
assigns.

          "TRUST ESTATE" means the Lessor's Estate.

          "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
effect from time to time in any relevant jurisdiction.

          "UNITED STATES", "U.S." or "US" means the United States of America.

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

          "WARRANTY BILL OF SALE" means (A) the full warranty bill of sale
covering the Aircraft (and specifically referring to each Engine) executed by
the Seller in favor of the Owner Trustee and to be dated the Delivery Date, and
(B) a full warranty bill of sale covering a Replacement Aircraft (and
specifically referring to each Engine) executed by the seller thereof in favor
of the Owner Trustee.

                                       13


                                                                     Exhibit F-1

                                RETURN CONDITIONS

         This Exhibit F-1 shall apply unless Exhibit F-2 applies in accordance
with its terms, in which case Exhibit F-2 shall supercede this Exhibit F-1.

Section 1.        General Conditions.

                  At the time of return, the Aircraft shall (i) be in compliance
                  with the Maintenance Program and (ii) meet the following
                  requirements:

         (a)      Operating Condition - The Aircraft shall be in good operating
                  condition, ordinary wear and tear excepted, with all of the
                  Aircraft equipment, components, and systems functioning in
                  accordance with their intended use. All replacement equipment,
                  parts, components or items installed on the Aircraft shall be
                  manufactured by the original manufacturer approved by the
                  Manufacturer or a manufacturer holding requisite authority of
                  the FAA, and in case of used, rotable parts, have an
                  FAA-approved serviceable tag.

         (b)      Configuration - The Aircraft shall be in the same passenger
                  configuration with all equipment installed therein as the
                  Aircraft was when delivered under the Embraer Purchase
                  Agreement, ordinary wear and tear excepted, including
                  replacements and substitute parts and equipment. The Aircraft
                  shall not suffer any modification or alteration (hereinafter
                  "Modifications") after the Delivery Date provided however that
                  Lessee may make Modifications to the Aircraft as long as they
                  are included as factory-installed features in EMB-145 aircraft
                  delivered to the Lessee subsequent to the delivery of the
                  Aircraft or otherwise in accordance with Section 7(d) of the
                  Lease. The term Modifications shall be deemed to include, but
                  not be limited to (i) changes to the Aircraft structure,
                  performance, weight and balance, (ii) changes which materially
                  adversely affect the Aircraft's flight qualities, operational
                  characteristics, operational safety, ease or cost of
                  maintenance, spare parts interchangeability or replaceability,
                  and (iii) substitution of different types of equipment or
                  accessories which are not equivalent in cost value and/or
                  operation capability to the equipment or accessories being
                  replaced, and shall exclude (x) changes pursuant to service
                  bulletins issued by the Manufacturer or the OEMs, and (y)
                  mandatory changes required to be accomplished by Lessee
                  hereunder. All permitted Modifications made to the Aircraft
                  shall be in accordance with FAA-approved data, and Lessee
                  shall provide complete data and documentation to substantiate
                  their certification, approval, and methods of compliance
                  (including, without limitation, a copy of the Aircraft
                  Illustrated Parts Catalog and a copy of the Aircraft Interior
                  Configuration document). A complete listing of all
                  modifications and repairs performed shall be supplied together
                  with the Aircraft. Modifications, other than permitted ones,
                  shall be removed and the appropriate repairs to the Aircraft
                  made prior to the day of return of the Aircraft.


                                                                          Page 1


         (c)      Certification - The Aircraft shall have, a valid and effective
                  Certificate of Airworthiness of the type "Transport, Category
                  (Passengers)" issued by the FAA, and shall be in full
                  compliance with, and capable of registration under, the
                  provisions of Part 121 of the U.S. Federal Aviation
                  Regulations (or any successor legislation) and other US
                  regulations applicable to the Aircraft's operation and
                  continued airworthiness, without any restrictions,
                  corrections, repairs, limitations, modifications or
                  alterations or overhauls having to be performed to meet such
                  standards.

         (d)      General Appearance - The Aircraft shall be clean by commercial
                  passenger airline standards, cosmetically acceptable, interior
                  complete, and prepared to be placed into scheduled revenue
                  airline operations. Interior items which may be broken shall
                  be repaired or replaced. All decals, signs and placards shall
                  be clean, secure and legible in the English language. The
                  Aircraft shall meet the following minimum requirements:

                  (i)      Fuselage, Wings and Empennage - The fuselage shall be
                           within Maintenance Program approved limits regarding
                           dents and abrasions and loose or pulled rivets; all
                           leading edges shall be within Maintenance Program
                           approved limits regarding damage occurring since
                           delivery; the airframe, Engines and wings shall be
                           free of fuel, oil and hydraulic leaks so as to allow
                           unrestricted operation; all leading edges and
                           fuselage areas which are aerodynamically critical
                           shall be free of any scab patches other than those
                           required by the Manufacturer and shall be repaired
                           with repairs which are permanent in nature in
                           accordance with the SRM, or are made in accordance
                           with the Manufacturer's approval.

                  (ii)     Interior - Ceilings, sidewalls, bulkhead panels shall
                           be clean, free of cracks and within Maintenance
                           Program approved limits regarding dents; all carpets
                           and seat covers shall be in good condition and clean
                           and meet FAR fire resistance regulations; all seats
                           shall be serviceable and in good condition. All
                           safety equipment shall be installed at the correct
                           stations, a loose equipment check list and location
                           drawings shall accompany the Aircraft and a loose
                           equipment inventory shall be drawn up on the Delivery
                           Date and checked on the day of return of the
                           Aircraft.

                  (iii)    Cockpit - All fairing panels shall be free of cracks
                           and shall be clean; all floor coverings shall be
                           clean and effectively sealed and secured, all seat
                           covers and cushions shall be in good condition and
                           clean and shall, as applicable, conform to FAA fire
                           resistance regulations. All seats shall be fully
                           serviceable and in good condition. All instruments
                           and light panels shall be clean, secure and legible,
                           function in accordance with their intended purpose
                           and have all lighting operating properly.

                  (iv)     Landing, Gear and Wheel Wells - The landing gear and
                           all wheel wells shall be clean, free of leaks, and
                           repaired as necessary. The main and nose


                                                                          Page 2


                           landing gear components and their associated
                           actuators and parts shall be in a good operating
                           condition.

                  (v)      Cargo Compartment, Galleys and Toilets - All cargo
                           compartment panels shall be installed and be in good
                           condition so as to comply with extended range
                           operations requirements. The cargo compartments,
                           galleys and toilet of the Aircraft shall be in a
                           clean and presentable condition and all cargo
                           securing system components shall be serviceable; all
                           galley inserts (to the extent delivered with the
                           Aircraft) shall be redelivered with the Aircraft.

                  (vi)     Windows - Any delamination, and crazing of the
                           windshields and cabin windows of the Aircraft shall
                           be within approved limits of the Maintenance Program
                           and shall be properly sealed.

                  (vii)    Doors - All the doors of the Aircraft shall be free
                           moving, correctly rigged and properly sealed and all
                           door assist mechanisms shall be charged in accordance
                           with the AMM.

         (e)      Airworthiness Directives and Service Bulletins - All FAA
                  Airworthiness Directives and amendments or changes to Aviation
                  Regulations issued by the FAA and applicable to the Aircraft
                  which require compliance within a period of six (6) months
                  following the day of return of the Aircraft (or the equivalent
                  hours or cycles, based on the Lessee's or Permitted
                  Sublessee's EMB-145 last four (4) years of operation average
                  monthly utilization) shall have been accomplished on a
                  Terminating Action basis and in compliance with the issuing
                  agency's and the manufacturer's associated service bulletins,
                  regardless of any operator-specific waiver, deferral, or
                  deviation from such directive or regulation. The Aircraft
                  shall have installed on it all Manufacturer and OEM service
                  bulletin kits requested by Lessee and actually received by
                  Lessee in respect of the Aircraft, and if not installed,
                  Lessee shall deliver them together with the Aircraft at no
                  charge.

         (f)      Deferred Maintenance - The Aircraft shall be free of all
                  deferred or carried over maintenance items, including without
                  limitation, any pilot log book reports, maintenance reports,
                  and the Aircraft's Central Maintenance Computer reports. Any
                  such deferred or carried over maintenance shall be promptly
                  accomplished in a terminating manner prior to the return of
                  the Aircraft at the end of the term of the Lease.

         (g)      Corrosion - The Maintenance Program shall include a corrosion
                  control program based on the corrosion prevention, treatment
                  and correction criteria recommended by the Manufacturer in the
                  CPCP. The Aircraft shall be free from corrosion or shall have
                  been adequately treated in compliance with the Maintenance
                  Program. Complete details of the corrosion control program, as
                  well as a summary of specific corrosion correction, of the
                  Aircraft in accordance with the Maintenance Program shall be
                  available for delivery together with the Aircraft. This
                  summary shall include Lessee's identifying the Manufacturer's
                  task identifier and cross referencing, Lessee's identifier
                  indicating status of accomplishment and findings


                                                                          Page 3


                  and incorporation status relative to all recommended
                  corrective and preventative actions. The hydraulic system and
                  fuel tanks shall be free from contamination as demonstrated by
                  a laboratory report to be performed after the Aircraft is
                  removed from service and delivered together with the Aircraft.

         (h)      Leased Components - The Aircraft shall be free and clear of
                  all Liens other than any Lessor's Liens or any Permitted
                  Security Interest and at return shall not have installed
                  thereon any equipment, components and/or parts which are
                  leased or loaned or otherwise owned by a third party.

         (i)      Records - The Aircraft shall be accompanied by all Aircraft
                  Documents (as defined below). The Aircraft Documents shall be
                  provided in English, and be in good condition, readable and
                  capable of being reproduced.

                  (i)      "Aircraft Document" shall mean, all technical data,
                           manuals, log books and weight and balance sheets, and
                           all inspection, modification and overhaul records and
                           other service, repair, maintenance, and technical
                           records that are maintained with respect to the
                           Aircraft, Airframe, Engines, APU, landing gears or
                           parts (including, without limitation, all additions,
                           renewals, revisions, and replacements of any such
                           materials from time to time made, or required to be
                           made, in accordance with the Maintenance Program
                           and/or FAA regulations, and in each case in whatever
                           form and by whatever means or medium such materials
                           may be maintained or retained by or on behalf of
                           Lessee (provided however that all such material shall
                           be maintained in the English language).

                  (ii)     All Parts, components and assemblies identified with
                           safe-life, hard time or condition monitored limits
                           (to the extent that such condition monitored items
                           are to be tracked in accordance with the Maintenance
                           Program) shall be provided with part number, serial
                           number, their service histories, accumulated cycles
                           and flight hours, safe-life, hard time or condition
                           monitored limits and remaining service lives on a
                           separate listing and where practicable, be physically
                           verified as installed and have hard copy
                           documentation (i.e., appropriate overhaul or
                           serviceable vendor tags and work orders) to verify
                           their service histories.

                  (iii)    All components and assemblies which are identified on
                           the maintenance records by part numbers and/or serial
                           numbers other than the Manufacturer's or other
                           manufacturer's shall be provided with two-way
                           cross-reference listing necessary to establish
                           complete traceability.

                  (iv)     All documentation, flight records, and maintenance
                           records as specified herein and as specified by
                           Federal Aviation Regulations Sections 121.380, and,
                           as applicable, Section 91.417 and 91.419 (or FAR's as
                           amended), and which normally accompany the transfer
                           of an aircraft or engine shall be delivered together
                           with the Aircraft. In the event of missing or
                           incomplete records, the tasks necessary to produce
                           such complete records shall be


                                                                          Page 4


                           accomplished in accordance with the Maintenance
                           Program prior to return of the Aircraft.

                  (v)      All documentation and records shall be in English and
                           shall be made available for inspection in the
                           location they are normally kept which location shall
                           permit direct access to the Aircraft, at least 14
                           Business Days before the day of return of the
                           Aircraft.

                  (vi)     Any and all documentation, data, drawings, records
                           and manuals as required to be maintained by the FAA
                           and SMRD, shall be provided, regardless of whether
                           such information is considered proprietary.

                  (vii)    Hard Landing inspection reports, Lightning Strike
                           inspection reports or High Intensity Radiated Field
                           (HIRF) check reports as may be required should
                           Aircraft records show evidence of any occurrence
                           indicating such inspections or checks to be
                           necessary.

                  (viii)   Corrosion Prevention & Control Program (CPCP)
                           inspection findings and correction reports, as
                           required by the Maintenance Program.

                  The head of Lessee's quality control department shall sign a
                  statement certifying that the data and information contained
                  in the documentation and records are true and correct.

         (j)      Exterior Markings - At time of return of the Aircraft, Lessee
                  shall, at its cost remove from the exterior and interior of
                  the Aircraft Lessee's operator specific exterior and interior
                  markings. The area where such markings were removed or painted
                  over shall be refurbished by Lessee as necessary to blend in
                  with the surrounding surface in a good and workmanlike manner.

         (k)      Overhaul and Repair - All components, rotables, and assemblies
                  (including the Engines, APU, and landing gears) shall be
                  documented with work orders, vendor serviceable tags, 8130
                  tags, form 337, etc. to have been repaired or overhauled by
                  FAA-certified repair stations in such manner so that such
                  components, rotables, assemblies, Engines, APU, and landing
                  gears are approved by the FAA for use on United
                  States-registered and certified aircraft. All overhaul and
                  repair procedures shall have met all FAA requirements
                  necessary to transfer to a new operator under Part 121 of the
                  U.S. Federal Aviation Regulations.

         (l)      Structural Repairs - All repairs that were performed since the
                  Delivery Date and that then exist on the Aircraft shall
                  conform to the SRM and the AMM and shall have FAA approval if
                  required, including without limitation repairs related to
                  impact damage to the Aircraft caused by ground handling
                  equipment or foreign objects. All repairs not covered by the
                  SRM or the AMM shall have been made in accordance with the
                  Manufacturer's approval if required, which approval shall not
                  be unreasonably be withheld and shall be provided with
                  complete data and documentation to verify and substantiate
                  their certification and methods of


                                                                          Page 5


                  compliance. A complete listing of all repairs performed shall
                  be supplied together with the Aircraft.

Section 2.        Condition of Airframe.

         Upon its return the Aircraft shall comply with the following
         conditions:

         (a)      C Check Inspection - The Airframe shall have completed, within
                  100 flight hours of return, the next sequential "C" check or
                  any multiple thereof. If the Aircraft has logged more than 100
                  flight hours since the last "C" check or any multiple thereof,
                  then Lessee shall perform the next scheduled "C" check or any
                  multiple thereof, as applicable. All observed defects observed
                  during such C check shall be rectified at Lessee's expense, in
                  accordance with the Maintenance Program;

         (b)      Structural and other scheduled Inspections - The Airframe
                  shall have at least twelve (12) months, or two thousand
                  (2,000) flight hours or cycles, whichever is applicable,
                  remaining before any scheduled structural tasks or maintenance
                  inspections which are not included in (a) above. In the event
                  that a structural task or maintenance inspection interval is
                  less than the above, Lessee shall, at its expense, perform all
                  such tasks immediately prior to return of the Aircraft;

         (c)      Landing Gear Life - The main Landing Gear and the nose Landing
                  Gear shall have at least fifty percent (50%) of the cycles
                  remaining prior to removal for overhaul in accordance with the
                  Maintenance Program, and the landing gear total cycles since
                  new ("TCSN") shall be no more than ten percent (10%) greater
                  than the airframe TCSN;

         (d)      Brakes - The brakes shall be serviceable.

Section 3.        Condition of Controlled Components.

         Aircraft and Engine hour or cycle controlled components or parts, at
         time of return to Lessor, shall have remaining, as a minimum, one half
         life and/or fifty percent (50%) of the Lessee's approved hour or cycle
         limit, whichever is applicable, before any scheduled removals for
         overhaul, test, disassembly or replacement. All components or parts
         controlled on a calendar basis shall have at least twelve (12) months
         or fifty percent (50%) of its total approved life in hours or cycles,
         if greater remaining before scheduled removal for testing, overhaul or
         replacement.

         However, if a component or part has a life, overhaul or check interval
         limit that is less than the above, Lessee shall, at its expense,
         perform all such tasks immediately prior to return. All such hour/cycle
         or calendar controlled components or parts are defined as those
         components or parts controlled under the Maintenance Program.


                                                                          Page 6


Section 4.        Condition of Installed Engines and APU.

         At time of return, each Engine shall be capable of certificated, full
         rated performance and its life limited parts ("LLP") will have at least
         fifty percent (50%) of cycles remaining before replacement.

         (a)      Time remaining - Each Engine shall have completed no more than
                  two thousand five hundred (2,500) flight hours since new or
                  since its last full performance restoration shop visit at
                  which it was subject to a full engine management program
                  rework, based on the reliability goals set out in Rolls-Royce
                  Alison workscope guide, which currently state that the
                  workscope is designed to give 30 degrees centigrade of exhaust
                  gas temperature margin and 5,000 flight hours of on-wing life.
                  To the extent that the shop workscope guide is amended in the
                  future to include different reliability goals then the engine
                  shall have at least fifty percent (50%) of the on-wing hours
                  remaining in accordance with such amended shop workscope
                  guide.

         (b)      Borescope Inspection - On each installed Engine an external
                  visual inspection, accessory inventory check and video-taped
                  borescope inspection in accordance with the requirements of
                  the Maintenance Program shall be performed by Lessee or a
                  designated representative as mutually agreed between Lessee
                  and Lessor during the ground inspection per Section 7(a) of
                  this Exhibit F-1 accompanied by a written report on the
                  findings of such inspection herein and satisfactory evidence
                  shall be provided to Lessor reflecting the correction of any
                  discrepancies found during such inspection.

         (c)      Adverse Trend Data - Complete engine records, including but
                  not limited to (i) Group A (Lifed) components (as listed in
                  Engine Manufacturer's Time Limits Manual) as approved by the
                  FAA and (ii) in flight performance data and (iii) shop visit
                  reports from all shop visits, shall be made available to
                  Lessor for review and evaluation. If the Aircraft and/or
                  engine historical and maintenance records and/or trend
                  monitoring indicate a rate of acceleration in performance
                  deterioration or oil consumption on any installed engine
                  beyond the limits of the Maintenance Program, the causes of
                  such conditions shall have been corrected prior to the return
                  date.

         (d)      Oil spectrum analysis - an oil spectrum analysis shall be made
                  on the installed Engines after the Aircraft is removed from
                  service and a written report shall be made available together
                  with the Aircraft. Any discrepancy found in the engine's
                  lubrication system shall have been corrected prior to the
                  return date.

         (e)      APU Life - The installed APU shall have remaining at least
                  fifty percent (50%) of the expected mean time before removal
                  as evidenced by the Lessee's demonstrated on-wing last two
                  years average for APU hours, before scheduled removal for
                  overhaul, heavy maintenance, or replacement of hour limited or
                  LCF parts at the time of return. The APU shall have a video
                  taped borescope inspection


                                                                          Page 7


                  and magnetic plug inspection during the ground inspection per
                  Section 7(a) of this Exhibit F-1.

Section 5.        Provision for "Power-By-The Hour Agreements".

         If the Engines, APU, or any other hour or cycle controlled components
         on the day of return are maintained under valid PBH Agreements (as
         defined below) (and either have been maintained throughout the Term
         under PBH Agreements, or Lessee has made payments to the maintenance
         provider to cover the period in which such components where not under
         such PBH Agreements), under which the Lessee is current on all payments
         and otherwise in good standing, then, in lieu of the relevant
         requirements in Sections 2(c), 2(d), 3, 4(a) or 4(e) of this Exhibit
         F-1, the Lessee shall return each such component in such condition as
         shall make it eligible for continued maintenance under PBH Agreements,
         without additional costs, start-up charges, or overhaul requirements.
         For the purposes hereof, a "PBH Agreement" shall mean a
         "power-by-the-hour" maintenance program, provided by the Engines, APU
         or component manufacturer or its successor or designee, providing full
         maintenance (other than routine day-to-day maintenance; provided, that
         foreign-object damage and abuse may be excluded or separately charged)
         for the Engines, APU or such components at no cost other than standard
         per-cycle rates (i.e., excluding charges based on the current
         maintenance status of such component), all benefits of which program,
         including but not limited to the payments made by Lessee under such PBH
         Agreements while operating the Aircraft, shall be assignable or
         otherwise transferable to any other carrier without restrictions of any
         kind.

Section 6.        Return Condition Adjustment.

         (a)      If the Lessee does not meet the conditions set forth for an
                  item referred to in Sections 2, 3, the first two lines of
                  Section 4 and in Section 4(a) and 4(e) (each such item, an
                  "Adjustable Item" and each such section, an "Adjustable Return
                  Condition") then Lessee shall pay to Lessor (for deficient
                  condition) an equivalency payment (the "Equivalency Payment")
                  in accordance with the following formula:

                                           [*]


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                                                                          Page 8


                                      [*]

         The components of the formula above shall be as agreed between Lessor
         and Lessee. If Lessor and Lessee fail to reach agreement on any
         components of the above formula, such amount will be determined as the
         average price that would be charged by a third party to restore the
         Aircraft to the conditions required under the Lease and this Exhibit
         F-1, based on one quotation obtained by Lessor and one quotation
         obtained by Lessee, both from a reputable, FAA and
         Manufacturer-approved EMB-145 repair station in the United States. If
         the prices of such quotations differ by more than ten percent (10%),
         Lessor and Lessee shall obtain a third quotation from another
         reputable, FAA and Manufacturer-approved EMB-145 repair station in the
         United States, the quotation which is farthest from the average of all
         three quotations shall be disregarded and the average of the two
         remaining quotations shall be binding upon Lessor and Lessee as the
         components of the formula.

         (b)      The Equivalency Payment for each return condition of each
                  Adjustable Item in the relevant Section referred to in the
                  first paragraph of this Section 6, whether positive or
                  negative, shall be aggregated in order to determine the total
                  Equivalency Payment due from Lessee. For clarification, items
                  in more than the required condition shall be netted against
                  items in less than the required condition when determining the
                  amount of the total payment due, provided however that such
                  netting is only applicable to the following major components:
                  Engines, APU and landing gear. If the cumulative Equivalency
                  Payment after such netting is negative, it shall be deemed to
                  be zero.

Section 7.        Inspection Upon Return

         Lessor shall have the right to inspect the Aircraft upon return, and
         the following conditions shall apply:

         (a)      Ground Inspection - The Aircraft including the Aircraft
                  Documents shall be made available to Lessor for ground
                  inspection by Lessor or its designee at Lessee's facilities.
                  Such inspection shall commence no later than fourteen (14)
                  Business Days prior to the date of return of the Aircraft.
                  Lessee shall remove the Aircraft from scheduled service and
                  open the areas of the Aircraft as required to perform the
                  necessary checks as specified in Section 2 of this Exhibit
                  F-1. In addition, Lessee shall allow Lessor to accomplish its
                  inspection to determine that the Aircraft, including the
                  Aircraft Documents are in the condition set forth in Sections
                  1, 2, 3 and 4 of this Exhibit F-1. During such checks,
                  Lessor's personnel shall have the right to reasonably request
                  that adjacent additional panels or areas be opened in order to
                  allow further inspection by Lessor's personnel.

         (b)      Operational Ground Check - Lessee shall conduct an operations
                  ground check on the Aircraft in accordance with the
                  Maintenance Program manual criteria for the


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* Confidential

                                                                          Page 9


                  purpose of demonstrating to Lessor the satisfactory operation
                  of the systems, including a full fuel tank leak check, pilot
                  and static systems check and hydraulic system internal leak
                  check.

         (c)      Operational Test Flight - The Aircraft shall be test flown by
                  Lessee, using qualified flight test personnel, for the amount
                  of time necessary to satisfactorily demonstrate the
                  airworthiness of the Aircraft and the proper functioning of
                  all systems and components in accordance with the agreed check
                  flight procedures. During such test flight command, care,
                  custody and control of the Aircraft shall remain at all times
                  with Lessee. Up to five (5) of Lessor's designated
                  representatives (or more if mutually agreed) may participate
                  in such flight as observers. Upon completion of such
                  operational flight-testing, the representatives of Lessee and
                  Lessor participating in such testing shall agree in writing
                  upon any discrepancies required to be corrected by Lessee in
                  order to comply with the conditions required hereunder.

         (d)      Discrepancies - If requested by Lessor in writing, all
                  discrepancies which are noted during the inspection and
                  acceptance flight(s) shall be corrected at Lessee's expense.
                  If such discrepancies are substantiated by the Maintenance
                  Program and Lessor determines that repairs, modifications or
                  other work items are required to cause the Aircraft to comply
                  with the requirements provided herein, including, without
                  limitation, any maintenance required so that the Engines will
                  meet all Engine parameters and trends specified by the
                  Maintenance Program, Lessee shall cause such repairs and other
                  work items to be commenced and completed prior to return.

Section 8.        Definitions.

         For the purpose of this Exhibit F-1, the following terms have the
         following meanings:

         APU shall mean the auxiliary power unit installed on the Airframe on
         the Delivery Date, and any substitute APU which may from time to time
         be substituted therefor pursuant to the terms of the Lease.

         MAINTENANCE PROGRAM: means the Lessee's maintenance program as
         originally agreed between the Manufacturer and Lessee, as such program
         may be from time to time amended and supplemented by Lessee and which
         (i) shall have been approved by the FAA, (ii) shall fully comply with
         the requirements of the FAA for the EMB-145 and Rolls-Royce Allison
         AE3007A1P aero engines (or an improved model, as the case may be)
         installed thereon, and (iii) shall incorporate the requirements of the
         EMB-145 Scheduled Maintenance Requirements Document Part 1 ("SMRD"),
         the Aircraft Maintenance Manual ("AMM"), the Structural Repair Manual
         ("SRM"), the Corrosion Prevention and Correction Program ("CPCP") and
         the Original Equipment Manufacturers' ("OEMs") maintenance manuals,
         (all of the foregoing as from time to time amended or supplemented),
         the Service Newsletters and the service bulletins issued by the
         Manufacturer and all OEMs.


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                                                                         Page 10


         CALENDAR CONTROLLED COMPONENTS OR PARTS: those components or parts
         identified in the MRB Report which have maintenance tasks at specific
         calendar-time intervals.

         CYCLE-CONTROLLED COMPONENTS OR PARTS: those components or parts
         identified in the MRB Report which have maintenance tasks at specific
         flight-cycle intervals.

         HOUR-CONTROLLED COMPONENTS OR PARTS: those components or parts
         identified in the MRB Report which have maintenance tasks at specific
         flight-hour intervals.

         LIFE CYCLE FATIGUE ("LCF") PARTS: those rotating parts which have
         specific cycle limits as specified by the manufacturer to preclude
         cycle fatigue failures.

         MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT"): the report published by
         the maintenance review board detailing the intervals and description of
         the maintenance tasks and, where applicable, the life limits required
         for continued airworthiness of the Aircraft. Where the intervals
         specified in the MRB Report differ from the limit specified by the
         component manufacturer, the MRB Report shall take precedence.

         TERMINATING ACTION: the alteration or modification of the Aircraft in
         accordance with mandatory service bulletins, orders, airworthiness
         directives, and instructions required to eliminate repetitive
         inspections or maintenance action.



                                                                         Page 11


                                                                     Exhibit F-2

                                RETURN CONDITIONS

This Exhibit F-2 shall apply only if Owner Participant notifies Lessee not later
than 150 days prior to the end of the Basic Term that it is demanding payment of
a deficiency amount under the Residual Value Guarantee Agreement and certifies
to Lessee the appraised fair market sales value of the Aircraft as determined
under the Residual Value Guarantee Agreement that is the basis for such claim
and the amount of the deficiency so claimed except that this Exhibit F-2 shall
be assumed to apply for the purposes stated in the definition of "Appraisal
Procedure".

Section 1.        General Conditions.

         At the time of return, the Aircraft shall (i) have been continuously
         and currently maintained in accordance with the Maintenance Program as
         authorized by the FAA, as if the Aircraft were to be kept in further
         commercial passenger service by Lessee and (ii) meet the following
         requirements:

                  (a)      Operating Condition - The Aircraft shall be in good
                           operating condition, ordinary wear and tear excepted,
                           with all of the Aircraft equipment, components, and
                           systems functioning in accordance with their intended
                           use irrespective of variations or deviations
                           authorized by the Minimum Equipment List or
                           Configuration Deviation List. All replacement
                           equipment, parts, components or items installed on
                           the Aircraft shall be manufactured by the original
                           manufacturer approved by the Manufacturer or a
                           manufacturer holding requisite authority of the FAA,
                           and in case of used, rotable parts, have an
                           FAA-approved serviceable tag.

                  (b)      Configuration - The Aircraft shall be in the same
                           passenger configuration with all equipment installed
                           therein as the Aircraft was when delivered under the
                           Embraer Purchase Agreement, ordinary wear and tear
                           excepted, including replacements and substitute parts
                           and equipment. The Aircraft shall not suffer any
                           modification or alteration (hereinafter
                           "Modifications") after the Delivery Date provided
                           however that Lessee may make Modifications to the
                           Aircraft as long as they are included as
                           factory-installed features in EMB-145 aircraft
                           delivered to the Lessee subsequent to the delivery of
                           the Aircraft. The term Modifications shall be deemed
                           to include, but not be limited to (i) changes to the
                           Aircraft structure, performance, weight and balance,
                           (ii) changes which materially adversely affect the
                           Aircraft's flight qualities, operational
                           characteristics, operational safety, ease or cost of
                           maintenance, spare parts interchangeability or
                           replaceability, and (iii) substitution of different
                           types of equipment or accessories which are not
                           equivalent in cost value and/or operation capability
                           to the equipment or accessories being replaced, and
                           shall exclude (x) changes pursuant to service
                           bulletins issued by the Manufacturer or the OEMs, and
                           (y) mandatory changes required to be


                                                                          Page 1


                           accomplished by Lessee hereunder. All permitted
                           Modifications made to the Aircraft shall be in
                           accordance with FAA-approved data, and Lessee shall
                           provide complete data and documentation to
                           substantiate their certification, approval, and
                           methods of compliance (including, without limitation,
                           a copy of the Aircraft Illustrated Parts Catalog and
                           a copy of the Aircraft Interior Configuration
                           document). A complete listing of all modifications
                           and repairs performed shall be supplied together with
                           the Aircraft. Modifications, other than permitted
                           ones, shall be removed and the appropriate repairs to
                           the Aircraft made prior to the day of return of the
                           Aircraft.

                  (c)      Certification - The Aircraft shall have, a valid and
                           effective Certificate of Airworthiness of the type
                           "Transport, Category (Passengers)" issued by the FAA,
                           and shall be in full compliance with, and capable of
                           registration under, the provisions of Part 121 of the
                           U.S. Federal Aviation Regulations (or any successor
                           legislation) and other US regulations applicable to
                           the Aircraft's operation and continued airworthiness,
                           without any restrictions, corrections, repairs,
                           limitations, modifications or alterations or
                           overhauls having to be performed to meet such
                           standards.

                  (d)      General Appearance - The Aircraft shall be clean by
                           commercial passenger airline standards, cosmetically
                           acceptable, interior complete, and prepared to be
                           placed into scheduled revenue airline operations.
                           Interior items which may be broken shall be repaired
                           or replaced. All decals, signs and placards shall be
                           clean, secure and legible in the English language.
                           The Aircraft shall meet the following minimum
                           requirements:

                           (i)      Fuselage, Wings and Empennage - The fuselage
                                    shall be within Maintenance Program approved
                                    limits regarding dents and abrasions and
                                    loose or pulled rivets; all leading edges
                                    shall be within Maintenance Program approved
                                    limits regarding damage occurring since
                                    delivery; the airframe, Engines and wings
                                    shall be free of fuel, oil and hydraulic
                                    leaks so as to allow unrestricted operation;
                                    all leading edges and fuselage areas which
                                    are aerodynamically critical shall be free
                                    of any scab patches other than those
                                    required by the Manufacturer and shall be
                                    repaired with repairs which are permanent in
                                    nature in accordance with the SRM, or are
                                    made in accordance with the Manufacturer's
                                    approval.

                           (ii)     Interior - Ceilings, sidewalls, bulkhead
                                    panels shall be clean, free of cracks and
                                    within Maintenance Program approved limits
                                    regarding dents; all carpets and seat covers
                                    shall be in good condition and clean and
                                    meet FAR fire resistance regulations; all
                                    seats shall be serviceable and in good
                                    condition. All safety equipment shall be
                                    installed at the correct stations, a loose


                                                                          Page 2


                                    equipment check list and location drawings
                                    shall accompany the Aircraft and a loose
                                    equipment inventory shall be drawn up on the
                                    Delivery Date and checked on the day of
                                    return of the Aircraft.

                           (iii)    Cockpit - All fairing panels shall be free
                                    of cracks and shall be clean; all floor
                                    coverings shall be clean and effectively
                                    sealed and secured, all seat covers and
                                    cushions shall be in good condition and
                                    clean and shall, as applicable, conform to
                                    FAA fire resistance regulations. All seats
                                    shall be fully serviceable and in good
                                    condition. All instruments and light panels
                                    shall be clean, secure and legible, function
                                    in accordance with their intended purpose
                                    and have all lighting operating properly.

                           (iv)     Landing, Gear and Wheel Wells - The landing
                                    gear and all wheel wells shall be clean,
                                    free of leaks, and repaired as necessary.
                                    The main and nose landing gear components
                                    and their associated actuators and parts
                                    shall be in a good operating condition.

                           (v)      Cargo Compartment, Galleys and Toilets - All
                                    cargo compartment panels shall be installed
                                    and be in good condition so as to comply
                                    with extended range operations requirements.
                                    The cargo compartments, galleys and toilet
                                    of the Aircraft shall be in a clean and
                                    presentable condition and all cargo securing
                                    system components shall be serviceable; all
                                    galley inserts (to the extent delivered with
                                    the Aircraft) shall be redelivered with the
                                    Aircraft.

                           (vi)     Windows - Any delamination, and crazing of
                                    the windshields and cabin windows of the
                                    Aircraft shall be within approved limits of
                                    the Maintenance Program and shall be
                                    properly sealed.

                           (vii)    Doors - All the doors of the Aircraft shall
                                    be free moving, correctly rigged and
                                    properly sealed and all door assist
                                    mechanisms shall be charged in accordance
                                    with the AMM.

                  (e)      Airworthiness Directives and Service Bulletins - All
                           FAA Airworthiness Directives and amendments or
                           changes to Aviation Regulations issued by the FAA and
                           applicable to the Aircraft which require compliance
                           within a period of six (6) months following the day
                           of return of the Aircraft (or the equivalent hours or
                           cycles, based on the Lessee's EMB-145 last four (4)
                           years of operation average monthly utilization) shall
                           have been accomplished on a Terminating Action basis
                           and in compliance with the issuing agency's and the
                           manufacturer's associated service bulletins,
                           regardless of any operator-specific waiver, deferral,
                           or deviation from such directive or regulation. The
                           Aircraft shall have installed on it all Manufacturer
                           and OEM service bulletin kits requested by Lessee and


                                                                          Page 3


                           actually received by Lessee in respect of the
                           Aircraft, and if not installed, Lessee shall deliver
                           them together with the Aircraft at no charge.

                  (f)      Deferred Maintenance - The Aircraft shall be free of
                           all deferred or carried over maintenance items,
                           including without limitation, any pilot log book
                           reports, maintenance reports, and the Aircraft's
                           Central Maintenance Computer reports. Any such
                           deferred or carried over maintenance shall be
                           promptly accomplished in a terminating manner prior
                           to the return of the Aircraft at the end of the term
                           of the Lease.

                  (g)      Corrosion - The Maintenance Program shall include a
                           corrosion control program based on the corrosion
                           prevention, treatment and correction criteria
                           recommended by the Manufacturer in the CPCP. The
                           Aircraft shall be free from corrosion or shall have
                           been adequately treated in compliance with the
                           Maintenance Program. Complete details of the
                           corrosion control program, as well as a summary of
                           specific corrosion correction, of the Aircraft in
                           accordance with the Maintenance Program shall be
                           available for delivery together with the Aircraft.
                           This summary shall include Lessee's identifying the
                           Manufacturer's task identifier and cross referencing,
                           Lessee's identifier indicating status of
                           accomplishment and findings and incorporation status
                           relative to all recommended corrective and
                           preventative actions. The hydraulic system and fuel
                           tanks shall be free from contamination as
                           demonstrated by a laboratory report to be performed
                           after the Aircraft is removed from service and
                           delivered together with the Aircraft.

                  (h)      Leased Components - The Aircraft shall be free and
                           clear of all Liens other than any Lessor's Liens or
                           any Permitted Security Interest and at return shall
                           not have installed thereon any equipment, components
                           and/or parts which are leased or loaned or otherwise
                           owned by a third party.

                  (i)      Records - The Aircraft shall be accompanied by all
                           Aircraft Documents. The Aircraft Documents shall be
                           provided in English, and be in good condition,
                           readable and capable of being reproduced.

                           (i)      "Aircraft Document" shall mean, all
                                    technical data, manuals, log books and
                                    weight and balance sheets, and all
                                    inspection, modification and overhaul
                                    records and other service, repair,
                                    maintenance, and technical records that are
                                    maintained with respect to the Aircraft,
                                    Airframe, Engines, APU, landing gears or
                                    parts (including, without limitation, all
                                    additions, renewals, revisions, and
                                    replacements of any such materials from time
                                    to time made, or required to be made, in
                                    accordance with the Maintenance Program
                                    and/or FAA regulations, and in each case in
                                    whatever form and by whatever means or
                                    medium such materials may be maintained or
                                    retained by or on behalf of Lessee (provided


                                                                          Page 4


                                    however that all such material shall be
                                    maintained in the English language).

                           (ii)     All Parts, components and assemblies
                                    identified with safe-life, hard time or
                                    condition monitored limits (to the extent
                                    that such condition monitored items are to
                                    be tracked in accordance with the approved
                                    Maintenance Program) shall be provided with
                                    part number, serial number, their service
                                    histories, accumulated cycles and flight
                                    hours, safe-life, hard time or condition
                                    monitored limits and remaining service lives
                                    on a separate listing and where practicable,
                                    be physically verified as installed and have
                                    hard copy documentation (i.e., appropriate
                                    overhaul or serviceable vendor tags and work
                                    orders) to verify their service histories.

                           (iii)    All components and assemblies, which are,
                                    identified on the maintenance records by
                                    part numbers and/or serial numbers other
                                    than the Manufacturer's or other
                                    manufacturer's shall be provided with
                                    two-way cross-reference listing necessary to
                                    establish complete traceability.

                           (iv)     All documentation, flight records, and
                                    maintenance records as specified herein and
                                    as specified by Federal Aviation Regulations
                                    Sections 121.380, and, as applicable,
                                    Section 91.417 and 91.419 (or FAR's as
                                    amended), and which normally accompany the
                                    transfer of an aircraft or engine shall be
                                    delivered together with the Aircraft. In the
                                    event of missing or incomplete records, the
                                    tasks necessary to produce such complete
                                    records shall be accomplished in accordance
                                    with the Maintenance Program prior to return
                                    of the Aircraft.

                           (v)      All documentation and records shall be in
                                    English and shall be made available for
                                    inspection in the location they are normally
                                    kept which location shall permit direct
                                    access to the Aircraft, at least 14 Business
                                    Days before the day of return of the
                                    Aircraft.

                           (vi)     Any and all documentation, data, drawings,
                                    records and manuals as required to be
                                    maintained by the FAA and SMRD, shall be
                                    provided, regardless of whether such
                                    information is considered proprietary.

                           (vii)    Hard Landing inspection reports, Lightning
                                    Strike inspection reports or High Intensity
                                    Radiated Field (HIRF) check reports as may
                                    be required should Aircraft records show
                                    evidence of any occurrence indicating such
                                    inspections or checks to be necessary.


                                                                          Page 5


                           (viii)   Corrosion Prevention & Control Program
                                    (CPCP) inspection findings and correction
                                    reports, as required by the Maintenance
                                    Program.

                  The head of Lessee's quality control department shall sign a
                  statement certifying that the data and information contained
                  in the documentation and records are true and correct.

                  (j)      Exterior Markings - At time of return of the
                           Aircraft, Lessee shall, at its cost remove from the
                           exterior and interior of the Aircraft Lessee's
                           operator specific exterior and interior markings. The
                           area where such markings were removed or painted over
                           shall be refurbished by Lessee as necessary to blend
                           in with the surrounding surface in a good and
                           workmanlike manner.

                  (k)      Overhaul and Repair - All components, rotables, and
                           assemblies (including the Engines, APU, and landing
                           gears) shall be documented with work orders, vendor
                           serviceable tags, 8130 tags, form 337, etc. to have
                           been repaired or overhauled by FAA-certified repair
                           stations in such manner so that such components,
                           rotables, assemblies, Engines, APU, and landing gears
                           are approved by the FAA for use on United
                           States-registered and certified aircraft. All
                           overhaul and repair procedures shall have met all FAA
                           requirements necessary to transfer to a new operator
                           under Part 121 of the U.S. Federal Aviation
                           Regulations.

                  (l)      Structural Repairs - All repairs that were performed
                           since the Delivery Date and that then exist on the
                           Aircraft shall conform to the SRM and the AMM and
                           shall have FAA approval if required, including
                           without limitation repairs related to impact damage
                           to the Aircraft caused by ground handling equipment
                           or foreign objects. All repairs not covered by the
                           SRM or the AMM shall have been made in accordance
                           with the Manufacturer's approval if required, which
                           approval shall not be unreasonably be withheld and
                           shall be provided with complete data and
                           documentation to verify and substantiate their
                           certification and methods of compliance. A complete
                           listing of all repairs performed shall be supplied
                           together with the Aircraft.

Section 2.        Condition of Airframe.

         On the day of return, the Aircraft shall be as follows:

                  (a)      C Check Inspection - The Airframe shall have
                           completed, within 100 flight hours of return, the
                           next sequential "C" check or any multiple thereof. If
                           the Aircraft has logged more than 100 flight hours
                           since the last "C" check or any multiple thereof,
                           then Lessee shall perform the next scheduled "C"
                           check or any multiple thereof, as applicable. All
                           observed


                                                                          Page 6


                           defects observed during such C check shall be
                           rectified at Lessee's expense, in accordance with the
                           Maintenance Program;

                  (b)      Structural and other scheduled Inspections - The
                           Airframe shall have at least twelve (12) months, or
                           two thousand (2,000) flight hours or cycles,
                           whichever is applicable or most limiting, remaining
                           before any scheduled structural tasks or maintenance
                           inspections which are not included in (a) above. In
                           the event that a structural task or maintenance
                           inspection interval is less than the above, Lessee
                           shall, at its expense, perform all such tasks
                           immediately prior to return of the Aircraft;

                  (c)      Landing Gear Life - The main Landing Gear and the
                           nose Landing Gear shall have at least fifty percent
                           (50%) of the cycles remaining prior to removal for
                           overhaul in accordance with the Maintenance Program,
                           and the landing gear total cycles since new ("TCSN")
                           shall be no more than ten percent (10%) greater than
                           the airframe TCSN;

                  (d)      Brakes - The brakes shall have no less than the C
                           check brake wear limits with the brakes set at normal
                           parking break pressure. The tires shall have a
                           remaining useful life of at least fifty percent
                           (50%).

Section 3.        Condition of Controlled Components.

         Aircraft and Engine hour or cycle controlled components or parts, at
         time of return to Lessor, shall have remaining, as a minimum, one half
         life and/or fifty percent (50%) of the Lessee's approved hour or cycle
         limit, whichever is applicable or most limiting, before any scheduled
         removals for overhaul, test, disassembly or replacement. All components
         or parts controlled on a calendar basis shall have at least twelve (12)
         months or fifty percent (50%) of its total approved life in hours or
         cycles, if greater remaining before scheduled removal for testing,
         overhaul or replacement.

         However, if a component or part has a life, overhaul or check interval
         limit that is less than the above, Lessee shall, at its expense,
         perform all such tasks immediately prior to return. All such hour/cycle
         or calendar controlled components or parts are defined as those
         components or parts controlled under the Maintenance Program.

Section 4.        Condition of Installed Engines and APU.

         At time of return, each Engine shall be capable of certificated, full
         rated performance and its life limited parts ("LLP") will have at least
         fifty percent (50%) of cycles remaining before replacement.

                  (a)      Time remaining - Each Engine shall have completed no
                           more than two thousand five hundred (2,500) flight
                           hours since new or since its last full performance
                           restoration shop visit at which it was subject to a
                           full engine management program rework, based on the
                           reliability goals set out in Rolls-Royce Alison
                           workscope guide, which currently state that the


                                                                          Page 7



                           workscope is designed to give 30 degrees centigrade
                           of exhaust gas temperature margin and 5,000 flight
                           hours of on-wing life. To the extent that the shop
                           workscope guide is amended in the future to include
                           different reliability goals then the engine shall
                           have at least fifty percent (50%) of the on-wing
                           hours remaining in accordance with such amended shop
                           workscope guide.

                  (b)      Borescope Inspection - On each installed Engine an
                           external visual inspection, accessory inventory check
                           and video-taped borescope inspection in accordance
                           with the requirements of the Maintenance Program
                           shall be performed by Lessee or a designated
                           representative as mutually agreed between Lessee and
                           Lessor during the ground inspection per Section 7(a)
                           of this Exhibit F-2 accompanied by a written report
                           on the findings of such inspection herein and
                           satisfactory evidence shall be provided to Lessor
                           reflecting the correction of any discrepancies found
                           during such inspection.

                  (c)      Adverse Trend Data - Complete engine records,
                           including but not limited to (i) Group A (Lifed)
                           components (as listed in Engine Manufacturer's Time
                           Limits Manual) as approved by the FAA and (ii) in
                           flight performance data and (iii) shop visit reports
                           from all shop visits, shall be made available to
                           Lessor for review and evaluation. If the Aircraft
                           and/or engine historical and maintenance records
                           and/or trend monitoring indicate a rate of
                           acceleration in performance deterioration or oil
                           consumption on any installed engine beyond the limits
                           of the Maintenance Program, the causes of such
                           conditions shall have been corrected prior to the
                           return date.

                  (d)      Oil spectrum analysis - an oil spectrum analysis
                           shall be made on the installed Engines after the
                           Aircraft is removed from service and a written report
                           shall be made available together with the Aircraft.
                           Any discrepancy found in the engine's lubrication
                           system shall have been corrected prior to the return
                           date.

                  (e)      APU Life -The installed APU shall have remaining at
                           least fifty percent (50%) of the expected mean time
                           before removal as evidenced by the Lessee's
                           demonstrated on-wing last two years average for APU
                           hours, before scheduled removal for overhaul, heavy
                           maintenance, or replacement of hour limited or LCF
                           parts at the time of return. The APU shall have a
                           video taped borescope inspection and magnetic plug
                           inspection during the ground inspection per Section
                           7(a) of this Exhibit F-2.


                                                                          Page 8


Section 5.        Provision for "Power-By-The Hour Agreements".

         If the Engines, APU, or any other hour or cycle controlled components
         on the day of return are maintained under valid PBH Agreements (as
         defined below) (and either have been maintained throughout the Term
         under PBH Agreements, or Lessee has made payments to the maintenance
         provider to cover the period in which such components where not under
         such PBH Agreements), under which the Lessee is current on all payments
         and otherwise in good standing, then, in lieu of the relevant
         requirements in Sections 2(c), 2(d), 3, 4(a) or 4(e) of this Exhibit
         F-2, the Lessee shall return each such component in such condition as
         shall make it eligible for continued maintenance under PBH Agreements,
         without additional costs, start-up charges, or overhaul requirements.
         For the purposes hereof, a "PBH Agreement" shall mean a
         "power-by-the-hour" maintenance program, provided by the Engines, APU
         or component manufacturer or its successor or designee, providing full
         maintenance (other than routine day-to-day maintenance; provided, that
         foreign-object damage and abuse may be excluded or separately charged)
         for the Engines, APU or such components at no cost other than standard
         per-cycle rates (i.e., excluding charges based on the current
         maintenance status of such component), all benefits of which program,
         including but not limited to the payments made by Lessee under such PBH
         Agreements while operating the Aircraft, shall be assignable or
         otherwise transferable to any other carrier without restrictions of any
         kind.

Section 6.        Return Condition Adjustment.

                  (a)      Each item referred to in Sections 2(c), 2(d), 3, the
                           first two lines of Section 4 and in Section 4(a) and
                           4(e) (each such item, an "Adjustable Item" and each
                           such section, an "Adjustable Return Condition") may
                           be returned with less than the required limits,
                           subject, however, to the minimum requirements set
                           forth in item (e) below.

                  (b)      If the Lessee does not meet the conditions set forth
                           for an Adjustable Item in the relevant Adjustable
                           Return Condition then Lessee shall pay to the Lessor
                           (for deficient condition) an Equivalency Payment in
                           accordance with the following formula:

                                               [*]


- --------
* Confidential

                                                                          Page 9



                                               [*]


                  The components of the formula above shall be as agreed between
                  Lessor and the Lessee. If Lessor and the Lessee fail to reach
                  agreement on any components of the above formula, such amount
                  will be determined as the average price that would be charged
                  by a third party to restore the Aircraft to the conditions
                  required under the Lease and this Exhibit F-2, based on one
                  quotation obtained by Lessor and one quotation obtained by
                  Lessee, both from a reputable, FAA and Manufacturer-approved
                  EMB-145 repair station in the United States. If the prices of
                  such quotations differ by more than ten percent (10%), Lessor
                  and Lessee shall obtain a third quotation from another
                  reputable, FAA and Manufacturer-approved EMB-145 repair
                  station in the United States, the quotation which is farthest
                  from the average of all three quotations shall be disregarded
                  and the average of the two remaining quotations shall be
                  binding upon Lessor and Lessee as the components of the
                  formula.

                  (c)      The Equivalency Payment for each return condition of
                           each Adjustable Item in the relevant Section referred
                           to in the first paragraph of this Section 6, whether
                           positive or negative, shall be aggregated in order to
                           determine the total Equivalency Payment due from
                           Lessee. (For clarification, items in more than the
                           required condition shall be netted against items in
                           less than the required condition when determining the
                           amount of the total payment due, provided however
                           that such netting is only applicable to the following
                           major components: Engines, APU and landing gear). If
                           the cumulative Equivalency Payment after such netting
                           is negative, it shall be deemed to be zero.

                  (d)      In no event shall the Equivalency Payment due from
                           the Lessee to the Manufacturer exceed the aggregate
                           amount of any payment and expenses that the
                           Manufacturer may make under the Residual Value
                           Guarantee Agreement.

                  (e)      Notwithstanding the equivalency charges that may be
                           otherwise payable or available under this Section 6,
                           if:

                           (i)      Any installed Engine has completed more than
                                    3,750 flight hours since new or since its
                                    last full performance restoration shop visit
                                    at which it was subject to a full engine
                                    management program rework


- ----------
* Confidential

                                                                         Page 10


                                    (or less than twenty-five percent (25%) of
                                    the on-wing hours remaining in accordance
                                    with an amended RR Allison shop workscope
                                    guide),

                           (ii)     Any Engine life limited part has a remaining
                                    useful life until the next scheduled
                                    replacement of less than twenty five percent
                                    (25%),

                           (iii)    The APU has remaining less than twenty five
                                    (25%) of the expected mean time before
                                    removal,

                           (iv)     The main landing gear or the nose landing
                                    gear has less than twenty five percent (25%)
                                    of the cycles remaining prior to removal for
                                    overhaul, or the cycles exceed one hundred
                                    and ten percent (110%) of the airframe, or

                           (v)      The brakes have less than the C check brake
                                    wear limits with the brakes set at normal
                                    parking break pressure, or the tires have a
                                    remaining useful life of less than twenty
                                    five percent (25%),

                  then, in any such case, Lessee shall, at its own cost and
                  expense, overhaul, refurbish and/or replace each non-complying
                  item so that it meets the applicable level specified in items
                  (i) through (v) above.

Section 7.        Inspection Upon Return

         Lessor shall have the right to inspect the Aircraft upon return, and
         the following conditions shall apply:

                  (a)      Ground Inspection - The Aircraft including the
                           Aircraft Documents shall be made available to Lessor
                           for ground inspection by Lessor or its designee at
                           Lessee's facilities. Such inspection shall commence
                           no later than fourteen (14) Business Days prior to
                           the date of return of the Aircraft. Lessee shall
                           remove the Aircraft from scheduled service and open
                           the areas of the Aircraft as required to perform the
                           necessary checks as specified in Section 2 of this
                           Exhibit F-2. In addition, Lessee shall allow Lessor
                           to accomplish its inspection to determine that the
                           Aircraft, including the Aircraft Documents are in the
                           condition set forth in Sections 1, 2, 3 and 4 of this
                           Exhibit F-2. During such checks, Lessor's personnel
                           shall have the right to reasonably request that
                           adjacent additional panels or areas be opened in
                           order to allow further inspection by Lessor's
                           personnel.

                  (b)      Operational Ground Check - Lessee shall conduct an
                           operations ground check on the Aircraft in accordance
                           with the Maintenance Program manual criteria for the
                           purpose of demonstrating to Lessor the satisfactory
                           operation of the systems, including a full fuel tank
                           leak check, pilot and static systems check and
                           hydraulic system internal leak check.


                                                                         Page 11


                  (c)      Operational Test Flight - The Aircraft shall be test
                           flown by Lessee, using qualified flight test
                           personnel, for the amount of time necessary to
                           satisfactorily demonstrate the airworthiness of the
                           Aircraft and the proper functioning of all systems
                           and components in accordance with the agreed check
                           flight procedures. During such test flight command,
                           care, custody and control of the Aircraft shall
                           remain at all times with Lessee. Up to five (5) of
                           Lessor's designated representatives (or more if
                           mutually agreed) may participate in such flight as
                           observers. Upon completion of such operational
                           flight-testing, the representatives of Lessee and
                           Lessor participating in such testing shall agree in
                           writing upon any discrepancies required to be
                           corrected by Lessee in order to comply with the
                           conditions required hereunder.

                  (d)      Discrepancies - If requested by Lessor in writing,
                           all discrepancies, which are noted during the
                           inspection and acceptance flight(s), shall be
                           corrected at Lessee's expense. If such discrepancies
                           are substantiated by the Maintenance Program and
                           Lessor determines that repairs, modifications or
                           other work items are required to cause the Aircraft
                           to comply with the requirements provided herein,
                           including, without limitation, any maintenance
                           required so that the Engines will meet all Engine
                           parameters and trends specified by the Maintenance
                           Program, Lessee shall cause such repairs and other
                           work items to be commenced and completed prior to
                           return.

Section 8.        Definitions.

         For the purpose of this Exhibit F-2, the following terms have the
following meanings:

         APPRAISAL PROCEDURE: this procedure shall apply only if Owner
         Participant provides a Residual Notice pursuant to Section 13(b)(iii)
         of the Lease and shall be used in such case to determine the Fair
         Market Sales Value of the Aircraft as herein provided. Manufacturer,
         Owner Participant and Lessee shall, within thirty (30) calendar days
         after Owner Participant has delivered a Residual Notice, each obtain
         appraisal values from a recognized independent appraiser (one to be
         selected by Manufacturer, one by Owner Participant, and one by Lessee),
         and the average value as determined by the appraisers shall be binding
         on Manufacturer, Owner Participant and Lessee; provided that if the
         value or values determined by one or more of the appraisers differs
         from the average of the values determined by all three appraisers by
         more than five percent (5%) of such average, the value which differs
         the most from such average shall be excluded, and the average of the
         values determined by the other two appraisers shall be binding on
         Manufacturer, Owner Participant and Lessee. Manufacturer, Owner
         Participant and Lessee shall each pay its own appraiser. Each appraiser
         must be associated with a professional organization of aircraft
         appraisers and each appraisal shall be conducted pursuant to ISTAT 1994
         (or any successor) appraisal methods, definitions and assumptions. Fair
         Market Sales Value as determined hereunder shall mean the value that
         would be obtained in an arms'-length transaction between an informed
         and willing buyer-


                                                                         Page 12


         user (other than a lessee currently in possession or a used equipment
         dealer) under no compulsion to buy and an informed and willing seller
         under no compulsion to sell. In determining Fair Market Sales Value, it
         will be assumed that the Aircraft is in the condition, location and
         overhaul status in which it is required to be returned to the Lessor
         pursuant to Section 12 of the Lease, that Exhibit F-2 of the Lease will
         apply, that the Lessee has removed all Parts which it is entitled to
         remove pursuant to Section 7 of the Lease and that the Aircraft is not
         encumbered by the Lease or any Lien.

         APU shall mean the auxiliary power unit installed on the Airframe on
         the Delivery Date, and any substitute APU which may from time to time
         be substituted therefor pursuant to the terms of the Lease.

         MAINTENANCE PROGRAM: means the Lessee's maintenance program as
         originally agreed between the Manufacturer and Lessee, as such program
         may be from time to time amended and supplemented by Lessee and which
         (i) shall have been approved by the FAA, (ii) shall fully comply with
         the requirements of the FAA for the EMB-145 and Rolls-Royce Allison
         AE3007A1 aero engines (or an improved model, as the case may be)
         installed thereon, and (iii) shall incorporate the requirements of the
         EMB-145 Scheduled Maintenance Requirements Document Part 1 ("SMRD"),
         the Aircraft Maintenance Manual ("AMM"), the Structural Repair Manual
         ("SRM"), the Corrosion Prevention and Correction Program ("CPCP") and
         the Original Equipment Manufacturers' ("OEMs") maintenance manuals,
         (all of the foregoing as from time to time amended or supplemented),
         the Service Newsletters and the service bulletins issued by the
         Manufacturer and all OEMs.

         CALENDAR CONTROLLED COMPONENTS OR PARTS: those components or parts,
         which are identified in the MRB Report which have maintenance tasks at
         specific calendar-time intervals.

         CYCLE-CONTROLLED COMPONENTS OR PARTS: those components or parts, which
         are identified in the MRB Report which have maintenance tasks at
         specific flight-cycle intervals.

         HOUR-CONTROLLED COMPONENTS OR PARTS: those components or parts, which
         are identified in the MRB Report which have maintenance tasks at
         specific flight-hour intervals.

         LIFE CYCLE FATIGUE ("LCF") PARTS: those rotating parts which have
         specific cycle limits as specified by the manufacturer to preclude
         cycle fatigue failures.

         MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT"): the report published by
         the maintenance review board detailing the intervals and description of
         the maintenance tasks and, where applicable, the life limits required
         for continued airworthiness of the Aircraft. Where the intervals
         specified in the MRB Report differ from the limit specified by the
         component manufacturer, the MRB Report shall take precedence.


                                                                         Page 13


         TERMINATING ACTION: the alteration or modification of the Aircraft in
         accordance with mandatory service bulletins, orders, airworthiness
         directives, and instructions required to eliminate repetitive
         inspections or maintenance action.




                                                                         Page 14



NOTE TO EXHIBIT 10.26

The 12 additional Lease Agreements are substantially identical in all material
respects to the filed Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                          October, 2001              Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N370SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N371SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

EX-10.27

                                                                   Exhibit 10.27

                                                               EXECUTION VERSION

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

                        PARTICIPATION AGREEMENT [N296SK]

                          Dated as of December 20, 2001

                                      among

                           CHAUTAUQUA AIRLINES, INC.,
                                    as Lessee

                       SILVERMINE RIVER FINANCE TWO, INC.,
                              as Owner Participant,

                                       and

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
               not in its individual capacity (except as otherwise
                     expressly set forth herein) but solely
                                as Owner Trustee

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

                  COVERING ONE EMBRAER MODEL EMB-145LR AIRCRAFT
                  AIRCRAFT BEARING U.S. REGISTRATION NO. N296SK
                     AND MANUFACTURER'S SERIAL NUMBER 145514



     PARTICIPATION AGREEMENT [N296SK] dated as of December 20, 2001 (this
"Agreement") among CHAUTAUQUA AIRLINES, INC., a New York corporation (herein,
together with its successors and permitted assigns, the "Lessee"), WELLS FARGO
BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, except as otherwise expressly stated herein, but solely as
owner trustee under the Trust Agreement referred to below (in such capacity as
trustee, together with its successors and permitted assigns, the "Owner
Trustee"), and SILVERMINE RIVER FINANCE TWO, INC., a Delaware corporation
(together with its successors and permitted assigns, the "Owner Participant").

                              W I T N E S S E T H:

          WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof; and

          WHEREAS, pursuant to the Embraer Purchase Agreement, the Manufacturer
agreed to manufacture and sell to Solitair and Solitair agreed to purchase from
the Manufacturer the Aircraft; and

          WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant and Wells Fargo Bank Northwest, National
Association, are entering into the Trust Agreement whereby, among other things,
Wells Fargo Bank Northwest, National Association, is appointed as Owner Trustee
and has undertaken to acquire and hold the Trust Estate in trust for the benefit
of the Owner Participant; and

          WHEREAS, pursuant to the Embraer Assignment Documents, Solitair has
agreed to assign its right to purchase the Aircraft from the Manufacturer,
together with the Assigned Warranties, to the Seller, and pursuant to the Seller
Assignment Documents, the Seller has agreed to sell the Aircraft, together with
the Assigned Warranties, to the Owner Trustee and subject to the terms and
conditions of this Agreement, the Owner Trustee is willing to purchase the
Aircraft from the Seller pursuant to the Seller Assignment Documents for
immediate lease to the Lessee pursuant to the Lease; and

          WHEREAS, subject to the terms and conditions of this Agreement and the
Trust Agreement, the Owner Participant is willing to make the equity investment
provided for herein to fund such purchase by the Owner Trustee; and

          WHEREAS, Solitair has agreed to assign the Engine Warranties to the
Owner Trustee and the Engine Manufacturer has consented to such assignment, upon
the terms and conditions contained in the Engine Warranty Assignment and
Consent; and

          WHEREAS, to induce the Owner Participant to make the equity investment
provided for herein to fund the purchase of the Aircraft by the Owner Trustee
from the Seller, the Manufacturer has agreed to enter into the Residual Value
Guarantee Agreement (MSN145514/N296SK), dated as of December 20, 2001 (the
"Residual Value Guarantee Agreement") with the Owner Participant and to
undertake the obligations provided therein; and



          WHEREAS, to induce the Owner Trustee to purchase the Aircraft and to
enter into the Lease, the Manufacturer has agreed to enter into the Guarantee
Agreement (MSN145514/N296SK), dated December 20, 2001 (the "Guarantee
Agreement") with the Owner Trustee and the Owner Participant and to undertake
the obligations provided therein;

          NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration and receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:

                                   ARTICLE 1.
                                 INTERPRETATION

          Section 1.01. DEFINITIONS. Capitalized terms used herein and defined
in Appendix A shall, except as such definitions may be specifically modified in
the body of this Agreement for the purposes of a particular section, paragraph
or clause, have the meanings given such terms in Appendix A.

          Section 1.02. REFERENCES. References in this Agreement to sections,
paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.

          Section 1.03. HEADINGS. The headings of the various sections,
paragraphs and clauses of this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.

          Section 1.04. APPENDICES, SCHEDULES AND EXHIBITS. The appendices,
schedules and exhibits hereto are part of this Agreement.

                                   ARTICLE 2.
                          SALE AND LEASING TRANSACTIONS

          Section 2.01. PARTICIPATION. Subject to all of the terms and
conditions of this Agreement, the parties agree to participate in the sale and
leasing transactions with respect to the Aircraft provided for in this Article
2.

          (a) ASSIGNMENT, SALE AND PURCHASE. By countersigning this Agreement,
Solitair, in consideration of $500,000 to be paid by the Owner Trustee to
Solitair, hereby (i) agrees to assign its right to purchase the Aircraft from
the Manufacturer, together with the Assigned Warranties, to the Seller pursuant
to the Embraer Assignment Documents provided that the Seller agrees immediately
to purchase the Aircraft from the Manufacturer pursuant to the Embraer
Assignment Documents and to sell the Aircraft together with the Assigned
Warranties to the Owner Trustee pursuant to the Seller Assignment Documents,
(ii) consents to the sale of the Aircraft together with the Assigned Warranties
by the Seller to the Owner Trustee pursuant to the Seller Assignment Documents,
and (iii) agrees to assign the Engine Warranties to the Owner Trustee pursuant
to the Engine Warranty Assignment and Consent. The Owner Trustee agrees to
accept the assignment from Solitair as contemplated by the Engine Warranty

                                        2


Assignment and Consent, accept the assignments from the Seller as contemplated
by the Seller Assignment Documents and purchase the Aircraft together with the
Assigned Warranties from the Seller pursuant to the Seller Assignment Documents
for a purchase price equal to the Lessor's Cost, of which $500,000 shall be paid
to Solitair and the balance shall be paid to the Seller, subject to the
following sentence. The parties hereto agree (i) that each of the Owner Trustee
and the Owner Participant may, for the purpose of treating all or part of the
purchase of the Aircraft hereunder as part of a like-kind exchange of property
under Section 1031 of the Internal Revenue Code, assign all or part of their
respective rights under this Agreement to a "qualified intermediary" (as defined
in Treasury Regulations Section 1.1031(k)-1(g)(4) (the "Qualified Intermediary")
and deliver notice of such assignment to the Seller, and (ii) that the Qualified
Intermediary may pay to the Seller and Solitair all or part of the Purchase
Price pursuant to the preceding sentence, PROVIDED that (x) such assignment
shall not release the Owner Trustee or the Owner Participant from any of its
obligations hereunder, (y) the Seller shall transfer title to the Aircraft
directly to the Owner Trustee in accordance with the terms and conditions of the
Seller Assignment Documents, and (z) such assignment shall not reduce or
otherwise adversely affect any of the rights, or increase any of the
obligations, of the Lessee under this Agreement.

          (b) LEASING. The Owner Trustee agrees to lease to the Lessee, and the
Lessee agrees to lease from the Owner Trustee, the Aircraft pursuant to the
Lease, such leasing to take place concurrently with the purchase of the Aircraft
by the Owner Trustee on the Delivery Date.

          (c) OWNER PARTICIPANT'S EQUITY INVESTMENT. The Owner Participant
agrees to provide immediately available funds in an amount equal to the Lessor's
Cost (the "Commitment") (i) by paying such amount to the Owner Trustee prior to
the time of closing on the Delivery Date at the account specified by the Owner
Trustee on or prior to the Delivery Date, such amount to be held and applied
toward the Owner Trustee's payment of Lessor's Cost for the Aircraft on the
Delivery Date (and if not so applied, to be promptly returned to the Owner
Participant) or (ii) by paying (or causing to be paid) (x) [*] of the
Lessor's Cost at the time of the closing on the Delivery Date directly to
Solitair's account specified by Solitair prior to the closing, and (y) the
balance of the Lessor's Cost at the time of the closing on the Delivery Date
directly to the Seller's account specified by the Seller prior to the closing,
in each case to be applied toward the payment of Lessor's Cost. Such funds, once
so applied, shall constitute an equity investment by the Owner Participant in
the Trust Estate.

          (d) DELIVERY DATE. The "Delivery Date" shall be the date fixed by the
Lessee in accordance with this Section 2.01(d) for the closing of the sale and
leasing transactions with respect to the Aircraft contemplated hereby, except
that following such closing the "Delivery Date" shall mean the date on which
such transactions actually closed. The Lessee shall give at least two Business
Days' notice to each other party hereto of the Delivery Date, which notice shall
also specify the amount of the Commitment. The Lessee may postpone a scheduled
Delivery Date from time to time, for any reason by notice given to the other
parties hereto not later than 2:00 p.m. on the date last scheduled as the
Delivery Date, such notice to specify a new Delivery Date. In the event that the
Owner Participant shall have provided the amount of the Commitment to the Owner
Trustee prior to such a postponement, the Owner Trustee shall return such amount
to the Owner Participant by 2:00 p.m. on the scheduled Delivery Date unless the
Owner Participant shall have agreed otherwise in writing. Absent such an
agreement, in the

                                        3

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* Confidential



event that the Commitment is not returned to the Owner Participant by 2:00 p.m.
on a scheduled Delivery Date on which the closing does not occur, the Lessee
shall pay interest to the Owner Participant at a rate equal to the rate per
annum announced from time to time by Citibank, N.A. as its prime rate plus [*]
for each day that such commitment is not returned to the Owner Participant by
2:00 p.m.. The making available by the Owner Participant of the Commitment at
the closing shall be deemed a waiver of notice of the Delivery Date by the
Owner Participant and the Owner Trustee.

          Section 2.02. CLOSING PROCEDURE.

          (a) TIME AND PLACE. The closing shall take place at 11:00 a.m. New
York City local time on the Delivery Date at the offices of Fulbright & Jaworski
L.L.P., 666 Fifth Avenue, New York, New York or at such other time and place as
the parties may agree. The closing shall be preceded by a pre-closing at the
same place, the time for which shall be fixed by the Lessee, at which the forms
of the Operative Agreements to be executed, the certificates and other documents
to be delivered and the forms of the legal opinions to be delivered at the
closing by each party or its counsel pursuant to this Agreement shall be
available for inspection by the parties and their respective counsel.

          (b) ACTIONS OF THE OWNER TRUSTEE. Upon actual or constructive receipt
in full by the Owner Trustee of the Commitment of the Owner Participant together
with instructions (which may be oral) from the Owner Participant or its special
counsel that the applicable conditions precedent set forth in Section 3.01 have
been satisfied or waived by the Owner Participant, the Owner Trustee on the
Delivery Date shall purchase the Aircraft from the Seller and lease the Aircraft
to the Lessee. To accomplish such transactions, the Owner Trustee shall,
concurrently with the actions of the Lessee pursuant to Section 2.02(c), take
the following actions:

               (i) pay or cause to be paid (x) an amount equal to [*] of
     the Lessor's Cost to Solitair and (y) the balance of the Lessor's Cost to
     the Seller, in accordance with the terms of Sections 2.01(a) and (c), by
     transferring such amounts in immediately available funds to the account
     specified by Solitair or the Seller, as the case may be, on or prior to the
     Delivery Date;

               (ii) authorize its representative or representatives, who shall
     be a person or persons designated by the Lessee and acceptable to the Owner
     Trustee, to accept delivery of the Aircraft pursuant to this Agreement;

               (iii) accept the Bills of Sale for the Aircraft;

               (iv) execute and deliver the Lease and the Lease Supplement;

               (v) deliver the Aircraft to the Lessee pursuant to the Lease;

               (vi) execute and deliver all other documents or certificates and
     take such other actions as may be required of the Owner Trustee on or
     before the Delivery Date pursuant to any Operative Agreement; and

                                        4

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* Confidential



               (vii) take such actions as may be requested by the Seller and
     Lessee to effect the due registration of the Aircraft with the FAA in the
     name of the Owner Trustee.

          (c) ACTIONS OF THE LESSEE. Upon satisfaction or waiver by the Lessee
of the conditions precedent set forth in Section 3.02, the Lessee shall on the
Delivery Date lease the Aircraft from the Owner Trustee pursuant to the Lease.
To accomplish such transactions the Lessee shall, concurrently with the actions
of the Owner Trustee pursuant to Section 2.02(b), take the following actions:

               (i) execute and deliver the Lease and the Lease Supplement;

               (ii) authorize its representative or representatives (who shall
     be the same person or persons designated by the Lessee for purposes of
     clause (ii) of Section 2.02(b)), to accept delivery of the Aircraft from
     the Owner Trustee pursuant to the Lease; and

               (iii) execute and deliver all other documents or certificates and
     take such other actions as may be required of the Lessee on or before the
     Delivery Date pursuant to any Operative Agreement.

                                   ARTICLE 3.
                              CONDITIONS PRECEDENT

          Section 3.01. CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER
PARTICIPANT. The obligation of the Owner Participant to make the Commitment
available for payment as directed by the Owner Trustee on the Delivery Date is
subject to satisfaction or waiver by the Owner Participant, on or prior to the
Delivery Date, of the conditions precedent set forth below in this Section 3.01;
PROVIDED, that it shall not be a condition precedent to the obligation of the
Owner Participant that any document be produced or action taken that is to be
produced or taken by the Owner Participant or by a Person within the Owner
Participant's control:

          (a) NOTICE. The Owner Participant shall have received the notice of
the Delivery Date as provided in Section 2.01(d), or shall have waived such
notice.

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

               (i) the Lease;

               (ii) Lease Supplement No. 1;

               (iii) the Tax Indemnity Agreement;

               (iv) the Trust Agreement;

                                        5


               (v) the Guarantee Agreement;

               (vi) the Residual Value Guarantee Agreement;

               (vii) the Embraer Assignment Documents;

               (viii) the Seller Assignment Documents;

               (ix) the Engine Warranty Assignment and Consent;

               (x) the Bills of Sale and Seller Guaranty;

               (xi) the broker's report and insurance certificates required by
     Section 9 of the Lease;

               (xii) an appraisal or appraisals from Avitas, which appraisal or
     appraisals shall be satisfactory in form and substance to Owner
     Participant;

               (xiii) (A) a copy of the Certificate of Incorporation and By-Laws
     of Lessee and resolutions of the board of directors of Lessee, in each case
     certified as of the Delivery Date, by the Secretary or an Assistant
     Secretary of Lessee, duly authorizing the execution, delivery and
     performance by Lessee of the Operative Agreements required to be executed
     and delivered by Lessee on or prior to the Delivery Date in accordance with
     the provisions hereof and thereof; (B) an incumbency certificate of Lessee
     and Trust Company as to the person or persons authorized to execute and
     deliver the relevant Operative Agreements on behalf of such party; and (C)
     a copy of the Certificate of Incorporation or Articles of Incorporation or
     Articles of Association and By-Laws and general authorizing resolutions of
     the boards of directors (or executive committees) or other satisfactory
     evidence of authorization of Trust Company, certified as of the Delivery
     Date by the Secretary or an Assistant Secretary of Trust Company, which
     authorize the execution, delivery and performance by Trust Company of each
     of the Operative Agreements to which it is a party, together with such
     other documents and evidence with respect to it as Owner Participant may
     reasonably request in order to establish the consummation of the
     transactions contemplated by this Agreement and the taking of all corporate
     proceedings in connection therewith;

               (xiv) (A) an Officer's Certificate of Lessee, dated as of the
     Delivery Date, stating that its representations and warranties set forth in
     this Agreement are true and correct as of the Delivery Date (or, to the
     extent that any such representation and warranty expressly relates to an
     earlier date, true and correct as of such earlier date); and (B) an
     Officer's Certificate of Solitair, dated as of the Delivery Date, attaching
     a true and correct copy of the Embraer Purchase Agreement (with certain
     confidential, proprietary information deleted therefrom);

               (xv) an Officer's Certificate of Trust Company, dated as of the
     Delivery Date, stating that its representations and warranties, in its
     individual capacity and as Owner Trustee, set forth in this Agreement are
     true and correct as of the Delivery Date

                                        6


     (or, to the extent that any such representation and warranty expressly
     relates to an earlier date, true and correct as of such earlier date);

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

               (A) Arthur Amron, Principal and General Counsel of the Lessee
     substantially in the form of Exhibit A-1 hereto and addressed to the Owner
     Participant and the Owner Trustee.

               (B) Fulbright & Jaworski, L.L.P. special counsel for the Lessee
     substantially in the form of Exhibit A-2 hereto addressed to the Owner
     Participant, the Owner Trustee and the Lessee;

               (C) Ray, Quinney & Nebeker, special counsel for the Owner Trustee
     substantially in the form of Exhibit A-3 hereto addressed to the Owner
     Participant and the Lessee;

               (D) Daugherty, Fowler, Peregrin & Haught, a Professional
     Corporation, special aviation counsel, substantially in the form of Exhibit
     A-4 hereto and addressed to the Owner Participant, the Owner Trustee and
     the Lessee;

               (E) special counsel for the Manufacturer, in a form reasonably
     acceptable to the Owner Participant and addressed to the Owner Participant,
     the Owner Trustee, Solitair and the Lessee;

               (F) in the case of the Owner Participant only, Holland & Knight
     LLP, tax counsel to the Owner Participant, addressed to the Owner
     Participant, with respect to tax matters;

               (G) Holland & Knight LLP, special counsel for the Owner
     Participant, substantially in the forms of Exhibits A-5, addressed to the
     Lessee and the Owner Trustee;

               (H) Ray Warman, Senior Vice President and Associate General
     Counsel to GE Capital Aviation Services, Inc., an Affiliate of the Owner
     Participant, substantially in the form of Exhibit A-6, addressed to the
     Lessee and the Owner Trustee; and

               (I) Arthur Amron, General Counsel of Solitair, in a form
     reasonably acceptable to the Owner Participant and addressed to the Owner
     Participant, the Owner Trustee and the Lessee;

               (xvii) the Guarantee Agreement shall be in full force and effect;
     and

               (xviii) the Residual Value Guarantee Agreement shall be in full
     force and effect.

                                        7


          (c) EXPORT. Owner Participant shall receive copies of (A) a print-out
of the registration of the transaction with the Registry of Credit Transactions
(the "Registro de Operacao de Credito - RC") to be obtained by the Manufacturer
through the SISCOMEX System in Brazil, (B) a print-out of the Export
Registration (the "Registro de Exportacao - RE") of the transaction to be
obtained by the Manufacturer through the SISCOMEX System in Brazil, and (C) the
Export Certificate of Airworthiness to be issued by the Aerospace Technical
Center ("Centro Tecnico Aerospacial - CTA") of the Ministry of Defense in Brazil
with respect to the Aircraft.

          (d) VIOLATION OF LAW. No change shall have occurred after the date of
this Agreement in any Applicable Law that makes it a violation of law for (a)
Lessee, Owner Participant, or Owner Trustee to execute, deliver and perform the
Operative Agreements to which any of them is a party or (b) Owner Participant to
make the Commitment available.

          (e) NO EVENT OF DEFAULT. On the Delivery Date, no event shall have
occurred and be continuing, or would result from the sale, mortgage or lease of
the Aircraft, which constitutes a Default or Event of Default.

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

          (g) TITLE. Owner Trustee shall have good title (subject to filing and
recordation of the FAA Bill of Sale with the FAA) to the Aircraft, free and
clear of Liens, except Permitted Liens.

          (h) CERTIFICATION. The Aircraft shall comply with the provisions of
Article 6 of the Embraer Purchase Agreement.

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

          (j) FILINGS. On the Delivery Date (i) application for registration of
the Aircraft in the name of the Owner Trustee shall have been duly made with the
FAA in compliance with the provisions of the Transportation Code; and (ii) the
Trust Agreement, the Lease, Lease Supplement No. 1 and the FAA Bill of Sale
shall have been duly filed for recordation (or shall be in the process of being
so duly filed for recordation) with the FAA in accordance with the
Transportation Code.

          (k) PRECAUTIONARY FINANCING STATEMENTS. A Uniform Commercial Code
"precautionary" financing statement or statements describing the Lease as a
lease but covering any security interest in favor of the Owner Trustee which may
be created thereby, shall have been executed and delivered by the Lessee and the
Owner Trustee (naming the Owner Trustee as Lessor and secured party), and shall
have been duly filed in all places necessary or desirable within the State of
New York.

                                        8


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

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

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

          (o) LESSOR'S COST. Owner Participant shall receive reasonably
satisfactory evidence that upon payment of an amount equal to Lessor's Cost,
Seller shall transfer good and marketable title to the Aircraft to the Owner
Trustee.

          Section 3.02. CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE. The
obligation of Lessee to lease the Aircraft on the Delivery Date is subject to
the satisfaction or waiver by Lessee, on or prior to the Delivery Date, of the
conditions precedent set forth below in this Section 3.02.

          (a) DOCUMENTS. Executed originals of the agreements, instruments,
certificates, documents and opinions described in Section 3.01(b) shall have
been received by Lessee, except as specifically provided therein, and shall be
satisfactory to Lessee, unless the failure to receive any such agreement,
instrument, certificate or document is the result of any action or inaction by
Lessee.

          (b) CORPORATE DOCUMENTS. (A) An incumbency certificate of Owner
Participant as to the person or persons authorized to execute and deliver the
relevant Operative Agreements on behalf of Owner Participant; and (B) a copy of
the Certificate of Incorporation or Articles of Incorporation or Articles of
Association and By-Laws and general authorizing resolutions of the boards of
directors (or executive committees) or other satisfactory evidence of
authorization of Owner Participant, certified as of the Delivery Date by the
Secretary or an Assistant Secretary of Owner Participant which authorize the
execution, delivery and performance by Owner Participant of each of the
Operative Agreements to which it is a party,

                                        9


together with such other documents and evidence with respect to it as Lessee may
reasonably request in order to establish the consummation of the transactions
contemplated by this Agreement and the taking of all corporate proceedings in
connection therewith;

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

          (d) OTHER CONDITIONS PRECEDENT. Each of the conditions set forth in
Sections 3.01(c), (d), (f), (g), (h), (i), (j), (l) and (n) shall have been
satisfied or waived by Lessee, unless the failure of any such condition to be
satisfied is the result of any action or inaction by Lessee.

          Section 3.03. POST-REGISTRATION OPINION. Promptly upon the
registration of the Aircraft and the recordation of the documents referenced in
Section 3.01(j)(ii), Lessee will direct Daugherty, Fowler, Peregrin & Haught, a
Professional Corporation, special counsel in Oklahoma City, Oklahoma, to deliver
to Lessee, Owner Participant and Owner Trustee a favorable opinion or opinions
addressed to each of them with respect to such registration and recordation.

          Section 3.04. CERTIFICATE OF AIRWORTHINESS. Promptly upon inspection
by the FAA, Lessee will provide Owner Participant with a copy of a current,
valid Standard Certificate of Airworthiness for the Aircraft duly issued by the
FAA

                                   ARTICLE 4.
               LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 4.01. LESSEE'S REPRESENTATIONS AND WARRANTIES. The Lessee
represents and warrants that, as of the Delivery Date (unless any such
representation and warranty is specifically made as of an earlier date, in which
case the Lessee represents and warrants as of such earlier date):

          (a) the Lessee is a corporation duly organized and validly existing
and is in good standing under the laws of the State of New York, has its
principal place of business and chief executive office (as such terms are used
in Article 9 of the Uniform Commercial Code) in Indianapolis, Indiana at the
address set forth in Section 12.01(a), and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
failure to be so qualified or in good standing would have a materially adverse
effect on its business or would impair its ability to perform its obligations
under the Lessee Documents;

          (b) the Lessee has full power, authority and legal right to conduct
its business and operations as currently conducted and to own or hold under
lease its properties and to enter into and perform its obligations under the
Lessee Documents;

          (c) the Lessee is a Certificated Air Carrier;

          (d) the Lessee possesses all necessary certificates, franchises,
licenses, permits, rights and concessions and consents (collectively "permits")
which are necessary to the

                                       10


operation of the routes flown by it and the conduct of its business and
operations as currently conducted and each such permit is in full force and
effect, except for any such permits the failure to have or maintain which would
not have a material adverse effect on the Lessee or its ability to perform its
obligations under the Lessee Documents;

          (e) the execution, delivery and performance of the Lessee Documents by
the Lessee have been duly authorized by all necessary corporate action on the
part of the Lessee and do not require any stockholder approval, or approval or
consent of any trustee or holder of any indebtedness or obligations of the
Lessee, and each such Lessee Documents has been duly executed and delivered and
constitutes the legal, valid and binding obligations of the Lessee enforceable
against it in accordance with the terms thereof except as such enforceability
may be limited by bankruptcy, insolvency, or other similar laws or by general
equitable principles;

          (f) no authorization, consent or approval of or other action by, and
no notice to or filing with, any United States federal or state governmental
authority or regulatory body is required for the execution, delivery or
performance by the Lessee of the Lessee Documents except for such registrations,
applications and recordings referred to in the opinion of Daugherty, Fowler,
Peregrin & Haught, a Professional Corporation delivered pursuant to
Section 3.01(b)(xvi)(D) and the filings referred to in Section 3.01(j)(ii);

          (g) neither the execution, delivery or performance by the Lessee of
the Lessee Documents nor compliance with the terms and provisions hereof or
thereof, conflicts or will conflict with or results or will result in a breach
or violation of any of the terms, conditions or provisions of, or will require
any consent (other than the Embraer Assignment Documents, the Seller Assignment
Documents and Engine Warranty Assignment and Consent) or approval under, any
Applicable Law or the charter documents, as amended, or bylaws, as amended, of
the Lessee or any order, writ, injunction or decree of any court or governmental
authority against the Lessee or by which it or any of its properties is bound or
any indenture, mortgage or contract or other agreement or instrument to which
the Lessee is a party or by which it or any of its properties is bound, or
constitutes or will constitute a default thereunder or results or will result in
the imposition of any Lien upon the Aircraft or any of its properties (other
than Permitted Liens), except for any such conflict, breach or default which
would not have a material adverse effect on the Lessee or its ability to perform
its obligations under the Lessee Documents;

          (h) except as disclosed in any of the financial statements referred to
in Section 4.01(p) or as otherwise disclosed in writing to the Owner
Participant, there are no pending or, to the knowledge of the Lessee, threatened
actions, suits, investigations or proceedings against or affecting the Lessee or
any of its properties before or by any court, governmental agency, arbitration
board, tribunal or other administrative agency which, (A) may reasonably be
expected to have a materially adverse effect on the Lessee's consolidated
financial condition, business, or operations, or (B) would materially adversely
affect the ability of the Lessee to consummate the transactions contemplated by
the Operative Agreements or perform its obligations under the Lessee Documents;

          (i) except for (A) the registration in the Owner Trustee's name of the
Aircraft pursuant to the Transportation Code, (B) the filing with and, where
appropriate, recordation by the FAA pursuant to the Transportation Code of the
Lease (including Lease Supplement No. 1)

                                       11


and (C) the filing of the financing statement referred to in Section 3.01(k), no
further  action, including any filing or recording of any document, is necessary
or advisable in order to establish the Owner Trustee's title to and interest in
the Aircraft and the Lessor's Estate as against the Lessee and any third
parties;

          (j) the Owner Trustee has received good and marketable title to the
Aircraft, free and clear of all Liens, except Permitted Liens;

          (k) all premiums which have become due with respect to the insurance
required to be provided by the Lessee on or prior to the Delivery Date under
Section 9 of the Lease have been paid by the Lessee;

          (l) no Default or Event of Default exists and no Event of Loss, or
event which with the passage of time would constitute an Event of Loss, exists;

          (m) the Aircraft is in such condition so as to qualify the Aircraft,
upon inspection by the FAA, for (A) certification by the FAA under the
Transportation Code as to type and airworthiness, and (B) issuance of a standard
airworthiness certificate by the FAA pursuant to the Transportation Code

          (n) each of the Lessee and any subsidiary of the Lessee is either (x)
not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended,
or (y) exempt from the registration requirements thereof;

          (o) there are no broker's or underwriter's fees payable on behalf of
the Lessee in connection with the transactions contemplated in the Operative
Agreements, other than those of the Lessee Advisor (as defined in
Section 8.01(a)) referred to in Article 8 hereof;

          (p) the audited consolidated balance sheet of Lessee as of December
31, 2000 and the related consolidated statements of operations and cash flows
for the period then ended have been prepared in accordance with generally
accepted accounting principles in the United States and fairly present in all
material respects the financial condition of Lessee and its consolidated
subsidiaries as of such date and the results of its operations and cash flows
for such period, and since December 31, 2000, there has been no material adverse
change in such financial condition or operations of Lessee, except for matters
disclosed in (a) the financial statements referred to above or (b) otherwise
disclosed in writing by Lessee to the Owner Participant;

          (q) to the best of Lessee's knowledge, Lessee is not in default under,
or in violation of, any Applicable Law, the violation of which would give rise
to a Material Adverse Change to Lessee;

          (r) neither the Lessee nor any Person authorized by the Lessee to act
on its behalf has directly or indirectly offered any beneficial interest in the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement, or in any similar security relating to the Aircraft, the Lease,
the Trust Estate or the Trust Agreement, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or

                                       12


security to, any Person in violation of the Securities Act or any applicable
state securities laws; and

          (s) Owner Trustee, as lessor under the Lease, is entitled to the
benefits of Section 1110 (as currently in effect) with respect to the Aircraft.

          Section 4.02. CERTAIN COVENANTS OF LESSEE. The Lessee covenants and
agrees as follows:

          (a) FILINGS AND RECORDINGS. The Lessee will cause to be done,
executed, acknowledged and delivered at the Lessee's cost and expense all such
further acts, conveyances and assurances as the Owner Trustee or the Owner
Participant shall reasonably require for accomplishing the purposes of the
Operative Agreements. Without limiting the generality of this Section 4.02(a),
the Lessee will promptly take, or cause to be taken, at the Lessee's cost and
expense,  such action with respect to the recording, filing, re-recording and
re-filing of the Lease (including each supplement thereto), and any financing
statements or other instruments as may be reasonably requested by the Owner
Trustee and appropriate, to maintain the Owner Trustee's title to and interest
in the Aircraft and the Lessor's Estate, as against the Lessee and any third
parties, or if the Lessee cannot itself take, or cause to be taken, such action,
will furnish to the Owner Trustee timely notice of the necessity of such action,
together with such instruments, in execution form, and such other information as
may be required to enable either of them to take such action at the Lessee's
cost and expense in a timely manner.

          (b) REGISTRATION. From and after the Delivery Date, the Lessee shall
cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Owner Trustee (PROVIDED, that the Owner Trustee
and the Owner Participant shall be and remain Citizens of the United States),
under the Transportation Code, and shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make application
for such registration; PROVIDED, HOWEVER, that the Lessee may, at any time cause
the Aircraft to be appropriately re-registered under the laws of a country with
which at the time of such registration the United States maintains normal
diplomatic relations and is listed on Exhibit E to the Lease; PROVIDED that:

               (i) at the time of re-registration, no Specified Default exists
     or would occur as a result of such re-registration;

               (ii) the Lessee shall pay all fees and expenses (including the
     reasonable fees and expenses of local counsel in such country) relating to
     such re-registration;

               (iii) the Lessee shall, at its cost, cause the interest of the
     Owner Trustee as owner of the Aircraft to be duly registered or recorded
     under the laws of such country and at all times thereafter to remain so
     duly registered or recorded unless and until the registration of the
     Aircraft is changed as provided herein, and shall, at its cost, cause to be
     done at all times all other acts including the filing, recording and
     delivery of any document or instrument and the payment of any sum necessary
     or, by reference to prudent industry practice in such country, advisable in
     order to create, preserve and

                                       13


     protect such interest in the Aircraft as against the Lessee or any third
     parties in such jurisdiction, and the laws of such country would give
     effect to the Owner Trustee's title to and ownership interest in the
     Aircraft;

               (iv) the obligations of the Lessee (and of the Permitted
     Sublessee under a Sublease) and the rights and remedies of the Lessor and
     the Owner Participant under the Operative Agreements shall remain or be, as
     the case may be, legal, valid, binding and enforceable in such country;

               (v) the Lessee shall ensure that all insurance required by
     Section 9 of the Lease shall be in full force and effect prior to, at the
     time of, and after such change in registration and the Owner Participant
     and the Owner Trustee shall receive a certificate of Lessee's insurance
     broker to such effect;

               (vi) the country of such re-registration imposes aircraft
     maintenance standards approved by, or at least as stringent as those
     approved by, the FAA or the central civil aviation authority of the United
     Kingdom, France, Germany, Japan, the Netherlands or Canada;

               (vii) it shall not be necessary by reason of such re-registration
     or for purposes of enforcing remedies contained in the Lease or the related
     Sublease for the Owner Trustee or the Owner Participant to register or
     qualify to do business in such country;

               (viii) no Liens (except Permitted Liens) shall arise by reason of
     such re-registration;

               (ix) none of the Owner Trustee and the Owner Participant shall be
     subjected to any risk of adverse tax consequences as a result of such
     re-registration for which the Lessee does not then indemnify or cause to be
     indemnified such Person in a manner satisfactory in form and substance to
     such Person;

               (x) any export licenses and certificate of deregistration
     required in connection with any repossession or return of the Aircraft will
     be readily obtainable in the normal course without material delay or
     material burden on the Owner Trustee, it being agreed that the Lessee shall
     be responsible for the cost thereof;

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

               (xii) unless Lessee shall have agreed to provide insurance
     reasonably satisfactory to the Owner Participant covering the risk of
     requisition of use of or title to the Aircraft by the government of such
     country (so long as the Aircraft is registered under the laws of such
     country), the laws of such country require fair compensation by the

                                       14


     government of such country payable in currency freely convertible into
     Dollars and freely removable from such country (without license or permit,
     unless Lessee prior to such proposed reregistration has obtained such
     license or permit or such license or permit will be readily obtainable in
     the normal course without material delay or material burden on the Owner
     Participant) for the taking or requisition by such government of such use
     or title;

               (xiii) the courts of such proposed country of registry will
     respect the choice of New York law to govern the Lease;

               (xiv) such re-registration may not be effected until after the
     Recovery Period unless the Lessee prepays on a lump sum basis any liability
     due under the Tax Indemnity Agreement as a result of such re-registration;

               (xv) the Owner Participant and the Owner Trustee shall have
     received opinions in scope, form and substance reasonably satisfactory to
     them, of counsel, expert in the laws of such country, to the effect set
     forth in clauses (iii), (iv) (with respect to the obligations of the Lessee
     under the Lease), (vii), (ix), (x), (xi), (xii) and (xiii) of this
     Section 4.02(b);

               (xvi) such proposed change in registration is made in connection
     with a Sublease to a Permitted Air Carrier and such Permitted Sublessee is
     domiciled in such country; and

               (xvii) Lessee shall deliver such request to Lessor and Owner
     Participant in writing at least 20 days in advance of the date of any such
     proposed change in registration.

Lessee agrees to pay on an After Tax Basis all reasonable out-of-pocket costs
and expenses (including, without limitation, reasonable counsel fees and
disbursements) of the Owner Participant and the Owner Trustee in connection with
any re-registration pursuant to this Section.

          (c) INFORMATION. The Lessee shall promptly furnish to the Owner
Trustee and the Owner Participant such information as may be required to enable
the Owner Trustee and the Owner Participant timely to file any reports required
to be filed by the Owner Trustee as the Lessor and the Owner Participant under
the Lease with any governmental authority as a result of the Owner Trustee's
ownership interest in the Aircraft.

          (d) CORPORATE EXISTENCE. The Lessee shall at all times maintain its
corporate existence, except as permitted by Section 4.02(e) hereof, and all of
its rights, privileges and franchises necessary in the normal conduct of its
business, except for any corporate right, privilege or franchise that it
determines is no longer necessary or desirable in the conduct of its business.

          (e) MERGER AND CONSOLIDATION. The Lessee shall not, during the Term,
enter into any merger with or into or consolidation with, or sell, convey,
transfer, lease or otherwise dispose of in one or a series of transactions all
or substantially all of its assets as an entirety to any Person, unless the
surviving corporation or Person which acquires by purchase, conveyance,

                                       15


transfer or lease all or substantially all of the assets of the Lessee as an
entirety (i) is a domestic corporation organized and existing under the laws of
the United States or any State of the United States, (ii) is a Citizen of the
United States, (iii) is a Section 1110 Person, so long as such status is a
condition to the availability of Section 1110, (iv) if not the Lessee, executes
a duly authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Trustee and Owner Participant,
containing an effective assumption of all of the Lessee's, as applicable,
obligations hereunder and under the other Operative Agreements, and each other
document contemplated hereby or thereby and delivers such instrument to the
Owner Participant and the Owner Trustee, (v) provides an opinion from counsel
(which counsel may be the Lessee's General Counsel) delivered to the Owner
Trustee and the Owner Participant, which opinion shall be reasonably
satisfactory to the Owner Participant, and an officer's certificate (which may
rely, as to legal matters, on such legal opinion), each stating that such
merger, consolidation, conveyance, transfer, lease or other disposition and the
instrument noted in clause (iv) above comply with this Section 4.02(e), that
such instrument is a legal, valid and binding obligation of, and is enforceable
against, such survivor or Person, and that all conditions precedent herein
provided for relating to such transaction have been complied with, and (vi) such
survivor or Person makes such filings and recordings with the FAA as may be
required pursuant to part A of subtitle VII of Title 49, United States Code to
evidence such merger or consolidation; PROVIDED THAT, no such merger,
consolidation or conveyance, transfer or lease shall be permitted if (1)
immediately after giving effect to such consolidation, merger, purchase,
conveyance, transfer, lease or other disposition, an Event of Default shall have
occurred and be continuing or (2) the surviving Person in such transaction has a
tangible net worth, as determined in accordance with generally accepted
accounting principles immediately following such transaction, of less than
seventy-five percent (75%) of Lessee, as measured immediately prior to such
transaction.

          Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Lessee and the satisfaction of
the conditions specified in this Section 4.02(e), the successor corporation
formed by such consolidation or into which the Lessee is merged or the Person to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Lessee under
this Agreement and the Lease and each other Operative Agreement and any other
document contemplated hereby and thereby to which the Lessee is a party with the
same effect as if such successor corporation had been named as the Lessee herein
and therein. No such consolidation or merger, or sale, conveyance, transfer or
lease of all or substantially all of the assets of the Lessee as an entirety
shall have the effect of releasing the Lessee or any successor corporation which
shall theretofore have become the Lessee hereunder in the manner prescribed in
this Section 4.02(e) from its liability hereunder or under the other Operative
Agreements. Nothing contained herein shall permit any lease, sublease, or other
arrangement for the use, operation or possession of the Aircraft except in
compliance with the applicable provisions of the Lease.

          (f) CHANGE OF STATE OF INCORPORATION. The Lessee agrees to give prompt
written notice (but in any event within 30 days prior to the expiration of the
period of time specified under Applicable Law to prevent lapse of perfection) to
the Owner Participant and the Owner Trustee of any change of its state of
incorporation or of any change in its corporate name.

                                       16


          (g) FINANCIAL STATEMENTS. The Lessee agrees to furnish to the Owner
Participant during the Term:

               (i) within 60 days after the end of each of the first three
     fiscal quarters in each fiscal year of the Lessee, unaudited consolidated
     balance sheets of the Lessee and its subsidiaries (if any) as of the end of
     such quarter and related consolidated statements of income, shareholder's
     equity and cash flows of the Lessee and its subsidiaries (if any) for the
     period commencing at the end of the previous fiscal year and ending with
     the end of such quarter;

               (ii) within 120 days after the end of each fiscal year of the
     Lessee, a copy of the annual report for such year for the Lessee or the
     affiliated group of which the Lessee is a member (on a consolidated basis,
     if applicable) and a balance sheet of the Lessee and its subsidiaries (if
     any) as of the end of such fiscal year and related statements of income,
     shareholder's equity and cash flows of the Lessee for such fiscal year, in
     comparative form with the preceding fiscal year, in each case certified by
     independent certified public accountants of national standing as having
     been prepared in accordance with generally accepted accounting principles
     in the United States;

               (iii) within 120 days after the end of each fiscal year of the
     Lessee, an Officer's Certificate of the Lessee, to the effect that the
     signer is familiar with or has reviewed the relevant terms of the Lease and
     has made, or caused to be made under his supervision, a review of the
     transactions and conditions of the Lessee during the preceding fiscal year
     and that such review has not disclosed the existence during such period,
     nor does the signer have knowledge of the existence as of the date of such
     certificate, of any condition or event which constituted or constitutes a
     Default or Event of Default, or, if any such condition or event existed or
     exists, specifying the nature and period of existence thereof and what
     action the Lessee has taken or is taking or proposes to take with respect
     thereof; and

               (iv) from time to time, such other non-confidential financial
     information as the Lessor or the Owner Participant may reasonably request.

          (h) FILING OF DOCUMENTS. Lessee, at its sole cost and expense, will
cause the documents filed with the FAA pursuant to Section 3.01(j), the
financing statements required pursuant to Section 3.01(k) and all continuation
statements (and any amendments necessitated by any combination, consolidation or
merger pursuant to Section 4.02(e), any change of its state of incorporation, or
any change in its corporate name) in respect of such financing statements to be
prepared and, subject only to the execution and delivery thereof by Owner
Trustee, duly and timely filed and recorded, or filed for recordation, to the
extent permitted under the Transportation Code (with respect to such documents
filed with the FAA) or the Uniform Commercial Code or similar law of any other
applicable jurisdiction (with respect to such other documents).

          (i) EXPORT AND IMPORT OF THE AIRCRAFT; CERTIFICATION. Promptly
following delivery of the Aircraft under the Lease, Lessee shall, at no cost or
expense to the Lessor or the Owner Participant, but with each of their
cooperation, if necessary, take or cause Seller to take

                                       17


all actions necessary to (i) export the Aircraft from Brazil, (ii) import the
Aircraft to the United States, and (iii) procure the issuance by the FAA
pursuant to the Transportation Code of a type certificate and standard
certificate of airworthiness, in each case in compliance with all Applicable
Laws.

          (j) ANNUAL FOREIGN OPINION. If the Aircraft has been registered in a
country other than the United States pursuant to Section 4.02(b), Lessee will
furnish to Owner Trustee and Owner Participant annually after such registration
is effected, an opinion of special counsel reasonably satisfactory to Owner
Participant stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, rerecording and
refiling of the Operative Agreements and any supplements and amendments thereof
as is necessary to establish, perfect and protect Owner Trustee's right, title
and interest in and to the Aircraft and the Operative Agreements, reciting the
details of such actions, or (ii) no such action is necessary to maintain the
perfection of such right, title and interest.

          Section 4.03. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Lessee provided in Section 4.01 and in any
other Operative Agreement shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.

                                   ARTICLE 5.
            OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 5.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OWNER
PARTICIPANT.

          (a) REPRESENTATIONS AND WARRANTIES. The Owner Participant represents
and warrants that, as of the Delivery Date (unless any such representation and
warranty is specifically made as of an earlier date, in which case the Owner
Participant represents and warrants as of such earlier date):

               (i) it is a corporation duly incorporated and validly existing in
     good standing under the laws of State of Delaware and it has full corporate
     power, authority and legal right to carry on its present business and
     operations, to own or lease its properties and to enter into and to carry
     out the transactions contemplated by this Agreement and the other Operative
     Agreements to which it is party;

               (ii) the execution, delivery and performance by it of this
     Agreement and the other Operative Agreements to which it is party have been
     duly authorized by all necessary corporate action on its part;

               (iii) neither the execution, delivery or performance by the Owner
     Participant of the Operative Agreements to which it is party, nor
     compliance with the terms and provisions hereof or thereof, conflicts or
     will conflict with or results or will result in a breach or violation of
     any of the terms, conditions or provisions of, under any law, governmental
     rule or regulation applicable to the Owner Participant or the charter
     documents, as amended, or bylaws, as amended, of the Owner Participant or
     any order, writ, injunction or decree of any court or governmental
     authority against the Owner

                                       18


     Participant or by which it or any of its properties is bound or any
     indenture, mortgage or contract or other agreement or instrument to which
     the Owner Participant is a party or by which it or any of its properties is
     bound, or constitutes or will constitute a default thereunder or results or
     will result in the imposition of any Lien upon any of its properties,
     except for any such conflict, breach or default which would not have a
     material adverse effect on the Owner Participant or its ability to perform
     its obligations under the Operative Agreements;

               (iv) the Operative Agreements to which it is party have been duly
     executed and delivered by the Owner Participant and constitute the legal,
     valid and binding obligations of the Owner Participant enforceable against
     it in accordance with their terms except as such enforceability may be
     limited by bankruptcy, insolvency, or other similar laws or general
     equitable principles;

               (v) there are no pending or, to the knowledge of the Owner
     Participant, threatened actions, suits, investigations or proceedings
     against the Owner Participant before any court, administrative agency or
     tribunal which are expected to materially adversely affect the ability of
     the Owner Participant to perform its obligations under this Agreement and
     the other Operative Agreements to which it is or is to be a party and the
     Owner Participant knows of no pending or threatened actions or proceedings
     before any court, administrative agency or tribunal involving it in
     connection with the transactions contemplated by the Operative Agreements;

               (vi) neither the execution and delivery by it of this Agreement
     or the other Operative Agreements to which it is a party nor the
     performance of obligations hereunder or thereunder requires the consent or
     approval of or the giving of notice to, the registration with, or the
     taking of any other action in respect of, any governmental authority or
     agency that would be required to be obtained or taken by the Owner
     Participant except for filings contemplated by this Agreement;

               (vii) the funds to be used by the Owner Participant to acquire
     its interests under this Agreement do not constitute assets (within the
     meaning of ERISA and any applicable rules and regulations) of an ERISA
     Plan;

               (viii) the Owner Participant is a bank, trust company, insurance
     company, financial institution or corporation with a combined capital and
     surplus or net worth of at least $50,000,000;

               (ix) the Owner Participant acknowledges that the Residual Value
     Guarantee Agreement and the Guarantee Agreement have not been disclosed to
     or reviewed by the Lessee;

               (x) the Owner Participant has not granted any right to the
     Manufacturer under the Residual Value Guarantee Agreement or the Guarantee
     Agreement which is inconsistent with the rights of the Lessee under the
     Operative Agreements; and

                                       19


               (xi) the amount guaranteed by the Manufacturer under the Residual
     Value Guarantee Agreement is the Guaranteed Amount.

          Notwithstanding the foregoing or anything else contained in this
Agreement, the Owner Participant makes no representation or warranty in this
Agreement with respect to laws, rules or regulations relating to aviation or to
the nature or use of the equipment owned by the Owner Trustee, including,
without limitation, the airworthiness, value, condition, workmanship, design,
patent or trademark infringement, operation, merchantability or fitness for use
of the Aircraft, other than such laws, rules or regulations relating to the
citizenship requirements of the Owner Participant under applicable aviation law.

          (b) LESSOR'S LIENS. The Owner Participant represents, warrants and
covenants that on the Delivery Date there are no Lessor's Liens attributable to
it (or an Affiliate thereof). The Owner Participant agrees with and for the
benefit of the Lessee and the Owner Trustee that the Owner Participant will, at
its own cost and expense, take such action as may be necessary to duly discharge
and satisfy in full, promptly after the same first becomes known to the Owner
Participant, any Lessor's Lien attributable to the Owner Participant (or an
Affiliate thereof), PROVIDED, HOWEVER, that the Owner Participant shall not be
required to discharge or satisfy such Lessor's Lien which is being contested by
the Owner Participant in good faith and by appropriate proceedings so long as
such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Aircraft or the Lessor's Estate or any interest in any thereof.

          (c) ASSIGNMENT OF INTERESTS OF OWNER PARTICIPANT. At any time after
the Delivery Date and subject to satisfaction of the conditions set forth in
this Section 5.01(c), the Owner Participant may assign, convey or otherwise
transfer to a single Person all (but not less than all) of the Beneficial
Interest, PROVIDED that (i) the Owner Participant gives the Lessee at least 10
days' notice of such assignment, conveyance or other transfer, (ii) the Owner
Participant and any Owner Participant Guarantor shall remain liable for all
obligations of the Owner Participant under the Trust Agreement and the other
Operative Agreements to which the Owner Participant is a party to the extent
(but only to the extent) relating to the period on or before the date of such
transfer, (iii) the transferee agrees by a written instrument substantially in
the form attached hereto as Exhibit B-1 (or otherwise in form and substance
reasonably satisfactory to Lessee) to assume liability for, and undertake
performance of, all obligations of the Owner Participant under the Trust
Agreement and the other Operative Agreements to which such Owner Participant is
a party relating to the period after the date of transfer, (iv) the transferee
shall make a representation to the effect that the funds to be used by the
transferee to acquire the Beneficial Interest do not constitute the assets of an
ERISA Plan, (v) at or prior to the time of such transfer, the transferee shall
furnish an opinion of counsel substantially in the form attached hereto as
Exhibit B-3 (or otherwise in form and substance reasonably satisfactory to
Lessee) (which counsel may be in-house counsel) to the effect that such
transferee and any guarantor of the payment and performance obligations of such
transferee, as the case may be, shall have requisite power and authority and
legal right to enter into and carry out the transactions contemplated hereby;
and that such agreement and any guaranty of the transferee's obligations has
been duly authorized, executed and delivered by the transferee or the guarantor
of the payment and performance obligations of such transferee, as the case may
be, and is a valid and binding agreement of the transferee or the guarantor of
the payment and performance obligations of such transferee enforceable in
accordance with its terms, subject to customary exceptions for such

                                       20


opinions and that the transfer does not violate the Applicable Law of the
jurisdiction in which such counsel is located, and (vi) the Lessee shall have
received an opinion from counsel selected by Owner Participant and reasonably
acceptable to Lessee that no withholding tax will be imposed by the U.S. on
Basic Rent, assuming that the Lessee is a U.S. Person. Any such transferee shall
(a) be (i) a bank, savings institution, finance company, leasing company or
trust company, national banking association acting for its own account or in a
fiduciary capacity as trustee or agent under any pension, retirement, profit
sharing or similar trust or fund, insurance company, financial institution,
fraternal benefit society or a corporation acting for its own account having a
combined capital and surplus (or, if applicable, consolidated net worth or its
equivalent) of not less than $50,000,000, (ii) a subsidiary of any Person
described in clause (i) where such Person provides (A) support for the
obligations assumed by such transferee subsidiary reasonably satisfactory to the
Lessee and the Owner Trustee or (B) a guaranty of such transferee subsidiary's
obligations substantially in the form attached hereto as Exhibit B-2 (or
otherwise in form and substance reasonably satisfactory to Lessee and Owner
Trustee), or (iii) an Affiliate of the transferring Owner Participant, so long
as such Affiliate has a combined capital and surplus (or, if applicable,
consolidated net worth or its equivalent) of not less than $50,000,000 (unless
the Owner Participant remains liable for the obligations of such Affiliate under
the Operative Agreements, in which case there shall be no such net worth
requirement), (b) be legally capable of binding itself to the obligations of the
Owner Participant and shall expressly agree to assume all obligations of the
Owner Participant under the Trust Agreement and this Agreement and (c) provide
representations, warranties, and covenants substantially similar to those
contained in clauses (a) and (c) of this Section 5.01; PROVIDED that, without
the prior written consent of the Lessee, such transferee shall not be an airline
or other aircraft operator or competitor of the Lessee in the business of air
transportation or an Affiliate of any thereof unless such Affiliate is (i)
General Electric Company, International Lease Finance Corporation, GPA, GATX
Corporation or Bouillon Aviation, (ii) any wholly-owned subsidiary of an entity
listed in the foregoing clause (i) that is (X) a special purpose corporation
limited to holding Owner Participant's interest in the transactions or (Y)
primarily engaged in the business of owning and leasing assets to third-party
lessees and which is not engaged in the business of an airline, other commercial
aircraft operation or freight forwarder or (iii) an entity from which Lessee has
leased an aircraft directly (or through a trust) and not as a result of the
transfer to such entity of any aircraft subject to an existing lease with
Lessee; PROVIDED that Lessee's consent shall not be required if an Event of
Default shall have occurred and be continuing at the time of such transfer; and
PROVIDED FURTHER that neither such transferee nor any Affiliate thereof shall
(x) be a party to any material litigation or arbitration (whether as plaintiff
or defendant) with the Lessee or any Affiliate of the Lessee or (y) be
attempting a hostile takeover of the Lessee or any Affiliate of the Lessee. A
transferee hereunder shall be a Citizen of the United States or has established
a voting trust, voting powers or other arrangement reasonably satisfactory to
the Owner Trustee and the Lessee to permit the Owner Trustee to be the
registered owner of the Aircraft under the Transportation Code, without in any
way restricting the Lessee's use and operation of the Aircraft. The Owner
Trustee shall not be on notice of or otherwise bound by any such assignment,
conveyance or transfer unless and until it shall have received an executed
counterpart of the instrument of such assignment, conveyance or transfer. Upon
any such disposition by the Owner Participant to a transferee as above provided,
the transferee shall be deemed the "Owner Participant" for all purposes of the
Operative Agreements, and shall be deemed to have acquired the same interest in
the Lessor's Estate as theretofore held by its

                                       21


transferor; and each reference therein to the "Owner Participant" shall
thereafter be deemed a reference to such transferee and the transferring Owner
Participant shall be released from all of its obligations under the Operative
Agreements to the extent such obligations are assumed by such transferee. All
reasonable fees and expenses incurred by Lessee, Owner Participant or Owner
Trustee in connection with any transfer by the Owner Participant permitted by
this Section 5.01(c) will be reimbursed by the Owner Participant, unless an
Event of Default has occurred and is continuing, in which case any fees and
expenses incurred by Lessee shall not be so reimbursed; PROVIDED, HOWEVER, that
in each case bills shall be submitted to the Owner Participant prior to payment.
Each of the parties hereto agree, to the extent so requested by the Owner
Participant, to use reasonable efforts to cooperate with the Owner Participant
in effecting any assignment, conveyance or other transfer permitted pursuant to
this Section 5.01(c), including providing its written consent and
acknowledgement to any such assignment, conveyance or other transfer and, in the
case of the Lessee, providing new insurance certificates that reflect the
interest of the transferee. After the expiration or termination of the Term of
the Lease, the Owner Participant may freely assign, convey or otherwise transfer
all or any part of the Beneficial Interest without compliance with this
Section 5.01(c), provided that no such transfer shall release the Owner
Participant from its obligations under the Operative Agreements accrued prior to
the end of the Term.

          (d) ACTIONS WITH RESPECT TO LESSOR'S ESTATE, ETC. The Owner
Participant agrees that it will not take any action to subject the Lessor's
Estate or the trust established by the Trust Agreement, as debtor, to the
reorganization or liquidation provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statute.

          (e) CITIZENSHIP. The Owner Participant agrees, solely for the benefit
of the Lessee and the Owner Trustee, that if at any time on or after the
Delivery Date when the Aircraft is registered or the Lessee proposes to register
the Aircraft in the United States (i) either the Owner Participant shall cease
to be, or an event which has been publicly disclosed has occurred of which the
Owner Participant has knowledge and which will cause the Owner Participant to
cease to be, a Citizen of the United States, and (ii) the Aircraft shall or
would therefore become ineligible for registration in the name of the Owner
Trustee under the Transportation Code and regulations then applicable thereunder
(such eligibility to be determined without regard to any provision of law that
permits the U.S. registration of the Aircraft by restricting where it is based
or used), then the Owner Participant shall give notice thereof to the Lessee and
the Owner Trustee and shall (at its own expense and without any reimbursement or
indemnification from the Lessee) immediately (and in any event within a period
of 20 days) promptly (x) effect a voting trust or other similar arrangement, (y)
transfer in accordance with the terms of this Agreement and the Trust Agreement
all its rights, title and interest in and to such Trust Agreement, the Lessor's
Estate and this Agreement, or (z) take any other alternative action that would
prevent any deregistration, or maintain or permit the United States
registration, of the Aircraft (determined without regard to any provision of law
that permits the U.S. registration of the Aircraft by restricting where it is
based or used). Each party hereto agrees, upon the request and at the sole
expense of the Owner Participant, to cooperate with the Owner Participant in
complying with its obligations under the provisions of the first sentence of
this Section 5.01(e), but without any obligation on the part of such other party
to take any action believed by it in good faith to be unreasonably burdensome to
such party or materially adverse to its business interests.

                                       22


          (f) GUARANTEES. The Owner Participant agrees for the benefit of the
Lessee that it shall not make or consent to any changes to the Residual Value
Guarantee Agreement or the Guarantee Agreement that would make the
representation in Section 5.01(a)(x) incorrect at the time of such change or
that would increase the Guaranteed Amount and the Owner Participant agrees to
provide notice to the Lessee of any decrease in the Guaranteed Amount and the
amount of such decrease.

          Section 5.02. CITIZENSHIP.

          (a) GENERALLY. The Owner Trustee, in its individual capacity,
represents and warrants that it is and on the Delivery Date will be a Citizen of
the United States. If the Owner Trustee in its individual capacity does not
comply with the requirements of this Section 5.02, the Owner Trustee and the
Lessee hereby agree that no Default shall be deemed to exist due to
non-compliance by the Lessee with the registration requirements in the Lease or
in Section 4.02(b) hereof occasioned solely by such noncompliance of the Owner
Trustee.

          (b) OWNER TRUSTEE. The Owner Trustee, in its individual capacity,
covenants that if at any time on or after the Delivery Date any of its
Responsible Officers shall have actual knowledge that it has ceased to be a
Citizen of the United States, it will resign immediately as the Owner Trustee if
such citizenship is necessary for registration of the Aircraft in the Owner
Trustee's name under the Transportation Code as in effect at such time (such
necessity to be determined without regard to any provision of law that permits
the U.S. registration of the Aircraft by restricting where it is based or used)
or, if it is not necessary for such registration, if the Owner Trustee is
informed in writing by the Lessee or the Owner Participant that such lack of
United States citizenship would have any adverse effect on the Lessee or the
Owner Participant. The Owner Trustee, in its individual capacity, further
covenants that if at any time it appears reasonably probable that it will cease
to be a Citizen of the United States based on information that is (i) known to a
Responsible Officer of the Owner Trustee or (ii) generally known to the public,
it will promptly so notify, to the extent permitted by law, all parties to this
Agreement.

          Section 5.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUST
COMPANY AND THE OWNER TRUSTEE.

          (a) REPRESENTATIONS AND WARRANTIES. In addition to and without
limiting its other representations and warranties provided for in this Article
5, Trust Company represents and warrants, in its individual capacity with
respect to items (i), (ii), (iii)(A), (iv), (v), (vi), (vii), (viii), (ix) and
(x) below, and as the Owner Trustee with respect to items (iii)(B) and (iv), on
the Delivery Date that:

               (i) it is a national banking association duly organized and
     validly existing in good standing under the laws of the United States with
     its principal place of business and chief executive office (as such terms
     are used in Article 9 of the Uniform Commercial Code) in the State of Utah
     at the address set forth in Section 12.01(b), and has full corporate power
     and authority, in its individual capacity or (assuming the Trust Agreement
     has been duly authorized, executed and delivered by the Owner Participant)
     as the Owner Trustee, as the case may be, to carry on its business as now
     conducted, and

                                       23


     to execute, deliver and perform this Agreement and the Operative Agreements
     to which it is or is to be a party;

               (ii) the execution, delivery and performance by Trust Company,
     either in its individual capacity or as the Owner Trustee, as the case may
     be, of this Agreement and the Operative Agreements to which it is or is to
     be party have been duly authorized by all necessary corporate action on its
     part, and do not contravene its articles of association or by-laws or other
     constitutional documents; each of this Agreement and the other Operative
     Agreements to which it is or is to be a party has been duly authorized, and
     has been duly executed and delivered by Trust Company, either in its
     individual capacity or as the Owner Trustee, as the case may be, and
     neither the execution and delivery thereof nor Trust Company performance of
     or compliance with any of the terms and provisions thereof will violate any
     federal or Utah law or regulation governing Trust Company's banking or
     trust powers;

               (iii) (A) assuming due authorization, execution and delivery by
     each other party thereto, each of the Operative Agreements to which it is
     or is to be party when duly executed and delivered will, to the extent each
     such document is entered into by Trust Company in its individual capacity,
     constitute the legal, valid and binding obligation of Trust Company in its
     individual capacity enforceable against it in such capacity in accordance
     with its respective terms, except as such enforceability may be limited by
     bankruptcy, insolvency, reorganization or other similar laws or equitable
     principles of general application to or affecting the enforcement of
     creditors' rights (regardless of whether enforceability is considered in a
     proceeding in equity or at law), and the performance by Trust Company in
     its individual capacity of any of its obligations thereunder does not
     contravene any lease, regulation or contractual restriction binding on
     Trust Company in its individual capacity;

               (B) assuming due authorization, execution and delivery by each
     other party thereto, each of the Operative Agreements to which it is or is
     to be party when duly executed and delivered will, to the extent each such
     document is entered into by the Owner Trustee in its trust capacity,
     constitute the legal, valid and binding obligation of the Owner Trustee
     enforceable against it in such capacity in accordance with its respective
     terms, except as such enforceability may be limited by bankruptcy,
     insolvency, reorganization or other similar laws or general equitable
     principles, and the performance by the Owner Trustee of any of its
     obligations thereunder does not contravene any lease, regulation or
     contractual restriction binding on the Owner Trustee;

               (iv) there are no pending or, to its knowledge, threatened
     actions or proceedings against Trust Company before any court or
     administrative agency which would materially adversely affect the ability
     of Trust Company, either in its individual capacity or as the Owner
     Trustee, as the case may be, to perform its obligations under the Operative
     Agreements to which it is or is to be party;

               (v) its chief executive office (as such term is defined in
     Article 9 of the Uniform Commercial Code) is 79 South Main Street, Salt
     Lake City, Utah 84111 and it

                                       24


     shall give the Lessee and the Owner Participant at least 30 days' prior
     written notice in the event of any change in its state of incorporation,
     chief executive office or name;

               (vi) neither the execution and delivery by it, either in its
     individual capacity or as the Owner Trustee, as the case may be, of any of
     the Operative Agreements to which it is or is to be a party, requires on
     the part of Trust Company in its individual capacity or any of its
     Affiliates the consent or approval of or the giving of notice to, the
     registration with, or the taking of any other action in respect of, any
     federal or governmental authority or agency governing its banking or trust
     powers;

               (vii) the Owner Trustee holds whatever title to the Aircraft as
     was conveyed to it by the Seller and the Aircraft is free of Lessor's Liens
     attributable to Trust Company in its individual capacity;

               (viii) Trust Company is a Citizen of the United States;

               (ix) Trust Company has made a filing with the New York State
     Banking Department under Section 131.3 of the New York State Banking Law
     with respect to the trust formed by the Trust Agreement; and

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

          (b) LESSOR'S LIENS. Trust Company, in its individual capacity, further
represents, warrants and covenants that there are no Lessor's Liens attributable
to it in its individual capacity on the Delivery Date. The Owner Trustee, in its
trust capacity, and at the cost and expense of the Lessee, covenants that it
will in its trust capacity promptly, and in any event within 30 days after the
same shall first become known to it, take such action as may be necessary to
discharge duly any Lessor's Liens (other than a Permitted Security Interest)
attributable to it in its trust capacity. Trust Company, in its individual
capacity, covenants and agrees that it will at its own expense take such action
as may be necessary to duly discharge and satisfy in full, promptly, and in any
event within 30 days after the same shall first become known to it, any Lessor's
Liens attributable to it in its individual capacity which may arise at any time
after the date of this Agreement.

          (c) INDEMNITY FOR LESSOR'S LIENS. Trust Company, in its individual
capacity, agrees to indemnify and hold harmless the Lessee, the Owner
Participant and the Owner Trustee from and against any loss, cost, expense or
damage which may be suffered by the Lessee, the Owner Participant or the Owner
Trustee as a result of the failure of Trust Company to discharge

                                       25


and satisfy any Lessor's Liens attributable to it in its individual capacity, as
described in Section 5.03(b) hereof.

          (d) SECURITIES ACT. None of Trust Company, the Owner Trustee or any
Person authorized by either of them to act on its behalf has directly or
indirectly offered any interest in the Lessor's Estate, or in any similar
security relating to the Lessor's Estate, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any Person in violation of the Securities Act or any applicable
state securities laws.

          (e) ACTIONS WITH RESPECT TO LESSOR'S ESTATE, ETC. Neither Trust
Company, in its individual capacity, nor the Owner Trustee will take any action
to subject the Lessor's Estate or the trust established by the Trust Agreement,
as debtor, to the reorganization or liquidation provisions of the Bankruptcy
Code or any other applicable bankruptcy or insolvency statute.

          (f) OTHER BUSINESS. Owner Trustee will not enter into any business or
other activity except as contemplated by the Operative Agreements.

          (g) PERFORMANCE OF AGREEMENTS. Owner Trustee shall perform its
obligations under the Operative Agreements to which it is a party in accordance
with the terms thereof.

          Section 5.04. THE LESSEE'S RIGHT OF QUIET ENJOYMENT. Notwithstanding
any other provision of any of the Operative Agreements, each other party to this
Agreement agrees, severally and as to its own actions only, that it will not, so
long as no Event of Default shall have occurred and be continuing, take or cause
to be taken any action contrary to the Lessee's rights under the Lease,
including, without limitation, its rights to possession, use and quiet enjoyment
of the Aircraft during the Term, PROVIDED that nothing contained herein shall
affect any of the rights of the Owner Participant or the Owner Trustee expressly
granted to such Person under any Operative Agreement.

          Section 5.05. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
     Representations,  warranties and covenants of the Owner Participant and the
Owner Trustee (in its individual or trust capacity) provided for in this Article
5, and their respective obligations under any and all of them, shall survive the
delivery  of the  Aircraft  and the  expiration  or  other  termination  of this
Agreement and the other Operative Agreements.

          Section 5.06. COMPLIANCE WITH TRUST AGREEMENT, ETC. Each of the Owner
Participant, Trust Company, and the Owner Trustee agrees with the Lessee that so
long as the Lease shall be in effect it will (i) comply with all of the terms of
the Trust Agreement applicable to it in its respective capacity, the
noncompliance with which would materially adversely affect any such party and
(ii) not take any action, or cause any action to be taken, to amend, modify or
supplement any other provision of the Trust Agreement in a manner that would
materially adversely affect any such party without the prior written consent of
such party. The Owner Trustee confirms for the benefit of the Lessee that it
will comply with the provisions of Article 2 of the Trust Agreement.
Notwithstanding anything else to the contrary in the Trust Agreement, so long as
the Lease remains in effect, the Owner Participant agrees not to terminate or
revoke the trust created by the Trust Agreement without the consent of the
Lessee.

                                       26


                                   ARTICLE 6.
                                      TAXES

          Section 6.01. LESSEE'S OBLIGATION TO PAY TAXES.

          (a) GENERALLY. The Lessee agrees promptly to pay when due, and to
indemnify on an After Tax Basis and hold each Tax Indemnitee harmless from all
license, recording, documentary, registration and other fees and all taxes
(including, without limitation, income, gross receipts, sales, rental, use,
value added, property (tangible and intangible), AD VALOREM, excise and stamp
taxes), fees, levies, imposts, recording duties, duties, charges, assessments or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax or interest thereon (individually, a "Tax," and
collectively called "Taxes"), however imposed or asserted (whether imposed upon
any Tax Indemnitee, the Lessee, all or any part of the Aircraft, Airframe, any
Engine or any Part or the Lessor's Estate, Rent, or otherwise upon or with
respect to any Operative Agreement or any transactions contemplated thereunder
or any payments thereunder or otherwise in connection therewith), by any
Federal, state or local government or taxing authority in the United States, or
by any government or taxing authority of a foreign country or of any political
subdivision or taxing authority thereof or by a territory or possession of the
United States or an international taxing authority, in any such case as relating
to or measured by:

               (i) the construction, purchase, charter, rental, assignment,
     presence, overhaul, control, acceptance, rejection, delivery, nondelivery,
     transport, location, ownership, registration, reregistration,
     deregistration, insuring, assembly, possession, repossession, operation,
     use, non-use, condition, maintenance, repair, improvement, conversion,
     sale, return, abandonment, preparation, installation, storage, redelivery,
     replacement, manufacture, leasing, subleasing, sub-subleasing,
     modification, alteration, rebuilding, importation, transfer of title,
     transfer of registration, exportation or other application or disposition
     of, or the imposition of any Lien (or the incurrence of any liability to
     refund or pay over any amount as a result of any Lien) on, the Aircraft,
     the Airframe, any Engine or any Part or any interest therein;

               (ii) amounts payable under the Operative Agreements;

               (iii) the Aircraft, or the income or other proceeds (x) received
     with respect to the Aircraft attributable to the transactions contemplated
     by the Operative Agreements or (y) held by the Owner Trustee under the
     Trust Agreement or after an Event of Default under the Lease;

               (iv) with respect to any Operative Agreement, any interest
     therein or by reason of the transactions described in or contemplated by
     the Operative Agreements;

               (v) the Aircraft, the Airframe, any Engine or any Part;

               (vi) the rentals (including Basic Rent and Supplemental Rent),
     receipts, earnings, principal, interest, fees, proceeds and any other
     income or amounts payable,

                                       27


     whether actual or deemed, arising upon, under or in connection with any of
     the Operative Agreements;

               (vii) in the case of the Owner Participant, any "prohibited
     transaction," within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code, arising out of or in connection with the
     acquisition or holding of the Owner Participant's interest in the Trust
     Estate.

          (b) EXCEPTIONS. The indemnity provided for in Section 6.01(a) shall
not extend to any of the following:

               (i) With respect to a Tax Indemnitee, Taxes, whether imposed by
     withholding or otherwise, based upon, measured by or with respect to the
     net or gross income, items of tax preference or minimum tax or excess
     profits, alternative minimum taxes, receipts, capital, franchise, net worth
     (whether, denominated income, excise, capital stock, or doing business
     taxes) or other similarly-based taxes (other than taxes that are in the
     nature of, sales, use, transfer, ad valorem, stamp, property, or similar
     taxes) ("Income Taxes") imposed by the United States or by any state, local
     or foreign jurisdiction, PROVIDED, HOWEVER, that this clause shall not
     exclude from the indemnity described in Section 6.01(a) above any such
     Income Taxes to be imposed by any such jurisdiction (other than the United
     States or any state or local taxing authority in any state in the United
     States) as a result of (I) the operation, registration, location, presence,
     or use of the Aircraft, Airframe, any Engine or any Part thereof, by the
     Lessee or any Affiliate thereof or any Sublessee within the jurisdiction of
     the taxing authority imposing such Tax, (II) the presence or activities of
     the Lessee or any Affiliate thereof or any Sublessee within the
     jurisdiction of the taxing authority imposing such Tax, (III) the status of
     the Lessee or any Affiliate thereof or any Sublessee as a foreign entity or
     as an entity owned in whole or in part by foreign persons, or (IV) the
     Lessee or any Affiliate thereof or any Sublessee having made (or having
     been deemed to have made) payments to such Tax Indemnitee from the
     jurisdiction of the taxing authority imposing such Tax,;

               (ii) Taxes imposed with respect to any period beginning after the
     earlier of (A) the discharge in full of the Lessee's obligation, if any, to
     pay Termination Value under and in accordance with the Lease, (B) the
     expiration of the Term of the Lease or (C) the termination of the Lease in
     accordance with the applicable provisions of the Lease thereof;

               (iii) As to the Owner Trustee, Taxes imposed against the Owner
     Trustee upon or with respect to any fees for services rendered in its
     capacity as Owner Trustee under the Trust Agreement;

               (iv) With respect to any Tax Indemnitee, Taxes resulting from the
     willful misconduct or gross negligence of such Tax Indemnitee or a Related
     Tax Indemnitee;

               (v) Taxes imposed on the Owner Trustee or the Owner Participant
     or any successor, assign or Affiliate thereof which became payable by
     reason of any

                                       28


     mortgage, pledge, financing, voluntary transfer or disposition by such Tax
     Indemnitee subsequent to the Delivery Date, including revocation of the
     Trust, of any interest in some or all of the Aircraft, Airframe, Engines or
     Parts thereof or its interest in the Lessor's Estate or a transfer or
     disposition of shares or other interests in the Owner Trustee or the Owner
     Participant or a disposition in connection with a bankruptcy or similar
     proceedings involving either the Lessor or the Owner Participant or a
     transfer or disposition of shares or other interests in the Owner Trustee
     or the Owner Participant in each case other than (A) transfers resulting
     from a loss, substitution or modification of the Aircraft, Engines or any
     Part, (B) transfers pursuant to the Lessor's exercise of remedies in
     accordance with Section 17 of the Lease, (C) termination of the Lease upon
     the Lessee's exercise of Lessee's options pursuant to Section 14 of the
     Lease, or (D) a transfer to Lessee pursuant to Section 13(b) of the Lease;
     the parties agree to cooperate to minimize any such Taxes covered by this
     provision;

               (vi) Taxes subject to indemnification by the Lessee pursuant to
     the Tax Indemnity Agreement;

               (vii) Taxes imposed on a successor, assign or other transferee of
     any interest of a Tax Indemnitee in the Aircraft, any Engine or any Part or
     any Operative Agreement or any proceeds thereunder to the extent that the
     aggregate amount of such Taxes exceeds the aggregate amount of Taxes that
     would have been imposed on the transferor (determined at the time of the
     transfer) and that would have been indemnifiable pursuant to
     Section 6.01(a) hereof, provided that the exclusion in this clause (vii)
     shall not apply in the case of any such sale, assignment, transfer or
     disposition that occurs in connection with an Event of Default or in
     connection with a bankruptcy, insolvency or other proceeding for the relief
     of debtors in which the Lessee is a debtor;

               (viii) Any Taxes which have been properly included in the
     Purchase Price;

               (ix) Any Taxes imposed on the Owner Trustee or Owner Participant
     which would not have been imposed but for a Lessor's Lien;

               (x) In the case of the Owner Participant, any Taxes relating to,
     resulting from, arising out of or in connection with a "prohibited
     transaction" within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code resulting from the direct or indirect use of
     assets of any ERISA Plan to acquire or hold Owner Participant's interest in
     the Trust Estate or in the case of any transferee of the Owner Participant
     referred to in Section 5.01(c), to purchase the Beneficial Interest
     pursuant to Section 5.01(c);

               (xi) Taxes that are being contested in accordance with the
     provisions hereof;

               (xii) United States withholding Taxes imposed on the Owner
     Participant as a result of the Owner Participant not being a U.S. Person;

                                       29


               (xiii) interest, penalties, fines or additions to tax to the
     extent they relate to Taxes for which no indemnity would be payable by
     Lessee pursuant to this Section 6.01(b); or

               (xiv) Taxes arising from or attributable to the like-kind
     exchange transaction described in the last sentence of Section 2.01(a) to
     the extent such Taxes exceed the amount of Taxes that would have been
     imposed in the absence of such like-kind exchange transaction.

          Section 6.02. AFTER TAX BASIS. The amount which the Lessee shall be
required to pay with respect to any Tax indemnified against under Section 6.01
(an "Indemnifiable Tax") shall be an amount sufficient to restore the Tax
Indemnitee, on an After Tax Basis, to the same position such party would have
been in had such Tax not been incurred, taking into account any tax benefits
recognized by such Tax Indemnitee as a result of the Indemnifiable Tax. If any
Tax Indemnitee actually realizes a tax benefit (whether by credit, deduction or
otherwise), or would have realized such a benefit as to which it has been given
notice if properly claimed, and with respect to Owner Participant, the Owner
Participant has not determined in good faith that claiming such benefit would
have a material adverse impact on the Owner Participant or an Affiliate thereof,
by reason of the payment of any Tax paid or indemnified against by the Lessee,
provided that an Event of Default has not occurred and is not continuing, such
Tax Indemnitee shall promptly pay to the Lessee, to the extent such tax benefit
was not previously taken into account in computing such payment or indemnity,
but not before the Lessee shall have made all payments then due to such Tax
Indemnitee under this Agreement, the Tax Indemnity Agreement and any other
Operative Agreement, an amount equal to the lesser of (x) the sum of such tax
benefit plus any other tax benefit realized by such Tax Indemnitee that would
not have been realized but for any payment made by such Tax Indemnitee pursuant
to this sentence and not already paid to the Lessee, or (y) the amount of the
payment made under Section 6.01 hereof and this Section 6.02 by the Lessee to
such Tax Indemnitee plus the amount of any other payments by the Lessee to such
Tax Indemnitee theretofore required to be made under this Section 6.02 and
Sections 6.01 and 6.05 hereof (and the excess, if any, of the tax benefit over
the applicable amount described in clause (x) over the amount described in
clause (y) above shall be carried forward and applied to reduce PRO TANTO any
subsequent obligations of the Lessee to make payments to such Tax Indemnitee
pursuant to Section 6.01 hereof). If an amount payable by any Tax Indemnitee to
the Lessee pursuant to this Section 6.02 is not paid when due because of the
occurrence and continuation of any Event of Default, such amount shall be
payable by any Tax Indemnitee to the Lessee upon the Lessee's curing all Events
of Default. The Lessee shall reimburse on an After Tax Basis such Tax Indemnitee
(subject to Section 6.01(b), but only insofar as subsections (iv), (vi), (vii),
(ix), (x), (xi), (xii) and (xiii) thereof would apply) for any payment of a tax
benefit pursuant to the preceding sentence (or a tax benefit otherwise taken
into account in calculating the Lessee's indemnity obligation hereunder) to the
extent that such tax benefit is subsequently disallowed or reduced.

          In determining the order in which any Tax Indemnitee utilizes
withholding or other foreign taxes as a credit against such Tax Indemnitee's
United States income taxes, such Tax Indemnitee shall be deemed to utilize (i)
first, all foreign taxes other than those described in clause (ii) below; and
(ii) then, on a pro rata basis, all foreign taxes with respect to which such Tax
Indemnitee is entitled to obtain indemnification pursuant to an indemnification
provision

                                       30


contained in any lease, loan agreement, or other financing document (including
this Agreement) that is similar to the indemnification provision in this Article
6.

          Section 6.03. TIME OF PAYMENT. Any amount payable to a Tax Indemnitee
pursuant to this Article 6 shall be paid promptly, but in any event within 30
days after receipt of a written demand therefor from such Tax Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable, PROVIDED that in
the case of amounts which are being contested by the Lessee in good faith or by
the Tax Indemnitee in either case pursuant to Section 6.04 hereof, or subject to
verification proceedings pursuant to Section 6.11 hereof, such amount shall be
payable within 30 days after the time such contest or verification proceeding,
as the case may be, is finally resolved. In no event shall any amount be payable
under Section 6.01 until two Business Day prior to the due date for Tax in
issue.

          Section 6.04. CONTESTS.

          (a) NOTICE OF CLAIM. If a written claim is made against any Tax
Indemnitee for Taxes with respect to which the Lessee is liable for a payment or
indemnity hereunder, such Tax Indemnitee shall promptly (but in any event within
30 days of receipt thereof) give the Lessee notice in writing of such claim and
shall furnish the Lessee with copies of any written requests for information
sent to such Tax Indemnitee from any taxing authority to the extent relating to
such Taxes with respect to which the Lessee may be required to indemnify
hereunder; PROVIDED, HOWEVER, that the failure of a Tax Indemnitee to give such
notice or furnish such copy shall not terminate any of the rights of such Tax
Indemnitee under this Article 6, except (A) to the extent that the Lessee's
contest rights have been materially and adversely impaired by the failure to
provide such notice or copy or (B) to the extent that such failure results in
the imposition of, or an increase in the amount of, any penalties, interest or
additions to Tax related to the Tax which is the subject of such claim or
proceeding.

          (b) REQUEST FOR CONTEST. If a written claim shall be made against any
Tax Indemnitee for any Tax, other than an Income Tax, for which the Lessee may
be obligated to indemnify pursuant to Section 6.01 hereunder, and under
applicable law of the taxing jurisdiction the Lessee is allowed to contest
directly such Tax and the Tax to be contested is not reflected in a report or
return with other Taxes of any Tax Indemnitee (as confirmed in writing by such
Tax Indemnitee) and if the Tax Indemnitee determines in good faith that it will
not suffer any adverse consequences as a result and that no tax return of the
Tax Indemnitee will be kept open as a result of such contest beyond the
applicable statute of limitations period (as confirmed in writing by such Tax
Indemnitee), then the Lessee shall be permitted, at its expense and in its own
name, or, if consented to in writing by the Tax Indemnitee, in the name of such
Tax Indemnitee, to contest the imposition of such Tax (a " Lessee Controlled
Contest"); PROVIDED, HOWEVER, that the Lessee shall not be permitted or entitled
to contest any Tax unless (A) such contest will not result in the risk of an
imposition of criminal penalties or a more than de minimis risk of a sale,
forfeiture or loss of the Aircraft, the Airframe, the Engines or any part
thereof or the creation of any Lien other than Liens for Taxes of the Lessee (x)
either not yet due or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve the risk of an imposition of criminal
penalties or a more than de minimis risk of any sale, forfeiture or loss of the
Aircraft (unless the Lessee has provided a bond or other sufficient protection
against any

                                       31


such risk reasonably satisfactory to the Tax Indemnitee), and (y) for the
payment of which such reserves, if any, as required to be provided under
generally accepted accounting principles have been provided and, to the extent
permitted by law, the Lessee shall be entitled to withhold payment during
pendency of such contest, (B) if an Event of Default shall have occurred and be
continuing, the Lessee shall have provided security for its obligations
hereunder reasonably satisfactory to the Owner Participant by placing in escrow
funds to cover any such obligations, (C) the Lessee shall have agreed to pay
such Tax Indemnitee on demand and on an After Tax Basis all costs and expenses
that such Tax Indemnitee actually incurs in connection with contesting such
claim (including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, or penalties, interest and addition to
tax), (D) if such contest shall be conducted in a manner requiring the payment
of the claim in advance, the Lessee shall have advanced sufficient funds, on an
interest free basis, to make the payment required (or the Lessee shall have paid
the amount required directly to the appropriate taxing authority), and agreed to
indemnify the Tax Indemnitee against any additional net adverse tax consequences
on an After Tax Basis to such Tax Indemnitee of such advance, and (E) if
requested by the Owner Participant, independent tax counsel selected by Owner
Participant and reasonably acceptable to the Lessee has rendered an opinion
within 30 days of the Owner Participant providing notice of the claim to the
Lessee that a Reasonable Basis exists for contesting such claim.

          If the Lessee shall so request within 30 days after receipt of such
notice from a Tax Indemnitee under this Section 6.04 hereof and with respect to
a Tax for which the Lessee may be obligated to indemnify pursuant to
Section 6.01 and which does not satisfy the requirements to constitute a Lessee
Controlled Contest, such Tax Indemnitee shall in good faith at the Lessee's
after-tax expense contest the imposition of such Tax; PROVIDED, HOWEVER, that
such Tax Indemnitee, after considering in good faith any advice of the Lessee
and the Lessee's counsel concerning the forum in which the adjustment is most
likely to be favorably resolved, may in its sole discretion select the manner
and forum for such contest and determine whether any such contest shall be made
by (a) resisting payment thereof if lawful and practicable or not paying the
same except under protest if protest is necessary and proper in each case so
long as non-payment will not result in a more than de minimis risk of the sale,
forfeiture or loss of, or the creation of a Lien other than a Permitted Lien on
the Aircraft, Airframe or any Engine or any risk of criminal liability; or (b)
if the payment be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and/or judicial proceedings; PROVIDED FURTHER,
HOWEVER, that at such Tax Indemnitee's option, such contest shall be conducted
by the Lessee in the name of such Tax Indemnitee if such Tax Indemnitee so
requests in writing and that in no event shall such Tax Indemnitee be required
or the Lessee permitted to contest under this paragraph the imposition of any
Tax for which the Lessee may be obligated pursuant to this Section 6.01 unless:

               (i) in the case of an Income Tax, the Lessee shall have furnished
     at the Lessee's expense an opinion of counsel selected by the Lessee and
     reasonably satisfactory to such Tax Indemnitee to the effect that a
     Reasonable Basis exists for pursuing such contest;

               (ii) the Lessee shall have agreed to pay such Tax Indemnitee on
     demand and on an After Tax Basis all reasonable costs and expenses that
     such Tax Indemnitee may incur in connection with contesting such claim
     (including, without

                                       32


     limitation, all costs expenses, losses, reasonable legal and accounting
     fees, disbursements, penalties, interest and additions to tax);

               (iii) such Tax Indemnitee shall have determined that the action
     to be taken will not result in any more than de minimis danger of sale,
     forfeiture or loss of, or the creation of any Lien other the Liens for
     Taxes of the Lessee (or any Sublessee) either not yet due or being
     contested in good faith by appropriate proceedings so long as such
     proceedings do not involve any more than de minimis risk of the sale,
     forfeiture or loss of the Aircraft, the Airframe or any Engine or any
     interest therein (unless the Lessee has provided a bond or other sufficient
     protection against any such risk reasonably satisfactory to the Tax
     Indemnitee) and for the payment of which such reserves, if any, as are
     required to be provided under generally accepted accounting principles have
     been provided;

               (iv) if an Event of Default shall have occurred and be
     continuing, the Lessee shall have provided security for its obligations
     hereunder reasonably satisfactory to the Owner Participant by placing in
     escrow sufficient funds to cover any such obligations;

               (v) Lessee shall have acknowledged its liability for such claims;

               (vi) such contest and related contests involving other equipment
     involve potential payments and/or indemnities by the Lessee (whether or not
     such indemnity is pursuant to this Agreement) of at least $25,000 in the
     aggregate; and

               (vii) if such contest shall be conducted in a manner requiring
     the payment of the claim in advance, the Lessee shall have advanced
     sufficient funds, on an interest free basis, to make the payment required,
     and agreed to indemnify the Tax Indemnitee against any additional net
     adverse tax consequences on an After Tax Basis to such Tax Indemnitee of
     such advance.

          In the case of a contest which is not a Lessee Controlled Contest, if
requested by the Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to appeal any adverse decision to the United States Supreme Court
provided that with respect to an appeal of an adverse judicial decision a
substantial basis in law and fact must exist that such appeal will be
successful. If the Lessee is permitted under applicable law to contest a Tax
asserted against the Lessee and the same or similar Tax is also asserted against
the Tax Indemnitee, subject to the conditions herein, each of the Lessee and
such Tax Indemnitee shall conduct its contest in its own name and the Lessee and
such Tax Indemnitee will cooperate in a reasonable manner with respect to the
respective contests of such Tax.

          (c) DECLINING TO CONTEST; SETTLEMENT.

               (i) If, after the Lessee has properly requested a contest in
     accordance with this Section 6.04 and Lessee is then complying with the
     terms of this Section 6.04, any Tax Indemnitee shall at any time decline to
     take any action required under Section 6.04 with respect to such contest,
     then, if such failure shall cause the contest to be

                                       33


     determined adversely or shall preclude such contest as a matter of law, the
     Lessee shall not be obligated to indemnify such Tax Indemnitee for such Tax
     and such Tax Indemnitee shall reimburse the Lessee for all amounts
     previously advanced by the Lessee in connection with such contest (other
     than costs and expenses of such contest).

               (ii) No Tax Indemnitee shall settle a contest of any indemnified
     Tax without requesting the Lessee's written consent (which consent will not
     be unreasonably withheld, as determined in the Lessee's good faith
     judgment). If any Tax Indemnitee shall settle a contest for any Tax without
     receiving the Lessee's written consent, then the Lessee shall not be
     obligated to indemnify such Tax Indemnitee for such Tax and the Tax
     Indemnitee shall reimburse the Lessee for all amounts previously advanced
     with respect to such contest (other than costs and expenses of such
     contest). Notwithstanding the preceding two sentences, no Tax Indemnitee
     shall be required to take or continue any action unless the Lessee shall
     have agreed to pay the Tax Indemnitee on a current and After Tax Basis all
     reasonable fees and expenses (including reasonable attorney's and
     accountant's fees) which such Tax Indemnitee may incur as a result of
     contesting such Taxes.

          (d) CONTINUING CLAIMS. Notwithstanding anything contained in this
Section 6.04 to the contrary, no Tax Indemnitee shall be required to contest any
claim if the subject matter thereof shall be of a continuing nature and shall
have previously been adversely decided pursuant to the contest provisions of
this Section 6.04 unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings and court decisions) or the Lessee shall have provided new facts after
such claim shall have been so previously decided, and such Tax Indemnitee shall
have received an opinion of independent tax counsel selected by it and
reasonably approved by the Lessee and furnished at the Lessee's sole expense to
the effect that, as a result of such change or new facts, it is more likely than
not that the position which such Tax Indemnitee or the Lessee, as the case may
be, had asserted in such previous contest, would prevail.

          (e) CLAIMS BARRED. If (A) any Tax Indemnitee fails to give the Lessee
written notice pursuant to this Section 6.04 of any claim by any government or
taxing authority for any Tax for which the Lessee is obligated pursuant to this
Section 6.01, (B) as a direct result of such failure the contest of such claim
has been materially and adversely impaired and (C) the Lessee furnishes, at the
Lessee's expense, an opinion of counsel selected by the Lessee and reasonably
satisfactory to such Tax Indemnitee to the effect that, had the contest of such
claim not been materially and adversely impaired, a Reasonable Basis would have
existed for pursuing such contest, such Tax Indemnitee shall be deemed to have
waived its right to any payment by the Lessee that would otherwise be payable by
the Lessee pursuant to this Section 6.01 in respect of such claim.

          Section 6.05. REFUNDS. When a Tax Indemnitee becomes entitled to
receive a refund or credit against Tax of all or any part of any Taxes which the
Lessee shall have paid for such Tax Indemnitee or for which the Lessee shall
have reimbursed or indemnified such Tax Indemnitee, such Tax Indemnitee shall
pay, provided an Event of Default has not occurred and is not continuing, to the
Lessee an amount equal to the amount of such refund or credit, together with any
interest attributable thereto, less (x) all payments then due to such Tax
Indemnitee

                                       34


under this Article 6, and (y) Taxes imposed with respect to the accrual or
receipt thereof, including interest received attributable thereto, plus any tax
benefit realized by such Tax Indemnitee as a result of any payment by such Tax
Indemnitee made pursuant to this sentence; PROVIDED, HOWEVER, that such amount
shall not be payable (a) before such time as the Lessee shall have made all
payments or indemnities then due and payable to such Tax Indemnitee under this
Article 6 and (b) to the extent that the amount of such payment (without regard
to any interest component thereof) would exceed (i) the amount of all prior
payments by the Lessee to such Tax Indemnitee pursuant to this Article 6 less
(ii) the amount of all prior payments by such Tax Indemnitee to the Lessee
pursuant to this Article 6 (any such excess shall be carried forward to reduce
PRO TANTO any subsequent obligations of the Lessee to make payments to such Tax
Indemnitee pursuant to Section 6.01 hereof). If an amount payable by any Tax
Indemnitee to the Lessee pursuant to this Section 6.02 is not paid when due
because of the occurrence and continuation of an Event of Default, such amount
shall be payable by any Tax Indemnitee to the Lessee upon the Lessee's curing
all Events of Default.

          Any subsequent loss of such refund or tax benefit shall be treated as
a Tax subject to indemnification under the provisions of this Article 6 (in the
case of any such tax benefit, subject to Section 6.01(b) but only insofar as
subsections (iv), (vi), (vii), (ix),(x), (xi), (xii) and (xiii) thereof would
apply).

          Section 6.06. REPORTS. In case any report or return is required to be
made with respect to any Taxes (other than Income Taxes) against which the
Lessee is or may be obligated to indemnify the Indemnitees under this Article 6,
the Lessee shall, to the extent it has knowledge thereof, make such report or
return, except for any such report or return that the Tax Indemnitee has
notified the Lessee that it intends to file, in such manner as will show the
ownership of the Aircraft in the Owner Trustee (unless the ownership of the
Aircraft is not shown on such report or return) and, upon request, shall send a
copy of the applicable portions of such report or return to the Tax Indemnitee
and the Owner Trustee or will notify the Tax Indemnitee of such requirement and
make such report or return in such manner as shall be satisfactory to such Tax
Indemnitee and the Owner Trustee. The Lessee will provide such information
within the possession or control of the Lessee as the Tax Indemnitee may
reasonably request in writing from the Lessee to enable the Tax Indemnitee to
fulfill its tax filing requirements with respect to the transactions
contemplated by the Operative Agreements (without duplication of any comparable
requirements of the Tax Indemnity Agreement) and any audit information request
arising from any such filing. The Tax Indemnitee will provide such information
within its possession or control as the Lessee may reasonably require from such
Tax Indemnitee to enable the Lessee to fulfill its tax filing requirements with
respect to the transactions contemplated by the Operative Agreements and any
audit information request arising from such filing; PROVIDED that in no event
shall any Tax Indemnitee be required to provide copies of any of its tax
returns.

          Section 6.07. SURVIVAL OF OBLIGATIONS. The representations,
warranties, indemnities and agreements of the Lessee provided for in this
Article 6 and the Lessee's obligations under any and all of them, in each case,
with respect to events or periods prior to the expiration or termination of the
Lease shall survive the expiration or other termination of the Operative
Agreements.

                                       35


          Section 6.08. PAYMENT OF TAXES. With respect to any Tax otherwise
indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe,
any Engine or Parts, to the extent permitted by the applicable federal, state,
local or foreign law, the Lessee shall pay such tax directly to the relevant
Taxing authority and file any returns or reports required with respect thereto
to the extent legally entitled to do so in its own name; PROVIDED, HOWEVER, that
the Lessee shall not make any statements or take any action which would indicate
that the Lessee or any Person other than the Owner Trustee or Owner Participant
is the owner of the Aircraft, the Airframe, any Engine or any Part or which
would otherwise be inconsistent with the terms of the Lease or the Tax Indemnity
Agreement and the position thereunder of the Owner Trustee and the Owner
Participant.

          Section 6.09. REIMBURSEMENTS BY INDEMNITEES GENERALLY. To the extent
the Lessee is required to pay or withhold any Tax imposed on or with respect to
a Tax Indemnitee in respect of the transactions contemplated by the Operative
Agreements, which Tax is not otherwise the responsibility of the Lessee under
the Operative Agreements, or any other written agreements between the Lessee and
such Tax Indemnitee, then such Tax Indemnitee shall pay to the Lessee within 30
days of the Lessee's demand therefor an amount which equals the amount actually
paid by the Lessee with respect to such Taxes.

          Section 6.10. FORMS. Each Tax Indemnitee agrees to furnish from time
to time to Lessee or to such other person as Lessee may designate, at Lessee's
request, such duly executed and properly completed forms as may be necessary or
appropriate in order to claim any reduction of or exemption from any withholding
or other Tax imposed by any taxing authority, if (x) such reduction or exemption
is available to such Tax Indemnitee, (y) Lessee has provided such Tax Indemnitee
with any information necessary to complete such form not otherwise reasonably
available to such Tax Indemnitee, and (z) with respect to Owner Participant, the
Owner Participant has determined in good faith that furnishing such form could
not have a material adverse impact on the Owner Participant or an Affiliate
thereof.

          Section 6.11. VERIFICATION. At the Lessee's request, the accuracy of
any calculation of amount(s) payable pursuant to this Article 6 shall be
verified by independent public accountants selected by the applicable Tax
Indemnitee and reasonably satisfactory to the Lessee, and such verification
shall bind the applicable Tax Indemnitee and the Lessee. In order, and to the
extent necessary, to enable such independent accountants to verify such amounts,
such Tax Indemnitee shall provide to such independent accountants (for their
confidential use and not to be disclosed to the Lessee or any other person) all
information reasonably necessary for such verification. Verification shall be at
the expense of the Lessee, unless such verification results in an adjustment in
the Lessee's favor of $10,000 or more of the amount of the payment as computed
by such Tax Indemnitee, in which case the verification shall be at the expense
of the Tax Indemnitee.

          Section 6.12. NON-PARTIES. If a Tax Indemnitee is not a party to this
Agreement, Lessee may require the Tax Indemnitee to agree in writing, in a form
reasonably acceptable to Lessee, to the terms of this Article 6 prior to making
any payment to such Tax Indemnitee hereunder.

                                       36


                                   ARTICLE 7.
                                GENERAL INDEMNITY

          Section 7.01. GENERALLY.

          (a) INDEMNITY. The Lessee agrees to indemnify each Indemnitee against
and agrees to protect, defend, save and keep harmless each Indemnitee from and
against and in respect of, and will pay on an After Tax Basis, any and all
liabilities, obligations, losses, damages, settlements, penalties, claims,
actions, suits, costs, disbursements and expenses, demands or judgments
(including reasonable legal fees and expenses) of every kind and nature, whether
or not any of the transactions contemplated by this Agreement are consummated
and whether arising before, on or after the Delivery Date (individually, an
"Expense," collectively, "Expenses"), which may be imposed on, incurred or
suffered by or asserted against any Indemnitee, in any way relating to, arising
out of or in connection with, any one or more of the following:

               (i) any Operative Agreement, Sublease or any transaction
     contemplated thereby;

               (ii) the operation, possession, use, non-use, maintenance,
     storage, overhaul, delivery, non-delivery, control, condition, alteration,
     modification, addition, improvement, airworthiness, replacement,
     substitution, return, abandonment, redelivery or other disposition, repair
     or testing of the Aircraft, Airframe, or any Engine or any engine used in
     connection with the Airframe, or any Part thereof by the Lessee, any
     sublessee or any other Person whatsoever, whether or not such operation,
     possession, use, non-use, maintenance, storage, overhaul, delivery,
     non-delivery, control, condition, alteration, modification, addition,
     improvement, airworthiness, replacement, substitution, return, abandonment,
     redelivery or other disposition, repair or testing is in compliance with
     the terms of the Lease, including, without limitation, claims for death,
     personal injury or property damage or other loss or harm to any Person
     whatsoever, including, without limitation, any passengers, shippers or
     other Persons wherever located, claims or penalty relating to any laws,
     rules or regulations, including, without limitation, environmental control,
     noise and pollution laws, rules or regulation and any Liens in respect of
     the Aircraft, any Engine or any Part;

               (iii) the manufacture, design, sale, return, purchase,
     acceptance, nonacceptance, rejection, delivery, non-delivery, condition,
     repair, modification, servicing, rebuilding, airworthiness, registration,
     reregistration, deregistration, ownership, financing, import, export,
     performance, non-performance, lease, sublease, transfer, merchantability,
     fitness for use, alteration, substitution or replacement of any Airframe,
     Engine, or Part or other transfer of use or possession, or other
     disposition of the Aircraft, the Airframe, any Engine or any Part
     including, without limitation, latent and other defects, whether or not
     discoverable, tort liability, whether or not arising out of the negligence
     of any Indemnitee (whether active, passive or imputed and including strict
     liability without fault), and any claims for patent, trademark or copyright
     infringement;

                                       37


               (iv) any breach of or failure to perform or observe, or any other
     non-compliance with, any condition, covenant or agreement to be performed,
     or other obligations of the Lessee under any of the Operative Agreements,
     or the falsity or inaccuracy of any representation or warranty of the
     Lessee in any of the Operative Agreements (other than representations and
     warranties in the Tax Indemnity Agreement) or the occurrence of any Default
     or Event of Default;

               (v) the enforcement of the terms of the Operative Agreements
     (including this Section 7.01(a));

               (vi) any interest in the Lessor's Estate or the Trust Agreement
     or any similar interest; and

               (vii) in the case of the Owner Participant, any "prohibited
     transaction," within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code, arising out of or in connection with the
     acquisition or holding of the Owner Participant's interest in the Trust
     Estate.

          (b) EXCEPTIONS. The indemnity provided for in Section 7.01(a) shall
not extend to any Expense of any Indemnitee to the extent it:

               (i) is attributable to the willful misconduct or gross negligence
     of such Indemnitee (other than gross negligence or willful misconduct
     imputed to such person by reason of its interest in the Aircraft or any
     transaction documents);

               (ii) except to the extent fairly attributable to acts or events
     occurring prior thereto, is attributable to acts or events (other than the
     performance by Lessee of its obligations pursuant to the terms of the
     Operative Agreements) which occur after the Aircraft is no longer part of
     the Lessor's Estate or, if the Aircraft remains a part of the Lessor's
     Estate, after the expiration of the Term (unless the Aircraft is being
     returned at such time, in which case after return of physical possession;
     PROVIDED that if the Lease has been terminated pursuant to Section 17
     thereof, the indemnity provided in Section 7.01(a) hereof shall survive for
     so long as Lessor shall be exercising remedies under such Section 17), or
     to acts or events which occur after return of possession of the Aircraft by
     the Lessee in accordance with the provisions of the Lease (subject to the
     foregoing proviso if the Lessor has terminated the Lease pursuant to
     Section 17 of the Lease); PROVIDED that nothing in this clause (ii) shall
     be deemed to exclude or limit any claim that any Indemnitee may have under
     Applicable Law by reason of an Event of Default or for damages from Lessee
     for breach of Lessee's covenants contained in the Lessee Documents or to
     release Lessee from any of its obligations under the Lessee Documents that
     expressly provide for performance after termination of the Term;

               (iii) other than as expressly provided herein or in the other
     Operative Agreements, is a Tax or loss of a Tax benefit, whether or not the
     Lessee is required to indemnify therefor pursuant to Article 6 hereof or
     pursuant to the Tax Indemnity Agreement;

                                       38


               (iv) is a cost or expense expressly required to be paid by such
     Indemnitee or its permitted transferees (and not by the Lessee) pursuant to
     this Agreement or any other Operative Agreement and for which the Lessee is
     not otherwise obligated to reimburse such Indemnitee, directly or
     indirectly pursuant to the terms of this Agreement or such other Operative
     Agreement;

               (v) is attributable to the incorrectness or breach by such
     Indemnitee of its representations or warranties, under any of the Operative
     Agreements except to the extent such incorrectness or breach was caused by
     a breach by Lessee of any representation or warranty or by any failure of
     Lessee to perform any obligation under an Operative Agreement;

               (vi) is attributable to the failure by such Indemnitee to perform
     any of its obligations under any of the Operative Agreements except to the
     extent such failure was caused by a breach by Lessee of any representation
     or warranty or by any failure of Lessee to perform any obligation under an
     Operative Agreement;

               (vii) is, in the case of the Owner Participant, Lessor's Liens
     attributable to the Owner Participant; in the case of the Owner Trustee,
     Lessor's Liens to the extent attributable to the Owner Trustee; in the case
     of Trust Company, Lessor's Liens to the extent attributable to Trust
     Company;

               (viii) is, in the case of the Owner Participant or the Owner
     Trustee, attributable to the offer or sale by such Indemnitee of any
     interest in the Aircraft, the Lessor's Estate or the Trust Agreement or any
     similar interest (including an offer or sale resulting from bankruptcy or
     other proceedings for the relief of debtors in which such Indemnitee is the
     debtor), unless in each case such offer or sale shall occur pursuant to the
     exercise of remedies under Section 17 of the Lease;

               (ix) in the case of the Owner Participant, is an Expense relating
     to, resulting from, arising out of or in connection with a "prohibited
     transaction" within the meaning of Section 406 of ERISA or
     Section 4975(c)(1) of the Code resulting from the direct or indirect use of
     assets of any ERISA Plan to acquire or hold Owner Participant's interest in
     the Trust Estate or in the case of any transferee of the Owner Participant
     referred to in Section 5.01(c), to purchase the Beneficial Interest
     pursuant to Section 5.01(c);

               (x) except during the continuation of an Event of Default, is
     attributable to any amendment to any of the Operative Agreements which is
     not requested, or consented to, by the Lessee or is not required or made
     pursuant to the terms of any of the Operative Agreements;

               (xi) is attributable to the exercise by any Indemnitee of any
     right to inspect the Aircraft except with respect to any such inspection
     conducted while an Event of Default is continuing;

               (xii) constitutes the loss of future profits of such Indemnitee
     or losses attributable to such Indemnitee's overhead; and

                                       39


               (xiii) arises from or is attributable to the like-kind exchange
     transaction described in the last sentence of Section 2.01(a) to the extent
     such Expenses exceed the amount of Expenses that would have been imposed in
     the absence of such like-kind exchange transaction.

          Section 7.02. NOTICE AND PAYMENT. Each Indemnitee shall give prompt
written notice to the Lessee of any liability as to which an officer of such
Indemnitee has actual knowledge, for which the Lessee is, or may be, liable
under this Article 7; PROVIDED, HOWEVER, that failure to give such notice shall
not terminate any of the rights of an Indemnitee under this Article 7 and shall
not release Lessee from any of its obligations to indemnify such Indemnitee
hereunder, except to the extent that such failure adversely affects any
applicable defense or counterclaim, otherwise increases the amount the Lessee
would have been liable for in the absence of such failure to provide such notice
or adversely affects the ability of Lessee's insurers to defend such claim.

          Section 7.03. DEFENSE OF CLAIMS. The Lessee or its insurers shall have
the right (in each such case at the Lessee's sole expense) to investigate,
defend (and control the defense of) any such claim for which indemnification is
sought pursuant to this Article 7 (so long as Lessee has agreed in writing
reasonably acceptable to the relevant Indemnitee that Lessee is liable to such
Indemnitee for any Expenses relating to or arising out of the claim for which
indemnification is sought, provided that Lessee will not be so liable to the
extent that it is reasonably determined that one or more of the exclusions
contained in Section 7.01(b) would be applicable to such claim) and each
Indemnitee shall cooperate with the Lessee or its insurers with respect thereto,
PROVIDED THAT, without limiting the right of the Lessee's insurers to assume and
control the defense of or to compromise, any such claim, the Lessee shall not be
entitled to assume and control the defense of or compromise any such claim (A)
during the continuance of any Event of Default arising under Sections 16(a),
(b), (f), (g) or (h) of the Lease, (B) if an actual or potential material
conflict of interest exists making it advisable in the good faith opinion of
such Indemnitee (on the basis of prevailing standards of professional
responsibility) for such Indemnitee to be represented by separate counsel or if
such proceeding involves the potential imposition of criminal liability on such
Indemnitee or (C) if such proceeding will involve any non-de minimis risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than Permitted
Liens) on the Aircraft or the Trust Estate (unless the Lessee posts a bond or
other security reasonably acceptable in form and substance to such Indemnitee)
or involve any risk of criminal liability to such Indemnitee. Subject to the
immediately foregoing sentence, where the Lessee or the insurers under a policy
of insurance maintained by the Lessee undertake the defense of an Indemnitee
with respect to such a claim, no additional legal fees or expenses of such
Indemnitee in connection with the defense of such claim shall be indemnified
hereunder unless the fees or expenses were incurred at the written request of
the Lessee or such insurers. Subject to the requirement of any policy of
insurance applicable to a claim, an Indemnitee may participate at its own
expense at any judicial proceeding controlled by the Lessee or its insurers
pursuant to the preceding provisions, to the extent that such party's
participation does not, in the reasonable opinion of the independent counsel
appointed by the Lessee or its insurers to conduct such proceedings, interfere
with the defense of such claim (it being agreed that the making of copies,
giving notice of proceedings and the like shall not be considered interference);
and such participation shall not constitute a waiver of the indemnification
provided in this Section 7.03. No Indemnitee shall enter into any settlement or
other compromise with respect to any claim

                                       40


described in this Section 7.03 (other than any claim involving potential
criminal liability) without the prior written consent of the Lessee, unless such
Indemnitee waives its right to be indemnified under this Article 7 with respect
to such claim or unless an Event of Default under Section 16(a), 16(f), 16(g) or
16(h) of the Lease is continuing. The Lessee shall not enter into any settlement
or compromise with respect to which the Lessee has not agreed to indemnify such
Indemnitee to such Indemnitee's satisfaction or which admits any criminal
violation, gross negligence or willful misconduct on the part of any Indemnitee
without the prior written consent of such Indemnitee.

          Section 7.04. INSURED CLAIMS. Notwithstanding any other provision of
this Article 7 to the contrary, in the case of any claim indemnified by the
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee pursuant to Section 9 of the Lease or otherwise, it shall be a condition
of such indemnity with respect to any particular Indemnitee that such Indemnitee
shall cooperate with the insurers in the exercise of their rights to
investigate, defend or compromise such claim as may be required to retain the
benefits of such insurance with respect to such claim.

          Section 7.05. SUBROGATION. To the extent that an Expense indemnified
by the Lessee under this Article 7 is in fact paid in full by the Lessee and/or
an insurer under a policy of insurance maintained by the Lessee, the Lessee
and/or such insurer as the case may be shall be subrogated to the extent of such
payment to the rights and remedies of the Indemnitee on whose behalf such
Expense was paid with respect to the transaction or event giving rise to such
Expense (other than the rights and remedies in respect of insurance policies
maintained by such Indemnitee and other than the rights of the Trust Company or
the Owner Trustee and remedies against the Owner Participant under the Trust
Agreement). Should an Indemnitee receive any refund, in whole or in part, with
respect to any Expense paid in full by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not an amount in excess of the amount Lessee
and/or such insurer has paid to such Indemnitee in respect of such Expense) to
the Lessee unless a Specified Default or an Event of Default shall have occurred
and be continuing (or would have occurred and be continuing if the Owner
Participant had given the notice specified in Section 16(a) of the Lease), in
which case, provided that Lessee shall have paid such Indemnitee all amounts
required under this Article 7 or under any other Operative Agreement, such
amounts shall be paid over to Owner Trustee to hold as security for Lessee's
obligations under the Lessee Documents or, if requested by Lessee, applied to
satisfy such obligations.

          Section 7.06. INFORMATION. Subject to Section 7.04, Lessee will
provide the relevant Indemnitee with such information, not within the control of
such Indemnitee, as is in Lessee's control or is reasonably available to Lessee,
which such Indemnitee may reasonably request, and will otherwise cooperate with
such Indemnitee, so as to enable such Indemnitee to fulfill its obligations
under Section 7.03 and to control or participate in any proceeding to the extent
permitted by Section 7.03. The Indemnitee shall supply Lessee with such
information, not within the control of Lessee, as is in such Indemnitee's
control or is reasonably available to such Indemnitee, which Lessee may
reasonably request to control or participate in any proceeding to the extent
permitted by Section 7.03.

                                       41


          Section 7.07. SURVIVAL OF OBLIGATIONS. The indemnities and agreements
of the Lessee provided for in this Article 7 shall survive the expiration or
other termination of this Agreement.

          Section 7.08. EFFECT OF OTHER INDEMNITIES. The Lessee's obligations
under this Article 7 shall be those of a primary obligor whether or not the
Person indemnified shall also be indemnified with respect to the same matter
under the terms of this Agreement, or any other document or instrument, and the
Person seeking indemnification from the Lessee pursuant to any provision of this
Agreement may proceed directly against the Lessee without first seeking to
enforce any other right of indemnification.

          Section 7.09. WAIVER OF CERTAIN CLAIMS. The Lessee hereby waives and
releases any Expense now or hereafter existing against any Indemnitee arising
out of death or personal injury to personnel of the Lessee, loss or damage to
property of the Lessee, or the loss of use of any property of the Lessee, which
results from or arises out of the condition, use or operation of the Aircraft
during the Term, including, without limitation, any latent or patent defect
whether or not discoverable.

          Section 7.10. CERTAIN LIMITATIONS. The Lessee does not guarantee and
nothing in the general indemnification provisions of this Article 7 shall be
construed as a guarantee (or an indemnification) by the Lessee with respect to
the residual value of the Aircraft or any part thereof.

                                   ARTICLE 8.
                                TRANSACTION COSTS

          Section 8.01. TRANSACTION COSTS AND OTHER COSTS.

          (a) TRANSACTION COSTS. If the transactions contemplated by this
Agreement to occur on the Delivery Date are consummated, the Owner Participant
shall pay (or reimburse the Lessee if the Lessee shall have previously made such
payment) all fees and expenses of the following persons relating to the
transactions contemplated hereby up to an aggregate maximum amount equal to the
Assumed Transaction Costs (as defined in Exhibit B to the Lease), following
receipt by the Owner Participant of appropriate invoices with respect thereto:
(i) the reasonable fees and expenses of counsel for Owner Participant; (ii) the
reasonable fees and expenses of the respective counsel for the Lessee, the Owner
Trustee, the Manufacturer, the Engine Manufacturer, Solitair and the Seller;
(iii) the reasonable fees and expenses of special aviation counsel; (iv) the
initial fees and expenses of the Owner Trustee; (v) the fees and expenses of
Seabury Securities, LLC (the "Lessee Advisor"); (vi) any amounts paid in
connection with any appraisal report prepared for the Owner Participant; and
(vii) any other amounts approved by the Lessee and the Owner Participant. To the
extent Transaction Costs exceed the Assumed Transaction Costs, (A) the Lessee
shall pay (or reimburse the applicable party for) the amount of such excess and
the Owner Participant shall have no obligation to pay (or reimburse the Lessee
for) the amount of such excess and (B) the Owner Participant shall have the
right to instruct the Lessee as to which of the Transaction Costs not exceeding
the amount of such excess shall be paid (or reimbursed, as applicable) by the
Lessee, in which case the Lessee shall pay (or

                                       42


reimburse the applicable party for) such Transaction Costs in accordance with
such instructions of the Owner Participant.

          (b) CONTINUING EXPENSES. The Lessee agrees to pay, as Supplemental
Rent, the continuing fees, expenses and disbursements (including reasonable
counsel fees and expenses) of Trust Company and the Owner Trustee, with respect
to the administration of the Lease and the Lessor's Estate.

          (c) AMENDMENTS AND SUPPLEMENTS. Without limitation of the foregoing,
the Lessee agrees to pay, as Supplemental Rent, to the Owner Trustee and the
Owner Participant all costs and expenses (including reasonable legal fees and
expenses) incurred by any of them in connection with any amendment, supplement,
waiver or consent (whether or not entered into) under this Agreement or any
other Operative Agreement or document or instrument delivered pursuant to any of
them, which amendment, supplement, waiver or consent is required by any
provision of any Operative Agreement (including any adjustment pursuant to
Section 3(d) of the Lease) or is requested by the Lessee or necessitated by the
action or inaction of the Lessee; PROVIDED, HOWEVER, that the Lessee shall not
be responsible for fees or expenses incurred in connection with the offer, sale
or other transfer (whether pursuant to Section 5.01(c) hereof or otherwise) by
the Owner Participant or the Owner Trustee of any interest in the Aircraft, the
Lessor's Estate, the Beneficial Interest or the Trust Agreement or any similar
interest (and the offeror, seller, or transferor shall be responsible for all
such fees and expenses), unless such offer, sale or transfer shall occur (A)
pursuant to the exercise of remedies under Section 17 of the Lease, or (B) in
connection with the termination of the Lease or action or direction of the
Lessee pursuant to Section 8, 13 or 14 of the Lease.

                                   ARTICLE 9.
                             SUCCESSOR OWNER TRUSTEE

          Section 9.01. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE.

          (a) RESIGNATION AND REMOVAL. The Owner Trustee or any successor Owner
Trustee may resign or may be removed (with the consent of the Lessee) by the
Owner Participant, and a successor Owner Trustee may be appointed and a Person
may become Owner Trustee under the Trust Agreement only in accordance with the
provisions of Section 8.01 of the Trust Agreement and the provisions of
paragraphs (b) and (c) of this Section 9.01.

          (b) CONDITIONS TO APPOINTMENT. The appointment in any manner of a
successor Owner Trustee pursuant to Section 8.01 of the Trust Agreement shall be
subject to the following conditions:

               (i) such successor Owner Trustee shall be a Citizen of the United
     States;

               (ii) such successor Owner Trustee shall be a bank or a trust
     company having combined capital, surplus and undivided profits of at least
     $100,000,000 or a bank or trust company fully guaranteed by a direct or
     indirect parent thereof having a combined capital, surplus and undivided
     profits of at least $100,000,000;

                                       43


               (iii) such appointment shall not violate any provisions of the
     Transportation Code or any applicable rule or regulation of the applicable
     regulatory agency or body of any other jurisdiction in which the Aircraft
     may then be registered or create a relationship which would be in violation
     of the Transportation Code or any applicable rule or regulation of the
     applicable regulatory agency or body of any other jurisdiction in which the
     Aircraft may then be registered;

               (iv) such successor Owner Trustee shall enter into an agreement
     or agreements, in form and substance reasonably satisfactory to the Lessee
     and the Owner Participant whereby such successor Owner Trustee confirms
     that it shall be deemed a party to this Agreement and each other Operative
     Agreement to which the Owner Trustee is a party and agrees to be bound by
     all the terms of such documents applicable to the Owner Trustee and makes
     the representations and warranties contained in Section 5.03 hereof (except
     that it may be duly incorporated, validly existing and in good standing
     under the laws of the United States of America or any State thereof); and

               (v) all filings of Uniform Commercial Code financing and
     continuation statements, filings in accordance with the Transportation Code
     and amendments thereto shall be made and all further actions taken in
     connection with such appointment as may be necessary in connection with
     maintaining the valid and continued registration of the Aircraft in
     accordance with the Transportation Code.

                                  ARTICLE 10.
                      LIABILITIES OF THE OWNER PARTICIPANT

          Section 10.01. LIABILITIES OF THE OWNER PARTICIPANT. The Owner
Participant shall not have any obligation or duty to the Lessee with respect to
the transactions contemplated by this Agreement, except those obligations or
duties expressly set forth in this Agreement or (to the Lessee only) the Tax
Indemnity Agreement or in any other Operative Agreement to which the Owner
Participant is a party and the Owner Participant shall not be liable for the
performance by any other party hereto of such other party's obligations or
duties hereunder.

                                  ARTICLE 11.
                                 OTHER DOCUMENTS

          Section 11.01. CONSENT OF LESSEE TO OTHER DOCUMENTS. The Lessee hereby
consents in all respects to the execution and delivery of the Trust Agreement.

          Section 11.02. CONSENT OF OWNER PARTICIPANT TO OTHER DOCUMENTS. The
Owner Participant hereby consents in all respects to the execution and delivery
of the Lease and hereby agrees to follow the terms of the Lease which are
applicable to it.

                                       44


                                   ARTICLE 12.
                                     NOTICES

          Section 12.01. NOTICES. Except as otherwise specifically provided
herein, all notices, requests, approvals or consents required or permitted by
the terms hereof 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). Any notice shall be effective
when received. Any notice shall either be sent by overnight courier service or
overnight delivery service or by hand, or sent in the form of a telecopy,
PROVIDED that there is receipt of such notice the next Business Day from an
overnight courier service, or by overnight delivery service or delivered by
hand. Any notice shall be directed to the Lessee, the Lessor, the Owner
Participant or any other party hereto to the respective addresses set forth
below or to such other address or telecopy number as any such party may
designate pursuant to this Section 12.01:

          (a) if to the Lessee, to its office at 2500 S. High School Road,
Indianapolis, Indiana 46241, Attention: President; telephone (317) 484-6047,
facsimile (317) 484-6060, with a copy to c/o Wexford Capital, LLC, 411 West
Putnam Avenue, Greenwich, Connecticut 06830, Attention: Jay Maymudes and Arthur
Amron, telephone (203) 862-7050 (Jay Maymudes) and (203) 862-7012 (Arthur
Amron), facsimile (203) 862-7350 (Jay Maymudes) and (203) 862-7312 (Arthur
Amron); or to such other address as the Lessee shall from time to time designate
in writing to the Lessor and any Owner Participant;

          (b) if to the Lessor or the Owner Trustee, to its office at 79 South
Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Department,
telephone (801) 246-5630, facsimile (801) 246-5053; or to such other address as
the Lessor shall from time to time designate in writing to the Lessee, with a
copy to the Owner Participant;

          (c) if to the Owner Participant to its office at 201 High Ridge Road,
Stamford, Connecticut 06927-4900, Attention: Contracts Manager, telephone (203)
357-3773 facsimile (203) 357-3201; or to such other address as the Owner
Participant shall from time to time designate in writing to the Lessee and the
Owner Trustee;

                                   ARTICLE 13.
                                  MISCELLANEOUS

          Section 13.01. COUNTERPARTS. This Agreement may be executed by the
parties 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.

          Section 13.02. NO ORAL MODIFICATIONS. Neither this Agreement nor any
of its terms may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification is sought. No such written termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy shall have been
delivered to and executed by the Owner Trustee. A copy of each such termination,

                                       45


amendment, supplement, waiver or modification shall also be delivered to each
other party to this Agreement.

          Section 13.03. CAPTIONS. The table of contents preceding this
Agreement and the headings of the various Articles and Sections of this
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions of this Agreement.

          Section 13.04. SUCCESSORS AND ASSIGNS. The terms of this Agreement
shall be binding upon, and shall inure to the benefit of, the Lessee and its
successors and permitted assigns, the Owner Participant and its successors and
permitted assigns, the Owner Trustee and its successors as Owner Trustee (and
any additional owner trustee appointed) under the Trust Agreement.

          Section 13.05. CONCERNING THE OWNER TRUSTEE. Trust Company is entering
into this Agreement solely in its capacities (except to the extent otherwise
expressly indicated), not in its individual capacity but solely as Owner Trustee
under the Trust Agreement, and except as otherwise expressly provided in this
Agreement or in the Lease or the Trust Agreement, Trust Company shall not be
personally liable for or on account of its statements, representations,
warranties, covenants or obligations under this Agreement; PROVIDED, HOWEVER,
that Trust Company accepts the benefits running to it under this Agreement, and
agrees that (except as otherwise expressly provided in this Agreement or any
other Operative Agreement to which it is a party) it shall be liable in its
individual capacity for (a) its own gross negligence or willful misconduct
(whether in its capacity as trustee or in its individual capacity), (b) any
breach of representations and warranties or any breach of covenants made in its
individual capacity pursuant to or in connection with this Agreement or the
other Operative Agreements to which it is a party, (c) the failure to use
ordinary care in receiving, handling and disbursing funds, (d) Lessor's Liens
attributable to it in its individual capacity, and (e) taxes, fees or other
charges on, or based on, or measured by, any fees, commissions or compensation
received by it in connection with the transactions contemplated by the Operative
Agreements.

          Section 13.06. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          Section 13.07. GOVERNING LAW. (a) THIS AGREEMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.

          (b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF TO THE

                                       46


NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY
AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO
ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

          (c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 12.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 13.07(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) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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.

          Section 13.08. SECTION 1110 COMPLIANCE. The parties hereto agree that
the transactions contemplated by the Operative Agreements are expressly intended
to be, shall be, and should be construed so as to be entitled to the benefits
and protection of Section 1110.

          Section 13.09. ASSIGNMENT.

          (a) The Owner Trustee may make a security assignment of or grant a
security interest in some or all of the Lessor's Estate ("Permitted Security
Interest"), as security for the Owner Trustee's obligations in connection with
any financing by the Owner Trustee pursuant to documents reasonably acceptable
to Lessee and otherwise in compliance with this Section 13.09, to a lender
("Lessor's Lender") which (x) shall be a bank, savings institution, finance
company, leasing company, or trust company or national banking association or
other financial institution

                                       47


acting for its own account or in a fiduciary capacity as trustee or agent for
other financial institutions or funds, (y) shall not be an airline or other
aircraft operator or competitor of the Lessee in the business of air
transportation or an Affiliate of any thereof; and (z) shall not be a party to
any material current or overtly threatened litigation or arbitration (whether as
plaintiff or defendant) with the Lessee or any Affiliate of the Lessee.

     The Owner Trustee will give Lessee at least ten (10) days prior written
notice of a Permitted Security Interest and Lessee agrees to execute and deliver
in connection with any Permitted Security Interest such documents and assurances
(including an acknowledgment of the Permitted Security Interest and a
certificate as to the absence of any Default under the Lease) and to take such
further action as the Owner Trustee may reasonably request in connection with
the Permitted Security Interest. A Lessor's Lender shall be entitled to be an
Indemnitee and an Additional Insured.

          (b) In connection with a Permitted Security Interest of the Lessor's
Estate by the Owner Trustee:

               (i) as a condition precedent to such Permitted Security Interest
     becoming effective, the Owner Trustee will procure that the Lessor's Lender
     shall execute and deliver to Lessee a letter of quiet enjoyment reasonably
     acceptable to Lessee in respect of Lessee's use and possession of the
     Aircraft;

               (ii) the Owner Trustee shall reimburse to Lessee its reasonable
     out-of-pocket expenses (including reasonable legal fees and expenses)
     actually incurred in connection with any such Permitted Security Interest
     referred to in this Section 13.09, provided that such expenses are
     substantiated to the Owner Trustee's reasonable satisfaction; and

               (iii) no such Permitted Security Interest shall impair the rights
     and benefits, or increase the burdens or obligations, of Lessee hereunder
     or under the Lease, including, without limitation, obligations with respect
     to the payment of Rent or under Section 6.01 or 7.01 hereof.

            [The remainder of this page is intentionally left blank.]

                                       48


          IN WITNESS WHEREOF, the parties have caused this Participation
Agreement to be executed by their respective, duly authorized officers as of the
day and year first written above.

                                       CHAUTAUQUA AIRLINES, INC.,
                                       as Lessee

                                       By: /s/ Robert H. Cooper
                                           -------------------------------------
                                           Name: Robert H. Cooper
                                           Title: Vice President

                                       SILVERMINE RIVER FINANCE TWO, INC.,
                                       as Owner Participation

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

                                       WELLS FARGO BANK NORTHWEST,
                                       NATIONAL ASSOCIATION, not in its
                                       individual capacity, except as otherwise
                                       expressly provided herein but solely as
                                       Owner Trustee

                                       By: /s/ Brett R. King
                                           -------------------------------------
                                           Name: Brett R. King
                                           Title:Vice President

                                       49


Solitair hereby acknowledges the terms and provisions of the foregoing
Participation Agreement and agrees to be bound by Section 2.01(a) thereof.

                                       SOLITAIR CORP.

                                       By: /s/ Doug Lambert
                                           -------------------------------------
                                           Name: Doug Lambert
                                           Title: Vice President

                                       50


                                TABLE OF CONTENTS



                                                                                                       PAGE
                                                                                                      
ARTICLE 1. INTERPRETATION.................................................................................2
     Section 1.01.  Definitions...........................................................................2
     Section 1.02.  References............................................................................2
     Section 1.03.  Headings..............................................................................2
     Section 1.04.  Appendices, Schedules and Exhibits....................................................2

ARTICLE 2. SALE AND LEASING TRANSACTIONS..................................................................2
     Section 2.01.  Participation.........................................................................2
            (a)     Assignment, Sale and Purchase.........................................................2
            (b)     Leasing...............................................................................3
            (c)     Owner Participant's Equity Investment.................................................3
            (d)     Delivery Date.........................................................................3
     Section 2.02.  Closing Procedure.....................................................................4
            (a)     Time and Place........................................................................4
            (b)     Actions of the Owner Trustee..........................................................4
            (c)     Actions of the Lessee.................................................................5

ARTICLE 3. CONDITIONS PRECEDENT...........................................................................5
     Section 3.01.  Conditions Precedent to Obligations of Owner Participant..............................5
            (a)     Notice................................................................................5
            (b)     Delivery of Documents.................................................................5
            (c)     Export................................................................................8
            (d)     Violation of Law......................................................................8
            (e)     No Event of Default...................................................................8
            (f)     No Event of Loss......................................................................8
            (g)     Title.................................................................................8
            (h)     Certification.........................................................................8
            (i)     Section 1110..........................................................................8
            (j)     Filings...............................................................................8
            (k)     Precautionary Financing Statements....................................................8
            (l)     No Proceedings........................................................................9
            (m)     Governmental Action...................................................................9
            (n)     Representations and Warranties........................................................9
     Section 3.02.  Conditions Precedent to Obligations of Lessee.........................................9
            (a)     Documents.............................................................................9
            (b)     Corporate Documents...................................................................9
            (c)     Officer's Certificate................................................................10
            (d)     Other Conditions Precedent...........................................................10
     Section 3.03.  Post-Registration Opinion.............................................................9
     Section 3.04.  Certificate of Airworthiness.........................................................10


                                        i


                                                                                                      
ARTICLE 4. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS............................................10
     Section 4.01.  Lessee's Representations and Warranties..............................................10
     Section 4.02.  Certain Covenants of Lessee..........................................................13
            (a)     Filings and Recordings...............................................................13
            (b)     Registration.........................................................................13
            (c)     Information..........................................................................15
            (d)     Corporate Existence..................................................................15
            (e)     Merger and Consolidation.............................................................15
            (f)     Change of State of Incorporation.....................................................16
            (g)     Financial Statements.................................................................17
            (h)     Filing of Documents..................................................................17
            (i)     Export and Import of the Aircraft; Certification.....................................17
            (j)     Annual Foreign Opinion...............................................................18
     Section 4.03.  Survival of Representations and Warranties...........................................18

ARTICLE 5. OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS......................................18
     Section 5.01.  Representations, Warranties and Covenants of Owner Participant.......................18
            (a)     Representations and Warranties.......................................................18
            (b)     Lessor's Liens.......................................................................20
            (c)     Assignment of Interests of Owner Participant.........................................20
            (d)     Actions with Respect to Lessor's Estate, Etc.........................................22
            (e)     Citizenship..........................................................................22
            (f)     Guarantees...........................................................................23
     Section 5.02.  Citizenship..........................................................................23
            (a)     Generally............................................................................23
            (b)     Owner Trustee........................................................................23
     Section 5.03.  Representations, Warranties and Covenants of Trust Company and
                    the Owner Trustee....................................................................23
            (a)     Representations and Warranties.......................................................23
            (b)     Lessor's Liens.......................................................................25
            (c)     Indemnity for Lessor's Liens.........................................................25
            (d)     Securities Act.......................................................................26
            (e)     Actions With Respect to Lessor's Estate, Etc.........................................26
            (f)     Other Business.......................................................................26
            (g)     Performance of Agreements............................................................26
     Section 5.04.  The Lessee's Right of Quiet Enjoyment................................................26
     Section 5.05.  Survival of Representations, Warranties and Covenants................................26
     Section 5.06.  Compliance with Trust Agreement, Etc.................................................26

ARTICLE 6. TAXES.........................................................................................27
     Section 6.01.  Lessee's Obligation to Pay Taxes.....................................................27
            (a)     Generally............................................................................27
            (b)     Exceptions...........................................................................28
     Section 6.02.  After Tax Basis......................................................................30
     Section 6.03.  Time of Payment......................................................................31
     Section 6.04.  Contests.............................................................................31



                                       ii


                                                                                                      
            (a)     Notice of Claim......................................................................31
            (b)     Request for Contest..................................................................31
            (c)     Declining to Contest; Settlement.....................................................33
            (d)     Continuing Claims....................................................................34
            (e)     Claims Barred........................................................................34
     Section 6.05.  Refunds..............................................................................34
     Section 6.06.  Reports..............................................................................35
     Section 6.07.  Survival of Obligations..............................................................35
     Section 6.08.  Payment of Taxes.....................................................................36
     Section 6.09.  Reimbursements by Indemnitees Generally..............................................36
     Section 6.10.  Forms................................................................................36
     Section 6.11.  Verification.........................................................................36
     Section 6.12.  Non-Parties..........................................................................36

ARTICLE 7. GENERAL INDEMNITY.............................................................................37
     Section 7.01.  Generally............................................................................37
              (a)   Indemnity............................................................................37
              (b)   Exceptions...........................................................................38
     Section 7.02.  Notice and Payment...................................................................40
     Section 7.03.  Defense of Claims....................................................................40
     Section 7.04.  Insured Claims.......................................................................41
     Section 7.05.  Subrogation..........................................................................41
     Section 7.06.  Information..........................................................................41
     Section 7.07.  Survival of Obligations..............................................................42
     Section 7.08.  Effect of Other Indemnities..........................................................42
     Section 7.09.  Waiver of Certain Claims.............................................................42
     Section 7.10.  Certain Limitations..................................................................42

ARTICLE 8. TRANSACTION COSTS.............................................................................42
     Section 8.01.  Transaction Costs and Other Costs....................................................42
            (a)     Transaction Costs....................................................................42
            (b)     Continuing Expenses..................................................................43
            (c)     Amendments and Supplements...........................................................43

ARTICLE 9. SUCCESSOR OWNER TRUSTEE.......................................................................43
     Section 9.01.  Appointment of Successor Owner Trustee...............................................43
            (a)     Resignation and Removal..............................................................43
            (b)     Conditions to Appointment............................................................43

ARTICLE 10. LIABILITIES OF THE OWNER PARTICIPANT.........................................................44
     Section 10.01. Liabilities of the Owner Participant.................................................44

ARTICLE 11. OTHER DOCUMENTS..............................................................................44
     Section 11.01. Consent of Lessee to Other Documents.................................................44
     Section 11.02. Consent of Owner Participant to Other Documents......................................44

ARTICLE 12. NOTICES......................................................................................45



                                       iii


                                                                                                      
     Section 12.01.Notices...............................................................................45

ARTICLE 13. MISCELLANEOUS................................................................................45
     Section 13.01. Counterparts.........................................................................45
     Section 13.02. No Oral Modifications................................................................45
     Section 13.03. Captions.............................................................................46
     Section 13.04. Successors and Assigns...............................................................46
     Section 13.05. Concerning the Owner Trustee.........................................................46
     Section 13.06. Severability.........................................................................46
     Section 13.07. GOVERNING LAW........................................................................46
     Section 13.08. Section 1110 Compliance..............................................................47
     Section 13.09. Assignment...........................................................................47

Appendix A   Definitions

Exhibit A-1  Form of Opinion of General Counsel of Lessee

Exhibit A-2  Form of Opinion of Fulbright & Jaworski L.L.P.

Exhibit A-3  Form of Opinion of Ray, Quinney & Nebeker, as special counsel
             to the Owner Trustee

Exhibit A-4  Form of Opinion of Daugherty, Fowler, Peregrin & Haught, a
             Professional Corporation

Exhibit A-5  Form of Opinion of Holland & Knight LLP, special counsel for
             the Owner Participant

Exhibit A-6  Form of Opinion of General Counsel to the Owner Participant

Exhibit B-1  Form of Assignment and Assumption Agreement

Exhibit B-2  Form of Owner Participant Guaranty

Exhibit B-3  Form of Opinion of counsel to the Owner Participant in respect
             of the Assignment and Assumption Agreement



                                       iv



NOTE TO EXHIBIT 10.27

The 12 additional Participation Agreements are substantially identical in all
material respects to the filed Participation Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                          October, 2001              Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                          November, 2001             Silvermine River Finance Two, Inc.
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N370SK                                          November, 2001             Silvermine River Finance Two, Inc.
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N371SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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EX-10.28

                                                                   Exhibit 10.28

                                                               EXECUTION VERSION

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

                            TRUST AGREEMENT [N296SK]

                          Dated as of December 20, 2001

                                     between

                       SILVERMINE RIVER FINANCE TWO, INC.,
                              as Owner Participant

                                       and

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
                                as Owner Trustee

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

                  Covering One Embraer Model EMB-145LR Aircraft
                      Bearing U.S. Registration No. N296SK
                     and Manufacturer's Serial Number 145514

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



                                                TABLE OF CONTENTS


                                                                                                       PAGE
                                                                                                      
ARTICLE I      DEFINITIONS AND TERMS......................................................................1
     Section 1.1.   Definitions...........................................................................1

ARTICLE II     AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS; DECLARATION OF TRUST....................1
     Section 2.1.   Authority to Execute Documents........................................................1
     Section 2.2.   Declaration...........................................................................1

ARTICLE III    ACCEPTANCE AND DELIVERY OF AIRCRAFT; LEASE OF AIRCRAFT; REPLACEMENT........................2
     Section 3.1.   Authorization.........................................................................2
     Section 3.2.   Conditions Precedent..................................................................3
     Section 3.3.   Postponement of Delivery Date.........................................................3
     Section 3.4.   Authorization in Respect of a Replacement Airframe or Replacement Engines.............3
     Section 3.5.   Trust Agreement Remaining in Full Force and Effect....................................4
     Section 3.6.   Authorization in Respect of Return of an Engine.......................................4

ARTICLE IV     RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE......................4
     Section 4.1.   Distribution of Payments..............................................................4
     Section 4.2.   Method of Payments....................................................................4

ARTICLE V      DUTIES OF THE OWNER TRUSTEE................................................................5
     Section 5.1.   Notice of Event of Default............................................................5
     Section 5.2.   Action Upon Instructions..............................................................5
     Section 5.3.   Indemnification.......................................................................6
     Section 5.4.   No Duties Except as Specified in Trust Agreement or Instructions......................6
     Section 5.5.   No Action Except Under Specified Documents or Instructions............................7

ARTICLE VI     THE OWNER TRUSTEE..........................................................................7
     Section 6.1.   Acceptance of Trusts and Duties.......................................................7
     Section 6.2.   Absence of Certain Duties.............................................................7
     Section 6.3.   No Representations or Warranties as to Certain Matters................................8
     Section 6.4.   No Segregation of Monies Required; Investment Thereof.................................9
     Section 6.5.   Reliance Upon Certificates, Counsel and Agents........................................9
     Section 6.6.   Not Acting in Individual Capacity.....................................................9
     Section 6.7.   Fees; Compensation....................................................................9
     Section 6.8.   Tax Returns..........................................................................10
     Section 6.9.   Fixed Investment Trust...............................................................10

ARTICLE VII    INDEMNIFICATION OF THE OWNER TRUSTEE BY THE OWNER PARTICIPANT.............................10
     Section 7.1.   The Owner Participant to Indemnify the Owner Trustee.................................10






                                                                                                       PAGE
                                                                                                      
ARTICLE VIII   SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES.....................................................11
     Section 8.1.   Resignation of the Owner Trustee; Appointment of Successor...........................11
     Section 8.2.   Co-Trustees and Separate Trustees....................................................12

ARTICLE IX     SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT  AND OTHER DOCUMENTS........................14
     Section 9.1.   Supplements and Amendments...........................................................14
     Section 9.2.   Discretion as to Execution of Documents..............................................14
     Section 9.3.   Absence of Requirements as to Form...................................................14
     Section 9.4.   Distribution of Documents............................................................14

ARTICLE X      MISCELLANEOUS.............................................................................14
     Section 10.1.  Termination of Trust Agreement.......................................................14
     Section 10.2.  The Owner Participant Has No Legal Title in Trust Estate.............................15
     Section 10.3.  Assignment, Sale, etc., of Aircraft..................................................15
     Section 10.4.  Trust Agreement for Benefit of Certain Parties Only..................................15
     Section 10.5.  Notices..............................................................................15
     Section 10.6.  Severability.........................................................................16
     Section 10.7.  Waivers, etc...................................................................... ..16
     Section 10.8.  Counterparts.........................................................................16
     Section 10.9.  Binding Effect, etc................................................................ .16
     Section 10.10. Headings; References.................................................................16
     Section 10.11. GOVERNING LAW........................................................................16
     Section 10.12. Administration of Trust..............................................................17


                                       ii


                            TRUST AGREEMENT [N296SK]

          This TRUST AGREEMENT [N296SK], dated as of December 20, 2001 between
SILVERMINE RIVER FINANCE TWO, INC., a Delaware corporation (together with its
successors and permitted assigns, the "Owner Participant"), and WELLS FARGO BANK
NORTHWEST, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, "WFB") and otherwise not in its individual capacity but
solely as trustee hereunder (herein in such capacity with its permitted
successors and assigns called the "Owner Trustee") (as hereafter from time to
time supplemented or amended, this or the "Trust Agreement").

                              W I T N E S S E T H :

                                    ARTICLE I

                              DEFINITIONS AND TERMS

          Section 1.1. DEFINITIONS. Capitalized terms used herein and defined in
Appendix A shall, except as such definitions may be specifically modified in the
body of this Trust Agreement for the purposes of a particular section, paragraph
or clause, have the meanings given such terms in Appendix A and, unless
otherwise specified, such meanings shall be equally applicable to both the
singular and the plural forms of such terms.

                                   ARTICLE II

               AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
                              DECLARATION OF TRUST

          Section 2.1. AUTHORITY TO EXECUTE DOCUMENTS. The Owner Participant
hereby authorizes and directs the Owner Trustee to do the following, and the
Owner Trustee agrees for the benefit of the Owner Participant that it will do
the following (i) to execute and deliver the Participation Agreement, the Lease,
the Lease Supplement covering the Aircraft, the Airframe Warranty Assignment and
Consent, the Engine Warranty Assignment and Consent and any other agreements,
instruments or documents, to which the Owner Trustee is a party in the
respective forms thereof in which delivered from time to time by the Owner
Participant to the Owner Trustee for execution and delivery and (ii) subject to
the terms hereof, to exercise its rights (upon instructions received from the
Owner Participant) and perform its duties under the documents referred to in
this Section in accordance with the terms thereof.

          Section 2.2. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Trust Estate upon the trusts hereinafter set forth for the
use and benefit of the Owner Participant, subject, however, to the provisions of
the Lease. This Trust Agreement is not intended by the Owner Participant to
create, and the trust created hereby is not intended by the Owner Participant
and the other parties interested herein to constitute a business trust for the
purposes of the Bankruptcy Code.



                                   ARTICLE III

                      ACCEPTANCE AND DELIVERY OF AIRCRAFT;
                         LEASE OF AIRCRAFT; REPLACEMENT

          Section 3.1. AUTHORIZATION. (a) The Owner Participant hereby
authorizes and directs the Owner Trustee to, and the Owner Trustee agrees for
the benefit of the Owner Participant that, on the Delivery Date it will, subject
to due compliance with the terms of Section 3.02 hereof:

               (i) authorize a representative or representatives of the Owner
          Trustee to accept delivery of the Aircraft and the Bills of Sale
          pursuant to the Participation Agreement;

               (ii) execute and deliver each of the Operative Agreements to
          which the Owner Trustee is to be a party;

               (iii) purchase the Aircraft pursuant to the Participation
          Agreement;

               (iv) pay an amount equal to Lessor's Cost to, or at the direction
          of, Solitair and the Seller pursuant to the Participation Agreement in
          consideration of the sale of the Aircraft to the Owner Trustee
          thereunder;

               (v) make application to the FAA for registration of the Aircraft
          in the name of the Owner Trustee by filing or causing to be filed with
          the FAA (i) the FAA Bill of Sale, (ii) the FAA Aircraft Registration
          Application in the name of the Owner Trustee (including, without
          limitation, an affidavit from the Owner Trustee stating that it is a
          "citizen of the United States" within the meaning of Section
          40102(a)(15) of the Transportation Code), and (iii) this Trust
          Agreement;

               (vi) take such other action as may reasonably be required of the
          Owner Trustee hereunder or under the Participation Agreement or the
          Lease to effectuate the transactions contemplated thereby; and

               (vii) execute and deliver all such other instruments, documents
          or certificates and take all such other actions in accordance with the
          directions of the Owner Participant, as the Owner Participant may
          reasonably deem necessary or advisable in connection with the
          transactions contemplated hereby and by the other Operative
          Agreements.

          (b)  The Owner Participant hereby authorizes and directs the Owner
       Trustee to, and the Owner Trustee agrees for the benefit of the Owner
       Participant that it will:

               (i) immediately after the delivery of the Aircraft to the Owner
          Trustee, cause the Aircraft to be leased to Lessee under the Lease;
          and

               (ii) execute and deliver a Lease Supplement covering the
          Aircraft.

                                       2


          Section 3.2. CONDITIONS PRECEDENT. The right and obligation of the
Owner Trustee to take the action required by Section 3.01 hereof shall be
subject to the following conditions precedent:

          (a) the Owner Participant shall have made the full amount of the
     Commitment with respect to the Aircraft available to the Owner Trustee, in
     immediately available funds, in accordance with Section 2.01(c) of the
     Participation Agreement; and

          (b) the terms and conditions of Section 3.01 of the Participation
     Agreement shall have been waived by the Owner Participant or complied with
     in a manner satisfactory to the Owner Participant. The Owner Participant
     shall, by instructing Owner Trustee to release the full amount of the
     Commitment then held by Owner Trustee as provided in Section 2.01 of the
     Participation Agreement, be deemed to have found satisfactory to it, or
     waived, all such conditions precedent.

          Section 3.3. POSTPONEMENT OF DELIVERY DATE. The Owner Trustee, upon
instructions from the Owner Participant, shall take all action specified in
Section 2.01 of the Participation Agreement as action to be taken by the Owner
Trustee.

          Section 3.4. AUTHORIZATION IN RESPECT OF A REPLACEMENT AIRFRAME OR
REPLACEMENT ENGINES. The Owner Trustee agrees for the benefit of the Owner
Participant that, upon the receipt by a Responsible Officer of Owner Trustee of
an authorization and direction from the Owner Participant, it will, in the event
of a Replacement Airframe or Replacement Engines, if any, being substituted
pursuant to Section 8(a)(i) of the Lease, or a Replacement Engine being
substituted pursuant to Section 7(e) of the Lease, subject to due compliance
with the terms of Sections 8(d) and 7(e) of the Lease, as the case may be:

          (a) to the extent not previously accomplished by a prior
     authorization, authorize a representative or representatives of the Owner
     Trustee to accept delivery of the Replacement Airframe or Replacement
     Engines, if any, or the Replacement Engine;

          (b) accept from Lessee or other vendor of the Replacement Airframe or
     Replacement Engines, if any, or the Replacement Engine, a bill of sale or
     bills of sale (if tendered) and the invoice, if any, with respect to the
     Replacement Airframe and Replacement Engines, if any, or the Replacement
     Engine being furnished pursuant to Section 8(a)(i) or 7(e) of the Lease;

          (c) in the case of a Replacement Airframe, make application to the FAA
     (or the Aeronautical Authority of any jurisdiction other than the United
     States of America in which the Replacement Airframe is then registered in
     accordance with the terms of the Lease) for registration in the name of the
     Owner Trustee of the Aircraft of which such Replacement Airframe is a part;

          (d) execute and deliver a Lease Supplement covering (i) the Aircraft
     of which such Replacement Airframe is part of and, (ii) such Replacement
     Engine, as the case may be;

                                       3


          (e) transfer its interest in (without recourse except as to
     obligations in respect of Lessor's Liens) and to the Airframe and Engines
     (if any) or the Engine being replaced to or at the direction of Lessee; and

          (f) take such further action as may be contemplated by Sections 8(d)
     or 7(e) of the Lease, as the case may be.

          Section 3.5. TRUST AGREEMENT REMAINING IN FULL FORCE AND EFFECT. In
the event of the substitution of a Replacement Airframe for the Airframe or the
substitution of a Replacement Engine for any Engine or engine all provisions of
this Trust Agreement relating to such replaced Airframe or Engine or engine
shall be applicable to such Replacement Airframe or Replacement Engine, with the
same force and effect as if such Replacement Airframe or Replacement Engine were
the same airframe or engine as the Airframe or Engine being replaced but for the
Event of Loss with respect to such Airframe or Engine.

          Section 3.6. AUTHORIZATION IN RESPECT OF RETURN OF AN ENGINE. The
Owner Trustee agrees for the benefit of the Owner Participant that, upon the
receipt by a Responsible Officer of the Owner Trustee of an authorization and
direction from the Owner Participant, it will, in the event of an engine being
transferred to the Owner Trustee pursuant to Section 12(b) of the Lease, subject
to due compliance with the terms of such Section 12(b):

          (a) accept from Lessee or other vendor the bill of sale contemplated
     by such Section 12(b) with respect to such engine being transferred to the
     Owner Trustee; and

          (b) transfer its right, title and interest in (without recourse or
     warranty except a warranty against Lessor's Liens) and to an Engine to or
     at the direction of Lessee as contemplated by such Section 12(b).

                                   ARTICLE IV

                      RECEIPT, DISTRIBUTION AND APPLICATION
                         OF INCOME FROM THE TRUST ESTATE

          Section 4.1. DISTRIBUTION OF PAYMENTS. All Basic Rent, Supplemental
Rent, insurance proceeds and requisition, indemnity or other payments of any
kind included in the Trust Estate and any other amounts received as part of the
Trust Estate and for the application or distribution of which no provision is
made herein, shall be distributed forthwith upon receipt by the Owner Trustee in
the following order of priority: FIRST, so much of such payment as shall be
required to pay or reimburse the Owner Trustee for any fees or expenses not
otherwise paid or reimbursed as to which the Owner Trustee is entitled to be so
paid or reimbursed pursuant to the provisions hereof shall be retained by the
Owner Trustee; and SECOND, the balance, if any, shall be paid to the Owner
Participant.

          Section 4.2. METHOD OF PAYMENTS. The Owner Trustee shall make
distributions or cause distributions to be made to the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds the amount to be distributed to such account or accounts of the
Owner Participant as it may designate from time to time by written notice to the
Owner Trustee (and the Owner Trustee shall use reasonable efforts to cause such

                                       4


funds to be transferred by wire transfer on the same day as received, but in any
case not later than the next succeeding Business Day); provided, however, that
the Owner Trustee shall use its best efforts to invest overnight, for the
benefit of the Owner Participant, in investments that would be permitted by
Section 15 of the Lease (but only to the extent such investments are available
and, if such investments are not available, then in such other investments
available to the Owner Trustee which, after consultation with the Owner
Participant, the Owner Participant shall direct), all funds not transferred by
the Owner Trustee by wire transfer on the same day as they were received.
Notwithstanding the foregoing, the Owner Trustee will, if so requested by the
Owner Participant by written notice, pay any and all amounts payable by the
Owner Trustee hereunder to the Owner Participant either (i) by crediting such
amount or amounts to an account or accounts maintained by the Owner Participant
as it may designate from time to time by written notice to the Owner Trustee, in
immediately available funds, (ii) by payment at the trust office of the Owner
Trustee (the trust office of the Owner Trustee shall be the principal corporate
trust office of the Owner Trustee at 79 South Main Street, Salt Lake City, Utah
84111, Attention: Corporate Trust Department, or the principal corporate trust
office of any successor Owner Trustee), in immediately available funds, or (iii)
by mailing an official bank check or checks in such amount or amounts payable to
the Owner Participant at such address as the Owner Participant shall have
designated in writing to the Owner Trustee.

                                    ARTICLE V

                           DUTIES OF THE OWNER TRUSTEE

          Section 5.1. NOTICE OF EVENT OF DEFAULT. If the Owner Trustee shall
have knowledge of a Default or an Event of Default, the Owner Trustee shall give
to the Owner Participant and the Lessee prompt telephonic or telecopied notice
thereof followed by prompt confirmation thereof by certified mail, postage
prepaid. Subject to the terms of Section 5.03, the Owner Trustee shall take such
action or shall refrain from taking such action, not inconsistent with the
provisions of the Operative Agreements, with respect to such Default or Event of
Default as the Owner Trustee shall be directed in writing by the Owner
Participant. For all purposes of this Trust Agreement and the Lease, the Owner
Trustee shall not be deemed to have knowledge of a Default or an Event of
Default unless notified in writing thereof in the manner and at the address set
forth in Section 10.05 or unless an officer in the Corporate Trust Department
who has responsibility for, or familiarity with, the transactions contemplated
hereunder, under the Participation Agreement or any Vice President in the
Corporate Trust Department of the Owner Trustee has actual knowledge thereof.

          Section 5.2. ACTION UPON INSTRUCTIONS. Subject in all respects to the
terms of Sections 5.01 and 5.03 and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following actions
as may be specified in such instructions: (i) give such notice or direction or
exercise such right, remedy or power hereunder or under any of the Operative
Agreements to which the Owner Trustee is a party, or in respect of all or any
part of the Trust Estate, as shall be specified in such instructions; (ii) take
such action to preserve or protect the Trust Estate (including the discharge of
any Liens or encumbrances) as may be specified in such instructions; (iii)
approve as satisfactory to it all matters required by the terms of the Lease to
be satisfactory to the Owner Trustee, it being understood that without written
instructions of the

                                       5


Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) after the expiration or earlier termination of the
Lease, convey all of the Owner Trustee's right, title and interest in and to the
Aircraft for such amount, on such terms and to such purchaser or purchasers as
shall be designated in such instructions, or retain, lease or otherwise dispose
of, or from time to time take such action with respect to, the Aircraft on such
terms as shall be set forth in such instructions or deliver the Aircraft to the
Owner Participant in accordance with such instructions; and (v) take or refrain
from taking such other action or actions as may be specified in such
instructions. In the event that the Owner Trustee is unsure of the application
of any provision of this Trust Agreement or any other agreement relating to the
transactions contemplated hereby, the Owner Trustee may request and rely upon
instructions of the Owner Participant.

          Section 5.3. INDEMNIFICATION. The Owner Trustee shall not be required
to take or refrain from taking any action under Section 5.01 (other than the
giving of notices referred to therein) or 5.02 unless the Owner Trustee shall
have been indemnified by the Owner Participant, in manner and form satisfactory
to the Owner Trustee, against any liability, cost or expense (including
reasonable counsel fees and disbursements) which may be incurred in connection
therewith; and, if the Owner Participant shall have directed the Owner Trustee
to take or refrain from taking any such action, the Owner Participant agrees to
furnish such indemnity as shall be required and in addition to pay the
reasonable fees and charges of the Owner Trustee for the services performed or
to be performed by it pursuant to such direction. The Owner Trustee shall not be
required to take any action under Section 5.01 or 5.02 if the Owner Trustee
shall reasonably determine, or shall have been advised by counsel, that such
action is contrary to the terms of any of the Operative Agreements to which the
Owner Trustee is a party, or is otherwise contrary to Applicable Law.

          Section 5.4. NO DUTIES EXCEPT AS SPECIFIED IN TRUST AGREEMENT OR
INSTRUCTIONS.
          The Owner Trustee shall not have any duty or obligation to manage,
control, use, sell, dispose of or otherwise deal with the Aircraft or any other
part of the Trust Estate, or otherwise to take or refrain from taking any action
under, or in connection with any of the Operative Agreements to which the Owner
Trustee is a party, except as expressly required by the terms of any of the
Operative Agreements to which the Owner Trustee is a party, or as expressly
provided by the terms hereof or in written instructions from the Owner
Participant received pursuant to the terms of Section 5.01 or 5.02, and no
implied duties or obligations shall be read into this Trust Agreement or any of
the Operative Agreements to which the Owner Trustee is a party against the Owner
Trustee. The Owner Trustee nevertheless agrees that it will, in its individual
capacity and at its own cost and expense (but without any right of indemnity in
respect of any such cost or expense under Section 7.01) promptly take such
action as may be necessary duly to discharge and satisfy in full (i) all
Lessor's Liens attributable to the Owner Trustee in its individual capacity,
(ii) any Liens (other than Lessor's Liens attributable to it in its individual
capacity) created as a result of its breach of any of its obligations under this
Trust Agreement (subject to the limitations on the liability of the Owner
Trustee in its individual capacity set forth in Section 6.01) on any part of the
Trust Estate, or on any properties of the Owner Trustee assigned, pledged or
mortgaged as part of the Trust Estate, which arise from acts of the Owner
Trustee in its individual capacity, the rights of Lessee under the Lease and the
rights of the Owner Participant hereunder, and (iii) any other Liens or
encumbrances attributable to the Owner Trustee in its individual capacity on any
part of the Trust Estate which result from claims

                                       6


against the Owner Trustee in its individual capacity unrelated to the ownership
of the Aircraft, the administration of the Trust Estate or the transactions
contemplated by the Operative Agreements.

          Section 5.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS.
          The Owner Trustee shall have no power or authority to, and the Owner
Trustee agrees that it will not, manage, control, use, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Trust Estate except
(i) as expressly required by the terms of any of the Operative Agreements to
which the Owner Trustee is a party, (ii) as expressly provided by the terms
hereof, or (iii) as expressly provided in written instructions from the Owner
Participant pursuant to Section 5.01 or 5.02.

                                   ARTICLE VI

                                THE OWNER TRUSTEE

          Section 6.1. ACCEPTANCE OF TRUSTS AND DUTIES. WFB accepts the trusts
hereby created and agrees to perform the same but only upon the terms hereof
applicable to it. WFB also agrees to receive and disburse all monies received by
it constituting part of the Trust Estate upon the terms hereof. WFB shall not be
answerable or accountable under any circumstances, except for (i) its own
willful misconduct or gross negligence, (ii) its performance of the terms of the
last sentence of Section 5.04, (iii) its failure to use ordinary care in
receiving or disbursing funds or to comply with the first sentence of Section
6.08, (iv) liabilities that may result from the inaccuracy of any representation
or warranty of the Owner Trustee in its individual capacity (or from the failure
by the Owner Trustee in its individual capacity to perform any covenant made in
its individual capacity) in Section 6.03 or in any of the Operative Agreements
to which the Owner Trustee is a party, (v) taxes, fees or other charges on,
based on or measured by any fees, commissions or other compensation received by
WFB as compensation for its services rendered as the Owner Trustee, and (vi) its
failure (in its individual capacity or as Owner Trustee) to use ordinary care in
connection with its obligations to invest funds pursuant to Section 15 of the
Lease or Section 4.02 hereof; PROVIDED, HOWEVER, that the failure to act or
perform in the absence of instructions after the Owner Trustee has requested
instructions from the Owner Participant pursuant to the last sentence of
Section 5.02 shall not constitute willful misconduct or gross negligence for
purposes of clause (i) of this Section 6.01.

          Section 6.2. ABSENCE OF CERTAIN DUTIES. Except in accordance with
written instructions furnished pursuant to Sections 5.01 and 5.02 and except as
provided in, and without limiting the generality of, Sections 3.01, 5.04 and
5.05 and the last sentence of Section 8.01(b), the Owner Trustee shall have no
duty (i) to see to any registration of the Aircraft or any recording or filing
of the Lease, this Trust Agreement, any financing or continuation statement or
of any supplement to any thereof or to see to the maintenance of any such
registration, rerecording or refiling, except that of Owner Trustee to comply
with the FAA reporting requirements set forth in 14 C.F.R. Section 47.45 and 14
C.F.R. Section 47.51 or any successor provisions, and that the Owner Trustee
shall upon written request furnished by Lessee take such action as may be
required of the Owner Trustee to maintain the registration of the Aircraft in
the name of the Owner Trustee under the Act or, to the extent the Aircraft is
registered in a country other than the United States of America pursuant to
Section 4.02 of the Participation Agreement, other

                                       7


Applicable Law, and to the extent that information for that purpose is supplied
by Lessee pursuant to any of the Operative Agreements, complete and timely
submit any and all reports relating to the Aircraft which may from time to time
be required by the FAA or any government or governmental authority having
jurisdiction, (ii) to see to any insurance on the Aircraft or to effect or
maintain any such insurance, whether or not Lessee shall be in default with
respect thereto, (iii) to see to the payment or discharge of any tax, assessment
or other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust Estate except as
provided by Section 5.04 hereof or Section 5.03(b) of the Participation
Agreement, (iv) to confirm or verify any financial statements of Lessee or (v)
to inspect the Aircraft or the books and records of Lessee with respect to the
Aircraft. Notwithstanding the foregoing, the Owner Trustee will furnish to Owner
Participant, promptly upon receipt thereof, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and other
instruments furnished to Owner Trustee under the Lease or any other Operative
Agreement except to the extent to which a Responsible Officer of Owner Trustee
reasonably believes (and confirms by telephone call with Owner Participant) that
duplicates or copies thereof have already been furnished to Owner Participant by
some other Person.

          Section 6.3. NO REPRESENTATIONS OR WARRANTIES AS TO CERTAIN MATTERS.
THE OWNER TRUSTEE IN ITS INDIVIDUAL CAPACITY OR AS THE OWNER TRUSTEE DOES NOT
MAKE AND SHALL NOT BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, ANY
ENGINE THEREOF, ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE)
OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY
ENGINE WHATSOEVER, except that the Owner Trustee in its individual capacity
warrants that on the Delivery Date the Owner Trustee shall have received and
shall hold whatever title to the Aircraft was conveyed to it by Seller free and
clear of Lessor's Liens attributable to the Owner Trustee in its individual
capacity, shall be in compliance with the last sentence of Section 5.04 hereof
and that the Aircraft shall during the Lease Term be free of Lessor's Liens
attributable to it in its individual capacity, or (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any other Operative Agreement to which the Owner Trustee in its individual
capacity or as Owner Trustee is a party, or any other document or instrument, or
as to the correctness of any statement contained in any thereof except to the
extent that any such statement is expressly made herein or therein as a
representation by the Owner Trustee in its individual capacity and except that
the Owner Trustee in its individual capacity hereby represents and warrants that
it has all corporate power and authority to execute, deliver and perform this
Trust Agreement and that this Trust Agreement has been, and (assuming the due
authorization, execution and delivery of the Trust Agreement by the Owner
Participant) the other Operative Agreements to which the Owner Trustee is a
party have been (or at the time of execution and delivery of any such instrument
by the Owner Trustee hereunder or pursuant to the terms of the Participation
Agreement that such an instrument will be) duly executed and delivered by one of
its officers who is or will be, as the case may be, duly authorized to execute
and deliver such instruments on behalf of the Owner Trustee and that this Trust
Agreement has been duly authorized, executed and delivered by WFB and
constitutes the legal, valid and binding obligation of WFB enforceable against
it in accordance with its terms, except as such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium or

                                       8


other similar laws affecting the rights of creditors generally and by general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

          Section 6.4. NO SEGREGATION OF MONIES REQUIRED; INVESTMENT THEREOF.
Monies received by the Owner Trustee hereunder need not be segregated in any
manner except to the extent required by Applicable Law, and may be deposited
under such general conditions as may be prescribed by Applicable Law, and shall
be invested as provided in Section 4.02 hereof or Section 15 of the Lease.

          Section 6.5. RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS. The Owner
Trustee shall incur no liability to anyone in acting in reliance upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it to be
genuine and reasonably believed by it to be signed by the proper party or
parties. Unless other evidence in respect thereof is specifically prescribed
herein, any request, direction, order or demand of the Owner Participant or
Lessee mentioned herein or in any of the other Operative Agreements to which the
Owner Trustee is a party shall be sufficiently evidenced by written instruments
signed by a person purporting to be a Responsible Officer of the Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors of Lessee or the Owner Participant, as
the case may be, certified by the Secretary or an Assistant Secretary of Lessee
or the Owner Participant, as the case may be, as duly adopted and in full force
and effect, as conclusive evidence that such resolution has been duly adopted by
said Board and that the same is in full force and effect. As to any fact or
matter the manner of ascertainment of which is not specifically described
herein, the Owner Trustee may, absent actual knowledge to the contrary, for all
purposes hereof rely on a certificate signed by a Responsible Officer of Lessee
or the Owner Participant, as the case may be, as to such fact or matter, and
such certificate shall constitute full protection to the Owner Trustee for any
action taken or omitted to be taken by it in good faith in reliance thereon.

          In the administration of the trusts hereunder, the Owner Trustee may
exercise its powers and perform its duties hereunder directly or through agents
or attorneys and the Owner Trustee shall not be liable for the default or
misconduct of any agents or attorneys selected by it with reasonable care. In
the administration of the trusts hereunder, the Owner Trustee may consult with
counsel, accountants and other skilled persons and the Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such counsel, accountants or other
skilled persons selected by it with reasonable care.

          Section 6.6. NOT ACTING IN INDIVIDUAL CAPACITY. In acting hereunder,
the Owner Trustee acts solely as trustee and not in its individual capacity
except as otherwise expressly provided herein; and, except as may be otherwise
expressly provided in this Trust Agreement, including without limitation,
Section 6.01, the Lease or the Participation Agreement, all Persons having any
claim against the Owner Trustee by reason of the transactions contemplated
hereby shall look only to the Trust Estate for payment or satisfaction thereof.

          Section 6.7. FEES; COMPENSATION. Except as provided in Section 5.03 or
7.01, the Owner Trustee agrees that it shall have no right against the Owner
Participant or the Trust Estate for any fee as compensation for its services
hereunder.

                                       9


          Section 6.8. TAX RETURNS. The Owner Trustee shall be responsible for
the keeping of all appropriate books and records relating to the receipt and
disbursement of all monies under this Trust Agreement or any agreement
contemplated hereby. The Owner Trustee agrees, without expense to the Owner
Participant, to file an application with the Internal Revenue Service for a
taxpayer identification number with respect to the trust created by this Trust
Agreement. The Owner Participant shall be responsible for causing to be prepared
and filed all income tax returns required to be filed by the Owner Participant.
The Owner Trustee shall be responsible for causing to be prepared, at the
request of the Owner Participant and the expense of the Lessee, all income tax
returns required to be filed with respect to the trust created hereby and shall
execute and file such returns; provided, however the Owner Trustee shall send a
completed copy of such return to the Owner Participant not more than 60 nor less
than 30 days prior to the due date of the return provided that the Owner Trustee
shall have timely received all necessary information to complete and deliver to
the Owner Participant such return. The Owner Participant or the Owner Trustee,
as the case may be, upon request, will furnish the Owner Trustee or the Owner
Participant, as the case may be, with all such information as may be reasonably
required from the Owner Participant or the Owner Trustee, as the case may be, in
connection with the preparation of such income tax returns.

          Section 6.9. FIXED INVESTMENT TRUST. Notwithstanding anything herein
to the contrary, the Owner Trustee shall not be authorized and shall have no
power to "vary the investment" of the Owner Participant within the meaning of
section 301.7701-4(c) of the Treasury Regulations.

                                   ARTICLE VII

                      INDEMNIFICATION OF THE OWNER TRUSTEE
                            BY THE OWNER PARTICIPANT

          Section 7.1. THE OWNER PARTICIPANT TO INDEMNIFY THE OWNER TRUSTEE. The
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and does
hereby indemnify, protect, save, defend and hold harmless the Owner Trustee in
its individual capacity, and its successors, assigns (but not security assigns),
directors, officers, representatives, agents, employees and servants, from and
against any and all liabilities, obligations, losses, damages, penalties, taxes
(excluding any taxes payable by the Owner Trustee on or measured by any
compensation received by the Owner Trustee for its services hereunder), claims,
actions, suits, costs, expenses or disbursements (including, without limitation,
reasonable legal fees, but excluding internal costs and expenses such as
salaries and overhead) and expenses of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against the Owner Trustee in its
individual capacity (whether or not also indemnified against by Lessee under the
Lease or under the Participation Agreement or also indemnified against by any
other Person; PROVIDED that Owner Participant shall be subrogated to the rights
of Owner Trustee against Lessee or any other indemnitor) in any way relating to
or arising out of this Trust Agreement or any of the other Operative Agreements
or the enforcement of any of the terms of any thereof, or in any way relating to
or arising out of the manufacture, purchase, acceptance, nonacceptance,
rejection, ownership, delivery, lease, possession, use, operation, condition,
sale, return or other disposition of the Airframe, any Engine or any Part of the
foregoing (including, without limitation, latent and other defects,

                                       10


whether or not discoverable, and any claim for patent, trademark or copyright
infringement), or in any way relating to or arising out of the administration of
the Trust Estate or the action or inaction of the Owner Trustee hereunder,
except (a) in the case of willful misconduct or gross negligence on the part of
the Owner Trustee either as trustee or in its individual capacity in the
performance or nonperformance of its duties hereunder or under any of the other
Operative Agreements to which it is a party or (b) those resulting from the
inaccuracy of any representation or warranty of the Owner Trustee in its
individual capacity (or from the failure of the Owner Trustee in its individual
capacity to perform any covenant) in Section 6.03, or in any of the Operative
Agreements, or (c) those arising or resulting from any of the matters described
in the last sentence of Section 6.01, or (d) those resulting from its failure to
perform the terms of the last sentence of Section 5.04 hereof or from its
failure to use ordinary care in the receipt and disbursement of funds or in
connection with its obligation to invest funds pursuant to Section 15 of the
Lease or Section 4.02 hereof or in compliance with the first Section of Section
6.08, or (e) any liability on the part of Owner Trustee arising out of its
negligence or willful or negligent misconduct in connection with its obligations
under Section 5.01, 6.08 or 8.02 hereof, or (f) those arising under any
circumstances or upon any terms where Lessee would not have been required to
indemnify Owner Trustee, in its individual capacity, pursuant to Section 6.01 or
7.01 of the Participation Agreement disregarding for purposes of this Section
7.01, Sections 6.01(ii), 6.01(v) and 7.01(b)(ii) of the Participation Agreement;
PROVIDED, that before asserting its right to indemnification, if any, pursuant
to this Section 7.01, Owner Trustee shall first demand its corresponding right
to indemnification pursuant to Section 6.01 or 7.01 of the Participation
Agreement (but need not exhaust any or all remedies available thereunder). The
indemnities contained in this Section 7.01 extend to the Owner Trustee only in
its individual capacity and shall not be construed as indemnities of the Trust
Estate. The indemnities contained in this Section 7.01 shall survive the
termination of this Trust Agreement and the resignation or removal of the Owner
Trustee. In addition, if necessary, the Owner Trustee shall be entitled to
indemnification from the Trust Estate for any liability, obligation, loss,
damage, penalty, tax, claim, action, suit, cost, expense or disbursement
indemnified against pursuant to this Section 7.01 to the extent not reimbursed
by Lessee, the Owner Participant or others, but without releasing any of them
from their respective agreements of reimbursement.

                                  ARTICLE VIII

                      SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES

          Section 8.1. RESIGNATION OF THE OWNER TRUSTEE; APPOINTMENT OF
SUCCESSOR. (a) RESIGNATION OR REMOVAL. The Owner Trustee or any successor Owner
Trustee (i) shall resign if required to do so pursuant to Section 5.02(b) of the
Participation Agreement and (ii) may resign at any time without cause by giving
at least 60 days prior written notice to the Owner Participant and Lessee, such
resignation to be effective upon the acceptance of appointment by the successor
Owner Trustee under Section 8.01(b). In addition, the Owner Participant may at
any time remove the Owner Trustee, or revoke the trusts created by this Trust
Agreement, in either case with or without cause by a notice in writing delivered
to the Owner Trustee and Lessee. Any such removal shall be effective upon the
acceptance of appointment by the successor Owner Trustee under Section 8.01(b).
In the case of the resignation or removal of the Owner Trustee, the Owner
Participant may appoint a successor Owner Trustee by an instrument in writing.
If a successor Owner Trustee shall not have been appointed within 30 days after
such notice of

                                       11


resignation or removal, the Owner Trustee may apply to any court of competent
jurisdiction to appoint a successor Owner Trustee to act until such time, if
any, as a successor shall have been appointed as above provided. Any successor
Owner Trustee so appointed by such court shall immediately and without further
act be superseded by any successor Owner Trustee appointed as above provided
within one year from the date of the appointment by such court.

          (b) EXECUTION AND DELIVERY OF DOCUMENTS, ETC. Any successor Owner
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee, with a copy to Owner Participant and Lessee, an instrument accepting
such appointment and assuming the obligations of Owner Trustee, in its
individual capacity and as Owner Trustee, under the Operative Agreements to
which Owner Trustee is a party, and thereupon such successor Owner Trustee,
without further act, shall become vested with all the estates, properties,
rights, powers, duties and trusts of the predecessor Owner Trustee in the trust
hereunder with like effect as if originally named the Owner Trustee herein; but
nevertheless, upon the written request of such successor Owner Trustee, such
predecessor Owner Trustee shall execute and deliver an instrument transferring
to such successor Owner Trustee upon the trusts herein expressed, all the
estates, properties, rights, powers and trusts of such predecessor Owner
Trustee, and such predecessor Owner Trustee shall duly assign, transfer, deliver
and pay over to such successor Owner Trustee all monies or other property then
held by such predecessor Owner Trustee upon the trusts herein expressed. Upon
the appointment of any successor Owner Trustee hereunder, the predecessor Owner
Trustee will complete, execute and deliver to the successor Owner Trustee such
documents as are necessary to cause registration of the Aircraft included in the
Trust Estate to be transferred upon the records of the FAA or other governmental
authority having jurisdiction, into the name of the successor Owner Trustee.

          (c) QUALIFICATION. Any successor Owner Trustee, however appointed,
shall be a Citizen of the United States, shall be qualified to act as a trustee
in Utah (if the trust created hereby is to remain in such state) and shall also
be a bank or trust company organized under the laws of the United States of
America or any state thereof having a combined capital and surplus of at least
$100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
and customary terms.

          (d) MERGER, ETC. Any corporation into which the Owner Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation to which substantially all the
corporate trust business of the Owner Trustee may be transferred, shall, subject
to the terms of Section 8.01(c), be the Owner Trustee hereunder without further
act.

          Section 8.2. CO-TRUSTEES AND SEPARATE TRUSTEES. If at any time or
times it shall be necessary or prudent in order to conform to any Applicable Law
of any jurisdiction in which all or any part of the Trust Estate is located, or
the Owner Trustee shall be advised by counsel that it is so necessary or prudent
in the interest of the Owner Participant or the Owner Trustee, or the Owner
Trustee shall have been directed to do so by the Owner Participant, the Owner
Trustee and the Owner Participant shall execute and deliver an agreement
supplemental hereto and all other instruments and agreements necessary or proper
to constitute another bank or trust company or one or more Persons (any and all
of which shall be a Citizen of the United States)

                                       12


approved by the Owner Trustee and the Owner Participant, either to act as
co-trustee or co-trustees, jointly with the Owner Trustee, or to act as separate
trustee or trustees hereunder (any such co-trustee or separate trustee being
herein sometimes referred to as an "additional trustee"). In the event the Owner
Participant shall not have joined in the execution of such agreements
supplemental hereto within ten days after the receipt of a written request from
the Owner Trustee so to do, the Owner Trustee may act under the foregoing
provisions of this Section 8.02 without the concurrence of the Owner
Participant; and the Owner Participant hereby appoints the Owner Trustee its
agent and attorney-in-fact to act for it under the foregoing provisions of this
Section 8.02 in either of such contingencies.

          Every additional trustee hereunder shall, to the extent permitted by
Applicable Law, be appointed and act, and the Owner Trustee and its successors
shall act, subject to the following provisions and conditions:

          (a) all powers, duties, obligations and rights conferred upon the
     Owner Trustee in respect of the custody, control and management of monies,
     the Aircraft or documents authorized to be delivered hereunder or under the
     Participation Agreement shall be exercised solely by the corporation
     designated as the Owner Trustee in the first paragraph of this Trust
     Agreement, or its successors as the Owner Trustee hereunder;

          (b) all other rights, powers, duties and obligations conferred or
     imposed upon the Owner Trustee and any limitations thereon shall be
     conferred or imposed upon and exercised or performed by the corporation
     designated as the Owner Trustee in the first paragraph of this Trust
     Agreement or its successors as the Owner Trustee, and such additional
     trustee or trustees jointly, except to the extent that under any Applicable
     Law of any jurisdiction in which any particular act or acts are to be
     performed (including the holding of title to the Trust Estate), the Owner
     Trustee shall be incompetent or unqualified to perform such act or acts, in
     which event such rights, powers, duties and obligations shall be exercised
     and performed by such additional trustee or trustees;

          (c) no power given to, or which it is provided hereby may be exercised
     by, any such additional trustee or trustees shall be exercised hereunder by
     such additional trustee or trustees, except jointly with, or with the
     consent in writing of, the corporation designed as the Owner Trustee in
     this Trust Agreement or its successor as the Owner Trustee, anything herein
     contained to the contrary notwithstanding;

          (d) no trustee hereunder shall be personally liable by reason of any
     act or omission of any other trustee hereunder; and

          (e) the Owner Participant, at any time, by an instrument in writing
     may remove any such additional trustee. In the event that the Owner
     Participant shall not have joined in the execution of any such instrument
     within ten days after the receipt of a written request from the Owner
     Trustee so to do, the Owner Trustee shall have the power to remove any such
     additional trustee without the concurrence of the Owner Participant; and
     the Owner Participant hereby appoints the Owner Trustee its agent and
     attorney-in-fact to act for it in such connection in such contingency.

                                       13


          In case any separate trustee under this Section 8.02 shall die, become
incapable of acting, resign or be removed, the title to the Trust Estate and all
rights and duties of such separate trustee shall, so far as permitted by
Applicable Law, vest in and be exercised by Owner Trustee, without the
appointment of a successor to such separate trustee.

                                   ARTICLE IX

                  SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT
                               AND OTHER DOCUMENTS

          Section 9.1. SUPPLEMENTS AND AMENDMENTS. At any time and from time to
time, upon the written request of the Owner Participant, (i) the Owner Trustee,
together with the Owner Participant, shall execute a supplement to this Trust
Agreement for the purpose of adding provisions to, or changing or eliminating
provisions of, this Trust Agreement (except Section 10.11) as specified in such
request, and (ii) the Owner Trustee shall enter into such written amendment of
or supplement to any other Operative Agreement to which the Owner Trustee is a
party as Lessee may agree to and as may be specified in such request, or execute
and deliver such written waiver or modification of or consent under the terms of
any such Operative Agreement as Lessee may agree to and as may be specified in
such request.

          Section 9.2. DISCRETION AS TO EXECUTION OF DOCUMENTS. If in the
opinion of the Owner Trustee any document required to be executed pursuant to
the terms of Section 9.01 adversely affects any right, duty, immunity or
indemnity in favor of the Owner Trustee hereunder or under any other Operative
Agreement to which the Owner Trustee is a party, the Owner Trustee may in its
discretion decline to execute such document unless Owner Trustee is furnished
with indemnification from Lessee or any other party upon terms and in amounts
reasonably satisfactory to Owner Trustee to protect the Trust Estate and Owner
Trustee against any and all liabilities, costs and expenses arising out of the
execution of such documents.

          Section 9.3. ABSENCE OF REQUIREMENTS AS TO FORM. It shall not be
necessary for any written request furnished pursuant to Section 9.01 to specify
the particular form of the proposed documents to be executed pursuant to such
Section, but it shall be sufficient if such request shall indicate the substance
thereof.

          Section 9.4. DISTRIBUTION OF DOCUMENTS. Promptly after the execution
by the Owner Trustee of any document entered into pursuant to Section 9.01, the
Owner Trustee shall mail, by certified mail, postage prepaid, a conformed copy
thereof to the Owner Participant, but the failure of the Owner Trustee to mail
such conformed copy shall not impair or affect the validity of such document.

                                    ARTICLE X

                                  MISCELLANEOUS

          Section 10.1. TERMINATION OF TRUST AGREEMENT. This Trust Agreement and
the trusts created hereby shall terminate and this Trust Agreement shall be of
no further force or effect upon the earliest of (a) the later of (x) the sale or
other final disposition by the Owner

                                       14


Trustee of all property constituting part of the Trust Estate and the final
distribution by the Owner Trustee of all monies or other property or proceeds
constituting part of the Trust Estate in accordance with Article IV hereof,
provided that at such time Lessee shall have fully complied with all of the
terms of the Participation Agreement and the Lease, and (y) the expiration or
termination of the Lease in accordance with its terms or (b) twenty-one (21)
years less one day after the death of the last survivor of all of the
descendants of the grandparents of Joseph P. Kennedy living on the date of the
earliest execution of this Trust Agreement by either party hereto, otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the terms hereof.

          Notwithstanding the foregoing, this Trust Agreement and trust created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Trust Agreement shall be of no further force and effect,
upon the election of the Owner Participant by notice to the Owner Trustee, if
such notice shall be accompanied by the written agreement (in form and substance
satisfactory to the Owner Trustee) of the Owner Participant assuming all
obligations of the Owner Trustee under or contemplated by the Operative
Agreements or incurred by it as trustee hereunder and releasing the Owner
Trustee therefrom; provided, however, that such notice may be given only after
the Lease shall no longer be in effect.

          Section 10.2. THE OWNER PARTICIPANT HAS NO LEGAL TITLE IN TRUST
ESTATE. The Owner Participant does not have legal title to any part of the Trust
Estate. No transfer, by operation of law or otherwise, of any right, title and
interest of the Owner Participant in and to the Trust Estate hereunder shall
operate to terminate this Trust Agreement or the trusts hereunder or entitle any
successors or transferees of the Owner Participant to an accounting or to the
transfer of legal title to any part of the Trust Estate.

          Section 10.3. ASSIGNMENT, SALE, ETC., OF AIRCRAFT. Any assignment,
sale, transfer or other conveyance of the Aircraft, any Engine, any Part or any
interest therein by the Owner Trustee made pursuant to the terms hereof or of
the Lease or the Participation Agreement shall bind the Owner Participant and
shall be effective to transfer or convey all right, title and interest of the
Owner Trustee and the Owner Participant in and to the Aircraft, such Engine,
such Part or interest therein. No purchaser or other grantee shall be required
to inquire as to the authorization, necessity, expediency or regularity of such
assignment, sale, transfer or conveyance or as to the application of any sale or
other proceeds with respect thereto by the Owner Trustee.

          Section 10.4. TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY.
Except for the terms of Section 4.01, Articles V and VIII, Sections 9.01, 10.01
and 10.03 hereof, nothing herein, whether express or implied, shall be construed
to give any Person other than the Owner Trustee, WFB, the Lessee and the Owner
Participant any legal or equitable right, remedy or claim under or in respect of
this Trust Agreement; but this Trust Agreement shall be held to be for the sole
and exclusive benefit of the Owner Trustee, WFB, the Lessee and the Owner
Participant.

          Section 10.5. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be given in the manner set
forth in Section 12.01 of the Participation Agreement.

                                       15


          Section 10.6. SEVERABILITY. Any provision hereof which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          Section 10.7. WAIVERS, ETC. No term or provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing entered into in compliance with the terms of Article IX hereof; and any
waiver of the terms hereof shall be effective only in the specified instance and
for the specific purpose given.

          Section 10.8. COUNTERPARTS. This Trust Agreement 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.

          Section 10.9. BINDING EFFECT, ETC. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee and its successors and permitted assigns, and the Owner Participant, its
successors and permitted assigns. Any request, notice, direction, consent,
waiver or other instrument or action by the Owner Participant or Owner Trustee
shall bind their respective successors and permitted assigns.

          Section 10.10. HEADINGS; REFERENCES. The headings of the various
Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.

          Section 10.11. GOVERNING LAW. (a) THIS TRUST AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

          (b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 TRUST AGREEMENT.

          (c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 REFERRED TO IN
SECTION 10.05. EACH PARTY HERETO HEREBY AGREES THAT SERVICE UPON IT IN
ACCORDANCE WITH THIS SECTION 10.11(c) SHALL CONSTITUTE VALID AND EFFECTIVE
PERSONAL SERVICE UPON SUCH PARTY.

                                       16


          (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 TRUST AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR
BY SUCH COURTS.

          (e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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 TRUST AGREEMENT.

          Section 10.12. ADMINISTRATION OF TRUST. The principal place of
administration of the trust created by this Trust Agreement shall be in the
State of Utah.

            [The remainder of this page is intentionally left blank.]

                                       17


          IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.

                               SILVERMINE RIVER FINANCE TWO, INC.

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

                               WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

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

                                       18



NOTE TO EXHIBIT 10.28

The 12 additional Trust Agreements are substantially identical in all material
respects to the filed Trust Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                          October, 2001              Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N370SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N371SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

EX-10.29

                                                                   EXHIBIT 10.29

                                                 EXECUTION VERSION

         TAX INDEMNITY AGREEMENT [N296SK] dated as of
         December 20, 2001 (the "Tax Indemnity Agreement") between
         CHAUTAUQUA AIRLINES, INC. (the "Lessee") and   SILVERMINE
         RIVER FINANCE TWO, INC. (the "Owner Participant").

                                     RECITAL

         As inducement to the Owner Participant to enter into the transactions
contemplated by that certain Participation Agreement [N296SK] dated as of
December 20, 2001 among Lessee, Owner Participant and Wells Fargo Bank
Northwest, National Association, as Owner Trustee, (the "Participation
Agreement"), and in consideration of the mutual covenants contained herein and
in the Participation Agreement and other documents contemplated thereby, the
Lessee and the Owner Participant hereby agree as follows:

         SECTION 1. DEFINITIONS.

         (a) The term "Owner Participant" shall include each member of the
affiliated group (within the meaning of Section 1504 of the Code (or any
successor provision thereto)) of which the Owner Participant is a member and
each entity which joins the Owner Participant in filing a combined, unitary or
consolidated state income tax return.

         (b) "Tax Attribute Period" shall mean the period beginning on the
Delivery Date and ending on December 31, 2008; PROVIDED that in the event the
depreciation period for the Aircraft is other than the period specified in Tax
Assumption 2(d)(i) as a result of a Lessee Act, such Tax Attribute Period shall
end on the last day of the last taxable year in which a depreciation deduction
for the Aircraft is allowed to Silvermine River Finance Two, Inc.

         (c) "Reasonable Basis" for a position exists if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association.

         (d) "Permitted Percentage" shall mean 10% during the Tax Attribute
Period.

         (e) Except as otherwise provided herein, capitalized terms used herein
without definition shall have the meanings ascribed thereto in Appendix A to the
Participation Agreement.

         SECTION 2. TAX ASSUMPTIONS

         The transactions described in the Participation Agreement have been
entered into on the assumptions (the "Tax Assumptions") that for federal income
tax purposes:

         (a) the entity created by the Trust Agreement will be treated either as
a "grantor trust" under Sections 671 ET SEQ. of the Code (and any successor
provisions thereto) or



as an agent or nominee of the Owner Participant, and the Owner Participant will
be treated as the owner of the entire trust and be required and entitled to take
into account in computing its taxable income all items of income, gain, loss,
deduction and credit of the trust in accordance with the accrual method of
accounting;

         (b) at all times during the period beginning on the Delivery Date and
ending at the end of the Term, the Lease will constitute a "true lease", the
Owner Participant will be treated as the purchaser, sole owner and lessor of the
Aircraft and the Lessee will be treated as the lessee of the Aircraft;

         (c) the Owner Participant's taxable year is the calendar year;

         (d) the Owner Participant, as the owner of the Aircraft for federal
income tax purposes, will be entitled to the following federal income tax
benefits:

              (i) cost recovery deductions equal to 14.29% of Lessor's Cost in
2001, 24.49% of Lessor's Cost in 2002, 17.49% of Lessor's Cost in 2003, 12.49%
of Lessor's Cost in 2004, 8.93% of Lessor's Cost in 2005, 8.92% of Lessor's Cost
in 2006, 8.93% of Lessor's Cost in 2007 and 4.46% of Lessor's Cost in 2008 (the
"MACRS Deductions"); and

              (ii) amortization deductions for Transaction Costs paid or
incurred by the Owner Participant in connection with the transactions
contemplated by the Operative Agreements computed on a straight-line basis over
the period commencing on the first day and ending on the last day of the Basic
Term of the Lease (the "Amortization Deductions", and together with the MACRS
Deductions, the "Assumed Tax Benefits");

         (e) no amount will be includible in the gross income of the Owner
Participant for income tax purposes with respect to the transactions
contemplated by the Operative Agreements at or at any time prior to the
expiration or earlier termination of the Lease other than (i) Basic Rent and
Renewal Rent in the amounts and at the times required pursuant to the Lease,
accrued and allocated in the manner provided by the Lease, (ii) any payment of
Termination Value (or the payment of amounts calculated by reference thereto) or
sales proceeds pursuant to Section 13 or 14 of the Lease, (iii) any amount paid
to or for the benefit of the Owner Participant and specifically identified or
calculated as interest, (iv) amounts to the extent they are offset by deductions
in the same taxable year to the Owner Participant arising out of the event
causing the inclusion of income (other than the Assumed Tax Benefits), (v) all
amounts payable on a grossed up or After Tax Basis to, or for the benefit of,
the Owner Participant, and (vi) amounts received by or for the benefit of the
Owner Participant pursuant to a warranty claim or as insurance proceeds with
respect to a loss or damage to the Aircraft, to the extent the Owner Participant
actually receives and retains and is not required to pay over such amounts to a
Lessee Person or some other Person unrelated to the Owner Participant;

         (f) the Owner Participant will be a domestic corporation subject to a
federal income tax rate of 35% (the "Assumed Federal Rate") and a state and
local income tax rate (before taking into account the deductibility of state and
local income taxes for Federal income tax purposes) of 4.615% (the "Assumed
State and Local Rate"), resulting in a combined rate (after giving effect to the
deductibility of such state and local income taxes for federal income tax

                                        2


purposes) of 38% (the "Assumed Tax Rate") in 2001 and in each year thereafter,
and the Owner Participant will have sufficient taxable income to fully utilize
the Assumed Tax Benefits against income taxable at the Assumed Tax Rate;

         (g) the Aircraft will be deemed to be placed in service by the Owner
Participant within the meaning of Section 168 of the Code on the Delivery Date;

         (h) none of the Owner Participant, the Lessee or any sublessee is, or
at any time during the Term will be, a "tax exempt entity" within the meaning of
Section 168(h) of the Code;

         (i) the Owner Participant will not be subject to the alternative
minimum tax under Section 55 of the Code;

         (j) no portion of the MACRS Deductions will be recaptured under
Section 1245 of the Code or otherwise during the Term;

         (k) the Lease will not be a "disqualified leaseback or long-term
agreement" within the meaning of Section 467(b) of the Code; and

         (l) for each taxable year of the Owner Participant during the Tax
Attribute Period not more than the Permitted Percentage of any item of income,
deduction or loss with respect to the transactions contemplated by the Operative
Agreements will be treated for federal income tax purposes as derived from, or
allocable to, sources outside the United States;

         The foregoing assumptions will be appropriately modified or adjusted
from time to time to reflect the occurrence of an event for which an indemnity
has been paid pursuant to this Agreement.

         SECTION 3. RECORDS AND STATEMENTS.

         The Lessee shall, at its expense, maintain such information or records
(including details of the use or operation of the Aircraft outside the United
States) relating to the Aircraft as are regularly maintained by the Lessee or as
may be required by law to be maintained (including, but not limited to, flight
logs). The Lessee shall, at the Lessee's expense, maintain and provide any such
records or information, and such other information customarily maintained by
comparable airlines, as the Owner Participant may reasonably request from the
Lessee to enable the Owner Participant and the Owner Trustee to fulfill their
respective tax filing, tax audit and tax litigation obligations.

         SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE.

         The Lessee represents, warrants and covenants that:

         (a) During the Tax Attribute Period the Aircraft is not and will not be
subject to Section 168(g) of the Code, assuming that the Owner Participant is
not a "tax-exempt entity" within the meaning of Section 168(h)(2) of the Code
and that the Owner Participant has not made an election under Section
168(g)(1)(E) of the Code;

                                        3


         (b) neither Lessee nor any Person controlled by it, in control of it,
or under common control with it, directly or indirectly, nor any Person claiming
by, through or under the Lessee, nor any sublessee or other user or person in
possession of the Aircraft (or any Parts) during the Term, nor any Affiliate of
any of the foregoing (but excluding the Lessor or the Owner Participant or any
Person claiming by, through or under the Lessor or the Owner Participant but not
so excluding any Person claiming directly or indirectly through or under the
Lease or the Lessee) (each such Person not so excluded, a "Lessee Person") has
claimed or will claim the MACRS Deductions or the Amortization Deductions or any
other depreciation or cost recovery deduction or interest deduction with respect
to the Aircraft for federal, state, local or foreign income tax purposes, or
will claim to be the owner of the Aircraft in respect of any period during the
Term, or has taken or will take any action or position (not required by the
Operative Agreements) inconsistent with the Tax Assumptions or the status of the
Owner Participant as the sole owner of the Aircraft for federal, state, local
and foreign tax purposes;

         (c) as of the Delivery Date (i) the Aircraft will not require any
improvements, modifications or additions (other than ancillary items of
removable equipment of a kind that customarily are selected and furnished by
purchasers or lessees of similar aircraft) in order to be rendered complete for
its intended use by the Lessee and (ii) Lessee has no present intention to make
any material nonseverable improvement, modification or addition to the Aircraft;

         (d) neither Lessee nor any member of the "lessee group" (as defined in
Rev. Proc. 2001-28, 2001-19 I.R.B. 1156) of which Lessee is a member has, on the
Delivery Date (assuming consummation of the transaction described in
Section 2.01(a) of the Participation Agreement), any investment in the Aircraft
within the meaning of Section 4.04 of Rev. Proc. 2001-28;

         (e) intentionally omitted;

         (f) any written information supplied by the Lessee (or its agents) to
the Appraiser and relied on by such Appraiser in making the appraisal and
identified to the Lessee in a letter from the Appraiser attached hereto as
Schedule 4(f) was accurate and complete at the time given and as of the Delivery
Date, and the Lessee did not withhold any information in connection with any
request by the Appraiser for information that would render the information
actually provided misleading; and

         (g) if at the time of the transfer of title of the Aircraft to the
Lessor on the Closing Date the Aircraft were instead acquired by the Lessee, the
Aircraft would constitute "7 year property" within the meaning of Section
168(e)(1) of the Code in the hands of the Lessee.

         SECTION 5. FEDERAL INCOME TAX INDEMNITY.

         (a) If for any taxable year, (i) as a result of (A) any act or omission
on the part of the Lessee or any Lessee Person (other than (I) the execution and
delivery of the Operative Agreements or (II) any act permitted or required under
the Operative Agreements, except for any alteration, modification, addition or
improvement to, or any repair, maintenance, substitution, replacement, pooling,
interchange or temporary or permanent removal from service or retirement of, the
Aircraft, any Engine or any Parts by any Lessee Person), (B) the inaccuracy or
breach of

                                        4


any representation, agreement, covenant or warranty of the Lessee contained
herein or in any other Operative Agreement or (C) the receipt of any refunds,
damages, insurance, warranty or similar proceeds or requisition, condemnation or
similar proceeds attributable to the Aircraft, any Engine or any Parts, by any
person other than the Owner Participant (or if received by the Owner
Participant, not retained by the same) (each such act, omission, inaccuracy,
breach or event described in clause (A), (B) or (C), a "Lessee Act"), the Owner
Participant shall suffer a loss, disallowance, reduction, elimination,
disqualification or deferral of, shall suffer a delay in claiming, shall not
have the right to claim, or shall be required to recapture (a "Recapture"), all
or any portion of the Assumed Tax Benefits, or (ii) the Owner Participant shall
be required to include in its gross income for federal income tax purposes any
amount other than the amounts described in Section 2(e) hereof (an "Inclusion")
as a result of (A) any alteration, modification, addition or improvement to, or
any repair, maintenance, substitution, replacement, pooling, interchange or
temporary or permanent removal from service or retirement of, the Aircraft, any
Engines or any Parts by any Lessee Person, (B) any payment by the Lessee of Rent
in an amount greater than due, or at a time earlier than at the time required,
pursuant to the Lease, (C) except to the extent such Inclusion constitutes a
Recapture, any receipt of any refunds, damages, insurance, warranty or similar
proceeds or requisition, condemnation or similar proceeds with respect to the
Aircraft, any Engines or any Parts by any person other than the Owner
Participant (or if received by the Owner Participant, not retained by the same),
(D) the Owner Participant's actual or constructive receipt of payments of
Supplemental Rent that are not made on an After Tax Basis to the Owner
Participant, (E) any receipt of earnings on funds held as security for Lessee's
obligations that are not retained by the Owner Participant, or (F) except to the
extent such Inclusion constitutes a Recapture, any Lessee Act described in
Section 5(a)(i)(A) or (B) hereof that results in a disposition of the Aircraft,
any Engine or any Parts for federal income tax purposes (any such event in
clause (i) or (ii) hereinafter being referred to as a "Tax Loss"), then the
Lessee shall pay to the Owner Participant, on an After Tax Basis, an indemnity
in a lump-sum amount computed in accordance with the following sentence. The
lump-sum amount shall be an amount which, taking into account the other payments
under the Operative Agreements and the various increases and decreases in
federal, state and local taxes (and in the case of an Inclusion, foreign taxes),
preserves the yield portion of the Owner Participant's Net Economic Return and
compensates the Owner Participant for the amount of any related interest,
penalties, and additions to tax payable by the Owner Participant. The
computation of such lump-sum amount shall be made by the Owner Participant
utilizing the methodology and assumptions, including the Tax Assumptions,
utilized by the Owner Participant in determining its Net Economic Return, except
as such assumptions shall be varied to take into account such Tax Loss or any
previous Tax Loss for which an indemnity was paid under this Agreement;
PROVIDED, HOWEVER, that in the case of a Tax Loss resulting from an Inclusion,
the computation of such lump-sum amount shall be made on the basis of the Owner
Participant's actual-tax detriments and benefits incurred or anticipated as of
the time of such Tax Loss (including any unavailability of a net operating loss
carryover of the Owner Participant). Further, for purposes of determining the
amounts of the increase and reduction in income taxes as a result of a Tax Loss,
the applicable tax rate shall be the Assumed Tax Rate, except with respect to a
Tax Loss resulting from an Inclusion, the increased and reduced federal, state,
local and foreign income taxes payable by (or not refundable to) the Owner
Participant as a result of such Tax Loss shall be computed by utilizing the
actual rates for federal, state, local and foreign taxes applicable to the Owner
Participant at the time of such Tax Loss. Any Tax Loss attributable to an
Inclusion which

                                        5


does not actually result in an increase in the Owner Participant's federal,
state, local or foreign income tax liability (or a decrease in the Owner
Participant's refund of such income taxes) in the year of such inclusion but
which reduces any net operating loss, business credit, foreign tax credit
carryover or other tax attribute of the Owner Participant shall be treated as
giving rise to an actual increase in federal, state, local or foreign income tax
liability in the year for which such tax attribute if not reduced thereby would
have given rise to a reduction in the Owner Participant's federal, state, local
or foreign tax liability.

         Each payment by the Lessee pursuant to this Section 5(a) shall be made
within 30 days after receipt of a written demand certifying that there has been
a Tax Loss, describing in reasonable detail the Tax Loss in question, the amount
of additional income tax, interest, penalties and additions to tax and the
calculation of the payment due in respect thereof and describing the event or
condition that the Owner Participant claims gives rise to an obligation by the
Lessee to indemnify hereunder (but in no event earlier that two (2) Business
Days prior to the date on which the Owner Participant is required to pay
additional federal, income taxes as a result of the Tax Loss); PROVIDED THAT, if
a contest of the Tax Loss is being conducted pursuant to Section 7 hereof,
payment (other than payments required under Section 7(b)), shall not be required
from the Lessee until 30 days after the Final Determination of such contest.

         (b) If, as the result of a Tax Loss or a change of facts that gave rise
to a Tax Loss, the amount of federal, and as regards any Inclusion, state, local
and foreign income taxes payable by the Owner Participant for any taxable year
shall be less than the amount of such taxes which would have been payable by the
Owner Participant had such Tax Loss or such change not occurred (or as the
result thereof the Owner Participant shall receive a refund of such income
taxes, which shall be greater than the amount of such refund, if any, which the
Owner Participant would have received had such Tax Loss or change not occurred)
(any such tax savings (other than savings already taken into account in
determining the indemnity pursuant to Section 5(a)), a "Correlative Benefit"),
then the Owner Participant shall pay to the Lessee the amount of any actual
resulting reduction in taxes (or increased refund, including any actual interest
(net of any taxes payable with respect to such refund or interest) received or
credited thereon), plus any net additional federal, state, local or foreign tax
benefits or savings actually realized by the Owner Participant as the result of
any payment made pursuant to this sentence (such actual reduction in or
increased refund of income taxes to be determined, with respect to a Tax Loss or
change other than as a result of an Inclusion, on a hypothetical basis, I.E.,
assuming the Owner Participant can utilize any additional tax benefits resulting
from the Tax Loss or change at the Assumed Tax Rate, and with respect to a Tax
Loss resulting from an Inclusion, to be determined on an actual basis, I.E., by
using the actual federal, state, local and foreign income tax rates (and, to the
extent that the Owner Participant utilizes the additional tax benefits as a
reduction or refund of state, local and foreign income taxes otherwise payable
by the Owner Participant, the actual composite state, local and foreign income
tax rates applicable to such reduction or refund) applicable to the Owner
Participant for the year in which such additional benefits arise); PROVIDED,
HOWEVER, that the amount payable by the Owner Participant pursuant to this
sentence shall not exceed the sum of the amounts previously paid by the Lessee
to the Owner Participant pursuant to Section 5(a), less the aggregate amount of
all prior payments by the Owner Participant to the Lessee under this sentence,
with any excess amount otherwise payable being carried forward and available to
reduce PRO TANTO any subsequent obligation of Lessee to Owner Participant
pursuant to Section 5(a); PROVIDED, FURTHER, that the Owner Participant shall
not be obligated to make any payment

                                        6


pursuant to this sentence while a Specified Default or Event of Default shall
have occurred and be continuing. If an amount payable by the Owner Participant
to the Lessee pursuant to this Section 5(b) is not paid when due because of the
occurrence and continuation of any Specified Default or Event of Default, such
amount shall be payable by the Owner Participant to the Lessee upon the Lessee's
curing all Specified Defaults or Events of Default. Subject to the provisions
above, each payment made by the Owner Participant to the Lessee pursuant to this
Section 5(b) shall be made within 30 days after the Owner Participant files a
tax return or receives a refund or adjustment from the Internal Revenue Service
which reflects such reduction in federal income tax. For purposes of calculating
indemnity obligations pursuant to Section 5(a) and amounts due to Lessee
pursuant to this Section 5(b), it shall be assumed that the Owner Participant
suffers a Tax Loss or is entitled to Correlative Benefits for state, local and
foreign income tax purposes if and only if the Owner Participant suffers a
corresponding Tax Loss or realizes a corresponding benefit for federal income
tax purposes.

         (c) Any taxes that are imposed on the Owner Participant as a result of
the subsequent disallowance of all or any portion of a reduction (or refund) of
the Owner Participant's tax liability for which the Owner Participant has paid
the Lessee pursuant to Section 5(b), shall be treated as a Tax Loss subject to
indemnification under this Agreement without regard to Section 6 or 7 hereof.

         (d) (i) If, as a result of the use or operation or location of the
Aircraft outside the United States by any Lessee Person, the Tax Assumption set
forth in Section 2(l) hereof shall be inaccurate during any taxable year of the
Owner Participant included in whole or in part within the Tax Attribute Period
(an "Excess Foreign Allocation"), and if as a result thereof the amount of the
foreign tax credits available for utilization by the Owner Participant for any
taxable year shall be less than the amount of the foreign tax credits that would
have been available for utilization by the Owner Participant if such Tax
Assumption had been accurate (such event being referred to herein as a "Foreign
Tax Credit Loss"), then the Lessee shall pay to the Owner Participant as an
indemnity and on an After Tax Basis an amount which is equal to the actual
increase in the federal income taxes payable by (or not refundable to) the Owner
Participant for such taxable year as a result of such Foreign Tax Credit Loss,
plus the amount of any interest, penalties and additions to tax payable by the
Owner Participant as a result of such Foreign Tax Credit Loss. The amounts of
any increase in federal income taxes payable by (or not refundable to) the Owner
Participant as a result of a Foreign Tax Credit Loss shall be computed on the
assumption that any reduced amount of foreign tax credits of the Owner
Participant is attributable to an Excess Foreign Allocation and foreign source
losses arising from other equipment leasing transactions that provided the Owner
Participant with indemnification for the loss of foreign tax credits, on a PRO
RATA basis, prior to being attributable to any other foreign source deductions
or losses of the Owner Participant.

             (ii) If, as a result of (A) a Foreign Tax Credit Loss or an Excess
Foreign Allocation or (B) the usage or location of the Aircraft outside the
United States so that more than the Permitted Percentage of any item of income
or gain with respect to the transactions contemplated by the Operative
Agreements during any taxable year is treated as derived from sources outside
the United States, the amount of the foreign tax credits that the Owner
Participant utilizes against its tax liability for a taxable year exceeds the
amount of such foreign tax credits to which the Owner Participant would have
otherwise been entitled, and

                                        7


provided that no Specified Default or any Event of Default shall have occurred
and be continuing (in which event such amounts shall become payable upon the
Lessee's curing such Specified Default or Event of Default), then the Owner
Participant shall pay to the Lessee the amount of any actual reduction in its
Federal income tax liability (or actual increase in a refund of Federal income
taxes owing to the Owner Participant) as a result of such increase in foreign
tax credits, plus any net additional Federal, state, local and foreign income
tax benefits actually realized by the Owner Participant as the result of such
payment; PROVIDED, HOWEVER, that the sum of the amounts payable by the Owner
Participant pursuant to this sentence shall not exceed the sum of the amounts
previously paid by the Lessee to the Owner Participant pursuant to Section
5(d)(i) to the extent not previously taken into account under this provision
(with any excess amount otherwise payable being carried forward and available to
reduce PRO TANTO any subsequent obligation of Lessee to Owner Participant
pursuant to this Section 5(d)) and PROVIDED, FURTHER, HOWEVER, that no payment
shall be required with respect to clause (B) above unless and until the usage or
location outside the United States has resulted in an aggregate amount of
increased foreign tax credits being available to the Owner Participant equal to
the aggregate amount of unindemnified tax increases suffered by the Owner
Participant resulting from the application of the Permitted Percentages during
the Tax Attribute Period. For purposes of this Section 5(d)(ii), in determining
the order in which the Owner Participant utilizes any foreign tax credits
against the Owner Participant's federal income taxes, the Owner Participant
shall be deemed to utilize (A) first, all foreign tax credits other than those
described in clause (B) of this sentence, and (B) then, on a PRO RATA basis, all
foreign tax credits, the utilization of which by the Owner Participant results
from either (x) the carryover or the carryforward of foreign tax credits which
were unutilized due to foreign source losses arising from equipment leasing
transactions that provided the Owner Participant with indemnification for the
loss of foreign tax credits (including this transaction) or (y) foreign source
income or gain generated by such transactions to the extent such foreign source
income or gain is sufficient to give rise to a payment obligation to the Lessee
thereunder.

         Once a foreign tax is deemed to be utilized pursuant to the ordering
rules set forth above, it shall not subsequently be recharacterized as not
having been utilized as a result of a foreign tax liability arising in a
subsequent year.

             (iii) Each payment by the Lessee pursuant to this Section 5(d)
shall be made within 30 days after receipt of a written demand therefor
accompanied by a written statement describing in reasonable detail the Foreign
Tax Credit Loss in question, the amount of additional Federal income tax,
interest, penalties and additions to tax and the calculation of the payment due
in respect thereof (but in no event earlier than two (2) Business Days prior to
the date such additional Federal income taxes are due); PROVIDED THAT, if a
contest of the Foreign Tax Credit Loss is being conducted pursuant to Section 7
hereof, payment (other than payments required under Section 7(b)) shall not be
required from the Lessee until 30 days after the Final Determination of such
contest. Each payment by the Owner Participant to the Lessee pursuant to this
Section 5(d) in respect of an actual increase in available foreign tax credits
shall be made within 30 days after the Owner Participant files a tax return (or
receives a refund or adjustment) which reflects the utilization of such
increased foreign tax credit. Notwithstanding anything herein to the contrary,
any taxes that are imposed on the Owner Participant as a result of the
subsequent disallowance of the reduction of the Owner Participant's tax
liability, for which reduction the Owner Participant has paid the Lessee
pursuant to this Section 5(d), shall be treated

                                        8


as a Foreign Tax Credit Loss subject to indemnification under this Agreement
without regard to Section 6 or 7.

         (e) Upon request of the Lessee, the accuracy of the Owner Participant's
calculation of the amount or amounts payable to either the Owner Participant or
the Lessee pursuant to this Section 5 and any recomputations of Termination
Values pursuant to Section 3(d) of the Lease shall be verified by a lease
advisory firm or a nationally recognized firm of accountants to be selected by
the Owner Participant and reasonably acceptable to the Lessee and, in order to
enable such firm to verify such adjustments, the Owner Participant shall provide
to such firm (for their own confidential use and not to be disclosed to the
Lessee or any other person) all information reasonably necessary for such
verification, including any computer analyses used by the Owner Participant to
calculate such amount or amounts. The results of such verification shall be
binding on the parties hereto. The cost of such verification shall be borne by
the Lessee unless it is the determination of such verification that the actual
amount payable deviates, in a manner favorable to the Lessee, by more than 10%
from the amount originally determined by the Owner Participant, in which case
such cost shall be borne by the Owner Participant.

         SECTION 6. EXCLUDED EVENTS.

         The Owner Participant shall not be entitled to any payment from the
Lessee under Section 5 hereof in respect of any Tax Loss to the extent such Tax
Loss is a result of one or more of the following events:

         (a) (i) any voluntary sale, assignment, transfer or other disposition
by the Owner Participant or the Lessor (at the direction of the Owner
Participant) of, the Aircraft, any Engine or any Parts, or of any interest in
the transaction, the Trust, the Trust Estate, the Rent or any Operative
Agreement; or (ii) any involuntary sale, assignment, transfer or disposition of
the Aircraft, any Engine or any Parts or any such interest resulting from the
bankruptcy or insolvency of, or proceedings for the relief of debtors, or
foreclosure proceedings, against the Owner Participant or the Lessor, unless, in
each case, such voluntary or involuntary sale, assignment, transfer or
disposition occurs in connection with the exercise of remedies in connection
with an Event of Default that has occurred and is continuing or in connection
with any substitution or replacement of the Aircraft, any Engine or any Parts by
a Lessee Person;

         (b) any event whereby the Lessee is required to pay Termination Value,
or an amount determined by reference thereto, to the extent that such amount has
been paid and such value properly reflects the timing of the tax consequences to
the Owner Participant of such payment and/or the event giving rise to Lessee's
obligation to make such payment;

         (c) without the written concurrence of the Lessee, the failure of the
Owner Participant to properly claim or make appropriate elections with respect
to any of the Assumed Tax Benefits, the inclusion by the Owner Participant of
any Recapture or Inclusion in the Owner Participant's gross income as reported
on its federal income tax return (including any amended return) or other tax
filing or document, or the taking of a position by the Owner Participant on a
Federal income tax return (or amended return) that would result in a Foreign Tax
Credit Loss, unless, in any such case, the Owner Participant shall have received
a written opinion of

                                        9


independent tax counsel selected by the Owner Participant and reasonably
acceptable to the Lessee that no Reasonable Basis exists for making such claim
or election, failing to so include in gross income, or failing to take such
position with respect to a Foreign Tax Credit Loss (and for this purpose such
counsel may take into account the Lessee's failure to provide accurate and
timely information pursuant to the Lessee's obligations under Section 3 of this
Agreement to furnish information to the Owner Participant);

         (d) except in the case of a Tax Loss resulting from a substitution or
replacement of the Aircraft or an Inclusion any amendment or addition to, or
change in the Code or other federal statutes relating to taxation or regulations
promulgated thereunder, which is enacted, adopted or promulgated after the
Delivery Date; PROVIDED that a change in federal income tax rates shall be taken
into account in determining gross-ups;

         (e) the failure of the trust created by the Trust Agreement to qualify
as a grantor trust under Section 671 ET SEQ. of the Code, or as a nominee, agent
or partnership for federal income tax purposes, but only to the extent of a
resulting increase in the Lessee's indemnity obligations hereunder;

         (f) a determination that the Lease is not a "true lease," or that the
Owner Participant is not the purchaser, owner or lessor of the Aircraft, for
federal income tax purposes, unless, in either case, as a result of a Lessee
Act;

         (g) any failure of the Owner Participant to contest a claim in
accordance with the contest provisions in Section 7 hereof, to the extent
Lessee's ability to contest is materially adversely affected;

         (h) the willful misconduct or gross negligence by the Owner
Participant;

         (i) any amendment or modification to any Operative Agreement not
requested by, or with the written consent of, Lessee unless in connection with
an Event of Default;

         (j) the application of Section 168(f), Section 168(g)(7), Section 183,
Section 465, Section 469 of the Code or regulations thereunder but, in each
case, only to the extent of a resulting increase in the Lessee's indemnity
obligations hereunder;

         (k) the inability of the Owner Participant to include in its original
tax basis in the Aircraft all or any portion of an amount equal to the Lessor's
Cost, other than as a result of a Lessee Act;

         (l) the application of any minimum tax, including the alternative
minimum tax imposed under Section 55 ET SEQ. of the Code but only to the
extent of a resulting increase in the Lessee's indemnity obligations hereunder;

         (m) application of the mid-quarter convention described in Section
168(d)(4)(C) of the Code but only to the extent of a resulting increase in the
Lessee's indemnity obligations hereunder;

                                       10


         (n) application of Section 467(b)(2) of the Code or the relevant
Treasury Regulations promulgated thereunder (other than as a result of any
adjustment of Basic Rent in connection with an Event of Default);

         (o) the treatment of less than the Permitted Percentage of any item of
income, gain, loss, deduction or credit with respect to the Aircraft or the
transactions contemplated by the Operative Agreements as from sources outside
the United States; or

         (p) the failure of the Owner Participant to have sufficient taxable
income or tax liability to benefit from the Assumed Tax Benefits;

         (q) the status of the Owner Participant as a "tax exempt entity" within
the meaning of Section 168(h) of the Code or as a Person that is not a "United
States person" within the meaning of Section 7701(a)(30) of the Code;

         (r) a change in the Owner Participant's taxable year from a calendar
year;

         (s) the existence or exercise in accordance with the Lease by the
Lessee of an option to renew the Lease set forth in Section 13(a) of the Lease
or to purchase the Aircraft set forth in Section 13(b) of the Lease or to
terminate the Lease set forth in Section 14 of the Lease;

         (t) any event occurring after the expiration or earlier termination of
the Lease and, if required, the return of the Aircraft to Lessor or placement in
storage of the Aircraft in accordance with the terms of the Lease; or

         (u) the inclusion of any amount in income of the Lessor or the Owner
Participant with respect to any period upon or after termination of the Lease as
a consequence of any substitution, improvement or modification of the Airframe
or of any Engine.

         SECTION 7. CONTEST PROVISIONS.

         (a) The Owner Participant shall notify the Lessee within 30 days of
receipt from the Internal Revenue Service of a written proposed or final revenue
agent's report, a 30-day letter or a notice of deficiency (as described in
Section 6212 of the Code), in which an adjustment is proposed to the federal
income taxes of the Owner Participant for which the Lessee would be required to
indemnify the Owner Participant pursuant to this Agreement. The failure of the
Owner Participant to promptly notify the Lessee pursuant to the preceding
sentence shall not relieve the Lessee of its obligation to indemnify the Owner
Participant pursuant to this Agreement, except to the extent such failure
materially adversely impairs the Lessee's ability to contest such adjustment.
If, within 15 days of receipt of notice from the Owner Participant, Lessee
requests, in writing, the Owner Participant to do so, the Owner Participant
shall contest the proposed adjustment, shall consider in good faith any
suggestions made by the Lessee as to the method of pursuing such contest, and,
provided the Lessee is complying with its obligations under this Section 7,
shall not, without the consent of the Lessee, except as provided in this Section
7(a), settle such proposed adjustment; PROVIDED, HOWEVER, that the Owner
Participant shall not be obligated to contest such adjustment unless (i) Owner
Participant shall have received

                                       11


a written opinion of independent tax counsel selected by the Owner Participant
and reasonably acceptable to the Lessee ("Tax Counsel") that there is a
Reasonable Basis for contesting the matter in question, (ii) the amount of the
indemnity potentially payable by Lessee in respect of such adjustment is in
excess of $75,000, (iii) no Event of Default shall have occurred and be
continuing (PROVIDED, HOWEVER, that if an Event of Default other than as a
result of a payment default or bankruptcy shall exist, the foregoing restriction
shall not apply if the Lessee posts a bond to secure payment of amounts that
will fall due in the event of an adverse resolution of the controversy), (iv)
the Owner Participant has determined, in good faith, that the contest shall not
result in a material risk of the loss or forfeiture of the Aircraft (unless the
Lessee has provided to the Owner Participant a bond or other sufficient
protection against such risk of loss or forfeiture reasonably satisfactory to
the Owner Participant) or the imposition of criminal penalties and (v) the
Lessee shall have acknowledged, in writing, that the contest is with respect to
a liability that is the Lessee's responsibility pursuant to this Agreement
except that the Lessee shall not be bound by its acknowledgment of liability to
the extent that the Final Determination articulates conclusions of law and fact
that clearly and unambiguously demonstrate that the Lessee is not liable under
this Agreement for the contested amounts hereunder. The Owner Participant shall
afford Lessee reasonable opportunities to consult with Owner Participant and
shall keep Lessee reasonably informed regarding communications from the Internal
Revenue Service, or in connection with any judicial proceeding, and the nature
of all actions proposed to be taken to contest such proposed adjustment and
consider in good faith such requests as the Lessee shall make concerning the
most appropriate forum and manner in which to proceed, including (w) the
arguments to be made in contesting the proposed adjustment, (x) whether any
action to contest such proposed adjustment will initially be by way of judicial
or administrative proceedings, or both, (y) whether any such proposed adjustment
will be contested by resisting payment thereof or by paying the same and seeking
a refund thereof and (z) if the Owner Participant shall undertake judicial
action with respect to such proposed adjustment, the court or other judicial
body before which such action will be commenced; but in all cases the Owner
Participant shall have ultimate discretion to determine the nature (and forum)
of, and shall control the prosecution of, all such actions. The Owner
Participant shall, if requested by the Lessee in a timely written request, seek
judicial review of any adverse administrative determination and shall, if Tax
Counsel is of the opinion that such appeal is more likely than not to prevail,
appeal an adverse determination by any judicial court; PROVIDED, HOWEVER, that
the Owner Participant shall not be required to appeal, or seek leave to appeal,
an adverse determination to the United States Supreme Court. At any time,
whether before or after commencing to take the action set forth in this Section
7, the Owner Participant may decline to contest or appeal all or any portion of
a proposed adjustment, or may compromise or settle any such proposed adjustment,
by notifying the Lessee in writing that the Lessee is relieved of its obligation
to indemnify the Owner Participant with respect to such adjustment or such
portion, as the case may be; PROVIDED, HOWEVER, that the Lessee shall not be
obligated to indemnify the Owner Participant hereunder with respect to any other
Tax Loss for which a successful contest or appeal is foreclosed as a result of
the failure to take action with respect to such contest or appeal (or the
settlement or compromise of such contest or appeal without the consent of the
Lessee), and the Owner Participant shall repay to the Lessee such amounts
theretofore advanced or paid by the Lessee related to such adjustment, contest
or appeal (other than amounts described in the first sentence of Section 7(b)).
Notwithstanding the foregoing, if the Owner Participant notifies the Lessee that
it does not wish to contest an issue which the Owner Participant has previously
contested in

                                       12


accordance with this Section 7 and which was resolved adversely to the Owner
Participant for an earlier taxable year in a judicial proceeding, then unless
the Owner Participant shall have received an opinion of Tax Counsel that as a
result of a change in law, it is more likely than not that a contest of the
matter in question will be successful, the Owner Participant shall not be
required to contest such issue.

         (b) The Owner Participant shall not be required to take any action
pursuant to this Section 7 unless and until the Lessee shall have agreed in
writing to reimburse the Owner Participant in a manner reasonably satisfactory
to Owner Participant (on demand and on a basis grossed-up for all applicable
federal, state, local and foreign taxes) for all reasonable out-of-pocket fees
and expenses, any statutory or regulatory penalties, interest, additions to tax,
or other similar liabilities, costs or losses which the Owner Participant may
incur as a result of contesting the validity of any proposed adjustment
(including, without limitation, any reasonable fees and disbursements of outside
counsel incurred in connection with taking any action or rendering any opinion
described in Section 7(a)). If the Owner Participant determines to contest any
adjustment by paying the additional tax and suing for a refund, the Lessee shall
timely lend to the Owner Participant on an interest-free basis an amount equal
to the sum of any tax, interest, penalties and additions to tax required to be
paid and shall indemnify the Owner Participant in a manner reasonably
satisfactory to the Owner Participant against any adverse tax consequences
resulting from such advance. Upon receipt by the Owner Participant of a refund
(or upon application of an amount otherwise refundable against another tax
liability of the Owner Participant) of any amount paid by it, in respect of
which amount the Owner Participant shall have been paid or advanced an
equivalent amount by the Lessee, the Owner Participant shall pay to the Lessee
the amount of such refund (plus any amounts otherwise refundable but applied
against another tax liability of the Owner Participant) (which, in the case of
any contest in which a loan has been advanced pursuant to this paragraph, shall
be deemed to be in repayment of the loan advanced by the Lessee to the extent
fairly attributable thereto), together with any interest received (including by
way of credit or offset) by the Owner Participant on such refund or application
that is fairly attributable to the amount and the period of such payment or
advance by the Lessee (net of any taxes incurred by the Owner Participant with
respect to the receipt or accrual of such interest), plus any net additional
federal, state, local and foreign tax benefits actually realized by the Owner
Participant as the result of such payment (or any payment under this paragraph);
and, upon disallowance of any such refund, the Lessee shall forgive the amount
of the loan fairly attributable thereto and shall pay to the Owner Participant
the balance of the amount of its indemnity obligation hereunder (including such
amount as shall be equal to the sum, on an After Tax Basis, of any tax,
interest, penalties or additions to tax payable with respect to the forgiveness
of such loan) or if such advance exceeds the amount of such indemnity
obligation, the Owner Participant shall pay such excess to the Lessee. Any
subsequent loss of such refund shall be treated as a Tax Loss subject to
indemnification pursuant to Section 5 hereof without regard to Section 6 (other
than Section 6(c) or (h)) hereof or this Section 7.

         (c) If any adjustment referred to in this Section 7 shall be proposed
and the Lessee shall have requested the Owner Participant to contest such
adjustment as above provided and the Lessee shall have duly complied with its
obligations under this Section 7, then notwithstanding any provision to the
contrary in Section 5 hereof, the Lessee's liability with respect to such
adjustment shall become fixed upon a "Final Determination" of such adjustment;
PROVIDED, HOWEVER, that if the opinion of Tax Counsel provided pursuant to
paragraph (a) of this

                                       13


Section 7 is to the effect that there is not a Reasonable Basis for a contest or
the required basis for an appeal, as the case may be, then the Lessee's
obligation to pay such indemnity within 30 days shall become fixed upon receipt
of such opinion by the Lessee. A "Final Determination" with respect to a Tax
Loss shall mean (i) a decision, judgment, decree or other order by any court of
competent jurisdiction, which decision, judgment, decree or other order has
become final after all allowable appeals (in the case of the Owner Participant
as required under this Section 7) by either party to the action have been
exhausted or the time for filing such appeal has expired, (ii) a closing
agreement entered into under Section 7121 of the Code, or any other settlement
agreement entered into in connection with an administrative or judicial
proceeding and with the consent of the Lessee where required, (iii) the
expiration of the time for instituting suit with respect to a notice of
deficiency or (iv) the expiration of the time for instituting a claim for
refund, or if such a claim was filed, the expiration of the time for instituting
suit with respect thereto.

         SECTION 8. SURVIVAL OF AGREEMENT.

         The obligations and liabilities of the Lessee and the Owner Participant
arising under this Agreement shall continue in full force and effect,
notwithstanding the expiration or other termination of the Lease or the
Participation Agreement, until all such obligations under this Agreement have
been met and all such liabilities under this Agreement have been paid in full.
This Agreement shall inure to the benefit of any successor or assign to the
Owner Participant or the Lessee permitted pursuant to the Participation
Agreement and the Lease; PROVIDED, HOWEVER, that (a) such successor or assign
shall have specifically agreed in writing to be bound by the terms and
conditions of this Agreement to perform the obligations imposed hereunder on the
Owner Participant or the Lessee, as the case may be, in accordance with the
interest of such successor or assign in the Trust or in the Aircraft, the Lease
and the Operative Agreements and (b) in applying the terms hereof to such
successor or assign, the terms "Owner Participant" and "Lessee" as used herein
shall mean such respective successor or assign.

         SECTION 9. NOTICES.

         Any notice provided for in this Agreement shall be given in the manner
provided in the Participation Agreement.

         SECTION 10. PAYMENTS.

         Any payments required to be made by the Lessee pursuant to this
Agreement shall be made directly by the Lessee to the Owner Participant, and no
such payment shall constitute part of the corpus of the Trust Estate. Payments
made by the Lessee or the Owner Participant pursuant to this Agreement shall be
made by wire transfer of immediately available funds to such bank and/or account
in the continental United States as specified by the other party in written
directions to the paying party, and if no such direction shall have been given,
by check payable in immediately available funds to the order of such payee and
mailed to such payee by certified mail, postage prepaid, at its address provided
for purposes of the Participation Agreement.

                                       14


         SECTION 11. NO SETOFF.

         No payment required to be made by the Lessee pursuant to this Agreement
shall be subject to any right of setoff, counterclaim, defense, abatement,
suspension, deferment or reduction, and, except in accordance with the express
terms hereof, the Lessee shall have no right to terminate this Agreement or to
be released, relieved or discharged from any obligation or liability under this
Agreement for any reason whatsoever.

         SECTION 12. LATE PAYMENTS, INTEREST.

         Any late payment by any party hereto of any of its obligations under
this Agreement shall bear interest at the Past Due Rate.

         SECTION 13. EXCLUSIVE REMEDY.

         The indemnities and other rights provided to the Owner Participant in
this Agreement shall be the sole remedy of the Owner Participant for a breach or
inaccuracy of any representation, warranty or covenant contained herein or for
loss of income tax benefits, or for Tax Loss resulting from any Inclusion.

         SECTION 14. GOVERNING LAW.

         This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed entirely within such state.

         SECTION 15. COUNTERPARTS.

         This Agreement may be simultaneously executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
such counterparts together shall constitute and be one and the same instrument.

         SECTION 16. CERTAIN ADJUSTMENTS.

         If the Lessee has made payments under this Tax Indemnity Agreement, the
Owner Participant shall, if appropriate, make adjustments to the schedule of
Termination Values (if applicable) to preserve the Owner Participant's Net
Economic Return and to prevent any duplication of payments or any payment for
Tax Losses previously paid. If an event giving rise to the payment of an amount
determined by reference to a schedule of Termination Values shall occur and the
date as of which the Owner Participant shall be affected for tax purposes shall
be earlier or later than the date taken into account in computing such schedule,
such values shall be appropriately adjusted based otherwise on the same
assumptions previously used by the Owner Participant in calculating such
schedule.

                                       15


         IN WITNESS WHEREOF, the Lessee and the Owner Participant have caused
this Tax Indemnity Agreement to be duly executed as of the day and year first
above written.

                                             CHAUTAUQUA AIRLINES, INC.

                                             By: /s/ Robert H. Cooper
                                                --------------------------------
                                                Name: Robert H. Cooper
                                                Title: Vice President

                                             SILVERMINE RIVER FINANCE TWO, INC.

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



SCHEDULE 4(f) [letter from Appraiser]

                                       17



NOTE TO EXHIBIT 10.29

The 12 additional Tax Indemnity Agreements are substantially identical in all
material respects to the filed Tax Indemnity Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                          October, 2001              Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N370SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N371SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

EX-10.30

                                                                 Exhibit 10.30

               WARRANTY ASSIGNMENT AGREEMENT AND CONSENT [N296SK]

    THIS WARRANTY ASSIGNMENT AGREEMENT AND CONSENT [N296SK] (this "Assignment")
is dated as of the 20th day of December, 2001, and is among Solitair Corp., a
Delaware corporation ("Solitair"), as assignor, Wells Fargo Bank Northwest,
National Association, a United States national banking association ("WFB"), not
in its individual capacity but solely as Owner Trustee under a Trust Agreement
dated as of December 20, 2001 (the "Trust Agreement") between WFB and Silvermine
River Finance Two, Inc., a Delaware corporation (the "Owner Participant") (in
such capacity hereinafter referred to as "Buyer"), as assignee, Chautauqua
Airlines, Inc., a New York corporation, as operator under the Lease Agreement as
defined below ("Operator"), and Rolls-Royce Corporation, a Delaware corporation
("Rolls-Royce"), as consenting party.

                              W I T N E S S E T H:

    WHEREAS, Solitair, Operator, and Rolls-Royce have entered into that certain
Rolls-Royce AE3007A Series Engine Warranty Agreement ("Warranty Agreement")
dated as of April 30, 1999 pursuant to which Rolls-Royce granted to Solitair and
Operator certain Warranties as defined therein for the Engines and Supplies; and

    WHEREAS, pursuant to that certain Participation Agreement [N296SK] (the
"Participation Agreement") dated as of December 20, 2001 among Operator, Owner
Participant and Buyer, Buyer has agreed to buy from Aero Ltd, an Embraer model
EMB-145LR aircraft, Embraer's serial number 145514, United States Registration
Number N296SK (the "Aircraft") with two (2) installed Rolls Royce model
AE3007A1P engines bearing manufacturer's serial numbers CAE311970 and CAE311958,
manufactured by Rolls-Royce, including Supplies as defined in the Warranty
Agreement (the "Engines"); and

    WHEREAS, the purchase of the Aircraft by Buyer pursuant to the Participation
Agreement is conditioned upon Solitair assigning to Buyer (as consented to by
Rolls-Royce) all of the assignable warranties granted by Rolls-Royce to Solitair
pursuant to the Warranty Agreement with respect to the Engines; and

    WHEREAS, in accordance with the Warranty Agreement, Rolls-Royce must consent
to any assignment of the Warranties; and

    WHEREAS, pursuant to that certain Lease Agreement [N296K] dated as of
December 20, 2001 ("Lease Agreement", capitalized terms not defined herein being
assigned the meanings given therein) between Buyer and Operator, Buyer shall
lease the Aircraft and assign the Assigned Warranties (as that term is defined
herein) to Operator subject to conditions; and

    WHEREAS, Solitair and Buyer wish to accomplish such assignments pursuant to
the terms and conditions of this Assignment, and Rolls-Royce wishes to consent
to such assignments.

                                        1



    NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Purchase Agreement and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Solitair and Buyer
hereby agree (and Rolls-Royce hereby consents) as follows:

    1. Solitair hereby assigns and transfers to Buyer and Buyer hereby accepts
such assignments and transfer of, the Warranties and indemnitees under the
Warranty Agreement to the extent that they relate to the Engines described
above.

    2. Rolls-Royce hereby consents to the assignment of the Warranties by Seller
to Buyer under and pursuant to the terms and conditions of this Agreement and
further consents to the assignment of the Warranties by Buyer to Operator.
Notwithstanding anything in this Assignment to the contrary, so long as
Operator's right to possess and use the Aircraft under the Lease Agreement has
not been terminated, Operator may, to the exclusion of Buyer, exercise in
Operator's name the right to obtain any recovery or benefit resulting from the
enforcement of any of the Warranties under the Warranty Agreement in respect of
the Engines and may exercise all other rights and powers of the Buyer with
respect to the Warranties, and may without the consent of Buyer, enter into
amendments or modifications thereof or terminate some or all of the Warranties
and replace them with power by the hour agreements (which agreements will not be
assigned to the Buyer), provided that Rolls-Royce hereby confirms to the Buyer
that in the event that the Operator's right to possess or use the Aircraft under
the Lease Agreement has been terminated, Buyer shall be entitled to exercise all
rights and powers of the Buyer with respect to the Warranties notwithstanding
that the Operator has entered into such power by the hour agreements, to the
same extent as if none of such Warranties had been terminated or replaced by
such power by the hour agreements. Rolls-Royce shall not be deemed to have
knowledge of, and need not recognize the occurrence or discontinuance of, any
termination of the Lease Agreement, unless and until Rolls-Royce has received
written notice thereof from Buyer (including by telex or telecopy) addressed to
Rolls-Royce Corporation at 2001 South Tibbs Avenue S30, Indianapolis, Indiana
46241, Attention: Vice President Commercial, and, in acting in accordance with
the terms and conditions of the Warranty Agreement and this Assignment,
Rolls-Royce may act with acquittance and conclusively rely upon any such notice.
If Rolls-Royce so receives notice from Buyer that Operator's right to possess
and use the Aircraft under the Lease Agreement has been terminated, Rolls-Royce
will have no further contractual obligation under the Warranty Agreement or
power by the hour agreements to the Operator, if applicable, and will, to the
extent not already provided to the Operator, perform all the duties and
obligations under the Warranty Agreement with respect to the Warranties for the
benefit of Buyer and, to the extent not already paid to the Operator, will make
any and all payments that it thereafter is required to make in respect of the
Warranties directly to Buyer at the account or location as Buyer from time to
time notifies Rolls-Royce in writing.

3.  Anything herein contained to the contrary notwithstanding:

    (a) Except with respect to the Engines specifically assigned hereunder,
Buyer and Owner Participant shall have no obligation or liability under the
Warranty Agreement by reason of, or arising out of, this Assignment, or be
obligated to perform any of Solitair's duties or obligations under the Warranty
Agreement, to make any payment, to present or file any claim, or to take any
other action to collect or enforce any claim for any payment assigned hereunder;

                                        2



    (b) Buyer confirms, for Rolls-Royce's benefit, that in exercising any rights
under the Warranty Agreement or in making any claim with respect to the Engines
or other goods and services delivered or to be delivered pursuant to the
Warranty Agreement, the terms and conditions of the Warranty Agreement shall
apply to and bind Buyer (and any assignee of Buyer) to the same extent as
Solitair; and

    (c) Except as expressly stated herein, nothing contained herein shall
subject Rolls-Royce or Solitair to any liability to which it, as the case may
be, would not otherwise be subject under the Warranty Agreement or modify in any
respect the rights of Rolls-Royce or Solitair thereunder.

    (d) Rolls-Royce shall have no obligation or liability to Solitair with
respect to the Engines specifically assigned hereunder after the date of closing
and the transfer of title.

5. This Assignment (and the acknowledgement and consent to be signed by
Rolls-Royce) may be executed in separate counterparts, each of which when so
executed and delivered shall be an original and all such counterparts shall
together constitute one and the same instrument.

6. This Assignment shall be governed by and construed in accordance with the
laws of the State of New York without reference to any choice of law rules
thereof that would result in a choice of law other than that of New York.

7. WFB is entering into this Assignment solely as Owner Trustee under the Trust
Agreement and not in its individual capacity and neither WFB nor any entity
acting as successor Owner Trustee or additional Owner Trustee under the Trust
Agreement shall be personally liable for, or for any loss in respect of, any of
the statements, representations, warranties, agreements or obligations stated to
be those of the Buyer hereunder, as to which all interested parties shall look
solely to the Trust Estate, except to the extent expressly provided otherwise in
the other Operative Agreements, PROVIDED HOWEVER, that nothing in this paragraph
7 shall be construed to limit in scope or substance the liability of WFB or any
entity acting as successor Owner Trustee or additional Owner Trustee under the
Trust Agreement in its individual capacity for the consequences of its own
willful misconduct or gross negligence or (in receiving, handling or remitting
funds) its simple negligence, or the inaccuracy or breach of its
representations, warranties or covenants made in such capacity in any other
Operative Agreements.

                            [SIGNATURE PAGE FOLLOWS]

                                        3



IN WITNESS WHEREOF, the parties hereto have caused this Warranty Assignment
Agreement and Consent [N296SK] to be duly executed as of the date and year first
above written.

                                  SOLITAIR CORP.

                                  BY: /s/ Doug Lambert
                                      ------------------------------------------

                                  NAME: Doug Lambert
                                        ----------------------------------------

                                  TITLE: Vice President
                                         ---------------------------------------

                                  WELLS FARGO BANK NORTHWEST, NATIONAL
                                  ASSOCIATION, not in its individual capacity
                                  but solely as Owner Trustee under the Trust
                                  Agreement

                                  By: /s/ Brett R. King
                                      ------------------------------------------

                                  Name: Brett R. King
                                        ----------------------------------------

                                  Title: Vice President
                                         ---------------------------------------

                                  CHAUTAUQUA AIRLINES, INC.

                                  By: /s/ Robert H. Cooper
                                      ------------------------------------------

                                  Name: Robert H. Cooper
                                        ----------------------------------------

                                  Title: Vice President
                                         ---------------------------------------

                                  Consented to by ROLLS-ROYCE
                                   CORPORATION

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

                                  Name: Peter Turner
                                        ----------------------------------------

                                  Title: Authorized Officer
                                         ---------------------------------------

                                        4



NOTE TO EXHIBIT 10.30

The 12 additional Warranty Assignment Agreements and Consents are substantially
identical in all material respects to the filed Warranty Assignment Agreement
and Consent except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                           July, 2001                General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                          August, 2001               General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                         September, 2001             General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                          October, 2001              Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N370SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N371SK                                          November, 2001             Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

EX-10.31

                                                                   Exhibit 10.31

                                                               EXECUTION VERSION

                                     N296SK

                            Chautauqua Airlines, Inc.
                           2500 South High School Road
                           Indianapolis, Indiana 46241

December 20, 2001

Wells Fargo Bank Northwest, National Association
79 South Main Street
Salt Lake City, Utah 84111

Silvermine River Finance Two, Inc.
201 High Ridge Road
Stamford, Connecticut 06927

Re:  Participation Agreement [N296SK], dated as of December 20, 2001 (the
     "Participation Agreement"), among Chautauqua Airlines, Inc. (the "Lessee"),
     Silvermine River Finance Two, Inc. ("Silvermine") and Wells Fargo Bank
     Northwest, National Association, as Owner Trustee (the "Owner Trustee").
     Capitalized terms used and not defined herein shall be given the meanings
     assigned in the Participation Agreement.

Dear Madams/Sirs:

The parties hereto agree that this letter shall be an Operative Agreement and
that for all purposes of the Participation Agreement and other Operative
Agreements, the first paragraph of Section 4.02(e) of the Participation
Agreement shall be deemed to be amended by adding at the end thereof:

     "In addition to the foregoing requirements, so long as Silvermine or an
     Affiliate of GECC (including for avoidance of doubt, Silvermine) is the
     Owner Participant, (x) during the first five (5) years of the Term, the
     Lessee shall not enter into any merger with or into or consolidation with,
     or sell, convey, transfer, lease or otherwise dispose of in one or a series
     of transactions all or substantially all of its assets to any Person nor
     shall Wexford Air Holdings, Inc. (the "Wexford Shareholder") sell any of
     its shares of common stock in the Lessee (collectively, a "Transaction")
     without the prior written consent of the Lessor, such consent not to be
     unreasonably withheld, unless: (a) following such Transaction, the Wexford
     Shareholder is the shareholder owning the greatest number of shares of
     common stock of the Lessee or other surviving entity; or (b) the acquiring
     or successor entity in such Transaction is a Certificated Air Carrier with
     a tangible net worth of not less than $50,000,000 or a Group III air
     carrier as determined under 14 CFR 241, Section 04 (or, if such
     determination has not been made, an air carrier with



     annual operating revenues of $1,000,000,000) or (c) immediately following
     the Transaction, Lessee receives and retains net proceeds of at least
     $25,000,000; and (y) clause (2) of the proviso in the immediately preceding
     sentence shall not apply during the first five (5) years of the Term with
     respect to any Transaction that otherwise fully satisfies any one of the
     conditions set forth in subclauses (a), (b) or (c) in clause (x) of this
     paragraph.

     The agreement stated in this letter is for the sole benefit of Silvermine
     and its Affiliates and shall terminate if at any time Silvermine or an
     Affiliate ceases to be the Owner Participant. Each party agrees that it
     will not disclose the terms of this letter (other than to its accountants,
     attorneys, agents or consultants), including to potential assignees, except
     as required by law.

     If you agree with the terms of this letter, please so indicate by executing
     the letter where indicated below.

                            [SIGNATURE PAGE FOLLOWS]



Very truly yours,

CHAUTAUQUA AIRLINES, INC.

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

ACCEPTED AND AGREED:

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
as Owner Trustee

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

SILVERMINE RIVER FINANCE TWO, INC.

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



NOTE TO EXHIBIT 10.31

The 12 additional Letter Agreements are substantially identical
in all material respects to the filed Letter Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                July, 2001                          General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                July, 2001                          General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                August, 2001                        General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                August, 2001                        General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                September, 2001                     General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                September, 2001                     General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                October, 2001                       Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N370SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N371SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

EX-10.32

                                                                   Exhibit 10.32

                              SIDE LETTER AGREEMENT
                           TO LEASE AGREEMENT [N296SK]

                          Dated as of December 20, 2001

     Reference is made to Participation Agreement [N296SK], dated as of December
20, 2001 (the "Participation Agreement"), among Chautauqua Airlines, Inc. (the
"Lessee"), Silvermine River Finance Two, Inc. ("Silvermine") and Wells Fargo
Bank Northwest, National Association, as Owner Trustee (the "Owner Trustee") and
acknowledged by Solitair Corp. Capitalized terms used and not defined herein
shall be given the meanings assigned in the Participation Agreement.

     Reference is made to Section 9 of the Lease and the parties hereto agree
that:

     1. This Letter Agreement shall be an Operative Agreement;

     2. So long as Silvermine (or an Affiliate of GECC (including for avoidance
of doubt, Silvermine)) is the Owner Participant, if, after the date of the
Lease, the Owner Participant shall change its policy relating to the minimum
amount of liability insurance coverage or war risk and allied perils liability
and hull insurance with respect to regional jet passenger aircraft with standard
manufacturer seating capacity of at least 35 seats operated by a U.S. regional
jet air carrier such that, under a new lease transaction entered into after the
date of the Lease by the Owner Participant as equity investor or lessor, the
Owner Participant will generally permit the documentation for any such new lease
transaction with respect to a regional jet passenger aircraft with standard
manufacturer seating capacity of at least 35 seats operated by a U.S. regional
jet air carrier to require (x) as to liability insurance (or war risks and
allied perils liability insurance), an amount of liability insurance (or war
risks and allied perils liability insurance) less than that required under
Section 9 of the Lease or (y) as to war risks and allied perils liability and
hull insurance, a form of coverage or scope of risk covered that is less
stringent than that required under Section 9 of the Lease, the Owner Participant
shall, upon written request by Lessee, (1) describe such change in writing to
Lessee and (2) cause the Lessor to amend Section 9 of the Lease to reduce the
amount of liability insurance (or war risk and allied perils liability
insurance, or both, as the case may be) or modify the form or scope of coverage
(as to war risks and allied perils liability or hull insurance) required of
Lessee under Section 9 of the Lease to such lesser amount or less stringent form
or scope of coverage; and

     3. Silvermine hereby confirms that the agreement stated in this Letter
Agreement is for the benefit of the Lessee and its successors and permitted
transferees and assigns.

                            [SIGNATURE PAGE FOLLOWS]



          IN WITNESS WHEREOF, the parties have caused this Side Letter Agreement
to be executed by their respective, duly authorized officers as of the day and
year first written above.

                                       CHAUTAUQUA AIRLINES, INC.,
                                       as Lessee

                                       By: /s/ Robert H. Cooper
                                           -------------------------------------
                                           Name:  Robert H. Cooper
                                           Title: Vice-President

                                       SILVERMINE RIVER FINANCE TWO, INC.,
                                       as Owner Participation

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

                                       WELLS FARGO BANK NORTHWEST, NATIONAL
                                       ASSOCIATION, not in its individual
                                       capacity, except as otherwise expressly
                                       provided herein but solely as Owner
                                       Trustee

                                       By: /s/ Brett R. King
                                           -------------------------------------
                                           Name:  Brett R. King



NOTE TO EXHIBIT 10.32

The 12 additional Side Letter Agreements to the Lease Agreement are
substantially identical in all material respects to the filed Side Letter
Agreement to the Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N289SK                                July, 2001                          General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N290SK                                July, 2001                          General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N291SK                                August, 2001                        General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N292SK                                August, 2001                        General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N293SK                                September, 2001                     General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N294SK                                September, 2001                     General Electric Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N295SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N297SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N298SK                                October, 2001                       Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N299SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N370SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------
N371SK                                November, 2001                      Silvermine River Finance Two, Inc.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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




                                           Title: Vice President

EX-10.33

                                                                  Exhibit 10.33

                                 LEASE AGREEMENT

                   CHAUTAUQUA AIRLINES INC. DBA\USAIR EXPRESS

     THIS LEASE AGREEMENT made and entered into this 17th day of June, 1994, by
and between the Indianapolis Airport Authority (hereinafter called "AUTHORITY"),
a municipal corporation in the State of Indiana, with offices at Indianapolis
International Airport Indianapolis, Indiana, and Chautauqua Airlines, Inc.
dba\USAir Express, (hereinafter called "LESSEE"),

                                   WITNESSETH

     In consideration of promises made herein AUTHORITY and LESSEE agree on the
following terms and conditions.

     1.   LEASED PREMISES

          The "Leased Premises" as used in this Lease shall consist of 8,253.5
          square feet of space located on the third floor of the Administration
          Building at Indianapolis International Airport and more particularly
          shown on Exhibit "A" dated July 15, 1994, attached hereto and made a
          part of this Lease.

     2.   TERM

          The term of this Lease shall be six (6) years commencing July 1, 1994,
          and expiring June 30, 2000.

               In the event LESSEE shall continue to occupy the Leased Premises
          beyond the Lease term or any extension thereof without AUTHORITY's
          written renewal thereof, such holding over shall not constitute a
          renewal or extension of this Lease, but shall create a tenancy from
          month to month which may be terminated at any time by AUTHORITY or
          LESSEE by giving thirty (30) days written notice to the other party.

                                        1


     3.   RENTAL

          A.   LEASED PREMISES

               As rental for the use of said Leased Premises and appurtenances
               thereto, LESSEE agrees to pay per annum in accordance with the
               following rental schedule, payable in advance in twelve (12)
               equal payments on the first day of each calendar month.

               RENTAL SCHEDULE

               9/16/94 THRU 6/30/95 - 8,253.5 sq.ft. x $4.50 p.s.f. = $37,140.75
               per year, payable at $3,095.07 per month

               7/1/95 THRU 6/30/96 - 8,253.5 sq.ft. x $5.00 p.s.f. = $41,267.50
               per year, payable at $3,438.96 per month

               7/1/96 THRU 6/30/97 - $,253.5 sq.ft. x $7.00 p.s.f. = $57,774.50
               per year, payable at $4,814.55 per month

               7/1/97 THRU 6/30/2000 - 8,253.5 sq.ft. x $13.00 p.s.f.=
               $107,295.50 per year, payable at $8,941.30 per month

                    The parties agree that no rental shall be due AUTHORITY
               during the initial construction phase but shall commence on the
               date of occupancy or September 16, 1994, whichever comes first.

                    Any partial month of rent shall be prorated. Said rent shall
               be payable at the office of the AUTHORITY or such other place as
               AUTHORITY may from time to time designate.

          B.   REIMBURSEMENT OF CONSTRUCTION COSTS

               The parties hereby acknowledge that AUTHORITY shall contract
               through the public bid process for renovation of the Leased
               Premises and AUTHORITY hereby agrees to pay a maximum of one
               Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) for said
               construction costs.

                                        2


                    LESSEE hereby agrees to reimburse AUTHORITY for the
               construction costs in seventy-two (72) equal payments of Two
               Thousand Five Hundred Fifty-seven and 00/100 Dollars ($2,557.00)
               each, which will be invoiced separately from rental, commencing
               July 1, 1994. If LESSEE or AUTHORITY, for any reason whatsoever,
               terminates this Lease Agreement prior to the June 30, 2000,
               expiration date of this Lease, LESSEE hereby agrees to pay
               AUTHORITY the total remaining unpaid balance due for the
               construction costs reimbursement upon presentation of invoice by
               AUTHORITY. [ILLEGIBLE]

     4.   PURPOSE

          LESSEE shall use the Leased Premises for office space for
          administrative functions of LESSEE and for no other purpose.

     5.   ACCEPTANCE AND IMPROVEMENTS

          The parties hereby agree that AUTHORITY will accept public bids for
          the renovation of the Leased Premises and will pay said construction
          costs up to One Hundred Fifty Thousand and 00/100 Dollars
          ($150,000.00). Any further improvements to the Leased Premises shall
          be made by LESSEE at LESSEE's expense. LESSEE shall submit to
          AUTHORITY, its plans and specifications for any proposed improvements
          to obtain a work permit as well as complying with such other
          conditions required by AUTHORITY. LESSEE shall provide to AUTHORITY a
          written certification of improvement costs paid by LESSEE within sixty
          (60) days following completion of construction.

     6.   MAINTENANCE

          AUTHORITY agrees to furnish reasonable heat, electricity,

                                        3


          water and air conditioning. LESSEE agrees to keep the Leased Premises
          in a neat, clean and sanitary condition, and LESSEE shall provide
          janitorial services required by it to maintain the interior of the
          Leased Premises.

     7.   ALTERATIONS

          All fixtures, carpeting and other improvements attached to the
          building shall become the property of AUTHORITY upon installation,
          subject to LESSEE's leasehold rights. All non-attached personal
          property, trade fixtures and equipment shall remain the property of
          LESSEE.

     8.   INDEMNITY

          LESSEE agrees to indemnify fully, and save and hold AUTHORITY harmless
          from and against all claims and actions and all expenses incidental to
          the investigation and defense thereof, based on or arising out of
          damages or injuries to third persons or their property, caused by the
          fault or negligence of LESSEE, provided, however, that LESSEE shall
          not be liable for any injury or damage or loss occasioned by the
          negligence of AUTHORITY, its agents or employees, and provided further
          that AUTHORITY shall give LESSEE prompt and reasonable notice of any
          such claims or actions, and LESSEE shall have the right to
          investigate, compromise and defend the same. LESSEE agrees to carry
          and keep in force, with a company suitable to AUTHORITY, public
          liability insurance covering personal injury and property damage and
          such other insurance as may be necessary to protect AUTHORITY herein
          from such claims and actions aforesaid. Without limiting its liability
          as foresaid, LESSEE agrees to carry and keep in force such

                                        4


          insurance with single limit of liability for personal injury and
          property damage in a sum not less than $1,000,000.00 for any one
          accident and to furnish AUTHORITY with proper certificate that such
          insurance is in force designating the AUTHORITY as an additional
          insured.

     9.   FIRE INSURANCE

          LESSEE may, at its option, maintain fire and extended coverage
          insurance upon its property. In the event the Leased Premises are
          partially or totally damaged or destroyed by fire or other casualty
          and the Leased Premises can be repaired or rebuilt within sixty (60)
          days of the date of such occurrence, this Lease shall remain in full
          force and effect, and AUTHORITY shall promptly repair such damage at
          its own expense, but there shall be a proportionate abatement of rent
          for so much of the Leased Premises as may be untenantable during the
          period of repair or restoration. If AUTHORITY shall determine that
          said Leased Premises has been so damaged that it cannot be repaired or
          restored within the limit of time above specified, AUTHORITY may
          notify LESSEE of the termination of the Lease Agreement and release
          LESSEE from any further liability for the payment of rent from and
          after the date of such occurrence of loss. If the loss is caused by
          LESSEE or its invitees, LESSEE shall restore the Leased Premises to
          the condition immediately before such loss at LESSEE's expense, and
          the rent shall not abate.

     10.  TAXES

          LESSEE shall pay all personal property taxes which may be accessed
          against furnishings or other personal property belonging to LESSEE
          located on the Leased Premises.

                                        5


     11.  ASSIGNMENT

          This Lease shall not be assigned, nor the premises sublet or occupied
          by others, without written consent of AUTHORITY.

     12.  TERMINATION OF LEASE

          A.   TERMINATION BY LESSEE

               LESSEE, in addition to all other rights at law or in equity, may
               terminate this Lease and terminate its obligations hereunder at
               any time that LESSEE is not in default in the payment of rentals
               to AUTHORITY and all reimbursement of construction costs have
               been paid by LESSEE to AUTHORITY. LESSEE shall provide to
               AUTHORITY sixty (60) days advance written notice of said
               termination, to be served as hereinafter provided, and by
               surrender of the Leased Premises, upon or after the happening of
               any one of the following events:

               1.   The issuance by any court of competent jurisdiction of an
                    injunction or order, or the enactment of any law, ordinance
                    or regulation or other act of a governmental body that in
                    any way prevents or restrains the use of the Airport, so as
                    to substantially affect LESSEE's use of the Airport;

               2.   The default by AUTHORITY in the performance of any covenant
                    or agreement herein required to be performed by AUTHORITY,
                    and the failure of AUTHORITY to undertake and be continuing
                    to remedy such default for a period of sixty (60) days after
                    receipt from LESSEE of written notice to remedy the same;
                    provided, however, that no notice of termination, as above
                    provided, shall be of any force or effect if AUTHORITY shall
                    have remedied the default prior to receipt of LESSEE's
                    notice of termination; and,

               3.   The assumption by the United States Government of any
                    authorized agency thereof of the operation, control, or use
                    of the Airport and facilities, or

                                        6


                    any substantial part or parts thereof, in a manner as
                    substantially to restrict LESSEE for a period of at least
                    thirty (30) days from full use of its Leased Premises, and
                    in that event, just and proportionate part of the rent
                    hereunder shall be abated.

          B.   TERMINATION BY AUTHORITY

               AUTHORITY, in addition to all other rights at law or in equity,
               may declare this Lease terminated in its entirety, subject to and
               in the manner provided in Paragraph A above, upon or after the
               happening of any one or more of the following events, and may
               exercise all rights of entry and re-entry upon the Leased
               Premises:

               1.   The failure to pay all installments of rent and construction
                    costs reimbursement when due (with interest) within thirty
                    (30) days after receipt by LESSEE of written notice to pay
                    such rent;

               2.   The filing of LESSEE of a voluntary petition in bankruptcy
                    or the making of any assignment of all or any part of
                    LESSEE's assets for benefit of creditors;

               3.   The adjudication of LESSEE as a bankrupt pursuant to any
                    involuntary bankruptcy proceedings;

               4.   The taking by a court of competent jurisdiction of LESSEE or
                    its assets pursuant to proceedings brought under the
                    provisions of any federal reorganization act;

               5.   The appointment of a receiver or a trustee of LESSEE's
                    assets by a court of competent jurisdiction and the failure
                    of LESSEE to dismiss the same within ninety (90) days or a
                    voluntary agreement with LESSEE's creditors;

               6.   The breach by LESSEE of any of the covenants or agreement
                    herein contained, and the failure of LESSEE to take
                    appropriate action to remedy such breach within thirty (30)
                    days after receipt by LESSEE of written notice from
                    AUTHORITY; and

               7.   The abandonment of the Leased Premises.

                                        7


     13.  AUTHORITY'S RIGHT OF ENTRY

          AUTHORITY reserves the right to enter upon the Leased Premises to
          examine the same and make such repairs, alterations or additions as it
          may deem necessary for the safety, improvement or preservation of said
          building but at such times not to interfere unreasonably with LESSEE'S
          use of Leased Premises.

     14.  QUIET POSSESSION

          AUTHORITY covenants that LESSEE, upon pay paying the rental herein
          provided and performing all of the covenants of this Lease to be
          performed by it, shall have quiet possession of the premises during
          the term hereof and any extension term.

     l5.  USE OF COMMON FACILITIES

          LESSEE shall have the right of ingress to and egress from said Leased
          Premises for LESSEE, its officers, employees, agents, customers,
          suppliers, patrons and invitees and shall enjoy the same, in common
          with others authorized so to do, of said airport terminal and
          appurtenances.

     16.  NON-DISCRIMINATION

          LESSEE for itself, its personal representatives, successors in
          interest, and assigns, as a part of the consideration hereof, does
          hereby covenant and agree that (1) no person on the grounds or race,
          color, or national origin shall be excluded form participation in,
          denied the benefits of, or be otherwise subjected to discrimination in
          the use of said facilities, (2) that in the construction of any
          improvements on, over, or under such land and the furnishing of
          services thereon, no person on the grounds of race, color, or national

                                        8


          origin shall be excluded from participation in, denied the benefits
          of, or otherwise be subject to discrimination, (3) that the LESSEE
          shall use the premises in compliance with all other requirements
          imposed by or pursuant to Title 49, Code of Federal Regulations,
          Department of Transportation, Subtitle A, Office of the Secretary,
          Part 21, Nondiscrimination in Federally-assisted programs of the
          Department of Transportation-Effectuation of Title VI of the Civil
          Rights Act of 1964, and as said Regulations may be amended.

     17.  AFFIRMATIVE ACTION

          The LESSEE assures that it will undertake an affirmative action
          program as required by 14 CFR Part 152, Subpart E, to insure that no
          person shall on the grounds of race, creed, color, national origin, or
          sex be excluded from participating in any employment activities
          covered in 14 CFR Part 152, Subpart E. The LESSEE assures that no
          person shall be excluded on these grounds from participating in or
          receiving the services of benefits of any program or activity covered
          by this subpart. The LESSEE assures that it will require that its
          covered suborganizations provide assurances to the LESSEE that they
          similarly will undertake affirmative action programs and that they
          will require assurances from their suborganizations, as required by 14
          CFR Part 152, Subpart E, to the same effect.

     18.  SIGNS

          LESSEE shall have the right to place its name in a dignified manner
          outside the entrance to said premises. The location

                                        9


          and form of all signs will be subject to the prior approval of
          AUTHORITY, which approval will not be unreasonably withheld.

     19.  PARAGRAPH HEADINGS

          The paragraph headings are inserted only as a matter of convenience in
          reference, and in no way define, limit or describe the scope or intent
          of any paragraph of this Lease.

     20.  NOTICE

          whenever any notice or payment is required by this Lease to be made,
          given or transmitted to the parties hereto, such notice or payment
          shall be deemed to have been given if enclosed in an envelope with
          sufficient postage attached to insure delivery and deposited in the
          United States mail, addressed to:

          AUTHORITY....................Executive Director
                                       Indianapolis Airport Authority
                                       Indianapolis International Airport
                                       Box 100, 2500 S. High School Rd.
                                       Indianapolis, IN 46241

          LESSEE.......................Chautauqua Airlines, Inc.
                                       Box 160, 2500 S. High School Rd.
                                       Indianapolis, IN 46241

          or such other place as either party shall in writing designate in the
          manner herein provided.

                                       10


     IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the date first above mentioned at Indianapolis Indiana.

                                       INDIANAPOLIS AIRPORT AUTHORITY

                                       By /s/ Michael W. Wells
                                          --------------------------------------
                                          Michael W. Wells, President

                                       By /s/ Gordon St. Angelo
                                          --------------------------------------
                                          Gordon St. Angelo, Vice President

                                       By /s/ Betty J. Johnson
                                          --------------------------------------
                                          Betty J. Johnson, Secretary

                                       By /s/ Lawrence A. O'Connor
                                          --------------------------------------
                                          Lawrence A. O'Connor, Jr., Member

                                       By /s/ Murvin S. Enders
                                          --------------------------------------
                                          Murvin S. Enders, Member

                                                      AUTHORITY

CHAUTAUQUA AIRLINES, INC.

By /s/ [ILLEGIBLE]
   ---------------------------
Title Vice President
      ------------------------

              LESSEE

Attachment: Exhibit "A" - Leased Premises

                                       11


[GRAPHIC]

EX-10.33(A)

                                                               Exhibit 10.33(a)

                                 FIRST AMENDMENT
                                       TO
                             OFFICE LEASE AGREEMENT
                                      WITH
                            CHAUTAUQUA AIRLINES, INC.

     THIS FIRST AMENDMENT, made and entered into this 17th day of July, 1998, by
and between the Indianapolis Airport Authority, (hereinafter called
"AUTHORITY"), and Chautauqua Airlines, Inc., a New York corporation, authorized
to do business in the State of Indiana, (hereinafter called "LESSEE").

                                   WITNESSETH:

     WHEREAS, AUTHORITY and LESSEE have previously entered into a Lease
Agreement dated June 17, 1994, for certain administrative office space located
on the third floor of the Administration Building at Indianapolis International
Airport; and,

     WHEREAS, the term of said Lease Agreement, expires on June 30, 2000; and

     WHEREAS, AUTHORITY and LESSEE have also previously entered into a Letter of
Agreement dated February 8, 1995 for office space located on the third floor of
the Administration Building commonly known as rooms H305, H305A, H305B, and
H305C; and

     WHEREAS, said Letter of Agreement shall terminate upon the execution of
this First Amendment; and

     WHEREAS, LESSEE desires to rent additional office space on the third floor
of the Administration Building commonly known as rooms H306 and H306A, and other
space on the fourth floor commonly known as rooms H401, H415, H415E, H415F,
H415G, H416, H416B, H416C, H416D, H417; and

     WHEREAS, Authority finds it necessary to revise the additional insureds;



     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereby agree that the Letter of Agreement dated
February 8, 1995 is terminated and that Section 1. LEASED PREMISES, Section 2.,
TERM, Section 3., RENTAL, Paragraph A, LEASED PREMISES, and Section 8.,
INDEMNITY of the basic Lease Agreement are hereby deleted and the following is
substituted:

     1.   LEASED PREMISES

          The term "Leased Premises" as used in this Amendment shall consist of
          9,749.1 square feet of space located on the third floor of the
          Administration Building and 2,763.65 square feet of space located on
          the fourth floor of the Administration Building at Indianapolis
          International Airport and more particularly shown on Exhibit "A" dated
          July 15, 1998, attached hereto.

     2.   TERM

          LESSEE shall have a different lease term for each floor it shall
          occupy. The term for the Third Floor Leased Premises shall commence on
          August 1, 1998 and shall expire July 31, 2001. The term for the Fourth
          Floor Leased Premises shall commence on August 1, 1998 and shall
          expire on July 31, 2000.

     3.   RENTAL

          A.   LEASED PREMISES

               As rental for the use of said Leased Premises and appurtenances
               thereto, LESSEE agrees to pay per annum in accordance with the
               following rental schedule, payable in advance in twelve (12)
               equal payments on the first day of each calendar month effective
               August 1, 1998.

                                        2


          B.   RENTAL SCHEDULE

               THIRD FLOOR

               8/1/98 THROUGH 7/31/01 - 9,749.1 sq. ft. x $10.50 p.s.f. =
               $102,365.55 per year, payable at $8,530.46 per month.

               FOURTH FLOOR

               8/1/98 THROUGH 7/311/00 - 2,763.65 sq. ft. x $10.50 p.s.f. =
               $ 29,018.33 per year, payable at $2,418.19 per month.

                    LESSEE shall have the right to terminate the Lease Agreement
               on the fourth floor space with ninety (90) days written notice
               prior to end of original term.

                    Any partial month of rent shall be prorated. Said rent shall
               be payable at the office of the AUTHORITY or such other place as
               AUTHORITY may from time to time designate.

     8.   INDEMNITY

          LESSEE agrees to indemnify fully, and save and hold AUTHORITY harmless
          from and against all claims and actions and all expenses incidental to
          the investigation and defense thereof, based on or arising out of
          damages or injuries to third persons or their property, caused by the
          fault or negligence of LESSEE, provided, however, that LESSEE shall
          not be liable for any injury or damage or loss occasioned by the
          negligence of AUTHORITY, its agents or employees, and provided further
          that AUTHORITY shall give LESSEE prompt and reasonable notice of any
          such claims or actions, and LESSEE shall have the right to
          investigate, compromise and defend the same. LESSEE agrees to carry
          out and keep in force, with a company suitable to AUTHORITY, public
          liability insurance covering bodily injury and property damage and
          such other insurance as

                                        3


          may he necessary to protect AUTHORITY herein from such claims and
          actions aforesaid. Without limiting its liability as foresaid, LESSEE
          agrees to carry and keep in force such insurance with single limit of
          liability for bodily injury and property damage in a sum not less than
          $5,000,000.00 for any one accident and to furnish AUTHORITY with
          proper certificate that such insurance is in force designating the
          Indianapolis Airport Authority, BAA Indianapolis LLC, and BAA USA
          Holdings, Inc. as additional insureds.

                                        4


     THIS FIRST AMENDMENT shall be effective July 15, 1998 and all other terms
of the basic Lease dated June 17, 1994, shall remain the same.

     IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the date first above mentioned.

                                          INDIANAPOLIS AIRPORT AUTHORITY

                                       By /s/ Michael W. Wells
                                          --------------------------------------
                                          Michael W. Wells, President

                                       By /s/ Gordan St. Angelo
                                          --------------------------------------
                                          Gordan St. Angelo, Vice President

                                       By /s/ Gene P. Haflich
                                          --------------------------------------
                                          Gene P. Haflich, Secretary

                                       By [SEAL OF ABSENT]
                                          --------------------------------------
                                          Max. L. Siegel, Member

                                       By /s/ Richard L. Cunningham
                                          --------------------------------------
                                          Richard L. Cunningham, Member

                                       By [SEAL OF ABSENT]
                                          --------------------------------------
                                          Michael B. Stayton, Member

                                       By /s/ David B. Mansfield
                                          --------------------------------------
                                          David B. Mansfield, Member

                                                    AUTHORITY

CHAUTAUQUA AIRLINES, INC.

By /s/ [ILLEGIBLE]
   -----------------------------
Title  Executive V.P. & COO
       -------------------------
             LESSEE

                                        5

EX-10.33(B)

                                                               Exhibit 10.33(b)

                                SECOND AMENDMENT
                                       TO
                             OFFICE LEASE AGREEMENT
                                      WITH
                            CHAUTAUQUA AIRLINES, INC.

     THIS SECOND AMENDMENT, made and entered into this 2 day of October 1998, by
and between the Indianapolis Airport Authority, (hereinafter referred to as
"AUTHORITY"), and Chautauqua Airlines, Inc., a New York corporation, authorized
to do business in the State of Indiana, (hereinafter referred to as "LESSEE").

                              W I T N E S S E T H:

     WHEREAS, LESSEE desires to rent additional office space on the fourth floor
of the Administration Building commonly known as Room 415A and Room 415C; and

     WHEREAS, LESSEE desires to have an option to extend their lease;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereby agree that Article 1., LEASED PREMISES.
Article 2., TERM, Article 3., RENTAL, LEASED PREMISES and Article 3 RENTAL
RENTAL SCHEDULE are hereby deleted and the following are substituted:

     1. LEASED PREMISES

        The term "Leased Premises" shall consist of 9,749.1 square feet on the
        third floor of the Administration Building including the mens and womens
        restrooms, although no rental is being charged for this square footage
        and excepting the telephone equipment, mechanical, electrical and
        janitorial rooms, corridor and lobby and 3.899.65 square feet on the
        fourth floor of the Administration Building of which all of the rental
        space is more particularly shown on Exhibit "A" dated September 15,
        1998, attached hereto.



     2. TERM

        LESSEE shall have a different term for each floor it shall occupy. The
        term for the third floor Leased Premises commenced on August 1, 1998 and
        shall expire July 31, 2001. The term for the fourth floor Leased
        Premises, except for Rooms 415A and 415C, commenced on August 1, 1998
        and shall expire on July 31, 2000. The commencement date for Rooms 415A
        and 415C shall begin on day of occupancy via letter of agreement and
        shall expire on July 31, 2000.

            LESSEE shall have an option to extend this Lease for an additional
        term of three (3) years upon the rental terms outlined in Article 3. B.
        LESSEE shall have a different term for each floor it shall occupy. The
        option term for the third floor shall commence August 1, 2001 and shall
        terminate on July 31, 2004. The option term for the fourth floor shall
        commence on August 1, 2000 and shall expire on July 31, 2003.

            LESSEE may exercise the option by mailing or delivering to AUTHORITY
        written notice of such intention not later than six (6) months prior to
        the date of expiration of the primary terms and the first option terms.
        Notification date on the third floor shall be on or before February 1,
        2001. Notification date on the fourth floor shall be on or before
        February 1, 2000.

     3. RENTAL

        A.  LEASED PREMISES

            Rental for the use of said Leased Premises and appurtenances
            thereto, LESSEE agrees to pay per annum in accordance with the
            following rental schedules payable in advance in twelve (12) equal
            payments on the first day of each calendar month affective on the
            first day of occupancy.

                                        2


            RENTAL SCHEDULE - PRIMARY TERM

            THIRD FLOOR

            AUGUST 1, 1998 THROUGH JULY 31, 2001
            9,749.1 square feet X $10.50 p.s.f. = $102,365.55 per year payable
            at $8,530.46 per month.

            FOURTH FLOOR

            AUGUST 1, 1998 THROUGH OCCUPANCY OF ROOMS 415A AND 415C
            2,763.65 square feet X $10.50 p.s.f. = $29,018.33 payable at
            $2,418.19 per month

            OCCUPANCY OF 415A AND 415C THROUGH JULY 31, 2000

            3,899.65 X $10.50 p.s.f = $40,946.33 per year payable at $3,412.19
            per month

                 Rental for Rooms 415A and 415C shall begin on date of
            occupancy via letter of agreement.

                 Any partial month of rent shall be prorated. Said rent shall be
            payable at the office of the AUTHORITY or such other place as

            AUTHORITY may from time to time designate.

            B. RENTAL SCHEDULE - OPTION PERIODS.

            THIRD FLOOR

            August 1, 2001 - July 31, 2002

            9,749.1 square feet X $11.00 per square feet = $107,240.00 per year
                                                           $  8,936.69 per month
            August 1, 2002 Through July 31, 2003
            9,749.1 square feet X $11.50 per square feet = $112,114.65 per year
                                                           $  9,342.89 per month

            August 1, 2003 Through July 31, 2004
            9,749.1 square feet X $12.00 per square feet = $116,989.20 per year
                                                           $  9,749.10 per month

                                        3


            FOURTH FLOOR

            August 1, 2000 through July 31, 2001
            3,899.65 square feet X $11.00 per square feet = $42,896.15 per year
                                                            $ 3,574.68 per month
            August 1, 2001 through July 31, 2002
            3,899.65 square feet X $11.50 per square feet = $44,845.98 per year
                                                            $ 3,737.16 per month
            August 1, 2002 through July 31, 2003
            3,899.65 square feet X  12.00 per square feet = $46,795.80 per year
                                                            $ 3,899.65 per month

                                       4


     THIS SECOND AMENDMENT shall be effective this 2 day of October, 1998 and
all other terms of the basic Lease dated June 17, 1994, shall remain the same.

     IN WITNESS WHEREOF, the parties  have caused this instrument to be
executed as of the date first above mentioned.

                                          INDIANAPOLIS AIRPORT AUTHORITY

                                         By /s/ Michael W. Wells
                                            ------------------------------------
                                            Michael W. Wells, President

                                         By /s/ Gordon St. Angelo
                                            ------------------------------------
                                            Gordon St. Angelo, Vice President

                                         By /s/ Gene P. Haflich
                                            ------------------------------------
                                            Gene P. Haflich, Secretary

                                         By [SEAL OF ABSENT]
                                            ------------------------------------
                                            Max L. Siegel, Member

                                         By /s/ Richard L. Cunningham
                                            ------------------------------------
                                            Richard L. Cunningham, Member

                                         By /s/ Michael B. Stayton
                                            ------------------------------------
                                            Michael B. Stayton, Member

                                         By /s/ David B. Mansfield
                                            ------------------------------------
                                            David B. Mansfield, Member

                                                     AUTHORITY

CHAUTAUQUA AIRLINES, INC.

By /s/ [ILLEGIBLE]
   ----------------------------------

Title Executive V.P. & COO
      -------------------------------

                                        5

EX-10.33(C)

                                                               Exhibit 10.33(c)

                                 THIRD AMENDMENT
                                       TO
                             OFFICE LEASE AGREEMENT
                                      WITH
                            CHAUTAUQUA AIRLINES, INC.

     THIS THIRD AMENDMENT, made and entered into this 6 day of November, 1998,
by and between the Indianapolis Airport Authority, (hereinafter referred to as
"AUTHORITY"), and Chautauqua Airlines, Inc., a New York corporation, authorized
to do business in the State of Indiana, (hereinafter referred to as "LESSEE").

                              W I T N E S S E T H:

     WHEREAS, LESSEE desires to rent additional office space on the fourth floor
of the Administration Building commonly known as Room H413 and Room 1413A; and

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereby agree that Article 1., LEASED PREMISES,
Article 2., TERM. Article 3., RENTAL. Leased Premises and Article 3.,"RENTAL,
RENTAL SCHEDULE are hereby deleted and the following are substituted:

        1. LEASED PREMISES

           The term "Leased Premises" shall consist of 9,749.1 square feet on
           the third floor of the Administration Building including the mens
           and womens restrooms, although no rental is being charged for this
           square footage and excepting the telephone equipment, mechanical,
           electrical and janitorial rooms, corridor and lobby and 4,411.15
           square feet on the fourth floor of the Administration Building of
           which all of the rental space is more particularly shown on Exhibit
           "A" dated October 20, 1998 attached hereto.



        2.  TERM

            LESSEE shall have a different term for each floor it shall occupy.
            the revised term and rental for the third floor Leased Premises
            commenced on August 1, 1998 and shall expire on July 31, 2001. The
            term for the fourth floor Leased Premises, except for Rooms H415A,
            H415C, H413 and H413A, commenced on August 1, 1998 and shall expire
            on July 31, 2000. The term for Rooms H415A and H415C commenced on
            September 23, 1998 and shall expire on July 31, 2000. The term for
            Room H413 and H413A commenced on October 23, 1998 and shall expire
            on July 31, 2000.

               LESSEE shall have an option to extend this Lease for an
            additional term of three (3) years upon the rental terms outlined in
            Article 3.B. LESSEE shall have a different term for each floor it
            shall occupy. The option terms for the third floor shall commence
            August 1, 2001 and shall terminate July 31, 2004. The option term
            for the fourth floor shall commence on August 1, 2000 and shall
            expire on July 31, 2003.

               LESSEE may exercise the option by mailing or delivering to
            AUTHORITY written notice of such intention not later than six (6)
            months prior to the date of expiration of the primary terms and the
            first option terms. Notification date on the third floor shall be on
            or before February 1, 2001. Notification date on the fourth floor
            shall be on or before February 1, 2000.

                                        2


        3.  RENTAL

            A. LEASED PREMISES

               Rental for the use of said Leased Premises and appurtenances
               thereto, LESSEE agrees to pay per annum in accordance with the
               following rental schedules payable in advance in twelve (12)
               equal payments on the first day of each calendar month affective
               on the first day of occupancy.

               RENTAL SCHEDULE - PRIMARY TERM

               THIRD FLOOR

               AUGUST 1, 1998 THROUGH JULY 31, 2001

               9,749.1 square feet X $10.50 p.s.f. = $102,365.55 per year
               payable at $8,530.46 per month

               FOURTH FLOOR

               AUGUST 1, 1998 THROUGH SEPTEMBER 22, 1998

               2,763.65 square feet X $10.50 p.s.f. = $29,018.33 per year
               payable at $2,418.19 per month

               SEPTEMBER 23, 1998 THROUGH OCTOBER 22, 1998

               3,899.65 square feet X $10.50 p.s.f. = $40,946.33 per year
               payable at $3,412.19 per month

               OCTOBER 23, 1998 THROUGH JULY 31, 2000

               4,411.15 square feet X $10.50 p.s.f. = $46,317.08 per year
               payable at $3,859.76 per month

                    Any partial month of rent shall be prorated. Said rent
               shall be payable at the office of the AUTHORITY or such other
               place as AUTHORITY may from time to time designate.

                                        3


            B. RENTAL SCHEDULE -.OPTION PERIODS

               THIRD FLOOR

               AUGUST 1, 2001 THROUGH JULY 31, 2002

               9,749.1 square feet X $11.00 per square feet = $107,240.10 per
               year payable at $8,936.68 per month

               AUGUST 1, 2002 THROUGH JULY 31, 2003

               9,749.1 square feet X $11.50 per square feet = $112,114.65 per
               year payable at $9,342.89 per month

               AUGUST 1, 2003 THROUGH JULY 31, 2004

               9,749.1 square feet X $12.00 per square feet = $116,989.24 per
               year payable at $9,749.10 per month

               FOURTH FLOOR

               AUGUST 1, 2000, THROUGH.JULY 31, 2001

               4,411.15 square feet X $11.00 per square feet = $48,522.65 per
               year payable at $4,043.55

               AUGUST 1, 2001 THROUGH JU1Y 31, 2002

               4,411.15 square feet X $11.50 per square feet = $50,728.23 per
               year payable at $4,227.35

               AUGUST 1, 2002 THROUGH JULY 31, 2003

               4,411.15 square feet X $12.00 per square Feet = $52,933.80 per
               year payable at $4,411.15

                                        4


     THIS THIRD AMENDMENT shall be effective this 6 day of NOVEMBER, 1998 and
all other terms of the basic Lease dated June 17, 1994, shall remain the same.

     IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the date first above mentioned.

                                        INDIANAPOLIS AIRPORT AUTHORITY

                                        By /s/ Michael W. Wells
                                           -------------------------------------
                                           Michael W. Wells, President

                                        By /s/ Gordon St. Angelo
                                           -------------------------------------
                                           Gordon St. Angelo, Vice-President

                                        By /s/ Gene P. Haflich
                                           -------------------------------------
                                           Gene P. Haflich, Secretary

                                        By /s/ [SEAL OF ABSENT]
                                           -------------------------------------
                                           Max L. Siegel, Member

                                        By /s/ Richard L. Cunningham
                                           ------------------------------------
                                           Richard L. Cunningham, Member

                                        By /s/ Michael B. Stayton
                                           -------------------------------------
                                           Michael B. Stayton, Member

                                        By /s/ David B. Mansfield
                                           -------------------------------------
                                           David E. Mansfield, Member

                                                      AUTHORITY

CHAUTAUQUA AIRLINES, INC.

By /s/ [ILLEGIBLE]
   -----------------------------------
Title Ex. V.P. & COO
      ---------------------------------

                                       5

EX-10.33(D)

                                                               Exhibit 10.33(d)

                                FOURTH AMENDMENT
                                       TO
                             OFFICE LEASE AGREEMENT
                                      WITH
                            CHAUTAUQUA AIRLINES, INC.

     THIS FOURTH AMENDMENT, made and entered into this 3 day of September, 1999.
by and between the Indianapolis Airport Authority, (hereinafter referred to as
"AUTHORITY"), and Chautauqua Airlines, Inc., a New York corporation, authorized
to do business in the state of Indiana, (hereinafter referred to as "LESSEE").

                              W I T N E S S E T H:

     WHEREAS, AUTHORITY and LESSEE previously entered into a Lease Agreement
dated June 17, 1994 for certain space located in the Administration Building at
Indianapolis International Airport: and

     WHEREAS, AUTHORITY and LESSEE amended the Lease Agreement on July 17, 1998,
October 2, 1998 and November 6, 1998; and

     WHEREAS, LESSEE desires to rent additional office space on the fourth floor
of the Administration Building commonly known as Room H415B, Room H415D, and a
portion of Hallway H411;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the Parties hereby agree that Article 1., LEASED PREMISES,
Article 2., TERM, Article 3., RENTAL, LEASED PREMISES and Article 3., RENTAL.
RENTAL SCHEDULE are hereby deleted and the following are substituted:

     1. LEASED PREMISES

        The term "Leased Premises" shall consist of 9,749.1 square feet on the
        third floor and 5,184.65 square feet on the fourth floor of the
        Administration Building of



        which the entire leased space is more particularly shown on Exhibit "A"
        dated August 25, 1999 attached hereto.

            The third floor square footage includes the Men's and Woman's
        restrooms, however no rental is being charged for this square footage

     2. TERM

        LESSEE shall have a different term for each floor it shall occupy. The
        revised term and rental for the third floor Leased Premises commenced on
        August 1, 1998 and shall expire on July 31, 2001. The term for the
        fourth floor Leased Premises, except for Rooms H415A, H415C, H413,
        H413A, H415B, H415D and a portion of Hallway H411 commenced on August 1,
        1998 and shall expire on July 31, 2000. The term for Rooms H415A and
        H415C commenced on September 23, 1998 and shall expire on July 31, 2000.
        The term for Room H413 and H413A commenced on October 23, 1998 and shall
        expire on July 31, 2000. The term for Rooms H415B, H415D and a portion
        of Hallway H411 commenced on August 1, 1999 and shall expire on July 31,
        2000.

            LESSEE shall have an option to extend this Lease for an additional
        term of three (3) years upon the rental terms outlined in Article 3.B.
        LESSEE shall have a different term for each floor it shall occupy. The
        option term for the third floor shall commence August 1, 2001 and shall
        terminate July 31, 2004. The option term for the fourth floor shall
        commence on August 1, 2000 and shall expire on July 31, 2003.

            LESSEE may exercise the option by mailing or delivering to AUTHORITY
        written notice of such intention not later than six (6) months prior

                                        2


        to the date of expiration of the primary terms and the first option
        terms. Notification date on the third floor shall be on or before
        February 1, 2001. Notification date on the fourth floor shall be on or
        before February 1, 2000.

     3. RENTAL

        A. LEASED PREMISES

           Rental for the use of said Leased Premises and appurtenances thereto,
           LESSEE agrees to pay per annum in accordance with the following
           rental schedules payable in advance in twelve (12) equal payments on
           the first day of each calendar month effective on the first day of
           occupancy. Rental Schedule -Primary Term

           THIRD FLOOR

           AUGUST 1, 1998 THROUGH JULY 31, 2001

           9,749.1 square feet X $10.50 p.s.f. = $102,365.55 per year payable at
           $8,530.46 per month

           FOURTH FLOOR

           OCTOBER 23, 1998 THROUGH JULY 31, 1999

           4,411 square feet X $10.50 p.s.f. = $46,317.08 per year payable at
           $3,859.76 per month

           AUGUST 1, 1999 THROUGH JULY 31, 2000

           5,184.65 square feet X $10.50 p.s.f. = $54,438.83 per year payable at
           $4,536.57 per month

            Any partial month of rent shall be prorated. Said rent shall be
        payable at the office of the AUTHORITY or such other place as AUTHORITY
        may from time to time designate.

                                        3


     B. RENTAL SCHEDULE - OPTION PERIODS

        THIRD FLOOR

        AUGUST 1, 2001 THROUGH JULY 31, 2002

        9,749.1 square feet X $11.00 p.s.f. = $107,240.10 per year payable at
        $8,936.68 per month

        AUGUST 1, 2002 THROUGH JULY 31, 2003

        9,749.1 square feet X $11.50 p.s.f. = $112,114.65 per year payable at
        $9,342.89 per month

        AUGUST 1, 2003 THROUGH AUGUST 31, 2004

        9,749.1 square feet X $12.00 p.s.f. = $116,989.20 per year payable at
        $9,749.10 per month

        FOURTH FLOOR

        AUGUST 1, 2000 THROUGH JULY 31, 2001

        5,184.65 square feet X $11.00 p.s.f. = $57,03.15 per year payable at
        $4,752.60 per month

        AUGUST 1, 2001 THROUGH JULY 31, 2002

        5,184.65 square feet X $11.50 p.s.f. = $59,623.48 per year payable at
        $4,968.62 per month

        AUGUST 1, 2002 THROUGH JULY 31, 2003

        5,184.65 square feet X $12.00 p.s.f. = $62,215.80 per year payable at
        $5,184.65 per month

                                        4


        THIS FOURTH AMENDMENT shall be effective this ___________ day of
____________________, 1999 and all other terms of the basic Lease dated June 17,
1994, shall remain the same.

        IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the date first above mentioned.

                                        INDIANAPOLIS AIRPORT AUTHORITY

                                        By /s/ Michael W. Wells
                                           -------------------------------------
                                           Michael W. Wells, President

                                        By /s/ Gordon St. Angelo
                                           -------------------------------------
                                           Gordon St. Angelo, Vice-President

                                        By /s/ Gene P. Haflich
                                           -------------------------------------
                                           Gene P. Haflich, Secretary

                                        By /s/ H. Patrick Callahan
                                           -------------------------------------
                                           H. Patrick Callahan, Member

                                        By /s/ Richard L. Cunningham
                                           -------------------------------------
                                           Richard L. Cunningham, Member

                                        By /s/ [SEAL OF ABSENT]
                                           -------------------------------------
                                           Max L. Siegel, Member

                                        By /s/ David E. Mansfield
                                           -------------------------------------
                                           David E. Mansfield, Member

                                                   AUTHORITY

CHAUTAUQUA AIRLINES, INC.

By /s/ [ILLEGIBLE]
   -------------------------

Title Executive V.P. & COO
      ----------------------

                                       5

EX-10.34

                                                                  Exhibit 10.34

[INDIANAPOLIS AIRPORT AUTHORITY LOGO]
[INDIANAPOLIS INTERNATIONAL AIRPORT LETTERHEAD]

DAVID J. ROBERTS
AIRPORT DIRECTOR

July 17, 2000

Mr. Hal Cooper
Vice President/CFO
Chautauqua Airlines
2500 S. High School Road, Suite 120
Indianapolis, IN 46241-4941

RE: Letter of Agreement
    Indianapolis International Airport

Dear Hal:

In a meeting with Jeannie Weiss, Eric Anderson and myself on March 28, 2000, you
and Wayne Heller requested that the vestibule on the Fourth Floor of
Chautauqua's leased premises be removed from your leasehold.

According to my calculations, this vestibule is approximately 289.8 square feet.
This removal of space will affect not only your current rental rates, but the
two remaining option periods Chautauqua has on this fourth floor space. The
removal of this 289.8 square feet will leave a total of 4,894.85 square feet on
fourth floor office space. The following are calculations for the current rental
period and the two option periods remaining:

     AUGUST 1, 2000 THROUGH JU1Y 31, 2001

     4894.85 sq. ft. X $11.00 per sq. ft. = $53843.35 per year, payable at
     $4486.95 per month

     AUGUST 1, 2001 THROUGH JULY 31, 2002

     4894.85 sq. ft. X $11.50 per sq. ft. = $56290.78 per year, payable at
     $4690.90 per month.

     AUGUST 1, 2002 THROUGH JULY 31, 2003

     4894.85 sq. ft. X $ 12.00 per sq. ft. = $58738.20 per year, payable at
     $4894.85 per month.

This removal of leasehold will be made effective April 1, 2000 and the
appropriate rental credit for the months of April through August will be issued
to Chautauqua.

                                [RECYCLED SYMBOL]



Letter of Agreement
July 17, 2000
Page Two

Please remember that the removal of this vestibule from Chautauqua's leasehold
opens this area up to the public. The double glass doors in the hallway will be
removed, and the keycores to both the middle stairwell and elevators will be
changed to allow for common usage.

Please sign below to indicate your acceptance of this Letter of Agreement to
remove 289.8 square feet from Chautauqua's leasehold. Please call me at 487-5225
if you have any questions or concerns.

Sincerely,

/s/ Andria A. Kerney

Andria A. Kerney
Property Manager

Cc:  Jeannie Weiss

By /s/ Wayne Heller                                        Date 9/22/00
   -----------------------------                           ------------

Title V.P. & COO
      --------------------------
      Chautauqua Airlines

EX-10.35

                                                                   EXHIBIT 10.35





                            AIRCRAFT LEASE AGREEMENT

                                    (N260SK)

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


                                   DATED AS OF

                                  JUNE 25, 1999

                                     BETWEEN

                                 ICX CORPORATION

                                       AS

                                     LESSOR

                                       AND

                            CHAUTAUQUA AIRLINES, INC.

                                       AS

                                     LESSEE


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




                                TABLE OF CONTENTS

                                                                           PAGE

SECTION 1. Definitions.......................................................1

SECTION 2. Agreement to Lease; Term, Rent, Security Deposit..................6

     2.1  Agreement to Lease.................................................6
     2.2  Term of the Lease..................................................7
     2.3  Rent...............................................................7
     2.4  Supplemental Rent..................................................7
     2.5  Payments in General................................................7
     2.6  Maintenance Reserves/Security Deposit...ERROR! BOOKMARK NOT DEFINED.

SECTION 3. Lessor's Representations, Warranties, and Agreements.............13

     3.1  Due Organization..................................................13
     3.2  Due Authorization.................................................13
     3.3  Enforceability..........................ERROR! BOOKMARK NOT DEFINED.
     3.4  No Violations.....................................................13
     3.5  Disclaimer........................................................13

SECTION 4. Lessee's Representations, Warranties, and Agreements.............15

     4.1  Due Organization..................................................15
     4.2  Due Authorization; Enforceability; No Violation...................15
     4.3  Litigation........................................................16
     4.4  No Defaults.......................................................17
     4.5  Merger or Consolidation of Lessee.......ERROR! BOOKMARK NOT DEFINED.
     4.6  Location of Chief Executive Offices...............................17
     4.7  Lessee Duly Licensed..............................................17
     4.8  Notice of Certain Events..........................................17
     4.9  No Event of Loss or Event of Default..............................18
     4.10 Enforceability of Lease.................ERROR! BOOKMARK NOT DEFINED.

SECTION 5.  Conditions Precedent to Obligation of Lessor and Lessee.........18

SECTION 6. Delivery of the Aircraft.........................................22

     6.1  Delivery Location.................................................22
     6.2  Acceptance of Delivery............................................22

SECTION 7. Registration, Maintenance and Operation; Possession and Permitted
Subleases; Insignia.........................................................22

     7.1  Registration......................................................22
     7.2  Maintenance.......................................................22
     7.3  Operation.........................................................28
     7.4  Possession and Permitted Subleases................................29




     7.5  Insignia..........................................................32

SECTION 8. Return of the Aircraft...........................................32

     8.1  Return............................................................32
     8.2  Return of Other Engines...........................................33
     8.3  Condition of the Aircraft.........................................33
     8.4  Engine Condition..................................................36
     8.5  Inspection........................................................36
     8.6  Inspections.............................ERROR! BOOKMARK NOT DEFINED.
     8.7  Operational Ground Check..........................................38
     8.8  Operational Check Flight..........................................38
     8.9  Acceptance........................................................39
     8.10 Deferred Discrepancy Correction...................................39
     8.11 Indemnification.........................ERROR! BOOKMARK NOT DEFINED.
     8.12 Manuals and Technical Records.....................................39
     8.13 Service Bulletin Kits.............................................40
     8.14 Lessee's Special Exterior Markings................................41
     8.15 Ownership.........................................................41
     8.16 Disputes Regarding Return Condition...............................41

SECTION 9. Liens............................................................42

SECTION 10. Loss, Destruction, Requisition, etc.............................44

     10.1 Event of Loss with Respect to the Aircraft........................44
     10.2 Event of Loss with Respect to an Engine...........................45
     10.3 Application of Payments from Governmental Authorities for
          Requisition of Title, etc.........................................47
     10.4 Requisition for Use of the Aircraft by the United States
          Government or the Government Under Which the Aircraft Are
          Registered or Based...............................................48
     10.5 Requisition for Use of an Engine by the United States
          Government or the Government Under Which the Aircraft Are
          Registered or Based...............................................48
     10.6 Application of Payments During Existence of an Event of Default...49
     10.7 Repairable Damage; Use of Insurance Proceeds......................49

SECTION 11. Insurance.......................................................50

     11.1 All-Risk Insurance................................................50
     11.2 War Risk Insurance................................................50
     11.3 Liability Insurance...............................................51
     11.4 Additional Requirements; Loss Payment.............................52
     11.5 No Set-off..............................ERROR! BOOKMARK NOT DEFINED.
     11.6 Application of Hull Insurance Proceeds............................54
     11.7 Insurance for Own Account.........................................55
     11.8 Reports...........................................................55
     11.9 Continuing Insurance....................ERROR! BOOKMARK NOT DEFINED.


                                       ii


     11.10 Self-Insurance; Deductibles......................................56

SECTION 12. Indemnities.....................................................57

     12.1 General Indemnification...........................................57
     12.2 General Tax Indemnity.............................................61
     12.3 Withholding.......................................................70

SECTION 13. Assignments and Subleasing......................................71

     13.1 By Lessee.........................................................71
     13.2 By Lessor.........................................................75

SECTION 14. Events of Default...............................................77

SECTION 15. Remedies........................................................79

SECTION 16. Further Assurances..............................................82

SECTION 17. Notices.........................................................83

SECTION 18. Net Lease, No Set-Off, Counterclaim, Etc........................84

SECTION 19. Lessor's Right to Perform for Lessee............................86

SECTION 20. Lessor Assignment of Rights and Warranties......................86

SECTION 21. Miscellaneous...................................................87

SECTION 22. Options to Purchase; Options to Renew...........................88

     22.1 Renewal Option....................................................88
     22.2 [Purchase Options.......................ERROR! BOOKMARK NOT DEFINED.

SECTION 23. Covenant of Quiet Enjoyment.....................................93

SECTION 24. Choice of Law; Service of Process...............................94

SECTION 25. Language..............................ERROR! BOOKMARK NOT DEFINED.


                                       iii



This is Counterpart No. _____ of 4 serially numbered and manually executed
counterparts. To the extent, if any, that this document constitutes chattel
paper under the Uniform Commercial Code, no security interest in this document
may be created through the transfer and possession of any counterpart other than
Counterpart No. 1.

                            AIRCRAFT LEASE AGREEMENT

      This AIRCRAFT LEASE AGREEMENT ("Agreement"), dated as of June 25, 1999, is
made by and between ICX Corporation, an Ohio corporation ("Lessor") and
Chautauqua Airlines, Inc., a New York corporation ("Lessee").

                              W I T N E S S E T H:

SECTION 1. DEFINITIONS.

      As used in this Agreement, the following terms shall have the following
meanings:

      1.1. "ACCEPTANCE CERTIFICATE" means the certificate in substantially the
form of Exhibit B hereto to be executed by Lessee on the Delivery Date.

      1.2. "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" (including "controlled
by" and "under common control with") 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.

      1.3. "AIRCRAFT" means the Airframe identified and described in the Lease
Supplement, to be delivered and leased hereunder; (ii) the Engines initially
leased hereunder as described in the Lease Supplement (or any engine substituted
for any of such Engines pursuant to the terms hereof), whether or not any of
such initial or substituted Engines may from time to time be installed on such
initial or substituted Airframe or may be installed on any other airframe or on
any other aircraft; and (iii) where the context permits, the Manuals and
Technical Records.

      1.4. "AIRFRAME" means (i) the Embraer ERJ-145LR aircraft (except Engines
or engines from time to time installed thereon) specified in the Lease
Supplement and having the United States registration number and manufacturer's
serial number specified in the Lease Supplement, which aircraft shall be leased
by Lessor to Lessee hereunder and under the Lease Supplement; (ii) any aircraft
(except Engines or engines from time to time installed thereon) which may from
time to time be substituted for such aircraft (except Engines or engines from
time to time installed thereon) pursuant to the terms hereof; and (iii) any and
all Parts which are from time to time incorporated or installed in or attached
thereto or which have been removed therefrom, but where title to which remains
vested in Lessor in accordance herewith.


                                      1


      1.5. "AIRWORTHINESS DIRECTIVE" means any airworthiness directive or any
other mandatory regulation, directive or instruction, including FAA-mandated
manufacturer's changes, issued by any governmental agency or authority asserting
jurisdiction over the Aircraft or over its use, operation or maintenance, which
may from time to time be issued and which is required to be carried out on
airframes or engines of the same type as the Airframe or Engines or any Parts in
order to meet the requirements of applicable law for the public transport of
passengers and/or property in common carriage.

      1.6. "BASE RATE" means the rate of interest announced from time to time by
the Chase Manhattan Bank, at its principal office in New York, New York, as its
prime or reference rate.

      1.7. "BASIC RENT" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 2.3(a), and, for any Renewal Term, the rent payable
for the Aircraft pursuant to Section 22.1 or Section 22.2, as the case may be.

      1.8. "BASIC TERM" means the period described in Section 2.2(a).

      1.9. "BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in the City of New
York.

      1.10. "CODE" means the Internal Revenue Code of 1986, as amended.

      1.11. "COMMENCEMENT DATE" means the Delivery Date.

      1.12. "CYCLE" means one takeoff and landing of the Aircraft.

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

      1.14. "DELIVERY DATE" means the date on which the Aircraft is accepted by
Lessee under the Lease Supplement, which is scheduled to be on or about June 25,
1999.

      1.15. "DISCREPANCY" means any difference or variation between the actual
condition of the Aircraft and the condition of the Aircraft as required
hereunder.

      1.16. "ENGINE" means (i) each of the Allison Engine Company AE3007A1
engines listed by manufacturer's serial number in the Lease Supplement and
installed on the Airframe covered by such Lease Supplement on the Delivery Date,
whether or not from time to time thereafter installed on the Airframe or
installed on any other airframe or on any other aircraft; (ii) any engine which
may from time to time be substituted, in accordance with the terms hereof, for
any of such Engines, and (iii) any and all Parts incorporated or installed in or
attached to such Engine or substituted engine or any and all Parts removed
therefrom so long as title thereto shall remain vested in Lessor in accordance
with the terms of Section 7 after removal from such Engine; provided, however,
that at such time as an engine shall be deemed part of the property leased
hereunder in substitution for an Engine in accordance with the applicable
provisions


                                      2


hereof, the replaced Engine shall cease to be an Engine hereunder. The term
"Engines" means, as of any date of determination, all Engines then leased
hereunder.

      1.17. "EVENT OF DEFAULT" has the meaning specified in Section 14.

      1.18. "EVENT OF LOSS" means any of the following events with respect to
the Aircraft, the Airframe or any Engine: (i) the loss of such property or the
use thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for normal
use by Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee) for any reason whatsoever; (ii) any damage to such property which
results in an insurance settlement with respect to such property on the basis of
a total loss, or a constructive or compromised total loss; (iii) the theft or
disappearance of such property, or the confiscation, condemnation, or taking
seizure of, or requisition of use (but not of title) of such property by any
governmental or purported governmental authority (other than a requisition for
use by the United States Government or any other government of registry of the
Aircraft or under which the Aircraft is based, or any agency or instrumentality
of any thereof, except to the extent provided in Section 1.18(v) below), which
shall have resulted in the loss of possession of such property by Lessee (or, if
any Permitted Sublease is then in effect, any Permitted Sublessee) for a period
in excess of 60 consecutive days or, if earlier, through the end of the Basic
Term; (iv) as a result of any law, rule, regulation, order or other action by
the FAA or other governmental body of the government of registry of the Aircraft
or under which the Aircraft is based having jurisdiction, the use of such
property in the normal course of the business of air transportation shall have
been prohibited for a period of 180 consecutive days unless prior to the end of
such 180-day period, Lessee is diligently carrying forward all necessary and
desirable steps to permit such use, but in any event, if such use has been
prohibited for a period of twelve consecutive months; (v) the requisition for
use (but not of title) by the United States Government or any other government
of registry of the Aircraft or under which the Aircraft is based or any
instrumentality or agency of any thereof, which shall have occurred for a period
in excess of 180 consecutive days, or, if earlier, through the end of the Term;
(vi) any divestiture of title to an Engine treated as an Event of Loss pursuant
to Section 10.3 hereof; and (vii) the requisition, confiscation, condemnation or
other compulsory acquisition of title to such property by any governmental or
purported governmental authority which shall have resulted in the loss of
possession of such property by Lessee for a period of more than 60 days or, if
earlier, through the end of the Term. An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe. An Event of Loss with respect to the Airframe shall not
be deemed to have occurred by reason of an Event of Less with respect to an
Engine.

      1.19. "FAIR MARKET RENTAL RATE" means the fair market rental rate
determined pursuant to Section 22 hereof.

      1.20. "FAIR MARKET SALES VALUE" means the fair market sales value
determined as provided in Section 23 hereof.

      1.21. "FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration and any successor agency or agencies thereto.



      1.22. "INCOME TAX" means any Tax based on or measured by net income
(including, without limitation, capital gains taxes, minimum taxes, and taxes on
tax preference items) and Taxes which are capital, doing business, franchise (in
the nature of a net income tax), excess profits, or net worth taxes and
interest, additions to tax, penalties, or other charges in respect thereof.

      1.23. "INDEMNITEES" means Lessor and its Affiliates, officers, directors,
employees, agents, successors and permitted assigns.

      1.24. "LEASE AGREEMENT", "THIS LEASE AGREEMENT", "THIS LEASE", "THIS
AGREEMENT", "HEREIN", "HEREOF", "HEREUNDER", "HEREBY" or other like words or
phrases mean this Lease Agreement as originally executed or as modified, amended
or supplemented pursuant to the applicable provisions hereof, including, without
limitation, supplementation hereof by one or more Lease Supplements entered into
between Lessor and Lessee pursuant to the provisions hereof.

      1.25. "LEASE SUPPLEMENT" means a Lease Supplement substantially in the
form of Exhibit A hereto, to be entered into between Lessor and Lessee on the
Delivery Date for the purpose of leasing the Aircraft under and pursuant to the
terms of this Lease Agreement, and any subsequent Lease Supplement entered into
in accordance with the terms hereof.

      1.26. "LESSEE'S SETTLEMENT PROPOSAL" has the meaning specified in Section
12.6.

      1.27. "LESSOR LIENS" means any Lien or disposition of title affecting the
Aircraft, an Airframe, any Engine or Part arising as a result of (i) claims
against Lessor not related to the transactions contemplated by this Lease; (ii)
any act or omission of Lessor which is either not related to the transactions
contemplated by or is expressly prohibited under this Lease; (iii) claims
against Lessor with respect to Taxes or Liens against which Lessee is not
required to indemnify Lessor hereunder; (iv) claims against Lessor with respect
to any loss, damage or claim against which Lessee is not required to indemnify
Lessor pursuant to this Lease; or (v) claims against Lessor arising out of any
transfer by Lessor of all or any portion of its interest in the Aircraft,
including, without limitation, as security for indebtedness, other than the
transfer of the Aircraft pursuant to the exercise of the remedies set forth in
Section 15 hereof.

      1.28. "LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
sublease or security interest or other similar interest.

      1.29. "MAINTENANCE PROGRAM" means Lessee's maintenance program approved by
the Federal Aviation Administration or the aviation authority of the country of
registry of the Aircraft for aircraft of the same type as the Aircraft and
engines of the same type as the Engines; provided, however, that if the country
of registry is not the United States, such program must be no less stringent
than an FAA approved program for aircraft of the same type as the Aircraft and
engines of the same type as the Engines.

      1.30. "MANUALS AND TECHNICAL RECORDS" means all such manuals, technical
data, log books, maintenance records, engineering documentation and other
records pertaining to the


                                      3


Aircraft to be maintained by Lessee as required hereunder or as shall be
required to comply with the requirements of the FAA and the Manufacturer from
time to time in force and the requirements of any other governmental body having
jurisdiction over the Aircraft.

      1.31. "MANUFACTURER" means with respect to the Airframe, Embraer-Empresa
Brasileira de Aeronautica S.A. ("Embraer") and with respect to the Engines,
Allison Engine Company, and their respective successors and assigns.

      1.32. "NET ECONOMIC RETURN" means anticipated after-tax yield (utilizing
the multiple investment sinking fund method of analysis), computed on the basis
of the same methodology and assumptions as were utilized by Lessor in
determining Basic Rent, Stipulated Loss Value and Termination Value.

      1.33. "PARTS" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature, other than (i)
complete Engines or engines, and (ii) any items leased by Lessee from a third
party (other than Lessor). The term "Parts" shall include all components
constituting a complete system.

      1.34. "PAST DUE RATE" means a rate per annum equal to the Base Rate plus
five percentage points.

      1.35. "PERMITTED LIEN" means any Lien referred to in Section 9.1(i)
through (viii).

      1.36. "Permitted Sublease" means a sublease of the Aircraft described in
Section 13.2.

      1.37 "PERMITTED SUBLESSEE" means (i) any U.S. Air Carrier; (ii) any
foreign air carrier that is principally based in a country listed in Schedule
III hereto, provided that at the time of the Permitted Sublease, there are no
external or internal war or conflicts involving such country and such country
maintains normal diplomatic relations with the United States or in any other
country approved by Lessor; or (iii) the United States government or any
political subdivision, instrumentality or agency thereof or the government of
the country in which the Aircraft is registered or any political subdivision,
instrumentality or agency thereof, and, if not one of the foregoing, any person
to whom Lessor has given Lessee permission to sublease pursuant to Section 13.1
hereof.

      1.38. "PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

      1.39. "RENEWAL RENT" means the monthly rent payable during the Renewal
Term.

      1.40. "RENEWAL TERM" shall have the meaning assigned in Section 22.1
hereof.

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

                                      4


      1.42. "RENT PAYMENT DATE" means the dates on which Basic Rent is due and
payable hereunder in accordance with the provisions of Sections 2.3 as specified
in Schedule I to this Lease.

      1.43. "RESPONSIBLE OFFICER" means, with respect to Lessor and Lessee, the
President, Chief Financial Officer or any other officer customarily bearing
responsibility for matters relating to the transactions contemplated by this
Lease, or any officer specifically authorized to take responsibility for any
matter relating to the transactions contemplated by this Lease.

      1.44. "RETURN LOCATION" shall have the meaning assigned to such term in
Section 8.1.

      1.45. "SETTLEMENT PROPOSAL" has the meaning specified in Section 12.6.

      1.46. "STIPULATED LOSS VALUE" with respect to the Aircraft as of any Rent
Payment Date means the amount specified in Schedule II attached hereto.

      1.47. "SUPPLEMENTAL RENT" means all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay to Lessor or
others hereunder, including payments of Stipulated Loss Value and amounts
calculated by reference thereto.

      1.48. "TAX" or "TAXES" means any and all fees (including, without
limitation, license, documentation and registration fees) and all taxes
(including, without limitation, income, gross receipts, preference, rental,
sales, use, turnover, value added, property (tangible or intangible), excise and
stamp taxes), licenses, levies, imposts, duties, charges, recording charges or
fees, assessments or withholdings of any nature whatsoever together with any
penalties, additions to tax, fines or interest thereon.

      1.49. "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated
the date hereof, between Lessor and Lessee, as amended, modified or supplemented
in accordance with the terms thereof.

      1.50. "TERM" means the Basic Term and the Renewal Term(s).

      1.51. "TERMINATION DATE" has the meaning assigned to such term in Section
2.2.

      1.52. "TERMINATION VALUE" with respect to the Aircraft as of any Rent
Payment Date means the amount specified in Schedule II attached hereto.

      1.53. "TRANSACTION COSTS" shall mean, printing and reproduction costs;
appraisal fees; placement fees and out-of-pocket expenses of Seabury Securities,
LLC; fees and expenses of counsel for Lessor and Lessee, recording costs of the
Lease and other documents, as well as fees and expenses of counsel for the
seller in connection with the sale of the Aircraft to Lessor.

      1.54. "TRANSPORTATION ACT" means subtitle VII of Title 49 of the United
States Code, or any successor provision.

                                      5


      1.55. "U.S. AIR CARRIER" means any air carrier (as defined in Section
40102(a)(2) of the Transportation Act) which is a citizen of the United States
(as defined in Section 40102(a)(15) of the Transportation Act) as to which there
is in force authority from the U.S. Department of Transportation authorizing
scheduled commuter interstate air transportation pursuant to an exemption under
14 C.F.R ss. 298 or a certificate of public convenience and necessity issued
pursuant to Section 41102(a) of the Transportation Act and as to which there is
in force an air carrier operating certificate issued pursuant to 14 C.F.R. Part
121 or Part 135 of the Federal Aviation 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; provided at all times such
carrier shall hold an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of the Transportation Act for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo.

SECTION 2. AGREEMENT TO LEASE; TERM; RENT

      2.1. AGREEMENT TO LEASE. Lessor hereby agrees, subject to satisfaction of
the conditions set forth herein, to lease to Lessee hereunder, and Lessee hereby
agrees to lease from Lessor hereunder, the Aircraft, as evidenced by the
execution by Lessor and Lessee of this Lease, a Lease Supplement leasing the
Aircraft hereunder and execution and delivery by Lessee of an Acceptance
Certificate. Lessee hereby agrees that such acceptance of the Aircraft by Lessee
shall, without further act, irrevocably constitute acceptance by Lessee of such
Aircraft for all purposes of this Lease.

2.2.  TERM OF THE LEASE.

      (a) BASIC TERM. The Basic Term of this Lease shall be fifteen years from
the Commencement Date, unless sooner terminated in accordance with the
provisions hereof (the "Termination Date").

      (b) RENEWAL TERM(S). The Renewal Term(s) shall be as described in Section
22.

      2.3. RENT.

      (a) BASIC RENT. Lessee shall promptly pay (or cause to be paid) to Lessor
Basic Rent during the Basic Term on each Rent Payment Date in the amount
provided in Schedule I to this Lease.

      (b) RENEWAL RENT. Lessee shall promptly pay (or cause to be paid) to
Lessor Renewal Rent on each Rent Payment Date during the Renewal Term in the
amount determined pursuant to Section 22 hereof).

      (c) SUPPLEMENTAL RENT. Lessee shall promptly pay (or cause to be paid) to
Lessor any and all Supplemental Rent as the same shall become due and owing
hereunder. In the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity or otherwise in the case of

                                      6


nonpayment of Basic Rent. Interest on past due Basic Rent shall be computed at
the Past Due Rate, and shall be considered Supplemental Rent. The expiration or
other termination of Lessee's obligation to pay Basic Rent hereunder shall not
limit or modify Lessee's obligations with respect to Supplemental Rent.

      (d) ADJUSTMENTS TO BASIC RENT. Following the Delivery Date, all
installments of Basic Rent remaining to be paid during the Basic Term shall be
recalculated and adjusted, upward or downwards as the case may be (and
corresponding adjustments shall be made to the Stipulated Loss Values and the
Termination Values applicable during the remaining Basic Term), in the event
that (i) the Transaction Costs payable by Lessor are more or less than [*] of
Lessor's Cost (unless Lessee elects to pay such excess directly), and/or (ii)
any tax indemnity payment is financed through a Basic Rent adjustment. Such
adjustment shall be made in such manner as to maintain the Net Economic Return
and to minimize the greatest extent practicable consistent therewith, the
mathematical average of the remaining Basic Rent payments. Adjustments to the
installments of Basic Rent (expressed as percentages of Lessor's Cost) and
conforming adjustments to the Stipulated Loss Values and Termination Values
shall be calculated by Lessor in accordance with the terms of this Section 3(c).
Lessor shall deliver to Lessee schedules setting forth the revised amounts,
which shall be subject to review by Lessee and verification as provided herein.
In the event that a dispute regarding any such adjustment is not resolved by
written agreement of Lessor and Lessee within 30 days following receipt by
Lessee of Lessor's schedules of proposed adjustments, Lessee shall have the
right by written notice to Lessor within 30 days after receipt of Lessor's
proposed adjustments to cause a lease advisory firm or a nationally-recognized
firm of accountants selected by Lessor and reasonably acceptable to Lessee to
verify shall proposed adjustments. Lessor shall provide to such firm, but not,
in any circumstances, to Lessee or any representatives of Lessee, on a
confidential basis, such information as such firm may reasonably require,
including, without limitation, a true copy of this Lease and a full description
of the methodology and assumptions employed by Lessor in calculating the Basic
Rent and Stipulated Loss Values and Termination Values as in effect on the
Delivery Date and a true copy of the calculations of the adjustments performed
by Lessor at the time, to enable such firm to determine whether the adjustments
proposed by Lessor are mathematically accurate, apply the same methodology and
assumptions (except to the extent changed by the events giving rise to such
recalculation) as were employed in the calculations of the Basic Rent,
Stipulated Loss Values and Termination Values in effect on the Delivery Date,
and are otherwise in conformity with the provisions of this Lease. Lessee and
its financial advisors shall be entitled to submit to such firm such data and
views concerning the proposed adjustments as Lessee may elect. The firm shall be
requested to deliver to each of Lessor and Lessee within 30 days after its
appointment its determination as to the changes, if any, that are appropriate
with respect to the adjustments proposed by Lessor. The adjustments proposed by
Lessor, if not disputed by Lessee as provided above, or the determination of the
firm as provided above, as the case may be, shall be conclusive, final and
binding upon Lessor and Lessee. No dispute concerning any adjustment shall
release Lessee from its obligations to pay the Basic Rent or Stipulated Loss
Value or Termination Value as then set forth herein. All reasonable fees and
expenses payable to the outside firm pursuant to this Section 3(c) shall be paid
by Lessee, except that such fees and expenses shall be shared equally by Lessor
and Lessee if, as a result of changes determined by the firm, the net present
value, discounted at the Base Rate, of Basic Rent

                                      7

- --------
* Confidential



remaining to be paid is [*] or more lower than it would have been under the
adjustments proposed by Lessor. Any adjustments made pursuant to this Section
3(c) shall (i) be made so as to avoid characterization of this Lease as a
"disqualified leaseback or long-term agreement" within the meaning of Section
467 of the Code and the Treasury Regulations promulgated thereunder, and (ii)
comply with the requirements of Revenue Procedure 75-21 and 75-28 (or any
successor relevant procedures), except to the extent that on the Delivery
Date the Lease constituted such a "disqualified leaseback or long-term
agreement" or was not in compliance with the revenue procedure referred to
above. All adjustments required pursuant to this Section 3(c) shall be set
forth in a Lease Supplement or in an amendment to this Lease.

      (e) PAYMENTS IN GENERAL. All payments of Rent shall be made to Lessor in
the United States of America by wire transfer of immediately-available funds
prior to noon (12:00) p.m. Eastern time on the due date thereof, to Lessor's
account at the Charter One Bank, F.S.B., 1215 Superior Avenue, Cleveland, Ohio
44114, ICX Corporation account no. 40-0113830, ABA number 241-070-417 (or such
other account as Lessor shall direct in a written notice to Lessee at least five
Business Days prior to the date such payment of Rent is due). Notwithstanding
anything in this Lease to the contrary, if any date on which a payment of Rent
becomes due and payable is not a Business Day, such payment shall not be made on
such scheduled date but shall be made on the next succeeding Business Day with
the same force and effect as if made on such scheduled date and, provided such
payment is made on such next succeeding Business Day, no interest shall accrue
on the amount of such payment from and after such scheduled date.

SECTION 3. LESSOR'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.

      Lessor hereby represents and warrants to, and covenants and agrees with,
Lessee as follows:

      3.1. DUE ORGANIZATION. Lessor is a corporation duly organized and validly
existing in good standing under the laws of the State of Ohio and has the
corporate power and authority to enter into and perform its obligations under
this Lease and the Lease Supplement.

      3.2. DUE AUTHORIZATION; ENFORCEABILITY. This Lease has been, and on the
Delivery Date, the Lease Supplement will be, duly executed and delivered by a
Responsible Officer who is duly authorized to execute and deliver such
instruments on behalf of Lessor. Each of the Lease and the Lease Supplement
(when so executed and delivered) will be the legal, valid and binding obligation
of Lessor, enforceable against Lessor in accordance with its terms, except as
such enforceability is affected by applicable laws or judicial decisions
regarding bankruptcy, bankruptcy moratorium, fraudulent transfers or other laws
affecting creditors' rights or by application of the principles of equity.

      3.3. NO VIOLATIONS. Neither the execution and delivery by Lessor of this
Lease and the Lease Supplement nor the performance by Lessor of its obligations
hereunder and thereunder, will be inconsistent with its charter or bylaws, does
not and will not contravene any currently existing law, governmental rule or
regulation, judgment or order, including, but not limited to, any statute, rule,
regulation, franchise or permit applicable to or binding on Lessor, and does not
and will not contravene any provision of, or constitute a default under, any
currently existing

                                      8

- --------
* Confidential



indenture, mortgage, contract or other instrument to which Lessor is a party or
by which it or any of its properties is bound.

      3.4. DISCLAIMER. LESSEE EXPRESSLY AGREES TO LEASE THE AIRCRAFT IN "AS IS,
WHERE IS" CONDITION "WITH ALL FAULTS", EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS LEASE. LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSOR AND LESSEE (A)
THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME
AND EACH ENGINE IS SUITABLE FOR ITS PURPOSE, (C) LESSOR IS NOT A MANUFACTURER
NOR A DEALER IN PROPERTY OF SUCH KIND, AND (D) LESSOR DOES NOT MAKE, HAS NOT
MADE AND SHALL NOT BE DEEMED TO HAVE MADE, AND WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, THE QUALITY OF
MATERIAL OR WORKMANSHIP, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.
LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR ANY DAMAGE OR LOSS (INCLUDING,
BUT NOT LIMITED TO, INCIDENTAL, CONSEQUENTIAL AND SPECIAL DAMAGES) SUFFERED BY
LESSEE DIRECTLY OR INDIRECTLY BECAUSE OF ANY DEFECT IN THE AIRCRAFT. NONE OF THE
PROVISIONS OF THIS SECTION 3.4 OR ANY OTHER PROVISION OF THIS LEASE IS INTENDED
TO AMEND, MODIFY OR OTHERWISE AFFECT THE EXPRESS REPRESENTATIONS, WARRANTIES OR
OTHER OBLIGATIONS OF THE MANUFACTURER, OR ANY OTHER VENDOR, MANUFACTURER,
SUBCONTRACTOR OR SUPPLIER WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR
TO RELEASE MANUFACTURER OR ANY OTHER VENDOR, MANUFACTURER, SUBCONTRACTOR OR
SUPPLIER FROM ANY SUCH REPRESENTATION, WARRANTY OR OBLIGATION OR ANY RIGHTS OF
LESSOR OR LESSEE WITH RESPECT THERETO.

SECTION 4. LESSEE'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.

      Lessee hereby represents and warrants to, and covenants and agrees with,
Lessor as follows:

      4.1. DUE ORGANIZATION. Lessee is a corporation duly organized and validly
existing in good standing under the laws of the state of New York; is duly
qualified as a foreign corporation to do business in each jurisdiction in which
its operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on this Lease,
Lessee or its business; is a U.S. Air Carrier; and has the corporate power and
authority to conduct

                                      9


its business as it is presently being conducted, to lease the Aircraft, and to
enter into and perform its obligations under this Lease, the Lease Supplement
and the Tax Indemnity Agreement.

      4.2. DUE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by Lessee of this Lease, the Lease Supplement and the Tax Indemnity
Agreement will on the Delivery Date be duly authorized by all necessary
corporate actions and will be executed and delivered by a Responsible Officer
who is duly authorized to execute and deliver such instruments on behalf of
Lessee. Each of the Lease, the Lease Supplement (when so executed and delivered)
and the Tax Indemnity Agreement will be the legal, valid and binding obligation
of Lessee, enforceable against Lessee in accordance with its terms, except as
such enforceability is affected by applicable laws or judicial decisions
regarding bankruptcy, bankruptcy moratorium, fraudulent transfers or other laws
affecting creditors' rights or by application of the principles of equity.

      4.3. NO VIOLATIONS. Neither the execution and delivery by Lessee of this
Lease, the Lease Supplement and the Tax Indemnity Agreement, nor the performance
by Lessee of its obligations hereunder and thereunder, will be inconsistent with
its charter or bylaws, does not and will not contravene any currently existing
law, governmental rule or regulation, judgment or order, including, but not
limited to, any statute, rule, regulation, franchise or permit applicable to or
binding on Lessee, and does not and will not contravene any provision of, or
constitute a default under, any currently existing indenture, mortgage, contract
or other instrument to which Lessee is a party or by which it or any of its
properties is bound, and does not and will not require the consent or approval
of any holders of the stockholders of Lessee or any currently existing
indebtedness or obligation of Lessee.

      4.4. NO GOVERNMENTAL APPROVALS, NOTICES AND FILINGS. Except for (i) the
filing for recording of the Lease and Lease Supplement pursuant to the
Transportation Act, and (ii) the filing of financing statements (and
continuation statements at periodic intervals) with respect to the interests
created by such documents under the Uniform Commercial Code of New York,
Connecticut, Ohio and Indiana (which filing statements Lessor has prepared and
Lessee shall cause to be presented in due form for filing to the appropriate
filing office in New York, Connecticut, Ohio and Indiana), no consent or
approval of, giving of notice to, registration with, filing or recording of any
document, or taking of any action in respect of or by, any United States
Federal, state or local or foreign governmental authority or agency or other
person is necessary with respect to the execution, delivery or performance by
Lessee of this Lease and the Lease Supplement, or the consummation by Lessee of
any of the transactions contemplated hereby or thereby, or to establish and
perfect Lessor's title to and interest in the Aircraft as against Lessee and as
against any third parties in any applicable jurisdictions.

      4.5. LITIGATION. There are no actions, suits, claims or proceedings
pending or, to the knowledge of Lessee, threatened against or affecting Lessee
in any court or before any governmental commission, arbitrator, agency, board or
authority, domestic or foreign, which relate to any of the transactions
contemplated by this Lease or the Lease Supplement or which, if adversely
determined, could have a material adverse effect on either the business,
operations or financial condition of Lessee or the ability of Lessee to perform
its obligations under this Lease

                                      10


or the Lease Supplement, or which may adversely affect the legality or
enforceability of the terms of this Lease or any other such document, except as
otherwise specifically disclosed herein.

      4.6. NO DEFAULTS. Lessee is not in default under any indenture, pledge,
contract, mortgage, loan agreement or other instrument to which Lessee is a
party, nor is Lessee in violation of any law, order, injunction, decree, rule or
regulation applicable to Lessee of any court or administrative body, which
default or violation could materially and adversely affect the business,
property, assets, operations or condition, financial or otherwise, of Lessee.

      4.7. LOCATION OF CHIEF EXECUTIVE OFFICES. The chief executive office or
chief place of business of Lessee is located at 2500 S. High School Road,
Indianapolis, Indiana 46241. Lessee agrees to give Lessor written notice of any
relocation of its chief executive office or chief place of business from the
present location.

      4.8. LESSEE DULY LICENSED. Lessee holds all licenses, certificates,
permits and franchises from the appropriate agencies of the United States and/or
all other governmental authorities having jurisdiction necessary to perform
under this Lease.

      4.9. NO EVENT OF LOSS OR EVENT OF DEFAULT. On the Delivery Date, no event
exists which would be an Event of Default hereunder or an Event of Loss
hereunder.

      4.10. FINANCIAL STATEMENTS. The statements of financial position of Lessee
as of March 31, 1999 and the related statements of earnings and cash flow of
Lessee, copies of which have been furnished to Lessor, fairly present the
financial condition of Lessee at such date and the results of operations and
cash flow of Lessee for the period ended on such date, in accordance with
generally accepted accounting principles consistently applied, and since March
31, 1999, there has been no material and adverse change in such condition or
operations.

      4.11. TITLE. Lessor will receive good title to the Aircraft free and clear
of all Liens, except the rights of Lessee under the Lease and the Lease
Supplement covering the Aircraft, and the Liens permitted by clauses (v) (solely
for Taxes not yet due) and (vi) (contested liens) of Section 9.1 hereof.

      4.12. NON-SOLICITATION. Neither Lessee nor anyone acting on behalf of
Lessee has directly or indirectly offered any interest in the Aircraft for sale
to, or solicited any offer to acquire any of the same from, anyone other than
Lessor and not more than forty (40) other institutions believed capable of
evaluating and bearing the risks of investment in the transactions contemplated
hereby.

      4.13. APPROVALS. No governmental approval of any kind is required of
Lessor for its executions of or performance under this Agreement or any
agreement contemplated hereby solely by reason of any fact or circumstance
peculiar to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's
proposed operations or use of the Aircraft.

      4.14. TAXES. Lessee has filed or caused to be filed all Federal, state,
local and (in Lessee's reasonable opinion) foreign tax returns which are
required to be filed and has paid or

                                      11


caused to be paid all taxes shown to be due and payable on such returns or
(except to the extent being contested in good faith and by appropriate
proceedings and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) on any assessment
received by Lessee, to the extent that such taxes have become due and payable,
except such returns or taxes as do not materially and adversely affect the
business, property or assets, operations or condition, financial or otherwise,
of Lessee and do not involve a material risk of the sale, forfeiture or loss of,
or the creation of any Lien (other than a Permitted Lien) on the Aircraft.

      4.15. AIRCRAFT. The Aircraft has been duly certified by the FAA as to type
and airworthiness, has been insured by Lessee in accordance with the terms of
this Lease, is in the condition and state of repair required under the terms of
this Lease, and the Airframe and Engines are in Lessee's possession.

SECTION 5. CONDITIONS PRECEDENT TO OBLIGATION OF LESSOR AND LESSEE.

      5.1. LESSOR'S CONDITIONS. Lessor's obligation to deliver the Aircraft to
Lessee for lease hereunder shall be subject to the receipt of the following
documents, in form and substance satisfactory to Lessor, prior to such delivery
(unless otherwise provided):

      (a)   The Lease, executed by Lessee and Lessor.

      (b)   A copy of resolutions of the Board of Directors of Lessee or other
            written evidence of appropriate corporate action, certified by the
            Secretary of Lessee, duly authorizing or ratifying the lease of the
            Aircraft hereunder and the execution, delivery and performance of
            this Lease and the Lease Supplement.

      (c)   An incumbency certificate as to the person or persons authorized to
            execute and deliver this Lease and the Lease Supplement.

      (d)   An Acceptance Certificate for the Aircraft executed by Lessee.

      (e)   A Lease Supplement for the Aircraft executed by Lessee.

      (f)   A certificate signed by Lessee's insurance brokers evidencing
            compliance with the insurance provisions of Section 11.

      (g)   Opinions of counsel to Lessee, dated the Delivery Date, in
            substantially the form of Exhibit E hereto.

      (h)   Such financing statements under the Uniform Commercial Code or other
            law with respect to the Lease and the Aircraft as shall have been
            reasonably requested by Lessor.

      (i)   All appropriate action required to have been taken by the Federal
            Aviation Administration and any other applicable governmental or
            political agency, subdivision or instrumentality of the United
            States, on or prior to the Delivery

                                      12


            Date in connection with the transactions contemplated by this Lease
            and the Lease Supplement shall have been taken, and all orders,
            permits, waivers, authorizations, exemptions and approvals of such
            entities required to be in effect on the Delivery Date in connection
            with the transactions contemplated by this Lease and the Lease
            Supplement shall have been issued, and all such orders, permits,
            waivers, authorizations, exemptions and approvals shall be in full
            force and effect on the Delivery Date.

      (j)   Receipt by Lessor of an appraisal of the Aircraft in form and
            substance satisfactory to Lessor.

      (k)   Delivery to Lessor by Solitair Corporation of an executed warranty
            bill of sale for the Aircraft in form and substance satisfactory to
            Lessor.

      (l)   Delivery to Lessor by Solitair Corporation of an executed assignment
            of warranties for the Aircraft and the Engines in form and substance
            satisfactory to Lessor.

      5.2.  LESSEE'S CONDITIONS.  Lessee's obligation to accept delivery of the
Aircraft from Lessor for lease hereunder shall be subject to the following
conditions precedent:

      (a)   The Aircraft is tendered by Lessor for delivery on the Delivery
            Date.

      (b)   Lessor, at Lessee's expense, shall have delivered to Lessee a
            temporary FAA certificate of registration for the Aircraft (a "pink
            slip") in Lessor's name, or if Lessee requests, Lessor shall execute
            and deliver an application for an authorization, telex or facsimile
            (a "flying time wire") which permits the Aircraft to be operated
            outside of the United States, at Lessee's cost.

                                      13


SECTION 6. DELIVERY OF THE AIRCRAFT.

      6.1. DELIVERY LOCATION. The Aircraft shall be delivered to Lessee "As-Is,
Where-Is" at Memphis, Tennessee.

      6.2. ACCEPTANCE OF DELIVERY. Lessee's execution of the Acceptance
Certificate shall constitute Lessee's acknowledgment and agreement that, as
between Lessor and Lessee, the Aircraft has been inspected to Lessee's
satisfaction, and that Lessee has unconditionally accepted the Aircraft for
lease hereunder. Concurrently with the execution of the Acceptance Certificate,
Lessee shall also execute and deliver to Lessor the Lease Supplement, dated the
Delivery Date, and Lessor shall also execute such Lease Supplement. Execution of
the Lease Supplement by Lessee and Lessor shall evidence that the Aircraft has
been leased hereunder upon and subject to all of the terms, conditions, and
provisions hereof. Without limiting or diminishing the disclaimers set forth in
Section 3.4, Lessee's failure to notify Lessor or any defect or discrepancy
shall not establish or evidence the absence thereof insofar as the Manufacturer
or any supplier is concerned.

SECTION 7. REGISTRATION; MAINTENANCE; OPERATION; POSSESSION; PERMITTED
SUBLEASES; INSIGNIA.

      7.1.  REGISTRATION.

      (a) On the Delivery Date, Lessee shall, at its own cost and expense, cause
this Lease and the Lease Supplement to be duly filed with the FAA under the
Transportation Act, and except as provided in Section 7.1(b), Lessee shall not
take any action or fail to take any action that would cause the Aircraft not to
remain at all times duly registered under the Transportation Act unless Lessor
consents in advance in writing to the registration of the Aircraft in another
jurisdiction. Lessee shall execute and deliver all such documents at its own
cost and expense as Lessor may reasonably request for the purpose of effecting
and continuing such registration. In addition, Lessee shall take such other
actions as may be necessary in any other jurisdiction in which the Aircraft may
be operated to protect Lessor's interest as owner of the Aircraft and as Lessor
hereunder. Lessee shall have the right, upon written notice to Lessor, to cause
the United States registration number for the Aircraft to be changed to another
United States registration number selected by Lessee. Lessor agrees to cooperate
with Lessee, at Lessee's sole cost and expense, including, without limitation,
executing and delivering to Lessee a Form AC 8050-64, "Assignment of Special
Registration Number," for the Aircraft. Lessee shall solely be responsible for
the cost of painting its designated United States registration number on the
Aircraft and for all other costs associated with or resulting from the change of
the registration number of the Aircraft.

      (b) Lessee shall have the right, in connection with a Permitted Sublease
to a Permitted Sublessee pursuant to Section 13.2, to change the registration of
the Aircraft to any country listed on Schedule III hereto approved for
re-registration. Lessee's right to change the registration shall be subject to
appropriate recordation in the country of registry of the rights of Lessor,
provided

                                      14


that Lessee shall deliver to Lessor an opinion of counsel reasonably
satisfactory in form and substance to Lessor to the effect that the rights of
Lessor in and to the Aircraft and the Lease and the obligations of Lessee under
the Lease will not be impaired under the laws of such country, Lessor will not
be required to qualify to do business in such jurisdiction as a result of such
re-registration, the laws of such Permitted Sublessee's country of domicile
require fair compensation by the government of such jurisdiction for the loss of
use of or title to such Engine or the Airframe in the event of the requisition
by such government of such use or title (it being understood that in the event
such opinion cannot be given in a form reasonably satisfactory to Lessor, such
opinion will be waived if insurance reasonably satisfactory to Lessor is
provided to cover such requisition) and provided, further, that Lessee shall
also provide Lessor with satisfactory assurances that the Lessor's title to the
aircraft will be recognized in such new jurisdiction of registry. In addition,
Lessee shall provide to Lessor evidence reasonably satisfactory to Lessor that
(i) the country of proposed re-registration provides promulgated guidelines
establishing that the prompt and orderly de-registration of the Aircraft will
not be unreasonably impeded, and (ii) the jurisprudence and laws of such country
do not clearly provide for greater tort liability to Lessor than under similar
circumstances in the United States. All costs incurred with such change of
registry shall be for the account of Lessee.

      7.2. MAINTENANCE. During the Term, Lessee, at its own cost and expense,
shall (or, if any Permitted Sublease is then in effect, shall cause any
Permitted Sublessee to):

      (a) maintain, inspect, service, repair, test, operate and overhaul (or
      cause to be maintained, inspected, serviced, repaired, tested, operated
      and overhauled) the Aircraft in accordance with the Maintenance Program so
      as to keep (A) the Aircraft in good operating condition, and (B) the
      Aircraft in such condition as may be necessary to enable the applicable
      airworthiness certification for the Aircraft to be maintained in good
      standing at all times under (I) the Transportation Act, except when a
      group of aircraft of the same type and series as the Aircraft powered by
      engines of the same type and series as those with which the Airframe is
      from time to time equipped and registered in the United States and flying
      in commercial passenger service have been grounded by the Federal Aviation
      Administration, and (II) the applicable laws of any other jurisdiction in
      which the Aircraft may then be registered, based and/or operated from time
      to time. In any event, the Aircraft shall be maintained at least at the
      level as Lessee maintains, and utilizing the same manner of maintenance,
      service, repair or overhaul as used by Lessee with respect to, similar
      aircraft owned, leased or operated by Lessee. Notwithstanding anything
      herein to the contrary, all maintenance, including "C" checks and engine
      overhauls, shall be performed by Lessee or an FAA-approved repair station;

      (b) maintain or cause to be maintained in the English language all Manuals
      and Technical Records, and other materials required to be maintained in
      respect of the Aircraft by the Federal Aviation Administration and the
      applicable regulatory agency or body of any other jurisdiction in which
      the Aircraft may then be registered and/or based from time to time,
      including, but not limited to, all documents necessary to establish
      compliance with applicable FAA requirements for the Airframe, the Engines
      and life-limited parts (which records, logs and other materials, as
      between Lessor and Lessee and

                                      15


      all parties claiming through Lessee, shall be the property of Lessor but
      shall be maintained by Lessee during the Term of this Lease and shall
      become the property of Lessee upon the occurrence of an Event of Loss and
      Lessee's compliance with Section 10.1); and

      (c) promptly furnish or cause to be furnished to Lessor such information
      as may be required to enable Lessor to file any reports required to be
      filed by Lessor with any governmental authority or lending institution.

      7.3. COMPLIANCE WITH AIRWORTHINESS DIRECTIVES. Lessee shall ensure at its
cost and expense that the Aircraft shall at all times have a currently effective
airworthiness certificate issued by the FAA under the Federal Aviation
Regulations (or by any other governmental authority having jurisdiction over the
operation of the Aircraft). Lessee (or during the term of any Permitted
Sublease, the Permitted Sublessee), at its cost and expense, shall ensure that
the Aircraft is in compliance with all applicable Airworthiness Directives, and
Federal Aviation Regulation requirements (or the requirements of any other
governmental authority having jurisdiction over the Aircraft). All Airworthiness
Directives shall be accomplished in accordance with all applicable bulletins and
manuals published by the manufacturer of the Airframe or Engines or Parts or
FAA-approved data developed by Lessee, and in a manner consistent with similar
aircraft owned, leased or operated by Lessee.

      7.4. REPLACEMENT OF PARTS. Lessee (or, if any Permitted Sublease is then
in effect, any Permitted Sublessee), shall, at its own cost and expense,
promptly replace or cause to be replaced all Parts which may from time to time
be incorporated or installed in or attached to the Airframe or any Engine and
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever, except as otherwise provided in Section 7.6. In addition,
Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee) may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that Lessee (or, if any Permitted
Sublease is then in effect, any Permitted Sublessee), except as otherwise
provided in Section 7.6, will, at its own cost and expense, replace such Parts
as promptly as practicable. If not obtained from an original equipment
manufacturer, all Parts installed during the Term must have been
repaired/overhauled by an FAA-approved repair station and be accompanied by
appropriate certification and documentation to demonstrate compliance with
applicable requirements. All replacement Parts shall be free and clear of all
Liens (except for Permitted Liens and pooling arrangements to the extent
permitted by Section 7.5 and except for replacement property temporarily
installed on an emergency basis) and shall be in as good operating condition as,
and shall have a value, utility and remaining useful life at least equal to, the
Parts replaced, but in all events such replacement Parts shall be no less than
in the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts have
been replaced by Parts which have been incorporated or installed in or attached
to the Airframe or such Engine and which meet the requirements for replacement
parts specified above.

                                      16


Immediately upon any replacement part becoming incorporated or installed in or
attached to the Airframe or any Engine as above provided, without further act
(subject only to Permitted Liens and any pooling arrangement to the extent
permitted by Section 7.5 and except for replacement property temporarily
installed on an emergency basis), (i) title to such replacement Part shall
thereupon vest in Lessor, (ii) such replacement Part shall become subject to
this Lease and be deemed part of the Airframe or such Engine for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to the Airframe or such Engine, and (iii) title to the replaced Part
shall thereupon vest in Lessee (or, if a Permitted Sublease is then in effect,
any Permitted Sublessee), free and clear of all Lessor Liens and rights of
Lessor, and shall no longer be deemed a part hereunder.

      7.5. POOLING OF PARTS. Any Part removed from an Airframe or any Engine as
provided in Section 7.4 may be subjected by Lessee (or, if any Permitted
Sublease is then in effect, any Permitted Sublessee) to a customary pooling or
interchange arrangement with other aircraft or engines owned or leased by Lessee
(or, if any Permitted Sublease is then in effect, any Permitted Sublessee);
provided that if as a consequence thereof a Part is removed, the Part replacing
such removed Part shall be incorporated or installed in or attached to the
Airframe or Engine in accordance with Section 7.4 as promptly as practicable
after the removal of such removed Part. When incorporated or installed in or
attached to the Airframe or any Engine in accordance with Section 7.4, any Part
replacing a Part that is removed under a customary pooling or interchange
arrangement may be owned by any third party, provided that Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee), at its cost and
expense, as promptly thereafter as practicable, either (i) causes title to such
replacement Part to vest in Lessor in accordance with such Section 7.4 by Lessee
(or, if any Permitted Sublease is then in effect, any Permitted Sublessee)
acquiring title thereto for the benefit of, and transferring such title to,
Lessor free and clear of all Liens other than Permitted Liens, or (ii) replaces
such replacement Part by incorporating or installing in or attaching to the
Airframe or Engine a further replacement Part owned by Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee) free and clear of
all Liens other than Permitted Liens and by causing title to such further
replacement Part to vest in Lessor in accordance with Section 7.4. All such
replacement Parts shall be in as good operating condition as, and shall have a
value, utility and remaining useful life at least equal to, the Parts replaced,
but in all events such replacement Parts shall be no less than in the condition
and repair required to be maintained by the terms hereof. No pooling or
interchange arrangement will result in a change of title or registration of the
Aircraft or effect Lessor's status under this Lease.

      7.6. ALTERATIONS, MODIFICATIONS AND ADDITIONS. Lessee (or, if a Permitted
Sublease is then in effect, any Permitted Sublessee), shall, at its own cost and
expense, make (or cause to be made) such alterations and modifications in and
additions to the Airframe and Engines as may be required from time to time to
meet the applicable standards of the FAA or any applicable regulatory agency or
body of any other jurisdiction to which the Aircraft may then be subject, and
such other modifications, alterations and improvements as do not decrease the
fair market value utility or remaining useful life of the Aircraft. Title to all
Parts incorporated or installed in or attached or added to the Airframe or an
Engine as the result of such alteration, modification, removal or addition
shall, without further act, vest in Lessor. Notwithstanding the foregoing,

                                      17


Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee) may, at any time during the Term, so long as no Event of Default has
occurred and is continuing, remove or suffer to be removed any Part, provided
that such Part (i) is in addition to, and not in replacement of or substitution
for, any Part originally incorporated or installed in or attached to the
Airframe or any Engine at the time of delivery thereof hereunder or any Part in
replacement of or substitution for any such Part, (ii) is not required to be
incorporated or installed in or attached or added to the Airframe or any Engine
pursuant to the terms of Section 7.2(a) or the first sentence of this Section
7.6, (iii) can be removed from the Airframe or such Engine without (A) causing
material damage to the Airframe or such Engine (it being understood that Lessee
shall repair any damage caused by a permitted removal), or (B) diminishing or
impairing the value, utility, condition, remaining useful life or airworthiness
which the Airframe or such Engine would have had at such time had such
alteration, modification, removal or addition not originally occurred, assuming
such Airframe or such Engine was then of the value, utility, and remaining
useful life and in the condition of airworthiness required to be maintained by
the terms of this Lease, and (iv) was not paid for by Lessor; provided, however,
that the value of all parts removed pursuant to this sentence shall not exceed
$100,000 in the aggregate. Upon the removal by Lessee (or Permitted Sublessee)
of any Part as provided above, title thereto shall, without further act, vest in
Lessee (or any Permitted Sublessee, as the case may be) and such Part shall no
longer be deemed part of the Airframe or Engine from which it was removed. Any
Part not removed by Lessee (or any Permitted Sublessee) as above provided prior
to the return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.

      7.7.  OPERATION.

            (a) Lessee will not maintain, use, service, repair, overhaul,
operate or locate the Aircraft (or, if any Permitted Sublease is then in effect,
permit any Permitted Sublessee to maintain, use, service, repair, overhaul,
operate or locate the Aircraft) in violation of any law or any rule, regulation,
order, directive, bulletin or certificate of any government or governmental
authority (domestic or foreign) having jurisdiction, or in violation of any
airworthiness certificate, license or registration relating to the Aircraft
issued by any such authority, except to the extent Lessee (or, if a Permitted
Sublease is then in effect, any Permitted Sublessee) is contesting in good faith
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not involve any material risk of liabilities or any
civil or criminal penalties being imposed on or against Lessor, that does not
involve any material risk of loss, forfeiture or sale of the Aircraft or any
Engine, and that does not adversely affect Lessor, Lessor's title or interest in
the Aircraft or any Engine, or Lessor's interest in this Lease. Except as
provided in Section 7.3, if any such law, rule, regulation, order, directive,
bulletin, certificate, license or registration requires alteration of the
Aircraft or any Engine, Lessee will conform the same therewith at its own cost
and expense and will maintain the Aircraft and each Engine in compliance with
such law, rule, regulation, order, directive, bulletin, certificate, license or
registration.

            (b) Lessee will not operate or locate the Aircraft, or permit any
Permitted Sublessee to operate or locate the Aircraft, in any area excluded from
coverage by any insurance

                                      18


policy required by the terms of this Lease, except in the case of temporary
operations due to unforeseen circumstances beyond Lessee's control (e.g.,
weather, hijacking, malfunctions, ETC.)

            (c) The Aircraft shall be operated only by pilots and other airmen
holding valid licenses or other necessary authorizations as may be required by
applicable laws and regulations.

      7.8.  POSSESSION AND PERMITTED SUBLEASES.

            (a) During the Basic Term, 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
or permit to be installed any Engine on any airframe other than the Airframe, or
to install or permit to be installed on the Airframe any engines other than the
Engines (other than to the extent an Engine is receiving off-wing maintenance
service). The wet lease or charter of the Aircraft shall not be considered a
sublease; provided, however, that at all times, Lessee has operational control
of the Airframe and Engines.

            (b) Notwithstanding anything herein to the contrary, Lessee may,
without the prior written consent of Lessor:

                  (i) install a substitute engine owned by Lessee on the
            Airframe so long as the substitute engine is free and clear of all
            Liens except Permitted Liens;

                  (ii) install or permit the installation of an Engine on an
            airframe which is owned by Lessee (or, if any Permitted Sublease is
            then in effect, any Permitted Sublessee) free and clear of all Liens
            except (A) Permitted Liens and those which apply only to the engines
            (other than Engines), appliances, parts, instruments, appurtenances,
            accessories, furnishings and other equipment (other than Parts)
            installed on such airframe (but not to the airframe as an entirety),
            and (B) mortgage liens or other security interests, provided that
            such mortgage liens or other security interests effectively provide
            that such Engine shall not become subject to the lien of such
            mortgage or security interest, notwithstanding the installation
            thereof on such airframe;

                  (iii) provided no Event of Default has occurred and is
            continuing, install or permit the installation of an Engine on an
            airframe leased to Lessee (or, if any Permitted Sublease is then in
            effect, any Permitted Sublessee) or purchased by Lessee (or, if any
            Permitted Sublease is then in effect, any Permitted Sublessee)
            subject to a conditional sale or other security agreement, provided
            that (A) such airframe is and remains free and clear of all Liens
            except (I) the rights of the parties to the lease or conditional
            sale or other security agreement covering such airframe, or their
            assignees, and (II) Liens of the type permitted by Section
            7.8(b)(ii) hereof and (B) such lease, conditional sale or other
            security agreement expressly provides that such Engine shall not
            become subject to the lien of such

                                      19


            lease, conditional sale or other security agreement, notwithstanding
            the installation thereof on such airframe; or

                  (iv) install or permit the installation of an Engine on an
            airframe owned by Lessee (or, if any Permitted Sublease is then in
            effect, any Permitted Sublessee), leased to Lessee (or, if any
            Permitted Sublease is then in effect, any Permitted Sublessee) or
            purchased by Lessee (or if any Permitted Sublease is then in effect,
            any Permitted Sublessee) subject to a conditional sale or other
            security agreement under circumstances where neither Section
            7.8(b)(ii) nor Section 7.8(b)(iii) is applicable, provided that such
            installation shall be deemed an Event of Loss with respect to such
            Engine and Lessee shall (or shall cause any Permitted Sublessee to)
            comply with Section 10.2 hereof in respect thereof.

             (c) The rights of any Permitted Sublessee or other transferee who
      receives possession by reason of a transfer permitted by this Section or
      Section 13 hereof, other than the transfer of an Engine which is deemed an
      Event of Loss, shall be and shall be deemed to be effectively subject and
      subordinate to, and any Permitted Sublease permitted by this Section or
      Section 13 hereof shall be effectively and expressly subject and
      subordinate to, all the terms of this Lease, including, without
      limitation, Lessor's rights to repossession and to avoid such Permitted
      Sublease upon such repossession. The terms of such Permitted Sublease
      shall not permit any Permitted Sublessee to take any action not permitted
      to be taken by Lessee under this Lease. Lessee shall remain primarily
      liable hereunder for the performance of all of the terms and conditions of
      this Lease to the same extent as if such Permitted Sublease had not
      occurred. No pooling agreement, interchange agreement, Permitted Sublease
      or other relinquishment of possession of the Airframe or any Engine or
      part shall in any way discharge or diminish any of Lessee's obligations to
      Lessor hereunder or constitute a waiver of Lessor's rights or remedies
      hereunder. All necessary action shall be taken by Lessee at its expense
      which is required in connection with any Permitted Sublease to continue
      the perfection of the right, title and interest of Lessor in the Aircraft,
      the Airframe and the Engines and Lessor's rights under the Lease, and such
      Permitted Sublease and all other actions necessary or required to preserve
      the right, title and interest of Lessor in the Aircraft, Airframe and
      Engines. Notwithstanding any provision herein to the contrary, no
      Permitted Sublease permitted pursuant to this Section or Section 13 shall
      permit any further sub-subleasing of the Aircraft.

      7.9. INSIGNIA. Lessee agrees to maintain (or cause to be maintained) in a
convenient location in the cockpit of the Airframe a nameplate setting forth the
name of Lessor and its status as owner/lessor of the Aircraft. Such nameplate
shall be replaced, if necessary, with a nameplate reflecting the name of any
successor Lessor, as permitted in this Agreement. Except as above provided,
Lessee will not allow the name of any Person to be placed on an Airframe as a
designation that might be interpreted as a claim of ownership; provided that
nothing herein contained shall prohibit Lessee (or any Permitted Sublessee) from
placing its customary colors and insignia on the Airframe.

                                      20


      7.10. INSPECTIONS BY LESSOR. Not more than once annually during the Term,
Lessor or its authorized representatives may upon at least 15 days' prior notice
to Lessee (unless an Event of Default has occurred and continuing, in which
event, Lessor may exercise its rights under this Section 7.10 as often as it
deems necessary upon one Business Day's prior notice) and at a time and place
reasonably acceptable to Lessee, at its own expense and risk, conduct a visual
walk-around inspection of the Aircraft and any Engines, which shall not include
opening any panels or bays and may inspect the Manuals and Technical Records
relating to the operation and maintenance thereof (which Lessee shall provide
copies of to Lessor upon Lessor's reasonable request), provided that (a) any
such inspection shall be subject to the safety, security and workplace rules
applicable at the location where such inspection is conducted and any applicable
governmental rules or regulations, (b) in the case of an inspection during a
maintenance visit, such inspection shall not interfere with the normal conduct
of such maintenance visit or extend the time required for such maintenance visit
or, in any event, at any time interfere with the use or operation of the
Airframe or any Engine or with the normal conduct of Lessee's or a Permitted
Sublessee's business (provided further, that in no event shall this provision
adversely affect Lessor's right to inspect the Aircraft at least once annually
during the Term), and (c) Lessor shall not be required to undertake or incur any
additional liabilities in connection with any such inspection. All information
obtained in connection with any such inspection shall be held confidential by
Lessor, except as may be required by an order of any court or administrative
agency or by any statute, rule, regulation or order of any governmental
authority or as may be necessary to enforce the terms of this Lease. If
requested by Lessor, Lessee shall provide, or shall cause any Permitted
Sublessee to provide, the date (if then scheduled) upon which the Airframe
undergoes its next scheduled major check and shall advise Lessor of the name and
location (if then known) of the relevant maintenance performer.

SECTION 8. RETURN OF THE AIRCRAFT.

      8.1. RETURN. Upon the termination of this Lease at the end of the Term
(unless there has been an Event of Loss with respect to the Aircraft or unless
Lessee exercises its option to purchase the Aircraft or upon Lessor's exercise
of its remedies pursuant to Section 15), Lessee shall, at its own cost and
expense, return the Aircraft to Lessor at a location in the continental United
States on Lessee's regional jet route system where Lessee has appropriate
maintenance and repair facilities specified by Lessor (the "Return Location") in
compliance with the provisions of this Section 8. At the time of its return, the
Aircraft shall be free and clear of all Liens, other than Lessor Liens, and
Lessor and Lessee shall execute a return acceptance certificate (the "Return
Acceptance Certificate") in substantially the form attached hereto as Exhibit F.
Lessee shall execute and deliver to Lessor such instruments of release and
termination of this Lease as to the Aircraft, in form suitable for recording at
FAA and other public offices, as Lessor may reasonably request in order to make
clear upon public records that the Aircraft is free and clear of all rights of
Lessee therein, and shall authorize Lessor to date such instruments with the
effective date of expiration or earlier cancellation or termination of the Term
of this Lease as to the Aircraft.

      8.2. RETURN OF OTHER ENGINES. In the event that any engine not owned by
Lessor and leased to Lessee hereunder shall be delivered with the returned
Airframe (a "Replacement

                                      21


Engine"), Lessee shall, concurrently with such delivery, at no cost to Lessor,
furnish, or cause to be furnished, to Lessor a full warranty (as to title) bill
of sale with respect to each such Replacement Engine, in form and substance
reasonably satisfactory to Lessor, and shall take such other action as Lessor
may reasonably request with respect to the transfer of title thereof to Lessor.
Upon transfer of title to Lessor, such Replacement Engine shall be deemed to be
an Engine for all purposes hereof and thereupon Lessor will transfer to Lessee,
without any representation, warranty or recourse of any kind whatsoever, express
or implied, except a warranty as to the absence of Lessor's Liens, all of
Lessor's right, title, and interest in and to any Engine not installed on such
Airframe at the time of the return thereof. A Replacement Engine shall be the
same or improved make and model as the Engines and, in any event, both engines
on the returned Airframe shall be of the same make and model. Any engine
returned shall meet the requirements set forth in Section 8.10, and shall be in
the same or better condition and have the same or greater remaining value,
utility and useful life as the replaced Engine, assuming that the replaced
Engine was in such condition and repair and of the value, utility and useful
life as required by this Lease.

      8.3. CONDITION OF THE AIRCRAFT. The Aircraft at the time of return to
Lessor shall have been maintained and repaired in accordance with the
Maintenance Program and this Lease, shall be in as good operating condition and
appearance as when delivered, with all of the Aircraft equipment, components and
systems functioning in accordance with their intended use, taking due account in
each case of ordinary wear and tear, with no obvious damage. The Airframe shall
satisfy the following conditions: if the C Check (or its then equivalent) is
performed in segments, Lessee shall complete the next segment check within 100
Flight Hours prior to return and shall rectify all Discrepancies revealed by
such check. If the Airframe is not on a segmented maintenance program, it shall
have not less than the lesser of (i) one-half time, or (ii) 2,000 Flight Hours
or 12 months, whichever is applicable, remaining until the next scheduled
structural inspection. Upon return of the Aircraft, all on-condition and
condition-monitored components shall be serviceable. Each applicable Airframe
component shall have remaining not less than the lesser of (i) one-half time, or
(ii) 12 months.

      8.4. REGISTRATION AND CERTIFICATION OF THE AIRCRAFT. Lessee will, unless
otherwise requested by Lessor in writing at least 30 days prior to expiration of
the Term, cause the Aircraft (including for this purpose any engines installed
on the Airframe which are not Engines), if it is not then so registered, to be
registered under the laws of the United States with the Federal Aviation
Administration in the name of Lessor or its designee. In addition, the Aircraft
shall have a valid Certificate of Airworthiness issued by the Federal Aviation
Administration permitting use of the Aircraft in commercial passenger service,
and shall have been continuously maintained in compliance with the Lease and
shall comply with the provisions of Federal Aviation Regulations, and all
applicable noise, corrosion, environmental and aging aircraft requirements. If
the Aircraft, with the prior written consent of Lessor, was not on an
FAA-approved maintenance program immediately prior to its return hereunder,
Lessee shall perform prior to the return of the Aircraft, at Lessee's cost and
expense, all work necessary, if any, to bridge the Aircraft onto a maintenance
program approved by the FAA so as to permit operation of the Aircraft under the
Federal Aviation Regulations.

                                     22


      8.5. OVERHAUL, REPAIRS, MODIFICATIONS; COMPLIANCE WITH GOVERNMENTAL
REQUIREMENTS.

      (a) The Aircraft shall be properly documented to have been repaired or
overhauled by certified repair stations acceptable to the FAA and in such a
manner so that the Aircraft is approved by the FAA for use in the United States.
All major repairs performed since the Aircraft was delivered to Lessee by the
Manufacturer and which still exist on the Aircraft, must be immediately eligible
to receive approval by the FAA (or a designee of the FAA), if so required. All
data and documentation necessary to substantiate their certification, approval,
and methods of compliance, as required, shall accompany all such repairs. All
modifications performed since the Delivery Date which deviate from the certified
configuration and which still exist on the Aircraft shall have approval by the
FAA (or a designee of the FAA) or certification if so required. Complete data
and documentation necessary to substantiate their certification and approval and
methods of compliance shall accompany all such modifications.

      (b) The Aircraft shall, at Lessee's cost and expense, be in compliance
with all amendments or changes to the Federal Aviation Regulations and
Airworthiness Directives applicable to the Airframe, the Engines (or Replacement
Engines) or Parts accomplished by terminating action in compliance with the
issuing agency's or manufacturer's specific instructions, as the case may be, to
the extent that such Regulations or Directives have an effective date for
terminating compliance on or before the date of return or within 60 days
thereafter. In addition to the foregoing, if Lessor by prior written consent
allows the Aircraft to be registered under the laws of another jurisdiction, the
Aircraft shall, at Lessee's expense, (i) be in compliance with all Airworthiness
Directives and standards of the aviation authority of such jurisdiction, and
(ii) be in such physical condition, and accompanied by such documents and
certificates (including, without limitation, any export airworthiness
certificate), as may be required in order for the Aircraft to be eligible to be
registered under the Transportation Act without expense to Lessor.

      8.6. DEFERRED MAINTENANCE. Lessee agrees that it will not defer
maintenance or service, scheduled or unscheduled, with respect to the Aircraft
in contemplation of return of the Aircraft and will maintain the Aircraft in
accordance with the Maintenance Program; provided, however, that the Aircraft
shall have no deferred maintenance items, inspection items or placards. Items
deferred because of maintenance concessions (I.E., an exemption to operate
beyond the normal limits by monitoring) shall be brought up-to-date as if such
maintenance concessions or exemptions did not exist. Components whose time
status exceed the conditions or requirements imposed by this Lease shall be
brought into compliance with such conditions or requirements.

      8.7. CONFIGURATION. The Aircraft shall be returned in full passenger
seating configuration. In the event that the then-current seating configuration
has fewer seats than the seating configuration on the Delivery Date, Lessee
shall also deliver any remaining seats to Lessor. Installed seats shall be fully
serviceable and seat covers and other soft furnishings shall be in good
condition.

      8.8. AIRCRAFT INTERIOR. The interiors and exteriors of the Aircraft shall
be clean in

                                      23


accordance with U.S. commuter air carrier industry standards.

      8.9. FUEL AND OIL. All fuel and oil on board the Aircraft shall be the
property of Lessor without charge.

      8.10. ENGINE CONDITION.

      (a) Upon return of the Aircraft, the Engines shall be in good operating
and serviceable condition and ready for flight with all equipment, accessories
and systems fully functional and operating within in-service limits and
guidelines established by the relevant manufacturers, including any equipment,
accessories or systems which would not otherwise be functioning due to an
authorized deviation or variation. If the Maintenance Program for major
overhauls and hot section inspections for the Engines is based on engine
condition trend monitoring in accordance with the engine manufacturer's or an
FAA-approved trend monitoring program, each Engine (or other engine returned
with the Airframe) shall have satisfactorily completed, immediately prior to
return, any boroscope inspection required under the trend monitoring program,
and Lessee shall provide all trend data for each Engine (or other engine
returned with the Airframe). If the boroscope inspection and the trend data
indicate that any action (other than inspection and monitoring) should be taken
in order to prevent serious engine deterioration or engine damage, Lessee shall
complete or cause to be completed at its sole cost and expense all such action
required, prior to return.

      (b) If the Maintenance Program is not based on engine condition trend
monitoring, the Engines shall have individually 2,000 Flight Hours and in the
aggregate 6,000 Flight Hours until scheduled overhaul, based upon the
Maintenance Program at the time of return.

      (c) If, at the time of return, the Engines are subject to a
Power-By-The-Hour Agreement under which Lessee (or Permitted Sublessee) is
current on all payments and otherwise in good standing, in lieu of the foregoing
requirements, Lessee shall return each Engine in such condition as shall make it
eligible for continuous maintenance under a Power-By-The-Hour Agreement, in the
hands of any U.S. air carrier. A "Power-By-The-Hour Agreement" is an engine
maintenance program provided by the Engines' manufacturer or one of its
affiliates or by another responsible maintenance provider, providing full
maintenance (other than routine day-to-day maintenance; provided, that
foreign-object damage, life-limited parts, line replacement units and abuse may
be excluded or separately charged) for the Engines at no cost other than
standard per-Cycle rates (I.E., excluding charges based on the current
maintenance status of the Engines), all benefits of which program are generally
available to qualifying U.S. air carriers.

      8.11. INSPECTION.

      (a) During the last three months of the Term, with not less than five days
prior notice, Lessee will cooperate, in all reasonable respects, with the
efforts of Lessor to sell or lease the Aircraft, including, without limitation,
permitting prospective purchasers or lessees to inspect the Aircraft and the
records relating thereto at reasonable times, provided that such cooperation
shall not interfere with the normal operation of the Aircraft by Lessee or any
Permitted Sublessee.

                                      24


      (b) Immediately prior to the redelivery of the Aircraft, Lessee will make
the Aircraft and the Manuals and Technical Records available to Lessor at a
mutually-agreeable location for inspection by Lessor in order to verify that the
Aircraft complies with the Lease. Lessee shall make available to Lessor at the
Return Location, not less than ten days prior to the redelivery of the Aircraft,
such documentation regarding the condition, use, maintenance, operation and
history of the Aircraft during the Term of the Lease as Lessor may reasonably
request. Except in regard to the costs associated with Lessee's personnel, the
inspection shall be at Lessor's cost and expense.

      8.12. OPERATIONAL GROUND CHECK. Prior to the return of the Aircraft to
Lessor hereunder, Lessee shall, at its cost and expense, conduct an operational
ground check in accordance with the requirements of the Manufacturers, the
Maintenance Program and this Lease, and shall promptly correct any Discrepancies
at Lessee's cost and expense.

      8.13. OPERATIONAL CHECK FLIGHT. Promptly after completion of all
corrections required under Section 8, the Aircraft shall be check flown by
Lessee at its cost and expense, using qualified flight personnel, for the
purpose of demonstrating to lessor compliance with the requirements of this
Lease and the satisfactory operation of the Aircraft and its equipment and
systems. Two of Lessor's employees or representatives may participate in such
flight as observers. Lessee's pilot shall be in command of the Aircraft. Such
flight shall be flown using the Manufacturer's operational check flight
procedures sufficient to demonstrate the proper operation of all systems for
normal passenger use and compliance with the requirements of this Lease. Upon
completion of such operational check flight, Lessor shall set forth in writing
any Discrepancies required to be corrected by Lessee in order to comply with
provisions of this Section 8, and Lessee shall promptly correct or cause to be
corrected at Lessee's cost and expense any such Discrepancies. Lessee shall
provide for such additional test flights as are necessary to demonstrate that
any Discrepancies identified on prior test flights have been corrected. If any
of the Discrepancies referred to in Section 8.12 or this Section 8.13 continues
to persist, Lessor may (but shall not be obligated to) accept return of the
Aircraft and apply the procedure set forth in Section 8.15 for such
Discrepancies.

      8.14. ACCEPTANCE. Unless otherwise mutually agreed, the operational check
flight(s) shall take place at the Return Location. Upon satisfactory completion
of the operational check flight(s), and after Lessee has corrected the
Discrepancies as required to comply with this Section 8 or, in the discretion of
Lessor, pursuant to the last sentence of Section 8.13, the Aircraft shall be
technically accepted by Lessor's representatives at the Return Location. Such
technical acceptance shall be evidenced by the execution and delivery of a
return acceptance certificate in substantially the form of Exhibit F hereto.
Subject to Section 8.15, Lessor hereby agrees that such acceptance of the
Aircraft by Lessor or Lessor's representatives shall, without further act,
irrevocably constitute acceptance of the redelivery of the Aircraft.

      8.15. DEFERRED DISCREPANCY CORRECTION. Any Discrepancies identified during
the inspection, operational ground checks and operational check flight(s)
referred to in Sections 8.11, 8.12 and 8.13 which were not corrected by Lessee
prior to the acceptance of the Aircraft by Lessor pursuant to Section 8.14 shall
be corrected by Lessee at Lessee's cost and expense or, at

                                      25


Lessor's option, may be corrected by Lessor or its designee after return of
the Aircraft and Lessee shall reimburse Lessor for all reasonable costs and
expenses incurred by Lessor or its designee for accomplishing such
Discrepancy corrections. Lessee shall, not later than 30 days after the date
of Lessor's invoice, pay Lessor for all such costs and expenses.

      8.16. MANUALS AND TECHNICAL RECORDS. Lessee shall deliver or cause to be
delivered to Lessor, at the time the Aircraft is returned to lessor, all of the
Manuals and Technical Records, inspection, modification, maintenance and
overhaul records, updated and maintained by Lessee through the date of return of
the Aircraft as required by the FAA and the Maintenance Program. Such Manuals
and Technical Records and other records shall be sufficient to establish and
certify that the Aircraft has been maintained on an FAA-approved maintenance
program. If hard (non-computerized) copies of the Manuals and Technical Records
are not available, Lessee shall provide records maintained in accordance with
alternate methods approved by the FAA. In addition, Lessee shall also provide
Lessor, at the time the Aircraft is returned to Lessor, all records, documents,
manuals, authorizations, drawings and data in English which were developed or
caused to be developed by Lessee and/or required to be maintained with respect
thereto under applicable rules and regulations of each country under the laws of
which the Aircraft has been registered or to which the Aircraft was otherwise
subject during the Term. If any Manuals and Technical Records are missing,
incomplete, or otherwise not in accordance with FAA standards and requirements,
Lessee shall re-accomplish the maintenance tasks necessary to produce such
Manuals and Technical Records in accordance with the Maintenance Program prior
to delivery of the Aircraft or otherwise perform all necessary acts (without
regard to applicable waivers or deferrals) to obtain or recreate such Manuals
and Technical Records in a manner satisfactory to the FAA. All life-limited
Parts shall have full documentation necessary to trace compliance with the
Maintenance Program and FAA requirements throughout the Term. All Manuals and
Technical Records shall be in English and shall be made available upon request
by Lessor for review at the central maintenance record facility for aircraft of
the same type a minimum of 15 Business Days prior to the required date of
Aircraft delivery to Lessor.

      8.17. SERVICE BULLETIN KITS. All vendors and manufacturers Service
Bulletin Kits for the Aircraft obtained by Lessee (or, if a Permitted Sublease
is then in effect, any Permitted Sublessee) free of charge but not installed
therein shall be returned with the Aircraft, as part of the Aircraft at the time
of return.

      8.18. LESSEE'S SPECIAL EXTERIOR MARKINGS. At the time of the return of the
Aircraft, Lessee shall, at its cost and expense, shall have all of Lessee's and
any Permitted Sublessee's special exterior markings and insignia removed or
painted over, and the areas where such markings have been removed or painted
over refurbished as necessary to blend with adjacent areas; provided that the
FAA registration number shall not be removed from the Aircraft. in the event
that, notwithstanding Lessee's obligation to do so, Lessee does not remove such
markings, Lessor shall have the right to do so at Lessee's cost and expense, but
Lessor shall have no obligation to remove such markings prior to the sale,
lease, or other disposition of the Aircraft by Lessor after its return.

      8.19. OWNERSHIP.  Any documents, equipment and any other items returned to
Lessor

                                      26


pursuant to this Section 8 which are not already owned by Lessor shall thereupon
become the property of Lessor.

            8.20. EQUIVALENCY CHARGE. Failure to comply with the above standards
relating to average time or average cycles, if then applicable, with respect to
the Aircraft or Engines shall result in a compensating payment by Lessee equal
to the value of such Discrepancy, net of the value to the extent that any of the
foregoing standards is exceeded with respect to the Aircraft or Engines (such
value to be based on the then-current estimated third-party cost to Lessee of
the overhaul involved to meet such standards); provided, however, that for
purposes of determining the value of any components that exceed such standards,
no credit shall be given to Lessee for any major components with less than 25%
life remaining at return.

      8.21. DISPUTES REGARDING RETURN CONDITION. Any dispute between Lessor and
Lessee regarding the condition of the Airframe or any Engine arising under this
Section 8 shall be referred to an aviation auditing firm selected by Lessor and
Lessee. Lessee shall bear the cost of such aviation auditing firm. The parties
will use their best efforts to obtain a final resolution of the dispute under
the foregoing procedures within 30 days following the date on which the dispute
arises.

      8.22. STORAGE. Following return of the Aircraft, Lessee shall, at Lessor's
written request, assist Lessor in arranging storage for the Aircraft (which may
be outdoors) at the Return Location for a period not exceeding 60 days. Such
storage shall be at Lessor's sole cost and expense (not to exceed Lessee's
actual cost); provided, however, that if such termination occurs as a result of
an Event of Default, such storage shall be at Lessee's cost. Lessor shall, at
its sole cost and expense, maintain in effect during such storage period
insurance covering the Aircraft, in such amounts and against such risks as would
be customarily carried in similar circumstances by a reasonably prudent Lessor;
provided, however, that if such termination occurs as a result of an Event of
Default, Lessee shall reimburse Lessor upon demand for the cost of such
insurance and shall [co-operate] COOPERATE with Lessor in obtaining such
insurance.

SECTION 9. LIENS.

      9.1. Lessee (or, if any Permitted Sublease is in effect, any Permitted
Sublessee) will not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to the Aircraft, any Engine, any Part, title
thereto or any interest therein or in this Lease, except (i) the rights of
Lessor as owner of the Aircraft, (ii) the respective rights of Lessor and Lessee
as provided herein, (iii) the rights of others under agreements or arrangements
to the extent permitted by the terms of Section 7.5 and Section 7.8(b)(iii)
hereof, (iv) Lessor Liens, (v) Liens for Taxes of Lessee (or, if any Permitted
Sublease is then in effect, any Permitted Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such proceedings
do not involve any material danger of the sale, forfeiture, loss or loss of use
of the Airframe, or any Engine or an interest therein, or any risk of material
liability (other than for the Taxes being contested), or any risk of civil or
criminal penalties being imposed on any Indemnitee, (vi) materialmen's,
mechanic's, workmen's, repairmen's, employees, or other like liens arising in
the ordinary course of Lessee's (or, if a Permitted Sublease is then in effect,

                                      27


Permitted Sublessee's) business (including those arising under maintenance
agreements entered into in the ordinary course of business) securing obligations
that are not overdue or are being contested in good faith by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture, loss or loss of use of the Airframe or any Engine or any
interest therein, or any risk of material liability (other than for payment of
the amount being contested), or any risk of civil or criminal penalties being
imposed on any Indemnitee, (vii) Liens arising out of any judgment or award
against Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee), unless the judgment secured shall not, within 30 days after the
entry thereof, have been discharged, vacated, reversed or execution thereof
stayed pending appeal or shall not have been discharged, vacated or reversed
within 30 days after the expiration of such stay, and (viii) any Lien with
respect to which Lessee (or, if any Permitted Sublease is then in effect, any
Permitted Sublessee) shall have provided a bond adequate in the reasonable
opinion of Lessor. Lessee will promptly, at its own expense, take (or cause to
be taken) such actions as may be necessary duly to discharge any such Lien not
excepted above if the same shall arise at any time.

SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.

      10.1. EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.

      (a) Upon the occurrence of an Event of Loss with respect to the Airframe
or the Airframe and the Engines and/or engines then installed thereon, Lessee
shall promptly, and in any event, within 15 Business Days after such occurrence,
give Lessor written notice of such Event of Loss. After an Event of Loss and
until receipt by Lessor of the Stipulated Loss Value and all other amounts due
under the Lease, Lessee shall continue to pay Basic Rent and the parties shall
perform all of their other obligations under the Lease that remain possible of
performance taking into consideration the Event of Loss. Lessee shall, within 45
days after such occurrence, give Lessor written notice of its election to
perform one of the following options (it being agreed that if Lessee has not
have given Lessor notice of such election, Lessee shall be deemed to have
elected the option described in clause (ii) below:

      (i) subject to the satisfaction of the conditions contained in Section
10(c), on a date not more than 150 days after the occurrence of the Event of
Loss (or, if earlier, the last day of the Term), convey or cause to be conveyed
to Lessor, and to be leased by Lessee hereunder in replacement of the Airframe
and Engines with respect to which the Event of Loss occurred, a Replacement
Airframe (together with the same number of Replacement Engines as the number of
Engines, if any, which were subject to such Event of Loss), such Replacement
Airframe and Replacement Engines to be free and clear of all Liens except
Permitted Liens and to have a remaining useful life, estimated residual value,
value and utility at least equal to the Airframe and Engines, if any, so
replaced (assuming that such Airframe and Engines were in the condition and
repair required by the terms hereof) and to be an airframe that is the same make
and model and same or later vintage as the Airframe to be replaced thereby, or
an improved make and model; provided that, if Lessee has not performed its
obligation to effect such replacement under this clause (i) during the 150-day
period provided herein (or, if earlier, the last day of the Term), it shall give
Lessor notice to such effect upon or before the expiration of such period and
shall

                                      28


promptly pay on the 30th day after the date of such notice to Lessor (or, if
earlier, the last day of the Term), in immediately-available funds, the amount
specified in clause (ii) below; or

      (ii) pay to Lessor on the earlier to occur of the third Business Day
following the date of receipt of insurance proceeds in respect of the Event of
Loss or 120 days following the date of the Event of Loss, the sum of (i) any
amounts then accrued under this Lease (including Basic Rent due and payable
hereunder), plus (ii) the Stipulated Loss Value of the Aircraft computed as of
the Rent Payment Date next following the date on which the Event of Loss
occurred, plus (iii) any Supplemental Rent and other amounts otherwise due and
payable hereunder plus (iv) any reasonable expenses and costs incurred in
connection with such Event of Loss by Lessor, minus (v) any prepaid rent
attributable to the period following the date of such payment.

      (b) In the event that Lessee has provided a Replacement Aircraft as
provided in Section 10(a)(i) hereof, (i) this Lease shall continue with respect
to such Replacement Aircraft as though no Event of Loss had occurred; (ii)
Lessor shall, at the expense of Lessee, convey to Lessee "as-is, where-is",
without recourse or warranty except for a warranty against Lessor's Liens, all
right, title and interest of Lessor in and to the Airframe and the Engine or
Engines, if any, installed on the Airframe upon the occurrence of the Event of
Loss by executing and delivering to Lessee such bills of sale and other
documents and instruments as Lessee may reasonably request to evidence such
conveyance; (iii) Lessor shall, at the request and expense of Lessee, to the
extent assignable, assign to Lessee all claims it may have against any other
Person arising from the Event of Loss; and (iv) Lessee shall be entitled to
receive all insurance proceeds and proceeds from any award in respect of
condemnation, confiscation, seizure or requisition, including any interest
thereon, to the extent not previously applied to the purchase price of the
Replacement Aircraft.

      (c) Lessee's right to substitute a Replacement Aircraft as provided in
Section 10(a)(i) shall be subject to the fulfillment, as Lessee's sole cost and
expense, in addition to the conditions continued in Section 10(a)(i), of the
following conditions precedent:

            (i) On the date of delivery of the Replacement Aircraft to Lessor
(such date being referred to in this Section 10(c) as the "Replacement Closing
Date"), no Event of Default shall have occurred and be continuing;

            (ii) On the Replacement Closing Date, the following documents shall
have been duly authorized, executed and delivered by the respective party or
parties thereto and shall be in full force and effect, and an executed
counterpart of each such document (or, in the case of the FAA Bill of Sale, a
photocopy thereof) shall have been delivered to Lessor:

      (A) a Lease Supplement covering the Replacement Aircraft, which has been
duly filed for recordation with the FAA;

      (B) an FAA Bill of Sale covering the Replacement Aircraft, executed by the
owner thereof in favor of Lessor, and dated the Replacement Closing Date;

      (C) a full warranty (as to title) bill of sale, in form and substance
satisfactory to

                                      29


Lessor, covering the Replacement Aircraft, executed by the owner thereof in
favor of Lessor, dated the Replacement Closing Date;

      (D) an assignment of manufacturer's and vendor's warranties with respect
to the Replacement Aircraft;

            (iii) On or before the Replacement Closing Date, Lessor shall have
received such documents and evidence with respect to Lessee (including, without
limitation, a certificate of a Responsible Officer regarding the particulars of
the Replacement Aircraft and its compliance with the terms of this Lease), or
the owner of the Replacement Aircraft, as Lessor may reasonably request in order
to establish the consummation of the transaction contemplated by Section
10(a)(i) and this Section 10(c), the taking of all necessary corporate action in
connection therewith and compliance with the conditions set forth in this
Section 10(c), in each case in form and substance reasonably satisfactory to
Lessor;

            (iv) Lessor shall have received satisfactory evidence as to the
compliance with Section 11 hereof with respect to the Replacement Aircraft;

            (v) On the Replacement Closing Date, (A) Lessor shall receive good
title to the Replacement Aircraft free and clear of Liens, (B) the Replacement
Aircraft shall have been duly certified by the FAA as to type and airworthiness
in accordance with the terms of this Lease, and (C) application for registration
of the Replacement Aircraft shall have been duly made with the FAA:

            (vi) Lessor shall have received an appraisal reasonably satisfactory
to it with respect to the Replacement Aircraft.

            (vii) Lessor, shall have received (A) an opinion of counsel to
Lessee, satisfactory in form and substance to Lessor, to the effect that (w) the
Replacement Aircraft is free and clear of all Liens, (x) the bill of sale
referred to in Section 10(c)(ii)(C) constitutes an effective instrument for
conveying title to the Replacement Airframe and Replacement Engines, if any, to
Lessor, (y) all documents executed and delivered by Lessee pursuant to this
Section 10(c) have been duly authorized executed and delivered by Lessee and
constitute legal, valid and binding obligations of, and are enforceable against,
Lessee in accordance with their respective terms and no further action is
necessary or advisable in order to establish and perfect the title of Lessor in
the Replacement Aircraft, and (z) Lessor is entitled to the benefits of 11
U.S.C. Section 1110 with respect to such Replacement Aircraft to the same extent
as with respect to the replaced Aircraft immediately preceding such replacement;
and (B) an opinion of qualified FAA counsel (or counsel in such jurisdiction
outside of the United States where the Aircraft may be registered) as to, in the
case of FAA counsel, the due recordation of the Lease Supplement and all other
documents or instruments the recordation of which is necessary to perfect and
protect the rights of Lessor in the Replacement Aircraft or, in the case of
counsel in another jurisdiction, the taking of all action necessary in such
jurisdiction for such purposes; and

            (ix) either (1) Lessor shall have received an opinion of independent
tax counsel (selected by Lessor and reasonably acceptable to Lessee), reasonably
satisfactory to the Lessor, to

                                      30


effect that there are no adverse tax consequences resulting from such
replacement (and Lessor shall use its best efforts to cause such a timely
opinion to be delivered) or (2) Lessee shall have provided, or caused to be
provided, an indemnity in respect of any adverse tax consequences in form and
substance satisfactory to Lessee.

      10.2. TERMINATION UPON PAYMENT. At such time as Lessor shall have received
the sum of the amounts specified Section 10.1(a)(ii) hereof, (a) the obligation
of Lessee to pay succeeding installments of Basic Rent shall cease to accrue,
(b) the Term shall terminate, (c) Lessor will transfer to or at the direction of
Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee), without recourse or warranty (except as to the absence of Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and any
Engines subject to such Event of Loss, as well as any Engines not subject to
such Event of Loss, and furnish to or at the direction of Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee) a warranty bill
of sale and an FAA bill of sale evidencing such transfer, and (d) Lessee (or, if
any Permitted Sublease is then in effect, any Permitted Sublessee) shall be
subrogated to all claims of Lessor, if any, against third parties, for damage to
or loss of the Airframe and any Engines which were subject to such Event of
Loss.

      10.3. EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon the occurrence of an
Event of Loss with respect to an Engine under circumstances not involving an
Event of Loss with respect to an Airframe, Lessee (or, if any Permitted Sublease
is then in effect, any Permitted Sublessee) shall promptly (and in any event,
not later than 15 days after such occurrence) give Lessor written notice thereof
and shall, within 60 days after the occurrence of such Event of Loss, convey or
cause to be conveyed to Lessor as replacement for the Engine with respect to
which such Event of Loss occurred, title to another engine of the same or
improved type as the Engine (or an equivalent or improved engine of the same
manufacturer and suitable for installation and use on the Airframe and
compatible with the other Engine(s) leased hereunder) free and clear of all
Liens (other than Permitted Liens, which engine may upon its transfer to Lessor
become subject to any and all Permitted Liens) and having (if no Event of
Default has occurred and is continuing) without regard to Cycles) a value,
utility and remaining economic useful life at least equal to the Engine with
respect to which such Event of Loss occurred (assuming that such Engine was of
the value, utility and useful life and in such condition and repair as required
by the terms of this Lease immediately prior to such Event of Loss). Prior to
any such conveyance, Lessee (or, if any Permitted Sublease is then in effect,
any Permitted Sublessee), shall, at its own expense, (a) furnish Lessor with a
full warranty bill of sale and a FAA bill of sale, in form and substance
reasonably satisfactory to Lessor, evidencing such transfer of title, (b) cause
a Lease Supplement to be duly executed by Lessee (or, if any Permitted Sublease
is then in effect, Permitted Sublessee) and filed for recording pursuant to the
Transportation Act or the applicable laws, rules and regulations of any other
jurisdiction in which the Airframe may then be registered, (c) furnish Lessor
with such evidence of compliance with the insurance provisions of Section 11
with respect to such substituted property as Lessor may reasonably request, (d)
provide an opinion in form and substance reasonably satisfactory to Lessor of
tax counsel reasonably satisfactory to Lessor to the effect that such
substitution will not result in any adverse tax consequences to Lessor, (e) at
Lessor's request, furnish an appraisal of an independent appraiser selected by
Lessor in form and substance reasonably satisfactory to Lessor evidencing

                                      31


compliance with the requirements as to value, utility and remaining economic
useful life of the substitute engine, (f) provide opinions in form and substance
reasonably satisfactory to Lessor of counsel reasonably acceptable to Lessor to
the same effect as set forth in Section 10(c)(vii) hereof, and (g) assign to
Lessor the benefit of all assignable manufacturer's and vendor's warranties with
respect to the replacement engine. Lessor shall transfer to or at the direction
of Lessee without recourse or warranty, except as to absence of Lessor Liens,
all of Lessor's right, title and interest, if any, in and to (i) the Engine with
respect to which such Event of Loss occurred by furnishing to or at the
direction of Lessee a warranty bill of sale and an FAA bill of sale evidencing
such transfer and (ii) all claims, if any, against third parties, for damage to
or loss of the Engine subject to such Event of Loss, and such Engine shall
thereupon cease to be an Engine leased hereunder. For all purposes hereof, each
such replacement engine shall, after such conveyance, be deemed part of the
property leased hereunder, and shall be deemed an Engine. No Event of Loss with
respect to an Engine under the circumstances contemplated by the terms of this
Section 10.3 shall result in any reduction in Basic Rent.

      10.4. APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR
REQUISITION OF TITLE, ETC. Provided no Event of Default has occurred and is
continuing, any payments (other than insurance proceeds, the application of
which is provided for in Section 11) received at any time by Lessor or by Lessee
from any governmental authority or other person with respect to an Event of Loss
resulting from the theft, disappearance, condemnation, confiscation or seizure
of, or requisition of title to or use of, the Airframe or any Engine, other than
a requisition for use (but not of title) by the United States Government or
other government of registry of the Aircraft or under which the Aircraft is
based or any instrumentality or agency of any thereof not constituting an Event
of Loss, shall be applied as follows:

      (a)   If payments are received with respect to the Airframe (or the
            Airframe and any Engine or engines then installed thereon), (i) if
            such property has not been replaced pursuant to the provisions
            hereof, after reimbursement of Lessor for reasonable costs and
            expenses, so much of such payments remaining as shall not exceed the
            Stipulated Loss Value and other amounts required to be paid by
            Lessee to Lessor pursuant to Section 10.1 hereof shall be applied in
            reduction of Lessee's obligation to pay such Stipulated Loss Value
            and such other amounts, if not already paid by Lessee, or, if
            already paid by Lessee, shall be applied to reimburse Lessee for its
            payment of such Stipulated Loss Value and such other amounts, and
            the balance, if any, of such payments remaining thereafter shall be
            paid to Lessor; or (ii) if such property has been replaced pursuant
            to the provisions hereof, after reimbursement of Lessor for
            reasonable costs and expenses, such payments shall be paid over to,
            or retained by, Lessee, provided that Lessee shall have fully
            performed or concurrently therewith, shall perform, its obligations
            under Section 10.1 with respect to the Event of Loss; and

      (b)   If such payments are received with respect to an Engine under
            circumstances contemplated by Section 10.3 hereof, so much of such
            payments remaining after reimbursement of Lessor for reasonable
            costs and expenses shall be paid over to, or retained by, Lessee,
            provided that Lessee shall have fully performed, or

                                      32


            concurrently therewith shall perform, its obligations under Section
            10.2 with respect to the Event of Loss for which such payments are
            made.

      (c)   If an Event of Default has occurred and is continuing, all payments
            shall be paid over to Lessor or held for the account of Lessor until
            such time as the Event of Default has been cured.

      10.5. REQUISITION FOR USE OF THE AIRCRAFT BY THE UNITED STATES GOVERNMENT
OR THE GOVERNMENT UNDER WHICH THE AIRCRAFT IS REGISTERED OR BASED. In the event
of the requisition for use of the Airframe and the Engines or engines installed
on the Airframe during the Term by the United States Government or any other
government under which the Aircraft is registered or based or any
instrumentality or agency of any thereof, Lessee shall notify Lessor of such
requisition, and all of Lessee's obligations under this Lease with respect to
the Aircraft shall continue to the same extent as if such requisition had not
occurred. All payments received by Lessor or Lessee from such government for the
use of such Airframe and Engines or engines during the Term shall be paid over
to, or retained by, Lessee (or, if directed by Lessee, any Permitted Sublessee);
and all payments received by Lessor or Lessee from such government for the use
of such Airframe and Engines or engines after the end of the Term shall be paid
over to, or retained by, Lessor.

      10.6. REQUISITION FOR USE OF AN ENGINE BY THE UNITED STATES GOVERNMENT OR
THE GOVERNMENT UNDER WHICH THE AIRCRAFT IS REGISTERED OR BASED. In the event of
the requisition for use of an Engine (but not an Airframe) by the United States
Government or any other government under which the Aircraft equipped with such
Engine is registered or based or any agency or instrumentality of any thereof,
Lessee shall replace such Engine hereunder by complying (or causing any
Permitted Sublessee to comply) with the terms of Section 10.3 to the same extent
as if an Event of Loss had occurred with respect thereto, and, upon compliance
with Section 10.3 hereof, any payments received by Lessor or Lessee from such
government with respect to such requisition shall be paid over to, or retained
by, Lessee.

      10.7. REPAIRABLE DAMAGE; USE OF INSURANCE PROCEEDS. In the event of
repairable damage to the Aircraft or any of the Engines, or of any Event of Loss
with respect to an Engine when no Event of Loss has occurred with respect to the
Airframe, Lessor shall forthwith, provided that no Event of Default has occurred
and is continuing, either pay any insurance proceeds received by it to Lessee
(or, if any Permitted Sublease is then in effect, any Permitted Sublessee) upon
Lessee's furnishing evidence to Lessor that such damage has been repaired in
accordance with the provisions of this Lease or is undergoing repair such that
the condition of the Aircraft shall be at least equivalent to its condition
immediately prior to the event of damage as if such event had not occurred, or,
in the case of an Event of Loss with respect to an Engine when no Event of Loss
has occurred with respect to the Airframe equipped with such Engine, utilize the
relevant insurance proceeds in the purchase of a Replacement Engine (or to
reimburse Lessee for amounts paid by Lessee to purchase a Replacement Engine, as
the case may be).

                                      33


SECTION 11. INSURANCE.

      11.1. INSURANCE REQUIREMENTS. On or before the Delivery Date and
throughout the Term, Lessee shall, without cost or expense to Lessor, obtain,
maintain and keep in full force and effect the following insurance coverage with
respect to the Aircraft, carried with insurers of recognized responsibility
acceptable to Lessor; with proceeds payable in United States dollars:

      (a) All-risk aircraft hull, ground, taxiing and flight insurance on the
Aircraft (with flight, taxiing and ingestion coverage) and all-risk coverage of
Engines and Parts while temporarily removed from the Aircraft and not replaced
by similar components, in an amount not less than the Stipulated Loss Value in
effect from time to time. Such hull insurance shall cover Engines or engines and
Parts temporarily removed from the Airframes pending installation of the same or
similar Engines, engines or Parts on the Airframes in an aggregate amount not
less than their replacement cost.

      (b) In the event that the Aircraft is operated in a war zone or hostile
area, war risk and allied perils insurance on the Aircraft in an amount not less
than the Stipulated Loss Value in effect from time to time and covering the
perils of:

            (i) war, invasion, acts of foreign enemies, hostilities (whether or
      not war is declared), civil war, rebellion, revolution, insurrection,
      martial law, military or usurped power, or attempts at usurpation of
      power;

            (ii) strikes, riots, civil commotions or labor disturbances;

            (iii) any act of one or more persons, whether or not agents of a
      sovereign power, for political or terrorist purposes and whether the loss
      or damage therefrom is accidental or intentional;

            (iv) any malicious act or act of sabotage;

            (v) confiscation, nationalization, seizure, restraint, detention,
      appropriation, requisition of title or use by or under the order of any
      government (whether civil, military or de facto) or public or local
      authority, including the government or any public or local authority of
      the country where the Aircraft is registered or based; and

            (vi) hijacking or any unlawful seizure or wrongful seizure or
      wrongful exercise of control of the Aircraft or crew in flight (including
      any attempt at such seizure or control) made by any person or persons on
      board the Aircraft acting without the consent of Lessee.

      (c) Comprehensive aircraft and general liability insurance for a combined
single limit of not less than $200,000,000 per occurrence, which shall include
public liability insurance, passenger legal liability insurance, bodily injury
liability insurance, aviation general third party liability insurance (including
products legal liability, but excluding manufacturer's product liability
insurance), cargo liability insurance and property damage liability insurance.

                                      34


      11.2  ADDITIONAL REQUIREMENTS; LOSS PAYMENT.  The insurance required under
Section 11.1 shall be provided on an agreed-value basis, and the policies shall:

            (a)   name Lessor as an additional insured as sole loss payee;

            (b) provide that the insurance shall not be invalidated by any
      action or inaction by Lessee (or of any Permitted Sublessee) and shall
      insure the interests of Lessor regardless of any breach or violation by
      Lessee (or any Permitted Sublessee) or any other named insured of any
      warranty, declaration or condition contained in such policies;

            (c) provide that the insurers shall waive any right of subrogation
      against Lessor (or, if any Permitted Sublease shall then be in effect,
      Lessee in its capacity as sublessor under such Permitted Sublease);

            (d) provide that the liability of the insurers shall not be affected
      by any other insurance which may be available to or carried by Lessor (or
      Lessee in its capacity as sublessor under any Permitted Sublease that
      shall then be in effect) so as to reduce the amount payable to Lessor;

            (e) extend to the indemnification provided in Section 12.1 hereof,
      to the extent that such indemnification is insurable under Lessee's
      liability policy;

            (f) be of the type usually carried for aircraft similar to the
      Aircraft and covering risks of the kind customarily insured against by
      corporations that are engaged in the same type of scheduled commuter
      business in the United States as Lessee;

            (g) be primary and without right of contribution from other
      insurance which may be available to or carried by Lessor (or by Lessee in
      its capacity as sublessor);

            (h) provide that Lessor shall have no liability for premiums,
      commissions, calls or assessments with respect to such policies;

            (i) provide in the case of the insurance required by Sections
      11.1(a)-(b) that (A) so long as an Event of Default has not occurred and
      is not continuing, if the amount of proceeds are less than One Million
      Five Hundred Thousand Dollars ($1,500,000), such proceeds shall be payable
      to Lessee (or, if a Permitted Sublease is then in effect, Permitted
      Sublessee); and (B) if the amount of proceeds exceeds Two Million Three
      Hundred Thousand Dollars ($2,300,000) or the proceeds are in respect of an
      Event of Loss with respect to the Airframe, such proceeds shall be payable
      to Lessor; and (C) if an Event of Default has occurred and is continuing,
      any single loss regardless of the amount, shall be payable to Lessor and
      held by Lessor for so long as such Event of Default is continuing, as
      security for the obligations of Lessee hereunder;

            (j) provide that if the insurers cancel such insurance, or any part
      thereof, or

                                      35


      any such insurance lapses for any reason whatsoever, or if any material
      change is made in such insurance which adversely affects the interests of
      Lessor, such cancellation or change shall not be effective as to Lessor
      for thirty (30) days (seven (7) days or, if less, the longest period of
      time that is commercially available, in the case of war risk and allied
      perils coverage) after receipt by Lessor of written notice by such
      insurers;

            (k) shall expressly provide that all of the provisions thereof,
      except the limits of liability, shall operate in the same manner as if a
      separate policy covered each insured;

            (l) shall include a United States service of suit clause with
      respect to insurers not domiciled within the United States;

            (m) shall be effective with respect to both domestic and
      international operations; and

            (n) shall contain a waiver of any right of the insurers to any
      set-off or counterclaim or any other deduction (whether by attachment or
      otherwise) in respect of any liability of or against Lessee or Lessor
      (including for the payment of premiums).

      11.3. APPLICATION OF HULL INSURANCE PROCEEDS. As between Lessor and
Lessee, any payments received by Lessor under policies of insurance required to
be maintained by Lessee pursuant to Sections 11.1(a) or (b), shall be applied as
follows provided no Event of Default has occurred and is continuing (for so long
as an Event of Default has occurred and is continuing, all payments shall be
held by Lessor as security for Lessee's obligations under this Lease and if
Lessor has exercised its remedies pursuant to Section 15 hereof, applied against
Lessee's obligations hereunder):

            (a) If such payments are received by Lessor with respect to loss or
      damage (including an Event of Loss with respect to an Engine) not
      constituting an Event of Loss with respect to an Airframe, so much of such
      payments remaining after reimbursement of Lessor for reasonable
      out-of-pocket costs and expenses shall be paid over to Lessee upon
      Lessee's performance of its repair or replacement obligations under this
      Lease pursuant to Section 10.7 hereof.

            (b) If such payments are received by Lessor with respect to an Event
      of Loss with respect to an Airframe, so much of such payments remaining
      after reimbursement of Lessor for reasonable out-of-pocket costs and
      expenses as shall not exceed the amount required to be paid by Lessee
      pursuant to Section 10.1 shall be applied in reduction of Lessee's
      obligation to pay such amount if not already paid by Lessee, and to
      reimburse Lessee if it shall have paid all or part of such amount, and the
      balance, if any, of such payments shall be paid over to Lessee.

            (c) If such payments are received with respect to an Airframe or an
      Airframe and Engines or engines installed on such Airframe and the
      Airframe has been or is being replaced by Lessee , so much of such
      payments remaining after reimbursement of Lessor for reasonable
      out-of-pocket costs and expenses shall be paid over to, Lessor, and upon

                                      36


      completion of (or, if requested by Lessee, simultaneously with) such
      replacement be paid over to Lessee.

      11.4. INSURANCE FOR OWN ACCOUNT. Nothing in this Section 11 shall prohibit
Lessor or Lessee from obtaining insurance for its own account and any proceeds
payable thereunder shall be payable as provided in the insurance policy relating
thereto, provided that no such insurance may be obtained that would limit or
otherwise adversely affect the coverage or payment of any insurance required to
be obtained or maintained pursuant to this Section 11.

      11.5. REPORTS. Lessee shall furnish or cause to be furnished to Lessor not
later than the Delivery Date and at least annually thereafter on or before the
renewal dates of Lessee's (or, if any Permitted Sublease is then in effect,
Permitted Sublessee's) relevant insurance policies, a report signed by Lessee's
(or, if any Permitted Sublease is then in effect, Permitted Sublessee's)
independent firm of insurance brokers reasonably satisfactory to Lessor stating
the opinion of such firm that the insurance coverage then carried and maintained
on the Aircraft complies with the terms hereof and describing in reasonable
detail the insurance coverage then carried and maintained with respect to the
Aircraft. Lessee shall (and shall cause any Permitted Sublessee to) during the
Term furnish to Lessor evidence of renewal of the insurance policies required
pursuant to this Section 11 prior to the cancellation, lapse or expiration of
such insurance policies. Lessee shall cause its insurance brokers to advise
Lessor in writing promptly of any default in the payment of any premium and of
any other act or omission on the part of Lessee of which they have knowledge
which would in such firm's opinion invalidate or render unenforceable, in whole
or in any material part, any insurance on the Aircraft. Lessee shall also cause
the insurer to advise Lessor in writing at least 30 days prior to the
termination or cancellation of, or material adverse change in, such insurance
carried and maintained on the Aircraft pursuant to Section 11.1. In the event
that Lessee (or, if any Permitted Sublease is in effect, Permitted Sublessee)
fails to maintain or cause to be maintained insurance as herein provided, Lessor
may at its sole option, but shall be under no duty to, provide such insurance
and, in such event, Lessee shall, upon demand, reimburse Lessor, as Supplemental
Rent, for the cost thereof; provided, however, that no exercise by Lessor of
such option shall affect the provisions of this Lease, including the provisions
that failure by Lessee to maintain the required insurance shall constitute an
Event of Default.

      11.6. SELF-INSURANCE; DEDUCTIBLES. In addition to any applicable
deductible per aircraft that does not exceed industry standards for similar U.S.
airlines operating similar equipment under a program applicable to all aircraft
in Lessee's fleet, Lessee may self-insure by way of deductible, premium
adjustment or otherwise, but in no case shall the aggregate amount of
self-insurance with respect to public liability, property damage and all-risk
hull insurance exceed during any policy year, with respect to all of the
aircraft in the Lessee's fleet (including, without limitation, the Aircraft),
the lesser of (a) 50% of the highest replacement value of any one aircraft in
the Lessee's fleet or (b) $7 million, increased by any increase in the Consumer
Price Index All Urban Consumers - U.S. All Items from the date hereof through
the date of determination, using the base year immediately preceding the
Delivery Date.

                                      37


SECTION 12. INDEMNITIES.

      12.1 GENERAL INDEMNIFICATION.

      (a) Lessee hereby assumes liability for, and does hereby agree, and shall
require any Permitted Sublessee or assignee to agree, to indemnify, protect,
save, defend, and hold harmless the Indemnitees from and against any and all
obligations, fees, liabilities, losses, damages, claims, demands, actions,
suits, judgments, costs and expenses, including reasonable legal expenses of
every kind and nature whatsoever (collectively, "Expenses") imposed on, incurred
or suffered by, or asserted against any Indemnitee, in any way relating to,
based on or arising out of:

            (i) this Lease and any other document entered into in connection
      with this Lease or any Permitted Sublease or transfer or any transactions
      contemplated hereby or thereby;

            (ii) the ordering, purchase, documentation, importation,
      exportation, acceptance or rejection, manufacture, construction, design,
      condition, modification, airworthiness, alteration, registration, fitness
      for use, merchantability, ownership, improvement, insuring, titling or
      retitling, registration or re-registration, licensing, financing,
      refinancing, delivery, non-delivery, control, transportation, testing,
      overhaul, repair, imposition of any Lien, leasing, re-leasing, possession,
      use, operation, maintenance, location, storage, removal, replacement,
      return, sale, abandonment, any transfer of any kind or other disposition
      of the Aircraft, or any portion thereof (including the Airframe and each
      Engine or any engine used with the Airframe), or otherwise in connection
      with or with respect to the transactions contemplated by this Lease,
      whether or not such ordering, purchase, documentation, importation,
      exportation, acceptance or rejection, manufacture, construction, design,
      condition, modification, airworthiness, alteration, registration, fitness
      for use, merchantability, ownership, improving, insuring, titling or
      retitling, registration or re-registration, licensing, financing,
      refinancing, delivery, non-delivery, control, transportation, testing,
      overhaul, repair, imposition of any Lien, leasing, re-leasing, possession,
      use, operation, maintenance, location, storage, removal, replacement,
      return, sale, abandonment, any transfer of any kind or other disposition
      is in compliance with the terms of this Lease, including, without
      limitation, any of such as may arise from (i) loss or damage, loss or harm
      to any property or death of or injury to any person, (ii) patent or latent
      defects in the Aircraft or any portion thereof (whether or not
      discoverable), (iii) any claims based on strict liability in tort or
      otherwise, (iv) any claims based on patent, trademark or copyright
      infringement, and (v) any claims based on liability arising under any
      applicable environmental or noise or pollution control law or regulation;

            (iii) any breach or failure on the part of Lessee or any Permitted
      Sublessee to perform, observe or comply with any of the terms of this
      Lease, or the falsity or inaccuracy of any representation or warranty of
      Lessee under this Lease or any other instrument or agreement executed in
      connection with this Lease which falsity has a material and adverse effect
      on the Indemnitee; or

                                      38


            (iv) the enforcement by Lessor of the terms of this Lease.

      (b) Lessee agrees that any payment or indemnity pursuant to this Section
12.1 in respect of any Expenses shall be in an amount which, after deduction of
all Taxes required to be paid by the recipient with respect to such payment or
indemnity under the laws of any federal, state or local government or taxing
authority in the United States, or under the laws of any taxing authority or
governmental subdivision of a foreign country, or any territory or possession of
the United States or any international authority, shall be equal to the excess,
if any, of (i) the amount of such Expense, over (ii) the net reduction in Taxes
required to be paid by such recipient by reason of the accrual or payment of
such Expense. For purposes of the foregoing, it shall be assumed that each
Indemnitee is subject to tax at the highest marginal rate imposed on or measured
by the income of corporations in each applicable taxing jurisdiction.

      (c) Lessee shall give each Indemnitee prompt notice of any occurrence,
event or condition known to Lessee as a consequence of which any Indemnitee may
be entitled to indemnification hereunder. Lessee shall forthwith upon demand of
any such Indemnitee reimburse such Indemnitee for reasonable expenses actually
incurred by it in connection with any of the foregoing or pay such amounts
directly.

      (d) Lessee shall be subrogated to an Indemnitee's rights in any matter
with respect to which Lessee has actually reimbursed such Indemnitee for amounts
expended by it or has actually paid such amounts directly pursuant to this
Section 12.1. Lessee shall not be entitled to exercise its subrogation rights
hereunder for so long as an Event of Default has occurred and is continuing
hereunder.

      (e) In case any action, suit or proceeding is brought against any
Indemnitee in connection with any Expense indemnified against hereunder, such
Indemnitee shall, promptly after receipt of notice of the commencement of such
action, suit or proceeding, notify Lessee thereof, enclosing a copy of all
papers served upon such Indemnitee; provided that the failure to provide such
notice shall not release Lessee from any of its obligations to indemnify
hereunder, except to the extent that such failure precludes Lessee's ability to
defend or resist such action. Lessee may, provided that Lessee has acknowledged
in writing its responsibility for such Expense hereunder, and upon such
Indemnitee's request shall, at Lessee's expense, resist and defend such action,
suit or proceeding, or cause the same to be resisted or defended by counsel
selected by Lessee and reasonably satisfactory to such Indemnitee (provided such
claim relates solely to one or more Expenses or can be severed from other
claims; if not, Lessee shall be consulted by such Indemmitee and be allowed, at
Lessee's sole cost and expense, to participate therein) and in the event of any
failure by Lessee to do so, Lessee shall pay all costs and expenses (including,
without limitation, reasonable legal expenses, including but not limited to
attorney's fees and expenses) incurred by such Indemnitee in connection with
such action, suit or proceeding.

      (f) Provided that no Event of Default has occurred and is continuing, no
Indemnitee shall enter into a settlement or other compromise with respect to any
Expense without the prior written consent of Lessee so long as (i) Lessee has
agreed in a writing acceptable to such Indemnitee that Lessee is liable to such
Indemnitee for such Expense hereunder, and (ii) Lessee

                                      39


has provided such evidence, certifications and assurances as such Indemnitee may
reasonably request that Lessee has the ability to promptly pay any such Expense
in full.

      (g) Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.

      (h) The obligations of Lessee under this Section 12.1 shall survive the
expiration or earlier termination of this Lease.

      12.2. EXCEPTIONS TO GENERAL INDEMNIFICATION. The indemnity provided for in
Section 12.1 shall not extend to Expenses of an Indemnitee arising out of or
resulting from, or which would not have been incurred but for, one or more of
the following:


                  (i) the inaccuracy or breach of any representation or warranty
            made by Lessor or the failure of Lessor to perform its obligations
            under this Lease;

                  (ii) the gross negligence or willful misconduct of such
            Indemnitee (other than gross negligence imputed to such Indemnitee
            solely by reason of its interest in the Aircraft or occurring as a
            result of Lessee's breach of its duties under this Lease or the
            Lease Supplement);

                  (iii) a voluntary disposition by Lessor of all or any part of
            its interest in the Aircraft, the Airframe or any Engine or Part or
            in this Lease other than pursuant to an exercise of remedies after
            an Event of Default has occurred and is continuing;

                  (iv) acts or events that occurred or failed to occur prior to
            the Delivery Date or after the expiration of the Term and the return
            of possession of the Aircraft to Lessor in accordance with the terms
            of Section 8;

                  (v) the failure of any Indemnitee to comply with any covenant,
            or the breach of any covenant made by an Indemnitee;

                  (vi) expenses which relate to a Lessor Lien or other Lien;

                  (vii) any Taxes, it being understood that Lessee's liability
            for Taxes (other than the gross-up provided in Section 12.1) of an
            Indemnitee shall be as set forth in Section 12.3; or

                  (viii) costs or expenses which under the express terms of this
            Lease are required to be paid by Lessor or its transferees.

      12.3  GENERAL TAX INDEMNITY.

                                      40


      (a) Lessee agrees, and shall require any Permitted Sublessee or assignee
to agree, to pay, and indemnify, defend and hold harmless each Indemnitee from
any and all Tax, howsoever imposed, whether levied or imposed upon or asserted
against such Indemnitee, Lessee, the Aircraft, the Airframe or any Engine or
Part by any federal, state or local government or taxing authority in the United
States, or by any taxing authority or governmental subdivision of a foreign
country, or by any territory or possession of the United States or by any
international authority, upon or with respect to (a) the Aircraft, the Airframe
or any Engine or Part or any part thereof or any contract relating to the
manufacture, construction, acquisition or delivery thereof, (b) the manufacture,
construction, ordering, purchase, ownership, improvement, location, storage,
transportation, delivery, non-delivery, acceptance, operation, leasing,
re-leasing, possession, control, use, maintenance, replacement, modification,
insuring, registration, reregistration, titling, licensing, financing,
refinancing, documentation, importation, exportation, transfer of title,
transfer of registration, imposition of any Lien, return, abandonment, sale or
other application or disposition thereof, (c) the rentals, receipts or earnings
arising from the Aircraft, the Airframe or any Engine or Part, (d) this Lease,
the Lease Supplement, and any other documents contemplated hereby and amendments
and supplements hereto and thereto which have been approved by Lessee or the
execution, delivery or performance of any thereof or the issuance, acquisition,
holding or subsequent transfer thereof, (e) any amount paid or payable pursuant
to this Lease or any document related hereto or the property or the income or
other proceeds with respect to the Aircraft, or upon the Rent payable by Lessee
hereunder, or (f) otherwise with respect to or in connection with the
transactions contemplated by this Lease. Lessee further agrees that any payment
or indemnity pursuant to this Section 12.3 in respect of any Tax shall be in an
amount which, after deduction of all Taxes required to be paid by such recipient
with respect to such payment or indemnity under the laws of any federal, state
or local government or taxing authority in the United States, or under the laws
of any taxing authority or governmental subdivision of a foreign country, or any
territory or possession of the United States or any international authority,
shall be equal to the excess, if any, of (i) the amount of such Tax over (ii)
the net reduction in Tax required to be paid by such recipient by reason of the
accrual or payment of such Tax. For purposes of the foregoing, it shall be
assumed that each Indemnitee is subject to tax at the highest marginal rate
imposed on or measured by the income of corporations in each applicable taxing
jurisdiction. With respect to any Tax in the nature of a withholding tax, Lessee
shall comply with the requirements set forth in Section 12.8 hereof. All of the
indemnities contained in this Section 12.3 shall continue in full force and
effect notwithstanding the expiration or other termination of the Term.

      12.4. EXCLUSIONS FROM GENERAL TAX INDEMNITY. The indemnity provided for in
Section 12.3 above shall not extend or apply to any of the following:

                  (a) any Income Tax imposed on an Indemnitee by (i) the United
            States federal government, (ii) any state or local government, (iii)
            any foreign government or any political subdivision or taxing
            authority thereof, (iv) any territory or possession of the United
            States, or (v) any international authority; provided, however, that
            such exclusion shall not apply to any Income Tax to the extent that
            (A) such Income Tax is imposed by any jurisdiction in which such
            Indemnitee would not be subject to Income Tax but for or as a result
            of (I) the

                                      41


            operation, registration, location, presence, or use of the Aircraft,
            the Airframe, any Engine or any Part thereof, or (II) the place of
            organization or principal office or the activities of Lessee or any
            Permitted Sublessee in such jurisdiction, and (B) exceeds the amount
            of Income Tax for which the Indemnitee would otherwise have been
            liable in the absence of the circumstances referred to in (I) and
            (II).

                  (b) any tax imposed on or with respect to an Indemnitee
            resulting from any voluntary transfer by such Indemnitee of any
            interest in the Aircraft, the Airframe, any Engine or any Part, or
            any involuntary transfer of the Aircraft, the Airframe or any Engine
            or any Part in connection with any bankruptcy or similar proceeding
            for the relief of debtors in which such Indemnitee is the debtor or
            any foreclosure by a creditor of such Indemnitee with respect
            thereto, other than a transfer pursuant to the exercise of remedies
            while an Event of Default shall have occurred and be continuing;

                  (c) any tax imposed on or with respect to an Indemnitee
            resulting from such Indemnitee's gross negligence or willful
            misconduct.

                  (d) any Tax attributable to the Aircraft that is imposed with
            respect to any period after the expiration of the Term and the
            return of possession of the Aircraft to Lessor in accordance with
            the terms of Section 8; provided, however, that the exclusion set
            forth in this paragraph shall not apply to any Taxes or other
            impositions relating to events occurring or matters arising prior to
            or simultaneously with such expiration.

                  (e) any Tax imposed on or with respect to an assignee or
            successor of the interest of an Indemnitee to the extent that such
            Tax would not have been imposed on or with respect to the assignor
            Indemnitee (other than a Tax imposed on an assignee of the
            Indemnitee who became such following the exercise by Lessor of its
            remedies under Sectionn 15).

                  (f) any Tax that would not have been imposed but for a Lessor
            Lien.

                  (g) any event or occurrence for which Lessee is obligated
            under this Lease to make a payment of Stipulated Loss Value or an
            amount determined by reference to the Stipulated Loss Value;

                  (h) the failure of an Indemnitee to exercise its contest
            rights as and to the extent required hereunder; or

                  (i) the failure of any Indemnitee to file proper and timely
            reports or returns or to pay any taxes when due or to claim an
            applicable exemption.

      12.5. CONTESTS. If a written claim is made by any taxing authority against
an Indemnitee for any Tax with respect to which Lessee is required to indemnify
hereunder, such Indemnitee shall promptly give Lessee written notice of such
claim. An Indemnitee's failure to

                                      42


provide such notice to Lessee (for reasons other than Lessee's failure to
fulfill its obligations to Indemnitee under this Lease) shall not diminish
Lessee's obligations or such Indemnitee's rights hereunder except to the extent
that such failure precludes Lessee's and such Indemnitee's ability to contest
such Tax. If Lessee promptly (and, in any event, within 15 days of receipt of
notice from the Indemnitee) requests the Indemnitee to do so, the Indemnitee
shall, at Lessee's expense, contest (or, at the Indemnitee's option, require
Lessee to contest in Lessee's name, if permitted by law) the validity,
applicability or amount of any such Tax. The Indemnitee shall determine in its
sole discretion the forum in which the contest of such Tax shall be pursued and
whether such contest shall be by (i) resisting payment thereof, if lawful and
practicable, (ii) not paying the same except under protest, if protest is
necessary or advisable and proper, or (iii) if the payment is made, using
reasonable efforts to obtain a refund thereof in appropriate administrative and
judicial proceedings. If the Indemnitee determines that such contest shall be by
the manner described in either of clauses (ii) or (iii) above, Lessee shall
advance sufficient funds on an interest-free basis to the Indemnitee to make the
payment required. If an Indemnitee contests the validity, applicability or
amount of any Tax hereunder, Lessee shall have the right to participate in such
contest at its own expense, including the right to attend governmental or
judicial conferences concerning such claim for Tax and the right to review and
advise the Indemnitee as to all material written submissions to any governmental
or other authority relating to the Tax for which indemnification is sought.
Notwithstanding the foregoing, the Indemnitee shall only be required to contest
(and Lessee shall only be permitted to contest) any Tax if (A) independent tax
counsel selected by the Indemnitee is of the opinion that there is a reasonable
basis for contesting the matter in question; (B) Lessee has acknowledged in
writing its liability to indemnify the Indemnitee with respect to the Tax in
question; (C) Lessee shall pay (and shall acknowledge in writing Lessee's
liability to pay) the Indemnitee on demand for all reasonable costs and expenses
incurred by such Indemnitee incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable legal
and accounting fees (including fees associated with the Indemnitee's
consultation with independent tax counsel as described herein), disbursements,
penalties, interest and additions to tax); (D) the issue shall not be the same
as an issue previously contested hereunder and decided adversely unless
independent tax counsel selected by the Indemnitee is of the opinion that the
applicable law has changed, and (E) the amount of Tax at issue exceeds $25,000.
The Indemnitee shall not be required to appeal any judicial decision unless it
receives an opinion of independent counsel selected by such Indemnitee to the
effect that it is more likely than not that such appeal would be successful.
Under no circumstances shall the Indemnitee be required to appeal a decision to
or request a hearing by the United States Supreme Court. Nothing in this Section
12.5 shall require any Indemnitee to contest, or permit Lessee to contest, a
claim with respect to the imposition of any Tax if such Indemnitee shall waive
its right to indemnification under Section 12.3 with respect to such claim.

      12.6. SETTLEMENTS. If, in the course of exercising its contest rights on
Lessee's behalf, an Indemnitee learns that a taxing authority asserting a claim
for which indemnity is sought hereunder is willing to agree to a settlement of a
claim, such Indemnitee shall notify Lessee of such settlement proposal
("Settlement Proposal"). If the Settlement Proposal is acceptable to Lessee,
Lessee shall so notify such Indemnitee, provided that an Indemnitee shall not be
obligated to agree to the Settlement Proposal if such Indemnitee releases Lessee
from any

                                      43


additional obligations pursuant to Section 12.3 with respect to such tax claim
and agrees that the amount of any indemnity payment under this Section 12.3 in
respect of such tax claim which Lessee shall be required to pay to such
Indemnitee shall not exceed the amount of such indemnity payment that would have
been required if such Indemnitee had agreed to the Settlement Proposal. If
Lessee declines the Settlement Proposal, Lessee shall notify Indemnitee in
writing of the amount for which Lessee would be reasonably willing to settle
such claim ("Lessee's Settlement Proposal"), and Indemnitee shall notify the
taxing authority of Lessee's Settlement Proposal. If the taxing authority does
not accept Lessee's Settlement Proposal, Indemnitee shall have the option of (i)
rejecting the Settlement Proposal, (ii) requiring Lessee to assume full
responsibility for the tax claim, or (iii) accepting the Settlement Proposal, in
the case of the Lessee's acceptance of the Settlement Proposal, the amount of
any indemnity payment determined under this Section 12.6 in respect of such tax
claim that Lessee shall be required to pay shall not exceed the amount for which
Lessee would have been willing to settle such tax claim.

      12.7. REPORTS. Lessee shall promptly notify Indemnitee of all reports or
returns required to be made with respect to any Tax with respect to which Lessee
is required to indemnify hereunder (provided, however, that this shall not be
deemed to require Lessee to file Indemnitee's Income Tax returns), and will
provide Indemnitee with all information necessary for the making and timely
filing of such reports or returns by Indemnitee. If Indemnitee requests that any
such reports or returns be prepared and filed by Lessee, Lessee shall prepare
and file the same, if permitted by applicable law to do so, and if not so
permitted, Lessee shall prepare such reports or returns for signature by Lessor,
and shall forward the same, together with immediately available funds for
payment of any Tax due, at least five Business Days in advance of the date such
payment is to be made, unless payment of such Tax is being resisted in
accordance with the provisions of Section 12.5.

      12.8. PAYMENT. Lessee shall pay any Tax directly to the appropriate taxing
authority if legally permissible, unless such Tax is being contested or resisted
in accordance with the provisions of Section 12.5, and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within five Business Days of such demand, but in no event shall any
such payments be made less than three Business Days prior to the date the Tax to
which any such payment hereunder relates is due (unless Lessee has not received
such demand at least 15 Business Days prior to such date, in which case payment
shall be made within five Business Days after receipt of such demand), in
immediately available funds, unless such Tax is being resisted in accordance
with the provisions of Section 12.5. Any such demand for payment from an
Indemnitee shall specify in reasonable detail the payment and the facts upon
which the right to payment is based. Each Indemnitee shall promptly forward to
Lessee any correspondence, notice, bill or advice received by it concerning any
Tax indemnified against hereunder unless such correspondence, notice, bill or
advice also addresses issues unrelated to the transactions contemplated under
this Lease (in which case, the unrelated issues shall be redacted). As soon as
practicable after each payment by Lessee of any Tax indemnified against
hereunder, Lessee shall furnish the appropriate Indemnitee the original or a
certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment of such Tax as is reasonably acceptable to such Indemnitee.
Lessee shall also furnish promptly upon request such

                                      44


data as any Indemnitee may reasonably require to enable such Indemnitee to
comply with the requirements of any taxing jurisdiction.

      12.9. REFUNDS. Upon receipt by an Indemnitee of a refund of any amounts
paid by it in respect of any contested Tax which amounts were advanced to the
Indemnitee by Lessee or otherwise paid by Lessee, such Indemnitee shall pay to
Lessee the amount of such refund, together with any interest received by such
Indemnitee on such refund that is fairly attributable to the amount and the
period of such payment or advance by Lessee (net of any taxes payable with
respect to the receipt or accrual of such interest by such Indemnitee); and,
upon disallowance of any portion of such requested refund, Lessee shall forgive
the related amount advanced to such Indemnitee with respect to the contested
Tax, and such forgiveness shall be treated for purposes of this Agreement as a
payment pursuant to Section 12.2.

      12.10. WITHHOLDING. If Lessee is required at any time to deduct or
withhold any Tax imposed by any taxing authority on any payment hereunder,
Lessee shall immediately pay to Lessor or other affected Indemnitee such
additional amounts (as Supplemental Rent) at such times as shall result in the
net amount actually received by the Lessor or such other Indemnitee being, after
taking into account (i) the amount of such deduction or withholding and (ii) the
amount of any Tax required to be paid by Lessor or such other Indemnitee by
reason of any payments made by Lessee pursuant to this Section 12.10, equal to
the full amount which would have been received by Lessor or such other
Indemnitee had such deduction or withholding not been made and such additional
Tax imposed and shall ensure that the foregoing shall be free of expense to
Lessor or such other Indemnitee for collection or other charges and shall pay to
the relevant taxing authority within the period for payment permitted by
applicable law the full amount of the deduction or withholding.

      12.11. INTEREST. Lessee shall pay to each Indemnitee upon demand, to the
extent permitted by law, interest on the amount of any indemnity under this
Section 12 not paid when due at the Past Due Rate.

SECTION 13. ASSIGNMENTS AND SUBLEASING.

      13.1. BY LESSEE. Except as specifically permitted under this Lease, Lessee
shall not, without the prior written consent of Lessor, assign any of its rights
in, to or under this Lease or the Lease Supplement, or Permitted Sublease or
otherwise transfer its interest in the Aircraft. Any such assignment, Permitted
Sublease or transfer shall in no way relieve Lessee from any obligation under
this Lease, which shall be and remain primary obligations of Lessee. The rights
of any Permitted Sublessee shall be subject and subordinate to all the terms of
this Lease (and the Permitted Sublease shall expressly so state). Each Permitted
Sublease in excess of one year by its term shall be assigned to or for the
benefit of Lessor. Notwithstanding the foregoing, Lessee shall not sell all or
substantially all of its assets or merge or consolidate with any other Person,
without the consent of the Lessor; provided, however, that notwithstanding the
foregoing, Lessee shall have the right, without the consent of Lessor, to merge
with any Person, provided that (A) immediately after any such transaction, no
Event of Default has occurred and is continuing, and (B) such Person which is to
be the transferee or surviving or acquiring corporation in such transaction (i)
shall be duly organized and validly existing under the laws of the United States
of

                                      45


America or a state thereof, or the District of Columbia, and a "citizen of the
United States" as defined in 49 U.S.C. ss. 40102(a)(15) of the Transportation
Act, (ii) shall be a U.S. Air Carrier, (iii) shall (unless Lessee is the
survivor), by agreement in writing, which shall be in form and substance
reasonably satisfactory to Lessor, expressly assume the due and punctual payment
of the Rent and other sums due and to become the due under this Lease and the
due and punctual performance and observance of all the covenants and provisions
of this Lease, and (C) in all cases, the assignee or transferee of Lessee's
assets or the survivor of the merger or consolidation has a tangible net worth
at least equal to Lessee's tangible net worth as of the date hereof.

      13.2. PERMITTED SUBLEASES. Provided that no Event of Default has occurred
and is continuing, Lessee may, during the Basic Term, without the prior consent
of Lessor, enter into a Permitted Sublease with respect to any Engine or the
Airframe and Engines or engines then installed on the Airframe to any Permitted
Sublessee if:

      (a) Lessee provides written notice to Lessor promptly after entering into
any such Permitted Sublease.

      (b) The Permitted Sublessee under such Permitted Sublease is not subject
to a proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date such Permitted Sublease is entered into or has
not declared a general moratorium on payment to U.S. creditors.

      (c) In the event that the Permitted Sublessee under such Permitted
Sublease is a foreign air carrier or Person based in a country other than the
United States, there has been no material adverse change in Lessee's tangible
net worth as of the date hereof and there are no external or internal wars or
conflicts involving such country at the time such Permitted Sublease is entered
into and the United States maintains normal diplomatic relations with the
country in which such proposed Permitted Sublessee is principally based;

      (d) In the event that the Permitted Sublessee under such Permitted
Sublease is a foreign air carrier or Person based in a country other than the
United States, prior to the effectiveness of such Permitted Sublease Lessor
shall have received an opinion, in form and substance reasonably acceptable to
Lessor of counsel to Lessee reasonably acceptable to Lessor to the effect that
(i) the terms of the proposed Permitted Sublease will be legal, valid, binding
and (subject to customary exceptions) enforceable against the proposed Permitted
Sublessee in the country in which the proposed Permitted Sublessee is
principally based; (ii) there exist no possessory rights in favor of the
Permitted Sublessee under such Permitted Sublease under the laws of such
Permitted Sublessee's country of domicile that would, upon bankruptcy or
insolvency of or other default by the Lessee and assuming that at such time such
Permitted Sublessee is not insolvent or bankrupt, prevent or unreasonably delay
the return or repossession of the Aircraft in accordance with and when permitted
by the terms of Section 14 upon the exercise by Lessor of its remedies under
Section 15; (iii) the laws of such Permitted Sublessee's country of domicile
require fair compensation by the government of such jurisdiction for the loss of
use of or title to such Engine or Airframe in the event of the requisition by
such government of such use or title (it being understood that in the event such
opinion cannot be given in a form reasonably satisfactory to Lessor, such
opinion shall be waived if insurance reasonably

                                      46


satisfactory to Lessor is provided to cover such requisition), (iv) the laws of
such Permitted Sublessee's country of domicile would give recognition to
Lessor's title to such Engine or the Airframe and to the registration of such
Engine or the Airframe in the name of Lessor (or Lessee as the proposed
sublessor or the proposed Permitted Sublessee, as appropriate), (v) all filings,
if any, required to be made in such jurisdiction in connection with the
execution of such Permitted Sublease in order to protect the interest of Lessor
in such Engine or the Airframe have been made, and (vi) the agreement of such
Permitted Permitted Sublessee that its rights under the Permitted Sublease are
subject to subordinate and all the terms of this Lease is enforceable against
such Permitted Permitted Sublessee under the applicable law of such country;

      (e) If the Permitted Permitted Sublessee is not a U.S. Air Carrier or is a
tax-exempt entity within the meaning of Section 168(h) of the Code, no Permitted
Sublease shall be allowed prior to the end of the recovery period with respect
to the Aircraft, unless Lessee prepays on a lump-sum basis any resulting
liability due under the Tax Indemnity Agreement based upon the assumption that
such Permitted Sublease will continue for the full term of such Permitted
Sublease; and

      (f) Lessee shall include in such Permitted Sublease appropriate provisions
which (i) make such Permitted Sublease expressly subject and subordinate to all
of the terms of this Lease, including the rights of Lessor to avoid such
Permitted Sublease in the exercise of its rights to repossession of the Airframe
and Engines hereunder and thereunder; (ii) expressly prohibit any further
subleasing of the Airframe and Engines; (iii) require that the Airframe and
Engines be maintained in accordance with a Maintenance Program; (iv) limit the
term of such Permitted Sublease (including renewal rights) to a period not
beyond the end of the Term, unless Lessee has then irrevocably committed to
exercise a purchase or extension option in accordance with the terms hereof; (v)
require that the Airframe and Engines be used in accordance with the limitations
applicable to Lessee's possession and use provided in this Lease; (vi) shall
include provisions for the maintenance, operation, possession and inspection of
the Aircraft that are the same in all material respects as the applicable
provisions of this Lease; and (vii) require insurance coverage to be maintained
to at least the same extent as set forth in this Lease.

      13.3. ASSIGNMENT BY LESSOR.

      (a) Lessor may voluntarily, at any time, upon ten Business Days prior
written notice to Lessee, assign, sell or transfer, all, but not less than all
of its right, title and interest in, to and under the Aircraft, this Lease and
the Lease Supplement, to a single transferee either through assignment of its
beneficial interest or through the sale or other transfer of all or
substantially all of its assets or business, in either case only if the
transferee (i) is a corporation or financial institution which is a "citizen of
the United States" as defined in the Transportation Code, (ii) has a net worth
of not less than $50,000,000 (or provides a guarantee of all of its obligations
by an entity meeting such net worth requirement), (iii) assumes the obligations
of Lessor in the transaction, and (iv) is not, without the written consent of
Lessee, an airline or any other competitor of Lessee or an affiliate of any
thereof. The provision of this Section 14(a) shall not apply to any transfer or
assignment pursuant to an exercise by Lessor of its remedies under Section 15.

                                      47


      (b) Lessor may encumber the Aircraft or assign its interest or any part
thereof under this Lease to a lender as security for the purpose of refinancing
its interest in the Aircraft.

      (c) Any assignment or encumbrance by Lessor pursuant to this Section 13.3
shall be subject to Lessee's rights hereunder. Lessee shall be under no
obligation to any assignee except upon written notice of such assignment from
Lessor. Upon written notice to Lessee of such assignment, Lessee agrees to pay
Rent to the assignee in accordance with the instructions specified in such
notice, and to give all notices which are required or permitted to be given by
Lessee to Lessor hereunder to the Person(s) specified to receive the same in
such written notice of assignment, and to otherwise comply with all notices,
directions and demands which may be given by such assignee in accordance with
the provisions of this Lease. Lessor shall pay all costs and expenses incurred
in connection with any such transfer, assignment or encumbrance, including those
of Lessee, except if such transfer, assignment or encumbrance is pursuant to the
exercise by Lessor of its rights and remedies under Section 15 hereof.

      SECTION 14.  EVENTS OF DEFAULT.

      (a) Each of the following events shall separately constitute an Event of
Default (whether any such 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 or order of any court or any order, rule or regulation of any
administrative or governmental body), and each such Event of Default shall
continue for so long as, but only for so long as, it shall not have been
remedied:

            (i) Lessee shall fail to make a payment of Basic Rent or Stipulated
      Loss Value within five Business Days after the same shall have become due;

            (ii) Lessee shall fail to make any other payment required hereunder
      or under any other agreement executed by Lessee in respect hereof within
      ten days after receipt by Lessee of written notice that such amount was
      not paid when due;

            (iii) Lessee shall have failed to perform or observe (or caused to
      be performed and observed) in any material respect any other non-financial
      covenant or agreement hereunder or under the Lease Supplement, or in any
      other document or certificate furnished by Lessee in connection herewith
      or therewith or pursuant hereto or thereto (other than the Tax Indemnity
      Agreement) and such failure shall continue unremedied for a period of more
      than 30 days after Lessee's receipt of written notice thereof by Lessor,
      unless such failure is not reasonably capable of being corrected within 30
      days, provided, however, that Lessee shall not be in default for so long
      as Lessee diligently commences and continues to diligently to correct such
      failure; provided, further, that Lessee shall in all events be in default
      or if Lessee does not remedy such failure within 120 days after receipt of
      such notice;

            (iv) Any representation or warranty (other than tax representations)
      set forth herein shall prove to have been incorrect in any material
      respect when made and, except

                                      48


      in the case of any financial representations, such incorrectness has a
      material adverse effect on Lessor or on Lessee's ability to perform its
      obligations under this Lease;

            (v) the commencement of an involuntary case or other proceeding in
      respect of Lessee (or, if a Permitted Sublease is then in effect, of
      Permitted Sublessee) under the federal bankruptcy laws, as now constituted
      or hereafter amended, or any other applicable federal or state bankruptcy,
      insolvency or other similar law in the United States, or seeking the
      appointment of a receiver, liquidator, assignee, custodian, trustee,
      sequestrator (or similar official) of Lessee (or, if a Permitted Sublease
      is then in effect, Permitted Sublessee) or for all or substantially all of
      its property, or seeking the winding-up or liquidation of its affairs and
      the continuation of any such case or other proceeding undismissed and
      unstayed for a period of 60 consecutive days, or an order, judgment or
      decree shall be entered in any proceeding by any court of competent
      jurisdiction appointing without Lessee's (or Permitted Sublessee's)
      consent, a receiver, trustee or liquidator of Lessee (or Permitted
      Sublessee) or for all or substantially all of its property, and any such
      order, judgment or decree shall remain in force and unvacated for a period
      of 60 consecutive days after the date of entry;

            (vi) the commencement by Lessee (or, if a Permitted Sublease is then
      in effect, Permitted Sublessee) of a voluntary case or proceeding under
      the federal bankruptcy laws, as now constituted or hereafter amended, or
      any other applicable federal or state bankruptcy, insolvency or other
      similar law in the United States, or the filing of an answer or petition
      seeking reorganization in a proceeding under any such laws or the filing
      of an answer admitting the material allegations of a petition filed
      against Lessee (or Permitted Sublessee) in any such proceeding or the
      consent by Lessee (or, if a Permitted Sublease is then in effect,
      Permitted Sublessee) to the appointment of or taking possession by a
      receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
      similar official) of Lessee or for all or substantially all of its
      property, or the making by Lessee (or, if a Permitted Sublease is then in
      effect, Permitted Sublessee) of any assignment for the benefit of
      creditors or the taking of any corporate action by Lessee to authorize any
      of the foregoing or to authorize a general payment moratorium;

            (vii) Lessee (or, if a Permitted Sublease is then in effect,
      Permitted Sublessee) shall fail to procure, carry and maintain on or with
      respect to the Aircraft (or cause to be procured, carried and maintained)
      insurance required to be maintained in accordance with the provisions of
      Section 11 hereof; and

            (viii) Lessee shall attempt to sell or alienate the Aircraft except
      in compliance with the provisions of this Lease.

SECTION 15. REMEDIES.

      15.1. LESSOR'S REMEDIES. Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, Lessor may, at
its option, declare this Lease to be in default by written notice to Lessee;
provided, however, that this Lease shall be deemed to be declared in default
without the necessity of such written declaration upon the occurrence of

                                      49


any Event of Default described in Section 14(v) or Section 14(vi); and at any
time thereafter, so long as any such outstanding Event of Default shall not have
been cured or remedied, Lessor may do one or more of the following with respect
to all or any part of the Airframe and any or all of the Engines as Lessor in
its sole discretion shall elect, to the extent permitted by, and subject to
compliance with any requirements of, applicable law then in effect:

            (a) Lessor may, upon the written demand of Lessor and at Lessee's
      expense, cause Lessee to return promptly, and Lessee shall return
      promptly, all or such part of the Airframe or any Engine 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 8 as if
      the Airframe or Engine were being returned at the end of the Term, or
      Lessor (or Lessor's designee) may, at its option, enter upon the premises
      where all or any part of the Airframe or any Engine is located and take
      immediate possession of and remove the same (together with any engine that
      is installed on the Airframe which is not an Engine, subject to the rights
      of any owner, lessor, lienholder or secured party of such engine) by
      summary proceedings or otherwise (and/or, at Lessor's option, store the
      same at Lessee's premises, at Lessee's cost and expense, until disposal
      thereof by Lessor);

            (b) Lessor may sell all or any part of the Aircraft, the Airframe or
      any Engine at public or private sale and with or without advertisement or
      notice to Lessee or any Permitted Sublessee, as Lessor in its sole
      discretion may determine, or otherwise dispose of, hold, use, operate,
      lease to others or keep idle all or any part of the Aircraft, the Airframe
      or any Engine as Lessor, in its sole discretion, may determine, all free
      and clear of any rights of Lessee or any Permitted Sublessee and without
      any duty to account to Lessee or any Permitted Sublessee with respect to
      such action or inaction, except as hereinafter set forth in this Section
      15; and in the event of a sale in accordance with the foregoing, Lessor
      shall have the right to bid for and purchase such property;

            (c) In the event Lessor, pursuant to Section 15.1(b), shall have
      sold the Aircraft, Lessor may, if it shall so elect, demand that Lessee
      pay Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
      liquidated damages for loss of a bargain and not as a penalty, any unpaid
      Basic Rent and Supplemental Rent with respect to the Aircraft due on or
      prior to such date plus the amount of any deficiency between the net
      proceeds of such sale (after deduction of all reasonable costs of sale)
      and the Stipulated Loss Value of the Aircraft, computed as of the Rent
      Payment Date immediately following the date of such sale, together with
      interest, if any, on the amount of such deficiency, at the Past Due Rate,
      from the date of such demand to the date of actual payment of such amount;

            (d) In lieu of exercising its rights under Section 15.1(a), (b) or
      (c) above, Lessor may, by notice to Lessee specifying a payment date not
      earlier than ten days or more than 30 days from the date of such notice,
      require Lessee to pay to Lessor, and Lessee hereby agrees that it will pay
      to Lessor, on the payment date specified in such notice, as liquidated
      damages for loss of a bargain, and not as a penalty, and in lieu of any
      further payments of Basic Rent hereunder, an amount equal to the sum of
      (i) all unpaid Basic Rent payable or that would have been payable on or
      before the date of payment

                                      50


      specified in such notice and any Supplemental Rent then owing, plus (ii)
      an amount equal to the Stipulated Loss Value for the Aircraft computed as
      of the Rent Payment Date immediately following the date of payment
      specified in such notice, together with interest, if any, at the Past Due
      Rate on the amount of such Basic Rent and Stipulated Loss Value from the
      payment date specified in such notice until the date of actual payment;
      and upon such payment of liquidated damages and all other Rent then due
      and payable by Lessee hereunder, Lessor shall transfer (without any
      representation, recourse or warranty whatsoever other than as to the
      absence of Lessor Liens) the Aircraft to Lessee or as Lessee may direct,
      and Lessor shall execute and deliver such documents evidencing such
      transfer and take such further action as Lessee shall reasonably request;

            (e) Lessor may rescind this Lease Agreement and/or may exercise any
      other right or remedy which may be available to it under applicable law or
      proceed by appropriate court action to enforce the terms hereof or to
      recover damages for breach hereof;

      15.2. Except as otherwise expressly provided above, no remedy referred to
in this Section 15 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity, and the exercise or beginning of exercise by Lessor
of any one or more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies. No waiver by Lessor of
any Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default;

SECTION 16. FURTHER ASSURANCES; INFORMATION.

      (a) On the Delivery Date, Lessee shall cause this Lease and the Lease
Supplement to be duly filed at the FAA. In addition, Lessee will promptly and
duly execute and deliver to Lessor and any assignee of Lessor permitted under
Section 13.3 hereof such other documents and assurances, and will take such
further actions as Lessor or any such assignee may from time to time reasonably
request in order to carry out more effectively the intent and purposes of this
Lease and to establish and protect the rights and remedies created or intended
to be created hereunder in favor of Lessor and any such assignee, including,
without limitation, if requested by Lessor, at the expense of Lessee, the
execution and delivery of supplements or amendments hereto, subjecting to this
Lease any airframe or engine substituted for an Airframe or any Engine, and the
recording or filing of counterparts thereof in accordance with the laws of such
jurisdictions as Lessor may from time to time reasonably deem advisable.

      (b) Lessee convenants to furnish to Lessor such information concering the
business, assets and financial condition of Lessee as Lessor may request and,
without request, furnish to Lessor:

                  (i) as soon as available, quarterly financial statements for
            such quarter and the fiscal year to date;

                  (ii) as soon as available, a copy of the detailed annual audit
            report and accompanying consolidated financial statements,
            accompanied by a certificate of a

                                      51


            Responsible Officer to the effect that no Event of Default has
            occurred and is continuing hereunder; and

                  (iii) as soon as possible after such Responsible Officer has
            notice of the occurrence of an Event of Default.

SECTION 17. NOTICES. All notices and other communications required or permitted
under the terms and provisions hereof shall be by registered mail, return
receipt requested, or by nationally-recognized overnight courier service, or by
confirmed facsimile transmission, and any such notice shall become effective
when received, addressed: if to Lessor, at:

                  ICX Corporation
                  3 Summit Park Drive
                  Suite 200
                  Cleveland, Ohio  44131
                  Attn:  Chief Financial Officer and General Counsel
                  Telephone:  (216) 328-8700
                  Facsimile:  (216) 328-8710

or to such other address or facsimile number as Lessor shall from time to time
designate in writing to Lessee, and if to Lessee, at:

                  Chautauqua Airlines, Inc.
                  2500 S. High School Road
                  Indianapolis, Indiana  46241
                  Attn:  President
                  Telephone:  (216) 328-8700
                  Facsimile:  (216) 328-8710

                  with a copy to:
                  c/o Wexford Management LLC
                  411 West Putnam Avenue
                  Greenwich, Conn., 06830
                  Attn:  Jay Maymudes and Arthur Amron
                  Telephone:  (203) 862-7050  (Jay Maymudes)
                              (203) 862-7012  (Arthur Amron)
                  Facsimile:  (203) 862-7350 (Jay Maymudes)
                              (203) 862-7312 (Arthur Amron)


                                      52


or to such other address or facsimile number as Lessee shall from time to time
designate in writing to Lessor.

SECTION 18. NET LEASE, NO SET-OFF, COUNTERCLAIM, ETC. This is a triple-net
lease, and Lessee's obligations to pay all Rent payable hereunder and to pay all
costs and expenses of every kind in connection with the use, operation,
maintenance and repair of the Airframe and each Engine by Lessee shall be
absolute and unconditional and shall not be affected by or subject to any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, abatement, defense or other right which Lessee may have against
Lessor or anyone else for any reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions), (ii) any defect in
the title, registration, airworthiness, condition, design, operation, or fitness
for use of, or any damage to or loss or destruction of, the Aircraft, or any
interruption, interference or cessation in or prohibition of the use or
possession thereof by Lessee (or any Permitted Sublessee) for any reason
whatsoever, including, without limitation, any such interruption, interference,
cessation or prohibition resulting from the act of any government authority,
(iii) any insolvency, bankruptcy, reorganization or similar case or proceedings
by or against Lessee (or any Permitted Sublessee), Lessor or any other Person,
(iv) the invalidity or unenforceability or lack of due authorization of this
Lease or any instrument or document executed in connection herewith or
therewith, or (v) any other circumstance, happening, or event whatsoever,
whether or not unforeseen or similar to any of the foregoing. 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 without limitation of the other rights or remedies of Lessor hereunder,
to pay to Lessor 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
Lease not been terminated in whole or in part. Lessee hereby waives, to the
extent permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease except in accordance with the
express terms hereof. Each payment of Rent by Lessee shall be final, and Lessee
shall not seek to recover, abate, suspend, defer or reduce all or any part of
such payment for any reason whatsoever, except for any payments not required
hereunder which were made in error. Nothing in this Section 18 shall be
construed to preclude Lessee from bringing any suit at law or in equity which it
would otherwise be entitled to bring for breach of any representation, warranty,
or covenant hereunder, or as a waiver of or consent to any act or failure to act
by any person except as otherwise expressly provided in this Lease.

SECTION 19. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make any
payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, in either case,
after the expiration of any applicable notice and cure periods, whether or not
such failure shall constitute an Event of Default hereunder, Lessor may itself
make such payment or perform or comply with such agreement but shall not be
obligated hereunder to do so, and the amount of such payment and the amount of
the reasonable expenses of Lessor 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 Past Due Rate, shall be deemed
Supplemental Rent hereunder payable by Lessee to Lessor on

                                      53


demand. No such payment or performance by Lessor shall be deemed to waive any
Default or Event of Default or relieve Lessee of its obligations hereunder.

SECTION 20. LESSOR ASSIGNMENT OF RIGHTS AND WARRANTIES. On the Delivery Date,
Lessor shall assign to Lessee for the duration of the Lease Term, the benefit of
all assignable manufacturer's warranties with respect to the Aircraft as well as
all manuals and related services and documentation available to Lessor, and
Lessor agrees to use its reasonable efforts, at Lessee's expense and upon its
written request, to assist Lessee in enforcing such rights as Lessor may have
with respect to the warranties for the benefit of Lessee; provided, however,
that upon notice from Lessor to Lessee after and during the continuance of an
Event of Default, such assignments which are otherwise made available to Lessee
shall immediately upon notice by Lessor be deemed canceled and shall be deemed
reassigned to Lessor, including all claims thereunder, whether or not perfected,
and all amounts payable shall be paid to and held by Lessor, until such time as
an Event of Default is no longer continuing. At the expiration of the Term of
this Lease (other than by reason of the exercise by Lessee of its purchase
option), the benefit of any assignment to Lessee shall automatically and without
further action by Lessor revert to Lessor or its designee. Lessee shall at its
own cost and expense do all such things and execute all such documents as may be
required for this purpose. Lessee shall maintain all necessary records and take
all necessary actions to qualify it for claims, and shall diligently and
promptly pursue any valid claims it may have against the manufacturers with
respect to the Aircraft and will provide notice of same to Lessor. Lessee shall
cooperate with Lessor, and shall furnish Lessor with such documents, records and
other information as Lessor shall reasonably request in order to assist Lessor
in pursuing any claim Lessor may have against any manufacturer with respect to
any warranty.

SECTION 21. MISCELLANEOUS. Any provision of this Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. No term or provision of this Lease may be changed, amended,
waived, discharged or terminated orally, but only by an instrument in writing
signed by Lessor and Lessee. This Lease shall constitute an agreement of lease,
and nothing contained herein shall be construed as conveying to Lessee any
right, title or interest in the Aircraft other than as a lessee. Neither Lessee
nor any Affiliate of Lessee shall file any tax returns in a manner inconsistent
with the foregoing or with Lessor's ownership of the Aircraft, and any Permitted
Sublease shall require a similar undertaking by the Permitted Sublessee
thereunder. The section and paragraph headings in this Lease and the table of
contents are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof. This Lease 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.

SECTION 22. OPTIONS TO RENEW.

      22.1 CAPPED RENEWAL OPTIONS. Lessee shall have the right to extend the
term of this

                                      54


Lease for a period of one year commencing at the end of the Basic Term by
irrevocable written notice to Lessor not less than 180 days prior to the end of
the Basic Term, provided that no Event of Default has occurred and is continuing
at the time of notice and commencement of the Renewal Term. In the event that
Lessee has elected to extend the Term in accordance with the preceding sentence,
Lessee shall have the right to extend the then-current Term for an additional
one-year period by irrevocable written notice given to Lessor not less than 180
days prior to the expiration of the then-current Term. The Rent payable during
each Renewal Term under this Section 22.1 shall be [*] (i) [*], or (ii) [*] of
the average Basic Rent paid during the Basic Term, and shall be paid on the
Rent Payment Dates.

      22.2 UNCAPPED RENEWAL OPTIONS. In the event that Lessee has exercised both
of its options to extend the Term pursuant to Section 22.1, Lessee shall have
two successive options to extend the Term for a period of one year each,
exercisable by written irrevocable notice to Lessor not less than 180 days prior
to the expiration of the then-current Term, provided no Event of Default has
occurred and is continuing at the time of the notice and the commencement of the
Renewal Term. The Basic Rent payable during each Renewal Term under this Section
22.2 shall be equal to [*], and shall be paid on the Rent Payment Dates.

      22.3 FAIR MARKET RENTAL VALUE. For the purposes of this Lease, the "Fair
Market Rental Value" of the Aircraft shall be the rent which would be payable in
an arm's length transaction between an informed and willing lessor under no
compulsion to lease and an informed and willing lessee under no compulsion to
lease, based upon the condition and location of the Aircraft (assuming the
Aircraft is in the condition in which it is required to be maintained and
further assuming half-life condition), which value shall be determined by mutual
written agreement or, in the absence of mutual written agreement, pursuant to
the appraisal procedure described in Section 23.3.

SECTION 23. PURCHASE OPTIONS.

      23.1 PURCHASE OPTIONS. Lessee shall have the right to purchase the
Aircraft (i) upon the termination of the Basic Term, for a purchase price equal
to the lesser of then Fair Market Sales Value of the Aircraft or the amount
specified on Schedule II; or (ii) at the end of any Renewal Term, for a purchase
price equal to the then Fair Market Sales Value of the Aircraft. Upon payment by
Lessee of the purchase price for the Aircraft and the Basic Rent or Renewal
Rent, if any, payable though the date of purchase, together with all
Supplemental Rent then due and payable hereunder (and provided that Lessee has
cured (or with such payments will cure) all Defaults, the Term shall end and the
obligation of Lessee to pay Rent hereunder (except for Supplemental Rent
obligations otherwise accrued but unpaid as of the date of such payment) shall
cease, and Lessor shall convey to Lessee all right, title and interest of Lessor
in and to the Aircraft on an "as-is, where is" basis, without recourse or
warranty except a warranty against Lessor's Liens.

      23.2 NOTICE. Lessee's right to purchase provided for Section 23.1 shall be
exercised by written notice to Lessor not less than 180 days before the
applicable date of purchase provided in Section 23.1(i) or Section 23.1(ii), as
the case may be. Such notice shall be irrevocable, except that Lessee may revoke
its exercise of an option to purchase the Aircraft within 15 days

                                      55

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* Confidential



following the determination of the Fair Market Sales Value. In the event that
Lessee exercises its right of revocation, the Term of this Lease shall be
extended to a date that is not earlier than 180 days following the notice of
revocation.

      23.3 FAIR MARKET SALES VALUE. For the purposes of this Lease, the "Fair
Market Sales Value" of the Aircraft shall be the sales value which would be
obtained in an arm's-length transaction between an informed and willing
purchaser under no compulsion to purchase and an informed and willing seller
under no compulsion to sell, based upon the condition and location of the
Aircraft (assuming the Aircraft is in the condition in which it is required to
be maintained and further assuming half-life condition), which value shall be
determined by mutual written agreement or, in the absence of mutual written
agreement, pursuant to an appraisal prepared and delivered by a nationally
recognized firm of independent aircraft appraisers nominated by Lessor and
approved by Lessee, and Lessor shall immediately notify Lessee in writing of
such nomination. The appraiser shall determine the Fair Market Sales Value
within seven Business Days, and its determination shall be final and binding
upon the parties. The cost of such appraisal or appointment shall be borne by
Lessee.

SECTION 24 VOLUNTARY TERMINATION FOR OBSOLESCENCE.

      24.1 RIGHT TO TERMINATE. So long as no Event of Default has occurred and
is continuing, Lessee shall have the right on at least [*] (which notice shall
be irrevocable, except as provided below), to terminate this Lease by written
notice from its chief financial officer to Lessor to the effect that the
Aircraft has become [*] to Lessee's equipment requirements. Such notice shall
specify a proposed date of termination, which shall be a Rent Payment Date at
any time on or after the [*] anniversary of the Commencement Date. During the
period following the giving of such notice of termination until the
Termination Date, Lessee, as agent for Lessor, shall use commercially
reasonable efforts to sell the Aircraft no later than the Termination Date
"as is", without any warranty by Lessor except as to Lessor's title, on
behalf of Lessor. If Lessee receives any bid, it shall, at least 10 Business
Days prior to the proposed day of sale, certify to Lessor in writing the
amount and terms of such bid, the proposed date of sale and the name and
address of the potential buyer (which may be Lessor or any Affilate of
Lessor, but shall not be Lessee or any Affiliate of Lessee). Lessor may also
solicit bids directly or through agents other than Lessee. Lessee may, by
notice to Lessor, withdraw its notice of termination at any time on or before
the date 10 days prior to the proposed Termination Date (unless such
withdrawal is due to the cancellation of the proposed purchase of the
Aircraft by the potential buyer, in which event, such notice may be given at
any time on or prior to the proposed Termination Date), and thereupon this
Lease shall continue in full force and effect. Withdrawal of notice of
termination shall not exhaust the Lessee's right to give a further notice of
termination as provided herein. On the Termination Date or such other date of
sale as shall be consented to in writing by Lessor and Lessee, which date
shall thereafter be deemed the Termination Date, Lessee shall, upon payment
in full of the amounts described in Section 24.2, deliver the Airframe and
Engines or engines installed thereon to the party which shall have prior to
such date submitted the highest bona fide cash bid to close such sale and
purchase of the same, and shall duly transfer to such party title to any
engines which are not Engines delivered with the Airframe. Lessor shall
simultaneously therewith sell and convey title

                                      56

- -------
* Confidential



to the Airframe and the Engines or engines conveyed to Lessor as provided in
Section 10 to such party, in "as-is, where-is" condition, without recourse or
warranty (except a warranty as to the absence of Lessor's Liens). Upon receipt
by Lessor of all amounts referred to in Section 24.2, Lessor will transfer to
Lessee, in "as-is, where-is" condition, without recourse or warranty (except a
warranty as to the absence of Lessor's Liens), all right, title and interest of
Lessor in and to any Engines constituting part of the Aircraft which were not
delivered to the purchaser with the Airframe. Lessee shall pay all reasonable
out-of-pocket expenses of Lessor in connection with any termination or proposed
termination of this Lease.

      24.2 PAYMENTS. The total selling price realized at any sale of the
Airframe and Engines or engines installed thereon in accordance with this
Section 24 shall be retained by Lessor. In addition, on the Termination Date
(including any tax indemnity payments that may have been paid by adjustment to
Basic Rent hereunder), Lessee shall pay to Lessor in immediately-available
funds, an amount equal to the sum of (i) the excess, if any, of the Termination
Value as of the Termination Date over the net proceeds of the sale of the
Aircraft, plus (ii) all unpaid Supplemental Rent due on or before the
Termination Date, plus (iii) the portion, if any, of Basic Rent payable through
Termination Date, together with all unpaid Basic Rent, if any, payable before
the Termination Date, plus (iv) the reasonable fees and expenses of Lessor in
connection therewith.

      24.3. TERMINATION OF LEASE. Upon delivery by Lessee of the Airframe and
Engines or engines installed thereon and payment by Lessee of all amounts
payable by Lessee under Section 24.2, the obligations of Lessee to pay Rent
shall cease and the Term shall end.

      24.4 EFFECT OF NO SALE. If, on the Termination Date, no sale of the
Aircraft has occurred, Lessee's termination notice given pursuant to Section
24.1 shall be deemed to be withdrawn as of such date, and this Lease shall
continue in full force and effect.

      24.5. NO DUTY ON PART OF LESSOR. Lessor shall be under no duty to solicit
bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take
any action in connection with any such sale other than to cooperate with such
efforts as Lessee may reasonably request and to make the transfers described in
Section 24.1.

SECTION 25. COVENANT OF QUIET ENJOYMENT. Lessor covenants and agrees that, so
long as no Event of Default has occurred and is continuing hereunder, it will
not, nor will it permit another Person claiming by, under or through it to,
interfere with Lessee's right to quiet enjoyment and continuing possession, use
and operation of the Aircraft during the Term of this Lease, and this Lease
shall not be terminated except as expressly provided herein.

SECTION 26. BANKRUPTCY. It is the intention of the parties that Lessor shall be
entitled to the benefits of 11 U.S.C. ss. 1110 with respect to the right to
repossess the Airframe, Engines and Parts as provided herein. In any
circumstance where more than one construction of the terms and conditions of
this Lease is possible, a construction that would preserve such benefits shall
control over any construction which would not preserve such benefits or render
them doubtful. To the extent consistent with the provisions of 11 U.S.C. ss.
1110 or any analogous section of the Federal bankruptcy laws, as amended from
time to time, it is hereby expressly agreed and provided that,

                                      57


notwithstanding any other provisions of the Federal bankruptcy laws, as amended
from time to time, to the contrary, any right of Lessor to take possession of
the Aircraft in compliance with the provisions of this Lease shall not be
effected by the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to
time, or any analogous provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.

SECTION 27. CHOICE OF LAW; SERVICE OF PROCESS.

      27.1. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of New York, without regard to or
application of its conflict of laws rules.

      27.2 CONSENT TO JURISDICTION. Each Lessee and Lessor voluntarily submits
itself to the exclusive jurisdiction of the state and federal courts situated in
New York, New York for any dispute arising hereunder. Each of Lessee and Lessor
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Lease brought in the Courts located in New York, New York, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any such Court has been brought in an inconvenient forum. To the
extent that either Lessor or Lessee may be entitled at any time to claim for
itself or its assets any immunity (whether by reason of sovereignty or
otherwise) from suit, from the jurisdiction of any Court, from execution of
judgment or otherwise, Lessor or Lessee, as the case may be, hereby irrevocably
agrees not to claim and hereby irrevocably waives such immunity in respect of
this Lease and any proceeding under this Lease.

      27.3 WAIVER OF JURY TRIAL. Each party hereby unconditionally waives its
rights to a jury trial of any claim or cause of action based upon or arising out
of, directly or indirectly, this Lease, any of the documents relating hereto,
any dealings between Lessee and Lessor relating to the subject matter of this
transaction, and/or the relationship that is being established hereunder between
Lessee and Lessor. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court (including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims). This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Lease, any related
documents, or to any other documents or agreements relating to this transaction
or any related transaction. In the event of litigation, this Lease may be filed
as a written consent to a trial by the court.

      27.4 SERVICE OF PROCESS. Lessee hereby agree that service of all writs,
process and summonses in any such suit, action or proceeding brought in the
State of New York may be made upon Arthur Amron. Lessor agrees that service of
all writs, process and summonses in any such suit, action or proceeding brought
in the State of New York may be made upon Michael Babbit. Each party hereby
irrevocably appoints its process agent as its true and lawful attorney-in-fact
in its name, place and stead to accept such service of any and all such writs,
process and summonses, and agrees that the failure of its process agent to give
any notice of any such service of process to it shall not impair or affect the
validity of such service or of any judgment based thereon. Each of Lessee and
Lessor hereby further irrevocably consents to the service of process

                                      58


in any suit, action or proceeding in said courts by the mailing thereof by the
other party by registered or certified mail, postage prepaid, or express mail to
it at its address set forth in Section 17 hereof.



                                      59





      28. OWNERSHIP. Notwithstanding any provision herein or elsewhere contained
to the contrary, it is understood and agreed between the parties that the
leasing transaction contemplated hereby is expressly intended to be, and shall
be and should be construed to be, a lease for Federal income tax purposes.



                                      60





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

                                     LESSOR:

                                     ICX CORPORATION



                                     By:     /s/ James Lovins
                                             ----------------------------------
                                     Title:
                                             ----------------------------------

                                     LESSEE:

                                     CHAUTAUQUA AIRLINES, INC.



                                     By:    /s/ James Muroski
                                            ----------------------------------
                                     Title: Vice President
                                            ----------------------------------



                                      61








                                   SCHEDULE I

                                       [*]



- --------
* Confidential







                                   SCHEDULE II

                                       [*]



- --------
* Confidential





                                  SCHEDULE III

                        SCHEDULE OF COUNTRIES AUTHORIZED

        FOR DOMICILE OF PERMITTED PERMITTED SUBLESSEE AND RE-REGISTRATION

                                        
               Australia                   Japan

               Austria                     Luxembourg

               Belgium                     Netherlands

               Canada                      *New Zealand

               Denmark                     Norway

               Finland                     Switzerland

               France                      United Kingdom

               Germany

               Iceland

               Ireland

               *Italy



- --------------------------------------------------------------------------------
*No Reregistration







                                                           EXHIBIT A

THIS IS COUNTERPART NO. _____ OF 4 SERIALLY NUMBERED AND MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN
COUNTERPART NO. 1.

          FORM OF LEASE SUPPLEMENT EXHIBIT A: FORM OF LEASE SUPPLEMENT
                                  AND RECEIPT

      THIS LEASE SUPPLEMENT dated June ___, 1999 is made by and between ICX
Corporation ("Lessor"), and Chautauqua Airlines, Inc. ("Lessee").

      Lessor and Lessee have entered into an Aircraft Lease Agreement, dated as
of June ___, 1999 (the "Lease"), relating to Embraer ERJ-145LR aircraft,
manufacturer's serial number EMB 145128, United States registration number
N260SK, which provides for the execution and delivery of a Lease Supplement.

      NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Lessor and
Lessee hereby agree as follows:

      1. THE LEASE. The Lease and all related documents to be executed by Lessee
in order to accomplish the transaction contemplated by the Lease have been duly
authorized, executed and delivered by Lessee and constitute valid, legal and
binding agreements, enforceable against Lessee in accordance with their terms.
All of the terms and provisions (including defined terms) of the Lease are
hereby incorporated by reference in this Lease Supplement to the same extent as
if fully set forth herein. The parties confirm that the Delivery Date is the
date of this Lease Supplement.

      2. THE AIRCRAFT. Lessee hereby certifies that the Aircraft described in
Schedule 1 hereto has been delivered to Lessee, inspected by Lessee, and
accepted under, and for all purposes of, the Lease in accordance with the
Acceptance Certificate annexed hereto, all on the date hereof. Lessee accepts
delivery of the Aircraft "AS IS," "WHERE IS," AND SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTION 3.4 OF THE
LEASE.

      3. REPRESENTATIONS BY LESSEE. Lessee hereby represents and warrants to
Lessor that on the date hereof:

            (a) The representations and warranties of Lessee set forth in the
            Lease are true and correct in all material respects as though made
            on and as of the date thereof, except to the extent that they
            expressly relate to a particular date.

            (b) Lessee has satisfied or complied with all requirements set forth
            in the Lease to be satisfied or complied with on or prior to the
            date thereof.

            (c) No Event of Default or Event of Loss under the Lease has
            occurred and is continuing on the date hereof, nor has any event
            occurred which, with the giving


                                      A-1


            of notice or lapse of time or both, would become an Event of Default
            or an Event of Loss.

            (d) The Lessee has obtained, and there are in full force and effect,
            such insurance policies with respect to the Aircraft as are required
            to be obtained under the terms of the Lease.

      4. COUNTERPARTS. 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.

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

LESSOR:

ICX CORPORATION:


By: _________________________


Title: ______________________








LESSEE:

CHAUTAUQUA AIRLINES, INC.


By: _________________________


Title: ______________________









                                      A-2





                         SCHEDULE 1 TO LEASE SUPPLEMENT

                              AIRCRAFT DESCRIPTION

      Airframe: Embraer EJR-145LR , manufacturer's serial number EMB 145128,

      United States Registration Number:  N260SK

      Engine: Allison Engine Company AE3007A1, manufacturer serial number CAE
311142.

      Engine: Allison Engine Company AE3007A1, manufacturer serial number CAE
311143.












                                                                       EXHIBIT B

                         FORM OF ACCEPTANCE CERTIFICATE

      This Acceptance Certificate is executed pursuant to that certain Aircraft
Lease Agreement dated as of June ____, 1999 ("Lease"), between ICX Corporation
("Lessor") and Chautauqua Airlines, Inc. ("Lessee").

      The terms used in this Acceptance Certificate shall have the meanings
ascribed to them in the Lease.

      Lessor and Lessee hereby confirm that the Aircraft described in this
Acceptance Certificate has been delivered as of the above date at Memphis,
Tennessee, and that the term of the Lease with respect to said Aircraft shall
commence as of the said date.

      Lessee confirms that said Aircraft has been examined by its duly appointed
and authorized representatives and that such examination shows that (a) there
are affixed to the Airframe metal tags bearing the following legend: "ICX
Corporation, Owner and Lessor", (b) the Aircraft is in the configuration and
condition required by the Lease on the date the Aircraft is delivered to Lessee,
and (c) the Airframe and Engines were plainly and distinctly marked with the
serial numbers set forth below:




Description of Equipment:                     Manufacturer's Serial Numbers
- ------------------------                      -----------------------------
                                                    



Airframe:  Embraer EJR-145LR                           EMB 145128




Engines:

Allison Engine Company AE3007A1                        CAE 311142

                                                       CAE 311143




                                      B-1





      Lessee confirms that on the date hereof (i) the Aircraft described in this
Acceptance Certificate was duly and unconditionally accepted by Lessee as the
Aircraft for leasing under the Lease, provided that nothing contained herein or
in the Lease diminishes or affects any right Lessor or Lessee may have with
respect to the Aircraft against the Manufacturer, any vendor or any
subcontractor or supplier thereof, (ii) the Aircraft became subject to and
governed by the terms of the Lease, and (iii) Lessee became unconditionally
obligated to pay to Lessor the rentals provided for in the Lease.

      This Acceptance Certificate is dated this ____ day of June, 1999.

                                    LESSOR:

                                    ICX CORPORATION



                                    By:   /s/ James Lovins
                                          -----------------------------------

                                    Title:
                                            -----------------------------------



                                    LESSEE:

                                    CHAUTAUQUA AIRLINES, INC.



                                    By:   /s/ James Muroski
                                         -----------------------------------

                                    Title:  Vice President
                                           -----------------------------------



                                      B-2



                                    EXHIBIT E

                          FORMS OF OPINIONS OF COUNSEL

      I. TO BE GIVEN BY INDEPENDENT OUTSIDE COUNSEL OF LESSEE OR OTHER LAWYERS
ACCEPTABLE TO LESSOR

                                             June ___, 1999

      ICX Corporation
      Three Summit Park Drive
      Suite 200
      Cleveland, Ohio  44131
      Attn:  Chief Financial Officer and General Counsel

                                          Re:   CHAUTAUQUA AIRLINES, INC.

      Gentlemen:


            Chautauqua Airlines, Inc., a New York corporation (the
"Corporation"), has asked us to render certain opinions to you regarding the
Corporation, and the following agreements to which the Corporation is a party:
(i) an Aircraft Lease Agreement, dated as of June 25, 1999, between ICX
Corporation, an Ohio corporation ("ICX"), and the Corporation (the "Lease");
(ii) a Lease Supplement, dated as of June 25, 1999, between ICX and the
Corporation; (iii) an Acceptance Certificate, dated as of June 25, 1999, between
ICX and the Corporation; and (iv) a Tax Indemnity Agreement, dated as of June
25, 1999, between ICX and the Corporation (collectively, the "Lease Documents").

            We have examined and relied upon originals, or copies certified or
otherwise identified to our satisfaction, of the following documents,
certificates and other statements of the Corporation and its officers and other
representatives as the basis for our opinion: (a) copies of the Lease Documents
in the form furnished to us by the Corporation; and (b) the opinion, dated as of
June 25, 1999, of Arthur Amron, General Counsel of the Corporation ("Counsel's
Opinion").

            In our examination of the Lease Documents, Counsel's Opinion and the
other documents, instruments, certificates and statements referred to above, we
have assumed, without any independent investigation, that (a) all statements,
representations, warranties and certifications set forth therein are true,
correct and complete; (b) the Lease Documents actually executed by the
Corporation are identical to the documents submitted to us by the Corporation;
(c) all documents submitted to us as originals are genuine and the signatures
thereon are authentic; (d) the agreements, documents, instruments and
certificates submitted to us as copies are genuine and conform to the originals;
and (e) the Lease Documents and all of the other agreements, documents,
instruments and certificates have been duly authorized, delivered and fully
performed by all persons other than the Corporation in all respects, and are the
legal, valid and binding obligations of all such persons, enforceable against
them in accordance with their respective terms. We have not represented the
Corporation generally as outside counsel, and,


                                      E-1


accordingly, we have extremely limited familiarity with its business and
activities. Therefore, as to all factual matters, we have, without any
independent investigation, relied upon, and assumed the accuracy of, Counsel's
Opinion and all of the statements, representations and warranties made in the
Lease Documents and in each of the other agreements, documents, instruments,
certificates and statements referred to above.

            Based upon and subject to the foregoing, and subject to the
assumptions and qualifications set forth below, it is our opinion that:

            1. No authorization, approval, consent, license or order of, or
registration with, or giving notice to, any Federal governmental or other
regulatory body or authority having jurisdiction over the Corporation is
required or necessary for the valid authorization, execution, delivery and
performance by the Corporation of the Lease Documents.

            2. Each of the Lease Documents is a valid and a binding obligation
of the Corporation, enforceable against the Corporation in accordance with its
terms.

            3. The Corporation is a "citizen of the United States" as defined in
49 U.S. Code ss.40102(a)(15).

            4. The Corporation is an "air carrier" as defined in 49 U.S. Code
ss.40102(a)(2).

            5. Except for (i) registrations and filings with the FAA, with
respect to which we express no opinion; (ii) the filing of appropriate Uniform
Commercial Code financing statements in the appropriate offices in Indiana,
Ohio, New York and Connecticut, and any jurisdiction in which records relating
to the aircraft to which the Lease pertains (the "Aircraft") is located; (iii)
the filing of continuation statements at appropriate intervals with respect to
any Uniform Commercial Code financing statements; (iv) the filing of new
appropriate financing statements under the circumstances described in
ss.9-402(7) of the Uniform Commercial Code; and (v) the filing of new
appropriate financing statements in the appropriate offices in the appropriate
jurisdictions if the Corporation changes its location as determined under
ss.9-103(3)(d) of the Uniform Commercial Code, no further filing or recording of
any document with any court or governmental agency or body is necessary under
the laws of the States of Indiana, Ohio, New York or Connecticut in order to
give notice to third parties of ICX's right, title and interest in the Aircraft
as against the Corporation.

            The opinions expressed herein are qualified in their entirety as
follows: (a) no opinion is expressed with respect to laws other than the laws of
the United States and the State of New York; (b) in rendering our opinions
hereunder, we have made no independent factual investigation other than as
expressly set forth herein (c) in rendering the opinion set forth in Paragraph 2
above, we have relied on the opinion set forth in Paragraph 2 of Counsel's
Opinion; (d) in rendering the opinion set forth in Paragraph 3 above, we have
relied upon the opinion set forth in Paragraph 7 of Counsel's Opinion; (e) in
rendering the opinion set forth in Paragraph 4 above, we have relied upon the
opinion set forth in Paragraph 4 of Counsel's Opinion; (f) no


                                      E-2


opinion is expressed as to whether any of the conditions precedent set forth in
the Lease has been satisfied; and (g) to the extent that any one or more of the
foregoing opinions relates to the enforceability of any agreement or instrument:
(1) the opinions are subject to the effect of applicable laws or judicial
decisions regarding bankruptcy, reorganization, insolvency, fraudulent
transfers, moratorium and other laws affecting creditors' rights and debtors'
relief generally; (2) the enforceability of the provisions of any such agreement
or instrument is subject to the application of principles of equity, whether in
a proceeding at law or in equity, including the exercise of discretionary powers
of any tribunal before which equitable remedies may be sought (including,
without limitation, specific performance and injunctive relief); and (3) the
enforceability of the provisions of any such agreement or instrument in
accordance with its respective terms may be limited by laws affecting the
remedies which it provides, including, but not limited to, laws and judicial
decisions limiting such enforceability.

            This opinion is rendered solely to you for your use in connection
with the transactions contemplated by the Lease Documents, and may not be relied
upon by you for any other purpose, and may not be furnished to or relied upon by
any other person for any purpose, or otherwise used, circulated or quoted,
without our prior written consent. This opinion is rendered as of the date
hereof, and we disclaim any undertaking to advise of any changes which may
hereafter be brought to our attention.

                                                Very truly yours,









                                      E-3




           II. FORM OF OPINION TO BE GIVE BY LESSEE'S GENERAL COUNSEL

                                                      CHAUTAUQUA AIRLINES, INC.
                                                     c/o Wexford Management LLC
                                                         411 West Putnam Avenue
                                                            Greenwich, CT 06830
                                                                 (203) 862-7000

                                                          Direct Dial: 862-7012
                                                           Direct Fax: 862-7312
                                                     E-Mail: aamron@wexford.com

      June 25, 1999

      ICX Corporation
      Three Summit Park Drive
      Suite 200
      Cleveland, Ohio  44131
      Attn:  Chief Financial Officer and General Counsel

                                                      Re:   Chautauqua Airlines,
Inc.

      Gentlemen:

      I have acted as counsel for Chautauqua Airlines, Inc., a New York
corporation (the "Corporation"), in connection with the execution and delivery
of Aircraft Lease Agreement (N260SK) (the "Lease") between the Corporation and
ICX Corporation ("Lessor"), dated as of June 25, 1999, relating to the Embraer
ERJ-145LR aircraft bearing manufacturer's serial number EMB 145128; Lease
Supplement No. 1, dated as of June 25, 1999, between Lessor and Lessee; an
Acceptance Certificate, dated as of June 25, 1999, between Lessor and the
Corporation; and a Tax Indemnity Agreement, dated as of June 25, 1999, between
Lessor and Lessee (the Lease, the Lease Supplement, the Acceptance Certificate
and the Tax Indemnity Agreement are hereinafter collectively referred to as the
"Lessee Documents"). This opinion is being delivered to you pursuant to Section
5.1(g) of the Lease. Unless otherwise defined herein, capitalized terms used
herein have the meanings assigned to them in the Lease.

      In rendering this opinion, I have examined originals or copies, certified
or otherwise identified to my satisfaction, of the Lessee Documents, and have
investigated such questions of law, and have examined such other corporate
records of the Corporation and other documents, and have obtained and relied
(without independent investigation) upon such certificates and



assurances from public officials, as I have deemed necessary as a basis for the
purpose of rendering this opinion.

      For the purpose of rendering this opinion, I have assumed, without any
independent investigation:

      A.    the genuineness of all signatures other than those of the
            Corporation, the capacity of all natural persons, the authenticity
            of all documents and instruments submitted to me as originals, and
            the conformity to authentic original documents and instruments of
            all documents and instruments submitted to me as certified,
            conformed photostatic or facsimile copies; and

      B.    that the documents reviewed by me constitute legal, valid and
            binding obligations of each party thereto, other than the
            Corporation, enforceable against each such party in accordance with
            their respective terms.

      Based upon and subject to the foregoing, and subject to the qualifications
set forth below, I am of the opinion that:

      1. The Corporation is duly incorporated, validly existing, and in good
standing under the laws of the State of New York, and has the corporate power
and authority to carry on its business as presently conducted and to perform its
obligations under the Lessee Documents.

      2. Each of the Lessee Documents has each been duly authorized, executed
and delivered by the Corporation.

      3. The execution and delivery of the Lessee Documents, the consummation by
the Corporation of the transactions contemplated thereby and compliance by the
Corporation with the terms and provisions thereof do not contravene, and will
not result in any breach of or constitute any default under, or result in the
creation of any lien, charge or encumbrance upon any property of the
Corporation, under any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan, credit agreement, corporate charter,
by-law or other agreement or instrument to which the Corporation is a party or
by which the Corporation or its properties or assets may be bound.

            4. The Corporation provides interstate transportation of passengers
or property by aircraft as a common carrier for compensation. The Corporation is
the holder of an air carrier operating certificate issued by the Federal
Aviation Administration under Part 135 of the Federal Aviation Regulations and
49 U.S. Code ss.44705 for aircraft capable of carrying ten or more individuals
or 6,000 pounds or more of cargo. The Corporation is an air carrier that
conducts air taxi operations under an exemption issued by the Department of
Transportation under authority of Part 298 of the Federal Aviation Regulations.
The Corporation holds all licenses, certificates and permits from applicable
governmental authorities necessary for the conduct of its business as an air
carrier and the performance of its obligations under the Lease.



            5. There are no suits or proceedings, pending or threatened, against
the Corporation before any executive, legislative, judicial, administrative or
regulatory body which might, if adversely determined, have a material adverse
effect on the financial condition or business of the Corporation or its ability
to perform its obligations under the Lessee Documents.

            6. Neither the Corporation nor any of its properties or assets has
the right of immunity from suit or execution on the grounds of sovereignty.

            7. The Corporation is organized under the laws of the State of New
York. The president and at least two-thirds of the board of directors and other
managing officers of the Corporation are individuals who are citizens of the
United States. At least 75% of the voting interest in the Corporation is owned
or controlled, directly or indirectly, by individuals who are citizens of the
United States.

            The opinions expressed herein are qualified in their entirety as
follows: (a) no opinion is expressed with respect to laws other than the federal
laws of the United States and the State of New York; and (b) to the extent that
any one or more of the foregoing opinions relates to the enforceability of any
agreement or instrument: (1) the opinions are subject to the effect of
applicable laws or judicial decisions regarding bankruptcy, reorganization,
insolvency, fraudulent transfers, moratorium and other laws affecting creditors'
rights and debtors' relief generally; (2) the enforceability of the provisions
of any such agreement or instrument is subject to the application of principles
of equity, whether in a proceeding at law or in equity, including the exercise
of discretionary powers of any tribunal before which equitable remedies may be
sought (including, without limitation, specific performance and injunctive
relief); and (3) the enforceability of the provisions of any such agreement or
instrument in accordance with its respective terms may be limited by laws
affecting the remedies which it provides, including, but not limited to, laws
and judicial decisions limiting such enforceability.

      This opinion is rendered solely to you for your use in connection with the
transactions contemplated by the Lessee Documents, and may not be relied upon by
you for any other purpose, and may not be furnished to or relied upon by any
other person (other than Pearl Professional Corporation, which may rely upon
this opinion for purposes of rendering a separate opinion to you pursuant to
Section 5.1(g) of the Lease) for any purpose, or otherwise used, circulated or
quoted, without my prior written consent. This opinion is rendered as of the
date hereof, and I disclaim any undertaking to advise of any changes which may
hereafter be brought to my attention.

      Very truly yours,



      Arthur H. Amron
      General Counsel




              III. FORM OF OPINION LETTER TO BE GIVEN BY DAUGHERTY,
      FOWLER, PEREGRIN & HAUGHT, LESSEE'S OUTSIDE INDEPENDENT FAA COUNSEL


ICX Corporation
Three Summit Park Drive
Suite 200
Cleveland, Ohio  44131




Dear ______________:

      This opinion is furnished to you pursuant to Section 5.1 of the Aircraft
Lease Agreement dated as of June ___, 1999 (the "Lease") between ICX Corporation
("Lessor") and Chautauqua Airlines, ("Lessee") with respect to that portion of
the Federal Aviation Act of 1958, as amended (the "Act"), relative to the
recordation of instruments and the registration of aircraft under the Act.

      Capitalized terms not otherwise defined herein shall have the meanings
given them in the Lease.

                  We have examined and filed on this date with the Federal
            Aviation Administration (the "FAA") the following described
            instruments at the respective times listed below: the Lease and
            Lease Supplement with respect to the Aircraft, which Lease and Lease
            Supplement were filed at ___ p.m., C.D.T.

      Based on our examination of the above described instruments and of such
records of the FAA as we deemed necessary to render this opinion, it is our
opinion that:

      1.    the Lease is in due form for recordation by and has been duly filed
            for recordation with the FAA pursuant to and in accordance with the
            provisions of the Transportation Act;

      2.    the Airframe is duly registered in the name of the Lessor pursuant
            to and in accordance with the provisions of the Transportation Act;



      3.    the Aircraft is free and clear of liens and encumbrances of record
            except as created by the Lease;

      4.    the rights of the Lessor and the Lessee, under the Lease, with
            respect to the Aircraft, are perfected; and,

      5.    no authorization, approval, consent, license or order of, or
            registration with, or the giving of notice to, the FAA is required
            for the valid authorization, delivery and performance of the Lease,
            except for such filings as are referred to above.

      Since title to the Airframe originated with an AC Form 8050-2 Aircraft
Bill of Sale from EMBRAER, a foreign vendor, our opinion with respect to the
Airframe covers only that period of time subsequent to the commencement of its
United States registration on April ___, 1999.

      No opinion is expressed as to laws other than Federal laws of the United
States. In rendering this opinion, we were subject to the accuracy of the FAA,
its employees and agents, in the filing, indexing and recording of instruments
filed with the FAA and in the search for encumbrance cross-reference index cards
for the Engines. Further, in rendering this opinion we are assuming the validity
and enforceability of the above-described instruments under local law. Since our
examination was limited to records maintained by the FAA, our opinion does not
cover liens which are perfected without the filing of notice thereof with the
FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29
of the United States Code, possessory artisan's liens, or matters of which the
parties have actual notice. In rendering this opinion we are assuming that there
are no documents with respect to the Aircraft which have been filed for
recording under the recording system of the FAA but have not yet been listed in
the available records of such system as having been so filed.

                                    Very truly yours,



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











                                                                       EXHIBIT F

                      FORM OF RETURN ACCEPTANCE CERTIFICATE


            Return Acceptance Certificate No. ___ dated this ___ day of _______,
_______.

            This Return Acceptance Certificate is executed pursuant to that
certain Aircraft Lease Agreement dated as of June ___, 1999 (the "Lease")
between ICX Corporation ("Lessor") and Chautauqua Airlines, Inc. ("Lessee").

            The terms used in this Return Acceptance Certificate No. ____ shall
have the meanings ascribed to such terms in the Lease.

            This Return Acceptance Certificate is executed by the parties hereto
to confirm, among other things, that on the date of this Return Acceptance
Certificate at [ ] time the following items are herewith delivered by Lessee to
Lessor:

            (a) One aircraft:


      Manufacturer:  Embraer


      Model:         ERJ-145LR



      Manufacturer's Serial No.:  EMB 145128



      Including:




                                      F-1





            (b) the following described aircraft engines installed thereon:





                                                                Manufacturer's
       Manufacturer                  Make and Model              Serial Nos.
       ------------                  --------------              ----------

                                                           
  Allison Engine Company                AE3007A1                 CAE 311142
          Engine

                                                                 CAE 311143




      Together with:




            (c) the aircraft documentation set forth in Attachment 2 hereto.





      2. HOURS AND CYCLES. The Airframe, Engines and Parts had the following
hours/cycles at return:




      A.          Airframe:



                  _____ hours/_____ cycles since last "C" check


                  _____ months remaining until next Major Structural Inspection







      B.          Engines:



                                      F-2




                                      TIME SINCE LAST HEAVY ENGINE VISIT

                                        HOURS                   CYCLES

                MSN



                MSN

                                          TIME REMAINING TO NEXT LIFE-

                                          LIMITED PART REMOVAL

                                        HOURS                   CYCLES

                MSN



                MSN






      C.          APU:

            _____ hours/_____ cycles remaining until next inspection


            _____ hours/_____ cycles remaining on turbine and compressor
            life-limited parts

      D.          Landing Gears:

            _____ hours/_____ cycles remaining to next scheduled removal on each
            landing gear


                                              TIME REMAINING TO NEXT



                                      F-3




                                                      SCHEDULED REMOVAL

                                                   HOURS              CYCLES

                MSN


                MSN




      E.    Status of components or Parts with time/cycle and calendar limits
            (see attached sheet)

      F.    Fuel on board at Delivery: _____ pounds (_____ gallons).


      ACCEPTANCE BY LESSOR. The above specified Aircraft, Engines, parts and
documentation are hereby accepted by Lessor subject to (a) the provisions of the
Lease and (b) correction by Lessee of the Discrepancies specified in Attachment
3 hereto (which corrections Lessee hereby undertakes to perform as soon as
reasonably possible). The acceptance of the Aircraft, Engines and Parts
hereunder by Lessor shall not constitute any waiver by Lessor of any right or
remedy it may have under the Lease, and shall not relieve or diminish any
obligation of Lessee under the Lease.

      NO DISCREPANCIES, NO LIENS, NAVIGATION AND AIRPORT CHARGES. Lessee
represents and warrants to Lessor that (a) the Aircraft is hereby returned to
Lessor in the condition and the manner required by the Lease (other than the
Discrepancies listed on Attachment 3 hereto), (b) there are no Liens on the
Aircraft, other than Liens arising by or through Lessor, and (c) all navigation
charges, landing fees and other charges and fees payable for the use of or
services provided by any airport, whether in respect of the Aircraft or any
other aircraft owned, leased or operated by Lessee have been paid in full.

      PLACE OF EXECUTION. This Return Acceptance Receipt is executed and
delivered by the parties in _______ [place].

      IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptance
Receipt to be executed in their respective corporate names by their duly
authorized representatives as of the day and year first above written.

LESSOR:


                                      F-4



ICX CORPORATION



By:   __________________


Its   __________________








LESSEE:



CHAUTAUQUA AIRLINES, INC.





By:   __________________


Its   __________________





                                      F-5









                  ATTACHMENTS TO RETURN ACCEPTANCE CERTIFICATE:

1.    Aircraft Hours and Cycles

2.    Aircraft Documentation

3.    List of Discrepancies







                                  ATTACHMENT 1
                        TO RETURN ACCEPTANCE CERTIFICATE

                            AIRCRAFT HOURS AND CYCLES




                                  ATTACHMENT 2
                        TO RETURN ACCEPTANCE CERTIFICATE

                             AIRCRAFT DOCUMENTATION

      The following documents are to be returned with the Aircraft in a current,
up-to-date and correct status:

                                     MANUALS

            NAME

1.    Approved Flight Manual

2.    Flight Crew Operating Manual

3.    Weight and Balance Manual

4.    Wiring Diagram Manual (including aircraft wiring list)

5.    Illustrated Parts Catalog for Airframe and Engines

6.    Aircraft and Engine Maintenance Manual

7.    Minimum Equipment Lists

8.    All Checklists

9.    Structural Repair Manual

                    AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS

1.    Log book (currently on Aircraft)

2.    Airframe Maintenance Status (with time-to-go or time since last)

3.    Airworthiness Directive Compliance Report

4.    Modification Status Report (with documentation of authority for
      modifications)

5.    Weighing Report (most recent)

6.    Accident and Incident Report

7.    List of Life Limited Components (with time-to-go with installation and use
      history since new)

8.    List of all Major Repairs



9.    Report of all Maintenance Reliability Reports Filed with the FAA

10.   Test Flight Reports

11.   Job Cards and Work Accomplishment Documents (copies)

12.   X-ray Pictures (most recent)

13.   Maintenance Technical Log books

14.   Aircraft Maintenance History Cards

15.   All Mechanical Interruption Summary and Mechanical Reliability Reports
      submitted to the FAA

16.   Last Overhaul and Repair Documents

17.   Airworthiness Directive Compliance Report

18.   List of Life Limited Components (with time-to-go with installation and use
      history since new)

19.   Component records maintained in accordance with a record-keeping policy
      approved by and acceptable to the FAA to certify the status and
      maintenance histories of the components.

                        ENGINE RECORDS (FOR EACH ENGINE)

1.    Last Overhaul and Repair Documents

2.    Airworthiness Directive Compliance Report

3.    List of Life Limited Components (with time-to-go with installation and use
      history since new)

4.    Modification Status Report (with documented authority for such
      modifications)


                                  CERTIFICATES

1.    Certificate of Airworthiness

2.    Certificate of Registration


                        MISCELLANEOUS TECHNICAL DOCUMENTS

1.    Passenger Cabin Configuration Drawings



2.    Emergency Equipment Location Drawings







Receipt of the foregoing documents, except as noted, is hereby acknowledged.



                                          ICX CORPORATION



                                          By:  _______________________________


                                          Title:  ____________________________









                                  ATTACHMENT 3
                        TO RETURN ACCEPTANCE CERTIFICATE

                                  DISCREPANCIES

EX-10.36

                                                           Exhibit 10.36

                            AIRCRAFT LEASE AGREEMENT

                          DATED AS OF SEPTEMBER 2, 1999

                                     BETWEEN

                           FINOVA CAPITAL CORPORATION,
                                    AS LESSOR

                                       AND

                           CHAUTAUQUA AIRLINES, INC.,
                                    AS LESSEE

                                   RELATING TO

                       ONE EMBRAER MODEL EMB-145 AIRCRAFT

                         U.S. REGISTRATION NUMBER N262SK
                                       AND
                       MANUFACTURER'S SERIAL NUMBER 145168



                     This is Counterpart Number ___ of four (4) serially
             numbered, manually executed counterparts of this Aircraft Lease
             Agreement. To the extent, if any, that this Aircraft Lease
             Agreement constitutes chattel paper under the Uniform Commercial
             Code in any jurisdic tion, no security interest in this Agreement
             may be created through the transfer and possession of any
             counterpart of this Aircraft Lease Agreement other than the
             serially numbered counterpart thereof marked Counterpart Number 1.





                            AIRCRAFT LEASE AGREEMENT
                                    (N262SK)


             THIS AIRCRAFT LEASE AGREEMENT (N262SK) (this "Agreement"), dated as
of the 2nd day of September, 1999, is between FINOVA CAPITAL CORPORATION, a
Delaware corporation ("Lessor"), and CHAUTAUQUA AIRLINES, INC., a New York
corporation ("Lessee").

                              W I T N E S S E T H:

             WHEREAS, Lessor owns the Aircraft described below;

             WHEREAS, Lessee desires to lease the Aircraft from Lessor; and

             WHEREAS, Lessor is agreeable to leasing the Aircraft to Lessee,
upon and subject to the terms and conditions of this Agreement.

             NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions set forth herein, the receipt and sufficiency of which are hereby
acknowledged by Lessor and Lessee, Lessor and Lessee hereby agree as follows:

                                    SECTION 1

                                   DEFINITIONS

             The following terms shall, except where the context otherwise
requires, have the following respective meanings for all purposes of this
Agreement:

             "ADDITIONAL INSURED" shall have the meaning ascribed to such term
in Section 11.2(a).

             "ADS" shall mean all airworthiness directives or comparable
directives issued by the Aviation Authority or any other Governmental Entity
exercising appropriate jurisdiction over the Aircraft requiring compliance.

             "AFFILIATE" shall mean, with respect to a specified Person, any
other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.




             "AGREEMENT," "LEASE," "HEREIN," "HEREOF," HEREUNDER," and other
like words shall mean this Agreement (including any Appendices hereto), as it
may be amended, modified or supplemented pursuant to the applicable provisions
hereof.

             "AIRCRAFT" shall mean, collectively, the Airframe, the Engines and
the Aircraft Documents.

             "AIRCRAFT DOCUMENTS" shall mean the documents listed in APPENDIX C
hereto, updated and maintained through the Return Date, and, in addition, all
other records, documents, log books, manuals, drawings and data relating to the
Aircraft and developed or caused to be developed by Lessee or required by the
Aviation Authority to be maintained by Lessee.

             "AIRCRAFT REDELIVERY DOCUMENTS" shall have the meaning ascribed to
such term in Section 18.2 hereof.

             "AIRFRAME" shall mean the Embraer model EMB-145 airframe described
in APPENDIX A hereto, together with all Parts, excluding, however, the Engines
or any other engines from time to time installed thereon.

             "ANTICIPATED DELIVERY DATE" shall mean September 2, 1999, which is
the date on which the parties hereto anticipate that the Aircraft will be
Delivered to Lessee pursuant to the terms and conditions of this Agreement.

             "APPROVED JURISDICTION" shall mean any of the countries listed in
APPENDIX G hereto (or any other country approved by Lessor in writing) wherein
the Aircraft may be registered pursuant to Section 5.1(b) hereof and a Permitted
Sublessee may be domiciled pursuant to Section 6.1(a) hereof.

             "ASSIGNMENT OF ENGINE MAINTENANCE AGREEMENT" shall mean the
Assignment of Engine Maintenance Agreement, substantially in the form of
APPENDIX I hereto, which shall be executed by Lessee (and consented to by Engine
Manufacturer) and delivered by Lessee to Lessor pursuant to Section 7.1(d)
hereof.

             "ASSUMED TRANSACTION EXPENSES" shall have the meaning ascribed to
such term in Section 4.1(b) hereof.

             "AUTHORIZED MAINTENANCE PERFORMER" shall mean Lessee or any other
repair station licensed or certificated by the Aviation Authority doing
maintenance work within the scope of its authorization.

             "AVIATION AUTHORITY" shall mean the FAA and any other Governmental
Entity having jurisdiction over the Aircraft, and any successors thereto,
respectively.


                                      -2-


             "BASE LEASE RENT AMOUNT" shall mean the amount of Basic Rent, as
set forth in APPENDIX B hereto, owing during the Term from the Delivery Date to
the Initial Expiration Date (as may be adjusted as a result of the Basic Rent
Adjustment).

             "BASE TERM PURCHASE PRICE" shall mean the amount, as set forth in
APPENDIX B hereto, of the purchase price for the Aircraft to be paid by Lessee
on the Initial Expiration Date pursuant to Section 3.9(a) hereof.

             "BASIC RENT" shall mean, as applicable, the Base Lease Rent Amount
or the Renewal Period Rent Amount, which shall be payable pursuant to Section
4.1 hereof.

             "BASIC RENT ADJUSTMENT" shall have the meaning ascribed to such
term in Section 4.1(b) hereof.

             "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in Phoenix, Arizona, Indianapolis,
Indiana, or New York, New York are required or authorized to close.

             "CERTIFICATED AIR CARRIER" shall mean an air carrier holding an air
carrier 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 6,000 pounds or more of cargo.

             "CLAIMS" shall have the meaning ascribed to such term in Section
10.1 hereof.

             "CYCLE" shall mean one take-off and next subsequent landing of the
Aircraft.

             "DEFAULT" shall mean any event which, with the giving of notice,
lapse of time, or both, would become an Event of Default.

             "DELIVERY" shall have the meaning ascribed to such term in Section
3.6 hereof.

             "DELIVERY DATE" shall mean the date on which the Delivery occurs.

             "DELIVERY LOCATION" shall mean Queens, New York (or any other
location mutually approved by Lessor and Lessee which is determined by the
parties to be acceptable for taxation purposes).

             "DOLLARS" and "$" shall mean the lawful currency of the United
States of America.

             "ENGINE" shall mean any of the two (2) engines identified as to
manufacturer and type and by serial number in APPENDIX A hereto, together with
all Parts installed thereon, and any engine substituted for an Engine in
accordance with Section 19.2.


                                      -3-


             "ENGINE MAINTENANCE AGREEMENT" shall mean a "Power-By-The-Hour"
Maintenance Agreement between the Engine Manufacturer and Lessee (or other
similar agreement between Lessee and any other Authorized Maintenance
Performer), as approved by Lessor (with such right to approve, however, which
shall not be unreasonably withheld, being limited to the lien rights granted
under the agreement to such Authorized Maintenance Performer and, in regard to
the first such agreement, the assignability of the agreement), in effect from
time to time, which shall provide for full maintenance (other than routine
day-to-day maintenance; PROVIDED, that foreign-object damage, life-limited
parts, line replacement units and abuse may be excluded or separately charged)
for the Engines at no cost other than standard per-cycle (or per hour) rates
(I.E., excluding charges based on the current maintenance status of the
Engines), all benefits of which program are generally available to qualifying
air carriers located in the United States.

             "ENGINE MANUFACTURER" shall mean Allison Engine Company, Inc.

             "EQUIPMENT CHANGE" shall have the meaning ascribed to such term in
Section 7.7 hereof.

             "EQUIPMENT COST" shall mean the amount equal to the sum of the
Purchase Price and the Transaction Expenses.

             "EVENT OF DEFAULT" shall mean any one of the events specified in
Section 16.1 hereof.

             "EXPIRATION" shall mean the end of the Term as herein agreed
(assuming no prior Termination occurs).

             "EXPIRATION DATE" shall have the same meaning as the Initial
Expiration Date, unless Lessee exercises its Renewal Option pursuant to Section
3.3 hereof, whereupon the Expiration Date shall be the end of the Renewal
Period.

             "FAA" shall mean the Federal Aviation Administration of the United
States of America and all successors thereto.

             "FAIR MARKET SALES VALUE" of the Aircraft shall mean the value,
from time to time, which would be obtained in an arm's-length transaction
between an informed and willing buyer (other than a buyer currently in
possession or a used equipment dealer) under no compulsion to buy, and an
informed and willing seller, under no compulsion to sell, as the same shall be
specified by agreement between Lessor and Lessee, or, if not agreed to by Lessor
and Lessee within a period of fifteen (15) days after either party requests a
determination, then as determined by two recognized independent aircraft
appraisers, one of which shall be appointed by Lessor and the other of which
shall be appointed by Lessee, or, if such appraisers


                                      -4-


cannot agree on such appraisal within twenty (20) days, each shall render its
own appraisal and shall by mutual consent appoint a third independent recognized
aircraft appraiser within five (5) days after the end of such twenty (20)-day
period. If the two appraisers fail to appoint a third independent recognized
aircraft appraiser within such five-day period, then either party, on behalf of
both, may apply to the American Arbitration Association (or any successor
organization thereto) in New York City, New York, for the appointment of such
third appraiser. The appraisal shall be completed within thirty (30) days after
the appointment of such third appraiser. As soon as the last appraiser appointed
has delivered his appraisal, that appraisal shall be compared with the
appraisals given by the other two appraisers. If the determination of one
appraiser is more disparate from the average of all three determinations than
each of the other two determinations, then the determination of such appraiser
shall be excluded, the remaining two determinations shall be averaged and such
average shall be final and binding upon the parties hereto; otherwise the
average of all three determinations shall be final and binding upon the parties
hereto.

             "FAR" shall mean the Federal Aviation Regulations issued by the
FAA.

             "FEDERAL AVIATION ACT" shall mean the United States Transportation
Code of 1994, as amended, as in effect on the date of this Agreement codified in
Subtitle VII of Title 49 of the United States Code, or any successor substituted
legislation at the time in effect and applicable.

             "FLIGHT HOURS" shall mean, with respect to the Aircraft, the time
as measured in hours and tenths of hours elapsing from the moment at which the
wheels of the Aircraft leave the ground on a takeoff until the wheels of the
Aircraft touch the ground on the next landing of the Aircraft.

             "GOVERNMENTAL ENTITY" shall mean: (a) any national government, any
political subdivision thereof, or any state, regional, or local authority
therein, and (b) any agency, board, commission, department, division, organ,
instrumentality, or court, of any of the foregoing, however constituted.

             "INDEMNIFIED PARTIES" shall have the meaning ascribed to such term
in Section 10.1 hereof.

             "INITIAL EXPIRATION DATE" shall mean the date which is one hundred
ninety-nine (199) months after the Delivery Date.

             "INTEREST" shall mean the interest which shall accrue on unpaid
installments of Rent pursuant to Section 4.4 hereof.

             "ITEMS" or "ITEMS OF EQUIPMENT" shall mean any or all of the
Aircraft, the Airframe, the Engines, and each Part.


                                      -5-


             "LAW" shall mean: (a) any constitution, statute, decree,
regulation, order, or other directive of the Governmental Entity of any location
to, from, or within which the Aircraft shall operate; (b) any treaty, pact,
compact, or other agreement to which any Governmental Entity is a signatory or
party; (c) any judicial or administrative interpretation or application of any
of the foregoing; and (d) any amendment or revision of any of the foregoing.

             "LEASE DOCUMENTS" shall mean this Agreement, the Lease Supplement,
the Engine Maintenance Agreement, the Assignment of Engine Maintenance
Agreement, the Tax Indemnity Agreement, and all other documents required to be
executed and delivered pursuant to such documents.

             "LEASE SUPPLEMENT" shall mean Lease Supplement No. 1, substantially
in the form of APPENDIX D hereto, which, as of the Delivery Date, shall be
executed by Lessor and Lessee, and, together with this Agreement, shall be filed
for recordation with the FAA.

             "LESSOR'S LIENS" shall mean Liens on or relating to or affecting
the Aircraft, the Airframe, the Engines or any part thereof arising as a result
of (a) Claims against Lessor not relating to this Agreement, (b) acts of Lessor
neither permitted nor required to be taken by it under this Agreement, (c) the
transfer by Lessor of its interest or any part thereof in the Aircraft, (d)
Taxes imposed or Claims asserted against Lessor which Lessee has not agreed to
indemnify against pursuant hereto or (e) any act, omission or circumstance
occurring or omitted prior to the Delivery Date or after the Return of the
Aircraft.

             "LIEN" shall mean any lien, mortgage, charge, deed of trust,
encumbrance, pledge, hypothecation, attachment, license, assignment by way of
security or security interest, including, without limitation: (a) any
preferential arrangement resulting in a secured transaction or having the same
economic or legal effect as a lien, mortgage, charge, deed of trust,
encumbrance, pledge, hypothecation, attachment, license, assignment by way of
security or security interest; (b) any agreement to give any lien, mortgage,
charge, deed of trust, encumbrance, pledge, hypothecation, attachment, license,
assignment by way of security or security interest; (c) the interest of a vendor
or a lessor under any conditional sale agreement, lease, hire purchase agreement
or other title retention arrangement; or (d) any statutory or other right of a
Governmental Entity to detain, hold or seize an aircraft or any part thereof
which is immediately enforceable with respect to such aircraft.

             "MAINTENANCE PROGRAM" shall mean Lessee's maintenance program as
set forth in its maintenance manual for the Aircraft, as it may be amended
during the Term in accordance with the requirements of the applicable Aviation
Authority.

             "MANUFACTURER" shall mean Embraer -- Empresa Brasileira de
Aeronautica S.A., the manufacturer of the Aircraft.


                                      -6-


             "NET ECONOMIC RETURN" shall mean Lessor's net after-tax yield,
determined by utilizing the multiple investment sinking fund method of analysis,
computed on the basis of the same methodology and assumptions as were utilized
by Lessor in determining Basic Rent and Stipulated Loss Value as of the Delivery
Date.

             "OTHER AIRCRAFT" shall mean that certain Embraer model EMB-145
aircraft more fully described in the Other Lease Agreement.

             "OTHER LEASE AGREEMENT" shall mean that certain Aircraft Lease
Agreement (N261SK) dated as of August 30, 1999 between Lessor, as lessor, and
Lessee, as lessee, regarding the lease of the Other Aircraft.

             "PARTS" shall mean any item, including, without limitation,
materials, accessories, components, equipment, appliances, instruments,
avionics, appurtenances, furnishings and any other equipment or components of
whatever nature (other than the Engines), which are installed in or attached or
appurtenant to the Aircraft.

             "PERMITTED LIEN" shall have the meaning ascribed to such term in
Section 9 hereof.

             "PERMITTED SUBLEASE" shall have the meaning ascribed to such term
in Section 6.1(a) hereof.

             "PERMITTED SUBLESSEE" shall have the meaning ascribed to such term
in Section 6.1(a) hereof.

             "PERSON" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity, of whatsoever nature.

             "PURCHASE AGREEMENT" shall mean the Aircraft Purchase Agreement
dated as of the date hereof between Seller, as seller, and Lessor, as buyer,
regarding the purchase and sale of the Aircraft.

             "PURCHASE OPTION" shall have the meaning ascribed to such term in
Section 3.9 hereof.

             "PURCHASE PRICE" shall mean the amount, as set forth in APPENDIX B
hereto, of the "Purchase Price" as defined by the Purchase Agreement.

             "RENEWAL OPTION" shall have the meaning ascribed to such term in
Section 3.3 hereof.


                                      -7-


             "RENEWAL PERIOD" shall have the meaning ascribed to such term in
Section 3.3 hereof.

             "RENEWAL PERIOD PURCHASE PRICE" shall mean the amount, as set forth
in APPENDIX B hereto, of the purchase price for the Aircraft to be paid by
Lessee on the last day of the Renewal Period pursuant to Section 3.9(a) hereof.

             "RENEWAL PERIOD RENT AMOUNT" shall mean the amount of Basic Rent,
as set forth in APPENDIX B hereto, owing during the Renewal Period.

             "RENT" shall mean Basic Rent and Supplemental Rent, collectively.

             "RENT DATE" shall have the meaning ascribed to such term in Section
4.2 hereof.

             "RENTAL PERIOD" shall have the meaning ascribed to such term in
Section 4.2 hereof.

             "REPLACEMENT ENGINE" shall mean an engine satisfying the conditions
of Section 19.2 hereof.

             "RESTRICTED PERIOD" shall mean the period beginning on the Delivery
Date and ending on the seventh (7th) anniversary of the end of the calendar year
in which the Delivery Date occurs.

             "RETURN" shall mean the redelivery of the Aircraft (including the
Aircraft Documents) to Lessor in accordance with Sections 17 and 18 hereof.

             "RETURN CONDITIONS" shall have the meaning ascribed to such term in
Section 18.1 hereof.

             "RETURN DATE" shall mean the date at Expiration or upon earlier
Termination when the Aircraft (including the Aircraft Documents) are actually
returned to Lessor in conformity with the Return Conditions.

             "RETURN LOCATION" shall mean any airport in the continental United
States on Lessee's regional jet route system (where Lessee has appropriate
maintenance and repair facilities) as selected by Lessor.

             "SELLER" shall mean Solitair Corp., a Delaware corporation.

             "STIPULATED LOSS VALUE" for the Aircraft as of any particular date
of computation shall mean an amount equal to the sum of:


                                      -8-


                     (a) an amount determined by multiplying the Purchase Price
      for the Aircraft by the percentage specified in APPENDIX H hereto opposite
      the immediately prior Rent Date applicable to such date of computation;
      and

                     (b) the amount of any unpaid installments of Basic Rent due
      prior to such date (together with any Interest owing thereon).

             "SUPPLEMENTAL RENT" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes or agrees to pay to
Lessor pursuant to this Agreement or any other of the Lease Documents,
including, without limitation, (a) Stipulated Loss Value payments, (b) all other
amounts required to be paid by Lessee pursuant to this Agreement, and (c)
amounts payable pursuant to the Tax Indemnity Agreement.

             "SURVIVING ENGINE" shall have the meaning ascribed to such term in
Section 19.3 hereof.

             "TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement
dated as of the date hereof between Lessee and Lessor relating to this
Agreement.

             "TAX" or"TAXES" shall mean any and all taxes, charges, fees,
imposts, levies, withholdings, deductions or other charges of any nature,
together with any penalties, fines, or interest thereon or other additions
thereto which are imposed, withheld, levied, or assessed by or on behalf of, or
otherwise payable to, any Governmental Entity.

             "TERM" shall mean the period commencing on the Delivery Date and
ending on the Expiration Date or on any earlier Termination Date, as applicable.

             "TERMINATION" shall mean the termination of this Agreement prior to
the Expiration Date pursuant to any of Sections 2.1, 2.2, 3.8, 4.1(b)(iv) or
16.2 hereof.

             "TERMINATION DATE" shall mean the date on which a Termination is
effective.

             "TOTAL LOSS" shall mean any of the following events with respect to
the Aircraft, the Airframe or an Engine: (a) the destruction, damage beyond
economical


                                      -9-


repair, or such property becoming permanently unfit for normal use, for any
reason whatsoever; (b) any event which results in an insurance settlement on the
basis of actual or constructive or compromised or agreed or arranged total loss;
(c) the disappearance of the Aircraft for a period of sixty (60) consecutive
days; (d) the loss of possession or loss of use by Lessee for a period of more
than sixty (60) consecutive days due to hijacking, theft, or other criminal
actions; (e) the confiscation, condemnation, taking or seizure of title by any
Governmental Entity which shall continue for a period in excess of sixty (60)
days; (f) with respect to the Airframe only, the requisition or taking of use of
the Airframe by a Governmental Entity (whose obligations do not bear the full
faith and credit of the United States) for a period in excess of one hundred
eighty (180) consecutive days; (g) with respect to an Engine, the requisition or
taking of use of the Airframe by a Governmental Entity; (h) the grounding of the
Aircraft for a period of twelve (12) consecutive months due to action by a
Governmental Entity, unless during such twelve-month period Lessee diligently
carries forward all necessary and desirable steps to permit normal use within
such period (PROVIDED, HOWEVER, that in no event shall such use have been
prohibited for a period of eighteen (18) consecutive months); (i) the operation
or location of the Aircraft, while under requisition for use by any Governmental
Entity, in any areas excluded from coverage by any insurance policy in effect
with respect to such Aircraft required by the terms of this Agreement, unless
Lessor and Lessee shall have obtained an indemnity in freely transferable
Dollars from that Governmental Entity covering the risks excluded from coverage
and satisfactory to both Lessor and Lessee; or (j) any divestiture of title to
an Engine treated as a Total Loss pursuant to Section 19.2 hereof.

             "TRANSACTION EXPENSES" shall mean the costs and disbursements
incurred (or assumed) by Lessor or Lessee in connection with the execution and
delivery of the Lease Documents, the Purchase Agreement and related documents,
the delivery of the Aircraft to Lessor pursuant to the Purchase Agreement, and
the lease of the Aircraft to Lessee pursuant to this Agreement, including,
without limitation:

                     (a) the reasonable fees, expenses and disbursements of (i)
      Herriot, Simbro & White, P.C., special counsel to Lessor, (ii) Womble
      Carlyle Sandridge & Rice, special tax counsel to Lessor, (iii) McAfee and
      Taft, special FAA counsel to Lessor, (iv) Fred Klein, of GRA (appraiser of
      Aircraft), and (v) Pearl Professional Corporation, special counsel to
      Lessee;

                     (b) all other reasonable out-of-pocket expenses in
      connection with the transactions contemplated by this Agreement,
      including, without limitation, printing and duplication expenses and any
      recording and filing fees;


                                      -10-


                     (c) the reasonable expenses and placement fees of Seabury
      Securities, LLC; and

                     (d) any other amounts approved by Lessee and Lessor.

             "USER" shall have the meaning ascribed to such term in Section
8.2(b) hereof.

                                    SECTION 2

                              CONDITIONS PRECEDENT

             2.1 LESSOR'S CONDITIONS PRECEDENT. Lessor's obligation to deliver
and to lease the Aircraft to Lessee hereunder shall be subject to satisfaction
of each of the following conditions precedent:

                     (a) All of the representations and warranties of Lessee set
forth in Section 14.1 hereof shall be true and correct in all material respects
as of the date hereof and as of the Delivery Date.

                     (b) Lessor shall have acquired good and marketable title to
the Aircraft free and clear of all liens pursuant to the terms and conditions of
the Purchase Agreement.

                     (c) No material adverse change in the affairs or finances
of Lessee shall have occurred since the date of the most recent financial
statements of Lessee delivered to Lessor.

                     (d) Lessor shall have approved the results of tax lien,
judgment, litigation and UCC searches and credit and trade reference checks
performed with respect to Lessee.

                     (e) Lessor shall have received, on or before the Delivery
Date, all of the following, all of which shall be in form and substance
reasonably satisfactory to Lessor:

                           (i) a certificate of an officer of Lessee certifying:

                                    (A) the names and true signatures of the
             incumbent officers of Lessee authorized to sign this Agreement and
             the other Lease Documents;

                                    (B) the duly adopted board resolution of
             Lessee approving and authorizing the execution, delivery and
             performance of this Agreement and the other Lease Documents, any
             related agreements and all transactions contemplated herein or
             therein (a copy of which shall be attached to such certificate);

                                    (C) that the representations and warranties
             contained in Section 14.1 hereof are true and accurate on and as of
             the Delivery Date; and


                                      -11-


                                    (D) no Default, Event of Default or Total
             Loss has occurred and is continuing.

                            (ii) a certificate of insurance issued by the
      insurer or broker for Lessee evidencing compliance with the insurance
      provisions of Section 11 hereof;

                            (iii) the fully-executed Lease Supplement, Tax
      Indemnity Agreement, Assignment of Engine Maintenance Agreement (if the
      Engine Maintenance Agreement has been executed and delivered as of
      Delivery) and the other Lease Documents;

                            (iv) a copy of Lessee's air carrier certificate
      issued by the FAA;

                            (v) a copy of Lessee's FAA-approved maintenance
      program;

                            (vi) the completed Year 2000 Questionnaire sent by
      Lessor to Lessee;

                            (vii) the fully-executed Other Lease Agreement;

                            (viii) the fully-executed Aircraft Purchase
      Agreement dated as of the date hereof between Seller, as seller, and
      Lessor, as buyer, regarding the purchase and sale of the Other Aircraft;

                            (ix) the payment of the first month's Basic Rent;
      and

                            (x) a legal opinion addressed to Lessor and dated as
      of the Delivery Date, issued by Pearl Professional Corporation, the
      general counsel of Lessee and/or a separate firm of attorneys reasonably
      acceptable to Lessor, to the effect that:

                                    (A) Lessee is duly incorporated, is validly
             existing as a corporation in good standing under the laws of its
             formation, and has full corporate power and authority to carry on
             its business in which it is presently engaged and to perform its
             obligations under the Lease Documents;

                                    (B) the execution and delivery of the Lease
             Documents to which Lessee is a party, the consummation by Lessee of
             the transactions therein contemplated and compliance by Lessee with
             the terms and provisions thereof do not and will not result in the
             violation of the provisions of the articles of incorporation or the
             by-laws of Lessee as in effect on the date of such opinion; and do
             not and will not conflict with or result in a breach of any terms
             or provisions of, or constitute a default under, or result in the
             creation or imposition of any lien,


                                      -12-


             charge, or encumbrance upon, any property or assets of Lessee under
             any indenture, mortgage, or other agreement or instrument to which
             Lessee is a party or by which it or any of its properties are or
             may be bound, or any existing applicable law, rule or regulation,
             or any judgment , order or decree then in effect, of any
             government, governmental instrumentality or court having
             jurisdiction over Lessee or any of its activities or properties;

                                    (C) the Lease Documents to which Lessee is a
             party have each been duly authorized, executed and delivered by
             Lessee, and each such instrument is a legal, valid, enforceable and
             binding obligation of Lessee, except as encorceability may be
             limited by bankruptcy, insolvency, reorganization or other laws of
             general application affecting the enforcement of creditors' rights;

                                    (D) except for any filing or recording that
             may be required under the Federal Aviation Act (and except such
             other filings or recordings as Lessee's counsel shall specify have
             been duly effected), no filing or recording of any instrument or
             document (including the filing of any financing statement) is
             necessary under the laws of the United States or of the State of
             Indiana in order for the Agreement to constitute a valid and
             perfected lease of record relating to the Aircraft;

                                    (E) except as disclosed in the opinion,
             there are no suits or proceedings pending or, to the knowledge of
             such counsel, threatened against Lessee in any court or before any
             regulatory commission, board or other administrative governmental
             agency against or affecting Lessee, which if determined adversely
             to Lessee would have a material adverse effect on the financial
             condition or business of Lessee or the performance by it of its
             obligations under the Lease Documents;

                                    (F) Lessee holds all licenses, certificates
             and permits from applicable governmental authorities in the United
             States necessary for the conduct of its business as a Certificated
             Air Carrier;

                                    (G) no authorization, approval, consent,
             license or order of, or registration with, or the giving of notice
             to any Governmental Entity is required for the valid authorization,
             execution, delivery and performance by Lessee of the Lease
             Documents to which it is a party, except for any filings or
             recordings with the FAA; and

                                    (H) The Aircraft is "equipment" as described
             in Section 1110(a)(2)(A) of the United States Bankruptcy Code.


                                      -13-


If for any reason (including Lessee's failure to satisfy any of the above
conditions precedent under this Section 2.1, but not including a failure of
Lessor or the Aircraft to conform to the requirements of Section 2.2 hereof) the
Aircraft shall not have been delivered to and accepted by Lessee within thirty
(30) days after the Anticipated Delivery Date, Lessor shall have the right (but
not the obligation) to terminate this Agreement by giving notice to Lessee to
that effect, with such notice of termination taking effect immediately,
whereupon neither Lessee nor Lessor shall have any further obligations under
this Agreement.

             2.2 LESSEE'S CONDITIONS PRECEDENT. Lessee's obligation to lease the
Aircraft from Lessor hereunder shall be subject to satisfaction of each of the
following conditions precedent:

                     (a)    The Aircraft shall not have suffered a Total Loss
                            prior to the Delivery.

                     (b)    Lessor shall have acquired title to the Aircraft.

                     (c)    Lessor shall have executed and delivered the Lease
                            Supplement.

                     (d)    Lessor shall have executed and delivered the Other
                            Lease Agreement.

In the event that Lessor shall have failed to fulfill the above conditions
precedent by the date that is thirty (30) days after the Anticipated Delivery
Date, Lessee shall have the right (but not the obligation) to terminate this
Agreement by giving notice to Lessor to that effect, with such notice of
termination taking effect immediately, whereupon neither Lessor nor Lessee shall
have any further obligations under this Agreement.

                                    SECTION 3

                       LEASE OF AIRCRAFT; TERM; DELIVERY;
                  TERMINATION FOR OBSOLESCENSE; PURCHASE OPTION

             3.1 LEASE OF THE AIRCRAFT. On the Delivery Date, Lessor shall lease
the Aircraft to Lessee and Lessee shall lease the Aircraft from Lessor during
the Term and return it on the Expiration Date (or upon the earlier Termination
of this Agreement as provided herein), upon and subject to the terms and
conditions of this Agreement. At all times during the Term, full legal title to
the Aircraft (including the Aircraft Documents) shall remain vested in Lessor to
the exclusion of Lessee, notwithstanding the delivery thereof to, and the use
by, Lessee.

             3.2 TERM. The Term shall commence on the Delivery Date and continue
until the Initial Expiration Date, subject to (a) Lessee's right to extend the
Term pursuant to its Renewal Option under Section 3.3 hereof and (b) any earlier
Termination as provided herein.

             3.3 RENEWAL OPTION. Provided that no Event of Default shall have
occurred and be continuing, Lessee shall have an option (the "Renewal Option")
to extend the Term of this


                                      -14-


Agreement for a period of three (3) years beyond the Initial Expiration Date
(the "Renewal Period"). Lessee shall exercise its Renewal Option, if at all, by
providing Lessor with written notice of such exercise at least one hundred
eighty (180) days prior to the Initial Expiration Date, which, upon receipt by
Lessor, shall be irrevocable by Lessee. Should Lessee fail to provide such
notice to Lessor as provided above, Lessee shall be deemed to have absolutely
waived its right to exercise its Renewal Option.

             3.4 ANTICIPATED DELIVERY DATE. Lessor and Lessee anticipate that
the Aircraft will be available for delivery to Lessee on or about the
Anticipated Delivery Date.

             3.5 ACCEPTANCE OF AIRCRAFT. Lessee hereby confirms that, as between
Lessor and Lessee, Lessee accepts the Aircraft in its "as is, where is"
condition. Nothing herein is intended to prejudice Lessee's rights against
Manufacturer, Engine Manufacturer, or any other manufacturer, vendor or other
person in connection with any warranties or service contracts with respect to
the Aircraft.

             3.6 DELIVERY; FILING OF LEASE SUPPLEMENT. On the Delivery Date, if
all the conditions set forth in Sections 2.1 and 2.2 hereof have been satisfied
or waived, the Aircraft shall be tendered for delivery to Lessee (which Lessee
shall accept) at the Delivery Location (the "Delivery"). Immediately upon (and
so as to evidence) such Delivery, the fully-executed Lease Supplement shall be
dated as of the Delivery Date and (together with this Agreement) filed for
recordation with the FAA.

             3.7 MODIFICATIONS; BRIDGING. All work required to be performed on
the Aircraft immediately after Delivery so as to satisfy Lessee's operational
demands, to bridge the Aircraft to Lessee's Maintenance Program (including,
without limitation, all painting and configuration modifications and other
interior work), and to accomplish compliance with the regulations of the
Aviation Authority shall be performed by an Authorized Maintenance Performer and
at Lessee's cost and expense.

             3.8 VOLUNTARY TERMINATION FOR OBSOLESCENCE.

                     (a) So long as no Event of Default shall have occurred and
be continuing, Lessee shall have the right, at any time after the end of the
Restricted Period but at least 120 days prior to the Initial Expiration Date
(and in no event during the Renewal Period), on at least 120 days prior written
notice to Lessor, to terminate this Agreement (effective on a specified Rent
Date) upon Lessee making a good faith determination that the Aircraft is
obsolete or surplus to its needs (a "Notice of Obsoles cence"). Such Notice of
Obsolescence shall be accompanied by a certificate of the Chief Financial
Officer or Treasurer of Lessee confirming that the Aircraft is economically
obsolete to Lessee or is surplus to Lessee's needs, and that Lessee is not
discriminating against the Aircraft. No further evidence shall be required on
the part of Lessee.


                                      -15-


                     (b) During the period from the giving of the Notice of
Obsolescence to the termination of this Agreement on the Termination Date as a
result thereof, Lessee, as agent for Lessor and at no expense to Lessor, shall
use its best efforts to obtain bids for the sale of the Aircraft, which shall
occur, if at all, on the Termination Date specified in the Notice of
Obsolescence. Lessee shall advise Lessor in writing of the amount and terms of
each bid and the name and address of each bidding party. Nothing in this Section
3.8 shall be construed as affecting Lessee's obligation to continue paying Rent
until the Termination of this Agreement is effective.

                     (c) Lessor may, if Lessee has not previously revoked its
Notice of Obsolescence pursuant to Section 3.8(d) hereof, elect to retain title
to the Aircraft (as opposed to proceeding to sale) on the Termination Date. If
Lessor so elects, Lessor shall give Lessee written notice of such election
within sixty (60) days of receiving Lessee's Notice of Obsolescence. Upon
receipt of notice of such an election by Lessor, Lessee shall not be entitled to
revoke the Notice of Obsolescence thereafter and shall reject all bids
theretofore or thereafter received. On the Termination Date specified in the
Notice of Obsolescence, Lessee shall deliver the Aircraft to Lessor in
accordance with the Return Conditions, shall pay all Rent due on or prior to the
Termination Date (other than Basic Rent payable in advance on the Termination
Date), and shall otherwise perform pursuant to this Agreement as required upon a
Termination hereof, but shall not be required to pay Lessor Stipulated Loss
Value or any amount determined by reference to Stipulated Loss Value.

                     (d) Lessee shall have the absolute right to withdraw its
Notice of Obsolescence (assuming that Lessor has not first elected to retain
title to the Aircraft pursuant to Section 3.8(c) hereof) by delivering written
notice thereof to Lessor no later than twenty (20) days prior to the Termination
Date specified in the Notice of Obsoles cence. Should Lessee deliver notice of
its intent to withdraw its Notice of Obsolescense, this Agreement shall continue
in full force and effect as if the Notice of Obsolescense had not been given by
Lessee.

                     (e) On the Termination Date specified in the Notice of
Obsolescence, Lessee shall deliver the Aircraft to the bidder, if any, which
shall have submitted the highest bid (evaluated on a net cost basis), and Lessor
shall transfer title to such bidder without representation, recourse or warranty
of any kind, express or implied (except a warranty that the Aircraft is free and
clear of any and all Liens other than Liens which Lessee is required to
discharge hereunder). Neither Lessee nor any Person Affiliated with Lessee shall
be entitled to submit a bid for the purchase of the Aircraft (or acquire title
to the Aircraft, either directly or through a third party) pursuant to the
provisions of this Section 3.8. The total selling price realized at such sale
shall be retained by Lessor and, in addition, on the date of such sale (and as a
condition precedent to the transfer of title), Lessee shall pay to Lessor the
amount, if any, of:


                                      -16-


                            (i) the Stipulated Loss Value for the Aircraft
      computed as of the date of such sale (determined without regard to any
      Basic Rent payable for the Rent Period beginning on the Termination Date);
      less

                            (ii) the net sales price for the Aircraft (which
      shall be exclusive of all costs and commissions associated with such
      sale).

                     (f) Lessor and any Person Affiliated with Lessor shall have
the right to submit one or more bids for the purchase of the Aircraft pursuant
to this Section 3.8, but all such bids must be received by Lessee at least
thirty (30) days prior to the Termination Date specified in the Notice of
Obsolescence. Should Lessor or any Person Affiliated with Lessor be the
prevailing bidder, Lessor shall retain title to the Aircraft, and the amount bid
by Lessor or any Person Affiliated with Lessor shall act as a credit against the
amount owing by Lessee pursuant to Section 3.8(e) hereof.

             3.9 PURCHASE OPTION. Lessee shall have the option of purchasing the
Aircraft (the "Purchase Option") from Lessor on the Expiration Date (I.E., on
either the Initial Expiration Date or at the end of the Renewal Period) subject
to the following terms and conditions:

                     (a) Lessee shall provide written notice to Lessor of its
intent to exercise the Purchase Option at least 270 days prior to the Expiration
Date. Such notice (i) shall be signed by an officer of Lessee, (ii) shall be
irrevocable upon receipt by Lessor, and (iii) shall confirm that the purchase
price for the Aircraft is as follows, depending upon whether Lessee purchases
the Aircraft on the Initial Expiration Date or at the end of the Renewal Period:

                            (A) if the Aircraft is to be purchased on the
      Initial Expiration Date, the purchase price for the Aircraft shall be in
      the amount of the Base Term Purchase Price; and

                            (B) if the Aircraft is to be purchased at the end of
      the Renewal Period, the purchase price for the Aircraft shall be in the
      amount of the Renewal Period Purchase Price.

                     (b) Should Lessee exercise its Purchase Option pursuant to
this Section 3.9, Lessor shall transfer title to the Aircraft to Lessee on the
Expiration Date without representation, recourse or warranty of any kind,
express or implied (except a warranty that the Aircraft is free and clear of
Liens, other than Liens which Lessee is required to discharge hereunder).


                                      -17-


                                    SECTION 4

                       PAYMENT OF RENT; METHOD OF PAYMENT;
                              FINANCIAL INFORMATION

             4.1     BASIC RENT; BASIC RENT ADJUSTMENT.

                     (a) Throughout the Term, Lessee shall pay, in advance, the
Basic Rent (as applicable, either the Base Lease Rent Amount or the Renewal
Period Rent Amount) specified in APPENDIX B to Lessor on each and every Rent
Date until the earlier of:

                            (i) in the event of a Total Loss, the payment to
      Lessor of the Stipulated Loss Value in accordance with Section 19.1;

                            (ii)    the Return; and

                            (iii) in the event that the Aircraft and the
      Aircraft Documents are returned to Lessor under circumstances in which the
      Aircraft or the Aircraft Documents do not conform to the Return
      Conditions, the date on which Lessor executes and delivers to Lessee a
      Redelivery Receipt in the form attached hereto as APPENDIX E hereto.

                     (b) The amount of Basic Rent set forth in APPENDIX B hereto
(owing from the Delivery Date until the Initial Expiration Date) assumes that
the Transaction Expenses shall be in an amount equal to one and one-half percent
(1.5%) of the Purchase Price for the Aircraft (the "Assumed Transaction
Expenses"). Should the actual amount of the Transaction Expenses be greater or
lesser than the Assumed Transaction Expenses, the amount of Basic Rent owing
from the Delivery Date to the Initial Expiration Date shall be increased or
decreased (a "Basic Rent Adjustment"), subject to the following requirements:

                            (i) A Basic Rent Adjustment may be made on one or
      more occasions (either before or after Delivery), but all Basic Rent
      Adjustments must be made prior to the date which is ninety (90) days after
      the Delivery Date, with any such adjustment being retroactive to the
      beginning of the Term.

                            (ii) Any Basic Rent Adjustment shall be in the
      amount required so that, after incorporating the actual amount of the
      Transaction Expenses, Lessor's Net Economic Return shall be the same as it
      was prior to the making of such Basic Rent Adjustment.

                            (iii) The amount of a Basic Rent Adjustment shall be
      mutually acceptable to Lessor and Lessee, and shall be evidenced by an
      amendment to this Agreement or by any other writing signed by the parties
      hereto.


                                      -18-


                            (iv) Should the amount of a Basic Rent Adjustment as
      determined by Lessor prior to Delivery make the transaction pursuant to
      this Agreement uneconomic in the opinion of Lessee, Lessee shall have the
      right to terminate this Agreement by providing written notice to Lessor of
      such termination; PROVIDED THAT, such notice of termination must be
      received by Lessor prior to Delivery and prior to Lessor acquiring title
      to the Aircraft pursuant to the Purchase Agreement; FURTHER PROVIDED THAT
      such right of termination shall be conditioned upon (A) Lessor being
      relieved of all obligations pursuant to the Purchase Agreement and (B)
      Lessee satisfying (and, as necessary, reimbursing Lessor for) all of the
      Transaction Expenses; FURTHER PROVIDED THAT, Lessee shall not have any
      such termination rights after the Delivery of the Aircraft.

             4.2 RENT DATE, RENTAL PERIOD. The first monthly payment of Basic
Rent shall be made on the Delivery Date, with each payment thereafter being made
on the first Business Day of each succeeding month during the Term (each, a
"Rent Date"). The Rental Period shall be the period between consecutive Rent
Dates (each, a "Rental Period").

             4.3 PAYMENTS IN DOLLARS TO LESSOR'S BANK ACCOUNT. All payments of
Rent owing by Lessee to Lessor pursuant to this Agreement shall be made in
Dollars in immediately available funds to Lessor's bank account described in
APPENDIX B or to such other bank account as Lessor may designate in writing to
Lessee. Payments shall not be considered made by Lessee until Lessor has
received full credit in Lessor's bank account. Lessee accepts all risks of delay
or blockage of any transfer made in accordance with the terms of this Agreement.

             4.4 INTEREST ON OVERDUE AMOUNTS. Any amount which is overdue
pursuant to this Agreement shall bear interest at the rate indicated in APPENDIX
B hereto calculated from the due date of such payment. The payment of such
interest shall be made together with the payment of the overdue amount.

             4.5 DUE DATE NOT ON BUSINESS DAY. In the event any payment required
hereunder is due on a day that is not a Business Day, then such payment shall be
due on the next succeeding Business Day.

             4.6 NET LEASE, PROHIBITION AGAINST SET-OFF, COUNTERCLAIM, ETC.

                     (a) This Agreement is a net lease, and it is intended that
Lessee shall pay Rent, and all costs and expenses of every character, whether
foreseen or unforeseen, ordinary or extraordinary or structural or
non-structural, in connection with the use, operation, maintenance, repair and
reconstruction of each Item of Equipment by Lessee during the Term, including
the costs and expenses particularly set forth in this Agreement. The Rent that
Lessee is obligated to pay shall be paid without notice or demand (unless
expressly required under any of the Lease Documents) and without set-off,
recoupment, counterclaim, abatement, suspension, deduction, withholding or
defense.


                                      -19-


                     (b) Except as otherwise expressly provided in any Lease
Document or other written agreement between Lessor and Lessee, this Agreement
shall not terminate, nor shall Lessee have any right to terminate this Agreement
or be entitled to abatement, suspension, deferment or reduction of any Rent that
Lessee is obligated to pay hereunder nor shall the obligations hereunder of
Lessee be affected, by reason of any matter whatsoever, including: (i) any
damage to or the destruction or loss of all or any portion of any Item of
Equipment from whatever cause, (ii) the loss or theft of any portion of any Item
of Equipment, (iii) the taking of any Item of Equipment or any portion thereof
by condemnation, confiscation, requisition or otherwise, (iv) the prohibition,
limitation or restriction of Lessee's use of all or any part of any Item of
Equipment, (v) the inadequacy or incorrectness of the description of all or any
portion of any Item of Equipment, (vi) Lessee's acquisition or ownership of all
or any part of the Items of Equipment otherwise than pursuant to an express
provision of this Agreement, (vii) any defect in compliance with specifications,
condition, merchantability, design, airworthiness, quality, durability,
operation or fitness for use or any purpose of any Item of Equipment, (viii) any
defect in the title to, or the existence of any Liens or rights of others
whatsoever with respect to, any Items of Equipment or any portion thereof, (ix)
any insolvency, bankruptcy, reorganization or similar proceedings by or against
Lessee, (x) any breach, default or misrepresentation by Lessor under this
Agreement or any other Lease Document or any of the documents referred to herein
or therein, or (xi) any invalidity or unenforceability, in whole or part, or any
other infirmity herein or therein, or any lack of power or authority of any
party to this Agreement or any other Lease Document, it being the intention of
the parties hereto that the obligations of Lessee shall be absolute and
unconditional and shall be separate and independent covenants and agreements and
shall continue unaffected unless and until the covenants have been terminated
pursuant to express provision of this Agreement.

                                    SECTION 5

                            REGISTRATION; NAMEPLATES

             5.1 REGISTRATION; CERTIFICATION. Lessee, at its own expense, will
cause the Aircraft to be properly registered at all times with the applicable
Aviation Authority pursuant to the following provisions:

                     (a) From the Delivery Date until the end of the Restricted
      Period, the Aircraft shall be registered in the name of Lessor with the
      FAA.

                     (b) From the end of the Restricted Period until the end of
      the Term, Lessee shall have the right, but only in connection with a
      Permitted Sublease pursuant to Section 6.1(a) hereof, to allow the
      Aircraft to be registered in any Approved Jurisdiction (either in the name
      of Lessor or, if required in such Approved Jurisdiction, in the name of
      the subject Permitted Sublessee); PROVIDED, HOWEVER, that any registration
      of the Aircraft outside of the United States shall be conditioned upon:
      (i) the rights of Lessor in the


                                      -20-


      Aircraft being properly noted on the applicable registry (to the extent
      allowed in such jurisdiction); and (ii) Lessee delivering to Lessor an
      opinion of legal counsel reasonably satisfactory in form and substance to
      Lessor to the effect that the rights of Lessor in and to the Aircraft will
      not be impaired under the laws of such country.

Lessor shall cooperate in good faith with Lessee to effect the registration of
the Aircraft pursuant to this Section 5.1.

             5.2 NAMEPLATES. Lessee shall attach or cause to be attached to the
Airframe in a location reasonably adjacent to and not less prominent than the
airworthiness certificate for the Aircraft and to each Engine fireproof
nameplates in form mutually acceptable to the parties. Lessee shall keep and
maintain all such nameplates plainly, permanently and conspicuously on the
Airframe and Engines throughout the Term.

                                    SECTION 6

                        POSSESSION, USE AND OPERATION OF
                      THE AIRCRAFT; RISK OF LOSS OR DAMAGE

             6.1 POSSESSION OF AIRCRAFT; SUBLEASE; WET-LEASE.

                     (a) Lessee, during the Term, shall be entitled to the
possession and use of the Aircraft. Lessee shall not sublease or otherwise
transfer possession of the Aircraft to any person or entity; PROVIDED, HOWEVER,
that, so long as no Event of Default shall have occurred and be continuing (and
subject to the other terms and conditions of this Agreement, including, without
limitation, Section 5.1 hereof):

                            (i) Lessee may deliver possession of the Aircraft to
      the Manufacturer or to an Authorized Maintenance Performer for testing,
      service, repair, maintenance or overhaul work thereon or on any Part
      thereof or for alterations or modifications in or additions thereto to the
      extent required or permitted by the terms of this Agreement.

                            (ii) Lessee may, with the prior written consent of
      Lessor (which consent Lessor shall not unreasonably withhold or delay),
      enter into a sublease of the Aircraft (a "Permitted Sublease"), subject to
      the following terms and conditions:

                                    (A) Lessee will at all times during the Term
             remain primarily liable for its obligations pursuant to this
             Agreement. The rights of any sublessee shall be expressly subject
             and subordinate to all of the terms and conditions of this
             Agreement.

                                    (B) The proposed sublessee (a "Permitted
             Sublessee") must:


                                      -21-


                                           (I) while the Aircraft is registered
                     in the United States, be (x) a Certificated Air Carrier
                     pursuant to the laws of the United States or (y) the United
                     States government or any political subdivision,
                     instrumentality or agency thereof;

                                           (II) while the Aircraft is registered
                     in any Approved Jurisdiction pursuant to Section 5.1(b)
                     hereof, be (x) a certificated air carrier pursuant to the
                     laws of, and be principally based in, such Ap proved
                     Jurisdiction or (y) the government of such Approved
                     Jurisdiction or any political subdivision, instrumentality
                     or agency thereof; and

                                           (III) otherwise be approved by
                     Lessor, with such approval not being unreasonably withheld
                     or delayed.

                                    (C) If the Permitted Sublessee is a carrier
             principally based in a jurisdiction other than the United States,
             Lessee must provide Lessor with an opinion of counsel from such
             foreign jurisdiction, in form and substance reasonably acceptable
             to Lessor, to the effect that there exists no possessory rights in
             favor of such Permitted Sublessee under the laws of such
             jurisdiction which would, upon the bankruptcy of or other Default
             by Lessee (and assuming that the Permitted Sublessee is not itself
             the subject of a bankruptcy proceeding) prevent or unreasonably
             delay the recovery time of the Aircraft by Lessor in accordance
             with and when permitted by the terms of this Agreement upon the
             exercise of the remedies hereunder.

                                    (D) The Permitted Sublease shall require
             that the Aircraft be maintained in accordance with the Permitted
             Sublessee's maintenance program, which shall have been approved by
             the subject Aviation Authority.

                                    (E) The Permitted Sublease shall not extend
             beyond the end of the Term.

                            (iii) Subject to the provisions of this Agreement
      concerning the occurrence of a Total Loss, Lessee shall not be in default
      of its obligations hereunder by transferring possession of the Airframe or
      any Engine to:

                                    (A) the United States or any instrumentality
             or agency thereof; PROVIDED THAT the continued performance of the
             obligations pursuant to this Agreement are backed by the full faith
             and credit of the United States government; and


                                      -22-


                                    (B) a foreign government wherein the
             Aircraft is registered pursuant to Section 5.1(b) hereof; PROVIDED
             THAT such transfer of possession is required by the laws of such
             foreign government pursuant to its powers of seizure, requisition,
             condemnation, or the like.

                     (b) During the Term (subject to the other terms and
conditions of this Agreement, including, without limitation, Section 5.1
hereof), Lessee shall be entitled to enter into and carry out any charter,
"wet-lease" or other agreement with respect to the Aircraft on terms whereby
the Aircraft will at all times be operated by an air crew employed by and
subject to the operational control of Lessee; PROVIDED that any such charter
or other agreement (i) shall be subordinate in all respects to this
Agreement, (ii) will not extend beyond the end of the Term, (iii) will not
result in any transfer of possession or control of the Aircraft, to or in
favor of any person or entity, such possession and control remaining at all
times exclusively with Lessee, (iv) contemplates operation of the Aircraft
within only those countries wherein the Aircraft shall be fully insured
pursuant to this Agreement, (v) shall not be entered into or renewed beyond
its current term in the event that at the time Lessee seeks to so enter into
or renew such charter, there exists an Event of Default; and (vi) Lessee
provides to Lessor written notice of any "wet-lease" (which shall include
long-term charter arrangements or agreements) with a duration of more than
thirty (30) days, which notice shall include the name of the "wet-lessee",
its address, its telephone and telefax numbers, the name of one or more
officers or directors of such "wet-lessee" authorized to act on its behalf,
and the duration of the "wet-lease". On request of Lessor, Lessee shall use
its best efforts to procure from any such "wet-lessee" a written
acknowledgment of Lessor's rights hereunder and in and over the Aircraft in
accordance with the terms hereof.

             6.2 POSSESSION OF ENGINES. During the Term, Lessee shall be
entitled to the possession and use of each of the Engines. Subject to Section
6.1 hereof, Lessee shall not, without the prior written consent of Lessor,
transfer possession of any of the Engines to any person or entity; PROVIDED,
HOWEVER, that, so long as no Event of Default shall have occurred and be
continuing, Lessee may, without the prior written consent of Lessor:

                     (a) deliver possession of any Engine to the manufacturer
      thereof or to an Authorized Maintenance Performer for testing, service,
      repair, maintenance or overhaul work on such Engine or any part thereof or
      for alterations or modifications in or additions to such Engine to the
      extent required or permitted by the terms of this Agreement;

                     (b) install any Engine on an airframe owned by Lessee free
      and clear of all Liens, except (i) Permitted Liens or those which apply
      only to the engines (other than Engines), appliances, parts, instruments,
      appurtenances, accessories, furnishings and other equipment (other than
      Parts) installed on such airframe and (ii) the Lien of any mortgage which
      provides that such Engine leased to Lessee hereby shall not become subject
      to the Lien thereof, notwithstanding the installation of such Engine on
      any airframe subject to such Lien, unless and until Lessee shall become
      the owner of such Engine;

                     (c) install any Engine on an airframe leased to Lessee or
      purchased by Lessee subject to a hire purchase or conditional sale
      agreement; PROVIDED that (i) such airframe is free and clear of all Liens
      except (x) Permitted Liens or those which apply only to the engines (other
      than Engines), appliances, parts, instruments, appurtenances, accessories,
      furnishings and other equipment (other than Parts) installed on such
      airframe, (y) the Lien of any mortgage which provides that such Engine
      leased to Lessee hereby shall not become subject to the Lien thereof,
      notwithstanding the installation of such Engine on any airframe subject to
      such Lien, unless and until Lessor is no longer the


                                      -23-


      owner of such Engine and (z) the rights of the parties to the lease or
      hire purchase or conditional sale agreement covering such airframe and
      (ii) there shall be in effect between Lessee and such lessor or hire
      vendor or conditional vendor of such airframe a written agreement (which
      may be the lease or hire purchase or conditional sale agreement covering
      such airframe) whereby such lessor or hire vendor or conditional vendor
      agrees that neither it nor its successors and assigns will acquire or
      claim any right, title or interest in such Engine by reason of such Engine
      being installed on such airframe at any time while such Engine is subject
      to this Agreement; and PROVIDED FURTHER, that any transfer permitted by
      this Section 6.2 shall be subject and subordinate to all of the terms of
      this Agreement, including, without limitation, Lessee's obligation to
      return the Engines at the end of the Term and Lessor's right to
      repossession pursuant hereto, and Lessee shall remain primarily liable
      hereunder for the performance of all of the terms of this Agreement to the
      same extent as if such transfer had not occurred.

Lessor hereby agrees that Lessor and its successors and assigns shall not
acquire or claim, as against any mortgagee, lessor or conditional vendor, any
right, title or interest in any engine owned by such person or entity or in
which it has a security or ownership interest by reason of such engine being
installed on the Airframe. Any Engine removed from the Aircraft shall be, during
the period such Engine is so removed, either safely housed and sheltered or
repaired or maintained in accordance with this Agreement, or installed on an
aircraft pursuant to this Section 6.2; PROVIDED, FURTHER, that: (i) Lessee
maintains or causes to be maintained insurance in accordance with Section 11 in
respect of the removed Engine at all times while it is removed from the Airframe
(and, if required by Lessor, Lessee shall furnish or cause to be furnished to
Lessor waivers or acknowledgments by the insurers of the aircraft on which such
removed Engine is installed); and (ii) as soon as reasonably practicable and in
any event on or before expiration of the Term or termination of this Agreement,
such removed Engine is reinstalled on the Airframe.

             6.3 POOLING OF PARTS. Any Part removed from the Aircraft as
provided in Section 7 may be subjected by Lessee to normal interchange or
pooling agreements or arrangements customary in the airline industry and entered
into by Lessee with other licensed air carriers or aviation parts suppliers in
the ordinary course of its business; PROVIDED that the part replacing such
removed Part shall be incorporated or installed in or attached to the Aircraft
in accordance with Section 7 promptly upon the removal of such removed Part. In
addition, any replacement part, when incorporated or installed in or attached to
the Aircraft in accordance with Section 7, may be owned by another such air
carrier or aviation parts supplier subject to such pooling arrangement;
PROVIDED, FURTHER, that the Part so removed remains the property of Lessor and
subject to this Agreement and that Lessee, at its expense, promptly thereafter
either (i) causes title to such replacement part to vest in Lessor free and
clear of Liens other than Permitted Liens, in accordance with Section 7.4
hereof, or (ii) replaces such replacement part by incorporating or installing in
or attaching to the Aircraft a further replacement part owned by Lessee free and
clear of all Liens other than Permitted Liens, and causes title to such further


                                      -24-



replacement part to vest in Lessor and causes such replacement part to become
subject to this Agreement.

             6.4 COMMERCIAL OPERATIONS. Lessee shall not use or permit the
Aircraft to be operated except in commercial operation for which Lessee is duly
authorized by the laws of the United States or any other jurisdiction to whose
laws the operation of the Aircraft is subject, so long as such jurisdictions are
not excluded from coverage by any insurance policy required by the terms of this
Agreement in effect with respect to the Aircraft.

             6.5 LAWFUL USE. Lessee shall not permit the Aircraft to be
maintained, used, or operated in violation of any Law of any Governmental Entity
having jurisdiction, or contrary to the Manufacturer's or Engine Manufacturer's
operating manuals and instructions, or in violation of any airworthiness
certificate, license, registration or AD relating to the Aircraft issued by any
such Governmental Entity. Lessee shall not cause or permit the Aircraft to
proceed to, or remain at, any location which is then the subject of a
prohibition order (or any similar order or directive), sanctions or restrictions
by or under any Governmental Entity having jurisdiction over Lessee or the
Aircraft.

             6.6 FREIGHT OPERATIONS. Lessee shall not use or permit the use of
the Aircraft for the carriage of (a) whole animals, living or dead, except in
cargo compartments according to I.A.T.A. regulations and except seeing-eye dogs
or domestic pet animals carried in suitable containers to prevent the escape of
any fluids and to ensure the welfare of the animal, (b) acids, toxic chemicals,
other corrosive materials, explosives, nuclear fuels, nuclear wastes or any
nuclear assemblies except as permitted for passenger aircraft under the
"Restriction of Goods" schedule issued by I.A.T.A. from time to time or (c) any
other goods, materials or items of cargo that would not be adequately covered by
the insurance required by or obtained pursuant to this Agreement.

             6.7 USE WITHIN INSURANCE COVERAGE. Lessee shall not operate the
Aircraft or suffer the Aircraft to be operated: (a) within or into any
geographic area unless the Aircraft is covered by insurance as required by the
provisions of Section 11; or (b) contrary to the terms or outside the coverage
of such insurance as required by the provisions of Section 11.

             6.8 OPERATION COSTS.

                     (a) During the Term, Lessee shall bear all costs in
connection with the possession, use, operation, maintenance, overhaul and repair
of the Aircraft.

                     (b) During the Term, Lessee shall provide and pay for all
crews and other personnel, fuel, lubricants, oil and electric power consumed by
and required for the operation of the Aircraft.


                                      -25-


                     (c) Lessee shall promptly pay all navigation charges, route
charges and airport charges (including landing fees, departure fees, airport
handling charges and taxes) the nonpayment of which could result in a Lien upon
the Aircraft or in the Aircraft being held or seized pending payment of such
charges.

             6.9 RISK OF LOSS OR DAMAGE. Lessee shall bear all risks of loss or
damage to the Aircraft, Engines, Parts and Aircraft Documents from any and all
causes whatsoever from the Delivery Date until the re-delivery thereof to
Lessor; PROVIDED, that in the event of a re-delivery of any one or more of the
Aircraft, Engines, Parts and Aircraft Documents to Lessor, under circumstances
which do not constitute a Return, then Lessee shall be responsible for the cost
to Lessor to insure the Aircraft, Engines, Parts and Aircraft Documents during
the period, following such re-delivery, for which Lessee continues to be
obligated to pay Basic Rent pursuant to Section 4.1 above. If the Aircraft is
requisitioned by any Governmental Entity during the Term, then, unless and until
the Aircraft becomes a Total Loss or the requisition is no longer in effect, (a)
the Term shall continue and Lessee shall continue to fulfill all its obligations
under this Agreement and (b) Lessee shall, during the Term, be entitled to all
requisition hire paid or other amounts paid to Lessor or to Lessee on account of
such requisition.

                                    SECTION 7

                          MAINTENANCE AND MODIFICATIONS

             7.1     MAINTENANCE OF AIRCRAFT; ADS; ENGINE MAINTENANCE AGREEMENT.

                     (a) From the Delivery until the re-delivery of the
Aircraft, Lessee, at its own expense, shall service, repair, maintain, overhaul,
check or cause the same to be done to the Aircraft and each Engine in accordance
with the Maintenance Program and Lessee's Corrosion Prevention and Control
Program (to the extent Lessee has such a corrosion program separate from its
Maintenance Program) so as to keep the Aircraft in a condition that is eligible
for FAR Part 121 operations, in the same condition as other Embraer model EMB
145 aircraft that it owns or operates, and in such operating condition as may be
necessary to enable the airworthiness certification of the Aircraft to be
maintained in good standing at all times under applicable laws and the
applicable rules and regulations of the Aviation Authority.

                     (b) Lessee, at its sole cost, shall comply with all ADs and
mandatory service bulletins affecting the Aircraft and having a final compliance
or termination date during the Term (without regard to any deferrals which may
be granted).

                     (c) Commencing no later than ninety (90) days after the
Delivery Date and continuing until at least ten (10) years after the Delivery
Date, the Engines shall be subject at all times to an Engine Maintenance
Agreement; PROVIDED that the execution and delivery of such Engine Maintenance
Agreement may be delayed beyond the foregoing ninety-day


                                      -26-


deadline so long as Lessee demonstrates that it is using its best efforts to
negotiate and document such Engine Maintenance Agreement; PROVIDED FURTHER,
HOWEVER, that under no circumstances shall such execution and delivery of the
Engine Maintenance Agreement occur later than one hundred eighty (180) days
after the Delivery Date. Prior to the effectiveness of such an Engine
Maintenance Agreement, Lessee shall continue to make payments to Engine
Manufacturer pursuant to a memorandum of understanding currently in effect
between Lessee and Engine Manufacturer.

                     (d) Lessee's rights pursuant to any (and every) Engine
Maintenance Agreement shall be assigned to Lessor pursuant to the Assignment of
Engine Maintenance Agreement (or a comparable assignment approved by Lessor),
which shall be exercisable by Lessor (i) upon the occurrence and during the
continuance of an Event of Default hereunder and (ii) at the end of the Term
(other than by reason of the exercise by Lessee of its Purchase Option pursuant
to this Agreement). Lessee shall use its best efforts to obtain the consent of
Engine Manufacturer (or other applicable maintenance provider) to the Assignment
of Engine Maintenance Agreement.

             7.2     MAINTENANCE OF AIRCRAFT DOCUMENTS.

                     (a) From the Delivery until the re-delivery of the Aircraft
to Lessor, Lessee, at its own expense, shall maintain and update, in the English
language, all Aircraft Documents as required by applicable Laws and by the
regulations of the Aviation Authority. Lessee shall at all times store the
Aircraft Documents in a complete and organized format.

                     (b) When incorporating ADs, service bulletins,
modifications, repairs or any other engineering changes to the Aircraft, Lessee
shall revise or cause to be revised the customized documentation for the
Aircraft in order to incorporate and reflect such ADs, service bulletins,
modifications or repairs, as applicable.

             7.3 AUTHORIZED MAINTENANCE PERFORMER. All maintenance on the
Airframe, Engines and Parts shall be performed by an Authorized Maintenance
Performer.

             7.4 REPLACEMENT OF PARTS. Except as otherwise provided herein,
Lessee, at its own expense, shall as soon as practicable replace all Parts that
may from time to time be incorporated or installed in or attached to the
Aircraft and that may become unserviceable, worn out, lost, stolen, destroyed,
seized, confiscated or damaged beyond repair. In addition, in the ordinary
course of maintenance, service, repair, overhaul, or testing, Lessee may remove
any Part; provided that Lessee shall replace such Part as promptly as
practicable. All replacement parts shall be free and clear of all Liens, except
for Permitted Liens, and shall be in good operating condition and shall be
certificated for use on an Embraer model EMB-145 aircraft.


                                      -27-


             7.5 TITLE TO PARTS. All Parts at any time removed from the Aircraft
shall remain the property of Lessor, no matter where located, until such time
as: (a) such Parts shall be replaced by parts that have been incorporated or
reinstalled in or attached to the Aircraft and that meet the requirements for
replacement parts specified above in Section 7.4; and (b) title thereto shall
have passed to Lessor free and clear of all Liens other than Permitted Liens.
Immediately upon the incorporation or installation in or attachment in or to the
Aircraft of any replacement part as above provided, and without further act (i)
title to the removed Part shall vest in Lessee, free and clear of all rights of
Lessor and any Lessor's Liens and (ii) such replacement part shall be subject to
this Agreement and shall be deemed a Part of the Aircraft for all purposes
hereof to the same extent as the Parts originally incorporated and installed in
or attached to the Aircraft.

             7.6 REMOVAL OF ENGINES. Lessee shall be entitled, so long as no
Event of Default shall have occurred and be continuing, to remove or permit the
removal of any Engine from the Airframe and to install on the Airframe an
engine; PROVIDED, that the removed Engine is, during the period of substitution,
either being safely housed and sheltered or repaired or maintained in accordance
with this Agreement, or is installed on an aircraft pursuant to Section 6.2;
PROVIDED, FURTHER, that:

                     (a) Lessee maintains or causes to be maintained insurance
      in accordance with Section 11 in respect of the removed Engine at all
      times while it is removed from the Airframe (and, if required by Lessor,
      Lessee shall furnish or cause to be furnished to Lessor waivers or
      acknowledgments by the insurers of the aircraft on which such removed
      Engine is installed); and

                     (b) as soon as reasonably practicable and in any event on
      or before end of the Term, such engine is removed from the Airframe and
      the removed Engine is reinstalled on the Airframe.

             7.7     EQUIPMENT CHANGES.

                     (a) Except as expressly provided herein or as a result of
an AD or service bulletin or other requirement of the Aviation Authority or the
Manufacturer, the Aircraft shall not be modified, altered, converted, or added
to ("Equipment Change"); PROVIDED that Lessee may, at Lessee's own expense, make
such Equipment Changes to the Aircraft as Lessee may deem desirable in the
proper conduct of its business, so long as such Equipment Change does not result
in a diminution in the value or utility of the Aircraft. All such Equipment
Changes shall be consistent with the rules and regulations of the Aviation
Authority.

                     (b) Title to all Parts incorporated or installed in or
attached or added to the Aircraft as the result of such Equipment Change shall,
without further act, vest in Lessor and shall become subject to this Agreement,
free of all Liens other than Permitted Liens; PROVIDED, HOWEVER, that so long as
no Event of Default shall be continuing, Lessee may remove any such


                                      -28-


Part if: (i) such Part is in addition to, and not in replacement of or in
substitution for, any Part originally incorporated or installed in or attached
to the Aircraft at the time of Delivery or any part in replacement of or in
substitution for any such original Part; (ii) such Part is not required to be
incorporated or installed in or attached or added to the Aircraft pursuant to
the provisions of Section 7.1 hereof; and (iii) such Part can be removed from
the Aircraft without diminishing or impairing the value or airworthiness which
the Aircraft would have had such Equipment Change not occurred.

                     (c) Upon the removal by Lessee of any such Part as above
provided, title thereto shall, without further act, vest in Lessee free and
clear of all Lessor's Liens and rights of Lessor and such part shall no longer
be deemed part of the Aircraft. Any Part not removed by Lessee as above provided
prior to the Return of the Aircraft shall remain the property of Lessor;
PROVIDED that, Lessor may require Lessee, by notice to Lessee given not later
than the 60th day prior to end of the Term (except during the continuance of an
Event of Default), to remove any Parts incorporated or installed in the Aircraft
as a result of an Equipment Change and to restore the Aircraft to its condition
prior to such Equipment Change, prior to the end of the Term.

             7.8 INSPECTIONS. Lessor may, but shall not be obligated to, upon
giving three (3) Business Days prior notice to Lessee of its intention to do so,
inspect the Aircraft, the Aircraft Documents, and any maintenance performed by
or on behalf of Lessee during normal business hours (or otherwise if required to
eliminate any interference with the maintenance or operation of the Aircraft)
pursuant to the following schedule, terms and conditions:

                     (a) Lessor, at its expense, may perform any such inspection
      once every year throughout the Term of this Agreement (except during the
      continuance of an Event of Default, in which case any such inspection
      shall be at the expense of Lessee and may be conducted at the discretion
      of Lessor and without prior notice to Lessee).

                     (b) Such inspections of the Aircraft shall be limited to a
      visual walk- around/walk-through inspection, and shall not involve the
      opening of any panels or bays (except that Lessor's technical
      representative shall be allowed to witness any such opening during any
      major inspections or overhauls of the Aircraft requiring such removal).

                     (c) In performing such inspections, Lessor shall not
      interfere with Lessee's business or the maintenance or operation of the
      Aircraft.

                     (d) Lessee shall assist and not interfere with any person
      designated by Lessor to conduct any inspection pursuant to this Section
      7.8. Lessor shall not incur any liability or obligation by reason of not
      making an inspection and no failure by Lessor to make such inspection
      shall lessen any obligation of Lessee under this Agreement, including but
      not limited to Lessee's obligations under this Section 7. In addition,
      Lessee


                                      -29-


      shall at all times permit Lessor's technical representatives to be present
      at and inspect any major maintenance being conducted on the Aircraft or
      any constituent thereof. Lessee shall, upon Lessor's request, provide
      Lessor with letters to the Authorized Maintenance Performer allowing the
      disclosure to Lessor of all matters relating to the maintenance of the
      Aircraft.

             7.9 LESSOR NOT OBLIGATED. From and after the Delivery of the
Aircraft, except as otherwise expressly provided in this Agreement, Lessor shall
have no obligation whatsoever to service, repair, maintain, check or cause the
same to be done to the Aircraft, or to keep the Aircraft in an airworthy
condition.

                                    SECTION 8

                                      TAXES

             8.1 GENERAL TAX INDEMNITY. Whether or not any of the transactions
contemplated hereby are consummated, Lessee agrees to timely pay, and to
indemnify, protect, save and hold Lessor harmless from, any and all Taxes,
whether or not such Taxes are now existing or hereafter adopted, enacted or
amended, that may be asserted, levied or imposed on or against Lessor upon or
with respect to or measured by: (a) the Aircraft or any Part thereof or interest
therein; (b) this Agreement, and the performance of any of the transactions
contemplated hereby or the exercise of remedies under this Agreement with
respect to an Event of Default; (c) the delivery, testing, transportation,
rental, sale, replacement, substitution, repossession, abandonment, transfer,
rebuilding, leasing, subleasing, possession, presence, use, operation,
condition, storage, maintenance, modification, alteration, repair or return of
the Aircraft or any Part thereof or interest therein occurring subsequent to the
Delivery Date; and (d) Rent payable under this Agreement.

             8.2 CERTAIN EXCEPTIONS. The provisions of Section 8.1 hereof shall
not apply to, and Lessee shall have no liability to Lessor thereunder with
respect to, Taxes excluded under any of the following provisions or any
combination thereof:

                     (a) Taxes which are not yet due;

                     (b) Taxes on, based on, measured by or with respect to the
             net or gross income, or net or gross receipts, capital, net worth,
             franchise, or conduct of business of Lessor (other than Taxes in
             the nature of license, sales, withholding, use, rental or property
             Taxes) imposed by any federal, state or local government or taxing
             authority in the United States or any foreign government or foreign
             taxing authority, or by any possession or territory of the United
             States;

                     (c) Taxes resulting from any sale, assignment, transfer or
             other disposition by Lessor of any interest in the Aircraft, unless
             such sale, assignment, transfer or


                                      -30-


             disposition occurs in connection with (i) the exercise by Lessee of
             its Purchase Option, (ii) the exercise by Lessor of any of its
             remedies pursuant to this Agreement as the result of an Event of
             Default, (iii) a substitution, modification, removal or replacement
             of the Aircraft, the Airframe, any Engine or any Part by a User, or
             (iv) a transfer or disposition (or a deemed transfer or
             disposition) resulting from a Total Loss (but Lessor and Lessee
             shall cooperate in good faith in minimizing any such Taxes);

                     (d) Taxes that would not have been imposed but for any
             failure of Lessor to (i) file proper and timely reports or returns
             or to pay any Taxes when due (unless such failure is caused by the
             failure of Lessee to timely provide information necessary to
             prepare any such report or calculate any such Tax), or (ii) comply
             with any certification, information, documentation, reporting or
             other similar requirements concerning the nationality, residence,
             identity or connection with the jurisdiction imposing such Taxes,
             if such compliance is required to obtain or establish relief or
             exemption from or reduction in such Taxes, Lessor was eligible to
             comply with such requirement, and Lessor knows or was timely
             advised by Lessee of such requirement;

                     (e) Taxes which would not have been imposed on Lessor but
             for the activities or status of Lessor unrelated to the
             transactions contemplated by the Lease Documents;

                     (f) Taxes resulting from the willful misconduct or gross
             negligence of Lessor;

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

                     (h) any Taxes for which payment was made as part of the
             Transaction Expenses;

                     (i) Taxes imposed on any transferee or successor of Lessor
             which would not have been imposed upon Lessor; and

                     (j) Taxes imposed as a result of the failure of Lessor to
             discharge its contest obligations under Section 8.5 hereof.


                                      -31-


             8.3 INDEMNITIES PAYABLE ON AFTER-TAX BASIS; PAYMENTS IN RESPECT OF
TAX BENEFITS. Lessee agrees that, with respect to any payment or indemnity to
Lessor under this Section 8, Lessee's indemnity obligations shall include an
amount necessary to hold Lessor harmless from all Taxes required to be paid by
Lessor with respect to the receipt or accrual of such payment or indemnity
(including any payment by Lessor of any Taxes in respect to any indemnity
payments received or receivable under this Section 8).

             8.4 PAYMENT OF TAX INDEMNITIES. If (a) any Taxes are required to be
deducted or withheld by Lessee from any payment of Rent, or other amounts due to
Lessor under this Agreement ("Withholding Taxes") and (b) Lessee is required to
indemnify Lessor against such Withholding Taxes pursuant to this Section 8
("Indemnifiable Withholding Taxes"), then Lessee shall, at the time of paying
such Rent, or other amount, pay to Lessor such additional amounts as may be
necessary in order that the net amount of such payment of Rent or other amount,
after deduction or withholding for Indemnifiable Withholding Taxes, will be
equal to the amount Lessor would have received if such Indemnifiable Withholding
Taxes had not been deducted or withheld. Any other amount payable to or on
behalf of Lessor, pursuant to Section 8.1 hereof shall be paid to Lessor or, if
so directed by Lessor, directly to the relevant taxing authority, within thirty
(30) Business Days after receipt by Lessee of a written demand therefor from
Lessor accompanied by a written statement describing in reasonable detail the
Taxes that are the subject of and basis for such payment or indemnity and the
computation of the amount so payable.

             8.5 CONTESTS. If a written claim is made by any taxing authority
against Lessor for any Tax with respect to which Lessee is required to indemnify
Lessor hereunder, Lessor shall promptly give Lessee written notice of such
claim. Lessor's failure to provide such notice to Lessee shall not diminish
Lessee's obligations or Lessor's rights hereunder except to the extent that such
failure precludes Lessee's and Lessor's ability to contest such tax claim. If
Lessee promptly (and, in any event, within 15 days of receipt of notice from
Lessor) requests Lessor to do so, Lessor shall, at Lessee's expense, contest
(or, at Lessor's option, require Lessee to contest in Lessee's name, if
permitted by law) the validity, applicability or amount of any such Tax. Lessor
shall determine in its sole discretion the forum in which the contest of such
Tax shall be pursued and whether such contest shall be by (i) resisting payment
thereof, if lawful and practicable, (ii) not paying the same except under
protest, if protest is necessary or advisable and proper, or (iii) if the
payment is made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings. If Lessor determines that
such contest shall be by the manner described in either of clauses (ii) or (iii)
above, Lessee shall advance sufficient funds on an after-tax, interest-free
basis to Lessor to make the payment required. If Lessor contests the validity,
applicability or amount of any Tax hereunder, Lessee shall have the right to
review and advise Lessor as to all material written submissions to any
governmental or other authority relating to the Tax for which indemnification is
sought. Lessor shall consult in good faith with Lessee and its counsel regarding
all other material aspects of any such contest. Lessee shall have the right to
attend governmental or judicial conferences


                                      -32-


concerning any such tax claim only if such Tax is the only matter that affects
Lessor which is pending before the governmental or judicial body.
Notwithstanding the foregoing, Lessor shall only be required to contest (and
Lessee shall only be permitted to contest) any Tax if (A) independent tax
counsel selected and compensated by Lessee is of the opinion that there is a
reasonable basis for contesting the matter in question; (B) Lessee has
acknowledged in writing its liability to indemnify Lessor with respect to the
Tax in question; (C) Lessee shall pay (and shall acknowledge in writing Lessee's
liability to pay) Lessor on demand for all reasonable costs and expenses
incurred by Lessor in connection with contesting such claim (including, without
limitation, all costs, expenses, losses, reasonable legal and accounting fees
(including fees associated with Lessor's consultation with independent tax
counsel as described herein), disbursements, penalties, interest and additions
to tax); (D) the issue shall not be the same as an issue previously contested
hereunder and decided adversely unless independent tax counsel selected and
compensated by Lessee is of the opinion that the applicable law has changed, (E)
the amount of Tax at issue exceeds $10,000, and (F) if an Event of Default has
occurred and is continuing under this Agreement, Lessee has posted a bond or
other security in form and substance satisfactory to Lessor in its sole and
absolute discretion. Lessor shall not be required to appeal any judicial
decision unless it receives an opinion of independent counsel selected and
compensated by Lessee to the effect that it is more likely than not that such
appeal would be successful. Under no circumstances shall Lessor be required to
appeal a decision to or request a hearing by the United States Supreme Court.
Nothing in this Section 8.5 shall require Lessor to contest, or permit Lessee to
contest, a claim with respect to the imposition of any Tax if Lessor shall waive
its right to indemnification under Section 8.1 hereof with respect to such
claim.

             8.6 SETTLEMENTS. If, in the course of exercising its contest rights
on Lessee's behalf, Lessor learns that a taxing authority asserting a claim for
which indemnity is sought hereunder is willing to agree to a settlement of such
a claim, Lessor shall notify Lessee of such settlement proposal ("Settlement
Proposal"). If the Settlement Proposal is acceptable to Lessee, Lessee shall so
notify Lessor; PROVIDED that Lessor shall not be obligated to agree to the
Settlement Proposal if Lessor releases Lessee from any additional obligations
pursuant to Section 8.1 hereof with respect to such Tax claim and agrees that
the amount of any indemnity payment under Section 8.1 hereof in respect of such
Tax claim which Lessee shall be required to pay to Lessor shall not exceed the
amount of such indemnity payment that would have been required if Lessor had
agreed to the Settlement Proposal. If Lessee declines the Settlement Proposal,
Lessee shall notify Lessor in writing of the amount for which Lessee would be
reasonably willing to settle such claim ("Lessee's Settlement Proposal"), and
Lessor shall notify the taxing authority of Lessee's Settlement Proposal. If the
taxing authority does not accept Lessee's Settlement Proposal, Lessor shall have
the option of (i) rejecting the Settlement Proposal, (ii) requiring Lessee to
assume full responsibility for the Tax claim, or (iii) accepting the Settlement
Proposal. In the case of Lessor's acceptance of the Settlement Proposal and
Lessee's declination of the Settlement Proposal, the amount of any indemnity
payment determined under this Section 8.6 in respect of such Tax claim that
Lessee shall be required to pay shall not exceed the amount of Lessee's
Settlement Proposal.


                                      -33-


             8.7 REPORTS. Lessee shall promptly notify Lessor of all reports or
returns required to be made with respect to any Tax with respect to which Lessee
is required to indemnify hereunder (PROVIDED, HOWEVER, that this shall not be
deemed to require Lessee to file Lessor's Income Tax returns), and will provide
Lessor with all information necessary for the making and timely filing of such
reports or returns by Lessor. If Lessor requests that any such reports or
returns be prepared and filed by Lessee, Lessee shall prepare and file the
reports or returns if permitted by applicable law to do so, and if not so
permitted, Lessee shall prepare such reports or returns for signature by Lessor,
and shall forward the same, together with immediately available funds for
payment of any Tax due, at least five Business Days in advance of the date such
payment is to be made, unless payment of such Tax is being resisted in
accordance with the provisions of Section 8.5, in which case Lessee shall pay
such Tax directly to the appropriate taxing authority if legally permissible or,
upon demand of Lessor, to Lessor within five (5) Business Days after a Final
Determination (as defined below). For purposes of this Section 8.7, a "Final
Determination" shall mean (i) a decision, judgment, decree or other order by any
court of competent jurisdiction which decision, judgment, decree or other order
has become final and unappealable, (ii) a closing agreement or settlement
agreement that has become binding and is not subject to further review or
appeal, or (iii) the termination of administrative proceedings and the
expiration of the time for instituting a claim in a court proceeding.

             8.8 PAYMENT. Lessee shall pay any Tax directly to the appropriate
taxing authority if legally permissible, unless such Tax is being contested or
resisted in accordance with the provisions of Section 8.5, and upon demand of
Lessor shall pay such Tax and any other amounts due hereunder to Lessor within
five Business Days of such demand, but in no event shall any such payments be
made less than three Business Days prior to the date the Tax to which any such
payment hereunder relates is due (unless Lessee has not received such demand at
least 15 Business Days prior to such date, in which case payment shall be made
within five Business Days after receipt of such demand), in immediately
available funds, unless such Tax is being resisted in accordance with the
provisions of Section 8.5, in which case Lessee shall pay such Tax directly to
the appropriate taxing authority if legally permissible or, upon demand of
Lessor, to Lessor within five (5) Business Days after a Final Determination (as
defined in Section 8.7 hereof). Any such demand for payment from Lessor shall
specify in reasonable detail the payment and the facts upon which the right to
payment is based. Lessor shall promptly forward to Lessee any correspondence,
notice, bill or advice received by it concerning any Tax indemnified against
hereunder unless such correspondence, notice, bill or advice also addresses
issues unrelated to the transactions contemplated under this Lease (in which
case, the unrelated issues shall be redacted). As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall furnish
Lessor with the original or a certified copy of a receipt for Lessee's payment
of such Tax or such other evidence of payment of such Tax as is reasonably
acceptable to Lessor. Lessee shall also furnish promptly upon request such data
as Lessor may reasonably require to enable Lessor to comply with the
requirements of any taxing jurisdiction.


                                      -34-


             8.9 REFUNDS. Upon receipt by Lessor of a refund of any amounts paid
by it in respect of any contested Tax which amounts were advanced to Lessor by
Lessee or otherwise paid by Lessee, Lessor shall pay to Lessee the amount of
such refund, together with any interest received by Lessor on such refund that
is fairly attributable to the amount and the period of such payment or advance
by Lessee (net of any taxes payable with respect to the receipt or accrual of
such interest by Lessor); and, upon disallowance of any portion of such
requested refund, Lessee shall forgive the related amount advanced to Lessor
with respect to the contested Tax, and shall indemnify Lessor on a net after-tax
basis for any Tax incurred by Lessor as a result of such forgiveness.

                                    SECTION 9

                                      LIENS

             During the Term, Lessee shall not create or suffer to exist any
Lien upon or against the Aircraft, the Aircraft Documents or any of its rights
under this Agreement, other than the following ("Permitted Liens"):

                     (a) Lessor's Liens;

                     (b) repairers' or other like Liens arising in the ordinary
      course of business, in respect of obligations which are neither overdue
      nor deferred;

                     (c) the rights of others expressly permitted under Sections
      6 and 7 hereof;

                     (d) Liens for taxes of any kind not yet due and payable or
      being contested in good faith by appropriate proceedings that do not
      involve any material risk of the sale, forfeiture or loss of the Aircraft
      or the Aircraft Documents or any interest therein;

                     (e) Liens arising out of judgments or awards against Lessee
      with respect to which there shall have been procured a stay of execution;

                     (f) salvage rights of insurers under insurance policies
      maintained pursuant to Section 11; and

                     (g) the respective rights of Lessor and Lessee as provided
      herein.

All Liens excepted above under item (b) shall be discharged or bonded over by
Lessee in the ordinary course of business, but not later than the end of the
Term. If at any time during the Term a Lien (other than a Permitted Lien) shall
be created or suffered to exist by Lessee, or be levied upon or asserted against
the Aircraft or the Aircraft Documents, or if any person or entity should assert
any Lien (other than a Permitted Lien) on any right of Lessee under this
Agreement, Lessee shall notify Lessor and Lessee shall cause such Lien (other
than Permitted


                                      -35-


Liens) forthwith to be discharged by bond or otherwise unless Lessor shall
otherwise consent in writing. If Lessee shall fail to discharge (or bond over)
any Lien (other than Permitted Liens), Lessor may do so, and Lessee shall pay to
Lessor on demand the amount paid by Lessor together with Lessor's losses, costs,
and expenses, including reasonable legal fees and expenses. The obligations set
forth in this Section 9 shall survive the Expiration or Termination of this
Agreement.

                                   SECTION 10

                                 INDEMNIFICATION

             10.1 INDEMNIFICATION AND HOLDING HARMLESS. Lessee agrees to defend,
indemnify, reimburse, and hold harmless Lessor and its successors, assigns,
directors, officers, employees and servants (hereinafter individually and
collectively the "Indemnified Parties") from and against any and all claims,
damages, losses, liabilities, demands, suits, judgments, causes of action, legal
proceedings, penalties, fines, other sanctions and any costs and expenses in
connection therewith, including but not limited to reasonable attorneys' fees
and expenses (any and all of which are hereafter referred to as "Claims") that
in any way result from or arise out of or in relation to: (a) the condition,
manufacture, delivery under this Agreement, possession, return, disposition
after an Event of Default, use or operation of the Aircraft either in the air or
on the ground; (b) any defect in the Aircraft arising from the material or any
article used therein or from the design, testing or use thereof, or from any
maintenance, service, repair, overhaul or testing of the Aircraft, regardless of
when such defect shall be discovered, and regardless of where the Aircraft may
then be located; (c) any breach by, or noncompliance by Lessee with, any
provision of this Agreement or any other agreement or document contemplated
hereby or given or entered into by Lessee in connection herewith; or (d) any
bodily injury suffered by any person, or any property damage suffered by any
person or entity, in the course of or as a result of the use, operation,
maintenance, service, repair, overhaul, testing, possession, delivery under this
Agreement or return of the Aircraft. The foregoing indemnity shall not apply to
(i) any Claim that constitutes a Permitted Lien, (ii) Claims for Taxes, it being
agreed that Section 8 hereof (together with the Tax Indemnity Agreement)
represents Lessee's entire obligation with respect to Taxes, (iii) Claims
attributable to the negligence or wilful misconduct of any Indemnified Party,
(iv) Claims attributable to any misrepresentation by any Indemnified Party
herein or in any agreement or document delivered by it in connection herewith or
(v) Claims attributable to acts or events occurring before the Delivery Date or
following Expiration or Termination of this Agreement and the re-delivery of the
Aircraft to Lessor (unless any of such events after re-delivery of the Aircraft
are attributable to acts (or a failure to act) on the part of Lessee prior to
such re-delivery).

             10.2 LESSEE'S WAIVER AND RELEASE. Lessee hereby waives and releases
any Claim now or hereafter existing against the Indemnified Parties on account
of any Claim of or on account of or arising from or in any way connected with
injury to or death of personnel of Lessee or loss or damage to property of
Lessee that may result from or arise in any manner out


                                      -36-


of or in relation to the condition, use or operation of the Aircraft, either in
the air or on the ground, during the Term, or that may be caused during the Term
by any defect in the Aircraft arising from the material or any article used
therein or from the design, testing or use thereof, or from any maintenance,
service, repair, overhaul or testing of the Aircraft, except to the extent that
such Claim arises out of the breach by any Indemnified Party of its obligations
hereunder or under any agreement or document delivered in connection herewith,
regardless of when such defect may be discovered, and regardless of the location
of the Aircraft at any such time. The foregoing waiver and release shall not
apply to any Claim arising out of the negligence or wilful misconduct of any
Indemnified Party.

             10.3 SURVIVING OBLIGATIONS. The indemnities and agreements
contained in this Section 10 shall survive the end of the Term and the Return of
the Aircraft. The indemnities contained in this Section 10 are expressly made
for the benefit of and shall be enforceable by the Indemnified Parties.

                                   SECTION 11

                                    INSURANCE

             11.1 REQUIRED POLICIES. Lessee shall at all times from Delivery
until the Return Date, at its own cost and expense, carry and maintain in effect
with respect to the Aircraft the following insurance with an insurer or insurers
(and, in regard to not less than 98% of any reinsurance, reinsurers) with a
rating by A.M. Best of A VIII or higher, in such form as shall be reasonably
satisfactory to Lessor:

                     (a) HULL ALL RISKS insurance against all risks of loss or
      damage, howsoever occasioned, covering (i) the Aircraft while flying,
      taxiing or on the ground and (ii) the Engines and Parts while not
      installed on the Aircraft or in transit, whether such item is a spare or
      has been removed from the Aircraft and replaced with an equivalent part or
      component and are not insured by the Aircraft's hull and war risk
      insurance, for the Stipulated Loss Value and subject to deductibles, other
      than in the event of Total Loss, which do not exceed industry standards
      for similar airlines located in the United States operating similar
      aircraft.

                     (b) HULL WAR AND ALLIED RISKS insurance against the
      following risks:

                            (i)     war, invasion, acts of foreign enemies,
                                    hostilities (whether war be declared or
                                    not), civil war, rebellion, revolution,
                                    insurrection, martial law, military or
                                    usurped power or attempts at usurpation of
                                    power;

                            (ii)    strikes, riots, civil commotions or labor
                                    disturbances;


                                      -37-


                            (iii)   any act of one or more persons, whether or
                                    not agents of a sovereign power, for
                                    political or terrorist purposes and whether
                                    the loss or damage resulting therefrom is
                                    accidental or intentional;

                            (iv)    any malicious act or act of sabotage;

                            (v)     confiscation, nationalization, seizure,
                                    restraint, detention, appropriation,
                                    requisition for title or use by or under the
                                    order of any government (whether civil,
                                    military or de facto) or public or local
                                    authority (other than the United States);

                            (vi)    hijacking or any unlawful seizure or
                                    wrongful exercise of control of the Aircraft
                                    or crew in flight (including any attempt at
                                    such seizure or control) made by any person
                                    or persons on board the Aircraft acting
                                    without the consent of the insured;

      for the Stipulated Loss Value (without insurer's right to replace) and
      subject to deductibles, other than in the event of Total Loss, which do
      not exceed industry standards for similar airlines located in the United
      States operating similar aircraft.

                     (c) ALL RISK PROPERTY INSURANCE with respect to any
      Engine(s), engine(s) and/or other Part(s), part(s) or component(s) of the
      Aircraft, whether such item is a spare or has been removed from the
      Aircraft and replaced by an equivalent Engine, engine, Part, part or
      component, while such items are not installed on the Aircraft and are not
      insured by the Hull and War Risk Insurance with respect to the Aircraft,
      for the Stipulated Loss Value and subject to deductibles which do not
      exceed industry standards for similar airlines located in the United
      States operating similar aircraft.

                     (d) COMPREHENSIVE AIRLINE LIABILITY insurance, including
      Aircraft Third Party, Passenger, Baggage, Contractual, Cargo, Mail and
      Airline General Third Party Liability Insurance, hangarkeeper's and
      product liability insurance, all of which are to include the War and
      Allied Perils enumerated in subsection (b) above, for a combined single
      limit in an amount not less than $200,000,000 per occurrence per aircraft
      (but products in the aggregate) during the currency of the policy.

             11.2 PROVISIONS IN THE POLICIES. All insurances referred to in
Section 11.1 above shall contain the following provisions:

                     (a) ADDITIONAL INSUREDS. In respect of the insurances,
      Lessor and its successors or assignees, directors, officers, employees and
      agents shall be included as Additional Insureds (each an "Additional
      Insured") (warranted no operational interest, without liability for
      premium, but with option to pay premium).


                                      -38-


                     (b) GEOGRAPHICAL AREA. The insurances shall provide for
      coverage in North America; PROVIDED, that if at any time the Lessee shall
      choose to operate the Aircraft outside of North America, the insurance
      shall also provide for coverage in such other jurisdiction.

                     (c) BREACH OF WARRANTY CLAUSE. The insurance coverage shall
      not be invalidated or voidable by any act or omission (including
      misrepresentation and non- disclosure) of Lessee which results in a breach
      of any condition or warranty of the policy; PROVIDED that the Additional
      Insured protected thereby has not caused, contributed to or knowingly
      condoned the said act or omission.

                     (d) WAIVER OF SET-OFF. Insurers shall waive any right of
      set-off or counterclaim against Lessee and the Additional Insureds, except
      in respect of outstanding premium in respect of the Aircraft.

                     (e) SUBROGATION. Upon payment of any loss or claim to
      Lessee or an Additional Insured, insurers shall to the extent and in
      respect of such payment be thereupon subrogated to all legal and equitable
      rights of the party indemnified thereby, but not against Lessee or an
      Additional Insured. Insurers shall not exercise such rights without the
      consent of those indemnified, such consent not to be unreasonably
      withheld. At the expense of the insurers, Lessee and Additional Insured
      shall do all things reasonably necessary to assist the insurers to
      exercise said rights.

                     (f) PRIMARY INSURANCES. The insurances shall be primary and
      without right of contribution from any other insurance which may be
      available to Lessee or to the Additional Insureds.

                     (g) INSURERS AWARE OF THIS AGREEMENT. The insurances shall
      certify that insurers are aware of the terms and conditions of this
      Agreement.

                     (h) NOTICE OF CANCELLATION OR CHANGES. Insurers shall give
      Lessor thirty (30) days prior written notice of any material change, lapse
      or cancellation of the insurances (for any reason whatsoever, including,
      without limitation, failure to pay premiums), but seven (7) days in
      respect of War and Allied Perils, such notices to be given to the address
      listed in Section 20.11. Notice will not be given at normal expiration
      date of the policy or any endorsement.

                     (i) US DOLLARS. All claims under any of the insurances
      shall be payable in Dollars.

                     (j) NON-UNITED STATES DOMICILED INSURERS. Insurers not
      domiciled in the United States (if any) shall submit to service of process
      in the United States relating to any


                                      -39-


      proceedings in connection with this Agreement or with insurances issued by
      such insurer relating hereto.

             11.3 PROVISIONS IN THE HULL POLICIES. The Hull policies mentioned
above in Sections 11.1 (a) and (b) shall contain the following provisions:

                     (a) STIPULATED LOSS VALUE BASIS. The insurances shall be on
      a stipulated loss value basis without the insurer's right to replace.

                     (b) LOSS ADJUSTMENT. Losses and damages not constituting a
      Total Loss and not exceeding Five Hundred Thousand Dollars ($500,000)
      shall be adjusted with Lessee. Insurers shall be authorized and instructed
      to inform Lessor on any loss adjustment involving claims exceeding Five
      Hundred Thousand Dollars ($500,000) in the aggregate.

                     (c) LOSS PAYABLE CLAUSE. In case of any Total Loss, the
      Insurers shall pay insurance proceeds up to the Stipulated Loss Value to
      Lessor, and shall pay amounts over and above the Stipulated Loss Value to
      Lessee. In the case of loss or damage not constituting a Total Loss and
      not exceeding Five Hundred Thousand Dollars ($500,000), Lessee shall be
      sole loss payee, but in case of partial loss or damage exceeding such
      amount, the insurance proceeds, up to the Stipulated Loss Value, shall be
      paid directly to Lessor (or as expressly authorized by Lessor).

                     (d) 50:50 CLAUSE. In the event of a dispute between the
      Hull All Risks and the Hull War and Allied Risks insurers or reinsurers,
      each insurance or reinsurance policy, respectively, shall pay 50% of the
      claim and the dispute shall be settled as between the insurers or
      reinsurers concerned, but shall not affect the insured or the Additional
      Insureds.

             11.4 PROVISIONS IN THE LIABILITY POLICIES. The liability policies
referred to in Section 11.1 (c) above shall contain the following provision:

                     SEVERABILITY OF INTEREST CLAUSE. The liability insurances
      shall operate in all respects (save only for the limit of liability) as if
      a separate policy had been issued to each insured named thereunder.

             11.5 CERTIFICATES. Prior to or on the Delivery Date, Lessee shall
submit to Lessor evidence of the insurances required by this Section 11 by way
of a certificate, issued by Lessee's insurance broker in form and substance
reasonably satisfactory to Lessor. All policies providing insurance required by
this Section 11 shall be renewed by certificate, binder, endorsement, or note,
or a new policy or policies with similar coverage substituted therefor,
commencing immediately upon the respective expiration dates of the coverage of
such policies, and Lessee shall promptly furnish Lessor with evidence
satisfactory to Lessor of such renewal or substitution on the renewal dates
thereof. Not later than two weeks prior to the


                                      -40-


expiration of any policy maintained pursuant to this Section 11, Lessee shall
deliver to Lessor a draft certificate evidencing the terms of the proposed
renewal policy. Upon Lessor's request, Lessee shall produce to Lessor evidence
of the payment of the premiums required under the insurances.

             11.6 FAILURE TO INSURE. If Lessee fails to maintain insurance in
compliance with the requirements of this Agreement, Lessor shall be entitled,
but not bound (without prejudice to any other rights of Lessor under this
Agreement):

                     (a) to pay the premiums due or to effect and maintain the
      insurance required by Section 11.1 or otherwise remedy Lessee's failure in
      such manner (including, without limitation, to effect an "owner's
      interest" policy) as it considers appropriate. Any sums so expended by it
      will become immediately due and payable by Lessee to Lessor together with
      interest thereon at the rate specified in APPENDIX B, from the date of
      expenditure by it up to the date of reimbursement by Lessee; or

                     (b) at any time while such failure is continuing, to
      require the Aircraft to remain at any airport or to proceed to and remain
      at any airport in the continental United States designated by it until
      such failure is remedied to its satisfaction.

             11.7 APPLICATION OF INSURANCE PROCEEDS IN EVENT OF TOTAL LOSS. All
insurance payments received as the result of the occurrence of a Total Loss with
respect to the Aircraft will be applied in reduction of Lessee's obligation to
pay pursuant to Section 19.1 if not already paid by Lessee, or, if already paid
by Lessee, shall be applied to reimburse Lessee for its payment of such amounts,
and the balance, if any, of such payments remaining thereafter will be paid over
to Lessee.

             11.8 OTHER APPLICATION OF INSURANCE PROCEEDS. All insurance
payments received as the result of any property damage or loss of the Airframe
or any Engine or Part not constituting a Total Loss with respect to the
Aircraft, will be applied in payment for repairs or for replacement of such
property, if not already paid for by Lessee (or to reimburse Lessee for such
repairs or replacements, if already paid for by Lessee). If the cost of any such
repairs or replacement exceeds such insurance proceeds the excess shall be paid
by Lessee.

             11.9 ADDITIONAL INSURANCE. Nothing in this Section 11 shall
prohibit Lessor or Lessee from obtaining insurance with respect to the Aircraft
for its own account (including, without limitation, in the case of Lessee, hull
insurance under the same policies maintained pursuant to this Section 11 in
amounts in excess of those required to be maintained pursuant to this Section
11) and any proceeds payable thereunder shall be payable as provided in the
insurance policy relating thereto, PROVIDED, that no such insurance may be
obtained which would limit or otherwise adversely affect the coverage or payment
of any insurance required to be obtained or maintained pursuant to this Section
11.


                                      -41-


                                   SECTION 12

                                   ASSIGNMENT

             12.1 ASSIGNMENT BY LESSEE. Lessee shall not assign or transfer all
or any of its rights and obligations under this Agreement without the prior
written consent of Lessor (which consent shall not be unreasonably withheld).

             12.2 ASSIGNMENT BY LESSOR.

                     (a) Lessor may, at its own expense and without the prior
consent of Lessee, sell or transfer the Aircraft and assign or transfer all or
any of its rights and obligations under this Agreement to another person or
entity, in the sole and absolute discretion of Lessor; PROVIDED, HOWEVER, that
such assignee or transferee (i) shall be a "citizen of the United States" (as
that term is defined in Section 40102(a) (15) of Title 49 of the United States
Code), (ii) shall not, without the written consent of Lessee, be an airline or
any other competitor of Lessee (or an Affiliate of such airline or competitor),
and (iii) shall have a net worth of not less than $25,000,000 (or provide a
guaranty of all of its obligations hereunder by an entity meeting such net worth
requirement). Upon (i) such an assignment becoming effective and (ii) the
assignee assuming all of Lessor's obligations under this Agreement, Lessor shall
be released of any further obligations hereunder.

                     (b) After notice from Lessor of any such sale or transfer
of the Aircraft or any assignment or transfer of all or any of Lessor's rights
and obligations under this Agreement, upon request from Lessor and at Lessor's
expense, Lessee shall, as soon as practicable, execute any agreements or other
instruments that may be necessary or reasonably requested by Lessor in order to
allow, give effect to, or perfect any assignment or transfer of Lessor's rights
and obligations under this Agreement (including, without limitation,
certificates confirming (to the extent that such matters are accurate) (i) the
continuing truth and accuracy of Lessee's representations as set forth herein,
(ii) that no Event of Default has occurred and is continuing, (iii) that no
Total Loss has occurred, (iv) that this Agreement is in full force and effect,
(v) that the insurance as required pursuant to this Agreement remains in full
force and effect with the assignee named as loss payee as required pursuant to
Section 11 hereof and added as an Additional Insured as of the assignment, and
(vi) such other matters as reasonably requested by Lessor).

                     (c) In any instance where a transfer or assignment effected
by Lessor is to more than one person, such transferees or assignees shall select
an agent who shall act on behalf of all such transferees or assignees and with
whom Lessee may deal exclusively, and notify Lessee thereof.

             12.3 ASSIGNMENT OF WARRANTIES. As of the Delivery Date and unless
an Event of Default shall have occurred and be continuing, Lessor hereby assigns
to Lessee (a) all


                                      -42-


warranties (to the extent they are still existing) covering the Aircraft and all
components, parts and accessories installed on, or delivered with the Aircraft;
and (b) Lessor's right to and possession of all manuals, diagrams and support
materials and all records covering the Aircraft and related components, parts
and accessories. To the extent requested by Lessee, Lessor shall execute and
deliver any separate forms of assignments furnished by Lessee further evidencing
the assignment provided by this Section 12.3. On the Return Date, Lessee shall
reassign (or assign) the foregoing to Lessor; PROVIDED, that Lessee may retain
the right to pursue remedies and to receive benefits with respect to claims of
Lessee arising in respect of events prior to the Return Date. Upon the
occurrence and continuance of an Event of Default, the assignment hereunder
shall automatically terminate and all rights assigned to Lessee pursuant to this
Section 12.3 shall automatically revert back to Lessor.

                                   SECTION 13
                    "AS IS" CONDITION, DISCLAIMER AND RELEASE

             EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, FROM AND AFTER
THE DELIVERY DATE, THE AIRCRAFT AND OTHER ITEMS DELIVERED HEREUNDER ARE LEASED
TO LESSEE IN "AS IS" CONDITION, AND LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES
ANY AND ALL WARRANTIES, OBLIGATIONS AND LIABILITIES, EXPRESS OR IMPLIED, DIRECT
OR INDIRECT, OF LESSOR, ITS SUCCESSORS AND ASSIGNS AND ALL OTHER INDEMNIFIED
PARTIES, AND ANY AND ALL RIGHTS, CLAIMS, AND REMEDIES, EXPRESS OR IMPLIED,
DIRECT OR INDIRECT, OF LESSEE AGAINST LESSOR, ITS SUCCESSORS AND ASSIGNS AND ALL
OTHER INDEMNIFIED PARTIES, ARISING BY LAW OR OTHER WISE (EXCEPT ANY SUCH SET
FORTH IN THIS AGREEMENT) WITH RESPECT TO THE AIRCRAFT OR ANY PARTS OR THE USE OR
OPERATION THEREOF OR ANY NONCONFORMANCE OR DEFECT THEREIN, INCLUD ING BUT NOT
LIMITED TO: (A) ANY WARRANTY AS TO THE CONDITION OF THE AIRCRAFT; (B) ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE; (C)
ANY IMPLIED WAR RANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE OF TRADE; (D) ANY LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR
NOT ARISING FROM THE STRICT LIABILITY OR THE ACTUAL OR IMPUTED NEGLIGENCE OF
LESSOR AND ITS RESPECTIVE SUCCESSORS OR ASSIGNS OR ANY OTHER INDEMNIFIED PARTY;
AND (E) ANY STATUTORY OR OTHER WARRANTY, CONDITION, DESCRIPTION OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE STATE, QUALITY, VALUE, CONDITION,
DESIGN, OPERATION OR FITNESS OF THE AIRCRAFT. IN ADDITION TO ALL OTHER
REQUIREMENTS OF THIS AGREEMENT, THIS SECTION 13 SHALL NOT BE MODIFIED EXCEPT BY
WRITTEN AGREEMENT SIGNED ON BEHALF OF LESSOR BY ITS DULY AUTHORIZED
REPRESENTATIVE.


                                      -43-


                                   SECTION 14

                         REPRESENTATIONS AND WARRANTIES

             14.1 LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and
warrants as of the date hereof and as of the Delivery Date that:

                     (a) LEGAL FORM AND QUALIFICATION. Lessee is a corporation
      organized and existing in good standing under the laws of the state of its
      formation and has full power to conduct its operations as presently
      conducted.

                     (b) AUTHORITY. Lessee has full power, authority and legal
      right to enter into, deliver and perform the Lease Documents.

                     (c) BINDING OBLIGATIONS. The Lease Documents to which
      Lessee is a party constitute, legal, valid and binding obligations of
      Lessee enforceable against Lessee in accordance with the terms thereof,
      except as may be limited by bankruptcy, insolvency, reorganization,
      moratorium or similar laws affecting enforcement of creditors' rights
      generally as well as by general principles of equity.

                     (d) NO ADDITIONAL CONSENTS OR APPROVALS. Neither the
      execution and delivery by Lessee of this Agreement or any other Lease
      Document to which it is a party, nor the consummation of any of the
      transactions contemplated hereby or thereby, requires the consent or
      approval of, the giving of notice to, or the registration with, any
      Governmental Entity.

                     (e) NO VIOLATION. Neither the execution and delivery nor
      the performance by Lessee of this Agreement and the other Lease Documents
      to which it is a party, nor the consummation of any of the transactions as
      contemplated hereby or thereby, will result in any violation of, or be in
      conflict with, or constitute a default under, or result in the creation of
      any Lien upon any property of Lessee under any of the provisions of
      Lessee's charter or by-laws, or of any indenture, mortgage, chattel
      mortgage, deed of trust, conditional sales contract, lease, note or bond
      purchase agreement, license, bank loan, credit agreement or other
      agreement to which Lessee is a party or by which Lessee is bound, or any
      law, judgment, governmental rule, regulation or order of any Governmental
      Entity.

                     (f) PROTECTION OF OWNERSHIP. Except for the registration
      and filings provided for in Section 5 (and any precautionary filings which
      may be made pursuant to the Uniform Commercial Code), no other filing or
      registration of any instrument or document is necessary in order to
      protect Lessor's title to and ownership of the Aircraft.


                                      -44-


                     (g) NO DEFAULT. No Default or Event of Default has occurred
      and is continuing.

                     (h) NO LITIGATION. There are no suits, litigation,
      arbitration or other proceedings pending or, to the knowledge of Lessee,
      threatened against or affecting Lessee that, if adversely determined,
      would have a material adverse effect upon Lessee's financial condition or
      business or its ability to perform its obligations hereunder.

                     (i) OPERATING CERTIFICATES. Lessee is a Certificated Air
      Carrier.

                     (j) WITHHOLDING TAX. Neither the payment of Rent nor the
      payment of any other amount required under this Agreement by Lessee to a
      Delaware corporation is subject to deduction or withholding taxes or the
      equivalent under the laws of any Governmental Entity.

                     (l) PARI PASSU RANKING. The obligations of Lessee to make
      payments hereunder will rank at least PARI PASSU in right of payment with
      all other unsecured, unsubordinated obligations of Lessee.

                     (m) SOVEREIGN IMMUNITY. Lessee does not enjoy or claim any
      sovereign or governmental immunity from suit or enforcement of private
      contracts.

                     (n) YEAR 2000. Lessee has taken all action necessary to
      assure that there will be no material adverse change to Lessee's business
      by reason of the advent of the year 2000.

             14.2 LESSOR'S REPRESENTATIONS AND WARRANTIES. Lessor represents and
warrants as of the date hereof and of the Delivery Date that:

                     (a) LEGAL FORM AND QUALIFICATION. Lessor is a corporation
      organized and existing in good standing under the laws of the state of
      Delaware and has full power to conduct its operations as presently
      conducted.

                     (b) AUTHORITY. Lessor has full power, authority and legal
      right to enter into, deliver and perform the Lease Documents.

                     (c) BINDING OBLIGATIONS. The Lease Documents to which
      Lessor is a party constitute, legal, valid and binding obligations of
      Lessor enforceable against Lessor in accordance with the terms thereof,
      except as may be limited by bankruptcy, insolvency, reorganization,
      moratorium or similar laws affecting enforcement of creditors' rights
      generally as well as by general principles of equity.


                                      -45-


                     (d) NO VIOLATION. Neither the execution and delivery or
      performance by Lessor of this Agreement and any other document delivered
      by Lessor in connection herewith, nor consummation of any of the
      transactions as contemplated thereby, will result in any violation of, or
      be in conflict with, or constitute a default under, or result in the
      creation of any Lien upon any property of Lessor under any indenture,
      mortgage, chattel mortgage, deed of trust, conditional sales contract,
      lease, note or bond purchase agreement, license, bank loan, credit
      agreement or other agreement to which Lessor is a party or by which Lessor
      is bound, or any law, judgment, governmental rule, regulation or order of
      any Governmental Entity.

                     (e) NO CONSENTS OR APPROVALS. Neither the execution and
      delivery by Lessor of this Agreement or any other Lease Document to which
      it is a party, nor the consummation of any of the transactions
      contemplated hereby or thereby, requires the consent or approval of, the
      giving of notice to, or the registration with, any Govern mental Entity.

                     (f) CITIZENSHIP. Lessor is (i) a "citizen of the United
      States" as that term is defined in Section 40102(a) (15) of Title 49 of
      the United States Code and (ii) a "United States person" as that term is
      defined in Section 7701(a) (30) of Title 26 of the United States Code.

                     (g) NO LITIGATION. There are no suits, litigation,
      arbitration or other proceedings pending or, to the knowledge of Lessor,
      threatened against or affecting Lessor that, if adversely determined,
      would have a material adverse effect upon Lessor's financial condition or
      business or its ability to perform its obligations hereunder.

                     (h) OWNERSHIP. As of the Delivery, Lessor holds legal title
      to the Aircraft.

                                   SECTION 15

                                    COVENANTS

             15.1 LESSEE'S COVENANTS. Lessee hereby covenants with Lessor that
during the Term, Lessee shall:

                     (a) punctually pay to Lessor when due all the monies
      specified and calculated in accordance with the terms of this Agreement
      and at the time and in the manner herein specified and shall punctually
      and duly observe and perform Lessee's obligations under this Agreement;

                     (b) maintain insurance in respect of the Aircraft, its
      liabilities and properties in accordance with good airline practice and
      the terms and conditions of this Agreement;


                                      -46-


                     (c) preserve its existence and maintain all rights,
      privileges, licenses and franchises necessary to its business or material
      to its performance of its obligations under this Agreement;

                     (d) not change its chief executive office without giving
      Lessor notice as soon as practicable (but such notice shall not in any
      event be required more than fifteen (15) days prior to such move);

                     (e) keep in full force Lessee's air carrier certificate
      issued by the FAA;

                     (f) promptly, upon becoming aware, notify Lessor, in
      writing, of the occurrence of any Event of Default or of any event which
      with the giving of notice or passage of time could become an Event of
      Default;

                     (g) not do or knowingly permit to be done or omit or
      knowingly permit to be omitted to be done any act or thing which might
      reasonably be expected to jeopardize the rights of Lessor as owner and
      lessor of the Aircraft and as an additional insured or loss payee under
      the insurance required under this Agreement;

                     (h) not, on any occasion when the ownership of the
      Aircraft, any Engine or any Part is relevant, claim any interest in the
      Aircraft other than as Lessee under this Agreement;

                     (i) not at any time (i) represent or hold out Lessor as
      carrying goods or passengers on the Aircraft or as being in any way
      connected or associated with any operation or carriage (whether for hire
      or reward or gratuitously) which may be undertaken by Lessee or (ii)
      pledge the credit of Lessor;

                     (j) not attempt, or hold itself out as having any power, to
      sell, lease or otherwise dispose of the Aircraft, the Aircraft Documents,
      any Engine or any Part, except as provided in Section 6 or Section 7
      hereof;

                     (k) maintain in good standing a current certificate of
      airworthiness for passenger operations, or the equivalent, for the
      Aircraft issued by the applicable Aviation Authority, except when the
      Aircraft is undergoing maintenance, modification or repair required or
      permitted by this Agreement, and provide on request from time to time to
      Lessor a copy of such certificate;

                     (l) deliver to Lessor promptly after the same are available
      (and in any event within 45 days after the close of each of the first
      three quarterly accounting periods of Lessee) after the close of each of
      the first three quarterly accounting periods in each fiscal year ending
      after the date hereof, a copy of its unaudited balance sheet as of the end


                                      -47-


      of such quarterly period and its related unaudited income statement and
      statement of financial condition and cash flows for such quarterly period;

                     (m) deliver to Lessor promptly after the same are available
      (and in any event within 120 days) after the end of each of its fiscal
      years ending after the date hereof, a copy of its audited balance sheet as
      of such date and its audited income statement and statement of financial
      condition and cash flows for such fiscal year, which (i) shall be prepared
      in accordance with generally accepted accounting principles and practices
      in the United States consistently applied and (ii) shall fairly and
      accurately present the financial position of Lessee as of the date as of
      which they were prepared and the results of the operations of Lessee for
      the period to which they relate;

                     (n) deliver to Lessor each calendar quarter:

                            (i) a written report setting forth the then-existing
             status of the Aircraft and each of the Engines, with such report
             indicating: (A) the number of Flight Hours and Cycles accrued on
             the Airframe and either of the Engines; (B) all C-Checks, overhauls
             and unscheduled maintenance performed on the Airframe and each of
             the Engines during the prior calendar quarter; (C) any Engine
             changes during the prior calendar quarter; (D) the anticipated time
             and location for the next heavy maintenance check or overhaul; and
             (E) such additional information concerning the location, condition,
             use and operation of the Aircraft and Engines as Lessor may
             reasonably request; and

                            (ii) a certificate signed by an officer of Lessee
             certifying that no Event of Default pursuant to this Agreement is
             in existence;

                     (o) promptly provide Lessor with such other financial,
      operational and other information concerning Lessee and its affairs as
      Lessor may from time to time reasonably require;

                     (p) not discriminate against the Aircraft in contemplation
      of the expiration or termination of this Agreement, with respect to
      Lessee's use, operation or maintenance of the Aircraft or the performance
      by Lessee of ADs or service bulletins; and

                     (q) take all action necessary to assure that there will be
      no material adverse change to Lessee's business by reason of the advent of
      the year 2000.

             15.2 LESSOR'S COVENANTS; QUIET ENJOYMENT. Lessor hereby covenants
with Lessee that, during the Term, so long as no Event of Default hereunder
shall be continuing:

                     (a) neither Lessor, any person acting on its behalf or in
      its stead, any predecessor or successor in interest of Lessor, nor any
      person claiming an interest in the


                                      -48-


      Aircraft by or through Lessor shall interfere with Lessee's rights
      hereunder or Lessee's quiet and undisturbed use and enjoyment of the
      Aircraft; and

                     (b) should such an interference occur, Lessor shall
      promptly eliminate the cause of such interference at its sole cost and
      expense upon receipt of a notice thereof from Lessee.

                                   SECTION 16

                           DEFAULT BY LESSEE; REMEDIES

             16.1 EVENT OF DEFAULT. An Event of Default shall mean the
occurrence and continuance of any of the following events:

                     (a) Lessee shall fail to make any payment of Rent on or
      within five (5) Business Days of the due date at the place and in the
      funds required under this Agreement; or

                     (b) Lessee shall fail to make any other payment required
      under any Lease Document within thirty (30) calendar days after receipt by
      Lessee of written notice of such failure; or

                     (c) Lessee shall fail to carry and maintain insurance on or
      in respect of the Aircraft in accordance with the provisions of this
      Agreement or shall operate the Aircraft without such insurance coverage
      being in full force and effect with regard to such operation; or

                     (d) Any representation or warranty made by Lessee herein
      (but not in the Tax Indemnity Agreement) shall have been incorrect in any
      material respect at the time made or deemed to be made, which
      incorrectness has a material adverse effect on Lessor, and shall not have
      been cured (to the extent of the material adverse impact of such
      incorrectness) within thirty (30) days after receipt by Lessee of written
      notice unless (i) such failure is capable of being corrected, (ii) Lessee
      diligently proceeds to correct such failure, and (iii) such failure is
      remedied within one hundred twenty (120) days after such notice; or

                     (e) Lessee shall fail to return possession of the Aircraft
      and the Aircraft Documents to Lessor at the Return Location on the Return
      Date; or

                     (f) Lessee shall:

                                    (i) fail to perform or observe any of the
                            covenants or agreements set forth in Sections 5.1,
                            6.1 or 9 hereof or Section 7.1 of


                                      -49-


                            the Tax Indemnity Agreement, and if such failure
                            shall continue unremedied for a period of thirty
                            (30) days after written notice thereof by Lessor; or

                                    (ii) fail to perform or observe any other
                            covenant, condition or agreement to be performed or
                            observed by it hereun der, and if such failure shall
                            continue unremedied for a period of thirty (30) days
                            after written notice thereof by Lessor; PROVIDED,
                            HOWEVER, that such failure shall not constitute an
                            Event of Default hereunder if (x) such failure is
                            not capable of being cured within the thirty-day
                            period following such notice from Lessor and (y) a
                            cure is diligently pursued by Lessee thereafter;
                            PROVIDED, FURTHER, HOWEVER, that in any event such
                            failure shall constitute an Event of Default
                            hereunder if it continues for more than one hundred
                            twenty (120) days following such notice from Lessor;
                            or

                     (g) Lessee shall (i) apply for or consent to the
      appointment of a receiver, trustee or liquidator for all, or substantially
      all of its property, (ii) cease to pay its debts generally as they become
      due or admit in writing its general inability to pay its debts as they
      mature, (iii) make a general assignment for the benefit of its creditors
      of all or substantially all of its property, (iv) be adjudicated as
      bankrupt or insolvent, or (v) file a voluntary petition in bankruptcy, or
      a petition or an answer seeking reorganization or an agreement with
      creditors or to take advantage of any bankruptcy, reorganization,
      insolvency, readjustment of debt, dissolution or liquidation, or similar
      law or statute, or an answer admitting the material allegations of a
      petition filed against it in any proceeding under any such law, or if
      corporate action shall be taken by Lessee for the purpose of effecting any
      of the foregoing; or

                     (h) An order, judgment or decree shall be entered, without
      the application, approval or consent of Lessee, by any court of competent
      jurisdiction, approving a petition seeking reorganization of Lessee or
      appointing a receiver, trustee or liquidator of Lessee for all or a
      substantial part of its assets, and such order, judgment or decree shall
      continue unstayed and in effect for a period of ninety (90) consecutive
      days; or

                     (i) The entry of any order of any governmental authority or
      any court of competent jurisdiction which shall not be stayed or
      discharged within ninety (90) days from the date of entry thereof,
      preventing Lessee from carrying on its business as presently conducted on
      the date of execution of this Agreement; or

                     (j) There shall have occurred and be continuing an Event of
      Default (as defined in any such other aircraft lease agreement) under any
      other aircraft lease agreement between Lessee and Lessor, including,
      without limitation, the Other Lease Agreement.


                                      -50-


             16.2 REMEDIES. If one or more Events of Default shall be
continuing, Lessor may, at Lessor's option, exercise one or more of the
following remedies, to the extent permitted by law:

                     (a) Lessor may do anything that may reasonably be required
      to cure any Event of Default (which shall be performed on Lessee's
      account).

                     (b) Lessor may instruct Lessee to ferry the Aircraft
      (including the Aircraft Documents) to an airport of Lessor's choice in the
      continental United States and ground the Aircraft at such airport until
      all Events of Default have been cured, whereupon Lessee shall immediately
      do so.

                     (c) Lessor may take any other remedial action available to
      Lessor under applicable law.

                     (d) Lessor may terminate the lease of the Aircraft to
      Lessee under this Agreement by:

                            (i) serving notice of such termination on Lessee in
      writing in accordance with Section 20.11, specifying the occurrence giving
      rise to such Event of Default, which notice shall cause this Agreement to
      terminate immediately (without any further act, service, notification or
      proceeding being necessary), whereupon Lessee shall promptly return the
      Aircraft and the Aircraft Documents in compliance with the Return
      Conditions to Lessor at the Return Location or at any airport in the
      continental United States specified by Lessor (and should Lessee fail to
      comply with the Return Conditions, Lessor may do or cause to be done, at
      Lessee's expense, whatever may be necessary to cause the Aircraft to so
      comply); or

                            (ii) with or without notice to Lessee, taking
      possession of the Aircraft and the Aircraft Documents, for which purpose
      Lessor by its servants or agents may enter upon Lessee's premises where
      the Aircraft and the Aircraft Documents may be located, or cause the same
      to be redelivered to Lessor at any airport in the continental United
      States specified by Lessor; and to effect the foregoing, Lessor may use
      any and all reasonable and lawful means necessary to take immediate
      possession of and remove (through self-help, summary proceedings or
      otherwise) the Aircraft and the Aircraft Documents from Lessee's premises,
      or from Lessee's possession wherever the same are located; and upon
      exercise by Lessor of its powers under this Section 16.2(d)(ii), such
      termination shall be deemed to take effect upon such taking of possession
      by Lessor or such re-delivery of the Aircraft and the Aircraft Documents
      to Lessor at said airport (without any further act, notification or
      proceeding being necessary).


                                      -51-


                     (e) Whether or not Lessor shall have exercised, or shall
      thereafter at any time exercise, any of its rights described in this
      Section 16.2 with respect to the Aircraft, Lessor, by written notice to
      Lessee specifying a payment date not earlier than ten (10) days from the
      date of such written notice, may demand that Lessee pay to Lessor, and
      Lessee shall pay to Lessor, on the payment date specified in such notice,
      as liquidated damages for loss of a bargain and not as a penalty (in lieu
      of the Basic Rent for the Aircraft due for periods commencing on or after
      the date specified for payment in such notice) 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 (A)
             the present value of the aggregate unpaid Basic Rent payable
             through the end of the Term of this Agreement discounted at the
             rate of five and one-half percent (5.5%) per annum to the date
             specified in such notice over (B) the present value of the fair
             market rent (or actual rent if the Aircraft is re-leased) payable
             with respect to the Aircraft through the end of the Term discounted
             at the rate of five and one-half percent (5.5%) per annum to the
             date specified in such notice; or

                            (ii) an amount equal to the excess, if any, of (A)
             the Stipulated Loss Value for the Aircraft computed as of the date
             specified for payment in such notice over (B) the Fair Market Sales
             Value of the Aircraft as of the date specified in such notice.

      The amount specified in the notice shall bear Interest from the payment
      date set forth in such notice until paid.

                     (f) In addition to the remedies hereinabove and without
      limiting any remedies Lessor may have at law or in equity, Lessor may
      lease, sell or otherwise dispose of the Aircraft as Lessor in its sole
      discretion may determine.

             16.3 INTEREST ON OVERDUE AMOUNTS. Overdue amounts required to be
paid pursuant to Section 4 hereof or this Section 16 shall bear interest at the
rate indicated in APPENDIX B.

             16.4 NO WAIVER. No implied waiver by Lessor of any Event of Default
or failure or delay of Lessor in exercising any right hereunder shall operate as
a waiver thereof. The acceptance by Lessor of partial payments from Lessee or
any third party, whether made before or after a termination pursuant to Section
16.2, shall not operate as a waiver by Lessor of an Event of Default and shall
not be construed as an intent to continue the contractual relationship or as a
reinstatement of this Agreement. Nothing in this Section 16.4 shall be construed
to permit Lessor to obtain a duplicate recovery of any element of damages to
which Lessor is entitled. No express or implied waiver by Lessor of any Default
or Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Default or Event of Default.


                                      -52-


             16.5 COSTS AND EXPENSES. Lessee agrees to pay to Lessor, upon
demand, all reasonable costs, expenses and disbursements (including, without
limitation, reasonable attorney's fees, legal fees and expenses) incurred by
Lessor in exercising its rights or remedies under this Agreement.

                                   SECTION 17

                               RETURN OF AIRCRAFT

             17.1 RETURN, PLACE AND TIME OF RETURN. Lessee shall at its own
expense return the Aircraft and the Aircraft Documents by delivering the same to
Lessor at the Return Location on the Expiration Date or promptly upon the
earlier Termination, except where (a) Lessee purchases the Aircraft pursuant to
its Purchase Option or (b) this Agreement terminates as a result of a Total
Loss.

             17.2 AIRCRAFT RETURN CONDITIONS. The Aircraft at the time of its
return to Lessor shall fulfill the Return Conditions described in Section 18
hereof.

             17.3 REDELIVERY RECEIPT. Upon return of the Aircraft and the
Aircraft Documents in accordance with the terms of this Agreement, Lessor and
Lessee shall execute a Redelivery Receipt substantially in the form of APPENDIX
E hereto.

             17.4 SPECIFIC PERFORMANCE. Timely return of the Aircraft and the
Aircraft Documents on the Return Date and at the Return Location is of the
essence of this Agreement and if the Aircraft and the Aircraft Documents are not
returned on the Return Date and at the Return Location, Lessor may obtain a
court order requiring Lessee to immediately return the Aircraft and the Aircraft
Documents at the Return Location.

             17.5 LESSEE'S OBLIGATIONS CONTINUE.

                     (a) In the event the Return of the Aircraft and the
Aircraft Documents is not effected at the time and location specified herein for
any cause, then the obligations of Lessee under this Agreement shall continue
until the Aircraft and the Aircraft Documents are actually returned to Lessor.
In particular, Lessee shall continue to pay Basic Rent to Lessor until the
Return is effected in accordance with the terms hereof and Lessee has complied
with the Return Conditions; PROVIDED that, should the Return of the Aircraft be
delayed due to Lessee's refusal to cease operating the Aircraft after the
Expiration Date, the amount of Basic Rent owing during such period of delay
shall be in an amount equal to 120% of the Basic Rent rate, as PRO RATED for any
portion of such period less than one month.

                     (b) Neither the continued performance by Lessee of any of
its obligations after the end of the Term nor the acceptance by Lessor of
payments of Rent or otherwise made


                                      -53-


by Lessee shall be considered a renewal of the terms of this Agreement or a
waiver of any right of Lessor hereunder, and Lessee shall not be entitled to the
quiet enjoyment of the Aircraft or any part thereof.

             17.6 STORAGE AFTER END OF TERM. Upon written notice to Lessee at
least sixty (60) days prior to the Expiration Date, Lessee shall provide Lessor
with sixty (60)-days free parking facilities for the Aircraft at the Return
Location (or at any other location in the continental United States selected by
Lessee and normally used for the storage of commercial aircraft). Lessor shall
maintain in effect during such storage period insurance covering the Aircraft to
the extent such insurance is available at reasonable commercial rates, and in
such amounts and against such risks as would be customarily carried in similar
circumstances by a reasonably prudent lessor, with such insurance being paid for
by Lessor; PROVIDED THAT, if the Term ends prior to the Expiration Date as the
result of an Event of Default, Lessee will reimburse Lessor for the cost of such
insurance.

                                   SECTION 18

                                RETURN CONDITIONS

             18.1 CONDITION. On the Return Date, the Aircraft and the Aircraft
Documents shall be in the condition required by APPENDIX F hereto (the "Return
Conditions").

             18.2 AIRCRAFT DOCUMENTS. At the time the Aircraft is returned to
Lessor, Lessee shall deliver to Lessor all Aircraft Documents previously
provided by Lessor to Lessee, updated and maintained through the Return Date in
accordance with the rules and regulations of the Aviation Authority, and in
addition, all records, documents, manuals, drawings and data that were developed
or caused to be developed by Lessee and/or required by the Aviation Authority to
be maintained by Lessee (herein individually and collectively referred to as
"Aircraft Redelivery Documents"). All such Aircraft Redelivery Documents shall
be complete and accurate and in the English language. Any Aircraft Redelivery
Document not already owned by Lessor shall become the property of Lessor upon
its delivery to Lessor.

             18.3 FINAL INSPECTION. Prior to the Return Date, Lessee shall make
the Aircraft and the Aircraft Documents available to Lessor for inspection in
order to verify that the condition of the Aircraft complies with the
requirements set forth in the Return Conditions (the "Final Inspection"). Such
Final Inspection will take place at the Return Location. Lessee, at its cost,
shall promptly correct any discrepancies between the Return Conditions and the
then-current status of the Aircraft ("Discrepancies") observed during the Final
Inspection and communicated by Lessor to Lessee.

             18.4 TEST FLIGHT. Promptly after completion of the corrections, if
any, required under Section 18.3 hereof, a test flight based on Manufacturer's
test flight program shall be conducted by Lessee at its own expense for the
purpose of demonstrating to Lessor the compliance of the Aircraft with the
provisions of this Section 18. Lessor's representatives may


                                      -54-


participate in the test flight as observers. Lessor shall indemnify and hold
harmless Lessee, its officers, directors, employees and agents from and against
all claims arising from the death of or injury to any observer or any employee
of Lessor participating in any inspection or test or demonstration flight of the
Aircraft. All pilot-reported Discrepancies and all Discrepancies identified by
Lessor during the test flight shall be corrected by Lessee at no cost to Lessor.
There shall be no deferred items on the Aircraft except as the parties may
mutually agree.

             18.5 CONDITIONS CUMULATIVE. None of the Return Conditions is
intended to be exclusive, but each shall be cumulative and in addition to any
other condition and requirement.

                                   SECTION 19

                                   TOTAL LOSS

             19.1 TOTAL LOSS OF THE AIRCRAFT. If the Aircraft shall become a
Total Loss prior to the Return Date, Lessee shall pay the Stipulated Loss Value
to Lessor or shall cause the insurers to make such payment within ninety (90)
days of the occurrence of the Total Loss. The Term of this Agreement shall end
upon the earlier to occur of (i) receipt of the Stipulated Loss Value by Lessor
and (ii) the receipt by Lessor of written confirmation from the insurer of the
Aircraft to the effect that such insurer will pay to Lessor the Stipulated Loss
Value of the Aircraft. Thereupon Lessor shall transfer title to the remains of
the Aircraft to the insurers or to Lessee, as appropriate under the insurance
policies, and Lessor shall return to Lessee any prepaid Rent and any other
monies theretofore paid by Lessee then held by it.

             19.2 ENGINE TOTAL LOSS. Upon a Total Loss of an Engine not then
installed on the Aircraft or a Total Loss of an Engine installed on the Aircraft
not involving a Total Loss of the Aircraft, Lessee shall give Lessor prompt
notice thereof, and Lessee shall replace such Engine as soon as reasonably
possible by duly conveying to Lessor and causing to become subject to this
Agreement as a replacement for such Engine, title to another engine, which
engine shall be free and clear of all Liens other than Permitted Liens, and
shall be the same model as the Engines (or an improved model of the same
manufacturer suitable for installation and use on the Airframe) and shall have a
value and utility at least equal to, and be in at least as good operating
condition as the Engine which sustained such Total Loss, assuming such Engine
was in the condition and repair required by the terms hereof immediately prior
to such Total Loss; provided that Lessor shall transfer to Lessee, free and
clear of all rights of Lessor and all Lessor's Liens (but otherwise without
recourse or warranty), all of Lessor's right, title and interest in such
replaced Engine. Such replacement engine (a "Replacement Engine") after approval
and acceptance by Lessor, shall be deemed an "Engine" as defined in Section 1.
Lessee agrees to take such action as Lessor may reasonably request in order that
title to any such Replacement Engine shall be duly and properly vested in Lessor
and leased under this Agreement to the same extent as the Engine replaced
thereby. Lessee's obligation to pay rent hereunder shall continue in full force
and effect, but Lessee shall be entitled to retain or to be


                                      -55-


reimbursed by Lessor the amount of insurance or condemnation proceeds, if any,
received by Lessor with respect to such replaced Engine.

             19.3 SURVIVING ENGINE. If a Total Loss of the Airframe occurs and
any Engine or Engines (a "Surviving Engine") shall not have become a Total Loss,
Lessor, at the request of Lessee, shall, subject to any applicable insurance
policy which provides to the contrary, transfer to Lessee free and clear of all
rights of Lessor and all Lessor's Liens (but otherwise without recourse or
warranty), all of Lessor's right, title and interest, if any, in and to any such
Surviving Engine; PROVIDED, that prior to transferring such right, title and
interest in such Surviving Engine, Lessor shall have received either (i) the
Stipulated Loss Value or (ii) written confirmation from the insurer of the
Aircraft to the effect that such insurer will pay to Lessor the Stipulated Loss
Value of the Aircraft.

                                   SECTION 20

                                  MISCELLANEOUS

             20.1 APPENDICES PART OF THE AGREEMENT. The Appendices of this
Agreement form an integral part hereof.

             20.2 HEADINGS FOR CONVENIENCE ONLY. The headings of clauses and the
index are inserted for convenience of reference only and shall be ignored in the
interpretation of this Agreement.

             20.3 ENTIRE AGREEMENT. This Agreement (as supplemented by the Lease
Supplement) constitutes the entire agreement between Lessor and Lessee with
respect to the leasing of the Aircraft and supersedes any previous
understanding, commitment, agreement or representation whatsoever, oral or
written.

             20.4 MODIFICATIONS OF THE AGREEMENT. This Agreement shall not be
modified or amended except by an instrument in writing, signed by Lessor and
Lessee.

             20.5 PARTIAL INVALIDITY. If any provision of this Agreement shall
be invalid or unenforceable, the parties shall replace this provision by such
valid and enforceable provision which to the nearest degree possible reflects
the commercial intent and purpose of the invalid or unenforceable provision.

             20.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
(OTHER THAN THE LAWS OF THE STATE OF NEW YORK RELATING TO CHOICE OF LAW).

             20.7 JURISDICTION; WAIVER OF JURY TRIAL.


                                      -56-


                     (a)    LESSOR AND LESSEE HEREBY AGREE THAT THE
SUPREME COURT OF THE STATE OF NEW YORK IN NEW YORK, NEW YORK OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (THE "NEW YORK
COURTS"), TO THE EXCLU SION OF ALL OTHER COURTS, SHALL HAVE EXCLUSIVE
JURISDICTION OVER ANY ACTION BROUGHT BY EITHER OF THE PARTIES HERETO WHICH
ARISES OUT OF OR IS RELATED TO THIS AGREEMENT. LESSOR AND LESSEE EACH WAIVES ANY
OBJECTION THAT IT MIGHT HAVE THAT EITHER OF THE NEW YORK COURTS IS AN
INCONVENIENT OR IM PROPER FORUM. NOTWITHSTANDING THE FOREGOING, HOWEVER, LESSOR
MAY PURSUE ANY LEGAL OR EQUITABLE CLAIM IN ANY COURT HAVING JURISDICTION OVER
THE AIRCRAFT AS THE RESULT OF THE LOCATION OF THE AIRCRAFT.

                     (b) LESSOR AND LESSEE IRREVOCABLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO
ENFORCE ANY PROVISION OF THIS AGREEMENT.

             20.8    LEGAL COSTS AND EXPENSES.

                     (a) Lessee shall be responsible for paying the cost of
Lessor's reasonable legal fees and related expenses associated with the
negotiation, preparation and execution of this Agreement, but Lessee shall have
the right to include such fees and expenses within the Transaction Expenses
which shall be paid by Lessor.

                     (b) Should Lessor or Lessee be required to take action to
enforce the terms of this Agreement (such action including, without limitation,
the preparing of demand and default notices and the filing and prosecution of
litigation), the prevailing party shall be entitled to recover from the other
party all associated reasonable costs and expenses, including reasonable
attorneys' fees and court costs.

             20.9 DISCLAIMER OF DAMAGES. LESSOR AND LESSEE EACH AGREES THAT IT
SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES, ANY RIGHT
THAT IT MAY OTHERWISE HAVE TO RECOVER CONSEQUENTIAL, INDIRECT AND SPECIAL
DAMAGES AS A RESULT OF ANY BREACH OR ALLEGED BREACH BY THE OTHER PARTY OF ANY OF
THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF THE OTHER PARTY CONTAINED IN
THIS AGREEMENT.

             20.10 FURTHER ASSURANCES. Lessee and Lessor shall, from time to
time, do and perform such other-and further acts and execute and deliver any and
all other and further instruments as may be required by law or reasonably
requested by either party to establish,


                                      -57-


maintain and protect the respective rights and remedies of the other party and
to carry out and effect the intent and purposes of this Agreement.

             20.11 DEMANDS, NOTICES; LANGUAGE. All demands, notices, technical
reports and other communications hereunder shall be given in English and in
writing and shall be deemed to have been duly given when personally delivered or
delivered by United States certified mail (return receipt requested) or an
internationally-recognized courier service to the subject party as follows (or
to such other address as such party advises in writing pursuant to this
Section):

             If to Lessee:

                     Chautauqua Airlines, Inc.
                     2500 S. High School Road
                     Indianapolis, Indiana 46241
                     Attention:     Chief Executive Officer

             with a copy to:

                     Pearl Professional Corporation
                     735 Post Road East
                     Westport, Connecticut 06880
                     Attention:     Stewart W. Pearl, Esq.

             If to Lessor:

                     FINOVA Capital Corporation
                     1850 North Central Avenue
                     Phoenix, Arizona 850004
                     Attention: Vice President-Law-Transportation Finance

                     and

                     FINOVA Capital Corporation
                     1850 North Central Avenue
                     Phoenix, Arizona 85004

                     Attention: Vice President-Operations Management-
                     Transportation Finance

                     with a copy to:


                                      -58-


                     Robert P. Simbro, Esq.
                     Herriot, Simbro & White, P.C.
                     3200 North Central Avenue
                     Eleventh Floor
                     Phoenix, Arizona 85012

             20.12 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and together shall have the
same effect as if the signatures thereto were upon the same instrument.

             20.13 BROKERS. Each of the parties hereto represents and warrants
to the other that it has not employed any brokers or sale agents in the creation
of or the negotiations relating to this Agreement (except to the extent that The
Seabury Group, LLC has acted as an advisor to Lessee), and each party shall
indemnify and hold harmless the other party by reason of any breach or alleged
breach by such party of its representation and warranty under this Section
20.13.

                            [SIGNATURE PAGE FOLLOWS]



                                      -59-


             IN WITNESS WHEREOF, the parties hereto have executed this Aircraft
Lease Agreement (N262SK) as of the day and year first herein written.

                                         FINOVA CAPITAL CORPORATION, a
                                         Delaware corporation

                                         BY: /s/ Anne Halton
                                             -----------------------------------

                                         NAME: Anne Halton
                                               ---------------------------------

                                         TITLE:
                                               --------------------------------


                                         CHAUTAUQUA AIRLINES, INC., a New
                                         York corporation

                                         BY: /s/ Robert H. Cooper
                                             -----------------------------------

                                         NAME: Robert H. Cooper
                                               ---------------------------------

                                         TITLE: Vice President
                                                --------------------------------





                                   APPENDIX A

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)

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

                       DESCRIPTION OF AIRFRAME AND ENGINES
- --------------------------------------------------------------------------------


      1.     DESCRIPTION OF AIRFRAME

                     MANUFACTURER:                  Embraer
                     MODEL NUMBER:                  EMB-145
                     UNITED STATES REG. NO.:        N262SK
                     SERIAL NUMBER:                 145168

      2.     DESCRIPTION OF ENGINES

                     MANUFACTURER:                  Allison Engine Company, Inc.
                     MODEL NUMBER:                  AE3007A1
                     SERIAL NUMBERS:                CAE 311207
                                                    CAE 311208

                     Each of the Engines has more than 750 rated takeoff
                     horsepower or the equivalent of such horsepower.







                                   APPENDIX B

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)

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

                        PARTICULAR COMMERCIAL CONDITIONS

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

1.       BASIC RENT:

                  During the Term, Basic Rent shall be payable monthly in
         advance commencing on the Delivery Date and thereafter on each Rent
         Date in the following amounts:

                  On the Delivery Date, the initial payment of Basic Rent shall
                  be in an amount equal to:

                           [*] (the "Base Lease Rent Amount") times a fraction,
                           the numerator of which shall be the number of days
                           which shall transpire from the Delivery Date through
                           the last day of the month in which the Delivery Date
                           occurs, and the denominator of which shall be the
                           number thirty (30);

                  Commencing on the first day of the month immediately following
                  the month in which the Delivery Date occurs, and continuing
                  through the last day of the month immediately preceding the
                  month in which the Initial Expiration Date occurs, Basic Rent
                  (subject to the Basic Rent Adjustment) shall be in the amount
                  of the Base Lease Rent Amount;

                  The amount of Basic Rent owing for the month in which the
                  Initial Expiration Date occurs shall equal one of the
                  following two amounts, depending upon whether Lessee has
                  exercised its Renewal Option:

- ------------
* Confidential




                           If Lessee has not exercised its Renewal Option, the
                           Basic Rent for such month shall be equal to the
                           following amount (the "Final Base Lease Rent
                           Amount"): the Base Lease Rent Amount times a
                           fraction, the numerator of which shall be the number
                           of days which shall transpire from the first day of
                           such month through the Initial Expiration Date, and
                           the denominator of which shall be the number thirty
                           (30); and

                           If Lessee has exercised its Renewal Option, the Basic
                           Rent for such month shall be equal to the sum of (a)
                           the Final Base Lease Rent Amount plus (b) an amount
                           equal to [*] (the "Renewal Period Rent Amount")
                           times a fraction, the numerator of which shall equal
                           the number of days which shall transpire from the
                           Initial Expiration Date through the last day of the
                           month in which the Initial Expiration Date occurs,
                           and the denominator of which shall be the number
                           thirty (30).

                  During the Renewal Period, if any, Basic Rent shall be in the
                  following amounts:

                           Commencing with the first day of the month
                           immediately following the month in which the Initial
                           Expiration Date occurs, and continu ing through the
                           last day of the month immediately prior to the end of
                           the Renewal Period, Basic Rent shall equal the
                           Renewal Period Rent Amount; and

                           During the final month of the Term, the amount of
                           Basic Rent shall equal the Renewal Period Rent Amount
                           times a fraction, the numerator of which shall be the
                           number of days which shall transpire from the first
                           day of such month through the end of the Renewal
                           Period, and the denominator of which shall be the
                           number thirty (30).

2.       AMOUNT OF PURCHASE PRICE PURSUANT TO PURCHASE AGREEMENT:

                  [*]

3.       PURSUANT TO PURCHASE OPTION UNDER SECTION 3.9, AMOUNTS OF BASE TERM
         PURCHASE PRICE AND RENEWAL PERIOD PURCHASE PRICE:

                                                                    
                  Base Term Purchase Price:                            [*]

                  Renewal Period Purchase Price:                       [*]



- -----------
* Confidential


4.       INTEREST RATE:

                  Overdue amounts shall bear interest at a floating PER ANNUM
         rate (computed on the basis of a 365-day year and actual days elapsed)
         equal to (a) the interest rate announced from time to time by Citibank,
         N.A. in New York, New York as its "base rate" plus (b) [*].

5.       LESSOR'S BANK ACCOUNT:

                  Unless Lessor otherwise directs in writing, all payments
         payable to Lessor hereunder shall be made by wire transfer of same-day
         federal funds to the bank account of Lessor described as follows:

                                              
                           BANK:                 Citibank, N.A., New York, New York
                           FOR THE ACCOUNT OF:   FINOVA Capital Corporation
                           ACCOUNT NO.           4068-0522
                           ABA ROUTING NO.:      021-000-089
                           REFERENCE:            Chautauqua -- N262SK



- -------
* Confidential






                                   APPENDIX C

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)


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

                       ATTACHED LIST OF AIRCRAFT DOCUMENTS
                             DELIVERED WITH AIRCRAFT

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




                               AIRCRAFT DOCUMENTS

                                    (N262SK)

1.       EMB-145LR Serial # 145168 Aircraft Log Book
2.       Sundstrand APU Serial # SP-E994191 Log Book
3.       Liebherr Landing Gear Assembly Records
4.       Rolls-Royce Allison AE3007A1 Engine Serial # 311207 Log Book
5.       Rolls-Royce Allison AE3007A1 Engine Serial # 311208 Log Book
6.       Brazilian Certificate of Airworthiness
7.       FAA Form 8130-6 Application for Airworthiness Certificate
8.       Airplane Flight Manual (AFM)
9.       Weight & Balance Manual (WB)
10.      Operations Manual (OM)
11.      Quick Reference Handbook (QRH)
12.      Dispatch deviation Procedures Manual (DDPM)
13.      Supplementary Performance Manual (SPM)
14.      Master Minimum Equipment List (MMEL)







                                   APPENDIX D

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)

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

                        ATTACHED FORM OF LEASE SUPPLEMENT
                   (EXECUTED CONTEMPORANEOUSLY WITH DELIVERY)

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









                             LEASE SUPPLEMENT NO. 1
                                    (N262SK)

                                                     Dated: September ____, 1999

         PURSUANT TO THE AIRCRAFT LEASE AGREEMENT (N262SK) (the "Lease") dated
as of the date hereof between FINOVA Capital Corporation, a Delaware corporation
("Lessor"), as lessor, and Chautauqua Airlines, Inc., a New York corporation
("Lessee"), as lessee, this Lease Supplement No. 1 (N262SK) is executed by the
parties hereto to confirm that at _________ p.m. (Central Daylight Time) on this
_____ day of September, 1999:

         (a)      the Airframe described as follows:

                  MANUFACTURER:                    Embraer
                  MODEL NUMBER:                    EMB-145
                  UNITED STATES REG. NO.:          N262SK
                  SERIAL NUMBER:                   145168

         (b)      together with the following described two (2) aircraft
                  engines:

                  MANUFACTURER:                    Allison Engine Company, Inc.
                  MODEL NUMBER:                    AE3007A1
                  SERIAL NUMBERS:                  CAE 311207
                                                   CAE 311208

         and (c) together with the "Aircraft Documents" (as defined in the
         Lease),

were delivered by Lessor to Lessee and were accepted by Lessee under and subject
to the terms and conditions of the Lease. The parties hereto confirm that on the
date hereof (i) the "Aircraft" (as defined by the Lease) was duly accepted by
Lessee for leasing under the Lease as between Lessor and Lessee (without
prejudice to any rights which Lessee may have against any manufacturer, vendor
or other person in connection with any warranties or service contracts with
respect to the Aircraft), (ii) the Aircraft became subject to and governed by
the provisions of the Lease, (iii) the Lease is in full force and effect, (iv)
all the terms and provisions of the Lease are hereby fully incorporated herein,
and (v) Lessee became obligated to make the payments provided for in the Lease.

                            [SIGNATURE PAGE FOLLOWS]







         IN WITNESS WHEREOF, the parties hereto have caused this Lease
Supplement No. 1 (N262SK) to be executed and delivered by their duly authorized
representatives as of the day and year above written.

                                    FINOVA CAPITAL CORPORATION, a
                                    Delaware corporation

                                    BY: /s/ Anne Halton
                                        ----------------------------------------

                                    NAME: Anne Halton
                                          --------------------------------------

                                    TITLE:
                                          --------------------------------------


                                    CHAUTAUQUA AIRLINES, INC., a New
                                    York corporation

                                    BY: /s/ Robert H. Cooper
                                        ----------------------------------------

                                    NAME: Robert H. Cooper
                                          --------------------------------------

                                    TITLE: Vice-President
                                           -------------------------------------







                                   APPENDIX E

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)

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

                       ATTACHED FORM OF REDELIVERY RECEIPT
              (EXECUTED CONTEMPORANEOUSLY WITH RETURN OF AIRCRAFT)

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










                               REDELIVERY RECEIPT
                                    (N262SK)

                                                         Dated: _______________

         PURSUANT TO THE AIRCRAFT LEASE AGREEMENT (N262SK) (the "Lease") dated
as of September ____, 1999 between FINOVA Capital Corporation, a Delaware
corporation ("Lessor"), as lessor, and Chautauqua Airlines, Inc., a New York
corporation ("Lessee"), as lessee, this Redelivery Receipt is executed by the
parties hereto to confirm that at ________ hours on this _____ day of
_____________, ________ the following described aircraft (the "Aircraft"):

         (a)      the Airframe described as follows:

                  MANUFACTURER:                     Embraer
                  MODEL NUMBER:                     EMB-145
                  UNITED STATES REG. NO.:           N262SK
                  SERIAL NUMBER:                    145168

         (b)      together with the following described two (2) aircraft engines
                  (the "Engines"):

                  MANUFACTURER:                     Allison Engine Company, Inc.
                  MODEL NUMBER:                     ___________
                  SERIAL NUMBERS:                   ___________
                                                    ___________

         and (c) together with the "Aircraft Documents" (as defined in the
         Lease),

were returned to Lessor pursuant to the terms of the Lease.

         Lessee hereby confirms that it shall reimburse Lessor for the
correction of the deferred items, if any, listed in Attachment 1 hereto.

         Lessor hereby confirms that it has accepted the Return of the Aircraft
and of the Aircraft Documents under the terms of the Lease, and that the Term of
the Lease has terminated.

                            [SIGNATURE PAGE FOLLOWS]







         IN WITNESS WHEREOF, the parties hereto have caused this Redelivery
Receipt (N262SK) to be executed and delivered by their duly authorized
representatives as of the day and year above written.

                                    FINOVA CAPITAL CORPORATION, a
                                    Delaware corporation

                                    BY:
                                        ----------------------------------------

                                    NAME:
                                         ---------------------------------------

                                    TITLE:
                                          --------------------------------------


                                    CHAUTAUQUA AIRLINES, INC., a New
                                    York corporation

                                    BY:
                                        ----------------------------------------

                                    NAME:
                                         ---------------------------------------

                                    TITLE:
                                          --------------------------------------




Attachment 1:              Deferred Items







                                   APPENDIX F

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)

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

                                RETURN CONDITIONS

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

         On the Return Date, the Aircraft will comply with the following
requirements, subject to Total Loss or normal wear and tear generally (with
undefined capitalized terms herein having the same meaning as in the Aircraft
Lease Agreement):

         1.       GENERAL CONDITION

                  Upon the return of the Aircraft to Lessor, the Aircraft shall:

                  (a)      be registered with the FAA;

                  (b)      have been maintained in accordance with the Aircraft
                           Lease Agree ment and with the same care and
                           consideration for the technical condition of the
                           Aircraft as if it were kept in continued regular
                           service by Lessee;

                  (c)      be in good operating condition (with all
                           "on-condition" and "condition monitored" components
                           serviceable) and be clean by scheduled passenger
                           airline standards;

                  (d)      have installed the full complement of Engines
                           (including any Replacement Engines installed in
                           accordance with the provisions of this Agreement) and
                           other equipment, parts, accessories, furnishings and
                           loose equipment as when originally delivered to
                           Lessee or as may be agreed by Lessee and Lessor on or
                           before the Return Date;

                  (e)      be in compliance with then current FAR, including,
                           without limitation, FAR Part 121 (or successor
                           regulation);

                  (f)      be free and clear of liens, charges and encumbrances
                           of any nature whatsoever not arising through Lessor;

                  (g)      be airworthy (as determined based on the
                           manufacturer's mainte nance and structure repair
                           manuals and FAA requirements), have a current




                           U.S. Certificate of Airworthiness issued by the FAA,
                           and be in compliance with the manufacturer's original
                           Type Certificate with respect to the Aircraft, as
                           such Type Certificate has been revised through the
                           Return Date;

                  (h)      have had a "C" Check (or comparable check) pursuant
                           to Lessee's Maintenance Program performed on the
                           Airframe by an Authorized Maintenance Performer
                           within 100 Flight Hours prior to the Return Date;

                  (i)      have, in regard to the hard time components of the
                           Aircraft with a full life of at least twelve (12)
                           months, a remaining life of at least twelve (12)
                           months for each such component; PROVIDED that, if any
                           such component does not have such a remaining life,
                           Lessee, in order to satisfy this Return Condition,
                           shall have the option of reimburs ing Lessor in an
                           amount equal to the cost of purchasing a complying
                           component (as reduced to satisfy only the 12-month
                           minimum standard) times a fraction, the numerator of
                           which is the number 12 less the number of months of
                           remaining life, and the denominator of which is the
                           number 12;

                  (j)      have complied with all mandatory service bulletins
                           and ADs affecting the Aircraft and having a final
                           compliance or termination date during the Term
                           (without regard to any variance, extension,
                           carry-over or deferral which may be granted);

                  (k)      have Lessee's name and logos removed and the exterior
                           of the Aircraft painted in white livery ;

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

                  (m)      be in as good operating condition, and in the same
                           configuration, as when delivered by Lessor to Lessee
                           on the Delivery Date, normal wear and tear and Total
                           Loss excepted; and

                  (n)      have no open, deferred, continued, carryover or
                           placarded log book items.









         2.       ENGINES

                  Each Engine will be installed on the Aircraft and will comply
with the following:

                  (a)      Each Engine (i) shall have been maintained in
                           accordance with the Lessee's Maintenance Program;
                           (ii) shall be in compliance with all mandatory
                           service bulletins and ADs affecting such Engine and
                           having a final compliance or termination date during
                           the Term (without regard to any deferrals that may be
                           granted); (iii) shall be free and clear of all Liens
                           arising by act or omission of, or suffered to exist
                           by, Lessee; and (iv) shall contain the same Parts (or
                           substitutes or replacements therefor, as provided in
                           the Aircraft Lease Agree ment) as initially delivered
                           to Lessee.

                  (b)      If, at the end of the Term, the Engines are subject
                           to an "Engine Maintenance Agreement" (as defined by
                           the Aircraft Lease Agree ment), and such Engine
                           Maintenance Agreement has been effectively assigned
                           to Lessor, Lessee shall return each Engine in such
                           condition as shall make such Engine eligible for
                           continued maintenance under the Engine Maintenance
                           Agreement.

                           If, at the end of the Term, the Engines are not
                           subject to an Engine Maintenance Agreement (or such
                           Agreement has not been effectively assigned to
                           Lessor): (i) each of the Engines (pursuant to
                           Lessee's Maintenance Program) shall have a minimum of
                           half-time until the next scheduled overhaul, based on
                           the Engine Manufacturer's published data over the
                           immediately prior 12 months; (ii) any mandatory
                           service bulletins or ADs that have been deferred
                           shall be incorporated before the Return, (iii) no
                           Engine shall be "on watch;" and each Engine shall
                           perform within the Engine Manufacturer's recommended
                           operating limitations.

                           To the extent that, at the end of the Term, any of
                           the life limited parts of the Engines are not covered
                           by an Engine Maintenance Agreement (which has been
                           assigned to Lessor), such life limited parts shall
                           have a remaining life of at least 2,500 Cycles.

                  (c)      Prior to the Return Date (unless an Engine
                           Maintenance Agreement is in effect), a borescope of
                           each Engine shall be conducted by a qualified
                           technician acceptable to Lessor, at Lessor's expense
                           and in the presence of Lessor's designated technical
                           representative. Any defects discovered in each such
                           inspection which exceed the Engine



                           Manufacturer's in-service limits shall be corrected
                           by Lessee, prior to Return of the Aircraft, at no
                           cost to Lessor.

         3.       FUSELAGE, WINDOWS AND DOORS

                  (a)      The fuselage will be free of major dents and
                           abrasions, scab patches and loose or pulled or
                           missing rivets (except to the extent such abrasions,
                           patches and loose, pulled or missing rivets were in
                           existence on the Delivery Date);

                  (b)      Windows will be free of delamination, blemishes and
                           crazing and will be properly sealed (except to the
                           extent such delamination, blemishes and crazing were
                           in existence on the Delivery Date); and

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

         4.       WINGS AND EMPENNAGE

                  (a)      Leading edges will be free from damage (except to the
                           extent such damage was in existence on the Delivery
                           Date);

                  (b)      Unpainted cowlings and farings will be polished; and

                  (c)      Wings will be free of fuel leaks outside of
                           Manufacturer's tolerances.

         5.       INTERIOR

                  (a)      Ceilings, sidewalls and bulkhead panels will be clean
                           and free of cracks and stains (except to the extent
                           that such cracks and stains were present on the
                           Delivery Date);

                  (b)      Carpets and seat covers will be in good condition,
                           clean and free of stains and meet FAR fire resistance
                           regulations as required for operation in Lessee's
                           commercial service as of the Return Date;

                  (c)      Seats will be serviceable and in good condition; and

                  (d)      The interior of the Aircraft will be configured
                           identical to the configuration of the Aircraft on the
                           Delivery Date (unless the configuration was changed
                           previously with Lessor's consent), including first
                           class seats, tables, video equipment and bulkhead
                           conversions, if any, present on the Aircraft on the
                           Delivery Date, it



                           being intended by Lessor and Lessee that title to any
                           of such seats, tables, video equipment and bulkhead
                           conversions which was held by Lessee on the Delivery
                           Date would pass to Lessor on Return of the Aircraft.

         6.       COCKPIT

                  (a)      Fairing panels shall be free of stains and cracks,
                           will be clean, secure and repainted as necessary;

                  (b)      Floor coverings will be clean and effectively sealed;

                  (c)      Seat covers will be in good condition, clean and free
                           of stains, and will conform to FAR fire resistance
                           regulations required for operation in Lessee's
                           commercial service as of the Return Date; and

                  (d)      Seats will be serviceable, in good condition and will
                           be repainted as necessary.

         7.       CARGO COMPARTMENTS

                  (a)      Panels will be in good condition; and

                  (b)      Nets will be in good condition.

         8.       LANDING GEAR

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

                  (b)      Each landing gear will have a minimum of quarter-time
                           remaining. Lessee will reimburse Lessor in cash for
                           an appropriate pro rata portion of the cost of a
                           landing gear overhaul to the extent that the actual
                           remaining time on each landing gear is less than
                           half-time.

         9.       APU

                  If, at the end of the Term, the auxiliary power unit on the
                  Aircraft (the "APU") is subject to a maintenance agreement
                  which has been assigned to Lessor, Lessee shall return the APU
                  in such condition as shall make the APU eligible for continued
                  maintenance under such maintenance agreement.



                  If, at the end of the Term, the APU is not subject to such a
                  maintenance agreement, a borescope inspection of the APU shall
                  be conducted by a qualified technician acceptable to Lessor,
                  at Lessor's expense and in the presence of Lessor's designated
                  technical representative. Any defects discovered in such
                  inspection which exceed the manufacturer's operating limits
                  shall be corrected by Lessee, prior to Return of the Aircraft,
                  at no cost to Lessor.

         10.      CORROSION

                  (a)      The Aircraft will have been inspected with respect to
                           corrosion as defined in the Lessee's Maintenance
                           Program; and

                  (b)      The fuselage will be adequately treated for corrosion
                           and an approved corrosion prevention program will
                           have been in operation by the Lessee and such program
                           shall be up to date in all respects.

         11.      MAINTENANCE PROGRAM

                  (a)      Prior to the Return and upon Lessor's request, Lessee
                           will provide Lessor with reasonable access to its
                           Maintenance Program and the Aircraft Documents in
                           order to facilitate the Aircraft's integration into
                           the next operator's fleet and the "bridging" of the
                           Aircraft from the Maintenance Program to the
                           maintenance program of such next operator; and

                  (b)      Lessee will, in connection with the Return, deliver
                           to Lessor a certified true, current and complete copy
                           of its Maintenance Program, to the extent necessary
                           in order to facilitate the Aircraft's integration
                           into the next operator's fleet and the "bridging" of
                           the Aircraft from the Maintenance Program to the
                           maintenance program of such next operator.

         12.      AIRCRAFT RECORDS

                  Each and all of the flight, engineering and maintenance
                  manuals, drawings, documents, certificates, status summaries,
                  maintenance records, log books and other data relating to the
                  Aircraft (and all of its components), including the Engines,
                  provided to (or developed by) Lessee at Delivery or throughout
                  the Term of the Aircraft Lease Agreement shall be returned to
                  Lessor on or before the Return Date in English and in an
                  organized format and in compliance with the regulations of the
                  FAA.






                                   APPENDIX G

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)

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

                             APPROVED JURISDICTIONS

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


Australia
Austria
Belgium
Bermuda
Canada
Cayman Islands
Denmark
Finland
France
Germany
Iceland
Ireland
Japan
Luxembourg
Netherlands
New Zealand
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                                   APPENDIX H

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)



                        [SEE APPENDIX H OF EXHIBIT 10.37]







                                   APPENDIX I

                                       TO

                        AIRCRAFT LEASE AGREEMENT (N262SK)


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

ATTACHED FORM OF ASSIGNMENT OF ENGINE MAINTENANCE AGREEMENT

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




                 APPENDIX I TO AIRCRAFT LEASE AGREEMENT (N262SK)

             ASSIGNMENT OF ENGINE MAINTENANCE AGREEMENT AND CONSENT
                                    (N262SK)

         THIS ASSIGNMENT OF ENGINE MAINTENANCE AGREEMENT AND CONSENT (N262SK)
(this "Assignment"), dated as of ______________ ___, 1999, is made among
CHAUTAUQUA AIRLINES, INC., a New York corporation ("Assignor"), as assignor,
FINOVA CAPITAL CORPORATION, a Delaware corporation ("Assignee"), as assignee,
and ALLISON ENGINCE COMPANY, INC. ("Maintenance Provider"), as consenting party.

                              W I T N E S S E T H:

         WHEREAS, pursuant to (a) that certain Aircraft Purchase Agreement
(N262SK) dated as of September ___, 1999 between Solitair Corp., as seller, and
Assignee, as buyer, and (b) that certain Aircraft Lease Agreement (N262SK) (the
"Lease") dated as of September ___, 1999 between Assignee, as lessor, and
Assignor, as lessee, Assignee has purchased and leased to Assignor one Embraer
model EMB-145 aircraft, bearing manufacturer's serial number 145168 and United
States Registration Number N262SK, together with two (2) Allison model AE 3007A1
engines bearing, respectively, manufacturer's serial numbers CAE 311207 and CAE
311208 (such two engines collectively with any other engine that becomes an
"Engine" under the terms of the Lease, the "Engines") (collectively, the
"Aircraft"); and

         WHEREAS, pursuant to the Fleet Hour Agreement (the "Maintenance Agree
ment") dated as of ______________ ___, ____ between Maintenance Provider and
Assignor, Maintenance Provider has agreed to provide and Assignor has agreed to
purchase certain rework and maintenance support described therein for the
Engines; and

         WHEREAS, it is an obligation of Assignor under the Lease that Assignor
execute and deliver this Assignment;

         NOW, THEREFORE, in consideration of the mutual covenants set forth in
the Lease, it is agreed as follows:

         1.       ASSIGNMENT.

                  (a) Assignor hereby assigns to Assignee all of its right,
         title and interest in and to the Maintenance Agreement to the extent
         that such right, title and interest in the Maintenance Agreement
         relates to the Engines (the "Maintenance Benefits").

                  (b) Assignee shall not be liable for any of the obligations or
         duties of Assignor under the Maintenance Agreement, except that in
         exercising any right under the Maintenance Agreement with respect to
         the Engines or making any claims with respect to the Engines, the terms
         and conditions of the Maintenance Agreement



         relating to the Engines shall apply to, and be binding upon, Assignee
         to the same extent as Assignor.

                  (c) Assignor agrees to execute and deliver to Assignee and
         Maintenance Provider this Assignment and to use its best efforts to
         have the Maintenance Provider execute and deliver to Assignee and
         Assignor the consenting signature hereto of Maintenance Provider.

                  (d) Assignor agrees for the benefit of Assignee that it will
         not breach any of its obligations under the Maintenance Agreement.

         2. RIGHTS OF ASSIGNOR. Notwithstanding anything in this Assignment to
the contrary, so long as (a) no Event of Default (as defined in the Lease) has
occurred and is continuing and (b) the Lease has not been terminated in
accordance with its terms, Assignor may, to the exclusion of Assignee, exercise
in Assignor's name the right to obtain any benefit or recovery with respect of
the Maintenance Benefits, and may exercise all other rights and powers of the
"operator" under the Maintenance Agreement in respect of the Engines, except
that Assignor may not, without Assignee's prior written consent, terminate the
Maintenance Agreement or amend or vary any of the terms of the Maintenance
Agreement which would have a material adverse effect on any of Assignee's rights
or interests in the Maintenance Benefits.

         3. REPRESENTATION. Assignor hereby represents and warrants for the
benefit of Assignee that it has not assigned its rights in the Maintenance
Benefits to any other person except as provided in this Assignment.

         4. GOVERNING LAW. This Assignment shall be governed by and construed in
accordance with the laws of the State of New York.

         5. ASSIGNMENT. Assignee may assign its rights pursuant to this
Assignment to any lessor, owner or mortgagee of the Aircraft or any other person
that provides financing for the acquisition or ownership of the Aircraft.

         6. CONSENT BY AND AGREEMENTS REGARDING MAINTENANCE PROVIDER.

                  (a) Maintenance Provider hereby consents to all of the terms
         of this Assignment.

                  (b) So long as Maintenance Provider has not received from
         Assignee a "Termination Notice" (as defined in Section 6(c) hereof),
         Assignor may exercise, on behalf of Assignee, Assignee's rights in the
         Maintenance Benefits in accordance with Section 2 of this Assignment.



                  (c) Maintenance Provider shall not be deemed to have knowledge
         of, and need not recognize the occurrence or discontinuance of, any
         termination of the Lease and dispossession of the Aircraft unless and
         until Maintenance Provider has received written notice thereof from
         Assignee (including by telecopy) addressed to Allison Engine Company,
         c/o Regional Support Manager, P.O. Box 420, U10B, Indianapolis, Indiana
         46206, fax number 317-230-4010 (the "Termination Notice"), upon which
         Maintenance Provider may conclusively rely. Assignee shall send a copy
         of the Termination Notice to Assignor in the manner provided for
         furnishing notices under the Lease.

                            [SIGNATURE PAGE FOLLOWS]




         IN WITNESS WHEREOF, the parties have entered into this Assignment of
Engine Maintenance Agreement and Consent (N262SK) the day and year first above
mentioned.

                                              CHAUTAUQUA AIRLINES, INC.,
                                              a New York corporation

                                              BY:
                                                  ------------------------------

                                              NAME:
                                                   -----------------------------

                                              TITLE:
                                                    ----------------------------


                                              FINOVA CAPITAL CORPORATION,
                                              a Delaware corporation

                                              BY:
                                                  ------------------------------

                                              NAME:
                                                   -----------------------------

                                              TITLE:
                                                    ----------------------------


                                              ALLISON ENGINE COMPANY, INC.

                                              BY:
                                                  ------------------------------

                                              NAME:
                                                   -----------------------------

                                              TITLE:
                                                    ----------------------------


NOTE TO EXHIBIT 10.36

The three additional Aircraft Lease Agreements are substantially identical in
all material respects to the filed Aircraft Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N262SK                                          September, 1999           Finova Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N263SK                                           October, 1999            Finova Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N264SK                                           February, 2000           Finova Capital Corp.
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EX-10.37

                                                                   EXHIBIT 10.37

                   FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT
                                    (N262SK)

      THIS FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT (N262SK) (this
"Amendment") is dated as of the 14th day of January, 2000 between FINOVA CAPITAL
CORPORATION, a Delaware corporation ("Lessor"), as lessor, and CHAUTAUQUA
AIRLINES, INC., a New York corporation ("Lessee"), as lessee.

                                   WITNESSETH:

      WHEREAS, Lessor, as lessor, and Lessee, as lessee, are parties to that
certain Aircraft Lease Agreement (N262SK) dated as of September 2, 1999 (the
"Lease Agreement"), as supplemented by Lease Supplement No. 1 (N262SK) dated as
of September 2, 1999 (the "Lease Supplement"), with such Lease Agreement and
Lease Supplement (collectively, the "Lease") being filed with the Federal
Aviation Administration ("FAA") on September 2,1999 and recorded by the FAA on
October 5, 1999 at Conveyance Number JJ31743; and

      WHEREAS, all capitalized terms not otherwise defined herein shall have the
same meaning as provided in the Lease; and

      WHEREAS, pursuant to the Lease (with all capitalized terms not otherwise
defined herein having the same meaning as ascribed to such terms in the Lease),
Lessor and Lessee agreed that, upon the parties making a final determination of
the actual amount of the Transaction Expenses associated with the Delivery, the
parties would adjust (a) the amount of the Basic Rent and (b) the Stipulated
Loss Value (in both cases so as to preserve Lessor's Net Economic Return); and

      WHEREAS, Lessor and Lessee have agreed upon the actual amount of the
Transaction Expenses associated with the Delivery; and

      WHEREAS, Lessor and Lessee wish to amend the Lease to reflect the adjusted
Basic Rent and Stipulated Loss Value amounts.

      NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and adequacy of which
the parties hereto acknowledge, Lessor and Lessee hereby agree as follows:

      1. DEFINITIONS. Unless otherwise defined in this Agreement, all
capitalized terms set forth in this Amendment shall have the same meaning as
ascribed to such terms in the Lease.

      2. INCORPORATION OF THIS AMENDMENT. All references to "this Agreement,"
"this Lease," and similar references in the Lease shall be deemed to refer to
the Lease as amended by this Amendment.




      3. AMENDMENT OF AMOUNT OF BASIC RENT. The amount of Basic Rent is hereby
adjusted by deleting, in its entirety, APPENDIX B to the Lease, and replacing
such appendix with APPENDIX B hereto. The adjustment in the amount of Basic Rent
pursuant to this Section 3 shall be applied retroactively from the Delivery
Date.

      4. AMENDMENT OF STIPULATED LOSS VALUE. The Stipulated Loss Value is hereby
adjusted by deleting, in its entirety, APPENDIX H to the Lease, and replacing
such appendix with APPENDIX H hereto. The adjustment in the amount of the
Stipulated Loss Value pursuant to this Section 4 shall be applied retroactively
from the Delivery Date.

      5. CAPTIONS. The captions or headings in this Amendment are for
convenience only and in no way define, limit or describe the scope or intent of
any provision of this Amendment.

      6. COUNTERPARTS. This Amendment may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.

      7. SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.

      8. SURVIVAL OF NON-AMENDED TERMS. Except as expressly amended pursuant to
this Amendment, all of the terms of the Lease shall survive the effectiveness of
this Amendment, remaining in full force and effect.

                            [SIGNATURE PAGE FOLLOWS]













            IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Aircraft Lease Agreement (N262SK) as of the day and year first
herein written.

                                          FINOVA CAPITAL CORPORATION, a
                                          Delaware corporation

                                          BY:  /s/ Ann F. Halton
                                              ----------------------------------

                                          NAME:  Ann F. Halton
                                               ---------------------------------

                                          TITLE:  Vice President
                                                --------------------------------


                                          CHAUTAUQUA AIRLINES, INC., a New
                                          York corporation

                                          BY:  /s/ Robert H. Cooper
                                              ----------------------------------

                                          NAME:  Robert H. Cooper
                                               ---------------------------------

                                          TITLE:  VP / CFO
                                                --------------------------------







                                   APPENDIX B

                                       TO

              FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT (N262SK)

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

                        PARTICULAR COMMERCIAL CONDITIONS

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

1.    Basic Rent:

            During the Term, Basic Rent shall be payable monthly in advance
      commencing on the Delivery Date and thereafter on each Rent Date in the
      following amounts:

            On the Delivery Date, the initial payment of Basic Rent shall be in
            an amount equal to:

                  [*]
                  (the "Base Lease Rent Amount") times a fraction, the numerator
                  of which shall be the number of days which shall transpire
                  from the Delivery Date through the last day of the month in
                  which the Delivery Date occurs, and the denominator of which
                  shall be the number thirty (30)

            Commencing on the first day of the month immediately following the
            month in which the Delivery Date occurs, and continuing through the
            last day of the month immediately preceding the month in which the
            Initial Expiration Date occurs, Basic Rent shall be in the amount of
            the Base Lease Rent Amount;

            The amount of Basic Rent owing for the month in which the Initial
            Expiration Date occurs shall equal one of the following two amounts,
            depending upon whether Lessee has exercised its Renewal Option:

- -------------------
* Confidential



                   If Lessee has not exercised its Renewal Option, the Basic
                   Rent for such month shall be equal to the following amount
                   (the "Final Base Lease Rent Amount"): the Base Lease Rent
                   Amount times a fraction, the numerator of which shall be the
                   number of days which shall transpire from the first day of
                   such month through the Initial Expiration Date, and the
                   denominator of which shall be the number thirty (30); and

                   If Lessee has exercised its Renewal Option, the Basic Rent
                   for such month shall be equal to the sum of (a) the Final
                   Base Lease Rent Amount plus (b) an amount equal to [*]
                   (the "Renewal Period Rent Amount") times a fraction, the
                   numerator of which shall equal the number of days which
                   shall transpire from the Initial Expiration Date through the
                   last day of the month in which the Initial Expiration Date
                   occurs, and the denominator of which shall be the number
                   thirty (30).

             During the Renewal Period, if any, Basic Rent shall be in the
             following amounts:

                   Commencing with the first day of the month immediately
                   following the month in which the Initial Expiration Date
                   occurs, and continuing through the last day of the month
                   immediately prior to the end of the Renewal Period, Basic
                   Rent shall equal the Renewal Period Rent Amount; and

                   During the final month of the Term, the amount of Basic Rent
                   shall equal the Renewal Period Rent Amount times a fraction,
                   the numerator of which shall be the number of days which
                   shall transpire from the first day of such month through the
                   end of the Renewal Period, and the denominator of which shall
                   be the number thirty (30).

2.    AMOUNT OF PURCHASE PRICE PURSUANT TO PURCHASE AGREEMENT:

            [*]

3.    PURSUANT TO PURCHASE OPTION UNDER SECTION 3.9, AMOUNTS OF BASE TERM
      PURCHASE PRICE AND RENEWAL PERIOD PURCHASE PRICE:

            Base Term Purchase Price:      [*]
                                           Dollars [*]

            Renewal Period Purchase Price: [*]
                                           [*] Dollars [*]


- -------------------
* Confidential





4.    INTEREST RATE:

            Overdue amounts shall bear interest at a floating PER ANNUM rate
      (computed on the basis of a 365-day year and actual days elapsed) equal to
      (a) the interest rate announced from time to time by Citibank, N.A. in New
      York, New York as its "base rate" plus (b) [*].

5.    LESSOR'S BANK ACCOUNT:

            Unless Lessor otherwise directs in writing, all payments payable to
      Lessor hereunder shall be made by wire transfer of same-day federal funds
      to the bank account of Lessor described as follows:

                  BANK:                  Citibank, NA., New York, New York
                  FOR THE ACCOUNT OF:    FINOVA Capital Corporation
                  ACCOUNT NO.            [*]
                  ABA ROUTING NO.:       [*]
                  REFERENCE:             Chautauqua -- N262SK



- -------------------
* Confidential



                                  Appendix H

                         [CONFIDENTIAL MATERIAL OMITTED
                          AND FILED SEPARATELY WITH THE
                          SECURITIES AND EXCHANGE
                          COMMISSION PURSUANT TO A
                          REQUEST FOR CONFIDENTIAL
                          TREATMENT]



NOTE TO EXHIBIT 10.37

The three additional First Amendments to Aircraft Lease Agreements are
substantially identical in all material respects to the filed First Amendment
to Aircraft Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N262SK                                          September, 1999           Finova Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N263SK                                           October, 1999            Finova Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------
N264SK                                           February, 2000           Finova Capital Corp.
- ------------------------------------- ----------------------------------- -----------------------------------

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EX-10.38

                                                                   Exhibit 10.38

                                                                  EXECUTION COPY

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

                      AIRCRAFT PURCHASE AGREEMENT [N288SK]

                                      among

                                 SOLITAIR CORP.
                                    as Seller

                            CHAUTAUQUA AIRLINES, INC.
                                    as Lessee

                           MITSUI & CO. (U.S.A.), INC.
                                 as Beneficiary

                                       and

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
           not in its individual capacity but solely as Owner Trustee
                                as Owner Trustee

                            dated as of June 5, 2001

                           One (1) EMB-145LR aircraft
                       manufacturer's serial number 145461
                     United States registration mark N288SK

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



                                TABLE OF CONTENTS




                                                                            PAGE

                                                                        
Section 1         SUBJECT MATTER...............................................2

Section 2         PRICE; TAXES; DELIVERY LOCATION..............................2

Section 3         TERMS OF PAYMENT................................. .... ......2

Section 4         RISK OF LOSS.................................................2

Section 5         DELIVERY OF AIRCRAFT.........................................3

Section 6         TERMS OF SALE................................................3

Section 7         DELIVERY DATE................................................3

Section 8         CONDITIONS PRECEDENT.........................................4

Section 9         Representations and Warranties...............................6

Section 10        FURTHER COVENANTS............................................9

Section 11        CONCERNING OWNER TRUSTEE....................................12

Section 12        MISCELLANEOUS...............................................12




     This AIRCRAFT PURCHASE AGREEMENT [N288SK] ("AGREEMENT"), made as of June 5,
2001, by and among SOLITAIR CORP., a New York corporation ("SELLER"), MITSUI &
CO. (U.S.A.), INC., a New York corporation ("BENEFICIARY"), CHAUTAUQUA AIRLINES,
INC., a New York corporation ("LESSEE"), and WELLS FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner
Trustee under a Trust Agreement dated as of June 5, 2001, between itself and
Beneficiary (such entity, in its individual capacity being herein referred to as
"WFB" and, in its capacity as Owner Trustee under such Trust Agreement, as
"OWNER TRUSTEE");

                              W I T N E S S E T H:

     WHEREAS, Seller is party to the EMB-145 Purchase Agreement Number
GCT-025/98, dated June 17, 1998 (the "MANUFACTURER PURCHASE AGREEMENT"), between
the Seller and EMBRAER - Empresa Brasileira de Aeronautica S.A., a Brazilian
company (the "MANUFACTURER");

     WHEREAS, Seller desires to assign its right, title and interest in and to
the Manufacturer Purchase Agreement, to the extent that the same relates to the
Aircraft (as hereinafter defined) and the purchase thereof, to Aero Ltd., a
Cayman Islands corporation ("AERO"), pursuant to and in accordance with the
terms and conditions of Purchase Agreement Assignment No. 1 [N288SK], dated the
date hereof ("ASSIGNMENT NO. 1"), between Seller and Aero and consented to by
the Manufacturer, in the form attached as Exhibit C-1;

     WHEREAS, Beneficiary desires that Owner Trustee purchase and acquire title
to, and Seller is willing to cause Aero to sell and transfer title to Owner
Trustee, in accordance with the terms and conditions hereinafter set forth, the
Aircraft;

     WHEREAS, as a condition to Seller's assignment of its rights in the
Manufacturer Purchase Agreement pursuant to Assignment No. 1, Aero will assign
its right, title and interest in and to [certain rights of Aero under] the
Manufacturer Purchase Agreement, as assigned by Assignment No. 1, to Owner
Trustee, pursuant to and in accordance with the terms of Purchase Agreement
Assignment No. 2 [N288SK], dated the date hereof ("ASSIGNMENT NO. 2"), among
Aero, Owner Trustee and Lessee and consented to by the Manufacturer, in the form
attached as Exhibit C-2;

     WHEREAS, Beneficiary desires that Owner Trustee be provided the benefit of,
and Seller is willing to cause Aero to transfer to Owner Trustee, the warranties
relating to the Airframe specified in the Assignment No. 2 and the warranties
relating to the Engines specified in the Engine Warranty Assignment and Consent,
the form of which is attached hereto as Exhibit D; and

     WHEREAS, simultaneously with the sale of the Aircraft to Owner Trustee,
Beneficiary shall cause Owner Trustee to, and Owner Trustee shall, lease the
Aircraft to Chautauqua Airlines, Inc., a New York corporation (the "LESSEE"),
pursuant to Aircraft Lease Agreement [N288SK] dated as of the date hereof
between Owner Trustee and Lessee (the "LEASE"); and

     WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed thereto in the Lease and shall be interpreted
in accordance with the rules of construction set forth in Section 1.03 of the
Lease;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto (individually a "PARTY" and
collectively the "PARTIES") agree as follows:



     Section 1 SUBJECT MATTER.

     In accordance with and subject to the terms and conditions hereinafter set
forth, on the Delivery Date (as defined in Section 4), Seller hereby agrees to
cause Aero to sell and transfer title to Owner Trustee, as designee of
Beneficiary, and Beneficiary hereby agrees to cause Owner Trustee to purchase
and acquire title from Aero to, one (1) Embraer EMB-145LR aircraft bearing
manufacturer's serial number 145461, together with the Engines and appurtenances
installed thereon and therein and delivered new from the Manufacturer, as more
particularly described and defined in the form of Bill of Sale attached hereto
as EXHIBIT A (the "AIRCRAFT"), in accordance with the terms and conditions of
this Agreement, and

          (b) Owner Trustee hereby agrees, at the direction of Beneficiary, to
purchase and acquire title to the Aircraft from Aero in accordance with the
terms and conditions hereof and to lease the Aircraft to Lessee in accordance
with the terms and conditions of the Lease.

     Section 2 PRICE; TAXES; DELIVERY LOCATION.

          (a) PRICE. The purchase price of the Aircraft shall be equal to the
amount payable by Seller for the Aircraft under Article 03 of the Manufacturer
Purchase Agreement, as evidenced by an invoice for the Aircraft issued by Aero,
DECREASED by any rebate payable by the Manufacturer and Aero in respect of
the Aircraft that is credited to the Beneficiary on or before the Delivery
Date and INCREASED by the amount of [*] payable directly to Solitair, and the
Seller and the Beneficiary agree that such amount as so decreased and
increased is equal to [*], which shall be the purchase price of the Aircraft
(the "AIRCRAFT PRICE") payable by the Beneficiary to Seller as consideration
for the sale and transfer of the Aircraft to the Owner Trustee, as designee
of the Beneficiary.

          (b) TAXES. Seller, Beneficiary and Owner Trustee shall cooperate and
take such reasonable measures as may be requested by Lessee to ensure that the
sale of the Aircraft is arranged in such a manner as to minimize or avoid Taxes
thereon, which shall be indemnified by Lessee pursuant to the Lease.

          (c) DELIVERY LOCATION. Seller shall cause Aero to deliver the Aircraft
to Owner Trustee on the Delivery Date, in accordance with the terms hereof, in
Sao Jose dos Campos, Sao Paulo, Brazil or in such other location and
jurisdiction designated by Seller and Lessee which they determine to be
acceptable for taxation purposes and that is reasonably acceptable to
Beneficiary and Owner Trustee.

     Section 3 TERMS OF PAYMENT.
          (a) TIME OF PAYMENT. Subject to the satisfaction or waiver of the
conditions set forth in Section 8(a), Beneficiary shall pay, or cause to be
paid, the Aircraft Price to Seller on the Delivery Date.

          (b) U.S. DOLLARS; TRANSFER. All payments due to Seller hereunder shall
be effected in United States dollars in immediately available funds without any
set-off, counterclaim or deduction of whatsoever nature by wire transfer to an
account designated by the Seller. Payments will be deemed to have been made when
such amounts have been credited and confirmed as immediately available funds to
such designated account.

     Section 4 RISK OF LOSS.

                                       2

- -------
* Confidential



     Delivery of the Bills of Sale to Owner Trustee and of the Acceptance
Certificate to Seller and Aero pursuant to Section 5 shall conclusively evidence
the sale of the Aircraft to Owner Trustee by Aero and of Owner Trustee's
acceptance of the Aircraft, and risk of loss of or damage to the Aircraft shall
pass from Seller and Aero to Owner Trustee at the time stated in the Acceptance
Certificate as being the time at which the transfer took place (the "DELIVERY
TIME"). The date on which the Delivery Time occurs is herein referred to as the
"DELIVERY DATE."

     Section 5 DELIVERY OF AIRCRAFT.

     Immediately upon receipt by Seller of the Aircraft Price, and subject to
the satisfaction or waiver of the conditions set forth in Section 8(b), Seller
shall cause Aero to deliver to Owner Trustee a duly executed original bill of
sale covering the Aircraft dated as of the Delivery Date, substantially in the
form of EXHIBIT A (the "WARRANTY BILL OF SALE") and a duly executed bill of sale
covering the Aircraft dated as of the Delivery Date on FAA AC Form 8050-2 (the
"FAA BILL OF SALE," and together with the Warranty Bill of Sale,, the "BILLS OF
SALE"), and immediately upon receipt by it of the Bills of Sale, Beneficiary
shall cause Owner Trustee to, and Owner Trustee shall, execute and deliver to
Aero and Seller an acceptance certificate substantially in the form of EXHIBIT B
(the "ACCEPTANCE CERTIFICATE"), covering the Aircraft and dated the Delivery
Date. Seller shall ensure that the FAA Bill of Sale is physically at the offices
of Lytle Soule & Curlee ("LSC") in Oklahoma City and by providing one or more
attorneys at LSC with such authorization as may be necessary in order to permit
such firm to present the FAA Bill of Sale at the Delivery Time to the FAA for
immediate recordation together with the other documents and instruments referred
to in Section 8(a)(v).

     Section 6 TERMS OF SALE.

     Seller hereby warrants and undertakes to Beneficiary that Seller shall
cause Aero to transfer to Owner Trustee all of its right, title and interest in
and to the Aircraft, free and clear of any and all Liens. EXCEPT FOR THE
WARRANTY OF TITLE PROVIDED BY AERO IN THE WARRANTY BILL OF SALE, THE AIRCRAFT IS
BEING SOLD AND DELIVERED TO OWNER TRUSTEE AND PURCHASED AND ACCEPTED BY OWNER
TRUSTEE "AS IS" AND "WHERE IS." SELLER MAKES NO, AND EXPRESSLY AND SPECIFICALLY
DISCLAIMS (AND OWNER TRUSTEE AND BENEFICIARY EACH EXPRESSLY AND SPECIFICALLY
WAIVES AND DISCLAIMS) ANY, REPRESENTATION, GUARANTEE, COVENANT, CONDITION OR
WARRANTY OF ANY KIND RELATING TO THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO THE
AIRWORTHINESS AND/OR CONDITION OF THE AIRCRAFT, WHETHER EXPRESS OR IMPLIED, ORAL
OR WRITTEN, ARISING BY LAW OR OTHERWISE, IN CONTRACT OR IN TORT, INCLUDING
WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO THE AIRCRAFT'S AIRWORTHINESS,
MERCHANTABILITY, QUALITY, FITNESS FOR ANY PARTICULAR USE, PURPOSE, DESIGN,
CONDITION, VALUE, QUALITY, DURABILITY, OR AS TO THE ABSENCE OF LATENT, INHERENT
OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE) OR AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, DESIGN, COPYRIGHT OR OTHER PROPRIETARY RIGHT OR
THOSE ARISING BY STATUTE OR OTHERWISE IN LAW FROM THE COURSE OF DEALING OR USAGE
OF TRADE.

     Section 7 DELIVERY DATE.

     The Delivery Date for the Aircraft is, as of the date hereof, scheduled to
occur on or about June 29, 2001 (the "SCHEDULED DELIVERY DATE"). The exact
Delivery Date will be designated by Seller, and Seller will give notice thereof
to Beneficiary, at least three (3) Business Days in advance thereof, PROVIDED
that if Seller fails to give to Beneficiary notice required by this sentence at
least three (3) Business Days prior to August 31, 2001, Beneficiary may, at its
option, by written notice to Seller,

                                       3


terminate its commitment hereunder to purchase and lease the Aircraft with no
liability whatsoever to Seller or Lessee or any other Person.

     Section 8 CONDITIONS PRECEDENT.

          (a) BENEFICIARY CONDITIONS. The obligation of Beneficiary and Owner
Trustee to purchase the Aircraft from Aero at the Delivery Time is subject to
the fulfillment to the reasonable satisfaction of Beneficiary and Owner Trustee,
or waiver by Beneficiary and Owner Trustee, of the following conditions
precedent on or prior to the Delivery Time:

          (i) all of the conditions precedent to obligations of Owner Trustee as
lessor under the Lease shall have been fulfilled or waived in accordance with
the terms thereof;

          (ii) the Owner Trustee shall have received (1) Assignment No. 1 duly
executed and delivered by Seller and Aero and the Consent and Agreement thereto
duly executed and delivered by Manufacturer; (2) Assignment No. 2 duly executed
and delivered by Aero and the Consent and Agreement thereto duly executed and
delivered by Manufacturer; and (3) the Engine Warranty Assignment and Consent
duly executed and delivered by Seller, Lessee and the Engine Manufacturer;

          (iii) all representations and warranties of Seller set forth herein or
in any of the documents delivered hereunder are true and accurate on and as of
the Delivery Date as though made on and as of the Delivery Date (unless any such
representation and warranty shall have been made with reference to a specified
date, in which case such representation and warranty shall be true and accurate
as of such specified date);

          (iv) the Aircraft shall be free and clear of Liens and Beneficiary and
Owner Trustee shall have received a memorandum of Daugherty, Fowler, Peregrin &
Haught ("SPECIAL FAA COUNSEL"), stating that there are no Liens of record noted
in the records of the United States Federal Aviation Administration;

          (v) Manufacturer shall have executed and delivered the Residual Value
Guarantee and the Deficiency Guarantee and there shall exist no condition
precedent to any such agreement becoming effective pursuant to the terms thereof
other than Delivery of the Aircraft;

          (vi) Seller shall have caused Aero to have delivered an original
executed FAA Bill of Sale to LSC to be held in escrow pending receipt by the
Seller of the Aircraft Price;

          (vii) Lessee shall have delivered the Lease and Lease Supplement No. 1
thereto, each duly executed and delivered by Lessee, to Special FAA Counsel to
be held in escrow pending release thereof by Lessee and Owner Trustee at the
Delivery Time in accordance with the terms of the Lease;

          (viii) no change shall have occurred subsequent to the execution of
this Agreement and prior to the Delivery Date in any applicable Law or in the
interpretation thereof that, in Beneficiary's reasonable opinion, would make it
illegal for Beneficiary or Owner Trustee, or both, to perform any of their
respective obligations under any of the Operative Documents;

          (ix) the Beneficiary shall have received a purchase agreement and
lease in substantially the same form as this Agreement and the Lease for each of
two other Embraer EMB

                                       4


     145LR aircraft (the "OTHER PURCHASE AGREEMENTS AND OTHER LEASES") duly
     executed and delivered by Seller and Lessee;

          (x) the Lessee shall have paid to the Owner Trustee the initial
     payment of Base Rent due under the Lease on the Delivery Date; and

          (xi) no Default or Event of Default shall have occurred and be
     continuing under (and as defined in) any Other Lease.

     (b) SELLER CONDITIONS. The obligation of Seller to sell the Aircraft to
Owner Trustee at the Delivery Time is subject to the fulfillment to the
reasonable satisfaction of Seller, or waiver by Seller, of the following
conditions precedent:

          (i) the Seller shall have received the Aircraft Price;

          (ii) the Seller shall have received Assignment No. 1 duly executed and
     delivered by Aero and the Consent and Agreement thereto duly executed and
     delivered by Manufacturer;

          (iii) all of the conditions precedent to obligations of Lessee under
     the Lease shall have been fulfilled or waived in accordance with the terms
     thereof;

          (iv) all representations and warranties of Beneficiary, WFB and Owner
     Trustee set forth herein or in any of the documents delivered hereunder or
     under the Lease are true and accurate on and as of the Delivery Date as
     though made on and as of the Delivery Date (unless any such representation
     and warranty shall have been made with reference to a specified date, in
     which case such representation and warranty shall be true and accurate as
     of such specified date);

          (v) the Seller and Aero shall have received the Acceptance Certificate
     duly executed and delivered by Owner Trustee;

          (vi) Owner Trustee shall have executed and delivered an original
     application for registration of the Aircraft on FAA AC Form 8050-1 to
     Special FAA Counsel, with pink copy thereof delivered to the Lessee to be
     placed on board the Aircraft at the Delivery Time, each to be held in
     escrow pending a direction by Seller to LSC to release the Bills of Sale
     from escrow;

          (vii) Owner Trustee shall have delivered the Lease and the Trust
     Agreement, duly executed and delivered by Owner Trustee, to Special FAA
     Counsel to be held in escrow pending release thereof by Lessee and Owner
     Trustee at the Delivery Time in accordance with the terms of the Lease or
     the Trust Agreement, as the case may be;

          (viii) no change shall have occurred subsequent to the execution of
     this Agreement and prior to the Delivery Date in any applicable Law or in
     the interpretation thereof that, in Seller's reasonable opinion, would make
     it illegal for Seller to perform any of its obligations under any of the
     Operative Documents to which it is a party;

          (ix) Beneficiary shall have caused (1) an application for registration
     of the Aircraft on FAA Form 8050-1 with the original signature of Owner
     Trustee attached thereto and (2) a copy of the Lease and the Lease
     Supplement No. 1 thereto and the Trust Agreement with the original
     signature of Owner Trustee attached thereto to be delivered to Special FAA
     Counsel to be held in escrow pending a direction by Seller to Special FAA
     Counsel to release the Bills of Sale from escrow; and

                                       5


          (x) the Lessee shall have received the Other Purchase Agreements and
     Other Leases, duly executed and delivered by Beneficiary and Owner Trustee.

     Section 9 Representations and Warranties.

          (a) SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents
and warrants to the other Parties hereto, as of its execution of this Agreement
and as of the Delivery Date, that:

          (i) Seller is a corporation duly organized and validly existing under
     the laws of the State of Delaware and has corporate power and authority to
     carry on its business as presently conducted, to own its properties and to
     execute and deliver, and to perform all of its obligations under this
     Agreement, Assignment No. 1 and the Engine Warranty Assignment and Consent
     (collectively, the "SELLER DOCUMENTS");

          (ii) The execution, delivery and performance by Seller of the Seller
     Documents have been duly authorized by all necessary corporate action, do
     not require any stockholder approval or approval of any trustee or holder
     of any indebtedness or obligations of Seller, and do not and will not
     contravene the certificate of incorporation, by-laws or other charter
     documents of Seller or any law, governmental rule, regulation, judgment or
     order binding on Seller or contravene or result in a breach of, or
     constitute a default under any indenture, mortgage, contract or other
     agreement to which Seller is a party or by which Seller or its properties
     may be bound or affected, except for any such conflicts, breaches or
     defaults which would not, individually or in the aggregate, have a material
     adverse effect on the ability of Seller to perform its obligations under
     the Seller Documents;

          (iii) Neither the execution and delivery by Seller of, nor the
     performance by Seller of its obligations under, any of the Seller Documents
     requires the consent or approval of, or the giving of notice to, or the
     registration with, or the taking of any other action in respect of any
     governmental entity having jurisdiction over Seller or any of its
     affiliates or properties, except for the filing with the FAA of the FAA
     Bill of Sale and such other registrations, applications and recordings
     referred to in the opinion of Special FAA Counsel to be rendered by Special
     FAA Counsel on the Delivery Date;

          (iv) Each of the Seller Documents has been duly executed and delivered
     by Seller and each of the Seller Documents constitutes the legal, valid and
     binding obligations of Seller, enforceable in accordance with their
     respective terms, except as enforcement thereof may be limited by
     applicable bankruptcy, insolvency, reorganization, moratorium or other
     similar laws affecting the enforcement of creditors' rights generally and
     by such principles of equity (regardless of whether such enforceability is
     considered in a proceeding in equity or at law) as a court having
     jurisdiction may impose;

          (v) There are no pending or, to the best of Seller's knowledge,
     threatened actions or proceedings before any court, arbitrator or
     administrative agency that, if adversely determined, would have a material
     adverse effect on Seller's ability to perform its obligations under the
     Seller Documents;

          (vi) Seller is not in default in any material respect under the
     Manufacturer Purchase Agreement with respect to the Aircraft or the
     aircraft subject to the Other Purchase Agreements and Other Leases; and

                                       6


          (vii) as of the Delivery Date, the Aircraft shall not have been
     delivered by the Manufacturer to Aero more than fourteen (14) days prior to
     the Delivery Date.

          (b) BENEFICIARY'S REPRESENTATIONS AND WARRANTIES. Beneficiary hereby
represents and warrants to the other Parties hereto, as of its execution of this
Agreement and as of the Delivery Date, that:

          (i) Beneficiary is a corporation duly organized and validly existing
     under the laws of the State of New York and has corporate power and
     authority to carry on its business as presently conducted, to own its
     properties and to execute and deliver, and to perform all of its
     obligations under this Agreement and the other Operative Documents to which
     it is a party (collectively, the "BENEFICIARY DOCUMENTS");

          (ii) The execution, delivery and performance by Beneficiary of the
     Beneficiary Documents have been duly authorized by all necessary corporate
     action, do not require any stockholder approval or approval of any trustee
     or holder of any indebtedness or obligations of Beneficiary, and do not and
     will not contravene the articles of incorporation or by-laws of Beneficiary
     or any current law, governmental rule, regulation, judgment or order
     binding on Beneficiary or contravene or result in a breach of, or
     constitute a default under any indenture, mortgage, contract or other
     agreement to which Beneficiary is a party or by which Beneficiary or its
     properties may be bound or affected, except for any such conflicts,
     breaches or defaults which would not, individually or in the aggregate,
     have a material adverse effect on the ability of Beneficiary to perform its
     obligations under the Beneficiary Documents;

          (iii) Neither the execution and delivery by Beneficiary of, nor the
     performance by Beneficiary of its obligations under, the Beneficiary
     Documents requires the consent or approval of, or the giving of notice to,
     or the registration with, or the taking of any other action in respect of,
     any governmental entity having jurisdiction over Beneficiary or any of its
     affiliates or properties, except for the filing with the FAA of the Trust
     Agreement and such other registrations, applications and recordings
     referred to in the opinion of Special FAA Counsel to be rendered by Special
     FAA Counsel on the Delivery Date;

          (iv) Each of the Beneficiary Documents has been duly executed and
     delivered by Beneficiary and each of the Beneficiary Documents constitutes
     the legal, valid and binding obligations of Beneficiary, enforceable in
     accordance with their respective terms, except as enforcement thereof may
     be limited by applicable bankruptcy, insolvency, reorganization, moratorium
     or other similar laws affecting the enforcement of creditors' rights
     generally and by such principles of equity (regardless of whether such
     enforceability is considered in a proceeding in equity or at law) as a
     court having jurisdiction may impose;

          (v) There are no pending, to the best of Beneficiary's knowledge, or
     threatened actions or proceedings before any court, arbitrator or
     administrative agency that, if adversely determined, would have a material
     adverse effect on Beneficiary's ability to perform its obligations under
     the Beneficiary Documents;

          (vi) The funds to be used by the Beneficiary to acquire its interest
     under this Agreement and the other Operative Documents do not constitute
     assets (within the meaning of ERISA and any applicable rules and
     regulations) of an ERISA Plan;

          (vii) The Beneficiary acknowledges that the Residual Value Guarantee
     and the Deficiency Guarantee (collectively, the "GUARANTEES") contain
     confidentiality provisions that

                                       7


     prohibit the Beneficiary and Manufacturer from disclosing the Guarantees
     and the terms thereof to the Lessee, Seller and Owner Trustee without the
     consent of the other party, that the Beneficiary has made no such
     disclosure other than in clauses (vii), (viii) and (ix) of this Section
     9(b) (which disclosure the Manufacturer has consented to), that the
     Manufacturer has not sought the consent of the Beneficiary to disclose any
     terms of the Guarantees to the Lessee, Seller and Owner Trustee and, to the
     knowledge of the Beneficiary, the Manufacturer has not made any such
     disclosure;

          (viii) The Beneficiary has not granted any right to the Manufacturer
     under the Guarantees which is inconsistent with the rights of the Lessee
     under the Operative Documents; and

          (ix) The amount guaranteed by the Manufacturer under the Residual
     Value Guarantee is the Guaranteed Amount.

          (x) The Beneficiary has not entered into any agreements with the
     Manufacturer or any Person with respect to the transactions contemplated by
     this Agreement and the Operative Documents other than the Beneficiary
     Documents and the Guarantees.

          (c) OWNER TRUSTEE'S REPRESENTATIONS AND WARRANTIES. WFB, in its
individual capacity, and Owner Trustee, each as to itself only, hereby
represents and warrants to each of the other Parties hereto that:

          (i) WFB is a national banking association duly organized and existing
     under the laws of the United States of America and has the power and
     authority to carry on its business as presently conducted and to perform
     its respective obligations as lessor under this Agreement, the Trust
     Agreement, the Lease, Assignment No. 2, the Engine Warranty Assignment and
     Consent, the Acceptance Certificate and the application for registration of
     the Aircraft on FAA AC Form 8050-1 and the other Operative Documents to
     which it is a party (collectively, the "OWNER TRUSTEE DOCUMENTS"), whether
     in its individual capacity or as Owner Trustee;

          (ii) The execution, delivery and performance by Owner Trustee of the
     Owner Trustee Documents have been duly authorized by all necessary trust
     action on the part of WFB, do not require any approval of the shareholders
     of WFB (or if such approval is required, such approval has been obtained)
     or approval of any trustee or holder of any indebtedness or obligations of
     WFB or Owner Trustee, and do not and will not contravene the charter or
     by-laws of WFB or any current law, governmental rule, regulation, judgment
     or order binding on WFB or Owner Trustee or contravene or result in a
     breach of, or constitute a default under any indenture, mortgage, contract
     or other agreement to which WFB or Owner Trustee is a party or by which WFB
     or Owner Trustee or the property of either of them may be bound or
     affected;

          (iii) Neither the execution and delivery by Owner Trustee of, nor the
     performance by WFB or Owner Trustee of their respective obligations under,
     the Owner Trustee Documents requires the consent or approval of, or the
     giving of notice to, or the registration with, or the taking of any other
     action in respect of, any governmental entity having jurisdiction over WFB,
     Owner Trustee or any of their respective affiliates or properties, except
     for the filing with the FAA of the Trust Agreement, the application for
     registration of the Aircraft on FAA AC Form 8050-1 and such other
     registrations, applications and recordings referred to in the opinion of
     Special FAA Counsel to be rendered by Special FAA Counsel on the Delivery
     Date;

          (iv) Each of the Owner Trustee Documents has been duly executed and
     delivered by Owner Trustee and each of the Owner Trustee Documents
     constitutes the legal, valid and binding

                                       8


     obligations of Owner Trustee, enforceable in accordance with their
     respective terms, except as enforcement thereof may be limited by
     applicable bankruptcy, insolvency, reorganization, moratorium or other
     similar laws affecting the enforcement of creditors' rights generally and
     by such principles of equity (regardless of whether such enforceability is
     considered in a proceeding in equity or at law) as a court having
     jurisdiction may impose;

          (v) There are no pending, to the best knowledge of WFB or Owner
     Trustee, or threatened actions or proceedings before any court, arbitrator
     or administrative agency that, if adversely determined, would have a
     material adverse effect on Owner Trustee's ability to perform its
     obligations under the Owner Trustee Documents.

          (d) LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee hereby represents
and warrants to each of the other Parties hereto that that each of its
warranties and representations contained in Section 5.01 of the Lease are true
and accurate as of its execution of this Agreement and as of the Delivery Date
(unless any such representation and warranty shall have been made with reference
to a specified date, in which case such representation and warranty shall be
true and accurate as of such specified date).

          (e) SURVIVAL. The representations and warranties of the Parties
provided for in this Section 9 and in any other Operative Documents shall
survive the Delivery of the Aircraft and the expiration or other termination of
this Agreement and the other Operative Documents.

     Section 10 FURTHER COVENANTS.

          (a) FURTHER ASSURANCES. Each Party will promptly and duly execute and
deliver, or cause to be executed or delivered, to any other Party hereto (at
Seller's sole cost and expense except as may be otherwise expressly provided
herein) all and every document, agreements, certificates, instruments and any
other documents as the requesting Party or its counsel may reasonably request in
order to effect, perfect or confirm the consummation of the transactions
contemplated by this Agreement, the other Operative Documents, the agreements,
instruments and documents delivered or to be delivered hereunder or thereunder,
the taking of all necessary proceedings in connection herewith or therewith and
compliance with the conditions here or therein set forth.

          (b) BENEFICIARY COVENANTS.

          (i) QUIET ENJOYMENT. Beneficiary covenants that so long as no Event of
Default shall have occurred and be continuing, it will not, and it will not
permit any mortgagee or any other Person acting by or through Beneficiary or
Lessor (including any Financing Party) to take or cause or permit to be taken
any action contrary to Lessee's right to the quiet use and enjoyment of the
Aircraft during the Term, in accordance with the terms of the Lease.

          (ii) LESSOR'S LIENS. The Beneficiary agrees with and for the benefit
of the Lessee and the Owner Trustee that the Beneficiary will, at its own cost
and expense, take such action as may be necessary to duly discharge and satisfy
in full, promptly after the same first becomes known to the Beneficiary, any
Lessor's Lien (other than any Lien arising pursuant to a Financing) attributable
to the Beneficiary (or an Affiliate thereof), PROVIDED, HOWEVER, that the
Beneficiary shall not be required to discharge or satisfy such Lessor's Lien
which is being contested by the Beneficiary in good faith and by appropriate
proceedings so long as such proceedings do not involve any material risk of the
sale, forfeiture or loss of the Aircraft or the Trust Estate or any interest in
any thereof.

                                       9


          (iii) AIRCRAFT REGISTRATION. Beneficiary agrees that if at any time on
or after the Delivery Date the Aircraft shall or would become ineligible for
registration in the name of the Owner Trustee at the FAA (such eligibility to be
determined without regard to any provision of law that permits the U.S.
registration of the Aircraft by restricting where it is based or used), then the
Beneficiary shall give notice thereof to the Lessee and the Owner Trustee and
shall (at its own expense and without any reimbursement or indemnification from
the Lessee) within a reasonable period after its obtaining actual knowledge that
the Aircraft is ineligible for its then-current U.S. registration (and in any
event within a period of 10 days thereafter) (x) effect a voting trust or
similar arrangement reasonably acceptable to Lessee that permits the continued
registration of the Aircraft in the name of the Owner Trustee at the FAA or (y)
transfer in accordance with the terms of the Agreement, the Lease and the Trust
Agreement all its rights, title and interest in and to the Trust Agreement and
the other Operative Documents. Each Party hereto agrees, upon the request and at
the sole expense of the Beneficiary, to cooperate with the Beneficiary in
complying with its obligations under the provisions of this Section 10(b)(i),
but without any obligation on the part of such other Party to take any action
believed by it in good faith to be unreasonably burdensome to such Party or
materially adverse to its business interests.

          (iv) COMPLIANCE WITH TRUST AGREEMENT. Beneficiary further agrees with
the Lessee that so long as the Lease and the Trust Agreement are in effect it
will (I) comply with all of the terms of the Trust Agreement applicable to it
noncompliance with which would materially adversely affect the Lessee and (II)
not take any action, or cause any action to be taken, to amend, modify or
supplement any other provision of the Trust Agreement in a manner that would
materially adversely affect the Seller without the prior written consent of the
Lessee. Notwithstanding anything else to the contrary in the Trust Agreement, so
long as the Lease remains in effect, the Beneficiary agrees not to terminate or
revoke the trust created by the Trust Agreement without the consent of the
Lessee.

          (v) ASSIGNMENT OF INTERESTS IN TRUST ESTATE. Beneficiary may assign
all of, or an undivided interest in, its rights and obligations hereunder, under
the other Operative Documents, and in the Trust Estate, to any Permitted
Transferee (PROVIDED that there shall be no more than two holders of the
interests in the Trust Estate at any time), upon

          (A) the execution and delivery by such Permitted Transferee of an
              agreement substantially in the form of Exhibit E-1 hereto or in
              such other form that is reasonably satisfactory in form and
              substance to Lessee and that includes the covenants,
              representations and warranties of the Permitted Transferee that
              are in the form of agreement attached as Exhibit E-1 and in which
              the Permitted Transferee unconditionally and irrevocably assumes
              the duties and obligations of the transferring Beneficiary under
              the Operative Documents with respect to the interest being
              transferred;

          (B) if and to the extent required by the definition of Permitted
              Transferee, the execution and delivery to Lessee and Owner Trustee
              of a Beneficiary Guaranty; and

          (C) delivery to the Lessee of an opinion of counsel (reasonably
              satisfactory to Lessee, which may be in-house counsel), in form
              and substance reasonably satisfactory to Lessee with respect to
              the due authorization, execution, delivery and enforceability of
              such agreement (and the Beneficiary Guaranty, if any) and the
              absence of any conflicts with or violations of any applicable Law
              (including any securities laws in respect of such transfer).

Upon (but only upon) any such transfer in accordance with the foregoing, the
duties and obligations of the Beneficiary arising from and after the date of
such transfer hereunder and under the other Operative

                                       10


Documents shall terminate to the extent of the interest being transferred to and
assumed by the Permitted Transferee, who shall become a Beneficiary hereunder to
such extent. No such assignment shall increase the expenses or indemnity
obligations of Lessee hereunder or under any Operative Document (including,
without limitation, under Article XIV or Article XV of the Lease or under the
Tax Indemnity Agreement) or shall impair the registration of the Aircraft with
the FAA or the eligibility of the Owner Trustee to qualify as registered owner
of the Aircraft with the FAA, and the transferring Beneficiary shall provide
such information as Lessee may reasonably request to determine whether the
requirements of this sentence are satisfied. No transfer by a Beneficiary under
this Section 10(b)(v) shall release such Beneficiary from any obligations to
other Parties hereto theretofore accrued or in respect of acts or omissions
theretofore occurring or with respect to any interest not being transferred. The
transferring Beneficiary shall be responsible for all costs and expenses of any
transfer pursuant to this Section 10(b)(v) (including, but not limited to,
reasonable fees and expenses of counsel for Lessee and Owner Trustee). A
"Permitted Transferee" (1) shall be (x) a bank, savings institution, finance
company, leasing company or trust company, national banking association acting
for its own account or in a fiduciary capacity as trustee or agent under any
pension, retirement, profit sharing or similar trust or fund, insurance company,
financial institution, fraternal benefit society or a corporation acting for its
own account having a combined capital and surplus (or, if applicable,
consolidated net worth or its equivalent) of not less than $25,000,000, (y) a
subsidiary of any Person described in clause (x) where such Person provides a
guaranty of the obligations of such subsidiary substantially in the form
attached as Exhibit E-2 or in such other form that is reasonably satisfactory in
form and substance to Lessee and Owner Trustee (a "BENEFICIARY GUARANTY"), or
(z) an Affiliate of the transferring Beneficiary, so long as such Affiliate has
a combined capital and surplus (or, if applicable, consolidated net worth or its
equivalent) of not less than $25,000,000 (unless the Beneficiary remains liable
for the obligations of such Affiliate under the Operative Documents, in which
case there shall be no such net worth requirement), (2) shall be reasonably
experienced in equipment leasing and financing transactions; and (3) shall not
be (x) an airline or other Person engaged in air transportation or a competitor
of Lessee in the business of air transportation or any Affiliate thereof, (y) a
party adverse to the Lessee or any Affiliate of the Lessee in any pending
litigation or arbitration (whether as plaintiff or defendant) or (z) a Person
that has overtly threatened to initiate any such litigation or arbitration
against Lessee or any Affiliate of Lessee.

          (vi) ASSIGNMENT OF RIGHTS BY BENEFICIARY AND OWNER TRUSTEE.
Notwithstanding anything to the contrary contained herein or in any other
Operative Document, on or prior to the Delivery Date, upon notice to the Seller,
each of the Owner Trustee's and Beneficiary's rights (but not any of their
respective obligations other than the obligation to pay Aircraft Price) under
this Agreement to acquire the Aircraft shall be freely assignable in connection
with a like-kind exchange under Section 1031 of the Code, PROVIDED that on or
prior to the Delivery Date the Owner Trustee and the Beneficiary shall have
reacquired all such rights which have been so assigned.

          (vii) ACTIONS WITH RESPECT TO TRUST ESTATE, ETC. The Beneficiary
agrees that it will not take any action to subject the Trust Estate or the trust
established by the Trust Agreement, as debtor, to the reorganization or
liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy
or insolvency statute.

          (viii) CONSENT TO OTHER OPERATIVE DOCUMENTS. The Beneficiary hereby
consents in all respects to the execution and delivery of the Lease and the
other Operative Documents and hereby agrees to follow the provisions thereof
which by their terms are applicable to it.

          (ix) GUARANTEES. The Beneficiary agrees for the benefit of the Lessee
that it will not make or consent to any change to the Guarantees that would make
the representation in Section 9(b)(viii) incorrect at the time of such change or
that would increase the Guaranteed Amount and the Beneficiary agrees to provide
notice to the Lessee of any decrease in the Guaranteed Amount and the amount of
such decrease.

                                       11


     (e) SURVIVAL. The obligations of the Parties under this Section 10 shall
survive the Delivery of the Aircraft.

     Section 11 CONCERNING OWNER TRUSTEE.

     It is understood and agreed that, except as otherwise expressly provided
herein or in the Trust Agreement or any other Operative Document, WFB is
entering into this Agreement solely in its capacity as trustee as provided in
the Trust Agreement and not in its individual capacity and in no case whatsoever
will WFB be liable or accountable in its individual capacity for any of the
statements, representations, warranties, agreements or obligations of Lessor
hereunder, or for any loss in respect thereof, as to all of which all interested
parties agree to look solely to the Trust Estate; provided that nothing in this
Section 11 shall be deemed to limit in scope or substance the personal liability
of WFB (a) to Beneficiary as expressly set forth in the Trust Agreement, (b) in
respect of the representations, warranties and agreements of WFB expressly made
in its individual capacity herein or in any other Operative Document to which it
is a party, (c) for the consequences of its own gross negligence, willful
misconduct and, in receiving, handling or remitting of funds only, its willful
misconduct or simple negligence as a trustee, (d) in respect of Lessor's Liens
attributable to it in its individual capacity, and (e) taxes, fees or other
charges on, or based on, or measured by, any fees, commissions or compensation
received by it in connection with the transactions contemplated by the Operative
Documents.

     Section 12 MISCELLANEOUS.

          (a) NOTICES AND REQUESTS. Any report, notice, request, demand or other
communication to or upon the Parties hereto under this Agreement shall (i) be in
the English language and in writing; (ii) be deemed to have been duly delivered
to a party if it is (1) left at the address of that party specified below or at
such other address as that party may notify to the other party from time to
time, (2) sent by courier to that party at that address, or (3) sent by
facsimile to the facsimile number of that party specified below or to such other
number as that party may notify the other party from time to time; (iii) signed
on behalf of the party giving, serving or making the same by any attorney,
director, officer, secretary, partner, agent or other duly authorized
representative of such party; and (iv) be effective (a) in the case of a letter
or delivery by courier, when left at the address referred to above; or (b) in
the case of a facsimile transmission, when receipt is confirmed by return
facsimile or by telephone or on actual receipt if not so confirmed.

     For the purposes of this Agreement, all reports, notices, requests, demands
or other communications shall be given or made by being addressed as follows:

          If to the Seller:

                      Solitair Corp.
                      c/o Wexford Capital LLC
                      411 West Putnam Avenue
                      Greenwich, Connecticut  06830
                      Attention: President
                      Telephone:  203-862-7000
                      Facsimile:  203-862-7490

          If to Beneficiary:

                                       12


                    Mitsui & Co. (U.S.A.), Inc.
                    200 Park Avenue
                    New York, NY  10166
                    Tel:    (212) 878-4314
                    Fax:    (212) 878-0979
                    Attn:  General Manager, Aerospace, Marine and Motor Vehicles

          If to WFB or Owner Trustee:

                    Wells Fargo Bank Northwest, National Association
                    79 South Main Street, Suite 300
                    Salt Lake City, Utah  84111
                    Attention:  Corporate Trust Department
                    Telephone:  801-246-5826
                    Facsimile:  801-246-5053

          If to Lessee:

                    Chautauqua Airlines, Inc.
                    2500 S. High School Road
                    Indianapolis, Indiana  46241
                    Tel:    (317) 484-6047
                    Fax:    (317) 484-6060
                    Attn:   President

          with a copy to:

                    Wexford Capital LLC
                    411 West Putnam Avenue
                    Greenwich, Connecticut 06830
                    Tel:    (203) 862-7000
                    Fax:    (203) 862-7490
                    Attn:   President

PROVIDED, that any report, notice, request, demand or other communication
delivered to Lessee in accordance with this Section 12(a) shall be effective as
to Lessee without regard to whether such report, notice, request, demand or
other communication has been delivered to Wexford Capital LLC

          (b) GOVERNING LAW; JURISDICTION.

          (i) THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK, AND
     THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL, PURSUANT TO NEW
     YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE LAWS OF THE
     STATE OF NEW YORK.

          (ii) The Parties hereto each hereby irrevocably consents that any
     legal action or proceeding against it or any of its assets arising out of
     or relating to this Agreement or any other Operative Document may be
     brought in any jurisdiction where it or any of its assets may be found, in
     the courts of the State of New York located in the County of New York, New
     York, and in the Federal courts sitting in the Southern District of New
     York, as the Party bringing such

                                       13


     action or proceeding may elect, and by execution and delivery of this
     Agreement each of the Parties hereto hereby irrevocably submits to and
     accepts with regard to any such action or proceeding, for itself and in
     respect of its assets, generally and unconditionally, the jurisdiction of
     the aforesaid courts and irrevocably agrees to be bound by any judgment
     rendered thereby. Nothing herein shall prevent any Party from bringing any
     legal action or proceeding or obtaining execution of judgment in any other
     appropriate jurisdiction. The Parties hereto further agree that a final
     judgment in any action or proceeding arising out of or relating to this
     Agreement or any other Operative Document shall be conclusive and may be
     enforced in any other jurisdiction within or outside the United States by
     suit on the judgment, a certified or exemplified copy of which shall be
     conclusive evidence of the fact and the amount of the indebtedness or
     liability therein described, or in any other manner provided by law. Each
     of the Parties hereto hereby irrevocably waives, to the fullest extent
     permitted by law, any objection which it may now or hereafter have to the
     laying of venue of any suit, action or proceeding arising out of or
     relating to this Agreement or any other Operative Document brought in any
     court in or of New York, New York, and hereby further irrevocably waives
     any claim that any such suit, action or proceeding in New York, New York
     has been brought in an inconvenient forum.

          (iii) Each Party hereto hereby irrevocably consents to the service by
     certified mail at its address set forth in Section 12(a) of any summons and
     complaint and any other process which may be served in any action or
     proceeding arising out of or relating to this Agreement or any other
     Operative Document. Notwithstanding the foregoing, nothing herein shall
     affect the rights of either Party to serve process in any other manner
     permitted by law.

          (iv) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
     FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
     TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
     OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER OPERATIVE
     DOCUMENT. Each Party hereto (a) certifies that no representative, agent or
     attorney of any other Party has represented, expressly or otherwise, that
     such other Party would not, in the event of litigation, seek to enforce the
     foregoing waiver and (b) acknowledges that it and the other Parties hereto
     have been induced to enter into this Agreement and the other transaction
     documents, as applicable, by, among other things, the mutual waivers and
     certifications in this section.

          (c) [RESERVED.]

          (d) ASSIGNMENTS. Except as otherwise expressly provided herein or in
any other Operative Document, this Agreement shall not be assignable by any
Party without the consent of the other Parties; PROVIDED, HOWEVER, that the
Beneficiary may assign its rights and obligations in and under this Agreement
without the consent of the Seller or Lessee in connection with the sale of all
or a portion of the Beneficiary's interests in the Trust Estate, the Aircraft
and Lease as provided in Section 10(b)(v) hereof and may assign its rights, but
not its obligations as provided in Section 10(b)(vi) hereof. This Agreement, and
the rights and obligations of the Parties hereunder, shall be binding upon and
inure to the benefit of each of the Parties, their respective successors and
permitted assigns.

          (e) TRANSACTION COSTS. Beneficiary shall be responsible for and shall
pay and reimburse the Parties for all reasonable out of pocket costs and
expenses of the Parties (other than costs and expenses relating to the Owner
Trustee specified in the next succeeding sentence), including the costs and
expenses of counsel, LSC, Special FAA counsel (other than costs and expenses of
Special FAA Counsel referred in the next succeeding sentence) and Pinheiro Neto,
special Brazilian counsel, and the fee of Lessee's advisor (not to exceed 0.5%
of the Aircraft Price), in each case incurred in connection with the
preparation, negotiation and delivery of this Agreement and any other documents,
agreements or

                                       14


instruments delivered in connection herewith up to a maximum amount in the
aggregate of [*], and Lessee shall be responsible for and shall pay or
reimburse Beneficiary for all such costs and expenses in excess of the
aggregate amount of [*]. Lessee also shall be responsible for and shall pay
or reimburse all costs and expenses relating to the Owner Trustee, including
the annual fees and expenses of the Owner Trustee and the costs and expenses
of Special FAA Counsel in qualifying the Trust Agreement with the FAA. All
such costs and expenses of the parties to the transaction other than the
Parties shall be evidenced by appropriate original bills or invoices, which
shall be reasonably satisfactory in form and amount to the Beneficiary and,
with respect to any amounts payable by Lessee, the Lessee.

          (f) NO WAIVER. The failure of any Party to enforce at any time any of
the provisions of this Agreement or any document, agreement or instrument
delivered hereunder, or to require at any time the performance by the other
Party of any of the provisions hereof or thereof, shall in no way be construed
to be a waiver of such provisions, nor in any way affect the validity of this
Agreement or such document, agreement or instrument or any part thereof, or the
right of such Party thereafter to enforce each and every such provision. The
express waiver by any Party of any provision, condition or requirement of this
Agreement or any document, agreement or instrument delivered hereunder shall not
constitute a waiver of any future obligation to comply with such provision,
condition or requirement.

          (g) SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by law, each of the Parties hereto hereby waives any provisions of law which
renders any provisions hereof prohibited or unenforceable in any respect.

          (h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          (i) ENTIRE AGREEMENT; MODIFICATION OR REVISION. This Agreement and the
other Operative Documents are, collectively, intended to be a complete and
exclusive statement of the terms of the agreement of the Parties and this
Agreement and the other Operative Documents supersede any prior or
contemporaneous agreements, whether oral or in writing in relation to the
transactions contemplated herein. None of this Agreement, any other Operative
Document or any term hereof or thereof may be modified or waived except by an
agreement in writing signed by the Parties.

          (j) HEADINGS. The headings of the Sections in this Agreement are
inserted for convenience of reference only, and are not deemed to be part of
this Agreement shall not in any way affect the interpretation thereof.

          (k) NO BROKER.

               (i) Seller hereby represents and warrants that it has not paid,
          agreed to pay or caused to be paid directly or indirectly in any form,
          to any Person, other than Seabury Securities LLC, any commission,
          percentage, contingent fee, brokerage or other similar payments of any
          kind, in connection with the establishment or operation of this
          Agreement.

               (ii) Beneficiary and Owner Trustee each hereby represents and
          warrants that it has not paid, agreed to pay or caused to be paid
          directly or indirectly in any form, to any Person, other than Tombo
          Aviation Inc., any commission, percentage, contingent fee,

- ----------
* Confidential
                                       15


          brokerage or other similar payments of any kind, in connection with
          the establishment or operation of this Agreement.

          (l) CONFIDENTIALITY. The Parties agree to keep the following
information confidential: the Aircraft Price, Assignment No.1, Assignment No. 2
and the terms of the warranties relating to the Airframe, the Engine Warranty
Assignment and Consent and the terms of the warranties relating to the Engines
and such other information as any Party shall identify in writing to the other
Parties as confidential information. This confidentiality obligation shall
survive the termination of the Lease for a period of one year following such
termination, except that if the Lease shall have been terminated following an
Event of Default, Lessor and Beneficiary shall have the right to disclose such
information as may be necessary in order to remarket the Aircraft and/or to
enforce any remedy that may be available to it. Notwithstanding the foregoing,
this Agreement, the other Operative Documents and all information supplied by
either of the Parties hereunder or thereunder may be disclosed by any of the
other Parties (1) as may be required by Law or by any court or administrative
order, (2) to the extent that the substance hereof or thereof becomes public
knowledge through no fault or negligence of such other party, (3) to such
Party's professional advisers and to the Manufacturer and Engine Manufacturer,
and (4) to any subsequent potential transferees of the Aircraft, the Trust
Estate or an interest therein or the Beneficial Interest or to a Financing
Party; PROVIDED that any such Person agrees to be bound by this Section 12(l).

                      [signature page immediately follows]

                                       16


     IN WITNESS WHEREOF, the Parties hereto have duly executed this Aircraft
Purchase Agreement [N288SK] as of the day and year first above written.

                                       SOLITAIR CORP.

                                       By: /s/ Doug Lambert
                                           -------------------------------------
                                         Name: Doug Lambert
                                         Title: Vice President


                                       CHAUTAUQUA AIRLINES, INC.

                                       By: /s/ Robert H. Cooper
                                           -------------------------------------
                                         Name: Robert H. Cooper
                                         Title: Vice President


                                       MITSUI & CO. (U.S.A.), INC.

                                       By: /s/ Kazuki Okamura
                                           -------------------------------------
                                         Name: Kazuki Okamura
                                         Title: General Manager


                                       WELLS FARGO BANK NORTHWEST, NATIONAL
                                       ASSOCIATION, not in its individual
                                       capacity, but solely as Owner Trustee

                                       By: /s/ Brett R. King
                                           -------------------------------------
                                         Name: Brett R. King
                                         Title: Vice President


                                                                       EXHIBIT A
                                                           TO PURCHASE AGREEMENT

                              FORM OF BILL OF SALE

KNOW ALL MEN BY THESE PRESENT THAT AERO LTD., a Cayman Islands corporation
("AERO"), whose address is [____________________], is the owner of good and
marketable title to that certain EMB-145 LR Aircraft bearing Manufacturer's
Serial No. [____], with two Rolls Royce Allison AE3007A1P engines bearing
manufacturer's serial numbers CAE [_____] and CAE [____], with all appliances,
parts, instruments, appurtenances, accessories, furnishings and/or other
equipment or property incorporated in or installed on or attached to said
aircraft, not including the galley equipment, serving equipment or emergency
medical equipment (hereinafter collectively referred to as the "AIRCRAFT")
purchased by WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity, but solely as trustee under
a Trust Agreement dated as of June 5, 2001 between itself and MITSUI & CO.
(U.S.A.), INC., a corporation organized and existing under the laws of the State
of New York, with its principal place of business at 200 Park Avenue, New York,
New York 10166 (the "PURCHASER"), under the Aircraft Purchase Agreement
[N288SK], dated as of June 5, 2001, including Attachments, Exhibits, Letters,
Amendments and Agreements by and between AERO and PURCHASER.

THAT for and in consideration of the sum of US$10.00) and other valuable
consideration, receipt of which is hereby acknowledged, AERO does this ___ day
of _____, 2001, grant, convey, transfer bargain and sell, deliver and set over
to PURCHASER and unto its successors and assigns forever, all of AERO's right,
title and interest in and to the Aircraft.

THAT AERO hereby represents and warrants to PURCHASER, its successors and
assigns:

(i)  that AERO has good and marketable title to the Aircraft and the good and
     lawful right to the Aircraft and the good and lawful right to sell the
     same; and
(ii) that good and marketable title to the Aircraft is hereby duly vested in
     PURCHASER free and clear of all claims, liens, encumbrances and rights of
     others of any nature. AERO hereby covenants and agrees to defend such title
     forever against all claims and demands whatsoever.

This Full Warranty Bill of Sale is governed by the laws of the state of New
York, United States of America.

IN WITNESS WHEREOF, AERO has caused this instrument to be executed and delivered
by its duly authorized officer and attorney in fact.

Date as of __________, __, 2001.

AERO LTD.

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

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



                                                                      EXHIBIT B
                                                           TO PURCHASE AGREEMENT

                         FORM OF ACCEPTANCE CERTIFICATE

     This undersigned WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not in
its individual capacity, but solely as trustee under a Trust Agreement, dated as
of June 5, 2001 (the "TRUST AGREEMENT"), between MITSUI & CO. (U.S.A.), INC. and
itself (the "PURCHASER"), hereby indicates and confirms to SOLITAIR CORP. (the
"SELLER") and AERO LTD. ("AERO") and their respective successors and assigns
that PURCHASER has at _____________a.m./p.m. (New York time) on this ______ day
of June, 2001 (the "DELIVERY TIME"), and at the city of Sao Jose dos Campos, Sao
Paulo, Brazil, accepted the following Aircraft, "as is, where is" in accordance
with the provisions of the Aircraft Purchase Agreement, dated as of June 5,
2001, among PURCHASER, SELLER and Mitsui & Co. (U.S.A.), Inc., and does hereby
consider it duly transferred to the ownership of PURCHASER, which from the
Delivery Time on assumes the full responsibility for any and all damages and
risks that may arise out of its ownership and operation:

     One EMB-145 LR Aircraft bearing Manufacturer's Serial No. 145461, with two
Rolls Royce Allison AE3007A1P engines bearing manufacturer's serial numbers CAE
311866 and CAE 311867, with all appliances, parts, instruments, appurtenances,
accessories, furnishings and/or other equipment or property incorporated in or
installed on or attached to said aircraft (not including the galley equipment,
serving equipment or emergency medical equipment),

     IN WITNESS WHEREOF, PURCHASER has caused this Acceptance Certificate to be
executed in its name, by its duly authorized officers) or representative(s),
pursuant to due corporate authority, this ___________ day of June. 2001.

                                       WELLS FARGO BANK NORTHWEST, NATIONAL
                                       ASSOCIATION, not in its individual
                                       capacity, but solely as trustee under the
                                       Trust Agreement

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




                                                                     EXHIBIT A-2
     Section 1. GENERAL CONDITIONS.

     "APPRAISAL PROCEDURE" means, if (x) the Beneficiary does not provide a
Residual Notice to the Lessee as provided in Section 3(e) by the one hundred
eightieth (180th) day prior to the Expiration Date (it being agreed that, if
such Residual Notice is so given, the RVG Appraisal Procedure in Exhibit D-2
shall be used to determine Fair Market Sales Value, except as set forth in the
last proviso to this sentence), and (y) the Lessor and the Lessee shall not have
agreed on the Fair Market Sale Value of the Aircraft within thirty (30) days
after Lessee gives notice pursuant to Section 3(c) that it is exercising its FMV
Option, then Fair Market Sale Value shall be as specified in an appraisal
prepared and delivered in New York City and mutually agreed to by two recognized
independent aircraft appraisers, one of which shall be appointed by the Lessor
and the other of which shall be appointed by the Lessee, in each case promptly
after such one hundred eightieth (180th) day, or, if such appraisers cannot
agree on such appraisal, an appraisal arrived at by a third independent
recognized appraiser chosen by the mutual consent of the two aircraft
appraisers, PROVIDED that if either party should fail to appoint an appraiser
within fifteen (15) days of receiving notice of the appointment of an appraiser
by the other party, then such appraisal shall be made by the appraiser appointed
by the first party, and PROVIDED FURTHER, that if the two appraisers cannot
agree on such appraisal and fail to appoint a third independent recognized
aircraft appraiser within fifteen (15) days after the appointment of the second
appraiser, then either party may apply to the American Arbitration Association
to make such appointment, and PROVIDED FURTHER that the appraisal shall be
completed within thirty (30) days of the appointment of the last appraiser so
appointed, and PROVIDED FURTHER that, for purposes of Section 17.02 of the
Lease, any determination of Fair Market Sales Value or Fair Market Rental Value
pursuant to Section 17.02 of the Lease shall be made by a single recognized
independent aircraft appraiser selected by Lessor and the costs and expenses
associated therewith shall be borne by Lessee..

     Each appraiser appointed pursuant to any of the foregoing procedures must
be associated with a professional organization of aircraft appraisers and the
appraised fair market sales values shall be determined by the appraisers
pursuant to ISTAT 1994 appraisal methods, definitions and assumptions (or any
successor thereto). Each of the Lessor and Lessee agrees to promptly provide the
other Party with copies of any reports received by it from any appraiser hired
by it in connection with the appraisal procedures described above. Except as
otherwise expressly provided in the Lease and in the last proviso of the first
paragraph of this definition of Appraisal Procedure, all appraisal costs will be
shared equally by the Lessor and the Lessee; provided that if the Lessee elects
not to renew the Lease or purchase the Aircraft following the conclusion of such
appraisal, the Lessee shall pay all such appraisal costs.

     "ASSUMED TRANSACTION COSTS" means [*]

     "BASIC RENT" means the amount payable on each Rent Payment Date as set
forth in Schedule BR1, as adjusted pursuant to Section 4.01) of the Lease,
PROVIDED that each such amount shall be allocated among the Rental Periods as
set forth in Schedule BR2, as adjusted pursuant to Section 4.01 of the Lease.

     "EARLY PURCHASE OPTION" means the purchase option exercisable by Lessee on
the Early Purchase Date.

- -------
* Confidential



     "DEFICIENCY GUARANTEE" means the Deficiency Guarantee Agreement, dated June
5, 2001, between the Manufacturer and Beneficiary.

     "FAIR MARKET RENTAL VALUE" means in respect of the Aircraft at any time,
the aggregate base rentals (which shall in no event be less than zero) which
would be payable in an arm's-length transaction for cash under a lease of the
Aircraft on an "as is", "where is" basis and otherwise on terms substantially
identical (except for Basic Rent and Term) to the terms of this Lease for such
period of time as such Fair Market Rental Value is to be determined between a
willing lessor and a willing lessee both with full knowledge of the relevant
facts, including the actual condition and maintenance status of the Aircraft at
such time, and neither under any compulsion to enter into the transaction.

     "FAIR MARKET SALE VALUE" means in respect of the Aircraft, if the
Beneficiary does not provide a Residual Notice to the Lessee as provided in
Section 3(e), an amount equal to the fair market sales value (which shall in no
event be less than zero) which would be obtained in an arms' length retail
transaction for a sale of the Aircraft, between an informed and willing buyer
(other than a lessee currently in possession or a used equipment dealer) and an
informed and willing seller, neither under any compulsion to buy or sell. In
determining Fair Market Sale Value by appraisal or otherwise, it will be assumed
that the Aircraft is in the condition, location and overhaul status in which it
is required to be returned to the Lessor pursuant to Article XVIII of the Lease
(without any allowance which may otherwise be permitted by Section 6 of EXHIBIT
D-1), that the Lessee has removed all Parts which it is entitled to remove
pursuant to Article IX of the Lease and that the Aircraft is not encumbered by
the Lease, PROVIDED that if an Event of Default has occurred, then for purposes
of Section 17.02 of the Lease, the Fair Market Sales Value of the Aircraft, the
Airframe or any Engine shall be determined on an "as is, where is" basis and
shall take into account customary brokerage and other out-of-pocket fees and
expenses which typically would be incurred in connection with a sale of the
Aircraft, the Airframe or any Engine. If the Beneficiary provides a Residual
Notice as provided in Section 3(e), the definition of Fair Market Sale Value
will be determined as provided in the definition of RVG Appraisal Procedure.

     "FMV OPTION" means the purchase option exercisable by the Lessee on the
Expiry Date.

     "GUARANTEED AMOUNT" means [*].

     "MAINTENANCE PROGRAM" means the Lessee's maintenance program, as such
program may be from time to time amended and supplemented by Lessee and which
(i) shall have been approved by the FAA ) and be in compliance with Part 121 of
the Federal Aviation Regulations (as set forth in Title 14 of the U.S. Code of
Federal Regulations), (ii) shall fully comply with the requirements of the FAA
for the EMB-145 and Rolls-Royce Allison AE3007-A1P aero engines (or an improved
model, as the case may be) installed thereon, and (iii) shall incorporate the
requirements of the EMB-145 Scheduled Maintenance Requirements Document Part 1
("SMRD"), the Aircraft Maintenance Manual ("AMM"), the Structural Repair Manual
("SRM"), the Corrosion Prevention and Correction Program ("CPCP") and the
Original Equipment Manufacturers' ("OEMS") maintenance manuals, (all of the
foregoing as from time to time amended or supplemented), the Service Newsletters
and the service bulletins issued by the Manufacturer and all OEMs, provided,
however, that when the Aircraft is subject to a Sublease, "Maintenance Program"
shall mean any maintenance program approved by the relevant Aeronautical
Authority for the Aircraft, Airframe and engines, as applicable, but only to the
extent provided in the Sublease. .

     "MINIMUM LIABILITY AMOUNT" means [*].

     "NET ECONOMIC RETURN" means the Beneficiary's nominal after-tax book yield
(utilizing the multiple investment sinking fund method of analysis), computed
through the Early Purchase Date and the Expiry Date on the basis of the same
methodology, constraints and assumptions as were utilized by the

- --------
* Confidential



initial Beneficiary in determining Basic Rent and Stipulated Loss Values as
of the Delivery Date; provided that, if the initial Beneficiary shall have
transferred all or any portion of its interest, Net Economic Return shall be
calculated as if the initial Beneficiary had retained its interest .

     "LEASE [N287SK]" means Aircraft Lease Agreement [N287SK], dated as of June
5, 2001 between an Other Lessor and Lessee.

     "LEASE [N288SK]"means Aircraft Lease Agreement [N288SK], dated as of June
5, 2001 between an Other Lessor and Lessee.

     "PBH AGREEMENT" has the meaning assigned in Exhibit D-1 or Exhibit D-2, as
applicable.

     "PURCHASE PRICE" means, in the case of the Early Purchase Option, the
higher of [*] and Stipulated Loss Value as listed in the column headed
"Stipulated Loss Value" in Schedule SLV on the Early Purchase Date, and in the
case of the FMV Purchase Option, the Fair Market Sale Value of the Aircraft as
of the Expiry Date.

     "RESIDUAL VALUE GUARANTEE" means the Residual Value Guarantee Agreement,
dated as of June 5, 2001, between the Beneficiary and the Manufacturer.

     "RVG APPRAISAL PROCEDURE" has the meaning specified in Section 9 of Exhibit
D-2.

     "SCHEDULED DELIVERY DATE" means June 5, 2001, or such other date as may be
notified to Lessee by the Manufacturer and agreed to by Lessor, but not later
than August 31, 2001.

     "STIPULATED LOSS VALUE" means, with respect to any given date, the amount
set forth in the column headed "Stipulated Loss Value" in Schedule SLV opposite
such date or the next succeeding date in such column, in each case as adjusted
pursuant to Section 4.01 of the Lease.

     Section 2. [RESERVED]

     Section 3. PURCHASE OPTION. (a) The Lessee may, at its option and upon
written notice to Lessor as hereinafter provided, (i) so long as no Specified
Default (other than an Event of Default described in Section 17.01(m) of the
Lease) shall have occurred and be continuing, purchase the Aircraft at the
Purchase Price on the date that is the fourteenth anniversary of the Delivery
Date (the "EARLY PURCHASE DATE") (such purchase option, the "EARLY PURCHASE
Option"), or (ii) so long as no Event of Default described in Section 17.02 (g),
(h) and (i) shall have occurred and be continuing, on the Expiration Date (the
"EXPIRY DATE") (such purchase option, the "FMV OPTION," and the Early Purchase
Option and FMV Option each being herein referred to as a "LESSEE PURCHASE
OPTION").

     (b) In the event Lessee intends to exercise the Early Purchase Option on
the Early Purchase Date, Lessee shall give irrevocable written notice to Lessor
stating that it intends to so exercise the Early Purchase Option, which notice
shall be delivered to Lessor not less than one hundred twenty (120) days nor
more than three hundred sixty-five (365) days prior to the Early Purchase Date
and shall set forth a reasonably detailed calculation of the amounts that will
be due on the Early Purchase Date, PROVIDED that if Lessee fails to to deliver
such notice not less than one hundred twenty (120) days prior to the Early
Purchase Date, Lessee shall be deemed to have waived its right to exercise the
Early Purchase Option.

     (c) In the event Lessee intends to exercise the FMV Option , Lessee shall
give written notice to Lessor of its intent to exercise its FMV Option on the
Expiry Date, which notice shall be delivered to Lessor not less than two hundred
ten (210) days prior to the Expiry Date, PROVIDED that if Lessee fails to

- -------
* Confidential



deliver such notice not less than two hundred ten (210) days prior to the Expiry
Date, Lessee shall be deemed to have waived its right to exercise the FMV
Option.

     (d) After providing notice of its exercise of a Lessee Purchase Option,
whether or not any purchase is consummated pursuant to a Purchase Option, Lessee
shall pay all the out-of-pocket expenses of Lessor (including, but not limited
to, reasonable legal fees) relating thereto or incurred in connection therewith,
PROVIDED that, if Lessee revokes the exercise of its FMV Option as provided in
Section 3(f) or such exercise is revoked as provided in Section 3(e), such costs
shall be limited to appraisal costs and shall be paid as provided in the
definition of the Appraisal Procedure or the RVG Appraisal Procedure, as
applicable.

     (e) If (i) the Lessee has timely given the notice described in Section
3(c) that it is exercising the FMV Purchase Option, and (ii), the Beneficiary
delivers notice to Lessee (such notice, a "RESIDUAL NOTICE") not less than one
hundred eighty (180) days prior to the Expiry Date that Beneficiary has notified
or is notifying the Manufacturer that it is demanding payment under the Residual
Value Guarantee, the Fair Market Sales Value of the Aircraft shall be determined
pursuant to the RVG Appraisal Procedure in Exhibit D-2. If (i) the Lessee has
timely given the notice described in Section 3(c) that it is exercising the FMV
Purchase Option and (ii) the Beneficiary does not so deliver a Residual Notice,
the Fair Market Sales Value of the Aircraft shall be determined in accordance
with the Appraisal Procedure in this Exhibit A-2. The Manufacturer shall have
the right to notify Lessee and Beneficiary within 30 days after the
determination of Fair Market Sales Value in accordance with the RVG Appraisal
Procedure whether it will exercise its purchase option under the Residual Value
Guarantee, in which case Lessee's exercise of the FMV Purchase Option shall be
revoked and cancelled.

     (f) Unless the Lessee's purchase option is revoked under the preceding
clause (e) by the Manufacturer's exercise of its purchase option under the
Residual Value Guarantee, Lessee shall have the option of revoking its exercise
of the FMV Purchase Option within forty-five (45) days after the determination
of Fair Market Sales Value pursuant to the Appraisal Procedure or within fifteen
(15) days following the determination of Fair Market Sales Value pursuant to the
RVG Appraisal Procedure, but in either case not later than 105 days prior to the
end of the Basic Term.

     (g) Upon the date specified by Lessee in the notice referred to in
paragraph (b) or (c) of this Section 3, as applicable (and subject to revocation
of the FMV Purchase Option as provided in Section 3(e) or Section 3(f)), Lessee
shall pay the applicable Purchase Price for the Aircraft at the Payment Location
and in the manner set forth in Section 4.02 of the Lease, together with (i) the
amount of Basic Rent, if any, then due and unpaid on such date PLUS (ii) the
amount of deferred Basic Rent, if any, as of such date as set forth in the
column headed "Deferred Basic Rent" in Schedule SLV, MINUS (iii) the amount of
prepaid Basic Rent, if any, as of such date as set forth in the column headed
"Prepaid Basic Rent" in Schedule SLV, PLUS (iv) any Supplemental Rent unpaid as
of such date. Upon receipt by Lessor of the amounts described in the preceding
sentence, Lessor will transfer the Aircraft to Lessee on an "as is, where is"
basis and without any representation or warranty except that it is transferring
to Lessee title, free of Lessor's Liens, but subject to Liens arising by or
through Lessee, and will, at Lessee's sole cost and expense, execute and deliver
a bill of sale evidencing the same and such other instruments as Lessee may
reasonably request to evidence such transfer and the release of the Aircraft
from the terms of this Lease.

     (h) Upon delivery by the Lessor of the Aircraft and payment by the Lessee
of all amounts payable by the Lessee under paragraph (g) above, the obligations
of the Lessee to pay Rent (except for Supplemental Rent obligations surviving
pursuant to Articles XIV and XV of the Lease or the Tax Indemnity Agreement or
which have otherwise accrued but not been paid as of the Early Purchase Date or
the Expiry Date) shall cease and the Term shall end.



     Section 4. ADDITIONAL CONDITIONS PRECEDENT. Lessor shall have received a
copy of the Residual Value Guaranty and the Deficiency Guarantee, each duly
executed and delivered by the Manufacturer.

     Section 5. RE-REGISTRATION. Lessor agrees that in connection with a
Sublease to a Permitted Sublessee that is not a Section 1110 Person and that is
not domiciled in the United States, Lessee may register the Aircraft in any
country listed on EXHIBIT F hereto; subject to satisfaction of the requirements
for such a Sublease in Section 8.01(c) of the Lease (including, without
limitation, the requirements that no Specified Default shall have occurred and
be continuing, such Permitted Sublessee has provided evidence satisfactory to
Lessor of insurance coverage required by the XI with respect to the operation of
the Aircraft by such Permitted Sublessee, and the Lessee has made the lump sum
payment required by Section 8.01(c)(i) of the Lease, if any) and to the
following conditions:

          (i) the Lessee shall pay all reasonable fees and expenses (including
     the reasonable fees and expenses of local counsel in such country) relating
     to such re-registration;

          (ii) the Lessee shall, at its cost, cause the interest of the Owner
     Trustee as owner of the Aircraft to be duly registered or recorded under
     the laws of such country and at all times thereafter to remain so duly
     registered or recorded unless and until the registration of the Aircraft is
     changed as provided herein, and shall, at its cost, cause to be done at all
     times all other acts including the filing, recording and delivery of any
     document or instrument and the payment of any sum necessary or, by
     reference to prudent industry practice in such country, advisable in order
     to create, preserve and protect such interest in the Aircraft as against
     the Lessee or any third parties in such jurisdiction, and the laws of such
     country would give effect to the Owner Trustee's title to and ownership
     interest in the Aircraft;

          (iii) the obligations of the Lessee (and of the Permitted Sublessee
     under a Sublease) and the rights and remedies of the Lessor shall remain or
     be, as the case may be, legal, valid, binding and enforceable in such
     country, and the courts of such country will respect the choice of New York
     law to govern the Lease;

          (iv) the Aeronautical Authority in the country of such re-registration
     imposes aircraft maintenance standards approved by, or at least as
     stringent as those approved by, the FAA the JAA or the central civil
     aviation authority of the United Kingdom, France, Germany, Japan, the
     Netherlands or Canada;

          (v) it shall not be necessary by reason of such re-registration or for
     purposes of enforcing remedies contained in the Lease or the related
     Sublease for the Owner Trustee or the Beneficiary to register or qualify to
     do business in such country;

          (vi) no Liens (except Permitted Liens) shall arise by reason of such
     re-registration;

          (vii) none of the Owner Trustee and the Beneficiary shall be subjected
     to any risk of adverse tax consequences in the jurisdiction in which the
     Aircraft is to be re-registered as a result of such re-registration for
     which the Lessee does not then indemnify or cause to be indemnified such
     Person in a manner satisfactory in form and substance to such Person;

          (viii) any export licenses and certificate of deregistration required
     in connection with any repossession or return of the Aircraft will be
     readily obtainable in the normal course without material delay or material
     burden on the Owner Trustee, it being agreed that the Lessee shall be
     responsible for the cost thereof;



          (ix) there is no tort liability of the owner or lessor of an aircraft
     not in possession thereof under the laws of such jurisdiction more onerous
     than under the laws of the United States or any state thereof (it being
     agreed that, in the event such opinion cannot be given in a form
     satisfactory to the Beneficiary, such opinion shall be waived if insurance
     reasonably satisfactory to the Beneficiary is provided to cover such risk);

          (x) unless Lessee shall have agreed to provide insurance reasonably
     satisfactory to the Beneficiary covering the risk of requisition of use of
     or title to the Aircraft by the government of such country (so long as the
     Aircraft is registered under the laws of such country), the laws of such
     country require fair compensation by the government of such country payable
     in currency freely convertible into Dollars and freely removable from such
     country (without license or permit, unless Lessee prior to such proposed
     re-registration has obtained such license or permit or such license or
     permit will be readily obtainable in the normal course without material
     delay or material burden on the Beneficiary) for the taking or requisition
     by such government of such use or title;

          (xi) the Beneficiary and the Owner Trustee shall have received
     opinions in scope, form and substance reasonably satisfactory to them, of
     counsel, expert in the laws of such country, to the effect set forth in
     clauses (ii), (iii) (with respect to the obligations of the Lessee under
     the Lease), (v), (vii), (viii), (ix) and (x) of this Section 5;

          (xii) such proposed change in registration is made in connection with
     a Sublease to a Permitted Sublessee domiciled in such country; and

          (xiii) Lessee shall deliver such request to Lessor and Beneficiary in
     writing at least 20 days in advance of the date of any such proposed change
     in registration.


     Section 6. RENEWAL TERM. Lessor agrees to enter into good faith discussions
with Lessee regarding the potential renewal of this Lease at the end of the
Basic Term for such period or periods (any such period, a "RENEWAL Term"), and
at such amount or amounts of basic rent, as may be agreed upon by Lessor and
Lessee at the time of such discussions; PROVIDED that nothing in this Section 7
of Exhibit A-2 shall be construed as an obligation on the part of Lessor to
agree to any such Renewal Term. Lessee agrees that, notwithstanding anything to
the contrary contained herein, Lessor shall be entitled to refuse to enter into
any Renewal Term in the event that (i) the Residual Value Guarantee, or (ii) a
substitute residual value guaranty that is substantially identical to the
Residual Value Guarantee (as determined in the reasonable discretion of the
Beneficiary) and is otherwise in form and substance satisfactory to the
Beneficiary (with the obligor thereunder having a tangible net worth at least
equal to the net worth of the Manufacturer immediately prior to the first day of
such Renewal Term), shall not be available to Beneficiary during such Renewal
Term. Lessee acknowledges that, as of the date hereof, Manufacturer has
indicated that it does not intend to make the Residual Value Guarantee available
to Beneficiary during any such Renewal Term.

     Section 7. ADJUSTMENTS TO BASIC RENT AND STIPULATED LOSS VALUES. The
installments of Basic Rent in SCHEDULE BR1 attached hereto are based on the
Assumed Aircraft Price being equal to [*] and on the Assumed Transaction
Costs being equal to [*]. The amount of Basic Rent payable on each Rent
Payment Date other than the first four (4) Rent Payment Date shall be
increased or decreased by [*] for every increase or decrease of [*] of the
Aircraft Price above or below the Assumed Aircraft Price. The amount of Basic
Rent payable on each Rent Payment Date other than the first four (4) Rent
Payment Date shall be decreased by [*] (or a proportionate part thereof) for
every

- --------
* Confidential



decrease of [*] (or proportionate part thereof) of the Transaction Costs
below the Assumed Transaction Costs.

     Section 8. [Reserved]

     Section 9. SELF-INSURANCE. Lessor and Lessee agree to engage in good faith
discussions on the right of Lessee to self-insure in such amounts as may be
agreed to by Lessor and Lessee at the time of such discussions. Nothing in this
Section 5 shall be construed as an obligation on the part of Lessor or
Beneficiary to agree to any such self-insurance provisions.

     Section 10. VOLUNTARY TERMINATION.

     (A) TERMINATION BY SALE OF AIRCRAFT. So long as no Specified Default shall
have occurred and be continuing, the Lessee shall have the right at its option
at any time after March 31, 2009 on at least 180 days', but not more than 365
days, prior written notice (which notice shall be irrevocable, except as
provided below) to the Lessor, specifying a proposed date of termination which
shall be a Termination Date, to terminate this Lease if the chief financial
officer of the Lessee shall have certified in writing to the Lessor that the
Aircraft shall have become obsolete or shall be surplus to the Lessee's
equipment requirements. Subject to the Lessor's preemptive election under
Section 10(c), during the period following the giving of such notice of
termination until the Termination Date, the Lessee, as agent for the Lessor,
shall endeavor to sell the Aircraft "as is", without any warranty by the Lessor
or the Lessee except as to the Lessor's title, on behalf of the Lessor. If
Lessee receives any bid, it shall at least 10 Business Days prior to the
proposed day of sale, certify to Lessor in writing the amount and terms of such
bid, such proposed date of sale and the name and address of the potential buyer
(which shall not be Lessee or any Affiliate or any Person with whom Lessee or
any Affiliate has any arrangement or understanding for the future purchase,
lease, operation or use of the Aircraft). Lessor may also solicit bids directly
or through agents other than Lessee. So long as the Lessor has not exercised its
preemptive election under Section 10(c), the Lessee may, by notice to the
Lessor, withdraw its notice of termination at any time on or before the date 10
days prior to the proposed Termination Date (unless such withdrawal is due to
the cancellation of the proposed purchase of the Aircraft by the potential buyer
in which event such notice may be given at any time on or prior to the proposed
Termination Date), and thereupon this Lease shall continue in full force and
effect. Withdrawal of notice of termination shall not exhaust the Lessee's right
to give a further notice of termination as provided herein; provided that Lessee
shall not be entitled to give more than two such notices (excluding one notice
of termination which has been withdrawn due to the cancellation of the proposed
purchase of the Aircraft by the potential buyer). Unless the Lessee shall
withdraw its notice of termination as stated above or the Lessor shall have made
a preemptive election to take possession of the Aircraft in accordance with
Section 10(c), on the Termination Date, or such other date of sale as shall be
consented to in writing by the Lessor and the Lessee, which date shall
thereafter be deemed the Termination Date, the Lessee shall, upon payment in
full of the amounts described in Section 10(b), deliver the Airframe and Engines
or engines installed thereon to the party which shall have prior to such date
submitted the highest bona fide cash bid to close such sale and purchase of the
same, in the same manner as if delivery were being made to the Lessor pursuant
to Article XVIII of the Lease, and shall duly transfer to such party title to
any engines which are not Engines delivered with the Airframe in accordance with
the terms of Article XVIII of the Lease. The Lessor shall, in "as-is, where-is"
condition, without recourse or warranty (except a warranty as to the absence of
Lessor's Liens), simultaneously therewith sell and convey title to the Airframe
and the Engines or engines conveyed to the Lessor as provided in Article XVIII
of the Lease for cash to such party. Upon the sale of the Airframe and the
Engines or engines conveyed to the Lessor as provided in Article XVIII of the
Lease pursuant to this Section 10 and receipt by the Lessor of all amounts
referred to in Section 10(b), the Lessor will transfer to the Lessee, in "as-is,
where-is" condition, without recourse or warranty (except a warranty as to the
absence of Lessor's Liens), all right, title and interest of the Lessor in and
to any Engines constituting part

- --------
* Confidential



of the Aircraft but which were not delivered to the purchaser with the Airframe.
The Lessee shall pay all out of pocket expenses of the Lessor and Beneficiary in
connection with any termination or proposed termination of this Lease except
that Lessee shall not be responsible for such expenses of the Lessor or the
Beneficiary in the event the Lessor exercises its preemptive election under
Section 10(c) and thereafter fails to perform its obligations under such
Section.

     (b) PAYMENTS DUE UPON SALE OF AIRCRAFT. The total selling price realized at
any sale of the Airframe and Engines or engines installed thereon in accordance
with this Section 10 shall be retained by the Lessor and, in addition, on the
Termination Date, the Lessee shall pay to the Lessor or, in the case of
Supplemental Rent, to the Persons entitled thereto, in immediately available
funds, an amount equal to the sum of (A) the excess, if any, of (x) the
Stipulated Loss Value as of the Termination Date, over (y) the net proceeds of
the sale of the Aircraft, plus (B) the amount of unpaid Basic Rent, if any,
payable as of such Termination Date, PLUS (C) the amount of deferred Basic Rent,
if any, as of such Termination Date as set forth in the column headed "Deferred
Basic Rent" in Schedule SLV, MINUS (D) the amount of prepaid Basic Rent, if any,
as of such Termination Date as set forth in the column headed "Prepaid Basic
Rent" in Schedule SLV, PLUS (E) all unpaid Supplemental Rent due on or before
the Termination Date, PLUS (F) the reasonable fees and expenses of the
Beneficiary and Lessor in connection therewith, PLUS (G) any sales, transfer or
similar Taxes incurred on such sale.

     (c) PREEMPTIVE ELECTION BY LESSOR. Notwithstanding the foregoing provisions
of this Section 10, the Lessor may, not later than 90 days prior to the proposed
Termination Date, notify the Lessee of its preemptive election to take
possession of the Aircraft and following delivery of such notice, the Lessee
shall have no obligation to pay Stipulated Loss Value or any amount with respect
to Stipulated Loss Value under this Section 10. On the Termination Date, if the
Lessor shall have exercised its preemptive election to retain the Aircraft in
accordance with the terms of this Section 10(c), the Lessee shall deliver the
Airframe and Engines or engines installed thereon to the Lessor in accordance
with Article XVIII of the Lease and shall pay all unpaid Basic Rent, if any,
payable before the Termination Date, together with all Basic Rent (if payable in
arrears) due on such Termination Date, all unpaid Supplemental Rent due on or
before or after the Termination Date, and the Lessor shall transfer to the
Lessee title to any Engines constituting part of the Airframes but which were
not then installed on the Aircraft as provided in Section 18.03.

     (d) TERMINATION OF LEASE. Upon delivery by the Lessee of the Airframe and
Engines or engines installed thereon and payment by the Lessee of all amounts
payable by the Lessee under either Section 10(b) or 10(c), as the case may be,
the obligations of the Lessee to pay Rent (except for Supplemental Rent
obligations surviving pursuant to Articles XIV and XV of the Lease or the Tax
Indemnity Agreement or which have otherwise accrued but not paid as of the
Termination Date) shall cease and the Term shall end.

     (e) EFFECT OF NO SALE OR PREEMPTIVE DELIVERY TO LESSOR. If on the
Termination Date no sale of the Aircraft shall have occurred and the Lessee has
not delivered the Aircraft to the Lessor pursuant to Section 10(c), the Lessee's
notice given pursuant to Section 10(a) shall be deemed to be withdrawn as of
such date and this Lease shall continue in full force and effect.

     (f) NO DUTY ON PART OF LESSOR. Lessor shall be under no duty to solicit
bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take
any action in connection with any such sale other than to cooperate with such
efforts as Lessee may reasonably request and to make the transfers described in
Section 10(a).




                                                                       EXHIBIT B


                          PRINCIPAL AIRCRAFT DOCUMENTS

         A.       MANUALS.

         OPERATIONAL

         1.  Airplane Flight Manual (AFM)
         2.  Weight & Balance Manual (WB)
         3.  Operations Manual (OM)
         4.  Quick Reference Handbook (QRH)
         5.  Dispatch Deviation Procedures Manual (DDPM)
         6.  Supplementary Performance Manual (SPM)
         7.  Operational Bulletins Set (OB)
         8.  Master Minimum Equipment List (MMEL)

         MAINTENANCE - BASIC SET

         9.   Aircraft Maintenance Manual (AMM)
         10.  Illustrated Parts Catalog (IPC)
         11.  Fault Isolation Manual (FIM)
         12.  Non Destructive Manual (NDI)
         13.  Scheduled Maintenance Requirements Document (SMRD)
         14.  Wiring Manual (WM)
         15.  Structural Repair Manual (SRM)
         16.  Service & Information Bulletins Set (SB/IB)
         17.  Service Newsletters (SNL)

         MAINTENANCE SUPPLEMENTARY SET

         18.  System Schematic Manual (SSM)
         19.  Instructions for Ground Fire Extinguishing and Rescue (IGFER)
         20.  Airport Planning (AP)
         21.  Illustrated tool & Equipment Manual (ITEM)
         22.  Task Card Manual (TCM)
         23.  Powerplant Build-up Manual (PPBM)
         24.  Auxiliary Power Unit Build up Manual (APUBM)
         25.  Corrosion Control Manual (CCM)
         26.  Vendor Service Publications Set

         The documents set forth in Clauses (B), (C), (D) and (E) of this
Exhibit B shall only be required to be maintained by the Lessee (or any
Permitted Sublessee) to the extent required by the FAA or the Maintenance
Program.



         B.       AIRWORTHINESS DIRECTIVES DOCUMENTATION

         1.       A single, complete and current AD status list of each
airframe, appliances, Engine and APU AD and mandatory FAA regulation applicable
to each Aircraft, appliances, Engine and APU including:

                  a.       AD number and revision number.
                  b.       AD title.
                  c.       Aircraft serial number, Engine serial number, APU
                           serial number, appliance serial number.
                  d.       Engineering documentation reference.
                  e.       Manufacturer's Service Bulletin references and
                           cross-references where appropriate.
                  f.       Specify terminated or repetitive status.
                  g.       Date of initial accomplishment,
                  h.       Date of last maintenance accomplishment, if
                           repetitive.
                  i.       Name and serial number of the internal maintenance
                           form used to document accomplishment, if applicable.
                  j.       State means by which compliance was accomplished
                           (e.g. modified, repaired, inspected).
                  The list shall be typed, certified and signed by authorized
                  quality assurance  representative of previous operator.

         2.       Legible copies of the completion documents that accomplish
each A.D. If the A.D. is a repetitive inspection, documentation of the last
accomplishment, signature of a certified mechanic and / or inspector, and the
mechanic's / inspector's certificate number or repair station number of the
mechanic accomplishing the work. The document must reference the A.D. number and
company authorization, which covered the AD.

         3.       Exemptions or deviations granted by the FAA (or equivalent) to
Lessor on AD compliance, including copy of exemption request.

         4.       Items 2 and 3 will be provided in individual document packages
for each AD Each package will contain all documents relative to that AD /
Aircraft combination.



         C.       ENGINEERING DOCUMENTATION

         1.       A single, current list of Airframe, appliance, Engine and APU
Service Bulletins, Engineering Orders, major repairs and Supplemental Type
Certificates ("STC") accomplished on Aircraft, Engine and APU, including method
and date of accomplishment, reference to engineering documentation, including
related drawing and original signed documents where applicable shall be provided
with information similar to that described in item B. 1.

         2.       A current copy of all Engineering documentation related to
Aircraft alterations, repairs and configuration changes. This shall include
documentation for work done by the manufacturer or any vendor. A current copy of
all repairs that require follow-up action.

         3.       Data package covering all non-manufacturer / non-FAA-approved
repairs or alterations, including the submittal to the FAA for an STC or Form
337, If applicable.

         4.       All open engineering deviations or Material Review Board
("MRB") records applicable to the Airframe, Engines and APU, components and
piece parts.



         5.       Mapping of all exterior repairs and damage to the exterior of
the Aircraft and Engines. Supporting data for each repair and damage shall be
provided with information similar to items C-1 and C-2.

         D.       ADDITIONAL DOCUMENTATION

         2.       Master Minimum Equipment List.
         4.       Monthly Reliability reports for one (1) year.
         5.       Accurate summary of the Maintenance Program.
         6.       Location map of emergency equipment with description.
         7.       Weight and balance current status.
         8.       Shop repair maintenance program specification for Engines and
                  APU's.
         9.       JAA Form 1 or FAA Form 8130 certification for all components,
                  as reasonably requested by Lessee.
         10.      Aircraft major equipment listing.
         11.      Passenger/cargo equipment list (seats, galleys. lavs,
                  entertainment, etc.).
         12.      Avionics equipment list (includes P/N, model number and
                  manufacturer and quantity).
         13.      Electronic logbook data, CD ROM or computer printouts, to the
                  extent accepted by the FAA, but otherwise, historical flight
                  log showing cumulative times for major inspection
                  accomplishments, engine changes, APU, etc.
         14.      Complete paperwork for last "C" check.
         15.      Compass card and F.D.R. calibration documentation.
         16.      Copies of Aircraft registration and certificate of
                  airworthiness.
         17.      List of previous owner / operators including dates, locations
                  and aircraft times.

         E.       INDIVIDUAL AIRCRAFT AND ENGINE RECORDS.

         1.       Incident report, if any.
         2.       Major structural damage reports, if any.
         3.       FAA Form 337 or equivalent JAA form or manufacturer's approval
                  for major repair and alteration, if any,
         4.       Engines last shop visit report.
         5.       Documentation and records concerning the last Aircraft
                  overhaul.
         6.       Copies of logbook entries for the last twelve (12) months of
                  operation.
         7.       Declaration of Aircraft accident and major repairs, if any,
         8.       Provide historical data for all life limited parts and hard
                  time components for the Airframe, Engines, and APU, if
                  reasonably requested by Lessee.
         9.       Listing of Aircraft and Engine components status by P/N - S/N
                  description position TBO-TSI-TSO-TSN (with respect to TSO or
                  TSN, if available), total time, next Due Time, including,
                  interpretation keys, if reasonably requested by Lessee.
         10.      APU- Same documentation as Items E. 8 and E. 9 above.
         11.      Certified letter with serial no.- total time/ total cycles-
                  times to the next inspection and the time to the next
                  inspection or removal of Engines and hard time component
                  status list.
         12.      All Engine and APU records, up to and including the last major
                  overhaul or heavy maintenance and shop visits (all modules)
                  including life limited part history to birth.
         13.      Electrical load analysis documents and data.
         14.      The last power plant test cell run documents for Engines and
                  APU
         15.      Borescope inspection documents for current installation for
                  Engines.
         17.      Corrosion prevention control program.
         18.      Aircraft readiness log (manufacturer's)
         19.      Approvals (DAR/DER 8110-3s) for all modifications alterations
                  not covered by Manufacturer's Service Bulletins or JAA
                  equivalent (including appliances),



         20.      Fire blocking status for all seats, interior
                  fabrics/materials, including burn test documentation and
                  certification where applicable.
         21.      Aircraft detail specification.
         22.      Daily time and cycle log for Aircraft and Engines.



                                                                     Exhibit D-1

                                RETURN CONDITIONS

         This Exhibit D-1 shall be applicable unless Exhibit D-2 applies in
accordance with its terms, in which case Exhibit D-2 shall supercede this
Exhibit D-1 and shall be applicable.

Section 1.        General Conditions.

         At the time of return, the Aircraft shall (i) have been continuously
         and currently maintained in accordance with the Maintenance Program,
         (ii) comply with the Maintenance Program as authorized by the FAA, in
         each case as if the Aircraft were to be kept in further commercial
         passenger service by Lessee, and (iii) meet the following requirements:

                  (a)      Operating Condition - The Aircraft shall be in good
                           operating condition, ordinary wear and tear excepted,
                           with all of the Aircraft equipment, components, and
                           systems functioning in accordance with their intended
                           use irrespective of variations or deviations
                           authorized by the Minimum Equipment List or
                           Configuration Deviation List. All replacement
                           equipment, parts, components or items installed on
                           the Aircraft shall be manufactured by the original
                           manufacturer approved by the Manufacturer or a
                           manufacturer holding requisite authority of the FAA,
                           and in case of used, rotable parts, have an
                           FAA-approved serviceable tag.

                  (b)      Configuration - The Aircraft shall be in the same
                           passenger configuration with all equipment installed
                           therein as the Aircraft was when delivered under the
                           Manufacturer Purchase Agreement, ordinary wear and
                           tear excepted, including replacements and substitute
                           parts and equipment. The Aircraft shall not suffer
                           any modification or alteration (hereinafter
                           "Modifications") after the Delivery Date provided
                           however that Lessee may make Modifications to the
                           Aircraft as long as they are included as
                           factory-installed features in EMB-145 aircraft
                           delivered to the Lessee subsequent to the delivery of
                           the Aircraft. The term Modifications shall be deemed
                           to include, but not be limited to (i) changes to the
                           Aircraft structure, performance, weight and balance,
                           (ii) changes which materially adversely affect the
                           Aircraft's flight qualities, operational
                           characteristics, operational safety, ease or cost of
                           maintenance, spare parts interchangeability or
                           replaceability, and (iii) substitution of different
                           types of equipment or accessories which are not
                           equivalent in cost value and/or operation capability
                           to the equipment or accessories being replaced, and
                           shall exclude (x) changes pursuant to service
                           bulletins issued by the Manufacturer or the OEMs, and
                           (y) mandatory changes required to be accomplished by
                           Lessee hereunder. All permitted Modifications made to
                           the Aircraft shall be in accordance with FAA-approved
                           data, and Lessee shall provide complete data and
                           documentation to substantiate their certification,
                           approval, and methods of compliance (including,
                           without limitation, a copy of the Aircraft
                           Illustrated Parts Catalog and a copy of the Aircraft
                           Interior Configuration document). A complete listing
                           of all modifications and repairs performed shall be
                           supplied together with the Aircraft. Modifications,
                           other than permitted ones, shall be removed and the
                           appropriate repairs to the Aircraft made prior to the
                           day of return of the Aircraft.


                                                                          Page 1



                  (c)      Certification - The Aircraft shall have, a valid and
                           effective Certificate of Airworthiness of the type
                           "Transport, Category (Passengers)" issued by the FAA,
                           and shall be in full compliance with, and capable of
                           registration under, the provisions of Part 121 of the
                           U.S. Federal Aviation Regulations (or any successor
                           legislation) and other US regulations applicable to
                           the Aircraft's operation and continued airworthiness,
                           without any restrictions, corrections, repairs,
                           limitations, modifications or alterations or
                           overhauls having to be performed to meet such
                           standards.

                  (d)      General Appearance - The Aircraft shall be clean by
                           commercial passenger airline standards, cosmetically
                           acceptable, interior complete, and prepared to be
                           placed into scheduled revenue airline operations.
                           Interior items which may be broken shall be repaired
                           or replaced. All decals, signs and placards shall be
                           clean, secure and legible in the English language.
                           The Aircraft shall meet the following minimum
                           requirements:

                           (i)      Fuselage, Wings and Empennage - The fuselage
                                    shall be within Maintenance Program approved
                                    limits regarding dents and abrasions and
                                    loose or pulled rivets; all leading edges
                                    shall be within Maintenance Program approved
                                    limits regarding damage occurring since
                                    delivery; the airframe, Engines and wings
                                    shall be free of fuel, oil and hydraulic
                                    leaks so as to allow unrestricted operation;
                                    all leading edges and fuselage areas which
                                    are aerodynamically critical shall be free
                                    of any scab patches other than those
                                    required by the Manufacturer and shall be
                                    repaired with repairs which are permanent in
                                    nature in accordance with the SRM, or are
                                    made in accordance with the Manufacturer's
                                    approval or FAA approved data.

                           (ii)     Interior - Ceilings, sidewalls, bulkhead
                                    panels shall be clean, free of cracks and
                                    within Maintenance Program approved limits
                                    regarding dents; all carpets and seat covers
                                    shall be in good condition and clean and
                                    meet FAR fire resistance regulations; all
                                    seats shall be serviceable and in good
                                    condition. All safety equipment shall be
                                    installed at the correct stations, a loose
                                    equipment check list and location drawings
                                    shall accompany the Aircraft and a loose
                                    equipment inventory shall be drawn up on the
                                    Delivery Date and checked on the day of
                                    return of the Aircraft.

                           (iii)    Cockpit - All fairing panels shall be free
                                    of cracks and shall be clean; all floor
                                    coverings shall be clean and effectively
                                    sealed and secured, all seat covers and
                                    cushions shall be in good condition and
                                    clean and shall, as applicable, conform to
                                    FAA fire resistance regulations. All seats
                                    shall be fully serviceable and in good
                                    condition. All instruments and light panels
                                    shall be clean, secure and legible, function
                                    in accordance with their intended purpose
                                    and have all lighting operating properly.

                           (iv)     Landing, Gear and Wheel Wells - The landing
                                    gear and all wheel wells shall be clean,
                                    free of leaks, and repaired as necessary.
                                    The main and nose landing gear components
                                    and their associated actuators and parts
                                    shall be in a good operating condition.


                                                                          Page 2



                           (v)      Cargo Compartment, Galleys and Toilets - All
                                    cargo compartment panels shall be installed
                                    and be in good condition so as to comply
                                    with extended range operations requirements.
                                    The cargo compartments, galleys and toilet
                                    of the Aircraft shall be in a clean and
                                    presentable condition and all cargo securing
                                    system components shall be serviceable; all
                                    galley inserts (to the extent delivered with
                                    the Aircraft) shall be redelivered with the
                                    Aircraft.

                           (vi)     Windows - Any delamination, and crazing of
                                    the windshields and cabin windows of the
                                    Aircraft shall be within approved limits of
                                    the Maintenance Program and shall be
                                    properly sealed.

                           (vii)    Doors - All the doors of the Aircraft shall
                                    be free moving, correctly rigged and
                                    properly sealed and all door assist
                                    mechanisms shall be charged in accordance
                                    with the AMM.

                  (e)      Airworthiness Directives and Service Bulletins - All
                           FAA Airworthiness Directives and amendments or
                           changes to Aviation Regulations issued by the FAA and
                           applicable to the Aircraft which require compliance
                           within a period of six (6) months following the day
                           of return of the Aircraft (or the equivalent hours or
                           cycles, based on the Lessee's EMB-145 last four (4)
                           years of operation average monthly utilization) shall
                           have been accomplished on a Terminating Action basis
                           and in compliance with the issuing agency's and the
                           manufacturer's associated service bulletins,
                           regardless of any operator-specific waiver, deferral,
                           or deviation from such directive or regulation. The
                           Aircraft shall have installed on it all Manufacturer
                           and OEM service bulletin kits requested by Lessee and
                           actually received by Lessee in respect of the
                           Aircraft, and if not installed, Lessee shall deliver
                           them together with the Aircraft at no charge.

                  (f)      Deferred Maintenance - The Aircraft shall be free of
                           all deferred or carried over maintenance items,
                           including without limitation, any pilot log book
                           reports, maintenance reports, and the Aircraft's
                           Central Maintenance Computer reports. Any such
                           deferred or carried over maintenance shall be
                           promptly accomplished in a terminating manner prior
                           to the return of the Aircraft at the end of the term
                           of the Lease.

                  (g)      Corrosion - The Maintenance Program shall include a
                           corrosion control program based on the corrosion
                           prevention, treatment and correction criteria
                           recommended by the Manufacturer in the CPCP. The
                           Aircraft shall be free from corrosion or shall have
                           been adequately treated in compliance with the
                           Maintenance Program. Complete details of the
                           corrosion control program, as well as a summary of
                           specific corrosion correction, of the Aircraft in
                           accordance with the Maintenance Program shall be
                           available for delivery together with the Aircraft.
                           This summary shall include Lessee's identifying the
                           Manufacturer's task identifier and cross referencing,
                           Lessee's identifier indicating status of
                           accomplishment and findings and incorporation status
                           relative to all recommended corrective and
                           preventative actions. The hydraulic system and fuel
                           tanks shall be free from contamination as
                           demonstrated by a laboratory


                                                                          Page 3



                           report to be performed after the Aircraft is removed
                           from service and delivered together with the
                           Aircraft.

                  (h)      Leased Components - The Aircraft shall be free and
                           clear of all Liens other than any Lessor's Liens and
                           at return shall not have installed thereon any
                           equipment, components and/or parts which are leased
                           or loaned or otherwise owned by a third party.

                  (i)      Records - The Aircraft shall be accompanied by all
                           Aircraft Documents. The Aircraft Documents shall be
                           provided in English, and be in good condition,
                           readable and capable of being reproduced.

                           (i)      All Parts, components and assemblies
                                    identified with safe-life, hard time or
                                    condition monitored limits (to the extent
                                    that such condition monitored items are to
                                    be tracked in accordance with the approved
                                    Maintenance Program) shall be provided with
                                    part number, serial number, their service
                                    histories, accumulated cycles and flight
                                    hours, safe-life, hard time or condition
                                    monitored limits and remaining service lives
                                    on a separate listing and where practicable,
                                    be physically verified as installed and have
                                    hard copy documentation (i.e., appropriate
                                    overhaul or serviceable vendor tags and work
                                    orders) to verify their service histories.

                           (ii)     All components and assemblies, which are,
                                    identified on the maintenance records by
                                    part numbers and/or serial numbers other
                                    than the Manufacturer's or other
                                    manufacturer's shall be provided with
                                    two-way cross-reference listing necessary to
                                    establish complete traceability.

                           (iii)    All documentation, flight records, and
                                    maintenance records as specified herein and
                                    as specified by Federal Aviation Regulations
                                    Sections 121.380, and, as applicable,
                                    Section 91.417 and 91.419 (or FAR's as
                                    amended), and which normally accompany the
                                    transfer of an aircraft or engine shall be
                                    delivered together with the Aircraft. In the
                                    event of missing or incomplete records, the
                                    tasks necessary to produce such complete
                                    records shall be accomplished in accordance
                                    with the Maintenance Program prior to return
                                    of the Aircraft.

                           (iv)     All documentation and records shall be in
                                    English and shall be made available for
                                    inspection in the location they are normally
                                    kept which location shall permit direct
                                    access to the Aircraft, at least 14 Business
                                    Days before the day of return of the
                                    Aircraft.

                           (v)      Any and all documentation, data, drawings,
                                    records and manuals as required to be
                                    maintained by the FAA and SMRD, shall be
                                    provided, regardless of whether such
                                    information is considered proprietary.

                           (vi)     Hard Landing inspection reports, Lightning
                                    Strike inspection reports or High Intensity
                                    Radiated Field (HIRF) check reports as may
                                    be required should Aircraft records show
                                    evidence of any occurrence indicating such
                                    inspections or checks to be necessary.


                                                                          Page 4



                           (vii)    Corrosion Prevention & Control Program
                                    (CPCP) inspection findings and correction
                                    reports, as required by the Maintenance
                                    Program.

                  The head of Lessee's quality control department shall sign a
                  statement certifying that the data and information contained
                  in the documentation and records are true and correct.

                  (j)      Exterior Markings - At time of return of the
                           Aircraft, Lessee shall, at its cost remove from the
                           exterior and interior of the Aircraft Lessee's
                           operator specific exterior and interior markings. The
                           area where such markings were removed or painted over
                           shall be refurbished by Lessee as necessary to blend
                           in with the surrounding surface in a good and
                           workmanlike manner.

                  (k)      Overhaul and Repair - All components, rotables, and
                           assemblies (including the Engines, APU, and landing
                           gears) shall be documented with work orders, vendor
                           serviceable tags, 8130 tags, form 337, etc. to have
                           been repaired or overhauled by FAA-certified repair
                           stations in such manner so that such components,
                           rotables, assemblies, Engines, APU, and landing gears
                           are approved by the FAA for use on United
                           States-registered and certified aircraft. All
                           overhaul and repair procedures shall have met all FAA
                           requirements necessary to transfer to a new operator
                           under Part 121 of the U.S. Federal Aviation
                           Regulations.

                  (l)      Structural Repairs - All repairs that were performed
                           since the Delivery Date and that then exist on the
                           Aircraft shall conform to the SRM and the AMM and
                           shall have FAA approval if required, including
                           without limitation repairs related to impact damage
                           to the Aircraft caused by ground handling equipment
                           or foreign objects. All repairs not covered by the
                           SRM or the AMM shall have been made in accordance
                           with the Manufacturer's approval if required, which
                           approval shall not be unreasonably be withheld and
                           shall be provided with complete data and
                           documentation to verify and substantiate their
                           certification and methods of compliance. A complete
                           listing of all repairs performed shall be supplied
                           together with the Aircraft.

Section 2.        Condition of Airframe.

         On the day of return, the Aircraft shall be as follows:

                  (a)      C Check Inspection - The Airframe shall have
                           completed, within 100 flight hours of return, the
                           next sequential C check or any multiple thereof. If
                           the Aircraft has logged more than 100 flight hours
                           since the last C check or any multiple thereof, then
                           Lessee shall perform the next scheduled C check or
                           any multiple thereof, as applicable. All observed
                           defects observed during such C check shall be
                           rectified at Lessee's expense, in accordance with the
                           Maintenance Program;

                  (b)      Structural and other scheduled Inspections - The
                           Airframe shall have at least twelve (12) months, or
                           two thousand (2,000) flight hours or cycles,
                           whichever is applicable or most limiting, remaining
                           before any scheduled structural tasks or maintenance
                           inspections which are not included in (a) above. In
                           the event that a structural task or maintenance
                           inspection interval is less than the above, Lessee
                           shall, at its expense, perform all such tasks
                           immediately prior to return of the Aircraft;


                                                                          Page 5



                  (c)      Landing Gear Life - The main Landing Gear and the
                           nose Landing Gear shall have at least fifty percent
                           (50%) of the cycles remaining prior to removal for
                           overhaul in accordance with the Maintenance Program,
                           and the landing gear total cycles since new ("TCSN")
                           shall be no more than ten percent (10%) greater than
                           the airframe TCSN;

                  (d)      Brakes - The brakes shall have no less than the C
                           check brake wear limits with the brakes set at normal
                           parking break pressure. The tires shall have a
                           remaining useful life of at least fifty percent
                           (50%).

Section 3.        Condition of Controlled Components.

         Aircraft and Engine hour or cycle controlled components or parts, at
         time of return to Lessor, shall have remaining, as a minimum, one half
         life and/or fifty percent (50%) of the Lessee's approved hour or cycle
         limit, whichever is applicable or most limiting, before any scheduled
         removals for overhaul, test, disassembly or replacement. All components
         or parts controlled on a calendar basis shall have at least twelve (12)
         months or fifty percent (50%) of its total approved life in hours or
         cycles, if greater, remaining before scheduled removal for testing,
         overhaul or replacement.

         However, if a component or part has a life, overhaul or check interval
         limit that is less than the above, Lessee shall, at its expense,
         perform all such tasks immediately prior to return. All such hour/cycle
         or calendar controlled components or parts are defined as those
         components or parts controlled under the Maintenance Program.

Section 4.        Condition of Installed Engines and APU.

         At time of return, each Engine shall be capable of certificated, full
         rated performance and its life limited parts ("LLP") will have at least
         fifty percent (50%) of cycles between installation and replacement
         under the Maintenance Program.

                  (a)      Time remaining - Each Engine shall have completed no
                           more than 2,500 flight hours since new or since its
                           last full performance restoration shop visit at which
                           it was subject to a full engine management program
                           rework, based on the reliability goals set out in the
                           Rolls-Royce Alison workscope guide, which currently
                           state that the workscope is designed to give 30
                           degrees centigrade of exhaust gas temperature margin
                           and 5,000 flight hours of on-wing life. To the extent
                           that the shop workscope guide is amended in the
                           future to include different reliability goals then
                           the engine shall have at least fifty percent (50%) of
                           the on-wing hours remaining in accordance with such
                           amended shop workscope guide.

                  (b)      Borescope Inspection - On each installed Engine an
                           external visual inspection, accessory inventory check
                           and video-taped borescope inspection in accordance
                           with the requirements of the Maintenance Program
                           shall be performed by Lessee or a designated
                           representative as mutually agreed between Lessor and
                           Lessee during the ground inspection per Section 7(a)
                           of this Exhibit accompanied by a written report on
                           the findings of such inspection herein and
                           satisfactory evidence shall be provided to Lessor
                           reflecting the correction of any discrepancies found
                           during such inspection, which are in excess of the
                           Engine Manufacturer's Maintenance Manual
                           Airworthiness Limitations.


                                                                          Page 6



                  (c)      Adverse Trend Data - Complete engine records,
                           including but not limited to (i) Group A (Lifed)
                           components (as listed in Engine Manufacturer's Time
                           Limits Manual) as approved by the FAA and (ii) in
                           flight performance data and (iii) shop visit reports
                           from all shop visits, shall be made available to
                           Lessor for review and evaluation. If the Aircraft
                           and/or engine historical and maintenance records
                           and/or trend monitoring indicate a rate of
                           acceleration in performance deterioration or oil
                           consumption on any installed engine beyond the limits
                           of the Maintenance Program, the causes of such
                           conditions shall have been corrected prior to the
                           return date.

                  (d)      Oil spectrum analysis - an oil spectrum analysis
                           shall be made on the installed Engines after the
                           Aircraft is removed from service and a written report
                           shall be made available together with the Aircraft.
                           Any discrepancies found in the engine's lubrication
                           system -which are in excess of the Engine
                           Manufacturer's Maintenance Manual Airworthiness
                           limitations shall have been corrected prior to the
                           return date.

                  (e)      APU Life - The installed APU shall have remaining at
                           least fifty percent (50%) of the expected mean time
                           before removal as evidenced by the Lessee's
                           demonstrated on-wing last two years average for APU
                           hours, before scheduled removal for overhaul, heavy
                           maintenance, or replacement of hour limited or LCF
                           parts at the time of return. The APU shall have a
                           video taped borescope inspection and magnetic plug
                           inspection during the ground inspection per Section
                           7(a) of this Exhibit D-1.

Section 5.        Provision for "Power-By-The Hour Agreements".

         If the Engines, APU, or any other hour or cycle controlled components
         on the day of return are maintained under valid PBH Agreements (as
         defined below) (and either have been maintained throughout the Term
         under PBH Agreements, or Lessee has made payments to the maintenance
         provider to cover the period in which such components where not under
         such PBH Agreements), under which the Lessee is current on all payments
         and otherwise in good standing, then, in lieu of the relevant
         requirements in Sections 2(c), 2(d), 3, 4(a) or 4(e) of this Exhibit
         D-1, the Lessee shall return each such component in such condition as
         shall make it eligible for continued maintenance under PBH Agreements,
         without additional costs, start-up charges, or overhaul requirements.
         For the purposes hereof, a "PBH Agreement" shall mean a
         "power-by-the-hour" maintenance program, provided by the Engines, APU
         or component manufacturer or its successor or designee, providing full
         maintenance (other than routine day-to-day maintenance; provided, that
         foreign-object damage and abuse may be excluded or separately charged)
         for the Engines, APU or such components at no cost other than standard
         per-cycle rates (i.e., excluding charges based on the current
         maintenance status of such component), all benefits of which program,
         including but not limited to the payments made by Lessee under such PBH
         Agreements while operating the Aircraft, shall be assignable or
         otherwise transferable to any other carrier. Notwithstanding the
         foregoing, each such Engine, APU and other hour or cycle controlled
         component shall have not less twelve months of expected time before
         overhaul or major refurbishment, whichever is applicable, based upon
         Lessee's average experience during the immediately preceding 2 year
         period.


                                                                          Page 7



Section 6.    Return Condition Adjustment.

                  (a)      Each item referred to in Sections 2(c), 2(d), 3, the
                           first two lines of Section 4 and in Section 4(a) and
                           4(e) (each such item, an "Adjustable Item" and each
                           such section, an "Adjustable Return Condition") may
                           be returned with less than the required limits,
                           subject, however, to the minimum requirements set
                           forth in item (e) below.

                  (b)      If the Lessee does not meet the conditions set forth
                           for an Adjustable Item in the relevant Adjustable
                           Return Condition then Lessee shall pay to the Lessor
                           (for deficient condition) an Equivalency Payment in
                           accordance with the following formula:

                                                [*]


                  The components of the formula above shall be as agreed between
                  Lessor and Lessee. If Lessor and the Lessee fail to reach
                  agreement on any components of the above formula, such amount
                  will be determined as the average price that would be charged
                  by a third party to restore the Aircraft to the conditions
                  required under the Lease and this Exhibit D-1, based on one
                  quotation obtained by Lessor and one quotation obtained by
                  Lessee, both from a reputable, FAA and Manufacturer-approved
                  EMB-145 repair station in the United States. If the prices of
                  such quotations differ by more than [*], Lessor and Lessee
                  shall obtain a third quotation from another reputable, FAA and
                  Manufacturer-approved EMB-145 repair station in the United
                  States, the quotation which is farthest from the average of
                  all three quotations shall be disregarded and the average of
                  the two remaining quotations shall be binding upon Lessor and
                  Lessee as the components of the formula.

                  (c)      The Equivalency Payment for each return condition of
                           each Adjustable Item in the relevant Section referred
                           to in the first paragraph of this Section 6, whether
                           positive or negative, shall be aggregated in order to
                           determine the total Equivalency Payment due from
                           Lessee. (For clarification, items in more than the

- ----------
* Confidential

                                                                          Page 8



                           required condition shall be netted against items in
                           less than the required condition when determining the
                           amount of the total payment due, provided however
                           that such netting is only applicable to the following
                           major components: Engines, APU and landing gear). If
                           the cumulative Equivalency Payment after such netting
                           is negative, it shall be deemed to be zero.

                  (d)      [intentionally omitted]

                  (e)      Notwithstanding the Equivalency Payment that may be
                           otherwise payable or available under this Section 6,
                           if:

                           (i)      Any installed Engine has less than the
                                    number of on-wing hours remaining before
                                    overhaul or major refurbishment, in
                                    accordance with the Maintenance Program, for
                                    such overhaul or major refurbishment to be
                                    scheduled not earlier than one year after
                                    the date of redelivery,

                           (ii)     Any Engine life limited part has a remaining
                                    useful life until the next scheduled
                                    replacement of not less than one year after
                                    the date of redelivery,

                           (iii)    The APU has remaining less than one year of
                                    the expected life before removal,

                           (iv)     The main landing gear or the nose landing
                                    gear has less than the number of cycles
                                    remaining prior to removal for overhaul, for
                                    such removal for overhaul to be scheduled
                                    not earlier than one year after the date of
                                    redelivery or, the cycles exceed one hundred
                                    and ten percent (110%) of the airframe
                                    cycles, or

                           (v)      The brakes have less than the C check brake
                                    wear limits with the brakes set at normal
                                    parking break pressure, or the tires have a
                                    remaining useful life of less than one year
                                    after the date of redelivery,

                  then, in any such case, Lessee shall, at its own cost and
                  expense, overhaul, refurbish and/or replace each non-complying
                  item so that it meets the applicable level specified in items
                  (i) through (v) above. For avoidance of doubt, this Section 6
                  shall be applicable whether or not the Engines, APU or any
                  other hour or cycle controlled component is maintained under a
                  PBH Agreement, as contemplated by Section 5.

Section 7.        Inspection Upon Return

         Lessor shall have the right to inspect the Aircraft upon return, and
         the following conditions shall apply:

                  (a)      Ground Inspection - The Aircraft, including the
                           Aircraft Documents, shall be made available to Lessor
                           for ground inspection by Lessor or its designee at
                           Lessee's facilities. Such inspection shall commence
                           no later than fourteen (14) Business Days prior to
                           the date of return of the Aircraft. Lessee shall
                           remove the Aircraft from scheduled service and open
                           the areas of the Aircraft as required to perform the
                           necessary checks as specified in Section 2 of this
                           Exhibit D-1. In


                                                                          Page 9



                           addition, Lessee shall allow Lessor to accomplish its
                           inspection to determine that the Aircraft, including
                           the Aircraft Documents are in the condition set forth
                           in Sections 1, 2, 3 and 4 of this Exhibit D-1. During
                           such checks, Lessor's personnel shall have the right
                           to reasonably request that adjacent additional panels
                           or areas be opened in order to allow further
                           inspection by Lessor's personnel.

                  (b)      Operational Ground Check - Lessee shall conduct an
                           operations ground check on the Aircraft in accordance
                           with the Maintenance Program manual criteria for the
                           purpose of demonstrating to Lessor the satisfactory
                           operation of the systems, including a full fuel tank
                           leak check, pilot and static systems check and
                           hydraulic system internal leak check.

                  (c)      Operational Test Flight - The Aircraft shall be test
                           flown by Lessee, using qualified flight test
                           personnel, for the amount of time necessary to
                           satisfactorily demonstrate the airworthiness of the
                           Aircraft and the proper functioning of all systems
                           and components in accordance with the agreed check
                           flight procedures. During such test flight command,
                           care, custody and control of the Aircraft shall
                           remain at all times with Lessee. Up to five (5) of
                           Lessor's designated representatives (or more if
                           mutually agreed) may participate in such flight as
                           observers. Upon completion of such operational
                           flight-testing, the representatives of Lessee and
                           Lessor participating in such testing shall agree in
                           writing upon any discrepancies required to be
                           corrected by Lessee in order to comply with the
                           conditions required hereunder.

                  (d)      Discrepancies - If requested by Lessor in writing,
                           all discrepancies, which are noted during the
                           inspection and acceptance flight(s), shall be
                           corrected at Lessee's expense. If such discrepancies
                           are substantiated by the Maintenance Program and
                           Lessor determines that repairs, modifications or
                           other work items are required to cause the Aircraft
                           to comply with the requirements provided herein,
                           including, without limitation, any maintenance
                           required so that the Engines will meet all Engine
                           parameters and trends specified by the Maintenance
                           Program, Lessee shall cause such repairs and other
                           work items to be commenced and completed prior to
                           return.

Section 8.        Delegation.

         Lessee agrees that whenever a determination under this Exhibit D-1 is
to be made by, or a right is granted to, the Lessor, the Lessor may, at its
option, allow the Manufacturer to make such determination or exercise such
right.

Section 9.        Definitions.

         For the purpose of this Exhibit D-1, the following terms have the
following meanings:

          "APU" shall mean the auxiliary power unit bearing serial number
         __________, and any substitute APU which may from time to time be
         substituted therefor pursuant to the terms of the Lease.


                                                                         Page 10



         "CALENDAR CONTROLLED COMPONENTS OR PARTS" means those components or
         parts, which are identified in the MRB Report which have maintenance
         tasks at specific calendar-time intervals.

         "CYCLE-CONTROLLED COMPONENTS OR PARTS" means those components or parts,
         which are identified in the MRB Report which have maintenance tasks at
         specific flight-cycle intervals.

         "HOUR-CONTROLLED COMPONENTS OR PARTS" means those components or parts,
         which are identified in the MRB Report which have maintenance tasks at
         specific flight-hour intervals.

         "LIFE CYCLE FATIGUE ("LCF") PARTS" means those rotating parts which
         have specific cycle limits as specified by the manufacturer to preclude
         cycle fatigue failures.

         "MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT")" means the report
         published by the maintenance review board detailing the intervals and
         description of the maintenance tasks and, where applicable, the life
         limits required for continued airworthiness of the Aircraft. Where the
         intervals specified in the MRB Report differ from the limit specified
         by the component manufacturer, the MRB Report shall take precedence.

         "TERMINATING ACTION" means the alteration or modification of the
         Aircraft in accordance with mandatory service bulletins, orders,
         airworthiness directives, and instructions required to eliminate
         repetitive inspections or maintenance action.


                                                                         Page 11



                                                                     Exhibit D-2

                                RETURN CONDITIONS

     This Exhibit D-2 shall be applicable only if Beneficiary notifies Lessee
not later than one hundred eighty (180) days prior to the end of the Basic Term
that Beneficiary is demanding payment of a deficiency amount under the Residual
Value Guarantee except that this Exhibit D-2 shall be assumed to apply for the
purposes stated in the definition of "RVG Appraisal Procedure".

Section 1. General Conditions.

     At the time of return, the Aircraft shall (i) have been continuously and
     currently maintained in accordance with the Maintenance Program, (ii)
     comply with the Maintenance Program as authorized by the FAA, in each case
     as if the Aircraft were to be kept in further commercial passenger service
     by Lessee, and (iii) meet the following requirements:

          (a)  Operating Condition - The Aircraft shall be in good operating
               condition, ordinary wear and tear excepted, with all of the
               Aircraft equipment, components, and systems functioning in
               accordance with their intended use irrespective of variations or
               deviations authorized by the Minimum Equipment List or
               Configuration Deviation List. All replacement equipment, parts,
               components or items installed on the Aircraft shall be
               manufactured by the original manufacturer approved by the
               Manufacturer or a manufacturer holding requisite authority of the
               FAA, and in case of used, rotable parts, have an FAA-approved
               serviceable tag.

          (b)  Configuration - The Aircraft shall be in the same passenger
               configuration with all equipment installed therein as the
               Aircraft was when delivered under the Manufacturer Purchase
               Agreement, ordinary wear and tear excepted, including
               replacements and substitute parts and equipment. The Aircraft
               shall not suffer any modification or alteration (hereinafter
               "Modifications") after the Delivery Date provided however that
               Lessee may make Modifications to the Aircraft as long as they are
               included as factory-installed features in EMB-145 aircraft
               delivered to the Lessee subsequent to the delivery of the
               Aircraft. The term Modifications shall be deemed to include, but
               not be limited to (i) changes to the Aircraft structure,
               performance, weight and balance, (ii) changes which materially
               adversely affect the Aircraft's flight qualities, operational
               characteristics, operational safety, ease or cost of maintenance,
               spare parts interchangeability or replaceability, and (iii)
               substitution of different types of equipment or accessories which
               are not equivalent in cost value and/or operation capability to
               the equipment or accessories being replaced, and shall exclude
               (x) changes pursuant to service bulletins issued by the
               Manufacturer or the OEMs, and (y) mandatory changes required to
               be accomplished by Lessee hereunder. All permitted Modifications
               made to the Aircraft shall be in accordance with FAA-approved
               data, and Lessee shall provide complete data and documentation to
               substantiate their certification, approval, and methods of
               compliance (including, without limitation, a copy of the Aircraft
               Illustrated Parts Catalog and a copy of the Aircraft Interior
               Configuration document). A complete listing of all modifications
               and repairs performed shall be supplied together with the
               Aircraft.
                                   Exhibit D-2                            Page 1


               Modifications, other than permitted ones, shall be removed and
               the appropriate repairs to the Aircraft made prior to the day of
               return of the Aircraft.

          (c)  Certification - The Aircraft shall have, a valid and effective
               Certificate of Airworthiness of the type "Transport, Category
               (Passengers)" issued by the FAA, and shall be in full compliance
               with, and capable of registration under, the provisions of Part
               121 of the U.S. Federal Aviation Regulations (or any successor
               legislation) and other US regulations applicable to the
               Aircraft's operation and continued airworthiness, without any
               restrictions, corrections, repairs, limitations, modifications or
               alterations or overhauls having to be performed to meet such
               standards.

          (d)  General Appearance - The Aircraft shall be clean by commercial
               passenger airline standards, cosmetically acceptable, interior
               complete, and prepared to be placed into scheduled revenue
               airline operations. Interior items which may be broken shall be
               repaired or replaced. All decals, signs and placards shall be
               clean, secure and legible in the English language. The Aircraft
               shall meet the following minimum requirements:

               (i)   Fuselage, Wings and Empennage - The fuselage shall be
                     within Maintenance Program approved limits regarding dents
                     and abrasions and loose or pulled rivets; all leading edges
                     shall be within Maintenance Program approved limits
                     regarding damage occurring since delivery; the airframe,
                     Engines and wings shall be free of fuel, oil and hydraulic
                     leaks so as to allow unrestricted operation; all leading
                     edges and fuselage areas which are aerodynamically critical
                     shall be free of any scab patches other than those required
                     by the Manufacturer and shall be repaired with repairs
                     which are permanent in nature in accordance with the SRM,
                     or are made in accordance with the Manufacturer's approval.

               (ii)  Interior - Ceilings, sidewalls, bulkhead panels shall be
                     clean, free of cracks and within Maintenance Program
                     approved limits regarding dents; all carpets and seat
                     covers shall be in good condition and clean and meet FAR
                     fire resistance regulations; all seats shall be serviceable
                     and in good condition. All safety equipment shall be
                     installed at the correct stations, a loose equipment check
                     list and location drawings shall accompany the Aircraft and
                     a loose equipment inventory shall be drawn up on the
                     Delivery Date and checked on the day of return of the
                     Aircraft.

               (iii) Cockpit - All fairing panels shall be free of cracks and
                     shall be clean; all floor coverings shall be clean and
                     effectively sealed and secured, all seat covers and
                     cushions shall be in good condition and clean and shall, as
                     applicable, conform to FAA fire resistance regulations. All
                     seats shall be fully serviceable and in good condition. All
                     instruments and light panels shall be clean, secure and
                     legible, function in accordance with their intended purpose
                     and have all lighting operating properly.

               (iv)  Landing, Gear and Wheel Wells - The landing gear and all
                     wheel wells shall be clean, free of leaks, and repaired as
                     necessary. The main and

                                   Exhibit D-2                            Page 2


                     nose landing gear components and their associated actuators
                     and parts shall be in a good operating condition.

               (v)   Cargo Compartment, Galleys and Toilets - All cargo
                     compartment panels shall be installed and be in good
                     condition so as to comply with extended range operations
                     requirements. The cargo compartments, galleys and toilet of
                     the Aircraft shall be in a clean and presentable condition
                     and all cargo securing system components shall be
                     serviceable; all galley inserts (to the extent delivered
                     with the Aircraft) shall be redelivered with the Aircraft.

               (vi)  Windows - Any delamination, and crazing of the windshields
                     and cabin windows of the Aircraft shall be within approved
                     limits of the Maintenance Program and shall be properly
                     sealed.

               (vii) Doors - All the doors of the Aircraft shall be free moving,
                     correctly rigged and properly sealed and all door assist
                     mechanisms shall be charged in accordance with the AMM.

          (e)  Airworthiness Directives and Service Bulletins - All FAA
               Airworthiness Directives and amendments or changes to Aviation
               Regulations issued by the FAA and applicable to the Aircraft
               which require compliance within a period of six (6) months
               following the day of return of the Aircraft (or the equivalent
               hours or cycles, based on the Lessee's EMB-145 last four 4) years
               of operation average monthly utilization) shall have been
               accomplished on a Terminating Action basis and in compliance with
               the issuing agency's and the manufacturer's associated service
               bulletins, regardless of any operator-specific waiver, deferral,
               or deviation from such directive or regulation. The Aircraft
               shall have installed on it all Manufacturer and OEM service
               bulletin kits requested by Lessee and actually received by Lessee
               in respect of the Aircraft, and if not installed, Lessee shall
               deliver them together with the Aircraft at no charge.

          (f)  Deferred Maintenance - The Aircraft shall be free of all deferred
               or carried over maintenance items, including without limitation,
               any pilot log book reports, maintenance reports, and the
               Aircraft's Central Maintenance Computer reports. Any such
               deferred or carried over maintenance shall be promptly
               accomplished in a terminating manner prior to the return of the
               Aircraft at the end of the term of the Lease.

          (g)  Corrosion - The Maintenance Program shall include a corrosion
               control program based on the corrosion prevention, treatment and
               correction criteria recommended by the Manufacturer in the CPCP.
               The Aircraft shall be free from corrosion or shall have been
               adequately treated in compliance with the Maintenance Program.
               Complete details of the corrosion control program, as well as a
               summary of specific corrosion correction, of the Aircraft in
               accordance with the Maintenance Program shall be available for
               delivery together with the Aircraft. This summary shall include
               Lessee's identifying the Manufacturer's task identifier and cross
               referencing, Lessee's identifier indicating status of
               accomplishment and findings and incorporation status relative to
               all

                                   Exhibit D-2                            Page 3


               recommended corrective and preventative actions. The hydraulic
               system and fuel tanks shall be free from contamination as
               demonstrated by a laboratory report to be performed after the
               Aircraft is removed from service and delivered together with the
               Aircraft.

          (h)  Leased Components - The Aircraft shall be free and clear of all
               Liens other than any Lessor's Liens and at return shall not have
               installed thereon any equipment, components and/or parts which
               are leased or loaned or otherwise owned by a third party.

          (i)  Records - The Aircraft shall be accompanied by all Aircraft
               Documents. The Aircraft Documents shall be provided in English,
               and be in good condition, readable and capable of being
               reproduced.

               (i)   All Parts, components and assemblies identified with
                     safe-life, hard time or condition monitored limits (to the
                     extent that such condition monitored items are to be
                     tracked in accordance with the approved Maintenance
                     Program) shall be provided with part number, serial number,
                     their service histories, accumulated cycles and flight
                     hours, safe-life, hard time or condition monitored limits
                     and remaining service lives on a separate listing and where
                     practicable, be physically verified as installed and have
                     hard copy documentation (i.e., appropriate overhaul or
                     serviceable vendor tags and work orders) to verify their
                     service histories.

               (ii)  All components and assemblies, which are, identified on the
                     maintenance records by part numbers and/or serial numbers
                     other than the Manufacturer's or other manufacturer's shall
                     be provided with two-way cross-reference listing necessary
                     to establish complete traceability.

               (iii) All documentation, flight records, and maintenance records
                     as specified herein and as specified by Federal Aviation
                     Regulations Sections 121.380, and, as applicable, Section
                     91.417 and 91.419 (or FAR's as amended), and which normally
                     accompany the transfer of an aircraft or engine shall be
                     delivered together with the Aircraft. In the event of
                     missing or incomplete records, the tasks necessary to
                     produce such complete records shall be accomplished in
                     accordance with the Maintenance Program prior to return of
                     the Aircraft.

               (iv)  All documentation and records shall be in English and shall
                     be made available for inspection in the location they are
                     normally kept which location shall permit direct access to
                     the Aircraft, at least 14 Business Days before the day of
                     return of the Aircraft.

               (v)   Any and all documentation, data, drawings, records and
                     manuals as required to be maintained by the FAA and SMRD,
                     shall be provided, regardless of whether such information
                     is considered proprietary.

               (vi)  Hard Landing inspection reports, Lightning Strike
                     inspection reports or High Intensity Radiated Field (HIRF)
                     check reports as may be required

                                   Exhibit D-2                            Page 4


                     should Aircraft records show evidence of any occurrence
                     indicating such inspections or checks to be necessary.

               (vii) Corrosion Prevention & Control Program (CPCP) inspection
                     findings and correction reports, as required by the
                     Maintenance Program.

          The head of Lessee's quality control department shall sign a statement
          certifying that the data and information contained in the
          documentation and records are true and correct.

          (j)  Exterior Markings - At time of return of the Aircraft, Lessee
               shall, at its cost remove from the exterior and interior of the
               Aircraft Lessee's operator specific exterior and interior
               markings. The area where such markings were removed or painted
               over shall be refurbished by Lessee as necessary to blend in with
               the surrounding surface in a good and workmanlike manner.

          (k)  Overhaul and Repair - All components, rotables, and assemblies
               (including the Engines, APU, and landing gears) shall be
               documented with work orders, vendor serviceable tags, 8130 tags,
               form 337, etc. to have been repaired or overhauled by
               FAA-certified repair stations in such manner so that such
               components, rotables, assemblies, Engines, APU, and landing gears
               are approved by the FAA for use on United States-registered and
               certified aircraft. All overhaul and repair procedures shall have
               met all FAA requirements necessary to transfer to a new operator
               under Part 121 of the U.S. Federal Aviation Regulations.

          (l)  Structural Repairs - All repairs that were performed since the
               Delivery Date and that then exist on the Aircraft shall conform
               to the SRM and the AMM and shall have FAA approval if required,
               including without limitation repairs related to impact damage to
               the Aircraft caused by ground handling equipment or foreign
               objects. All repairs not covered by the SRM or the AMM shall have
               been made in accordance with the Manufacturer's approval if
               required, which approval shall not be unreasonably be withheld
               and shall be provided with complete data and documentation to
               verify and substantiate their certification and methods of
               compliance. A complete listing of all repairs performed shall be
               supplied together with the Aircraft.

Section 2. Condition of Airframe.

     On the day of return, the Aircraft shall be as follows:

          (a)  C Check Inspection - The Airframe shall have completed, within
               100 flight hours of return, the next sequential C check or any
               multiple thereof. If the Aircraft has logged more than 100 flight
               hours since the last C check or any multiple thereof, then Lessee
               shall perform the next scheduled C check or any multiple thereof,
               as applicable. All observed defects observed during such C check
               shall be rectified at Lessee's expense, in accordance with the
               Maintenance Program;

          (b)  Structural and other scheduled Inspections - The Airframe shall
               have at least twelve (12) months, or two thousand (2,000) flight
               hours or cycles, whichever is applicable or most limiting,
               remaining before any scheduled structural tasks or

                                   Exhibit D-2                            Page 5


               maintenance inspections which are not included in (a) above. In
               the event that a structural task or maintenance inspection
               interval is less than the above, Lessee shall, at its expense,
               perform all such tasks immediately prior to return of the
               Aircraft;

          (c)  Landing Gear Life - The main Landing Gear and the nose Landing
               Gear shall have at least fifty percent (50%) of the cycles
               remaining prior to removal for overhaul in accordance with the
               Maintenance Program, and the landing gear total cycles since new
               ("TCSN") shall be no more than ten percent (10%) greater than the
               airframe TCSN;

          (d)  Brakes - The brakes shall have no less than the C check brake
               wear limits with the brakes set at normal parking break pressure.
               The tires shall have a remaining useful life of at least fifty
               percent (50%).

Section 3. Condition of Controlled Components.

     Aircraft and Engine hour or cycle controlled components or parts, at time
     of return to Lessor, shall have remaining, as a minimum, one half life
     and/or fifty percent (50%) of the Lessee's approved hour or cycle limit,
     whichever is applicable or most limiting, before any scheduled removals for
     overhaul, test, disassembly or replacement. All components or parts
     controlled on a calendar basis shall have at least twelve (12) months or
     fifty percent (50%) of its total approved life in hours or cycles, if
     greater remaining before scheduled removal for testing, overhaul or
     replacement.

     However, if a component or part has a life, overhaul or check interval
     limit that is less than the above, Lessee shall, at its expense, perform
     all such tasks immediately prior to return. All such hour/cycle or calendar
     controlled components or parts are defined as those components or parts
     controlled under the Maintenance Program.

Section 4. Condition of Installed Engines and APU.

     At time of return, each Engine shall be capable of certificated, full rated
     performance and its life limited parts ("LLP") will have at least fifty
     percent (50%) of cycles between installation and replacement under the
     Maintenance Program.

          (a)  Time remaining - Each Engine shall have completed no more than
               2,500 flight hours since new or since its last full performance
               restoration shop visit at which it was subject to a full engine
               management program rework, based on the reliability goals set out
               in Rolls-Royce Alison workscope guide, which currently state that
               the workscope is designed to give 30 degrees centigrade of
               exhaust gas temperature margin and 5,000 flight hours of on-wing
               life. To the extent that the shop workscope guide is amended in
               the future to include different reliability goals then the engine
               shall have at least fifty percent (50%) of the on-wing hours
               remaining in accordance with such amended shop workscope guide.

          (b)  Borescope Inspection - On each installed Engine an external
               visual inspection, accessory inventory check and video-taped
               borescope inspection in accordance with the requirements of the
               Maintenance Program shall be performed by Lessee or a designated
               representative as mutually agreed between Lessee and Lessor

                                   Exhibit D-2                            Page 6


               during the ground inspection per Section 7(a) of this Exhibit D-2
               accompanied by a written report on the findings of such
               inspection herein and satisfactory evidence shall be provided to
               Lessor reflecting the correction of any discrepancies found
               during such inspection.

          (c)  Adverse Trend Data - Complete engine records, including but not
               limited to (i) Group A (Lifed) components (as listed in Engine
               Manufacturer's Time Limits Manual) as approved by the FAA and
               (ii) in flight performance data and (iii) shop visit reports from
               all shop visits, shall be made available to Lessor for review and
               evaluation. If the Aircraft and/or engine historical and
               maintenance records and/or trend monitoring indicate a rate of
               acceleration in performance deterioration or oil consumption on
               any installed engine beyond the limits of the Maintenance
               Program, the causes of such conditions shall have been corrected
               prior to the return date.

          (d)  Oil spectrum analysis - an oil spectrum analysis shall be made on
               the installed Engines after the Aircraft is removed from service
               and a written report shall be made available together with the
               Aircraft. Any discrepancy found in the engine's lubrication
               system shall have been corrected prior to the return date.

          (e)  APU Life - The installed APU shall have remaining at least fifty
               percent (50%) of the expected mean time before removal as
               evidenced by the Lessee's demonstrated on-wing last two years
               average for APU hours, before scheduled removal for overhaul,
               heavy maintenance, or replacement of hour limited or LCF parts at
               the time of return. The APU shall have a video taped borescope
               inspection and magnetic plug inspection during the ground
               inspection per Section 7(a) of this Exhibit D-2.

Section 5. Provision for "Power-By-The Hour Agreements".

     If the Engines, APU, or any other hour or cycle controlled components on
     the day of return are maintained under valid PBH Agreements (as defined
     below) (and either have been maintained throughout the Term under PBH
     Agreements, or Lessee has made payments to the maintenance provider to
     cover the period in which such components where not under such PBH
     Agreements), under which the Lessee is current on all payments and
     otherwise in good standing, then, in lieu of the relevant requirements in
     Sections 2(c), 2(d), 3, 4(a) or 4(e) of this Exhibit D-2, the Lessee shall
     return each such component in such condition as shall make it eligible for
     continued maintenance under PBH Agreements, without additional costs,
     start-up charges, or overhaul requirements. For the purposes hereof, a "PBH
     Agreement" shall mean a "power-by-the-hour" maintenance program, provided
     by the Engines, APU or component manufacturer or its successor or designee,
     providing full maintenance (other than routine day-to-day maintenance;
     provided, that foreign-object damage and abuse may be excluded or
     separately charged) for the Engines, APU or such components at no cost
     other than standard per-cycle rates (i.e., excluding charges based on the
     current maintenance status of such component), all benefits of which
     program, including but not limited to the payments made by Lessee under
     such PBH Agreements while operating the Aircraft, shall be assignable or
     otherwise transferable to any other carrier without restrictions of any
     kind.

                                   Exhibit D-2                            Page 7


Section 6. Return Condition Adjustment.

          (a)  Each item referred to in Sections 2(c), 2(d), 3, the first two
               lines of Section 4 and in Section 4(a) and 4(e) (each such item,
               an "Adjustable Item" and each such section, an "Adjustable Return
               Condition") may be returned with less than the required limits,
               subject, however, to the minimum requirements set forth in item
               (e) below.

          (b)  If the Lessee does not meet the conditions set forth for an
               Adjustable Item in the relevant Adjustable Return Condition then
               Lessee shall pay to the Lessor (for deficient condition) an
               Equivalency Payment in accordance with the following formula:

                                        [*]


          The components of the formula above shall be as agreed between Lessor
          and the Lessee. If Lessor and the Lessee fail to reach agreement on
          any components of the above formula, such amount will be determined as
          the average price that would be charged by a third party to restore
          the Aircraft to the conditions required under the Lease and this
          Exhibit D-2, based on one quotation obtained by Lessor and one
          quotation obtained by Lessee, both from a reputable, FAA and
          Manufacturer-approved EMB-145 repair station in the United States. If
          the prices of such quotations differ by more than ten percent (10%),
          Lessor and Lessee shall obtain a third quotation from another
          reputable, FAA and Manufacturer-approved EMB-145 repair station in the
          United States, the quotation which is farthest from the average of all
          three quotations shall be disregarded and the average of the two
          remaining quotations shall be binding upon Lessor and Lessee as the
          components of the formula.

          (c)  The Equivalency Payment for each return condition of each
               Adjustable Item in the relevant Section referred to in the first
               paragraph of this Section 6, whether positive or negative, shall
               be aggregated in order to determine the total Equivalency Payment
               due from Lessee. (For clarification, items in more than the

                                   Exhibit D-2                            Page 8

- ----------
* Confidential



               required condition shall be netted against items in less than the
               required condition when determining the amount of the total
               payment due, provided however that such netting is only
               applicable to the following major components: Engines, APU and
               landing gear). If the cumulative Equivalency Payment after such
               netting is negative, it shall be deemed to be zero.

          (d)  In no event shall the Equivalency Payment due from the Lessee to
               the Manufacturer exceed the aggregate amount of any payment and
               expenses that the Manufacturer may make under the Residual Value
               Guarantee.

          (e)  Notwithstanding the equivalency charges that may be otherwise
               payable or available under this Section 6, if:

               (i)   Any installed Engine has completed more than 3,750 flight
                     hours since new or since its last full performance
                     restoration shop visit at which it was subject to a full
                     engine management program rework (or less than twenty-five
                     percent (25%) of the on-wing hours remaining in accordance
                     with an amended RR Allison shop workscope guide),

               (ii)  Any Engine life limited part has a remaining useful life
                     until the next scheduled replacement of less than twenty
                     five percent (25%),

               (iii) The APU has remaining less than twenty five (25%) of the
                     expected mean time before removal,

               (iv)  The main landing gear or the nose landing gear has less
                     than twenty five percent (25%) of the cycles remaining
                     prior to removal for overhaul, or the cycles exceed one
                     hundred and ten percent (110%) of the airframe, or

               (v)   The brakes have less than the C check brake wear limits
                     with the brakes set at normal parking break pressure, or
                     the tires have a remaining useful life of less than twenty
                     five percent (25%),

     then, in any such case, Lessee shall, at its own cost and expense,
     overhaul, refurbish and/or replace each non-complying item so that it meets
     the applicable level specified in items (i) through (v) above.

Section 7. Inspection Upon Return

     Lessor shall have the right to inspect the Aircraft upon return, and the
following conditions shall apply:

          (a)  Ground Inspection - The Aircraft including the Aircraft Documents
               shall be made available to Lessor for ground inspection by Lessor
               or its designee at Lessee's facilities. Such inspection shall
               commence no later than fourteen (14) Business Days prior to the
               date of return of the Aircraft. Lessee shall remove the Aircraft
               from scheduled service and open the areas of the Aircraft as
               required to

                                   Exhibit D-2                            Page 9


               perform the necessary checks as specified in Section 2 of this
               Exhibit D-2. In addition, Lessee shall allow Lessor to accomplish
               its inspection to determine that the Aircraft, including the
               Aircraft Documents are in the condition set forth in Sections 1,
               2, 3 and 4 of this Exhibit D-2. During such checks, Lessor's
               personnel shall have the right to reasonably request that
               adjacent additional panels or areas be opened in order to allow
               further inspection by Lessor's personnel.

          (b)  Operational Ground Check - Lessee shall conduct an operations
               ground check on the Aircraft in accordance with the Maintenance
               Program manual criteria for the purpose of demonstrating to
               Lessor the satisfactory operation of the systems, including a
               full fuel tank leak check, pilot and static systems check and
               hydraulic system internal leak check.

          (c)  Operational Test Flight - The Aircraft shall be test flown by
               Lessee, using qualified flight test personnel, for the amount of
               time necessary to satisfactorily demonstrate the airworthiness of
               the Aircraft and the proper functioning of all systems and
               components in accordance with the agreed check flight procedures.
               During such test flight command, care, custody and control of the
               Aircraft shall remain at all times with Lessee. Up to five (5) of
               Lessor's designated representatives (or more if mutually agreed)
               may participate in such flight as observers. Upon completion of
               such operational flight-testing, the representatives of Lessee
               and Lessor participating in such testing shall agree in writing
               upon any discrepancies required to be corrected by Lessee in
               order to comply with the conditions required hereunder.

          (d)  Discrepancies - If requested by Lessor in writing, all
               discrepancies, which are noted during the inspection and
               acceptance flight(s), shall be corrected at Lessee's expense. If
               such discrepancies are substantiated by the Maintenance Program
               and Lessor determines that repairs, modifications or other work
               items are required to cause the Aircraft to comply with the
               requirements provided herein, including, without limitation, any
               maintenance required so that the Engines will meet all Engine
               parameters and trends specified by the Maintenance Program,
               Lessee shall cause such repairs and other work items to be
               commenced and completed prior to return.

Section 8. Delegation.

     Lessee agrees that whenever a determination under this Exhibit D-2 is to be
made by, or a right is granted under this Exhibit D-2 to, the Lessor, the Lessor
may, at its option, allow the Manufacturer to act as the authorized
representative of the Lessor and make such determination or exercise such right.

Section 9. Definitions.

     For the purpose of this Exhibit D-2, the following terms have the following
meanings:

         "RVG APPRAISAL PROCEDURE" means this procedure shall apply only if
         Lessee exercises the FMV Purchase Option and Beneficiary provides a
         Residual Notice pursuant to Section 3 of Exhibit A-2 of the Lease and
         shall be used in such case to determine the Fair Market Sales Value of
         the Aircraft as herein provided. Manufacturer, Beneficiary and Lessee
         shall, within thirty (30)

                                   Exhibit D-2                           Page 10


     calendar days after Beneficiary has delivered a Residual Notice, each
     obtain appraisal values from a recognized independent appraiser (one to be
     selected by Manufacturer, one by Beneficiary, and one by Lessee), and the
     average value as determined by the appraisers shall be binding on
     Manufacturer, Beneficiary and Lessee; provided that if the value or values
     determined by one or more of the appraisers differs from the average of the
     values determined by all three appraisers by more than five percent (5%) of
     such average, the value which differs the most from such average shall be
     excluded, and the average of the values determined by the other two
     appraisers shall be binding on Manufacturer, Beneficiary and Lessee.
     Manufacturer, Beneficiary and Lessee shall each pay its own appraiser. Each
     appraiser must be associated with a professional organization of aircraft
     appraisers and each appraisal shall be conducted pursuant to ISTAT 1994 (or
     any successor) appraisal methods, definitions and assumptions. Fair Market
     Sales Value as determined hereunder shall mean the value that would be
     obtained in an arms'-length transaction between an informed and willing
     buyer-user (other than a lessee currently in possession or a used equipment
     dealer) under no compulsion to buy and an informed and willing seller under
     no compulsion to sell. In determining Fair Market Sales Value, it will be
     assumed that the Aircraft is in the condition, location and overhaul status
     in which it is required to be returned to the Lessor pursuant to Article
     XVIII of the Lease, without allowance for any return condition adjustments
     otherwise permitted by Section 6 of this Section D-2, that Exhibit D-2 of
     the Lease will apply, that the Lessee has removed all Parts which it is
     entitled to remove pursuant to Article IX of the Lease and that the
     Aircraft is not encumbered by the Lease or any Lien.

     "APU" shall mean the auxiliary power unit bearing serial number __________,
     and any substitute APU which may from time to time be substituted therefor
     pursuant to the terms of the Lease.

     "CALENDAR CONTROLLED COMPONENTS OR PARTS" means those components or parts,
     which are identified in the MRB Report which have maintenance tasks at
     specific calendar-time intervals.

     "CYCLE-CONTROLLED COMPONENTS OR PARTS" means those components or parts,
     which are identified in the MRB Report which have maintenance tasks at
     specific flight-cycle intervals.

     "HOUR-CONTROLLED COMPONENTS OR PARTS" means those components or parts,
     which are identified in the MRB Report which have maintenance tasks at
     specific flight-hour intervals.

     "LIFE CYCLE FATIGUE ("LCF") PARTS" means those rotating parts which have
     specific cycle limits as specified by the manufacturer to preclude cycle
     fatigue failures.

     "MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT")" means the report published
     by the maintenance review board detailing the intervals and description of
     the maintenance tasks and, where applicable, the life limits required for
     continued airworthiness of the Aircraft. Where the intervals specified in
     the MRB Report differ from the limit specified by the component
     manufacturer, the MRB Report shall take precedence.

     "TERMINATING ACTION" means the alteration or modification of the Aircraft
     in accordance with mandatory service bulletins, orders, airworthiness
     directives, and instructions required to eliminate repetitive inspections
     or maintenance action.

                                   Exhibit D-2                           Page 11



                                                                  EXHIBIT E-1 TO
                                                          THE PURCHASE AGREEMENT

                   FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

          THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of ___________,
________ between [_____________________] (the "TRANSFEREE") and
________________________________________ (the "TRANSFEROR").

                              W I T N E S S E T H:

          WHEREAS, the Transferor is a party to an Aircraft Purchase Agreement
[N288SK], dated as of June 5, 2001 among Solitair Corp., Chautauqua Airlines,
Inc. (the "Lessee"), the Transferor and Wells Fargo Bank Northwest, National
Association, not in its individual capacity (except as otherwise expressly
provided therein) but solely as Owner Trustee (as the same may be from time to
time amended, the "PURCHASE AGREEMENT") and certain other Transaction Documents
(as defined herein);

          WHEREAS, the Transferor desires to sell and assign to the Transferee
[all of]/[an undivided interest in] its right, title and interest in, to and
under the Trust Agreement (as defined in the Purchase Agreement) (except as
reserved below), and the Transferee desires to (i) purchase and accept from the
Transferor the assignment of [all of]/[such undivided interest in] the
Transferor's right, title and interest in, to and under the Trust Agreement
(except as reserved below) and (ii) assume the Assumed Obligations (as defined
herein); and

          WHEREAS, capitalized terms used herein without definition and which
are defined in the Purchase Agreement are used herein with the respective
meanings given such terms in the Purchase Agreement;

          NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties agree as follows:

          1. ASSIGNMENT. Effective as of the date hereof (the "TRANSFER DATE"),
the Transferor hereby irrevocably sells, assigns, transfers, conveys and sets
over to the Transferee [all of]/[an undivided interest in ___ portion of] its
right, title and interest in, to and under the Trust Estate, the Purchase
Agreement, the Trust Agreement, the Tax Indemnity Agreement and all other
Operative Documents (as defined in the Purchase Agreement), agreements,
contracts, documents and instruments executed and delivered at any time prior to
the execution and delivery of this Agreement in connection with any of the
foregoing (the "TRANSACTION DOCUMENTS"), and any proceeds therefrom, except such
rights of the Transferor as have arisen or accrued prior to the Transfer Date
(such excepted rights to include, without limitation, the right to receive any
amounts due or accrued to the Transferor under any Transaction Document as of a
date prior to the Transfer Date and the right to enforce any terms under the
Purchase Agreement

                                                           Exhibit E-1 -- Page 1


or the Tax Indemnity Agreement with respect to acts or events occurring prior to
the Transfer Date).

          2. ASSUMPTION. The Transferee hereby assumes all of the obligations,
liabilities and duties of the Transferor arising from and after the Transfer
Date under each Transaction Document [with respect to the undivided interest
therein transferred hereunder] (the "ASSUMED OBLIGATIONS") and confirms that
from and after the Transfer Date it shall be deemed a party to each Transaction
Document to which the Transferor is a party and shall be bound by all the terms
thereof (including the agreements and obligations of the Transferor set forth
therein) as if it were named as the Transferor therein.

          3. FURTHER ASSURANCES. Each party hereto shall, at any time and from
time to time, upon the request of the other party hereto, promptly and duly
execute and deliver any and all such further instruments and documents and take
such further action as the other party may reasonably request to obtain the full
benefits of this Agreement and of the rights and powers herein granted.

          4. REPRESENTATIONS AND WARRANTIES. The Transferee hereby represents
and warrants to the other parties hereto that:

          (a) ORGANIZATION; AUTHORITY. The Transferee (i) is a __________ duly
organized, validly existing and in good standing under the laws of
___________________ and (ii) has the full [corporate] power and authority to
conduct its business as presently conducted, to own or hold under lease its
properties and to execute, deliver and perform this Agreement and to perform the
Assumed Obligations.

          (b) DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement and the performance of the Assumed Obligations have been duly
authorized by all necessary corporate action on the part of the Transferee.

          (c) CONFLICT. The execution, delivery and performance by the
Transferee of this Agreement and the performance of the Assumed Obligations and
the consummation or performance by the Transferee of the transactions
contemplated thereby will not conflict with or result in any violation of,
constitute a default under, or result in the creation of any Lien upon any
property of the Transferee under, any term of the Certificate of Incorporation
or By-laws of the Transferee or any agreement, mortgage, contract, indenture,
lease or other instrument, or any Applicable Law, by which the Transferee or its
properties or assets are bound, except for any such violation, conflict or
default which would not have a material adverse effect on the Transferee or its
ability to perform the Assumed Obligations.

          (d) GOVERNMENT CONSENTS. Neither the execution or delivery of this
Agreement and the performance of the Assumed Obligations nor the consummation of
any of the transactions contemplated hereby or thereby by the Transferee
requires the consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of any United States federal,
state or other governmental authority or agency, including any judicial body,
that would be required to be taken or obtained by the Transferee.

                                                           Exhibit E-1 -- Page 2


          (e) LEGAL, VALID AND BINDING OBLIGATIONS. The Assumed Obligations and
this Agreement constitute the legal, valid and binding obligations of the
Transferee enforceable against the Transferee in accordance with their
respective terms except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting the
rights of creditors generally and by general principles of equity, regardless of
whether enforcement is pursuant to a proceeding in equity or at law.

          (f) LITIGATION. There are no pending or, to the knowledge of the
Transferee, threatened actions or proceedings against the Transferee by or
before any court or administrative agency or arbitrator that, either
individually or in the aggregate, are reasonably likely to materially adversely
affect the ability of the Transferee to perform its obligations under this
Assumption Agreement or the Assumed Obligations.

          (g) SECURITIES REPRESENTATION. The Transferee is acquiring its
interest in the Trust Estate for investment and not with a view to any resale or
distribution thereof, but subject, nevertheless, to any requirement of law that
the disposition of its property remain within its control at all times, and that
neither it nor anyone authorized by it to act on its behalf has directly or
indirectly offered any interest in the Trust Estate, or any similar security for
sale to, or solicited any offer to acquire any of the same from, anyone.

          (h) LESSOR'S LIENS. Upon the execution of this Assumption Agreement,
there will be no Lessor's Lien attributable to the Transferee on the Trust
Estate.

          (i) ERISA. No part of the funds to be used by the Transferee to
acquire the interests to be acquired by it hereunder constitutes assets (within
the meaning of ERISA and any rules and regulations thereunder) of any ERISA
plan.

          (j) PERMITTED TRANSFEREE. The Transferee is a bank, savings
institution, finance company, leasing company or trust company, national banking
association acting for its own account or in a fiduciary capacity as trustee or
agent under any pension, retirement, profit sharing or similar trust or fund,
insurance company, financial institution, fraternal benefit society or a
corporation acting for its own account having a combined capital and surplus
(or, if applicable, consolidated net worth or its equivalent) of not less than
$25,000,000.(1) [The Transferee is an Affiliate(2) of the transferring
Beneficiary having a combined capital and surplus (or, if applicable,
consolidated net worth or its equivalent) of not less than $25,000,000.](3) The
Transferee is reasonably experienced in equipment leasing and financing
transactions. The Transferee is not (x) an airline or other Person engaged in
air transportation or a competitor of Lessee in the business of air
transportation or any Affiliate thereof, (y) a party adverse to the Lessee or
any Affiliate of the Lessee in any pending litigation or arbitration (whether as
plaintiff

- ----------
(1) If a guaranty is being provided pursuant to Section 10(b)(v) of the Purchase
    Agreement, replace "The Transferee" at the beginning of this sentence with
    the name of the guarantor.

(2) Include if the Transferee is an Affiliate of the transferring Beneficiary.

(3) There shall be no such net worth requirement if the transferring Beneficiary
    remains liable for the obligations of such Affiliate under the Operative
    Documents.

                                                           Exhibit E-1 -- Page 3


or defendant) or (z) a Person that has overtly threatened to initiate
any such litigation or arbitration against Lessee or any Affiliate of Lessee.

             Notwithstanding the foregoing or anything else contained in this
Agreement, the Transferee makes no representation or warranty in this Agreement
with respect to laws, rules or regulations relating to aviation or to the nature
or use of the equipment owned by the Owner Trustee, including, without
limitation, the airworthiness, value, condition, workmanship, design, patent or
trademark infringement, operation, merchantability or fitness for use of the
Aircraft.

          5. RELIANCE. The representations, warranties, covenants and agreements
of the Transferee are made for the benefit of, and may be relied upon by, the
Owner Trustee, Lessee and Transferor (collectively, the "BENEFICIARIES"), and
each of the Beneficiaries shall be deemed to be an express third party
beneficiary with respect thereto, entitled to enforce directly and in its own
name any rights or claims it may have against such Transferee as such
beneficiary.

          6. PAYMENTS. Transferor hereby covenants and agrees to pay over to
Transferee, if and when received on or following the Transfer Date, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Transferor that, under Section 2 hereof, belong to Transferee, and
Transferee hereby covenants and agrees to pay over to Transferor, if and when
received on or following the Transfer Date, any amounts (including any sums
payable as interest in respect thereof) paid to or for the benefit of Transferee
that, under Section 2 hereof, belong to Transferor.

          7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts (or upon
separate signature pages), all of which together shall constitute but one and
the same instrument.

          8. GOVERNING Law. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF
NEW YORK, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL,
PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.

                                                           Exhibit E-1 -- Page 4


          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered on the date first above written

                                   [                                          ]
                                    ------------------------------------------
                                   Transferor

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

                                   [                                          ]
                                    ------------------------------------------
                                   Transferee

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

                                                           Exhibit E-1 -- Page 5



                                                                  EXHIBIT E-2 TO
                                                          THE PURCHASE AGREEMENT

                           FORM OF GUARANTY AGREEMENT

                                                   [DATE]

         Re:    Chautauqua Airlines, Inc. - One Embraer model EMB-145LR Aircraft
                Bearing United States Registration No. N288SK

Ladies and Gentlemen:

     Reference is made to that certain Assignment and Assumption Agreement dated
as of _______________ (the "ASSIGNMENT AGREEMENT") by and between
_______________ ("BENEFICIARY") and _______________ ("ASSIGNEE"). Assignee is a
direct or indirect subsidiary of the undersigned, _____________________, a
____________ ("GUARANTOR"). Except as otherwise noted herein, all capitalized
terms used herein shall have the respective defined meanings set forth in (1)
that certain Purchase Agreement [N288SK] (the "PURCHASE AGREEMENT"), dated as of
June 5, 2001 among Solitair Corp., Chautauqua Airlines, Inc. (the "Lessee"), the
Beneficiary and Wells Fargo Bank Northwest, National Association, a national
banking association, not in its individual capacity, except as expressly
provided therein, but solely as Owner Trustee ("OWNER TRUSTEE"); and (2) that
certain Aircraft Lease Agreement [N288SK] (the "LEASE"), dated as of June 5,
2001 between the Owner Trustee, as Lessor and the Lessee, as Lessee (each of the
Lessee and the Owner Trustee, together with its successors and permitted
assigns, a "GUARANTEED PARTY").

     In connection with the transactions contemplated by the Assignment
Agreement, Guarantor represents and warrants to, and covenants with, each
Guaranteed Party, as follows:

     1. OWNERSHIP OF ASSIGNEE. Assignee is a direct or indirect subsidiary of
Guarantor.

     2. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that
Guarantor is duly organized and validly existing in good standing under the laws
of _____________. The execution, delivery and performance of this Guaranty
Agreement are within Guarantor's power and authority, have been duly authorized
by all necessary corporate action on the part of the Guarantor and do not
contravene the charter or the by-laws of Guarantor or any indenture, mortgage,
credit agreement, note, long-term lease or other material agreement to which
Guarantor is a party or by which Guarantor is bound, and this Guaranty Agreement
constitutes a legal, valid and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms.

     3. SUBMISSION TO JURISDICTION, ETC. Guarantor hereby agrees to be bound, to
the same extent Beneficiary is bound, by the provisions of Section 12(b) of the
Purchase Agreement, which are incorporated herein by reference as if fully set
forth herein.

                                                           Exhibit E-2 -- Page 1


     4. UNDERTAKINGS.

     (a) Guarantor hereby unconditionally and irrevocably guaranties not merely
as surety but as primary obligor, the due and punctual: (i) performance by
Assignee of all of the obligations of the "Beneficiary" under the Operative
Documents assumed by Assignee under the Assignment Agreement; (ii) payment of
any and all sums which are payable by the Beneficiary pursuant to any of the
Operative Documents which payment obligations were assumed by Assignee under the
Assignment Agreement; and (iii) performance of, observance of and compliance
with all other obligations, covenants and undertakings and representations and
warranties of, or made by, Assignee in the Assignment Agreement or the
Beneficiary contained in or arising under the Operative Documents and assumed by
Assignee under the Assignment Agreement (such payments and other obligations
referred to in this Section 4(a) hereinafter referred to as the "OBLIGATIONS").
Guarantor agrees that it will not use the assets of any ERISA Plan to fund its
payment obligations hereunder.

     (b) Guarantor agrees that this Guaranty Agreement is an unconditional and
absolute guaranty of payment and performance (not merely collectability), that
its undertakings hereunder are not contingent upon any Guaranteed Party bringing
any action against Assignee or resorting to any security and hereby expressly
waives any claim that its undertakings hereunder are so contingent.

     (c) Guarantor irrevocably waives promptness, diligence, demand, and all
notices whatsoever as to the Obligations guaranteed hereby, and any other
circumstances which might otherwise constitute a defense available to it, or a
discharge of it (other than the defense of payment or performance), and agrees
that it shall not be required to consent to or receive any notice of any
amendment or modification of, or waiver, consent or extension with respect to,
the Purchase Agreement or the other Operative Documents to which Assignee is a
party that may be made or given as provided herein or otherwise.

     (d) Guarantor further agrees to pay all expenses (including, without
limitation, all fees and disbursements of counsel) that may be paid or incurred
by any Guaranteed Party in enforcing any rights with respect to, or collecting,
any or all of the Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guaranty Agreement.

     (e) Guarantor understands and agrees that its obligations hereunder shall
be construed as continuing, absolute and unconditional without regard to (i) the
validity, regularity or enforceability of any Operative Document, any of the
Obligations or any collateral security therefor or guarantee or right of offset
with respect thereto at any time or from time to time held by any Guaranteed
Party, (ii) any defense, set-off or counterclaim (other than a defense of
payment or performance) that may at any time be available to or be asserted by
the Assignee against any Guaranteed Party, or (iii) any other instances
whatsoever (with or without notice to or knowledge of the Assignee or the
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of Assignee for the Obligations, or of Guarantor under this
Guaranty Agreement, in bankruptcy or in any other instance.

     5. NO DISCHARGE. The obligation of Guarantor hereunder will not be
discharged by: (a) any extension or renewal with respect to any obligation of
Assignee, as Beneficiary, under

                                                           Exhibit E-2 -- Page 2


the Operative Documents; (b) any modification of, or amendment or supplement to,
any such agreement; (c) any furnishing or acceptance of additional security or
any release of any security; (d) any waiver, consent or other action or inaction
or any exercise or non-exercise of any right, remedy or power with respect to
Assignee, or any change in the structure of Assignee; (e) any insolvency,
bankruptcy, reorganization, arrangement, composition, liquidation, dissolution
or similar proceedings with respect to Assignee; (f) except as provided in
Section 6 any change in ownership of the shares of capital stock of Guarantor or
Assignee; or (g) any other occurrence whatsoever, except payment in full of all
amounts payable by Assignee, as Beneficiary, under the Operative Documents and
performance in full of all Obligations of Assignee, as Beneficiary, in
accordance with the terms and conditions of the Operative Documents.

     6. TRANSFERS. The Guarantor may assign, convey or otherwise transfer its
obligations hereunder to any other Person (hereinafter referred to as the
"TRANSFEREE GUARANTOR"), provided that (a) the Transferee Guarantor enters into
an agreement substantially in the form of this Guaranty Agreement and (b) the
Transferee Guarantor meets the requirements of Section 10(b)(iv) of the Purchase
Agreement relating to a "guarantor". If pursuant to Section 10(b)(iv) of the
Purchase Agreement or the preceding sentence, a new guaranty shall be delivered
or the obligations of the Guarantor shall be transferred, the Transferee
Guarantor shall deliver an opinion or opinions of counsel substantively similar
to the form of opinion attached to the Purchase Agreement as Exhibit G to the
effect that the obligations incurred by the Transferee Guarantor pursuant hereto
constitute the legal, valid, binding and enforceable obligations of such
Transferee Guarantor. Upon the satisfaction by the Guarantor of the conditions
set forth in this Section 6, the Guarantor shall be released and discharged of
any and all further obligations under this Guaranty Agreement.

     7. REINSTATEMENT. Guarantor agrees that this Guaranty Agreement shall be
automatically reinstated with respect to any payment made prior to the
termination of this Guaranty Agreement by or on behalf of Assignee pursuant to
the Purchase Agreement or the other Operative Documents to which Assignee is a
party if and to the extent that such payment is rescinded or must be otherwise
restored, whether as a result of any proceedings in bankruptcy or reorganization
or otherwise.

     8. NO SUBROGATION. Notwithstanding any payment or payments made by
Guarantor hereunder or any set-off or application of funds of Guarantor by any
Guaranteed Party, Guarantor shall not be entitled to be subrogated to any of the
rights of Guaranteed Party against Assignee or any collateral, security or
guarantee or right of set-off held by any Guaranteed Party for the payment of
the Obligations, nor shall Guarantor seek or be entitled to seek any
reimbursement from the Assignee in respect of payments made by Guarantor
hereunder, until all amounts and performance owing to the Guaranteed Parties by
Assignee on account of the Obligations are paid and performed in full.

     9. SEVERABILITY. Any provision of this Guaranty Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

                                                           Exhibit E-2 -- Page 3


     10. MISCELLANEOUS. This Guaranty Agreement shall: (a) be binding upon
Guarantor, its successors and assigns; (b) inure to the benefit of, and be
enforceable by, the Guaranteed Parties but shall not, and is not intended to,
create rights in any other third parties; (c) not be waived, amended or
modifiedthe written consent of each of the Guaranteed Parties; (d) be governed
by and construed in accordance with, the internal laws of the State of New York,
and (e) remain in full force and effect until the earlier of (i) payment in full
of all sums payable by Assignee, as Beneficiary, under the Assignment Agreement
and the Operative Documents and by Guarantor hereunder, and performance in full
of all other Obligations of Assignee, as Beneficiary, under the Assignment
Agreement and the Operative Documents and (ii) the compliance by Guarantor with
Section 6. All notices to, requests of, demands on and other communications with
Guarantor shall be made in writing and shall be personally delivered, sent by
facsimile or telecommunication transmission (which in either case provides
written confirmation to the sender of its delivery) or sent by registered or
certified mail, postage prepaid, or by prepaid courier service to Guarantor at:
______________________________________, Attention: ______________________,
telephone (___) __________] facsimile [(___) __________].

     IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly
executed this ______ day of ________________________.

                                     [GUARANTOR]

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

                                                           Exhibit E-2 -- Page 4



                                                                       EXHIBIT F

                             COUNTRY LIST

                Australia                 Italy

                Austria                   Japan

                Belgium                   Luxembourg

                Canada                    The Netherlands

                Denmark                   New Zealand

                Finland                   Norway

                France                    Portugal

                Germany                   Singapore

                Iceland                   Switzerland

                Ireland                   United Kingdom



                                                                       EXHIBIT G

                              GENERAL TAX INDEMNITY

     Section 1.01 INDEMNITY. Lessee agrees for the benefit of each Tax
Indemnitee to pay and, on written demand, to indemnify and hold each Tax
Indemnitee harmless from all Taxes, howsoever levied or imposed, whether levied
or imposed upon or asserted against any Tax Indemnitee, this Lease, the
Aircraft, or any part thereof or interest therein, or otherwise by any Federal,
state or local government, political subdivision, or taxing authority in the
United States, by any government or taxing authority of or in a foreign country
or of or in a territory or possession of the United States or by any
international taxing authority upon or with respect to, or arising out of or
connected with, or based upon or measured:

          (a) by the Aircraft, or any part thereof, or interest therein;

          (b) by the exportation, importation, ownership, delivery,
non-delivery, warehousing, removal, leasing, exchange, acceptance, assigning,
possession, repossession, condition, recording, use, location, presence,
operation, settlement of any insurance or warranty claim, sale, subleasing,
rental, retirement, chartering, imposition of any Lien, abandonment,
registration or change in registration, preparation, installation, modification,
repair, maintenance, replacement, transportation, storage, transfer of title,
return or other disposition of the Aircraft or any part thereof or interest
therein;

          (c) by the rentals, receipts or earnings arising from any one or more
of the items or acts described in Section 1.01 (a) or (b) above (including,
without limitation, the Rent), or any other payment contemplated by this Lease;

          (d) upon or with respect to this Lease, or any other Operative
Document pertaining to or in connection with the transactions contemplated by
this Lease; or

          (e) otherwise with respect to or in connection with the transactions
contemplated by this Lease.

     Section 1.02 EXCEPTIONS TO INDEMNITY. Notwithstanding anything to the
contrary in this Agreement or any other Operative Document, the indemnity
provided for in this Exhibit G does not extend to any of the following Taxes:

          (a) Taxes that are based on or measured by gross or net income or
receipts, capital or net worth or capital stock, capital adequacy, or reserves
or that are capital gains Taxes, excess profits Taxes, minimum or alternative
minimum Taxes, accumulated earnings Taxes, personal holding company Taxes,
succession Taxes, estate Taxes, franchise Taxes, doing business Taxes, or
similar Taxes; PROVIDED, HOWEVER, that this exception (a) shall not apply to (i)
Taxes that are in the nature of sales, use, or property Taxes or (ii) Taxes if
Taxes of such type would not have been incurred by a Tax Indemnitee but for the
use, operation, location, or registration of the Aircraft by Lessee or any
Affiliate thereof or any sublessee, or the activities or place of incorporation
or business organization of Lessee or any Affiliate of Lessee, in a jurisdiction
in which such Taxes have been incurred (PROVIDED, HOWEVER, that Lessee shall
only incur responsibility for Taxes of such type only if and to the extent that
such Taxes are imposed as a result of such use, operation, location,
registration, or activities and not as a result of the activity of a Tax
Indemnitee and PROVIDED, FURTHER, that this clause (ii) shall not apply to any
Taxes of such type imposed by any Federal, state or local government, political
subdivision, or taxing authority in the United States);

          (b) withholding taxes imposed on any indebtedness of any Tax
Indemnitee;



          (c) Taxes incurred by a Tax Indemnitee or any of its Affiliates by (A)
engaging in activities in the jurisdiction imposing such Tax which activities or
property are unrelated to the transactions contemplated by this Lease or other
Operative Documents, (B) being incorporated therein or maintaining an office or
having a place of business therein and (C) such Tax Indemnitee's failure to file
any form, document or certificate within thirty (30) days following notice by
Lessee to such Tax Indemnitee that such form, document or certificate is
required to be filed in order to avoid or mitigate applicability of such Tax;

          (d) Taxes (including excess taxes) incurred as the result of any
voluntary or involuntary transfer or Financing by Lessor or any other Tax
Indemnitee of any interest in the Aircraft, any part thereof, this Lease or any
Operative Document, the Trust Estate or in the Lessor or any Tax Indemnitee
except following (w) an Event of Default in the exercise of remedies, (x) the
exercise of the Purchase Option pursuant to the Lease, (y) the substitution,
replacement, modification, pooling or improvement of the Aircraft or any part
thereof pursuant to Article IX of the Lease, or (z) an Event of Loss;

          (e) Taxes incurred by any Tax Indemnitee because of a Lessor's Lien or
the gross negligence or willful misconduct of such Tax Indemnitee or the breach
or inaccuracy of any representation, warranty or covenant of such Tax Indemnitee
in this Lease or any other Operative Document;

          (f) Taxes attributable to acts or events occurring after the
redelivery of the Aircraft to the Lessor, except to the extent fairly
attributable to acts or events occurring prior thereto;

          (g) Taxes imposed against a transferee of a Tax Indemnitee to the
extent of the excess of such Taxes over the amount of such Taxes which would
have been imposed had there not been a transfer by an original Tax Indemnitee of
any interest of such Tax Indemnitee in the Aircraft, the Trust Estate, or the
Operative Documents;

          (h) Taxes for which the Lessee is obligated to indemnify the
Beneficiary under the Tax Indemnity Agreement;

          (i) United States withholding taxes imposed on payments to a foreign
person (other than any such withholding taxes imposed on payments to Aero);

          (j) Taxes imposed with respect to any fees received by or the Owner
Trustee;

          (k) interest, penalties, fines or additions to tax to the extent they
relate to Taxes for which no indemnity would be payable by the Lessee pursuant
to this Section 1.02;

          (l) Taxes imposed by section 4975 of the Code; or

          (m) Taxes arising from or attributable to the like-kind exchange
transaction described in Section 10(b)(vi) of the Purchase Agreement to the
extent such Taxes exceed the amount of Taxes that would have been imposed in the
absence of such like-kind exchange transaction.

     Section 1.03 CONTESTS. If a claim is made against a Tax Indemnitee for
Taxes with respect to which Lessee is liable for a payment or indemnity under
this Lease, such Tax Indemnitee will promptly give Lessee notice in writing of
such claim; PROVIDED, HOWEVER, that such Tax Indemnitee's failure to give notice
will not relieve Lessee of its obligations hereunder except to the extent that
such failure actually or

                                        2


effectively (i) results in the imposition of penalties or interest by the
applicable taxation authority or (ii) has a material adverse impact upon
Lessee's right to contest such Taxes in accordance with this Section 1.03. So
long as (i) a contest of such Taxes does not involve any material danger of the
sale, forfeiture, seizure or loss of the Aircraft or any interest therein
(except if the Lessee shall have adequately bonded any Lien that results in such
risk or otherwise made adequate provision to protect the interests of the Tax
Indemnitees), (ii) adequate reserves have been provided for such Taxes by Lessee
or, if required by applicable law, an adequate bond has been posted, (iii) in
the event the Tax Indemnitee decides after consultation with the Lessee to pay
the Tax prior to the contest, the Lessee shall have provided to the Tax
Indemnitee an interest-free advance in an amount equal to the Tax which the Tax
Indemnitee is required to pay, and (iv) no Event of Default described in clauses
(a), (b), (g), (h), (i), or (j) of Section 17.01 of the Lease shall have
occurred and be continuing, then such Tax Indemnitee at Lessee's written request
will in good faith, with due diligence and at Lessee's expense (including paying
the reasonable legal and accounting fees of such Tax Indemnitee), contest (or
permit Lessee to contest its own name if permitted by applicable Law or in the
name and on behalf of such Tax Indemnitee) the validity, applicability or amount
of such Taxes.

Section 1.04 TAX OBLIGATIONS AND AFTER-TAX BASIS OF PAYMENTS. Notwithstanding
any other provision anywhere contained in the Operative Documents, it is
understood that all of the Lessee's obligations with respect to taxes are set
forth in this Exhibit G (and Section 1.04 of Exhibit H to the Lease to the
extent that payments by the Lessee thereunder are required to be made on an
"after-tax basis") and in the Tax Indemnity Agreement, and if the Lessee shall
be required under any provision of the Operative Documents to pay any tax
imposed upon any Tax Indemnitee or with respect to a payment made by the Lessee
under the Operative Documents for which the Lessee is not responsible under this
Exhibit G, Section 1.04 of Exhibit H to the Lease or the Tax Indemnity
Agreement, it shall be entitled to prompt reimbursement of such amount from the
party whose tax liability was paid. Notwithstanding anything in this Exhibit G
to the contrary, Lessee further agrees that, with respect to any indemnity
payment hereunder, such indemnity payment shall include any amount necessary to
hold the recipient of the indemnity payment harmless on a net after-tax basis
(after taking into account all relevant Tax benefits and savings whether by way
of deduction, credit, allocation, apportionment or otherwise, realized or,
except in the case of foreign tax credits, the present value of such Tax
benefits and savings expected to be realized) from all Taxes required to be paid
by such recipient with respect to such indemnity payment, so that such recipient
shall receive an amount which, net of any Taxes required to be paid or withheld
by (or for the account of) such recipient in respect of such amount, and taking
into account the aforementioned tax benefits and savings, shall be equal to the
amount of indemnity payment otherwise required hereunder.

     All computations for the purposes hereof shall be based on tax rates in
effect on the date payment pursuant to this Section is made. Computations
involving the loss of use of money or calculations of present value shall be
based on the Treasury Rate, as adjusted for applicable income tax effects and
compounded semiannually.

     If any Tax Indemnitee or Indemnitee shall realize a tax benefit not taken
into account in the preceding paragraph in the form of a deduction or foreign
tax credit against United States income tax liability, as a result of any claims
or Taxes paid or indemnified against by the Lessee under Section 1.04 of Exhibit
H to the Lease or this Exhibit G (whether by way of deduction, credit,
allocation or apportionment of income or otherwise), such Tax Indemnitee or
Indemnitee shall pay to the Lessee an amount which, after subtraction of any
further tax savings such Tax Indemnitee or Indemnitee realizes as a result of
the payment thereof, is equal to the amount of such tax benefit; PROVIDED, in
calculating the amount of any credits against United States Federal income taxes
realized by the Tax Indemnitee with respect to foreign Taxes, it shall be
assumed that (i) to the extent Tax Indemnitee's ability to utilize foreign tax
credits to reduce its liability for United States Federal taxes is actually
increased by reason of

                                        3


net foreign source taxable income attributable to the transaction contemplated
by the Operative Documents, the foreign tax credit generated with respect to the
foreign income tax for which the Lessee is obligated to make an indemnity
payment hereunder shall be deemed to be utilized prior to any other foreign tax
credit of the Tax Indemnitee; (ii) except as provided in the preceding clause
(i), any foreign tax credit not described in the succeeding clauses (iii) and
(iv) shall be deemed to be utilized prior to any foreign tax credit attributable
to the Lessee; (iii) any foreign tax credit generated by Lessee shall be
utilized ahead of any credit generated by another lessee of the Beneficiary with
respect to whom the Beneficiary has a contractual obligation to pay over the
benefits arising therefrom on a basis that assumes that such credits shall be
utilized after all other credits available to the Beneficiary have been
utilized, and (iv) except as provided in clause (i), any foreign tax credit
generated by the Lessee shall be utilized on a PARI PASSU basis with all other
credits generated in connection with any other leases of the Beneficiary not
described in clause (iii) and with respect to whom the Beneficiary does not have
a contractual obligation to pay over the benefits arising therefrom on a basis
that assumes that such credits shall be utilized ahead of all other credits of
the Beneficiary. Each payment made by any Tax Indemnitee or Indemnitee to the
Lessee pursuant to this paragraph shall be made within 30 days after the
respective Tax Indemnitee or Indemnitee files a tax return (including estimated
returns) which reflects the tax benefits described in the prior sentence.

     Section 1.05 REPORTS. In case any report or return is required to be made
with respect to any Taxes (other than income Taxes) that are an obligation of
Lessee hereunder or for which an indemnification obligation may arise under this
Exhibit G, Lessee will, to the extent it has knowledge thereof make such report
or return in such manner that is not inconsistent with the ownership of the
Aircraft and the Engines in Lessor, and, upon request, send a copy of the
applicable portions of such report or return to Lessor. In addition, the Tax
Indemnitees shall furnish Lessee, at Lessee's written request and expense, with
any information in Tax Indemnitee's possession or control (and not within the
control of Lessee) that is reasonably necessary to make any tax filing, report
or return (but no Tax Indemnitee shall be required to furnish its tax return,
although it may be required to furnish information contained therein).

     Section 1.06 REFUNDS. Upon receipt by a Tax Indemnitee of a refund or
credit of all or any part of any Taxes that Lessee has paid or for which the
Lessee has reimbursed or indemnified the Tax Indemnitee, such Tax Indemnitee
will promptly pay to Lessee the net amount of such Taxes refunded or credited,
after taking into account any net Tax benefit, and interest received or credited
thereto.

     Section 1.07 SURVIVAL. All the obligations under this Exhibit G shall
survive the assignment (subject to the limitations in Section 1.02), expiration
or other termination of this Lease and the Operative Documents.

     Section 1.08 PAYMENT PROCEDURES. Any amount payable to a Tax Indemnitee
pursuant to this Exhibit G shall be paid within 30 days after receipt of a
written demand therefor from such Tax Indemnitee accompanied by a written
statement describing in reasonable detail the basis for such indemnity and the
computation of the amount so payable, provided that such amount need not be paid
prior to the later of (i) 1 business day prior to the date that the
indemnifiable Taxes are due or (ii) in the case of amounts which are being
contested by the Lessee in good faith or by the Tax Indemnitee pursuant to
Section 1.03, the time such contest is finally resolved. Within 15 days
following the Lessee's receipt of the computation of the amount of the
indemnity, the Lessee may request that an accounting firm to be jointly selected
by the Lessee and such Tax Indemnitee (but not including the accounting firm
that regularly prepares the certified financial statements of the Lessee or such
Tax Indemnitee unless such firm consists of one of the "Big 5" accounting firms
in which case such firm shall be deemed acceptable to the parties) determine
whether such computations of the Tax Indemnitee are correct. The computations

                                        4


of such accounting firm shall be final, binding and conclusive upon the parties
and the Lessee shall have no right to inspect the books, records or tax returns
of the Tax Indemnitee to verify such computation. All fees and expenses payable
in connection with such verification shall be borne by the Lessee unless such
verification discloses an error adverse to the Lessee of more than 5% of the
amount computed by the Tax Indemnitee, in which case such fees and expenses
shall be paid by the Tax Indemnitee.

     Section 1.09 NON-SIGNATORIES. As a condition precedent to any performance
by the Lessee in connection with any indemnity, payment or other obligation
pursuant to this Exhibit G with respect to any Person claiming as a Tax
Indemnitee which is not a signatory to this Lease, such Person shall expressly
agree in writing with the Lessee to be bound by all the terms of this Exhibit G
and this Lease applicable to such Person in its capacity as a Tax Indemnitee.

                                        5


                                                                       EXHIBIT H

                                GENERAL INDEMNITY

     Section 1.01 GENERAL INDEMNITY. Except as otherwise expressly set forth in
Section 1.03, Lessee agrees to indemnify, reimburse, hold harmless and defend
each Indemnitee from and against any and all claims, damages, losses,
liabilities, demands, suits, judgments, causes of action, legal proceedings,
whether civil or criminal, penalties, fines and other sanctions, and any
reasonable attorneys' fees and other reasonable costs and expenses in connection
herewith, (including any of the foregoing arising or imposed with or without
fault of any Indemnitee, or under the doctrine of absolute or strict liability)
and including any third party claims arising from or in any way connected with
injury to or death of any Person or loss or damage to property (any and all of
which are hereafter referred to as "CLAIMS") which in any way result from,
pertain to or arise out of, or are in any manner related to (a) the Lease, any
other Operative Document or the Manufacturer Purchase Agreement or the breach of
any representation, warranty or covenant made by Lessee hereunder, thereunder or
in any document delivered by Lessee in connection herewith or therewith, or (b)
the condition, ownership, manufacture, purchase, delivery, lease, sublease,
acceptance, possession, return, disposition, use, operation, maintenance,
repair, alteration or control of the Aircraft, the Airframe, any Engine or any
Part, either in the air or on the ground during the Term, or (c) any defect in
the Aircraft, any Engine or any Part (whether or not discovered or discoverable
by Lessee or Lessor) arising from the material or any articles used therein or
from the design, testing, or use thereof or from any maintenance, service,
repair, overhaul, or testing of the Aircraft, any Engine or any Part, whether or
not the Aircraft, such Engine or such Part is in the possession of Lessee, and
regardless of where the Aircraft, such Engine or such Part may then be located,
or (d) any transaction, approval, or document contemplated by the Lease, any
Operative Document or the Manufacturer Purchase Agreement or given or entered
into in connection herewith or therewith. Lessee shall be subrogated to all
rights and remedies that any Indemnitee may have against the Manufacturer and
its subcontractors or any other person as to any such Claims, but only to the
extent that Lessee has paid in full to such Indemnitee the amount claimed by it
hereunder with respect to such Claims.

     Section 1.02 LESSEE WAIVER AND LIMITATION OF LIABILITY. Except as expressly
set forth in Section 1.03, Lessee hereby waives and releases each Indemnitee
from any Claims (other than Claims attributable to or arising out of the willful
misconduct or gross negligence of such Indemnitee), whether existing now or
hereafter arising, for or on account of or arising out of or in any way
connected with injury to or death of personnel of Lessee or loss or damage to
property of Lessee or the loss of use of any property that may result from or
arise in any manner out of or in relation to the ownership, leasing, condition,
use or operation of the Aircraft, in the air or on the ground, or that may be
caused by any defect in the Aircraft, from the material or any article used
therein or from the design or testing thereof, or use thereof, or from any
maintenance, service, repair, overhaul or testing of the Aircraft regardless of
when such defect may be discovered, whether or not the Aircraft is at the time
in the possession of Lessee, and regardless of the location of the Aircraft at
any such time.

     Section 1.03 EXCEPTIONS. Notwithstanding anything to the contrary herein,
the indemnity provided for in Section 1.01 will not extend to any Claim of any
Indemnitee to the extent it:

          (a) is attributable to acts or events occurring after the redelivery
of the Aircraft to Lessor, except to the extent fairly attributable to acts or
events occurring prior thereto;



          (b) is directly attributable to the gross negligence or willful
misconduct of such Indemnitee or the breach or inaccuracy of any representation,
warranty or covenant of such Indemnitee in the Lease or in any other Operative
Document;

          (c) other than as expressly provided in Section 1.04 of this Exhibit
H, is a Tax or loss of a Tax benefit, whether or not the Lessee is required to
indemnify therefor pursuant to Article XIV hereof or pursuant to the Tax
Indemnity Agreement;

          (d) is a cost or expense expressly required to be paid by such
Indemnitee or its permitted transferees (and not by the Lessee) pursuant to the
Lease or any other Operative Document and for which the Lessee is not otherwise
obligated to reimburse such Indemnitee, directly or indirectly pursuant to the
terms of the Lease or such other Operative Document;

          (e) is, in the case of the Beneficiary, Lessor's Liens attributable to
the Beneficiary; in the case of the Owner Trustee, Lessor's Liens to the extent
attributable to the Owner Trustee; in the case of WFB, Lessor's Liens to the
extent attributable to WFB; in the case of a Financing Party, Lessor's Liens to
the extent attributable to such Financing Party;

          (f) is, in the case of the Beneficiary or the Owner Trustee,
attributable to the sale by such Indemnitee of any interest in the Aircraft, the
Beneficial Interest or any similar interest (including a sale resulting from
bankruptcy or other proceedings for the relief of debtors in which such
Indemnitee is the debtor and which is not caused by the Default of the Lessee),
unless in each case such sale shall occur pursuant to the exercise of remedies
under Section 17.02 hereof or following the occurrence of an Event of Default;

          (g) in the case of the Beneficiary, is a Claim relating to, resulting
from, arising out of or in connection with a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code resulting from
the direct or indirect use of assets of any ERISA Plan to acquire or hold
Beneficiary's interest in the Trust Estate or in the case of any transferee of
the Beneficiary referred to in Section 10(b)(v) of the Purchase Agreement, to
purchase the Beneficial Interest pursuant to Section 10(b)(v) of the Purchase
Agreement;

          (h) except during the continuation of an Event of Default, is
attributable to any amendment to any of the Operative Documents which is not
requested, or consented to, by the Lessee or is not required or made pursuant to
the terms of any of the Operative Documents;

          (i) constitutes the loss of future profits of such Indemnitee or
losses attributable to such Indemnitee's overhead; or

          (j) arises from or is attributable to the like-kind exchange
transaction described in Section 10(b)(vi) of the Purchase Agreement to the
extent such Claim exceeds the amount of Claim that would have been imposed in
the absence of such like-kind exchange transaction.

     Section 1.04 AFTER-TAX BASIS OF PAYMENTS. Lessee further agrees that, with
respect to any payment or indemnity hereunder, such payment or indemnity shall
include any amount necessary to hold the recipient of the payment or indemnity
harmless on a net after-tax basis from all Taxes required to be paid by such
recipient or otherwise withheld with respect to such payment or indemnity (after
taking into account all related Tax benefits and savings), subject to, and
calculated in accordance with, Sections 1.05 and 1.09 of EXHIBIT H to the Lease,
MUTATIS MUTANDIS.

                                        2


     Section 1.05 PAYMENTS. Any amount payable as an indemnity to any Indemnitee
by Lessee pursuant to this Exhibit H is to be paid to such party directly, in
immediately available funds, by bank wire transfer at such bank or to such
account as specified by the payee in written directions to Lessee, within thirty
(30) days after receipt of a written demand therefor from such Indemnitee (or,
if such indemnity is payable from insurance proceeds, promptly after timely
receipt of such insurance proceeds).

     Section 1.06 REFUNDS. If any Indemnitee obtains a recovery of all or any
part of any indemnity amount that Lessee has paid in full to such Indemnitee,
such Indemnitee will promptly pay to Lessee the net amount recovered by such
Indemnitee, together with any tax benefit actually realized in connection
therewith, PROVIDED no Specified Default is then continuing. If any Indemnitee
is subsequently obligated to repay all or any portion of any such recovery, then
Lessee shall, upon demand by Lessor, repay to Lessor any amounts paid in respect
thereof by Lessor pursuant to this Section 1.06.

     Section 1.07 DEFENSE OF CLAIMS. Unless an Event of Default has occurred and
has not been waived by Lessor, Lessee and its insurers will have the right (in
each such case at Lessee's sole expense) to investigate, defend or compromise
any claim for which indemnification is sought as provided in this Section 1.07
(so long as Lessee has agreed in writing reasonably acceptable to the relevant
Indemnitee that Lessee is liable to such Indemnitee for any Claims relating to
or arising out of the Claim for which indemnification is sought, PROVIDED that
Lessee will not be so liable to the extent that it is determined that one or
more of the exclusions contained in Section 1.03 would be applicable to such
Claim), and each Indemnitee will cooperate with Lessee and its insurers with
respect thereto. If a claim is made against an Indemnitee involving one or more
Claims and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such Claim to Lessee; PROVIDED that
the failure to give such notice shall not affect the obligations of Lessee
hereunder except to the extent Lessee is prejudiced by such failure or the
Lessee's indemnification obligations are increased as a result of such failure.
If no Specified Default shall have occurred and be continuing, Lessee shall be
entitled, at its sole cost and expense, acting through counsel reasonably
acceptable to the respective Indemnitee, (A) in any judicial or administrative
proceeding that involves solely a claim for one or more Claims, to assume
responsibility for and control thereof, (B) in any judicial or administrative
proceeding involving a claim for one or more Claims and other claims related or
unrelated to the transactions contemplated by the Operative Documents, to assume
responsibility for and control of such claim for Claims to the extent that the
same may be and is severed from such other claims (and such Indemnitee shall use
its best efforts to obtain such severance), and (C) in any other case, to be
consulted by such Indemnitee and to be allowed, at Lessee's sole expense, to
participate therein. Notwithstanding any of the foregoing to the contrary,
Lessee shall not be entitled to assume responsibility for and control of any
such judicial or administrative proceedings or compromise any claim if such
proceedings or compromise will involve a material risk of the sale, forfeiture
or loss of, or the creation of any Lien (other than a Permitted Lien) on, the
Aircraft, the Beneficial Interest or any part thereof unless in such an event
Lessee shall have posted a bond or other security satisfactory to the relevant
Indemnitees in respect to such risk. The Indemnitee may participate at its own
expense and with its own counsel in any judicial proceeding controlled by Lessee
pursuant to the preceding provisions.

     Section 1.08 SURVIVAL. All the obligations of Lessee under this Exhibit H
shall survive the assignment, expiration or other termination of the Lease. Such
obligations are expressly undertaken by Lessee for the benefit of, and shall be
enforceable directly by, Lessor and each other Indemnitee, provided that if an
Indemnitee is not a party to the Lease, Lessee may require such Indemnitee to
agree in writing, in a form reasonably acceptable to Lessee, to the terms of
this Exhibit H prior to making any payment to such Indemnitee hereunder.



                 PURCHASE AGREEMENT ASSIGNMENT NO. 2 - (N288SK)

         PURCHASE AGREEMENT ASSIGNMENT NO. 2 - (N288SK), dated as of June 29,
2001 (this "Assignment"), among (1) AERO LTD., a Cayman Islands corporation
("Assignor"), (2) Wells Fargo Bank Northwest, National Association ("WFB"), not
in its individual capacity but solely as Owner Trustee under Trust Agreement
(N288SK) dated as of the date hereof ("Trust Agreement") between Mitsui & Co.
(U.S.A.), Inc. ("Beneficiary") and WFB ("Assignee"), and (3) Chautauqua
Airlines, Inc., a New York corporation ("Lessee").

         WHEREAS, Solitair Corp. as buyer, and EMBRAER-Empresa Brasileira de
Aeronautica S.A., a corporation organized under the laws of Brazil
("Manufacturer"), have entered into the Purchase Agreement, pursuant to which,
among other things, Manufacturer has agreed to manufacture and sell to Solitair
Corp. and it has agreed to purchase from Manufacturer, certain aircraft,
including the Aircraft (each such capitalized term is as defined in the Purchase
Agreement Assignment No. 1 described below).

         WHEREAS, immediately prior to the execution and delivery of this
Assignment, Solitair Corp. as assignor and Assignor as assignee are entering
into the Purchase Agreement Assignment No. 1 - (N288SK) dated as of even date
herewith (the "Purchase Agreement Assignment No. 1"), pursuant to which, among
other things, Solitair Corp. is assigning to Assignor certain of its right,
title and interest in, to and under the Purchase Agreement including, without
limitation, the right to purchase the Aircraft from Manufacturer upon and
subject to the terms and conditions set forth in the Purchase Agreement and the
Purchase Agreement Assignment No. 1; and

         WHEREAS, Assignor desires to sell and transfer to Assignee all of its
present and future rights, title, obligations and interest in, to and under the
warranties and indemnities under the Purchase Agreement that are described in
clause (y) of the definition of the Purchase Agreement in the Purchase Agreement
Assignment No. 1 (the "Assigned Warranties");

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements of the parties contained herein, and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Assignor and Assignee agree as follows:

         Section 1. DEFINITIONS. 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 Purchase
Agreement Assignment No. 1.

         Section 2. TRANSFER AND ASSUMPTION. Assignor does hereby sell, assign
and transfer to Assignee all of Assigned Warranties and Assignee hereby accepts
the Assigned Warranties from Assignor. Assignor and Assignee agree that such
sale, assignment, transfer and acceptance is effective as of the date hereof.

         Assignor hereby acknowledges and consents to the assignment of
warranties with respect to the Aircraft by Assignee to Lessee pursuant to
Section 10.01 of the Lease. Notwithstanding anything in this Assignment to the
contrary, so long as no Event of Default


                                       1


shall have occurred and the Lease shall not have been terminated under Section
17.02 thereof, Lessee may, to the exclusion of Assignee, exercise in Lessee's
name the right to obtain any recovery or benefit resulting from the enforcement
of any of the Assigned Warranties under the Purchase Agreement in respect of the
Aircraft subject to the terms of the Lease and may exercise all other rights and
powers of the "Buyer" with respect to the Assigned Warranties and may, without
the consent of the Assignee, enter into amendments or modifications thereof.

         Manufacturer shall not be deemed to have knowledge of, and need not
recognize the occurrence or discontinuance of, any Event of Default under, or
termination of, the Lease, unless and until Manufacturer has received written
notice thereof from Assignee addressed to Manufacturer, to its Director of
Contracts by mail to EMBRAER-Empresa Brasileira de Aeronautica S.A., Av.
Brigadeiro Faria Lima, 2170, 12.227-901 Sao Jose dos Campos-SP, Brazil, or by
telecopy to telecopy no.: (55-123) 45-1257, and, in acting in accordance with
the terms and conditions of the Purchase Agreement and this Assignment,
Manufacturer may act with acquittance and conclusively rely upon any such
notice. If Manufacturer so receives notice from Assignee that an Event of
Default shall have occurred and the Lease shall have been terminated under
Section 17.02 thereof, Manufacturer will perform all the duties and obligations
under the Purchase Agreement with respect to the Assigned Warranties for the
benefit of Assignee and will make any and all payments that it thereafter is
required to make in respect of the Assigned Warranties directly to Assignee at
the account or location as Assignee from time to time notifies Manufacturer in
writing.

         Section 3. In accordance with the Purchase Agreement, the assignment
herein is subject to the following conditions:

                  (a) Assignee is not and will not be owned, effectively
         controlled or managed by any airframe manufacturer which competes with
         Manufacturer in the thirty-seven (37) to seventy (70) seat turbo jet
         market; and

                  (b) In the event Assignee subsequently transfers the Aircraft
         and/or any of Assignee's remaining rights to the Assigned Warranties
         with respect to the Aircraft, to any other entity, Assignee agrees to
         notify Manufacturer of the identity of such entity at least thirty (30)
         calendar days prior to such transaction (provided that if Assignee
         fails to notify Manufacturer within this time, Assignee may not assign
         its remaining rights without Manufacturer's consent, which shall not be
         unreasonably withheld) and provide Manufacturer with prior written
         notice of any events under such agreement that would cause any rights
         thereby assigned to revert to Assignee under such agreement; provided,
         however, that, pursuant to the Purchase Agreement, Assignee shall not
         transfer the Aircraft to an entity which is owned, effectively
         controlled or managed by any airframe manufacturer which competes with
         Manufacturer in the thirty-seven (37) to seventy (70) seat turbo jet
         market.

         Section 4. Anything herein contained to the contrary notwithstanding:

                  (a) Neither Assignee nor Beneficiary shall have any obligation
         or liability under the Purchase Agreement by reason of, or arising out
         of, this Assignment, or be obligated to perform any of Assignor's
         duties or obligations under the Purchase Agreement, to make any
         payment, to present or file any claim, or to take any other action to
         collect or enforce any claim for any payment assigned hereunder;


                                       2



                  (b) Assignee confirms, for Manufacturer's benefit, that in
         exercising any rights under the Purchase Agreement or in making any
         claim with respect to the Aircraft or other goods and services
         delivered or to be delivered pursuant to the Purchase Agreement, the
         terms and conditions of the Purchase Agreement shall apply to and bind
         Assignee (and any assignee of Assignee) to the same extent as Assignor;
         and

                  (c) Except as stated herein, nothing contained herein shall
         subject Manufacturer or Assignor to any liability to which it, as the
         case may be, would not otherwise be subject under the Purchase
         Agreement or modify in any respect the rights of Manufacturer or
         Assignor thereunder.

         Section 5. NOTICES. Any notices provided for in the Purchase Agreement
Assignment No. 1 shall be delivered to Assignee and Lessee at the following
address or such other place as Assignee or Lessee, as the case may be, may
designate in accordance with the Purchase Agreement Assignment No. 1:

         (a)      if to Assignee to:

                  Wells Fargo Bank Northwest, National Association
                  MAC: U1254-031
                  79 South Main Street, 3rd Floor
                  Salt Lake City, Utah 84111
                  Tel: (801) 246-5630
                  Fax: (801) 246-5053
                  Attn: Corporate Trust Department

                  with a copy to:

                  Mitsui & Co. (U.S.A.), Inc.
                  200 Park Avenue
                  New York, New York 10166
                  Tel: (212) 878-4314
                  Fax: (212) 878-0979
                  Attn: General Manager, Aerospace, Marine and Motor Vehicle
                        Department

         (b)      if to Lessee to:
                  Chautauqua Airlines, Inc.
                  2500 S. High School Road
                  Indianapolis, Indiana 46241
                  Tel: (317) 484-6047
                  Fax: (317) 484-6060
                  Attn: President

                  with a copy to:

                  Wexford Capital LLC
                  411 West Putnam Avenue
                  Greenwich, Connecticut 06830
                  Tel: (203) 862-7000


                                       3



                  Fax: (203) 862-7490
                  Attn: President

         Section 6. HEADINGS. The headings of the Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

         Section 7. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA, WITHOUT REGARD TO CONFLICT OF LAWS RULES OTHER THAN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW.

         Section 8. WAIVER OF WARRANTIES. THE ASSIGNEE HEREBY WAIVES, RELEASES
AND RENOUNCES, ALL WARRANTIES, OBLIGATIONS AND LIABILITIES OF THE ASSIGNOR OTHER
THAN THE WARRANTY OF TITLE CONTAINED IN THE WARRANTY BILL OF SALE ISSUED OF EVEN
DATE HEREWITH BY THE ASSIGNOR TO THE ASSISGNEE, AND ASSIGNEE FURTHER WAIVES AND
RELEASES ALL OTHER RIGHTS, CLAIMS AND REMEDIES OF ASSIGNEE AGAINST ASSIGNOR
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY
NON-CONFORMANCE OR DEFECT OR FAILURE OR ANY OTHER REASON IN ANY AIRCRAFT OR
OTHER THING DELIVERED UNDER THE PURCHASE AGREEMENT, INCLUDING DATA, DOCUMENT,
INFORMATION OR SERVICE, INCLUDING BUT NOT LIMITED TO:

         a.  ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS;

         b. ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE;

         c. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
OR NOT ARISING FROM THE NEGLIGENCE OR OTHER RELATED CAUSES OF ASSIGNOR, WHETHER
ACTIVE, PASSIVE OR IMPUTED; AND

         d. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO ANY AIRCRAFT, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO ANY
AIRCRAFT OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

         Section 9. COUNTERPARTS. This Assignment and the acknowledgment and
consent to be signed by the Manufacturer 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.

         Section 10. WFB is entering into this Assignment solely as Owner
Trustee under the Trust Agreement and not in its individual capacity and neither
WFB nor any entity acting as successor Owner Trustee or additional Owner Trustee
under the Trust Agreement shall be personally liable for, or for any loss in
respect of, any of the statements, representations, warranties, agreements or
obligations stated to be those of the Assignee hereunder, as to


                                       4



which all interested parties shall look solely to the Trust Estate (as defined
in the Trust Agreement), except to the extent expressly provided otherwise in
the other Operative Documents (as defined in the Trust Agreement), PROVIDED
HOWEVER, that nothing in this Section 10 shall be construed to limit in scope or
substance the liability of WFB or any entity acting as successor Owner Trustee
or additional Owner Trustee under the Trust Agreement in its individual capacity
for the consequences of its own willful misconduct or gross negligence or (in
receiving, handling or remitting funds) its simple negligence, or the inaccuracy
or breach of its representations, warranties or covenants made in such capacity
in any other Operative Documents.

              [Remainder of the Page is Intentionally Left Blank.]


                                       5



         IN WITNESS WHEREOF, Assignor and Assignee have caused this Purchase
Agreement Assignment No. 2 to be duly executed and sealed as of the day and year
first written above.

         AERO LTD., as Assignor

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


         WELLS FARGO BANK NORTHWEST, NATIONAL
         ASSOCIATION, not in its individual capacity but solely
         as Owner Trustee on behalf of Mitsui & Co. (U.S.A.), Inc., as Assignee


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


         CHAUTAUQUA AIRLINES, INC., as Lessee


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


                                       6



                       Annex 1 to Purchase Agreement Assignment No. 2 - (N288SK)

                     CONSENT AND AGREEMENT No. 2 - (N288SK)

         The undersigned, EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A., a
corporation organized and existing under the laws of Brazil, hereby acknowledges
notice of and consents to all of the terms (including without limitation the
assignment of the Assigned Warranties by Assignee to Lessee pursuant to Section
10.01 of the Lease) of the foregoing Purchase Agreement Assignment No. 2 -
(N288SK), dated as of June 29, 2001, among Aero Ltd., Wells Fargo Bank
Northwest, National Association, not in its individual capacity but solely as
Owner Trustee on behalf of Mitsui & Co. (U.S.A.), Inc. (the "Beneficiary") and
Chautauqua Airlines, Inc. (the "Lessee"), to the extent they relate to the
Manufacturer (herein called the "Assignment No. 2", the defined terms therein
being hereinafter used with the same meaning) and hereby confirms to the
Assignee and the Lessee that: (i) all representations, warranties, indemnities
and agreements of the Manufacturer under the Assigned Warranties with respect to
the Aircraft shall inure to the benefit of the Assignee to the same extent as if
originally named the "Buyer" therein, subject to the terms and conditions of the
Assignment No. 2, the Purchase Agreement and the Purchase Agreement Assignment
No. 1 -(N288SK) dated as of June 29, 2001 between Solitair Corp. and Assignor
("Assignment No. 1"); (ii) neither Assignee nor Beneficiary shall be liable for
any of the obligations or duties of Solitair Corp. or the Assignor under the
Purchase Agreement or Assignment No. 1, nor shall the Assignment No. 2 give rise
to any duties or obligations whatsoever on the part of the Assignee owing to the
Manufacturer except for Assignee's agreement to effect that in exercising any
rights under the Purchase Agreement as assigned by Assignment No. 1, or in
making any claims with respect to the Aircraft or other things (including
without limitation data, sale documents and services) delivered or to be
delivered pursuant to the Purchase Agreement as assigned by Assignment No. 1,
the terms and conditions of the Purchase Agreement as assigned by Assignment No.
1, shall apply to and be binding upon Assignee to the same extent as if Assignee
had been the original "Buyer" thereunder, and with respect to such agreement the
Manufacturer agrees that, anything contained in the Purchase Agreement or the
Assignment No. 2 to the contrary notwithstanding, so long as the Manufacturer
shall not have received notice that an Event of Default shall have occurred and
the Lease shall have been terminated under Section 17.02 thereof, the Assignee
shall not have any responsibility to the Manufacturer for failure to comply with
any of the terms of the Purchase Agreement as assigned by Assignment No. 1 with
respect to the Aircraft while subject to the terms of the Lease to Lessee so
long as the Assignee acts upon the written instructions of Lessee (to which
instructions the Manufacturer understands it shall have access on request);
provided that no person other than the Manufacturer shall have any rights
against the Assignee with respect to the undertaking and agreement set forth in
this clause (ii); (iii) the Manufacturer will continue to pay to the Lessee all
payments which the Manufacturer may be required to make in respect of the
Aircraft under the Purchase Agreement as assigned by Assignment No. 1 unless and
until the Manufacturer shall have received written notice addressed to its
Contracts Administrator, by mail to EMBRAER-Empresa Brasileira de Aeronautica
S.A., Av. Brigadeiro Faria Lima, 2170, 12.227-901 Sao Jose dos Campos, SP,
Brazil, or by telecopy to telecopy no.: (55-123) 45-1257, that an Event of
Default shall have occurred and the Lease shall have been terminated under
Section 17.02 thereof (which such notice from the Assignee shall be conclusive
proof thereof to the Manufacturer and as to which the Manufacturer shall have no
obligation to inquire), whereupon the Manufacturer will make any and all
payments and take any and all actions which it may be required thereafter to
make or take in respect of the Aircraft under the Purchase Agreement as assigned
by Assignment No. 1 and the Assigned Warranties which have been assigned under
the Assignment No. 2 directly to the


                                       1



Assignee at its address at Wells Fargo Bank Northwest, National Association,
MAC: U1254-031,79 South Main Street, 3rd Floor, Salt Lake City, Utah 84111, Tel:
(801) 246-5630, Fax: (801) 246-5053, Attn: Corporate Trust Department, with copy
to Mitsui & Co. (U.S.A.), Inc., 200 Park Avenue, New York, New York 10166, Tel:
(212) 878-4314, Fax: (212) 878-0979, Attn: General Manager, Aerospace, Marine
and Motor Vehicle Department; and (iv) from and after the delivery of the
Aircraft and payment in full therefor as invoiced by the Assignor to the
Assignee on the Delivery Date, the Manufacturer will not assert any lien or
claim against the Aircraft or any part thereof arising with respect to or in
connection with any work or other services performed before the delivery and
acceptance of the Aircraft.

         The Manufacturer hereby represents and warrants that (A) the
Manufacturer is a corporation duly organized and existing in good standing under
the laws of Brazil, (B) the making and performance of the Purchase Agreement
have been duly authorized by all necessary corporate action on the part of the
Manufacturer, do not require any stockholder approval, do not contravene the
Manufacturer's By-Laws or any indenture, credit agreement or other contractual
agreement to which the Manufacturer is a party or by which it is bound, and the
making of the Purchase Agreement does not contravene any law binding on the
Manufacturer, (C) the making and performance of this Consent and Agreement have
been duly authorized by all necessary corporate action on the part of the
Manufacturer, do not require any stockholder approval and do not contravene any
law binding on the Manufacturer or contravene the Manufacturer's By-laws or any
indenture, credit agreement or other contractual agreement to which the
Manufacturer is a party or by which it is bound and (D) the Purchase Agreement
constituted as of the date thereof and at all times thereafter to and including
the date of this Consent and Agreement constitutes a binding obligation of the
Manufacturer enforceable against the Manufacturer in accordance with its terms
subject to: (i) the limitations of applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally; and (ii) general principles of equity (regardless of whether such
enforceability is considered in -a proceeding in equity or at law), which
principles do not make the remedies available at law or in equity with respect
to the Purchase Agreement inadequate for the practical realization of the
benefits intended to be provided thereby and this Consent and Agreement is a
binding obligation of the Manufacturer enforceable against the Manufacturer in
accordance with its terms subject to: (a) the limitations of applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally; and (b) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law), which principles do not make the remedies available at law or in equity
which respect to this Consent and Agreement inadequate for the practical
realization of the benefits intended to be provided thereby.

         [The remainder of this page has been left blank intentionally.]


                                       2


         THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, AS
APPLICABLE TO CONTRACTS BETWEEN CITIZENS OF THE STATE TO BE PERFORMED WHOLLY
WITHIN THAT STATE, AND WITHOUT REGARD TO CONFLICTS OF LAW RULES OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

         Dated as of June 29, 2001

                                   EMBRAER-EMPRESA BRASILEIRA
                                   DE AERONAUTICA S.A.


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

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




NOTE TO EXHIBIT 10.38

The two additional Aircraft Purchase Agreements are substantially identical
in all material respects to the filed Aircraft Purchase Agreement except as
follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N286SK                                           June, 2001                Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------
N287SK                                           June, 2001                Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.39

                                                                   Exhibit 10.39

                                                               EXECUTION VERSION

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

                            TRUST AGREEMENT [N288SK]

                            Dated as of June 5, 2001

                                     Between

                           MITSUI & CO (U.S.A.), INC.

                                       And

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

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

                      One Embraer Model ERJ-145LR Aircraft
                    Bearing Manufacturer's Serial No. 145461
                     United States Registration Mark N288SK

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



                                TABLE OF CONTENTS



                                                                                                PAGE
                                                                                                
                                    ARTICLE I

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

                                   ARTICLE II

DECLARATION OF TRUST.............................................................................. 1

                                   ARTICLE III

AUTHORIZATION; CONDITIONS PRECEDENT................................................................1

Section 3.01      AUTHORIZATION....................................................................1
Section 3.02      CONDITIONS PRECEDENT.............................................................2
Section 3.03      AUTHORIZATION IN RESPECT OF A REPLACEMENT AIRFRAME OR REPLACEMENT ENGINES....... 2
Section 3.04      TRUST AGREEMENT REMAINING IN FULL FORCE AND EFFECT...............................3
Section 3.05      AUTHORIZATION IN RESPECT OF RETURN OF AN ENGINE..................................3

                                   ARTICLE IV

                            RECEIPT, DISTRIBUTION AND
APPLICATION OF INCOME FROM THE TRUST ESTATE........................................................3

Section 4.01      PAYMENTS FROM TRUST ESTATE ONLY..................................................3
Section 4.02      DISTRIBUTION OF PAYMENTS.........................................................3
Section 4.03      METHOD OF PAYMENTS...............................................................4

                                    ARTICLE V

DUTIES OF OWNER TRUSTEE............................................................................4

Section 5.01      NOTICE OF EVENT OF DEFAULT.......................................................4
Section 5.02      ACTION UPON INSTRUCTIONS.........................................................4
Section 5.03      LIMITATIONS ON DUTIES............................................................5
Section 5.04      NO DUTIES EXCEPT AS SPECIFIED; NO ACTION EXCEPT AS SPECIFIED.....................5
Section 5.05      SATISFACTION OF CONDITIONS PRECEDENT.............................................5
Section 5.06      FIXED INVESTMENT TRUST...........................................................6
Section 5.07      LIMITED PURPOSE..................................................................6


                                        i


                                                                                               
                                   ARTICLE VI

OWNER TRUSTEE......................................................................................6

Section 6.01      ACCEPTANCE OF TRUSTS AND DUTIES..................................................6
Section 6.02      ABSENCE OF CERTAIN DUTIES........................................................6
Section 6.03      NO REPRESENTATIONS OR WARRANTIES AS TO CERTAIN MATTERS...........................7
Section 6.04      NO SEGREGATION OF MONIES; INTEREST...............................................7
Section 6.05      RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS...................................7
Section 6.06      NOT ACTING IN INDIVIDUAL CAPACITY................................................8
Section 6.07      FEES; COMPENSATION...............................................................8
Section 6.08      TAX RETURNS......................................................................8
Section 6.09      REPRESENTATIONS AND COVENANTS OF OWNER TRUSTEE AND WFB...........................8

                                   ARTICLE VII

INDEMNIFICATION OF WFB BY BENEFICIARY.............................................................10

                                  ARTICLE VIII

TRANSFER OF BENEFICIARY'S INTEREST................................................................11

Section 8.01      TRANSFER OF INTEREST............................................................11

                                   ARTICLE IX

SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES.............................................................11

Section 9.01      RESIGNATION OF OWNER TRUSTEE; APPOINTMENT OF SUCCESSOR..........................11
Section 9.02      CO-TRUSTEES AND SEPARATE TRUSTEES...............................................12

                                    ARTICLE X

                          SUPPLEMENTS AND AMENDMENTS TO
TRUST AGREEMENT AND OTHER DOCUMENTS...............................................................13

Section 10.01     SUPPLEMENTS AND AMENDMENTS AND DELIVERY THEREOF.................................13
Section 10.02     DISCRETION AS TO EXECUTION OF DOCUMENTS.........................................13
Section 10.03     ABSENCE OF REQUIREMENTS AS TO FORM..............................................13
Section 10.04     DISTRIBUTION OF DOCUMENTS.......................................................13
Section 10.05     NO REQUEST NEEDED AS TO LEASE SUPPLEMENT........................................14



                                       ii


                                                                                               
                                   ARTICLE XI

CERTAIN LIMITATIONS...............................................................................14

Section 11.01     LIMITATIONS ON CONTROL .........................................................14
Section 11.02     DISCRETION AND ACTIONS OF OWNER TRUSTEE.........................................14
Section 11.03     PAYMENTS........................................................................15
Section 11.04     OWNER TRUSTEE ACTS AS TRUSTEE...................................................15

                                   ARTICLE XII

MISCELLANEOUS.....................................................................................15

Section 12.01     TERMINATION OF TRUST AGREEMENT..................................................15
Section 12.02     TERMINATION AT OPTION OF BENEFICIARY............................................15
Section 12.03     BENEFICIARY HAS NO LEGAL TITLE IN TRUST ESTATE..................................16
Section 12.04     ASSIGNMENT, SALE, ETC., OF AIRCRAFT.............................................16
Section 12.05     TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY.............................16
Section 12.06     NOTICES.........................................................................16
Section 12.07     SEVERABILITY....................................................................16
Section 12.08     WAIVERS, ETC....................................................................16
Section 12.09     COUNTERPARTS....................................................................16
Section 12.10     BINDING EFFECT, ETC.............................................................16
Section 12.11     HEADINGS; REFERENCES............................................................16
Section 12.12     GOVERNING LAW...................................................................17
Section 12.13     ADMINISTRATION OF TRUST.........................................................17



                                       iii


                            TRUST AGREEMENT [N288SK]

     This TRUST AGREEMENT [N288SK] dated as of June 5, 2001, between MITSUI &
CO. (U.S.A.), INC., a New York corporation ("BENEFICIARY"), and WELLS FARGO BANK
NORTHWEST, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, "WFB" and otherwise not in its individual capacity but
solely as trustee hereunder, "OWNER TRUSTEE").

                                    ARTICLE I

                                   DEFINITIONS

     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 the Aircraft Lease Agreement [N288SK]
dated June 5, 2001 (the "LEASE") between Owner Trustee and Chautauqua Airlines,
Inc. (the "LESSEE").

                                   ARTICLE II

                              DECLARATION OF TRUST

     WFB hereby declares that it will hold the Trust Estate as Owner Trustee
upon the trusts hereinafter set forth for the use and benefit of Beneficiary,
subject, however, to the provisions of the Lease and the other Operative
Documents. This Trust Agreement is not intended by the Beneficiary to create,
and the trust created hereby is not intended by the Beneficiary and the other
parties interested herein to constitute a business trust for the purposes of the
Bankruptcy Code.

     The Owner Trustee and the trust created hereunder shall not engage in any
business other than, and its purpose shall be restricted to, the ownership,
leasing, operation and financing, if any, of the Aircraft and Engines and any
other lawful act or activity reasonably incidental thereto (which shall include
pledging of the Trust Estate to secure indebtedness of the Lessor to the extent
required in connection with any financing of the Aircraft).

                                   ARTICLE III

                       AUTHORIZATION; CONDITIONS PRECEDENT

     Section 3.01 AUTHORIZATION. In respect of the Aircraft, Beneficiary hereby
authorizes and directs Owner Trustee to, and Owner Trustee agrees for the
benefit of Beneficiary that it will, on and after the Delivery Date, subject
(except with respect to Section 3.01(a)) to due compliance with the terms of
Section 3.02:

          (a) execute and deliver the Lease and the other Operative Documents to
which it is a party (in the respective forms in which they are delivered from
time to time by Beneficiary to Owner Trustee);



          (b) subject to the terms of this Trust Agreement, (i) exercise its
rights and perform its duties under the Operative Documents to which it is a
party and (ii) exercise the rights and perform the duties of Lessor under the
Lease;

          (c) purchase the Aircraft pursuant to the Purchase Agreement;

          (d) accept from Seller the delivery of the Aircraft, the bill of sale
specified in the Purchase Agreement and the invoice, if any, with respect to
such Aircraft;

          (e) effect the registration of the Aircraft with the FAA in the name
of Owner Trustee by filing or causing to be filed with the FAA: (i) the bill of
sale referred to in paragraph (d) above; (ii) an aircraft registration
application in the name of Owner Trustee (including, without limitation, an
affidavit from Owner Trustee in compliance with the provisions of Section
47.7(c)(2) of the FARs); and (iii) this Trust Agreement;

          (f) make payment of the Purchase Price for the Aircraft from the
aggregate amount of funds contributed by Beneficiary therefor, if any; and

          (g) execute and deliver all such other instruments, documents or
certificates and take all such other actions in accordance with the direction of
Beneficiary, as Beneficiary may deem necessary or advisable in connection with
the transactions contemplated by this Trust Agreement and the other Operative
Documents.

          (h) immediately after the delivery of the Aircraft to the Owner
Trustee, cause the Aircraft to be leased to Lessee under the Lease; and

          (i) execute and deliver a Lease Supplement covering the Aircraft.

     Section 3.02 CONDITIONS PRECEDENT. The rights and obligations of Owner
Trustee to take the actions required by Section 3.01 shall be subject to the
Beneficiary having notified Owner Trustee that the terms and conditions of
Section 8(a) of the Purchase Agreement, insofar as they relate to conditions
precedent to performance by Beneficiary of its obligations thereunder, have been
either fulfilled to the satisfaction of, or waived by, Beneficiary. Beneficiary
shall, by instructing Owner Trustee in writing to release the full amount of the
funds provided by it, if any, then held by Owner Trustee, be deemed to have
found satisfactory to it, or waived, all such conditions precedent.

     Section 3.03 AUTHORIZATION IN RESPECT OF A REPLACEMENT AIRFRAME OR
REPLACEMENT ENGINES. The Owner Trustee agrees for the benefit of the Beneficiary
that, upon the receipt by a Responsible Officer of Owner Trustee of an
authorization and direction from the Beneficiary, it will, in the event of a
Replacement Airframe or Replacement Engines, if any, being substituted pursuant
to Section 12.01(a)(i) of the Lease, or a Replacement Engine being substituted
pursuant to Section 12.02 of the Lease, subject to due compliance with the terms
of Sections 12.01(d) and 12.02 of the Lease, as the case may be;

          (a) to the extent not previously accomplished by a prior
authorization, authorize a representative or representatives of the Owner
Trustee to accept delivery of the Replacement Airframe or Replacement Engines,
if any, or the Replacement Engine;

          (b) accept from Lessee or other vendor of the Replacement Airframe or
Replacement Engines, if any, or the Replacement Engine, a bill of sale or bills
of sale (if tendered) and the invoice, if any, with respect to the Replacement
Airframe and Replacement Engines, if any, or the Replacement Engine being
furnished pursuant to Section 12.01(a)(i) or 12.02 of the Lease;

                                        2


          (c) in the case of a Replacement Airframe, make application to the FAA
(or the Aeronautical Authority of any jurisdiction other than the United States
of America in which the Replacement Airframe is then registered in accordance
with the terms of the Lease) for registration in the name of the Owner Trustee
of the Aircraft of which such Replacement Airframe is a part;

          (d) execute and deliver a Lease Supplement covering (i) the Aircraft
of which such Replacement Airframe is part of and, (ii) such Replacement Engine,
as the case may be;

          (e) transfer its interest in (without recourse except as to
obligations in respect of Lessor's Liens) and to the Airframe and Engines (if
any) or the Engine being replaced to or at the direction of Lessee; and

          (f) take such further action as may be contemplated by Sections
12.01(d) or 12.02 of the Lease, as the case may be.

     Section 3.04 TRUST AGREEMENT REMAINING IN FULL FORCE AND EFFECT. In the
event of substitution of a Replacement Airframe for the Airframe or the
substitution of a Replacement Engine for any Engine or engine all provisions of
this Trust Agreement relating to such replaced Airframe or Engine or engine
shall be applicable to such Replacement Airframe or Replacement Engine, with the
same force and effect as if such Replacement Airframe or Replacement Engine were
the same airframe or engine as the Airframe or Engine being replaced but for the
Event of Loss with respect to such Airframe or Engine.

     Section 3.05 AUTHORIZATION IN RESPECT OF RETURN OF AN ENGINE. The Owner
Trustee agrees for the benefit of the Beneficiary that, upon the receipt by a
Responsible Officer of the Owner Trustee of an authorization and direction from
the Beneficiary, it will, in the event of an engine being transferred to the
Owner Trustee pursuant to Section 18.03 of the Lease, subject to due compliance
with the terms of such Section 18.03:

          (a) accept from Lessee or other vendor the bill of sale contemplated
by such Section 18.03 with respect to such engine being transferred to the Owner
Trustee; and

          (b) transfer its right, title and interest in (without recourse or
warranty except a warranty against Lessor's Liens) and to an Engine to or at the
direction of Lessee as contemplated by such Section 18.03.

                                   ARTICLE IV

                            RECEIPT, DISTRIBUTION AND
                  APPLICATION OF INCOME FROM THE TRUST ESTATE.

     Section 4.01 PAYMENTS FROM TRUST ESTATE ONLY. All payments to be made by
Owner Trustee under this Trust Agreement shall be made only from the income from
and proceeds of the Trust Estate to the extent that Owner Trustee shall have
received sufficient income or proceeds from the Trust Estate to make such
payments. Beneficiary agrees that it will look solely to the income from and
proceeds of the Trust Estate to the extent available for distribution to
Beneficiary as provided in this Trust Agreement. Except as provided in Article
VII, Beneficiary agrees that WFB is neither personally liable to Beneficiary for
any amounts payable nor subject to any other liability under this Trust
Agreement.

     Section 4.02 DISTRIBUTION OF PAYMENTS. (a) PAYMENTS TO THE BENEFICIARY. All
payments of Basic Rent and Supplemental Rent, or other payments of any kind,
received by the Owner Trustee and all property constituting the Trust Estate
upon the termination of this Trust Agreement in accordance with

                                        3


the provisions of Article XII, forthwith upon receipt by Owner Trustee, shall be
paid over to the Beneficiary without deduction, set-off or adjustment of any
kind; PROVIDED, HOWEVER, that any payments received by the Owner Trustee from
the Beneficiary with respect to Owner's Trustee's fees and disbursements, or
pursuant to Article VII shall be retained by Owner Trustee and applied toward
the purpose for which such payments were made.

          (b) PAYMENTS TO OWNER TRUSTEE, OTHER PARTIES. Any payment of a type
referred to in Section 4.02(a) received by Owner Trustee and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made in this Trust Agreement shall be distributed
forthwith upon receipt by Owner Trustee in the following order of priority:
FIRST, so much of such payment as shall be required to reimburse Owner Trustee
for any expenses not otherwise reimbursed as to which Owner Trustee is entitled
to be so reimbursed pursuant to the provisions hereof shall be retained by Owner
Trustee; SECOND, so much of the remainder for which provision as to the
application thereof is contained in the Lease or any of the other Operative
Documents shall be applied and distributed in accordance with the terms of the
Lease or such other Operative Document; and THIRD, the balance, if any, shall be
paid to Beneficiary.

     Section 4.03 METHOD OF PAYMENTS. Owner Trustee shall make distributions or
cause distributions to be made to Beneficiary pursuant to this Article IV by
transferring the amount to be distributed by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be so distributed shall not have been received by Owner Trustee by
12:00 noon, New York City time, and which funds Owner Trustee shall not have
been reasonably able to distribute to Beneficiary on the day received) to
Beneficiary's account at Citibank, N.A., ABA No. 021000089, Account Name: Mitsui
& Co. (U.S.A.), Inc., Account No. 30831745, Ref: Chautauqua, or to such other
account or accounts of Beneficiary as Beneficiary may designate from time to
time in writing to Owner Trustee; PROVIDED, that Owner Trustee shall use
reasonable efforts to invest overnight, in cash equivalents, all funds received
by it at or later than 12:00 noon, New York City time, and which funds Owner
Trustee shall not have been reasonably able to distribute to Beneficiary on the
day received.

                                    ARTICLE V

                             DUTIES OF OWNER TRUSTEE

     Section 5.01 NOTICE OF EVENT OF DEFAULT. (a) If Owner Trustee shall have
knowledge of a Default or an Event of Default, Owner Trustee shall give to
Beneficiary and Lessee prompt telephonic or telecopy notice thereof followed by
prompt confirmation thereof by certified mail, postage prepaid.

          (b) Subject to the terms of Section 5.03, Owner Trustee shall take
such action or shall refrain from taking such action, not inconsistent with the
provisions of the Operative Documents, with respect to such Default or Event of
Default or other event as Owner Trustee shall be directed in writing by
Beneficiary. For all purposes of this Trust Agreement, the Lease and the other
Operative Documents, in the absence of actual knowledge of Owner Trustee, Owner
Trustee shall not be deemed to have knowledge of a Default or Event of Default
unless notified in writing by the Beneficiary or Lessee.

     Section 5.02 ACTION UPON INSTRUCTIONS. Subject to the terms of Sections
5.01 and 5.03, upon the written instructions at any time and from time to time
of Beneficiary, Owner Trustee will take each of the following actions, not
inconsistent with the provisions of the Operative Documents, as may be specified
in such instructions: (a) give such notice or direction or exercise such right,
remedy or power under this Trust Agreement or any of the other Operative
Documents or in respect of all or any part of the Trust Estate, or take such
other action, as shall be specified in such instructions (including entering
into such agreements and instruments as shall be necessary under Article X); (b)
take such action to preserve

                                        4


or protect the Trust Estate (including the discharge of Liens) as may be
specified in such instructions; (c) approve as satisfactory to it all matters
required by the terms of the Lease and the other Operative Documents to be
satisfactory to Owner Trustee, it being understood that without written
instructions of Beneficiary, Owner Trustee shall not approve any such matter as
satisfactory to it; (d) subject to the rights of Lessee under the Lease, after
the expiration or earlier termination of the Lease, convey all of Owner
Trustee's right, title and interest in and to the Aircraft for such amount, on
such terms and to such purchaser or purchasers as shall be designated in such
instructions, or retain, lease or otherwise dispose of, or from time to time
take such other action with respect to, the Aircraft on such terms as shall be
designated in such instructions; and (e) take or refrain from taking such other
action or actions as may be specified in such instructions. In the event that
the Owner Trustee is unsure of the application of any provision of this Trust
Agreement or any other agreement relating to the transactions contemplated
hereby, the Owner Trustee may request and rely upon instructions of the
Beneficiary.

     Section 5.03 LIMITATIONS ON DUTIES. Owner Trustee shall not be required to
take any action under Section 5.01 (other than the giving of the notices
referred to therein) or 5.02, other than the administrative tasks and covenants
expressly undertaken by it under the Operative Documents, if Owner Trustee shall
reasonably believe such action is not adequately indemnified by Beneficiary
under Article VII, unless Lessee or Beneficiary agrees to furnish such
additional indemnity as shall reasonably be required, in manner and form
satisfactory to Owner Trustee, and, in addition, to the extent not otherwise
paid (or as separately agreed in any applicable fee letter), to pay the
reasonable compensation of Owner Trustee for the services performed or to be
performed by it pursuant to such direction and any reasonable fees and
disbursements of counsel or agents employed by Owner Trustee in connection
therewith. Owner Trustee shall not be required to take any action under Section
5.01 or 5.02 (other than the giving of the notices referred to therein) if Owner
Trustee shall have been advised by counsel that such action is contrary to the
terms of any of the Operative Documents or is otherwise contrary to applicable
Law and Owner Trustee has delivered to Beneficiary written notice of the basis
for its refusal to act.

     Section 5.04 NO DUTIES EXCEPT AS SPECIFIED; NO ACTION EXCEPT AS SPECIFIED.
(a) NO DUTIES EXCEPT AS SPECIFIED. Owner Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate or to otherwise take or refrain
from taking any action under, or in connection with, any of the Operative
Documents, except as expressly required by the terms of any Operative Document,
or as expressly provided by the terms hereof or in a written instruction from
Beneficiary received pursuant to the terms of Section 5.01 or 5.02, and no
implied duties or obligations shall be read into this Trust Agreement against
Owner Trustee. WFB agrees that it will, in its individual capacity and at its
own cost or expense (but without any right of indemnity in respect of any such
cost or expense hereunder or under the Lease), promptly take such action as may
be necessary to duly discharge and satisfy in full all Lessors Liens
attributable to it in its individual capacity that it is required to discharge
pursuant to Section 7.02 of the Lease and otherwise comply with the terms of
said Section 7.02 binding upon it.

          (b) NO ACTION EXCEPT AS SPECIFIED. Owner Trustee shall have no power,
right or authority to, and agrees that it will not, manage, control, use, sell,
dispose of or otherwise deal with the Aircraft or any other part of the Trust
Estate except (i) as expressly required by the terms of any of the Operative
Documents to which it is a party, (ii) as expressly provided by the terms hereof
or (iii) as expressly provided in written instructions from Beneficiary pursuant
to Section 5.01 or 5.02.

     Section 5.05 SATISFACTION OF CONDITIONS PRECEDENT. Anything in this Trust
Agreement to the contrary notwithstanding, Owner Trustee shall, subject to the
satisfaction of Owner Trustee of the occurrence of all the applicable conditions
precedent specified in Section 3.02, comply with the provisions of Section 3.01.

                                        5


     Section 5.06 FIXED INVESTMENT TRUST. Notwithstanding anything in this Trust
Agreement to the contrary, Owner Trustee shall not be authorized and shall have
no power to "vary the investment" of Beneficiary within the meaning of Treasury
Regulations Section 301.7701-4(c)(1), it being understood that Owner Trustee
shall have the power and authority to fulfill its obligations under Section 4.03
hereof.

     Section 5.07 LIMITED PURPOSE. The Trust shall not engage in any business
other than, and its purpose shall be restricted to, the ownership, leasing,
operation and financing of the Aircraft, a pledge of its assets to secure
indebtedness of the Lessor to the extent required in connection with any
financing of the Aircraft, and any other lawful act or activity reasonably
incidental thereto.

                                   ARTICLE VI

                                  OWNER TRUSTEE

     Section 6.01 ACCEPTANCE OF TRUSTS AND DUTIES. WFB accepts the trusts hereby
created and agrees to perform the same as Owner Trustee but only upon the terms
hereof applicable to it. Owner Trustee also agrees to receive and disburse all
monies received by it constituting part of the Trust Estate pursuant to the
terms hereof. WFB shall not be answerable or accountable under any
circumstances, except for (a) its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of Owner
Trustee in violation of Section 5.04(b), (b) its failure (in its individual
capacity) to perform its obligations under Section 5.04(a), (c) its or Owner
Trustee's failure to use ordinary care to receive or disburse funds or to comply
with the first sentence of Section 6.08, (d) liabilities that may result from
the inaccuracy of any representation or breach of warranty of it in its
individual capacity (or from the failure by it in its individual or trust
capacity to perform any covenant) in this Trust Agreement, the Lease or in any
of the other Operative Documents, (e) taxes, fees or other charges on, based on
or measured by any fees, commissions or compensation received by WFB in
connection with the transactions contemplated by this Trust Agreement and the
other Operative Documents to which it (in its individual capacity or as Owner
Trustee) is a party, or (f) its or Owner Trustee's failure to use ordinary care
in receiving or disbursing funds or for a breach of its obligation to invest
funds pursuant to Section 4.03. WFB shall have no obligation to advance its
individual funds for any purpose, and Owner Trustee shall have no obligation to
distribute to Beneficiary, Lessee or any third party any amounts to be paid to
Owner Trustee until such amounts are collected by Owner Trustee.

     Section 6.02 ABSENCE OF CERTAIN DUTIES. (a) Except in accordance with
written instructions furnished pursuant to Section 5.01 or 5.02 and except as
provided in, and without limiting the generality of, Sections 3.01 and 5.04(a)
and the last sentence of Section 9.01(b), neither Owner Trustee nor WFB shall
have any duty (i) to see to any recording or filing of any Operative Document,
or of any supplement to any thereof or to see to the maintenance of any such
~recording or filing or any other filing of reports with the FAA or other
governmental agencies, except that of WFB to comply with the FAA reporting
requirements set forth in 14 C.F.R. Section 47.45 and 14 C.F.R. Section 47.51,
or any successor provisions, and that the Owner Trustee shall upon written
request furnished by Lessee take such action as may be required of the Owner
Trustee to maintain the registration of the Aircraft in the name of the Owner
Trustee under the Federal Aviation Act or, to the extent the Aircraft is
registered in a country other than the United States of America pursuant to
Section 5 of Exhibit A-2 of the Lease, other applicable law, and Owner Trustee
shall, to the extent that information for that purpose is timely supplied by
Lessee pursuant to any of the Operative Documents, complete and timely submit
(and furnish Beneficiary with a copy of) any and all reports relating to the
Aircraft that may from time to time be required by the FAA or any government or
governmental authority having jurisdiction, (ii) to see to any insurance on the
Aircraft or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, other than to forward to Beneficiary
copies of all reports and other written information that Owner Trustee receives

                                        6


from Lessee pursuant to Articles XI and XIII of the Lease unless Beneficiary is
to receive the same directly from the Lessee pursuant to the Operative
Documents, (iii) except as provided in Section 5.04 or 6.01 hereof, to see to
the payment or discharge of any tax, assessment or other governmental charge or
any Lien or encumbrance of any kind owing with respect to or assessed or levied
against any part of the Trust Estate except as provided by Section 5.04 hereof
or Section 7.02 of the Lease or (iv) to inspect Lessee's books and records with
respect to the Aircraft at any time permitted pursuant to the Lease.

          (b) Notwithstanding clause (a), Owner Trustee will furnish to the
Beneficiary, promptly upon receipt thereof, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and other
instruments furnished to Owner Trustee under the Lease or any other Operative
Document except to the extent to which the same is to be provided directly to
the Beneficiary pursuant to the Operative Documents or to which a responsible
officer of Owner Trustee reasonably believes that duplicates or copies thereof
have otherwise already been furnished to Beneficiary by some other person.

     Section 6.03 NO REPRESENTATIONS OR WARRANTIES AS TO CERTAIN MATTERS.
NEITHER WFB NOR OWNER TRUSTEE MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE ABSENCE OF ANY STRICT
LIABILITY OBLIGATION OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF WHATSOEVER, or (b) any
representation or warranty as to the validity, legality or enforceability of
this Trust Agreement or any other Operative Agreement to which WFB, in its
individual capacity or as Owner Trustee, is a party, or any other document or
instrument, or as to the correctness of any statement contained in any thereof
except to the extent that any such statement is expressly made herein or therein
by such party as a representation by WFB, in its individual capacity or as Owner
Trustee, as the case may be.

     Section 6.04 NO SEGREGATION OF MONIES; INTEREST. Monies received by Owner
Trustee under this Trust Agreement need not be segregated in any manner except
to the extent required by applicable Law, or except as provided in written
instructions from Beneficiary, and shall be invested as provided in Section
4.03.

     Section 6.05 RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS. Owner Trustee
shall incur no liability to anyone in acting in good faith in reliance upon and
in accordance with any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper
reasonably believed by it to be genuine and reasonably believed by it to be
signed by the proper party or parties. Unless other evidence in respect thereof
is specifically prescribed in this Trust Agreement, any request, direction,
order or demand of Beneficiary or Lessee mentioned in this Trust Agreement or in
any of the other Operative Documents shall be sufficiently evidenced by written
instruments signed by the Chairman of the Board, the President, any Vice
President or any other officer and in the name of Beneficiary or Lessee, as the
case may be. Owner Trustee may accept a copy of a resolution of the Board of
Directors or Executive Committee of Lessee, certified by the Secretary or an
Assistant Secretary of Lessee as duly adopted and in full force and effect, as
conclusive evidence that such resolution has been duly adopted by said Board of
Directors or Executive Committee and that the same is in full force and effect.
As to any fact or matter the manner of ascertainment of which is not
specifically described in this Trust Agreement, Owner Trustee may, absent actual
knowledge to the contrary, for all purposes rely on a certificate signed by the
Chairman of the Board, the President, any Vice President or any other officer of
Lessee, and the Treasurer or an Assistant Treasurer or the Secretary

                                        7


or an Assistant Secretary of Lessee, as to such fact or matter, and such
certificate shall constitute full protection to Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon and in
accordance therewith. In the administration of trusts under this Trust
Agreement, Owner Trustee may execute any of the trusts or powers and perform its
powers and duties under this Trust Agreement directly or through agents or
attorneys and may, at the expense of the Trust Estate, consult with counsel,
accountants and other skilled persons to be selected and employed by it.

     Section 6.06 NOT ACTING IN INDIVIDUAL CAPACITY. In acting under this Trust
Agreement, WFB acts solely as Owner Trustee and not in its individual capacity
except as otherwise expressly provided in this Trust Agreement or in the other
Operative Documents to which it is a party; and, except as may be otherwise
expressly provided in this Trust Agreement, all persons, other than Beneficiary
as provided in this Trust Agreement, having any claim against Owner Trustee by
reason of the transactions contemplated hereby shall look only to the Trust
Estate for payment or satisfaction thereof except to the extent provided in
Section 6.01 or otherwise as Owner Trustee shall expressly agree otherwise in
writing.

     Section 6.07 FEES; COMPENSATION. WFB and Owner Trustee acknowledge that
Lessee is obligated to pay the fees and expenses of Owner Trustee pursuant to
Section 20.11 of the Lease; PROVIDED, that Owner Trustee shall have a Lien upon
the Trust Estate for any such fees or expenses not paid by Lessee, and such Lien
shall entitle Owner Trustee to priority as to payment thereof over payment to
any other Person under this Trust Agreement.

     Section 6.08 TAX RETURNS. Owner Trustee shall be responsible for the
keeping of all appropriate books and records relating to the receipt and
disbursement of all monies under this Trust Agreement or any agreement
contemplated hereby. Beneficiary shall be responsible for causing to be prepared
and filed all income tax returns required to be filed by Beneficiary. If
requested by Beneficiary, Owner Trustee shall prepare all income tax returns
required to be filed with respect to the trust created hereby; otherwise
Beneficiary shall prepare such returns and, upon delivery to it, Owner Trustee
shall execute and file such returns; PROVIDED, that, if Owner Trustee has been
preparing such returns, Owner Trustee shall send promptly a completed copy of
such return to Beneficiary not more than sixty (60) nor less than fifteen (15)
days prior to the due date of the return; PROVIDED, that Owner Trustee shall
have timely received all necessary information to complete and deliver to
Beneficiary such return. Beneficiary, upon request, will furnish Owner Trustee
with all such information as may be reasonably required from Beneficiary in
connection with the preparation of such income tax returns. Owner Trustee shall
keep copies of all returns delivered to or filed by it.

     Section 6.09 REPRESENTATIONS AND COVENANTS OF OWNER TRUSTEE AND WFB. (a)
WFB represents and warrants to the Beneficiary that it is on the date hereof a
Citizen of the United States.

          (b) WFB covenants and agrees for the benefit of the Beneficiary (i)
that it shall not cause or permit to exist a Lien (other than in favor of any
Financing Party) attributable to or caused by it with respect to the Aircraft or
any other portion of the Trust Estate, (ii) that it will promptly, at its own
expense, take such action as may be necessary duly to discharge any such Lien
attributable to or caused by it with respect to the Aircraft or any other
portion of the Trust Estate and (iii) to make restitution to the Trust Estate
for any actual diminution of the assets of the Trust Estate resulting from such
Liens attributable to or caused by it.

          (c) Each of WFB (in its individual capacity) and the Owner Trustee, as
applicable, represents and warrants for the benefit of the Beneficiary that:

               (i) WFB is a national banking association duly organized and
     existing under the laws of the United States of America and has the power
     and authority to carry on its business

                                        8


     as presently conducted and to perform its obligations as lessor under this
     Trust Agreement and the other Operative Documents to which it is a party,
     whether in its individual capacity or as Owner Trustee;

               (ii) this Trust Agreement has and the other Operative Documents
     to which it is a party, whether in its individual capacity or as Owner
     Trustee (collectively, the "OWNER TRUSTEE DOCUMENTS"), have been duly
     authorized by all necessary trust action on the part of WFB and none of
     such agreements requires any approval of the shareholders of WFB (or if
     such approval is required, such approval has been obtained) and neither the
     execution and delivery hereof and thereof nor the consummation of the
     transactions contemplated hereby and thereby nor compliance by WFB, whether
     in its individual capacity or as Owner Trustee, with any of the terms and
     provisions hereof and thereof will contravene any Utah law or federal law
     governing the banking and trust powers of WFB, whether in its individual
     capacity or as Owner Trustee, or result in any breach of, or constitute any
     default under, or result in the creation of any Lien, charge or encumbrance
     upon any property of WFB under any creditor agreement or instrument,
     charter or by-law or other agreement or instrument to which WFB, whether in
     its individual capacity or as Owner Trustee, is a party or by which WFB,
     whether in its individual capacity or as Owner Trustee, or its properties
     or assets are bound or affected;

               (iii) WFB, whether in its individual capacity or as Owner
     Trustee, has or will, prior to the Delivery Date have, received every
     consent, approval or authorization of, and has given every notice to, each
     Governmental Entity having jurisdiction with respect to the execution,
     delivery or performance of this Trust Agreement and the other Owner Trustee
     Documents (including all monetary and other obligations hereunder) that is
     required for WFB, whether in its individual capacity or as Owner Trustee,
     to execute and deliver this Trust Agreement and the other Owner Trustee
     Documents and each such consent, approval or authorization and notice is
     valid and effective and has not been revoked;

               (iv) this Trust Agreement has been, and the other Owner Trustee
     Documents have been, duly executed and delivered by WFB, whether in its
     individual capacity or as Owner Trustee, and this Trust Agreement does, and
     the other Owner Trustee Documents do, constitute legal, valid and binding
     obligations of WFB, whether in its individual capacity or as Owner Trustee,
     enforceable in accordance with their respective terms, except as
     enforcement thereof may be limited by applicable bankruptcy, insolvency,
     reorganization, moratorium or other similar laws affecting the enforcement
     of creditors' rights generally and by such principles of equity (regardless
     of whether such enforceability is considered in a proceeding in equity or
     at law) as a court having jurisdiction may impose;

               (v) there are no suits or proceedings pending or, to the
     knowledge of WFB, threatened in any court or before any regulatory
     commission, board or other Governmental Entity against or affecting WFB,
     whether in its individual capacity or as Owner Trustee, that may, either
     individually or in the aggregate, reasonably be expected to have a
     materially adverse effect on the ability of WFB, whether in its individual
     capacity or as Owner Trustee, to perform its obligations under this Trust
     Agreement and the other Owner Trustee Documents;

               (vi) on the Delivery Date, there are no Lessor's Liens
     attributable to WFB, either in its individual capacity or as Owner Trustee,
     in respect of all or any part of the Aircraft or the Trust Estate.

                                        9


                                   ARTICLE VII

                      INDEMNIFICATION OF WFB BY BENEFICIARY

     Beneficiary hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects, saves and keeps harmless, WFB and its successors,
assigns, agents and servants, from and against any and all liabilities,
obligations, losses, damages, penalties, taxes (excluding any taxes payable by
WFB on or measured by any compensation received by WFB for its services under
this Trust Agreement), claims, actions, suits, costs, expenses or disbursements
(including, without limitation, reasonable legal fees and expenses, but
excluding internal costs and expenses such as salaries and overhead, and
including, without limitation, any liability of an owner, any strict liability
and any liability without fault) of any kind and nature whatsoever, which may be
imposed on, incurred by or asserted against WFB (whether or not also indemnified
against by Lessee under the Lease or also indemnified against by any other
Person, in any way relating to or arising out of this Trust Agreement or any of
the other Operative Documents or the enforcement of any of the terms of any
thereof, or in any way relating to or arising out of the manufacture, purchase,
acceptance, nonacceptance, rejection, ownership, delivery, lease, possession,
use, operation, condition, sale, return or other disposition of the Aircraft
(including, without limitation, latent and other defects, whether or not
discoverable, and any claim for patent, trademark or copyright infringement), or
in any way relating to or arising out of the administration of the Trust Estate
or the action or inaction of Owner Trustee, under this Trust Agreement, except
(a) in the case of gross negligence or willful misconduct on the part of WFB, in
its individual capacity or as Owner Trustee, in the performance or
nonperformance of its duties under this Trust Agreement or under any of the
other Operative Documents or (b) those claims resulting from the inaccuracy of
any representation or warranty of WFB (or from the failure of WFB to perform any
of its covenants) in Section 5.02 of the Lease or elsewhere in any of the
Operative Documents or (c) as may result from a breach by WFB of its covenant in
the last sentence of Section 5.04(a) hereof or (d) in the case of the failure to
use ordinary care on the part of WFB, in its individual capacity or as Owner
Trustee, in the receipt or disbursement of funds or in connection with its
obligation to invest funds pursuant to Section 4.08 of the Lease or Section 4.03
hereof or in compliance with the provisions of the first sentence of Section
6.08 or (e) those claims arising under any circumstances or upon any terms where
Lessee would not have been required to indemnify WFB pursuant to Article XIV or
XV of the Lease disregarding for purposes of this paragraph Sections 14.07(d)
and (e) and Section 15.03(a) thereof, PROVIDED, that before asserting its right
to indemnification, if any, pursuant to this Article VII, WFB shall first demand
its corresponding right to indemnification pursuant to Article XIV or XV of the
Lease (but need not exhaust any or all remedies available thereunder); PROVIDED,
that Beneficiary shall be subrogated to the rights of Owner Trustee against
Lessee or any other indemnitor. The indemnities contained in this Article VII
extend to WFB only in its individual capacity and shall not be construed as
indemnities of the Trust Estate (except to the extent, if any, that WFB has been
reimbursed by the Trust Estate for amounts covered by the indemnities contained
in this Article VII). The indemnities contained in this Article VII shall
survive the termination of this Trust Agreement. In addition, if necessary, WFB
shall be entitled to indemnification from the Trust Estate for any liability,
obligation, loss, damage, penalty, tax, claim, action, suit, cost, expense or
disbursement indemnified against pursuant to this Article VII to the extent not
reimbursed by Lessee, Beneficiary or others, but without releasing any of them
from their respective agreements of reimbursement; and, to secure the same WFB
shall have a lien on the Trust Estate, subject to the provisions of Section
6.07, which shall be prior to any interest therein of Beneficiary. The payor of
any indemnity under this Article VII shall be subrogated to any right of the
person indemnified in respect of the matter as to which such indemnity was paid.

                                       10


                                  ARTICLE VIII

                       TRANSFER OF BENEFICIARY'S INTEREST

     Section 8.01 TRANSFER OF INTEREST. The Beneficiary shall have the right to
sell, lease, assign or otherwise transfer or dispose of all or any part of its
interest in the Trust Estate or this Trust Agreement shall be governed by and
subject to the terms of Section 10(b)(vi) of the Purchase Agreement.

                                   ARTICLE IX

                      SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES

     Section 9.01 RESIGNATION OF OWNER TRUSTEE; APPOINTMENT OF SUCCESSOR. (a)
RESIGNATION OR REMOVAL. Owner Trustee or any successor Owner Trustee (a) shall
resign upon obtaining actual knowledge of any facts that would cast doubt upon
its continuing status as a Citizen and (b) may resign at any time without cause
by giving at least 60 days' prior written notice to Beneficiary and Lessee, such
resignation to be effective upon the assumption of the trusts hereunder by the
successor Owner Trustee under Section 9.01(b). In addition, Beneficiary may at
any time remove Owner Trustee, but only for cause, by a notice in writing
delivered to Owner Trustee, such removal to be effective upon the assumption of
the trusts hereunder by the successor Owner Trustee under Section 9.01(b). In
the case of the resignation or removal of Owner Trustee, Beneficiary may appoint
a successor Owner Trustee by an instrument signed by Beneficiary. If a successor
Owner Trustee shall not have been appointed within 30 days after such notice of
resignation or removal, Owner Trustee or the Beneficiary may apply to any court
of competent jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed as above provided. Any
successor Owner Trustee so appointed by such court shall immediately and without
further act be superseded by any successor Owner Trustee appointed as above
provided within one year from the date of the appointment by such court.

          (b) EXECUTION AND DELIVERY OF DOCUMENTS, ETC. Any successor Owner
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee, with a copy to Beneficiary, an instrument accepting such appointment
and assuming the obligations of Owner Trustee, in its individual capacity and as
Owner Trustee, hereunder and thereupon such successor Owner Trustee, without
further act, shall become vested with all the estates, properties, rights,
powers, duties and trusts of the predecessor Owner Trustee in the trusts under
this Trust Agreement with like effect as if originally named Owner Trustee in
this Trust Agreement; but nevertheless, upon the written request of such
successor Owner Trustee, such predecessor Owner Trustee shall execute and
deliver an instrument transferring to such successor Owner Trustee, upon the
trusts herein expressed, all the estates, properties, rights, powers and trusts
of such predecessor Owner Trustee, and such predecessor Owner Trustee shall duly
assign, transfer, deliver and pay over to such successor Owner Trustee all
monies or other property then held by such predecessor Owner Trustee upon the
trusts herein expressed. Upon the appointment of any successor Owner Trustee
under this Section 9.01, the predecessor Owner Trustee will execute such
documents as are provided to it by such successor Owner Trustee and will take
such further actions as are requested of it by such successor Owner Trustee as
are required to cause registration of the Aircraft included in the Trust Estate
to be transferred upon the records of the FAA, or other governmental authority
having jurisdiction, into the name of the successor Owner Trustee.

          (c) QUALIFICATIONS. Any successor Owner Trustee, however appointed,
shall be a Citizen of the United States, shall be qualified to act as a trustee
in Utah (if the trust created hereby is to remain in such state) and shall also
be a bank or trust company organized under the laws of the United States or any
state thereof having a combined capital and surplus of at least $100,000,000, if
there be such

                                       11


an institution willing, able and legally qualified to perform the duties of
Owner Trustee under this Trust Agreement upon reasonable or customary terms.

          (d) MERGER, ETC. Any corporation into which WFB may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which WFB shall be a party, or
any corporation to which substantially all the corporate trust business of WFB
may be transferred, shall, subject to the terms of Section 9.01(c), be Owner
Trustee under this Trust Agreement without further act.

     Section 9.02 CO-TRUSTEES AND SEPARATE TRUSTEES. (a) If at any time it shall
be necessary or prudent in order to conform to any applicable Law of any
jurisdiction in which all or any part of the Trust Estate is located, or Owner
Trustee being advised by counsel shall determine that it is so necessary or
prudent in the interest of Beneficiary or Owner Trustee, or Owner Trustee shall
have been directed to do so by Beneficiary, Owner Trustee and Beneficiary shall
execute and deliver an agreement supplemental hereto and all other instruments
and agreements necessary or proper to constitute another bank or trust company
or one or more persons (any or all of which shall be a Citizen of the United
States) approved by Owner Trustee and Beneficiary, either to act as co-trustee,
jointly with Owner Trustee, or to act as separate trustee under this Trust
Agreement (any such co-trustee or separate trustee being herein sometimes
referred to as an "ADDITIONAL TRUSTEE"). In the event Beneficiary shall not have
joined in the execution of such agreements supplemental hereto within ten days
after the receipt of a written request from Owner Trustee to do so, or in case
an Event of Default shall occur and be continuing, Owner Trustee may act under
the foregoing provisions of this Section 9.02 without the concurrence of
Beneficiary; and Beneficiary hereby appoints Owner Trustee its agent and
attorney-in-fact to act for it under the foregoing provisions of this Section
9.02 in either of such contingencies.

          (b) Every additional trustee under this Trust Agreement shall, to the
extent permitted by law, be appointed and act, and Owner Trustee and its
successors shall act, subject to the following provisions and conditions:

               (i) All powers, duties, obligations and rights conferred upon
     Owner Trustee in respect of the custody, control and management of monies,
     the Aircraft or documents authorized to be delivered under this Trust
     Agreement shall be exercised solely by Owner Trustee;

               (ii) All other rights, powers, duties and obligations conferred
     or imposed upon Owner Trustee shall be conferred or imposed upon and
     exercised or performed by Owner Trustee and such additional trustee
     jointly, except to the extent that under any law of any jurisdiction in
     which any particular act or acts are to be performed (including the holding
     of title to the Trust Estate) Owner Trustee shall be incompetent or
     unqualified to perform such act or acts, in which event such rights,
     powers, duties and obligations shall be exercised and performed by such
     additional trustee;

               (iii) No power given to, or that it is provided hereby may be
     exercised by, any such additional trustee shall be exercised under this
     Trust Agreement by such additional trustee, except jointly with, or with
     the consent in writing of, Owner Trustee;

               (iv) No trustee under this Trust Agreement shall be personally
     liable by reason of any action or omission of any other trustee under this
     Trust Agreement; and

               (v) Beneficiary, at any time, by an instrument in writing may
     remove any such additional trustee. In the event that Beneficiary shall not
     have joined in the execution of any such instrument within ten days after
     the receipt of a written request from Owner Trustee to do so,

                                       12


     Owner Trustee shall have the power to remove any such additional trustee
     without the concurrence of Beneficiary; and Beneficiary hereby appoints
     Owner Trustee its agent and attorney-in-fact to act for it in such
     connection in such contingency.

          (c) In case any separate trustee under this Section 9.02 shall die,
become incapable of acting, resign or be removed or any part thereof, the title
to the Trust Estate and all rights and duties of such separate trustee shall, so
far as permitted by law, vest in and be exercised by Owner Trustee, without the
appointment of a successor to such separate trustee.

                                    ARTICLE X

                          SUPPLEMENTS AND AMENDMENTS TO
                       TRUST AGREEMENT AND OTHER DOCUMENTS

     Section 10.01 SUPPLEMENTS AND AMENDMENTS AND DELIVERY THEREOF. This Trust
Agreement may not be amended, supplemented or otherwise modified except by an
instrument in writing signed by Owner Trustee and Beneficiary. Owner Trustee
will execute any amendment, supplement or other modification of this Trust
Agreement or of any other Owner Trustee Document that it is requested in writing
to execute by Beneficiary, except that Owner Trustee shall not execute any such
amendment, supplement or other modification that, by the express provisions of
any of the above documents, requires the consent of any other party unless such
consent shall have been obtained; and PROVIDED, that, without the prior written
consent of Beneficiary, (i) no such supplement, amendment or modification shall
(A) modify any of the provisions of Article IV or this Section 10.01, (B)
reduce, modify or amend any indemnities in favor of Beneficiary as set forth in
Article XIV or XV of the Lease, (C) reduce the amount or extend the time of
payment of Basic Rent, Supplemental Rent, or Stipulated Loss Value as set forth
in the Lease or (D) modify any of the rights of Beneficiary under the Operative
Documents and (ii) no such supplement, amendment or modification shall require
Beneficiary to invest or advance funds or shall entail any additional personal
liability or the surrender of any indemnification, claim or individual right on
the part of Beneficiary with respect to any agreement or obligation.

     Section 10.02 DISCRETION AS TO EXECUTION OF DOCUMENTS. Prior to executing
any document required to be executed by it pursuant to the terms of Section
10.01, Owner Trustee shall be entitled to receive an opinion of counsel to the
effect that the execution of such document is authorized under this Trust
Agreement. If in the opinion of Owner Trustee any such document adversely
affects any right, duty, immunity or indemnity in favor of Owner Trustee under
this Trust Agreement or under any other Owner Trustee Document, Owner Trustee
may in its discretion decline to execute such document unless Owner Trustee is
furnished with indemnification from Lessee or any other party upon terms and in
amounts reasonably satisfactory to Owner Trustee to protect the Trust Estate,
Owner Trustee and WFB against any and all liabilities, costs and expenses
arising out of the execution of such documents.

     Section 10.03 ABSENCE OF REQUIREMENTS AS TO FORM. It shall not be necessary
for any written request furnished pursuant to Section 10.01 to specify the
particular form of the proposed documents to be executed pursuant to such
Section 10.01, but it shall be sufficient if such request shall indicate the
substance thereof.

     Section 10.04 DISTRIBUTION OF DOCUMENTS. Promptly after the execution by
Owner Trustee of any document entered into pursuant to Section 10.01, Owner
Trustee shall mail, by certified mail, postage prepaid, a conformed copy thereof
to Beneficiary, but the failure of Owner Trustee to mail such conformed copy
shall not impair or affect the validity of such document.

                                       13


     Section 10.05 NO REQUEST NEEDED AS TO LEASE SUPPLEMENT. No written request
pursuant to Section 10.01 shall be required to enable Owner Trustee to enter
into, pursuant to Section 3.01 and the Lease, as the case may be, the Lease
Supplement with Lessee.

                                   ARTICLE XI

                               CERTAIN LIMITATIONS

     Section 11.01 LIMITATIONS ON CONTROL. Notwithstanding any other provision
of the Trust Agreement, but subject to other provisions of this Article XI, from
and after the Delivery Date and until termination of this Trust Agreement, (i)
the Beneficiary shall not, except as otherwise provided in Section 5, have any
voting rights or other rights to direct Owner Trustee hereunder (collectively
"CONTROL RIGHTS") and (ii) Owner Trustee shall have absolute and complete
discretion in all matters as to which the Beneficiary otherwise would have had
any Control Rights, but for the provisions of this Article XI. Such discretion
(i) is in addition to the discretion given to Owner Trustee under the other
Articles of this Trust Agreement and (ii) is expressly limited to the Control
Rights that, but for the provisions of this Article XI, would be held or
exercisable by the Beneficiary, and does not extend to any other rights, powers
or privileges in respect of the beneficial interest of the Beneficiary in the
Trust Estate.

     Section 11.02 DISCRETION AND ACTIONS OF OWNER TRUSTEE. (a) In exercising
its discretion under this Article XI, Owner Trustee shall exercise its best
judgment and shall not be liable for any action taken or omitted hereunder,
except for its gross negligence or willful misconduct, and shall exercise the
Control Rights in connection with all matters involving the ownership and
operation of the Aircraft by Owner Trustee. Owner Trustee shall not be required,
and shall have no duty or obligation, to exercise Control Rights in respect of
any other matters.

          (b) In exercise or administration of the power or duties created under
this Article XI, Owner Trustee may act directly or through any agents or
attorneys and may, at the cost and expense of the Trust Estate, consult with
counsel, accountants and other skilled persons to be selected and retained by
it, and Owner Trustee shall not be liable for anything done, suffered or omitted
in good faith in accordance with the advice or opinion of any such counsel,
accountants or other skilled persons and Owner Trustee shall not be liable for
the negligence of any such counsel, accountants or other skilled persons.

          (c) Notwithstanding any other provision hereof, in exercising any
Control Rights pursuant to this Article XI in connection with all matters
involving the ownership or operation of the Aircraft by Owner Trustee, Owner
Trustee shall be free of any kind of control by the Beneficiary and shall
exercise the Control Rights as it in its discretion shall deem necessary to
protect the interests of the United States, notwithstanding any countervailing
interests of any foreign power which, or whose citizens may, have a direct or
indirect interest in the Beneficiary and any such action by Owner Trustee shall
not be considered malfeasance or in breach of any obligation which Owner Trustee
might otherwise have to the Beneficiary. In exercising any Control Rights
pursuant to this Article XI in connection with any other matters which may arise
not relating to the ownership and operation of the Aircraft, Owner Trustee shall
be permitted, but shall be under no duty, to seek the advice of the Beneficiary
before exercising any Control Rights. Owner Trustee, promptly after each
exercise of any Control Rights hereunder, shall notify the Beneficiary of the
exercise thereof.

          (d) Without the prior written consent of the Beneficiary, the Owner
Trustee agrees in its individual capacity that it shall not (i) dissolve or
amend the Trust Agreement, (ii) sell, mortgage, pledge or otherwise dispose of
all or a substantial part of the Trust Estate, including the Aircraft or the
Lease, (iii) transfer any portion of the Beneficiary's beneficial interest in
the Trust Estate to any other person, or (iv) amend any Owner Trustee Document.

                                       14


          (e) Notwithstanding anything contained in this Trust Agreement, the
Owner Trustee and Beneficiary hereby agree that if Persons who are neither U.S.
citizens nor resident aliens have the power to direct or remove the Owner
Trustee, either directly or indirectly through the control of another Person,
those Persons together shall not have more than twenty-five percent (25%) of the
aggregate power to direct or remove the Owner Trustee. Nothing in this clause
(e) shall be construed to prevent those Persons from having more than
twenty-five percent (25%) of the beneficial interest in the Trust Estate.

     Section 11.03 PAYMENTS. Notwithstanding any other provision of this Article
XI, the Beneficiary and not Owner Trustee shall be entitled to receive from
Owner Trustee or otherwise all Basic Rent and Supplemental Rent and other
payments of whatsoever kind and nature payable to the Beneficiary pursuant to
this Trust Agreement or any Owner Trustee Document in the same manner as if the
Control Rights had not been transferred to Owner Trustee and held in trust
hereunder.

     Section 11.04 OWNER TRUSTEE ACTS AS TRUSTEE. Notwithstanding any other
provision of this Trust Agreement, in exercising any Control Rights pursuant to
this Article XI, Owner Trustee acts solely as trustee and not in its individual
capacity, and except as may be otherwise expressly provided in Section 11.02,
all persons having any claim against the Owner Trustee in its individual
capacity or as Owner Trustee by reason of the transactions contemplated by this
Article XI shall not have any recourse to the Trustee in its individual
capacity.

                                   ARTICLE XII

                                  MISCELLANEOUS

     Section 12.01 TERMINATION OF TRUST AGREEMENT. This Trust Agreement and the
trusts created hereby shall terminate and this Trust Agreement shall be of no
further force or effect upon the earliest of (a) the sale or other final
disposition by Owner Trustee of all property constituting part of the Trust
Estate and the final distribution by Owner Trustee of all monies or other
property or proceeds constituting part of the Trust Estate in accordance with
Article IV; PROVIDED, that at such time Lessee shall have fully complied with
all of the terms of the Lease; or (b) the date that is ninety (90) years
following the earliest execution of this Trust Agreement by any party hereto,
but if this Trust Agreement and the trusts created hereby shall be or become
authorized under applicable Law to be valid for a period commencing on such date
(or, without limiting the generality of the foregoing, if legislation shall
become effective providing for the validity of this Trust Agreement and the
trusts created hereby for a period in gross exceeding the period for which this
Trust Agreement and the trusts created hereby are herein above stated to extend
and be valid), then this Trust Agreement and the trusts created hereby shall not
terminate under this clause (b) but shall extend to and continue in effect, but
only if such non-termination and extension shall then be valid under applicable
Law, until the day preceding such date as the same shall, under applicable Law,
cease to be valid; otherwise this Trust Agreement and the trusts created hereby
shall continue in full force and effect in accordance with the terms hereof.
Except as expressly set forth in Section 12.02, this Trust Agreement and the
trusts created hereby may not be revoked by Beneficiary.

     Section 12.02 TERMINATION AT OPTION OF BENEFICIARY. Notwithstanding Section
12.01, this Agreement and trust created hereby shall terminate and the Trust
Estate shall be distributed to Beneficiary, and this Trust Agreement shall be of
no further force and effect, upon the election of Beneficiary by notice to Owner
Trustee, if such notice shall be accompanied by the written agreement (in form
and substance satisfactory to Owner Trustee) of Beneficiary assuming all
obligations of Owner Trustee under or contemplated by the Operative Documents or
incurred by it as trustee hereunder and releasing Owner Trustee therefrom.

                                       15


     Section 12.03 BENEFICIARY HAS NO LEGAL TITLE IN TRUST ESTATE. No
Beneficiary shall have legal title to any part of the Trust Estate. No transfer,
by operation of applicable Law or otherwise, of any right, title and interest of
Beneficiary in and to the Trust Estate under this Trust Agreement shall operate
to terminate this Trust Agreement or the trusts under this Trust Agreement or
entitle any successors or transferees of Beneficiary to an accounting or to the
transfer of legal title to any part of the Trust Estate.

     Section 12.04 ASSIGNMENT, SALE, ETC., OF AIRCRAFT. Any assignment, sale,
transfer or other conveyance of the Aircraft by Owner Trustee made pursuant to
the terms of this Trust Agreement or of the Lease or any other Operative
Document shall bind Beneficiary and shall be effective to transfer or convey all
right, title and interest of Owner Trustee and Beneficiary in and to the
Aircraft. No purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency or regularity of such assignment, sale,
transfer or conveyance or as to the application of any sale or other proceeds
with respect thereto by Owner Trustee.

     Section 12.05 TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY. Except
as otherwise provided in Sections 4.01, 4.02, 5.01, 6.07, 10.01, 11.01, 11.02,
12.01, 12.02 and 12.04 and Articles V, VIII and IX, nothing in this Trust
Agreement, whether express or implied, shall be construed to give any person
other than Owner Trustee and Beneficiary any legal or equitable right, remedy or
claim under or in respect of this Trust Agreement; and this Trust Agreement
shall be held to be for the sole and exclusive benefit of Owner Trustee, WFB and
Beneficiary.

     Section 12.06 NOTICES. Unless otherwise expressly specified or permitted by
the terms hereof, all notices shall be given in the manner set forth in Section
12(a) of the Purchase Agreement.

     Section 12.07 SEVERABILITY. If any provision of this Trust Agreement 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 Trust Agreement shall be deemed to be a valid
and binding agreement in all respects, enforceable in accordance with its terms.

     Section 12.08 WAIVERS, ETC. No term or provision hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
entered into in compliance with the terms of Article X; and any waiver of the
terms hereof shall be effective only in the specific instance and for the
specific purpose given.

     Section 12.09 COUNTERPARTS. This Trust Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
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.

     Section 12.10 BINDING EFFECT, ETC. All covenants and agreements contained
in this Trust Agreement shall be binding upon, and inure to the benefit of, WFB,
Owner Trustee and their respective successors and assigns, and Beneficiary and
its successors and, to the extent permitted by Article VIII, assigns. Any
request, notice, direction, consent, waiver or other instrument or action by
Beneficiary shall bind its successors and assigns.

     Section 12.11 HEADINGS; REFERENCES. The headings and the table of contents
used in this Trust Agreement are for convenience of reference only and shall not
define or limit any of the terms or

                                       16


provisions hereof and shall not in any way affect the construction of, or be
taken into consideration in interpreting, this Trust Agreement.

     Section 12.12 GOVERNING LAW. THIS TRUST AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAWS.

     Section 12.13 ADMINISTRATION OF TRUST. The principal place of
administration of the trust created by this Trust Agreement shall be in the
State of Utah.

                                       17


     IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
[N288SK] to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.

                                     MITSUI & CO. (U.S.A.), INC.

                                     By /s/ Kazuki Okamura
                                       -----------------------------------------
                                       Name:  Kazuki Okamura
                                       Title: General Manager

                                     WELLS FARGO BANK NORTHWEST, NATIONAL
                                     ASSOCIATION

                                     By /s/ Brett R. King
                                       -----------------------------------------
                                       Name:  Brett R. King
                                       Title: Vice President

                                       18




NOTE TO EXHIBIT 10.39

The two additional Trust Agreements are substantially identical in all material
respects to the filed Trust Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
N286SK                                           June, 2001                Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------
N287SK                                           June, 2001                Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.40

                                                                   Exhibit 10.40


                                                               EXECUTION VERSION

                        AIRCRAFT LEASE AGREEMENT [N288SK]

                                     between

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
             not in its individual capacity, except as expressly set
                    forth herein, but solely as Owner Trustee

                                    as Lessor

                                       and

                            CHAUTAUQUA AIRLINES, INC.

                                    as Lessee

                            Dated as of June 5, 2001

   One Embraer EMB-145LR aircraft bearing manufacturer's serial no. 145461 and
                     United States registration mark N288SK
   and the two Rolls-Royce Allison AE 3007-A1P engines bearing serial numbers
                             CAE311866 and CAE311867

THIS AIRCRAFT LEASE AGREEMENT (THIS "LEASE") HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST HEREIN MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL
COUNTERPART. THE COUNTERPART TO BE DEEMED THE ORIGINAL COUNTERPART SHALL BE THE
COUNTERPART THAT CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE LESSOR ON THE
SIGNATURE PAGE THEREOF. SEE SECTION 20.04 FOR INFORMATION CONCERNING THE RIGHTS
OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.

                                    DUPLICATE
                     THIS IS NOT THE "ORIGINAL" COUNTERPART.



                       AIRCRAFT LEASE AGREEMENT [ N288SK]

     This AIRCRAFT LEASE AGREEMENT [N288SK] is made as of June 5, 2001, between
WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States of America, not in
its individual capacity, except as expressly set forth herein, but solely as
Owner Trustee (in such capacity, the "LESSOR"), and CHAUTAUQUA AIRLINES, INC., a
New York corporation (the "LESSEE").

                                    RECITALS:

     WHEREAS, Lessee desires to lease from Lessor and Lessor is willing to lease
to Lessee the Aircraft upon and subject to the terms and conditions of this
Lease; and

     WHEREAS, the parties intend this Lease to constitute a true lease and not a
security agreement;

     NOW IT IS HEREBY AGREED as follows:

                                    ARTICLE I

                          DEFINITIONS AND CONSTRUCTION

     Section 1.01 DEFINITIONS. In this Lease, except as otherwise provided or
unless the context otherwise requires, the following terms shall have the
meanings set forth below:

     "ADDITIONAL INSURED" means the Owner Trustee (in its individual and trust
capacities), the Beneficiary and any Financing Party.

     "AERO" means Aero Ltd, a Cayman Islands corporation.

     "AERONAUTICAL AUTHORITY" means as of any time of determination, the FAA,
the JAA or other governmental airworthiness authority having jurisdiction over
the Aircraft or the Airframe and Engines or engines attached thereto under the
laws of the country in which the Airframe is then registered as provided in
Section 8.05.

     "AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling 50% or more of any class of voting securities of such
Person or otherwise controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" (including "controlled
by" and "under common control with") shall mean 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.

     "AIRCRAFT" means the Airframe described in EXHIBIT A-1 together with (a)
the Engines relating to such Airframe, whether or not installed on such
Airframe, (b) any and all Parts furnished with such Airframe and such Engines,
(c) all Aircraft Documents relating to such Airframe, Engines and Parts, and (d)
all substitutions, replacements and renewals of any and all thereof made
pursuant to the terms of this Lease title to which is, or is required pursuant
to this Lease to be, vested in Lessor.

     "AIRCRAFT DOCUMENTS" means all technical data, manuals, log books and
weight and balance sheets, and all inspection, modification and overhaul records
and other service, repair, maintenance, and



technical records that are maintained with respect to the Aircraft, Airframe,
Engines, APU, landing gears or parts (including, without limitation, all
additions, renewals, revisions, and replacements of any such materials from time
to time made, or required to be made, in accordance with the Maintenance Program
and/or FAA regulations, and in each case in whatever form and by whatever means
or medium such materials may be maintained or retained by or on behalf of
Lessee, and including in any event the items identified in EXHIBIT B and
back-to-birth life limited Parts traceability records); PROVIDED, HOWEVER, that
all such material shall be maintained in the English language.

     "AIRCRAFT PRICE" has the meaning assigned to such term in the Purchase
Agreement.

     "AIRFRAME" means (i) the Embraer model EMB-145LR aircraft (excluding the
Engines and any other engines which may from time to time be installed thereon,
but including any and all Parts which may from time to time be incorporated in,
installed on or attached to such aircraft, and including any and all such Parts
removed therefrom so long as title to such removed Parts remains vested in the
Lessor under the terms of Article IX) originally delivered and leased hereunder,
identified by national registration number and manufacturer's serial number in
the Lease Supplement executed and delivered on the Delivery Date, so long as a
Replacement Airframe shall not have been substituted therefor pursuant to
Section 12.01, and (ii) a Replacement Airframe, so long as another Replacement
Airframe shall not have been substituted therefor pursuant to Section 12.01.

     "AIRWORTHINESS DIRECTIVE" or "AD" means any airworthiness directive issued
by the FAA and applicable to aircraft and engines of the same type as the
Aircraft and the Engines.

     "AMM" has the meaning assigned to such term in the definition "Maintenance
Program."

     "APPROVED INSURANCE BROKER" means an insurance broker meeting the
requirements set forth in Section 11.07(a)(iii).

     "APPROVED INSURER" means a reputable insurer of nationally or
internationally recognized responsibility and standing in aircraft insurances.

     "ASSIGNMENT NO. 1" means the Purchase Agreement Assignment No. 1 (N288SK),
dated as of June 29, 2001, between Seller and Aero, together with the Consent
and Agreement thereto dated as of June 29, 2001 executed and delivered by the
Manufacturer.

     "ASSIGNMENT NO. 2" means the Purchase Agreement Assignment No. 2 (N288SK)
dated as of June 29, 2001, between Aero and Lessor, together with the Consent
and Agreement thereto dated as of June 29, 2001 executed and delivered by the
Manufacturer and the guarantee executed and delivered by the Manufacturer of
Aero's obligations thereunder in favor of Lessor, Lessee and Seller.

     "BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
Section.101 ET SEQ.) as amended from time to time, or any similar legislation of
the United States enacted to supersede, amend, or supplement such Bankruptcy
Code (and any reference to a provision of the Bankruptcy Code shall refer to any
successor provision(s), however designated).

     "BASIC TERM" means the period commencing on the Delivery Date and ending on
but excluding the Expiration Date, or such earlier date on which this Lease
shall be terminated as provided therein.

     "BENEFICIAL INTEREST" means all right, title and interest of the
Beneficiary in, to and under the Trust Agreement.

                                        2


     "BENEFICIARY" means Mitsui & Co. (U.S.A.), Inc., a New York corporation.

     "BENEFICIARY GUARANTOR" means the provider of a Beneficiary Guaranty.

     "BENEFICIARY GUARANTY" means any guaranty delivered or to be delivered to
support the obligations of the Beneficiary under the Operative Documents in
connection with the transfer by the Beneficiary of the Beneficial Interest.

     "BILL OF SALE" means the warranty bill of sale relating to the Aircraft
delivered to Lessor pursuant to the Purchase Agreement.

     "BUSINESS DAY" means a day other than a Saturday or a Sunday and other than
a day on which banking institutions in Indianapolis, Indiana or New York, New
York are required or authorized by law or order to be closed.

     "C CHECK" shall mean any inspection and related maintenance procedures
designated as such by Lessee.

     "CITIZEN OF THE UNITED STATES" means a citizen of the United States as
defined in Section. 40102(a)(15) of the Federal Aviation Act, or any analogous
part of any successor or substituted legislation or regulation at the time in
effect.

     "CLAIMS" has the meaning set forth in Section 1.01 of EXHIBIT H.

     "CLOSING DOCUMENTS" means each of the documents listed in EXHIBIT E.

     "CODE" means the United States Federal Internal Revenue Code of 1986, as
amended from time to time, or any similar legislation of the United States
enacted to supersede, amend, or supplement such Code (and any reference to a
provision of the Code shall refer to any successor provision(s), however
designated).

     "CPCP" has the meaning assigned to such term in the definition "Maintenance
Program."

     "CYCLE" means one take-off and landing of the Aircraft or any aircraft on
which the part or engine in question may at any time be installed.

     "DEFAULT" means an event or condition that is, or with the lapse of time,
the giving of notice, the making of any determination or the fulfillment of any
condition would constitute, an Event of Default.

     "DELIVERY" means the delivery of the Aircraft to and the acceptance of the
Aircraft by Lessee for the purposes of this Lease, as evidenced by the execution
and delivery by the Lessee of the Delivery Acceptance Certificate.

     "DELIVERY ACCEPTANCE CERTIFICATE" means a Delivery Acceptance Certificate,
dated the Delivery Date, in substantially the form of EXHIBIT C.

     "DELIVERY DATE" means the date on which Delivery of the Aircraft occurs, as
evidenced by the delivery by Lessee to Lessor of the Delivery Acceptance
Certificate.

     "DELIVERY LOCATION" means Sao Jose dos Campos, Sao Paulo, Brazil or such
other location in the United States as Lessor and Lessee may mutually agree.

                                        3


     "DOLLARS" and "$" means the lawful currency of the United States of
America.

     "ENGINE" means (i) each of the two Allison model AE3007A1P engines
originally delivered and leased under this Lease, identified by manufacturer's
serial number in the Lease Supplement executed and delivered on the Delivery
Date, so long as a Replacement Engine shall not have been substituted therefor
pursuant to Section 12.02, and (ii) a Replacement Engine, so long as another
Replacement Engine shall not have been substituted therefor pursuant to Section
12.02, whether or not such engine or Replacement Engine, as the case may be, is
from time to time installed on the Airframe or installed on any other aircraft,
and including in each case all Parts incorporated or installed in or attached
thereto and any and all Parts removed therefrom so long as title to such Parts
remains vested in the Lessor under the terms of Article IX. The term "ENGINES"
means, as of any date of determination, the two engines each of which is an
Engine on that date.

     "ENGINE MANUFACTURER" means Rolls-Royce Corporation, a Delaware
corporation.

     "ENGINE WARRANTY AGREEMENT" means the Rolls-Royce AE3007A Series Engine
Warranty Agreement made effective as of April 30, 1999, among the Engine
Manufacturer, Seller and the Lessee, as amended and supplemented from time to
time.

     "ENGINE WARRANTY ASSIGNMENT AND CONSENT" means the Warranty Assignment
Agreement and Consent [N288SK] dated as of June 5, 2001, between Seller and
Lessor and consented to by the Engine Manufacturer.

     "EQUIVALENCY PAYMENT" has the meaning specified in EXHIBIT D-1 or EXHIBIT
D-2, as applicable.

     "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.

     "ERISA PLAN" means, individually or collectively, an employee benefit plan,
as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or any
applicable regulation thereunder or a plan or individual retirement account
which is subject to Section 4975(c) of the Code;

     "EVENT OF DEFAULT" means any event specified in Section 17.01.

     "EVENT OF LOSS" means any of the following events with respect to the
Aircraft, the Airframe or any Engine whether or not installed on the Airframe
(except for an Engine that has been replaced by a Replacement Engine):

          (a) loss of such property or its use due to theft, hijacking or
     disappearance for a period in excess of sixty (60) consecutive days, or in
     any event extending beyond the Term;

          (b) destruction, damage beyond economic repair or rendition of such
     property permanently unfit for normal use for any reason whatsoever;

          (c) any damage to such property which results in an insurance
     settlement with respect to such property on the basis of a total loss or on
     the basis of a compromised or constructive total loss;

          (d) the condemnation, confiscation, appropriation or seizure of, or
     requisition of title to such property by any Governmental Entity or
     purported Governmental Entity;

                                        4


          (e) the condemnation, confiscation, appropriation or seizure of the
     use of such property by or on the authority of any Governmental Entity or
     purported Governmental Entity, that in any such case shall have resulted in
     the loss of possession thereof by Lessee for a period in excess of sixty
     (60) consecutive days for any Governmental Entity other than a United
     States Entity and one hundred eighty (180) days for any United States
     Entity (or in either case for such shorter period ending on the date that
     is seven (7) days from the date of receipt of an insurance settlement with
     respect to such property on the basis of a total loss) or in any event
     extending beyond the end of the Term;

          (f) in the case of any Engine, a deemed Event of Loss pursuant to
     clause (vi) or clause (vii) of Section 8.01(a).

The date of such Event of Loss shall be (aa) the 61st day following an Event of
Loss described in clause (a); (bb) the date of an Event of Loss described in
clause (b); (cc) the date of any insurance settlement in the case of an Event of
Loss described in clause (c); (dd) the date of an Event of Loss described in
clause (d); (ee) the 61st day following an Event of Loss described in clause (e)
with respect to a Governmental Entity other than a United States Entity and the
181st day following an Event of Loss described in clause (e) with respect to a
United States Entity; and (ff) the date of the deemed Event of Loss described in
clause (f). An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if any Event of Loss occurs with respect to the Airframe.

     "EXPIRATION DATE" means the date specified as such in the Lease Supplement
executed and delivered on the Delivery Date.

     "FAIR MARKET RENTAL VALUE" means in respect of the Aircraft at any time,
the aggregate base rentals (which shall in no event be less than zero) which
would be payable in an arm's-length transaction for cash under a lease of the
Aircraft on an "as is", "where is" basis and otherwise on terms substantially
identical (except for Basic Rent and Term) to the terms of this Lease for such
period of time as such Fair Market Rental Value is to be determined between a
willing lessor and a willing lessee both with full knowledge of the relevant
facts, including the actual condition and maintenance status of the Aircraft at
such time, and neither under any compulsion to enter into the transaction.

     "FAA" means the United States Federal Aviation Administration and any
successor agency or agencies thereto.

     "FAA-FILED DOCUMENTS" means this Lease, the bill of sale on FAA Form 8050-2
executed by Aero, the Trust Agreement, the application for registration of the
Aircraft with the FAA in the name of the Owner Trustee (together with any
attachments thereto), and the Delivery Acceptance Certificate and Lease
Supplement to be filed with the FAA in connection with the Delivery of the
Aircraft.

     "FEDERAL AVIATION ACT" means subtitle VII of title 49 of the United States
Code, as amended and in effect on the date of this Lease or as subsequently
amended, or any successor or substituted legislation at the time in effect and
applicable.

     "FINANCING" means any financing arrangement to which Lessor is a party
secured by an interest in the Aircraft or this Lease in accordance with Section
19.02.

     "FINANCING PARTY" means any party to a Financing, including any such party
acting as lender in a Financing; PROVIDED that such lender (i) shall be a Person
(other than a natural person) who is reasonably experienced in equipment leasing
and financing transactions, (ii) shall not be an airline or other Person engaged
in air transportation or a competitor of Lessee in the business of air
transportation or any

                                        5


Affiliate thereof, and (iii) shall not be a party adverse to the Lessee or any
Affiliate of the Lessee in any pending litigation or arbitration (whether as
plaintiff or defendant) and shall not have overtly threatened to initiate any
such litigation or arbitration against Lessee or any Affiliate of Lessee.

     "FLIGHT HOUR" means each hour or part thereof, measured to one decimal
place, elapsing from the moment the wheels of the Airframe (or any airframe on
which the Engine or Part in question may be installed) first leave the ground on
take-off to the moment when the wheels of the Airframe or airframe first touch
the ground on landing.

     "GOVERNMENTAL ENTITY" means and includes (a) the FAA or other United States
Entity; (b) any national government, or political subdivision thereof or local
jurisdiction therein; (c) any board, commission, department, division, organ,
instrumentality, court, or agency of any entity described in (b) above, however
constituted; and (d) any joint authority, association, organization, or
institution of which any entity described in (b) or (c) above is a member or to
whose jurisdiction any such entity is subject or in whose activities any such
entity is a participant but only (except for purposes of defining Law below) to
the extent that any of the preceding have jurisdiction over the Aircraft or its
operations.

     "INDEMNITEE" means WFB, in its individual capacity and as Lessor, the
Beneficiary, the Financing Parties, if any, and each Affiliate, officer,
director, shareholder, agent, employee, successor and permitted assign of any of
the foregoing Persons.

     "INTEREST RATE" means, at any time, LIBOR (as adjusted for applicable
reserve requirements) [*], where LIBOR means [*] appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for deposits
in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to
the first day of the period to which the obligation to pay such interest arises,
for a term of one month. If for any reason such rate is not available, the term
"LIBOR" shall mean, for all amounts owing under this Lease to which an
obligation to pay such interest arises, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of the period to
which the obligation to pay such interest arises, for a term of one month;
PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%). All computations of
interest under this Lease at the Interest Rate or otherwise are to be made on
the basis of a 360 day year for the actual number of days elapsed and shall be
compounded monthly.

     "JAA" means the European Joint Aviation Authority or any successor agency
thereto.

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

     "LEASE" means this Aircraft Lease Agreement [N288SK ], together with all
Lease Supplements.

     "LEASE SUPPLEMENT" means a supplement to this Lease in form and substance
satisfactory to Lessor and Lessee.

     "LESSOR'S LIENS" means Liens against, on, or with respect to, the Aircraft,
any Engine or Part or title thereto or interest thereon arising as a result of

                                        6

- --------
* Confidential



          (a) claims against Lessor, WFB or the Beneficiary or claims arising by
     or through Lessor, WFB or the Beneficiary as a result of acts or omissions
     of Lessor, WFB or the Beneficiary not related to this Lease or any other
     Operative Document or the transactions contemplated hereby or thereby;

          (b) Taxes or Claims imposed against Lessor, WFB or the Beneficiary
     that are not required to be indemnified against by Lessee pursuant to
     Article XIV or XV;

          (c) a Financing pursuant to Section 19.02(b); and;

          (d) claims against Lessor, WFB or the Beneficiary or claims arising
     by, through or under Lessor, WFB or the Beneficiary arising out of the
     voluntary or involuntary transfer by Lessor, WFB or the Beneficiary (other
     than to any Financing Party) or any transferee, successor or assign of
     Lessor, WFB or the Beneficiary of all or any part of its respective
     interests in the Aircraft, any Engine, any Part or the Operative Documents,
     other than a transfer pursuant to Article XII or Article XVII.

     "LIEN" means any mortgage, pledge, lien, charge, encumbrance,
hypothecation, lease, statutory or other rights in rem, assignment or exercise
of rights, security interest or claim, trust or title retention or any other
encumbrance of any kind securing any obligation of any Person including any
equivalent thereof created or arising under the Laws of the State of
Registration or any subdivision thereof.

     "MAINTENANCE CONTRACTOR" means (i) Lessee, (ii) Manufacturer, (iii) Engine
Manufacturer or (iv) any other maintenance contractor that is duly certified by
the Aeronautical Authority to perform such work on aircraft and engines of the
same type as the Aircraft and the Engines and chosen by Lessee.

     "MAINTENANCE PROGRAM" has the meaning specified in Exhibit A-2.

     "MANUFACTURER" means EMBRAER - Empresa Brasileira de Aeronautica S.A., a
company organized under the laws of Brazil.

     "MANUFACTURER PURCHASE AGREEMENT" the EMB-145 Purchase Agreement Number
GCT-025/98, dated June 17, 1998, between the Manufacturer and Seller.

     "OFFICER'S CERTIFICATE" means as to any Person other than a natural person
a certificate signed by a Responsible Officer of such Person.

     "OEMS" has the meaning assigned to such term in the definition "Maintenance
Program".

     "OPERATING RESULTS" means revenue passenger miles, available seat miles,
load factor and passengers enplaned.

     "OPERATIVE DOCUMENTS" means, collectively, this Lease, the Purchase
Agreement, the Trust Agreement, the Tax Indemnity Agreement, Assignment No. 1,
Assignment No. 2, the Engine Warranty Assignment and Consent, the Bill of Sale
and the FAA-filed documents.

     "ORIGINAL TERM" has the meaning set forth in Section 17.02(e).

     "OTHER LEASE" means any lease of jet aircraft between Beneficiary or any of
its Affiliates (including any Other Lessor) and Lessee or any of its Affiliates
entered into by such Persons or acquired

                                        7


by Beneficiary or its Affiliates on or after the date hereof, but excluding any
such lease in which the Beneficiary and its Affiliates own less than fifty
percent of the beneficial ownership or interests.

     "OTHER LESSOR" means any trust or similar arrangement of which the
Beneficiary or any of its Affiliates is the beneficiary or beneficial owner in
whole or in part.

     "OWNER TRUSTEE" means WFB, in its capacity as owner trustee under the Trust
Agreement.

     "PARTS" means any and all appliances, avionics, components, parts,
instruments, appurtenances, accessories, furnishings, seats, galleys,
lavatories, and other equipment of whatever nature (other than complete Engines
or engines and excluding galley equipment and serving equipment (including, but
not limited to, galley carts, coffee heater, coffee pots, utensils, dishes and
cups) and emergency medical equipment), that may now or from time to time be
incorporated or installed or positioned in or on or attached to the Airframe or
any Engine, or that remain the property of Lessor pursuant to the terms of
Article IX despite removal therefrom, PROVIDED that at such time as a
Replacement Part shall be substituted for a Part in accordance with Article IX,
the Part so replaced shall cease to be a Part hereunder.

     "PERMITTED INVESTMENTS" means (a) direct obligations of the United States
of America or any agency or instrumentality thereof, (b) obligations fully
guaranteed by the United States of America or any agency or instrumentality
thereof, (c) any mutual fund the portfolio of which is limited to obligations of
the type described in clauses (a) and (b), (d) certificates of deposit issued
by, or bankers' acceptances of, or time deposits or a deposit account with, any
bank, trust company, or national banking association incorporated or doing
business under the laws of the United States of America or one of the states
thereof, having a combined capital and surplus of at least $100,000,000 and
having a rating of "A-" or better from the Standard & Poor's Ratings Group or
"A3" or better by Moody's Investors Services, Inc., (e) commercial paper issued
by companies in the United States which directly issue their own commercial
paper and which are doing business under the laws of the United States of
America or one of the states thereof and in each case having a rating assigned
to such commercial paper of A1+ by Standard & Poor's Ratings Group or P-1 by
Moody's Investors Services, Inc., or (f) obligations of the type described in
clauses (a), (b), (d), or (e) above, purchased from any bank, trust company, or
banking association referred to in clause (d) above pursuant to repurchase
agreements obligating such bank, trust company, or banking association to
repurchase any such obligation not later than 30 days after the purchase of any
such obligation. Unless otherwise specified in writing by the Lessor, all such
Permitted Investments shall mature not later than 30 days from the date of
purchase. Interest on such Permitted Investments shall accumulate and be held by
Lessor until the principal amount of such Permitted Investments due and owing to
Lessee shall be paid to Lessee, in which case any such interest shall be paid to
Lessee together with such principal amount.

     "PAYMENT LOCATION" means the account of the Beneficiary at Citibank, N.A.,
ABA No. 021000089, Account Name: Mitsui & Co. (U.S.A.), Inc., Account No.
30831745, Ref: Chautauqua [N288SK], or such other account as may be designated
by Beneficiary in accordance with Section 4.02.

     "PERMITTED AIR CARRIER" means (a) any Section 1110 Person and (b) any
foreign air carrier that is principally based in any foreign country listed on
EXHIBIT F.

     "PERMITTED LIEN" means:

          (i) any Lessor's Lien;

                                        8


          (ii) any Lien created in favor of Lessee, Lessor or Beneficiary under
     the Operative Documents or of other Persons, to the extent permitted by
     Section 8.01 or 9.03 hereof;

          (iii)any Lien created by Lessor in favor of any Financing Party in a
     Financing purusant to Section 19.02;

          (iv) any Lien for Taxes either not yet due or being contested in good
     faith;

          (v)  any air navigation authority, airport, materialmen's, workmen's,
     repairmen's, mechanics', suppliers', employees' or other similar Liens
     arising in the ordinary course of Lessee's business by statute or by
     operation of Law in respect of obligations that are not yet due or that are
     being contested in good faith;

          (vi) Liens arising out of any judgment or award against Lessee,
     PROVIDED that such judgment or award is reversed, discharged, vacated or
     stayed within no more than 45 days after entry thereof;

          (vii) salvage and similar rights of insurers under policies of
     insurance maintained in accordance with Article XI; and

          (viii) Liens with respect to which the Lessee has provided a bond or
     other security adequate in the good faith opinion of the Lessor;

PROVIDED, HOWEVER, that in the case of Liens described in paragraphs (iv) and
(v) that are being contested by Lessee in good faith, adequate resources or
reserves for the payment of the sums giving rise to the Lien have been provided
for by Lessee and such Lien does not arise by reason of the failure of Lessee to
make any payment which is not being reasonably disputed by Lessee as being due
and so long as the same does not involve any material risk (in the reasonable
opinion of Lessor) of the detention, seizure, forfeiture, sale or loss
(including loss of use) of, or of any interest of the Lessor, Beneficiary or
Financing Party in, the Aircraft, any Engine or Part or any discernible risk of
criminal liability or any material risk of any civil penalty against Lessor,
Beneficiary, or any Financing Party or any Affiliate of any thereof.

     "PERMITTED SUBLESSEE" means (i) any Permitted Air Carrier, (ii) the Engine
Manufacturer, (iii) any Affiliate of the Manufacturer domiciled in the United
States; (iv) any United States Entity backed by the full faith and credit of the
United States of America, and (v) any other Person that may be approved in
writing by the Lessor prior to the effectiveness of the relevant Sublease.

     "PERSON" means and includes any individual person, corporation, limited
liability company, partnership, business trust, firm, joint stock company, joint
venture, trust, estate, unincorporated organization, association, sovereign
state or Governmental Entity or other entity recognized as a separate person
under applicable Law.

     "PURCHASE AGREEMENT" means the Aircraft Purchase Agreement [N288SK] dated
as of June 5, 2001, among Seller, Lessee, Lessor and the Beneficiary relating to
the Aircraft.

     "RECOVERY PERIOD" means "TAX ATTRIBUTE PERIOD" as defined in the Tax
Indemnity Agreement.

     "RE-LEASING" has the meaning set forth in Section 17.02(e).

     "RENEWAL TERM" has the meaning set forth in Section 6 of EXHIBIT A-2.

                                        9


     "RENT" means Basic Rent and Supplemental Rent.

     "RENT PAYMENT DATE" means the Delivery Date, the same calendar day as the
Delivery Date occurring in the calendar month next following the calendar month
in which the Delivery Date occurred, and, thereafter, the same calendar day as
the Delivery Date occurring in each subsequent calendar month during the Term.

     "RENTAL PERIOD" means each period from and including (i) the Delivery Date
to, but excluding, the next succeeding Rent Payment Date, and thereafter, (ii)
each Rent Payment Date to, but excluding, the next succeeding Rent Payment Date
or, in the case of the last Rental Period, the period from and including the
last Rent Payment Date to, but excluding the last day of the Term.

     "REPLACEMENT AIRCRAFT" means any Aircraft of which a Replacement Airframe
is part.

     "REPLACEMENT AIRFRAME" means an Embraer model EMB-145LR aircraft or a
comparable or improved model of such aircraft of the Manufacturer (except
Engines or engines from time to time installed thereon) which shall satisfy the
requirements for a Replacement Airframe set forth in Section 12.01(a)(ii) and
which shall have become subject to this Lease pursuant to Section 12.01.

     "REPLACEMENT ENGINE" means an engine (a) (i) of the Engine Manufacturer and
is the same model or an improved model, (ii) of equal or greater value, utility
and modification, having all Airworthiness Directives completed for which a
terminating action is required as of the transfer of such Replacement Engine to
Lessor in accordance with Section 12.02, and (iii) in as good an operating
condition (as determined in the case of a used engine acquired from any
unrelated Person by a full (hot and cold section) borescope inspection), in each
case, as that of the Engine for which it is substituted, assuming such Engine
was in the condition and repair required by the terms hereof immediately prior
to the Event of Loss, (b) suitable for installation and use on the Airframe and
compatible with the other engine then installed on the Airframe , and (c ) in
the case of a Replacement Engine delivered in connection with the return of the
Aircraft pursuant to Section 18.03, having no greater number of accumulated
Flight Hours or Cycles since the last overhaul or shop visit on such engine, as
applicable under Lessee's engine maintenance program at the time of return of
the Aircraft, as the Engine that should have been returned, assuming such Engine
which should have been returned was in the condition and repair as required by
the terms hereof immediately prior to such return.

     "REPLACEMENT PART" has the meaning set forth in Section 9.01(b).

     "RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any officer
in its Corporate Trust Administration designated by the Owner Trustee to perform
obligations under the Operative Documents, and with respect to any other party,
any corporate officer of a party who, in the normal performance of his or her
operational responsibilities, with respect to the subject matter of any
covenant, agreement or obligation of such party pursuant to any Operative
Document, would have responsibility for and knowledge of such matter and the
requirements of any Operative Document with respect thereto.

     "RETURN ACCEPTANCE CERTIFICATE" means a certificate in the form of EXHIBIT
D-3 to be completed by Lessor pursuant to Section 18.06.

     "RETURN CONDITIONS" means such status and condition as shall permit the
Aircraft to comply with Sections 18.01 through 18.04 and EXHIBIT D-1 or EXHIBIT
D-2, as applicable.

                                       10


     "RETURN LOCATION" means such location within the continental United States
on Lessee's regional jet route system at one of its principal maintenance bases
as may be designated by Lessor and, so long as no Default or Event of Default
shall have occurred and be continuing, acceptable to Lessee.

     "RETURN OCCASION" means the event that occurs when possession of the
Aircraft is returned from Lessee to Lessor at the end of the Term or upon
Lessor's taking possession of the Aircraft pursuant to Article XVIII.

     "SECTION 1110" means 11 U.S.C.ss.1110 of the Bankruptcy Code.

     "SECTION 1110 PERSON" is a Citizen of the United States and is an "air
carrier" within the meaning of the Federal Aviation Act holding an "air carrier
operating certificate" issued under Chapter 447 (or any successor provision) of
the Federal Aviation Act for aircraft capable of carrying 10 or more individuals
or 6,000 or more pounds of cargo, with such certificate in full force and
effect.

     "SELLER" means Solitair Corp., a Delaware corporation.

     "SERVICE BULLETIN" means a service bulletin or service information letter
issued by the Manufacturer, Engine Manufacturer or other original equipment
manufacturer in respect of the Aircraft or any part thereof.

     "SPECIFIED DEFAULT" means (a) an event or condition described in Section
17.01(a), (g), (h), (i) or (j) (but only in the case of a voluntary suspension
of all Lessee's operations) that, after the giving of notice or lapse of time,
or both, would become an Event of Default, or (b) any Event of Default.

     "SMRD" has the meaning assigned to such term in the definition "Maintenance
Program."

     "SRM" has the meaning assigned to such term in the definition "Maintenance
Program."

     "STATE OF REGISTRATION" means the United States, or such other country in
which the Aircraft may be registered in accordance with Section 8.05 of this
Lease or Section 5 of Exhibit A-2.

     "SUBLEASE" means any sublease of the Aircraft with a Permitted Sublessee
entered into in accordance with Section 8.01(a) and any further subleasing of
the Aircraft whether or not authorized by this Lease; PROVIDED, HOWEVER, that a
wet lease or charter shall not be considered a Sublease for purposes of this
Lease.

     "SUPPLEMENTAL RENT" means any and all amounts, liabilities and obligations
(other than Basic Rent) that Lessee agrees to pay hereunder, or under any other
Operative Document , including, without limitation:

          (a) any payment of Stipulated Loss Value; and/or

          (b) any payment of Equivalency Payment; and/or

          (c) any payment by way of indemnity hereunder; and/or

          (d) as provided herein and to the extent permitted by applicable Law,
     interest at the Interest Rate calculated on any part of any installment of
     Basic Rent not paid on the due date thereof for the period the same remains
     unpaid, and on any Supplemental Rent not paid when due hereunder until the
     same is paid.

                                       11


     "TAX" and "TAXES" means any and all forms of taxation, levy, impost, duty,
with holding or charge of whatever nature and by whatever name called whenever
created or imposed and whether of the United States or elsewhere and whether
imposed by a local, municipal, governmental, state, federal or other body or
authority together with any additions to tax, penalties, fines, charges or
interest thereon and "taxation" shall be construed accordingly.

     "TAX INDEMNITEE" means WFB, in its individual capacity and as Lessor, the
Beneficiary, any Affiliate of a Tax Indemnitee with respect to any interest in
the Aircraft, or any part thereof and their respective successors and permitted
assigns.

     "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement [N288SK], dated
as of June 5, 2001 between the Lessee and the Beneficiary.

     "TERM" means the period of the leasing of the Aircraft to Lessee pursuant
to this Lease, and shall include the Basic Term and one or more Renewal Terms
(if any).

     "TRANSACTION COSTS" means those costs and expenses set forth in Section
12(e) of the Purchase Agreement that are to be paid or reimbursed by
Beneficiary.

     "TREASURY RATE" means in respect of any period the per annum rate equal to
the yield-to-maturity on the most liquid U.S. Treasury note maturing on the date
which falls on the last day of such period at the time it is to be determined
for the purposes of this Lease, in each case as reasonably determined by Lessor
(or any other person acceptable to Lessor and Lessee) as set forth on page 5 of
the Telerate screen (or, if such page no longer exists, a substitute page
providing the equivalent information).

     "TRUST AGREEMENT" means the Trust Agreement [N288SK], dated as of June 5,
2001, between WFB and the Beneficiary.

     "TRUST ESTATE" means all estate, right, title and interest of Lessor in and
to the Aircraft, this Lease, any Lease Supplement and any other Operative
Document to which Lessor is a party, including all amounts of Rent and
Supplemental Rent, insurance proceeds or other amounts payable to or for the
benefit of Lessor (other than any amounts payable to Lessor in its individual
capacity) pursuant thereto.

     "UCC" means the Uniform Commercial Code of New York as in effect from time
to time.

     "UNITED STATES ENTITY" means the government of the United States or America
or any agency or instrumentality thereof.

     "WFB" means Wells Fargo Bank Northwest, National Association, a United
States national banking association.

     Section 1.02 OTHER TERMS. In this Lease, the terms "APPLICABLE RATE,"
"APPRAISAL PROCEDURE," "EARLY PURCHASE DATE," "BASIC RENT," "EQUIVALENCY
CHARGE," "EXPIRY DATE," "FAIR MARKET SALE VALUE," "EARLY PURCHASE OPTION,"
"MINIMUM LIABILITY AMOUNT,""NET ECONOMIC RETURN," FMV OPTION," "PURCHASE PRICE,"
"SCHEDULED DELIVERY DATE," "STIPULATED LOSS VALUE," and "TERMINATION DATE" and
certain other terms defined in EXHIBIT A-2 shall have the meanings set forth in
EXHIBIT A-2.

     Section 1.03 CONSTRUCTION. In this Lease, except as otherwise expressly
provided or unless the context otherwise requires:

                                       12


          (a) the Schedules and Exhibits to this Lease shall form an integral
part hereof;

          (b) reference herein to this Lease shall be deemed to include
references to this Lease and its Schedules and Exhibits and all Lease
Supplements as the same may be amended or supplemented or replaced from time to
time;

          (c) references within any documents to appendices, schedules,
paragraphs, sections, exhibits or annexes are references to appendices,
schedules, paragraphs, sections, exhibits or annexes in or to such document;

          (d) headings, subheadings, and paragraph number descriptions and the
table of contents are solely for the convenience of reference and shall not
affect the meaning, construction or effect of any provision of this Lease or any
other document;

          (e) references to any Person or party shall include such Person or
party, its successors and permitted assigns and transferees;

          (f) references to the neuter gender include the masculine or feminine,
the masculine gender includes the feminine and the singular number includes the
plural, and vice versa;

          (g) reference to any agreement means such agreement as amended,
modified or supplemented from time to time in accordance with the provisions
thereof;

          (h) references to "including" shall mean including without limiting
the generality of any description preceding such term and the rule of EJUSDEM
GENERIS shall not be applicable to limit a general statement, followed by or
referable to an enumeration of specific matters, to matters similar to those
specifically mentioned;

          (i) the "winding up" or "dissolution" of a company or the appointment
of an "administrative receiver," a "liquidator," a "receiver" or an
"administrator" shall be construed so as to include any equivalent or analogous
proceedings and any proceedings giving protection for any period against the
claims of creditors under the Law of the jurisdiction in which such company is
incorporated or any jurisdiction in which such company carries on business or
owns assets;

          (j) references to any statutory provision shall include reference to
that provision as it may be amended from time to time and to any like or similar
provisions replacing the same or which replacement provision addresses the same,
the similar or analogous matter;

          (k) references to "indebtedness" shall be construed so as to include
any obligation (whether incurred as principal or as surety) for the payment or
repayment of money, whether present or future, actual or contingent;

          (l) where any matter requires the approval or consent of either party,
such approval or consent shall be deemed not to have been given unless given in
writing and where any matter is required to be acceptable to either party, the
same shall be deemed not to have been accepted unless such acceptance is
communicated in writing; and

          (m) each of the parties hereto and its counsel have reviewed and
revised, or requested revisions to, this Lease, and the usual rule of
construction that any ambiguities are to be resolved against the drafting party
shall be inapplicable in the construction and interpretation of this Lease.

                                       13


                                   ARTICLE II

                              LEASE AND CONDITIONS

     Section 2.01 TERM. (a) On the Delivery Date Lessor hereby agrees to tlease
the Aircraft to Lessee, and Lessee hereby agrees to lease the Aircraft from
Lessor, on the terms of this Lease for the Basic Term.

          (b) Lessee and Lessor agree that this Lease is, and shall be treated
for U.S. federal income tax purposes as, a lease of the Aircraft, Airframe,
Engines and Parts. It is the intention of each of Lessee and Lessor that Lessor
(and any Financing Party holding a mortgage as assignee of Lessor) 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, and in any instance where more than one construction of the terms and
conditions of this Lease or any other pertinent Operative Document is possible,
or of the facts and circumstances underlying the transactions contemplated
herein or therein, Lessor and Lessee agree that a construction that would create
and preserve such benefits shall control over any construction that would not
create and preserve such benefits. Lessor and Lessee agree that, for all
purposes of applicable Law, this Lease constitutes an agreement of lease and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft, Airframe, Engines, Parts or Aircraft
Documents, except as expressly provided herein to Lessee as a lessee only.

     Section 2.02  CONDITIONS  PRECEDENT.  (a) Lessor's  obligation to lease the
Aircraft to Lessee shall be subject to satisfaction of the following conditions:

               (i) no Default, Event of Default or Event of Loss shall have
     occurred and be continuing, and no Default or Event of Default would result
     from the leasing of the Aircraft hereunder on the Delivery Date;

               (ii) the representations and warranties of Lessee set forth in
     Section 5.01 and of Seller set forth in Section 9(a) of the Purchase
     Agreement shall be true and correct on the Delivery Date (unless any such
     representation and warranty shall have been made with reference to a
     specified date, in which case such representation and warranty shall be
     true and accurate as of such specified date), and each other party to this
     Lease and the other Operative Documents to which it is a party shall have
     performed and observed, in all material respects, all of its covenants,
     obligations and agreements in this Lease and the other Operative Documents
     to which it is a party to be observed or performed by it as of the Delivery
     Date;

               (iii) Lessee shall have delivered to Lessor an original of this
     Lease and Lease Supplement No. 1 thereto, and Lessor shall have received
     each of the other Closing Documents, each duly executed by the parties
     thereto other than Lessor, dated as of the Delivery Date (or such other
     date as may be reasonably satisfactory to Lessor) and in form and substance
     reasonably satisfactory to Lessor;

               (iv) no Default or Event of Default shall have occurred and be
     continuing under any Other Lease;

               (v) no change shall have occurred subsequent to the execution of
     this Lease and prior to the Delivery Date in any applicable Law or in the
     interpretation thereof that, in Lessor's reasonable opinion, would make it
     illegal for Lessor, Beneficiary, Seller or Lessee, or any or all of them,
     to perform any of their respective obligations under any of the Operative
     Documents; and

                                       14


               (vi) no action or proceeding shall have been instituted, nor
     shall any action be threatened in writing, before any governmental
     authority, nor shall any order, judgement or decree have been issued or
     proposed to be issued by any governmental authority, to set aside,
     restrain, enjoin or prevent the completion and consummation of this Lease
     or any other Operative Document or the transactions contemplated hereby or
     thereby.

               (vii) the conditions set forth in Section 4 of EXHIBIT A-2 shall
     have been met.

          (b) Lessee's obligation to lease the Aircraft hereunder shall be
subject to its satisfaction of the following conditions:

               (i) no Event of Loss shall have occurred.

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

               (iii) Lessee shall have received originals of this Lease and
     Lease Supplement No. 1 thereto, and Lessee shall have received each of the
     other Closing Documents, each duly executed by the parties thereto other
     than Lessee, dated as of the Delivery Date (or such other date as may be
     reasonably satisfactory to Lessee) and in form and substance reasonably
     satisfactory to Lessee;

               (iv) no change shall have occurred subsequent to the execution of
     this Lease and prior to the Delivery Date in any applicable Law or in the
     interpretation thereof that, in Lessee's reasonable opinion, would make it
     illegal for Lessor, Beneficiary, Seller or Lessee, or any or all of them,
     to perform any of their respective obligations under any of the Operative
     Documents; and

               (v) no action or proceeding shall have been instituted, nor shall
     any action be threatened in writing, before any governmental authority, nor
     shall any order, judgement or decree have been issued or proposed to be
     issued by any governmental authority, to set aside, restrain, enjoin or
     prevent the completion and consummation of this Lease or any other
     Operative Document or the transactions contemplated hereby or thereby.

PROVIDED that Lessee hereby acknowledges that each of the foregoing conditions
shall be deemed to have been satisfied upon delivery of the Aircraft by Aero to
Lessor and payment of the Aircraft Price and acceptance of the Aircraft by
Lessor under the Purchase Agreement, in which event Lessee shall not have any
right to reject the Aircraft or any Part thereof hereunder.

          (c) The conditions specified in paragraph (a) are inserted for the
sole benefit of Lessor and may be waived or deferred in whole or in part by
Lessor. Lessor may attach to such waiver or deferral such requirements and
further or other conditions as Lessor reasonably thinks fit.

          (d) The conditions specified in paragraph (b) are inserted for the
sole benefit of Lessee and may be waived or deferred in whole or in part by
Lessee, subject to the proviso at the end of

                                       15


paragraph (b). Lessee may attach to such waiver or deferral such requirements
and further or other conditions as Lessee reasonably thinks fit.

                                   ARTICLE III

                             DELIVERY AND ACCEPTANCE

     Section 3.01 DELIVERY. Lessor and Lessee anticipate that the Aircraft and
the Aircraft Documents will be tendered for delivery on June 29, 2001 at the
Delivery Location. On the Delivery Date the FAA-filed Documents shall be filed
with the FAA.

     Section 3.02 ACCEPTANCE OF AIRCRAFT. Following delivery of the Aircraft to
Lessor under the Purchase Agreement and execution by the Lessee of the Delivery
Acceptance Certificate, Lessee shall accept the Aircraft to be leased hereunder
"AS IS, WHERE IS" AND SUBJECT TO ALL FAULTS AND TO EACH AND EVERY DISCLAIMER OF
WARRANTY AND REPRESENTATION SET FORTH IN SECTION 7.03; it being understood that,
upon acceptance by Lessor of the Aircraft under the Purchase Agreement, Lessee
shall be obligated to execute and deliver the Delivery Acceptance Certificate
and accept the Aircraft under this Section 3.02.

     Section 3.03 RISK OF LOSS. From and after the Delivery Date and throughout
the Term until the Aircraft is redelivered to Lessor in accordance herewith,
Lessee shall bear all risk of loss, damage, theft or destruction of, or any
other Event of Loss with respect to, the Aircraft or to the Airframe, any Engine
or any Part.

                                   ARTICLE IV

                                      RENT

     Section 4.01 RENT; ADJUSTMENTS. (a) BASIC RENT. Lessee covenants and agrees
to pay to Lessor (or as Lessor shall direct) in respect of the Aircraft, as
Rent, on each Rent Payment Date, the Basic Rent for the Aircraft due on such
Rent Payment Date as provided in SCHEDULE BR-1 attached hereto and any and all
Supplemental Rent as the same becomes due. The Basic Rent payable on any Rent
Payment Date shall be allocated among the Rental Periods as provided in SCHEDULE
BR-2 attached hereto for all purposes, including federal and state income tax
purposes.

          (b) ADJUSTMENTS TO BASIC RENT AND STIPULATED LOSS VALUES.

               (i) If there is any change in the Aircraft Price from the Assumed
     Aircraft Price (as defined in EXHIBIT A-2), all installments of Basic Rent
     remaining to be paid during the Basic Term shall be recalculated and
     adjusted upwards or downwards as the case may be (and corresponding
     adjustments shall be made to the Basic Rent allocations set forth in
     SCHEDULE BR-2 and Stipulated Loss Values applicable during the remaining
     Basic Term), as provided in EXHIBIT A-2.

               (ii) If the Transaction Costs payable by the Beneficiary pursuant
     to Section 12(e) of the Purchase Agreement shall be less than the Assumed
     Transaction Costs (as defined in EXHIBIT A-2), all installments of Basic
     Rent remaining to be paid during the Basic Term shall be recalculated and
     adjusted downwards (and corresponding adjustments shall be made to the
     Basic Rent allocations set forth in SCHEDULE BR-2 and Stipulated Loss
     Values applicable during the remaining Basic Term), as provided in EXHIBIT
     A-2.

                                       16


               (iii) If required by the terms of Section 17 of the Tax Indemnity
     Agreement, Stipulated Loss Values applicable during the remaining Basic
     Term shall be recalculated and adjusted upwards or downwards as the case
     may be (and, if appropriate, corresponding adjustments shall be made to
     Basic Rent applicable during the remaining Basic Term and the Basic Rent
     allocations set forth in SCHEDULE BR-2) to maintain the Net Economic Return
     through the Early Purchase Date as well as the end of the Basic Term and,
     to the greatest extent consistent with such maintenance of such Net
     Economic Return, to minimize the net present value (calculated at a
     discount rate specified by the Lessee to the Beneficiary) of the remaining
     Basic Rent payments (or, if the Lessee shall have so specified to the
     Beneficiary, the remaining Basic Rent Payments to the Early Purchase Date).

     Section 4.02 MANNER OF PAYMENT. Each installment of Rent and all other
amounts payable by Lessee hereunder shall be paid, in Dollars, by wire transfer
of freely available same day funds on the due date therefor by 12:00 noon (New
York time) to the Payment Location therefor or to such other account as Lessor
may designate from time to time by not less than five (5) Business Days' written
notice to Lessee.

     Section 4.03 ABSENCE OF NEED FOR DEMAND. Except where payable on demand (in
which case payment shall be made promptly on demand), all payments to be made by
Lessee pursuant to this Lease on a date certain shall be made by Lessee on such
date whether or not demanded by the person to whom such payments are to be made.

     Section 4.04 NON-BUSINESS DAY; DATE OF RECEIPT. (a) If any payment falls
due hereunder on a day that is not a Business Day, such payment shall be made on
the next succeeding Business Day with the same force and effect as if paid on
the scheduled date of payment, and (if paid on such next succeeding Business
Day) no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of payment on such next succeeding Business Day.

          (b) All payments shall be considered to have been made on the date on
which they are received at the Payment Location in the manner provided in
Section 4.02.

     Section 4.05 NET LEASE; PROHIBITION AGAINST SET OFF, COUNTERCLAIM, ETC.
THIS LEASE IS A NET LEASE AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN,
LESSOR SHALL HAVE NO RESPONSIBILITY (OPERATIONALLY OR FINANCIALLY) IN RESPECT OF
THE USE, POSSESSION, CONTROL OR OPERATION OF THE AIRCRAFT. LESSEE'S OBLIGATION
TO PAY ALL RENT AND ALL OTHER AMOUNTS DUE HEREUNDER AND TO PERFORM ALL THE TERMS
HEREOF SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE AFFECTED OR REDUCED
BY ANY CIRCUMSTANCES, INCLUDING (I) ANY SET-OFF, COUNTERCLAIM, RECOUPMENT,
DEFENSE OR OTHER RIGHT THAT LESSEE MAY HAVE AGAINST LESSOR OR ANY OTHER PERSON;
(II) ANY DEFECT IN THE TITLE, AIRWORTHINESS OR ELIGIBILITY FOR REGISTRATION
UNDER APPLICABLE LAW, OR ANY CONDITION, DESIGN, OPERATION OR FITNESS FOR USE OF
THE AIRCRAFT, OR ANY INTERRUPTION OR CESSATION IN THE USE OR POSSESSION THEREOF
BY LESSEE; (III) SUBJECT TO SECTION 12.01, ANY EVENT OF LOSS; (IV) ANY LIENS
WITH RESPECT TO THE AIRCRAFT; (V) THE INVALIDITY OR UNENFORCEABILITY OF THIS
LEASE OR ANY ABSENCE OF RIGHT, POWER OR AUTHORITY OF LESSOR OR LESSEE TO ENTER
INTO THIS LEASE; (VI) ANY INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR
PROCEEDINGS BY OR AGAINST LESSOR OR LESSEE; IT BEING THE EXPRESS INTENTION OF
LESSOR AND LESSEE THAT ALL RENT AND OTHER AMOUNTS PAYABLE HEREUNDER SHALL BE
PAYABLE AND ALL OTHER TERMS HEREOF SHALL BE PERFORMED IN ALL EVENTS, UNLESS THE
OBLIGATION TO PAY OR TO PERFORM THE SAME SHALL BE TERMINATED OR SUSPENDED
PURSUANT TO THE EXPRESS PROVISIONS OF THIS LEASE. EXCEPT AS EXPRESSLY PROVIDED
IN THIS LEASE, EACH PAYMENT OF RENT OR ANY OTHER PAYMENT HEREUNDER MADE BY
LESSEE TO LESSOR SHALL BE FINAL AND LESSEE WILL NOT SEEK TO RECOVER ANY PART OF
SUCH PAYMENT FROM LESSOR FOR ANY REASON

                                       17


WHATSOEVER. 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 LAW OR OTHERWISE, TO TERMINATE THIS LEASE OR ANY
OBLIGATION IMPOSED UPON LESSEE HEREUNDER.

     NOTHING IN THIS SECTION 4.05 SHALL BE CONSTRUED TO PROHIBIT LESSEE FROM
SEPARATELY PURSUING ANY CLAIM 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 RENT DUE HEREUNDER
AND TO PERFORM ALL THE TERMS HEREOF).

     Section 4.06 INTEREST ON OVERDUE AMOUNTS. If Lessee fails to pay any sum
when due hereunder, Lessee shall pay interest thereon at the Interest Rate after
as well as before any judgment from the date such sum fell due until the date of
payment thereof. Such interest shall be payable by Lessee to Lessor on demand.
The provisions of this Section shall be in addition and without prejudice to any
other rights of Lessor at law or hereunder in relation to the failure of Lessee
to make prompt payment of sums due hereunder.

     Section 4.07 PAYMENTS BY LESSOR. Notwithstanding any provision of this
Lease to the contrary, Lessor shall not be obligated to make any payment or to
release any money to Lessee if a Specified Default shall have occurred and be
continuing but shall be entitled to hold such money as provided in Section 4.09
until any such Specified Default shall no longer be continuing, PROVIDED,
HOWEVER, that if an Event of Default occurs, Lessor shall be entitled to apply
such money to any Rent or other obligation owed by Lessee to Lessor hereunder.

     Section 4.08 PAYMENTS SET ASIDE OR REPAID. If at any time following the
application or payment of any sums hereunder to or for the benefit of Lessee by
Lessor it is discovered that no such application or payment should have been
made or that any payment by Lessee to Lessor is set aside, avoided under any
Laws relating to insolvency or liquidation or otherwise must be repaid, Lessee
shall, on Lessor's demand, reimburse Lessor in an amount equal to the sum so
applied or paid or, as the case may be, such amount so set aside, avoided or
repaid and such amount so set aside, avoided or repaid shall not be considered
as having been discharged or diminish the liability of Lessee to Lessor and the
liability of Lessee to Lessor shall continue to apply as if such payment had at
all times remained owing to Lessor and Lessee shall accordingly indemnify Lessor
in respect thereof.

     Section 4.09 INVESTMENT OF FUNDS. Any monies paid to or retained by the
Lessor which are required to be paid to the Lessee or applied for the benefit of
the Lessee (including, without limitation, amounts payable to the Lessee under
Articles XI and XII), but which the Lessor is entitled to hold under the terms
hereof pending the occurrence of some event or the performance of some act
(including, without limitation, the remedying of an Event of Default), shall,
until paid to the Lessee or applied as provided herein, be invested by the
Lessor from time to time at the direction, risk and expense of the Lessee in
Permitted Investments. The Lessor shall remit any gain (including interest
received) realized as the result of any such investment (net of any fees,
commissions and other expenses, if any, incurred in connection with such
investment) at the time such monies are to be paid to the Lessee or applied to
or for the benefit of the Lessee, unless an Event of Default shall have occurred
and be continuing, in which case such gains shall be held or applied in
accordance with the provisions of Section 4.07. The Lessee will promptly pay to
the Lessor, on demand, the amount of any loss realized as the result of any such
investment (together with any fees, commissions and other expenses, if any,
incurred in connection with such investment).

                                       18


                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES
                         -------------------------------

     Section 5.01 REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee acknowledges
that Lessor has entered into this Lease in full reliance upon the
representations of Lessee in the following terms and Lessee now warrants to
Lessor that the following statements are as of the date hereof, and on the
Delivery Date (unless any such representation and warranty shall have been made
with reference to a specified date, in which case such representation and
warranty shall be true and accurate as of such specified date) will be, true and
accurate:

          (a) Lessee is a corporation duly incorporated and validly existing in
good standing under the Laws of the State of New York, holds all authorizations
necessary to authorize Lessee to engage in air transport and to carry on its
passenger airline service as presently conducted and has the corporate power and
authority to carry on its business as presently conducted and to perform its
obligations under this Lease and the other Operative Documents to which it is a
party;

          (b) this Lease has, and the other Operative Documents to which Lessee
is a party have, been duly authorized by all necessary corporate action on the
part of Lessee and none of such agreements requires any approval of the
shareholders of Lessee (or if such approval is required, such approval has been
obtained) and neither the execution and delivery hereof and thereof nor the
consummation of the transactions contemplated hereby and thereby nor compliance
by Lessee with any of the terms and provisions hereof and thereof will
contravene any Law applicable to Lessee or result in any breach of, or
constitute any default under, or result in the creation of any Lien upon any
property of Lessee under any creditor agreement or instrument, corporate charter
or by-law or other agreement or instrument to which Lessee is a party or by
which Lessee or its properties or assets are bound or affected, except for any
such conflicts, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on the business or financial condition
of Lessee or on its ability to perform its obligations under this Lease and the
other Operative Documents to which Lessee is a party;

          (c) Lessee has or will, prior to the Delivery Date have, received
every consent, approval or authorization of, and has given every notice to, each
Governmental Entity having jurisdiction with respect to the execution, delivery
or performance of this Lease and the other Operative Documents to which it is a
party (including all monetary and other obligations hereunder) that is required
for Lessee to execute and deliver this Lease and the other Operative Documents
to which it is a party and each such consent, approval or authorization and
notice is valid and effective and has not been revoked, except for the
registrations, applications and recordings referred to in the opinion of Special
FAA Counsel delivered pursuant to Section 2.02 and the filings with the FAA of
the FAA-filed Documents pursuant to Section 2.02;

          (d) this Lease has been, and the other Operative Documents to which
Lessee is a party have been or will be, duly executed and delivered by Lessee,
and this Lease does, and the other Operative Documents to which Lessee is a
party do or will, constitute legal, valid and binding obligations of Lessee,
enforceable in accordance with their respective terms, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by such principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) as a court
having jurisdiction may impose and by laws that may affect some of such remedies
but which do not make the available remedies inadequate for the substantial
realization of the benefits provided herein;

                                       19


          (e) except as disclosed in any of the financial statements referred to
in Section 5.01(f), or as otherwise disclosed in writing to the Beneficiary
prior to the date hereof, there are no suits or proceedings pending or, to the
knowledge of Lessee, threatened in any court or before any regulatory
commission, board or other Governmental Entity against or affecting Lessee that
may, either individually or in the aggregate, reasonably be expected to have a
materially adverse effect on the ability of Lessee to perform its obligations
hereunder;

          (f) the audited financial statements of Lessee for the financial
period ended December 31, 2000, have been prepared in accordance with United
States generally accepted accounting principles consistently applied and present
fairly in all material respects the financial condition of Lessee and its
consolidated subsidiaries, if any, as of such date and the results of its
operations and cash flows for such period;

          (g) except as  disclosed  in writing to the  Beneficiary  prior to the
date hereof,  there has been no change in the  financial  condition,  results of
operations  or  business  prospects  of Lessee  since the date of the  financial
statements  described in paragraph(f) above that could reasonably be expected to
have a  material  adverse  effect  on the  ability  of  Lessee  to  perform  its
obligations  hereunder  or under any other  Operative  Document to which it is a
party; and

          (h) Lessee is a Section 1110 Person, and under the law as in effect on
the date hereof and on the Delivery Date, Lessor would be entitled to the
benefit of Section 1110 with respect to the Aircraft, for all Lessee's
obligations under this Lease, if Lessee were to become a debtor under 11 U.S.C.
Chapter 11.

     Section 5.02 REPRESENTATIONS AND WARRANTIES OF LESSOR. WFB and Owner
Trustee each acknowledges that Lessee has entered into this Lease in full
reliance upon the representations and warranties of WFB and the Owner Trustee in
the following terms and each of WFB and the Owner Trustee, as applicable, now
represents and warrants to Lessee that the following statements are as of the
date hereof, and as of the Delivery Date (unless any such representation and
warranty shall have been made with reference to a specified date, in which case
such representation and warranty shall be true and accurate as of such specified
date), will be, true and accurate:

          (a) WFB is a national banking association duly organized and existing
under the laws of the United States of America and has the power and authority
to carry on its business as presently conducted and to perform its obligations
as lessor under this Lease and the other Operative Documents to which it is a
party, whether in its individual capacity or as Owner Trustee;

          (b) this Lease has and the other Operative Documents to which it is a
party, whether in its individual capacity or as Owner Trustee, have been duly
authorized by all necessary trust action on the part of WFB and none of such
agreements requires any approval of the shareholders of WFB (or if such approval
is required, such approval has been obtained) and neither the execution and
delivery hereof and thereof nor the consummation of the transactions
contemplated hereby and thereby nor compliance by WFB, whether in its individual
capacity or as Owner Trustee, with any of the terms and provisions hereof and
thereof will contravene any Utah law or federal law governing the banking and
trust powers of WFB, whether in its individual capacity or as Owner Trustee, or
result in any breach of, or constitute any default under, or result in the
creation of any Lien, charge or encumbrance upon any property of WFB under any
creditor agreement or instrument, charter or by-law or other agreement or
instrument to which WFB, whether in its individual capacity or as Owner Trustee,
is a party or by which WFB, whether in its individual capacity or as Owner
Trustee, or its properties or assets are bound or affected;

                                       20


          (c) WFB, whether in its individual capacity or as Owner Trustee, has
or will, prior to the Delivery Date have, received every consent, approval or
authorization of, and has given every notice to, each Governmental Entity having
jurisdiction with respect to the execution, delivery or performance of this
Lease and the other Operative Documents (including all monetary and other
obligations hereunder) that is required for WFB, whether in its individual
capacity or as Owner Trustee, to execute and deliver this Lease and the other
Operative Documents to which it is a party and each such consent, approval or
authorization and notice is valid and effective and has not been revoked;

          (d) this Lease has been, and the other Operative Documents have been,
duly executed and delivered by WFB, whether in its individual capacity or as
Owner Trustee, and this Lease does, and the other Operative Documents to which
it is a party do, constitute legal, valid and binding obligations of WFB,
whether in its individual capacity or as Owner Trustee, enforceable in
accordance with their respective terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by such principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) as a court having jurisdiction
may impose and by laws that may affect some of such remedies but which do not
make the available remedies inadequate for the substantial realization of the
benefits provided herein;

          (e) there are no suits or proceedings pending or, to the knowledge of
WFB, threatened in any court or before any regulatory commission, board or other
Governmental Entity against or affecting WFB, whether in its individual capacity
or as Owner Trustee, that may, either individually or in the aggregate,
reasonably be expected to have a materially adverse effect on the ability of
WFB, whether in its individual capacity or as Owner Trustee, to perform its
obligations under this Lease and the other Operative Documents to which it is a
party;

          (f) on the Delivery Date, WFB is a "Citizen of the United States";

          (g) on the Delivery Date, Owner Trustee holds whatever title to the
Aircraft as was conveyed to it by Aero and there are no Lessor's Liens
attributable to WFB, either in its individual capacity or as Owner Trustee, in
respect of all or any part of the Aircraft or the Trust Estate;

          (h) there are no Claims or Taxes that may be imposed on or asserted
against Lessee, Beneficiary, Owner Trustee (except on fees of Owner Trustee) or
the Trust Estate or any part thereof or any interest therein under the laws of
the State of Utah in connection with the execution, delivery, or performance of
any Operative Document by the Owner Trustee, which would not have been imposed
if Owner Trustee had not (x) had its principal place of business in, (y)
performed (in its individual capacity or as Owner Trustee) any or all of its
duties under the Operative Documents in or (z) engaged in any activities
unrelated to the transactions contemplated by the Operative Documents in, the
State of Utah; and

          (i) WFB has made a filing with the New York State Banking Department
under Section 131.3 of the New York State Banking Law with respect to the trust
formed by the Trust Agreement.

     Section 5.03 SURVIVAL, NO PREJUDICE. (a) The representations and warranties
contained in Sections 5.01 and 5.02 shall survive the execution of this Lease
and Delivery of the Aircraft.

          (b) The rights of Lessor in relation to any misrepresentation or
breach of representation or warranty by Lessee shall not be prejudiced by any
investigation by or on behalf of

                                       21


Lessor into the affairs of Lessee, by the performance of this Lease or by any
other act or thing done or omitted to be done by Lessor that would, but for this
Section 5.03(b), prejudice such rights.

          (c) The rights of Lessee in relation to any misrepresentation or
breach of representation or warranty by Lessor shall not be prejudiced by any
investigation by or on behalf of Lessee into the affairs of Lessor, by the
performance of this Lease or by any other act or thing done or omitted to be
done by Lessee that would, but for this Section 5.03(c), prejudice such rights.

                                   ARTICLE VI

                               COVENANTS OF LESSEE

     Section 6.01 MAINTENANCE OF CORPORATE EXISTENCE. Lessee will (a) preserve
and maintain such of its rights, privileges, licenses and franchises in any
jurisdiction where failure to obtain such licenses or qualifications would have
a material adverse effect upon Lessee (but without limiting Lessee's discretion
to determine in which jurisdictions it chooses to do business) or its ability to
perform its obligations hereunder and (b) not merge into or consolidate with or
convey, transfer or lease substantially all of its assets as an entirety to any
Person unless:

               (i) the surviving or acquiring entity has executed an assumption
     agreement in form and substance reasonably satisfactory to Lessor pursuant
     to which the surviving entity has agreed to assume all of Lessee's
     obligations under the Operative Documents, and

               (ii) immediately after the merger, consolidation, transfer or
     lease, no Event of Default shall have occurred or be continuing, and

               (iii) immediately after the merger, consolidation, transfer or
     lease, the net worth of the surviving or acquiring entity shall be at least
     equal to Lessee's net worth immediately prior to such merger, consolidation
     or transfer or lease.

     Section 6.02 MAINTENANCE OF STATUS. Lessee is, and shall remain so long as
it shall be Lessee under this Lease, duly qualified to carry on its business as
an air carrier under applicable Law in accordance with the terms of this Lease
and shall, at all times during the Term, be a Section 1110 Person so long as
such status is a condition to the availability of Section 1110.

     Section 6.03 TAXES AND CHARGES. During the Term, Lessee shall be
responsible for and shall pay or cause to be paid all Taxes, governmental
charges, imposts, fees or levies, imposed upon it, or upon its income or
profits, or upon any property belonging to it, or which are incurred by Lessee
and/or any other operator of the Aircraft in the course of the operation of the
Aircraft or any other aircraft, prior to the date on which any such Tax, charge,
impost, fee or levy, if not paid, would become a Lien upon the Aircraft,
PROVIDED that Lessee shall pay or cause to paid as the same become due for
payment any such charges, imposts, fees or levies which attach to the Aircraft
in the course of the operation of the Aircraft or of any other aircraft and
which are imposed by any Governmental Entity other than a United States Entity
or any Governmental Entity within the United States, unless Lessee shall be
contesting in good faith the imposition or amount of any such Taxes,
governmental charges or levies, and in such case, subject to application of the
proviso, MUTATIS MUTANDIS, set forth in the definition of Permitted Lien.

     Section 6.04 GOVERNMENTAL CONSENTS. Lessee shall maintain in full force and
effect all governmental consents, licenses, authorizations, approvals,
declarations, filings and registrations required to be obtained by it in
connection with its obligations under this Lease and the other Operative
Documents and to take all such actions in connection therewith as may be proper
or advisable. Lessee

                                       22


further undertakes to obtain or effect any new or additional governmental
consents, licenses, authorizations, approvals, declarations, filings or
registrations that may become necessary for the performance by it of any of the
terms and conditions of this Lease or any other Operative Document.

     Section 6.05 LIENS. During the Term, Lessee shall not directly or
indirectly create, incur, assume or suffer to exist any Lien on or with respect
to the Aircraft, any Engine or any Part, title thereto or any interest therein,
other than Permitted Liens and shall promptly, at its own expense, duly
discharge any Lien, other than Permitted Liens, if the same shall arise during
the Term with respect to the Aircraft, any Engine or any Part or at any time
thereafter as a result of any act or omission of the Lessee during the Term. The
obligations of Lessee under this Section 6.05 shall survive the assignment,
expiration or other termination of this Lease.

                                   ARTICLE VII

                     COVENANTS OF LESSOR AND WFB; DISCLAIMER

     Section 7.01 QUIET ENJOYMENT. Lessor covenants that so long as no Event of
Default shall have occurred that has not been waived, it will not, and it will
not permit any mortgagee or any other Person acting by or through Lessor
(including Beneficiary and any Financing Party) to take or cause or permit to be
taken any action contrary to Lessee's right to the quiet use and enjoyment of
the Aircraft during the Term, in accordance with the terms hereof.

     Section 7.02 LESSOR'S LIENS. Each of WFB and Owner Trustee covenants that,
for the duration of the Term, it will not create, assume, permit or suffer to
exist any Lessor's Lien (other than Liens arising as a result of a Financing)
and will promptly take such actions as may be necessary to duly discharge any
Lessor's Lien (other than Liens arising as a result of a Financing) at any time
arising at Lessor's sole cost and expense. WFB agrees to indemnify and hold
harmless the Lessee and the Owner Trustee from and against any loss, cost,
expense or damage which may be suffered by the Lessee or the Owner Trustee as a
result of the failure of WFB to discharge and satisfy in full and promptly after
the same shall first become known to it any Lessor's Lien attributable to it in
its individual capacity.

     Section 7.03 DISCLAIMER OF WARRANTIES. THE AIRCRAFT IS TO BE LEASED
HEREUNDER "AS IS, WHERE IS" AND LESSEE HEREBY ACKNOWLEDGES THAT IT HAS HAD THE
OPPORTUNITY TO INSPECT THE AIRCRAFT AS PROVIDED HEREIN PRIOR TO THE DELIVERY
THEREOF. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 5.02 AND 7.01, LESSOR HAS NOT
AND SHALL NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY SPECIFICALLY DISCLAIMS,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE AIRWORTHINESS,
VALUE, DURABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY, FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE LIKE, OR FITNESS FOR
USE FOR ANY PARTICULAR PURPOSE OF THE AIRCRAFT OR AS TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR
OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO ANY MATTER WHATSOEVER,
EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF
PERFORMANCE OR DEALING OR USAGE OF TRADE), WITH RESPECT TO THE AIRCRAFT; AND
LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS RELIANCE UPON ANY SUCH
WARRANTY OR WARRANTIES.

     LESSOR SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY
OTHER AFFILIATE OF LESSEE, WHETHER ARISING IN CONTRACT OR TORT OUT OF ANY
NEGLIGENCE OR STRICT LIABILITY OF LESSOR OR OTHERWISE, FOR (I) ANY LIABILITY,
LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE
AIRCRAFT OR ANY ENGINE OR BY ANY DEFECT THEREIN, (II) THE USE, OPERATION OR
PERFORMANCE OF THE AIRCRAFT OR ANY RISKS RELATING THERETO, (III) ANY
INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR
CONSEQUENTIAL

                                       23


DAMAGES OR (IV) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS
OF LESSOR SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AND LESSOR SHALL
NOT BE DEEMED TO HAVE MADE ANY OTHER REPRESENTATIONS OR WARRANTIES.

     Section 7.04 CITIZENSHIP. WFB represents and warrants that it is and on the
Delivery Date will be a Citizen of the United States. If WFB does not comply
with the requirements of this Section 7.04, the Lessor and the Lessee hereby
agree that no Default shall be deemed to exist due to non-compliance by the
Lessee with the registration requirements set forth in Section 8.05 of this
Lease and Section 5 of Exhibit A-2 occasioned solely by such noncompliance of
WFB. WFB covenants that if at any time on or after the Delivery Date any of its
officers shall have actual knowledge that it has ceased to be a Citizen of the
United States, it will resign immediately as the Owner Trustee. WFB further
covenants that if at any time it appears reasonably probable that it will cease
to be a Citizen of the United States based on information that is (i) known to a
Responsible Officer of WFB or (ii) generally known to the public, it will
promptly so notify, to the extent permitted by law, the Lessee.

     Section 7.05 OTHER BUSINESS. Owner Trustee will not enter into any business
or other activity except as contemplated by the Operative Documents.

     Section 7.06 COMPLIANCE WITH TRUST AGREEMENT. Each of WFB and the Owner
Trustee agrees with the Lessee that so long as this Lease shall be in effect it
will (i) comply with all of the terms of the Trust Agreement applicable to it in
its respective capacity, the noncompliance with which would materially adversely
affect Lessee and (ii) not take any action, or cause any action to be taken, to
amend, modify or supplement any other provision of the Trust Agreement in a
manner that would materially adversely affect Lessee without the prior written
consent of Lessee.

     Section 7.07 SECURITIES ACT. None of WFB, the Lessor or any Person
authorized by either of them to act on its behalf has directly or indirectly
offered any interest in the Trust Estate, or in any similar security relating to
the Trust Estate, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security to, any
Person in violation of the Securities Act of 1933, as amended, or any applicable
state securities laws.

     Section 7.08 PERFORMANCE OF AGREEMENTS. Owner Trustee shall perform its
obligations under the Operative Documents to which it is a party in accordance
with the terms thereof.

     Section 7.09 ACTIONS WITH RESPECT TO TRUST ESTATE, ETC. Neither WFB, in its
individual capacity, nor the Owner Trustee will take any action to subject the
Trust Estate or the trust established by the Trust Agreement, as debtor, to the
reorganization or liquidation provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statute.

                                  ARTICLE VIII

                   POSSESSION; SUBLEASING; MAINTENANCE AND USE

     Section 8.01 POSSESSION. (a) PERMITTED TRANSFERS. Lessee will not without
the prior written consent of Lessor (which consent will not be unreasonably
withheld or delayed), assign, pledge or otherwise encumber this Lease or sublet
or transfer possession or operational control of the Aircraft or any Engine
leased hereunder or install any Engine or permit any Engine to be installed on
any airframe other than the Airframe; PROVIDED, HOWEVER, that if (x ) except as
expressly permitted in Section 8.05 and in Section 5 of EXHIBIT A-2, the action
to be taken shall not affect the registration of the Aircraft and (y )

                                       24


all necessary approvals of each Governmental Entity having jurisdiction over the
Aircraft, Lessee or other relevant Person have been obtained, then subject to
the limitations set forth in Sections 8.01(b ) and (c ), Lessee may, without the
consent of Lessor:

               (i) deliver possession of the Aircraft, Airframe or any Engine or
     any Part thereof to a Maintenance Contractor for testing or other similar
     purposes or for service, repair, maintenance, testing or overhaul work on
     the Aircraft or for alterations or modifications in or additions to the
     Aircraft to the extent required or permitted by the terms hereof;

               (ii) install any Engine on an airframe owned by Lessee free and
     clear of all Liens, except (A) Permitted Liens or those that apply only to
     the engines (other than Engines), appliances, parts, instruments,
     appurtenances, accessories, furnishings and other equipment (other than
     Parts) installed on such airframe and (B) the Lien of any mortgage that
     expressly and effectively provides that such Engine shall not become
     subject to the Lien thereof, notwithstanding the installation of such
     Engine on any airframe subject to such Lien, unless and until Lessee shall
     become the owner of such Engine;

               (iii) install any Engine on an airframe leased to Lessee or
     purchased by Lessee subject to a conditional sale or other security
     agreement; PROVIDED that (A) such airframe is free and clear of all Liens
     except the rights of the parties to the lease or conditional sale or other
     security agreement covering such airframe and except Liens of the type
     permitted by Section 8.01(a)(ii)(A) and (B); and (B) there shall be in
     effect between Lessee and such lessor or conditional vendor or other
     secured party of such airframe a written agreement (which may be the lease
     or hire purchase or conditional sale agreement covering such airframe)
     whereby such lessor or conditional vendor or other secured party expressly
     and effectively agrees that neither it nor its successors and assigns will
     acquire or claim any right, title or interest in such Engine by reason of
     such Engine's being installed on such airframe at any time while such
     Engine is subject to this Lease; and PROVIDED FURTHER, that the rights of
     any transfer permitted by this Section 8.01 shall be subject and
     subordinate to all of the terms of this Lease, including, without
     limitation, Lessee's obligation to return the Engines at the end of the
     Term and Lessor's right to repossession pursuant hereto, and Lessee shall
     remain primarily liable hereunder for the performance of all of the terms
     of this Lease to the same extent as if such transfer had not occurred;

               (iv) so long as no Specified Default shall have occurred and be
     continuing, sublease the Aircraft to any Permitted Sublessee;

               (v) enter into a charter or wet lease or other similar
     arrangement, which shall not constitute a transfer of possession hereunder
     so long as (A) no Person other than the Lessee is granted any legally
     enforceable possessory interest in the Aircraft and the Lessee retains
     operational control of the Aircraft at all times, (B) Lessee will remain
     primarily responsible for the performance of all terms of this Lease and
     the other Operative Documents, and (C) any such wet lease or other
     arrangement does not preclude Lessee from performing any of its obligations
     under this Lease;

               (vi) so long as no Specified Default shall have occurred and be
     continuing, subject any Engine to an interchange or pooling agreement
     approved by the Lessor (such approval not to be unreasonably withheld in
     the case of any such Engine interchange agreement solely among Section 1110
     Persons) and that is applicable to other similar property owned by or
     leased to the Lessee and is entered into by the Lessee in the ordinary
     course of its airline business, PROVIDED, that (A) no such agreement or
     arrangement shall under any circumstances result in, contemplate or require
     the transfer of title to any Engine and (B) if the Lessor's title to any
     Engine shall

                                       25


     nevertheless be divested under any such agreement or arrangement, such
     divestiture shall be deemed to be an Event of Loss with respect to such
     Engine and the Lessee shall comply with Section 12.02 hereof in respect
     thereof; and

               (vii) so long as no Specified Default shall have occurred and be
     continuing, transfer possession of the Airframe or any Engine to the United
     States of America, or to a foreign government, when required by applicable
     Law (it being understood that nothing in this clause (viii) shall relieve
     the Lessee from its obligations under Section 12.01(a) if such transfer
     becomes an Event of Loss), in which event Lessee shall promptly notify
     Lessor in writing of any such transfer of possession.

     In the event that Lessee shall have entered into a mortgage, lease or
conditional sale agreement complying with the provisions of Section 8.01(a)(ii)
or (iii), Lessor hereby agrees, for the benefit of the mortgagee, lessor or
conditional vendor under such agreement, that Lessor and its successors and
assigns shall not acquire or claim, as against such mortgagee, lessor or
conditional vendor, any right, title or interest in any engine owned by such
person or in which it has a security or ownership interest by reason of such
engine's being installed on the Airframe.

          (b) LIMITATIONS ON TRANSFERS. With respect to any transfer pursuant to
     Section 8.01(a):

               (i) the rights of any transferee pursuant to a transfer or other
     arrangement permitted by Section 8.01(a) shall be subject and subordinate
     to all the terms of this Lease and to the rights of Lessor in the Aircraft
     and this Lease, PROVIDED that, in the case of a transfer pursuant to
     Section 8.01(a)(ii) and (iii), Lessee shall ensure that the lease,
     mortgage, hire purchase or conditional sale agreement pursuant to which the
     airframe on which an Engine is installed is leased or purchased by the
     Lessee contains a clause similar to the last proviso of Section
     8.01(a)(iii);

               (ii) Lessee shall remain primarily liable hereunder for the
     performance of all of the terms hereof to the same extent as if such
     transfer or other arrangement had not occurred, and no such transfer or
     other arrangement pursuant to the terms of Section 8.01(a) shall in any way
     discharge or diminish any of Lessee's obligations to Lessor hereunder; and

               (iii) Lessee shall be responsible for filing or recording all
     such instruments, including, if applicable, this Lease and an aircraft
     mortgage, as may be necessary to perfect and preserve the respective
     interests of Lessor and any Financing Party in the Aircraft and this Lease
     in the State of Registration at its sole expense, notwithstanding any
     provision of this Lease to the contrary.

          (c) LIMITATIONS ON SUBLEASES. With respect to any Sublease pursuant to
     Section 8.01(a)(iv):

               (i) Prior to the end of the Recovery Period, Lessee may not enter
     into a Sublease (A) with any Permitted Sublessee domiciled in a country
     other than the United States, (B) or with any "tax-exempt entity," within
     the meaning of Section 168(h)(2) of the Code, or (C) that would result in a
     determination by any United States taxing authority that the Aircraft will
     be treated as "used predominantly outside the United States" within the
     meaning of Section 168(g) of the Code that would result in the cost
     recovery deductions to Lessor being less than the maximum allowable to a
     United States owner of the Aircraft, unless Lessee has prepaid on a lump
     sum basis, prior to the commencement of such Sublease, an amount equal to
     any indemnity obligation

                                       26


     of the Lessee due under the Tax Indemnity Agreement. The Country List in
     Exhibit F shall be subject to review from time to time, and Lessee may
     propose additions thereto, subject to the consent of Lessor not to be
     unreasonably withheld, and Lessor may propose deletions therefrom in its
     reasonable discretion.

               (ii) With respect to any Sublease, Lessee shall notify Lessor as
     soon as a copy of the proposed Sublease is available and in any event not
     less than 30 days prior to the execution of any such Sublease or, if later,
     the commencement of such Sublease, and together with such notice, Lessee
     will deliver promptly to Lessor a copy of such proposed Sublease and, if
     requested by Lessor, other documents reasonably related to such proposed
     Sublease and Permitted Sublessee.

               (iii) Lessee shall not enter into any Sublease unless:

                    (A) the term (including any option of the Permitted
          Sublessee to renew or extend) of any such Sublease does not continue
          beyond the end of the Term, unless (x) no Specified Default shall have
          occurred and be continuing at the commencement of such Sublease and
          (y) Lessee shall have irrevocably committed to purchase the Aircraft
          pursuant to the terms hereof;

                    (B) such Permitted Sublessee is prohibited from
          sub-subleasing the Aircraft or, except to the extent provided in
          subclause (F), otherwise assigning, granting or transferring any of
          its rights, obligations or interests with respect thereto or under the
          Sublease;

                    (C) the Sublease by its terms is expressly and effectively
          subject and subordinate to all of the terms of this Lease, and to
          Lessor's rights, powers or remedies hereunder, including Lessor's
          right pursuant to the exercise of its rights and remedies hereunder to
          avoid such Sublease and to recover the Aircraft from Lessee;

                    (D) such Permitted Sublessee is not on the effective date of
          such Sublease in default thereof in any material respect, with or
          without giving of notice or passage of time;

                    (E) if such Permitted Sublessee is domiciled in the United
          States, the Aircraft is and remains registered, and eligible for
          registration, in Lessor's name in accordance with the provisions
          hereof;

                    (F) the terms and conditions of such Sublease (1) shall not
          permit any Sublessee to perform any act not permitted to Lessee, (2)
          shall either (x) impose on the Sublessee obligations that are
          substantially the same as those contained in Sections 8.01(a)
          (PROVIDED that Sublessee may only be authorized to make the transfers
          permitted in clauses (i), (ii), ( iii ) and (v) of Section 8.01(a)),
          Section 8.01(b), Sections 8.02 through 8.08, Section 9.01, Section
          9.02(a) and (b), and Section 9.03 (PROVIDED that only pooling
          arrangements approved in advance by Lessor shall be permitted) or (y)
          permit Lessee to continue to perform its obligations thereunder, (3)
          shall provide for the inspections contemplated by Section 13.02, and
          (4) shall not delegate to Sublessee any of the obligations of Lessee
          under Article XVIII; and

                                       27


                    (G) such Permitted Sublessee has provided evidence
          satisfactory to Lessor of insurance coverage required by Article XI
          with respect to the operation of the Aircraft by such Permitted
          Sublessee.

               (iv) Lessee may not enter into any Sublease the provisions of
     which would prevent Lessee from complying with the terms of EXHIBIT D-1 and
     EXHIBIT D-2 hereto.

               (v) In the case of any Sublease that has a term greater than one
     year (assuming that any renewal options in such Sublease are exercised), as
     security for the due and punctual payment of all Rent payable by Lessee,
     and the timely performance and observance by Lessee of all covenants made
     by it under this Lease, Lessee hereby grants to Lessor a security interest
     in all of Lessee's right, title and interest in and to any such Sublease of
     the Aircraft together with all renewals of such Sublease executed or in
     effect from time to time, and all payments, including rent, insurance
     proceeds (other than public liability insurance proceeds) and all other
     amounts due and to become due thereunder (other than indemnity payments for
     the account of Lessee) and all proceeds of the foregoing; PROVIDED, that
     Lessor shall be exclusively entitled to exercise all of Lessee's rights and
     remedies under each Sublease of the Aircraft, including the right to
     demand, collect, sue, make claims for, and otherwise be paid all rent and
     other amounts due and to become due under each such Sublease, only from and
     after the occurrence of an Event of Default hereunder.

               (vi) With respect to any Sublease that has a term longer than one
     year, such Sublease shall (A) be accompanied by a security assignment in
     form and substance reasonably satisfactory to Lessor, and (B) be filed,
     together with such security assignment and such other documents as are
     necessary to perfect, protect and preserve the security interest granted
     hereby with respect to such Sublease, with the FAA or other government of
     registry of the Aircraft, as applicable, and with the necessary state
     recording offices pursuant to the UCC, or with such other recording offices
     as are required under applicable Law, and Lessee shall take such actions as
     Lessor shall reasonably request to perfect the security interest in the
     Sublease.

               (vii) Concurrently with entering into any Sublease, Lessee shall
     give written notice to the Permitted Sublessee of Lessor's right to be paid
     such rents and Lessor's other rights with respect to the Sublease from and
     after the occurrence of an Event of Default, and Lessee and such Permitted
     Sublessee shall each acknowledge in writing that all such payments shall be
     made directly to Lessor, and as to Lessor's other rights and remedies wish
     respect thereto.

               (viii) Lessee's right to enter into any Sublease is further
     conditioned upon Lessee delivering to Lessor (A) an opinion of counsel
     (which counsel and opinion shall be reasonably satisfactory to Lessor) to
     the effect, among other things, that (1) if the country in which the
     Permitted Sublessee has its principal office and domicile is not the United
     States, such country would give effect to the title of Lessor in and to the
     Aircraft, and permit the registration of the Aircraft in the name of Lessor
     (or Lessee or Permitted Sublessee, as appropriate), and (2) if the
     Permitted Sublessee is a Section 1110 Person, an opinion of counsel that
     the Lessee as lessor is entitled to the benefits of Section 1110 (assuming
     no change in United States law which would make such benefits unavailable
     to aircraft leases generally under United States law), and (B) a notice
     stating the identity of the applicable Permitted Sublessee and stating that
     no Specified Default shall have occurred and be continuing and that such
     Sublease complies with the requirements of this Section 8.01 and to the
     knowledge of Lessee after due inquiry the applicable Permitted Sublessee is
     not then subject to a proceeding or final order under applicable
     bankruptcy, insolvency or reorganization laws.

                                       28


               (ix) Any consolidation or merger of Lessee or conveyance,
     transfer or lease of all or substantially all of Lessee's assets permitted
     by Section 6.01 shall not be prohibited by this Section 8.01(c).

          (d) [Intentionally Omitted]

          (e) EXPENSES. Lessee hereby agrees to reimburse all reasonable out of
pocket costs and expenses of Lessor (including the reasonable fees and expenses
of counsel) incurred in connection with any re-registration of, or any Sublease
or other permitted transfer relating to the Aircraft.

          (f) NO ASSIGNMENT. Lessee shall not assign, except in accordance with
this Section 8.01 or as otherwise expressly provided in this Lease, any interest
in this Lease or any of its rights hereunder or in any property leased
hereunder. Lessor shall have no responsibility for any increased costs resulting
from any assignment that is provided for under Section 8.01.

     Section 8.02 LAWFUL INSURED OPERATIONS. (a) Lessee will operate and use the
Aircraft only in or in connection with lawful
commercial passenger airline operations.

          (b) Lessee will not maintain the Aircraft, or permit the Aircraft to
be maintained in a manner contrary to the Maintenance Program or in violation of
any applicable Law or any certificate of airworthiness, permit, license or
registration issued by the Aeronautical Authority, except to the extent being
contested diligently and in good faith, and Lessee will not use or operate the
Aircraft, or permit the Aircraft to be used or operated in a manner contrary to
the Lessee's operating manuals approved by the Aeronautical Authority or
instructions or the Maintenance Program or in violation of any applicable Law or
in violation of any certificate of airworthiness, permit, license or
registration issued by the Aeronautical Authority, except to the extent being
contested diligently and in good faith, PROVIDED that in either case such
contest does not create any material risk of the loss or forfeiture of the
Aircraft or to cancellation, suspension or loss of insurance coverage.

          (c) [Intentionally Omitted]

          (d) Lessee will not operate the Aircraft, or permit the Aircraft to be
operated during the Term unless the Aircraft is covered by insurance as required
by the provisions hereof and such operation is in compliance with the terms of
such insurance.

          (e) Lessee solely shall bear any costs and expenses that may arise
from any loss or damage (with respect to both the Aircraft and any affected
third parties) that may occur during or in connection with operations of the
Aircraft including those that are excluded from coverage by the insurance
maintained in accordance with Article XI.

          (f) Lessee shall not at any time represent Lessor as carrying goods or
passengers in the Aircraft or as being in any way connected or associated with
the operation or carriage being undertaken by Lessee or as having any
operational interest in or responsibility for the Aircraft.

     Section 8.03 RESTRICTIONS ON OPERATION. Lessee shall not operate or locate
the Aircraft or permit the Aircraft to be operated or located on any routes or
in any country in any manner that (i) would be in breach of or violate any
relevant Law of the United States or in or over any area that may expose Lessor
or any Financing Party to any penalty, fine, sanction or other liability,
whether civil or criminal, under any applicable Law, or (ii), subject to Section
8.05, would result in the Aircraft being ineligible for registration in the name
of Lessor under 49 U.S.C. 44102(a)(1)(C). Lessee shall not operate the Aircraft
in any geographical area for which it is not duly authorized. Lessee shall not
use the Aircraft for training of

                                       29


any Person other than its own employees and shall not use the Aircraft for
training its personnel more than it uses any other EMB-145 aircraft in its
fleet, whether owned or leased.

     Section 8.04 AOC. Lessee shall continue to hold an air carrier operator's
certificate with an operating specification allowing it to operate aircraft of
the same type as the Aircraft and for the purpose for which the Aircraft is
permitted to be used hereunder issued by the FAA.

     Section 8.05 REGISTRATION AND OPERATION. Except as otherwise permitted by
Section 5 of Exhibit A-2, or as otherwise required by the Federal Aviation Act
or rules, regulations, or orders promulgated thereunder, or to the extent that
such registration cannot be effected or continued due solely to the Lessor's
failure to comply with the citizenship or other eligibility requirements for
registration of commercial aircraft under the Federal Aviation Act or any rule,
regulation or order promulgated thereunder, Lessee shall at its expense keep the
Aircraft at all times registered under the applicable Laws of the United States
in the name of Lessor and, at all times that the Aircraft is being used and
operated for the public transport of passengers, shall insure that the Aircraft
possesses a valid, current certificate of airworthiness and such other
certificates, licenses, permits and authorizations as may be from time to time
required for the use and operation of the Aircraft for the public transport of
passengers; PROVIDED that the Lessor shall execute and deliver all such
documents as the Lessee may reasonably request for the purpose of effecting,
continuing or (as provided in this Section 8.05 of this Lease and Section 5 of
Exhibit A-2) changing such registration.

     Section 8.06 INSIGNIA. On the Delivery Date or promptly thereafter, but in
any event prior to the Aircraft being placed in service, Lessor shall place, and
at all times during the Term, Lessee shall maintain, in the cockpit of the
Airframe in a prominent location and on the gearbox of each Engine, a fireproof
plate of a reasonable size bearing the legend:

          "THIS AIRCRAFT/ENGINE IS OWNED BY WELLS FARGO BANK NORTHWEST, NATIONAL
     ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS OWNER TRUSTEE
     (THE "OWNER"), AND IS LEASED BY THE OWNER TO CHAUTAUQUA AIRLINES, INC."

Lessee agrees to make such changes to such identification plates as Lessor may
reasonably request from time to time.

     Section 8.07 REMOVED ENGINES. At any time when an Engine is installed on an
airframe or aircraft other than the Airframe or the Aircraft, Lessee shall
ensure that insurance cover is maintained incompliance with Article XI .
Notwithstanding anything herein to the contrary, Lessee shall not install, and
shall not permit the installation of, any Engine on any airframe that is not an
EMB-145 airframe or, if fully compatible in accordance with Manufacturer's and
Engine Manufacturer's specifications, an EMB-140 airframe.

     Section 8.08 MAINTENANCE. Lessee, at its own cost and expense, shall:

          (a) perform or cause a Maintenance Contractor to perform all service,
inspections, repairs, maintenance, modifications, alterations, overhaul, checks
(including heavy checks) and testing, (i) as may be required under the rules and
regulations of the Aeronautical Authority applicable to the Aircraft and in
compliance with the Maintenance Program and good commercial practice, (ii) as
may be included in any ADs, (iii) so as to keep the Aircraft airworthy (except
as otherwise provided in Section 8.08(b)) and in good operating order, repair,
condition and appearance and in at least as good operating condition and
appearance as when delivered to Lessee subject to normal wear and tear
associated with the operation and maintenance thereof in accordance herewith and
(iv) as required pursuant to Section 1(l) of EXHIBIT D-1 OR EXHIBIT D-2, AS
APPLICABLE. Lessee shall do each of the foregoing and shall incorporate Service

                                       30


Bulletins, in the same manner and with the same care as is the case with similar
aircraft and engines of the same make and model as the Aircraft and Engines
owned by or operated by or on behalf of Lessee, without discrimination (as
compared to other similar aircraft owned or operated by Lessee) in contemplation
of the expiration or termination of this Lease with respect to the use,
operation or mandatory maintenance, other than the withdrawal of the Aircraft
from service as necessary to prepare the Aircraft for return to Lessor upon such
expiration or termination. Nothing in this Section 8.08(a) shall be construed in
such a manner as to require Lessee to modify the Aircraft in such a manner as to
reflect a configuration that is unique to Lessee solely because Lessee may be so
modifying other aircraft operated by it;

          (b) keep the Aircraft (i) in such condition as may be necessary to
enable the airworthiness certification of the Aircraft to be maintained in good
standing at all times (except during periods of maintenance, repair or
modification when the Aircraft is not operated, during any period when the
Aeronautical Authority shall have revoked or suspended the airworthiness
certification of all aircraft of the same type, model and series as the
Aircraft, and during any period which the Aircraft is in long-term storage) and
(ii) in compliance with Part 121 of the Federal Aviation Regulations (as set
forth in Title 14 of the U.S. Code of Federal Regulations), or, if the Aircraft
has been re-registered in accordance with the provisions of this Lease in a
country other than the United States, the requirements of the civil aviation
authority having jurisdiction over the Lessee's or any Permitted Sublessee's
operations, and all other applicable Law; and

          (c) maintain throughout the Term in a form that is accurate, complete,
and current all Aircraft Documents listed on EXHIBIT B and all log books, all
manuals and revisions and updates thereto, all certification and inspection
records (including without limitation all certifications and forms required by
the Aeronautical Authority and otherwise and all reports, x-rays, video tapes,
print-outs and other non destructive testing documents), and all other material
required by the Aeronautical Authority or required by the Maintenance Program
relating to operation, maintenance or other activity of the Aircraft during the
Term, with all such Aircraft Documents being in English.

     Section 8.09 COSTS. Lessee shall be responsible for and shall hold Lessor
harmless from all costs incurred in the operation of the Aircraft for profit or
otherwise, including, without limitation, the costs and expenses of flight
crews, cabin personnel, fuel, oil, lubricants, maintenance, insurance, landing
fees, navigation fees, airport charges and any and all other expenses or claims
of any kind or nature, directly or indirectly incurred or imposed in connection
with or related to the use, movement, operation, maintenance, repair, storage or
location of the Aircraft during the Term.

                                   ARTICLE IX

                       REPLACEMENT OF PARTS; MODIFICATIONS

     Section 9.01 REPLACEMENT AND REMOVAL OF PARTS. (a) Except as otherwise
provided in Section 9.01(f) or if the Airframe or an Engine to which a Part
relates has suffered an Event of Loss, Lessee, at its own cost and expense,
shall promptly replace or ensure the replacement of all Parts that, from time to
time, may become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or rendered unfit for use for any reason whatsoever.

          (b) In the ordinary course of maintenance, service, repair, overhaul
or testing during the Term, Lessee may at its own cost and expense cause to be
removed or allow the removal of any Parts, whether or not worn out, destroyed,
damaged beyond repair or rendered unfit for use, PROVIDED that Lessee shall
replace at its own cost and expense such Parts as promptly as practicable (any
Part replaced

                                       31


pursuant to Section 9.01(a) or (b), a "REPLACEMENT PART"), PROVIDED FURTHER,
HOWEVER, that Lessee may elect not to replace Parts only to the extent provided
in Section 9.01(f).

          (c) All Replacement Parts shall be free and clear of all Liens, shall
be Aeronautical Authority-approved and fully interchangeable, shall have been
overhauled, repaired and inspected by a Maintenance Contractor, except for
Permitted Liens and for pooling arrangements to the extent permitted by Section
9.03, and shall be in as good operating condition as, and have a utility at
least equal to and a value reasonably approximating, the Parts replaced
(assuming such Parts were in the condition and repair in which they were
required to be maintained by the terms hereof) and all serviceable tags or other
required documentation relating to the last overhaul of such Parts performed by
an Aeronautical Authority approved facility shall be provided and maintained by
Lessee.

          (d) All Parts owned by Lessor that are at any time removed from the
Aircraft shall remain the property of Lessor and subject to this Lease, no
matter where located, until such time as such Parts shall be replaced by parts
which have been incorporated or installed in or attached to the Aircraft and
that meet the requirements of Replacement Parts specified in Section 9.01(c) or
as otherwise provided in Section 9.01(f). Immediately upon any Replacement Part
becoming incorporated or installed in or attached to the Aircraft as above
provided, without further act, (i) title to the removed Part shall thereupon
vest in Lessee, free and clear of all rights of Lessor and any Financing Party
and Lessor's Liens, and such removed Part shall no longer be deemed a Part
hereunder, (ii) title to such Replacement Part shall thereupon vest solely in
Lessor, and (iii) such Replacement Part shall become subject to this Lease and
be deemed a Part for all purposes hereof to the same extent as the Part which it
has replaced.

          (e) Lessee shall be entitled, so long as no Event of Default shall be
continuing, to substitute, replace or renew any Part with a part that does not
satisfy the requirements of Section 9.01(c) PROVIDED that:

               (i) there shall not have been available to Lessee at the time and
     in the place that such substitute or replacement part was required to be
     installed on the Airframe or an Engine a substitute or replacement part
     complying with such requirements;

               (ii) it would have resulted in an unreasonable disruption of the
     operation of the Aircraft to have grounded the Aircraft until such time as
     a substitute or replacement part complying with such requirements became
     available for installation in or on the Aircraft; and

               (iii) as soon as practicable after installation of the same in or
     on the Airframe or Engine (which, in the case of an Engine, shall be no
     later than the next off-wing shop visit of the Engine) Lessee shall remove
     any such part not complying with such requirements and replace or
     substitute the same with a part complying with the same.

          (f) Lessee may, at its own cost and expense at any time during the
Term, remove or cause to be removed any Part from the Airframe or an Engine if
(i) such Part is in addition to, and not in replacement of or in substitution
for, any Part originally incorporated or installed in or attached to the
Airframe or such Engine at the time of delivery thereof hereunder or any Part in
replacement of, or in substitution for, any such original Part and (ii) such
Part can be removed from the Airframe or such Engine without materially (as
measured on an aggregate basis) diminishing or impairing the value, condition,
utility, airworthiness that the Airframe or such Engine would have had at the
time of removal had such removal not been effected by Lessee, assuming the
Aircraft was otherwise maintained in the condition required by this Lease,
PROVIDED that Lessee also may remove Parts that the Lessee deems obsolete or no
longer suitable or appropriate for use in the Aircraft, Airframe or such Engine
so long as the aggregate value of such removed Parts (based on their value as of
the Delivery Date) does not exceed

                                       32


$200,000. Lessee shall only make such removals referred to in the proviso to the
first sentence of this Section 9.01(f) if such removals are made in the same
manner and with the same care as removals made in the case of similar aircraft
and engines of the same make and model as the Aircraft and Engines owned by or
operated by or on behalf of Lessee, without discrimination (as compared to other
similar aircraft owned or operated by Lessee). Upon the removal of any such
Part, title thereto shall vest, without further act, in Lessee free and clear of
all rights of Lessor and such Part shall no longer be deemed a Part hereunder.
Any Part not removed as above provided prior to the return of the Aircraft to
Lessor hereunder shall remain the property of Lessor.

          (g) Notwithstanding anything to the contrary contained in this Section
9.01, Lessee may not replace or remove any Parts in a manner that would prevent
it from complying with Section 1(b) of EXHIBIT D-1 or EXHIBIT D-2, as
applicable.

     Section 9.02 ALTERATIONS, MODIFICATIONS AND ADDITIONS. (a) Lessee, at its
own expense, shall promptly make or ensure or allow the making of such
alterations, modifications and additions to the Aircraft as may be required from
time to time to meet the applicable standards of the FAA or to comply with any
mandatory Law, rule, directive, bulletin, notice, regulation or order of any
Governmental Entity having jurisdiction over the Aircraft; PROVIDED that Lessee
may in good faith and by appropriate procedure, contest the validity or
application of any such standard in any reasonable manner which does not
materially and adversely affect the interests of the Lessor or Beneficiary and
does not involve any material risk of sale, forfeiture or loss of the Aircraft
or the interest of the Lessor or Beneficiary therein, any material risk of civil
penalty or any discernable risk of criminal liability being imposed on Lessor or
Beneficiary.

          (b) So long as no Specified Default has occurred and is continuing,
Lessee, at its own expense, may from time to time make other alterations,
modifications and additions to the Aircraft, subject to the following conditions
and limitations:

               (i)  Lessee may not make any such alteration, modification or
                    addition in a manner that would prevent it from complying
                    with Section 1(b) of EXHIBIT D-1 or EXHIBIT D-2, as
                    applicable;

               (ii) no such alteration, modification or addition diminishes the
                    remaining warranty status, value or utility, or impairs the
                    condition or airworthiness, of the Aircraft;

               (iii) title to all Parts incorporated or installed in or attached
                    or added to the Aircraft as a result of such alteration,
                    modification or shall vest immediately in Lessor and become
                    subject to this Lease, without the necessity for any further
                    act of transfer, document or notice

               (iv) Lessee shall only make such alterations, modifications and
                    additions in the same manner and with the same care as are
                    made in the case of similar aircraft of the same make and
                    model as the Aircraft owned by or operated by or on behalf
                    of Lessee, without discrimination (as compared to other
                    similar aircraft owned or operated by Lessee; PROVIDED that
                    Lessee shall be deemed to be in compliance with this Section
                    9.02(b)(iv) with respect to any alteration or modification
                    made to the Aircraft to meet the operational requirements of
                    any code share party under a code share or other similar
                    arrangement that is also made to other aircraft leased or

                                       33


                    owned by Lessee that are subject to code sharing or similar
                    arrangements with such code share party; and

               (v)  No such alteration, modification or addition shall cause the
                    Aircraft to be limited use property, but without limiting
                    Lessee's right to remove Parts pursuant to Section 9.01(f).

          (c) In no event shall Lessor bear any liability or cost for any
alteration, modification or addition to, or for any grounding or suspension of
operations or of the certification of, the Aircraft, or for any loss of revenue
arising therefrom.

     Section 9.03 POOLING OR PARTS LEASING. Any Part removed from the Airframe
or from any Engine as provided in Section 9.01 may be subjected by the Lessee to
a pooling or parts leasing agreement or arrangement that (i) is sponsored or
supervised by the Manufacturer or Engine Manufacturer or a manufacturer of such
Parts, (ii) is entered into in connection with a power by the hour agreement,
(iii) is based on immediate operational necessity or (iv) has been approved in
advance by the Lessor (such approval not to be unreasonably withheld), PROVIDED
that the part replacing such removed Part shall be incorporated or installed in
or attached to such Airframe or Engine in accordance with Section 9.01 as
promptly as practicable after the removal of such removed Part. In addition, any
Replacement Part when incorporated or installed in or attached to the Airframe
or any Engine in accordance with Section 9.01 may be owned by another airline or
vendor as customary in the airline industry, subject to any such pooling or
parts leasing arrangement, PROVIDED that the Lessee, at its expense as promptly
thereafter as reasonably practicable, either (x) causes title to such temporary
Replacement Part to vest in the Lessor in accordance with Section 9.01(d) by the
Lessee acquiring title thereto for the benefit of the Lessor free and clear of
all Liens except Permitted Liens, at which time such temporary replacement part
shall become a Part and become subject to this Lease or (y) replaces such
temporary Replacement Part by incorporating or installing in or attaching to
such Airframe or Engine a further Replacement Part owned by the Lessee free and
clear of all Liens except Permitted Liens and by causing title to such further
Replacement Part to vest in the Lessor in accordance with Section 9.01(d).

                                    ARTICLE X

                            MANUFACTURERS' WARRANTIES

     Section 10.01 ASSIGNMENT. Lessor hereby assigns to Lessee all rights Lessor
has under any warranty, express or implied, with respect to the Aircraft and the
Engines or any Parts thereof made by the Manufacturer, the Engine Manufacturer,
or any other Person, and all proceeds thereof and recoveries thereunder under
the Manufacturer Purchase Agreement, Assignment No. 2, the Engine Warranty
Agreement and Engine Warranty Assignment and Consent and otherwise, to the
extent that such warranties exist or may be assigned or otherwise made available
to Lessee; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
and any termination of this Lease under Section 17.02 hereof, all such rights
shall, without further action or notice, immediately revert to Lessor including
all claims thereunder whether or not perfected. In the event any such warranties
are not assignable to Lessee, Lessor shall use commercially reasonable efforts
at Lessee's expense to enforce such warranties on Lessee's behalf so long as no
Event of Default shall have occurred and not been remedied or waived.

     Section 10.02 LIMITATIONS. Lessee shall not do or omit to do anything (or
permit or fail to prevent the doing or omission of anything) that, or the
omission of which, prejudices any right that Lessor or Lessee may have against
the Manufacturer, the Engine Manufacturer or against the manufacturer or
supplier of any part of the Aircraft or against any maintenance, conversion or
repair facility in respect of the Aircraft or any part thereof.

                                       34


                                   ARTICLE XI

                                    INSURANCE

     Section 11.01 PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE. Lessee shall,
without expense to the Lessor, maintain or cause to be maintained in effect at
all times during the Term, with an Approved Insurer, public liability insurance
(including, without limitation, aircraft third party, passenger legal liability,
property damage, general third party legal liability and product liability
coverage (in each case, without any exclusion for date recognition coverage) but
excluding manufacturer's product liability coverage) with respect to the
Aircraft in an amount not less than the greater of (x) the amount which Lessee
may carry from time to time on other similar aircraft in its fleet (whether
owned or leased) and (y) the Minimum Liability Amount; PROVIDED that an
agreement of a United States Entity backed by the full faith and credit of the
United States government for the benefit of the Additional Insureds to insure
against or indemnify for substantially the same risks to at least the same
amount shall satisfy the requirements of this Section 11.01, PROVIDED FURTHER,
that on or prior to the date of such agreement, the Lessee shall provide an
Officer's Certificate of the Lessee certifying that any such insurance or
indemnity provides protection no less favorable than insurance coverage that
would comply with this Section 11.01. Such insurance shall be of the type
usually carried by the Lessee with respect to similar aircraft and engines, and
covering risks of the kind customarily insured against by the Lessee and shall
be consistent with generally accepted industry-wide practice for airlines
similarly situated to Lessee with regard to the insurance of aircraft similar to
those operated by Lessee and based or operated in any jurisdiction in which the
Aircraft may then be based or operated.

     During any period of more than thirty (30) days that the Aircraft is placed
in short-term or long-term storage status, the Lessee may modify the insurance
required by this Section 11.01 to modify the amounts of public liability and
property damage insurance, the scope of the risks covered and the type of
insurance, in all circumstances to conform to such insurance customary in the
United States airlines industry for regional air carriers similarly situated
with the Lessee in respect of similar aircraft which are placed in short-term or
long-term storage status, except that in all instances the amounts of coverage
and scope of risk covered and the type of insurance shall be at a minimum no
less favorable than the insurance as from time to time applicable to aircraft
owned or leased by Lessee and in short-term or long-term storage status.

     Section 11.02 INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT AND ENGINES.
Subject to the rights of Lessee under Section 11.10, Lessee shall, without
expense to the Lessor, maintain or cause to be maintained in effect at all times
during the Term, with an Approved Insurer, all risk (which may, except as
provided in Section 11.04, exclude war and allied perils (but which shall not
contain any exclusion for date recognition coverage)), agreed value, ground and
flight hull insurance, covering the Aircraft for an amount at all times (even
when the Aircraft is grounded or in storage) not less than the Stipulated Loss
Value from time to time; PROVIDED that, the Lessee shall not be required to
maintain all-risk flight aircraft hull insurance with respect to any period in
which the Aircraft is placed in short term or long term storage status, and
PROVIDED FURTHER that all-risk flight aircraft hull insurance shall be in effect
during any check flights, ferry flights or other flight time during such
storage. Such insurance shall not provide insurers with a right to replace the
Airframe or any Engine with another airframe or Engine. Such hull insurance or
other personal property insurance of the Lessee shall cover Engines or engines
and Parts temporarily removed from the Airframe pending replacement by
installation of the same or similar Engines, engines or Parts on the Airframe in
an amount not less than the fair market value of such Engine or Part. Such
insurance shall be of the type usually carried by the Lessee with respect to
similar aircraft and engines, and covering risks of the kind customarily insured
against by the Lessee and shall be consistent with generally accepted
industry-wide practice for airlines similarly situated to Lessee with regard to
the insurance of aircraft similar to those operated by Lessee and based or
operated in any jurisdiction in

                                       35


which the Aircraft may then be based or operated. An agreement of a United
States Entity backed by the full faith and credit of the United States
government to insure against or indemnify for substantially the same risks to at
least the same amount will satisfy any of the requirements of this Section
11.02.

     Section 11.03 ADDITIONAL INSUREDS; LOSS PAYMENT. The Lessee shall cause all
policies of insurance carried in accordance with this Article XI to name the
Additional Insureds as their respective interests may appear as additional
insureds and shall cause all policies required by Section 11.02 to name Lessor
as the sole loss payee. Such policies shall provide with respect to such
Additional Insureds that (a) none of their respective interests in such policies
shall be invalidated by any act or omission or breach of warranty or condition
contained in such policies by the Lessee or, in the case of any particular
Additional Insured, any other Additional Insured; (b) no cancellation or lapse
of coverage for nonpayment of premium or otherwise, and no substantial change of
coverage which adversely affects the interests of any such Additional Insured,
shall be effective as to such Additional Insured until 30 days (or 10 days in
respect of non-payment of premium and, in the case of war risk coverage, such
lesser period as may be applicable) after receipt by such Additional Insured of
written notice from the insurers of such cancellation, lapse or change; (c) they
shall have no liability for premiums, commissions, calls, assessments or
advances with respect to such policies; (d) such policies will be primary
without any right of contribution from any other insurance carried by such
Additional Insureds; (e) the insurers waive any rights of set-off, counterclaim,
deduction or subrogation against such Additional Insureds; (f) shall apply
worldwide and have no territorial restrictions or limitations (except, in the
case of war, hijacking or related perils insurance, as otherwise permitted
hereunder); and (g) shall contain a 50/50% Clause per Lloyd's Aviation
Underwriter's Association Standard Policy Form AVS 103 to the extent a separate
war risk policy is maintained. Each liability policy shall provide that all the
provisions thereof, except the limits of liability, shall operate in the same
manner as if there were a separate policy covering each insured and provide that
the exercise by the insurer of rights of subrogation derived from rights
retained by the Lessee will not delay payment of any claim that would otherwise
be payable but for such rights of subrogation. Each hull policy shall name the
Lessor as loss payee with respect to proceeds payable for an Event of Loss and
where the aggregate insurance proceeds exceed $750,000; PROVIDED that, so long
as the insurers shall not have received written notice that a Specified Default
has occurred and is continuing, if insurance proceeds in the aggregate equal to
$750,000 or less become payable, then such proceeds shall be payable to the
Lessee and, notwithstanding the foregoing, any amounts up to Stipulated Loss
Value (x) of any proceeds which in the aggregate exceed $750,000, (y) of any
proceeds in respect of an Event of Loss or (z) if the insurers shall have
received written notice that a Specified Default has occurred and is continuing,
any proceeds with respect to any single loss, shall be payable to Lessor as loss
payee.

     Section 11.04 WAR RISK. Subject to the rights of Lessee under Section
11.10, if and to the extent that the Lessee or a Permitted Sublessee operates
the Aircraft (a) on routes for which it maintains war risk, hijacking or allied
perils insurance in effect with respect to other similar owned or leased
aircraft in its fleet, (b) on routes (other than routes within the United States
and Canada) where the custom in the industry is to carry war risk insurance, or
(c) in any area of recognized hostilities, the Lessee or such Permitted
Sublessee shall maintain or cause to be maintained a war risks insurance policy
(hull and liability) on the Aircraft covering all of those risks that are
currently enumerated in Lloyds Form AVN 48B (War, Hijacking and Other Perils
Exclusion Paragraph (Aviation)) to the fullest extent possible and any
additional risks that may hereafter be included therein or in any form
succeeding to any of its functions in an amount with respect to hull, not less
than the Stipulated Loss Value and, with respect to liability, in an amount not
less than the Minimum Liability Amount. An agreement of a United States Entity
backed by the full faith and credit of the United States government to insure
against or indemnify for substantially the same risks to at least the same
amount will satisfy any of the requirements of this Section 11.04.

                                       36


     Section 11.05 APPLICATION OF HULL INSURANCE PROCEEDS. As between the Lessor
and the Lessee, any payments received under policies of hull or other property
insurance required to be maintained by the Lessee pursuant to Section 11.02 or
11.04, shall be applied as follows:

          (a) if such payments are received with respect to loss or damage
(including an Event of Loss with respect to an Engine) not constituting an Event
of Loss with respect to the Airframe, payments in the aggregate of $750,000 or
less shall be paid over to or retained by the Lessee and, subject to Section
11.03, any payments which in the aggregate are greater than $750,000 shall be
paid over to or retained by the Lessor for payment to the Lessee only upon
performance of its repair or replacement obligation as set forth in Section
12.02;

          (b) if such payments are received with respect to an Event of Loss
with respect to the Airframe, or the Airframe and Engines or engines installed
thereon, and the Airframe is not being replaced by the Lessee pursuant to
Section 12.01(a)(ii) or has not been replaced by Lessee pursuant to Section
12(a)(ii) within one hundred twenty (120) days after the Event of Loss, so much
of such payments as shall not exceed the amounts required to be paid by the
Lessee pursuant to Section 12.01(a)(i) shall be applied in reduction of the
Lessee's obligation to pay such amounts if not already paid by the Lessee and to
reimburse the Lessee if such amounts shall have been paid, and the balance, if
any, of such payments shall be promptly paid over to or retained by the Lessee;

          (c) if such payments are received with respect to the Airframe or the
Airframe and Engines or engines installed thereon as a result of an Event of
Loss with respect thereto and the Airframe is being replaced by the Lessee
pursuant to Section 12.01(a)(ii), such payments shall be paid over to, or
retained by the Lessee, PROVIDED that if the Lessee has not completed such
replacement and the performance of all other obligations under Section 12.01(c),
such payments shall be paid over to, or retained by, the Lessor as security, and
upon completion of, or in connection with a closing for, such replacement, be
paid over to or retained by the Lessee or, if such completion of a replacement
has not occurred within the applicable time period, applied as provided in
Section 11.05(b).

     Section 11.06 INSURANCE BY LESSOR. Nothing in this Article XI shall
prohibit the Lessee, the Lessor, or any other Additional Insured from obtaining
insurance with respect to the Aircraft, any Engines or engines installed on the
Airframe, or any Part for its own account (including, without limitation, in the
case of the Lessee, hull insurance under the same policies maintained pursuant
to this Article XI in amounts in excess of those required to be maintained
pursuant to this Article XI) and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto, PROVIDED that no
such insurance may be obtained which would limit or otherwise adversely affect
the availability of coverage or payment of any insurance required to be obtained
or maintained pursuant to this Article XI, it being understood that all salvage
rights to the Airframe or the Engines shall remain with the Lessee's insurers at
all times.

     Section 11.07 REPORTS, ETC. (a) Lessee will furnish to the Lessor (i) on or
prior to the Delivery Date, insurance certificates describing in reasonable
detail the insurance maintained by Lessee as required pursuant to this Article
XI, (ii) prior to the cancellation, lapse or expiration of the insurance
policies required pursuant to this Article XI, evidence of renewal of such
insurance policies, and (iii) on or prior to the Delivery Date and on or before
the renewal dates of the insurance policies carried by the Lessee pursuant to
this Article XI, a report signed by a firm of aircraft insurance brokers, not
affiliated with the Lessee, appointed by the Lessee and reasonably satisfactory
to the Lessor, stating the opinion of such firm that all premiums in connection
with the insurance then due have been paid and the insurance then carried and
maintained on the Aircraft complies with the terms hereof and, in the case of
renewal insurance, that such renewal insurance will on and after the effective
date thereof so comply with the terms hereof, PROVIDED that all information
contained in such report shall be held confidential by the Lessor and

                                       37


Beneficiary and shall not be furnished or disclosed by them to anyone except
their legal counsel, insurance brokers or advisors, bona fide prospective
transferees of the Lessor and Beneficiary and their respective agents (PROVIDED
that they shall agree for the benefit of the Lessee to hold all such information
similarly confidential) or as may be required by applicable Law. The Lessee will
instruct such firm to give prompt written advice to the Lessor of any default in
the payment of any premium and of any other act or omission on the part of the
Lessee of which it has knowledge and which would in such firm's opinion
invalidate or render unenforceable, in whole or in any material part, any
insurance on the Aircraft. The Lessee will also instruct such firm to advise the
Lessor in writing at least 30 days prior to the termination or cancellation of,
or material adverse change in, such insurance carried and maintained on the
Aircraft pursuant to this Article XI (or such lesser period as may be applicable
in the case of war risk coverage).

          (b) Lessee shall use reasonable efforts to notify Lessor promptly of
any event (other than an event constituting an Event of Loss, notice of which
shall be governed by Section 12.01(a) or (b), as applicable) with respect to the
Aircraft, the Airframe, any Engine or any Part thereof that will or may give
rise to a claim under any hull risk insurance policy in excess of $750,000,
PROVIDED that receipt by Lessor of any payments pursuant to Section 11.05(a)
shall be deemed to constitute notice of such event, subject to Lessee providing
such additional information regarding such event as Lessor shall request after
receipt of such payment.

          (c) If at any time and from time to time, Lessor shall identify a
Financing Party to Lessee, Lessee shall cause to be delivered new insurance
certificates and broker's undertakings to ensure that each such Financing Party
is afforded the insurance coverage required under this Lease.

     Section 11.08 NEGATIVE UNDERTAKINGS. (a) Lessee shall not knowingly do or
omit to do or permit to be done or left undone anything whereby any policy
required to be maintained under this Article XI would or may reasonably be
expected to be rendered in whole or in part invalid or unenforceable.

          (b) Without prejudice to the obligations of Lessee under Section
11.08(a), Lessee shall not operate or locate the Airframe or any Engine or
suffer the Airframe or any Engine to be operated or located, (i) in any area or
for carriage of any goods excluded from coverage by any insurance required by
the terms of this Article XI, except in the case of requisition by or any
contract with any Governmental Entity where Lessee obtains an indemnity in lieu
of such insurance from such Governmental Entity against the risks and in the
amounts required by this Article XI in respect of such area or such carriage of
any goods, or (ii) in any recognized or threatened area of hostilities unless
fully covered by war risk insurance or unless the Airframe or Engine is operated
or used under contract with any Governmental Entity under which contract such
Governmental Entity assumes full liability for any damage, loss, destruction or
failure to return possession of such Airframe or Engines at the end of the term
of such contract and for injury to persons and damage to property of others, or
(iii) in any place or in any manner or for any purpose inconsistent with the
terms or outside the cover provided by any such policy, and the result of such
operation or location is that any policy required to be maintained under this
Article XI would or may be reasonably expected to be rendered in whole or in
part invalid or unenforceable, PROVIDED that if Lessee unintentionally and
temporarily operates or locates the Airframe or any Engine or suffers the
Airframe or any Engine to be operated or located in violation of this Section
11.08(b ), Lessee shall be deemed not to have breached its obligations under
this Section 11.08(b ) if, upon a Responsible Officer becoming aware thereof,
Lessee promptly terminates any such operation or changes such location that
resulted in such violation and takes reasonable affirmative actions to prevent
the operation or location of the Aircraft in violation of Section 11.08(b)
occurring again.

     Section 11.09 FAILURE TO INSURE.  If Lessee shall fail to maintain or cause
there  to be  maintained  insurance  as  herein  provided,  Lessor  may,  at its
option,provide such insurance and in such event Lessee


                                       38


shall, upon demand, reimburse  Lessor for the cost thereof.  Such provision by
Lessor  shall not affect the right of Lessor to treat such  failure by Lessee as
an Event of Default.

     Section 11.10 DEDUCTIBLE. For insurance provided pursuant to Section 11.02
or 11.04, a deductible per occurrence that is not in excess of the prevailing
standard market deductible for similar aircraft shall be permitted for each
aircraft in the Lessee's fleet. In no case shall the amount of the deductible
during any policy year with respect to the Aircraft exceed $750,000 unless
Lessee provides a report from the Lessee's independent insurance broker
confirming that any higher deductible amount maintained by Lessee does not
exceed the amount maintained by airlines similarly situated to Lessee with
regard to the insurance of aircraft similar to those operated by Lessee and
based or operated in any jurisdiction in which the Aircraft may then be based or
operated.

                                   ARTICLE XII

                                  EVENT OF LOSS

     Section 12.01 EVENT OF LOSS WITH RESPECT TO THE AIRFRAME. (a) Upon the
occurrence of an Event of Loss to the Airframe or the Airframe and the Engines
or engines then installed on the Airframe, Lessee (x) shall as soon as possible
(and, in any event, within five (5) days after the occurrence of such Event of
Loss) provide written notice to Lessor and Beneficiary of such Event of Loss and
(y) shall forthwith (and, in any event, within sixty (60) days after the
occurrence of such Event of Loss), give written notice to Lessor of its election
to perform one of the following options (it being understood that, if Lessee
fails to give such notice, or if Lessee has elected the option set forth in
clause (ii) below but has failed to comply with the provisions thereof or with
the provisions of Section 12.01(c), Lessee shall be deemed to have elected the
option set forth in clause (i) below):

               (i) On or before the date that is ninety (90) days after the date
     of any Event of Loss with respect to the Airframe or the Airframe and any
     Engines or engines, but in no event later than two (2) Business Days after
     receipt of insurance or other proceeds in respect of such Event of Loss
     (or, if Lessee has elected to replace the Airframe or the Airframe and any
     Engines or engines pursuant to Section 12.01(a)(ii), on the first Business
     Day after the 120th day following the Event of Loss), Lessee shall pay to
     Lessor the sum of (A) the Stipulated Loss Value PLUS (B) the amount of
     Basic Rent, if any, due and unpaid on such date, PLUS (C) the amount of
     deferred Basic Rent, if any, as of such date as set forth in the column
     headed "Deferred Basic Rent" in Schedule SLV, MINUS (D) the amount of
     prepaid Basic Rent, if any, as of such date as set forth in the column
     headed "Prepaid Basic Rent" in Schedule SLV, PLUS (E) all Supplemental Rent
     (other than Stipulated Loss Value) unpaid as of such date; or

               (ii) So long as (A) no Specified Default has occurred and is
     continuing, and (B) the conditions set forth in Section 12.01(c) are met,
     Lessee may substitute another Embraer aircraft model EMB-145LR or Embraer
     airframe model EMB-145LR of the same or later vintage as the Airframe that
     suffered the Event of Loss together with one or more Rolls-Royce Allison AE
     300 7A1P engines, as the case may be, or an improved model of the Airframe
     and Engines, if any, that suffered the Event of Loss, that, in each case,
     has a value, utility, condition, maximum take-off weight, maximum landing
     weight (and in the case of an engine, with an equal or greater engine
     thrust rating), estimated residual value and remaining useful life equal to
     or greater than, and in as good an operating condition as, the Airframe and
     Engines, if any, that suffered such Event of Loss (assuming that such
     Airframe and Engines were then in the condition required by the terms of
     this Lease) within 120 days following the occurrence of such Event of Loss
     in accordance with the terms and provisions of Section 12.01(c) below.

                                       39


          (b) If an Event of Loss occurs with respect to the Airframe and Lessee
elects the option set forth in clause (i) of Section 12.01(a), then upon payment
in full by Lessee of all amounts referred to therein:

               (i) the obligations of the Lessee to pay Rent (except for
     Supplemental Rent obligations surviving pursuant to Section 6.05 and
     Articles XIV and XV of this Lease or the Tax Indemnity Agreement or which
     have otherwise accrued but not been paid as of the Termination Date) shall
     cease;

               (ii) the Term shall end; and

               (iii) Lessor will transfer to Lessee, without recourse or
     warranty (except as set forth below) on an as-is, where-is basis, all of
     Lessor's right, title and interest, if any, in and to the Airframe and
     Engines (if any) suffering the Event of Loss, as well as all of Lessor's
     right, title and interest in and to any Engine constituting part of the
     Aircraft but not installed thereon at the time of the Event of Loss, by way
     of a bill of sale conveying to Lessee such title as was received by Lessor
     on the Delivery Date, free of Lessor's Liens, but subject to Liens arising
     by or through Lessee.

     Nothing in this Section 12.01(b) shall be deemed to relieve Lessee of its
obligation to pay Rent prior to the date on which the Stipulated Loss Value and
all other amounts due hereunder have been paid in full.

          (c) If an Event of Loss occurs with respect to the Airframe and Lessee
elects the option set forth in clause (ii) of Section 12.01(a), then Lessee
shall duly convey to Lessor, at its sole cost and expense, and shall reimburse
Lessor for any out-of-pocket costs and expenses incurred in connection
therewith, as replacement for the Aircraft that suffered the Event of Loss,
title to a Replacement Aircraft (or a Replacement Airframe or a Replacement
Airframe and a Replacement Engine which, together with the Engine or Engines
constituting a part of the Aircraft but not installed thereon at the time of the
Event of Loss, constitute the Aircraft) free and clear of all Liens except
Permitted Liens described in clauses (i), (ii) and (iii) of the definition
thereof. Prior to or at the time of such conveyance, Lessee shall at its
expense:

               (i) furnish to Lessor a full warranty bill of sale, in form and
     substance reasonably satisfactory to Lessor, with respect to such
     Replacement Aircraft or Replacement Airframe and Replacement Engines, if
     any,

               (ii) cause a supplement hereto, in form and substance reasonably
     satisfactory to Lessor, subjecting such Replacement Aircraft or Replacement
     Airframe and Replacement Engines to the terms of this Lease, to be duly
     executed by Lessee and recorded as may be necessary or as Lessor may
     request pursuant to the Federal Aviation Act,

               (iii) cause Uniform Commercial Code financing statement(s) to be
     filed in such place or places as may be necessary or advisable in order to
     evidence and perfect the interests of Lessor in and to such Replacement
     Aircraft or Replacement Airframe and Replacement Engines under applicable
     law,

               (iv) furnish Lessor with such evidence as to Lessee's title to
     such Replacement Aircraft or Replacement Airframe and Replacement Engine
     and as to the integration of substituted property into the Maintenance
     Program as Lessor may reasonably request,

                                       40


               (v) furnish Lessor with a certificate of an authorized officer of
     Lessee together with an appraisal by a qualified independent appraiser of
     nationally recognized standing reasonably acceptable to Lessor that such
     Replacement Aircraft or Replacement Airframe and Replacement Engines have a
     value, utility, condition, maximum take-off weight, maximum landing weight
     (and in the case of an engine, with an equal or greater engine thrust
     rating) and remaining useful life, at least equal to, and are in as good an
     operating condition as, the Aircraft, or the Airframe and Engines, if any,
     subject to the Event of Loss (assuming that such Aircraft, or Airframe and
     Engines were in the condition required by the terms of this Lease),
     together with an insurance certificate related thereto evidencing
     compliance with Article XI,

               (vi) furnish Lessor with an opinion of counsel, reasonably
     acceptable to Lessor, to the effect that title to such Replacement Aircraft
     or Replacement Airframe and Replacement Engines have been duly conveyed to
     Lessor free and clear of all Liens except Permitted Liens and that such
     Replacement Aircraft is duly leased hereunder, and that the supplement to
     this Lease covering the same has been duly recorded under applicable Law
     together with a favorable opinion of counsel, acceptable to Lessor in its
     reasonable discretion, as to the availability of Section 1110 of the
     Bankruptcy Code or any successor statute thereto having similar subject
     matter to Section 1110 with respect to such Replacement Aircraft or
     Replacement Airframe and Replacement Engines and as to such other matters
     as may be reasonably requested by Lessor or Beneficiary,

               (vii) furnish Lessor with an opinion (in form and substance
     reasonably acceptable to Lessor) of independent tax counsel selected by
     Lessee and reasonably acceptable to Lessor, to the effect that the
     replacement of the Aircraft or the Airframe and Engine, as applicable, will
     not cause any adverse tax consequences to Lessor or, in lieu of such
     opinion, furnish Lessor with an indemnity satisfactory to Lessor against
     any such adverse tax consequences,

               (viii) provide all other documentation and take such other action
     as may be necessary or as Lessor may reasonably request in order that such
     Replacement Aircraft or Replacement Airframe and Replacement Engines be
     duly and properly titled in Lessor and covered by the insurance policies
     required under Article XI,

               (ix) cause such Replacement Aircraft to be duly registered in
     Lessor's name at the FAA, and

               (x) subject to Section 10.01, assign to Lessor the benefit of all
     assignable manufacturers' warranties with respect to such Aircraft or
     Replacement Airframe and Replacement Engines.

     Upon full compliance by Lessee with the terms of this Section 12.01(c),
Lessor will transfer to Lessee without recourse or warranty (except as set forth
below) on an as-is, where-is basis, all of Lessor's right, title and interest,
if any, in and to the Airframe and Engines (if any) suffering the Event of Loss,
by way of a bill of sale conveying to Lessee such title as was received by
Lessor on the Delivery Date, free of Lessor's Liens, but subject to Liens
arising by or through Lessee, and shall remit to Lessee any insurance proceeds
relating to property damage from policies maintained by Lessee or any Permitted
Sublessee pursuant to Article XI or net condemnation award, in either case,
actually received by Lessor. For the avoidance of doubt, Lessee agrees that it
shall be solely responsible for the location of any Replacement Aircraft,
Replacement Airframe or Replacement Engine at the time that it is to be so
transferred in relation to any liability of Lessee under Article XIV. For all
purposes hereof, the property so substituted shall be deemed an "AIRCRAFT,"
"AIRFRAME" and "ENGINE," as the case may be, as defined herein. No Event of Loss
with respect to the Aircraft or the Airframe and the Engines or engines then

                                       41


installed thereon for which substitution has been elected pursuant to this
Section 12.01(c) shall result in any reduction in any sum due from Lessee under
any Operative Document.

         Section 12.02 SUBSTITUTION OF ENGINES. (a) Upon an Event of Loss with
respect to an Engine under circumstances in which there has not occurred an
Event of Loss with respect to the Airframe, Lessee (x) shall as soon as possible
(and, in any event, within ten (10) Business Days after the occurrence of such
Event of Loss) provide written notice to Lessor and Beneficiary of such Event of
Loss and (y) shall as soon as possible (and, in any event, within ninety (90)
days after the occurrence of such Event of Loss) convey to Lessor, as
replacement for the Engine suffering such Event of Loss, title to a Replacement
Engine in accordance with this Section 12.02(a), free of all Liens (except Liens
permitted by clauses (i ), (ii ), (iii ) and (v ) of the definition of Permitted
Liens). Prior to or at the time of any such transfer, Lessee, at its own
expense, will promptly

               (i) furnish Lessor with a full warranty bill of sale (excluding
     Liens permitted by clauses (i), (ii), (iii) and (v) of the definition of
     Permitted Liens) of that is, by its terms, governed by the laws of the
     State of New York and otherwise in form and substance reasonably
     satisfactory to Lessor with respect to such Replacement Engine;

               (ii) execute and deliver a supplement hereto, in form and
     substance reasonably satisfactory to Lessor, subjecting such Replacement
     Engine to this Lease;

               (iii) furnish Lessor with such evidence of title to such
     Replacement Engine and of compliance with the insurance provisions of
     Article XI with respect to such Replacement Engine as Lessor may reasonably
     request; and

               (iv) furnish Lessor with such documents as Lessor may reasonably
     request in connection with the completion of the transactions contemplated
     by this Section 12.02, in each case in form and substance reasonably
     satisfactory to Lessor.

     Upon full compliance by Lessee with the terms of this Section 12.02, Lessor
will transfer to Lessee "AS IS, WHERE IS" and without recourse or warranty,
except a warranty as to the absence of Liens arising by or through Lessor, such
right, title and interest in the Engine that suffered the Event of Loss as
Lessor received on the Delivery Date. For all purposes hereof, each such
Replacement Engine shall be deemed part of the property leased hereunder, shall
be deemed an "Engine" as defined herein. No Event of Loss covered by this
Section 12.02 shall result in any reduction in Rent.

          (b) In connection with the return of the Aircraft pursuant to Section
18.03 or at any time during the Term, so long as no Specified Default shall have
occurred and be continuing, on at least thirty (30) days prior written notice to
Lessor, the Lessee may elect to replace an Engine on the Airframe with a
Replacement Engine in accordance with this Section 12.02. In such event, Lessee
shall convey to Lessor, as replacement for the Engine suffering such deemed
Event of Loss, title to a Replacement Engine in accordance with the provisions
of Section 12.02(a).

                                       42


     Section 12.03 APPLICATION OF PROCEEDS AND PAYMENTS. Any payments received
at any time by Lessor or by Lessee from any insurer under any policy of
insurance required to be maintained pursuant to Article XI (other than liability
insurance) shall be applied in the manner specified in Section 11.05. Subject to
Section 4.07, any payments received at any time by Lessor or Lessee from any
Governmental Entity or other Person (except as provided in the preceding
sentence) with respect to an Event of Loss will be applied as follows:

          (a) if such payments are received as a result of an Event of Loss with
respect to the Airframe (or the Airframe and the Engine or Engines installed
thereon):

               (i) so much of such payments as shall not exceed the amounts
     payable by Lessee pursuant to Section 12.01(a)(i) shall be paid to Lessor
     in reduction of Lessee's obligation to pay such amounts if not already paid
     by Lessee, or, if already paid by Lessee, shall be applied by Lessor to
     reimburse Lessee for its payment of such amounts and the balance of such
     payment, if any, remaining thereafter shall be paid over to, or retained
     by, Lessee; or

               (ii) if the Airframe (or the Airframe and the Engines or Engines
     installed thereon) is being replaced in accordance with Section
     12.01(a)(ii), all such payments shall be held by Lessor as security until
     such time as Lessee shall have fully complied with its obligations under
     Section 12.01(a)(ii) and (c), whereupon such payments shall be paid over to
     Lessee or to such other Person or Persons as Lessee may direct or shall be
     applied as provided in Section 12.01(a)(i) if such replacement is not
     completed within the applicable time period; and

          (b) if such payments are received with respect to an Event of Loss to
an Engine that has been or is being replaced by the Lessee pursuant to the terms
hereof, such payments shall be paid over to, or retained by, the Lessee,
PROVIDED that if the Lessee has not completed such replacement, such payments
shall be paid over to, or retained by, the Lessor as security, and upon
completion of, or in connection with a closing for, such replacement in
accordance with Section 12.02, shall be paid over to or retained by the Lessee.

     Section 12.04 REQUISITION FOR USE BY GOVERNMENT. In the event of the
requisition for use by a Governmental Entity of the Airframe or any Engine
(other than a requisition constituting an Event of Loss), all Lessee's
obligations under this Lease shall continue to the same extent as if such
requisition had not occurred, except to the extent that performance or
observance of any obligation by the Lessee shall have been prevented or delayed
as a result of such requisition (other than Lessee's obligations to pay Rent and
its obligation under Article XI hereof). If the Airframe or any Engine or engine
installed thereon is not returned by such Governmental Entity prior to the last
day of the Term, the Term shall nonetheless terminate on such last day. Subject
to Section 4.07, all payments received by Lessor or Lessee from the Governmental
Entity for the use of the Airframe or Engine during the Term prior to the time
such requisition becomes an Event of Loss shall be paid over to, or retained by,
Lessee; PROVIDED that any such payments received by Lessor may be offset against
Lessee's obligation to pay Rent; and all payments received by Lessor or Lessee
from the Governmental Entity for the use of such item after such requisition
constitutes an Event of Loss or after the expiration of the Term and the receipt
by Lessor of payment of Stipulated Loss Value, shall be paid over to, or
retained by, Lessee. Lessee shall, as soon as practicable after the termination
of any requisition for use or hire, cause the Aircraft to be put into the
condition required by this Lease.

                                       43


                                  ARTICLE XIII

                           INFORMATION AND INSPECTION

     Section 13.01 FINANCIAL AND GENERAL INFORMATION. Throughout the Term,
Lessee agrees to furnish to Beneficiary the following:

          (a) (i) within forty-five (45) days or such other number of days as
Lessee furnishes the same to its lessors or lenders (as the case may be), after
the close of each fiscal quarter occurring in each fiscal year of Lessee, an
unaudited consolidated balance sheet, profit and loss statement, as of the close
of such fiscal quarters and for the periods then ended, (ii) within ninety (90)
days or such other number of days as Lessee furnishes the same to its lessors or
lenders (as the case may be), after the close of each fiscal year of Lessee, an
audited consolidated balance sheet, profit and loss statement, as of the close
of such fiscal year and for the period then ended, prepared in accordance with
generally accepted accounting principles in the United States, and (iii) within
forty-five (45) days or such other number of days as Lessee furnishes the same
to its lessors or lenders (as the case may be), after the close of each fiscal
quarter occurring in each fiscal year of Lessee, Operating Results as of the
close of such fiscal quarters and for the periods then ended;

          (b) within seventy-two (72) hours after the occurrence thereof, notice
of any notices published by the FAA or the Department of Transportation
proposing any disciplinary action on Lessee, which would have a material adverse
effect upon Lessee or upon its ability to perform its obligations hereunder;

          (c) upon request of Lessor, (i) notice of scheduled maintenance on the
Aircraft equivalent to a C check or greater and the locations thereof, together
with reasonable prior written notice of any changes in the schedule so provided,
and (ii) a true and accurate summary of the Maintenance Program, as in effect at
the time of such request;

          (d) promptly after request for the same, such information regarding
the condition of the Aircraft as Lessor may reasonably require; and

          (e) with the financial statements provided pursuant to Section
13.02(a)(ii), an Officer's Certificate of the Lessee, to the effect that the
signer is familiar with or has reviewed the relevant terms of this Lease and has
made, or caused to be made under his supervision, a review of the transactions
and conditions of the Lessee during the preceding fiscal year and that such
review has not disclosed the existence during such period, nor does the signer
have knowledge of the existence as of the date of such certificate, of any
condition or event which constituted or constitutes a Default or Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Lessee has taken or
is taking or proposes to take with respect thereof.

     Section 13.02 INSPECTION RIGHTS. (a) Once in each twelve month period
during the Term on reasonable notice, and at any time so long as an Event of
Default is continuing and with one (1) Business Day's notice or such shorter
notice as may be reasonable under the circumstances, Lessee shall allow Lessor,
any Financing Party and/or their respective authorized representatives (it being
understood that Lessor, during the twelve (12) month period immediately
preceding the last day of the Term, may designate the Manufacturer as its
authorized representative), at the risk of such Persons, to conduct an on-board
or visual walk around inspection of the Aircraft and any Engine (including a
visual walk-around inspection of the Aircraft during any C check or other heavy
maintenance) and to inspect the Aircraft Documents, in each case during normal
business hours in the location where the Aircraft is physically located or in
the location where the Aircraft Documents are kept, as applicable, PROVIDED that
(i) any such

                                       44


inspection shall be subject to the safety, security (in respect of which Lessee
shall assist Lessor, but shall not be responsible to obtain airport security
clearance) and workplace rules applicable at the location where such inspection
is conducted and any applicable governmental rules or regulations, and (ii) so
long as Lessor is not exercising its remedies under Section 17.02, in the case
of an inspection during a maintenance visit, such inspection shall not in any
respect interfere with the normal conduct of such maintenance visit or extend
the time required for such maintenance visit or interfere with the use or
operation of the Airframe or any Engine or with the normal conduct of Lessee's
business.

          (b) Lessor shall have no duty to make any such inspection and shall
not incur any liability or obligation by reason of not making any such
inspection. Lessor's failure to object to any condition or procedure observed or
observable in the course of an inspection hereunder shall not be deemed to waive
or modify any of the terms of this Lease with respect to such condition or
procedure.

          (c) The cost of such inspections shall be borne (i) except as set
forth in clause (ii), by the Person making the inspection; and (ii) during the
continuance of an Event of Default, by Lessee.

                                   ARTICLE XIV

                              GENERAL TAX INDEMNITY

     Section 14.01 GENERAL TAX INDEMNITY. The terms and conditions of the
General Tax Indemnity are set forth in full in EXHIBIT G.

                                   ARTICLE XV

                                GENERAL INDEMNITY

     Section 15.01 GENERAL INDEMNITY. The terms and conditions of the General
Indemnity are set forth in full in EXHIBIT H.

                                   ARTICLE XVI

                   PERFECTION OF TITLE AND FURTHER ASSURANCES

     Section 16.01 TITLE TO AIRCRAFT. Title to the Aircraft shall at all times
remain vested in Lessor and it is the intent of Lessor and Lessee that this
Agreement shall constitute a lease for all purposes and shall not be
characterized by either of them under any circumstances as a borrowing or
indebtedness of Lessee that is not a "true lease". If at any time any filing,
notarization or recording is necessary or reasonably advisable to protect the
interest of Lessor in the Aircraft or this Lease, Lessee shall, at its sole cost
and expense at the reasonable request of Lessor, cause this Lease and any
financing statements with respect thereto, and any and all additional
instruments that shall be executed pursuant to the terms hereof or thereof to be
kept, filed, notarized and recorded and to be re-executed, re-notarized, refiled
and re-recorded in the appropriate office or offices pursuant to applicable
Laws, to perfect, protect and preserve the rights and interests of Lessor
hereunder and in the Aircraft, including the right of Lessor to repossess, and
export from any country, the Aircraft, the Engines and the Parts following an
Event of Default.

     Section 16.02 FURTHER ASSURANCES. The Lessee and the Lessor will each
promptly and duly execute and deliver to the other such further documents and
assurances and take such further action as the other may from time to time
reasonably request in order to more effectively carry out the intent and

                                       45


purpose of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of the Lessor and the Lessee
hereunder.

                                  ARTICLE XVII

                           EVENTS OF DEFAULT; REMEDIES

     Section 17.01 EVENTS OF DEFAULT. Any one or more of the following
occurrences or events shall constitute an Event of Default (whether such
occurrences or events shall be voluntary or involuntary or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or of any other Governmental Entity):

          (a) Lessee shall fail to make any payment of Rent to Lessor when due
and in the manner and at the place required under this Lease and such failure
shall continue for a period of (i) in the case of Basic Rent or a payment of
Stipulated Loss Value, within three (3) Business Days after the date on which it
is due, and (ii) in the case of any other payment of Supplemental Rent, within
ten (10) Business Days after receipt by Lessee of a written demand therefor from
Lessor or, if later, ten (10) Business Days after such other payment of
Supplemental Rent is due and payable;

          (b) Lessee shall fail to obtain and maintain any insurance required
under the provisions of Article XI or shall fail to perform or observe its
covenants in Section 11.08(b);

          (c) Any representation or warranty made by Lessee herein or in any
other Operative Document, or in any document or certificate furnished to Lessor
in connection with this Lease or pursuant hereto (other than the Tax Indemnity
Agreement) proves to have been incorrect in any material respect at the time
made and shall not be remedied within thirty (30) days after notice thereof has
been given to the Lessee by the Lessor;

          (d) [reserved];

          (e) Lessee shall make or permit any assignment or transfer of this
Lease, or any interest therein, or of the right to possession of or operational
control over the Aircraft, the Airframe, and any Engine or any Part other than
as permitted by the Operative Documents, and such assignment or transfer of
operational control shall continue unremedied for a period of thirty (30) days
after delivery of notice thereof from the Lessor to the Lessee;

          (f) Lessee shall fail to perform or observe any other material
covenant, condition or agreement to be performed or observed by it pursuant to
this Lease or any other Operative Document to which it is a party (other than
the Tax Indemnity Agreement) and such failure shall continue unremedied for a
period of thirty (30) days after delivery of notice of such failure from the
Lessor to the Lessee, unless such failure is curable and the Lessee shall, after
the delivery of such notice (or such date), be diligently proceeding to correct
such failure and shall in fact correct such failure within 120 days after
delivery of such notice (or such date), PROVIDED that the covenant to provide
notice to Lessor in Section 13.01(b) shall be deemed to be cured if Lessee
provides such notice within the foregoing time periods after notice from Lessor,
unless Lessor shall have been materially adversely affected by the delay in the
delivery of such notice;

          (g) Lessee consents to the appointment of a receiver, examiner,
administrator, trustee, official manager, custodian, or liquidator or
provisional liquidator of itself or of a substantial part of its property or
Lessee admits in writing its inability to pay its debts generally as they come
due, or makes a general assignment for the benefit of creditors, or Lessee files
a voluntary petition in bankruptcy

                                       46


or a voluntary petition seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect), or an answer admitting the
material allegations of a petition filed against Lessee, in any such proceeding,
or Lessee by voluntary petition, answer or consent seeks relief under the
provisions of any bankruptcy or other similar law providing for the insolvency,
reorganization or winding-up of corporations, or provides for an agreement,
composition, extension or adjustment with its creditors;

          (h) An order, judgment or decree is entered by any court, with or
without the consent of Lessee appointing a receiver, examiner, administrator,
trustee, official manager, custodian or liquidator or provisional liquidator for
Lessee or if all or any substantial part of the property of Lessee is
sequestered, and any such order, judgment or decree of appointment or
sequestration remains in effect, undismissed, unstayed or unvacated for a period
of sixty (60) days after the date of entry thereof;

          (i) A petition against Lessee in a proceeding under the bankruptcy,
insolvency or other similar Laws (as now or hereafter in effect) is filed and is
not withdrawn or dismissed within sixty (60) days thereafter and is not being
disputed in good faith with reasonable chance of success, or if, under the
provisions of any Law providing for reorganization or winding-up of corporations
that may apply to Lessee, any court of competent jurisdiction assumes
jurisdiction over, or custody or control of, Lessee or of all or any substantial
part of Lessor's property and such jurisdiction, custody or control remains in
effect, unrelinquished, unstayed or unterminated for a period of sixty (60) days
and is not being disputed in good faith with reasonable chance of success;

          (j) Lessee voluntarily or involuntarily suspends all or substantially
all of its operations or if all or substantially all of the franchises,
concessions, permits, licenses, rights or privileges required for the conduct of
the business and operations of Lessee are revoked, canceled or otherwise
terminated and, in the case of any involuntary suspension only, such involuntary
suspension (including, but not limited to, a suspension by Lessee due to an
imminent labor disruption or regulatory suspension) continues for a period of
ninety (90) days, PROVIDED that, if an involuntary suspension directly results
from a general grounding by the Aeronautical Authority of all aircraft of the
same type and series as the Aircraft, such involuntary suspension continues for
a period of one hundred eighty (180) days;

          (k) This Lease ceases to be in full force and effect or to be a legal,
valid and binding obligation of Lessee, in whole or in material part,
enforceable against Lessee in accordance with its terms as a result of any act
or omission of Lessee;

          (l) Lessee repudiates its obligations under this Lease in whole or in
material part;

          (m) An "Event of Default" shall have occurred under any Other Lease
(as defined therein);

          (n) Lessee shall cease at any time during the Term to be a Section
1110 Person and such circumstance results in the Owner Trustee no longer being
entitled to the benefits of Section 1110; or

          (o) Lessee shall receive notice of default or exercise of remedies
with respect to the payment or performance of any indebtedness or other
obligation to any third party and any such default or exercise of remedies
results in an acceleration of such indebtedness or obligation; provided,
however, that the aggregate amount of any such indebtedness or obligation is in
excess of $3,500,000 (determined in the case of borrowed money by the amount
outstanding under the agreement pursuant to which such borrowed money was
borrowed, in the case of a deferred purchase price by the remaining balance and
in the case of a lease by the present value of the remaining rent payable
thereunder);

                                       47


PROVIDED that, notwithstanding anything to the contrary contained in this Lease,
any failure of the Lessee to perform or observe any covenant, condition, or
agreement herein shall not constitute an Event of Default under clause (f) above
if such failure is caused solely by reason of an event referred to in the
definition of "EVENT OF LOSS" so long as the Lessee is continuing to comply with
the applicable terms of Section 12.

     Section 17.02 REMEDIES. (a) Upon the occurrence of any Event of Default,
Lessor may at its option declare this Lease to be in default; PROVIDED that,
upon the occurrence of any Event of Default specified in paragraphs (g), (h) or
(i) of Section 17.01, this Lease shall automatically be deemed to have been
declared in default. Once this Lease has been declared to be in default or is
deemed to have been so declared then, and at any time thereafter, Lessor shall
be entitled to exercise any of the following remedies as Lessor in its sole
discretion shall elect, to the extent permitted by applicable Law then in effect
without making demand or giving notice or the taking of any other action,
require that Lessee, and Lessee shall upon the written request of Lessor and at
Lessee's expense, immediately return the Aircraft to Lessor in the manner
specified in such written request, in which event such return shall not be
delayed for purposes of complying with the return conditions specified in
Article XVIII (none of which conditions shall be deemed to affect Lessor's
possession of the Aircraft) or be delayed for any other reason, PROVIDED
HOWEVER, that Lessor, at Lessor's option, may require Lessee to and Lessee shall
thereafter take such actions as would be required by the provisions of this
Lease if the Aircraft were being returned at the end of the Term, subject to
making the Aircraft available to Lessee if Lessor has then repossessed the
Aircraft. In addition, Lessor, at its option and to the extent permitted by
applicable Law, may enter upon the premises where all or any part of the
Aircraft is located and take immediate possession of and, at Lessor's sole
option, remove the same (including any engine that is not an Engine but that is
installed on the Airframe, subject to the rights of the owner, lessor or secured
party thereof) by summary proceedings or otherwise;

          (b) Sell at private or public sale, as Lessor may determine, or hold,
use, operate or lease to others the Aircraft as Lessor in its sole discretion
may determine, all free and clear of any rights of Lessee except as set forth in
this Section 17.02;

          (c) Whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above, Lessor,
by fifteen (15) days' written notice to Lessee specifying a payment date, may
demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the payment
date specified in such notice any unpaid Basic Rent for the Aircraft to and
including the payment date specified in such notice, PLUS, as liquidated damages
for loss of bargain and not as a penalty (in lieu of Basic Rent payable for the
period commencing after the date specified for payment in such notice),
whichever of the following amounts Lessor, in its sole discretion, shall specify
in such notice (together with accrued interest thereon, if any, to the extent
permitted by applicable Law at the Interest Rate from the date specified for
payment in such notice to the date of actual payment: (i) the amount if any, by
which (x) the Stipulated Loss Value computed as of the payment date specified in
such notice (plus the amount of the deferred Basic Rent, if any, as of such date
as set forth in the column headed "Deferred Basic Rent" in Schedule SLV, and
minus the amount of prepaid Basic Rent, if any, as of such date as set forth in
the column headed "Prepaid Basic Rent" in Schedule SLV), exceeds (y) the
aggregate Fair Market Rental Value (determined in accordance with the Appraisal
Procedure) of the Aircraft for the remainder of the Basic Term (or if in a
Renewal Term, then until the scheduled end of the Renewal Term), after
discounting such Fair Market Rental Value periodically (equal to installment
frequency) to present worth as of the payment date specified in such notice
using the Treasury Rate as of such date, (ii) the amount if any, by which (x)
the Stipulated Loss Value computed as of the payment date specified in such
notice (plus the amount of the deferred Basic Rent, if any, as of such date as
set forth in the column headed "Deferred Basic Rent" in Schedule SLV, and minus
the amount of prepaid Basic Rent, if any, as of such date as set forth in the
column headed "Prepaid Basic Rent" in Schedule SLV), exceeds (y) the

                                       48


Fair Market Sales Value (determined on the basis of an arms-length transaction
between a willing seller and a willing buyer both with full knowledge of the
relevant facts, including the actual condition and maintenance status of the
Aircraft at such time) of the Aircraft as of such date, or (iii) the amount, if
any, by which (x) the aggregate Basic Rent for the remainder of the Basic Term
(or if in a Renewal Term, then until the scheduled end of the Renewal Term),
discounted periodically (equal to installment frequency) to present worth as of
the payment date using the Treasury Rate as of such date, exceeds (y) the Fair
Market Rental Value (determined in accordance with the Appraisal Procedure) of
the Aircraft for the remainder of the Basic Term (or if in a Renewal Term, then
until the scheduled end of the Renewal Term), after discounting such Fair Market
Rental Value periodically (equal to installment frequency) to present worth as
of the payment date specified in such notice using the Treasury Rate as of such
date;

          (d) In the event that Lessor, pursuant to Section 17.02(b), shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under Section
17.02(c), may demand that Lessee pay Lessor, and Lessee shall pay Lessor on the
date of such sale, any unpaid Basic Rent and Supplemental Rent for the Aircraft
payable up to and including the Rent Payment Date next succeeding the date of
such sale, plus, as liquidated damages for loss of bargain and not as a penalty
(in lieu of Basic Rent for the Aircraft payable after the time of such sale),
the amount of any deficiency between the net proceeds of such sale and the
Stipulated Loss Value, computed as of the Rent Payment Date next succeeding the
date of such sale, together with interest thereon, to the extent permitted by
applicable Law, at the Interest Rate from the date as of which such Stipulated
Loss Value is computed until the date of actual payment;

          (e) In the event that Lessor, pursuant to Section 17.02(b), shall have
re-leased the Aircraft, Lessor, in lieu of exercising its rights under Section
17.02(c), may demand that Lessee pay Lessor, and Lessee shall pay Lessor, any
unpaid Basic Rent for the Aircraft payable up to the date of the Re-leasing,
plus, as liquidated damages for loss of bargain and not as a penalty (in lieu of
Basic Rent for the Aircraft payable after the time of such re-leasing (the
"RE-LEASING")), together with accrued interest thereon, if any, at the Interest
Rate to the date specified for payment, the amount, if any, by which (i) the
aggregate Basic Rent that would otherwise have become due over the Basic Term
(or if in a Renewal Term, then until the scheduled end of the Renewal Term) for
the Aircraft determined without regard to the exercise of remedies under this
Article XVII (the "ORIGINAL TERM"), discounted periodically (equal to
installment frequency) to present worth as of the date of Re-leasing using the
Treasury Rate as of such date, exceeds (ii) the sum of (A) the aggregate basic
rental payments to become due under the Re-leasing from the date of the
Re-leasing to the earlier of (x) the end of the term of the Re-leasing and (y)
the date upon which the Original Term would have expired, discounted
periodically (equal to installment frequency) to present worth as of the date of
the Re-leasing using the Treasury Rate as of such date and (B) an estimate of
Fair Market Rental Value (determined in accordance with the Appraisal Procedure)
for the period, if any, commencing on the end of the Re-leasing through the end
of the Original Term, discounted periodically (equal to installment frequency)
to present worth as of the date of the Re-leasing using the Treasury Rate as of
such date;

          (f) Proceed by appropriate court action or actions, either at law or
in equity, to enforce the performance by Lessee of the applicable covenants of
this Lease and to recover damages for the breach thereof and/or for any loss
suffered by Lessor by reason of the return of the Aircraft to Lessor otherwise
than on the last day of the Term and/or to rescind this Lease; and/or

          (g) Terminate this Lease by written notice and repossess the Aircraft.

     In addition to the foregoing, Lessee shall be liable for any and all unpaid
Basic and Supplemental Rent during or after the exercise of any of the
aforementioned remedies, together with interest on such unpaid amounts at the
Interest Rate, until Lessor shall have recovered in full the amounts payable to
Lessor under this Section 17.02 and for all reasonable legal fees and other
costs and expenses incurred by

                                       49


Lessor (on a full indemnity basis) by reason of the occurrence of any Event of
Default or the exercise of Lessor's remedies with respect thereto including all
costs and expenses incurred in connection with the return of the Aircraft in
accordance with the terms of Article XVIII or in placing the Aircraft in the
condition and with the airworthiness certification as required by such Article
XVIII.

     In effecting any repossession of the Aircraft, Lessor and its
representatives and agents, to the extent permitted by Law, shall:

               (i) have the right to enter upon any premises which it reasonably
     believes the Aircraft, the Airframe, an Engine or a Part to be located;

               (ii) not be liable, in conversion or otherwise, for the taking of
     any personal property of Lessee that is in or attached to the Aircraft, the
     Airframe, any Engine or Part that is repossessed; PROVIDED, HOWEVER, that
     Lessor shall return to Lessee all personal property of Lessee or its
     customers that was on the Aircraft at the time Lessor re-takes possession
     of the Aircraft;

               (iii) if Lessee is either obstructing or not reasonably
     cooperating with the return to Lessor of the Aircraft or any part thereof,
     not be liable or responsible, in any manner, for any inadvertent damage or
     injury to any of Lessee's property in repossessing and holding the
     Aircraft, the Airframe, any Engine or Part, except for that directly caused
     by Lessor's gross negligence or willful misconduct;

               (iv) have the right to maintain possession of and dispose of the
     Aircraft, the Airframe, any Engine or Part on any premises owned by Lessee
     or under Lessee's control; and

               (v) have the right to obtain a key to any premises on or at which
     the Aircraft, the Airframe, any Engine or Part, may be located from the
     landlord or owner thereof.

     If required by Lessor, Lessee, at its sole expense, shall make the
Aircraft, the Airframe, any Engine or Part available at a place designated by
Lessor in accordance with Article XVIII. Lessee hereby agrees that, in the event
of the return to or repossession by Lessor of the Aircraft, the Airframe, any
Engine or Part, any rights in any warranty (express or implied) heretofore
assigned to Lessee or otherwise held by Lessee shall without further act, notice
or writing be assigned or reassigned to Lessor, if assignable. Lessee shall be
liable to Lessor for all expenses, disbursements, costs and fees incurred (i) in
repossessing, storing, preserving, shipping, maintaining, repairing and
refurbishing the Aircraft, the Airframe, any Engine or Part to the condition
required by Article XVIII and (ii) in the event of a repossession of the
Aircraft by Lessor following an Event of Default, in preparing the Aircraft, the
Airframe, any Engine or Part for sale or lease, advertising the sale or lease of
the Aircraft, the Airframe, any Engine or Part and selling or releasing the
Aircraft, the Airframe, any Engine or Part and for any reasonable expenditures
which Lessor considers advisable to repair and restore the Aircraft, the
Airframe, any Engine or Part to the condition required by Article XVIII, all at
Lessee's sole expense.

     No remedy referred to in this Section 17.02 is intended to be exclusive,
but, to the extent permissible hereunder or under applicable Law, each shall be
cumulative and in addition to any other remedy referred to or otherwise
available to Lessor at Law or in equity; and the exercise or beginning of
exercise by Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Lessor of any or all of such other remedies.
No express or implied waiver by Lessor of any Default or Event of Default shall
in any way be, or be construed to be, a waiver of any subsequent Default or
Event of Default.

                                       50


                                  ARTICLE XVIII

                             RETURN OF THE AIRCRAFT

     Section 18.01 RETURN. On the expiration of the Term or at such other time
as Lessee shall be required to return the Aircraft to Lessor pursuant to the
terms hereof, Lessee, at its own expense, shall deliver the Aircraft to Lessor
at the Return Location equipped with all required Parts and all Engines (or
Replacement Engines delivered in accordance with Section 18.03), duly installed
thereon and with all Aircraft Documents complete and up to date and in all cases
in the Return Conditions and reasonably acceptable to Lessor. The Aircraft, at
the time of return to Lessor, shall be in the same configuration as on delivery,
except as modified in accordance with the terms and conditions of this Lease and
the Return Conditions, and be fully equipped with the Engines or equivalent
engines owned by Lessee (and complying with Section 18.03) APU, landing gears
and other equipment and modifications properly installed thereon. The Aircraft
shall be in a condition suitable for immediate operation in accordance with
commercial passenger airline standards.

     Section 18.02 NO LIENS. Immediately prior to the Return Occasion, Lessee
shall, at its cost, ensure that the Aircraft, Engines and Parts are free and
clear of all Liens, except Lessor's Liens.

     Section 18.03 RETURN OF ENGINES. In the event any engine not owned by
Lessor shall be returned with the Airframe in lieu of an Engine and the reason
therefor is other than that an Event of Loss has occurred to such Engine, Lessor
shall not be obligated to accept such engine unless it meets the requirements
for a Replacement Engine, is free and clear of Liens, is suitable for use on the
Airframe with the other Engine or engine being returned with the Airframe, in
the condition required by EXHIBIT D-1 or EXHIBIT D-2, as applicable, and has an
expected useful life at least equal to, the Engine that should have been
returned, assuming such Engine which should have been returned was in the
condition and repair as required by the terms hereof immediately prior to such
required. Lessee shall, at its own expense and concurrently with such delivery,
convey such Replacement Engine to Lessor in accordance with the requirements in
Section 12.02(a). Upon full compliance with this Section 18.03 and passage of
title to such engine to Lessor, such engine shall be an Engine for all purposes
of this Lease and Lessor shall transfer to Lessee all Lessor's right, title and
interest in an Engine constituting part of the Aircraft so returned but not
installed on the Aircraft at the time of such return, without any
representation, warranty or recourse of any kind whatsoever, express or implied,
except a warranty that such Engine is free and clear of Liens created by Lessor.

     Section 18.04 CONDITION OF THE AIRCRAFT. Upon the Return Occasion, Lessee
shall, at its cost, cause the Aircraft to comply with all of the Return
Conditions.

     Section 18.05 RETURN CERTIFICATES. (a) Upon completion of the ground
inspections and the functional check flight of the Aircraft referred to in
EXHIBIT D-1 or EXHIBIT D-2, as applicable, Lessor shall either:

               (i) accept the return of the Aircraft and sign the Return
     Acceptance Certificate with any deficiencies noted thereon and deliver the
     same to Lessee; or

               (ii) if the Aircraft fails to conform to the Return Conditions,
     notify Lessee of the non-conforming items in writing.

          (b) The provisions of this Section 18.06 shall be without prejudice to
the rights or remedies of Lessor or to the obligations of Lessee under any other
provision of this Lease.

                                       51


     Section 18.06 [Intentionally Omitted].

     Section 18.07 REGISTRATION AND DEREGISTRATION COSTS. Lessee shall be solely
responsible for any and all costs relating to the exportation and
de-registration of the Aircraft from the State of Registration (if other than
the United States), if any, in connection with the redelivery of the Aircraft to
Lessor as required hereby, including the cost of obtaining any necessary
certificates of airworthiness for export in respect of the Aircraft.

     Section 18.08 AIRPORT AND NAVIGATION CHARGES. Lessee will ensure that on
the Return Occasion, any and all airport, navigation and other charges imposed
or levied by the airport at which the Aircraft is habitually based as at the
date of the Return Occasion (if located outside the United States) that give
rise or might if unpaid give rise to any Lien, right of detention or right of
sale in relation to the Aircraft, any Engine or any Part, whether incurred in
respect of the Aircraft or any other aircraft operated by Lessee, have been paid
and discharged in full and will at Lessor's request produce evidence thereof
satisfactory to Lessor, which may include a certificate of an officer of Lessee
stating that all such outstanding airport, navigation or other charges have been
paid in full and that no such charge is being contested by Lessee.

     Section 18.09 AID IN DISPOSITION. Lessee agrees that during the last 180
days of the Term (and during the storage period set forth in Section 18.11) it
will cooperate in all reasonable respects with the efforts of Lessor to lease or
sell the Aircraft, including, without limitation, permitting potential lessees
or purchasers to inspect the Aircraft and the records relating thereto, PROVIDED
that Lessee shall not be required to incur out-of-pocket expenses for which it
is not to be reimbursed or interrupt the use and operation of the Aircraft.

     Section 18.10 STORAGE FOLLOWING RETURN OCCASION. Upon any expiration or
termination of this Lease for the Aircraft, at the written request of Lessor,
Lessee will arrange, or will cause to be arranged, secured ramp storage
facilities and storage maintenance for the Aircraft (properly insured) at an
appropriate storage area (which shall include any of Lessee's hangar facilities
suitable for such aircraft) for the Aircraft for a period not exceeding sixty
(60) days at Lessee's expense (other than for the costs of insurance and storage
maintenance, which Lessor shall reimburse to Lessee) and at Lessor's risk.
Notwithstanding other provisions of this Article 18, in the event of an Event of
Default all storage, maintenance, insurance costs and risk of loss for the
Aircraft shall be for the account of Lessee.

     Section 18.11 LESSEE'S CONTINUING OBLIGATIONS. In the event that Lessee
does not return the Aircraft to Lessor on the last day of the Term in the
condition required by Sections 18.01 through 18.04, whether as a result of any
termination under Section 17.02 or otherwise, and whether or not the reason for
such failure to return is within the control of Lessee:

             (a) the  obligations  of Lessee  under this Lease  (other  than the
payment of Basic  Rent,  which  shall be  governed  by Section  18.11(b )) shall
continue in full force and effect on a day-to-day  basis until such return,  and
the Lessee shall be obligated to continue to perform its obligations  under this
Lease,  including,  without  limitation,  the  obligation to maintain  insurance
coverages,  and the Term shall be deemed to be extended on a  day-to-day  basis,
PROVIDED  that nothing in this  paragraph  (a ) shall be deemed to  constitute a
waiver of any right that Lessor may have consequent upon any Event of Default by
Lessee; and

             (b) until such time as the Aircraft is  redelivered  in  accordance
with the Return  Conditions  or the Lessor  accepts  return of the  Aircraft and
delivers a Return Certificate  pursuant to Section 18.05,  instead of paying the
Basic Rent specified in the definition thereof, the Lessee shall pay one hundred
percent  (100%) of such Basic Rent  (calculated on a daily basis) for the period
from the date that the Aircraft was required to be returned to the date on which
it is actually returned and put into the

                                       52


condition required by this Article XVIII and EXHIBIT D-1 or EXHIBIT D-2, as
applicable, or the Lessor accepts return of the Aircraft and delivers a Return
Certificate pursuant to Section 18.05, PROVIDED that, if Lessee's failure to
return the Aircraft is solely and directly the result of Lessor's failure to
complete any inspection and acceptance in a commercially reasonable manner, then
Lessee shall pay no Basic Rent during such delay, and during any such period,
Lessee shall not use or operate the Aircraft except as required by this Lease.
When the Lessor accepts return of the Aircraft and delivers a Return Certificate
pursuant to Section 18.05, the Term shall end and Lessee's obligations under
this Lease shall cease, except as provided in Section 20.13 hereof.

                                   ARTICLE XIX

                                   ALIENATION

     Section 19.01 SUCCESSOR OWNER TRUSTEE. (a) The Owner Trustee or any
successor Owner Trustee may resign or may be removed (with the consent of the
Lessee not to be unreasonably withheld) by the Beneficiary, and a successor
Owner Trustee may be appointed (with the prior written consent of the Lessee,
not to be unreasonably withheld) and a Person may become Owner Trustee under the
Trust Agreement only in accordance with the provisions of Section 9.01 of the
Trust Agreement and the provisions of this Section 19.01. The appointment in any
manner of a successor Owner Trustee pursuant to the Trust Agreement shall be
subject to the following conditions:

                  (i) such  successor  Owner  Trustee  shall be a Citizen of the
United States;

                  (ii) such  successor  Owner Trustee shall be a bank or a trust
company  having  combined  capital,  surplus and  undivided  profits of at least
$100,000,000;

                  (iii) such appointment shall not violate any provisions of the
Federal  Aviation Act or any  applicable  rule or regulation  of the  applicable
regulatory  agency or body of any other  jurisdiction  in which the Aircraft may
then be registered or create a  relationship  which would be in violation of the
Federal  Aviation Act or any  applicable  rule or regulation  of the  applicable
regulatory  agency or body of any other  jurisdiction  in which the Aircraft may
then be registered;

                  (iv)  such  successor   Owner  Trustee  shall  enter  into  an
agreement or agreements,  in form and substance  reasonably  satisfactory to the
Lessee and the Beneficiary whereby such successor Owner Trustee confirms that it
shall be deemed a party to this Lease and each other Operative Document to which
the Owner  Trustee  is a party  and  agrees to be bound by all the terms of such
documents  applicable  to the Owner  Trustee and makes the  representations  and
warranties  contained  in  Section  5.02  hereof  (except  that  it may be  duly
incorporated, validly existing and in good standing under the laws of the United
States of America or any State thereof); and

                  (v) all filings of UCC financing and continuation  statements,
filings in accordance with the Federal Aviation Act and amendments thereto shall
be made and all further actions taken in connection with such appointment as may
be necessary in connection with maintaining the valid and continued registration
of the Aircraft in accordance with the Federal Aviation Act.

     Section 19.02 ALIENATION BY LESSOR. (a) Lessor may not, without the prior
consent of the Lessee, assign any of its rights under or interest in this Lease
except to a successor Owner Trustee as provided in Section 19.01 or as otherwise
expressly provided herein or in any other Operative Document. Lessee shall
provide Lessor with such information regarding the location of the Aircraft in
connection with any such assignment as the Lessor may reasonably request.

                                       53


          (b) Lessor may enter into a Financing with a Financing Party upon
twenty (20) days' prior written notice to Lessee, and Lessee agrees to execute
and deliver in connection with any Financing such documents and assurances
(including an acknowledgment of the Financing and a certificate as to the
absence of any Default under this Lease) and to take such further action as the
Owner Trustee may reasonably request in connection with the Financing. A
Financing Party shall be entitled to be an Indemnitee and an Additional Insured.

          (c) In connection with a Financing by the Lessor, (i) as a condition
precedent to such Financing becoming effective, Lessor will procure that the
Financing Party shall execute and deliver to Lessee a letter of quiet enjoyment
reasonably acceptable to Lessee in respect of Lessee's use and possession of the
Aircraft, (ii) the Lessor shall reimburse Lessee for any reasonable costs and
expenses (including reasonable attorneys' fees) actually incurred by Lessee in
connection with such Financing, and (iii) no such Financing shall increase the
expenses or indemnity obligations of Lessee hereunder or under any other
Operative Document., including without limitation obligations under Article XIV
or XV hereof or the Tax Indemnity Agreement.

     Section 19.03 BENEFIT AND BINDING EFFECT. The terms and provisions of this
Lease shall be binding upon and, subject to the limitations on assignment of
rights hereunder, inure to the benefit of the Lessor and the Lessee and their
respective successors and permitted assigns. Nothing herein shall be construed
as creating rights in any other Person except, to the extent provided herein,
the Beneficiary. The obligations to indemnify each Indemnitee are made for the
benefit of such Indemnitee and its respective successors and permitted assigns.

     Section 19.04 PERMITTED SUBLESSEE'S PERFORMANCE AND RIGHTS. Any obligation
imposed on the Lessee in this Lease shall require only that the Lessee perform
or cause to be performed such obligation, even if stated herein as a direct
obligation, and the performance of any such obligation by any sublessee or
transferee of the Airframe or any Engine or Part permitted by the terms hereof
under a Sublease or transfer agreement then in effect shall constitute
performance by the Lessee and to the extent of such performance discharges such
obligation by the Lessee. Except as otherwise provided in Section
8.01(c)(iii)(F) or a Sublease, a Permitted Sublessee shall have the rights
granted to the Lessee hereunder with respect to the Aircraft, Airframe and
Engines, and the provisions of this Lease shall be interpreted to permit a
Permitted Sublessee to exercise such rights to the extent permitted in the
relevant Sublease.

     Section 19.05 ALIENATION BY LESSEE. Except as provided in Article VIII,
Lessee shall not assign, transfer or otherwise dispose of or create any Lien in
or over its rights or obligations, or both, or, except as expressly permitted by
the terms hereof, delegate any of its obligations under this Lease or any other
Operative Document, except with the prior written consent of Lessor.

                                   ARTICLE XX

                                  MISCELLANEOUS

     Section 20.01 SEVERABILITY. Any provision of this Lease that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. To the extent permitted
by Law, Lessee and/or Lessor hereby waives any provisions of Law which renders
any provisions hereof prohibited or unenforceable in any respect.

     Section 20.02 NOTICES. Any report, notice, request, demand or other
communication to or upon the parties hereto under this Lease shall (i) be in the
English language and in writing; (ii) be deemed to

                                       54


have been delivered to a party if it is (1) left at the address of that party
specified below or at such other address as that party may notify to the other
party from time to time,(2) sent by courier to that party at that address, or
(3) sent by facsimile to the facsimile number of that party specified below or
to such other number as that party may notify the other party from time to time;
(iii) signed on behalf of the party giving, serving or making the same by any
attorney, director, officer, secretary, partner, agent or other duly authorized
representative of such party; and (iv) be effective (A) in the case of a letter
or delivery by courier, when left at the address referred to above ; or (B) in
the case of a facsimile transmission, when receipt is confirmed by return
facsimile or by telephone or on actual receipt if not so confirmed.

For the purposes of this Lease, all reports, notices, requests, demands or other
communications shall be given or made by being addressed as follows:

          (a)  if to Lessor to:

               Wells Fargo Bank Northwest, National Association
               79 South Main Street Salt Lake City, Utah 84111
               Tel:  (801) 246-5630
               Fax:  (801) 246-5053
               Attn: Corporate Trust Department

               with a copy to:

               Mitsui & Co. (U.S.A.), Inc.
               200 Park Avenue
               New York, NY  10166
               Tel:    (212) 878-4314
               Fax:    (212) 878-0979
               Attn:   General Manager, Aerospace, Marine and Motor Vehicle
                       Department

          (b)  if to Lessee to:

               Chautauqua Airlines, Inc.

               2500 S. High School Road
               Indianapolis, Indiana  46241
               Tel:    (317) 484-6047
               Fax:    (317) 484-6060
               Attn:   President

               with a copy to:

               Wexford Capital LLC
               411 West Putnam Avenue
               Greenwich, Connecticut 06830
               Tel:    (203) 862-7000
               Fax:    (203) 862-7490
               Attn:   President

                                       55


PROVIDED, that any report, notice, request, demand or other communication
delivered to Lessee in accordance with this Section 20.02 shall be effective as
to Lessee without regard to whether such report, notice, request, demand or
other communication has been delivered to Wexford Capital LLC.

     Section 20.03 LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make
any payment required to be made by it hereunder or fails to perform or comply
with any of the covenants, agreements or obligations contained herein, Lessor
shall have the right, but not the obligation, to make such payment or conform or
comply with such agreement, covenant or obligation, and the amount of such
payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance thereof or compliance therewith,
together with interest thereon at the Interest Rate, shall be payable by Lessee
to Lessor, as Supplemental Rent, upon demand. Lessor agrees to notify Lessee in
writing prior to making any payment or exercising any right under this Section
20.03, unless the Aircraft will be in danger of loss, sale, confiscation,
forfeiture or seizure should such payment not be made or right exercised. The
taking of any such action by Lessor shall not constitute a waiver or release of
any obligation of Lessee under this Lease, nor a waiver of any Default or Event
of Default which may arise out of Lessee's nonperformance of such obligation,
nor an election or waiver by Lessor of any remedy or right available to Lessor
under or in relation to this Lease.

     Section 20.04 COUNTERPARTS, CHATTEL PAPER. This Lease may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. To the extent, if
any, that this Lease constitutes chattel paper (as such term is defined in the
UCC as in effect in any applicable jurisdiction) no security interest in this
Lease may be created through the transfer of possession of any counterpart other
than the original counterpart containing the receipt therefor executed by the
Lessor on the signature page thereof.

     Section 20.05 CONCERNING OWNER TRUSTEE. It is understood and agreed that,
except as otherwise expressly provided herein or in the Trust Agreement or any
other Operative Document, WFB is entering into this Lease solely in its capacity
as trustee as provided in the Trust Agreement and not in its individual capacity
and in no case whatsoever will WFB be liable or accountable in its individual
capacity for any of the statements, representations, warranties, agreements or
obligations of Lessor hereunder, or for any loss in respect thereof, as to all
of which all interested parties agree to look solely to the Trust Estate;
PROVIDED that nothing in this Section 20.05 shall be deemed to limit in scope or
substance the personal liability of WFB (a) to Beneficiary as expressly set
forth in the Trust Agreement, (b) in respect of the representations, warranties
and agreements of WFB expressly made in its individual capacity herein or in any
other Operative Document to which it is a party, (c) for the consequences of its
own gross negligence, willful misconduct and, in receiving, handling or
remitting of funds only, its willful misconduct or simple negligence as a
trustee, (d) in respect of Lessor's Liens attributable to it in its individual
capacity, and (e) taxes, fees or other charges on, or based on, or measured by,
any fees, commissions or compensation received by it in connection with the
transactions contemplated by the Operative Documents.

     Section 20.06 NO BROKERS. (a) Lessee hereby represents and warrants that it
has not paid, agreed to pay or caused to be paid directly or indirectly in any
form, to any Person, other than Seabury Securities LLC, any commission,
percentage, contingent fee, brokerage or other similar payments of any kind, in
connection with the establishment or operation of this Lease.

                  (b) Lessor  hereby  represents  and  warrants  that it has not
paid,  agreed to pay or caused to be paid directly or indirectly in any form, to
any  Person,  other  than  Tombo  Aviation  Inc.,  any  commission,  percentage,
contingent fee,  brokerage or other similar  payments of any kind, in connection
with the establishment or operation of this Lease.

                                       56


     Section 20.07 ENTIRE AGREEMENT; MODIFICATION OR REVISION. This Lease and
the other Operative Documents is intended to be a complete and exclusive
statement of the terms of the agreement of the parties hereto and this Lease and
the other Operative Documents supersede any prior or contemporaneous agreements,
whether oral or in writing in relation to the leasing of the Aircraft to Lessee.
Neither this Lease nor any term of this Lease may be modified or waived except
by an agreement in writing signed by the parties.

     Section 20.08 GOVERNING LAW; JURISDICTION. (a) THIS LEASE IS BEING
DELIVERED IN THE STATE OF NEW YORK AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

          (b) The parties hereto each hereby irrevocably consents that any legal
action or proceeding against it or any of its assets arising out of or relating
to this Lease or any other Operative Document may be brought in any jurisdiction
where it or any of its assets may be found, in the courts of the State of New
York located in the County of New York, New York, and in the Federal courts
sitting in the Southern District of New York, as the party bringing such action
or proceeding may elect, and by execution and delivery of this Lease each of the
parties hereto hereby irrevocably submits to and accepts with regard to any such
action or proceeding, for itself and in respect of its assets, generally and
unconditionally, the jurisdiction of the aforesaid courts and irrevocably agrees
to be bound by any judgment rendered thereby. Nothing herein shall prevent any
party from bringing any legal action or proceeding or obtaining execution of
judgment in any other appropriate jurisdiction. The parties hereto further agree
that a final judgment in any action or proceeding arising out of or relating to
this Lease or any other Operative Document shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of the indebtedness or liability therein
described, or in any other manner provided by Law. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by Law, any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Lease or any other Operative
Document brought in any court in or of New York, New York, and hereby further
irrevocably waives any claim that any such suit, action or proceeding in New
York, New York has been brought in an inconvenient forum.

          (c) Each party hereto hereby irrevocably consents to the service by
certified mail at its address set forth in Section 20.02 of any summons and
complaint and any other process which may be served in any action or proceeding
arising out of or relating to this Lease or any other Operative Document.
Notwithstanding the foregoing, nothing herein shall affect the rights of either
party to serve process in any other manner permitted by Law.

     Section 20.09 WAIVER OF IMMUNITY. To the extent that any party may in any
jurisdiction claim for itself or its assets immunity from suit, execution,
attachment (whether in aid of execution before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there may be
attributed to itself or its assets such immunity (whether or not claimed), that
party hereby irrevocably agrees not to claim and hereby irrevocably waives such
immunity to the full extent permitted by the Laws of such jurisdiction.

     Section 20.10 WAIVER OF JURY TRIAL. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this Lease or any other Operative Document. Each party
hereto (a) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce the foregoing waiver and (b)
acknowledges that it and the other parties hereto have been induced to enter
into

                                       57


this Agreement and the other  transaction  documents,  as applicable,  by, among
other things, the mutual waivers and certifications in this section.

     Section 20.11 [RESERVED]. Section 20.12 CONFIDENTIALITY. The Lessor and
Beneficiary agree to keep the following information confidential: all
information that is included in any Exhibit hereto that is not filed with the
FAA and such other information as any Party shall identify in writing to the
other Parties as confidential information, including any such information that
is so identified in connection with an inspection of the Aircraft pursuant to
Section 13.02. This confidentiality obligation shall survive the termination of
this Lease for a period of one year following such termination, except that if
this Lease shall have been terminated following an Event of Default, Lessor
shall have the right to disclose such information as may be necessary in order
to remarket the Aircraft and/or to enforce any remedy that may be available to
it. Notwithstanding the foregoing, this Lease, the other Operative Documents and
all information supplied by either of the parties hereunder or thereunder may be
disclosed by any other party (1) as may be required by Law or by any court or
administrative order, (2) to the extent that the substance hereof or thereof
becomes public knowledge through no fault or negligence of such other party, (3)
to such party's professional advisers and to the Manufacturer and Engine
Manufacturer, and (4) to any subsequent potential transferees of the Aircraft,
the Trust Estate or an interest therein or the Beneficial Interest or to a
Financing Party, PROVIDED that any such Person agrees to be bound by this
Section 20.12.

     Section 20.13 TERMINATION. Upon the return of the Aircraft in accordance
with Article XVIII or as otherwise provided in Section 18.11, the Term shall
end, and the obligations of the Lessee to pay Rent (except for Supplemental Rent
obligations surviving pursuant to Section 6.05 and Articles XIV and XV of this
Lease or the Tax Indemnity Agreement or which have otherwise accrued but not
been paid as of the Termination Date) shall cease.

                     [This space intentionally left blank.]

                                       58


     IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due authority, have
each caused this Aircraft Lease Agreement [N288SK] to be executed by their duly
authorized officers on the day and year first above written.

                                        Lessor:

                                        WELLS FARGO BANK NORTHWEST, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, except as expressly set forth
                                        herein, but solely as Owner Trustee

                                        By: /s/ Brett R. King
                                           -------------------------------------
                                           Name:  Brett R. King
                                           Title: Vice President

                                        Lessee:

                                        CHAUTAUQUA AIRLINES, INC.

                                        By: /s/ Robert H. Cooper
                                           -------------------------------------
                                        Name:  Robert H. Cooper
                                        Title: Vice President



     IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due authority, have
each caused this Aircraft Lease Agreement [N288SK] to be executed by their duly
authorized officers on the day and year first above written.

                                        Lessor:

                                        WELLS FARGO BANK NORTHWEST, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, except as expressly set forth
                                        herein, but solely as Owner Trustee

                                        By: /s/ Brett R. King
                                           -------------------------------------
                                           Name:  Brett R. King
                                           Title: Vice President

                                        Lessee:

                                        CHAUTAUQUA AIRLINES, INC.

                                        By: /s/ Robert H. Cooper
                                           -------------------------------------
                                        Name:  Robert H. Cooper
                                        Title: Vice President

     The undersigned acknowledges receipt of this original counterpart of this
Aircraft Lease Agreement [N288SK] on this __ day of ____________, 2001.


                                        WELLS FARGO BANK NORTHWEST, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, except as expressly set forth
                                        herein, but solely as Owner Trustee

                                        By: /s/ Brett R. King
                                           -------------------------------------
                                        Name:  Brett R. King
                                        Title: Vice President

AIRCRAFT LEASE AGREEMENT []



                                                                     EXHIBIT A-1

                             DESCRIPTION OF AIRCRAFT

AIRFRAME:



MFG/MODEL                         SERIAL NO.                 REGISTRATION MARK
                                                            
Embraer EMB-145LR                   145461                        N288SK


ENGINES (each of which has over 750 rated takeoff horsepower or the equivalent
thereof):



MFG/MODEL                                                SERIAL NO.
                                                      
Rolls-Royce Allison AE3007-A1P                           CAE 311866
Rolls-Royce Allison AE3007-A1P                           CAE 311867





                                                                       EXHIBIT C

                     FORM OF DELIVERY ACCEPTANCE CERTIFICATE
                                EMBRAER EMB-145LR
                                     MSN [ ]

     To:  Wells Fargo Bank Northwest, National Association
          79 South Main Street
          Salt Lake City, Utah 84111

     This Delivery Acceptance Certificate is delivered on the date set forth
below by Chautauqua Airlines, Inc. (the "LESSEE") to Wells Fargo Bank Northwest,
National Association, not in its individual capacity, except as expressly set
forth therein, but solely as Owner Trustee (the "LESSOR") pursuant to Aircraft
Lease Agreement [ ] dated as of June [ ], 2001 (the "LEASE") between Lessor and
Lessee. Terms used in this Certificate shall have the same meanings as in the
Lease.

     1.   ACCEPTANCE. Lessee hereby indicates and confirms to Lessor that Lessee
has at ________ hours, local time, on ______________ __, 2001 at the Delivery
Location accepted from Lessor possession of:

          one (1) Embraer EMB-145LR airframe bearing manufacturer's serial no. ,
          together with

          two (2) AE3007-A1P engines bearing manufacturer's serial nos. [ ] and
          [ ]; and

          one (1) ________ auxiliary power unit bearing manufacturer's serial
          no. ; and -------

          all equipment, accessories, furnishings and parts belonging to,
          installed in or appurtenant to that Airframe, those Engines and APU
          and all Aircraft Documents relating to such Airframe, Engines, APU,
          ancillary equipment or devices (excluding galley equipment, serving
          equipment and emergency medical equipment), and in full compliance
          with the terms of the Lease.

     2.   CONFIRMATIONS. Lessee confirms that at the above mentioned time and on
the above mentioned date (being the Delivery Date for the above Aircraft
pursuant to the Lease):

               (i)  Lessee became obligated to pay to Lessor the amounts
                    provided for in the Lease in respect of the above mentioned
                    Aircraft;

               (ii) the Aircraft is insured in accordance with the terms of the
                    Lease;

               (iii) Lessor has fully, duly and timely performed all of its
                    obligations under the Lease; and

               (iv) the representations and warranties contained in Section 5.01
                    of the Lease are true and correct as at the date hereof
                    (unless any such representation and warranty shall have been
                    made with reference to a specified date,



                    in   which case such representation and warranty shall be
                    true and correct as of such specified date).

     3. RELIANCE. Lessee acknowledges and agrees that any Financing Party may
rely upon all or any of the foregoing in granting any Financing and that funds
may be advanced in reliance upon the foregoing.

                                        2


     IN WITNESS WHEREOF, Lessee has caused this Delivery Acceptance Certificate
to be executed on its behalf by its duly authorized officers or representatives
pursuant to due corporate authority on this the Delivery Date.

                                        CHAUTAUQUA AIRLINES, INC.

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



                                                                     EXHIBIT D-3

                      FORM OF RETURN ACCEPTANCE CERTIFICATE
                                EMBRAER EMB-145LR
                                       MSN

To:  Chautauqua Airlines, Inc.
     2500 S. High School Road
     Indianapolis, Indiana 46241

          This Return Acceptance Certificate is delivered on the date set forth
below by Wells Fargo Bank Northwest, National Association, not in its individual
capacity, except as expressly set forth therein, but solely as Owner Trustee
(the "LESSOR") pursuant to an Aircraft Lease Agreement [N288SK] dated as of
June4, 2001 (the "LEASE") between Lessor and Lessee. Terms used in this
Certificate shall have the same meaning as in the Lease.

          Lessor hereby indicates and confirms to Lessee that Lessor has at
___________hours, local time, on ______________, 20____ at
_______________________(1), being the agreed Return Location, accepted from
Lessee possession of:

          one (1) Embraer EMB-145LR airframe bearing manufacturer's serial no. ,
          together with its
          two (2) Rolls Royce Allison AE 3007-A1P engines bearing manufacturer's
          serial nos. [ ] and [ ] and
          one (1) __________ auxiliary power unit bearing  manufacturer's serial
          no. _________ and
          all  equipment,  accessories,  furnishings  and  parts  belonging  to,
          installed in or appurtenant  to that  Airframe,  those Engines and APU
          and all Aircraft  Documents relating to such Airframe,  Engines,  APU,
          ancillary  equipment  (excluding all of the galley equipment , serving
          equipment and emergency medical equipment).

               (i)  in the required Return Conditions except as may be noted in
                    Annex 3 hereto
               (ii) with a status as detailed in Annex 1.

          Lessee hereby certifies that no airport, navigation, or other charges
are due with respect to the Aircraft.

                  [Remainder of page intentionally left blank]

- ----------
(1) Insert name of airport and city.



     IN WITNESS WHEREOF, Lessor has caused this Return Acceptance Certificate to
be executed on its behalf by its duly authorized officers or representatives
pursuant to due corporate authority on this the Return Occasion.

                                        WELLS FARGO BANK NORTHWEST, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, but solely as Owner Trustee

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

                                        CHAUTAUQUA AIRLINES, INC.

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



                                                                      ANNEX 1 to
                                                   Return Acceptance Certificate

Aircraft Type:  Embraer EMB-145LR
MSN:            [                 ]
Registration:   [                 ]

Airframe:

Total Time:                         ________         Hrs



Engines:                                    Position #1                    Position #2
                                                                     
Engine Serial Number:                       [   ]                          [        ]
Percent of life remaining
to next OH:                                 ________                       ________
Percent of life remaining
to first limiting part:                     ________                       ________




Landing Gear:                               Nose                 Left Main          Right Main
                                                                           
Serial No.                                  ________             ________           ________
Percent of life remaining
to next OH:                                 ________             ________           ________

Brakes:
Percent of life remaining to replacement    ________             ________           ________

Tires:
Percent of life remaining to replacement    ________ ________    ________




                                                                       EXHIBIT E

                            LIST OF CLOSING DOCUMENTS

1.   Documents to be Provided by Lessee:

          a.   Copies of the Certificate of Incorporation and By-laws of Lessee,
               certified by a duly authorized officer of the Lessee;

          b.   Good standing certificate of Lessee;

          c.   Copies of the resolutions of the Board of Directors of the Lessee
               approving and authorizing the execution, delivery and performance
               of the Lease and the other Operative Documents in which Lessee is
               a party, and any and all other documents required to be executed
               and delivered on its behalf, certified by a duly authorized
               officer of the Lessee, together with such other documents and
               evidence with respect to it as Beneficiary may reasonably request
               in order to establish the consummation of the transactions
               contemplated by the Operative Documents and the taking of all
               corporate proceedings in connection therewith;

          d.   a Certificate of duly authorized officers of Lessee setting forth
               the names and signatures of the persons authorized and appointed
               to execute and deliver on behalf of Lessee the Lease and each
               other document to be delivered by Lessee thereunder and to take
               any action contemplated therein;

          e.   A certificate dated the Delivery Date and signed by the chief
               executive officer and the chief financial officer or treasurer or
               their equivalent of Lessee, dated the Delivery Date, stating
               that: (i) the representations and warranties contained in Section
               5.01 of the Lease, Section 9(a) of the Purchase Agreement and
               Section 6 of the Engine Warranty Assignment are true and accurate
               on and as of the Delivery Date as though made on and as of such
               time (except to the extent such representations and warranties
               expressly relate solely to an earlier date, in which case such
               representations and warranties were true and correct on and as of
               such earlier date); (ii) no event has occurred and is continuing,
               or would result from the leasing of the Aircraft under the Lease,
               that constitutes a Default, an Event of Default or an Event of
               Loss (as such terms are defined in the Lease) and (iii) Lessee is
               not in default of any of its obligations under any Other Lease
               (as such term is defined in the Lease).

2.   Documents to be provided by the Trust Company:

     a.        A copy of the Certificate of Incorporation or Articles of
               Incorporation or Articles of Association and By-Laws and general
               authorizing resolutions of the boards of directors (or executive
               committees) or other satisfactory evidence of authorization of
               the Trust Company, certified as of the Delivery Date by the
               Secretary or an Assistant Secretary of Trust Company, which
               authorize the execution, delivery and performance by Trust
               Company of each of the Operative Documents to which it is a
               party, together with such other documents and evidence with
               respect to it as Lessee and Beneficiary may reasonably request in
               order to establish the consummation of the transactions
               contemplated by the Operative Documents and the taking of all
               corporate proceedings in connection therewith;



     b.        A good standing certificate of Trust Company and an incumbency
               certificate of Trust Company as to the person or persons
               authorized to execute and deliver the relevant Operative
               Documents on behalf of Trust Company and/or Owner Trustee, as the
               case may be; and

     c.        An Officer's Certificate of Trust Company, dated the Delivery
               Date, stating that its representations and warranties, in its
               individual capacity and as Owner Trustee, set forth in the Lease
               and the other Operative Documents are true and correct as of the
               Delivery Date (or, to the extent that any such representation and
               warranty expressly relates to an earlier date, true and correct
               as of such earlier date).

3.   Documents to be provided by Seller:

          a.   A copy of the Certificate of Incorporation and By-Laws and
               resolutions of the Board of Directors of Seller, certified as of
               the Delivery Date by the Secretary or an Assistant Secretary of
               Seller, which authorize the execution, delivery and performance
               by Seller of each of the Operative Documents to which it is a
               party, together with such other documents and evidence with
               respect to it as Beneficiary may reasonably request in order to
               establish the consummation of the transactions contemplated by
               the Operative Documents and the taking of all corporate
               proceedings in connection therewith;

          b.   A good standing certificate of Seller and an incumbency
               certificate of Seller as to the person or persons authorized to
               execute and deliver the relevant Operative Documents on behalf of
               Seller, and;

          c.   An Officer's Certificate of Seller, dated the Delivery Date,
               stating that its representations and warranties set forth in the
               Operative Documents to which it is a party are true and correct
               as of the Delivery Date (or, to the extent that any such
               representation and warranty expressly relates to an earlier date,
               true and correct as of such earlier date);

4.   Documents to be provided by Aero:

          d.   A copy of the Certificate of Incorporation and By-Laws and
               resolutions of the Board of Directors of Aero, certified as of
               the Delivery Date by the Secretary or an Assistant Secretary of
               Aero, which authorize the execution, delivery and performance by
               Aero of Assignment No. 1, Assignment No. 2 and the Bills of Sale
               (the "AERO DOCUMENTS"), together with such other documents and
               evidence with respect to it as Beneficiary may reasonably request
               in order to establish the consummation of the transactions
               contemplated by such documents and the taking of all corporate
               proceedings in connection therewith;

          e.   A good standing certificate of Aero and an incumbency certificate
               of Aero as to the person or persons authorized to execute and
               deliver the Aero Documents on behalf of Aero, and;

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

5.   Documents to be provided by Beneficiary:

                                        2


          a.   A copy of the Certificate of Incorporation and By-Laws and
               general authorizing resolutions of the board of directors (or
               executive committees) or other satisfactory evidence of
               authorization of Beneficiary, certified as of the Delivery Date
               by the Secretary or an Assistant Secretary of Beneficiary, which
               authorize the execution, delivery and performance by Beneficiary
               of each of the Operative Documents to which it is a party,
               together with such other documents and evidence with respect to
               it as Lessee may reasonably request in order to establish the
               consummation of the transactions contemplated by the Operative
               Documents and the taking of all corporate proceedings in
               connection therewith;

          b.   A good standing certificate of Beneficiary and an incumbency
               certificate of Beneficiary as to the person or persons authorized
               to execute and deliver the relevant Operative Documents on behalf
               of Beneficiary, and;

          c.   An Officer's Certificate of Beneficiary, dated the Delivery Date,
               stating that its representations and warranties set forth in the
               Operative Documents to which it is a party are true and correct
               as of the Delivery Date (or, to the extent that any such
               representation and warranty expressly relates to an earlier date,
               true and correct as of such earlier date);

6.   A certificate of insurance signed by an Approved Insurance Broker or
Approved Insurer evidencing compliance by Lessee with the provisions of Article
XI.

7.   A letter of undertaking signed by an Approved Insurer or by an Approved
Insurance Broker complying with the provisions of Article XI.

8.   Legal opinions of:

          a.   Fulbright & Jaworski L.L.P., special counsel to Lessee,
               substantially in the form attached to the Purchase Agreement as
               Exhibit F-1;

          b.   Arthur H. Amron, in-house counsel to Lessee, substantially in the
               form attached to the Purchase Agreement as Exhibit F-2;

          c.   Ray, Quinney & Nebeker, a Professional Corporation, special
               counsel to WFB and Owner Trustee, substantially in the form
               attached to the Purchase Agreement as Exhibit F-3;

          d.   Daugherty, Fowler, Peregrin & Haught, a Professional Corporation,
               special FAA counsel, substantially in the form attached to the
               Purchase Agreement as Exhibit F-4;

          e.   Pillsbury Winthrop LLP, special counsel to Beneficiary,
               substantially in the form attached to the Purchase Agreement as
               Exhibit F-5;

          f.   Shuichi Shimoyama, Esq., manager of the Legal Department of
               Beneficiary, substantially in the form attached to the Purchase
               Agreement as Exhibit F-6;

          g.   Arthur H. Amron, in-house counsel to Seller, substantially in the
               form attached to the Purchase Agreement as Exhibit F-7;

                                        3


          h.   Pinheiro Neto, special Brazilian counsel to Beneficiary, in a
               form reasonably satisfactory to Seller, the Beneficiary, the
               Lessor and the Lessee and addressed to Seller, the Beneficiary,
               the Lessor and the Lessee;

          i.   (delivered only to Beneficiary) Pillsbury Winthrop LLP, special
               tax counsel to Beneficiary; and

          j.   special counsel for the Manufacturer, in a form reasonably
               satisfactory to the Beneficiary and the Lessee and addressed to
               the Beneficiary, the Lessor and the Lessee[; and

          k.   special Cayman Islands counsel for Aero, in a form reasonably
               satisfactory to Seller, the Beneficiary and the Lessee and
               addressed to Seller, the Beneficiary, the Lessor and the Lessee].

9.   An executed counterpart of each of the Operative Documents and the Trust
Agreement, duly executed by each of the parties thereto or a certified copy
thereof, including, without limitation, an originally executed copy of the Lease
and Lease Supplement No. 1 thereto;

10.  The Delivery Acceptance Certificate for the Aircraft duly signed for and on
behalf of Lessee;

11.  A copy of the certificate of airworthiness for the Aircraft, which
certificate shall be in full force and effect with no exceptions noted thereon;

12.  Evidence that the aircraft has not been registered in any jurisdiction
prior to the Delivery Date;

13.  Evidence that any required export license, import license and all customs
formalities relating to the export of the Aircraft from Brazil and the import of
the Aircraft into the United States have been obtained or complied with
(including, without limitation, copies of the following documents: (i) a
print-out of the registration of the transaction with the Registry of Credit
Transactions (the "Registro de Operacao de Credito  RC") to be obtained by the
Manufacturer through the SISCOMEX System in Brazil, (ii) a print-out of the
Export Registration (the "Registro de Exportacao - RE") of the transaction to be
obtained by the Manufacturer through the SISCOMEX System in Brazil, and (iii)
the Export Certificate of Airworthiness to be issued by the Aerospace Technical
Center ("Centro Tecnico Aerospacial - CTA") of the Ministry of Defense in Brazil
with respect to the Aircraft and (iv) evidence reasonably satisfactory to Lessor
of the amount due to the Manufacturer under the Manufacturer Purchase Agreement;

14.  One or more Uniform Commercial Code financing statements signed by Lessee
as debtor/lessee and naming Lessor as secured party/lessor;

15.  A certified accurate summary of the Lessee's Maintenance Program and an
excerpted copy of the Manufacturer Purchase Agreement to the extent relating to
the Manufacturer's warranties and related obligations or any right in the
Manufacturer Purchase Agreement assigned to Lessor pursuant to the Assignment
No.2;

16.  An excerpted copy of the Engine Warranty Agreement to the extent relating
to the Engine Manufacturer's warranties and related obligations or any right in
the Engine Warranty Agreement assigned to Lessor pursuant to the Engine Warranty
Assignment & Consent;

17.  An appraisal with respect to the Aircraft, in form and substance
satisfactory to the Lessor.

                                        4


18.  Such other documents or conditions as Lessor may reasonably request, in
form and substance satisfactory to Lessor.

                              POST-CLOSING MATTERS

     As soon as reasonably practicable following the Delivery Date, Lessee shall
cause Special FAA Counsel to issue a post-recordation opinion indicating that
the FAA-filed Documents (other than the Trust Agreement, the application for
registration of the Aircraft with the FAA in the name of the Owner Trustee
(together with any attachments thereto) and the notice of no prior registration
of the Aircraft) have been recorded by the FAA.

     Written confirmation that the identification plate required to be affixed
to the Airframe and Engines pursuant to Section 8.05 has been duly affixed.

     If necessary, evidence that the Consent and Agreement to each of Assignment
No. 1 and Assignment No. 2 and the Guaranty by the Manufacturer, together with a
certified translation of each such document, has been filed with the Brazilian
Register of Deeds and Documents.

                                        5


NOTE TO EXHIBIT 10.40

The two additional Aircraft Lease Agreements are substantially identical in
all material respects to the filed Aircraft Lease Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
             N286SK                             June, 2001                           Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------
             N287SK                             June, 2001                           Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.41

                                                                Exhibit 10.41


                         LEASE SUPPLEMENT NO. 1 [N288SK]

          THIS LEASE SUPPLEMENT NO. 1 [N288SK] dated June 29, 2001, between
WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a United States national
banking association, not in its individual capacity, but solely as Owner
Trustee, except as otherwise provided herein, the Lessor, and CHAUTAUQUA
AIRLINES, INC., a New York corporation, the Lessee;

                              W I T N E S S E T H :

          WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Aircraft Lease Agreement [N288SK], dated as of June 5, 2001 (the
"Lease", the terms defined therein being herein used with the same meaning),
which Lease provides, among other things, for the execution and delivery of
Lease Supplements in substantially the form hereof for the purpose of leasing a
specific Aircraft under the Lease when delivered by the Lessor to the Lessee in
accordance with the terms thereof;

          WHEREAS, the Lease, a counterpart of which is attached hereto and made
a part hereof, relates to the Aircraft and Engines described in Schedule I
hereto and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document;

          NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Article III of the Lease, the Lessor
and the Lessee hereby agree as follows:

          1. The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts and leases from the Lessor, under the Lease as herein
supplemented, the Aircraft, described in Schedule I hereto.

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

          3. The Basic Term shall commence on the Delivery Date and continue
through December 29, 2017 (the "Expiration Date").

          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 Documents.

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

          6. This Lease Supplement may be executed by the parties hereto in
separate counterparts and all such counterparts shall together constitute but
one and the same instrument.



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 or the
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart of each thereof containing the receipt therefor
executed by the Lessor on the signature page of each thereof.

          7. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

            [The remainder of this page is intentionally left blank.]



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

                                      WELLS FARGO BANK NORTHWEST,
                                      NATIONAL ASSOCIATION
                                      not in its individual capacity, but solely
                                      as Owner Trustee

                                      By: /s/ Brett R. King
                                          -------------------------------------
                                           Name: Brett R. King
                                           Title: Vice President

                                      CHAUTAUQUA AIRLINES, INC.

                                      By: /s/ Robert H. Cooper
                                          -------------------------------------
                                           Name: Robert H. Cooper
                                           Title: Vice President

     The undersigned acknowledges receipt of this original counterpart of this
Lease Supplement on this ___ day of __________, 2001.


                                      WELLS FARGO BANK NORTHWEST,
                                      NATIONAL ASSOCIATION
                                      not in its individual capacity, but solely
                                      as Owner Trustee

                                      By: /s/ Brett R. King
                                          -------------------------------------
                                           Name:  Brett R. King
                                           Title: Vice President



                                                                      SCHEDULE I
                                                             TO LEASE SUPPLEMENT

                       DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME



Manufacturer     Manufacturer's     FAA Registration     Manufacturer's
                   Model               Number             Serial No.

                                                
Embraer          EMB-145LR          N288SK               145461



                                    ENGINES



Manufacturer                     Manufacturer's               Manufacturer's
                                   Model                       Serial No.
                                                        
Allison Engine Company, Inc.     AE 3007A1P                   CAE 311866
                                                              CAE 311867


          Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.



NOTE TO EXHIBIT 10.41

The two additional Lease Supplements No. 1 are substantially identical
in all material respects to the filed Lease Supplement No. 1 except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N286SK                             June, 2001                        Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------
              N287SK                             June, 2001                        Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------

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

EX-10.42

                                                                   Exhibit 10.42


               WARRANTY ASSIGNMENT AGREEMENT AND CONSENT [N288SK]

     THIS WARRANTY ASSIGNMENT AGREEMENT AND CONSENT [N288SK] (this "Assignment")
is dated as of the 29th day of June, 2001, and is among Solitair Corp., a
Delaware corporation ("Seller"), as assignor, Wells Fargo Bank Northwest,
National Association, a United States national banking association ("WFB"), not
in its individual capacity but solely as Owner Trustee under a Trust Agreement
dated as of June 5, 2001 (the "Trust Agreement") between WFB and Mitsui & Co.
(U.S.A.), Inc. (the "Beneficiary") (in such capacity hereinafter referred to as
"Buyer"), as assignee, Chautauqua Airlines, Inc., a New York corporation, as
operator under the Lease Agreement as defined below ("Operator"), and
Rolls-Royce Corporation, a Delaware corporation ("Rolls-Royce"), as consenting
party.

                              W I T N E S S E T H:

     WHEREAS, Seller, Operator, and Rolls-Royce have entered into that certain
Rolls-Royce AE3007A Series Engine Warranty Agreement ("Warranty Agreement")
dated as of April 30, 1999 pursuant to which Rolls-Royce granted to Seller and
Operator certain Warranties as defined therein for the Engines and Supplies; and

     WHEREAS, Seller owns an Embraer model EMB-145LR aircraft, Embraer's serial
number 145443, United States Registration Number N288SK (the "Aircraft") with
two (2) installed Allison AE3007A1P engines bearing manufacturer's serial
numbers CAE311866 and CAE311867), manufactured by Allison Engine Company, Inc.,
a subsidiary of Rolls-Royce, including Supplies as defined in the Warranty
Agreement (the "Engines"); and

     WHEREAS, pursuant to that certain Aircraft Purchase Agreement [N288SK] (the
"Purchase Agreement") dated as of June 5, 2001 among Seller, Beneficiary, Buyer
and Lessee, Seller has agreed to sell, and Buyer has agreed to buy, the Aircraft
with the installed Engines; and

     WHEREAS, the sale of the Aircraft to Buyer pursuant to the Purchase
Agreement is conditioned upon Seller assigning to Buyer (as consented to by
Rolls-Royce) all of the assignable warranties granted by Rolls-Royce to Seller
pursuant to the Warranty Agreement with respect to the Engines; and

     WHEREAS, in accordance with the Warranty Agreement, Rolls-Royce must
consent to any assignment of the Warranties; and

     WHEREAS, pursuant to that certain Aircraft Lease Agreement [N288K] dated as
of June 5, 2001 ("Lease Agreement", capitalized terms not defined herein being
assigned the meanings given therein) between Buyer and Operator, Buyer shall
lease the Aircraft and assign the Assigned Warranties (as that term is defined
herein) to Operator subject to conditions; and

     WHEREAS, Seller and Buyer wish to accomplish such assignments pursuant to
the terms and conditions of this Assignment, and Rolls-Royce wishes to consent
to such assignments.

                                       1


     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Purchase Agreement and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer
hereby agree (and Rolls-Royce hereby consents) as follows:

     1. Seller hereby assigns and transfers to Buyer and Buyer hereby accepts
such assignments and transfer of, the Warranties and indemnitees under the
Warranty Agreement to the extent that they relate to the Engines described
above.

     2. Rolls-Royce hereby consents to the assignment of the Warranties by
Seller to Buyer under and pursuant to the terms and conditions of this Agreement
and further consents to the assignment of the Warranties by Buyer to Operator.
Notwithstanding anything in this Assignment to the contrary, so long as no Event
of Default shall have occurred and the Lease Agreement shall not have been
terminated under Section 17.02 thereof, Operator may, to the exclusion of Buyer,
exercise in Operator's name the right to obtain any recovery or benefit
resulting from the enforcement of any of the Warranties under the Warranty
Agreement in respect of the Engines and may exercise all other rights and powers
of the Buyer with respect to the Warranties, and may without the consent of
Buyer, enter into amendments or modifications thereof or terminate some or all
of the Warranties and replace them with power by the hour agreements (which
agreements will not be assigned to the Buyer), provided that Rolls-Royce hereby
confirms to the Buyer that in the event that an Event of Default shall have
occurred and the Lease Agreement shall have been terminated under Section 17.02
thereof, Buyer shall be entitled to exercise all rights and powers of the Buyer
with respect to the Warranties notwithstanding that the Operator has entered
into such power by the hour agreements, to the same extent as if none of such
Warranties had been terminated or replaced by such power by the hour agreements.
Rolls-Royce shall not be deemed to have knowledge of, and need not recognize the
occurrence or discontinuance of, any Event of Default under, or termination of,
the Lease Agreement, unless and until Rolls-Royce has received written notice
thereof from Buyer (including by telex or telecopy) addressed to Rolls-Royce
Corporation at 2001 South Tibbs Avenue S30, Indianapolis, Indiana 46241,
Attention: Vice President Commercial, and, in acting in accordance with the
terms and conditions of the Warranty Agreement and this Assignment, Rolls-Royce
may act with acquittance and conclusively rely upon any such notice. If
Rolls-Royce so receives notice from Buyer that an Event of Default shall have
occurred and the Lease Agreement shall have been terminated under Section 17.02
thereof, Rolls-Royce will have no further contractual obligation under the
Warranty Agreement or power by the hour agreements to the Operator, if
applicable, and will, to the extent not already provided to the Operator,
perform all the duties and obligations under the Warranty Agreement with respect
to the Warranties for the benefit of Buyer and, to the extent not already paid
to the Operator, will make any and all payments that it thereafter is required
to make in respect of the Warranties directly to Buyer at the account or
location as Buyer from time to time notifies Rolls-Royce in writing.

3.   Anything herein contained to the contrary notwithstanding:

     (a) Except with respect to the Engines specifically assigned hereunder,
Buyer and Beneficiary shall have no obligation or liability under the Warranty
Agreement by reason of, or arising out of, this Assignment, or be obligated to
perform any of Seller's duties or obligations

                                       2


under the Warranty Agreement, to make any payment, to present or file any
claim, or to take any other action to collect or enforce any claim for any
payment assigned hereunder;

     (b) Buyer confirms, for Rolls-Royce's benefit, that in exercising any
rights under the Warranty Agreement or in making any claim with respect to the
Engines or other goods and services delivered or to be delivered pursuant to the
Warranty Agreement, the terms and conditions of the Warranty Agreement shall
apply to and bind Buyer (and any assignee of Buyer) to the same extent as
Seller; and

     (c) Except as expressly stated herein, nothing contained herein shall
subject Rolls-Royce or Seller to any liability to which it, as the case may be,
would not otherwise be subject under the Warranty Agreement or modify in any
respect the rights of Rolls-Royce or Seller thereunder.

     (d) Rolls-Royce shall have no obligation or liability to Seller with
respect to the Engines specifically assigned hereunder after the date of closing
and the transfer of title.

5.   This Assignment (and the acknowledgement and consent to be signed by
Rolls-Royce) may be executed in separate counterparts, each of which when so
executed and delivered shall be an original and all such counterparts shall
together constitute one and the same instrument.

6.    This Assignment shall be governed by and construed in accordance with the
laws of the State of New York without reference to any choice of law rules
thereof that would result in a choice of law other than that of New York.

7.       WFB is entering into this Assignment solely as Owner Trustee under the
Trust Agreement and not in its individual capacity and neither WFB nor any
entity acting as successor Owner Trustee or additional Owner Trustee under the
Trust Agreement shall be personally liable for, or for any loss in respect of,
any of the statements, representations, warranties, agreements or obligations
stated to be those of the Buyer hereunder, as to which all interested parties
shall look solely to the Trust Estate, except to the extent expressly provided
otherwise in the other Operative Documents, PROVIDED HOWEVER, that nothing in
this paragraph 7 shall be construed to limit in scope or substance the liability
of WFB or any entity acting as successor Owner Trustee or additional Owner
Trustee under the Trust Agreement in its individual capacity for the
consequences of its own willful misconduct or gross negligence or (in receiving,
handling or remitting funds) its simple negligence, or the inaccuracy or breach
of its representations, warranties or covenants made in such capacity in any
other Operative Documents.

                            [SIGNATURE PAGE FOLLOWS]

                                       3


IN WITNESS WHEREOF, the parties hereto have caused this Warranty Assignment
Agreement and Consent [N288SK] to be duly executed as of the date and year first
above written.


                                  SOLITAIR CORP.

                                  BY: /s/ Douglas J. Lambert
                                      ------------------------------------------
                                  NAME: Douglas J. Lambert
                                        ----------------------------------------
                                  TITLE: Vice President
                                         ---------------------------------------

                                  WELLS FARGO BANK NORTHWEST,
                                  NATIONAL ASSOCIATION, not in its individual
                                  capacity but solely as Owner Trustee under the
                                  Trust Agreement

                                  By: /s/ Brett R. King
                                      ------------------------------------------
                                  Name: Brett R. King
                                        ----------------------------------------
                                  Title: Vice President
                                         ---------------------------------------

                                  CHAUTAUQUA AIRLINES, INC.

                                  By: /s/ Robert H. Cooper
                                      ------------------------------------------
                                  Name: Robert H. Cooper
                                        ----------------------------------------
                                  Title: Vice President
                                         ---------------------------------------

                                  Consented to by ROLLS-ROYCE CORPORATION

                                  By:
                                      ------------------------------------------
                                  Name: Peter Turner
                                        ----------------------------------------
                                  Title: Authorized Officer
                                         ---------------------------------------

                                       4


NOTE TO EXHIBIT 10.42

The two additional Warranty Assignment Agreements are substantially identical
in all material respects to the filed Warranty Assignment Agreement except as
follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N286SK                             June, 2001                        Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------
              N287SK                             June, 2001                        Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

EX-10.43

                                                               EXECUTION VERSION

                             TAX INDEMNITY AGREEMENT

     TAX INDEMNITY AGREEMENT dated as of June 5, 2001 (this "TAX INDEMNITY
AGREEMENT" or this "AGREEMENT"), between CHAUTAUQUA AIRLINES, INC. (the
"LESSEE") and MITSUI & CO. (U.S.A.), INC. (the "BENEFICIARY").

                                    RECITALS

     A. Concurrently with the execution and delivery of this Agreement, the
Beneficiary and the Owner Trustee are executing and delivering a Trust Agreement
[N288SK], dated as of June 5, 2001 (the "TRUST AGREEMENT"), pursuant to which
the Beneficiary has agreed to cause the Owner Trustee to acquire and to lease to
the Lessee the Aircraft; and

     B. It is a condition precedent to the obligation of the Beneficiary to
cause the Owner Trustee to purchase the Aircraft and to lease the Aircraft to
the Lessee pursuant to the Trust Agreement and Aircraft Lease Agreement [N288SK]
dated as of the date hereof (the "LEASE") that the Lessee execute and deliver to
the Beneficiary this Agreement, which provides, among other things, for certain
income tax indemnities from the Lessee to the Beneficiary and certain
reimbursements by the Beneficiary to he Lessee, based upon the Tax Assumptions;
and

     NOW, THEREFORE, as an inducement to the Beneficiary to enter into the Lease
and the Purchase Agreement and in consideration of the mutual covenants
contained herein and therein, Lessee and the Beneficiary hereby agree as
follows:

     Section 1. DEFINITIONS. (a) The term "BENEFICIARY" shall mean the
Beneficiary and, for any taxable year in which the Beneficiary joins in the
filing of a consolidated federal income tax return, shall include each member of
the affiliated group (within the meaning of Section 1504 of the Code (or any
successor provision thereto)) of which the Beneficiary is a member.

          (b) "BENEFICIARY'S COST" shall mean [*]

          (c) "GROSS--UP" shall mean the portion of any indemnity payment due
from the Lessee to the Beneficiary pursuant to Section 6 hereof that is
calculated to indemnify the Beneficiary for the taxation of the indemnity
payment or the portion of any reverse payment due from the Beneficiary to the
Lessee that is calculated to take into account the reduction in income taxes of
the Beneficiary resulting from such reverse payment.

          (d) "LESSEE PERSON" shall mean the Lessee, any Person controlled by
it, in control of it, or under common control with it, directly or indirectly,
any Person claiming by, through or under the Lessee, any sublessee or other user
or person in possession of the Aircraft (or any part thereof) during the Term,
any Affiliate of any of the foregoing (but excluding the Beneficiary or the
Owner Trustee or any Person claiming by, through or under the Beneficiary or the
Owner Trustee (but not so excluding any Person claiming directly or indirectly
through or under the Lease), unless any such Person is in possession of the
Aircraft or any part thereof pursuant to an exercise of remedies in connection
with an Event of Default under the Lease).

          (e) "TAX ATTRIBUTE PERIOD" shall mean the period beginning on the
Delivery Date and ending on March 31, 2009, PROVIDED that in the event the
depreciation period for the Aircraft is other than the period specified in Tax
Assumption 2(c)(i) as a direct result of a Lessee Act (as hereinafter defined),

- -------
* Confidential



which caused an indemnity to become payable hereunder by the Lessee to the
Beneficiary, such period shall end on the last day of the taxable year in which
a depreciation deduction for the Aircraft is allowed or allowable to Mitsui &
Co. (U.S.A.), Inc.

          (f) "PERMITTED PERCENTAGE" shall mean [*]

          (g) "REASONABLE BASIS" means the support required by American Bar
Association Formal Opinion 85-352 for a position which a lawyer may properly
advise a client to take on a tax return in accordance with that Opinion.

          (h) Capitalized terms used herein without definition shall have
meanings ascribed thereto in the Lease.

     In this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:

          (i) references within any documents to appendices, schedules,
paragraphs, sections, exhibits or annexes are references to appendices,
schedules, paragraphs, sections, exhibits or annexes in or to such document;

          (ii) headings, subheadings, and paragraph number descriptions and the
table of contents are solely for the convenience of reference and shall not
affect the meaning, construction or effect of any provision of this Agreement or
any other document;

          (iii) reference to any agreement means such agreement as amended,
modified or supplemented from time to time in accordance with the provisions
thereof;

          (iv) references to "including" shall mean including without limiting
the generality of any description preceding such term and the rule of EJUSDEM
GENERIS shall not be applicable to limit a general statement, followed by or
referable to an enumeration of specific matters, to matters similar to those
specifically mentioned;

          (v) where any matter requires the approval or consent of either party,
such approval or consent shall be deemed not to have been given unless given in
writing and where any matter is required to be acceptable to either party, the
same shall be deemed not to have been accepted unless such acceptance is
communicated in writing; and

          (vi) each of the parties hereto and its counsel have reviewed and
revised, or requested revisions to, this Agreement, and the usual rule of
construction that any ambiguities are to be resolved against the drafting party
shall be inapplicable in the construction and interpretation of this Agreement.

     Section 2. ASSUMPTIONS. The transactions described in the Lease have been
entered into on the assumptions (the "TAX ASSUMPTIONS") that for Federal income
tax purposes:

          (a) at all times during the Term, for federal income tax purposes the
Lease will constitute a "true lease", the Beneficiary will be treated as the
owner and lessor of the Aircraft and the Lessee will be treated as the lessee of
the Aircraft;

          (b) the Beneficiary's taxable year is the year ending March 31, and
the Beneficiary will include all items of income, gain, loss, deduction, or
credit with respect to the transactions contemplated by the Lease using an
accrual method of accounting;

                                        2

- -------
* Confidential



          (c) the Beneficiary, as the owner of the Aircraft for Federal income
tax purposes, will be entitled to the following Federal income tax benefits:

               (i) cost recovery deductions for 100% of the Beneficiary's Cost
     of the Aircraft pursuant to Section 168(b) of the Code, commencing in the
     Beneficiary's taxable year in which the Delivery Date occurs, computed (i)
     on the basis that the Aircraft is "7-year property" (within the meaning of
     Section 168(e) of the Code), (ii) by using the 200% declining balance
     method over a 7 year recovery period, switching to the straight-line method
     for the first taxable year of the Beneficiary during the term for which
     such method yields a larger allowance, (iii) assuming salvage value is zero
     and (iv) using a half-year convention, equal to the following percentages
     of the Beneficiary's Cost for each of the following years (the "MACRS
     DEDUCTIONS"):



         TAXABLE YEAR ENDING MARCH 31                        PERCENT
                                                 
                 2002                                         14.29%
                 2003                                         24.49%
                 2004                                         17.49%
                 2005                                         12.49%
                 2006                                          8.93%
                 2007                                          8.92%
                 2008                                          8.93%
                 2009                                          4.46%;


               (ii) for each taxable year of the Beneficiary during the Tax
     Attribute Period, not more than the Permitted Percentage of any item of
     income, deduction or loss with respect to the transactions contemplated by
     the Lease will be treated for Federal income tax purposes as derived from,
     or allocable to, sources outside the United States; and

               (iii) the Beneficiary will be a domestic corporation subject to a
     Federal and state income tax rate of (after giving effect to the
     deductibility of such state income taxes for Federal income tax purposes)
     40.00% (the "ASSUMED TAX RATE") in 2001 and in each year thereafter, and
     the Beneficiary will have sufficient taxable income to be taxed at the
     Assumed Tax Rate after full utilization of the MACRS Deductions;

          (d) the Beneficiary will not be subject to the minimum tax or the
     alternative minimum tax under Section 55 of the Code;

          (e) during the Tax Attribute Period, neither the Aircraft nor any part
     thereof will be treated as "used predominantly outside the United States"
     within the meaning of Section 168(g) of the Code; and

          (f) the Beneficiary will not be required to include in its gross
income for Federal, State or local income tax purposes any amount with respect
to the transactions contemplated by the Operative Documents other than (i) Basic
Rent when and as such Basic Rent is stated to accrue in accordance with

                                        3


the terms of the Lease, (ii) any payment of Stipulated Loss Value to the extent
that such amount exceeds the Beneficiary's adjusted basis in the Airframe to
which such payment relates, at the time such payment is required to be made
under the Operative Documents, (iii) any amount payable to the Beneficiary or
Lessor on overdue payments and specifically identified as interest at the time
payable pursuant to the Operative Documents, (iv) any payment made to the
Beneficiary or the Lessor if and to the extent that the amount of the payment is
determined on an "after-tax" basis and (v) any other amounts offset by
deductions of the same character and in the same taxable year (other than the
MACRS Deductions) that would not have been available but for the event or
circumstance giving rise to the inclusion in income (the failure of any of the
assumptions in this subsection (f) to be correct being referred to herein as an
"INCOME INCLUSION").

     Section 3. RECORDS AND STATEMENTS. The Lessee shall, at its expense,
maintain such information or records relating to the Aircraft as are regularly
maintained by the Lessee or as may be required by law to be maintained
(including, but not limited to, flight logs). The Lessee shall, at the Lessee's
expense, provide or cause to be provided any such records or information, and
such other information customarily maintained by comparable airlines, as the
Beneficiary may reasonably request from the Lessee to enable the Beneficiary to
fulfill its tax filing, tax audit, and tax litigation obligations, including,
but not limited to, its Federal income tax filing obligations.

     Section 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE. The Lessee
represents, warrants and covenants that:

          (a) if at the time of transfer of title to the Owner Trustee on the
Delivery Date the Aircraft were instead acquired by the Lessee, the Aircraft
would qualify on the Deliver Date as "7-year property" within the meaning of
Section 168(e)(1) of the Code in the hands of the Lessee;

          (b) neither Lessee nor any other Lessee Person thereof has claimed or
will claim the MACRS Deductions, or claim to be the owner of the Aircraft in
respect of any period after the Delivery Date and during the Term, or has taken
or will take any action or position (not required by the Lease or other
Operative Documents) inconsistent with the status of the Beneficiary during the
Term as the sole owner of the Aircraft for Federal, state, local and foreign tax
purposes, in each case, with respect to any period after the Delivery Date and
during the Term;

          (c) assuming that neither Beneficiary, Owner Trustee nor any Affiliate
of Beneficiary or Owner Trustee is a "tax-exempt entity" within the meaning of
Section 168(h)(2) of the Code during the Tax Attribute Period, neither the
Aircraft nor any part thereof will be "tax-exempt use property" within the
meaning of Section 168(h) of the Code; and

          (d) during the Tax Attribute Period, neither the Lessee nor any Lessee
Person will take any action which would cause (x) the Aircraft to be used
"predominantly outside the United States" within the meaning of Section 168(g)
of the Code or (y) the registration of the Aircraft in any jurisdiction outside
the United States.

     Section 5. FEDERAL INCOME TAX INDEMNITY. (a) If for any taxable year, as a
direct result of

               (i) any act on the part of the Lessee or any Lessee Person (other
     than the execution and delivery of the Lease or an act required under the
     Lease or other Operative Documents or expressly permitted under the Lease
     or other Operative Documents or requested by the Beneficiary in writing);
     (ii) Lessee failing to take any action required to be taken under the
     Operative Documents other than a failure requested in writing by the
     Beneficiary; (iii) the inaccuracy or breach of any representation,
     agreement, covenant or warranty of the Lessee

                                        4


     contained herein; (iv) the Lessee failing to take such other reasonable
     action as is requested in writing from time to time by the Beneficiary
     (unless such failure is due to reasonable cause); or (v) any replacement of
     Aircraft or any Engine or any improvements, alterations, modifications or
     additions to the Aircraft (or any part thereof) or the temporary or
     permanent removal from service of the Aircraft (each such act, failure,
     omission, inaccuracy, breach or event, a "LESSEE ACT"),

the Beneficiary for federal income tax purposes shall suffer a loss,
disallowance or deferral of, shall suffer a delay in claiming, shall not have
the right to claim (based on a written opinion of independent tax counsel
selected by the Beneficiary and reasonably acceptable to the Lessee that there
is not a Reasonable Basis for claiming the item in question), shall be required
to recapture (a "RECAPTURE"), all or any portion of the MACRS Deductions (a
"MACRS LOSS") or Beneficiary shall be required to include in its gross income
for Federal income tax purposes any amount which constitutes an Income Inclusion
and which is attributable to (x) any improvements, additions, modifications or
alterations to the Aircraft, (y) any replacement of the Aircraft, Airframe or
Engines (except to the extent such replacement constitutes a Recapture) or (z)
any prepayments of Basic Rent or other scheduled payments by the Lessee (an
"INCOME INCLUSION LOSS") (either a MACRS Loss or an Income Inclusion Loss being
hereinafter referred to as a "TAX LOSS"), then unless (x) the Lessee elects with
respect to such Tax Loss to make the payment or payments provided for in
paragraph (c) of this Section 5 or (y) the Tax Loss results from a Sublease
during the Tax Attribute Period with a Permitted Sublessee domiciled in a
country other than the United States (in which case the provisions of paragraph
(c) of this Section 5 shall apply), the Lessee, after written notice from the
Beneficiary of such Tax Loss, shall pay to the Beneficiary as an indemnity, from
time to time as required, an amount which, after deduction of the amount of all
additional Federal, state, local, and foreign taxes actually required to be paid
by the Beneficiary in respect of the receipt or accrual of such amount, shall be
equal to the increase in Federal and state income taxes payable by (or not
refundable to) the Beneficiary as a result of such Tax Loss, plus the amount of
any actual interest, penalties and additions to tax payable by the Beneficiary
with respect to such Tax Loss (taking into account the deductibility of interest
or other additional amounts for Federal income tax purposes to the extent such
amounts are deductible on a concurrent basis). Further, for purposes of
determining the amounts of the increase in income taxes as a result of a MACRS
Loss, the applicable tax rate shall be the Assumed Tax Rate and shall be
calculated on a hypothetical basis (I.E., assuming that the Beneficiary pays
taxes and can fully utilize the MACRS Deductions), and, for purposes of
determining the Tax Loss from an Income Inclusion Loss or the amount of any
"Gross-up," the applicable tax rate shall be the highest marginal income tax
rate of the Beneficiary for the taxable year in which such Income Inclusion Loss
or Gross-up is accrued by the Beneficiary. Each payment by the Lessee pursuant
to this Section 5(a) shall be made within 30 days after receipt of a written
demand certifying that there has been a Tax Loss, describing in reasonable
detail the Tax Loss in question, the amount of additional income tax, interest,
penalties and additions to tax and the calculation of the payment due in respect
thereof and describing the event or condition that Beneficiary claims gives rise
to an obligation by the Lessee to indemnify hereunder (but in no event earlier
than one (1) Business Day prior to the date the indemnified tax liability is, or
would be, due); PROVIDED THAT, if a contest of the Tax Loss is being conducted
pursuant to Section 7 hereof, payment (other than payments required under
Section 7), shall not be required from the Lessee until 30 days after the Final
Determination (as hereinafter defined) of such contest.

          (b) If, as the result of a Tax Loss for which an indemnity has been
paid pursuant to Section (a), the amount of Federal income taxes payable by the
Beneficiary for any taxable year shall be less than the amount of such taxes
which would have been payable by the Beneficiary had such Tax Loss not occurred
(or as the result thereof the Beneficiary shall receive a refund or credit of
Federal income taxes, which shall be greater than the amount of such refund or
credit, if any, which the Beneficiary would have received had such Tax Loss not
occurred), then the Beneficiary shall pay to the Lessee the amount of such
increased reduction in taxes (or refund or credit, including any actual interest
(net of any taxes payable with respect to such interest) received or credited
thereon), plus any net additional Federal,

                                        5


state, local or foreign tax benefits actually realized by the Beneficiary as the
result of any payment made pursuant to this sentence (such reduction in or
increased refund or credit of income taxes to be determined on a hypothetical
basis, I.E., assuming the Beneficiary can utilize any additional tax benefits
resulting from the Tax Loss at the Assumed Tax Rate and a hypothetical basis);
PROVIDED, HOWEVER, that the "Gross-up" or the tax benefit resulting from an
Income Inclusion Loss shall be determined on the basis of the highest marginal
income tax rate of the Beneficiary Each payment made by the Beneficiary to the
Lessee pursuant to this Section 5(b) shall be made within 30 days after the
Beneficiary files a tax return (including estimated returns) or received or was
credited with a refund or adjustment from the Internal Revenue Service which
reflects such reduction in federal income tax. The Beneficiary shall act in good
faith in claiming and pursuing refunds and Tax savings which would result in
payments to the Lessee pursuant to this Section 5.

          (c) (i) If (x) the Beneficiary suffers a Tax Loss and the Lessee
elects to make the payment or payments provided for in this paragraph (c), after
written notice to the Lessee by the Beneficiary that a Tax Loss has occurred and
at the election of the Lessee, or (y) a Tax Loss is reasonably expected to
result from a Sublease entered into during the Tax Attribute Period with a
Permitted Sublessee domiciled in a country other than the United States (a
"Foreign Sublease"), the Lessee shall pay either (A) a lump sum amount which,
after deducting income taxes required to be paid by the Beneficiary as a result
of the Beneficiary's receipt or accrual of such amount, will cause the yield
portion of the Beneficiary's Net Economic Return to be maintained (after taking
into account any present or future tax benefits reasonably expected to be
available to the Beneficiary as a result of such Tax Loss or Foreign Sublease)
or (B) except in the case of a Foreign Sublease, if no Event of Default has
occurred and is continuing, a series of equal payments which, when added to
Basic Rent payable under the Lease, and which after deducting income taxes
required to be paid by the Beneficiary as a result of the receipt or accrual
thereof (computed in accordance with Section 7 hereof), will cause the yield
portion of the Beneficiary's Net Economic Return to be maintained, in either
case together with any interest, penalties and additions to tax payable in
respect of such Tax Loss. The computation of the indemnity amount or payment
amounts under this paragraph (c) shall be made by the Beneficiary utilizing the
methodology and assumptions, including the Tax Assumptions, utilized by the
Beneficiary in determining its Net Economic Return, except as such assumptions
shall be varied to take into account such Tax Loss or Foreign Sublease or any
previous Tax Loss or Foreign Sublease for which an indemnity was paid under this
Agreement. Further, for purposes of determining the amounts of the increase and
reduction in income taxes as a result of a Tax Loss or Foreign Sublease, the
applicable tax rate shall be the Assumed Tax Rate provided, that for purposes of
computing the amount of any Income Inclusion Loss or the amount of any
"Gross-up", the Beneficiary shall be assumed to be subject to the highest
marginal income tax rate applicable to the Beneficiary for the relevant period
or periods affected by such computation (and, to the extent such computation
relates to a future period, the highest marginal income tax rate applicable to
the Beneficiary in effect or scheduled to be in effect as of the date such
indemnity becomes payable hereunder). Except in the case of a Foreign Sublease,
indemnity payments under this paragraph shall commence (or if the Lessee shall
have elected to pay the indemnity in a lump sum, such sum shall be payable) on
the later of (x) in the case of a contest pursuant to Section 7, 30 days after
the Final Determination of such contest, or (y) the Rent Payment Date next
succeeding the date on which the Beneficiary pays to the Internal Revenue
Service an amount of any tax increase resulting from a Tax Loss (or suffers a
reduction in the amount of any refund or credit which the Beneficiary would have
been entitled to receive but for such Tax Loss), provided, however, that, for
purposes of this clause (y), if an indemnity obligation arises after the last
payment of Basic Rent under the Lease shall have been made, then the total
amount of such indemnity shall be payable in a lump sum within 30 days of the
Beneficiary's request therefor; PROVIDED, FURTHER, that any amount payable to
the Beneficiary shall not be due prior to 30 days after receipt by the Lessee of
a written demand therefor accompanied by a written statement describing in
reasonable detail such Tax Loss and the computation of the amount so payable. If
a Specified Default shall occur and be continuing, or if the Lease shall
terminate for any other reason, and

                                        6


such Specified Default occurs after the Lessee shall have commenced the payment
of an indemnity pursuant to clause (B) of Section 5(c) hereof, then the Lessee
shall pay to the Beneficiary a lump sum amount equal to all such payments then
remaining unpaid, discounted to the date of the Specified Default so as to
maintain the yield portion of the Beneficiary's Net Economic Return. In the case
of a Foreign Sublease, the indemnity shall be calculated only as a lump sum
amount in accordance with clause (A) of this Section 5(c)(i), and such amount
shall be payable as a lump sum immediately prior to the commencement of such
Foreign Sublease. If the Lessee notifies the Beneficiary in writing that
commencement of the contemplated Foreign Sublease will not occur, the
Beneficiary shall promptly return to the Lessee any indemnity payment made
pursuant to the immediately preceding sentence with respect to such contemplated
Foreign Sublease.

          (ii) If, as the result of a Tax Loss or a Foreign Sublease or a change
of facts that gave rise to a Tax Loss or a Foreign Sublease for which an
indemnity was paid pursuant to Section 5(c)(i), the amount of federal income
taxes payable by the Beneficiary for any taxable year shall be less than the
amount of such taxes which would have been payable by the Beneficiary had such
Tax Loss or Foreign Sublease or such change not occurred (or as the result
thereof the Beneficiary shall receive a refund of such income taxes, which shall
be greater than the amount of such refund, if any, which the Beneficiary would
have received had such Tax Loss, Foreign Sublease or change not occurred (other
than savings already taken into account in determining the indemnity pursuant to
Section 5(c)(i)), then provided that no Specified Default has occurred and is
continuing (if a Specified Default shall have occurred and be continuing the
Beneficiary shall hold such amounts described in this Section 5(c)(ii) as
provided in Section 4.09 of the Lease until any such Specified Default shall no
longer be continuing at which time the Beneficiary shall pay such amounts to the
Lessee) the Beneficiary shall pay to the Lessee the amount of any actual
resulting reduction in taxes (or increased refund, including any actual interest
(net of any taxes payable with respect to such refund or interest) received or
credited thereon), plus any net additional federal, state, local or foreign tax
benefits or savings actually realized by the Beneficiary as the result of any
payment made pursuant to this sentence (such actual reduction in or increased
refund of income taxes to be determined, with respect to a Tax Loss, Foreign
Sublease or change, on a hypothetical basis, i.e., assuming the Beneficiary can
utilize any additional tax benefits resulting from the Tax Loss, Foreign
Sublease or change at the Assumed Tax Rate, provided, however, that the amount
payable by the Beneficiary pursuant to this sentence shall not exceed the sum of
the amounts previously paid by the Lessee to the Beneficiary pursuant to
Section 5(c)(i), less the aggregate amount of all prior payments by the
Beneficiary to the Lessee under this sentence, with any excess amount otherwise
payable being carried forward and available to reduce pro tanto any subsequent
obligation of Lessee to Beneficiary pursuant to this Section 5. Subject to the
provisions above, each payment made by the Beneficiary to the Lessee pursuant to
this Section 5(c)(ii) shall be made within 30 days after the Beneficiary files a
tax return or receives a refund or adjustment from the Internal Revenue Service
which reflects such reduction in federal income tax, and the Beneficiary shall
act in good faith to properly and timely claim on each such tax return or
returns any tax benefit that Beneficiary determines in its sole discretion is
reasonably available that results in such reduction if a Reasonable Basis exists
to claim such benefit. The Beneficiary shall act in good faith in claiming and
pursuing refunds and Tax savings which would result in payments to the Lessee
pursuant to this Section 5.

          (d) Any taxes that are imposed on the Beneficiary as a result of the
subsequent disallowance of all or any portion of a reduction (or refund or
credit) of the Beneficiary's tax liability, which reduction (or refund or
credit) was taken into account under Section 5(b), shall be treated as a Tax
Loss subject to indemnification under this Agreement without regard to Section 6
hereof (except Section 6(e)). For purposes of calculating indemnity obligations
pursuant to Sections 5(a) or 5(c), and amounts due to Lessee pursuant to
Section 5(b) or 5(c), it shall be assumed that the Beneficiary suffers a Tax
Loss or is entitled to a benefits for state and local income tax purposes if and
only if the Beneficiary suffers a corresponding Tax Loss or realizes a
corresponding benefit for federal income tax purposes.

                                        7


          (e) (i) If, as a result of the use or operation or location of the
Aircraft outside the United States by any Lessee Person, the Tax Assumption set
forth in Section 2(c)(ii) hereof shall be inaccurate during any taxable year of
the Beneficiary included in whole or in part within the Tax Attribute Period (an
"EXCESS FOREIGN ALLOCATION"), and if as a result thereof the amount of the
foreign tax credits available for utilization by the Beneficiary for any taxable
year shall be less than the amount of the foreign tax credits that would have
been available for utilization by the Beneficiary if such Tax Assumption had
been accurate (such event being referred to herein as a "FOREIGN TAX CREDIT
LOSS"), then the Lessee shall pay to the Beneficiary as an indemnity an amount
which, after deduction of the amount of all additional federal, state, local and
foreign taxes actually required to be paid by the Beneficiary in respect of the
receipt or accrual of such amount, is equal to the actual increase in the
Federal income taxes payable by (or not refundable or creditable to) the
Beneficiary for such taxable year as a result of such Foreign Tax Credit Loss,
plus the amount of any interest, penalties and additions to tax payable by the
Beneficiary as a result of such Foreign Tax Credit Loss. The amounts of any
increase in Federal income taxes payable by (or not refundable or creditable to)
the Beneficiary as a result of a Foreign Tax Credit Loss shall be computed on
the assumption that any reduced amount of foreign tax credits of the Beneficiary
is attributable to an Excess Foreign Allocation and foreign source losses
arising from other equipment leasing transactions that provided the Beneficiary
with indemnification for the loss of foreign tax credits, on a pro rata basis,
prior to being attributable to any other foreign source deductions or losses of
the Beneficiary;

          (ii) If, as a result of (A) an Excess Foreign Allocation or (B) the
usage or location of the Aircraft outside the United States so that any item of
income or gain with respect to the transactions contemplated by the Lease during
any taxable year is treated as derived from sources outside the United States,
the amount of the foreign tax credits that the Beneficiary utilizes against its
tax liability for a taxable year exceeds the amount of such foreign tax credits
to which the Beneficiary would have otherwise been entitled, and provided that
no Specified Default under the Lease shall have occurred and be continuing (in
which event such amounts shall become payable upon the Lessee's curing such
Specified Default, then the Beneficiary shall pay to the Lessee the amount of
any actual reduction in its Federal income tax liability (or actual increase in
a refund or credit of Federal income taxes owning to the Beneficiary)), plus any
net additional Federal, state, local and foreign income tax benefits actually
realized by the Beneficiary as the result of such payment; PROVIDED, HOWEVER,
that the sum of the amounts payable by the Beneficiary pursuant to this sentence
before taking into account the "Gross-up" shall not exceed before taking into
account the "Gross-up" the sum of the amounts previously paid by the Lessee to
the Beneficiary pursuant to this Section 5(d) to the extent not previously taken
into account under this provision, and PROVIDED, FURTHER, HOWEVER, that no
payment shall be required with respect to clause (B) above unless and until the
usage or location outside the United States has resulted in an aggregate amount
of increased foreign tax credits being available to the Beneficiary (calculated
for this purpose without regard to the otherwise applicable requirement that
foreign source gain or income exceed the "Permitted Percentage" of 10%) equal to
the aggregate amount of unindemnified tax increases (reduced by any utilization
of foreign tax credit carryovers or carryforwards that would, under principles
applicable to clause (A) above, have resulted in an obligation to make a payment
to the Lessee if the Permitted Percentage during the year in which the
unindemnifed tax increase occurred were zero) suffered by the Beneficiary
resulting from the application of the Permitted Percentages during the Tax
Attribute Period. In addition, for purposes of determining the utilization of
foreign tax credits as a carryforward or carryback pursuant to clause (A) above,
such carryforward or carryback utilization shall be attributable to the Lessee
after utilization of all other carryforwards and carrybacks except that such
carryforward and carryback utilization shall be attributed to the Lessee on a
pro rata basis with the utilization of carryforwards and carrybacks relating to
other leasing transactions in which the Beneficiary was entitled to
indemnification with respect to a loss or deferral of foreign tax credits.

                                        8


          Once a foreign tax, the loss of the credit in respect of which
     Beneficiary was indemnified and paid by Lessee in accordance with
     Section 5(e) hereof, is deemed to be utilized pursuant to the ordering
     rules set forth above, it shall not subsequently be recharacterized as not
     having been utilized as a result of a foreign tax liability arising in a
     subsequent year;

               (iii) Each payment by the Lessee pursuant to this Section 5(e)
     shall be made within 30 days after receipt of a written demand therefor
     accompanied by a written statement describing in reasonable detail the
     Foreign Tax Credit Loss in question, the amount of additional Federal
     income tax, interest, penalties and additions to tax and the calculation of
     the payment due in request thereof (but in no event earlier than one (1)
     Business Day prior to the date such additional Federal income taxes are
     due); PROVIDED THAT, if a contest of the Foreign Tax Credit Loss is being
     conducted pursuant to Section 7 hereof, payment (other than payments
     required under Section 7) shall not be required from the Lessee until 30
     days after the Final Determination of such contest. Each payment by the
     Beneficiary to the Lessee pursuant to this Section 5(e) in respect of an
     actual increase in available foreign tax credits shall be made within 30
     days after the Beneficiary files a tax return (including estimated returns)
     (or receives a refund, credit or adjustment) which reflects the utilization
     of such increased foreign tax credit.

          (f) Upon request of the Lessee, the accuracy of the Beneficiary's
calculation of the amount or amounts payable to either the Beneficiary or the
Lessee pursuant to this Section 6 shall be promptly verified by the independent
accounting firm selected by the Beneficiary (other than the Beneficiary's
regular auditors unless such auditors comprise one of the "Big 5" accounting
firms which will be deemed acceptable to Lessee) and reasonably acceptable to
Lessee and, in order to enable such accountants to verify such adjustments, the
Beneficiary shall provide to such accountants (for their own confidential use
and not be disclosed to the Lessee or any other person) all information
reasonably necessary for such verification, including any computer analyses used
by the Beneficiary to calculate such amount or amounts. The cost of such
verification shall be borne by the Lessee unless it is the determination of such
verification that the actual amount payable deviates, in a manner favorable to
the Lessee, by more than [*] from the amount originally determined by the
Beneficiary in which case such cost shall be borne by the Beneficiary.

     Section 6.  EXCLUDED EVENTS. The Beneficiary shall not be entitled to any
payment from the Lessee under Section 5 hereof in respect of any Tax Loss or
Foreign Tax Credit Loss to the extent such Tax Loss or Foreign Tax Credit Loss
occurs as a direct result of one or more of the following events:

          (a) any sale, assignment, transfer or other disposition (including any
deemed disposition under Section 338 of the Code or any similar provision) by
the Beneficiary or the Owner Trustee of the Aircraft, any Engine, any Part or
any interest in any thereof (including any deemed disposition under Section 338
of the Code or any similar provision) or the Lease, any other Operative
Documents, the Trust Estate or the Beneficiary or the Owner Trustee unless such
sale, assignment, transfer or other disposition occurs in connection with the
exercise of remedies in connection with an Event of Default under the Lease that
has occurred and is continuing, or any involuntary sale, assignment, transfer or
disposition (including any deemed disposition under Section 338 of the Code or
any similar provision) of any such interest resulting from the bankruptcy or
insolvency of, or proceedings for the relief of debtors, or foreclosure
proceedings, against the Beneficiary or Lessor unless, in each case, such
involuntary sale, assignment, transfer, disposition (including any deemed
disposition under Section 338 of the Code or any similar provision) bankruptcy
or insolvency or foreclosure results from such Event of Default;

          (b) the failure of the Beneficiary properly and in a timely manner to
claim the MACRS Deductions or the inclusion by the Beneficiary of any Recapture
in the Beneficiary's gross income as reported on its Federal income tax return
(including any amended return) or other tax filing or document,

                                        9

- -------
* Confidential



or the taking of a position by the Beneficiary on a Federal income tax return
(or amended return) that would result in a Foreign Tax Credit Loss or an Income
Inclusion Loss, unless, in such case, the Beneficiary shall have received a
written opinion of independent tax counsel selected by the Beneficiary and
reasonably satisfactory to Lessee that no Reasonable Basis exists for making
such claim or failing to so include in gross income;

          (c) except in the case of a Tax Loss resulting from the replacement of
an Aircraft, Airframe or Engine, any amendment or addition to, or change in, the
Code or Income Tax Regulations (or any interpretation of either thereof), which
is enacted or adopted after the Delivery Date, PROVIDED that a change in Federal
income tax rates shall be taken into account in determining the indemnity
amounts payable to the extent specified in Section 5 above;

          (d) any failure of the Beneficiary to take in a timely manner all
actions in contesting a claim if the Beneficiary was required to take such
actions pursuant to Section 7 hereof and such failure has a material adverse
impact upon the Lessee's contest rights under Section 7 hereof;

          (e) the willful misconduct or gross negligence of the Beneficiary,
Owner Trustee or any Affiliate of either thereof;

          (f) the status for Federal income tax purposes of the Beneficiary, the
Owner Trustee or any Affiliate of either thereof as a "tax-exempt entity" within
the meaning of Section 168(h) of the Code or as a Person that is not a "United
States person" within the meaning of Section 7701(a)(30) of the Code;

          (g) the failure of the Beneficiary to have sufficient taxable income
or tax liability for Federal income tax purposes to benefit from the Federal
income tax benefits described in Section 2(c);

          (h) any Loss to the extent incurred or imposed in respect of or
relating to any period after the later of (i) the expiration or earlier
termination of the Lease in accordance with the terms thereof or (ii) delivery
of possession of the Aircraft to the Beneficiary (or any designee of the
Beneficiary);


          (i) the failure of the Trust created by the Trust Agreement to be
treated as a grantor trust under Section 671 ET SEQ. of the Code;

          (j) the application of Section 168(d)(3) of the Code or Regulations
thereunder;

          (k) the failure of the Lease to be treated as a "true lease" for
Federal income tax purposes or the failure of the Beneficiary to be treated as
the owner of the Aircraft for Federal income tax purposes, unless in either
case, as a result of a breach of the representations in Section 4(b);

          (l) the treatment of the Permitted Percentage (or less than the
Permitted Percentage) of any item of income, deduction, loss or credit as having
been derived from, or allocable to income derived from, sources outside the
United States;

          (m) the Beneficiary having a tax year of less than 12 months;

          (n) the application of any of Sections 55, 168(b)(2)(C), 168(b)(3)(D),
168(f)(1), 168(g)(7), 465, 467, 469 of the Code or Regulations thereunder;

          (o) the failure of the Aircraft to be registered with the FAA as a
result of the failure of the Beneficiary or Owner Trustee to be a Citizen of the
United States;

                                       10


          (p) the Beneficiary having a basis in the Aircraft on the Delivery
Date of less than the Beneficiary's Cost;

          (q) an event with respect to which Lessee is required to pay
Stipulated Loss Value (or an amount calculated with reference to Stipulated Loss
Value);

          (r) any amendment or modification to any Operative Document without
the written consent of Lessee;

          (s) the exercise of a Purchase Option by the Lessee or the sale of the
Aircraft to the Lessee pursuant to the exercise of a Purchase Option;

          (t) a change in the Beneficiary's tax year;

          (u) any penalties, additions to tax or interest assessed against
Beneficiary as a result of any return not being filed on a timely basis unless
such failure is directly a result of a Lessee Act; or

          (v) the inclusion in income by the Beneficiary upon or following
termination of Lease of amounts attributable to improvements or additions to the
Aircraft.

     Section 7.  CONTEST PROVISIONS AND PROCEEDINGS. (a) The Beneficiary shall
promptly (but in no event less than 20 days prior to the last day for submitting
a protest to the Internal Revenue Service) notify the Lessee in writing of
receipt from the Internal Revenue Service of a written proposed or final revenue
agent's report, a 30-day letter or a notice of deficiency (as described in
Section 6212 of the Code), in which an adjustment is proposed to the Federal
income taxes of the Beneficiary for which the Lessee would be required to
indemnify the Beneficiary pursuant to this agreement if such adjustment were
sustained. Such notice shall specify the name of Beneficiary's counsel (if the
existence of a Beneficiary's counsel is at that point necessary under this
Agreement), the terms of the proposed adjustment, and any action taken or
proposed to be taken by the Internal Revenue Service with respect to the
proposed adjustment. After the giving of such notice, the Beneficiary shall for
at least 20 days after the giving of such notice forbear (if such forbearance is
permitted by law) payment of any tax (including interest, penalties and
additions to tax thereon) asserted to be payable as a result of such proposed
adjustment. If the Lessee within 20 days of receipt of notice from the
Beneficiary) requests, in writing, the Beneficiary to do so, the Beneficiary
shall contest the proposed adjustment, shall consider in good faith any
suggestion made by the Lessee and its counsel as to the method of pursuing such
contest, and, provided the Lessee is complying with its obligations under this
Section 7, shall not, without the consent of the Lessee, except as provided in
the last sentence of this Section 7(a), settle such proposed adjustment;
PROVIDED, HOWEVER, that the Beneficiary shall not be obligated to contest such
adjustment unless (i) independent tax counsel selected by the Beneficiary and
reasonably acceptable to Lessee ("TAX COUNSEL") delivers an opinion that there
is a Reasonable Basis for contesting the matter in question, (ii) the amount of
the proposed adjustment is in excess of $50,000, (iii) no Event of Default
described in clauses (a), (b), (g), (h), (i), or (j) of Section 17.01 of the
Lease shall have occurred and be continuing, and (iv) the Beneficiary has
determined, in good faith, that the contest shall not result in a material risk
of the loss or forfeiture of the Aircraft (unless the Lessee has provided to the
Beneficiary a bond or other sufficient protection against such risk of loss or
forfeiture reasonably satisfactory to the Beneficiary) or the imposition of
criminal penalties. Any clear and unambiguous conclusions or findings of fact or
law contained in the Final Determination (as defined in Section 7(c)) of a
judicial proceeding conducted pursuant to this Section 7 shall be binding on the
Lessee and the Beneficiary for purposes of determining the existence or extent
of the Lessee's indemnity obligation pursuant to this Agreement. The Beneficiary
shall afford Lessee and its counsel reasonable opportunities to consult the
Beneficiary and shall keep

                                       11


Lessee reasonably informed of the nature of all actions taken to contest such
proposed adjustment, including (x) whether any action to contest such proposed
adjustment will initially be by way of judicial or administrative proceedings,
or both, (y) whether any such proposed adjustment will be contested by resisting
payment thereof or by paying the same and seeking a refund thereof and (z) if
the Beneficiary shall undertake judicial action with respect to such proposed
adjustment, the court or other judicial body before which such action will be
commenced; but in all cases the Beneficiary shall have ultimate discretion to
determine the nature (and forum) of, and shall control the prosecution of, all
such action. The Beneficiary shall upon the conclusion of any administrative
proceedings, promptly notify the Lessee of the outcome of such proceedings, and
shall notify the Lessee at least 60 days in advance of the last date for filing
a petition in the Tax Court. In the event of an unfavorable resolution of
administrative proceedings, the Beneficiary shall, if requested by the Lessee in
a timely manner, (x) contest any proposed adjustment beyond the level of
administrative proceedings, (y) consider in good faith any advice offered by the
Lessee's counsel concerning the court of competent jurisdiction in which the
adjustment is most likely to be favorably resolved, and (z) keep the Lessee
reasonably informed as to the progress of any litigation and, if requested by
the Lessee, shall consult with the Lessee's counsel and consider in good faith
any recommendations by the Lessee's counsel concerning the conduct of such
proceedings, and shall permit Lessee's counsel to review and comment in advance
on all submissions to the extent relating to the Loss PROVIDED that the final
form and substance of such submissions shall be determined by Tax Counsel. The
Beneficiary shall take such reasonable action during the course of such
proceedings as the Tax Counsel deems advisable after consultation with the
Lessee's counsel to preserve as a basis for appeal any legal issue that the
Lessee or the Lessee's counsel has identified in writing. The Beneficiary shall
be required to appeal any adverse judicial determination only if (A) an appeal
is timely requested in writing by the Lessee, and (B) the Beneficiary is
furnished with an opinion of Tax Counsel selected by the Beneficiary and
reasonably acceptable to the Lessee that there is a substantial basis that
Beneficiary will prevail on such appeal; PROVIDED, HOWEVER, that in no event
shall the Beneficiary be required to appeal any adverse decision in the U.S.
Supreme Court. At any time, whether before or after commencing to take the
actions set forth in this Section 7, the Beneficiary may decline to contest or
appeal all or any portion of a proposed adjustment, or may compromise or settle
any such proposed adjustment, by notifying the Lessee in writing that the Lessee
is relieved of its obligation to indemnify the Beneficiary with respect to such
adjustment or such portion, as the case may be; PROVIDED, HOWEVER, that (x) the
Beneficiary shall promptly notify the Lessee of the Beneficiary's intent to
decline to contest or appeal all or any portion of proposed adjustment, or to
compromise or settle all or any portion of a proposed adjustment and (y) the
Lessee shall not be obligated to indemnify the Beneficiary hereunder with
respect to any other Tax Loss or Foreign Tax Credit Loss for which a successful
contest or appeal is foreclosed as a result of the failure to take action with
respect to such contest or appeal (or the settlement or compromise of such
contest or appeal without the consent of the Lessee), and the Beneficiary shall
repay to the Lessee within 30 days of the notice referred to in the previous
clause(x) hereof such amounts theretofore advanced or paid by the Lessee related
to such adjustment, contest or appeal (other than reimbursement of costs and
expenses of the Beneficiary previously incurred), plus interest at the rate that
would have been payable if such contest had been successfully concluded at such
time PROVIDED, FURTHER, if the Beneficiary proposes to enter into a settlement
or compromise with resect to such adjustment, such settlement would materially
and substantially reduce the Beneficiary's or the Lessee's liability with
respect to an issue involving such adjustment (without regard to any reduction
achieved by "trading" such issue for unrelated issues), and the Beneficiary
notifies the lessee in writing regarding the proposed settlement (including
reasonable detail with respect to the basis and amount of such proposed
settlement), then the Beneficiary may enter into such settlement or compromise
without waiving its rights to indemnification relating to such adjustment unless
within 30 days after the receipt of such notice the Lessee shall have provided
the Beneficiary with written acknowledgement of its obligation to indemnify the
Beneficiary with respect to such adjustment to the extent the contest is not
successful. If the Lessee requests that the Beneficiary accept a settlement of a
proposed adjustment offered by the Internal Revenue Service (other than an offer
conditioned upon the Beneficiary's agreement with respect to any unrelated
issue) and acknowledges its

                                       12


liability under this agreement with respect to such adjustment, the Beneficiary
shall either accept such settlement offer or agree with the Lessee that Lessee's
liability with respect to such adjustment shall be limited to an amount
calculated on the basis of such settlement offer.

          (b) The Beneficiary shall not be required to take any action pursuant
to this Section 7 unless and until the Lessee shall have agreed in writing to
reimburse the Beneficiary (on demand and on an actual, net after-tax basis
grossed-up for all applicable Federal, state, local and foreign taxes for all
reasonable fees and expenses, any statutory or regulatory penalties, interest,
additions to tax, or other liabilities, costs or losses which the Beneficiary
may incur as a result of contesting the validity of any proposed adjustment
(including, without limitation, any reasonable fees and disbursements of counsel
incurred in connection with taking any action or rendering any opinion described
in Section 7(a)). If the Beneficiary determined to contest any adjustment by
paying the additional tax and suing for a refund, the Lessee shall timely lend
to the Beneficiary on an interest-free basis an amount equal to the sum of any
tax, interest, penalties and additions to tax required to be paid and shall
indemnify the Beneficiary in a manner reasonably satisfactory to the Beneficiary
against any adverse tax consequences resulting from such advance. Upon receipt
by the Beneficiary of a refund (or upon application of amounts otherwise
refundable against other tax liability of the Beneficiary) of any amount paid by
it, in respect of which amount the Beneficiary shall have been paid or advanced
an equivalent amount by the Lessee, the Beneficiary shall pay to the Lessee the
amount of such refund (plus any amounts otherwise refundable but applied against
other tax liability of the Beneficiary) (which, in the case of any contest in
which a loan has been advanced pursuant to this paragraph, shall be deemed to be
in repayment of the loan advanced by the Lessee to the extent fairly
attributable thereto), together with any interest received by or credited to the
Beneficiary on such refund (or application) that is fairly attributable to the
amount and the period of such payment or advance by the Lessee (net of any taxes
actually payable by the Beneficiary with respect to the receipt or accrual of
such interest), plus any net additional Federal, state local and foreign tax
benefits actually realized by the Beneficiary as the result of such payment;
and, upon disallowance of any such refund, the Lessee shall forgive the amount
of the loan fairly attributable thereto and shall pay to the Beneficiary the
balance of the amount of its indemnity obligation hereunder (including such
amount as shall be equal to the sum, on an actual after-tax basis, of any tax,
interest, penalties or additions to tax payable with respect to the forgiveness
of such loan) (or if such advance exceeds the amount of such disallowance, the
 Beneficiary shall pay such excess to the Lessee). Any subsequent loss of such
refund (or of such application of amounts otherwise refundable) to the extent
having resulted in a payment to Lessee, shall be treated as a Tax Loss subject
to indemnification pursuant to Section 5 hereof without regard to Section 6
hereof (other than Section 6(b) or 6(e) hereof). If the Beneficiary receives an
award of attorneys' fees or related expenses in a contest for which the Lessee
has paid or reimbursed all or any portion of such fees and expenses, the
Beneficiary shall pay to the Lessee the portion of such award attributable to
such fees and expenses paid or reimbursed by the Lessee.

          (c) If any adjustment referred to in this Section 7 shall be proposed
and the Lessee shall have requested the Beneficiary to contest such adjustment
as above provided and the Lessee shall have duly complied with the terms of this
Section 7, then notwithstanding any provision to the contrary in Section 5, the
Lessee's liability with respect to such adjustment shall become fixed upon a
Final Determination of such adjustment. A "FINAL DETERMINATION" with respect to
a Tax Loss shall mean (i) a decision, judgment, decree or other order by any
court of competent jurisdiction, which decision, judgment, decree or other order
has become final after all allowable appeals (in the case of the Beneficiary as
required under this Section 7) by either party to the action have been exhausted
or the time for filing such appeal has expired, (ii) a closing agreement entered
into under Section 7121 of the Code, or any other settlement agreement entered
into in connection with an administrative or judicial proceeding and with the
consent of the Lessee where required, (iii) the expiration of the time for
instituting suit with

                                       13


respect to the claimed deficiency, or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.

     Section 8.  SURVIVAL OF AGREEMENT. The obligations and liabilities of the
Lessee and the Beneficiary arising under this Agreement shall continue in full
force and effect, notwithstanding the expiration or other termination of the
Lease, until all such obligations under this Agreement have been met and all
such liabilities under this Agreement have been paid in full. This Agreement
shall inure to the benefit of any successor or assign to the Beneficiary or the
Lessee permitted pursuant to the Lease; PROVIDED, HOWEVER, that (a) such
successor or assign shall have specifically agreed in writing to be bound by the
terms and conditions of this Agreement to perform the obligations imposed
hereunder on the Beneficiary or the Lessee, as the case may be, in accordance
with the interest of such successor or assign in the Aircraft and the Lease, (b)
the successor or assign shall not be entitled to indemnity payment or other
rights or benefits greater than the payments, rights or benefits to which the
Beneficiary or the Lessee, as the case may be, would have been entitled if no
transfer or assignment had occurred, and (c) in applying the terms hereof to
such successor or assign, the terms "Beneficiary" and "Lessee" as used herein
shall mean such respective successor or assign.

     Section 9.  NOTICES. Any notice, request, or other communication provided
for in this Agreement shall be given in the manner provided in the Lease.

     Section 10. PAYMENTS. Payments made by the Lessee or the Beneficiary
pursuant to this Agreement shall be made by wire transfer of immediately
available funds to such bank and/or account in the continental United States as
specified by the other party in written directions to the paying party at least
one (1) Business Day prior to the due date thereof, and if no such direction
shall have been given, by check payable in immediately available funds to the
order of such payee and mailed to such payee by certified mail, postage prepaid,
at its address provided for purposes of the Lease.

     Section 11.  NO SETOFF. No payment required to be made by the Lessee
pursuant to this Agreement shall be subject to any right of setoff,
counterclaim, defense, abatement, suspension, deferment or reduction other than
as expressly provided herein; and, except in accordance with the express terms
hereof, neither the Beneficiary nor the Lessee shall have the right to terminate
this Agreement or to be released, relieved or discharged from any obligation or
liability under this Agreement for any reason whatsoever other than as expressly
provided herein.

     Section 12.  LATE PAYMENTS, INTEREST. Any late payment by any party hereto
of any of its obligations under this Agreement shall bear interest at the
Interest Rate set forth in the Lease

     Section 13.  EXCLUSIVE REMEDY. The indemnities provided to the Beneficiary
in this Agreement shall be the sole remedy of the Beneficiary for a breach or
inaccuracy of any representation, warranty or covenant contained herein or for
loss of income tax benefits.

     Section 14.  GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL,
PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.

     Section 15.  COUNTERPARTS. This Agreement may be simultaneously executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, and such counterparts together shall constitute and be one and the
same instrument.

     Section 16.  ASSIGNMENT. This Agreement shall not be assignable by either
party without the consent of the other; PROVIDED, HOWEVER, that the Beneficiary
may assign this Agreement (subject to the

                                       14


limitations contained in Section 8) without the consent of the Lessee in
connection with the sale of all of the Beneficiary's interests in the Aircraft
and the Lease in accordance with the terms of the Lease and other Operative
Documents.

     Section 17.  CERTAIN ADJUSTMENTS. In the event of a Tax Loss (or Foreign
Sublease) subject to payment of indemnification by the Lessee hereunder, the
Stipulated Loss Values set forth in the Lease shall be adjusted as provided in
accordance with the Lease (utilizing the same methods and assumptions originally
used to calculate said Values, other than assumptions changed as a result of
such Tax Loss or as a result of a previous adjustment of such Values), and the
Tax Assumptions shall be deemed to have been appropriately modified. If an event
giving rise to the payment of an amount determined by reference to a schedule of
Stipulated Loss Values shall occur and the date as of which the Beneficiary
shall be affected for tax purposes shall be earlier or later than the date taken
into account in computing such schedule, such values shall be appropriately
adjusted based otherwise on the same assumptions previously used by the
Beneficiary in calculating such schedule.

                      [Signature page immediately follows]

                                       15


     IN WITNESS WHEREOF, the Lessee and the Beneficiary have caused this
instrument to be duly executed as of the day and year first above written.

                                          MITSUI & CO. (U.S.A.), INC.

                                          By /s/ Kazuki Okamura
                                             -----------------------------------
                                             Name: Kazuki Okamura
                                             Title: General Manager

                                          CHAUTAUQUA AIRLINES, INC.

                                          By: /s/ Robert H. Cooper
                                              ----------------------------------
                                             Name: Robert H. Cooper
                                             Title: Vice President

                                       16


NOTE TO EXHIBIT 10.43

The two additional Tax Indemnity Agreements are substantially identical in all
material respects to the filed Tax Indemnity Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N286SK                             June, 2001                        Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------
              N287SK                             June, 2001                        Mitsui & Co.
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.44

                                                                   Exhibit 10.44


                                                               EXECUTION VERSION

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

                                  ENGINE LEASE

                             COMMON TERMS AGREEMENT

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

                          DATED AS OF December 18, 2001

                                     BETWEEN

                            CHAUTAUQUA AIRLINES, INC.

                                       And

                     GENERAL ELECTRIC CAPITAL CORPORATION





                                                       CONTENTS
SECTION                                                                                                       PAGE
                                                                                                            
1.  INTERPRETATION..............................................................................................1

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

3.  CONDITIONS PRECEDENT........................................................................................3

4.  COMMENCEMENT................................................................................................3

5.  PAYMENTS....................................................................................................4

6.  MANUFACTURER'S WARRANTIES..................................................................................17

7.  LESSOR'S COVENANTS.........................................................................................18

8.  LESSEE'S COVENANTS.........................................................................................20

9.  INSURANCE..................................................................................................30

10.    INDEMNITY...............................................................................................31

11.    EVENTS OF LOSS..........................................................................................34

12.    RETURN OF engines.......................................................................................36

13.    DEFAULT.................................................................................................37

14.    TRANSFER................................................................................................42

15.    MISCELLANEOUS...........................................................................................43

16.    DISCLAIMERS AND WAIVERS.................................................................................47

17.    BROKERS AND OTHER THIRD PARTIES.........................................................................49

18.    ILLEGALITY..............................................................................................50




            
schedule 1     Definitions
Schedule 2     Representations and Warranties
Schedule 3     Conditions Precedent
Schedule 4     Pre-Delivery Procedures and Delivery Condition
Schedule 5     Certificate of Acceptance
Schedule 6     Procedures and Operating Condition at Redelivery
Schedule 7     Insurance Requirements
Schedule 8(a)  Form of Lessee's General Counsel's Legal Opinion
Schedule 8(b)  Form of Opinion of Fulbright & Jaworski L.L.P.
Schedule 9     Events of Default
Schedule 10    Form of Lease Termination Certificate
Schedule 11    Form of Aircraft Owner/Mortgagee Acknowledgment
Schedule 12    Form of Engine Lease Supplement
Schedule 13    Form of Letter of Credit
Schedule 14    Form of Letter of Quiet Enjoyment





                                  ENGINE LEASE
                             COMMON TERMS AGREEMENT

THIS COMMON TERMS AGREEMENT (this "CTA") is made as of December 18, 2001
BETWEEN:

(1)  GENERAL ELECTRIC CAPITAL CORPORATION ("GECC"); and

(2)  CHAUTAUQUA AIRLINES, INC. ("Lessee").

WHEREAS:

(A)  From time to time, Lessee or one of its Affiliates may wish to lease
     commercial aircraft engines and related equipment from GECC or one of its
     Affiliates, and GECC or one of its Affiliates may wish to lease commercial
     aircraft engines and related equipment to Lessee or one of its Affiliates;

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

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

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

1.   INTERPRETATION

1.1  DEFINITIONS

     In the Lease, capitalized words and expressions are defined in SCHEDULE 1
     (INTERPRETATION) or in the Engine Lease Agreement, and the Lease shall be
     construed in accordance with such SCHEDULE 1 and the Engine Lease
     Agreement.

1.2  CONSTRUCTION

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

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

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



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

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

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

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

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

          (viii) in the event of a conflict between the provisions of the Engine
                 Lease Agreement and the provisions of this CTA, the provisions
                 of the Engine Lease Agreement shall control.

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

2.   REPRESENTATIONS AND WARRANTIES.

2.1  LESSEE'S REPRESENTATIONS AND WARRANTIES.

     Lessee hereby makes the representations and warranties set out in
     Section 1.1 of Schedule 2 (LESSEE'S REPRESENTATIONS AND WARRANTIES) as of
     the date of execution of the Engine Lease Agreement and ....as of the
     Delivery Date thereunder, and Lessee understands that these statements must
     be true, both when the Engine Lease Agreement is executed and on the
     Delivery Date thereunder.

2.2  LESSOR'S REPRESENTATIONS AND WARRANTIES.

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

                                       -2-


3.   CONDITIONS PRECEDENT. Lessor need not deliver and start the leasing of the
     Engine under the Lease unless each of the Lessor Conditions Precedent is
     satisfied or waived in writing by Lessor. Lessee need not accept and start
     the leasing of the Engine under the Lease unless each of the Lessee
     Conditions Precedent is satisfied or waived in writing by Lessee.

4.   COMMENCEMENT

4.1  LEASING

     (a)  Subject to Sections 3 (CONDITIONS PRECEDENT) and 4.4 (DELAYED
          DELIVERY), Lessor will lease that Engine to Lessee and Lessee will
          take that Engine on lease for the Term, which shall commence on the
          Delivery Date, and which shall be evidenced by Lessee's execution of
          an Engine Lease Supplement for such Engine on or before the Delivery
          Date. Lessor shall notify Lessee of the expected Delivery Date in the
          Scheduled Delivery Month.

     (b)  Lessee will be responsible for all risks associated with any loss of
          or damage to the Engine from the Rent Commencement Date until
          possession of the Engine is returned to Lessor on the Return Occasion.

4.2  PRE-DELIVERY PROCEDURE. Lessor and Lessee will follow the Pre-Delivery
     Procedure.

4.3  DELIVERY AND ACCEPTANCE. After the Pre-Delivery Procedure has been
     completed and subject to Section 3 (CONDITIONS PRECEDENT):

     (a)  Lessor will tender delivery of the Engine to Lessee at the Delivery
          Location.

     (b)  Lessee will accept the Engine and provide evidence of its acceptance
          by signing and delivering an Engine Lease Supplement and Certificate
          of Acceptance to Lessor.

     Lessee's acceptance of the Engine shall be regarded as absolute,
     unconditional and irrevocable. After Delivery, Lessee shall bear all risk
     of loss for the Engine from any cause whatsoever.

                                      -3-


4.4  DELAYED DELIVERY. Lessor shall not be liable for any Losses suffered or
     incurred by Lessee, arising from or in connection with any delay in
     delivery or failure to deliver the Engine.

5.   PAYMENTS

5.1  DEPOSIT. Lessee shall pay Lessor any Deposit.

5.2  RENTAL PERIODS. The first Rental Period will start on the Rent Commencement
     Date and each subsequent Rental Period will start on the date immediately
     following the last day of the previous Rental Period. Each Rental Period
     will end on the date immediately before the numerically corresponding day
     in the next month except as otherwise provided in the Engine Lease
     Agreement, except that:

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

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

5.3  RENT

     (a)  TIME OF PAYMENT: Lessee will pay to Lessor or its order Rent in
          advance on each Rent Date. Lessor must receive value for the payment
          on each Rent Date. If a Rental Period begins on a day which is not a
          Business Day, the Rent payable in respect of that Rental Period shall
          be paid on the Business Day immediately after that day, without
          interest.

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

5.4  SUPPLEMENTAL RENT

     (a)  AMOUNT: If, under the Engine Lease Agreement, Lessee is required to
          pay Supplemental Rent, Lessee will pay that Supplemental Rent, at the
          rates referred to in Section 3.1 of the Engine Lease Agreement, to
          Lessor in relation to each calendar month (or part of a month) of the
          Term, on the fifteenth day following the end of that calendar month
          (except that the last payment of Supplemental Rent during the Term
          shall be paid on the Expiry Date).

     (b)  ADJUSTMENT: If, under the Engine Lease Agreement, Lessee is required
          to pay Supplemental Rent, the Supplemental Rent rates shall be
          adjusted after the Delivery Date not more frequently than annually
          (with any such adjustment having retrospective application as
          appropriate to reflect the provisions of paragraphs (ii) and (iii)
          below) based on the following:

                                      -4-


          (i)    ANNUAL SUPPLEMENTAL RENT ADJUSTMENT: by the Annual Supplemental
                 Rent Adjustment, compounded annually commencing on the first
                 anniversary of the Delivery Date.

          (ii)   HOUR TO CYCLE RATIO ADJUSTMENT: Lessor and Lessee acknowledge
                 that the Engine Supplemental Rent rate and the Engine LLP
                 Supplemental Rent rate are based upon the assumption that the
                 Engine will operate on an Assumed Ratio. If that assumption
                 proves to be incorrect at any time for any period of twelve
                 (12) consecutive months during the Term based upon Lessee's
                 actual operating experience during such twelve (12) months, and
                 the hour to cycle ratio differs from the Assumed Ratio by more
                 than ten percent (10%) during such twelve (12) month period,
                 (i) Lessor shall have the right, upon written notice to Lessee,
                 to adjust the Engine Supplemental Rent rate and the Engine LLP
                 Supplemental Rent rate (in the case of a decrease in the ratio
                 below the Assumed Ratio) and (ii) Lessor, upon written request
                 from Lessee, will make that adjustment (in the case of an
                 increase in the ratio above the Assumed Ratio). Any adjustment
                 shall be based on a table contained in the Engine Lease
                 Agreement. Actual hour to cycle ratios may fall outside the
                 ratios identified in that table. In that case, the actual
                 values shall be determined by extrapolating the closest
                 observed intervals in the table. If the Engine Lease Agreement
                 does not include a table showing the adjustment that should be
                 made in respect of Engine Supplemental Rent or Engine LLP
                 Supplemental Rent (as the case may be) for changes in the
                 Assumed Ratio, then no such adjustment shall be made.

          (iii)  ENGINE-THRUST-RATING ADJUSTMENT: Lessor and Lessee acknowledge
                 that any amounts of Engine Supplemental Rent payable by Lessee
                 are based upon the assumption that the Engines will operate at
                 certain assumed engine thrust ratings. If that assumption
                 proves to be incorrect by more than ten percent (10%) at any
                 time for a period of 12 consecutive months during the Term
                 based upon Lessee's actual operating experience during such 12
                 months, (i) Lessor shall have the right, upon written notice to
                 Lessee, to make such adjustment as Lessor determines is
                 necessary in its reasonable discretion to maintain the rates of
                 Engine Supplemental Rent at levels which accurately reflect the
                 costs associated with obtaining relevant maintenance services
                 at prevailing industry rates (in the case where the Engine
                 Supplemental Rent rate is adjusted upward) and (ii) Lessor,
                 upon written request from Lessee, will make (and notify Lessee
                 in writing of) such adjustment as Lessor determines is
                 necessary in its reasonable discretion to maintain the rates of
                 Engine Supplemental Rent at levels which accurately reflect the
                 costs associated with obtaining relevant maintenance services
                 at prevailing industry rates (in the case where the Engine
                 Supplemental Rent rate is adjusted downward).

                                      -5-


          (iv)   MATERIAL REVISION TO MAINTENANCE PROGRAM: If the Maintenance
                 Program is revised so as to materially affect the cost
                 associated with obtaining relevant maintenance services for
                 which a Maintenance Contribution may be payable, (i) Lessor
                 shall have the right, upon written notice to Lessee, to make
                 such adjustment as Lessor determines is necessary in its
                 reasonable discretion to maintain the Supplemental Rent at
                 levels which accurately reflect the costs associated with
                 obtaining relevant maintenance services at prevailing industry
                 rates (in the case where the Supplemental Rent rate is adjusted
                 upward) and (ii) Lessor, upon written request from Lessee, will
                 make (and notify Lessee in writing of) such adjustment as
                 Lessor determines is necessary in its reasonable discretion to
                 maintain the rates of Supplemental Rent at levels which
                 accurately reflect the costs associated with obtaining relevant
                 maintenance services at prevailing industry rates (in the case
                 where the Engine Supplemental Rent rate is adjusted downward).
                 Each notice by Lessor mentioned in paragraphs (ii), (iii) and
                 (iv) shall specify the revised Supplemental Rent rates and the
                 effective date of such revision, and Lessee shall be bound by
                 all such adjustments made by Lessor in its reasonable
                 discretion. Lessee agrees to advise Lessor, in writing,
                 promptly following any occurrence which would result in the
                 assumptions mentioned in paragraphs (ii) and (iii) above
                 becoming incorrect at any time during the Term.

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

5.5  PAYMENTS. All payments by Lessee to Lessor under the Lease will be made for
     value on the due date (or if the due date is not a Business Day then on the
     following Business Day) in Dollars and in immediately available funds by
     wire transfer to the Lessor's Account.

5.6  WITHHOLDING

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

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

     (ii) pay Lessor an extra amount so that Lessor receives a net amount on the
          relevant payment date, that is equal to the amount that it would have
          received if the reduction had not been made. The amount of any such
          payment to Lessor must take into account the tax treatment of that
          payment to Lessor applying the principles of Section 5.10 (INDEMNITY
          PAYMENTS - AFTER TAX BASIS) such that

                                      -6-


          Lessor shall be in no worse position than it would have been if the
          deduction had not applied in the first place;

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

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

     Except with respect to the application of the principles of Section 5.10,
     this Section 5.6 shall not apply to any Lessor Taxes described in Section
     5.8.

5.7  TAX INDEMNITY

     (a)  General:

          (i)    Except as provided in Section 5.8 (LESSOR TAXES), Lessee will
                 on demand pay and indemnify each Tax Indemnitee against any and
                 all Taxes levied or imposed against or upon or payable by such
                 Tax Indemnitee or Lessee and arising from, with respect to or
                 in connection with the transactions pursuant to the Lease,
                 including all Taxes relating or attributable to Lessee, the
                 Lease or the Engine, directly or indirectly, in connection with
                 the importation, exportation, registration, ownership (but only
                 to the extent relating to or attributable to or arising as a
                 result of the possession, operation, use or maintenance of the
                 Engine by Lessee), leasing, subleasing, purchase, delivery,
                 possession, use, operation, repair, maintenance, overhaul,
                 transportation, landing, storage, presence or redelivery of the
                 Engine or any part thereof or any rent, receipts, insurance
                 proceeds, income, indemnification payment or other amounts
                 arising therefrom, or the making of any Equipment Change or the
                 permanent replacement of any Engine provided, that as a
                 condition precedent to any performance by the Lessee in
                 connection with any indemnity, payment or other obligation
                 pursuant to this Section 5.7 with respect to any Person
                 claiming as a Tax Indemnitee which is not a signatory to this
                 Agreement, such Person shall expressly agree in writing with
                 the Lessee to be bound by all the terms of this Section and
                 this Agreement applicable to such Person in its capacity as a
                 Tax Indemnitee.

          (ii)   All Taxes indemnified pursuant to this Section 5.7(a) shall be
                 paid by Lessee directly to the appropriate taxing authority (to
                 the extent permitted by applicable Law) at or before the time
                 prescribed by applicable Law.

          (iii)  Any amount payable by Lessee to a Tax Indemnitee pursuant to
                 this Section 5.7(a) (GENERAL) shall be paid within thirty (30)
                 days after receipt of a written demand therefor from the
                 relevant Tax Indemnitee accompanied by a written statement
                 describing in reasonable detail the basis for such indemnity
                 and the computation of the amount so payable; provided that
                 such amount need not be

                                      -7-


                 paid prior to the later of (i) the due date for such Taxes or
                 (ii) in the case of amounts which are being contested by the
                 Lessee in good faith or by the Tax Indemnitee pursuant to
                 Section 5.9, the time such contest is finally resolved. Within
                 15 days following the Lessee's receipt of the computation of
                 the amount of the indemnity, the Lessee may request that an
                 accounting firm to be jointly selected by the Lessee and such
                 Tax Indemnitee determine whether such computations of the Tax
                 Indemnitee are correct. The computations of such accounting
                 firm shall be final, binding, and conclusive upon the parties
                 and the Lessee shall have no right to inspect the books,
                 records, or tax returns of the Tax Indemnitee to verify such
                 computation. All fees and expenses payable in connection with
                 such verification shall be borne by the Lessee unless such
                 verification discloses an error adverse to the Lessee of 5% or
                 more of the amount computed by the Tax Indemnitee, in which
                 case such fees and expenses shall be paid by the Tax
                 Indemnitee.

     (b)  SALES AND USE TAXES:

          (i)    Without limiting Section 5.7(a) (GENERAL) above, Lessee shall,
                 subject to the exclusions in Section 5.8 (LESSOR TAXES) below,
                 pay to Lessor (or, if permitted by applicable Law and if
                 requested by Lessor, Lessee shall pay to the relevant tax
                 authority for the account of Lessor) all sales, use, rental,
                 value added, goods and services and similar taxes ("SALES
                 TAXES") required to be paid to the tax authority of the
                 jurisdiction in which the Delivery Location is situated or to
                 the jurisdiction of the Habitual Base or the State of
                 Incorporation, or to the tax authority of any jurisdiction in
                 which the Engine may be used, operated or otherwise located
                 from time to time, with respect to the lease of the Engine to
                 Lessee, including any "supply" for Sales Tax purposes under the
                 Lease, unless Lessee delivers to Lessor such exemption
                 certificate or other document as may be required by applicable
                 Law to evidence Lessor's entitlement to exemption from all
                 Sales Taxes imposed by each such jurisdiction with respect to
                 the lease of the Engine.

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

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

                                      -8-


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

5.8  LESSOR TAXES. Lessee is not required to indemnify a Tax Indemnitee under
     Section 5.6 (WITHHOLDING), Section 5.7(a)(GENERAL), or Section 5.7(b)
     (SALES AND USE TAXES) to the extent that the Tax arises because of:

          (i)    the willful misconduct or gross negligence of a Tax Indemnitee;

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

          (iii)  a Tax liability charged on a Tax Indemnitee's income, receipts,
                 profits, gains, franchise, net worth, or doing business (but
                 excluding any Tax that is a Sales Tax or property tax or that
                 is in the nature of a Sales Tax or property tax) imposed by (x)
                 any Government Entity in the United States or (y) any
                 government entity in a jurisdiction other than the United
                 States if such Tax would not have been imposed but for the
                 presence of a Tax Indemnitee in such jurisdiction or other
                 connection of a Tax Indemnitee with such jurisdiction unless
                 such presence or connection is attributable to this Lease or
                 the transactions contemplated herein ;

          (iv)   a Tax liability charged with respect to the period, or an event
                 occurring, after the Expiry Date, provided that the exclusion
                 set forth in this Section 5.8(iv) shall not apply to the extent
                 such Tax liability is either directly attributable to the
                 Lessor's exercise of remedies pursuant to Section 13.2 or is
                 imposed on or with respect to payments due from the Lessee
                 after the Expiry Date;

          (v)    Taxes imposed on a Tax Indemnitee or any successor, assign or
                 Affiliate thereof which became payable by reason of any
                 mortgage, pledge, financing, transfer or disposition by such
                 Tax Indemnitee subsequent to the Delivery Date of all or any
                 interest in an Engine other than (A) transfers resulting from a
                 loss, substitution or modification of an Engine, (B) transfers
                 pursuant to the Lessor's exercise of remedies in accordance
                 with Section 13.2, or (C) a transfer to Lessee pursuant to
                 Section 3.5 of the Engine Lease Agreement;

          (vi)   interest, penalties, fines or additions to tax to the extent
                 they relate to Taxes for which no indemnity would be payable by
                 Lessee pursuant to this Section 5.8;

          (vii)  Taxes imposed on a transferee of a Tax Indemnitee to the extent
                 that the aggregate amount of such Taxes exceeds the Taxes that
                 would have been imposed on the transferor in the absence of
                 such transfer with such determination to be made based on the
                 laws in effect on the date of such transfer, provided that the
                 exclusion in this clause (vii) shall not apply in the case of
                 any such sale, assignment, transfer or disposition that occurs
                 in connection with an Event of

                                      -9-


                 Default or in connection with a bankruptcy, insolvency or other
                 proceeding for the relief of debtors in which the Lessee is a
                 debtor;

          (viii) United States withholding Taxes imposed as a result of a Tax
                 Indemnitee not being a U. S. Person;

          (ix)   Taxes that would not have been imposed but for a Lessor Lien;
                 or

          (x)    Taxes imposed by Section 4975 of the Internal Revenue Code of
                 1986.

          Lessee will also indemnify each Tax Indemnitee, on an After-Tax Basis,
          as set forth in the Section entitled "Special Tax Indemnity" in
          SCHEDULE B of the Engine Lease Agreement.

5.9  TAX INFORMATION, TAX CONTEST, AND REFUND

     (a)  INFORMATION

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

          (ii)   If any report, return or statement is required to be made by
                 Lessor or any other Tax Indemnitee with respect to any Tax
                 (other than an income tax imposed by any government entity in
                 the United States) for which there is an indemnity obligation
                 of Lessee under the Lease, Lessee will, to the extent that
                 Lessee has knowledge or reasonably should have knowledge
                 thereof, promptly notify Lessor of the requirement and:

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

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

          (iii)  Lessee will provide such information and documents as Lessor
                 may reasonably request to enable Lessor or any other Tax
                 Indemnitee to comply with its tax filing, audit and litigation
                 obligations. Lessor or any other Tax Indemnitee will provide
                 such information or documents, at Lessee's expense, that Lessee
                 does not otherwise have as Lessee may reasonably request and
                 which are necessary to enable Lessee to comply with its
                 obligations under the Lease (including

                                      -10-


                 Sections 5.6(WITHHOLDING) and 5.7(TAX INDEMNITY) of the CTA and
                 SCHEDULE B of the Engine Lease Agreement).

     (B)  CONTEST: If any Tax Indemnitee receives a written claim for any Tax
          for which a Tax Indemnitee would be required to pay an indemnity
          pursuant to Section 5.7, such Tax Indemnitee shall notify Lessee
          promptly of such claim, provided that any failure to provide such
          notice will not relieve Lessee of any indemnification obligation
          pursuant to Section 5.7 unless such failure effectively precludes the
          ability to contest such Tax. If timely requested by Lessee in writing,
          Tax Indemnitee shall, at the expense of Lessee (including, without
          limitation, all costs, expenses, legal and accountants' fees and
          disbursements, and penalties, interest and additions to tax incurred
          in contesting such claim) in good faith contest or (if permitted by
          applicable Law) permit Lessee to contest such claim by (i) resisting
          payment thereof if practicable and appropriate, (ii) not paying the
          same except under protest if protest is necessary and proper, or (iii)
          if payment is made, using reasonable efforts to obtain a refund of
          such Taxes in appropriate administrative and judicial proceedings. The
          Tax Indemnitee shall determine the method of any contest conducted by
          the Tax Indemnitee except for any contest involving only taxes (other
          than income taxes) of the Tax Indemnitee for which the Tax Indemnitee
          is indemnified under this Agreement ("Severable Taxes") and (in good
          faith consultation with Lessee) control the conduct thereof. Lessee
          shall determine the method of any contest conducted by Lessee and any
          contest involving Severable Taxes and (in good faith consultation with
          the Tax Indemnitee) control the conduct thereof. Lessee shall pay in
          full all payments of Rent and other amounts payable pursuant to the
          Lease, without reduction for or on account of any Tax (other than
          Lessor Taxes described in Section 5.8), while such contest is
          continuing. A Tax Indemnitee shall not be required to contest, or to
          continue to contest, a claim for Taxes under this Section 5.9 if (w)
          Lessee shall have failed, upon request of the Tax Indemnitee, to
          acknowledge its liability for such claims, or (x) such contest would
          result in a risk of criminal penalties or a material risk of a sale,
          forfeiture or loss of (including loss of use), or the imposition of a
          Lien (other than a Permitted Lien) on, the Engine (unless the Lessee
          posts a bond or other security reasonably acceptable in form and
          substance to such Tax Indemnitee), or (y) in the case of a contest
          other than a contest of Severable Taxes, Lessee shall not have
          furnished an opinion of independent tax counsel selected by Tax
          Indemnitee and reasonably satisfactory to Lessee, that a reasonable
          basis exists for such contest, or (z) in the case of a contest other
          than a contest of Severable Taxes, a Default shall be continuing
          (unless Lessee shall have provided security reasonably satisfactory to
          Lessor securing Lessee's performance of its obligations under this
          Section 5.9). If a Tax Indemnitee contests any claim for Taxes by
          making a payment and seeking a refund thereof, then Lessee shall
          advance to the Tax Indemnitee, on an interest-free basis, an amount
          equal to the Taxes to be paid by Tax Indemnitee in connection with the
          contest and shall indemnify Lessor on an After-Tax Basis for any
          adverse tax consequences to Tax Indemnitee of such interest-free
          advance. Upon the final determination of any contest pursuant to this
          Section 5.9 in respect of any Taxes for which Lessee shall have made
          an advance to Lessor in

                                      -11-


          accordance with the immediately preceding sentence, the amount of
          Lessee's obligation shall be determined as if such advance had not
          been made; any indemnity obligation of Lessee to Tax Indemnitee under
          this Section 5.9 and Tax Indemnitee's obligation to repay the advance
          will be satisfied first by setoff against each other, and any
          difference owing by either party shall be paid within ten days after
          such final determination.

     (C)  REFUNDS. If a Tax Indemnitee obtains a refund or reimbursement of all
          or any part of any Taxes that the Lessee shall have paid for such Tax
          Indemnitee or that the Lessee shall have reimbursed, advanced funds to
          or indemnified such Tax Indemnitee, but not before Lessee shall have
          made all payments then due to such Tax Indemnitee pursuant to Section
          5.7 and any other payments then due under the Lease, such Tax
          Indemnitee shall pay Lessee the amount of such refund or
          reimbursement, reduced by any Taxes imposed on the Tax Indemnitee on
          receipt or accrual of such refund or reimbursement and increased by
          any Taxes saved by the Tax Indemnitee by reason of the deductibility
          of such payment by Tax Indemnitee. If, in addition to such refund or
          reimbursement, the Tax Indemnitee receives an amount of interest on
          such refund or reimbursement, such Tax Indemnitee shall pay to Lessee
          the portion of such interest which is fairly attributable to such
          refund, reduced by any Taxes imposed on the Tax Indemnitee on receipt
          or accrual of such interest and increased by any Taxes saved by reason
          of the deductibility of such payment by Tax Indemnitee. Tax Indemnitee
          shall not be required to make any payment to Lessee pursuant to this
          Section 5.9 while an Event of Default shall have occurred and be
          continuing.

5.10 INDEMNITY PAYMENTS - AFTER-TAX BASIS. The amount of any payment made under
     Section 5.6 (WITHHOLDING), Section 5.7 (TAX INDEMNITY), Section
     5.21(EXPENSES) or Section 10(INDEMNITY) to or for the benefit of any
     Indemnitee, shall include such amount as may be necessary to hold such
     Indemnitee harmless on an After-Tax Basis from all Taxes required to be
     paid by such Indemnitee with respect to such payment or indemnity
     (including any payments pursuant to this Section 5.10). If any Tax
     Indemnitee or Indemnitee shall realize a tax benefit as a result of any
     claims or Taxes paid or indemnified against by the Lessee under Section
     5.6, Section 5.7, Section 5.21, or Section 10 (whether by way of deduction,
     credit, allocation or apportionment of income or otherwise) to the extent
     such tax benefit was not previously taken into account in computing the
     amount of such payment or indemnity, but not before the Lessee shall have
     made all payments then due to such Tax Indemnitee or Indemnitee under this
     Agreement and the Lease, such Tax Indemnitee or Indemnitee shall pay to the
     Lessee an amount that, after subtraction of any further tax savings such
     Tax Indemnitee or Indemnitee realizes as a result of the payment thereof,
     is equal to the amount of such tax benefit. In determining the order in
     which any Tax Indemnitee utilizes withholding or other foreign taxes as a
     credit against such Tax Indemnitee's United States income taxes, such Tax
     Indemnitee shall be deemed to utilize (i) first, all foreign taxes other
     than those described in clause (ii) below; and (ii) then, on a pro rata
     basis, all foreign taxes with respect to which such Tax Indemnitee is
     entitled to obtain indemnification pursuant to an indemnification provision
     contained in any lease, loan agreement, or other financing document
     (including this Agreement) that is similar to the indemnification provision
     in Section 5.7.

                                      -12-


5.11 LESSOR OBLIGATIONS FOLLOWING EXPIRY DATE. Promptly after:

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

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

     (c)  exercise by Lessee of any option which may be set forth in the Lease
          from time to time to purchase the Engine and payment by Lessee to
          Lessor of the amount set forth in the Lease as the purchase option
          price, in accordance with and within such period as may be provided in
          the Lease;

     or in each case such later time as Lessor is reasonably satisfied that
     Lessee has irrevocably paid to Lessor all amounts which may then be due and
     payable under the Lease and the Other Agreements and in each case so long
     as no other Default has occurred and is continuing:

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

          (ii)   Lessor will pay to Lessee the amount of any Rent received in
                 respect of any period falling after the date of redelivery of
                 the Engine or payment of the purchase option price in
                 connection with Lessee's exercise of any purchase option for an
                 Engine that may be set forth in the Lease or payment of the
                 Agreed Value, as the case may be; and

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

5.12 NET LEASE

     The Lease is a net lease. The Lessee's obligation to pay Rent and to
     perform all of its other obligations under the Lease is absolute and
     unconditional no matter what happens and no matter how fundamental or
     unforeseen the event, including any of the following: (a) any right of
     set-off, counterclaim, recoupment, defense or other right which either
     party to the Lease may have against the other (including any right of
     reimbursement) or which Lessee may have against the Manufacturer, any
     manufacturer or seller of or any Person providing services with respect to
     the Engine or any Part or any other Person, for any reason whatsoever; (b)
     any unavailability of the Engine for any reason, including a requisition of
     the Engine or any prohibition or interruption of or interference with or
     other restriction against Lessee's use, operation or possession of the
     Engine (whether or not the same would, but for this provision, result in
     the termination of the Lease by operation of Law); (c) any lack or
     invalidity of title or any other defect in title, airworthiness,
     merchantability, fitness for any purpose, condition, design, or operation
     of any kind or nature of the Engine for any particular use or trade, or for
     registration or documentation under the Law of any relevant jurisdiction,
     or (except as otherwise provided in Section 11 of this CTA) any Event of
     Loss in respect of or any damage to the Engine; (d) any insolvency,
     bankruptcy, reorganization, arrangement, readjustment of debt, dissolution,
     liquidation or similar

                                      -13-


     proceedings by or against Lessor, Lessee or any other Person; (e) any
     invalidity or unenforceability or lack of due authorization of, or other
     defect in, the Lease; (f) any Security Interests or Taxes; and/or (g) any
     other cause or circumstance which but for this provision would or might
     otherwise have the effect of terminating or in any way affecting any
     obligation of Lessee under the Lease. Lessee acknowledges and agrees that
     it has used its own judgement in selecting the Engine, and has not relied
     on Lessor or on any information supplied by Lessor, that Lessor is not a
     manufacturer of or dealer in engines and that Lessor has all of the rights
     and benefits of a lessor under a lease to which Section 2A-407 of the UCC
     applies as provided in such Section 2A-407.

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

     Each payment of Rent or Supplemental Rent made by Lessee shall be final.
     Lessee will not seek to recover all or any part of any payment of Rent or
     Supplemental Rent for any reason whatsoever except manifest error in which
     case Lessor shall make payment to Lessee promptly following receipt of
     Lessee's written notice identifying such error (subject always to Section
     5.20).

     Nothing in this Section 5.12 will constitute a waiver by or be construed to
     limit Lessee's right to institute separate legal proceedings or otherwise
     independently pursue any claim against Lessor in the event of Lessor's
     breach of the Lease, subject to Sections 7.1, as it relates to quiet
     enjoyment, and 16.3, as it relates to claims generally, of this CTA, or to
     limit Lessee's rights and remedies against any other Person.

5.13 FURTHER PROVISIONS REGARDING DEPOSIT

     (a)  If, under the Lease, Lessee is required to pay a Deposit, Lessee
          hereby grants a security interest in the Deposit to Lessor and the
          remaining provisions of this Section shall apply. Lessee agrees that
          Lessor shall be entitled to commingle the Deposit with Lessor's
          general or other funds, Lessor will have no obligation to pay any
          interest thereon and Lessor will not hold any such funds as agent or
          in trust for Lessee or in any similar fiduciary capacity. In this
          regard, Lessee acknowledges and agrees that the requirements of
          Section 7-101 of the NEW YORK GENERAL OBLIGATIONS LAW to the effect
          that Lessor hold the Deposit in a separate, interest bearing account
          do not apply.

     (b)  If a Special Default or an Event of Default shall have occurred and be
          continuing under the Lease, in addition to all rights and remedies
          accorded to Lessor elsewhere in the Lease or under Law in respect of
          the Deposit, Lessor may immediately or at any time thereafter, without
          prior notice to Lessee, apply all or part of the Deposit (or any
          amount drawn under the Letter of Credit provided hereunder) (if
          applicable) in or towards the payment or

                                      -14-


          discharge of any matured obligation owed by Lessee or any Affiliate of
          Lessee under the Lease or the Other Agreements, in such order as
          Lessor sees fit, and/or exercise any of the rights of set-off
          described in Section 5.20 (SET-OFF) against all or part of the Deposit
          (or any amount drawn under the Letter of Credit provided hereunder)
          (if applicable).

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

5.14 LETTER OF CREDIT

     (a)  If, under the Lease, Lessee is required or elects to provide Lessor
          with a Letter of Credit, such Letter of Credit will be issued and
          payable by a Pre-Approved Bank or another bank acceptable to Lessor in
          its sole and absolute discretion and substantially in the form of
          Schedule 13 and otherwise in form and substance acceptable to Lessor
          in its sole and absolute discretion.

     (b)  The Letter of Credit may have a validity period or periods ending
          prior to the Required LC Expiry Date, provided that (i) the Letter of
          Credit shall, in each case, be renewed, extended or reissued and
          delivered to Lessor not later than 30 Business Days prior to its
          expiry; and (ii) a Letter of Credit shall remain in force at all times
          up to the Required LC Expiry Date. Lessee acknowledges and agrees that
          its failure to renew, extend or reissue the Letter of Credit when and
          as provided in the foregoing sentence shall constitute an immediate
          Event of Default, which shall entitle Lessor to immediately draw upon
          the Letter of Credit in the full amount thereof.

     (c)  If at any time during the Term, Lessor determines in its sole and
          absolute discretion that the current issuing or confirming bank for
          the Letter of Credit is no longer an acceptable issuing or confirming
          bank (whether by virtue of a material adverse change in its financial
          condition, a decrease in any credit rating of its long-term unsecured
          debt obligations, or for any other reason), Lessee shall within five
          (5) Business Days after the date of any such notice from Lessor cause
          the Letter of Credit to be replaced by a Letter of Credit issued by
          another bank acceptable to Lessor in its sole and absolute discretion
          and (if requested by Lessor in its sole and absolute discretion) that
          such replacement Letter of Credit is confirmed by another bank
          acceptable to Lessor in its sole and absolute discretion.

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

                                      -15-


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

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

5.17 CURRENCY

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

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

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

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

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

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

5.20 SET-OFF. In this Section 5.20, references to Lessee will also include
     Lessee Affiliates. Lessor may, without notice, set-off any obligations owed
     by Lessee under the Lease or under the Other Agreements against any
     obligation Lessor or any of its Affiliates owes Lessee under the Lease or
     under the Other Agreements, regardless of the place of payment or currency.
     Promptly after making any such set-off, Lessor shall notify Lessee thereof,
     but failure to give such notice shall not affect the effectiveness of any
     such set-off. If the obligations are in different currencies,

                                      -16-


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

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

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

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

     (c)  in connection with the enforcement or preservation of any of Lessor's
          rights under the Lease (including under Section 10) (INDEMNITY)) or in
          respect of the repossession of any Engine in accordance with Section
          13.2 of this CTA.

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

6.   MANUFACTURER'S WARRANTIES

     (a)  So long as no Event of Default has occurred which is continuing,
          Lessor shall make available to Lessee during the Term the benefit of
          all manufacturer's warranties in relation to the repair or remedy of
          any defect in the Engine (including compensation for loss of use of
          the Engine, if available) to the extent that it is permitted to do so.
          In furtherance of the foregoing, Lessor shall take such actions, at
          Lessee's cost and expense, as Lessee may reasonably request to make
          such warranties available to Lessee. Lessee will give Lessor prompt
          written notice of any warranty claim which is settled with Lessee on
          the basis of a cash payment.

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

                                      -17-


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

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

     (c)  Lessee will take all steps as are necessary at the end of the Term to
          ensure that the benefit of any warranties relating to the Engine which
          have not expired is vested in Lessor to the extent that such
          warranties may be so assigned.

7.   LESSOR'S COVENANTS

7.1  QUIET ENJOYMENT. So long as no Event of Default has occurred and is
     continuing, Lessor will not interfere with Lessee's right to quiet use and
     possession of the Engine during the Term. Exercise by Lessor of its rights
     of inspection or other rights provided to it under the Lease in the absence
     of an Event of Default shall not be considered to be a breach of the
     foregoing covenant. Lessee agrees that its only right with respect to a
     default by Lessor under the Lease is to make a claim against Lessor for
     compensatory (but not consequential) damages resulting directly therefrom
     and in any event subject to Section 16.3 (DISCLAIMER OF CONSEQUENTIAL
     DAMAGES) hereof, and Lessee hereby waives any and all other rights or
     remedies it may have under Section 2A-211 of the UCC or Sections 2A-508
     through 2A-522 of the UCC or any other right or remedy inconsistent with
     this provision.

7.2  MAINTENANCE CONTRIBUTIONS

     (a)  If, under the Engine Lease Agreement for the Engine, Lessee is
          required to pay Supplemental Rent, then provided no Event of Default
          or Special Default has occurred and is continuing, Lessor will pay as
          maintenance contributions (as a separate and independent obligation
          and not as a return of Supplemental Rent), subject to Section 7.2(b)
          (EXCLUSIONS), the following amounts to the applicable Maintenance
          Performer (it being understood and agreed, however, that no such
          Maintenance Performer shall be a third-party beneficiary of this
          Lease) or Lessee if Lessee has paid for the relevant work to be
          performed by way of contribution to the cost of maintenance of the
          Engine, within thirty (30) days after receipt by Lessor, WITHIN SIX
          MONTHS AFTER COMMENCEMENT OF SUCH MAINTENANCE AND BEFORE THE EXPIRY
          DATE, of an invoice and supporting documentation reasonably
          satisfactory to Lessor and which is accurate, complete and legible
          evidencing performance of the following work during a completed Engine
          shop visit when the Engine requires off-wing tear down and/or
          disassembly by the Maintenance Performer:

          (i)    ENGINE LIFE-LIMITED PARTS: The Engine LLP Supplemental Rent
                 payable by Lessee for the Engine will be designated and will be
                 reimbursable solely for the replacement of LLP in the Engine
                 and Lessor will reimburse Lessee from the

                                      -18-


                 Engine LLP Supplemental Rent for the actual out-of-pocket
                 materials cost (with overhead, mark-up or profit factor limited
                 to an amount equal to the lesser of (x) [*] of the LLP
                 in connection with the replacement of LLP in the Engine, with
                 parts required for all other purposes or causes excluded,
                 including those causes set forth in Section 7.2(b)
                 (EXCLUSIONS). Reimbursement for the reasonable cost of labor
                 will be permitted only for the replacement of Fan Hub while on
                 wing with Lessor's prior written consent and otherwise in
                 conformance with the requirements of this Agreement.
                 Reimbursement, excluding exchange fees and handling, packing
                 and shipping charges, for the replacement cost of LLP will be
                 made up to the amount of the Engine LLP Supplemental Rent held
                 by Lessor in respect of that Engine at the time of removal of
                 the Engine from the Related Airframe to which it was attached
                 immediately prior to the replacement of LLP for which
                 reimbursement is sought;

          (ii)   ENGINE REFURBISHMENT: With respect to the Engine Refurbishment
                 of any Engine, the performance restoration, in accordance with
                 the Lease, of such Engine, or a module thereof, accomplished by
                 an FAR Part 145-approved agency in accordance with the
                 Manufacturer's work scope planning guide, including all
                 Manufacturer-recommended reliability SBs, alert SBs and FAA ADs
                 (to the extent required during such performance restoration
                 shop visit and due for termination within the cyclic release
                 period to a maximum of two years), the lesser of (A) the amount
                 of that invoice and (B) the amount of the Engine Supplemental
                 Rent held by Lessor in respect of that Engine at the time of
                 removal of the Engine from the Related Airframe to which it was
                 attached immediately prior to the restoration.

     (B)  EXCLUSIONS. Lessor will not pay any maintenance contributions:

          (i)    For repairs covered by insurance or warranty or arising as a
                 result of accidents or incidents (whether or not eligible for
                 recovery under Lessee's insurance), operational or maintenance
                 mishandling or AD work (except as specifically provided in
                 Section 7.2(a)(ii) (ENGINE REFURBISHMENT); nor

          (ii)   For repairs arising as a result of foreign object damage
                 ("FOD"), the removal , installation, maintenance and repair of
                 QEC and/or any elective replacement (unless mutually agreed by
                 Lessor and Lessee) of Parts not required under the Maintenance
                 Program to be replaced as part of the maintenance described in
                 Section 7.2(a)(i) (ENGINE LIFE-LIMITED PARTS) and (ii) (ENGINE
                 REFURBISHMENT), as the case may be.

     (C)  SUPPLEMENTAL RENT ACCOUNTS. Separate accounts will be established for
          performance restoration and LLP. Lessee will be entitled to draw on
          the appropriate reserve account,

                                      -19-


          during the Term and for the purpose of meeting return conditions, to
          restore performance of the Engine or replace LLP to the extent that
          the account is in credit. Any costs for performance restoration or
          replacement of LLP in excess of the reserves paid for such work will
          be the responsibility of Lessee. Any balances in the Supplemental Rent
          accounts remaining at the end of the Lease Term will be retained by
          Lessor; provided, however, that if an Event of Loss occurs with
          respect to an Engine, upon payment to Lessor of the Agreed Value for
          such Engine, and provided that no Event of Default or Special Default
          has occurred and is continuing, Lessor will pay to Lessee the portion
          of Supplemental Rent received by Lessor in respect of such Engine.

8.   LESSEE'S COVENANTS

8.1  DURATION: Lessee shall perform and comply, or cause its Permitted
     Sub-Lessee or Maintenance Performer to perform and comply, with its
     undertakings and covenants in the Lease at all times during the Term and
     the performance of any such undertakings and covenants by any Permitted
     Sub-Lessee or Maintenance Performer shall constitute performance by the
     Lessee and to the extent of such performance discharges such obligations by
     the Lessee. All such undertakings and covenants shall, except where
     expressly otherwise stated, be performed at the expense of Lessee.

8.2  INFORMATION

     Lessee will:

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

     (b)  provide Lessor with the Financial Information;

     (c)  upon the occurrence thereof (and in any event within seven (7) days of
          such occurrence), notify Lessor of any Event of Loss and of any event
          which is likely to result in an insurance claim in excess of the
          Damage Notification Threshold and details of any negotiations with
          insurers or insurance brokers relating to such claim;

     (d)  promptly after the occurrence thereof, notify Lessor of any Default;
          and

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

                                      -20-


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

     (g)  notify Lessor, promptly, of the removal of any Engine for the purpose
          of Engine Refurbishment.

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

     (a)  in violation of any applicable Regulations or in a manner causing
          Lessor, Owner, any Financing Party or GECAS to be in violation of any
          applicable Regulations;

     (b)  for any purpose for which the Engine was not designed;

     (c)  in any circumstances or place where the Engine is not covered by the
          Insurances; or

     (d)  for purposes of training, qualifying or re-confirming the status of
          cockpit personnel except for the benefit of Lessee's cockpit
          personnel, and then only if the use of the Engine for such purpose is
          not disproportionate to the use for such purpose of other engine of
          the same type operated by Lessee.

8.4  SUBLEASING; POSSESSION.

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

     (a)  to a sub-lessee of the Engine to which Lessor consents in writing
          which consent shall not be unreasonably withheld or delayed (a
          "PERMITTED SUB-LESSEE"), pursuant to a sub-lease to which Lessor
          consents in writing which consent shall not be unreasonably withheld
          or delayed (a "PERMITTED SUB-LEASE"), and provided that no Default
          shall have occurred and be continuing at the commencement of such
          sub-lease; or

     (b)  as permitted under Section 8.11 (REMOVAL OF ENGINES AND PARTS); or

     (c)  so long as no Default shall have occurred and be continuing, and all
          approvals, consents or authorizations required from the Air Authority
          in connection with any such delivery, transfer or relinquishment of
          possession have been obtained and remain in full force and effect:

                                      -21-


          (i)    the Lessee may, without the prior consent of the Lessor, enter
                 into a charter or wet lease or other similar arrangement of no
                 more than six (6) months' duration (or such longer period as
                 Lessor may give prior written consent to, such consent not to
                 be unreasonably withheld) under which the Lessee or a Permitted
                 Sub-Lessee has operational control of the Engine and the
                 Related Airframe on which such Engine is installed in the
                 course of the Lessee's business (which shall not be considered
                 a transfer of possession hereunder), provided that the Lessee's
                 obligations under the Lease or such Permitted Sub-Lessee's
                 obligations under the relevant Permitted Sub-Lease shall
                 continue in full force and effect notwithstanding any such
                 charter or wet lease or other similar arrangement; or

          (ii)   the Lessee or a Permitted Sub-Lessee may, without the prior
                 consent of the Lessor, deliver possession of the Engine or any
                 Part to the manufacturer or maintenance facility thereof or to
                 any organization for testing, service, repair, maintenance,
                 overhaul work or other similar purposes or for alterations or
                 modifications or additions required or permitted by the terms
                 of the Lease.

8.5  INSPECTION

     (a)  Lessee will permit Lessor's, Owner's and the Financing Parties'
          Representatives to inspect the Engine at any time. Unless a Default
          has occurred and is continuing, any such Person will give Lessee
          reasonable notice of inspection and will ensure that it does not
          result in a disruption to the maintenance or scheduled operation of
          such Engine. Lessee shall comply with the reasonable requests of
          Lessor's, Owner's and the Financing Parties' Representative
          representatives during the course of an inspection.

     (b)  The cost of conducting an inspection shall be borne by Lessor, Owner
          or the Financing Parties, as the case may be, unless, (i) an Event of
          Default has occurred and is continuing or (ii) if as a result of that
          inspection, Lessee is found to be in default of its obligations under
          the Lease, in which case the cost shall be borne by Lessee.

     (c)  No liability or obligation will be incurred by Lessor, Owner,
          Financing Parties' Representative or the Financing Parties, as the
          case may be, by reason of non-exercise by any of them of the
          inspection rights referred to in this Section 8.5.

8.6  OWNERSHIP; PROPERTY INTERESTS; RELATED MATTERS

     (a)  Lessee will:

          (i)    fix and maintain Nameplates containing the Nameplate
                 Inscription in a prominent position on each Engine;

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

                                      -22-


          (iii)  pay all navigation charges, air traffic control charges,
                 landing charges or other amounts of any nature imposed by any
                 Government Entity with respect to Lessee, each Related
                 Airframe, each Engine and/or the Lease except to the extent
                 that, in the reasonable opinion of Lessor, such payment is
                 being contested in good faith by appropriate proceedings in
                 respect of which adequate reserves have been provided by Lessee
                 and non-payment of which does not give rise to any material
                 likelihood of the Engine or any interest therein being sold,
                 forfeited or otherwise lost or of criminal liability on the
                 part of Lessor or Owner.

     (b)  Lessee will not:

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

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

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

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

          (v)    allow the name of any Person (other than Lessor or any
                 Financing Party) to be placed on the Engine as a designation
                 that could reasonably be interpreted as a claim of ownership or
                 as a Security Interest.

     (c)  Lessee shall not and shall procure that any other Person claiming by
          or through Lessee does not challenge the existence, validity,
          enforceability or priority of the Lease or the rights of Lessor as
          lessor or of Owner as owner in respect of the Engine or Financing
          Parties' Representative as holder of a first priority Security
          Interest in the Engine and the Lease

8.7  GENERAL

     (a)  Lessee will:

                                      -23-


          (i)    maintain its business as a commercial airline, will preserve
                 its corporate existence (other than as permitted in Section 8.7
                 (vi) below), will maintain all rights, privileges, licenses and
                 franchises material thereto or material to performing its
                 obligations under the Lease, and will procure that any consent,
                 authorization, license, certificate or approval of or
                 registration with or declaration to any Government Entity
                 required to be obtained or maintained by Lessee in connection
                 with the Lease and/or the operation of the Engine (including
                 any airline license or air transport license including
                 authority to operate the Engine under Part 121 of the FARs, a
                 Certificate of Convenience and Necessity issued under the Act
                 and an air carrier operating certificate issued under the Act)
                 is not modified in a materially prejudicial manner and is not
                 withheld, revoked, suspended, cancelled, withdrawn, terminated
                 or not renewed and does not otherwise cease to be in full
                 force;

          (ii)   not operate, maintain, insure or deal with, or keep records
                 with respect to, the Engine in a manner which discriminates
                 against the Engine adversely insofar as Lessor's and Owner's
                 interests are concerned, when compared with the manner in which
                 Lessee operates, maintains, insures or deals with, or keep
                 records with respect to, similar engines or parts in Lessee's
                 fleet;

          (iii)  not change the "location" (as such term is used in Section
                 9-307 of the UCC) of the Lessee from its State of Incorporation
                 or the location of its chief executive office from that
                 described in the heading of the Engine Lease Agreement or
                 otherwise be located (as defined in Section 9-307 of the UCC)
                 at any place in the United States other than the location
                 described the heading of the Engine Lease Agreement, except
                 upon 30 days prior written notice thereof to Lessor;

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

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

          (vi)   not consolidate with or merge into or with any other
                 corporation or other Person, and not convey, transfer, lease or
                 otherwise dispose of all or substantially all of its property
                 and other assets to any corporation or other Person, unless the
                 Person surviving such consolidation or merger or the Person
                 which acquires by conveyance, transfer, lease or other
                 disposition of all or substantially all of such property or
                 other assets (the "Successor Entity"): (A) is a Certificated
                 Air Carrier, and (B) if not the Lessee, executes a duly
                 authorized, legal, valid, binding and enforceable agreement
                 assuming the Lessee's obligations hereunder and delivers such
                 instrument to Lessor; provided that no such merger,
                 consolidation, conveyance, transfer, lease or other disposition
                 shall be permitted

                                      -24-


                 if an Event of Default shall have occurred and be continuing or
                 if immediately after giving effect to such consolidation,
                 merger, conveyance, transfer, lease or other disposition, an
                 Event of Default shall occur as a result thereof. Upon any
                 consolidation or merger, or any conveyance, transfer or lease
                 of all or substantially all of the assets of Lessee and the
                 satisfaction of the conditions specified in this Section
                 8.7(a)(vi), the successor corporation formed by such
                 consolidation or into which the Lessee is merged or the Person
                 to which such conveyance, transfer or lease is made shall
                 succeed to, and be substituted for, and may exercise every
                 right and power of, the Lessee under this Agreement and the
                 Lease and each other document contemplated hereby and thereby
                 to which the Lessee is a party with the same effect as if such
                 successor corporation had been named as the Lessee herein and
                 therein. No such consolidation or merger, or sale, conveyance,
                 transfer or lease of all or substantially all of the assets of
                 the Lessee as an entirety shall have the effect of releasing
                 the Lessee or any successor corporation which shall theretofore
                 have become the Lessee hereunder in the manner prescribed in
                 this Section 8.7(a)(vi) from its liability hereunder or under
                 the Lease, and nothing contained herein shall permit any lease,
                 sublease, or other arrangement for the use, operation or
                 possession of the Engine except in compliance with the
                 applicable provisions of this Agreement and the Lease.

          (vii)  act as both the importer and exporter of record and shall, at
                 its expense, obtain and maintain all certificates, licenses,
                 permits, approvals and other governmental authorizations from
                 time to time required for the use and operation of the Engine
                 or which may be necessary to import, export or transport the
                 Engine from the Delivery Location and to the Redelivery
                 Location.

8.8  RECORDS. Lessee will keep all Engine Documents:

     (a)  in English;

     (b)  according to prudent standard international practice airline practice;
          and

     (c)  so they meet the all applicable requirements of the Air Authority
          (including at minimum all FAA requirements, including specifically FAR
          91.417 or the equivalent Air Authority's requirement) and the
          Maintenance Program.

8.9  PROTECTION. Lessee will:

     (a)  so long as the Engine remains installed on a Related Airframe, take
          all actions reasonably requested by Lessor that are within Lessee's
          control to keep such Related Airframe registered with the Air
          Authority; and

     (b)  make any and all filings required to be made with the Air Authority
          registry that are within its control and take all other actions within
          its control that are necessary or advisable to reflect on the Air
          Authority registry or as otherwise appropriate under

                                      -25-


          applicable Law any change in the ownership of the Engine, or in the
          interests of Lessor, Owner or the Financing Parties' Representative in
          the Lease or the Engine, any modification to the Engine (such as the
          permanent replacement of the Engine in accordance with the Lease) or
          as a result of any change in applicable Regulations. Lessor will bear
          any costs incurred as a consequence of a transfer by Lessor, Owner or
          the Financing Parties' Representative of the interests of Lessor,
          Owner or the Financing Parties' Representative in the Lease or the
          Engine or a change in the identity of Lessor, Owner or the Financing
          Parties' Representative (in each case, unrelated to the replacement of
          any Engine or Part or a Default), and Lessee will bear any other costs
          incurred in complying with this Section 8.9, including in connection
          with the replacement of any Engine.

8.10 MAINTENANCE AND REPAIR. Lessee will maintain, overhaul and repair the
     Engine (or arrange for the Engine to be maintained, overhauled and
     repaired, through the Maintenance Performer), so that:

     (a)  the Engine is kept in as good operating condition and repair as the
          condition of the Engine as at Delivery and after giving effect to any
          post-Delivery modifications, repairs or maintenance paid for or
          otherwise provided by or on behalf of Lessor, except for ordinary wear
          and tear, for purposes of any Engine, ordinary wear and tear does not
          include FOD, damage from accident, neglect and improper use, operation
          and handling;

     (b)  so long as the Engine remains installed on a Related Airframe, the
          Lessee has a current certificate of airworthiness (issued by the Air
          Authority in the appropriate public transport category) for such
          Related Airframe, except when aircraft of the same type, model or
          series as such Related Airframe (powered by engines of the same type
          as those with which the Related Airframe shall be equipped at the time
          of grounding) registered in the same country have been grounded by the
          Air Authority, provided, however, that if the certificate of
          airworthiness of such Related Airframe shall be withdrawn, then so
          long as the Lessee (or a Permitted Sub-Lessee) is taking or causing to
          be taken all necessary action to promptly (but in no event more than
          10 days from such withdrawal) correct the condition which caused such
          withdrawal and provided further that the Insurance for the Engine is
          not adversely affected by such withdrawal, no Event of Default shall
          arise from such withdrawal;

     (c)  the Engine complies with (i) all applicable Regulations including the
          standard stipulated by FAR Part 121 Subpart L (or its JAA equivalent)
          and any other rules and regulations of the FAA (or JAA) and in at
          least the same manner and with at least the same care, including
          record keeping, maintenance scheduling, modification status and
          technical condition, as is the case with respect to similar engines
          owned or otherwise operated by Lessee and as if Lessee were to retain
          and continue operating the Engine in its fleet after the Expiry Date,
          including all maintenance to the Engine or any Part required to
          maintain all warranties, performance guaranties or service life
          policies in full force and effect; and

                                      -26-


          (ii) the requirements of all ADs and SBs designated by the State of
          Design or State of Registry as "mandatory," and to be carried out
          before the Return Occasion or within the AD Compliance Period; and

     (d)  all maintenance is carried out according to the Maintenance Program in
          at least the same manner and with at least the same care, including
          Line Maintenance, maintenance scheduling, modification status and
          technical condition, as is the case with respect to similar engines
          owned or otherwise operated by Lessee.

8.11 REMOVAL OF PARTS

     (A)  GENERAL: Lessee must replace, at its sole expense, in accordance with
          Section 8.11(b) (PERMANENT REPLACEMENT) within sixty (60) days thereof
          or such longer period as Lessor may consent to, such consent not to be
          unreasonably withheld, any Part which is permanently removed from the
          Engine, provided, however, that any Engine which has suffered an Event
          of Loss shall be subject to Section 11.1 (EVENTS OF LOSS). Any Part
          which otherwise is lost, stolen, destroyed, seized, obsolete,
          confiscated, damaged beyond repair or permanently rendered unfit for
          any reason, must be replaced in accordance with Section 8.11(b). Any
          Engine may be installed on an aircraft Lessee owns or leases in
          accordance with Section 8.11(c) (OTHER EQUIPMENT). Lessee shall obtain
          from the lessor of any Related Airframe and from any holder of a
          Security Interest in any Related Airframe an Owner/Mortgagee
          Acknowledgement prior to the installation of such Engine on any
          Related Airframe; provided, however, that in the case of a lease or
          Security Interest, Lessee shall not be required to obtain the
          Owner/Mortgagee Acknowledgement if the applicable lease or security
          interest agreement covering the airframe on which an Engine is
          installed contains an agreement that such Person will not seek to
          acquire, claim or exercise as against Lessor any rights, title or
          interest with respect to such Engine as a result of such Engine being
          installed on such Airframe.

     (B)  PERMANENT REPLACEMENT: If Lessee permanently replaces a Part, subject
          to any additional terms and conditions in the Lease:

          (i)    the replacement part must be in good operating condition, be
                 made by the same manufacturer as the Part it is replacing, have
                 a value and utility the same or better than the Part it is
                 replacing, have as much useful life available until the next
                 scheduled maintenance procedure, be of the same or a more
                 advanced make and model and of the same interchangeable
                 modification status as the Part it is replacing;

          (ii)   the replacement part must have become and remain, until
                 replaced in accordance with this Section 8.11, the property of
                 Owner free from Security Interests (other than Permitted
                 Liens), and subject to the applicable Financing Documents;

                                      -27-


          (iii)  Lessee must have full traceability details of the source and
                 maintenance records of the replacement part and in the case of
                 serialized rotable parts, also have a complete service history
                 acceptable to the FAA; and

          (iv)   comply with the reasonable requirements of the Financing
                 Documents in connection with any such replacement (provided
                 that the terms of the Financing Documents will not be
                 inconsistent with Lessor's covenants under the Lease) including
                 to provide such legal opinions and other documents as may be
                 reasonably required under the Financing Documents.

     (C)  OTHER ENGINE: An Engine may be installed on an aircraft which Lessee
          owns or leases if:

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

          (ii)   Lessee has operational control over the Engine;

          (iii)  Owner keeps the ownership of the Engine; and

          (iv)   the Engine does not become subject to a Security Interest and
                 the Related Airframe is not subject to any Security Interest
                 except a Permitted Lien or a lease or Security Interest
                 described in Section 8.11(a) (GENERAL) above.

(D)  TEMPORARY REPLACEMENT: Lessee may install any part on the Engine as a
     temporary replacement if:

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

     (ii) there is not available a part complying with the requirements of the
          Lease for a replacement part;

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

     (iv) as soon as practicable after a part is installed on the Engine, but
          before the earlier of ninety (90) days after such temporary
          replacement or the Expiry Date, Lessee removes that part and replaces
          it with the original Part (or by a part which complies with Section
          8.11(b) (PERMANENT REPLACEMENT)); and

     (v)  the Insurance for the Engine is not adversely affected.

                                      -28-


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

8.12 EQUIPMENT CHANGES. Lessee will not make any modification or addition to the
     Engine (each an "Equipment Change"), except for an Equipment Change which:

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

          (ii) (w) is approved by the Manufacturer or (x) has a cost
               (including labor) of less than the Modification Approval Amount
               or (y) has the prior written approval of Lessor, and (z) in any
               case, does not diminish the condition, utility, airworthiness
               or value of the Engine.

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

8.13 TITLE TO REPLACEMENT PARTS. Title to any Part that is installed on the
     Engine shall, except in the case of a temporary replacement of a Part, vest
     in Owner solely by virtue of its attachment to the Engine and it shall then
     be subject to the Lease and, if applicable, the Financing Documents, as if
     it were attached to the Engine at Delivery. If so requested by Lessor,
     Lessee will provide a properly executed bill of sale or similar instrument
     to evidence the vesting of good and marketable title, free and clear of any
     Security Interest (except Lessor Liens), to any such replaced part in Owner
     and all documents required under the Financing Documents. After Lessor has
     determined that Lessee has permanently replaced any Part in accordance with
     Section 8.11(b) (REMOVAL OF PARTS) and this Section 8.13, all of Lessor's
     or Owner's rights in the Part that has been replaced shall vest in Lessee
     without further act, without recourse or warranty (except as to the absence
     of Lessor's Liens), on an AS IS, WHERE IS basis, and will at Lessee's
     expense provide or will procure that Owner provides a bill of sale or
     similar instrument as Lessee may reasonably request to evidence such
     transfer. Lessee shall indemnify, on an After-Tax Basis, Lessor, Owner and
     each other Tax Indemnitee for all fees, expenses and Taxes reasonably
     incurred by Lessor, Owner or any other Tax Indemnitee in connection with
     any such transfer, except for Lessor Taxes.

                                      -29-


8.14 OFF-WING STORAGE. If the Engine is not installed on any airframe for a
     continuous period in excess of 30 days, Lessee will store the Engine, at
     Lessee's sole cost, in accordance with the recommendations of Manufacturer
     and the FAA and the requirements of the Air Authority.

9.   INSURANCE

9.1  INSURANCE. Lessee will maintain the Insurance in full force during the
     Term, and thereafter as expressly required in the Lease, which Insurance
     shall be with insurers of nationally or internationally recognized
     responsibility and shall be of the type and covering risks of the kind
     customarily insured against in the industry for comparable operators,
     operating similar aircraft and engines in similar situations as Lessee and
     shall comply with the requirements set forth in Schedule 7 (INSURANCE
     REQUIREMENTS).

9.2  INSURANCE UNDERTAKINGS AND INFORMATION: Lessee will:

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

          (i)    invalidates or may invalidate any Insurance; or

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

     (b)  not take out without the prior written approval of Lessor any
          insurance or reinsurance in respect of the Engine which adversely and
          materially affects the Insurance required to be maintained hereunder;
          and

     (c)  on or prior to each Delivery Date and on or prior to the cancellation,
          lapse or expiration of the insurance policies required hereunder,
          provide to Lessor copies of certificates of insurance and broker's
          letters of undertaking in a form reasonably acceptable to Lessor,
          detailing the coverage and confirming compliance with the specified
          insurance requirements of the Lease and, in the case of broker's
          letters of undertaking, opining that the Insurance complies with the
          requirements of the Lease on or before each renewal date.

9.3  FAILURE TO INSURE. If Lessee fails to maintain any of the Insurance in
     compliance with the Lease:

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

                                      -30-


     (b)  Lessor at any time while such failure is continuing may require the
          Engine to remain at any airport, or such other location where such
          Engine is then located, or to proceed to and remain at any airport, or
          such other location designated by Lessor until the failure is remedied
          to its reasonable satisfaction.

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

10.  INDEMNITY

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

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

          (ii)   any breach by the Lessee of any of its obligations under the
                 Lease, or with respect to any Engine, for any breach by Lessee
                 of its obligations under any agreement for a Related Airframe;
                 or

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

                 For the avoidance of doubt, the reference to "ownership" in
                 clause (i) shall not require Lessee to indemnify Lessor in
                 respect of (y) any defect in Lessor's or Owner's title to the
                 Engine or (z) any decline in residual value of the Engine or
                 any part thereof except to the extent attributable to a breach
                 by Lessee of any of its obligations under the Lease.

     (b)  Lessee is not required to indemnify any particular Indemnitee
          (provided that Lessor and its Subsidiaries and Affiliates and its and
          their officers, directors and employees shall be treated as a single
          Indemnitee) under this Section, to the extent a particular Loss is:

                                      -31-


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

          (ii)   caused by Lessor's breach of the Lease;

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

          (iv)   caused by an event which occurs before the commencement of the
                 Term (except where the Loss is suffered during the Term as a
                 result of a pre-Delivery defect in or otherwise arises out of
                 or relates to or is any way connected with the manufacture,
                 design, maintenance, repair, rebuilding, overhaul or
                 modification of the Engine);

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

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

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

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

          (ix)   a Lessor Lien or attributable to a Lessor Lien;

          (x)    in the case of the Lessor, a Loss relating to, resulting from,
                 arising out of or in connection with a "prohibited transaction"
                 within the meaning of Section 406 of ERISA or
                 Section 4975(c)(1) of the Internal Revenue Code of 1986
                 resulting from the direct or indirect use of assets or any
                 ERISA Plan to acquire or hold Lessor's interest in the Engine
                 or in the case of any transferee of the Lessor, to purchase the
                 Engine from the Lessor;

     (c)  If any Indemnitee becomes aware of a Loss which may give rise to an
          indemnity obligation on the part of Lessee under Section 10(a), such
          Indemnitee shall promptly

                                      -32-


          notify Lessee thereof, and, if so requested by Lessee, the relevant
          Indemnitee shall consult with Lessee to consider what action may
          properly be taken to defend or otherwise resist or mitigate the Loss.
          Following such consultation, and subject to the prior written approval
          of the relevant Indemnitee (such approval not to be unreasonably
          withheld), Lessee or its insurers shall be entitled to take such
          action as the relevant Indemnitee has approved to mitigate or defend
          such Loss in the name of the relevant Indemnitee, provided that:

          (i)    no such action may be taken by Lessee unless the Loss is
                 insured or other adequate provision in respect of the Loss and
                 any associated costs or expenses has been made by Lessee to the
                 reasonable satisfaction of the relevant Indemnitee (having
                 regard to the nature and amount of Loss);

          (ii)   Lessee shall indemnify the relevant Indemnitee in full on
                 demand in respect of any fees, costs or expenses suffered or
                 incurred by the relevant Indemnitee as a result of such Loss,
                 or in connection with any action taken by Lessee as aforesaid;

          (iii)  no Indemnitee shall be prohibited by the foregoing provision
                 from settling or paying any Loss immediately if it is under a
                 legal obligation to do so;

          (iv)   the relevant Indemnitee shall be entitled to terminate any
                 mitigating or Loss defending actions or to prohibit
                 participation by Lessee in the defense of a Loss if the
                 relevant Indemnitee reasonably considers that its reputation
                 may be damaged or its business interests adversely affected by
                 continuing any such mitigation or defending actions or if the
                 Indemnitee reasonably considers that the defense of such Loss
                 should be conducted by it and its own advisers; and

          (v)    failure by any Indemnitee to comply with any of the foregoing
                 provisions of this Section 10(c) shall not prejudice or
                 discharge any of the indemnity obligation of Lessee pursuant to
                 Section 10(a) above.

     (d)  Insured Claims. Notwithstanding any other provision of Section 10 to
          the contrary, in the case of any Loss indemnified by the Lessee
          hereunder which is covered by a policy of insurance maintained by the
          Lessee pursuant to Section 9 hereof or otherwise, it shall be a
          condition of such indemnity with respect to any particular Indemnitee
          that such Indemnitee shall cooperate with the insurers in the exercise
          of their rights to investigate, defend or compromise such Loss as may
          be required to retain the benefits of such insurance with respect to
          such Loss.

     (e)  Subrogation. To the extent that a Loss indemnified by the Lessee under
          Section 10 is in fact paid in full by the Lessee and/or an insurer
          under a policy of insurance maintained by the Lessee, the Lessee
          and/or such insurer as the case may be shall be subrogated to the
          extent of such payment to the rights and remedies of the Indemnitee on
          whose behalf

                                      -33-


          such Loss was paid with respect to the transaction or event giving
          rise to such Loss (other than the rights and remedies in respect of
          insurance policies maintained by such Indemnitee). Should an
          Indemnitee receive any refund, in whole or in part, with respect to
          any Loss paid in full by the Lessee and/or such Insurer hereunder, it
          shall promptly pay over the amount refunded (but not an amount in
          excess of the amount Lessee and/or such insurer has paid to such
          Indemnitee in respect of such Loss) to the Lessee unless an Event of
          Default shall have occurred and be continuing, in which case, provided
          that Lessee shall have paid such Indemnitee all amounts required under
          Section 10, such amounts shall be paid over to Lessor to hold as
          security for Lessee's obligations under the Lease or, if requested by
          Lessee, applied to satisfy such obligations.

     (f)  Non-Parties. If an Indemnitee is not a party to the Lease, Lessee may
          require the Indemnitee to agree in writing, in a form reasonably
          acceptable to Lessee, to the terms of this Section 10 prior to making
          any payment to such Indemnitee hereunder.

11.  EVENTS OF LOSS

11.1 EVENTS OF LOSS

     (a)  If an Event of Loss occurs prior to Delivery of the Engine, the Lease
          will immediately terminate and except as expressly stated in the Lease
          neither party will have any further obligation other than pursuant to
          Section 5.21 (EXPENSES) and Section 3 of SCHEDULE 4 (PRE-DELIVERY
          PROCEDURES AND DELIVERY CONDITION REQUIREMENTS), except that Lessor
          will return any Deposit to Lessee and return to Lessee or cancel any
          Letter of Credit.

     (b)  If an Event of Loss occurs after Delivery, Lessee shall pay or cause
          to be paid the Agreed Value to Lessor on or prior to the earlier of
          (i) ninety (90) days after the occurrence of the Event of Loss and
          (ii) the date of receipt of insurance proceeds in respect of that
          Event of Loss.

     (c)  Subject to the rights of any insurers and reinsurers or other third
          party, upon irrevocable payment in full to Lessor of the Agreed Value
          and all other amounts which are then due or will thereupon become due
          to Lessor under the Lease, and if Lessee requests such transfer,
          Lessor will, or will procure that Owner will, without recourse or
          warranty (except as to the absence of Lessor's Liens) transfer to
          Lessee or will procure that Owner transfers to Lessee legal and
          beneficial title, subject to no Lessor's Liens (but otherwise without
          warranty), to the Engine, on an AS IS, WHERE IS basis, and will at
          Lessee's expense, execute and deliver or will procure that Owner
          executes and delivers such bills of sale and other documents and
          instruments as Lessee may reasonably request to evidence (on the
          public record or otherwise) such transfer, free and clear of all
          rights of Lessor and Lessor Liens. Lessee shall indemnify, on an
          After-Tax Basis, Lessor and Owner and each other Tax Indemnitee for
          all fees, expenses and Taxes incurred by Lessor, Owner or any other
          Tax Indemnitee in connection with any such transfer, except for Lessor
          Taxes.

                                      -34-


11.2 REQUISITION. During any requisition for use or hire of any Engine which
     does not constitute an Event of Loss:

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

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

11.3 NON-INSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS. As between
     the Lessor and the Lessee, any payments on account of an Event of Loss
     (other than insurance proceeds or other payments the application of which
     is provided for in this Section 11 or elsewhere in the Lease, as the case
     may be, or payments in respect of damage to the business or property of the
     Lessee) with respect to the Engine received at any time by the Lessor or by
     the Lessee from any Government Entity or other Person will be applied as
     follows:

     (a)  so much of such payments as shall not exceed the amounts required to
          be paid by the Lessee pursuant to Section 11.1(b) hereof shall be
          applied in reduction of the Lessee's obligation to pay such amounts,
          to the extent not already paid by the Lessee, and, after such amounts
          required to be paid to the Lessor pursuant to Section 11.1(b) above
          shall be paid in full, shall be applied to reimburse the Lessee for
          such amounts up to the full amount thereof, and

     (b)  the balance, if any, of such payment remaining thereafter shall be
          applied to reimburse the Lessee and the Lessor for their reasonable
          costs (including reasonable attorney's fees), if any, of procuring
          such payments, and

     (c)  the balance remaining, if any, shall then be distributed between the
          Lessor and the Lessee as their interests may appear.

                                      -35-


12.  RETURN OF ENGINES

12.1 RETURN. On the Expiry Date or redelivery of the Engine pursuant to Section
     13.2 (RIGHTS AND REMEDIES) or termination of the leasing of the Engine
     under the Lease, Lessee will, unless an Event of Loss has occurred or
     Lessee shall have purchased the Engine pursuant to any purchase option set
     forth in the Lease, redeliver the Engine and the Engine Documents at
     Lessee's expense to Lessor at the Redelivery Location, in accordance with
     the procedures and in compliance with the conditions set forth in Schedule
     6 (PROCEDURES AND OPERATING CONDITION AT REDELIVERY), free and clear of all
     Security Interests (other than Lessor Liens) and in a condition qualifying
     for and having a valid and fully effective FAA Form 8130-3.

12.2 NON-COMPLIANCE. If at the time of Final Inspection Lessee has not fully
     complied with any of its obligations under the Lease (including SCHEDULE 6
     (PROCEDURES AND OPERATING CONDITION AT REDELIVERY)), or Lessee fails to
     make the Engine available to Lessor on a timely basis for inspection and
     redelivery pursuant to Section 12.1 (RETURN) and such SCHEDULE 6 (whether
     such failure is due to any act or omission of Lessee or any other
     circumstance whatsoever), the Term shall be extended until the time when
     the Engine has been redelivered to Lessor in full compliance with the
     Lease, for the sole purpose of enabling such non-compliance or failure to
     be promptly rectified, and during such extension period:

     (a)  Lessee shall not use the Engine in flight operations except those
          related directly to the redelivery of the Engine to Lessor or the
          performance of Lessee's obligations in connection therewith;

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

     (c)  Lessee shall pay Rent to Lessor at a rate per month equal [*],
          calculated on a per diem basis; provided, however, that Lessee shall
          not be responsible for Lessor's failure to accept return of the Engine
          and the Engine Documents in accordance with the requirements hereof in
          a timely manner or for any Rent with respect to periods after Lessee
          has tendered the Engine and the Engine Documents for return in
          accordance with the Lease, provided, however that if Lessor's
          inspection of the Engine and the Engine Documents, which inspection
          shall be conducted in good faith and timely manner, reveals any
          discrepancy from the condition required by the provisions of this
          Section 12 and Schedule 6 hereof, Lessee shall continue to pay
          Rent in accordance with Section 12.2(c) until the Engine and the
          Engine Documents are returned to the Lessor in accordance with the
          Lease.

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

                                      -36-


     prejudice to Lessor's rights to terminate the letting of the Engine and to
     recovery of damages pursuant to Section 13.2 (RIGHTS AND REMEDIES).

     Lessor may elect (either on first tender of the Engine by Lessee or at any
     time during the said extension period) to accept redelivery of the Engine
     notwithstanding non-compliance with Section 12.1 or SCHEDULE 6, in which
     case Lessee will indemnify Lessor on an After-Tax Basis, and provide cash
     to Lessor (in an amount agreed to between Lessor and Lessee) as security
     for that indemnity, in respect of the cost to Lessor of putting the Engine
     into the condition required by the Lease.

12.3 REDELIVERY. Upon redelivery Lessee will provide to Lessor, upon reasonable
     advance notice by Lessor made prior to the Expiry Date, and at Lessor's
     expense, all documents necessary to export the Engine from the United
     States (including a valid and subsisting export license and export
     certificate of airworthiness for the Engine, if applicable).

12.4 ACKNOWLEDGEMENT. Provided Lessee has complied with its obligations under
     this Section 12 and SCHEDULE 6 (PROCEDURES AND OPERATING CONDITION AT
     REDELIVERY), of the Lease, following redelivery of the Engine by Lessee to
     Lessor at the Redelivery Location, Lessor will deliver to Lessee an
     acknowledgement confirming that Lessee has redelivered the Engine to Lessor
     in accordance with the Lease which acknowledgement shall be without
     prejudice to Lessor's accrued and continuing rights under the Lease or any
     Other Agreement.

13.  DEFAULT

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

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

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

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

                                      -37-


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

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

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

                 A.  in the event that Lessor has re-leased the Engine on terms
                     (other than rental payment terms) which, taken as a whole,
                     Lessor reasonably regards as being substantially similar to
                     the terms of the Lease, an amount equal to the aggregate
                     basic rental payments to become due under such re-lease for
                     the period coinciding with the remainder of the Term
                     (determined without reference to any right of Lessor to
                     cancel the leasing of the Engine, whether or not such right
                     is exercised), discounted periodically (equal to instalment
                     frequency) to present worth at the Discount Rate to the
                     date of payment by Lessee; or

                 B.  in the event that Lessor has not re-leased the Engine or
                     has sold the Engine or has re-leased the Engine on terms
                     (other than rental payment terms) which, taken as a whole,
                     Lessor does not reasonably regard as being substantially
                     similar to the terms of the Lease, an amount equal to the
                     fair market rental value (determined pursuant to the
                     Appraisal Procedure) of the Engine for the period
                     commencing with the date that Lessor reasonably anticipates
                     that the Engine could be re-leased at such rental rate and
                     ending with the date that the Term was scheduled to expire
                     (determined without reference to any right of Lessor to
                     cancel the leasing of the Engine, whether or not such right
                     is exercised), discounted periodically (equal to instalment
                     frequency) to present worth at the Discount Rate to the
                     date of payment by Lessee.

          (iii)  all costs and other incidental damages associated with Lessor's
                 exercise of its remedies hereunder or otherwise incurred by
                 Lessor as a result of an Event of Default, including
                 repossession costs, legal fees, Engine storage, maintenance and
                 insurance costs, Engine re-lease or sale costs (including, in
                 the case of a re-lease, any costs incurred to transition the
                 Engine to the next operator's maintenance program) and Lessor's
                 internal costs and expenses (including the cost of personnel
                 time calculated based upon the compensation paid to the

                                      -38-


                 individuals involved on an annual basis and a general Lessor
                 overhead allocation), all such costs and incidental damages
                 being referred to herein collectively as "ENFORCEMENT AND
                 REMARKETING COSTS";

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

          (v)    any loss, cost, expense or liability, or damage to Lessor's
                 residual interest in the Engine, sustained by Lessor due to
                 Lessee's failure to maintain the Engine in accordance with the
                 terms of this Agreement or Lessee's failure to redeliver the
                 Engine in the condition required by this Agreement, including
                 any consequential loss of revenues or profits, all such amounts
                 being referred to herein collectively as "ENGINE CONDITION
                 DAMAGES"; and

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

     (d)  either:

          (i)    enter upon the premises where all or any part of the Engine is
                 located and take immediate possession of and, at Lessor's sole
                 option, remove the Engine, all without liability accruing to
                 Lessor for or by reason of such entry or taking of possession
                 whether for the restoration of damage to property, conversion
                 or otherwise, caused by such entry or taking, except damages
                 caused by gross negligence or willful misconduct; or

          (ii)   by delivering notice to Lessee, require Lessee to redeliver the
                 Engine to Lessor at the Redelivery Location (or such other
                 location as Lessor may require) on the date specified in such
                 notice and in all respects in the condition required by the
                 Lease upon the Return Occasion (it being understood that Lessee
                 shall not delay any such return for the purpose of placing the
                 Engine in such condition, but shall nevertheless be liable to
                 Lessor for the failure of the Engine to be in such condition);
                 and/or

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

     (f)  by written notice to Lessee specifying a payment date (which shall be
          a date not earlier than five (5) Business Days following the date of
          such notice), Lessor may demand that Lessee pay to Lessor, and Lessee
          shall pay to Lessor on the payment date specified in

                                      -39-


          such notice (in lieu of the Rent due for the period commencing after
          the date specified for payment in such notice) the sum of the
          following amounts:

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

          (ii)   an amount [*] (determined without reference to any right of
                 Lessor to cancel the leasing of the Engine, whether or not such
                 right is exercised), [*] specified by Lessee to Lessor, less
                 the applicable amount set forth below:

                 A.  in the event that Lessor has re-leased the Engine on terms
                     (other than rental payment terms) which, taken as a whole,
                     Lessor reasonably regards as being substantially similar to
                     the terms of the Lease, an amount equal to the aggregate
                     basic rental payments to become due under such re-lease for
                     the period coinciding with the remainder of the Term
                     (determined without reference to any right of Lessor to
                     cancel the leasing of the Engine, whether or not such right
                     is exercised), discounted periodically (equal to instalment
                     frequency) to present worth at the Discount Rate to the
                     date of payment by Lessee; or

                 B.  in the event that Lessor has not re-leased the Engine or
                     has sold the Engine or has re-leased the Engine on terms
                     (other than rental payment terms) which, taken as a whole,
                     Lessor does not reasonably regard as being substantially
                     similar to the terms of the Lease, an amount equal to the
                     fair market rental value (determined pursuant to the
                     Appraisal Procedure) of the Engine for the period
                     commencing with the date that Lessor reasonably anticipates
                     that the Engine could be re-leased at such rental rate and
                     ending with the date that the Term was scheduled to expire
                     (determined without reference to any right of Lessor to
                     cancel the leasing of the Engine, whether or not such right
                     is exercised), discounted periodically (equal to
                     installment frequency) to present worth at the Discount
                     Rate to the date of payment by Lessee;

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

          (iv)   such [*]

          (v)    it being understood that, to the extent that any of the
                 foregoing amounts represents an estimate by Lessor of losses,
                 damages, costs or expenses which

                                      -40-


                 Lessor expects to incur, (y) Lessor shall adjust the amount
                 thereof as needed to reflect the actual amount of such losses,
                 damages, costs or expenses incurred by Lessor when
                 substantially all of such amounts become known to Lessor, but
                 Lessee shall nevertheless be obligated to pay the amount
                 demanded by Lessor (subject to such subsequent adjustment), and
                 (z) notwithstanding the amount specified in such demand, Lessor
                 shall be entitled to claim such other (and greater) amount in
                 any action against Lessee hereunder; and/or

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

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

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

     Lessee hereby agrees that, in the event of the return to or repossession by
     Lessor of the Engine or Part, any rights in any warranty (express or
     implied) previously assigned to Lessee or otherwise held by Lessee shall
     without further act, notice or writing be assigned or reassigned to Lessor,
     if assignable.

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

                                      -41-


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

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

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

14.  TRANSFER

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

                                      -42-


14.2 LESSOR. Lessor may, without the consent of Lessee, sell, assign, transfer
     or grant to any Person (other than an airline that is a competitor of
     Lessee), all of Lessor's rights, obligations, title or interest in any
     Engine, and the Lease and Rent in respect thereof. Such Person shall
     execute and deliver to Lessee an agreement assuming the Lessor's
     obligations under the Lease of such Engine, whereupon such Person shall
     become the "Lessor" for all purposes of this Lease, including the rights of
     assignment pursuant to this Section 14.2. Lessor may, without the consent
     of Lessee, assign all of its interest in any Engine and the Lease and Rent
     in respect thereof for security to a Financing Party (other than an airline
     that is a competitor of Lessee) pursuant to Financing Documents, provided
     that such Financing Party shall execute and deliver to Lessee a letter of
     quiet enjoyment in the form attached hereto as Schedule 14. Lessee agrees
     to execute acknowledgments and other documents that may be reasonably
     requested by Lessor or any such Person or Financing Party (an "Assignee").
     Each Assignee will have and may enforce all of the rights and benefits of
     Lessor transferred to it, including without limitation the rights to
     indemnification by Lessee and the right to be named as additional insured
     and loss payee with respect to the insurance policies maintained by Lessee
     pursuant to the Lease; provided, however, that a Financing Party shall only
     be entitled to exercise the rights of Lessor to the exclusion of Lessor and
     upon delivery of a notice to Lessee that Lessor is in default under the
     relevant Financing Documents. Lessor shall reimburse Lessee for all
     reasonable out of pocket costs and expenses incurred by Lessee in
     connection with any assignment or transfer under this Section 14.2. Any
     sale, assignment, transfer or other disposition pursuant to this Section
     14.2 shall not increase the obligations of Lessee under the Lease.
     Notwithstanding any such assignment or transfer, Lessor, Owner, Financing
     Parties' Representative and each other Indemnitee shall continue to be
     entitled to indemnification under Section 10 (INDEMNITY), and shall
     continue to be named as an additional insured under all Insurances referred
     to in Section 9 (INSURANCE) for a period of not less than two years after
     such transfer.

14.3 SUCCESSORS AND ASSIGNS. The terms and provisions of this Lease shall be
     binding upon and inure to the benefit of Lessor, Lessee and their
     respective successors and permitted assigns.

15.  MISCELLANEOUS

15.1 SURVIVAL. Lessee's obligations under any provision of the Lease providing
     for an obligation on the part of Lessee to indemnify Lessor or any other
     Indemnitee shall survive the expiration or any termination of the Lease and
     continue in full force and effect.

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

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

                                      -43-


     discretion thinks fit. Lessor will notify Lessee of any such delegation
     prior to Lessee being required to treat the Person to whom such delegation
     is made as being entitled to exercise the relevant right, power or
     discretion of Lessor, no such delegation will have the effect of modifying
     Lessor's obligations hereunder and Lessee shall be entitled to rely on the
     actions of the Person to whom such delegation is made to the same extent as
     if such Person were the Lessor hereunder.

15.4 SEVERABILITY. If a provision of the Lease is or becomes illegal, invalid or
     unenforceable in any jurisdiction, that will not affect the legality,
     validity or enforceability in that jurisdiction of any other provision of
     the Lease or the legality, validity or enforceability in any other
     jurisdiction of that or any other provision of the Lease.

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

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

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

     All notices shall be directed to the Lessee, Lessor or any other party to
     the Lessee to respective addresses and facsimile numbers set forth in the
     Engine Lease Agreement or such other addresses and facsimile number as any
     such party may designate pursuant to this Section 15.7.


15.8 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL

     (a)  THE PARTIES HERETO AGREE THAT THE LEASE IN ALL RESPECTS SHALL BE
          GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
          OF CALIFORNIA, UNITED STATES, AS APPLIED TO CONTRACTS TO BE PERFORMED
          WHOLLY WITHIN THE STATE OF CALIFORNIA THE PARTIES AGREE THAT THE LEASE
          WAS EXECUTED AND DELIVERED IN THE STATE OF CALIFORNIA.

     (b)  Each party agrees for the benefit of the other party that the United
          States District Court for the Northern District of California and any
          California state court sitting in the City of San Francisco,
          California, are to have non-exclusive jurisdiction to settle any
          disputes

                                      -44-


          arising out of or relating to the Lease and submits itself and its
          property to the non-exclusive jurisdiction of the foregoing courts
          with respect to such disputes.

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

          (i)    appoints Corporation Service Company, d/b/a CSC-Lawyers
                 Incorporating Service, 2730 Gateway Oaks Drive, Suite 100,
                 Sacramento, CA 95833, Phone: (800) 222-2122 or (916) 563-2100,
                 Fax: (916) 563-2121, as its agent for service of process
                 relating to any proceedings before the California courts in
                 connection with the Lease and agrees to maintain the process
                 agent in California notified to Lessor;

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

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

     (d)  Without prejudice to any mode of service, Lessor:

          (i)    appoints C.T. Corporation System, 1350 Treat Boulevard, Suite
                 100, Walnut Creek, CA 94596, as its agent for service of
                 process relating to any proceedings before the California or
                 federal courts in connection with the Leases and agrees to
                 maintain the process agent in California notified to Lessor;

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

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

     (e)  Each of Lessor and Lessee:

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

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

                                      -45-


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

     (f)  Nothing in this Section 15.8 limits the right of either party to bring
          proceedings against the other in connection with the Lease in any
          other court of competent jurisdiction or concurrently in more than one
          jurisdiction.

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

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

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

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

15.9 SOLE AND ENTIRE AGREEMENT; TRUE LEASE; SECTION 1110

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

                                      -46-


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

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

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

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

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

     (C)  SECTION 1110: Lessee acknowledges that Lessor would not have entered
          into the Lease unless it had available to it the benefits of a lessor
          under Section 1110. It is the intention of the parties that the Lessor
          shall be entitled to the benefits of Section 1110 with respect to the
          right to repossess the Engines and Parts as provided herein, and in
          any circumstances where more than one construction of the terms and
          conditions of the Lease is possible, a construction which would
          preserve such benefits, shall control over any construction which
          would not preserve such benefits or would render them doubtful.

15.10 INDEMNITEES. Subject to Section 10(f) hereof, all rights expressed to be
      granted to each Indemnitee (other than Lessor) under the Lease are given
      to Lessor on behalf of that Indemnitee, and each Indemnitee is an express
      third party beneficiary thereof.

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

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

16.  DISCLAIMERS AND WAIVERS

     LESSOR AND LESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND CONFIRMATIONS SET
     FORTH IN SECTIONS 16.1 TO 16.4 BELOW SHALL APPLY AT ALL TIMES DURING THE
     TERM. LESSEE'S ACCEPTANCE OF THE ENGINE IN ACCORDANCE WITH SECTION 4.3
     (DELIVERY AND ACCEPTANCE) SHALL BE CONCLUSIVE EVIDENCE THAT LESSEE HAS
     FULLY INSPECTED THE ENGINE AND

                                      -47-


     EVERY PART THEREOF AND THAT THE ENGINE, THE PARTS AND THE ENGINE DOCUMENTS
     ARE TECHNICALLY ACCEPTABLE TO LESSEE AND SATISFY THE DELIVERY CONDITION
     REQUIREMENTS AND ARE IN SUITABLE CONDITION FOR DELIVERY TO AND ACCEPTANCE
     BY LESSEE.

16.1 DISCLAIMER. THE ENGINE IS LEASED AND DELIVERED UNDER THE LEASE "AS IS,
     WHERE IS," AND LESSEE AGREES AND ACKNOWLEDGES THAT:

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

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

          (i)    ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
                 DIRECTLY OR INDIRECTLY BY THE ENGINE OR BY ANY INADEQUACY
                 THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER
                 CIRCUMSTANCE IN CONNECTION THEREWITH (EXCEPT FOR DIRECT DAMAGES
                 DUE TO LESSOR'S BREACH AS AND TO THE EXTENT EXPRESSLY PROVIDED
                 IN SECTION 7.1 (QUIET ENJOYMENT) HEREOF);

                                      -48-


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

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

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

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

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

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

17.  BROKERS AND OTHER THIRD PARTIES

17.1 NO BROKERS. Each of the parties hereby represents and warrants to the other
     that it has not paid, agreed to pay or caused to be paid directly or
     indirectly in any form, any commission, percentage, contingent fee,
     brokerage or other similar payments of any kind, in connection with the
     establishment or operation of the Lease, to any Person (other than fees
     payable to legal advisers or portfolio services).

17.2 INDEMNITY. Each party agrees to indemnify and hold the other harmless from
     and against any and all claims, suits, damages, costs and expenses
     (including, reasonable legal fees and expenses) asserted by any agent,
     broker or other third party for any commission or compensation of any
     nature whatsoever based upon the Lease or the Engine, if such claim, suit,
     damage, cost or

                                      -49-


     expense arises out of any breach by the indemnifying party, its employees
     or agents of Section 17.1.

18.  ILLEGALITY

If at any time during the Term it is or becomes unlawful for Lessee to perform
any of its obligations under this Agreement, or this Agreement is or becomes
wholly or partly invalid or unenforceable which event, in the judgment of
Lessor, materially and adversely affects the rights of Lessor hereunder, then,
notwithstanding anything contained in Section 15.4 to the contrary, Lessor may
by notice in writing to Lessee (i) request execution of an amendment of this
Agreement in accordance with applicable Law promptly, but in any event no later
than 30 days after such event has occurred, if such amendment, in the reasonable
judgment of Lessor, shall protect and preserve the interests of Lessor under
this Lease, with such amendment to be completed at the sole cost and expense of
Lessee or (ii) terminate the leasing of the Engines under this Lease, whereupon
(x) Lessee shall promptly comply with Section 12, (y) Lessee will indemnify
Lessor on demand against any Losses which Lessor may sustain or incur directly
or indirectly as a result of such unlawfulness, invalidity or unenforceability
and such termination, including (but not limited to) the amounts set forth in
Sections 13.2(c)(i)-(vi), and (z) the provisions of Sections 13.4 shall apply as
if each reference therein to an Event of Default were a reference to the
occurrence of such unlawfulness, invalidity or unenforceability and to such
termination.

                                      -50-


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

CHAUTAUQUA AIRLINES, INC.


By: /s/ Robert H. Cooper
    ---------------------------------

Name: Robert H. Cooper
      ---------------------------------
Title: Vice President
       ---------------------------------


GENERAL ELECTRIC CAPITAL CORPORATION

By: /s/ Norman Liu
    --------------------------------

Name: Norman Liu
      --------------------------------

Title: Vice President
       --------------------------------

                                      -51-


                                   SCHEDULE 1
                                   DEFINITIONS

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

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

AD or AD/CN means an airworthiness directive or equivalent issued by the State
of Design or the State of Registry.

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

AFTER-TAX BASIS means in the case of any amount payable on an "After-Tax Basis"
to or for the benefit of any Person (including any amount payable pursuant to
this definition), after deduction of the net amount of all Taxes (taking into
account any related credit or deductions) required to be paid by such Person
with respect to the receipt or accrual by it of such amount (and assuming that
such Person is subject to (i) United States federal income tax at the highest
marginal statutory rate imposed on corporations in the highest taxable income
bracket for the relevant period, (ii) United States state and local income
taxes, and (iii) income taxes (if any) imposed by countries outside the United
States at, in the case of (ii) and (iii), the actual rates imposed on such
Person, that Person receives the required amount.

AIR AUTHORITY means as of any time of determination, the FAA or other
governmental airworthiness authority having jurisdiction over the Related
Airframe and the Engine under the laws of the country in which such Related
Airframe is then registered.

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

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

CERTIFICATE OF ACCEPTANCE means a certificate of acceptance in the form of
SCHEDULE 5 (CERTIFICATE OF ACCEPTANCE).

                                       1-1


CERTIFICATED AIR CARRIER means any Person holding an "air carrier operating
certificate" issued under Chapter 447 (or any successor provision) of the
Transportation Code for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo.

CITIZEN OF THE UNITED STATES means a "citizen of the United States" within the
meaning of Section 40102(a)(15) (or any successor provision) of the
Transportation Code, or any analogous part of any successor or substituted
legislation or regulation at the time in effect.

CSN means Engine Cycles since new.

CSO means Engine Cycles since overhaul.

CTA has the meaning given in the heading of this Agreement.

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

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

DELIVERY DATE means the date on which Delivery occurs.

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

EMM means the Manufacturer's Engine Maintenance Manual.

ENGINE means each Engine as defined in one or more Engine Lease Agreements,
including any engine stand and any other equipment related to any Engine as
described in and subject to that Engine Lease Agreement and in each case
includes all modules and Parts from time to time belonging to or installed in
that Engine but excludes any properly replaced Part, title to which has passed
to Lessee pursuant to the Lease.

ENGINE CYCLE means operation of an Engine on a Related Airframe from and
including a take-off to and including the landing of that Related Airframe.

ENGINE DOCUMENTS means the documents, data and records identified in the list
attached to the Certificate of Acceptance, and any other documents and records
required in connection with Lessee's obligations under Section 8.8 (RECORDS),
and all additions, renewals, revisions and replacements from time to time made
to any of the foregoing in accordance with the Lease.

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

                                      1-2


ENGINE LEASE AGREEMENT means the Master Engine Lease Agreement and any
subsequent Engine Lease Agreement, entered, or to be entered into, between
Lessor and Lessee with respect to one or more Engines and any related equipment
as further described therein.

ENGINE LEASE SUPPLEMENT means each Engine Lease Supplement, substantially in the
form of Schedule 12 hereto.

ENGINE REFURBISHMENT means, with respect to any Engine, the complete visual
inspection and repair as necessary in accordance with the shop manual of the
combustion section of an Engine in an engine repair/overhaul station, including,
(without limitation) complete unstacking of the high pressure turbine and low
pressure turbine (including both high and low compressors); complete visual
inspection, de-blading of discs as required; visual inspections of all discs;
verification that all snap diameters on discs are within limits; inspection of
all blades for proper chord dimensions and cracking; repair or replacement of
all blades below minimums; inspection and repair of stators as necessary;
blade-up of discs using new lock plates; assembly of rotors in the turbine;
balance of all rotors; and installation of rotors in the Engine.

EQUIPMENT CHANGE has the meaning given in Section 8.12 (EQUIPMENT CHANGE).

ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as amended.

ERISA PLAN means, individually or collectively, an employee benefit plan, as
defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or any
applicable regulation thereunder or a plan or individual retirement account
which is subject to Section 4975(c) of the Internal Revenue Code.

EVENT OF DEFAULT means any event or condition specified in SCHEDULE 9 (EVENTS OF
DEFAULT).

EVENT OF LOSS means any of the following events with respect to any Engine:

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

     (b)  the Engine being destroyed, damaged beyond reasonable economic repair
          (which for this purpose shall mean that the cost of such repair is
          greater than 75% of the replacement cost of such Engine) or
          permanently rendered unfit for normal use for any reason whatsoever;
          or

     (c)  any theft, hijacking or disappearance of the Engine for a period more
          than 45 days or more or, if earlier, for a period that extends until
          the end of the Term; or

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

     (f)  the Engine being confiscated, detained, seized, condemned or
          requisitioned for use or hire by any Government Entity other than the
          United States Government for the lesser of (i) a period of more than
          30 days (or 180 days in the case of requisition for use or hire by

                                      1-3


          the government of the United States Government) or (ii) a period equal
          to or exceeding the remaining balance of the Term; or

     (h)  as a result of any rule, regulation, order or other action by the FAA
          the use of the Engine by Lessee or any Permitted Sub-Lessee shall have
          been prohibited for a period of twelve (12) consecutive months or, if
          earlier, for a period that extends until the end of the Term.

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

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

FAR means the FEDERAL AVIATION REGULATIONS set forth in Title 14 of the U.S.C.
of Federal Regulations, as amended and modified from time to time.

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

FAR PART 145 means Part 145 of the FAR, as amended or modified from time to
time.

FINAL INSPECTION has the meaning given in Section 1.1 of SCHEDULE 6 (PROCEDURES
AND OPERATING CONDITION AT REDELIVERY).

FINANCIAL INDEBTEDNESS means any indebtedness in respect of:

     (a)  moneys borrowed or raised;

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

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

     (d)  any lease agreement; or

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

FINANCIAL INFORMATION means:

     (a)  as soon as available but not in any event later than 60 days after the
          last day of each of the first three fiscal quarters of Lessee, the
          unaudited consolidated financial statements of Lessee (consisting of a
          balance sheet and statements of operations and of retained

                                      1-4


          earnings and cash flows) prepared for the most recent previous fiscal
          quarter certified by a qualified financial officer of Lessee as being
          true and correct and fairly presenting its financial condition and
          results of operation in accordance with GAAP (subject to year-end
          adjustments); and

     (b)  as soon as available but not in any event later than 120 days after
          the last day of each fiscal year of Lessee, the audited combined
          financial statements of Lessee (consisting of a balance sheet and
          statements of operations and of retained earnings and cash flows),
          prepared for the fiscal year then most recently ended certified by the
          independent auditors of Lessee in accordance with GAAP.

FINANCING DOCUMENTS means any mortgage, lease assignment, loan agreement,
conditional sale agreement, head lease or any other documents entered into by
Lessor or Owner with any Financing Party in connection with Lessor's or Owner's
financing of the Engine.

FINANCING PARTY means the Person or Persons from time to time notified by Lessor
to Lessee as providing finance to Lessor in respect of its acquisition,
ownership or leasing of the Engine, whether by way of a head lease, loan or
otherwise.

FINANCING PARTIES' REPRESENTATIVE means any one or more Financing Parties from
time to time notified to Lessee as being the Financing Parties' Representative.

FINANCING STATEMENTS means UCC Financing Statements in respect of the Lease and
the Engines leased thereunder prepared in a form acceptable for filing with the
applicable Government Entities in the state of Lessee's State of Incorporation
and such other jurisdictions as Lessor shall reasonably require.

FOD means foreign object damage.

GAAP means generally accepted accounting principles in the United States.

GE CAPITAL or GECC means General Electric Capital Corporation.

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

GOVERNMENT ENTITY means (a) a national government, political subdivision
thereof, or local jurisdiction therein; (b) any instrumentality, board,
commission, court, or agency of any of the above, however constituted; and (c)
any association, organization, or institution to whose jurisdiction any of the
above is subject.

GUARANTEE means, if applicable, a guarantee in form and substance acceptable to
Lessor in its sole and absolute discretion, and references to the Guaranty
include any replacement or re-issued guaranty.

HABITUAL BASE means the location of the Engine's primary base of operation, as
specified in the Engine Lease Agreement.

                                      1-5


IFSD means in-flight service difficulty.

INSURANCE means the insurance in respect of the Engine in form satisfactory to
Lessor and as required by Lessor, and includes any insurance and reinsurance
required by Section 9 (INSURANCE) and SCHEDULE 7 (INSURANCE REQUIREMENTS).

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

LEASE means the Master Engine Lease Agreement, dated as of December 18, 2001,
between Aviation Financial Services Inc. and Lessee (of which this CTA forms
part), any other Engine Lease Agreement for an Engine (of which this CTA forms a
part), any schedules or documents executed pursuant to the Schedules hereto or
pursuant to the Engine Lease Agreement, any Engine Lease Supplement to the
Lease, and any side letters related to the Lease.

LEASE TERMINATION means a Certificate of Lease Termination, substantially in the
form of Schedule 10 (FORM OF LEASE TERMINATION CERTIFICATE).

LESSEE CONDITIONS PRECEDENT means the conditions specified in Part B of SCHEDULE
3 (CONDITIONS PRECEDENT).

LESSOR means the Person named as Lessor in the applicable Engine Lease
Agreement.

LESSOR CONDITIONS PRECEDENT means the conditions specified in Part A of SCHEDULE
3 (CONDITIONS PRECEDENT).

LESSOR LIEN means (i) any Security Interest whatsoever from time to time created
by Lessor or Owner in connection with the financing of the Engine, including the
Financing Documents, (ii) any other Security Interest in the Engine which
results from acts or omissions of or claims against Lessor or Owner (or any
Person claiming through Lessor or Owner) that do not relate to the transactions
contemplated by the Lease and is not attributable to Lessee or Lessee's use or
possession of the Engine or any Related Aircraft, (iii) Taxes or Losses imposed
against the Lessor which are not required to be indemnified against by the
Lessee pursuant to any of the terms of the Lease, or (iv) claims against the
Lessor arising from the transfer by the Lessor of its interests in the Engine
other than a transfer of the Engine or any part hereof pursuant to Section 3.5
of the Engine Lease Agreement and Sections 8.11(a), 8.11(c), 8.11(d), 8.12, 11
and 13.2 of this CTA;

LESSOR TAXES means Taxes for which Lessee is not obligated to indemnify Lessor
and/or Owner and/or a Financing Party as provided in Section 5.8 (LESSOR TAXES).

                                      1-6


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

LINE MAINTENANCE means with respect to any Engine, routine scheduled line
maintenance of any Engine, including without limitation, preventive maintenance
tests, system checks and related necessary work as recommended by Manufacturer
or required by the Air Authority.

LLP means life limited Parts.

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

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

MAINTENANCE PERFORMER means any Authorized Facility (as defined in the Fleet
Hour Agreement), Manufacturer or such other Person as is approved by the Air
Authority to perform maintenance and/or modification services on commercial
aircraft engines, which Person shall be agreed by Lessee and Lessor to have
recognized standing and experience, and suitable facilities and equipment to
perform such services on aircraft engines of the same or improved model as the
Engines.

MAINTENANCE PROGRAM means an FAA approved maintenance program for the Engine in
accordance with the Manufacturer's specifications, planning documents,
maintenance manuals and documents and encompassing scheduled maintenance,
condition-monitored maintenance, and/or on-condition maintenance of Engines and
Parts, including servicing, testing, preventive maintenance, repairs, structural
inspections, system checks, overhauls, approved modifications, SBs, engineering
orders, ADs, corrosion control, inspections and treatments.

MANUFACTURER means the manufacturer of each Engine or any separate item of
Equipment as identified in Schedule A to each Engine Lease Agreement.

MODIFICATION APPROVAL AMOUNT means $50,000.

MMPD means Manufacturer's Maintenance Planning Document.

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

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

                                      1-7


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

OWNER/MORTGAGEE ACKNOWLEDGEMENT means an executed acknowledgement substantially
in the form of SCHEDULE 11 (AIRCRAFT OWNER/MORTGAGEE ACKNOWLEDGEMENT).

PART means, whether or not installed on any Engine:

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

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

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

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

PERMITTED LIEN means:

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

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

     (c)  any Lessor Lien;

     (d)  rights of others under any sub-lease or arrangements to the extent
          expressly permitted under Section 8.4 (SUBLEASING) and Section 8.11(e)
          (PARTS POOLING);

     (e)  respective rights of the parties to the Lease as provided in the
          Lease; and

     (f)  salvage and similar rights of insurers under policies of insurance
          maintained with respect to the Engine;

but only if (in the case of a contested lien in both (a) and (b)) (i) adequate
reserves have been provided by Lessee for the payment of such Taxes or
obligations; and (ii) such proceedings, or the continued existence of the lien,
do not give rise in the sole judgement of Lessor to any non-deminimis risk of
the sale,

                                      1-8


forfeiture or other loss of the Engine or any interest therein or of criminal
liability on the part of Lessor or Owner.

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

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

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

PRE-DELIVERY PROCEDURE means the procedure leading to Delivery as specified in
SCHEDULE 4 (PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION REQUIREMENTS).

QEC MEANS quick engine change kits as specified in the Engine Lease Agreement.

REGULATIONS means any Law or regulation, official directive or recommendation,
mandatory requirement, or contractual undertaking, or airworthiness requirements
or limitations issued by a Governmental Entity, which applies to Lessee or the
Engine and any Law or regulation, official directive or recommendation or
mandatory requirement issued by a Governmental Entity which applies to Lessor,
Owner, Financing Parties' Representative or GECAS.

RELATED AIRFRAME means with respect to any Engine, the airframe on which such
Engine is, or is to be, installed, as identified in the Engine Lease Agreement
or otherwise, but such airframe shall be a Related Airframe only so long as the
Engine is so installed thereon, being installed thereon or being removed
therefrom.

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

RENT DATE means the first day of each Rental Period.

REQUIRED LC EXPIRY DATE means the date being sixty-one (61) days after the
Expiry Date.

RETURN OCCASION means the date on which the Engine is redelivered to Lessor in
accordance with Section 12 (RETURN OF ENGINES).

SB means service bulletin.

SCHEDULED DELIVERY DATE is defined in the Engine Lease Agreement or, if no such
date is defined therein, the date notified to Lessee by Lessor pursuant to
Section 4.1(a).

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

                                      1-9


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

SPECIAL DEFAULT means the occurrence of any Default or Event of Default referred
to in Clauses (a), (f) or (m) of Schedule 9 of this Agreement.

STATE OF DESIGN means the state having jurisdiction over the Person responsible
for the type design of the Engine or Part.

STATE OF INCORPORATION means the state of organization of the applicable Person
as identified in the heading of the Engine Lease Agreement.

STATE OF REGISTRY means the state of registry of any Related Airframe.

SUBSIDIARY means:

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

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

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

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

TECHNICAL REPORT means a monthly report of the Engine Flight Hours and Engine
Cycles operated by the each Engine in respect of each calendar month in the form
reasonably required by Lessor.

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

TRANSPORTATION CODE means Title 49 of the U.S.C. subtitle VII, as amended and in
effect on the date of the Lease or as subsequently amended, or any successor or
substituted legislation at the time in effect and applicable, and the
regulations promulgated pursuant thereto.

TSN means time (Engine Flight Hours) since new.

TSO means time (Engine Flight Hours) since overhaul.

                                      1-10


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

UNITED STATES means the United States of America.

UNITED STATES GOVERNMENT means the United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and credit
of the United States of America.

U.S.C. means the UNITED STATES CODE.

The terms AD COMPLIANCE PERIOD, AGREED VALUE, ANNUAL SUPPLEMENTAL RENT
ADJUSTMENT, ASSUMED RATIO, DAMAGE NOTIFICATION THRESHOLD, DEDUCTIBLE AMOUNT,
DELIVERY CONDITION REQUIREMENTS, DELIVERY LOCATION, DEPOSIT, DISCOUNT RATE,
ENGINE CYCLES RESTRICTION, ENGINE FLIGHT HOURS RESTRICTION, ENGINE LLP
SUPPLEMENTAL RENT, ENGINE SUPPLEMENTAL RENT, FLEET HOUR AGREEMENT, FHA
ASSIGNMENT AGREEMENT, GUARANTOR, INDEMNITEE, INTEREST RATE, LESSEE, LESSOR,
LESSOR'S ACCOUNT, LRU, MANUFACTURER, MINIMUM COMPONENT CALENDAR LIFE, MINIMUM
ENGINE CYCLES, MINIMUM ENGINE FLIGHT HOURS, MINIMUM LIABILITY COVERAGE, OWNER,
PRE-APPROVED BANK, PURCHASE AGREEMENT, REDELIVERY LOCATION, RENT, RENT
COMMENCEMENT DATE, SCHEDULED DELIVERY MONTH, SCHEDULED EXPIRY DATE, SPARES
DEDUCTIBLE AMOUNT, and TAX INDEMNITEE are all defined in the Engine Lease
Agreement.

                                      1-11


                                   SCHEDULE 2
                         REPRESENTATIONS AND WARRANTIES

1.1  LESSEE'S REPRESENTATIONS AND WARRANTIES

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

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

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

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

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

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

     (f)  LITIGATION: Except as disclosed by Lessee to Lessor prior to the date
          of the execution of the Lease and the Delivery Date, it is not
          involved in any litigation or other dispute which may reasonably be
          expected to materially and adversely affect its financial condition or
          its ability to perform its obligations under the Lease.

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

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

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

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

                                       2-1


     (i)  LOCATION: Lessee's chief executive office (as that term is defined in
          Article 9 of the UCC) is located at the address set forth in the
          heading of the Engine Lease Agreement; the "location" (as such term is
          used in Section 9-307 of the UCC) of the Lessee is its State of
          Incorporation and the records of the Lessee concerning the Engine are
          maintained at such chief executive office or at the Habitual Base of
          the Engine.

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

     (k)  CITIZEN OF THE UNITED STATES: Lessee is a "Citizen of the United
          States".

     (l)  ERISA: Lessee has not established and does not maintain or contribute
          to any employee plan that is covered by Title IV of ERISA.

1.2  LESSOR'S REPRESENTATIONS AND WARRANTIES

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

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

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

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

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

     (e)  OWNERSHIP: At Delivery, Lessor will possess such interest in the
          Engine as will entitle it to lease the Engine to Lessee and perform
          its obligations in accordance with this Lease.

     (f)  LITIGATION: Except as disclosed by Lessor to Lessee prior to the date
          of the execution of the Lease and the Delivery Date, it is not
          involved in any litigation or other dispute which may reasonably be
          expected to materially and adversely affect its financial condition or
          its ability to perform its obligations under the Lease.

     (g)  ERISA: The funds to be used by the Lessor to acquire its interests in
          any Engine do not constitute assets (within the meaning of ERISA and
          any applicable rules and regulations) of an ERISA plan.

                                      2-2


     (h)  CITIZEN OF THE UNITED STATES: Lessor is a Citizen of the United
          States.

     (i)  LIENS: There are no Lessor Liens on the Engine other than any Lessor
          Lien consisting of the interest of an Owner or Financing Parties'
          Representative, or both, which Owner or Financing Parties'
          Representative has furnished to Lessee, or at Delivery shall furnish
          to Lessee, a letter of quiet enjoyment in the form of Schedule 14
          hereto.

                                      2-3


                                   SCHEDULE 3
                              CONDITIONS PRECEDENT

PART A - LESSOR CONDITIONS PRECEDENT

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

1.1  PRELIMINARY CONDITIONS

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

     (a)  OPINION(S): a signed original (or facsimile transmission thereof) of
          the opinion(s) substantially conforming to SCHEDULE 8(a) that will be
          issued on the Delivery Date by Lessee's General Counsel and SCHEDULE
          8(b) that will be issued on the Delivery Date by Fulbright & Jaworski
          L.L.P.;

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

     (c)  LICENSES: copies of Lessee's air transport license, air carrier
          operating certificate, air operator's certificates, including
          authority to operate the Engine under FAR Part 121, and a Certificate
          of Public Convenience and Necessity issued under Section 40102 of
          Title 49 of U.S.C. or, if outside the United States, the equivalent of
          such certificates and a Certificate of Airworthiness and Registration
          for each Related Airframe;

     (d)  TITLE: copies of the historical bills of sale for the Engine
          establishing valid title thereto;

     (e)  UCC: Financing Statement with respect to the Lease and the Engine in a
          form reasonably acceptable to Lessor shall have been prepared by
          Lessee to be filed in each jurisdiction reasonably requested by
          Lessor;

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

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

1.2  FINAL CONDITIONS

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

          (i)    CERTIFICATE OF ACCEPTANCE AND ENGINE LEASE SUPPLEMENT: each of
                 the Certificate of Acceptance, and Lease Supplement, dated and
                 fully completed, and


                                      3-1


                 executed by Lessee, and, in the case of the Lease Supplement,
                 filed (together with the CTA) for recording at the FAA;

          (ii)   OPINIONS: a signed original (or facsimile transmission thereof)
                 of each of the opinions referred to in Section 1.1(a) of this
                 SCHEDULE 3, dated the Delivery Date;

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

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

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

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

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

          (viii) LESSEE'S MAINTENANCE PROGRAM: such information and documents
                 relating to the Lessee's Maintenance Program as Lessor may
                 reasonably request in a timely manner prior to Delivery;

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

          (x)    FAA OPINION: evidence that there will be issued an opinion of
                 Daugherty, Fowler, Peregrin & Haught, a Professional
                 Corporation, special FAA counsel, with regard to FAA
                 registration matters in a form reasonably acceptable to Lessor
                 as to the due filing for recordation of the Lease and, if
                 applicable, the Financing Documents, (the costs for which shall
                 be paid by Lessee);

          (xi)   CERTIFICATE OF LEASE TERMINATION: a certificate of lease
                 termination executed by a duly authorized officer of Lessee
                 substantially in the form of Schedule 11 acknowledging that the
                 Lease is no longer in effect with respect to the Engine, which

                                      3-2


                 certificate Lessor will hold in escrow to be filed at the FAA
                 upon the expiration or other termination of the Lease;

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

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

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

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

     (d)  PURCHASE AGREEMENT: if Lessor is to acquire any Engine from Lessee,
          then Lessor or an affiliate of Lessor and Lessee shall have executed
          the Purchase Agreement with respect to such Engine, no default or
          breach of the Purchase Agreement by Lessee shall have occurred and be
          continuing and Lessor has accepted delivery of the Engine in
          accordance with the terms and conditions of the Purchase Agreement;

     (e)  MATERIAL ADVERSE CHANGE: there shall have been no material adverse
          change in the financial condition or operations of Lessee or in the
          ability of Lessee to comply with its obligations under the Lease since
          (1) September 30, 2001 with respect to the initial Delivery of Engines
          hereunder, or (2) the date of the most recent Financial Information
          furnished to Lessor hereunder, in the case of each Delivery following
          the initial Delivery of Engines hereunder; and

     (f)  GENERAL: such other documents as Lessor may reasonably request in a
          timely manner prior to Delivery.

PART B - LESSEE CONDITIONS PRECEDENT

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

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

                                      3-3


          (i)    ENGINE LEASE AGREEMENT: the applicable Engine Lease Agreement,
                 dated and executed by Lessor and filed (together with the CTA)
                 for recording at the FAA; and

          (ii)   ACKNOWLEDGEMENT RE QUIET ENJOYMENT: if Lessee is required to
                 deliver an acknowledgement of or agreement with respect to the
                 assignment by Lessor of the Lease to Owner or Financing
                 Parties' Representative, a letter of quiet enjoyment in the
                 form of Schedule 14 hereto;

          (iii)  FAA OPINION: evidence that there will be issued an opinion of
                 Daugherty, Fowler, Peregrin & Haught, a Professional
                 Corporation, special FAA counsel, with regard to FAA
                 registration matters in a form reasonably acceptable to Lessor
                 as to the due filing for recordation of the Lease and, if
                 applicable, the Financing Documents, (the costs for which shall
                 be paid by Lessee);

     (b)  REPRESENTATIONS/WARRANTIES: the representations and warranties of
          Lessor in SECTION 1.2 OF SCHEDULE 2 (LESSOR'S REPRESENTATIONS AND
          WARRANTIES) shall be true and correct in all material respects, and
          would be true and correct in all material respects if repeated on
          Delivery Date; and

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

     (d)  PURCHASE AGREEMENT: if Lessor is to acquire any Engine from Lessee,
          then Lessor or an affiliate of Lessor and Lessee shall have executed
          the Purchase Agreement with respect to such Engine, no default or
          breach of the Purchase Agreement by Lessor shall have occurred and be
          continuing and Lessor has accepted delivery of the Engine in
          accordance with the terms and conditions of the Purchase Agreement;

     (e)  GENERAL: such other documents as Lessee may reasonably request in a
          timely manner prior to Delivery.

                                      3-4


                                   SCHEDULE 4

                             PRE-DELIVERY PROCEDURES

                                       AND

                         DELIVERY CONDITION REQUIREMENTS

1.   LICENSES

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

     (b)  Lessor will provide Lessee with any required data and information
          relating to the Engine or Lessor as are reasonably available to Lessor
          for the purposes of obtaining any such licenses, permits or approvals.

2.   INSPECTION

     (a)  Subject to any applicable lease agreement or purchase agreement,
          Lessee may inspect the Engine (including a test cell or power
          assurance run) to ensure that the Engine fulfils the Delivery
          Condition Requirements.

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

     (c)  If Lessor notifies Lessee that it does not intend to correct the
          defect, either party may terminate the Lease.

     If the Engine has been purchased from Lessee (or one of its Affiliates) by
     Owner and immediately leased back by Lessor to Lessee, the provisions of
     this Section 2 shall not apply to the leasing of the Engine.

3.   INDEMNITY

     Lessee is responsible for and will indemnify each Indemnitee against all
     Losses arising from death or injury to any observer, representative or any
     employee of Lessee in connection with the inspection of the Engine whether
     or not such Losses arise out of or are attributable to any act or omission,
     negligent or otherwise, of any Indemnitee.

                                      4-1


                                   SCHEDULE 5

                            CERTIFICATE OF ACCEPTANCE

This Certificate of Acceptance is delivered, on the date set out below by
[LESSEE]("LESSEE"), to [Name of Lessor] ("LESSOR"), pursuant to the Common Terms
Agreement, dated ___________, between Lessor and Lessee and the Engine Lease
Agreement, dated ___________, between Lessor and Lessee incorporation the terms
of the Common Terms Agreement (the "AGREEMENT"). The capitalized terms used in
this Certificate shall have the meaning given to such terms in the Agreement.

1.   DETAILS OF ACCEPTANCE

Lessee hereby confirms to Lessor that Lessee has at [ ] o'clock on this _____
day of __________, ______, at ________, accepted delivery of the following:

(a) [         ] Engine:

     Manufacturer's Serial Number: ______________

(b)  Engine Document Check List:  as attached hereto

(c)  QEC Check List:  as attached hereto.

(d)  LRU Check List:  as attached hereto.

(e)  Other Accessories Check List:  as attached hereto.

(f)  Engine stand/Engine cover:  as attached hereto.

(g)  Data Plate certification:  as attached hereto.

2.   HOURS AND CYCLES DATA (AS OF DELIVERY DATE)

   ENGINE:

   Number of Engine Flight Hours since new: _______________ hours

   Number of Engine Flight Hours since last refurbishment: ________________
   hours

   Number of Engine Flight Cycles since new: _______________cycles

   Number of Engine Flight Cycles since last refurbishment: _______________
   cycles

   Disk Sheet:

                                       5-1


   Hot Section Inspection:

   Interval: ___________________________

   Time Since (S/N __________) : ______________

   Time Remaining to First Restriction:

   Hours: _____________ Restriction: _____________

   Cycles: _____________ Restriction: _____________

   Average Cycles in LLP (see attached Schedule): _______________

3.   ACCEPTANCE:

     Lessee hereby confirms that the Engine, engine stand, QEC, Parts and Engine
     Documents described in this Certificate of Acceptance have been received;
     (ii) the Engine has been duly marked with the Nameplate in accordance with
     the terms of Section 8.6(a)(i) of the Lease; (iii) the Engine is insured as
     required by the Lease; (iv) the representations and warranties of Lessee
     referred to in Section 2.1 (LESSEE'S REPRESENTATIONS AND WARRANTIES) of
     Schedule 2 of the Lease are hereby repeated with effect as of the date
     first above written (or, to the extent that any such representation and
     warranty expressly relates to an earlier date, true and correct as of such
     earlier date); (v) having inspected the Engine, Lessee acknowledges that
     the Engine satisfies all conditions required for Lessee's acceptance of
     delivery as set forth in the Lease; and (vi) the execution and delivery of
     this Certificate signifies absolute and irrevocable acceptance by Lessee of
     the Engine for all purposes hereof and of the Lease.

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

LESSEE:                                      LESSOR:

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

                                      5-2


                                   SCHEDULE 6


                PROCEDURES AND OPERATING CONDITION AT REDELIVERY

                                    (ENGINES)

On the Return Occasion of the Engine, subject to ordinary wear and tear of a
kind and to an extent consistent with similar engines engaged in commercial
airline operations, will be redelivered to Lessor by Lessee in accordance with
the procedures and in any event in the condition set out below.

1.1  FINAL INSPECTION


Immediately prior to the Return Occasion, Lessee will make the Engine available
to Lessor for inspection ("FINAL INSPECTION") in order to verify that the
condition of the Engine complies with the Lease. The Final Inspection will
include, and be long enough (and Lessor will reasonably endeavor to complete
such Final Inspection within 30 days) to permit Lessor, in good faith, to:

     (a)  inspect the Engine Documents;

     (b)  observe a test cell run if the Engine has undergone a shop visit
          immediately prior to redelivery, or an engine maximum power assurance
          run, in accordance with the EMM, at Lessee's cost;

     (c)  following the test cell run or the engine maximum power assurance run,
          inspect the Engine and the uninstalled Parts, including a complete
          video borescope inspection of all stages of (A) the low pressure and
          high pressure compressors (performed by cold section video borescope)
          and (B) the high pressure turbine and low pressure turbine modules
          (performed by hot section video borescope).

Furthermore, Lessee acknowledges that the next operator of the Engine will need
to inspect the Engine and the Engine Documents prior to redelivery and Lessee
hereby agrees to cooperate with Lessor and/or such next operator in order to
coordinate and grant access for inspections and/or meetings as reasonably
necessary.

Lessor shall be responsible for and shall indemnify Lessee against all Losses
arising from the death or injury to any observer or any employee of Lessor in
connection with the inspection of the Engine under this Clause 1.1 whether or
not such Losses arise out of or are attributable to any act or omission,
negligent or otherwise of Lessee.

1.2  GENERAL CONDITION

The Engine will:

     (a)  be in at least as good operating and physical condition, excluding
          normal wear and tear, as when delivered to Lessee by Lessor, subject
          to ordinary operating wear and tear and changes and alterations
          properly made by Lessee as permitted under, and otherwise in
          accordance with, the Lease. The Engine will have been maintained to at
          least the same standard and modification status as other similar
          engines within Lessee's fleet. The Engine will be free of any
          concessions, technical variances, repairs or modifications not
          approved

                                      6-1


          by Manufacturer, maintenance deferrals, carry-overs, extensions or any
          on-watch items requiring a special, reduced period or out of sequence
          inspection or maintenance;

     (b)  be fully serviceable as evidenced by Lessee's Air Authority
          serviceability tag in accordance with the Maintenance Program and an
          FAA Form 8130-3 or JAA Form One;

     (c)  be in such condition as to permit the immediate use in commercial
          airline service under the current regulations of the FAA or Air
          Authority (including FAA shop release documentation if reasonably
          requested by Lessor);

     (d)  have complete back to birth records available for all LLP and
          components;

     (e)  have engine trend monitoring data evidencing no adverse trends or rate
          of deterioration or operating abnormality which would require
          corrective action or a shop visit in advance of next scheduled shop
          visit;

     (f)  have a non-incident statement signed by Lessee;

     (g)  be operating within the limits established by Manufacturer;

     (h)  be in compliance with the FAA and Air Authority's ADs and mandatory
          SBs the compliance with which is required on or before the date Lessor
          accepts redelivery or completion within the AD Compliance period,
          accompanied by records showing the method and date of compliance and
          compliance documents showing accomplishment with no variance,
          extension, carry-overs or deferrals. Any airworthiness directives of
          the Air Authority or FAA which must be completed on a terminating
          action basis by the Lessee on other engines of the same type in its
          fleet will be performed on a terminating action basis by Lessee at
          Lessee's cost;

     (i)  have installed the full complement of equipment, parts, accessories,
          furnishings and loose equipment, as when originally delivered to
          Lessee and as normally installed in the Engine for continued regular
          service, and will be in the same external configuration as when
          originally delivered to Lessee except for Engine changes permitted or
          required by the Lease;

     (j)  have no open, deferred, continued, carry over or placarded log book
          items; and

     (k)  have the Nameplate as at Delivery or as changed due to engine
          enhancements or changes.

1.3  COMPONENTS

(a)  Each Engine Flight Hour and Engine Cycle controlled Hard Time Component
     shall have not less than the Minimum Hard Time Component Flight Hours and
     the Minimum Hard Time Component Cycles of life remaining to the next
     expected Engine Refurbishment based on the Manufacturer's mean time between
     removals for such Engine and shall be supported by appropriate
     certification documentation indicating TSN, CSN, TSO and CSO such as JAA
     Form One or FAA Form 8130-1; for this purpose "HARD TIME COMPONENT" means
     any component which has a limited on-wing life in accordance with the
     Maintenance Program and which can have life fully restored through
     appropriate maintenance;

                                      6-2


(b)  Each calendar-limited component including safety equipment will have not
     less than its Minimum Component Calendar Life remaining to the next
     scheduled removal in accordance with the Maintenance Program;

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

If the Engine will not meet these conditions without a shop visit in the six
months preceding termination of the Lease, Lessee will consult with Lessor prior
to committing the Engine to the shop and Lessor will re-evaluate the requirement
for maximum time since shop visit based on the then current circumstances. All
components (excluding LLP) shall have a minimum of fifty percent (50%) life
remaining (Engine Flight Hours, Engine Cycles or months whichever is applicable
and most limiting). Average total time since new on installed components and
Parts in the aggregate shall have no more than one hundred ten percent (110%) of
the total time on the Engine.

1.4  ENGINES:

     Each Engine will:

     (a)  have not less than the Minimum Engine Flight Hours life remaining to
          the next expected removal and each of the LLPs shall have not less
          than the Engine Cycles Restriction release life remaining. The
          expected life remaining will be determined by the inspection and
          checks accomplished by Lessor in accordance with the Lease;

     (b)  be free of all Security Interests, other than Security Interests
          granted by Lessor;

     (c)  have undergone the inspections as set forth in Section 1.1(b) and (c)
          herein. If any inspection procedure identifies any Engine defect(s)
          that causes the Engine to be unserviceable, Lessee will immediately
          notify Lessor in writing, correct such defect(s) at Lessee's cost and
          provide evidence satisfactory to Lessor that defects have been
          corrected in accordance with the EMM and the Maintenance Program;

     (d)  be prepared for shipment for long-term storage in accordance with
          Manufacturer's recommendations;

     (e)  be zero time since the last complete hot and cold section video
          borescope inspection in accordance with Manufacturer's and the Related
          Airframe manufacturer's maintenance manual and will be in compliance
          with requirements of the EMM, Lessee's operations specifications, and
          the requirements and recommendations of the Air Authority;

     (f)  together with installed components, not be subject to any reduced
          frequency inspections in comparison to the Related Airframe
          manufacturer's maintenance manual limits;

     (g)  immediately prior to redelivery, will have the required EGT Margin. In
          addition, the EGT Margin shall be sufficient, and the Engine shall
          otherwise be in a condition, to permit the operation of the Engine for
          at least the Minimum Engine Flight Hours until its next expected
          Engine Refurbishment. The Engine shall have performance
          characteristics consistent with engines of a similar manufacturer,
          made, model, thrust, age and time since performance restoration and,
          if (i) fresh from an Engine Refurbishment, be zero time since a full
          parameter test cell run which will demonstrate, including at full
          take-off power, performance characteristics consistent with Lessee's
          approved Related Airframe operating requirements, or (ii) the Engine
          has been removed from an aircraft immediately prior to redelivery,
          will

                                      6-3


          have performed an on-wing maximum power assurance run demonstrating
          maximum permitted power take-off performance as per Lessee's Related
          Airframe operating requirement. In all cases, the engine condition
          monitoring (ECM) data will be available for Lessor's review, will
          cover periods of installation sufficient to have initialized a
          baseline on the trend plot and will exhibit no abnormal trends or
          acceleration in the deterioration of the performance of the Engine;

     (h)  Lessee will bear all costs of packaging, including the provision of an
          engine shipping stand, transportation, including the return of the
          engine stand to Lessee (if applicable), insurance duties, taxes and
          other costs associated with the return of the Engine, Delivered Duty
          Paid (INCOTERMS 2000) to the Redelivery Location. Any vehicles and
          trailers used for shipment of the Engine shall be air ride equipped.
          On a given shipment, such vehicle shall be dedicated to the Engine
          belonging solely to Lessor; except, that (i) the Engine or other
          related equipment may be off-loaded at the Redelivery Location without
          disturbing any of the additional items included in such shipment; and
          (ii) Lessee shall not handle or reposition any of the additional items
          included in such shipment on such vehicle;

     (i)  have no defect which places less than the Minimum Engine Flight Hours
          and the Engine Cycles Restriction of remaining life, each including in
          respect of LLPs, pursuant to Manufacturer's or Air Authority's
          requirements until removal.

1.5  ENGINE DOCUMENTS:

The Engine Documents will:

     (a)  be delivered by Lessee to Lessor, together with the records generated
          by Lessee and records maintained or obtained, or required to be
          maintained or obtained, under the applicable rules and regulations of
          the Air Authority or any other applicable Law. With respect to any
          Part installed by Lessee during the Term and not removed prior to
          Redelivery, the records returned to Lessor will include: (i) part
          number, description and serial number (if Part is serialized); (ii)
          historical record, including but not limited to (A) serviceability
          status at installation, (B) for a time-controlled Part, total time and
          cycles, time and cycles since overhaul as may be applicable, and total
          time and cycles of the Engine at the time of Part installation, and
          (C) for an LLP, "back-to-birth" documentation tracing usage of the
          Part since new. The Engine Documents will be accurate and complete and
          satisfy all other requirements so as to permit immediate use of the
          Engine under the rules and regulations of the Air Authority. At
          minimum, the Engine Documents shall include the following:

          1.     Certified statement as to Engine Flight Hours and Engine Cycles
                 since overhaul on each Engine module.

          2.     Engine Log Book (as applicable to Lessee's records keeping
                 system).

          3.     Engine Master Record (record of installation and removal and
                 accumulated Engine Flight Hours and Engine Cycles).

          4.     Accessory status (including description, part number, serial
                 number, date and time installed, and current time since
                 overhaul).

                                      6-4


          5.     Record of last overhaul (FAA Form 8130-3 or JAA Form One) for
                 each of the accessory rotables requiring overhaul on a time
                 specified basis.

          6.     Repair, overhaul and inspection records for each shop visit
                 since and including the last overhaul of each module.

          7.     Documents demonstrating installation and full traceability to
                 new for each LLP.

          8.     Engine condition monitoring report.

          9.     Most recent engine borescope (if videotaped, include copy of
                 video).

          10.    Most recent fuel, oil sampling, magnetic chip detector and
                 vibration survey results (as available).

          11.    Most recent on-wing ground performance run.

          12.    Last certified test cell run if the Engine has undergone a shop
                 visit immediately prior to redelivery.

          13.    Manufacturer delivery documents.

          14.    Engine oil used.

          15.    Any incidents during operation since last shop visit with
                 action taken (e.g. IFSD/FOD/oil loss, etc.).

(b)  Summary Records. Lessee shall cause each of the following Engine Documents
     to be complete including any update required to reflect work performed in
     preparation for return to Lessor. Each summary report shall be certified by
     signature of Lessee's Director of Quality Assurance or Director of Quality
     Control as being a complete and accurate description of Engine status at
     return to Lessor.

          1.     AD/CN Applicability and Compliance Status. Listings will
                 include all AD/CNs issued by the Air Authority against the
                 model and series of each item and will clearly identify any
                 exemptions, waivers or alternate means of compliance granted by
                 the Air Authority to the operator. In addition to other
                 pertinent data, the documents shall include Manufacturer's
                 SB(s) reference, AD/CN and SB revision numbers, method of
                 compliance, date and time (Engine Flight Hours and Engine
                 Cycles) of accomplishment, status (terminated, repetitive,
                 open), and next due.

          2.     Manufacturer SB Compliance Summary. Summary will clearly
                 identify whether an SB was completed in full, in part or in
                 variance to manufacturer data and shall detail which portions
                 were accomplished or the nature of any variance.

          3.     List of Lessee Modifications Incorporated (EO's, EA's, FCD's,
                 etc.). In addition to other pertinent data, this document shall
                 include operator document reference, description, date and time
                 of accomplishment.

                                      6-5


          4.     LLP Status Reports. In addition to other pertinent information,
                 this document shall include description, location, manufacturer
                 part number, manufacturer serial number, total time (Engine
                 Flight Hours and Engine Cycles), life limit and time remaining.

          5.     Check/Inspection History (record of scheduled checks
                 accomplished during the Term including date and time
                 accomplished).

          6.     Complete Status Summary for each special maintenance,
                 modification or inspection program (corrosion prevention and
                 control, supplemental inspection, aging engine, etc.) in effect
                 at time of return.

          7.     Time-Controlled Components (TCC) Status Report. This shall
                 address status of each TCC installed in the Engine. The list of
                 TTCs shall be that listed in the MMPD plus those listed in the
                 Maintenance Program. In addition to other pertinent
                 information, this document shall include description, location,
                 manufacturer part number, manufacturer serial number, date and
                 Engine time at installation, current time since overhaul
                 (Engine Flight Hours and Engine Cycles), limit, and time
                 remaining.

          8.     List of currently installed Parts. In addition to other
                 pertinent information, this document shall include description,
                 location, manufacturer part number, manufacturer serial number,
                 date installed and aircraft time at installation.

(c)  The Engine Documents shall include the following AD/CNs, SBs and
     Modifications:

          1.     AD/CN Accomplishment Records for all AD/CNs accomplished
                 including task cards, engineering orders, drawings, shop cards,
                 etc., as necessary to establish method of compliance, quality
                 control acceptance, and approval authority. Records shall be
                 returned in dedicated AD/CN files segregated by Engine and
                 Parts and shall be in AD/CN number order. Records for AD/CNs
                 requiring repetitive accomplishment of identical action may be
                 restricted to initial and most recent accomplishment.

          2.     SB Accomplishment Records for all SBs accomplished on the
                 Engine and Parts including task cards, engineering orders,
                 drawings, shop cards, etc., as necessary to establish method of
                 compliance, quality control acceptance, and approval authority.
                 Records shall be returned in dedicated SB files segregated by
                 the Engine and Parts and shall be in SB number order. Records
                 for SBs requiring repetitive accomplishment of identical action
                 may be restricted to initial and most recent accomplishment.
                 SBs carried out to satisfy AD requirements shall be returned
                 with AD records and need not be duplicated in SB files.

          3.     Modification Accomplishment Records for all modifications
                 accomplished on the Engine and Parts including task cards,
                 engineering orders, drawings, shop cards, etc., as necessary to
                 establish method of compliance, quality control acceptance and
                 approval authority. Records shall be returned in dedicated
                 modification files segregated by Engine and Parts and shall be
                 organized in a fashion that allows documents for a particular
                 modification to be located quickly and efficiently.
                 Modifications carried out to satisfy AD/CN requirements shall
                 be returned with AD/CN records and need not be duplicated in
                 modification files.

                                      6-6


(d)  The Engine Documents shall include the following Quality Assurance
     Statements:

          1.     Statement of total Engine Flight Hours and total Engine Cycles
                 on the Engine at Engine transfer.

          2.     Automated Record System procedures and Security Control (as
                 applicable to Lessee's records keeping system).

          3.     List of Repair Stations used by Lessee including Part 145
                 Certification and Letter to Repair Stations authorizing release
                 of records to Lessor upon request.

          4.     Report detailing Incidents or Accidents (if none, signed
                 statement to that effect).

(e)  The Engine Documents shall include a list of all records and documentation
     transferred with the Engine.

                                      6-7


                                   SCHEDULE 7
                             INSURANCE REQUIREMENTS

1.1  TYPES OF INSURANCE

The Insurances required to be maintained are as follows:

     (a)  HULL ALL RISKS of loss or damage while flying, taxiing and on the
          ground with respect to the Engine on an agreed value basis for the
          Agreed Value and with a deductible not exceeding the Deductible Amount
          or such other amount agreed by Lessor from time to time; provided
          that, neither the Lessee nor any Permitted Sub-Lessee shall be
          required to maintain all-risk flight hull insurance with respect to
          any period in which the Engine is on the ground and properly stored;

     (b)  HULL WAR RISKS AND ALLIED PERILS in accordance with the London form
          LSW555B or its equivalent form reasonably acceptable to Lessor (or an
          agreement of the United States Government to insure against or
          indemnify for substantially the same risks), from time to time, with
          respect to the Engine, (I) in an amount not less than the Agreed Value
          for such Engine, and (II) maintained with independent insurers of
          internationally recognized reputation and responsibility.

     (c)  ALL RISKS Coverage (including war and allied risk and spares insurance
          except when on the ground or in transit other than by air as is
          customarily available) property insurance on all Engines and Parts
          when not installed on any aircraft, including engine test and running
          risks, on the basis of their fair market replacement value; provided,
          however, that Lessee shall carry all risk spares insurance with
          respect to all Engines subject to the Lease, which insurance shall
          include intransit coverage, covering any damage which may occur while
          such Engine is in Lessee's care, custody and control, but not then
          attached to an aircraft, in a minimum amount not less than the Agreed
          Value for such Engine, with a deductible not exceeding the Spares
          Deductible Amount or such other amount agreed by Lessor from time to
          time; and

     (d)  COMPREHENSIVE AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER,
          BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING
          PRODUCTS) LEGAL LIABILITY. Coverage for a combined single limit
          (bodily injury/property damage) of an amount not less than the Minimum
          Liability Coverage for the time being for any one occurrence (but in
          respect of products and personal injury liability, this limit may be
          an aggregate limit for any and all losses occurring during the
          currency of the policy). War and Allied Risks are also to be covered
          under the policy to the extent usual and customary from the leading
          international insurance markets for comparable operators operating
          similar engines in similar circumstances. In addition, without
          limitation of the requirements of the preceding sentence (and
          notwithstanding anything to the contrary contained in the preceding
          sentence), the Lessee shall in all events maintain in effect, at all
          times during the Term, war risk and allied perils liability insurance
          in accordance with the London

                                      7-1


          form AVN52C (as in effect on September 1, 2001) or its equivalent form
          reasonably acceptable to Lessor (or an agreement of the United States
          Government to insure against or indemnify for substantially the same
          risks), from time to time, with respect to the Engine, (I) in an
          amount not less than the greater of (x) the amount of war risk and
          allied perils liability insurance from time to time applicable to
          similar aircraft owned or operated by the Lessee and (y) $350,000,000
          per occurrence, and (II) maintained with independent insurers of
          internationally recognized reputation and responsibility.

          During any period that the Engine is in storage, the Lessee may, so
          long as the Lessee takes reasonable measures to protect the Engine,
          modify the insurance required by this Clause 1.1(d) to modify the
          amounts of public liability and property damage insurance, the scope
          of the risks covered and the type of insurance, in all circumstances
          to conform to such insurance as is customary in the United States
          airlines industry for regional air carriers similarly situated with
          the Lessee in respect of similar engines which are grounded, not in
          operation and stored, provided that in all instances, the amounts of
          coverage and scope of risk covered and the type of insurance shall be
          at a minimum no less favorable than the insurance as from time to time
          applicable to engines owned or leased by Lessee on the ground, not in
          operation and stored.

1.2  TERMS OF HULL AND SPARES INSURANCE

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

     (a)  ADDITIONAL INSUREDS: name the Lessor, its successors and permitted
          assigns as additional insureds for its respective rights and interests
          (without imposing on any such Person any obligation imposed on the
          insured, including the liability to pay any calls, commissions or
          premiums);

     (b)  LOSS PAYEE: name the Lessor as loss payee;

     (c)  50/50 PROVISION: if separate Hull "all risks" and "war risks"
          insurances are arranged, include a 50/50 provision in accordance with
          market practice (Lloyd's Aviation Underwriter's Association Standard
          Policy Form AVS. 103 is the current London market language);

     (d)  NO OPTION TO REPLACE: confirm that the insurers are not entitled to
          replace the Engine in the event of an insured Event of Loss.

1.3  TERMS OF LIABILITY INSURANCE

All required liability insurances will:

     (a)  ADDITIONAL INSUREDS: include each Indemnitee, as an additional insured
          for its respective rights and interests, warranted, each as to itself
          only (except each Affiliate of an Indemnitee shall be considered the
          same as the Indemnitee for this purpose only), no

                                      7-2


          operational interest (without imposing on any such Person any
          obligation imposed on the insured, including the liability to pay any
          calls, commissions or premiums);

     (b)  SEVERABILITY: include a severability of interests clause which
          provides that the insurance, except for the limit of liability, will
          operate to give each insured the same protection as if there was a
          separate policy issued to each insured; and

     (c)  PRIMARY POLICY: contain a provision confirming that the policy is
          primary without right of contribution and the liability of the
          insurers will not be affected by any other insurance of which Lessor,
          each Indemnitee or Lessee have the benefit so as to reduce the amount
          payable to the additional insureds under such policies.

1.4  TERMS OF ALL INSURANCES

All Insurances will:

     (a)  LESSEE PRACTICE: be at least of the type usually carried by the Lessee
          with respect to similar equipment in its fleet covering risks of the
          kind customarily insured against by the Lessee;

     (b)  DOLLARS: provide cover denominated in Dollars;

     (c)  WORLDWIDE: operate on a worldwide basis subject to such territorial
          limitations and exclusions may be reasonably acceptable to Lessor;

     (d)  BREACH OF WARRANTY: provide that, in relation to the interests of each
          of the Indemnitees, the Insurances will not be invalidated by any act
          or omission by Lessee, or any other person other than the respective
          Indemnitees (or its Affiliates) seeking protection and shall insure
          the interests of each of the Indemnitees regardless of any breach or
          violation by Lessee, or any other person other than the respective
          Indemnitees (or its Affiliates) seeking protection of any warranty,
          declaration or condition, contained in such Insurances;

     (e)  SUBROGATION: provide that the insurers will hold harmless and waive
          any rights of recourse or subrogation against the additional insureds;

     (f)  PREMIUMS: provide that the additional insureds will have no obligation
          or responsibility for the payment of any premiums due (but reserve the
          right to pay the same should any of them elect so to do) and that the
          insurers will not exercise any right of set-off, counter-claim or
          other deduction, by attachment or otherwise, in respect of any premium
          due against the respective interests of the additional insureds other
          than outstanding premiums relating to the any Engine or Part the
          subject of the relevant claim;

     (g)  CANCELLATION/CHANGE: provide that the Insurances will continue
          unaltered for the benefit of the additional insureds for at least 30
          days after written notice by registered mail or telex of any
          cancellation, lapse or change has been sent by insurer(s) to Lessor,
          or where

                                      7-3


          an insurance broker is appointed to the insurance broker who shall
          promptly send on such notice to Lessor, except in the case of war
          risks for which 7 days (or such lesser period as is or may be
          customarily available in respect of war risks or allied perils) will
          be given, or in the case of war between the 5 great powers or nuclear
          peril for which termination is automatic;

     (h)  INITIATING CLAIMS: contain a provision entitling any Indemnitee to
          initiate a claim under any policy in the event of the refusal or
          failure of Lessee to do so; and

     (j)  INDEMNITIES: accept and insure the indemnity provisions of the Lease
          to the extent of the risks covered by the policies.

1.5  DEDUCTIBLES

Lessee shall be responsible for any and all deductibles under the Insurances
(other than those in respect of insurance maintained by Lessor or any other
Indemnitee pursuant to Clause 1.8 of this Schedule).

1.6  APPLICATION OF INSURANCE PROCEEDS

The Insurances will be endorsed to provide for payment of proceeds as follows:

     (a)  EVENT OF LOSS: all insurance payments received as the result of an
          Event of Loss with respect to an Engine occurring during the Term will
          be paid to Lessor as loss payee, and Lessor will pay or cause to be
          paid any remaining balance of those amounts to Lessee after deduction
          of all amounts which may be then due and payable by Lessee to Lessor
          under the Lease (including under Section 11.1(b) of the CTA);

     (b)  EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds of any
          property, damage or loss to any Engine or any Part occurring during
          the Term not constituting an Event of Loss and in excess of the Damage
          Notification Threshold will be paid to Lessor as loss payee, for
          payment to or at the direction of Lessee upon performance by Lessee of
          its repair or replacement obligations in accordance with the Lease;

     (c)  BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in amounts
          below the Damage Notification Threshold shall be paid by the insurer
          directly to Lessee;

     (d)  LIABILITY PROCEEDS: all insurance proceeds in respect of third party
          liability will be paid by the insurers to the relevant third party in
          satisfaction of the relevant liability or to Lessee and/or Lessor in
          reimbursement of any payment so made;

     (e)  DEFAULT: notwithstanding any of the foregoing paragraphs, if at the
          time of the payment of any such insurance proceeds an Event of Default
          or Special Default has occurred and is continuing, all such proceeds
          will be paid to Lessor, Owner or Financing Parties' Representative, as
          the case may be, or retained to be applied toward payment of any
          amounts which may be or become payable by Lessee in such order as
          Lessor or Owner, as the case may be, may elect until such time as no
          Event of Default or Special Default is

                                      7-4


     continuing and then applied as described above; and to the extent that
     insurance proceeds are paid to Lessee, Lessee agrees to hold such proceeds
     in trust and comply with the foregoing provisions and apply or pay over
     such proceeds as so required.

1.7  UNITED STATES GOVERNMENTAL INDEMNITY

Notwithstanding any provisions contained in Section 9 of the CTA or this
Schedule to the contrary, Lessor agrees to accept in lieu of insurance required
hereunder indemnification or insurance from the United States Government against
such risks and in such amounts and on such terms such that when added to the
Insurance maintained by Lessee (or Permitted Sub-Lessee), Lessee (or Permitted
Sub-Lessee) complies with the requirements of Section 9 and this Schedule,
PROVIDED that on or prior to the date of such agreement, the Lessee (or
Permitted Sub-Lessee) shall provide an officer's certificate of the Lessee (or
Permitted Sub-Lessee) certifying that any such insurance or indemnity provides
protection no less favorable than insurance coverage that would comply with
Section 9 and this Schedule.

1.8 INSURANCE FOR OWN ACCOUNT

Nothing in Section 9 of the CTA or this Schedule shall prohibit the Lessor, any
other Indemnitee or the Lessee from obtaining insurance with respect to the
Engine for its own account (including, without limitation, in the case of the
Lessee, hull insurance under the same policies maintained pursuant to Section 9
of the CTA and this Schedule in amounts in excess of those required to be
maintained pursuant to Section 9 of the CTA and this Schedule) and any proceeds
payable thereunder shall be payable as provided in the insurance policy relating
thereto, provided that no such insurance may be obtained which would limit or
otherwise adversely affect the availability of coverage or payment of any
insurance required to be obtained or maintained pursuant to Section 9 of the CTA
and this Schedule, it being understood that all salvage rights to the Engine
shall remain with the Lessee's insurers at all times.

                                      7-5


                                   SCHEDULE 9
                                EVENTS OF DEFAULT

Each of the following events or conditions constitutes an Event of Default:

     (a)  NON-PAYMENT: Lessee fails to make (i) any payment of Rent,
          Supplemental Rent, or Agreed Value when due and such failure shall
          continue for a period of 3 Business Days or (ii) any payments that
          become due and payable hereunder (other than payments of Rent,
          Supplemental Rent and Agreed Value) within 10 days after receipt by
          the Lessee of a written demand therefor from the Lessor; or

     (b)  INSURANCE: Lessee fails to comply with any provision of Section 9 or
          Schedule 7 or any insurance required to be maintained under the Lease
          is cancelled or terminated, or a notice of cancellation is given and
          the same is not cured within 3 Business Days prior to such
          cancellation becoming effective so as to ensure continued compliance
          by Lessee with the insurance requirements of this Agreement; or

     (c)  BREACH: Lessee fails to comply with any other provision of the Lease
          not referenced in this Schedule 9, and shall continue unremedied for a
          period of 15 days after delivery of notice of such failure from the
          Lessor to the Lessee, unless such failure is curable and does not pose
          any material risk of loss of title to the Engine by Lessor or Owner or
          loss of possession of the Engine by Lessee, and the Lessee shall,
          after the delivery of such notice, be diligently proceeding to correct
          such failure and shall in fact correct such failure 45 days after
          delivery of such notice; or

     (d)  REPRESENTATION: any representation or warranty made (or deemed to be
          repeated) by Lessee in or pursuant to the Lease or in any document or
          certificate or statement delivered pursuant to the Lease is or proves
          to have been incorrect in any material respect when made or deemed to
          be repeated and shall remain material at the time in question and
          shall not be remedied within 10 days after notice thereof has been
          given to the Lessee by the Lessor, unless such incorrectness is
          curable and Lessee shall, after delivery of such notice, be diligently
          proceeding to correct such failure and shall in fact correct such
          failure 45 days after the delivery of such notice; or

     (e)  CROSS-DEFAULT: Lessee shall receive notice of default or exercise of
          remedies with respect to the payment or performance of any Financial
          Indebtedness of Lessee and any such default or exercise of remedies
          results in an acceleration of such Financial Indebtedness; provided,
          however, that the aggregate amount of any such Financial Indebtedness
          is in excess of $5,000,000 (determined in the case of borrowed money
          by the amount outstanding under the agreement pursuant to which such
          borrowed money was borrowed, in the case of a deferred purchase price
          by the remaining balance and in the case of a lease by the present
          value of the remaining rent payable thereunder); or

                                      9-1


     (f)  BANKRUPTCY, ETC:

     (i)  Lessee consents to the appointment of a custodian, receiver, trustee
          or liquidator of itself or all or a substantial part of its property
          or its consolidated property, or Lessee admits in writing its
          inability to, or is unable to, or does not, pay its debts generally as
          they come due, or makes a general assignment for the benefit of
          creditors, or Lessee files a voluntary petition in bankruptcy or
          voluntary petition seeking reorganization in a proceeding under any
          bankruptcy or insolvency laws (as now or hereafter in effect), or an
          answer admitting the material allegations of a petition filed against
          Lessee in any such proceeding, or Lessee by voluntary petition, answer
          or consent seeks relief under the provisions of any other bankruptcy,
          insolvency or other similar law providing for the reorganization or
          winding-up of debtors, or provides for an agreement, composition,
          extension or adjustment with its creditors, or any board of directors
          or shareholder action is taken by Lessee in furtherance of any of the
          foregoing, whether or not the same is fully effected or accomplished;
          or

          (ii)   An order, judgement or decree is entered by any court
                 appointing, without the consent of Lessee, a custodian,
                 receiver, trustee or liquidator of or sequestering any
                 substantial part of Lessee's property, and any such order,
                 judgement or decree of appointment or sequestration remains in
                 effect, undismissed, unstayed or unvacated for a period of 90
                 days after the date of entry thereof or at any time an order
                 for relief is granted; or

          (iii)  An involuntary petition against Lessee or other proceeding
                 under the United States Federal Bankruptcy laws or other
                 insolvency laws (as now or hereafter in effect) is filed and is
                 not withdrawn or dismissed within 90 days thereafter or at any
                 time an order for relief is granted in such proceeding, or if,
                 under the provisions of any law providing for reorganisation or
                 winding-up of debtors which may apply to Lessee, any court of
                 competent jurisdiction assumes jurisdiction over, or custody or
                 control of, Lessee or of all or any substantial part of
                 Lessee's property, and such jurisdiction, custody or control
                 remains in effect, unrelinquished, unstayed or unterminated for
                 a period of 90 days or at any time an order for relief is
                 granted in such proceeding; or

     (g)  SUSPENSION OF BUSINESS: Lessee suspends for a period exceeding 5 days
          or ceases or takes substantive steps to cease to carry on all or a
          substantial part of its business as a Certificated Air Carrier (other
          than as a result of a labor dispute with Lessee's employees or
          mandatory action by a Government Entity that applies to all
          Certificated Air Carriers operating aircraft similar to the Lessee);
          or

     (i)  CHANGE OF CONTROL: any single Person or group of Persons acquire
          control of Lessee in violation of the terms and conditions of Section
          8.7(vi); provided, however, if Lessee fails to perform or observe any
          of the provisions of Section 8.7(vi) which are contained in that
          certain Letter Agreement dated the date hereof between Lessee and
          Aviation

                                      9-2


          Financial Services Inc., as lessor, no Event of Default shall arise
          under this paragraph (i) until such failure continues unremedied for a
          period of 30 days after delivery of notice of such failure from Lessor
          or Lessee, unless such failure is curable and Lessee shall, after the
          delivery of such notice, be diligently proceeding to correct such
          failure and shall in fact correct such failure 120 days after delivery
          of such notice; or

     (j)  DELIVERY: Lessee fails to comply with its obligation under Section 4
          to accept delivery of the Engine or Lessee fails to comply with any of
          its obligations under Schedule A of the Engine Lease Agreement;
          provided, however, that no Event of Default shall arise under this
          paragraph (j) if Lessee satisfies its obligations under Section 4.3(b)
          hereof; or

     (k)  LETTER OF CREDIT:

          (i)    the issuer of the Letter of Credit (if any) fails to make any
                 payment under that Letter of Credit when due; or

          (ii)   any such Letter of Credit is not in full force or, for any
                 reason ceases to constitute the legal, valid and binding
                 obligation of the issuer; or

          (iii)  any of the events listed in paragraph (f) above applies to such
                 issuer (references in those sub-paragraphs to Lessee being
                 deemed to be to the issuer); or

          (iv)   where applicable, any Letter of Credit is not renewed, extended
                 or reissued within the time, or replaced when, required by
                 Section 5.14;

                 and each reference in this paragraph (k) to "the issuer" shall
                 include a reference to any confirming bank for the Letter of
                 Credit.

     (l)  REDELIVERY: Lessee fails to return the Engine to Lessor on the Expiry
          Date in accordance with Section 12, unless Lessee is diligently
          proceeding to correct any deficiencies in the condition of the Engine
          and cures all such deficiencies within 60 days after the Expiry Date;
          or

     (m)  LITIGATION: a judgement for the payment of money not covered by
          insurance in excess of $5,000,000.00 (or the equivalent thereof in
          other currencies) shall be rendered against Lessee and the same shall
          remain undischarged for a period of 30 days, unless during such
          period, execution of such judgement shall have been effectively stayed
          by agreement of the parties involved or by court order or such
          judgement shall have been adequately bonded; or

     (n)  GUARANTEE:

          (i)    any representation or warranty made by Guarantor (if
                 applicable) is or proves to have been incorrect in any material
                 respect when made or deemed to be repeated or Guarantor (if
                 applicable) fails to make any payment or comply with any other
                 obligation under the Guarantee when due; or

                                      9-3


          (ii)   the Guarantor (if applicable) repudiates, revokes or claims
                 that it has no further obligations under the Guarantee or the
                 Guarantee ceases to be in full force or, for any reason, ceases
                 to be the legal, valid and binding obligation of Guarantor (if
                 applicable); or

          (iii)  any of the events listed in paragraph (f) or (g) above occurs
                 in respect of Guarantor (if applicable) (and for purposes of
                 this paragraph(s), references in those paragraphs to Lessee
                 shall be deemed to be references to Guarantor); or

     (o)  TRANSFER/LESSEE REQUIREMENTS: Lessee makes or permits any assignment
          or transfer of the Lease, or any interest herein, or of the right to
          possession of the Engine or any Part, or any obligations under the
          Lease, or Lessee subleases the Engine, in any case except as expressly
          permitted in the Lease;

     (p)  ENGINE LOSS: Lessee fails to timely comply with its obligations under
          Section 11.1(b) with respect to an Event of Loss; or

     (q)  RELATED AIRFRAME DEFAULT: A default shall have occurred and be
          continuing under any lease or financing arrangement for any Related
          Airframe, and as a result there is a material risk that title to the
          Engine could be lost by Lessor or possession of the Engine could be
          lost by Lessee.

                                      9-4


                                   SCHEDULE 10

                      FORM OF LEASE TERMINATION CERTIFICATE

The undersigned hereby certify that the Master Engine Lease Agreement dated as
of _________, ____ between the undersigned Lessor and undersigned Lessee, and as
further described in the Appendix attached hereto, has terminated in respect of
the Engines identified on Exhibit A hereto (except as described in Section 15.1
of the CTA attached thereto) and such aircraft engines are no longer subject to
the terms thereof. This certificate may be executed in one or more counterparts
each of which when taken together shall constitute one and the same instrument.

      DATED this __________ day of ____________________, __________

LESSOR                                      LESSEE

[     INSERT LESSOR'S NAME     ]            [    INSERT LESSEE'S NAME    ]

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


Title:                                      Title:
     --------------------------                  ----------------------------

                                      11-1


                                   SCHEDULE 11

GE Engine Leasing,
GE Capital Aviation Services, Inc.
201 High Ridge Road
Stamford, Connecticut  06327

     Attention: GE Engine Leasing General Counsel
     Fax No.: (203) 585-0028

Gentlemen/Ladies:

     The undersigned is the owner and lessor to [INSERT NAME OF LESSEE] of the
[INSERT MAKE AND MODEL OF AIRFRAME] airframe bearing manufacturer's serial
number ___________ (the "AIRFRAME").
Alternate first sentence: The undersigned
holds a security interest in the [INSERT MAKE AND MODEL OF AIRFRAME] airframe
bearing manufacturer's serial number ____________ (the "AIRFRAME"), operated by
[INSERT NAME OF LESSEE].

We understand that you will lease to [INSERT NAME OF LESSEE] the [INSERT MAKE
AND MODEL OF ENGINE] aircraft engine bearing manufacturer's serial number
____________ (the "ENGINE"), which may be installed on the Airframe.

     We hereby agree that we shall recognize your rights and interests in, and
the rights and interests of [INSERT NAME OF HEAD LESSOR/FINANCING PARTY, IF ANY
(THE "THIRD PARTY")] in the Engine installed on the Airframe and,
notwithstanding any contrary provisions of applicable laws, our rights and
benefits under which are hereby waived to the extent in conflict with this
letter, we shall not claim, as against you or the Third Party, any right, title
or interest in the Engine as a result of the Engine being installed on the
Airframe.

     This letter shall be governed by and construed in accordance with the laws
of the State of New York, USA.

[INSERT NAME OF LESSOR/SECURITY HOLDER]

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

                                      11-1


                                   SCHEDULE 12
                         FORM OF ENGINE LEASE SUPPLEMENT

ENGINE LEASE SUPPLEMENT NO. __, dated ___________, ______, between AVIATION
FINANCIAL SERVICES INC., a corporation organized under the laws of
______________ ("Lessor"), and CHAUTAUQUA AIRLINES, INC., a corporation
organized under the laws of the State of New York ("Lessee").

     Lessor and Lessee have previously entered into that certain Engine Lease
Agreement dated as of December __, 2001, including the CTA as defined therein
(collectively, herein referred to as the "Lease" and the defined terms therein
being hereinafter used with the same meaning). The Lease provides for the
execution and delivery from time to time of an Engine Lease Supplement
substantially in the form hereof for the purpose of leasing the engine described
below under the Lease as and when delivered by Lessor to Lessee in accordance
with the terms thereof.

     The Lease and this Engine Lease Supplement relate to the Engines and Parts
as more precisely described below and in the Certificate of Acceptance. A
counterpart of the Lease is attached hereto and this Engine Lease Supplement and
the Agreement shall form one document.

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

1.   Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts, acknowledges receipt of possession and leases from Lessor under
the Lease, that certain AE3007A1P aircraft Engine (which Engine has 750 or more
rated takeoff horsepower or the equivalent of such horsepower) described in the
Annex hereto, together with the Engine Documents described in the Lease (the
"Delivered Engine").

2.   The Delivery Date of the Delivered Engine is the date of this Engine Lease
Supplement set forth in the opening paragraph hereof.

3.   The Term for the Delivered Engine shall commence on the Delivery Date and
shall end on the Expiry Date, which shall be _____________[insert date].

4.   The amount of Rent for the Delivered Engine is set forth in Schedule B to
the Engine Lease Agreement.

5.   Lessee hereby confirms to Lessor that (i) the Delivered Engine have been
duly marked in accordance with the terms of Section 8.6(a)(i) of the CTA, (ii)
the Engine is insured as required by the Lease, (iii) the representations and
warranties of Lessee referred to in Section 2.1 of the CTA are hereby repeated
with effect as of the date first above written, (iv) having inspected the
Delivered Engine, Lessee acknowledges that the Delivered Engine satisfies all
conditions required for Lessee's acceptance of delivery as set forth in the
Lease or as otherwise expressly set forth in the Certificate of Technical

                                      13-1


Acceptance, and (v) the execution and delivery of this Engine Lease Supplement
signifies absolute and irrevocable acceptance by Lessee of the Delivered Engine
for all purposes hereof and of the Lease.

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

7.   This Engine Lease Supplement may be executed in any number of counterparts;
each of such counterparts, shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and the same Engine
Lease Supplement.

     IN WITNESS WHEREOF, Lessor and Lessee have caused this Engine Lease
Supplement No. __ to be duly executed as of the day and year first above
written.

LESSOR,                                           LESSEE,

[INSERT LESSORS NAME]                             [INSERT LESSEE'S NAME]


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


`Name:                                       Name:
     ---------------------------                  ---------------------------


Title:                                      Title:
      --------------------------                   --------------------------

                                      13-2


                                                                           ANNEX

                              DESCRIPTION OF ENGINE



Manufacturer                   Manufacturer's Model               Manufacturer's
                                                                  Serial No.
- --------------------------------------------------------------------------------
                                                            
Rolls Royce                        AE 3007A1P                     CAE 311


Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.

                                      13-3


                                   SCHEDULE 13

                            FORM OF LETTER OF CREDIT

                      IRREVOCABLE STANDBY LETTER OF CREDIT


BENEFICIARY:
[Name of Lessor]
Attention: ______________
201 High Ridge Road
Stamford, CT. 06927

     This Letter of Credit is provided in connection with the leasing of [engine
     type and serial no.], by [Name of Lessor] to Chautauqua Airlines, Inc. This
     letter of credit however creates primary obligations on us and is
     independent of the lease.

At   the request of Chautauqua Airlines, Inc. ("CUSTOMER") for account of same,
     we hereby establish this irrevocable Letter of Credit to authorise you to
     draw on _____ _____ an amount or amounts not exceeding in aggregate USD
     _____ ( _____ United States Dollars) upon receipt by us of the following
     demand certificate from [Name of Lessor] ("BENEFICIARY"):

"The undersigned is an authorised signatory of [Name of Lessor] ("BENEFICIARY").
     Beneficiary hereby draws upon your irrevocable Letter of Credit dated _____
     _____ . Beneficiary hereby instructs you to transfer US$ _____ ( _____
     United States Dollars) to [INSERT APPROPRIATE BANK DETAILS], immediately,
     with telex confirmation to us of such payment."

We   hereby agree with you that drawings drawn under and in compliance with the
     terms of this Letter of Credit received on or prior to _____ _____ will be
     duly honoured upon receipt by us of such a demand certificate. Partial
     drawings are permitted.

If   a drawing by you hereunder does not, in any instance, conform to the
     provisions of this Letter of Credit, we shall give you prompt notice that
     the purported drawing was not effected in accordance with such provisions,
     stating the reasons therefor, and that we are holding any documents
     presented in connection therewith at your disposal or are returning the
     same to you, as we may elect.

This Letter of Credit is transferable and constitutes an obligation to make
     payment against documents. Except to the extent the express provisions
     hereof conflict, this Letter of Credit is issued subject to the Uniform
     Customs and Practice for Documentary Credits (1993 Revision) International
     Chamber of Commerce Publication No. 500 ("UNIFORM CUSTOMS").

                                      13-1


As   to matters not expressly governed by the Uniform Customs this Letter of
     Credit is governed by and shall be construed in accordance with the laws of
     the state of California, United States and any disputes arising out of or
     in connection with this Letter of Credit shall be resolved before the
     United States District Court for the Northern District of California and
     any California state court sitting in the City of San Francisco,
     California.

                                      13-2


     Signed.


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

Authorised Signature                                 Authorised Signature

                                      13-3


                                   SCHEDULE 14

                        FORM OF LETTER OF QUIET ENJOYMENT

From:_________("[Owner]/[Financing Party]")

To:  Chautauqua Airlines, Inc. ("Lessee")

                                                                          [Date]

Dear Sirs,


RE:  Rolls Royce _____________ Aircraft Engine Manufacturer's Serial Number
     _______ (the "Engine")

     Engine Lease Agreement dated [ ] as amended, supplemented or modified from
     time to time (the "Lease") between ___________ ("Lessor") and the Lessee.

1.   Capitalized terms used herein and not otherwise defined shall have the
     meanings assigned to them in the Lease.

2.   In consideration of your entering into the Engine Lease Agreement dated [ ]
     and for other good and valuable consideration, the receipt and sufficiency
     of which is hereby acknowledged, we confirm to you that so long as no Event
     of Default has occurred and is continuing under the Lease,
     [Owner]/[Financing Party] will not interfere with Lessee's right to quiet
     use and possession of the Engine during the Term.

3.   The foregoing undertaking is not to be construed as restricting any rights
     of [Owner]/[Financing Party] to dispose of the Engine to such persons and
     on such terms as [Owner]/[Financing Party] considers appropriate, subject
     to the Lease.

                                      14-1


4.   The rights conferred by this letter are granted only to the Lessee and do
     not extend to any assignee or sub-lessee of the Lessee.

5.   This letter shall be governed by and construed in accordance with the laws
     of California.

                                      14-2


Please countersign this letter in order to confirm your agreement to the
arrangements contained herein.


[[Owner]/[Financing Party]]


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

Name:

Title:

Accepted and Agreed this ___ day of ____, 20___


for and on behalf of

Chautauqua Airlines, Inc.


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

Name:

Title:

                                      14-3


                                      14-4

EX-10.45

                                                                   Exhibit 10.45


                                                               EXECUTION VERSION


                          MASTER ENGINE LEASE AGREEMENT

                          DATED AS OF DECEMBER 18, 2001

                                     BETWEEN

                        AVIATION FINANCIAL SERVICES INC.

                                    AS LESSOR

                                       AND

                            CHAUTAUQUA AIRLINES, INC.

                                    AS LESSEE

                                   relating to
                    FOUR NEW AND FIVE USED AIRCRAFT ENGINES:

                        NEW:  AE3007A1P ESN CAE312071
                              AE3007A1P ESN CAE312096
                              AE3007A1P ESN TBD X TWO

                       USED:  AE3007A1P ESN CAE311434
                              AE3007A1P ESN CAE311206
                              AE3007A1P ESN CAE311635
                              AE3007A1P ESN CAE311794
                              AE3007A1P ESN CAE311908
                        ---------------------------------
                       INCORPORATING THE PROVISIONS OF AN

                                  ENGINE LEASE
                             COMMON TERMS AGREEMENT

                             DATED DECEMBER 18, 2001
                        ---------------------------------

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

                                                          ENGINE LEASE AGREEMENT
                                                            CHAUTAUQUA AIRLINES



                          MASTER ENGINE LEASE AGREEMENT


THIS ENGINE LEASE AGREEMENT is made on December 18, 2001, (this "Lease"),

BETWEEN:

(1)      AVIATION FINANCIAL SERVICES INC., a corporation incorporated under the
Laws of Delaware having its principal place of business and chief executive
office at c/o GE Engine Leasing, GE Capital Aviation Services, Inc., 201 High
Ridge Road, Stamford, Connecticut 06927 ("LESSOR"); and

(2)      CHAUTAUQUA AIRLINES, INC., a corporation incorporated under the Laws of
NEW YORK with its principal place of business and chief executive office at 2500
S. HIGH SCHOOL ROAD, INDIANAPOLIS, INDIANA 46241 ("LESSEE").

WHEREAS:

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

(B)      General Electric Capital Corporation ("GECC") and Lessee have entered
         into the CTA (as defined below) in respect of commercial aircraft
         engines and related equipment that may be leased from time to time by
         Lessee or one of its Affiliates from Lessor or one of its Affiliates;
         and

(C)      Lessor and Lessee wish to incorporate by reference such CTA into this
         Lease.

IT IS AGREED as follows:

1.       INTERPRETATION

1.1      DEFINITIONS; INTERPRETATION. Unless otherwise defined herein, words and
         expressions defined in the CTA have the same respective meanings for
         the purposes of this Lease. The construction provisions of Section 1.2
         of the CTA shall apply to this Lease. In this Lease, the following
         capitalized words and expressions shall have the following meanings:

         AD COMPLIANCE PERIOD is defined in Schedule B, Part VI hereto.

         AGREED VALUE shall have the meaning specified in Schedule B, Part I
         hereto.

         ANNUAL SUPPLEMENTAL RENT ADJUSTMENT and ASSUMED RATIO have the meanings
         specified in SCHEDULE B, PART V HERETO.

         CTA means the Engine Lease Common Terms Agreement, dated as of December
         18, 2001 executed by GECC and Lessee (as in effect on the date hereof
         without, unless Lessor and Lessee otherwise expressly agree, giving any
         effect to any subsequent amendment, supplement, waiver or other
         modification thereto), and which forms part of this Lease, a true and
         complete copy of which is attached as SCHEDULE C hereto.

                                                          ENGINE LEASE AGREEMENT

                                       1


         DAMAGE NOTIFICATION THRESHOLD shall have the meaning specified in
         Schedule B, Part I hereto.

         DEDUCTIBLE AMOUNT shall have the meaning specified in Schedule B, Part
         I hereto.

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

         DELIVERY LOCATION means Indianapolis, Indiana, or such other location
         as Lessor and Lessee mutually agree.

         DEPOSIT means all amounts payable pursuant to Section 3.1(DEPOSIT)
         hereof.

         DISCOUNT RATE shall have the meaning specified in Schedule B, Part II
         hereto.

         ENGINE means whether or not installed on any airframe, each engine of
         the manufacturer and model specified in Part I of SCHEDULE A which
         Lessor tenders to Lessee on the Delivery Date, together in each case
         with the QEC, LRU, accessories and the Engine Documents and Records as
         described in Part I of SCHEDULE A hereto and tendered for Delivery by
         Lessor to Lessee relating to such Engine and otherwise subject to the
         terms and conditions of this Lease. The term "ENGINE" includes, as of
         any date of determination, all the foregoing equipment then leased
         hereunder and includes all modules and other Parts from time to time
         belonging to or installed in that Engine but excludes any properly
         replaced Part, title to which has passed to Lessee pursuant to this
         Lease.

         ENGINE CYCLES RESTRICTION shall have the meaning specified in Schedule
         B, Part VI hereto.

         ENGINE FLIGHT HOURS RESTRICTION shall have the meaning specified in
         Schedule B, Part VI hereto.

         ENGINE LLP SUPPLEMENTAL RENT is defined in SCHEDULE B hereto.

         ENGINE SUPPLEMENTAL RENT is defined in SCHEDULE B hereto.

         ENGINE SUPPLEMENTAL RENT FHA TERMINATION AMOUNT is defined in Schedule
         B hereto.

         GUARANTOR is not applicable.

         FLEET HOUR AGREEMENT means the AE 3007A/1 Series Engine Fleet Hour
         Agreement dated March 23, 2001 between the Manufacturer and the Lessee
         relating to the provision of rework and maintenance support for the
         Engines, as further amended and supplemented from time to time as
         permitted hereunder or as replaced with another Fleet Hour Agreement as
         permitted hereunder.

         FHA ASSIGNMENT AGREEMENT means that certain Agreement Regarding
         Assignment of the Fleet Hour Agreement between and among the Lessee,
         Lessor and the Manufacturer, dated the date hereof relating to the
         Engines.

                                                          ENGINE LEASE AGREEMENT

                                        2


         INDEMNITEE means each of Lessor, Owner, General Electric Capital
         Corporation and GECAS and their respective successors and permitted
         assigns, and each of their respective shareholders, Affiliates,
         partners, contractors, directors, officers, representatives, agents and
         employees.

         INTEREST RATE is defined in Schedule B, Part II hereto.

         LESSOR'S ACCOUNT is defined in Section 3.3 herein.

         LRU means line replaceable units.

         MANUFACTURER means the manufacturer of each Engine or any separate item
         of equipment, as the case may be, as set forth on SCHEDULE A hereto.

         MINIMUM COMPONENT CALENDAR LIFE is defined in Schedule B, Part VI.

         MINIMUM ENGINE CYCLES is defined in Schedule B, Part VI.

         MINIMUM ENGINE FLIGHT HOURS is defined in Schedule B, Part VI.

         MINIMUM LIABILITY COVERAGE is defined in Schedule B, Part I.

         NOTICE is defined in Section 3.5(a) herein.

         OWNER means AVIATION FINANCIAL SERVICES INC.

         PRE-APPROVED BANK means any bank organized under the laws of the United
         States or any State thereof, or the New York branch of a major
         international bank, in each case for only so long as its long-term
         Dollar denominated unsecured debt (or if it does not have long-term
         unsecured Dollar denominated debt, its parent corporation's long-term
         unsecured Dollar denominated debt) carries a rating from Standard &
         Poor's of A+ or better.

         PURCHASE AGREEMENT means the Engine Purchase Agreement, dated as of
         December 18, 2001, between Lessee as seller and Lessor as buyer
         relating to the purchase of the Engines

         PURCHASE PRICE is defined in Schedule B, Part VII.

         REDELIVERY LOCATION means such location within the United States of
         America on the Lessee's jet route system as designated by Lessor.

         RENT IS DEFINED in Schedule B, Part II.

         RENT COMMENCEMENT DATE means with respect to each Engine, the date on
         which Lessor tenders and the Lessee accepts such Engine under Section
         4.3.(a)(DELIVERY AND ACCEPTANCE) of the CTA.

         RETURN CONDITION SECURITY AMOUNT is defined in Schedule B, Part II.

         RIGHT is defined in Section 3.5(a) herein.

         SCHEDULED DELIVERY DATE means for each Engine a date in the Scheduled
         Delivery Month as notified by Lessee to Lessor pursuant to the Purchase
         Agreement.

                                                          ENGINE LEASE AGREEMENT

                                       3



         SCHEDULED DELIVERY MONTH means the date for the expected delivery of
         each Engine as set forth in Part IV of Schedule A attached hereto.

         SCHEDULED EXPIRY DATE means the date immediately preceding the last day
         the 15th anniversary of the second Rent Date for each Engine (or in the
         event that such date is a day that is not a Business Day, the
         immediately preceding Business Day), which date shall be specifically
         set forth in the Certificate of Acceptance.

         SERVICE CREDIT AMOUNT is defined in Schedule B hereto.

         SPARES DEDUCTIBLE AMOUNT is defined in Schedule B, Part I.

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

2.       LEASING

2.1      TERM. Subject to the terms and conditions of the Lease, Lessor will
         lease each Engine to Lessee and Lessee will take delivery of and lease
         each Engine from Lessor in accordance with the Lease for the duration
         of the Term for such Engine.

3.       PAYMENTS

3.1      DEPOSIT; RENT; SUPPLEMENTAL RENT; Lessee shall pay to Lessor the
         Deposit, Rent and Supplemental Rent (except as otherwise provided in
         this Section 3.1) as provided in the CTA and as set forth in Schedule
         B, Part II (Deposit), Part III (Rent) and Part V (Supplemental Rent),
         respectively. Notwithstanding the foregoing, for so long as the Fleet
         Hour Agreement and the FHA Assignment Agreement shall be in effect
         Lessee shall not be obligated to pay Engine Supplemental Rent with
         respect to any calendar month if Lessee has either (a) paid in full
         when due all amounts owed to the Manufacturer under the Fleet Hour
         Agreement in respect of such calendar month or (b) has provided Lessor
         with evidence satisfactory to Lessor that Lessee has otherwise cured or
         satisfied in full its payment obligations to the Manufacturer for such
         month and that such cure or satisfaction does not at that time and will
         not in the future result in an increase in the amount of the Cure
         Payment. If Lessee makes a payment of Engine Supplemental Rent to
         Lessor and subsequently either (i) pays in full all amounts payable
         under the Fleet Hour Agreement in respect of the corresponding calendar
         month, or (ii) otherwise satisfies or cures its payment obligations for
         such month as provided in clause (b) of the preceding sentence,
         provided that no Event of Default shall have occurred and then be
         continuing, Lessor shall pay the Lessee the amount of Engine
         Supplemental Rent received from Lessee for such calendar month promptly
         following written request from Lessee and such evidence of payment in
         full to the Manufacturer as Lessor may reasonably request. Lessee shall
         pay to Lessor an amount equaling the Engine Supplemental Rent FHA
         Termination Amount (a) in the event that the Manufacturer issues a
         notice to Lessor under the FHA Assignment Agreement stating that the
         Manufacturer intends to terminate the Fleet Hour Agreement and such
         notice is not rescinded within ten (10) days following receipt by
         Lessor, on the eleventh (11th) day following such receipt, or (b) on
         the date that is thirty (30) days prior to the date that the Fleet Hour
         Agreement is scheduled to expire if such scheduled expiry date would
         occur prior to the Scheduled Expiry Date for this Lease. Lessee shall
         notify Lessor in writing not less than fifteen (15) days prior to any
         proposed amendment or modification of the

                                                          ENGINE LEASE AGREEMENT

                                       4


         Fleet Hour Agreement during the Term. In addition to the Events of
         Default set forth in Schedule 9 of the CTA, it shall be an Event of
         Default if Lessee amends, supplements, extends or replaces the Fleet
         Hour Agreement during the Term without first obtaining Lessor's written
         consent and in Lessor's reasonable judgement such amendment,
         supplement, extension or replacement is adverse to the interests of
         Lessor in any material respect.

3.2      LESSOR'S MAINTENANCE CONTRIBUTION: Lessor shall pay to Lessee Lessor's
         Maintenance Contribution in accordance with Section 7.2 of the CTA.

3.3      LESSOR'S BANK ACCOUNT: For the purposes of Section 5.5(PAYMENTS) of the
         CTA, Lessor's bank account and wire transfer particulars, to which all
         payments to Lessor shall be made by Lessee, are at the date hereof
         ("Lessor's Account"): Bankers Trust Company, ABA Number 021 001 033 for
         the account of GECC T & I Air Depository Account, Account Number
         50-255-888.

3.4      MACRS BENEFITS: The provisions of Section(s) (a) of Schedule B, Part IV
         and Section 5.7 (c) of the CTA shall apply under this Lease.

3.5      PURCHASE OPTION:

(a)      RIGHT: Lessor hereby grants to Lessee a right to purchase the Engine on
         the last day of the Term (the "Right") for an amount equal to the Fair
         Market Value of the Engine (the "Purchase Price") provided that Lessor
         shall have received prior written notice not less than 180 days before
         the last day of the Term (the "Notice") of Lessee's intention to
         exercise the Right.

         For the purposes of this Clause 3.5 "Fair Market Value" shall mean such
         amount as is agreed between Lessor and Lessee (such amount shall be
         determined not more than 180 days prior to the last day of the Term) as
         the expected fair market value of the Engine on the last day of the
         Term or failing agreement as to such expected fair market value, such
         amount as shall be determined in Dollars by an independent expert
         appointed by Lessor and an independent expert appointed by Lessee. If
         either party shall not have indicated in writing to the other within
         fourteen (14) days after the failure by the parties to agree upon the
         expected fair market value of the Engine of the appointment of its
         independent expert, the expected fair market value shall be the amount
         determined by the independent expert whose appointment has been
         notified in writing to the other party. If the independent experts
         appointed by the parties fail to agree upon the expected fair market
         value of the Engine within fourteen (14) days of their appointment, the
         independent experts shall jointly appoint a third independent expert
         who shall determine the expected fair market value of the Engine within
         14 days of his appointment and whose decision shall be final and
         binding upon all the parties. If the independent experts are unable to
         agree upon the third independent expert within 10 days of the expiry of
         such 14 day period, such third independent expert shall be selected by
         the American Arbitration Association. The expected fair market value of
         the Engine on the last day of the Term shall be determined on the basis
         that:

                                                          ENGINE LEASE AGREEMENT

                                       5


                    (i)  it is free of all Security Interests of whatsoever
                         nature;

                    (ii) it is in a condition complying with all requirements
                         that would have been applicable to the Engine on the
                         Return Occasion if Lessee had redelivered the Engine to
                         Lessor and that it individually has no fewer than 3,200
                         Engine Flight Hours remaining to the next expected
                         Engine Refurbishment and that each Life Limited Part
                         has 50% of its total Engine Cycle life remaining to
                         replacement;

                    (iii) it is sold on an arms length basis between a willing
                          seller and a willing buyer;

                    (ii) the value of any additional equipment incorporated into
                         the Engine at Lessee's expense as additional equipment
                         and not as a replacement or substitution pursuant to
                         the Lease shall be excluded; and

                    (iii) the value shall not take into account any Taxes
                         payable by, or the effect of any Tax on, the seller or
                         buyer.

         The costs of any such valuations shall be paid equally by the parties
         except where Lessee fails to exercise the Right to purchase the Engine
         in which event such costs shall be for the account of Lessee. For a
         period of ten (10) Business Days following the date that the Fair
         Market Value is determined, Lessee shall be entitled by written notice
         to Lessor to revoke its exercise of the Right, after which time
         Lessee's Notice of exercise of the Right shall be deemed irrevocable.


(b)      RIGHT EXERCISED : In the event of the Notice having been duly given by
         Lessee of its exercise of the Right, on the applicable purchase date
         for such Engine, upon full and final payment by Lessee of (i) the
         applicable purchase price for the Engine, (ii) all unpaid Rent due and
         payable through and including the purchase date and (iii) all other
         amounts due and payable by Lessee under this Lease, Lessor will
         transfer to Lessee all of its right, title and interest in the Engine
         and any assignable warranties in respect of the Engine on an "AS-IS,
         WHERE-IS" basis without recourse or warranty, the Term with respect to
         such Engine shall end, Lessee's obligation to pay Rent under this Lease
         with respect to such Engine shall cease, and provided no Event of
         Default or Special Default has occurred and is continuing, Lessor will
         pay to Lessee the portion of Engine LLP Supplemental Rent received by
         Lessor in respect of such Engine and remaining in the Engine LLP
         Supplemental Rent account as provided in Section 7.2(c) of the CTA. In
         the event that Engine Supplemental Rent is paid in respect of the
         Engine, Lessor and Lessee agree to negotiate in good faith, following
         Lessee's issuance of a Notice, whether the amount (if any) that remains
         in the Engine Supplemental Rent account for such Engine shall be paid
         over to Lessee, retained by Lessor or shared by Lessor and Lessee
         following satisfaction of the conditions set forth in the preceding
         sentence. Notwithstanding the foregoing, (x)

                                                          ENGINE LEASE AGREEMENT

                                       6


         the Indemnitees shall continue to have the benefit of all the
         indemnities set forth in the Lease with respect to such Engine; (y)
         Lessee shall indemnify Lessor for all Taxes (other than Excluded Taxes)
         in connection with such transfer; and (z) Lessee shall cause the
         Indemnitees to be named as additional insureds on Lessee's liability
         insurance policies in respect of the Engine for a period of 2 years
         from the purchase date.

(c)      RIGHT CANCELLED : In the event

         (i)   that Lessee does not exercise the Right in accordance with
               Section 3.5(a); or

         (ii)  of termination of the Lease prior to the last day of the Term due
               to the happening of an Event of Loss or an Event of Default,

         the Right shall forthwith be cancelled without liability of any kind to
         Lessor or Lessee under this Section 3.5 and in the event notice of the
         exercise of the Right shall have been given prior to such cancellation,
         the sale of the Engine pursuant to such exercise shall likewise
         forthwith be cancelled.

(d)      RETURN CONDITIONS: If the Right is exercised and fully performed by
         Lessee in accordance with Section 3.5 hereof, Lessee shall have no
         obligation on the last day of the Term to satisfy the conditions set
         forth in Schedule 6 of the CTA (Procedures and Operating Conditions at
         Redelivery) and Lessor shall make the payments required by Clause 5.11
         of the CTA as and when required thereby.

4.       CONDITION OF THE ENGINE AT DELIVERY

         On the Delivery Date for each Engine, as a condition to Lessee's
         obligation to accept delivery thereof, such Engine shall be in the
         condition provided in Part II of SCHEDULE A hereto. Lessor shall
         coordinate with Lessee, in anticipation of delivery of each Engine, in
         the exercise of Lessor's inspection rights under the Purchase Agreement
         respecting the Engine to be purchased.

5.       CONDITION OF THE EQUIPMENT AT REDELIVERY

         On the Return Occasion, Lessee shall redeliver each Engine to Lessor at
         the Redelivery Location and at such redelivery the Engine shall be in
         the condition provided in the CTA, including SCHEDULE 6(PROCEDURE AND
         OPERATING CONDITION AT REDELIVERY), of the CTA. On or within thirty
         (30) days following the twelfth (12) anniversary of the first Rent
         Commencement Date to occur under the Lease, Lessee shall deliver to
         Lessor a written statement describing with respect to each Engine the
         current maintenance status, expected annual utilization through
         redelivery, and projected maintenance status at redelivery and further
         detailing the contractual arrangements made by Lessee to ensure that
         each Engine will comply with all applicable return conditions on the
         Return Occasion (without giving

                                                          ENGINE LEASE AGREEMENT

                                       7


         effect to any Engine purchase rights or obligations or Engine
         substitution rights or obligations). In the event that (a) such written
         statement, together with such supplemental and supporting information
         as Lessor may request, does not demonstrate to Lessor's reasonable
         satisfaction that Lessee will redeliver the Engines on the Return
         Occasion in compliance with all applicable return condition
         requirements (without giving effect to any Engine purchase rights or
         obligations or Engine substitution rights or obligations), and (b) at
         the time of such written statement or at any time thereafter during the
         remainder of the Term Lessee fails to meet the Applicable Financial
         Test, Lessee shall within fifteen (15) days following demand by Lessor
         increase the amount the Security Deposit by the Return Condition
         Security Amount.

6.       NAMEPLATE INSCRIPTION

         Lessee shall install a Nameplate on each Engine to read:

         "THIS ENGINE IS OWNED BY AVIATION FINANCIAL SERVICES INC., AS OWNER AND
         IS LEASED TO CHAUTAUQUA AIRLINES, INC. AND MAY NOT BE OR REMAIN IN THE
         POSSESSION OF OR BE OPERATED BY, ANY OTHER PERSON WITHOUT THE PRIOR
         WRITTEN CONSENT OF AVIATION FINANCIAL SERVICES INC."

7.       ADDRESSES FOR NOTICES

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

         LESSOR:
         c/o: GE Engine Leasing
         GE Capital Aviation Services, Inc.
         201 High Ridge Road
         Stamford, CT  06927
         Attention:  Contracts Leader
         Facsimile:  (203) 357-3201
         Telephone:  (203) 357-4482

         LESSEE:
         2500 S. High School Road
         Indianapolis, Indiana 46241
         Attention: President
         Facsimile: (317) 484-6060
         Telephone: (317) 484-6047

         WITH A COPY TO:
         c/o Wexford Capital, LLC
         411 West Putnam Avenue
         Greenwich, Connecticut 06830
         Attention: Jay Maymudes and Arthur Amron
         Facsimile: (203) 862-7350 (Jay Maymudes) and (203) 862-7312 (Arthur
         Amron)
         Telephone: (203) 862-7050 (Jay Maymudes) and (203) 862-7012 (Arthur
         Amron)

8.       THE SCHEDULES AND CTA

         ALL THE PROVISIONS OF SCHEDULES A AND B HERETO, AND THE CTA, ARE
         INCORPORATED BY REFERENCE HEREIN AND ARE PART OF THIS LEASE AS IF THEY
         WERE SET OUT IN FULL HEREIN. WITHOUT LIMITING

                                                          ENGINE LEASE AGREEMENT

                                       8


         THE GENERALITY OF THE FOREGOING, BY ITS SIGNATURE BELOW, EACH OF LESSOR
         AND LESSEE ACKNOWLEDGES AND AGREES THAT THE LEASE OF THE ENGINE
         HEREUNDER IS ON AN "AS IS, WHERE IS" BASIS AND THAT THE DISCLAIMERS,
         EXCULPATIONS AND LIMITATIONS OF LIABILITY, INDEMNITIES, THE CHOICE OF
         CALIFORNIA LAW AS THE GOVERNING LAW, THE LESSEE'S SUBMISSION TO
         PERSONAL JURISDICTION IN CALIFORNIA, AND THE WAIVER OF ANY RIGHT TO A
         TRIAL BY JURY PROVIDED FOR IN THE CTA ARE INCORPORATED HEREIN BY SUCH
         REFERENCE AND ARE PART OF THIS LEASE AS IF THE SAME WERE SET OUT IN
         FULL HEREIN.

9.       NO AMENDMENT EXCEPT IN WRITING

         No provision of this Lease, including any provision of SCHEDULE A,
         SCHEDULE B or the CTA, may be amended, rescinded, changed, waived,
         discharged, terminated or otherwise modified in any way whatsoever,
         except in writing signed by both parties.

                                                          ENGINE LEASE AGREEMENT

                                       9


IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Master Engine Lease Agreement, on the date shown at the beginning of this Lease.

LESSOR:

AVIATION FINANCIAL SERVICES INC.

By:     /s/ Charles H. Meyer
        --------------------------

Name:   Charles H. Meyer
        --------------------------

Title:  Vice President
        --------------------------
LESSEE:

CHAUTAUQUA AIRLINES, INC.

By:     /s/ Robert H. Cooper
        --------------------------

Name:   Robert H. Cooper
        --------------------------

Title:  Vice President
        --------------------------

                                                          ENGINE LEASE AGREEMENT

                                       10


                                   SCHEDULE A


PART I-ENGINE AND RELATED EQUIPMENT DESCRIPTION

ENGINE




ENGINE MANUFACTURER AND MODEL                    EXPECTED DELIVERY DATE           ENGINE SERIAL NUMBER

                                                                          
Rolls Royce             AE3007AIP                December, 2001                    MSN  CAE311434
Rolls Royce             AE3007AIP                December 2001                     MSN  CAE311206
Rolls Royce             AE3007AIP                December 2001                     MSN  CAE311635
Rolls Royce             AE3007AIP                December 2001                     MSN  CAE312096
Rolls Royce             AE3007AIP                December 2001                     MSN  CAE311794
Rolls Royce             AE3007AIP                December 2001                     MSN  CAE311908
Rolls Royce             AE3007AIP                December 2001                     MSN  CAE312071
Rolls Royce             AE3007AIP                December 2003 (or such earlier    MSN
                                                 date as Lessor and Lessee
                                                 agree)
Rolls Royce             AE3007AIP                December 2003 (or such earlier    MSN
                                                 date as Lessor and Lessee
                                                 agree)


         QEC MANUFACTURER:                         N/A

         NOSE COWL MANUFACTURER:                   N/A

         ENGINE STAND SERIAL NUMBER:               per serial number on the
                                                   Certificate of Acceptance

         QEC:                                      N/A

         LRU:     [LIST TO BE PROVIDED]            see list attached to the
                                                   Certificate of Acceptance

         OTHER ACCESSORIES:                        [LIST TO BE PROVIDED]

         ENGINE DOCUMENTS AND RECORDS:             Listed Part 2 below.

Each Engine has 750 or more rated takeoff horsepower or the equivalent.

                                                    ENGINE LEASE AGREEMENT [MSN]

                                       A-1


ENGINE DOCUMENTS AND RECORDS

         1.       Engine Records

         -        Engine time and cycle records
         -        last shop visit, restoration and repair documents
         -        AD compliance report (terminated and repetitive)
         -        SB status report
         -        list of time controlled components with remaining Engine
                  Flight Hours and Engine Cycles
         -        modification status report
         -        engine disc sheets

         2.       Manuals

         -        illustrated parts catalog (CD-ROM)
         -        Engine Maintenance Manual (CD-ROM) and any approved
                  engineering changes, as applicable


PART II-DELIVERY CONDITION REQUIREMENTS

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

DELIVERY CONDITION REQUIREMENTS:

Used Engines: ESN CAE311434; CAE311206; CAE311635; CAE311794; CAE311908; "as is,
where is" pursuant to the terms of the Purchase Agreement.

New Engines: two engines ESN CAE312096 and CAE312071, and two engines ESN to be
determined shall be new, bare, ex-factory certificated for operation at 7,400
pounds with engine stand, engine cover, LRU, other accessories and Engine
Documents and Records as listed herein

                                                          ENGINE LEASE AGREEMENT

                                       A-2


                                   SCHEDULE A

                     PART III- RETURN CONDITION REQUIREMENTS

In addition to and supplementing Lessee's obligations set forth in Clause 12 and
Schedule 6 of the Common Terms Agreement, Lessee shall redeliver the Engine to
Lessor on the Return Occasion meeting the following requirements:

Lessee shall redeliver the Engines with on average no fewer than 3,200 Engine
Flight Hours remaining to the next expected Engine Refurbishment and on average
no fewer than 3,200 Engine Cycles remaining on the Life Limited Parts to the
next limiter, and with no one Engine having fewer than 1,600 Engine Flight Hours
to the next expected Engine Refurbishment and with each Engine having a minimum
of 1,600 Engine Cycles life remaining on Life Limited Parts to the next limiter.
For avoidance of doubt, the foregoing average and minimum condition standards
shall be calculated without reference to any Engine as to which Lessee has
exercised its Right to purchase in accordance with Section 3.5 hereof and has
performed its purchase obligation with respect thereto. In the event that any
Engine fails, or the Engines as a group fail by 10% or more, to satisfy the
return condition requirements, Lessee shall be obligated to purchase the
deficient Engine, or in the case of the group of Engines failing, such number of
the most deficient Engines as is necessary for the remaining Engines to satisfy
the return conditions; provided, however, that in lieu of purchasing up to two
such deficient Engines Lessee may elect to provide up to two Suitable Substitute
Engines (as herein defined) as replacements for such deficient Engines. If
Lessee is required to purchase one or more of the Engines pursuant hereto, the
purchase price shall be determined in the same manner as provided in Section 3.5
and the sale shall be made on the same basis as provided in Section 3.5. If
Lessee elects to provided a Suitable Substitute Engine, Lessor will convey the
Engine that such Suitable Substitute Engine replaces to Lessee on the same basis
as provided in Section 3.5 (excluding the payment of a purchase price) and
Lessee shall convey such Suitable Substitute Engine pursuant to a full warranty
bill of sale in form reasonably acceptable to Lessor. As used herein, "Suitable
Substitute Engine" means an engine that complies with all the terms and
conditions of this Lease (including, without limitation, compliance with all
return conditions), and that is in substantially the same or a better condition
that the Engine it will replace as to (i) maintenance status in relation to the
number of Flight Hours of operation since its last Engine Refurbishment, (ii)
LLP value profile, (iii) modification status, and (iv) expected life remaining
to the next Engine Refurbishment.

                                                          ENGINE LEASE AGREEMENT

                                      A-3



                                   SCHEDULE B
                                COMMERCIAL TERMS

The definitions and other commercial and financial terms set forth in this
SCHEDULE B shall apply to the leasing of the Engines under the Lease.

The commercial and financial information contained in this SCHEDULE B are
considered by Lessor and Lessee as proprietary and confidential. Lessor and
Lessee shall, and any of their assignees, upon becoming such shall agree that
they shall, treat this SCHEDULE B as proprietary and confidential and will not,
without the prior written consent of the other (which consent shall not be
unreasonably withheld), disclose or cause to be disclosed, the terms hereof or
thereof to any Person, except to its agents, representatives, advisors,
employees, counsel, underwriters, auditors, investors, financing parties, head
lessors and sublessees as necessary or appropriate for the leasing transaction
which is the subject hereof, or except (a) as may be required by applicable Law
or pursuant to an order, or a valid and binding request, issued by any court or
other Government Entity having jurisdiction over Lessor, Lessee or the assignee
of either of them, as the case may be, or (b) as necessary to enable Lessor or
its assignee to make transfers, assignments or other dispositions to potential
transferees, assignees or participants of its interest in and to the Lease. In
the event that Lessee elects to make an offering of debt or equity securities,
Lessor shall grant its consent to disclosure of the terms hereof provided that
the following conditions are fulfilled: (1) such disclosure shall be limited to
the information that is required by applicable Law; (2) prior to such disclosure
being made by Lessee, the form of the proposed disclosure shall be presented to
Lessor for review and comment; (3) to the extent permissible under applicable
Law, the information disclosed shall be presented in a manner that preserves the
confidentiality of the rental rates and similar economic terms hereof; (4)
Lessee shall exercise commercially reasonable efforts to preserve the
confidentiality of the information disclosed to the fullest extent consistent
with compliance with applicable Law; and (5) Lessee shall pay the reasonable
costs and expenses of Lessor's counsel in reviewing and evaluating any
disclosure request made by Lessee pursuant hereto.

In connection with any such disclosure or any filing of the information
contained herein or therein pursuant to any such applicable Law, Lessor, Lessee
or the assignee of either of them, as the case may be, shall request and use its
best reasonable efforts to obtain confidential treatment of this SCHEDULE B and
the other party will cooperate in making and supporting any such request for
confidential treatment.

PART I   PART I-CASUALTY OCCURRENCE DEFINITIONS

AGREED VALUE (i) for each Used Engine [*] and (ii) for each New Engine [*]

DAMAGE NOTIFICATION THRESHOLD means [*]

DEDUCTIBLE AMOUNT means a deductible per occurrence that is not in excess of the
prevailing standard market deductible for similar engines.

MINIMUM LIABILITY COVERAGE means [*]

SPARES DEDUCTIBLE AMOUNT means a deductible per occurrence that is not in excess
of the prevailing standard market deductible for similar spare engines.

                                                          ENGINE LEASE AGREEMENT

                                      B-1


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

DEPOSIT: The amount of the Deposit for each Engine required by Section 3.1
hereof shall be payable in cash on the Delivery Date of such Engine and in the
amount equal to one month Rent for such Engine, calculated in accordance with
the formulas set forth in PART III below.

DISCOUNT RATE means [*]

INTEREST RATE: The Interest Rate shall be the "prime rate" as quoted in the WALL
STREET JOURNAL from time to time during the applicable period plus [*] but not
to exceed the maximum amount permitted by Law.

RETURN CONDITION SECURITY AMOUNT means the sum of [*]

PART III      RENT

[*]


                                                          ENGINE LEASE AGREEMENT

                                       B-2


[*]


PART IV       TAX DEFINITIONS; SPECIAL TAX INDEMNITY

         MACRS DEDUCTIONS means cost recovery deductions available to Lessor for
         100% of the cost of the Engine pursuant to Section 168(b) of the
         Internal Revenue Code of 1986, as amended (the CODE), commencing in the
         calendar year in which the Engine is delivered, computed (a) on the
         basis that the Engine is "7-year property" within the meaning of
         Section 168(e) of the Code, (b) by using the 200% declining balance
         method over a seven year recovery period, switching to the
         straight-line method for the first taxable year of the Indemnitee
         during the term for which such method yields a larger allowance, (c)
         assuming salvage value is zero, and (d) using a half-year convention.

         LESSOR/OWNER TAX JURISDICTION means United States.

         FSC BENEFITS are not applicable.

         FSC BENEFIT INDEMNITY  is not applicable

         FSC EQUIPMENT CHANGE AMOUNT is not applicable.

         FSC INDEMNITY MAXIMUM AMOUNT is not applicable.

                                                          ENGINE LEASE AGREEMENT

                                       B-3


SPECIAL TAX INDEMNITY

MACRS DEDUCTIONS INDEMNITY

(i)      Lessee will on demand pay and indemnify Owner for any loss,
         disallowance, or deferral of, or delay in claiming the MACRS Deductions
         resulting from Lessee's using the Engine in such a manner as to cause
         the Engine to be treated as "used predominantly outside the United
         States" within the meaning of Section 168(g) of the Code as in effect
         on the date of this Lease (hereinafter referred to as a "MACRS Loss").
         In determining the indemnity required in connection with a MACRS Loss
         to Owner under this Clause, Owner shall be assumed to be subject to a
         combined U. S. and state income tax rate of (after giving effect to the
         deductibility of such state income taxes for U. S. income tax purposes)
         38% in 2001 and in each year thereafter (the "ASSUMED TAX RATE"), and
         the Owner will be assumed to have sufficient taxable income to be taxed
         at the Assumed Tax Rate after full utilization of the MACRS Deductions.
         The amount payable under this indemnity shall be the amounts required
         from time to time, which, after deduction by Owner of the amount of all
         additional U. S., state, local, and foreign taxes required to be paid
         by Owner in respect of the receipt or accrual of such amount, will
         equal the increase in income taxes payable by (or not refundable to)
         Owner as the result of such MACRS Loss, plus the amount of any actual
         interest, penalties, and additions to tax payable by Tax Indemnitee
         with respect to such MACRS Loss.

(ii)     If, as the result of a MACRS Loss, the amount of the U. S. income taxes
         payable by Owner for any taxable year shall be less than the amount of
         such taxes that would have been payable by Owner had such MACRS Loss
         not occurred (or as the result thereof, Owner shall receive a refund of
         U. S. income taxes payable that shall be greater than the amount of
         such refund , if any, that Owner would have received had such MACRS
         Loss not occurred), then Owner shall pay to the Lessee the amount of
         such increased reduction in taxes (or refund, including any actual
         interest (net of any taxes payable with respect to such interest)
         received thereon), plus any net additional U. S., state, local, or
         foreign tax benefits actually realized by Owner as the result of any
         payment made pursuant to this sentence (such reduction in, or increased
         refund of, income taxes to be determined on a hypothetical basis, I.E.,
         assuming Owner can utilize any additional tax benefits resulting from
         the MACRS Loss at the Assumed Tax Rate); provided, however, that the
         amount payable by Owner pursuant to this sentence shall not exceed the
         sum of the amounts previously paid by the Lessee to Owner pursuant to
         the preceding paragraph with respect to such MACRS Loss to the extent
         not previously taken into account under this sentence.

PART V        SUPPLEMENTAL RENT

The Supplemental Rent payable will be determined with reference to the
following:

                                                          ENGINE LEASE AGREEMENT

                                       B-4


ANNUAL SUPPLEMENTAL RENT ADJUSTMENT means an annual escalation of [*]

ASSUMED RATIO means a one hour to one cycle ratio (1:1).

ASSUMED RATIO ADJUSTMENT: For the purposes of Section 5.4(SUPPLEMENTAL RENT) of
the CTA, any adjustment from the Assumed Ratio shall be based upon the following
table:

                                                                                    
HOUR/CYCLE RATIO:                              [*]                     [*]                   [*]

SUPPLEMENTAL RENT AMOUNT:                      [*]                     [*]                   [*]




ENGINE LLP SUPPLEMENTAL RENT means in respect of the LLP for each Engine [*]
for each Engine Cycle operated by that Engine during that calendar month or any
part of such calendar month during the Term.

ENGINE SUPPLEMENTAL RENT means in respect of each Engine, [*] for each Engine
Flight Hour (or fraction thereof) operated by that Engine during that calendar
month or any part of such calendar month during the Term.

PART VI       MAINTENANCE AND RETURN CONDITION DEFINITIONS;
              MAINTENANCE PAYMENTS AT REDELIVERY;

AD COMPLIANCE PERIOD means the 180 days following redelivery of the Engine in
compliance with Section 12 (RETURN OF ENGINES) of the CTA.

APPLICABLE FINANCIAL TEST means (a) a minimum tangible net worth determined in
accordance with GAAP of not less than Fifty Million Dollars (US$50,000,000.00),
and (b) aggregate cash and cash equivalents balances as reflected on the
Financial Information for the applicable quarter of not less than Twenty Million
Dollars (US$20,000,000.00).

EGT MARGIN means 15 degrees centigrade.

ENGINE CYCLES RESTRICTION means 1,600 Engine Cycles of life remaining to the
next scheduled removal for each Engine.

ENGINE FLIGHT HOURS RESTRICTION is not applicable.

MINIMUM COMPONENT CALENDAR LIFE is not applicable.

MINIMUM ENGINE CYCLES is not applicable.

MINIMUM ENGINE FLIGHT HOURS means 1,600 Engine Flight Hours of expected life
remaining to the next removal.

MINIMUM HARD TIME COMPONENT CYCLES is not applicable.

MINIMUM HARD TIME COMPONENT FLIGHT HOURS is not applicable.

ENGINE SUPPLEMENTAL RENT FHA TERMINATION AMOUNT with respect to an Engine means
the product of the number of Engine Flight Hours of operation on such Engine
since its last Engine Refurbishment and then applicable rate for payments of
Engine Supplemental Rent, less the

                                                          ENGINE LEASE AGREEMENT

                                       B-5


Service Credit Amount (if any) to which Lessor is entitled under the FHA
Assignment Agreement.

SERVICE CREDIT AMOUNT with respect to an Engine is the amount (if any) of the
Allocable Paid-In Base and LRU Charge (as defined in the FHA Assignment
Agreement) that is available to Lessor as a credit against maintenance service
from or on behalf of the Manufacturer under the FHA Assignment Agreement.



PART VII          CHANGE OF CONTROL

For so long as the Lessor under this Lease is Aviation Financial Services Inc.
or any Affiliate of Aviation Financial Services Inc., Lessee agrees that it
shall comply with the terms of that certain Letter Agreement dated the date
hereof between Chautauqua Airlines, Inc. and Aviation Financial Services Inc.

                                                          ENGINE LEASE AGREEMENT

                                       B-6


                                   SCHEDULE C

                                  ENGINE LEASE
                             COMMON TERMS AGREEMENT

                                    [ATTACH]


SF1 #88922 v7

                                                    ENGINE LEASE AGREEMENT [MSN]
                                     C-1

EX-10.46

                                                                Exhibit 10.46

                             ENGINE LEASE SUPPLEMENT

     ENGINE LEASE SUPPLEMENT NO. 1, dated December 19, 2001 between AVIATION
FINANCIAL SERVICES, INC., a corporation organized under the laws of the State of
Delaware ("Lessor"), and CHAUTAUQUA AIRLINES, INC., a corporation organized
under the laws of the State of New York ("Lessee").

     Lessor and Lessee have previously entered into that certain Engine Lease
Agreement dated as of December 18, 2001, including the Common Terms Agreement as
defined therein (collectively, herein referred to as the "Lease" and the defined
terms therein being hereinafter used with the same meaning). The Lease provides
for the execution and delivery from time to time of an Engine Lease Supplement
substantially in the form hereof for the purpose of leasing the engines
described below under the Lease as and when delivered by Lessor to Lessee in
accordance with the terms thereof.

     The Lease and this Engine Lease Supplement relate to the Engines and Parts
as more precisely described below and in the Certificate of Acceptance. A
counterpart of the Lease is attached hereto and this Engine Lease Supplement and
the Agreement shall form one document.

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

1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee hereby
accepts, acknowledges receipt of possession and leases from Lessor under the
Lease, those certain AE3007A1P aircraft Engines (each of which Engines has 750
or more rated takeoff horsepower or the equivalent of such horsepower) described
in the Annex hereto, together with the Engine Documents described in the Lease
(each a "Delivered Engine").

2. The Delivery Date of each Delivered Engine is the date of this Engine Lease
Supplement set forth in the opening paragraph hereof.

3. The Term for each Delivered Engine shall commence on the Delivery Date and
shall end on the Expiry Date, which shall be December 19, 2016.

4. The amount of Rent for each Delivered Engine is set forth in Schedule B to
the Engine Lease Agreement.

5. Lessee hereby confirms to Lessor that (i) each Delivered Engine have been
duly marked in accordance with the terms of Section 8.6(a) of the Common Terms
Agreement, (ii) each Delivered Engine is insured as required by the Lease, (iii)
the representations and warranties of Lessee referred to in Section 2.1 of the
Common Terms Agreement are hereby repeated with effect as of the date first
above written, (iv) having inspected each Delivered Engine, Lessee acknowledges
that each Delivered Engine satisfies all conditions required for Lessee's
acceptance of delivery as set forth in the Lease or as otherwise expressly set
forth in the Certificate of Acceptance, and (v) the execution and delivery of
this Engine Lease Supplement



signifies absolute and irrevocable acceptance by Lessee of each Delivered Engine
for all purposes hereof and of the Lease.

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

7. This Engine Lease Supplement may be executed in any number of counterparts;
each of such counterparts, shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and the same Engine
Lease Supplement.



     IN WITNESS WHEREOF, Lessor and Lessee have caused this Engine Lease
Supplement No. 1 to be duly executed as of the day and year first above written.

LESSOR,                                       LESSEE,

AVIATION FINANCIAL                            CHAUTAUQUA AIRLINES, INC.
SERVICES, INC.

By:   /s/ Charles H. Meyer                    By:      /s/ Robert H. Cooper
   ------------------------------                -------------------------------

Name:     Charles H. Meyer                    Name:        Robert H. Cooper
     ----------------------------                  -----------------------------

Title:   Vice President                       Title:     Vice President
      ---------------------------                   ----------------------------



                                                                           ANNEX

                              DESCRIPTION OF ENGINE


Manufacturer                     Manufacturer's Model         Manufacturer's
                                                              Serial No.
- --------------------------------------------------------------------------------
                                                        
Rolls Royce                      AE 3007A1P                   CAE 312071

Rolls Royce                      AE 3007A1P                   CAE 312096

Rolls Royce                      AE 3007A1P                   CAE 311434

Rolls Royce                      AE 3007A1P                   CAE 311206

Rolls Royce                      AE 3007A1P                   CAE 311635

Rolls Royce                      AE 3007A1P                   CAE 311794

Rolls Royce                      AE 3007A1P                   CAE 311908


Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.

EX-10.47

                                                                Exhibit 10.47

                            Chautauqua Airlines, Inc.

                           2500 South High School Road
                           Indianapolis, Indiana 46241

December 18, 2001

Aviation Financial Services Inc.
c/o GE Engine Leasing
GE Capital Aviation Services, Inc.
201 High Ridge Road
Stamford, Connecticut 06927

Re:  Master Engine Lease Agreement (the "Lease") dated as of December 18, 2001,
     incorporating the terms of that certain Engine Lease Common Terms Agreement
     between General Electric Capital Corporation and Lessee (the "CTA"),
     between Chautauqua Airlines, Inc. (the "Lessee") and Aviation Financial
     Services Inc. ("Lessor"). Capitalized terms used and not defined herein
     shall be given the meanings assigned in the Lease.

Dear Madams/Sirs:

The parties hereto agree that for all purposes of the Lease, Section 8.7(a)(vi)
of the CTA shall be deemed to be amended by adding at the end thereof:

"In addition to the foregoing requirements, so long as Aviation Financial
Services Inc. or an Affiliate of Aviation Financial Services Inc. is the Lessor,
Lessee shall not, during the Term, enter into any merger with or into or
consolidation with, or sell, convey, transfer, lease or otherwise dispose of in
one or a series of transactions all or substantially all of its assets as an
entirety to any Person, unless the surviving corporation or Person which
acquires by purchase, conveyance, transfer or lease all or substantially all of
the assets of the Lessee as an entirety (A) is a domestic corporation organized
and existing under the laws of the United States or any State of the United
States, (B) is a Citizen of the United States, (C) is a Certificated Air
Carrier, (D) if not the Lessee, executes a duly authorized, legal, valid,
binding, and enforceable agreement, reasonably satisfactory in form and
substance to Lessor, Owner and the Financing Parties' Representative, containing
an effective assumption of all of the Lessee's, as applicable, obligations
hereunder and under the Engine Lease Agreement, and each other document
contemplated hereby or thereby and delivers such instrument to the Lessor, Owner
and the Financing Parties' Representative, (E) provides an opinion from counsel
(which counsel may be the Lessee's General Counsel) delivered to the Lessor,
Owner and the Financing Parties' Representative, which opinion shall be
reasonably satisfactory to the



Lessor, and an officer's certificate (which may rely, as to legal matters, on
such legal opinion), each stating that such merger, consolidation, conveyance,
transfer, lease or other disposition and the instrument noted in Section
8.7(a)(vi)(B) of the CTA complies with this letter agreement and Section
8.7(a)(vi) of the CTA, that such instrument is a legal, valid and binding
obligation of, and is enforceable against, such survivor or Person, and that all
conditions precedent herein provided for relating to such transaction have been
complied with, and (F) such survivor or Person makes such filings and recordings
with the FAA as may be required pursuant to part A of subtitle VII of Title 49,
United States Code to evidence such merger or consolidation; PROVIDED THAT, no
such merger, consolidation or conveyance, transfer or lease shall be permitted
if (1) immediately after giving effect to such consolidation, merger, purchase,
conveyance, transfer, lease or other disposition, an Event of Default shall have
occurred and be continuing or (2) the surviving Person in such transaction has a
tangible net worth, as determined in accordance with generally accepted
accounting principles immediately following such transaction, of less than
seventy-five percent (75%) of Lessee, as measured immediately prior to such
transaction.

In addition to the foregoing requirements, so long as Aviation Financial
Services Inc. or an Affiliate of Aviation Financial Services Inc. is the Lessor
(A) during the first five (5) years of the Term, the Lessee shall not enter into
any merger with or into or consolidation with, or sell, convey, transfer, lease
or otherwise dispose of in one or a series of transactions all or substantially
all of its assets to any Person nor shall Wexford Air Holdings, Inc. (the
"Wexford Shareholder") sell any of its shares of common stock in the Lessee
(collectively, a "Transaction") without the prior written consent of the Lessor,
such consent not to be unreasonably withheld, unless: (i) following such
Transaction, the Wexford Shareholder is the shareholder owning the greatest
number of shares of common stock of the Lessee or other surviving entity; or
(ii) the acquiring or successor entity in such Transaction is a Certificated Air
Carrier with a tangible net worth of not less than Fifty Million Dollars
($50,000,000.00) or a Group III air carrier as determined under 14 CFR 241,
Section 04 (or, if such determination has not been made, an air carrier with
annual operating revenues of One Billion Dollars ($1,000,000,000.00); or (iii)
immediately following the Transaction, Lessee receives and retains net proceeds
of at least Twenty Five Million Dollars ($25,000,000.00); and (B) clause (2) of
the proviso in the immediately preceding paragraph shall not apply during the
first five (5) years of the Term with respect to any Transaction that otherwise
fully satisfies any one of the conditions set forth in subclauses (i), (ii), or
(iii) in clause (A) of this paragraph."

The agreement stated in this letter is for the sole benefit of Aviation
Financial Services Inc. and its Affiliates and shall terminate if at any time
Aviation Financial Services Inc. or an Affiliate ceases to be the Lessor. Each
party agrees that it will not disclose the terms of this letter (other than to
its accountants, attorneys, agents or consultants), including to potential
assignees, except as required by law.



If you agree with the terms of this letter, please so indicate by executing the
letter where indicated below.

Very truly yours,

CHAUTAUQUA AIRLINES, INC.

By:  /s/ Robert H. Cooper
     --------------------------
     Name:  Robert H. Cooper
     Title: Vice President

ACCEPTED AND AGREED:

AVIATION FINANCIAL SERVICES INC.

By:  Charles H. Meyer
     --------------------------
     Name:  Charles H. Meyer
     Title: Vice President

EX-10.48

                                                                   Exhibit 10.48

                                                                  EXECUTION COPY

                           ENGINE PURCHASE AGREEMENT

     THIS ENGINE PURCHASE AGREEMENT (this "Agreement") is made as of the 18th
day of December, 2001 by and between CHAUTAUQUA AIRLINES, INC., a New York
corporation, as seller (the "Seller"), and AVIATION FINANCIAL SERVICES INC., a
Delaware corporation, as buyer (the "Buyer").

                              W I T N E S S E T H:

     WHEREAS, Seller owns five (5) Rolls-Royce model AE3007A1P aircraft engines
and will purchase four (4) Rolls-Royce model AE3007A1P aircraft engines from the
Engine Manufacturer pursuant to the Manufacturer Purchase Agreement on the
respective Delivery Dates of such Engines, all as more fully described in
EXHIBIT C hereof and defined below; and

     WHEREAS, Seller desires to sell to Buyer all of its right, title and
interest in and to the Engines pursuant to the terms and conditions of this
Agreement; and

     WHEREAS, Buyer desires to purchase from Seller all of Seller's right, title
and interest in and to the Engines pursuant to the terms and conditions of this
Agreement; and

     WHEREAS, immediately upon the purchase of the Engines by Buyer from the
Seller, Buyer desires to lease to Seller and Seller desires to lease from Buyer
the Engines pursuant to the terms and conditions of the Lease (as defined
below).

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

     SECTION 1. DEFINITIONS.

     Capitalized terms defined elsewhere in this Agreement shall have the
respective meanings there ascribed to them. The following capitalized terms
shall have the following meanings:

          "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
     day which is a legal holiday for commercial banking institutions in New
     York, New York and Indianapolis, Indiana.

          "DELIVERY" shall mean, with respect to each Engine, the following
     events performed in connection with the sale of such Engine by Seller in
     accordance with the terms hereof, all of which events shall be deemed to
     occur concurrently for the purpose of this Agreement and the transactions
     contemplated hereby:

               (a) the tender of such Engine by Seller to Buyer at the Delivery
     Location;

                                       1


               (b) the delivery by Seller to Buyer of the Warranty Bill of Sale
     relating to such Engine;

               (c) the delivery by Buyer to Seller of the Delivery Receipt with
     respect to such Engine; and

               (d) the payment by (or on behalf of) Buyer to Seller of the
     Purchase Price relating to such Engine.

          "DELIVERY DATE" shall mean, with respect to each Engine, the date of
     Delivery of such Engine.

          "DELIVERY LOCATION" shall mean any location mutually approved by
     Seller and Buyer which is determined by the parties to be acceptable for
     taxation purposes.

          "DELIVERY RECEIPT" shall mean, with respect to each Engine, the
     receipt, in the form attached hereto as EXHIBIT A, executed by Buyer and
     delivered to Seller as part of the Delivery of such Engine, evidencing the
     delivery of such Engine to Buyer.

          "DOLLARS" shall mean the legal currency, at the relevant time, of the
     United States of America.

          "ENGINE DOCUMENTS" shall mean, with respect to each Engine, each and
     all of the documents, data and records to extent owned by Seller pertaining
     to, as applicable, such Engine, as itemized in the schedule attached to the
     Delivery Receipt of such Engine.

          "ENGINE MANUFACTURER" shall mean Rolls-Royce Corporation.

          "ENGINES" shall mean, collectively, the nine (9) Rolls-Royce model
     AE3007A1P aircraft engines manufactured by Engine Manufacturer bearing the
     manufacturer's serial numbers set forth in EXHIBIT C hereto, together with
     all appliances, parts, instruments, accessories, furnishings and all other
     items of equipment incorporated in, installed on, appurtenant to, or
     otherwise included with such Engines on the respective Delivery Date.

          "EVENT OF LOSS" shall have the meaning giving in the Lease.

          "FAA" shall mean the Federal Aviation Administration of the United
     States of America and any successor agency thereto.

          "LEASE" shall mean the Master Engine Lease Agreement dated as of
     December 18, 2001 between Lessor, as lessor and Lessee, as lessee,
     incorporating the provisions of an Engine Lease Common Terms Agreement
     dated as of December 18, 2001 (the "CTA") between Lessee and General
     Electric Capital Corporation, including each Engine Lease Supplement to
     such Master Engine Lease Agreement and each Certificate of Acceptance (as
     defined therein).

          "LESSEE" shall mean the Seller.

                                       2


          "LESSOR" shall mean the Buyer.

          "MANUFACTURER PURCHASE AGREEMENT" means the AE 3007A/1 Series Engine
     General Terms Agreement dated as of December 6, 2000 between the Engine
     Manufacturer and the Lessee, as amended and supplemented from time to time.

          "MORTGAGE RELEASE" shall mean, with respect to any Engine subject to
     an Engine Chattel Mortgage, Security Agreement and Assignment of Rents in
     favor of Fleet Capital Corporation (each an "Existing Mortgage"), the
     Release of Engine Chattel Mortgage, Security Agreement and Assignment of
     Rents in form and substance reasonably satisfactory to Buyer dated the
     Delivery Date relating to such Engine, by Fleet Capital Corporation as
     secured party.

          "PURCHASE DOCUMENTS" shall mean this Agreement, each Warranty Bill of
     Sale, each Delivery Receipt, each Warranty Assignment Agreement and
     Consent, each Mortgage Release, and all other documents executed and
     delivered pursuant to such documents.

          "PURCHASE PRICE" shall mean, with respect to each Engine, the purchase
     price for such Engine as listed in EXHIBIT D hereto.

          "SECURITY INTEREST" shall have the meaning giving in the Lease.

          "SPECIAL FAA COUNSEL" shall mean Daugherty, Fowler, Peregrin & Haught,
     Oklahoma City, Oklahoma.

          "TAXES" shall mean any and all fees (including without limitation,
     license, documentation and registration fees), taxes (including, without
     limitation, income, gross receipts, sales, rental, use, value-added,
     property (tangible or intangible), excise and stamp taxes), levies,
     imposts, duties, recording charges or fees, charges, assessments or
     withholding of any nature whatsoever imposed by any government or other
     taxing authority of any jurisdiction, together with any and all penalties,
     fines, or additions thereto or interest thereon, but excluding any taxes
     which are imposed on or are measured by the income or capital gains of
     Buyer.

          "WARRANTY ASSIGNMENT AGREEMENT AND CONSENT" shall mean, with respect
     to each Engine, the Warranty Assignment Agreement and Consent dated as of
     the Delivery Date relating to such Engine, among Seller, as assignor,
     Buyer, as assignee, and Engine Manufacturer, as consenting party, each in
     substantially the form of Exhibit E hereof.

          "WARRANTY BILL OF SALE" shall mean, with respect to each Engine, the
     Warranty Bill of Sale relating to such Engine dated as of the Delivery Date
     relating to such Engine and executed by Seller in favor of Buyer in
     substantially the form of EXHIBIT B hereto.

                                       3


          SECTION 2. PURCHASE AND SALE OF ENGINES.

          2.1 SALE OF ENGINES. Subject to the terms and conditions of this
     Agreement, Seller agrees to sell all right, title and interest in each
     Engine to Buyer and Buyer agrees to purchase such right, title and interest
     from Seller.

          2.2 PURCHASE PRICE. Subject to the terms and conditions of this
     Agreement, Buyer shall make (or cause) payment of the Purchase Price for
     each Engine on the Delivery Date relating to such Engine by wire transfer
     to the following account (or such other account as the Seller shall specify
     in a notice to the Buyer) located in the United States of America:

               Bank:               Fleet Bank, Hartford, CT
               Account Name:       Chautauqua Airlines, Inc.
               Account Number:     942-843-4548
               ABA Routing No.:    011-900-571
               Reference:          Sale Proceeds - Engines

     Such payment shall be made in immediately available, freely transferable
     and convertible Dollars without set-off, counterclaim or deduction of
     whatsoever nature, with such transfer occurring immediately prior to the
     filing of the Lease and the Engine Lease Supplement relating to such Engine
     with the FAA.

          2.3 WARRANTY ASSIGNMENT AGREEMENT. Effective upon Delivery of each
     Engine, Seller hereby assigns (and shall cause to be assigned by the
     Warranty Assignment Agreement and Consent relating to such Engine) to Buyer
     all of its right, title and interest with respect to the Warranties (as
     defined in the Warranty Assignment Agreement and Consent relating to such
     Engine) subject to the terms of the Warranty Assignment Agreement and
     Consent relating to such Engine.

          SECTION 3. DELIVERY AND TRANSFER OF TITLE.

          3.1 DELIVERY OF ENGINES. Seller shall deliver each Engine to Buyer on
     the Delivery Date of such Engine at the Delivery Location.

          3.2 DELIVERY CONDITIONS. Subject to the terms and conditions of this
     Agreement, prior to or concurrent with Delivery of each Engine:

               (a) All of the conditions set forth in Section 4.1 hereof shall
          have been satisfied by Seller or waived by Buyer;

               (b) All of the conditions set forth in Section 4.2 hereof shall
          have been satisfied by Buyer or waived by Seller; and

               (c) Concurrently with the tender of delivery of such Engine and
          the transfer of title to such Engine by Seller to Buyer, Buyer shall
          deliver to Seller the fully-executed Delivery Receipt of such Engine.

                                       4


          3.3 TITLE AND RISK OF LOSS. Effective immediately upon the Delivery of
     each Engine, title to such Engine and the risk of loss relating thereto
     shall pass to Buyer.

          SECTION 4. CONDITIONS TO PERFORMANCE.

          4.1 CONDITIONS TO OBLIGATION OF BUYER TO PERFORM. Buyer's obligation
     to pay (or cause to be paid) to Seller the Purchase Price for each Engine,
     deliver to Seller the Delivery Receipt for such Engine, and otherwise
     perform hereunder relating to such Engine shall be conditional upon, at or
     before the Delivery of such Engine, the following events relating to such
     Engine occurring and documents being delivered (in a form reasonably
     acceptable to Buyer), unless waived by Buyer in writing:

               (a) As of the Delivery Date of such Engine, the representations
          of Seller set forth in the Purchase Documents relating to such Engine
          shall be true and correct.

               (b) Such Engine shall be located in the Delivery Location and
          Buyer shall be reasonably satisfied that no sales, use, rental, value
          added, goods and services, stamp, transfer or similar tax will be
          required to be paid to any taxing authority in connection with (i) the
          Delivery of such Engine or (ii) the delivery of such Engine by Buyer
          to Seller under the Lease.

               (c) An Event of Loss relating to such Engine shall not have
          occurred and be continuing and no condition, event or circumstance
          shall have occurred which with the lapse of time or making of relevant
          determination would constitute an Event of Loss.

               (d) Seller shall have removed any and all Security Interests
          affecting title to such Engine (it being understood that the Security
          Interest of an Existing Mortgage may be satisfied concurrently with
          Delivery out of the proceeds of the Purchase Price for such Engine in
          accordance with the terms of this Agreement).

               (e) Seller and Lessee shall have delivered (or cause to be
          delivered) in escrow to Special FAA Counsel the following duly
          authorized, fully executed documents, and Seller and Lessee shall have
          irrevocably instructed (or, in the case of any Mortgage Release,
          caused Fleet Capital Corporation to irrevocably instruct) Special FAA
          Counsel to file such documents with the FAA upon Buyer paying the
          Purchase Price for such Engine pursuant to Section 2.2 hereof:

                    (i)   the Lease;

                    (ii)  the Lease Supplement relating to such Engine; and

                    (iii) Mortgage Release (if any) relating to such Engine.

               (f) Seller shall have delivered in escrow to Buyer's counsel the
          Warranty Bill of Sale and the Warranty Assignment Agreement and
          Consent relating to such Engine and Seller shall have irrevocably
          authorized such counsel to release to Buyer such documents

                                       5


          upon Buyer paying (or causing the payment of) the Purchase Price
          for such Engine pursuant to Section 2.2 hereof.

               (g) The opinion of Special FAA Counsel relating to such Engine,
          dated as of the Delivery Date of such Engine, shall have been provided
          in the form and substance reasonably acceptable to Buyer.

               (h) All of the conditions set forth in Part A of Schedule 3 of
          the Lease relating to such Engine shall have been satisfied by Lessee
          or waived by Lessor.

          4.2 CONDITIONS TO OBLIGATION OF SELLER TO PERFORM. Seller's obligation
     to sell each Engine to Buyer and to deliver to Buyer the Warranty Bill of
     Sale relating to such Engine and to otherwise perform hereunder relating to
     such Engine shall be conditional upon, at or before the Delivery of such
     Engine, the following events relating to such Engine occurring and
     documents being delivered (in a form reasonably acceptable to Seller),
     unless waived by Seller in writing:

               (a) Seller shall have received the Delivery Receipt of such
          Engine as executed by Buyer;

               (b) Seller shall have received full payment of the Purchase Price
          for such Engine in accordance with Section 2.2 hereof;

               (c) as of the Delivery Date of such Engine, the representations
          of Buyer set forth in Section 7 hereof shall be true and correct;

               (d) as of the Delivery of such Engine, such Engine shall have
          been sold and delivered to the Seller pursuant to the terms of the
          Manufacturer Purchase Agreement; and

               (d) All of the conditions set forth in Part B of Schedule 3 of
          the Lease relating to such Engine shall have been satisfied by Lessor
          or waived by Lessee.

          SECTION 5. TECHNICAL ACCEPTANCE. Buyer's execution and delivery to
     Seller of the Delivery Receipt of each Engine shall evidence Buyer's
     irrevocable acceptance of such Engine in its "as is, where is" condition,
     subject to the terms and conditions of this Agreement.

          SECTION 6. SELLER'S REPRESENTATIONS AND WARRANTIES.

          6.1 SELLER'S REPRESENTATIONS OF AUTHORITY AND RELATED MATTERS.

               Seller represents to the Buyer, as of its execution of this
          Agreement and (unless otherwise provided in writing to the other party
          hereto prior to the Delivery of each Engine) as of the Delivery Date
          of such Engine, that:

               (a)  it is duly formed, validly existing under the laws of the
                    State of New York;

                                       6


               (b)  it has full power, authority and legal right to enter into,
                    and perform pursuant to the terms of, this Agreement and the
                    other Purchase Documents relating to such Engine to which it
                    is a party;

               (c)  the execution, delivery and performance of this Agreement
                    and the other Purchase Documents relating to such Engine to
                    which it is a party have been duly authorized by all
                    necessary action on its part and do not require any
                    approvals or consents except such approvals and consents as
                    have heretofore been duly obtained;

               (d)  the execution, delivery and performance of this Agreement
                    and the other Purchase Documents relating to such Engine to
                    which it is a party by Seller do not (i) contravene any law,
                    governmental rule, regulation, judgment or order applicable
                    to or binding on it, or (ii) contravene its certificate of
                    incorporation or bylaws, or (iii) contravene or result in a
                    default under any agreement to which it is a party or by
                    which it is bound, or (iv) contravene any provision of, or
                    constitute a default under, any indenture, mortgage,
                    contract or other instrument to which Seller is a party or
                    by which Seller or any of its assets are bound or are
                    subject;

               (e)  it is not a party to any agreement or instrument and it is
                    not subject to any charter or other restriction which would
                    have a material adverse effect on its ability to perform its
                    obligations under this Agreement and the other Purchase
                    Documents relating to such Engine to which it is a party;

               (f)  each of this Agreement and the other Purchase Documents
                    relating to such Engine to which it is a party constitutes a
                    legal, valid and binding obligation of such party
                    enforceable in accordance with the terms herein and therein,
                    except as such enforceability may be limited by bankruptcy,
                    insolvency, reorganization, moratorium or similar laws
                    affecting creditors' rights generally, as well as by
                    principles of equity;

               (g)  such Engine has not suffered an Event of Loss; and

               (h)  as of the Delivery of such Engine, Seller is the sole legal
                    and beneficial owner of such Engine, free and clear of any
                    Security Interests other than the Existing Mortgage (if
                    any), which Existing Mortgage will be terminated and
                    released as of the Delivery Date by the Mortgage Release.

          6.2 SELLER'S WARRANTY OF TITLE. Seller hereby warrants to the Buyer
     that:

               (a)  immediately prior to the moment of title transfer of each
     Engine, Seller shall have good and marketable title to such Engine free and
     clear of any and all Security Interests, together with full power and
     lawful authority to transfer such title to Buyer; and

               (b) upon Delivery of each Engine to Buyer, Seller shall have
     transferred to Buyer good and marketable title to such Engine free and
     clear of any and all Security Interests other

                                       7


     than those created by Buyer, and Seller hereby warrants and agrees to
     defend such title against all claims and demands whatsoever and forever
     other than those created by Buyer.

          6.3 LIMITATION OF SELLER'S WARRANTIES.

               (a) EXCEPT AS TO TITLE AS PROVIDED IN SECTION 6.2 HEREOF AND IN
          THE WARRANTY BILL OF SALE, EACH ENGINE IS BEING SOLD AND DELIVERED BY
          SELLER TO BUYER AND PURCHASED AND ACCEPTED BY BUYER "AS IS" AND "WHERE
          IS." SELLER MAKES NO, AND EXPRESSLY AND SPECIFICALLY DISCLAIMS (AND
          BUYER EXPRESSLY AND SPECIFICALLY WAIVES AND DISCLAIMS) ANY,
          REPRESENTATION, GUARANTEE, COVENANT, CONDITION OR WARRANTY OF ANY KIND
          RELATING TO SUCH ENGINE, INCLUDING BUT NOT LIMITED TO THE
          AIRWORTHINESS AND/OR CONDITION OF SUCH ENGINE, WHETHER EXPRESS OR
          IMPLIED, ORAL OR WRITTEN, ARISING BY LAW OR OTHERWISE, IN CONTRACT OR
          IN TORT, INCLUDING WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO SUCH
          ENGINE'S AIRWORTHINESS, MERCHANTABILITY, QUALITY, FITNESS FOR ANY
          PARTICULAR USE, PURPOSE, DESIGN, CONDITION, VALUE, QUALITY,
          DURABILITY, OR AS TO THE ABSENCE OF LATENT, INHERENT OR OTHER DEFECTS
          (WHETHER OR NOT DISCOVERABLE) OR AS TO THE ABSENCE OF ANY INFRINGEMENT
          OF ANY PATENT, DESIGN, COPYRIGHT OR OTHER PROPRIETARY RIGHT OR THOSE
          ARISING BY STATUTE OR OTHERWISE IN LAW FROM THE COURSE OF DEALING OR
          USAGE OF TRADE. BUYER AGREES AND ACKNOWLEDGES THAT IN NO EVENT SHALL
          SELLER BE LIABLE FOR INJURIES TO PERSONS OR PROPERTIES, FOR LOSS OF
          USE, REVENUES OR PROFIT WITH RESPECT TO SUCH ENGINE OR ANY LIABILITY
          OF BUYER FOR ANY DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

               (b) NO AGREEMENT ALTERING OR EXTENDING SELLER'S LIABILITY FOR
          WARRANTIES SHALL BE BINDING UPON SELLER UNLESS IN WRITING AND EXECUTED
          BY A DULY AUTHORIZED OFFICER OR REPRESENTATIVE OF SELLER.

          SECTION 7. BUYER'S REPRESENTATIONS AND WARRANTIES.

          7.1 BUYER REPRESENTATIONS OF AUTHORITY AND RELATED MATTERS.

               Buyer represents to the Seller, as of its execution of this
          Agreement and (unless otherwise provided in writing to the other party
          hereto prior to the Delivery of each Engine) as of the Delivery Date
          of such Engine, that:

               (a)  it is duly formed and validly existing pursuant to the laws
                    of the State of Delaware.

                                       8


               (b)  it has full power, authority and legal right to enter into,
                    and perform pursuant to the terms of, this Agreement and the
                    other Purchase Documents relating to such Engine to which it
                    is a party;

               (c)  the execution, delivery and performance of this Agreement
                    and the other Purchase Documents relating to such Engine to
                    which it is a party have been duly authorized by all
                    necessary action on its part and do not require any
                    approvals or consents except such approvals and consents as
                    have heretofore been duly obtained;

               (d)  the execution, delivery and performance of this Agreement
                    and the other Purchase Documents relating to such Engine to
                    which it is a party by Buyer do not (i) contravene any law,
                    governmental rule, regulation, judgment or order applicable
                    to or binding on it, or (ii) contravene its certificate of
                    incorporation or bylaws, or (iii) contravene or result in a
                    default under any agreement to which it is a party or by
                    which it is bound, or (iv) contravene any provision of, or
                    constitute a default under, any indenture, mortgage,
                    contract or other instrument to which Buyer is a party or by
                    which Buyer or any of its assets are bound or are subject;

               (e)  it is not a party to any agreement or instrument and it is
                    not subject to any charter or other restriction which would
                    have a material adverse effect on its ability to perform its
                    obligations under this Agreement and the other Purchase
                    Documents relating to such Engine to which it is a party;
                    and

               (f)  each of this Agreement and the other Purchase Documents
                    relating to such Engine to which it is a party constitutes a
                    legal, valid and binding obligation of such party
                    enforceable in accordance with the terms herein and therein,
                    except as such enforceability may be limited by bankruptcy,
                    insolvency, reorganization, moratorium or similar laws
                    affecting creditors' rights generally, as well as by
                    principles of equity.

                                       9


          SECTION 8. TAXES AND INDEMNITIES.

          8.1 TAXES.

               (a) Each of the parties hereto shall act in good faith and
          cooperate with one another to ensure that the amount of Taxes which
          might arise as a result of this Agreement, any of the other Purchase
          Documents, or the performance hereof or thereof are minimized. Seller
          shall pay (or cause to be paid) in a timely and proper manner, and
          shall indemnify Buyer and its affiliates, successors and assigns
          (within ten Business Days after receipt of written demand therefor) on
          an after tax basis for, all Taxes required by any applicable law (or
          any administrative or judicial interpretation thereof) to be paid in
          connection with the Delivery, and Seller shall prepare and file (or
          cause to be prepared and filed) in a timely and proper manner all
          reports, returns or other documents required by any applicable law (or
          any administrative or judicial interpretation thereof) to be filed
          with respect to such Taxes. Notwithstanding the foregoing, Seller
          shall not have any liability pursuant to this Agreement for, and shall
          not be obligated to indemnify Buyer pursuant to this Agreement against
          any Taxes which: (i) are in the nature of property or ad valorem taxes
          not imposed on the basis of the sale of the Engines and are imposed
          for periods after the Delivery, (ii) are imposed upon the use of the
          Engines subsequent to the sale of the Engines, (iii) are attributable
          to any financing obtained by Buyer for the acquisition of the Engines
          or the recordation or provision of any security interest therefor and
          are imposed for periods after the Delivery, (iv) are attributable to
          any event or occurrence or which otherwise accrues subsequent to the
          sale of the Engines, (v) would not have been imposed but for the form
          of the organization, capitalization, location of the businesses of or
          the conduct of the business activities (other than the activities
          contemplated by this Agreement) or ownership of properties by the
          Buyer in the jurisdiction of the taxing authority imposing such Taxes,
          or (vi) any Lessor Taxes (as defined in the CTA). For the avoidance of
          doubt, (A) nothing contained in this Agreement shall modify or
          otherwise affect any liability for Taxes that Seller may have in its
          capacity as Lessee pursuant to the CTA or the Lease, and (B) in no
          event shall the Buyer be able to recover by way of indemnity the same
          Tax under both this Agreement and the CTA or the Lease.

               (b) The parties hereto expressly agree that the provisions of
          Sections 5.9 and 5.10 of the CTA shall apply MUTATIS MUTANDIS in
          respect of any Taxes and indemnification provided for under this
          Section 8.1.

          8.2 INDEMNITIES.

               (a) Except as provided in Section 8.2(b) below, Seller agrees to
          assume liability for and to indemnify Buyer or any of its officers,
          employees or agents (the "Indemnitees") (other than solely in its
          capacity as a manufacturer of the Engine) against and agrees to pay on
          demand any and all Losses (as defined in the Lease) which Buyer may
          suffer or incur at any time, whether directly or indirectly, arising
          out of, related to or in any way connected with:

                                       10


                    (i) the purchase hereunder, ownership, maintenance, repair,
               possession, import, export, registration, storage, modification,
               leasing, insurance, inspection, testing, design, sub-leasing,
               use, condition or other matters relating to the Engines or any
               part thereof (regardless of whether such Losses are based on
               strict liability in tort, any act or omission, including the
               negligence, of any Indemnitee, or otherwise); or

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

               (b) Seller is not required to indemnify any particular Indemnitee
          under Section 8.2(a) (without, however, limiting Seller's obligations
          as lessee under the Lease), to the extent a particular Loss:

               (i)   arises out of any act, omission, event or circumstance
                     occurring after Delivery;

               (ii)  is caused by the gross negligence or wilful misconduct of
                     that Indemnitee;

               (iii) is the result of failure by Buyer to comply with any of its
                     express obligations under this Agreement (unless such
                     failure is caused by failure by Seller to comply with any
                     of its express obligations under this Agreement) or any
                     representation or warranty given by Buyer not being true
                     and correct;

               (iv)  is related to any Taxes;

               (v)   constitutes ordinary and usual operating or overhead
                     expenses of such Indemnitee (other than where such expense
                     is caused by the occurrence of any breach by Seller of its
                     obligations under this Agreement);

               (vi)  is a Loss which Buyer and Seller have agreed in writing is
                     to be excluded; or

               (vii) a Loss relating to, resulting from, arising out of or in
                     connection with a "prohibited transaction" within the
                     meaning of Section 406 of ERISA (as defined in the Lease)
                     or Section 4975(c)(1) of the Internal Revenue Code of 1986
                     resulting from the direct or indirect use of assets or any
                     ERISA Plan to acquire or hold Buyer's interest in the
                     Engine or in the case of any transferee of the Buyer, to
                     purchase the Engine from the Buyer.

               (c) The parties hereto expressly agree that the provisions of
          Sections 10(c), (d), (e) and (f) of the CTA shall apply MUTATIS
          MUTANDIS in respect of any Loss and indemnification provided for under
          this Section 8.2.

                                       11


     SECTION 9. TERMINATION.

     Unless the parties hereto otherwise agree, this Agreement shall terminate
as to an Engine automatically upon the occurrence of an Event of Loss with
respect to such Engine prior to the Delivery of such Engine. Otherwise, this
Agreement may be terminated as to an Engine only as follows:

          (a)  by written agreement of all parties hereto at any time prior to
               the Delivery of such Engine;

          (b)  by Buyer, if the conditions specified in Section 4.1 hereof
               relating to such Engine have not been waived by Buyer or
               satisfied by the Delivery Date of such Engine; and

          (c)  by Seller, if the conditions specified in Section 4.2 hereof
               relating to such Engine have not been waived by Seller or
               satisfied by the Delivery Date of such Engine.

Upon any such termination relating to any such Engine, this Agreement
relating to such Engine shall be of no further force and effect.

     SECTION 10. FURTHER COOPERATION.

     The parties hereto agree to fully cooperate with one another, and to
execute and deliver whatever documents are reasonably required, so as to
effectuate the terms of this Agreement.

     SECTION 11. MISCELLANEOUS.

     11.1 NOTICES. Unless otherwise specified in writing by the parties hereto,
all notices, approvals, requests, consents, and other communications given
pursuant to this Agreement (a) shall be in writing, (b) shall be sent by
recognized overnight courier service or facsimile, (c) shall be deemed delivered
when actually received or when such delivery is refused, and (d) shall be made
to the respective addresses set forth in the Lease or to such other address or
telecopy number as any such party may designate pursuant to the Lease.

     11.2 EXHIBITS. All Exhibits attached to this Agreement shall be deemed to
be incorporated and made a part of this Agreement, and form an integral part
herein.

     11.3 ASSIGNMENTS. This Agreement, and the rights and obligations of the
parties hereunder, shall not be assignable or delegable by any party hereto
without the prior written consent of the other party (which consent shall not be
unreasonably withheld). This Agreement, and the rights and obligations of the
parties hereunder, shall be binding upon and inure to the benefit of each of the
parties, their respective successors and permitted assigns, and legal
representatives.

     11.4 CAPTIONS. All captions and section headings used in this Agreement are
for convenience only and shall not in any manner be deemed to limit or restrict
the context of the article or section to which they relate.

                                       12


     11.5 BROKERS' COMMISSIONS. Each of the parties hereby represents and
warrants to the other that it has not paid, agreed to pay or caused to be paid
directly or indirectly in any form, any commission, percentage, contingent fee,
brokerage or other similar payments of any kind, in connection with the
establishment or operation of this Agreement, to any Person (other than fees
payable to legal advisers). Each party agrees to indemnify and hold the other
harmless from and against any and all claims, suits, damages, costs and expenses
(including, reasonable legal fees and expenses) asserted by any agent, broker or
other third party for any commission or compensation of any nature whatsoever
based upon this Agreement or the Engines, if such claim, suit, damage, cost or
expense arises out of any breach by the indemnifying party, its employees or
agents of this Section 10.5.

     11.6 APPLICABLE LAW, JURISDICTION AND WAIVER OF JURY TRIAL.

          (a) THIS AGREEMENT AND THE OTHER PURCHASE DOCUMENTS SHALL BE GOVERNED
BY AND BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

          (b) ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY OR INDIRECTLY OUT OF
THIS AGREEMENT OR ANY OF THE OTHER PURCHASE DOCUMENTS SHALL BE SUBJECT TO THE
JURISDICTION AND VENUE OF THE CALIFORNIA STATE COURTS SITTING IN THE CITY OF SAN
FRANCISCO, CALIFORNIA OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA. THE PARTIES HERETO HEREBY EXPRESSLY SUBMIT AND CONSENT
IN ADVANCE TO SUCH JURISDICTION AND VENUE IN EITHER OF SUCH COURTS, AND AGREE
THAT JURISDICTION AND VENUE ARE PROPER IN SUCH COURTS AND THAT SUCH VENUE IS NOT
INCONVENIENT. THE CHOICE OF JURISDICTION AND FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY ANY PARTY HERETO, OF A
JUDGMENT IN ANY OTHER APPROPRIATE JURISDICTION.

          (c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OF THE OTHER
PURCHASE DOCUMENTS, WHETHER SUCH ACTION IS BASED ON BREACH OF CONTRACT, TORT, OR
ANY OTHER LEGAL OR EQUITABLE THEORY.

     11.7 ENTIRE AGREEMENT. This Agreement (together with the Exhibits hereto
and the other Purchase Documents) shall constitute the entire agreement among
the parties hereto with respect to the transactions contemplated herein,
supersedes in its entirety any prior agreements, whether oral or in writing, of
the parties hereto, and shall not in any manner be supplemented, amended or
modified except by a written instrument executed on behalf of the parties by
their duly authorized representatives.

     11.8 WAIVERS. The waiver by any party hereto of performance of any term,
covenant or condition of this Agreement in a particular instance shall not
constitute a waiver of any subsequent

                                       13


breach or preclude such party from thereafter demanding performance thereof
according to the provisions herein.

     11.9 COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute the same instrument.

     11.10 EXPENSES. Each party hereunder hereby agrees to be responsible for
and to pay the costs and expenses incurred by it in connection with the
negotiation and drafting of this Agreement and the consummation of the
transactions contemplated hereby, including attorneys' fees and expenses.

     11.11 SEVERABILITY. If any provision hereof should be held invalid, illegal
or unenforceable in any respect in any jurisdiction, then, to the fullest extent
permitted by law, (i) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.

     11.12 CONFIDENTIALITY. The parties hereto expressly agree that the
confidentiality provisions set forth in Schedule B of the Engine Lease Agreement
(as defined in the CTA) shall apply mutatis mutandis in respect of any
disclosure of the contents of this Agreement.

     11.13 SURVIVAL. Notwithstanding anything contained herein to the contrary,
all agreements, indemnities, representations and warranties contained in this
Agreement shall survive the Delivery Date and the expiration or other
termination hereof.

                            [SIGNATURE PAGE FOLLOWS]

                                       14


     IN WITNESS WHEREOF, the parties have caused this Engine Purchase Agreement
to be executed by their duly authorized representatives as of the date first
stated above.

                                   CHAUTAUQUA AIRLINES, INC., a New York
                                   corporation (Seller)

                                   By:  /s/ Robert H. Cooper
                                       ----------------------------------------
                                   Name:  Robert H. Cooper
                                         --------------------------------------
                                   Title: Vice President
                                         --------------------------------------

                                   AVIATION FINANCIAL SERVICES INC., a
                                   Delaware corporation (Buyer)

                                   By: /s/ Charles H. Meyer
                                       ----------------------------------------
                                   Name: Charles H. Meyer
                                         --------------------------------------
                                   Title: Vice President
                                          -------------------------------------

                                       15


                                    EXHIBIT A

                                       TO

                            ENGINE PURCHASE AGREEMENT

- -------------------------------------------------------------------------------
                        ATTACHED FORM OF DELIVERY RECEIPT
- -------------------------------------------------------------------------------



                                DELIVERY RECEIPT

     THE UNDERSIGNED, on behalf of and as the duly authorized agent for AVIATION
FINANCIAL SERVICES INC., a Delaware corporation ("Buyer"), hereby acknowledges
that CHAUTAUQUA AIRLINES, INC., a New York corporation ("Seller"), in
accordance with the terms of that certain Engine Purchase Agreement dated as of
the date hereof between Buyer and Seller (the "Purchase Agreement"), has, at
_____ a.m./p.m. (Eastern Standard Time) this ____ day of __________, 2001
delivered to Buyer at the following described aircraft engine(s)(the "Engines"):

     (a)  the following [_____] Engine(s):

          MANUFACTURER:                              Rolls-Royce Corporation

          MODEL NUMBER:                              AE3007A1P

          SERIAL NUMBERS:                            CAE 311434
                                                     CAE 311206
                                                     CAE 311635
                                                     CAE 311794
                                                     CAE 311908
                                                     CAE 312071
                                                     CAE 312096
                                                     CAE 311___
                                                     CAE 311___

     (c)  together with (as the following terms are defined in the Purchase
          Agreement) (i) all appliances, parts, instruments, accessories,
          furnishings and all other items of equipment incorporated in,
          installed on, appurtenant to, or otherwise included with such
          Engine(s) on the Delivery Date of such Engine(s), (ii) the Engine
          Documents relating to such Engine(s) as itemized in the Schedule
          attached to this Delivery Receipt, and (iii) all other components of
          such Engine(s).

     Buyer hereby confirms that it is accepting delivery of the Engine(s) in its
"as is, where is" condition, subject to the terms, conditions and warranties
(and limitations on warranties) set forth in the Purchase Agreement and the
"Warranty Bill of Sale" (as defined by the Purchase Agreement).

                            [SIGNATURE PAGE FOLLOWS]



     IN WITNESS WHEREOF, the undersigned has executed this Delivery Receipt as
of the date referred to above.


                                   AVIATION FINANCIAL SERVICES INC.,
                                   a Delaware corporation (Buyer)

                                   By:  /s/ Charles H. Meyer
                                       -----------------------------------------
                                   Name:  Charles H. Meyer
                                         ---------------------------------------
                                   Title: Vice President
                                          --------------------------------------



                                                    Schedule to Delivery Receipt

                            LIST OF ENGINE DOCUMENTS


                                    EXHIBIT B

                                       TO

                            ENGINE PURCHASE AGREEMENT

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

                     ATTACHED FORM OF WARRANTY BILL OF SALE

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



                              WARRANTY BILL OF SALE

DATE:     __________, 2001

     CHAUTAUQUA AIRLINES, INC., A NEW YORK CORPORATION ("Seller") holds legal
and beneficial title to the following described aircraft engines (the
"Engines"):

     (a)  the following [_____] aircraft engines:

          MANUFACTURER:                              Rolls-Royce Corporation

          MODEL NUMBER:                              AE3007A1P

          SERIAL NUMBERS:                            CAE 311434
                                                     CAE 311206
                                                     CAE 311635
                                                     CAE 311794
                                                     CAE 311908
                                                     CAE 312071
                                                     CAE 312096
                                                     CAE 311___
                                                     CAE 311___

     (b)  together with (as the following terms are defined in the Purchase
          Agreement) (i) all appliances, parts, instruments, accessories,
          furnishings and all other items of equipment incorporated in,
          installed on, appurtenant to, or otherwise included with such
          Engine(s) on the Delivery Date of such Engine(s), (ii) the Engine
          Documents relating to such Engine(s), and (iii) all other components
          of such Engine(s).

     Seller hereby confirms that, on this date, it tendered the Engine(s) for
delivery to AVIATION FINANCIAL SERVICES INC., A DELAWARE CORPORATION, pursuant
to that certain Engine Purchase Agreement dated as of December 18, 2001 between
Buyer and Seller (the "Purchase Agreement"), and that Buyer accepted such tender
by executing and delivering to Seller the "Delivery Receipt" (as defined in the
Purchase Agreement).

     Seller, for good and valuable consideration, the receipt, adequacy and
legal sufficiency of which are hereby acknowledged, hereby grants, conveys,
transfers, bargains, sells, delivers and sets over unto Buyer all right, title
and interest in and to the Engine(s).

     Seller hereby warrants to Buyer and its successors and assigns that, on the
date hereof, it is the lawful owner of good, marketable, valid legal title in
and to the Engine(s), and that such title is hereby conveyed free and clear of
any and all security interests, liens, claims,



charges or encumbrances of any nature whatsoever. Seller covenants and agrees to
warrant and defend such title against all claims and demands whatsoever and
forever.

     The terms of the Purchase Agreement, including but not limited to Seller's
representations, warranties, covenants, agreements and indemnities relating to
the Engines, are incorporated herein by this reference. In the event of any
conflict or inconsistency between the terms of the Purchase Agreement and the
terms hereof, the terms of the Purchase Agreement shall govern.

     EACH ENGINE IS BEING SOLD ON AN "AS-IS, WHERE-IS" BASIS, AND SELLER MAKES
NO REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ENGINE OR THE
TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT EXCEPT AS EXPRESSLY SET
FORTH HEREIN OR IN THE PURCHASE AGREEMENT.

                            [SIGNATURE PAGE FOLLOWS]



     IN WITNESS WHEREOF, Seller has caused this Warranty Bill of Sale to be
executed by its duly authorized representative as of the date first above
written.

                                   CHAUTAUQUA AIRLINES, INC. ("Seller")

                                   By:  /s/ Robert H. Cooper
                                       -----------------------------------------
                                   Name:  Robert H. Cooper
                                         ---------------------------------------
                                   Title: Vice President
                                          --------------------------------------



                                    EXHIBIT C

                                       TO

                            ENGINE PURCHASE AGREEMENT

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

                         ATTACHED DESCRIPTION OF ENGINES

                            TO BE DELIVERED BY SELLER

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



                             DESCRIPTION OF ENGINES

              NINE (9) ROLLS-ROYCE MODEL AE3007A1P AIRCRAFT ENGINES

              MANUFACTURER:                          Rolls-Royce Corporation

              MODEL NUMBER:                          AE3007A1P

              SERIAL NUMBERS:                        CAE 311434

                                                     CAE 311206

                                                     CAE 311635

                                                     CAE 311794

                                                     CAE 311908

                                                     CAE 312071

                                                     CAE 312096

                                                     TBD

                                                     TBD



                                    EXHIBIT D

                                       TO

                            ENGINE PURCHASE AGREEMENT

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

                       ATTACHED PURCHASE PRICE OF ENGINES

                               TO BE PAID BY BUYER

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



                          PURCHASE PRICE OF EACH ENGINE



                  ENGINE                             PURCHASE PRICE

                  CAE 311434                         [*]

                  CAE 311206                         [*]

                  CAE 311635                         [*]

                  CAE 311794                         [*]

                  CAE 311908                         [*]

                  CAE 312071                         [*]

                  CAE 312096                         [*]

                  TBD                                [*]

                  TBD                                [*]



                                    EXHIBIT E

                                       TO

                            ENGINE PURCHASE AGREEMENT

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

                                ATTACHED FORM OF

                    WARRANTY ASSIGNMENT AGREEMENT AND CONSENT

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



                                     FORM OF

                    WARRANTY ASSIGNMENT AGREEMENT AND CONSENT

EX-10.55

                            AIRCRAFT LEASE AGREEMENT

                                    (N266SK)

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

                                   DATED AS OF

                                  MAY 18, 2000

                                     BETWEEN

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
           NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE,
                                       AS
                                     LESSOR

                                       AND

                            CHAUTAUQUA AIRLINES, INC.
                                       AS
                                     LESSEE

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



THIS IS COUNTERPART NO. _____ OF 4 SERIALLY NUMBERED AND MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN
COUNTERPART NO. 1.

                                       2


                                TABLE OF CONTENTS

                                                                                                          

         SECTION 1. DEFINITIONS...............................................................................5

         SECTION 2. AGREEMENT TO LEASE; TERM; RENT............................................................8

         SECTION 3. LESSOR'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS...........................10

         SECTION 4. LESSEE'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS...........................15

         SECTION 5. CONDITIONS PRECEDENT TO OBLIGATION OF LESSOR AND LESSEE..................................14

         SECTION 7. REGISTRATION; MAINTENANCE; OPERATION; POSSESSION; PERMITTED SUBLEASES; INSIGNIA..........20

         SECTION 8. RETURN OF THE AIRCRAFT...................................................................28

         SECTION 9. LIENS....................................................................................31

         SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.....................................................27

         SECTION 11. INSURANCE...............................................................................38

         SECTION 12. INDEMNITIES.............................................................................42

         SECTION 13. ASSIGNMENTS AND SUBLEASING..............................................................44

         SECTION 14. EVENT OF DEFAULT........................................................................46

         SECTION 15. REMEDIES................................................................................48

         SECTION 16. FURTHER ASSURANCES; INFORMATION.........................................................50

         SECTION 17. NOTICES.................................................................................51

         SECTION 18. NET LEASE, NO SET-OFF, COUNTERCLAIM, ETC................................................52

         SECTION 19. LESSOR'S RIGHT TO PERFORM FOR LESSEE....................................................53

         SECTION 20. LESSOR ASSIGNMENT OF RIGHTS AND WARRANTIES..............................................53

         SECTION 21. MISCELLANEOUS...........................................................................53

         SECTION 22. OPTIONS TO RENEW........................................................................61

         SECTION 23. PURCHASE OPTIONS........................................................................54

         SECTION 24. VOLUNTARY TERMINATION FOR OBSOLESCENCE..................................................55

         SECTION 25. COVENANT OF QUIET ENJOYMENT.............................................................57

         SECTION 26. BANKRUPTCY..............................................................................57

         SECTION 27. CHOICE OF LAW; CONSENT TO JURISDICTION..................................................64



                                       3


                                                                                              
         SCHEDULE I............................................................................................

         SCHEDULE I............................................................................................

         EXHIBIT A.............................................................................................

         SCHEDULE I TO LEASE SUPPLEMENT........................................................................

         EXHIBIT B............................................................................................i

         EXHIBIT E..........................................................................................iii

         II. FORM OF OPINION TO BE GIVEN BY LESSE'S GENERAL COUNSEL.........................................vii

         III. FORM OF OPINION TO BE GIVEN BY DAUGHERTY, FOWLER, PEREGRIN &HAUGHT,
         LESSEE'S OUTSIDE INDEPENDENT FAA....................................................................xi

         EXHIBIT F.........................................................................................xiii

         ATTACHMENT 1 TO RETURN ACCEPTANCE CERTIFICATE: AIRCRAFT HOURS AND CYCLES................... .....xviii

         ATTACHMENT 2 TO RETURN ACCEPTANCE CERTIFICATE: AIRCRAFT DOCUMENTATION..............................xix

         ATTACHMENT 3 TO RETURN CERTIFICATE: DISCREPANCIES..................................................xxi

         EXHIBIT G............................................................................................i

         EXHIBIT H...........................................................................................ii

         1. GENERAL CONDITIONS...............................................................................ii

         2. CONDITIONS OF AIRFRAME..........................................................................vii

         3. CONDITION OF CONTROLLED COMPONENTS.............................................................viii

         4. CONDITION OF INSTALLED ENGINES AND APU.........................................................viii

         5. PROVISION FOR "POWER-BY-THE HOUR AGREEMENTS".....................................................ix

         6. RETURN CONDITION ADJUSTMENT.......................................................................x

         7. INSPECTION UPON RETURN..........................................................................xii

         DEFINITIONS.......................................................................................xiii

         

                                       4


                            AIRCRAFT LEASE AGREEMENT

     This AIRCRAFT LEASE AGREEMENT ("Agreement"), dated May 18, 2000, is made by
and between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity but solely as Owner Trustee ("Lessor"), and CHAUTAUQUA AIRLINES, INC.,
a New York Corporation ("Lessee").

                                   WITNESSETH:

SECTION 1. DEFINITIONS.

     As used in this Agreement, the following terms shall have the following
meanings:

     1.1.  "ACCEPTANCE CERTIFICATE" means the certificate in substantially the
form of Exhibit B hereto to be executed by Lessee on the Delivery Date.

     1.2.  "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" (including "controlled
by" and "under common control with") 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, by contract or otherwise.

     1.3.  "AIRCRAFT" means (i) the Airframe to be delivered and leased
hereunder; (ii) the Engines initially leased hereunder as described in the Lease
Supplement (or any engine substituted for any of such Engines pursuant to the
terms hereof), whether or not any of such initial or substituted Engines may
from time to time be installed on such initial or substituted Airframe or may be
installed on any other airframe or on any other aircraft; and (iii) where the
context permits, the Manuals and Technical Records.

     1.4.  "AIRFRAME" means (i) the Embraer EMB-145LR aircraft (except Engines
or engines from time to time installed thereon) specified in the Lease
Supplement and more fully described in Exhibit G hereto and having the United
States registration number and manufacturer's serial number specified in the
Lease Supplement, which aircraft shall be leased by Lessor to Lessee hereunder
and under the Lease Supplement; (ii) any aircraft (except Engines or engines
from time to time installed thereon) which may from time to time be substituted
for such aircraft (except Engines or engines from time to time installed
thereon) pursuant to the terms hereof; (iii) the auxiliary power unit; and (iv)
any and all Parts which are from time to time incorporated or installed in or
attached thereto or which have been removed therefrom, but where title to which
remains vested in Lessor in accordance herewith.

                                       5


     1.5.  "AIRWORTHINESS DIRECTIVE" means any airworthiness directive or any
other mandatory regulation, directive or instruction, including FAA-mandated
manufacturer's changes, issued by any governmental agency or authority asserting
jurisdiction over the Aircraft or over its use, operation or maintenance, which
may from time to time be issued and which is required to be carried out on
airframes or engines of the same type as the Airframe or Engines or any Parts in
order to meet the requirements of applicable law for the public transport of
persons and/or property in common carriage.

     1.6.  "BASE RATE" means the rate of interest announced from time to time by
the Chase Manhattan Bank, at its principal office in New York, New York, as its
prime or reference rate.

     1.7.  "BASIC RENT" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 2.3(a), and, for any Renewal Term, the rent payable
for the Aircraft pursuant to Section 22.1 or Section 22.2, as the case may be.

     1.8.  "BASIC TERM" means the period described in Section 2.2(a).

     1.9.  "BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in Chicago or the
City of New York.

     1.9A  "'C' CHECK" means a "C" check performed in accordance with Lessee's
Maintenance Program or the equivalent heavy maintenance visit.

     1.10. "CODE" means the Internal Revenue Code of 1986, as amended.

     1.11. "COMMENCEMENT DATE" means the Delivery Date.

     1.12. "CYCLE" means one takeoff and landing of the Aircraft.

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

     1.14. "DELIVERY DATE" means the date that the Aircraft is accepted by
Lessee under the Lease Supplement, which is scheduled to be on or about May 18,
2000.

     1.15. "DISCREPANCY" means any difference or variation between the actual
condition of the Aircraft and the condition of the Aircraft as required
hereunder.

     1.16. "ENGINE" means (i) each of the Allison Engine Company AE3007A1
engines listed by manufacturer's serial number in the Lease Supplement and
installed on the Airframe covered by such Lease Supplement on the Delivery Date,
whether or not from time to time thereafter installed on the Airframe or
installed on any other airframe or on any other aircraft; (ii) any engine which
may from time to time be substituted, in accordance with the terms hereof, for
any such Engine; and (iii) any and all Parts incorporated or installed in or
attached to such Engine or substituted engine or any and all Parts removed
therefrom so long as title thereto shall

                                       6


remain vested in Lessor in accordance with the terms of Section 7 after removal
from such Engine; provided, however, that at such time as an engine shall be
deemed part of the property leased hereunder in substitution for an Engine in
accordance with the applicable provisions hereof, the replaced Engine shall
cease to be an Engine hereunder. The term "Engines" means, as of any date of
determination, all Engines then leased hereunder.

     1.17. "EVENT OF DEFAULT" has the meaning specified in Section 14.

     1.18. "EVENT OF LOSS" means any of the following events with respect to the
Aircraft, the Airframe or any Engine: (i) the loss of such property or the use
thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for normal
use by Lessee for any reason whatsoever; (ii) any damage to such property which
results in an insurance settlement with respect to such property on the basis of
a total loss or a constructive or compromised total loss; (iii) the theft or
disappearance of such property, or the confiscation, condemnation, or taking
seizure of, or requisition of use (but not of title) of such property by any
governmental or purported governmental authority (other than a requisition for
use by the United States Government or any agency or instrumentality of any
thereof backed by the full faith and credit of the United States government,
except to the extent provided in Section 1.18(v) below), which shall have
resulted in the loss of possession of such property by Lessee (or, if any
Permitted Sublease is then in effect, the sublessee) for a period in excess of
180 consecutive days or, if earlier, through the end of the Basic Term; (iv) as
a result of any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft or under which
the Aircraft is based having jurisdiction, the use of such property in the
normal course of the business of air transportation shall have been prohibited
for a period of 180 consecutive days, unless prior to the end of such 180-day
period, Lessee is diligently carrying forward all necessary and desirable steps
to permit such use, but in any event, if such use has been prohibited for a
period of twelve consecutive months; (v) the requisition for use (but not of
title) by the United States Government or any instrumentality or agency of any
thereof backed by the full faith and credit of the United States government,
which shall have occurred for a period in excess of 180 consecutive days, or, if
earlier, through the end of the Term; (vi) any divestiture of title to an Engine
treated as an Event of Loss pursuant to Section 10.3 hereof; and (vii) the
requisition, confiscation, condemnation or other compulsory acquisition of title
to such property by any governmental or purported governmental authority which
shall have resulted in the loss of possession of such property by Lessee for a
period of more than 180 days or, if earlier, through the end of the Term.

     1.19. "FAIR MARKET RENTAL RATE" means the fair market rental rate
determined as provided in Section 22 hereof.

     1.20. "FAIR MARKET SALES VALUE" means the fair market sales value
determined as provided in Section 23 hereof.

     1.21. "FAR" means the Federal Aviation Regulations of the FAA, or any
successor provisions thereto.

                                       7


     1.22. "FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration and any successor agency or agencies thereto.

     1.23. "FLIGHT HOUR" means, with respect to the Aircraft, each sixty (60)
minute period or portion thereof (expressed in tenths of hours) elapsing from
the moment at which the wheels of the Aircraft leave the ground on take-off of
the Aircraft until the wheels of the Aircraft touch the ground on landing of the
Aircraft following each flight of such Aircraft.

     1.24. "INCLUDING" means including but not limited to.

     1.25. "INCOME TAX" means any Tax based on or measured by net income
(including, without limitation, capital gains taxes, minimum taxes, and taxes on
tax preference items) and Taxes which are capital, doing business, franchise (in
the nature of a net income tax), excess profits, or net worth taxes and
interest, as well as any additions to tax, penalties, or other charges in
respect thereof.

     1.26. "INDEMNITEES" means Lessor (individually and in its trust capacity),
Owner Participant, and their respective Affiliates, officers, directors,
employees, agents, successors and permitted assigns.

     1.27. "LEASE AGREEMENT", "THIS LEASE AGREEMENT", "THIS LEASE", "THIS
AGREEMENT", "HEREIN", "HEREOF", "HEREUNDER", "HEREBY" or other like words or
phrases mean this Lease Agreement as originally executed or as modified, amended
or supplemented pursuant to the applicable provisions hereof, including, without
limitation, supplementation hereof by one or more Lease Supplements entered into
between Lessor and Lessee pursuant to the provisions hereof.

     1.28. "LEASE SUPPLEMENT" means a Lease Supplement substantially in the form
of Exhibit A hereto, to be entered into between Lessor and Lessee on the
Delivery Date for the purpose of leasing the Aircraft under and pursuant to the
terms of this Lease Agreement, and any subsequent Lease Supplement entered into
in accordance with the terms hereof.

     1.29. "LESSEE'S SETTLEMENT PROPOSAL" has the meaning specified in Section
12.6.

     1.30. "LESSOR" means First Security Bank, National Association, not
individually but solely as Owner Trustee, its successors and assigns.

     1.31. "LESSOR LIENS" means any Lien or disposition of title affecting the
Aircraft, an Airframe, any Engine or Part arising as a result of (i) claims
against Lessor not related to the transactions contemplated by this Lease; (ii)
any act or omission of Lessor which is either not related to the transactions
contemplated by or is expressly prohibited under this Lease; (iii) claims
against Lessor with respect to Taxes or Liens against which Lessee is not
required to indemnify Lessor hereunder; (iv) claims against Lessor with respect
to any loss, damage or claim against which Lessee is not required to indemnify
Lessor pursuant to this Lease; or (v) claims against Lessor arising out of any
transfer by Lessor of all or any portion of its interest in the

                                       8


Aircraft, including as security for indebtedness, other than the transfer of the
Aircraft during the continuation of an Event of Default or a Default under
Section 14(a)(v).

     1.32. "LESSOR'S COST" has the meaning specified in the Lease Supplement.

     1.33. "LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
sublease or security interest or other similar interest.

     1.34. "MAINTENANCE PROGRAM" means Lessee's maintenance program approved by
the Federal Aviation Administration for aircraft of the same type as the
Aircraft and engines of the same type as the Engines.

     1.35. "MAINTENANCE PAYMENTS" has the meaning specified in Section 2(e).

     1.36. "MANUALS AND TECHNICAL RECORDS" means all such manuals, technical
data, log books, maintenance records, engineering documentation and other
records pertaining to the Aircraft to be maintained by Lessee as required
hereunder or as shall be required to comply with the requirements of the FAA and
the Manufacturer from time to time in force and the requirements of any other
governmental body having jurisdiction over the Aircraft.

     1.37. "MANUFACTURER" means with respect to the Airframe, Embraer-Empresa
Brasileira de Aeronautica S.A. ("Embraer") and with respect to the Engines,
Allison Engine Company, and their respective successors and assigns.

     1.38. "NET ECONOMIC RETURN" means anticipated after-tax yield and aggregate
after-tax cash flow (utilizing the multiple investment sinking fund method of
analysis), computed on the basis of the same methodology and assumptions
utilized by Lessor in determining Basic Rent and Stipulated Loss Value.

     1.39. "NOTIFIED DEFAULT" means any Default as to the occurrence of which
Lessor has notified Lessee in writing, including any Default which with the
lapse of time would become an Event of Default without the necessity of written
notice from Lessor to Lessee.

     1.40. "OEM" has the meaning specified in Section 7.6.

     1.41. "OPERATIVE DOCUMENTS" means this Lease, including any Lease
Supplement, the Acceptance Certificate, the Trust Agreement, the Tax Indemnity
Agreement, the Residual Value Guaranty, Exhibit I, and any other documents
executed in connection with the transactions contemplated by this Lease.

     1.42. "OWNER PARTICIPANT" means TA Air XVI, Corp., a Delaware corporation,
its successors and assigns.

     1.43. "PARTS" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature, other than (i)
complete Engines or engines,

                                       9


and (ii) any items leased by Lessee from a third party (other than Lessor). The
term "Parts" shall include all components constituting a complete system.

     1.44. "PAST DUE RATE" means a rate per annum equal to the Base Rate plus
five percentage points.

     1.45. "PERMITTED LIEN" has the meaning specified in Section 9.1.

     1.46. "PERMITTED SUBLEASE" means a sublease of the Aircraft described in
Section 13.2.

     1.47. "PERMITTED SUBLESSEE" means (i) any U.S. Air Carrier that is not then
subject to an event or proceeding of the type described in Sections 14(a)(v) or
14(a)(vi) and is generally paying its obligations as they become due; or (ii)
the United States government or any instrumentality or agency thereof the credit
of which is backed by the full faith and credit of the United States government;
or (iii) any other Person approved by Lessor in its reasonable discretion.

     1.48. "PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

     1.49. "POWER-BY-THE-HOUR AGREEMENT" means an engine maintenance program
provided by the Engine Manufacturer or one of its Affiliates, or by another
responsible maintenance provider approved by Lessor, providing full maintenance
(other than routine day-to-day maintenance; provided, that foreign-object
damage, life-limited parts, line replacement units and abuse may be excluded or
separately charged) for the Engines at no cost other than standard per-Cycle
rates (i.e., excluding charges based on the current maintenance status of the
Engines), all benefits of which program are generally available to air carriers;
provided that such program is no less beneficial to Lessee in any material
respect than set forth in the Memorandum of Understanding, dated February 2,
2000, between Rolls-Royce Allison and Lessee .

     1.50. "PURCHASE OPTION DATE" has the meaning specified in Schedule I.

     1.51. "RENEWAL RENT" means the monthly rent payable during the Renewal
Term.

     1.52. "RENEWAL TERM" shall have the meaning assigned in Section 22.1
hereof.

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

     1.54. "RENT PAYMENT DATE" means the dates on which Basic Rent is due and
payable hereunder in accordance with the provisions of Sections 2.3 as specified
in Schedule I to this Lease.

                                       10


     1.55. "RESIDUAL VALUE GUARANTY" means that certain Residual Value
Guarantee, dated the date hereof, among Lessor, Lessee and Embraer with respect
to the residual value of the Aircraft.

     1.56. "RESPONSIBLE OFFICER" means, with respect to Lessee, the President,
Chief Financial Officer, any Senior Vice President or any other senior officer.

     1.57. "RETURN LOCATION" shall have the meaning assigned to such term in
Section 8.1.

     1.58. "SETTLEMENT PROPOSAL" has the meaning specified in Section 12.6.

     1.59. "STIPULATED LOSS VALUE" with respect to the Aircraft as of any Rent
Payment Date means the amount specified in Schedule II attached hereto.

     1.60. "SUPPLEMENTAL RENT" means all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay to Lessor or
others hereunder or under any other Operative Document, including Maintenance
Payments and payments of Stipulated Loss Value and amounts calculated by
reference thereto.

     1.61. "TAX" or "TAXES" means any and all fees (including, without
limitation, license, documentation and registration fees) and all taxes or
estimated taxes (including, without limitation, income, gross receipts,
transfer, license, franchise, profits, ad valorem, service, withholding,
occupation, gains, preference, rental, sales, use, turnover, value added,
property (tangible or intangible), excise and stamp taxes), licenses, levies,
imposts, duties, charges, recording charges or fees, assessments or withholdings
of any nature whatsoever together with any penalties, additions to tax, fines or
interest thereon.

     1.62. "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated
the date hereof, between Owner Participant and Lessee, as amended, modified or
supplemented in accordance with the terms thereof.

     1.63. "TERM" means the Basic Term and the Renewal Term(s).

     1.64. "TERMINATION DATE" has the meaning assigned to such term in Section
2.2.

     1.65. "TRANSACTION COSTS" shall mean an amount equal to $[*], which
Lessor shall pay as provided in Section 3.5, for printing and reproduction
costs; appraisal fees; placement fees and out-of-pocket expenses of Seabury
Securities, LLC; fees and expenses of counsel for Lessor; recording costs of the
Lease and other documents; the acceptance fee of the Lessor; and out-of-pocket
expenses of the Owner Participant prior to the Commencement Date.

     1.66. "TRANSPORTATION ACT" means subtitle VII of Title 49 of the United
States Code, or any successor provision.

                                       11


- --------------------
* Confidential


     1.67. "TRUST AGREEMENT" means the Trust Agreement, dated the date hereof,
between Lessor and Owner Participant.

     1.68. "U.S. AIR CARRIER" means any air carrier (as defined in Section
40102(a)(2) of the Transportation Act) which is a citizen of the United States
(as defined in Section 40102(a)(15) of the Transportation Act) as to which there
is in force authority from the U.S. Department of Transportation authorizing
scheduled commuter interstate air transportation pursuant to an exemption under
14 C.F.R Section 298 or a certificate of public convenience and necessity issued
pursuant to Section 41102(a) of the Transportation Act and as to which there is
in force an air carrier operating certificate issued pursuant to 14 C.F.R. Part
121 or Part 135 of the Federal Aviation 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; provided at all times such
carrier shall hold an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of the Transportation Act for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo.

SECTION 2.  AGREEMENT TO LEASE; TERM; RENT

     2.1.   AGREEMENT TO LEASE. Lessor hereby agrees, subject to satisfaction of
the conditions set forth herein, to lease to Lessee hereunder, and Lessee hereby
agrees to lease from Lessor hereunder, the Aircraft, as evidenced by the
execution by Lessor and Lessee of this Lease, a Lease Supplement leasing the
Aircraft hereunder and execution and delivery by Lessee of an Acceptance
Certificate. Lessee hereby agrees that such acceptance of the Aircraft by Lessee
shall, without further act, irrevocably constitute acceptance by Lessee of the
Aircraft for all purposes of this Lease.

     2.2.   TERM OF THE LEASE.

     (a)    BASIC TERM. The Basic Term of this Lease shall be sixteen and
one-half years from the Commencement Date, unless sooner terminated in
accordance with the provisions hereof (the "Termination Date").

     (b)    RENEWAL TERM(S). The Renewal Term(s) shall be as described in
Section 22.

     2.3.   RENT.

     (a)    BASIC RENT. Lessee shall promptly pay (or cause to be paid) to
Lessor Basic Rent during the Basic Term on each Rent Payment Date in the amount
provided in Schedule I to this Lease.

     (b)    RENEWAL RENT. Lessee shall promptly pay (or cause to be paid) to
Lessor Renewal Rent on each Rent Payment Date during the Renewal Term in the
amount determined pursuant to Section 22 hereof.

                                       12


     (c)    SUPPLEMENTAL RENT. Lessee shall promptly pay (or cause to be paid)
to Lessor, or to whomever shall be entitled thereto, any and all Supplemental
Rent as the same shall become due and owing hereunder. In the event of any
failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have
all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Interest on past due Rent
shall be computed at the Past Due Rate, and shall be considered Supplemental
Rent. The expiration or other termination of Lessee's obligation to pay Basic
Rent hereunder shall not limit or modify Lessee's obligations with respect to
Supplemental Rent.

     (d)    PAYMENTS IN GENERAL. All payments of Rent shall be made to Lessor in
the United States of America by wire transfer of immediately-available funds
prior to noon (12:00) p.m. Eastern time on the due date thereof, to such account
as Lessor shall direct in a written notice to Lessee from time to time at least
five Business Days prior to the date such payment of Rent is due.
Notwithstanding anything in this Lease to the contrary, if any date on which a
payment of Rent becomes due and payable is not a Business Day, such payment
shall not be made on such scheduled date but shall be made on the next
succeeding Business Day with the same force and effect as if made on such
scheduled date and, provided such payment is made on such next succeeding
Business Day, no interest shall accrue on the amount of such payment from and
after such scheduled date.

     (e)    MAINTENANCE PAYMENTS. Lessee is currently negotiating a
Power-by-the-Hour Agreement. Any Power-by-the-Hour Agreement during the Term
shall be assigned to Lessor by Lessee as additional collateral for Lessee's
obligations under this Lease and Lessee shall ensure that Lessor has a perfected
security interest in Lessee's interest in such Power-by-the-Hour Agreement. Such
collateral assignment shall be effective upon the effectiveness of the
Power-by-the-Hour Agreement; provided that Lessor shall not exercise any rights
under the assignment unless and until an Event of Default has occurred and is
continuing. The counterparty shall consent to such collateral assignment in
writing and agree that, (i) upon written notice from Lessor of the occurrence
and continuation of an Event of Default, and (ii) the assumption thereof by
Lessor or its assignee, Lessor or its assignee shall be eligible for all rights
and benefits thereunder on terms no less favorable than Lessee. At any time
during time during the Term (other than the 120-day period following the
Delivery Date) that there is not a Power-by-the Hour Agreement, Lessee shall pay
to Lessor Engine maintenance payments with respect to each Engine for each
Flight Hour that such Engine is used, including all Flight Hours on a
retroactive (to the last maintenance visit) basis so that Lessor has received
payments for each Engine equivalent to the proportional share of the cost of the
next maintenance visit for such Engine ("Maintenance Payments"). The amount of
and terms and conditions with regard to Maintenance Payments and the use and
application thereof have not been agreed by Lessee and Lessor, and Lessee and
Lessor agree to negotiate in good faith with respect thereto promptly upon the
failure of Lessee to enter into a Power-by-the-Hour Agreement within 90 days
after the Delivery Date and at any time thereafter during which a
Power-by-the-Hour Agreement is not in effect for any reason. The amount of and
terms and conditions of the Maintenance Payments shall be set forth in a Lease
Supplement and filed with the FAA. In the event that Lessor and Lessee are
unable to agree in writing on the amount of and terms and conditions of the

                                       13


Maintenance Payments and the use and application thereof within thirty (30) days
of the date that Maintenance Payments are required under this Lease, such amount
and terms and conditions shall be determined pursuant to a determination
prepared and delivered by a nationally recognized firm of aircraft auditors
nominated by Lessor and approved by Lessee, and Lessor shall immediately notify
Lessee in writing of such nomination. The aircraft auditing firm shall make its
determination within ten Business Days following its appointment, and such
determination shall be final and binding upon the parties. The cost of such
determination shall be borne by Lessee.

     SECTION 3. LESSOR'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.

     Lessor hereby represents and warrants to, and covenants and agrees with,
Lessee as follows:

     3.1.   DUE ORGANIZATION. Lessor is a corporation duly organized and validly
existing in good standing under the laws of the State of Utah and has the
corporate power and authority to enter into and perform its obligations under
this Lease and the Lease Supplement.

     3.2.   DUE AUTHORIZATION; ENFORCEABILITY. This Lease has been, and on the
Delivery Date, the Lease Supplement will be, duly executed and delivered by an
officer who is duly authorized to execute and deliver such instruments on behalf
of Lessor. Each of the Lease and the Lease Supplement (when so executed and
delivered) will be the legal, valid and binding obligation of Lessor,
enforceable against Lessor in accordance with its terms, except as such
enforceability is affected by applicable laws or judicial decisions regarding
bankruptcy, bankruptcy moratorium, fraudulent transfers or other laws affecting
creditors' rights or by application of the principles of equity.

     3.3.   NO VIOLATIONS. Neither the execution and delivery by Lessor of this
Lease and the Lease Supplement nor the performance by Lessor of its obligations
hereunder and thereunder will be inconsistent with its charter or bylaws, does
not and will not contravene any currently existing law, governmental rule or
regulation, judgment or order, including, but not limited to, any statute, rule,
regulation, franchise or permit applicable to or binding on Lessor, and does not
and will not contravene any provision of, or constitute a default under, any
currently existing indenture, mortgage, contract or other instrument to which
Lessor is a party or by which it or any of its properties is bound.

     3.4.   DISCLAIMER. LESSEE EXPRESSLY AGREES TO LEASE THE AIRCRAFT IN "AS IS,
WHERE IS" CONDITION "WITH ALL FAULTS", EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS LEASE. LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSOR AND LESSEE (A)
THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND

                                       14


ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE
IS SUITABLE FOR ITS PURPOSE, (C) LESSOR IS NOT A MANUFACTURER NOR A DEALER IN
PROPERTY OF SUCH KIND, AND (D) LESSOR DOES NOT MAKE, HAS NOT MADE AND SHALL NOT
BE DEEMED TO HAVE MADE, AND WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE AIRWORTHINESS, VALUE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, THE ABSENCE OF LATENT OR
OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, THE QUALITY OF MATERIAL OR
WORKMANSHIP, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF. LESSEE AGREES THAT
LESSOR SHALL NOT BE LIABLE FOR ANY DAMAGE OR LOSS (INCLUDING, BUT NOT LIMITED
TO, INCIDENTAL, CONSEQUENTIAL AND SPECIAL DAMAGES) SUFFERED BY LESSEE DIRECTLY
OR INDIRECTLY BECAUSE OF ANY DEFECT IN THE AIRCRAFT. NONE OF THE PROVISIONS OF
THIS SECTION 3.4 OR ANY OTHER PROVISION OF THIS LEASE IS INTENDED TO AMEND,
MODIFY OR OTHERWISE AFFECT THE EXPRESS REPRESENTATIONS, WARRANTIES OR OTHER
OBLIGATIONS OF THE MANUFACTURER, OR ANY OTHER VENDOR, MANUFACTURER,
SUBCONTRACTOR OR SUPPLIER WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR
TO RELEASE MANUFACTURER OR ANY OTHER VENDOR, MANUFACTURER, SUBCONTRACTOR OR
SUPPLIER FROM ANY SUCH REPRESENTATION, WARRANTY OR OBLIGATION OR ANY RIGHTS OF
LESSOR OR LESSEE WITH RESPECT THERETO.

     3.5.   TRANSACTION COSTS. Lessor shall pay the Transaction Costs upon
receipt of appropriate invoices as soon as reasonably practicable after the
Commencement Date.

SECTION 4.  LESSEE'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.

     Lessee hereby represents and warrants to, and covenants and agrees with,
Lessor as follows:

     4.1.   DUE ORGANIZATION. Lessee is a corporation duly organized and validly
existing in good standing under the laws of the state of New York; is duly
qualified as a foreign corporation to do business in each jurisdiction in which
its operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on the business,
operations or financial condition of Lessee or the ability of Lessee to perform
its obligations under the Operative Documents; is and will continue to be a U.S.
Air Carrier; Lessee

                                       15


will take all actions necessary to allow Lessor to be entitled during the Term
to the benefits of Section 1110 of the United States Bankruptcy Code in any
action or proceeding in which Lessee is the debtor; and Lessee has the corporate
power and authority to conduct its business as it is presently being conducted,
to lease the Aircraft, and to enter into and perform its obligations under this
Lease and each other Operative Document to which Lessee is a party.

     4.2.   DUE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by Lessee of this Lease, the Lease Supplement, the Acceptance
Certificate, the Residual Value Guaranty, the Tax Indemnity Agreement and each
other Operative Document to which Lessee is a party will on the Delivery Date be
duly authorized by all necessary corporate actions and will be executed and
delivered by a Responsible Officer of Lessee. Each of the Lease, the Lease
Supplement (when so executed and delivered), the Acceptance Certificate, the
Residual Value Guaranty, the Tax Indemnity Agreement and each other Operative
Document to which Lessee is a party will be the legal, valid and binding
obligation of Lessee, enforceable against Lessee in accordance with its terms,
except as such enforceability is affected by applicable laws or judicial
decisions regarding bankruptcy, bankruptcy moratorium, fraudulent transfers or
other laws affecting creditors' rights or by application of the principles of
equity.

     4.3.   NO VIOLATIONS. Neither the execution and delivery by Lessee of this
Lease and each other Operative Document to which Lessee is a party, nor the
performance by Lessee of its obligations hereunder and thereunder, will be
inconsistent with its charter or bylaws, does not and will not contravene any
currently existing law, governmental rule or regulation, judgment or order,
including, but not limited to, any statute, rule, regulation, franchise or
permit applicable to or binding on Lessee, and does not and will not contravene
any provision of, or constitute a default under, any currently existing
indenture, mortgage, contract or other instrument to which Lessee is a party or
by which it or any of its properties is bound, and does not and will not require
the consent or approval of any holders of the stock or any currently existing
indebtedness or obligation of Lessee.

     4.4.   NO GOVERNMENTAL APPROVALS, NOTICES AND FILINGS. Except for (i) the
filing for recording of the Lease and Lease Supplement pursuant to the
Transportation Act, and (ii) the filing of financing statements (and
continuation statements at periodic intervals) with respect to the interests
created by such documents under the Uniform Commercial Code of New York,
Connecticut, and Indiana (which filing statements Lessor has prepared and Lessee
shall cause to be presented in due form for filing to the appropriate filing
office in New York, Connecticut, and Indiana), no consent or approval of, giving
of notice to, registration with, filing or recording of any document, or taking
of any action in respect of or by, any United States Federal, state or local or
foreign governmental authority or agency or other person is necessary with
respect to the execution, delivery or performance by Lessee of this Lease and
the Lease Supplement, or the consummation by Lessee of any of the transactions
contemplated hereby or thereby, or to establish and perfect Lessor's title to
and interest in the Aircraft as against Lessee and as against any third parties
in any applicable jurisdictions.

                                       16


     4.5.   LITIGATION. There are no actions, suits, claims or proceedings
pending or, to the knowledge of Lessee, threatened against or affecting Lessee
in any court or before any governmental commission, arbitrator, agency, board or
authority, domestic or foreign, which relate to any of the transactions
contemplated by this Lease or the Lease Supplement or which, if adversely
determined, could have a material adverse effect on either the business,
operations or financial condition of Lessee or the ability of Lessee to perform
its obligations under this Lease or the Lease Supplement, or which may adversely
affect the legality or enforceability of the terms of this Lease or any other
such document, except as otherwise specifically disclosed herein.

     4.6.   NO DEFAULTS. Lessee is not in default under any indenture, pledge,
contract, mortgage, loan agreement or other instrument to which Lessee is a
party, nor is Lessee in violation of any law, order, injunction, decree, rule or
regulation applicable to Lessee of any court or administrative body, which
default or violation could materially and adversely affect the business,
property, assets, operations or condition, financial or otherwise, of Lessee.

     4.7.   LOCATION OF CHIEF EXECUTIVE OFFICES. The chief executive office or
chief place of business of Lessee is located at 2500 S. High School Road,
Indianapolis, Indiana 46241. Lessee agrees to give Lessor not less than 90 days'
prior written notice of any relocation of its chief executive office or chief
place of business from the present location.

     4.8.   LESSEE DULY LICENSED. Lessee holds and will continue to hold all
licenses, certificates, permits and franchises from the appropriate agencies of
the United States and/or all other governmental authorities having jurisdiction
necessary to perform its obligations under this Lease.

     4.9.   NO EVENT OF LOSS OR EVENT OF DEFAULT. On the Delivery Date, no event
exists which would be a Default or, with the passage of time or giving of notice
or both, an Event of Loss hereunder.

     4.10.  FINANCIAL STATEMENTS. The statements of financial position of Lessee
as of December 31, 1999 and the related statements of earnings and cash flow of
Lessee, copies of which have been furnished to Lessor, fairly present the
financial condition of Lessee at such date and the results of operations and
cash flow of Lessee for the period ended on such date, in accordance with
generally accepted accounting principles consistently applied, and since
December 31, 1999, there has been no material and adverse change in such
condition or operations. During the Term, Lessee shall cause its annual
financial statements to be audited by a nationally recognized accounting firm.

     4.11.  TITLE. On the Delivery Date, Lessor will receive good title to the
Aircraft free and clear of all Liens, except the rights of Lessee under the
Lease and the Lease Supplement covering the Aircraft, and the Liens permitted by
Section 9.1(v) and Section 9.1(vi) (solely for obligations that are not
overdue).

                                       17


     4.12.  NON-SOLICITATION. Neither Lessee nor anyone acting on behalf of
Lessee has directly or indirectly offered any interest in the Aircraft for sale
to, or solicited any offer to acquire any of the same from, anyone other than
Lessor and not more than forty (40) other institutions believed capable of
evaluating and bearing the risks of investment in the transactions contemplated
hereby.

     4.13.  TAXES. Lessee has filed or caused to be filed all Federal, state,
local and foreign tax returns which are required to be filed and has paid or
caused to be paid all Taxes shown to be due and payable on such returns or
(except to the extent being contested in good faith and by appropriate
proceedings and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) on any assessment
received by Lessee, to the extent that such Taxes have become due and payable,
except such returns or Taxes as would not materially and adversely affect the
business, property or assets, operations or condition, financial or otherwise,
of Lessee and would not involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Lien) on the Aircraft.

     4.14.  GOVERNMENTAL APPROVALS. No governmental approval is required of
Lessor or Owner Participant for its execution of any Operative Document by
reason of the status of the Lessee, the Aircraft or Lessee's use of the
Aircraft.

     4.15.  AIRCRAFT. The Aircraft has been duly certified by the FAA as to type
and airworthiness, has been insured by Lessee in accordance with the terms of
this Lease, and is in the possession of Lessee in the condition and state of
repair required under the terms of this Lease.

     4.16.  REPOSSESSION RIGHTS. Lessor shall be entitled to the protection of
Section 1110 of the United States Bankruptcy Code in any action or proceeding in
which Lessee or any sublessee is a debtor.

SECTION 5.  CONDITIONS PRECEDENT TO OBLIGATION OF LESSOR AND LESSEE.

     5.1.   LESSOR'S CONDITIONS. Lessor's obligation to deliver the Aircraft to
Lessee for lease hereunder shall be subject to the receipt of the following
documents, in form and substance satisfactory to Lessor, prior to such delivery
(unless otherwise provided or waived by Lessor):

     (a)    The Lease, executed by Lessee and Lessor.

     (b)    A copy of resolutions of the Board of Directors of Lessee or other
            written evidence of appropriate corporate action, certified by a
            Responsible Officer of Lessee, duly authorizing or ratifying the
            lease of the Aircraft hereunder and the execution, delivery and
            performance of this Lease and the Lease Supplement.

                                       18


     (c)    Lessee shall have delivered to Lessor a certificate executed by a
            Responsible Officer (i) certifying the incumbency and attaching the
            signatures of the persons authorized to execute and deliver the
            Operative Documents on behalf of Lessee, (ii) confirming that all
            representations and warranties set forth in the Operative Documents
            are true and accurate, and (iii) authenticating an attached
            certificate of good standing issued by the appropriate state agency.

     (d)    An Acceptance Certificate for the Aircraft executed by Lessee.

     (e)    A Lease Supplement and Tax Indemnity Agreement for the Aircraft
            executed by Lessee.

     (f)    A certificate signed by Lessee's insurance brokers evidencing
            compliance with the insurance provisions of Section 11.

     (g)    Opinions of counsel to Lessee, dated the Delivery Date, in
            substantially the form of Exhibit E hereto.

     (h)    Such financing statements under the Uniform Commercial Code or other
            law with respect to the Lease and the Aircraft as shall have been
            reasonably requested by Lessor.

     (i)    All appropriate action required to have been taken by the Federal
            Aviation Administration and any other applicable governmental or
            political agency, subdivision or instrumentality of the United
            States, on or prior to the Delivery Date in connection with the
            transactions contemplated by this Lease and the Lease Supplement
            shall have been taken, and all orders, permits, waivers,
            authorizations, exemptions and approvals of such entities required
            to be in effect on the Delivery Date in connection with the
            transactions contemplated by this Lease and the Lease Supplement
            shall have been issued, and all such orders, permits, waivers,
            authorizations, exemptions and approvals shall be in full force and
            effect on the Delivery Date.

     (j)    Receipt by Lessor of an appraisal of the Aircraft in form and
            substance satisfactory to Lessor.

     (k)    Delivery to Lessor by Solitair Corporation of an executed warranty
            bill of sale for the Aircraft in form and substance satisfactory to
            Lessor.

     (l)    Delivery to Lessor by Solitair Corporation of an executed assignment
            of warranties for the Aircraft and the Engines in form and substance
            satisfactory to Lessor.

     (m)    Delivery to the Lessor of a Residual Value Guaranty by Embraer in
            form and substance satisfactory to Lessor.

                                       19


     (n)    Delivery to Lessor and Owner Participant of supplemental side
            letters and agreements in form and substance satisfactory to such
            parties.

     (o)    Delivery to Lessor of an executed warranty bill of sale for
            Lessee-furnished equipment used in connection with the operation of
            the Aircraft, if any, in form and substance satisfactory to Lessor.

     5.2.   LESSEE'S CONDITIONS. Lessee's obligation to accept delivery of the
Aircraft from Lessor for lease hereunder shall be subject to the following
conditions precedent:

     (a)    The Aircraft is tendered by Lessor for delivery on the Delivery
            Date.

     (b)    Lessor, at Lessee's expense, shall have delivered to Lessee a
            temporary FAA certificate of registration for the Aircraft (a "pink
            slip") in Lessor's name.

     SECTION 6. DELIVERY.

     6.1.   DELIVERY LOCATION. The Aircraft shall be delivered to Lessee "As-Is"
at Queens, New York.

     6.2.   ACCEPTANCE OF DELIVERY. Lessee's execution of the Acceptance
Certificate shall constitute Lessee's acknowledgment and agreement that, as
between Lessor and Lessee, the Aircraft has been inspected to Lessee's
satisfaction, and that Lessee has unconditionally accepted the Aircraft for
lease hereunder. Concurrently with the execution of the Acceptance Certificate,
Lessee shall also execute and deliver to Lessor the Lease Supplement, Dated the
Delivery Date, and Lessor shall also execute such Lease Supplement. Execution of
the Lease Supplement by Lessee and Lessor shall evidence that the Aircraft has
been leased hereunder upon and subject to all of the terms, conditions, and
provisions hereof. Without limiting or diminishing the disclaimers set forth in
section 3.4, Lessee's failure to notify Lessor of any defect or discrepancy
shall not establish or evidence the absence thereof insofar as the manufacturer
or any supplier is concerned.

SECTION 7.  REGISTRATION; MAINTENANCE; OPERATION; POSSESSION; PERMITTED
SUBLEASES; INSIGNIA.

     7.1.   REGISTRATION.

     On the Delivery Date, Lessee shall, at its own cost and expense, cause this
Lease and the Lease Supplement to be duly filed with the FAA under the
Transportation Act. Lessee shall not

                                       20


take any action or fail to take any action that would cause the Aircraft not to
remain at all times duly registered in the name of Lessor under the
Transportation Act unless Lessor consents in advance in writing to the
registration of the Aircraft in another jurisdiction. Lessee shall execute and
deliver all such documents at its own cost and expense as Lessor may reasonably
request for the purpose of effecting and continuing such registration. In
addition, Lessee shall take such other actions as may be necessary in any
jurisdiction in which the Aircraft may be operated to protect Lessor's interest
as owner of the Aircraft and as Lessor hereunder. Lessee shall have the right,
upon written notice to Lessor, to cause the United States registration number
for the Aircraft to be changed to another United States registration number
selected by Lessee. Lessor agrees to cooperate with Lessee, at Lessee's sole
cost and expense, including, without limitation, executing and delivering to
Lessee a Form AC 8050-64, "Assignment of Special Registration Number," for the
Aircraft. Lessee shall solely be responsible for the cost of painting its
designated United States registration number on the Aircraft and for all other
costs associated with or resulting from the change of the registration number of
the Aircraft.

     7.2.   MAINTENANCE. During the Term, Lessee, at its own cost and expense,
shall (or, if any Permitted Sublease is in effect, shall ensure that any
sublessee shall):

     (a)    maintain, inspect, service, repair, test, operate and overhaul (or
     cause to be maintained, inspected, serviced, repaired, tested, operated and
     overhauled) the Aircraft in accordance with the Maintenance Program so as
     to keep (A) the Aircraft in as good operating condition as on the date
     delivered by Manufacturer, ordinary wear and tear excepted, and (B) the
     Aircraft in such condition as may be necessary to enable the applicable
     airworthiness certification for the Aircraft to be maintained in good
     standing at all times under (I) the Transportation Act, except when a group
     of aircraft of the same type and series as the Aircraft powered by engines
     of the same type and series as those with which the Airframe is from time
     to time equipped and registered in the United States and flying in
     commercial passenger service, which group includes one or more aircraft
     operated by a Person other than Lessee, have been grounded by the Federal
     Aviation Administration, and (II) the applicable laws of any other
     jurisdiction in which the Aircraft may then be registered, based and/or
     operated from time to time. In any event, the Aircraft shall be maintained
     at least at the level as Lessee maintains, and utilizing the same manner of
     maintenance, service, repair or overhaul as used by Lessee with respect to,
     similar aircraft owned, leased or operated by Lessee. In the event of a
     change in the Maintenance Program, Lessee shall provide Lessor a copy of
     the new program specifications, certified as true and correct by Lessee,
     not later than fifteen (15) Business Days following the implementation of
     the same. The Maintenance Program shall provide for the inspection of
     corrosion and the cleaning, repair and treatment thereof in accordance with
     the corrosion treatment and correction criteria as specified by the
     FAA-approved corrosion prevention and control program applicable to Embraer
     EMB-145 aircraft. Lessee shall adopt and incorporate in the Maintenance
     Program specific measures for the control of corrosion in due conformance
     with Embraer's corrosion prevention manual, and shall carry out such work
     as may be required to comply therewith, including periodic inspections by
     penetration of fuel tanks, periodic inspection

                                       21


     and clean-up under cargo areas, periodic treatment of all mild and moderate
     corrosion and correcting all severe or exfoliated corrosion in accordance
     with the Maintenance Program. Lessee shall incorporate into the Aircraft
     all those Airframe and Engine Manufacturer service bulletins that Lessee
     plans to adopt during the Term for the rest of its Embraer EMB-145 aircraft
     fleet. The Lessee shall not discriminate against the Aircraft in terms of
     service bulletin compliance relative to the rest of Lessee's Embraer fleet.
     Notwithstanding anything herein to the contrary, all maintenance, including
     "C" Checks and engine overhauls, shall be performed by Lessee or an
     FAA-approved repair station;

     (b)    maintain or cause to be maintained, in the English language, all
     Manuals and Technical Records, and other materials required to be
     maintained in respect of the Aircraft by the Federal Aviation
     Administration and the applicable regulatory agency or body of any other
     jurisdiction in which the Aircraft may then be registered and/or based from
     time to time, including, but not limited to, all documents necessary to
     establish compliance with applicable FAA requirements for the Airframe, the
     Engines and life-limited parts. All such records, logs and other materials
     created during the immediately preceding twelve (12) months shall be kept
     in one location on Lessee's premises and all such records, logs and other
     materials more than twelve (12) months old shall be archived by Lessee at a
     location approved by Lessor. All records, logs and other materials, as
     between Lessor and Lessee and all parties claiming through Lessee, shall be
     the property of Lessor but shall be maintained by Lessee during the Term of
     this Lease and shall become the property of Lessee upon the occurrence of
     an Event of Loss and Lessee's compliance with Section 10.1; and

     (c)    promptly furnish or cause to be furnished to Lessor such information
     as may be required to enable Lessor to file any reports required to be
     filed by Lessor with any governmental authority or lending institution.

     7.3.   COMPLIANCE WITH AIRWORTHINESS DIRECTIVES. Lessee shall ensure at its
cost and expense that the Aircraft shall at all times have a currently effective
airworthiness certificate issued by the FAA under the Federal Aviation
Regulations (or by any other governmental authority having jurisdiction over the
operation of the Aircraft). Lessee, at its cost and expense, shall ensure that
the Aircraft is in compliance with all applicable Airworthiness Directives,
manufacturer's "alert" service bulletins and Federal Aviation Regulation
requirements (or the requirements of any other governmental authority having
jurisdiction over the Aircraft) which become due during the Term or are
otherwise required to be performed within six (6) months following the end of
the Term. All Airworthiness Directives shall be accomplished in accordance with
all applicable bulletins and manuals published by the Manufacturer or
FAA-approved data developed by Lessee, and in a manner consistent with similar
aircraft owned, leased or operated by Lessee. Lessee shall include with the
Manual and Technical Records all documentation necessary to establish the source
data, method of compliance, verification of accomplishment, quality assurance
and all schedules of recurring action of any Airworthiness Directive.

                                       22


     7.4.   REPLACEMENT OF PARTS. Lessee shall (or if a Permitted Sublease is in
effect, shall ensure that the sublessee), at its own cost and expense, promptly
replace or cause to be replaced all Parts which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine which may
from time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use for any reason
whatsoever, except as otherwise provided in Section 7.6. In addition, Lessee
(or, if any Permitted Sublease is then in effect, the sublessee) may, at its own
cost and expense, remove in the ordinary course of maintenance, service, repair,
overhaul or testing, any Parts, whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that Lessee, except as otherwise provided in Section
7.6, will, at its own cost and expense, replace or cause to be replaced such
Parts as promptly as practicable. If not obtained from an original equipment
manufacturer, all Parts installed during the Term must have been
repaired/overhauled by an FAA-approved repair station and be accompanied by
appropriate certification (including a serviceability tag in the case of any
calendar-limited or life-limited parts) and documentation to demonstrate
compliance with applicable requirements. All replacement Parts shall be free and
clear of all Liens (except for Permitted Liens and pooling arrangements to the
extent permitted by Section 7.5 and except for replacement property temporarily
installed on an emergency basis) and shall be in as good operating condition as,
and shall have a value, utility and remaining useful life at least equal to, the
Parts replaced, but in all events such replacement Parts shall be no less than
in the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts have
been replaced by Parts which have been incorporated or installed in or attached
to the Airframe or such Engine and which meet the requirements for replacement
parts specified above. Immediately upon any replacement part becoming
incorporated or installed in or attached to the Airframe or any Engine as above
provided, without further act (subject only to Permitted Liens and any pooling
arrangement to the extent permitted by Section 7.5 and except for replacement
property temporarily installed on an emergency basis), (i) title to such
replacement Part shall thereupon vest in Lessor, (ii) such replacement Part
shall become subject to this Lease and be deemed part of the Airframe or such
Engine for all purposes hereof to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine, and
(iii) title to the replaced Part shall thereupon vest in Lessee (or, if a
Permitted Sublease is then in effect, the sublessee), free and clear of all
Lessor Liens and rights of Lessor, and shall no longer be deemed a Part
hereunder.

     7.5.   POOLING OF PARTS. Any Part removed from an Airframe or any Engine as
provided in Section 7.4 may be subjected by Lessee (or, if any Permitted
Sublease is then in effect, the sublessee) to a pooling or interchange
arrangement customary in the United States airline industry with other aircraft
or engines owned or leased by Lessee (or, if any Permitted Sublease is then in
effect, the sublessee); provided that if as a consequence thereof a Part is
removed, the Part replacing such removed Part shall be incorporated or installed
in or attached to the Airframe or Engine in accordance with Section 7.4 as
promptly as practicable after the removal of such removed Part. When
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 7.4, any Part replacing a Part that is removed under a
customary pooling

                                       23


or interchange arrangement may be owned by any third party, provided that Lessee
(or, if any Permitted Sublease is then in effect, the sublessee), at its cost
and expense, as promptly thereafter as practicable, either (i) causes title to
such replacement Part to vest in Lessor in accordance with such Section 7.4 by
Lessee (or, if any Permitted Sublease is then in effect, the sublessee)
acquiring title thereto for the benefit of, and transferring such title to,
Lessor free and clear of all Liens other than Permitted Liens, or (ii) replaces
such replacement Part by incorporating or installing in or attaching to the
Airframe or Engine a further replacement Part owned by Lessee (or, if any
Permitted Sublease is then in effect, the sublessee) free and clear of all Liens
other than Permitted Liens and by causing title to such further replacement Part
to vest in Lessor in accordance with Section 7.4. All such replacement Parts
shall be in as good operating condition as, and shall have a value, utility and
remaining useful life at least equal to, the Parts replaced, but in all events
such replacement Parts shall be no less than in the condition and repair
required to be maintained by the terms hereof. Neither the Airframe nor Engines
shall be subject to any pooling or interchange arrangement. No pooling or
interchange arrangement shall result in a change of title or registration of the
Aircraft or affect Lessor's status or title to any Part under this Lease.

     7.6.   ALTERATIONS, MODIFICATIONS AND ADDITIONS. Lessee shall, at its own
cost and expense, make (or cause to be made) such alterations and modifications
in and additions to the Airframe and Engines as may be required from time to
time to meet the applicable standards of the FAA or any applicable regulatory
agency or body of any other jurisdiction to which the Aircraft may then be
subject or the standards, specifications or requirements imposed by any Person
for which Lessee is utilizing the Aircraft pursuant to a code share arrangement.
All such alterations, modifications and additions shall be documented by any
applicable FAA-approved Original Equipment Manufacturer ("OEM") Service
Bulletin, OEM Master Change or FAA-approved Supplemental Type Certificate,
whichever is applicable under the Transportation Act and/or applicable FARs.
Lessee shall not, without the prior written consent of Lessor, make any
additions to or alterations or modifications (including a change in
configuration) of the Aircraft other than as expressly permitted by this Section
7.6 and shall not make any alteration, modification and/or addition expressly
permitted by this Section 7.6 without giving Lessor reasonable prior notice of
the same. Such notice shall contain a detailed description of the work scope of
such addition, alteration or modification and the name of the proposed
maintenance facility that shall complete the work, each of which work scope and
maintenance facility shall be reasonably acceptable to Lessor. Title to all
Parts incorporated or installed in or attached or added to the Airframe or an
Engine as the result of any such alteration, modification, removal or addition
shall, without further act, vest in Lessor and become subject to this Lease.
Notwithstanding the foregoing, Lessee (or, if any Permitted Sublease is then in
effect, the sublessee) may, at any time during the Term, so long as no Notified
Default has occurred and is continuing, remove or suffer to be removed any Part,
provided that such Part (i) is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or attached
to the Airframe or any Engine at the time of delivery thereof hereunder or any
Part in replacement of or substitution for any such Part, (ii) is not required
to be incorporated or installed in or attached or added to the Airframe or any
Engine pursuant to the terms of Section 7.2(a) or the first sentence of this
Section 7.6, (iii) can be removed from the Airframe or such

                                       24


Engine without (A) causing material damage to the Airframe or such Engine (it
being understood that Lessee shall repair any damage caused by a permitted
removal), or (B) diminishing or impairing the value, utility, condition,
remaining useful life or airworthiness which the Airframe or such Engine would
have had at such time had such alteration, modification, removal or addition not
originally occurred, assuming such Airframe or such Engine was then of the
value, utility, and remaining useful life and in the condition of airworthiness
required to be maintained by the terms of this Lease, and (iv) was not paid for
by Lessor; provided, however, that the original cost of all parts removed
pursuant to this sentence shall not exceed $150,000 in the aggregate. Upon the
removal by Lessee (or a sublessee pursuant to a Permitted Sublease) of any Part
as provided above, title thereto shall, without further act, vest in Lessee (or
the sublessee pursuant to a Permitted Sublease, as the case may be) and such
Part shall no longer be deemed part of the Airframe or Engine from which it was
removed. Any Part not removed by Lessee (or any sublessee pursuant to a
Permitted Sublease) as above provided prior to the return of the Airframe or
Engine to Lessor hereunder shall remain the property of Lessor.

     7.7.   OPERATION.

            (a) Lessee shall not maintain, use, service, repair, overhaul,
operate or locate the Aircraft (or, if any Permitted Sublease is then in effect,
suffer the sublessee to maintain, use, service, repair, overhaul, operate or
locate the Aircraft) in violation of any law or any rule, regulation, order,
directive, bulletin or certificate of any government or governmental authority
(domestic or foreign) having jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued by any such
authority, except to the extent Lessee (or, if a Permitted Sublease is then in
effect, the sublessee) is contesting in good faith the validity or application
of any such law, rule, regulation or order in any reasonable manner which does
not involve any material risk of liabilities or any civil or criminal penalties
being imposed on or against Lessor, that does not involve any material risk of
loss, forfeiture or sale of the Aircraft or any Engine, and that does not
adversely affect Lessor, Lessor's title or interest in the Aircraft or any
Engine, or Lessor's interest in this Lease.

            (b) Lessee shall not operate or locate the Aircraft, or suffer the
Aircraft to be operated or located (or permit the Aircraft to be on the ground),
in any area excluded from coverage by any insurance policy required by the terms
of this Lease, except in the case of temporary operations due to unforeseen
circumstances beyond Lessee's control (e.g., weather, hijacking, malfunctions,
etc.)

            (c) The Aircraft shall be operated solely in commercial passenger
operations and only by pilots and other airmen holding valid licenses or other
necessary authorizations as may be required by applicable laws and regulations.

            (d) Lessee shall promptly pay or procure that all license fees,
registration fees, landing fees, air navigation and other similar charges of any
nature (together with any penalties, fines or interest thereon) assessed or
demanded by any governmental authority upon or with respect to the delivery,
leasing, possession, use, operation or return of the Aircraft by Lessee are

                                       25


promptly paid, and shall immediately provide Lessor, upon Lessor's request, with
an itemized statement of all such fees and charges outstanding as of the date of
such request.

     7.8.   POSSESSION AND PERMITTED SUBLEASES.

            (a)    During the Term, 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 or
permit to be installed any Engine on any airframe other than the Airframe, or to
install or permit to be installed on the Airframe any engines other than the
Engines (other than to the extent an Engine is receiving off-wing maintenance).
The wet lease or charter of the Aircraft (expiring before the end of the Term)
shall not be considered a sublease; provided, however, that at all times, Lessee
has operational control of the Airframe and Engines.

            (b)    Notwithstanding anything herein to the contrary, Lessee may,
without the prior written consent of Lessor:

                   (i)   install a substitute engine owned by Lessee on the
            Airframe so long as the substitute engine is free and clear of all
            Liens except Permitted Liens;

                   (ii)  install or permit the installation of an Engine on an
            airframe which is owned by Lessee (or, if any Permitted Sublease is
            then in effect, the sublessee) free and clear of all Liens except
            (A) Permitted Liens and those which apply only to the engines (other
            than Engines), appliances, parts, instruments, appurtenances,
            accessories, furnishings and other equipment (other than Parts)
            installed on such airframe (but not to the airframe as an entirety),
            and (B) mortgage liens or other security interests, provided that
            such mortgage liens or other security interests effectively provide
            that such Engine shall not become subject to the lien of such
            mortgage or security interest, notwithstanding the installation
            thereof on such airframe;

                   (iii) provided no Notified Default has occurred and is
            continuing, install or permit the installation of an Engine on an
            airframe leased to Lessee (or, if any Permitted Sublease is then in
            effect, the sublessee) or purchased by Lessee (or, if any Permitted
            Sublease is then in effect, the sublessee) subject to a conditional
            sale or other security agreement, provided that (A) such airframe is
            and remains free and clear of all Liens except (I) the rights of the
            parties to the lease or conditional sale or other security agreement
            covering such airframe, or their assignees, and (II) Liens of the
            type permitted by Section 7.8(b)(ii) hereof and (B) such lease,
            conditional sale or other security agreement expressly provides that
            such Engine shall not become subject to the lien of such lease,
            conditional sale or other security agreement, notwithstanding the
            installation thereof on such airframe; or

                                       26


                   (iv)  install or permit the installation of an Engine on an
            airframe owned by Lessee (or, if any Permitted Sublease is then in
            effect, the sublessee), leased to Lessee (or, if any Permitted
            Sublease is then in effect, the sublessee) or purchased by Lessee
            (or if any Permitted Sublease is then in effect, the sublessee)
            subject to a conditional sale or other security agreement under
            circumstances where neither Section 7.8(b)(ii) nor Section
            7.8(b)(iii) is applicable, provided that such installation shall be
            deemed an Event of Loss with respect to such Engine and Lessee shall
            (or shall cause any sublessee to) comply with Section 10.2 hereof in
            respect thereof.

            (c)    The rights of any sublessee or other transferee which
receives possession by reason of a transfer permitted by this Section or by
Section 13 hereof, other than the transfer of an Engine which is deemed an Event
of Loss and as to which Lessee has complied with Section 10.2, shall be subject
and subordinate to, and any sublease permitted by Section 13 hereof shall be
effectively and expressly subject and subordinate to, all the terms of this
Lease, including, without limitation, Lessor's rights to repossession and to
avoid such sublease upon such repossession. No sublease shall permit the
sublessee to take any action not permitted to be taken by Lessee under this
Lease. Lessee shall remain primarily liable hereunder for the performance of all
of the terms and conditions of this Lease to the same extent as if such sublease
had not occurred. No pooling agreement, interchange agreement, sublease or other
relinquishment of possession of the Airframe or any Engine or Part shall in any
way discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights or remedies hereunder. All action which
is required in connection with any sublease to continue the perfection of the
right, title and interest of Lessor in the Aircraft, the Airframe and the
Engines and Lessor's rights under the Lease, and such sublease and all other
actions necessary or required to preserve the right, title and interest of
Lessor in the Aircraft, Airframe and Engines shall be taken by Lessee at its
expense. Notwithstanding any provision herein to the contrary, no Permitted
Sublease permitted by Section 13 shall permit any further sub-subleasing of the
Aircraft.

     7.9.   INSIGNIA. Lessee agrees to maintain (or cause to be maintained)
adjacent to the airworthiness certificate in the cockpit of the Airframe and on
each Engine a nameplate setting forth the name of Lessor and its status as
owner/lessor of the Aircraft. Such nameplate shall be replaced, if necessary,
with a nameplate reflecting the name of any successor Lessor or financing party,
as permitted in this Agreement. Except as provided above, Lessee will not allow
the name of any Person to be placed on the Airframe as a designation that might
be interpreted as a claim of ownership; provided that nothing herein contained
shall prohibit Lessee (or any sublessee pursuant to a Permitted Sublease) from
placing its customary colors and insignia on the Airframe.

     7.10.  INSPECTIONS BY LESSOR. At all reasonable times and on reasonable
notice to Lessee, Lessor, the Owner Participant or any financing party to
Lessor, or their respective authorized representatives, may inspect the Aircraft
and inspect and make copies of the books and records of Lessee and any sublessee
required to be maintained by the FAA relating to the

                                       27


maintenance of the Aircraft (inspections conducted when an Event of Default or a
Default described in Section 14(a)(v) has occurred and is continuing shall be at
Lessee's cost and expense; all other inspections shall be at Lessor's, the Owner
Participant's or the financing party's sole cost and expense, as the case may
be), and shall keep any information or copies obtained thereby confidential and
shall not disclose the same to any Person, except (A) to Lessor, the Owner
Participant or any financing party to Lessor, and to any prospective transferees
(and such prospective transferee's counsel, independent insurance advisors or
other agents) who agree to hold such information confidential, (B) to Lessor's,
the Owner Participant's, and the financing party's counsel, independent
insurance advisors or other agents who agree to hold such information
confidential, or (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation; provided, however, that
any and all disclosures permitted by clause (C) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons for
whom such disclosure is hereby permitted. Any such inspection of the Aircraft
shall be subject to Lessee's safety and security rules applicable to the
location of the Aircraft, shall be a visual, walk-around inspection of the
interior and exterior of the Aircraft and shall not include opening any panels,
bays or the like without the express consent of Lessee (except in connection
with a maintenance visit when a panel, bay or the like is scheduled or required
to be opened); provided that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any sublessee under a Permitted Sublease). Upon receipt
by Lessee of a written request from the Owner Participant specifying that the
Owner Participant desires to have an authorized representative observe the next
scheduled maintenance to be performed on the Aircraft during the Term, Lessee
shall cooperate with the Owner Participant to enable the Owner Participant's
representative to observe such scheduled maintenance to be performed on the
Aircraft during the Term. Neither the Owner Participant nor the Lessor shall
have any duty to make any such inspection nor shall either of them incur any
liability or obligation by reason of not making such inspection. Except during
the last six (6) months of the Term or during the continuance of an Event of
Default, all inspections by the Owner Participant and its authorized
representatives or Lessor and its authorized representatives provided for under
this Section 7.10 shall, in regard to each of the Owner Participant and Lessor,
be limited to one (1) inspection of any kind contemplated by this Section 7.10
during any calendar year. In addition to any inspection provided hereunder, upon
each request of the Owner Participant, Lessee will, at the sole cost and expense
of the Owner Participant, make available to the Owner Participant an inspection
in accordance with and of the kind contemplated by this Section 7.10, but solely
for the purpose of a potential transfer of the Owner Participant's interest in
the Aircraft.

SECTION 8.  RETURN OF THE AIRCRAFT.

     8.1.   RETURN. Upon the termination of this Lease at the end of the Term
(unless there has been an Event of Loss with respect to the Aircraft or unless
Lessee exercises its option to purchase the Aircraft) or upon Lessor's exercise
of its remedies pursuant to Section 15, Lessee shall, at its own cost and
expense, return the Aircraft (including the Manuals and Technical

                                       28


Records) to Lessor at a location in the continental United States on Lessee's
regional jet route system where Lessee has appropriate maintenance and repair
facilities specified by Lessor (the "Return Location") in compliance with the
provisions of this Section 8. At the time of its return, the Aircraft shall be
free and clear of all Liens, other than Lessor Liens, and Lessor and Lessee
shall execute a return acceptance certificate (the "Return Acceptance
Certificate") in substantially the form attached hereto as Exhibit F. Lessee
shall execute and deliver to Lessor such instruments of release and termination
of this Lease as to the Aircraft, in form suitable for recording at FAA and
other public offices, as Lessor may reasonably request in order to make clear
upon public records that the Aircraft is free and clear of all rights of Lessee
therein, and shall authorize Lessor to date such instruments with the effective
date of expiration or earlier cancellation or termination of the Term of this
Lease as to the Aircraft. Lessor shall file such instruments at the expense of
Lessee.

     8.2.   RETURN OF OTHER ENGINES. In the event that any engine not owned by
Lessor and leased to Lessee hereunder shall be delivered with the returned
Airframe (a "Replacement Engine"), Lessee shall, concurrently with such
delivery, at no cost to Lessor, furnish, or cause to be furnished, to Lessor a
full warranty (as to title) bill of sale with respect to each such Replacement
Engine, in form and substance reasonably satisfactory to Lessor, and shall take
such other action as Lessor may reasonably request with respect to the transfer
of title thereof to Lessor. Upon transfer of title to Lessor, such Replacement
Engine shall be deemed to be an Engine for all purposes hereof and thereupon
Lessor shall transfer to Lessee, without any representation, warranty or
recourse of any kind whatsoever, express or implied, except a warranty as to the
absence of Lessor's Liens, all of Lessor's right, title, and interest in and to
any Engine not installed on such Airframe at the time of the return thereof. A
Replacement Engine shall be the same or improved make and model as the Engines
and, in any event, both engines on the returned Airframe shall be of the same
make and model. Any engine returned shall meet the requirements set forth in
Section 8.10, and shall be in the same or better condition and have the same or
greater remaining value, utility and useful life as the replaced Engine,
assuming that the replaced Engine was in such condition and repair and of the
value, utility and useful life required by this Lease.

     8.3.   CONDITION OF THE AIRCRAFT. The Aircraft, all Parts and components at
the time of return to Lessor shall be in full compliance with all provisions of
Exhibit H hereto.

     8.4.   INSPECTION; MAINTENANCE.

     (a)    During the last six (6) months of the Term, upon not less than five
days prior notice, Lessee will cooperate, in all reasonable respects, with the
efforts of Lessor to sell or lease the Aircraft, including, without limitation,
permitting prospective purchasers or lessees to inspect the Aircraft and the
records relating thereto at reasonable times, provided that such cooperation
shall not interfere with the normal operation of the Aircraft by Lessee or any
Permitted Sublessee.

                                       29


     (b)    With respect to the last maintenance check or shop visit for the
Aircraft or any Engine, as the case may be, prior to the end of the Term, Lessee
shall comply with any reasonable request of Lessor in regard thereto, including
a request by Lessor to change the scope of work to be performed; provided,
however, Lessor shall be responsible for any incremental cost resulting directly
from any such request to change or otherwise alter the scope of work beyond that
which would otherwise be required to be performed under this Lease during such
maintenance check or shop visit, as the case may be, and Lessee shall not be
obligated to pay Rent for any additional time after the Term that is
attributable to the time required to perform such work.

     8.5.   ACCEPTANCE. Upon satisfactory completion of the operational check
flight(s), if any, and after Lessee has corrected the Discrepancies as required
to comply with this Section 8, the Aircraft shall be technically accepted by
Lessor's representatives at the Return Location. Such technical acceptance shall
be evidenced by the execution and delivery of a Return Acceptance Certificate in
substantially the form of Exhibit F hereto. Subject to Section 8.6, Lessor
hereby agrees that such acceptance of the Aircraft by Lessor or Lessor's
representatives shall, without further act, irrevocably constitute acceptance of
the redelivery of the Aircraft.

     8.6.   EXTENSION OF TERM DUE FOR DISCREPANCY CORRECTION. Should redelivery
of the Aircraft and the Manuals and Technical Records from Lessee to Lessor be
delayed (which delay shall be deemed to have occurred until Lessee shall have
complied with all of the return conditions set forth in this Section 8 with
respect to the Aircraft) beyond the date required by the terms of this Lease for
any reason other than as specified in Section 8.4, all of Lessee's obligations
under this Lease with respect to the Aircraft will remain in full force and
effect, including, without limitation, the obligation to pay Rent (including
Basic Rent at the greater of Fair Market Rental Value or the average Basic Rent
paid by Lessee during the Basic Term) hereunder with respect to the Aircraft. If
the condition of the Aircraft and the Manuals and Technical Records do not
comply with this Section 8 and Exhibit H, Lessee will, at its sole cost and
expense, diligently proceed to rectify any defect or non-compliance as promptly
as practicable (and in any event within thirty (30) days) to Lessor's reasonable
satisfaction; and the Term will be automatically extended and this Lease will
remain in full force and effect as provided above with respect to the Aircraft
until the date on which such defect or non-compliance has been so rectified;
provided, however, that if Lessee is unable to complete such rectification
within such 30-day period despite having diligently attempted to do so and
Lessee promptly notifies Lessor of such inability, the 30-day period shall be
extended for so long as necessary to complete such rectification, up to a
maximum of 60 additional days (the "Rectification Period"). If Lessee shall not
have rectified any such defect or non-compliance within the Rectification
Period, Lessee shall, upon Lessor's request given on or after the expiration of
such period, redeliver the Aircraft and the Manuals and Technical Records to
Lessor and Lessor shall, at Lessee's sole expense, diligently proceed to rectify
such defect or non-compliance to Lessor's reasonable satisfaction and the
applicable Term will be automatically extended and this Lease will remain in
full force and effect as provided in this Section 8.6 until the date on which
such defect or non-compliance has been so rectified.

                                       30


     8.7.   OWNERSHIP. Any documents, equipment and any other items returned to
Lessor pursuant to this Section 8 that are not already owned by Lessor shall
thereupon become the property of Lessor.

     8.8.   DISPUTES REGARDING RETURN CONDITION. Any dispute between Lessor and
Lessee regarding the condition of the Airframe or any Engine arising under this
Section 8 or Exhibit H shall be referred to an aviation auditing firm selected
by Lessor and Lessee. Lessee shall bear the cost of such aviation auditing firm.
The parties will use commercially reasonable efforts to obtain a final
resolution of the dispute under the foregoing procedures within 30 days
following the date on which the dispute arises.

     8.9.   STORAGE. Following return of the Aircraft, Lessee shall, at Lessor's
written request, assist Lessor in arranging storage for the Aircraft (which may
be outdoors) at the Return Location for a period not exceeding 60 days. Such
storage shall be at Lessor's sole cost and expense (not to exceed Lessee's
actual cost); provided, however, that if such termination occurs as a result of
an Event of Default, such storage shall be for up to 180 days at Lessee's cost.
Lessor shall, at its sole cost and expense, maintain in effect during such
storage period insurance covering the Aircraft, in such amounts and against such
risks as would be customarily carried in similar circumstances by a reasonably
prudent Lessor; provided, however, that if such termination occurs as a result
of an Event of Default, Lessee shall reimburse Lessor upon demand for the cost
of such insurance and shall cooperate with Lessor in obtaining such insurance.

SECTION 9.  LIENS.

     9.1.   PERMITTED LIENS. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
any Engine, any Part, title thereto or any interest therein or in this Lease,
except (i) the rights of Lessor as owner of the Aircraft, (ii) the respective
rights of Lessor and Lessee as provided herein, (iii) the rights of others under
agreements or arrangements to the extent permitted by the terms of Section 7.5
and Section 7.8(b)(iii) hereof, (iv) Lessor Liens, (v) Liens for Taxes of Lessee
(or, if any Permitted Sublease is then in effect, the sublessee) not yet due or
being contested in good faith by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Airframe or any Engine or interest therein or any risk of
material liability (other than for payment of the amount), or any risk of
criminal penalties being imposed on any Indemnitee and so long as adequate
reserves therefor have been established, (vi) materialmen's, mechanic's,
workmen's, repairmen's, employees, or other like liens arising in the ordinary
course of Lessee's (or, if a Permitted Sublease is then in effect, the
sublessee's) business (including those arising under maintenance agreements
entered into in the ordinary course of business) securing obligations that are
not overdue or are being contested in good faith by appropriate proceedings so
long as such proceedings do not involve any material danger of the sale,
forfeiture, loss or loss of use of the Airframe or any Engine or any interest
therein, or any risk of material liability (other than for payment of the
amount), or any risk of criminal

                                       31


penalties being imposed on any Indemnitee and so long as adequate reserves
therefor have been established, (vii) any Lien arising out of a judgment or
award against Lessee, (or if a Permitted Sublease is in effect, the sublessee)
unless the judgment secured is not within 30 days after the entry thereof
discharged, vacated or reversed, or the execution thereof stayed pending appeal,
and (viii) any Lien with respect to which Lessee (or, if any Permitted Sublease
is then in effect, the sublessee) shall have provided a bond adequate in the
reasonable opinion of Lessor. Lessee will promptly, at its own expense, take (or
cause to be taken) such actions as may be necessary duly to discharge any such
Lien not excepted above if the same shall arise at any time.

SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.

10.1.  EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.

       (a)  Upon the occurrence of an Event of Loss with respect to the Airframe
or the Airframe and the Engines and/or engines then installed thereon, Lessee
shall promptly, and in any event, within three (3) days after such occurrence,
give Lessor written notice of such Event of Loss. After an Event of Loss and
until receipt by Lessor of the Stipulated Loss Value and all other amounts due
under the Lease, Lessee shall continue to pay Basic Rent and the parties shall
perform all of their other obligations under the Lease that remain possible of
performance taking into consideration the Event of Loss. Lessee shall, within 45
days after such occurrence, give Lessor written notice of its election to
perform one of the following options (it being agreed that if Lessee has not
have given Lessor notice of such election, Lessee shall be deemed to have
elected the option described in clause (ii) below):

       (i)  provide that no Notified Default has occurred and is continuing and
subject to the satisfaction of the conditions contained in Section 10(c), on a
date not more than 150 days after the occurrence of the Event of Loss (or, if
earlier, the last day of the Term), convey or cause to be conveyed to Lessor,
and to be leased by Lessee hereunder in replacement of the Airframe and Engines
with respect to which the Event of Loss occurred, a Replacement Airframe
(together with the same number of Replacement Engines as the number of Engines,
if any, which were subject to such Event of Loss), such Replacement Airframe and
Replacement Engines to be free and clear of all Liens except Permitted Liens and
to have a remaining useful life, estimated residual value, value and utility at
least equal to the Airframe and Engines, if any, so replaced (assuming that such
Airframe and Engines were in the condition and repair required by the terms
hereof) and to be an airframe that is the same make and model as the Airframe to
be replaced thereby, or an improved make and model, and such Replacement Engines
to be covered by a Power-by-the-Hour Agreement satisfactory to Lessor if the
Aircraft was subject to a Power-by-the-Hour Agreement at the time of the Event
of Loss; provided that, if Lessee has not performed its obligation to effect
such replacement under this clause (i) during the 150-day period provided herein
(or, if earlier, the last day of the Term), it shall give Lessor notice to such
effect upon or before the expiration of such period and shall promptly pay on
the third Business Day after the

                                       32


date of such notice to Lessor (or, if earlier, the last day of the Term), in
immediately-available funds, the amount specified in clause (ii) below; or

       (ii) pay to Lessor on the earlier to occur of the third Business Day
following the date of receipt of insurance proceeds in respect of the Event of
Loss or ninety (90) days following the date of the Event of Loss, the sum of (i)
any amounts then accrued under this Lease (including Basic Rent due and payable
hereunder), plus (ii) the Stipulated Loss Value of the Aircraft computed as of
the Rent Payment Date next following the date on which the Event of Loss
occurred, plus (iii) any Supplemental Rent and other amounts otherwise due and
payable under the Operative Documents, plus (iv) any reasonable expenses and
costs incurred in connection with such Event of Loss by Lessor, minus (v) any
prepaid Rent attributable to the period following the date of such payment.

       (b)  In the event that Lessee has provided a Replacement Aircraft as
provided in Section 10(a)(i) hereof, (i) this Lease shall continue with respect
to such Replacement Aircraft as though no Event of Loss had occurred; (ii)
Lessor shall, at the expense of Lessee, convey to Lessee "as-is, where-is",
without recourse or warranty except for a warranty against Lessor's Liens, all
right, title and interest of Lessor in and to the Airframe and the Engine or
Engines, if any, installed on the Airframe upon the occurrence of the Event of
Loss by executing and delivering to Lessee such bills of sale and other
documents and instruments as Lessee may reasonably request to evidence such
conveyance; (iii) Lessor shall, at the request and expense of Lessee, to the
extent assignable, assign to Lessee all claims it may have against any other
Person arising from the Event of Loss (other than with respect to any insurance
maintained by Lessor, the Owner Participant or their Affiliates); and (iv)
provided no Notified Default has occurred and is continuing, Lessee shall be
entitled to receive all insurance proceeds and proceeds from any award in
respect of condemnation, confiscation, seizure or requisition, including any
interest thereon, to the extent not previously applied to the purchase price of
the Replacement Aircraft.

       (c)  Lessee's right to substitute a Replacement Aircraft as provided in
Section 10(a)(i) shall be subject to the fulfillment, as Lessee's sole cost and
expense, in addition to the conditions continued in Section 10(a)(i), of the
following conditions precedent:

            (i)    On the date of delivery of the Replacement Aircraft to Lessor
(such date being referred to in this Section 10(c) as the "Replacement Closing
Date"), no Notified Default shall have occurred and be continuing;

            (ii)   On the Replacement Closing Date, the following documents
shall have been duly authorized, executed and delivered by the respective party
or parties thereto and shall be in full force and effect, and an executed
counterpart of each such document (or, in the case of the FAA Bill of Sale, a
photocopy thereof) shall have been delivered to Lessor:

                   (A)   a Lease Supplement covering the Replacement Aircraft,
which has been duly filed for recordation with the FAA;

                                       33


                   (B)   an FAA Bill of Sale covering the Replacement Aircraft,
executed by the owner thereof in favor of Lessor, and dated the Replacement
Closing Date;

                   (C)   a full warranty (as to title) bill of sale, in form and
substance satisfactory to Lessor, covering the Replacement Aircraft, executed by
the owner thereof in favor of Lessor, dated the Replacement Closing Date;

                   (D)   an assignment of manufacturer's and vendor's warranties
with respect to the Replacement Aircraft;

                   (E)   an assignment of any Power-by-the-Hour Agreement with
respect to the Replacement Engines;

                   (F)   an acknowledgement from Embraer in form and substance
satisfactory to Lessor that Lessor has all of the benefits of the Residual Value
Guaranty with respect to the Replacement Aircraft;

            (iii)  On or before the Replacement Closing Date, Lessor shall have
received such documents and evidence with respect to Lessee (including, without
limitation, a certificate of a Responsible Officer regarding the particulars of
the Replacement Aircraft and its compliance with the terms of this Lease), or
the owner of the Replacement Aircraft, as Lessor may reasonably request in order
to establish the consummation of the transaction contemplated by Section
10(a)(i) and this Section 10(c), the taking of all necessary corporate action in
connection therewith and compliance with the conditions set forth in this
Section 10(c), in each case in form and substance reasonably satisfactory to
Lessor;

            (iv)   Lessor shall have received satisfactory evidence as to the
compliance with Section 11 hereof with respect to the Replacement Aircraft;

            (v)    On the Replacement Closing Date, (A) Lessor shall receive
good title to the Replacement Aircraft free and clear of Liens, other than
Lessor Liens, (B) the Replacement Aircraft shall have been duly certified by the
FAA as to type and airworthiness in accordance with the terms of this Lease, and
(C) application for registration of the Replacement Aircraft shall have been
duly made with the FAA;

            (vi)   Lessor shall have received an appraisal reasonably
satisfactory to it with respect to the Replacement Aircraft; and

            (vii)  Lessor, shall have received (A) an opinion of counsel to
Lessee, reasonably satisfactory in form and substance to Lessor, to the effect
that (x) the Replacement Aircraft is free and clear of all Liens other than
Lessor Liens, (y) the bill of sale referred to in Section 10(c)(ii)(C)
constitutes an effective instrument for conveying title to the Replacement
Airframe and Replacement Engines, if any, to Lessor, and (z) all documents
executed and delivered by Lessee pursuant to this Section 10(c) have been duly
authorized executed and delivered by Lessee and constitute legal, valid and
binding obligations of, and are enforceable

                                       34


against, Lessee in accordance with their respective terms, that no further
action is necessary or advisable in order to establish and perfect the title of
Lessor in the Replacement Aircraft and as to such other matters as Lessor may
reasonably request; (B) an opinion of qualified FAA counsel (or counsel in such
jurisdiction outside of the United States where the Aircraft may be registered)
as to, in the case of FAA counsel, the due recordation of the Lease Supplement
and all other documents or instruments the recordation of which is necessary to
perfect and protect the rights of Lessor in the Replacement Aircraft or, in the
case of counsel in another jurisdiction, the taking of all action necessary in
such jurisdiction for such purposes; and (C) an opinion of tax counsel selected
by Lessor and reasonably satisfactory to Lessee to the effect that such
substitution will not result in adverse tax consequences to Lessor or Owner
Participant that are not indemnified by the Lessee under the Tax Indemnity
Agreement, and evidence that Lessee has made provision for any such
indemnification obligation under the Tax Indemnity Agreement in a manner
satisfactory to Lessor.

       10.2.  TERMINATION UPON PAYMENT. At such time as Lessor shall have
received all amounts specified Section 10.1(a)(ii) hereof, (a) the obligation of
Lessee to pay succeeding installments of Basic Rent shall cease to accrue, (b)
the Term shall terminate, (c) Lessor shall transfer to or at the direction of
Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee), without recourse or warranty (except as to the absence of Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and any
Engines subject to such Event of Loss, as well as any Engines not subject to
such Event of Loss, and furnish to or at the direction of Lessee (or, if any
Permitted Sublease is then in effect, the sublessee) a warranty (as to the
absence of Lessor Liens only) bill of sale and an FAA bill of sale evidencing
such transfer, and (d) Lessee (or, if any Permitted Sublease is then in effect,
the sublessee) shall be subrogated to all claims of Lessor, if any, against
third parties, for damage to or loss of the Airframe and any Engines which were
subject to such Event of Loss (other than with respect to insurance maintained
by Lessor, the Owner Participant or their Affiliates).

       10.3.  EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon the occurrence of an
Event of Loss with respect to an Engine under circumstances not involving an
Event of Loss with respect to the Airframe, Lessee (or, if any Permitted
Sublease is then in effect, the sublessee) shall promptly (and in any event, not
later than 15 days after such occurrence) give Lessor written notice thereof and
shall, within 60 days after the occurrence of such Event of Loss, convey or
cause to be conveyed to Lessor as replacement for the Engine with respect to
which such Event of Loss occurred, title to another engine of the same or
improved type as the Engine (or an equivalent or improved engine of the same
manufacturer and suitable for installation and use on the Airframe and
compatible with the other Engine leased hereunder), covered by the same
Power-by-the-Hour Agreement as the other Engine if the other Engine is subject
to a Power-by-the-Hour Agreement and having a value, utility and remaining
economic useful life at least equal to, and in as good operating condition as,
the Engine with respect to which such Event of Loss occurred (assuming that such
Engine was of the value, utility and useful life and in such condition and
repair as required by the terms of this Lease immediately prior to such Event of
Loss) and free and clear of all Liens (other than Permitted Liens, which engine
may upon its transfer to Lessor become subject to any and all Permitted Liens).
Prior to any such conveyance,

                                       35


Lessee (or, if any Permitted Sublease is then in effect, the sublessee), shall,
at its own expense, (a) furnish Lessor with a full warranty bill of sale and a
FAA bill of sale, in form and substance reasonably satisfactory to Lessor,
evidencing such transfer of title, (b) cause a Lease Supplement to be duly
executed by Lessee and filed for recording pursuant to the Transportation Act or
the applicable laws, rules and regulations of any other jurisdiction in which
the Airframe may then be registered, (c) furnish Lessor with such evidence of
compliance with the insurance provisions of Section 11 with respect to such
substituted property as Lessor may reasonably request, (d) at Lessor's request,
furnish an appraisal of an independent appraiser selected by Lessor in form and
substance reasonably satisfactory to Lessor evidencing compliance with the
requirements as to value, utility and remaining economic useful life of the
substitute engine, (e) provide opinions in form and substance reasonably
satisfactory to Lessor of counsel reasonably acceptable to Lessor to the same
effect as set forth in Section 10(c)(vii) hereof, (f) assign to Lessor the
benefit of all assignable manufacturer's and vendor's warranties with respect to
the replacement engine, and (g) assign to Lessor any Power-by-the-Hour Agreement
with respect to the Replacement Engine. Lessor shall transfer to or at the
direction of Lessee without recourse or warranty, except as to absence of Lessor
Liens, all of Lessor's right, title and interest, if any, in and to (i) the
Engine with respect to which such Event of Loss occurred by furnishing to or at
the direction of Lessee a warranty (as to the absence of Lessor Liens only) bill
of sale and an FAA bill of sale evidencing such transfer and (ii) all claims, if
any, against third parties, for damage to or loss of the Engine subject to such
Event of Loss (other than with respect to insurance maintained by Lessor, the
Owner Participant or their Affiliates), and such Engine shall thereupon cease to
be an Engine leased hereunder. For all purposes hereof, each such replacement
engine shall, after such conveyance, be deemed part of the property leased
hereunder, and shall be deemed an Engine. No Event of Loss with respect to an
Engine under the circumstances contemplated by the terms of this Section 10.3
shall result in any reduction in Basic Rent.

       10.4.  APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR
REQUISITION OF TITLE, ETC. Provided no Notified Default has occurred and is
continuing, any payments (other than insurance proceeds, the application of
which is provided for in Section 11) received at any time by Lessor or by Lessee
from any governmental authority or other person with respect to an Event of Loss
resulting from the theft, disappearance, condemnation, confiscation or seizure
of, or requisition of title to or use of, the Airframe or any Engine, other than
a requisition for use (but not of title) by the United States Government or
other government of registry of the Aircraft or under which the Aircraft is
based or any instrumentality or agency of any thereof not constituting an Event
of Loss, shall be applied as follows:

       (a)    If payments are received with respect to the Airframe (or the
Airframe and any Engine or engines then installed thereon), (i) if such property
has not been replaced pursuant to the provisions hereof, after reimbursement of
Lessor for reasonable costs and expenses, so much of such payments remaining as
shall not exceed the Stipulated Loss Value and other amounts required to be paid
by Lessee to Lessor pursuant to Section 10.1 hereof shall be applied in
reduction of Lessee's obligation to pay such Stipulated Loss Value and any other
amounts not already paid by Lessee, or, to the extent already paid by Lessee,
shall be applied to reimburse Lessee for its payment of such Stipulated Loss
Value and such other amounts, and the balance, if

                                       36


any, of such payments remaining thereafter shall be paid to Lessor; or (ii) if
such property has been replaced pursuant to the provisions hereof, after
reimbursement of Lessor for reasonable costs and expenses, such payments shall
be paid over to, or retained by, Lessee, provided that Lessee shall have fully
performed or concurrently therewith, shall perform, its obligations under
Section 10.1 with respect to the Event of Loss.

       (b)    If such payments are received with respect to an Engine under
circumstances contemplated by Section 10.3 hereof, so much of such payments
remaining after reimbursement of Lessor for reasonable costs and expenses shall
be paid over to, or retained by, Lessee, provided that Lessee shall have fully
performed, or concurrently therewith shall perform, its obligations under
Section 10.2 with respect to the Event of Loss for which such payments are made.

       (c)    If a Notified Default has occurred and is continuing, all payments
shall be paid over to Lessor or held for the account of Lessor until such time
as the Event of Default has been cured.

       10.5.  REQUISITION FOR USE OF THE AIRCRAFT BY THE UNITED STATES
GOVERNMENT. In the event of the requisition for use of the Airframe and the
Engines or engines installed on the Airframe during the Term by the United
States government or any instrumentality or agency of any thereof which is
backed by the full faith and credit of the United States government, Lessee
shall promptly notify Lessor of such requisition, and all of Lessee's
obligations under this Lease with respect to the Aircraft shall continue to the
same extent as if such requisition had not occurred. All payments received by
Lessor or Lessee from such government for the use of such Airframe and Engines
or engines during the Term shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any sublessee) unless a Notified Default has occurred and is
continuing; and all payments received by Lessor or Lessee from such government
for the use of such Airframe and Engines or engines after the end of the Term
shall be paid over to, or retained by, Lessor.

       10.6.  REQUISITION FOR USE OF AN ENGINE BY THE UNITED STATES GOVERNMENT.
In the event of the requisition for use of an Engine (but not the Airframe) by
the United States government or any agency or instrumentality of any thereof
which is backed by the full faith and credit of the United States government,
Lessee shall replace such Engine hereunder by complying (or causing any
sublessee to comply) with the terms of Section 10.3 to the same extent as if an
Event of Loss had occurred with respect thereto, and, upon compliance with
Section 10.3 hereof, unless a Notified Default has occurred and is continuing
any payments received by Lessor or Lessee from such government with respect to
such requisition shall be paid over to, or retained by, Lessee.

       10.7.  REPAIRABLE DAMAGE; USE OF INSURANCE PROCEEDS. In the event of
repairable damage to the Aircraft or any of the Engines, or of any Event of Loss
with respect to an Engine when no Event of Loss has occurred with respect to the
Airframe, Lessor shall forthwith, provided that no Notified Default has occurred
and is continuing, either pay any insurance

                                       37


proceeds received by it to Lessee (or, if any Permitted Sublease is then in
effect, the sublessee) upon Lessee's furnishing evidence to Lessor that such
damage has been repaired in accordance with the provisions of this Lease or is
undergoing repair such that the condition of the Aircraft shall be at least
equivalent to its condition immediately prior to the event of damage as if such
event had not occurred, or, in the case of an Event of Loss with respect to an
Engine when no Event of Loss has occurred with respect to the Airframe equipped
with such Engine, utilize the relevant insurance proceeds in the purchase of a
Replacement Engine (or to reimburse Lessee for amounts paid by Lessee to
purchase a Replacement Engine, as the case may be).

SECTION 11. INSURANCE.

    11.1.  INSURANCE REQUIREMENTS. On or before the Delivery Date and throughout
the Term, Lessee shall, without cost or expense to Lessor, obtain, maintain and
keep in full force and effect the following insurance coverage with respect to
the Aircraft, carried with insurers of recognized responsibility acceptable to
Lessor:

    (a)    All-risk aircraft hull, ground, taxiing and flight insurance on the
Aircraft and all-risk coverage of Engines and Parts while temporarily removed
from the Aircraft and not replaced by similar components, in an amount not less
than the Stipulated Loss Value in effect from time to time. Such hull insurance
shall cover Engines or engines and Parts temporarily removed from the Airframes
and any engines or parts temporarily installed on the Airframes in an aggregate
amount not less than their replacement cost.

    (b)    In the event that the Aircraft is operated outside the United States
or Canada, war risk and allied perils insurance on the Aircraft in an amount not
less than the Stipulated Loss Value in effect from time to time and covering the
perils of:

           (i)     war, invasion, acts of foreign enemies, hostilities (whether
    or not war is declared), civil war, rebellion, revolution, insurrection,
    martial law, military or usurped power, or attempts at usurpation of power;

           (ii)    strikes, riots, civil commotions or labor disturbances;

           (iii)   any act of one or more persons, whether or not agents of a
    sovereign power, for political or terrorist purposes and whether the loss or
    damage therefrom is accidental or intentional;

           (iv)    any malicious act or act of sabotage;

           (v)     confiscation, nationalization, seizure, restraint, detention,
    appropriation, requisition of title or use by or under the order of any
    government (whether civil, military or de facto) or public or local
    authority, including the government or any public or local authority of the
    country where the Aircraft is registered or based; and

                                       38


           (vi)    hijacking or any unlawful seizure or wrongful seizure or
    wrongful exercise of control of the Aircraft or crew in flight (including
    any attempt at such seizure or control) made by any person or persons on
    board the Aircraft acting without the consent of Lessee.

    (c)    Comprehensive aircraft and general liability insurance for a combined
single limit of not less than $300,000,000 per occurrence, which shall include
public liability insurance, passenger legal liability insurance, bodily injury
liability insurance, general third party liability insurance (including products
legal liability, but excluding manufacturer's product liability insurance),
cargo liability insurance and property damage liability insurance.

    11.2   ADDITIONAL REQUIREMENTS; LOSS PAYMENT. The insurance required under
Section 11.1 shall be provided on an agreed-value basis, and the policies shall:

           (a)     with respect to all-risk hull, ground, taxiing, and war risk
    and allied perils insurance, name Lessor as sole loss payee and, with
    respect to aircraft and general liability insurance, name Lessor, Owner
    Participant, their respective Affiliates and successors, and their
    respective directors, officers, employees, servants and agents as additional
    insureds (the "Additional Insureds");

           (b)     provide that the insurance shall not be invalidated by any
    action or inaction by Lessee or any Person and shall insure the interests of
    Lessor and the Additional Insureds regardless of any breach or violation by
    Lessee or any Person of any warranty, declaration or condition contained in
    such policies;

           (c)     provide that the insurers shall waive any right of
    subrogation against each Additional Insured (and, if any Permitted Sublease
    shall then be in effect, Lessee in its capacity as sublessor under such
    Permitted Sublease);

           (d)     provide that the liability of the insurers shall not be
    affected by any other insurance which may be available to or carried by any
    Additional Insured (or Lessee in its capacity as sublessor under any
    Permitted Sublease that shall then be in effect) so as to reduce the amount
    payable to Lessor or an Additional Insured;

           (e)     extend to the indemnification provided in Section 12.1
    hereof, to the extent that such indemnification is insurable under Lessee's
    liability policy;

           (f)     be of the type usually carried for aircraft similar to the
    Aircraft and covering risks of the kind customarily insured against by
    commercial airline companies that are engaged in the same type of scheduled
    airline business in the United States as Lessee;

           (g)     be primary and without right of contribution from other
    insurance which may be available to or carried by any Additional Insured (or
    by Lessee in its capacity as sublessor);

                                       39


           (h)      provide that Lessor shall have no liability for premiums,
    commissions, calls or assessments with respect to such policies;

           (i)     provide in the case of the insurance required by Sections
    11.1(a)-(b) that (A) so long as no Notified Default has occurred and is
    continuing, if the amount of proceeds is less than Five Hundred Thousand
    ($500,000), such proceeds shall be payable to Lessee (or, if a Permitted
    Sublease is then in effect, the sublessee); and (B) if the amount of
    proceeds equals or exceeds Five Hundred Thousand Dollars ($500,000) or the
    proceeds are in respect of an Event of Loss with respect to the Airframe,
    such proceeds shall be payable to Lessor; and (C) if a Notified Default has
    occurred and is continuing, any loss, regardless of the amount, shall be
    payable to Lessor and held by Lessor for so long as such Notified Default is
    continuing, as security for the obligations of Lessee hereunder;

           (j)     provide that if the insurers cancel such insurance, or any
    part thereof, or any such insurance lapses for any reason whatsoever, or if
    any material change is made in such insurance which adversely affects the
    interests of Lessor, such cancellation or change shall not be effective as
    to Lessor for thirty (30) days (seven (7) days, in the case of war risk and
    allied perils coverage) after receipt by Lessor of written notice by such
    insurers;

           (k)     expressly provide that all of the provisions thereof, except
    the limits of liability, shall operate in the same manner as if a separate
    policy covered each insured;

           (l)     include a United States service of suit clause with respect
    to insurers not domiciled within the United States;

           (m)     be effective with respect to both domestic and international
    operations; and

           (n)     contain a waiver of any right of the insurers to any set-off
    or counterclaim or any other deduction (whether by attachment or otherwise)
    in respect of any liability of or against Lessee or Lessor (including for
    the payment of premiums);

           (o)     in the case of war risk and allied perils insurance, contain
    a "50-50 provision" endorsement that provides that where a loss occurs and
    it is not clear whether the loss is covered under the hull or war-risk
    coverage, the underwriters of each policy shall each fund 50% of the
    adjusted loss until such time as the cause of the loss is determined; and

           (p)     provide that all losses in excess of $500,000 shall be
    adjusted by Lessor. Lessor shall keep Lessee fully informed of, and shall
    consult in good faith with Lessee regarding, all matters and developments
    relating to any such adjustment.

                                       40


    11.3.  APPLICATION OF HULL INSURANCE PROCEEDS. As between Lessor and Lessee,
any payments received by Lessor under policies of insurance required to be
maintained by Lessee pursuant to Sections 11.1(a) or (b), shall, except as
provided in Section 11.2(i), be applied as follows provided no Notified Default
has occurred and is continuing (for so long as a Notified Default has occurred
and is continuing, all payments shall be held by Lessor as security for Lessee's
obligations under this Lease and if Lessor has exercised its remedies pursuant
to Section 15 hereof, applied against Lessee's obligations hereunder):

           (a)     If such payments are received by Lessor with respect to loss
    or damage (including an Event of Loss with respect to an Engine) not
    constituting an Event of Loss with respect to an Airframe, so much of such
    payments remaining after reimbursement of Lessor for reasonable costs and
    expenses shall be paid over to Lessee upon Lessee's performance of its
    repair or replacement obligations under this Lease pursuant to Section 10.7
    hereof.

           (b)     If such payments are received by Lessor with respect to an
    Event of Loss with respect to the Airframe, so much of such payments
    remaining after reimbursement of Lessor for reasonable costs and expenses as
    shall not exceed the Stipulated Loss Value shall be applied in reduction of
    Lessee's obligation to pay such amount to the extent not already paid by
    Lessee, and to reimburse Lessee to the extent it shall have paid all or part
    of such amount, and the balance, if any, of such payments shall be paid over
    to Lessee.

           (c)     Notwithstanding the foregoing, if such payments are received
    with respect to the Airframe or the Airframe and Engines or engines
    installed on such Airframe and the Airframe has been or is being replaced by
    Lessee, so much of such payments remaining after reimbursement of Lessor for
    reasonable costs and expenses shall be paid over to Lessor, and upon
    completion of (or, if requested by Lessee, simultaneously with) such
    replacement be paid over to Lessee.

    11.4.  INSURANCE FOR OWN ACCOUNT. Nothing in this Section 11 shall prohibit
Lessor from obtaining insurance for its own account and any proceeds payable
thereunder shall be payable as provided in the insurance policy relating
thereto, provided that no such insurance may be obtained that would limit or
otherwise adversely affect the coverage or payment of any insurance required to
be obtained or maintained pursuant to this Section 11.

    11.5.  REPORTS. Lessee shall furnish or cause to be furnished to Lessor not
later than the Delivery Date and at least annually thereafter on or before the
renewal dates of Lessee's (or, if any Permitted Sublease is then in effect, the
sublessee's) relevant insurance policies, a report signed by Lessee's (or, if
any Permitted Sublease is then in effect, the sublessee's) independent firm of
insurance brokers reasonably satisfactory to Lessor stating the opinion of such
firm that the insurance coverage then carried and maintained on the Aircraft
complies with the terms hereof and describing in reasonable detail the insurance
coverage then carried and maintained with respect to the Aircraft, including,
without limitation, a list of insurers, the quota share (if more than one
insurer) for each insurer, the policy numbers, and the policy expiration dates.

                                       41


Lessee shall (and shall cause any sublessee to) during the Term furnish to
Lessor evidence of renewal of the insurance policies required pursuant to this
Section 11 prior to the cancellation, lapse or expiration of such insurance
policies. Lessee shall cause its insurance brokers to undertake to advise Lessor
in writing promptly of any default in the payment of any premium and of any
other act or omission on the part of Lessee of which they have knowledge which
would in such firm's opinion invalidate or render unenforceable, in whole or in
any material part, any insurance on the Aircraft. Lessee shall also cause the
insurer to advise Lessor in writing at least 30 days prior to the termination or
cancellation of, or material adverse change in, such insurance carried and
maintained on the Aircraft pursuant to Section 11.1. In the event that Lessee
(or, if any Permitted Sublease is in effect, the sublessee) fails to maintain or
cause to be maintained insurance as herein provided, Lessor may at its sole
option, but shall be under no duty to, provide such insurance and, in such
event, Lessee shall, upon demand, reimburse Lessor, as Supplemental Rent, for
the cost thereof; provided, however, that no exercise by Lessor of such option
shall affect the provisions of this Lease, including the provisions that failure
by Lessee to maintain the required insurance shall constitute an Event of
Default.

    11.6.  SELF-INSURANCE; DEDUCTIBLES. Lessee shall have the right to
self-insure by way of deductible, premium adjustment or otherwise, but in no
case shall the aggregate amount of self-insurance with respect to all of the
aircraft in the Lessee's fleet (including, without limitation, the Aircraft)
exceed during any policy year the lesser of (i) [*] of the highest replacement
value of any one aircraft in the Lessee's fleet or (ii) [*], increased by
any increase in the Consumer Price Index - All Urban Consumers - U.S. All Items
from the date hereof through the date of determination, using the base year
immediately preceding the Delivery Date. In no case shall the amount of
self-insurance (including deductibles) during any policy year with respect to
the Aircraft exceed [*] unless Lessee provides a report from an independent
firm of insurance brokers reasonably satisfactory to Lessor confirming that any
higher deductible amount maintained by Lessee does not exceed the amount
maintained by similar U.S. airlines operating similar equipment under a program
applicable to all aircraft in Lessee's fleet; provided that in such case there
shall be no other self-insurance with respect to the Aircraft other than such
deductible.

SECTION 12.  INDEMNITIES.

    12.1   GENERAL INDEMNIFICATION.

    (a)    Lessee hereby assumes liability for, and does hereby agree, and shall
require any sublessee or assignee to agree, to indemnify, protect, save, defend,
and hold harmless the Indemnitees from and against any and all obligations,
fees, liabilities, losses, damages, claims, demands, actions, suits, judgments,
costs and expenses, including reasonable legal expenses of every kind and nature
whatsoever and whether or not indemnified by any other Person (collectively,
"Expenses") imposed on, incurred or suffered by, or asserted against any
Indemnitee, in any way relating to, based on or arising out of:

                                       42

- --------------------
* Confidential


           (i)     the Operative Documents and any other document entered into
    in connection with this Lease or any sublease or transfer or any
    transactions contemplated hereby or thereby;

           (ii)    the ordering, purchase, documentation, importation,
    exportation, acceptance or rejection, manufacture, construction, design,
    condition, modification, airworthiness, alteration, registration, fitness
    for use, merchantability, ownership, improvement, insuring, titling or
    retitling, registration or re-registration, licensing, financing,
    refinancing, delivery, non-delivery, control, transportation, testing,
    overhaul, repair, imposition of any Lien, leasing, re-leasing, possession,
    use, operation, maintenance, location, storage, removal, replacement,
    return, sale, abandonment, any transfer of any kind or other disposition of
    the Aircraft, or any portion thereof (including the Airframe and each Engine
    or any engine used with the Airframe), or otherwise in connection with or
    with respect to the transactions contemplated by the Operative Documents,
    whether or not such ordering, purchase, documentation, importation,
    exportation, acceptance or rejection, manufacture, construction, design,
    condition, modification, airworthiness, alteration, registration, fitness
    for use, merchantability, ownership, improving, insuring, titling or
    retitling, registration or re-registration, licensing, financing,
    refinancing, delivery, non-delivery, control, transportation, testing,
    overhaul, repair, imposition of any Lien, leasing, re-leasing, possession,
    use, operation, maintenance, location, storage, removal, replacement,
    return, sale, abandonment, any transfer of any kind or other disposition is
    in compliance with the terms of the Operative Documents, including, without
    limitation, any of such as may arise from (i) loss or damage, loss or harm
    to any property or death of or injury to any Person, (ii) patent or latent
    defects in the Aircraft or any portion thereof (whether or not
    discoverable), (iii) any claims based on strict liability in tort or
    otherwise, (iv) any claims based on patent, trademark or copyright
    infringement, and (v) any claims based on liability arising under any
    applicable environmental or noise or pollution control law or regulation;

           (iii)   any breach or failure on the part of Lessee or any sublessee
    to perform, observe or comply with any of the terms of the Operative
    Documents, or the falsity or inaccuracy of any representation or warranty of
    Lessee under the Operative Documents or any other instrument or agreement
    executed in connection with this Lease which falsity has a material and
    adverse effect on the Indemnitee;

           (iv)    the enforcement by Lessor of the terms of the Operative
    Documents; or

           (v)     the ongoing trustee fees of Lessor during the Term.

    (b)    Lessee agrees that any payment or indemnity pursuant to this Section
12.1 in respect of any Expenses shall be in an amount which, after deduction of
all Taxes required to be paid by the recipient with respect to such payment or
indemnity under the laws of any federal, state or local government or taxing
authority in the United States, or under the laws of any taxing authority or
governmental subdivision of a foreign country, or any territory or possession of
the

                                       43


United States or any international authority, shall be equal to the amount of
such Expense. If any Indemnitee shall actually realize a tax savings by reason
of any Tax paid or indemnified by Lessee pursuant to this Section 12.1(b) and
such savings is not otherwise taken into account in computing such payment or
indemnity, such Indemnitee shall pay to Lessee an amount equal to the lesser of
(i) the amount of such tax savings realized, or (ii) the amount of all payments
pursuant to Section 12.1(a) by Lessee to such Indemnitee (less any payments
previously made by such Indemnitee to Lessee pursuant to this Section 12.1(b)).

    (c)    Lessee shall give each Indemnitee prompt notice of any occurrence,
event or condition known to Lessee as a consequence of which any Indemnitee may
be entitled to indemnification hereunder. Lessee shall forthwith upon demand of
any such Indemnitee reimburse such Indemnitee for reasonable expenses actually
incurred by it in connection with any of the foregoing or pay such amounts
directly.

    (d)    Lessee shall be subrogated to an Indemnitee's rights in any matter
with respect to which Lessee has actually reimbursed such Indemnitee for amounts
expended by it or has actually paid such amounts directly pursuant to this
Section 12.1 (other than any claim against another Indemnitee or against any
insurance maintained by an Indemnitee).

    (e)    In case any action, suit or proceeding is brought against any
Indemnitee in connection with any Expense indemnified against hereunder, such
Indemnitee shall, promptly after receipt of notice of the commencement of such
action, suit or proceeding, notify Lessee thereof, enclosing a copy of all
papers served upon such Indemnitee; provided that the failure to provide such
notice shall not release Lessee from any of its obligations to indemnify
hereunder, except to the extent that such failure precludes Lessee's ability to
defend or resist such action. Lessee may, provided that Lessee has acknowledged
in writing its responsibility for such Expense hereunder, and upon such
Indemnitee's request shall, at Lessee's expense, resist and defend such action,
suit or proceeding, or cause the same to be resisted or defended by counsel
selected by Lessee and reasonably satisfactory to such Indemnitee and in the
event of any failure by Lessee to do so, Lessee shall pay all costs and expenses
(including, without limitation, reasonable legal expenses, including but not
limited to attorney's fees and expenses) incurred by such Indemnitee in
connection with such action, suit or proceeding. Notwithstanding the foregoing,
Lessee shall not be entitled to assume responsibility for or participate in or
be consulted with respect to any action, suit or proceeding if (i) such
proceeding will involve a material risk of the sale, forfeiture or loss of, or
creation of any Lien on, the Aircraft or any part thereof unless in such event
Lessee shall have posted a bond or other security reasonably satisfactory to the
affected Indemnitees in respect of such risk, or (ii) such action, suit or
proceeding could, in the good faith opinion of the Indemnitee, entail any risk
of criminal liability, or (iii) in the written opinion of counsel to the
Indemnitee, an actual or potential conflict of interest exists and it is
advisable for such Indemnitee and Lessee to be represented by separate counsel.
In all cases in which Lessee is entitled to and has assumed the defense of a
claim, the Indemnitee may participate at its own expense with its own counsel in
any action, suit or proceeding defended by counsel selected by Lessee pursuant
to the preceding provisions.

                                       44


    (f)    Provided that no Event of Default has occurred and is continuing, no
Indemnitee shall enter into a settlement or other compromise with respect to any
Expense without the prior written consent of Lessee so long as (i) Lessee has
agreed in a writing acceptable to such Indemnitee that Lessee is liable to such
Indemnitee for such Expense hereunder, and (ii) Lessee has provided such
evidence, certifications and assurances as such Indemnitee may reasonably
request that Lessee has the ability to promptly pay any such Expense in full.

    (g)    Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.

    (h)    The obligations of Lessee under this Section 12.1 shall survive the
expiration or earlier termination of this Lease.

    12.2.  EXCEPTIONS TO GENERAL INDEMNIFICATION. The indemnity provided for in
Section 12.1 shall not extend to Expenses of an Indemnitee arising out of or
resulting from, or which would not have been incurred but for, one or more of
the following:

               (i)    the inaccuracy or breach of any representation or warranty
           made by Lessor or the failure of Lessor to perform its obligations
           under this Lease;

               (ii)   the gross negligence or willful misconduct of such
           Indemnitee (other than gross negligence or willful misconduct imputed
           to such Indemnitee by reason of its interest in the Aircraft);

               (iii)  a voluntary disposition by Lessor of all or any part of
           its interest in the Aircraft, the Airframe or any Engine or Part or
           in this Lease other than any such disposition occurring after an
           Event of Default or a Default under Section 14(a)(v) has occurred and
           is continuing;

               (iv)   acts or events that occurred or failed to occur after the
           expiration of the Term and the return of possession of the Aircraft
           to Lessor in accordance with the terms of this Lease;

               (v)    the failure of any Indemnitee to comply with any covenant,
           or the breach of any covenant made by an Indemnitee;

               (vi)   expenses which relate to a Lessor Lien;

               (vii)  any Taxes, it being understood that Lessee's liability for
           Taxes (other than the gross-up provided in Section 12.1) of an
           Indemnitee shall be exclusively as set forth in Section 12.3 and the
           Tax Indemnity Agreement; or

                                       45


               (viii) costs or expenses which under the express terms of this
           Lease are required to be paid by Lessor or its transferees.

    12.3   GENERAL TAX INDEMNITY.

    (a)    Lessee agrees, and shall require any Permitted Sublessee or assignee
to agree, to pay, and indemnify, defend and hold harmless each Indemnitee from
any and all Tax, howsoever imposed, whether levied or imposed upon or asserted
against such Indemnitee, Lessee, the Aircraft, the Airframe or any Engine or
Part by any federal, state or local government or taxing authority in the United
States, or by any taxing authority, foreign government or governmental
subdivision of a foreign country, or by any territory or possession of the
United States or by any international authority, upon or with respect to (a) the
Aircraft, the Airframe or any Engine or Part or any part thereof or any contract
relating to the manufacture, construction, acquisition or delivery thereof, (b)
the manufacture, construction, ordering, purchase, ownership, improvement,
location, storage, transportation, delivery, re-delivery, non-delivery,
acceptance, rejection, operation, leasing, re-leasing, possession, control, use,
maintenance, replacement, repair, rebuilding, modification, insuring,
registration, re-registration, de-registration, titling, licensing, inspection,
financing, refinancing, documentation, importation, exportation, transfer of
title, transfer of registration, imposition of any Lien (or the occurrence of
any liability to refund or pay over any amount as a result of a Lien), return,
abandonment, sale or other application or disposition thereof, (c) the rentals,
receipts or earnings arising from the Aircraft, the Airframe or any Engine or
Part, (d) the Operative Documents, including this Lease and the Lease Supplement
and amendments and supplements hereto and thereto which have been approved by
Lessee or the execution, delivery or performance of any thereof or the issuance,
acquisition, holding or subsequent transfer thereof, (e) any amount paid or
payable pursuant to this Lease or any document related hereto or the property or
the income or other proceeds with respect to the Aircraft, or upon the Rent
payable by Lessee hereunder, or (f) otherwise with respect to or in connection
with the transactions contemplated by this Lease. Lessee further agrees that any
payment or indemnity pursuant to this Section 12.3 in respect of any Tax shall
be in an amount which, after deduction of all Taxes required to be paid by such
recipient with respect to such payment or indemnity under the laws of any
federal, state or local government or taxing authority in the United States, or
under the laws of any taxing authority, foreign government or governmental
subdivision of a foreign country, or any territory or possession of the United
States or any international authority, shall be sufficient to hold such
recipient of the payment or indemnity harmless on an after-tax basis; provided,
however, the amount of such additional payment or indemnity shall be reduced by
the net reduction in Tax, if any, that may be realized by such recipient by
reason of the payment or indemnity. For purposes of the foregoing, it shall be
assumed that each Indemnitee is subject to tax at the highest marginal rate
imposed on or measured by the income of corporations in each applicable taxing
jurisdiction. With respect to any Tax in the nature of a withholding tax, Lessee
shall comply with the requirements set forth in Section 12.10 hereof. All of the
indemnities contained in this Section 12.3 shall continue in full force and
effect notwithstanding the expiration or other termination of the Term.

                                       46


    12.4.  EXCLUSIONS FROM GENERAL TAX INDEMNITY. The indemnity provided for in
Section 12.3 above shall not extend or apply to any circumstance described in
any one or more of the following provisions:

               (a) any Income Tax imposed on an Indemnitee by (i) the United
           States federal government, (ii) any state or local government, (iii)
           any foreign government or any political subdivision or taxing
           authority thereof, (iv) any territory or possession of the United
           States, or (v) any international authority; provided, however, that
           such exclusion shall not apply to any Income Tax to the extent that
           such Income Tax (A) is imposed by any jurisdiction in which such
           Indemnitee would not be subject to Income Tax but for or as a result
           of (I) the operation, registration, location, presence, rental or use
           of the Aircraft, the Airframe, any Engine or any Part thereof, or
           (II) the place of organization or principal office or the activities
           of Lessee or any sublessee in such jurisdiction, and (B) exceeds the
           amount of Income Tax for which the Indemnitee would otherwise have
           been actually liable in the absence of the circumstances referred to
           in (I) and (II).

               (b) any Tax imposed on or with respect to an Indemnitee resulting
           from any voluntary transfer by such Indemnitee of any interest in the
           Aircraft, the Airframe, any Engine or any Part in a transaction, or
           any involuntary transfer of the Aircraft, the Airframe or any Engine
           or any Part in connection with any bankruptcy or similar proceeding
           for the relief of debtors in which such Indemnitee is the debtor or
           any foreclosure by a creditor of such Indemnitee with respect
           thereto, other than a transfer while an Event of Default or a Default
           under Section 14(a)(v) has occurred and is continuing;

               (c) any Tax imposed on or with respect to an Indemnitee resulting
           from such Indemnitee's gross negligence or willful misconduct.

               (d) any Tax attributable to the Aircraft that is imposed with
           respect to any period after the expiration of the Term and the return
           of possession of the Aircraft to Lessor in accordance with the terms
           of this Lease if no Event of Default is existing at the time of
           return;

               (e) any Tax imposed on or with respect to an assignee or
           successor of the interest of an Indemnitee to the extent that such
           Tax would not have been imposed on or with respect to the assignor
           Indemnitee;

               (f) Taxes imposed on the Owner Participant and indemnified under
           the Tax Indemnity Agreement;

                                       47


               (g) any Taxes that would not be incurred but for the failure of
           an Indemnitee to exercise its contest rights as and to the extent
           required hereunder; or

               (h) the failure of any Indemnitee to file proper and timely
           reports or returns or to pay any taxes when due or to claim an
           applicable exemption, unless such failure is attributable to the
           failure of Lessee to provide all information required to be provided
           under the Lease.

    12.5.  CONTESTS. If a taxing authority makes a written claim against an
Indemnitee for any Tax with respect to which Lessee is required to indemnify
hereunder, such Indemnitee shall promptly give Lessee written notice of such
claim. An Indemnitee's failure to provide such notice to Lessee shall not
diminish Lessee's obligations or such Indemnitee's rights hereunder except to
the extent that such failure precludes Lessee's and such Indemnitee's ability to
contest such Tax. If Lessee promptly (and, in any event, within 15 days of
receipt of notice from the Indemnitee) requests the Indemnitee to do so, the
Indemnitee shall, at Lessee's expense, contest (or, at the Indemnitee's option,
require Lessee to contest in Lessee's name, if permitted by law) the validity,
applicability or amount of any such Tax. The Indemnitee shall determine in its
sole discretion the forum in which the contest of such Tax shall be pursued and
whether such contest shall be by (i) resisting payment thereof, if lawful and
practicable, (ii) not paying the same except under protest, if protest is
necessary or advisable and proper, or (iii) if the payment is made, using
reasonable efforts to obtain a refund thereof in appropriate administrative and
judicial proceedings. If the Indemnitee determines that such contest shall be by
the manner described in either of clauses (ii) or (iii) above, Lessee shall
advance sufficient funds on an after-tax, interest-free basis to the Indemnitee
to make the payment required. If an Indemnitee contests the validity,
applicability or amount of any Tax hereunder, Lessee shall have the right to
participate in such contest at its own expense, including the right to attend
governmental or judicial conferences concerning such claim for Tax and the right
to review and advise the Indemnitee as to all material written submissions to
any governmental or other authority relating to the Tax for which
indemnification is sought. Notwithstanding the foregoing, the Indemnitee shall
only be required to contest (and Lessee shall only be permitted to contest) any
Tax if (A) independent tax counsel selected by the Indemnitee is of the opinion
that there is a reasonable basis for contesting the matter in question; (B)
Lessee has acknowledged in writing its liability to indemnify the Indemnitee
with respect to the Tax in question; (C) Lessee shall pay (and shall acknowledge
in writing Lessee's liability to pay) the Indemnitee on demand for all
reasonable costs and expenses incurred by such Indemnitee in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees (including fees associated with the
Indemnitee's consultation with independent tax counsel as described herein),
disbursements, penalties, interest and additions to tax); (D) the issue shall
not be the same as an issue previously contested hereunder and decided adversely
unless independent tax counsel selected by the Indemnitee is of the opinion that
the applicable law has changed, and (E) the amount of Tax at issue exceeds
$25,000. The Indemnitee shall not be required to appeal any judicial decision
unless it receives an opinion of independent counsel selected by such Indemnitee
to the effect that it is more likely than not that such appeal would be

                                       48


successful. Under no circumstances shall the Indemnitee be required to appeal a
decision to or request a hearing by the United States Supreme Court. Nothing in
this Section 12.5 shall require any Indemnitee to contest, or permit Lessee to
contest, a claim with respect to the imposition of any Tax if such Indemnitee
shall waive its right to indemnification under Section 12.3 with respect to such
claim.

    12.6.  SETTLEMENTS. If, in the course of exercising its contest rights on
Lessee's behalf, an Indemnitee learns that a taxing authority asserting a claim
for which indemnity is sought hereunder is willing to agree to a settlement of a
claim, such Indemnitee shall notify Lessee of such settlement proposal
("Settlement Proposal"). If the Settlement Proposal is acceptable to Lessee,
Lessee shall so notify such Indemnitee, provided that an Indemnitee shall not be
obligated to agree to the Settlement Proposal if such Indemnitee releases Lessee
from any additional obligations pursuant to Section 12.3 with respect to such
tax claim and agrees that the amount of any indemnity payment under this Section
12.3 in respect of such tax claim which Lessee shall be required to pay to such
Indemnitee shall not exceed the amount of such indemnity payment that would have
been required if such Indemnitee had agreed to the Settlement Proposal. If
Lessee declines the Settlement Proposal, Lessee shall notify Indemnitee in
writing of the amount for which Lessee would be reasonably willing to settle
such claim ("Lessee's Settlement Proposal"), and Indemnitee shall notify the
taxing authority of Lessee's Settlement Proposal. If the taxing authority does
not accept Lessee's Settlement Proposal, Indemnitee shall have the option of (i)
rejecting the Settlement Proposal, (ii) requiring Lessee to assume full
responsibility for the tax claim, or (iii) accepting the Settlement Proposal. In
the case of the Lessee's acceptance of the Settlement Proposal, the amount of
any indemnity payment determined under this Section 12.6 in respect of such tax
claim that Lessee shall be required to pay shall not exceed the amount for which
Lessee would have been willing to settle such tax claim.

    12.7.  REPORTS. Lessee shall promptly notify Indemnitee of all reports or
returns required to be made with respect to any Tax with respect to which Lessee
is required to indemnify hereunder (provided, however, that this shall not be
deemed to require Lessee to file Indemnitee's Income Tax returns), and will
provide Indemnitee with all information necessary for the making and timely
filing of such reports or returns by Indemnitee. If Indemnitee requests that any
such reports or returns be prepared and filed by Lessee, Lessee shall prepare
and file the same, if permitted by applicable law to do so, and if not so
permitted, Lessee shall prepare such reports or returns for signature by Lessor,
and shall forward the same, together with immediately available funds for
payment of any Tax due, at least five Business Days in advance of the date such
payment is to be made, unless payment of such Tax is being resisted in
accordance with the provisions of Section 12.5.

    12.8.  PAYMENT. Lessee shall pay any Tax directly to the appropriate taxing
authority if legally permissible, unless such Tax is being contested or resisted
in accordance with the provisions of Section 12.5, and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within five Business Days of such demand, but in no event shall any
such payments be made less than three Business Days prior to the date the Tax to

                                       49


which any such payment hereunder relates is due (unless Lessee has not received
such demand at least 15 Business Days prior to such date, in which case payment
shall be made within five Business Days after receipt of such demand), in
immediately available funds, unless such Tax is being resisted in accordance
with the provisions of Section 12.5. Any such demand for payment from an
Indemnitee shall specify in reasonable detail the payment and the facts upon
which the right to payment is based. Each Indemnitee shall promptly forward to
Lessee any correspondence, notice, bill or advice received by it concerning any
Tax indemnified against hereunder unless such correspondence, notice, bill or
advice also addresses issues unrelated to the transactions contemplated under
this Lease (in which case, the unrelated issues shall be redacted). As soon as
practicable after each payment by Lessee of any Tax indemnified against
hereunder, Lessee shall furnish the appropriate Indemnitee the original or a
certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment of such Tax as is reasonably acceptable to such Indemnitee.
Lessee shall also furnish promptly upon request such data as any Indemnitee may
reasonably require to enable such Indemnitee to comply with the requirements of
any taxing jurisdiction.

    12.9.  REFUNDS. Upon receipt by an Indemnitee of a refund of any amounts
paid by it in respect of any contested Tax which amounts were advanced to the
Indemnitee by Lessee or otherwise paid by Lessee, such Indemnitee shall pay to
Lessee the amount of such refund, together with any interest received by such
Indemnitee on such refund that is fairly attributable to the amount and the
period of such payment or advance by Lessee (net of any taxes payable with
respect to the receipt or accrual of such interest by such Indemnitee); and,
upon disallowance of any portion of such requested refund, Lessee shall forgive
the related amount advanced to such Indemnitee with respect to the contested
Tax, and such forgiveness shall be treated for purposes of this Agreement as a
payment pursuant to Section 12.2.

    12.10. WITHHOLDING. Subject in all respects to the exceptions set forth in
Section 12.4, if Lessee is required at any time to deduct or withhold any Tax
imposed by any taxing authority on any payment hereunder, Lessee shall
immediately pay to Lessor or other affected Indemnitee such additional amounts
(as Supplemental Rent) at such times as shall result in the net amount actually
received by the Lessor or such other Indemnitee being, after taking into account
(i) the amount of such deduction or withholding and (ii) the amount of any Tax
required to be paid by Lessor or such other Indemnitee by reason of any payments
made by Lessee pursuant to this Section 12.10, equal to the full amount which
would have been received by Lessor or such other Indemnitee had such deduction
or withholding not been made and such additional Tax imposed, and shall ensure
that the foregoing shall be free of expense to Lessor or such other Indemnitee
for collection or other charges and shall pay to the relevant taxing authority
within the period for payment permitted by applicable law the full amount of the
deduction or withholding.

    12.11. INTEREST. Lessee shall pay to each Indemnitee upon demand, to the
extent permitted by law, interest on the amount of any indemnity under this
Section 12 not paid when due at the Past Due Rate.

                                       50


    12.12. SURVIVAL. The provisions of this Section 12 shall survive
termination of this Lease.

SECTION 13. ASSIGNMENTS AND SUBLEASING.

    13.1.  BY LESSEE. Except as specifically permitted under this Lease, Lessee
shall not, without the prior written consent of Lessor, assign any of its rights
in, to or under this Lease or the Lease Supplement, or sublease or otherwise
transfer its interest in all or any part of the Aircraft and any assignment or
transfer not permitted hereunder shall be void AB INITIO. No assignment,
sublease or transfer shall in no way relieve Lessee from any obligation under
this Lease, which shall be and remain primary obligations of Lessee. The rights
of any sublessee under a Permitted Sublease shall be subject and subordinate to
all the terms of this Lease (and the Permitted Sublease shall expressly so
state). Each Permitted Sublease in excess of six (6) months by its term
(including any renewal rights) shall be assigned to Lessor. Notwithstanding the
foregoing, Lessee shall not sell all or substantially all of its assets or merge
or consolidate with any other Person, without the consent of the Lessor;
provided, however, that notwithstanding the foregoing, Lessee shall have the
right, without the consent of Lessor, to merge with any Person, provided that
(A) immediately after any such transaction, no Event of Default has occurred and
is continuing, and (B) such Person which is to be the transferee or surviving or
acquiring corporation in such transaction (i) shall be duly organized and
validly existing under the laws of the United States of America or a state
thereof, or the District of Columbia, and a "citizen of the United States" as
defined in 49 U.S.C. Section 40102(a)(15) of the Transportation Act, (ii) shall
be a U.S. Air Carrier, (iii) shall have (unless Lessee is the survivor), by
agreement in writing, which shall be in form and substance reasonably
satisfactory to Lessor, expressly assumed the due and punctual payment of the
Rent and other sums due and to become due under the Operative Documents and the
due and punctual performance and observance of all the covenants and provisions
of the Operative Documents, and (C) in all cases, the assignee or transferee of
Lessee's assets or the survivor of the merger or consolidation has a tangible
net worth at least equal to the greater of (x) Lessee's tangible net worth as of
the date hereof and (iii) Lessee's tangible net worth as of the date preceding
the sale, merger or consolidations.

    13.2.  PERMITTED SUBLEASES. After the earlier to occur of the tenth
anniversary of the Delivery Date or the termination of and failure to
immediately replace any code share agreement applicable to the Aircraft,
provided that no Notified Default has occurred and is continuing, Lessee may,
during the Basic Term, with the prior consent of Lessor, such consent not to be
unreasonably withheld or delayed, enter into a Permitted Sublease with respect
to the Aircraft to any Permitted Sublessee if:

    (a)    Lessee provides written notice to Lessor promptly after entering
into any such Permitted Sublease; and

                                       51


    (b)    Lessee shall include in such Permitted Sublease appropriate
provisions which (i) make such Permitted Sublease expressly subject and
subordinate to all of the terms of this Lease, including the rights of Lessor to
avoid such Permitted Sublease in the exercise of its rights to repossession of
the Airframe and Engines hereunder and thereunder; (ii) expressly prohibit any
further subleasing of the Airframe and Engines; (iii) require that the Airframe
and Engines be maintained in accordance with a Maintenance Program; (iv) limit
the term of such Permitted Sublease (including renewal rights) to a period not
beyond the end of the Term, unless Lessee has then irrevocably committed to
exercise a purchase or extension option in accordance with the terms hereof; (v)
require that the Airframe and Engines be used in accordance with the limitations
applicable to Lessee's possession and use provided in this Lease; (vi) shall
include provisions for the maintenance, operation, possession and inspection of
the Aircraft that are the same in all material respects as the applicable
provisions of this Lease; and (vii) require insurance coverage to be maintained
to at least the same extent as set forth in this Lease.

    13.3.  ASSIGNMENT BY LESSOR.

    (a)    Lessor may voluntarily, at any time, upon ten Business Days prior
written notice to Lessee, assign, sell or transfer, all, but not less than all
of its right, title and interest in, to and under the Aircraft, this Lease and
the Lease Supplement, to a single transferee either through assignment of its
beneficial interest or through the sale or other transfer of all or
substantially all of its assets or business, in either case only if the
transferee (i) is a "citizen of the United States" as defined in the
Transportation Code (or enters into a voting trust agreement , voting powers
agreement or other similar arrangement in form and substance reasonably
satisfactory to Lessee, it being agreed that the Trust Agreement is acceptable
to Lessee), (ii) has a net worth of not less than $20,000,000 (or provides a
guarantee of all of its obligations by an entity meeting such net worth
requirement), (iii) assumes the obligations of Lessor in the transaction, and
(iv) is not, without the written consent of Lessee, an airline or an Affiliate
thereof. The provision of this Section 13.3(a) shall not apply to any transfer
or assignment if an Event of Default or a Default under Section 14(a)(v) has
occurred and is continuing. Lessee agrees that upon any transfer pursuant to
this Section 13.3(a), the transferor thereupon shall be relieved of all its
obligations hereunder and the transferee shall succeed to all of Lessor's
rights, interests and obligations under this Lease as though the transferee had
been the Lessor hereunder.

    (b)    Lessor may encumber the Aircraft or this Lease or assign its
interest or any part thereof under this Lease to a lender as security for the
purpose of financing its interest in the Aircraft and Lease. Such assignee shall
not be required to perform any duty, covenant or condition required to be
performed by Lessor under this Lease.

    (c)    Any assignment or encumbrance by Lessor pursuant to this Section
13.3 shall be subject to Lessee's rights hereunder. Lessee shall be under no
obligation to any assignee except upon written notice of such assignment from
Lessor. Upon written notice to Lessee of such assignment, Lessee agrees to pay
Rent to the assignee in accordance with the instructions specified in such
notice, and to give all notices which are required or permitted to be given by
Lessee to Lessor hereunder to the Person(s) specified to receive the same in
such written notice

                                       52


of assignment, and to otherwise comply with all notices, directions and demands
which may be given by such assignee in accordance with the provisions of this
Lease. Unless an Event of Default or a Default under Section 14(a)(v) has
occurred and is continuing, Lessor shall pay all costs and expenses incurred in
connection with any such transfer, assignment or encumbrance, including those of
Lessee, unless such transfer, assignment or encumbrance is during the
continuation of an Event of Default or a Default under Section 14(a)(v). Lessee
agrees to cooperate in all reasonable respect in connection with Lessor's
transfer or assignment of the Aircraft and this Lease or any interest therein,
and agrees to promptly provide such acknowledgments, agreements, consents,
estoppels or other documents as reasonably requested by Lessor in connection
therewith and agrees to provide any information relating to the financial
condition or business or operations of Lessee and such other information as
Lessor may reasonably request.

SECTION 14.  EVENTS OF DEFAULT.

    (a)    Each of the following events shall separately constitute an Event of
Default (whether any such 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 or order of any court or any order, rule or regulation of any
administrative or governmental body), and each such Event of Default shall
continue for so long as, but only for so long as, it shall not have been
remedied:

           (i)    Lessee shall fail to make a payment of Basic Rent or
     Stipulated Loss Value within five days after the same shall have become
     due;

           (ii)   Lessee shall fail to make any other payment required hereunder
     or under any Operative Document executed by Lessee in respect hereof within
     ten days after written notice that such amount was not paid when due;

           (iii)  Lessee shall have failed to perform or observe (or caused to
     be performed and observed) in any material respect any other covenant or
     agreement hereunder or under the Lease Supplement, or in any other
     Operative Document or document or certificate furnished by Lessee in
     connection herewith or therewith or pursuant hereto or thereto (other than
     those expressly referenced in this Section 14(a) for which cure periods, if
     any, are set forth therein) and such failure shall continue unremedied for
     a period of thirty (30) days after written notice thereof by Lessor, unless
     such failure is not reasonably capable of being corrected within 30 days,
     in which case Lessee shall not be in default for so long as Lessee
     diligently commences and continues to diligently to correct such failure,
     provided that Lessee shall in all events be in default if Lessee does not
     remedy such failure within ninety (90) days after receipt of such notice;

                                       53


           (iv)   Any representation or warranty (other than tax representations
     in the Tax Indemnity Agreement) set forth herein or in any certificate or
     document furnished by Lessee shall prove to have been incorrect in any
     material respect when made;

           (v)    the commencement of an involuntary case or other proceeding in
     respect of Lessee (or, if a Permitted Sublease is then in effect, of the
     sublessee) under the federal bankruptcy laws, as now constituted or
     hereafter amended, or any other applicable federal or state bankruptcy,
     insolvency or other similar law in the United States, or seeking the
     appointment of a receiver, liquidator, assignee, custodian, trustee,
     sequestrator (or similar official) of Lessee (or, if a Permitted Sublease
     is then in effect, the sublessee) or for all or substantially all of its
     property, or seeking the winding-up or liquidation of its affairs and the
     continuation of any such case or other proceeding undismissed and unstayed
     for a period of 60 consecutive days, or an order, judgment or decree shall
     be entered in any proceeding by any court of competent jurisdiction
     appointing without Lessee's (or the sublessee's) consent, a receiver,
     trustee or liquidator of Lessee (or the sublessee) or for all or
     substantially all of its property, and any such order, judgment or decree
     shall remain in force and unvacated for a period of 60 consecutive days
     after the date of entry;

           (vi)   the commencement by Lessee (or, if a Permitted Sublease is
     then in effect, the sublessee) of a voluntary case or proceeding under the
     federal bankruptcy laws, as now constituted or hereafter amended, or any
     other applicable federal or state bankruptcy, insolvency or other similar
     law in the United States, or the filing of an answer or petition seeking
     reorganization in a proceeding under any such laws or the filing of an
     answer admitting the material allegations of a petition filed against
     Lessee (or sublessee) in any such proceeding or the consent by Lessee (or,
     if a Permitted Sublease is then in effect, the sublessee) to the
     appointment of or taking possession by a receiver, liquidator, assignee,
     trustee, custodian, sequestrator (or other similar official) of Lessee or
     for all or substantially all of its property, or the making by Lessee (or,
     if a Permitted Sublease is then in effect, the sublessee) of any assignment
     for the benefit of creditors or the taking of any corporate action by
     Lessee to authorize any of the foregoing or to authorize a general payment
     moratorium;

           (vii)  Lessee shall fail to procure, carry and maintain on or with
     respect to the Aircraft (or cause to be procured, carried and maintained)
     insurance required to be maintained in accordance with the provisions of
     Section 11 hereof;

           (viii) Lessee shall attempt to sell or alienate the Aircraft or any
     part thereof except in compliance with the provisions of this Lease; and

           (ix)   Lessee shall cease to be a Citizen of the United States or an
     "air carrier" within the meaning of Section 40102(a)(2) of the
     Transportation Act; and

           (x)    Lessee suspends all or substantially all of its commercial
     airline operations or the franchises, concessions, permits, rights or
     privileges required for the conduct of the

                                       54


     business and operations of Lessee are revoked, cancelled or otherwise
     terminated, or the free and continued use and exercise thereof is curtailed
     or prevented, and as a result thereof the preponderant business activity of
     Lessee ceases to be that of a commercial airline.

           (xi)   judgment for the payment of money in excess of $1,000,000 is
     rendered against Lessee and the same shall remain undischarged for a period
     of thirty (30) days during which execution of such judgment shall not be
     effectively stayed or an attachment or other Lien shall be issued against
     any of the property of Lessee for an amount in excess of $1,000,000 and
     shall remain undischarged or unbonded for thirty (30) days; and

           (xii)  Lessee shall be in default with respect to any indebtedness
     for borrowed money in an amount in excess of $1,000,000 or under any
     aircraft operating lease if the total unpaid amount payable thereunder
     exceeds $1,000,000, if the creditor or lessor thereunder causes the
     acceleration of such indebtedness or the termination of such aircraft
     operating lease.

SECTION 15. REMEDIES.

    15.1.  LESSOR'S REMEDIES. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default by written notice to Lessee;
provided, however, that this Lease shall be deemed to be declared in default
without the necessity of such written declaration upon the occurrence of any
Event of Default described in Section 14(v) or Section 14(vi); and at any time
thereafter, so long as any Event of Default shall not have been cured or
remedied, Lessor may do one or more of the following with respect to all or any
part of the Airframe and any or all of the Engines as Lessor in its sole
discretion shall elect, to the extent permitted by, and subject to compliance
with any mandatory requirements of, applicable law then in effect:

           (a) Lessor may, upon the written demand of Lessor and at Lessee's
    expense, cause Lessee to return promptly, and Lessee shall return promptly,
    all or such part of the Airframe or any Engine 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 8 as if the Airframe or
    Engine were being returned at the end of the Term, or Lessor (or Lessor's
    designee) may, at its option, enter upon the premises where all or any part
    of the Airframe or any Engine is located (or is believed to be located) and
    take immediate possession of and remove the same (together with any engine
    that is installed on the Airframe which is not an Engine, subject to the
    rights of any owner, lessor, lien holder or secured party of such engine)
    by summary proceedings or otherwise (and/or, at Lessor's option, store the
    same at Lessee's premises, at Lessee's cost and expense, until disposal
    thereof by Lessor);

                                       55


           (b) Lessor may sell all or any part of the Aircraft, the Airframe or
    any Engine at public or private sale and with or without advertisement or
    notice to Lessee or any sublessee, as Lessor in its sole discretion may
    determine, or otherwise dispose of, hold, use, operate, lease to others or
    keep idle all or any part of the Aircraft, the Airframe or any Engine as
    Lessor, in its sole discretion, may determine, all free and clear of any
    rights of Lessee or any sublessee and without any duty to account to Lessee
    or any sublessee with respect to such action or inaction, except as
    hereinafter set forth in this Section 15; and in the event of a sale in
    accordance with the foregoing, Lessor, Owner Participant or their
    Affiliates shall have the right to bid for and purchase such property;

           (c) In the event Lessor, pursuant to Section 15.1(b), shall have sold
    the Aircraft, Lessor may, if it shall so elect, demand that Lessee pay
    Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
    liquidated damages for loss of a bargain and not as a penalty, any unpaid
    Basic Rent and Supplemental Rent with respect to the Aircraft due on or
    prior to such date plus the amount of any deficiency between the net
    proceeds of such sale (after deduction of all reasonable costs of sale) and
    the Stipulated Loss Value of the Aircraft, computed as of the Rent Payment
    Date immediately following the date of such sale, together with interest,
    if any, on the amount of such deficiency, at the Past Due Rate, from the
    date of such sale to the date of actual payment of such amount;

           (d) In lieu of exercising its rights under Section 15.1(b) or (c)
    above, Lessor may, by notice to Lessee specifying a payment date not
    earlier than ten days or more than 30 days from the date of such notice,
    require Lessee to pay to Lessor, and Lessee hereby agrees that it will pay
    to Lessor, on the payment date specified in such notice, as liquidated
    damages for loss of a bargain, and not as a penalty, and in lieu of any
    further payments of Basic Rent hereunder, an amount equal to the sum of (i)
    all unpaid Basic Rent payable or that would have been payable on or before
    the date of payment specified in such notice and any Supplemental Rent then
    owing, plus (ii) an amount equal to the Stipulated Loss Value for the
    Aircraft computed as of the Rent Payment Date immediately following the
    date of payment specified in such notice, together with interest, if any,
    at the Past Due Rate on the amount of such Basic Rent and Stipulated Loss
    Value from the payment date specified in such notice until the date of
    actual payment; and upon such payment of liquidated damages and all other
    Rent then due and payable by Lessee hereunder, Lessor shall transfer
    (without any representation, recourse or warranty whatsoever other than as
    to the absence of Lessor Liens) the Aircraft to Lessee or as Lessee may
    direct, and Lessor shall execute and deliver such documents evidencing such
    transfer and take such further action as Lessee shall reasonably request;
    and

           (e) Lessor may rescind this Lease Agreement and/or may exercise any
    other right or remedy which may be available to it under applicable law or
    proceed by appropriate court action to enforce the terms hereof or to
    recover damages for breach hereof.

                                       56


    15.2.  CUMULATIVE REMEDIES. Except as otherwise expressly provided above, no
remedy referred to in this Section 15 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity, and the exercise or beginning
of exercise by Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Lessor of any or all of such other remedies.
No waiver by Lessor of any Event of Default shall in any way be, or be construed
to be, a waiver of any future or subsequent Event of Default.

SECTION 16. FURTHER ASSURANCES; INFORMATION.

    (a) On the Delivery Date, Lessee shall cause this Lease and the Lease
Supplement to be duly filed at the FAA. In addition, Lessee will promptly and
duly execute and deliver to Lessor and any assignee of Lessor permitted under
Section 13.3 hereof such other documents and assurances, and will take such
further actions as Lessor or any such assignee may from time to time reasonably
request in order to carry out more effectively the intent and purposes of this
Lease and to establish and protect the rights and remedies created or intended
to be created hereunder in favor of Lessor and any such assignee, including,
without limitation, if requested by Lessor, at the expense of Lessee, the
execution and delivery of supplements or amendments hereto, subjecting to this
Lease any airframe or engine substituted for an Airframe or any Engine, and the
recording or filing of counterparts thereof in accordance with the laws of such
jurisdictions as Lessor may from time to time reasonably deem advisable.

    (b) Lessee covenants to furnish to Lessor such information concerning the
business, assets and financial condition of Lessee as Lessor may reasonably
request and, without request, furnish to Lessor:

               (i)  within forty-five (45) days of the end of each fiscal
        quarter, Lessee's financial statements for such quarter and the fiscal
        year to date prepared in accordance with generally accepted accounting
        principles set forth in the opinions and pronouncements of the
        Accounting Principles Board of the American Institute of Certified
        Public Accountants and statements and pronouncements of the Financial
        Accounting Standards Board that are applicable to the circumstances as
        of the date of determination ("GAAP");

               (ii)  within ninety (90) days of the end of each fiscal year, a
        copy of the audited annual report and accompanying consolidated
        financial statements of Lessee prepared in accordance with GAAP,
        certified by Lessee's independent accountants, and accompanied by a
        certificate of a Responsible Officer to the effect that, after due
        investigation and inquiry, no Default has occurred and is continuing
        hereunder; and

                                       57


               (iii) as soon as possible after any Responsible Officer has
        knowledge of the occurrence of a Default, notice to Lessor thereof.

    SECTION 17. NOTICES. All notices and other communications required or
permitted under the terms and provisions hereof shall be by registered mail,
return receipt requested, or by nationally-recognized overnight courier service,
or by confirmed facsimile transmission, and any such notice shall become
effective when received, addressed:

if to Lessor, at: First Security Bank, National Association
                  79 South Main Street, Suite 300
                  Salt Lake City, Utah  84111
                  Attn: Brett King
                  Telephone: (801) 246-5819
                  Facsimile: (801) 246-5053

                  with copies to:
                  Transamerica Equipment Financial Services
                  Aircraft Finance Group
                  5080 Spectrum Drive, Suite 1100W
                  Addison, Texas  75001
                  Attn: General Counsel
                  Telephone: (972) 458-5999
                  Facsimile: (972) 458-5959

                  Transamerica Equipment Financial Services
                  Aircraft Finance Group
                  5080 Spectrum Drive, Suite 1100W
                  Addison, Texas 75001
                  Attn: Dave B. Fate
                  Telephone: (972) 458-5999
                  Facsimile: (972) 458-5959

or to such other address or facsimile number as Lessor shall from time to time
designate in writing to Lessee, and if to Lessee, at:

                  Chautauqua Airlines, Inc.
                  2500 S. High School Road
                  Indianapolis, Indiana 46241
                  Attn: President

                                       58


                  Telephone: (216) 328-8700
                  Facsimile: (216) 328-8710

                  with a copy to:
                  c/o Wexford Management LLC
                  411 West Putnam Avenue
                  Greenwich, Conn., 06830
                  Attn: Jay Maymudes and Arthur Amron
                  Telephone:  (203) 862-7050 (Jay Maymudes)
                              (203) 862-7012 (Arthur Amron)
                  Facsimile:  (203) 862-7350 (Jay Maymudes)
                              (203) 862-7312 (Arthur Amron)

or to such other address or facsimile number as Lessee shall from time to time
designate in writing to Lessor.

SECTION 18. NET LEASE, NO SET-OFF, COUNTERCLAIM, ETC. This is a triple-net
lease, and Lessee's obligations to pay all Rent payable hereunder and to pay all
costs and expenses of every kind in connection with the use, operation,
maintenance and repair of the Airframe and each Engine by Lessee shall be
absolute and unconditional and shall not be affected by or subject to any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, abatement, defense or other right which Lessee may have against
Lessor or anyone else for any reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions), (ii) any defect in
the title, registration, airworthiness, condition, design, operation, or fitness
for use of, or any damage to or loss or destruction of, the Aircraft, or any
interruption, interference or cessation in or prohibition of the use or
possession thereof by Lessee (or any sublessee) for any reason whatsoever,
including, without limitation, any such interruption, interference, cessation or
prohibition resulting from the act of any government authority, (iii) any
insolvency, bankruptcy, reorganization or similar case or proceedings by or
against Lessee (or any sublessee), Lessor or any other Person, (iv) the
invalidity or unenforceability or lack of due authorization of this Lease or any
instrument or document executed in connection herewith or therewith, or (v) any
other circumstance, happening, or event whatsoever, whether or not unforeseen or
similar to any of the foregoing. Lessee hereby waives, to the extent permitted
by applicable law, any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express terms
hereof. Each payment of Rent by Lessee shall be final, and Lessee shall not seek
to recover, abate, suspend, defer or reduce all or any part of such payment for
any reason whatsoever, other than any payments not required hereunder which were
made in error. Nothing in this Section 18 shall be construed to preclude Lessee
from bringing any suit at law or in equity which it would otherwise be entitled
to bring for breach of any representation, warranty, or covenant hereunder, or
as a waiver of or consent to any act or failure to act by any Person except as
otherwise expressly provided in this Lease.

                                       59


SECTION 19. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make any
payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, in either case,
after the expiration of any applicable notice and cure periods, Lessor may
itself make such payment or perform or comply with such agreement but shall not
be obligated hereunder to do so, and the amount of such payment and the amount
of the reasonable expenses of Lessor 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 Past Due Rate, shall be deemed
Supplemental Rent hereunder payable by Lessee to Lessor on demand. No such
payment or performance by Lessor shall be deemed to waive any Default or relieve
Lessee of its obligations hereunder.

SECTION 20. LESSOR ASSIGNMENT OF RIGHTS AND WARRANTIES. On the Delivery Date,
Lessor shall assign to Lessee for the duration of the Lease Term so long as no
Notified Default has occurred and is continuing, the benefit of all assignable
manufacturer's warranties with respect to the Aircraft as well as all manuals
and related services and documentation available to Lessor, and Lessor agrees to
use its reasonable efforts, at Lessee's expense and upon its written request, to
assist Lessee in enforcing such rights as Lessor may have with respect to the
warranties for the benefit of Lessee; provided, however, that upon notice from
Lessor to Lessee after the occurrence and during the continuation of (i) any
Notified Default, all amounts payable shall be paid to and held by Lessor, until
such time as such Notified Default is no longer continuing, and (ii) an Event of
Default, such assignments which are otherwise made available to Lessee shall
immediately upon notice by Lessor be deemed canceled and shall be deemed
reassigned to Lessor, including all claims thereunder, whether or not perfected.
At the expiration of the Term of this Lease (other than by reason of the
exercise by Lessee of its purchase option), the benefit of any assignment to
Lessee shall automatically and without further action by Lessor revert to Lessor
or its designee. Lessee shall at its own cost and expense do all such things and
execute all such documents as may be required for this purpose. Lessee shall
maintain all necessary records and take all necessary actions to qualify it for
claims, and shall diligently and promptly pursue any valid claims it may have
against the manufacturers with respect to the Aircraft and will provide notice
of same to Lessor. Lessee shall cooperate with Lessor, and shall furnish Lessor
with such documents, records and other information as Lessor shall reasonably
request in order to assist Lessor in pursuing any claim Lessor may have against
any manufacturer with respect to any warranty.

SECTION 21. MISCELLANEOUS. Any provision of this Lease that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision

                                       60


in any other jurisdiction. No term or provision of this Lease may be changed,
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by Lessor and Lessee. This Lease shall constitute an agreement of
lease, and nothing contained herein shall be construed as conveying to Lessee
any right, title or interest in the Aircraft other than as a lessee. Neither
Lessee nor any Affiliate of Lessee shall file any tax returns in a manner
inconsistent with the foregoing or with Lessor's ownership of the Aircraft, and
any Permitted Sublease shall require a similar undertaking by the Permitted
Sublessee thereunder. The section and paragraph headings in this Lease and the
table of contents are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof. This Lease 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.

SECTION 22. OPTIONS TO RENEW.

     22.1  RENEWAL OPTIONS. Lessee shall have two successive options to extend
the Term for a period of one year each, exercisable by written irrevocable
notice to Lessor not less than 180 days prior to the expiration of the
then-current Term, provided no Notified Default has occurred and is continuing
at the time of the notice and the commencement of the Renewal Term; provided,
however, that Lessee shall not have the right to extend the Term unless the term
of the Residual Value Guaranty also is extended for a corresponding period in a
manner reasonably acceptable to Lessor. The Basic Rent payable during each
Renewal Term under this Section 22.1 shall be equal to the Fair Market Rental
Value, and shall be paid in advance on the Rent Payment Dates.

     22.2  FAIR MARKET RENTAL VALUE. For the purposes of this Lease, the "Fair
Market Rental Value" of the Aircraft shall be the rent which would be payable in
an arm's length transaction between an informed and willing lessor under no
compulsion to lease and an informed and willing lessee under no compulsion to
lease, based upon the better of (i) the actual condition of the Aircraft, or
(ii) the condition of the Aircraft assuming that it is in the condition in which
it is required to be maintained and further assuming half-life condition. The
Fair Market Rental Value shall be determined by mutual written agreement or, in
the absence of mutual written agreement within 30 days following Lessee's
extension notice, pursuant to the appraisal procedure described in Section 23.3.

SECTION 23. PURCHASE OPTIONS.

     23.1  PURCHASE OPTIONS. Provided that no Notified Default has occurred and
is continuing on the date of purchase by Lessee, Lessee shall have the right to
purchase the Aircraft (i) upon the Purchase Option Date, for a purchase price
equal to the amount specified on

                                       61


Schedule I, (ii) upon termination of the Basic Term, for a purchase price equal
to the then Fair Market Sales Value of the Aircraft (but under no circumstance
less than the Lease Support RVG Level set forth in the Residual Value Guaranty);
or (iii) at the end of any Renewal Term, for a purchase price equal to the then
Fair Market Sales Value of the Aircraft. Upon payment by Lessee of the purchase
price for the Aircraft and the Basic Rent or Renewal Rent, if any, payable
though the date of purchase, together with all Supplemental Rent then due and
payable hereunder, the Term shall end and the obligation of Lessee to pay Rent
hereunder (except for Supplemental Rent obligations otherwise accrued but unpaid
as of the date of such payment or which survive the Term of this Lease) shall
cease, and Lessor shall convey to Lessee all right, title and interest of Lessor
in and to the Aircraft on an "as-is, where is" basis, without recourse or
warranty except a warranty against Lessor's Liens.

     23.2  NOTICE. Lessee's right to purchase provided for Section 23.1 shall be
exercised by written notice to Lessor not less than 180 days before the
applicable date of purchase provided in Section 23.1(i), Section 23.1(ii) or
Section 23.1(iii), as the case may be. Such notice shall be irrevocable, except
that Lessee may revoke its exercise of an option to purchase the Aircraft within
15 days following the determination of the Fair Market Sales Value. In the event
that Lessee exercises its right of revocation, at the option of Lessor, the Term
of this Lease shall be extended to a date that is not earlier than 180 days
following the notice of revocation and Basic Rent during such extension period
shall be equal to 110% of the Basic Rent immediately prior to such extension.

     23.3  FAIR MARKET SALES VALUE. For the purposes of this Lease, the "Fair
Market Sales Value" of the Aircraft shall be the sales value which would be
obtained in an arm's-length transaction between an informed and willing
purchaser under no compulsion to purchase and an informed and willing seller
under no compulsion to sell, based upon the condition of the Aircraft (assuming
the Aircraft is in the condition in which it is required to be maintained and
further assuming half-life condition), which value shall be determined by mutual
written agreement or, in the absence of mutual written agreement within 30 days
following Lessee's option exercise notice, pursuant to an appraisal prepared and
delivered by a nationally recognized firm of independent aircraft appraisers
nominated by Lessor and approved by Lessee, and Lessor shall immediately notify
Lessee in writing of such nomination. The appraiser shall determine the Fair
Market Sales Value within seven Business Days, and its determination shall be
final and binding upon the parties. The cost of such appraisal or appointment
shall be borne by Lessee.

SECTION 24 VOLUNTARY TERMINATION FOR OBSOLESCENCE.

     24.1  RIGHT TO TERMINATE. So long as no Notified Default has occurred and
is continuing, Lessee shall have the right during the Basic Term on at least 180
days prior written notice, to terminate this Lease by written notice from its
Chief Financial Officer to Lessor to the effect that the Aircraft has become
obsolete or surplus to Lessee's equipment requirements. Such notice shall
specify a proposed date of termination, which shall be a Rent Payment Date at
any

                                       62


time on or after the seventh anniversary of the Commencement Date. During the
period following the giving of such notice of termination until the Termination
Date, Lessee, as agent for Lessor, shall use commercially reasonable efforts to
sell the Aircraft "as is", without any warranty by Lessor except as to Lessor's
title and the absence of Lessor's Liens. (Lessor and Owner Participant may also
solicit bids directly or through agents other than Lessee and Owner Participant
may also bid.) If Lessee receives any bid acceptable to it, it shall, at least
10 Business Days prior to the proposed date of sale thereunder, certify to
Lessor in writing the amount and terms of such acceptable bid, the proposed date
of sale and the name and address of the potential buyer. Lessee may, by notice
to Lessor, withdraw its notice of termination at any time on or before the
proposed Termination Date, and thereupon this Lease shall continue in full force
and effect. Lessee may withdraw notice of termination not more than twice during
the Term. On the Termination Date or such other date of sale as shall be
consented to by Lessee (which date shall thereafter be deemed the Termination
Date), Lessee shall, upon payment in full of the amounts described in Section
24.2, deliver the Airframe and Engines or engines installed thereon to the party
which shall have prior to such date submitted the highest acceptable cash Dollar
bid (net of brokerage commissions) to close such sale and purchase of the same
(which shall not be Lessee or any Affiliate of Lessee or any Person with whom
Lessee or its Affiliates has any arrangement or understanding regarding the
future use of the Aircraft ), and shall duly transfer to such party title to any
engines which are not Engines delivered with the Airframe. Lessor shall
simultaneously therewith sell and convey title to the Airframe and the Engines
or engines conveyed to Lessor as provided in Section 10 to such party, in
"as-is" condition, without recourse or warranty (except a warranty as to the
absence of Lessor's Liens). Upon receipt by Lessor of all amounts referred to in
Section 24.2, Lessor shall transfer to Lessee, in "as-is" condition, without
recourse or warranty (except a warranty as to the absence of Lessor's Liens),
all right, title and interest of Lessor in and to any Engines constituting part
of the Aircraft which were not delivered to the purchaser with the Airframe.
Lessee shall pay all reasonable out-of-pocket expenses of Lessor in connection
with any termination or proposed termination of this Lease.

     24.2  PAYMENTS. Lessor shall retain the total selling price realized at any
sale of the Airframe and Engines or engines installed thereon in accordance with
this Section 24. In addition, on the Termination Date, Lessee shall pay to
Lessor in immediately-available funds, an amount equal to the sum of (i) the
excess, if any, of the sum of the Stipulated Loss Value as of the Termination
Date over the net proceeds of the sale of the Aircraft, plus (ii) all unpaid
Supplemental Rent due on or before the Termination Date, plus (iii) the portion,
if any, of Basic Rent payable through Termination Date, together with all unpaid
Basic Rent, if any, payable before the Termination Date, plus (iv) the
reasonable fees and expenses of Lessor in connection therewith; plus (v) in the
event that at the time of delivery by Lessee pursuant to Section 24.1, the
Aircraft fails to satisfy the applicable provisions of Section 8 and Exhibit H,
an amount (which shall constitute Lessor's sole and exclusive remedy against
Lessee in respect of any such failure) equal to the Equivalency Payment that
would be due from Lessee to Lessor under Section 6 of Exhibit H if the Aircraft
had been returned to Lessor in such condition.

                                       63


     24.3. TERMINATION OF LEASE. Upon delivery by Lessee of the Airframe and
Engines or engines installed thereon and payment by Lessee of all amounts
payable by Lessee under Section 24.2, the obligations of Lessee to pay Basic
Rent shall cease and the Term shall end.

     24.4  EFFECT OF NO SALE. If, on the Termination Date, no sale of the
Aircraft has occurred, Lessee's termination notice given pursuant to Section
24.1 shall be deemed to be withdrawn as of such date, and this Lease shall
continue in full force and effect.

     24.5. NO DUTY ON PART OF LESSOR. Lessor shall be under no duty to solicit
bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take
any action in connection with any such sale other than to cooperate with such
efforts as Lessee may reasonably request and to make the transfers described in
Section 24.1.

SECTION 25. COVENANT OF QUIET ENJOYMENT. Lessor covenants and agrees that, so
long as no Event of Default has occurred and is continuing hereunder, it will
not, nor will it permit another Person claiming by, under or through it to,
interfere with Lessee's right to quiet enjoyment and continuing possession, use
and operation of the Aircraft during the Term of this Lease, and this Lease
shall not be terminated except as expressly provided herein.

SECTION 26. BANKRUPTCY. It is the intention of the parties that Lessor shall be
entitled to the benefits of 11 U.S.C. Section 1110 with respect to the right to
repossess the Airframe, Engines and Parts as provided herein. In any
circumstance where more than one construction of the terms and conditions of
this Lease is possible, a construction that would preserve such benefits shall
control over any construction that would not preserve such benefits or render
them doubtful. To the extent consistent with the provisions of 11 U.S.C. Section
1110 or any analogous section of the Federal bankruptcy laws, as amended from
time to time, it is hereby expressly agreed and provided that, notwithstanding
any other provisions of the Federal bankruptcy laws, as amended from time to
time, to the contrary, any right of Lessor to take possession of the Aircraft in
compliance with the provisions of this Lease shall not be affected by the
provisions of 11 U.S.C. Section 362 or 363, as amended from time to time, or any
analogous provisions of any superseding statute or any power of the bankruptcy
court to enjoin such taking of possession.

SECTION 27. CHOICE OF LAW; CONSENT TO JURISDICTION.

     27.1. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of New York, without regard to or
application of its conflict of laws rules.

                                       64


     27.2  CONSENT TO JURISDICTION. Each of Lessee and Lessor voluntarily
submits itself to the non-exclusive jurisdiction of the state and federal courts
situated in New York, New York for any dispute arising hereunder. Each of Lessee
and Lessor hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Lease brought in the Courts located in New York, New York, and
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such Court has been brought in an inconvenient forum.
To the extent that either Lessor or Lessee may be entitled at any time to claim
for itself or its assets any immunity (whether by reason of sovereignty or
otherwise) from suit, from the jurisdiction of any court, from execution of
judgment or otherwise, Lessor or Lessee, as the case may be, hereby irrevocably
agrees not to claim and hereby irrevocably waives such immunity in respect of
this Lease and any proceeding under this Lease.

     27.3  WAIVER OF JURY TRIAL. Each party hereby unconditionally waives its
rights to a jury trial of any claim or cause of action based upon or arising out
of, directly or indirectly, this Lease, any Operative Document, any of the
documents relating hereto, any dealings between Lessee and Lessor relating to
the subject matter of this transaction, and/or the relationship that is being
established hereunder between Lessee and Lessor. The scope of this waiver is
intended to encompass any and all disputes that may be filed in any court
(including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims). This waiver shall apply
to any subsequent amendments, renewals, supplements or modifications to this
Lease, any related documents, or to any other documents or agreements relating
to this transaction or any related transaction. In the event of litigation, this
Lease may be filed as a written consent to a trial by the court.

           (THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY)

                                       65


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

                                            LESSOR:

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

                                            By:      /s/ Brett R. King
                                                   -----------------------------
                                            Title:  Vice President
                                                  ------------------------------

                                            LESSEE:

                                            CHAUTAUQUA AIRLINES, INC.

                                            By:      /s/ Robert H. Cooper
                                                  ------------------------------
                                            Title:   Vice President
                                                  ------------------------------

                                       66


                                   SCHEDULE I

                                      [*]




- -------
* Confidential



                                   SCHEDULE I

          BASIC RENT AND BASIC RENT PAYMENT DATES: INSERT APPROPRIATE RENT
     SCHEDULE.

          [*]

          [*]



- --------------------
* Confidential




                                    EXHIBIT A

                            FORM OF LEASE SUPPLEMENT

THIS IS COUNTERPART NO. _____ OF 4 SERIALLY NUMBERED AND MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN
COUNTERPART NO. 1.

     THIS LEASE SUPPLEMENT dated May 18, 2000 is made by and between First
Security Bank, National Association, not in its individual capacity but solely
as Owner Trustee ("Lessor"), and Chautauqua Airlines, Inc. ("Lessee").

     Lessor and Lessee have entered into an Aircraft Lease Agreement, dated as
of May 18, 2000 (the "Lease"), relating to Embraer EMB-145LR aircraft,
manufacturer's serial number EMB 145241, United States registration number
N266SK, which provides for the execution and delivery of a Lease Supplement.

     NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Lessor and
Lessee hereby agree as follows:

     1. THE LEASE. The Lease and all related documents to be executed by Lessee
in order to accomplish the transaction contemplated by the Lease have been duly
authorized, executed and delivered by Lessee and constitute valid, legal and
binding agreements, enforceable against Lessee in accordance with their terms.
All of the terms and provisions (including defined terms) of the Lease are
hereby incorporated by reference in this Lease Supplement to the same extent as
if fully set forth herein. The parties confirm that the Delivery Date is the
date of this Lease Supplement.

     2. THE AIRCRAFT. Lessee hereby certifies that the Aircraft described in
Schedule 1 hereto has been delivered to Lessee, inspected by Lessee, and
accepted under, and for all purposes of, the Lease in accordance with the
Acceptance Certificate annexed hereto, all on the date hereof. Lessee accepts
delivery of the Aircraft "AS IS," "WHERE IS," AND SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTION 3.4 OF THE
LEASE.

     3. REPRESENTATIONS BY LESSEE. Lessee hereby represents and warrants to
Lessor that on the date hereof:

        (a) The representations and warranties of Lessee set forth in the Lease
        are true and correct in all material respects as though made on and as
        of the date thereof, except to the extent that they expressly relate to
        a particular date.

        (b) Lessee has satisfied or complied with all requirements set forth in
        the Lease to be satisfied or complied with on or prior to the date
        thereof.

        (c) No Event of Default or Event of Loss under the Lease has occurred
        and is continuing on the date hereof, nor has any event occurred which,
        with the giving of notice or lapse of time or both, would become an
        Event of Default or an Event of Loss.



        (d) The Lessee has obtained, and there are in full force and effect,
        such insurance policies with respect to the Aircraft as are required to
        be obtained under the terms of the Lease.

     4.   COUNTERPARTS. 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.

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

LESSOR:

FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Owner trustee

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

Title:
      -------------------


LESSEE:

CHAUTAUQUA AIRLINES, INC.

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

Title:
      ------------------



                         SCHEDULE 1 TO LEASE SUPPLEMENT

                              AIRCRAFT DESCRIPTION

Airframe: Embraer EMB-145LR , manufacturer's serial number EMB 145241

United States Registration Number: N266SK

Engine: Allison Engine Company AE3007A1, manufacturer's serial number CAE
311374.

Engine: Allison Engine Company AE3007A1, manufacturer's serial number CAE
311373.



                                    EXHIBIT B

                         FORM OF ACCEPTANCE CERTIFICATE

     This Acceptance Certificate is executed pursuant to that certain Aircraft
Lease Agreement dated as of May 18, 2000 ("Lease"), between First Security Bank,
National Association, not in its individual capacity but solely as Owner Trustee
("Lessor") and Chautauqua Airlines, Inc. ("Lessee").

     The terms used in this Acceptance Certificate shall have the meanings
ascribed to them in the Lease.

     Lessor and Lessee hereby confirm that the Aircraft described in this
Acceptance Certificate has been delivered as of the above date at Queens, New
York, and that the term of the Lease with respect to said Aircraft shall
commence as of the said date.

     Lessee confirms that said Aircraft has been examined by its duly appointed
and authorized representatives and that such examination shows that (a) there
are affixed to the Airframe and Engines metal tags bearing the following legend:
"First Security Bank, National Association, Owner and Lessor," (b) the Aircraft
is in the configuration and condition required by the Lease on the date the
Aircraft is delivered to Lessee, and (c) the Airframe and Engines were plainly
and distinctly marked with the serial numbers set forth below:



DESCRIPTION OF EQUIPMENT:                      MANUFACTURER'S SERIAL NUMBERS

                                                      
Airframe:  Embraer EMB-145LR                             EMB 145241

Engines:

Allison Engine Company AE3007A1                          CAE 311374

                                                         CAE 311373




     Lessee confirms that on the date hereof (i) the Aircraft described in this
Acceptance Certificate was duly and unconditionally accepted by Lessee as the
Aircraft for leasing under the Lease, provided that nothing contained herein or
in the Lease diminishes or affects any right Lessor or Lessee may have with
respect to the Aircraft against the Manufacturer, any vendor or any
subcontractor or supplier thereof, (ii) the Aircraft became subject to and
governed by the terms of the Lease, and (iii) Lessee became unconditionally
obligated to pay to Lessor the rentals provided for in the Lease.

     This Acceptance Certificate is dated this ____ day of May, 2000.

                                  LESSOR:

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

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

                                  LESSEE:

                                  CHAUTAUQUA AIRLINES, INC.

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

                                       ii


                                   EXHIBIT E

                          FORMS OF OPINIONS OF COUNSEL

        I. FORM OF OPINION TO BE GIVEN BY INDEPENDENT OUTSIDE COUNSEL OF
                                     LESSEE

                                                      May 18, 2000

TA Air XVI, Corp.

c/o Transamerica Equipment Financial Services

Aircraft Finance Group

5080 Spectrum Drive

Suite 1100W

Addison, Texas 75001

First Security Bank, National Association
79 South Main Street, Suite 300
Salt Lake City, Utah 84111

                                           Re:  CHAUTAUQUA AIRLINES, INC.

Ladies and Gentlemen:

     Chautauqua Airlines, Inc., a New York corporation (the "Corporation"), has
asked us to render certain opinions to you regarding the Corporation, and the
following agreements to which the Corporation is a party: (i) an Aircraft Lease
Agreement, dated as of May 18, 2000, between First Security Bank, National
Association ("Lessor"), and the Corporation (the "Lessee"); (ii) a Lease
Supplement, dated as of May 18, 2000, between Lessor and the Corporation; (iii)
an Acceptance Certificate, dated as of May 18, 2000, between Lessor and the
Corporation; and (iv) a Tax Indemnity Agreement, dated as of May 18, 2000,
between TA Air XVI Corp., a Delaware

                                       iii


corporation ("TA Air") and the Corporation (collectively, the "Lease
Documents"). Capitalized terms used but not defined herein have the meanings
given to them in the Lease.

     We have examined and relied upon originals, or copies certified or
otherwise identified to our satisfaction, of the following documents,
certificates and other statements of the Corporation and its officers and other
representatives as the basis for our opinion: (a) copies of the Lease Documents
in the form furnished to us by the Corporation; and (b) a certificate relating
to certain factual matters executed by an executive officer of the Corporation
(the "Officer's Certificate").

     In our examination of the Lease Documents and the other documents,
instruments, certificates and statements referred to above, we have assumed,
without any independent investigation, that (a) all statements, representations,
warranties and certifications set forth therein are true, correct and complete;
(b) the Lease Documents actually executed by the Corporation are identical to
the documents submitted to us by the Corporation; (c) all documents submitted to
us as originals are genuine and the signatures thereon are authentic; (d) the
agreements, documents, instruments and certificates submitted to us as copies
are genuine and conform to the originals; and (e) the Lease Documents and all of
the other agreements, documents, instruments and certificates have been duly
authorized, delivered and fully performed by all persons other than the
Corporation in all respects, and are the legal, valid and binding obligations of
all such persons, enforceable against them in accordance with their respective
terms. We have not represented the Corporation generally as outside counsel,
and, accordingly, we have extremely limited familiarity with its business and
activities. Therefore, as to all factual matters, we have, without any
independent investigation, relied upon, and assumed the accuracy of, the
Officer's Certificate and all of the statements, representations and warranties
made in the Lease Documents and in each of the other agreements, documents,
instruments, certificates and statements referred to above.

     Based upon and subject to the foregoing, and subject to the assumptions and
qualifications set forth below, it is our opinion that:

          1.  No authorization, approval, consent, license or order of, or
registration with, or giving notice to, any Federal governmental or other
regulatory body or authority having jurisdiction over the Corporation is
required or necessary for the valid authorization, execution, delivery and
performance by the Corporation of the Lease Documents.

          2.  Each of the Lease Documents is a valid and a binding obligation of
the Corporation, enforceable against the Corporation in accordance with its
terms.

                                       iv


          3.  The Corporation is a "citizen of the United States" as defined in
49 U.S. Code Section 40102(a)(15).

          4.  The Corporation is an "air carrier" as defined in 49 U.S. Code
Section 40102(a)(2).

          5.  Except for (i) registrations and filings with the FAA, with
respect to which we express no opinion; (ii) the filing of appropriate Uniform
Commercial Code financing statements in the appropriate offices in Indiana, New
York and Connecticut, and any jurisdiction in which records relating to the
aircraft to which the Lease pertains (the "Aircraft") is located; (iii) the
filing of continuation statements at appropriate intervals with respect to any
Uniform Commercial Code financing statements; (iv) the filing of new appropriate
financing statements under the circumstances described in Section9-402(7) of the
Uniform Commercial Code; (v) the filing of new appropriate financing statements
in the appropriate offices in the appropriate jurisdictions if the Corporation
changes its location as determined under Section9-103(3)(d) of the Uniform
Commercial Code; and (vi) the taking possession by Lessor of the chattel paper
original of the Lease, no further filing or recording of any document with any
court or governmental agency or body is necessary under the laws of the States
of Indiana, New York or Connecticut in order to establish and perfect the right,
title and interest of Lessor under the Lease or in and to the Aircraft.

          6.  Lessor, as lessor under the Lease, is entitled to the protection
of Section 1110 of the United States Bankruptcy Code in respect of the Lease and
the Aircraft in the event of a proceeding under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor.

     The opinions expressed herein are qualified in their entirety as follows:
(a) no opinion is expressed with respect to laws other than the laws of the
United States and the States of New York and Connecticut, and to the extent that
the opinions expressed herein relate to or are affected by or are dependent upon
the laws of any other jurisdictions, we have assumed, without independent
investigation, that such laws are the same as those of the States of New York
and Connecticut applied without regard to conflicts of laws principles; (b) in
rendering our opinions hereunder, we have made no independent factual
investigation other than as expressly set forth herein; (c) no opinion is
expressed as to whether any of the conditions precedent set forth in the Lease
has been satisfied; (d) our opinions as to no violation of existing law and to
the consents and approvals are based upon a review of those statutes, rules and
regulations which, in our experience, normally are applicable to transactions of
the type contemplated by the Lease Documents; and (e) to the extent that any one
or more of the foregoing opinions relates to the enforceability of any agreement
or instrument: (1) the opinions are subject to the effect of applicable laws or
judicial decisions regarding bankruptcy, reorganization, insolvency,

                                        v


fraudulent transfers, moratorium and other laws affecting creditors' rights and
debtors' relief generally; (2) the enforceability of the provisions of any such
agreement or instrument is subject to the application of principles of equity,
whether in a proceeding at law or in equity, including the exercise of
discretionary powers of any tribunal before which equitable remedies may be
sought (including, without limitation, specific performance and injunctive
relief); and (3) the enforceability of the provisions of any such agreement or
instrument in accordance with its respective terms may be limited by laws
affecting the remedies which it provides, including, but not limited to, laws
and judicial decisions limiting such enforceability.

     This opinion is rendered solely to you for your use in connection with the
transactions contemplated by the Lease Documents, and may not be relied upon by
you for any other purpose, and may not be furnished to or relied upon by any
other person for any purpose, or otherwise used, circulated or quoted, without
our prior written consent. This opinion is rendered as of the date hereof, and
we disclaim any undertaking to advise of any changes which may hereafter be
brought to our attention.

                                                Very truly yours,

                                       vi


               II. FORM OF OPINION TO BE GIVE BY LESSEE'S GENERAL
                                     COUNSEL

                                                    CHAUTAUQUA AIRLINES, INC.

                                                      c/o Wexford Management LLC

                                                          411 West Putnam Avenue

                                                             Greenwich, CT 06830

                                                                  (203) 862-7000

                                                           Direct Dial: 862-7012

                                                           Direct Fax : 862-7312

                                                      E-Mail: aamron@wexford.com

                                           May 18, 2000

TA Air XVI, Corp.

c/o Transamerica Equipment Financial Services

Aircraft Finance Group

5080 Spectrum Drive

Suite 1100W

Addison, Texas 75001

First Security Bank, National Association
79 South Main Street, Suite 300
Salt Lake City, Utah  84111

                                       Re:      CHAUTAUQUA AIRLINES, INC.

                                       vii


Ladies and Gentlemen:

     I have acted as counsel for Chautauqua Airlines, Inc., a New York
corporation (the "Corporation"), in connection with the execution and delivery
of Aircraft Lease Agreement (N266SK) (the "Lease") between the Corporation and
First Security Bank, National Association ("Lessor"), dated as of May 18, 2000,
relating to the Embraer EMB-145LR aircraft bearing manufacturer's serial number
EMB 145241; Lease Supplement No. 1, dated as of May 18, 2000, between Lessor and
Lessee; an Acceptance Certificate, dated as of May 18, 2000, between Lessor and
the Corporation; and a Tax Indemnity Agreement, dated as of May 18, 2000,
between TA Air XVI, Corp. and Lessee (the Lease, the Lease Supplement, the
Acceptance Certificate and the Tax Indemnity Agreement are hereinafter
collectively referred to as the "Lessee Documents"). Unless otherwise defined
herein, capitalized terms used herein have the meanings assigned to them in the
Lease.

     In rendering this opinion, I have examined originals or copies, certified
or otherwise identified to my satisfaction, of the Lessee Documents, and have
investigated such questions of law, and have examined such other corporate
records of the Corporation and other documents, and have obtained and relied
(without independent investigation) upon such certificates and assurances from
public officials, as I have deemed necessary as a basis for the purpose of
rendering this opinion.

     For the purpose of rendering this opinion, I have assumed, without any
independent investigation, the capacity of all natural persons, the authenticity
of all documents and instruments submitted to me as originals, and the
conformity to authentic original documents and instruments of all documents and
instruments submitted to me as certified, conformed photostatic or facsimile
copies.

     Based upon and subject to the foregoing, and subject to the qualifications
set forth below, I am of the opinion that:

     1. The Corporation is duly incorporated, validly existing, and in good
standing under the laws of the State of New York, and has the corporate power
and authority to carry on its business as presently conducted and to perform its
obligations under the Lessee Documents.

                                      viii


     2. Each of the Lessee Documents has each been duly authorized, executed and
delivered by the Corporation.

     3. The execution and delivery of the Lessee Documents, the consummation by
the Corporation of the transactions contemplated thereby and compliance by the
Corporation with the terms and provisions thereof (i) do not require stockholder
approval, and (ii) do not require any consent or approval, do not contravene,
and will not result in any breach of or constitute any default under, or result
in the creation of any lien, charge or encumbrance upon any property of the
Corporation, under any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan, credit agreement, corporate charter,
by-law or other agreement or instrument to which the Corporation is a party or
by which the Corporation or its properties or assets may be bound.

     4. The Corporation provides interstate transportation of passengers or
property by aircraft as a common carrier for compensation. The Corporation is
the holder of an air carrier operating certificate issued by the Federal
Aviation Administration under Part 121 of the Federal Aviation Regulations and
49 U.S. Code Section44705 for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo. The Corporation is an air carrier
that conducts air taxi operations under an exemption issued by the Department of
Transportation under authority of Part 298 of the Federal Aviation Regulations.
The Corporation holds all licenses, certificates and permits from applicable
governmental authorities necessary for the conduct of its business as an air
carrier and the performance of its obligations under the Lease.

     5. There are no suits or proceedings, pending or threatened, against the
Corporation before any executive, legislative, judicial, administrative or
regulatory body which, if adversely determined, might, individually or in the
aggregate, have a material adverse effect on the financial condition or business
of the Corporation or its ability to perform its obligations under the Lessee
Documents.

     6. Neither the Corporation nor any of its properties or assets has the
right of immunity from suit or execution on the grounds of sovereignty.

     7. The Corporation is organized under the laws of the State of New York.
The president and at least two-thirds of the board of directors and other
managing officers of the Corporation are individuals who are citizens of the
United States. At least 75% of the voting interest in the Corporation is owned
or controlled, directly or indirectly, by individuals who are citizens of the
United States.

                                       ix


     The opinions expressed herein are qualified in their entirety as follows:
(a) no opinion is expressed with respect to laws other than the federal laws of
the United States and the State of New York; and (b) to the extent that any one
or more of the foregoing opinions relates to the enforceability of any agreement
or instrument: (1) the opinions are subject to the effect of applicable laws or
judicial decisions regarding bankruptcy, reorganization, insolvency, fraudulent
transfers, moratorium and other laws affecting creditors' rights and debtors'
relief generally; (2) the enforceability of the provisions of any such agreement
or instrument is subject to the application of principles of equity, whether in
a proceeding at law or in equity, including the exercise of discretionary powers
of any tribunal before which equitable remedies may be sought (including,
without limitation, specific performance and injunctive relief); and (3) the
enforceability of the provisions of any such agreement or instrument in
accordance with its respective terms may be limited by laws affecting the
remedies which it provides, including, but not limited to, laws and judicial
decisions limiting such enforceability.

     This opinion is rendered solely to you for your use in connection with the
transactions contemplated by the Lessee Documents, and may not be relied upon by
you for any other purpose, and may not be furnished to or relied upon by any
other person for any purpose, or otherwise used, circulated or quoted, without
my prior written consent. This opinion is rendered as of the date hereof, and I
disclaim any undertaking to advise of any changes that may hereafter be brought
to my attention.

     Very truly yours,


     Arthur H. Amron

     General Counsel

                                        x


              III. FORM OF OPINION LETTER TO BE GIVEN BY DAUGHERTY,
           FOWLER, PEREGRIN & HAUGHT, LESSEE'S OUTSIDE INDEPENDENT FAA
                                     COUNSEL

TA Air XVI, Corp.

c/o Transamerica Equipment Financial Services

Aircraft Finance Group

5080 Spectrum Drive

Suite 1100W

Addison, Texas 75001

First Security Bank, National Association
79 South Main Street, Suite 300
Salt Lake City, Utah 84111

Ladies and Gentlemen:

     This opinion is furnished to you pursuant to Section 5.1 of the Aircraft
Lease Agreement dated as of May 18, 2000 (the "Lease") between First Security
Bank, National Association ("Lessor") and Chautauqua Airlines, Inc. ("Lessee")
with respect to that portion of the Federal Aviation Act of 1958, as amended
(the "Act"), relative to the recordation of instruments and the registration of
aircraft under the Act.

     Capitalized terms not otherwise defined herein shall have the meanings
given them in the Lease.

     We have examined and filed on this date with the Federal Aviation
Administration (the "FAA") the following described instruments at the respective
times listed below: the FAA Bill of Sale, the Lease and Lease Supplement with
respect to the Aircraft, and the Trust Agreement, which documents were filed at
___ p.m., C.D.T, _____, C.D.T., and _____, C.D.T., respectively.

     Based on our examination of the above described instruments and of such
records of the FAA as we deemed necessary to render this opinion, it is our
opinion that:

     1. The FAA Bill of Sale, Lease and Lease Supplement, and the Trust
        Agreement are in due form for recordation by and have been duly filed
        for recordation with the FAA pursuant to and in accordance with the
        provisions of the Transportation Act.

                                       xi


     2. The Aircraft is duly registered in the name of the Lessor pursuant to
        and in accordance with the provisions of the Transportation Act.

     3. The Lessor is the owner of legal title to the Aircraft and the Aircraft
        is free and clear of liens and encumbrances of record except as created
        by the Lease.

     4. The rights of the Lessor and the Lessee, under the Lease, with respect
        to the Aircraft, are perfected.

     5. No other registration of the Aircraft and no filings or recordings
        (other than the filings and recordings with the FAA which have been
        effected) are necessary to perfect in any jurisdiction within the United
        States the Lessor's title to the Aircraft.

     6. No authorization, approval, consent, license or order of, or
        registration with, or the giving of notice to, the FAA is required for
        the valid authorization, delivery and performance of the Lease and the
        Trust Agreement, except for such filings as are referred to above.

     Since title to the Airframe originated with an AC Form 8050-2 Aircraft Bill
of Sale from Embraer, a foreign vendor, our opinion with respect to the Airframe
covers only that period of time subsequent to the commencement of its United
States registration on April ___, 2000.

     No opinion is expressed as to laws other than Federal laws of the United
States. In rendering this opinion, we were subject to the accuracy of the FAA,
its employees and agents, in the filing, indexing and recording of instruments
filed with the FAA and in the search for encumbrance cross-reference index cards
for the Engines. Further, in rendering this opinion we are assuming the validity
and enforceability of the above-described instruments under local law. Since our
examination was limited to records maintained by the FAA, our opinion does not
cover liens that are perfected without the filing of notice thereof with the
FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29
of the United States Code, possessory artisan's liens, or matters of which the
parties have actual notice. In rendering this opinion we are assuming that there
are no documents with respect to the Aircraft that have been filed for recording
under the recording system of the FAA but have not yet been listed in the
available records of such system as having been so filed.

                                Very truly yours,


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

                                       xii


                                      xiii


                                    EXHIBIT F

                      FORM OF RETURN ACCEPTANCE CERTIFICATE

          Return Acceptance Certificate dated this ___ day of _________, _____.

          This Return Acceptance Certificate is executed pursuant to that
certain Aircraft Lease Agreement dated as of May 18, 2000 (the "Lease") between
First Security Bank, National Association, not in its individual capacity but
solely as Owner Trustee ("Lessor") and Chautauqua Airlines, Inc. ("Lessee").

          The terms used in this Return Acceptance Certificate No. ____ shall
have the meanings ascribed to such terms in the Lease.

          This Return Acceptance Certificate is executed by the parties hereto
to confirm, among other things, that on the date of this Return Acceptance
Certificate at [          ] time the following items are herewith delivered by
Lessee to Lessor:

          (a)   One aircraft:

     Manufacturer: Embraer

     Model:        EMB-145LR

     Manufacturer's Serial No.: EMB ____

     Including:

          (b)   the following described aircraft engines
installed thereon:

                                       xiv




                                                                MANUFACTURER'S
        MANUFACTURER                   MAKE AND MODEL             SERIAL NOS.
                                                            
   Allison Engine Company              AE3007A1                   CAE _____
           Engine
                                                                  CAE _____


     Together with:

          (c)   the aircraft documentation set forth in
Attachment 2 hereto.

     2. HOURS AND CYCLES. The Airframe, Engines and Parts had the following
hours/cycles at return:

     A.       Airframe:

              _____ hours/_____ cycles since last "C" Check

              _____ months remaining until next Major Structural Inspection

     B.       Engines:

                                             TIME SINCE LAST HEAVY ENGINE VISIT
                                             ----------------------------------

                                                  HOURS            CYCLES
                                                  -----            ------

                                       xv


                        MSN

                        MSN

                                             TIME REMAINING TO NEXT LIFE-
                                             ----------------------------

                                             LIMITED PART REMOVAL
                                             --------------------

                                                HOURS             CYCLES
                                                -----             ------

                        MSN

                        MSN

     C.       APU:

              _____ hours/_____ cycles remaining until next inspection

              _____ hours/_____ cycles remaining on turbine and compressor
          life-limited parts

     D.       Landing Gears:

              _____ hours/_____ cycles remaining to next scheduled removal on
          each landing gear

                                             TIME REMAINING TO NEXT
                                             ----------------------

                                              SCHEDULED REMOVAL
                                              -----------------

                                               HOURS      CYCLES
                                               -----      ------

                                       xvi


                        MSN

                        MSN

     E.       Status of components or Parts with time/cycle and calendar
          limits (see attached sheet)

     F.       Fuel on board at Delivery: _____ pounds (_____ gallons).

     ACCEPTANCE BY LESSOR. The above specified Aircraft, Engines, parts and
documentation are hereby accepted by Lessor subject to (a) the provisions of the
Lease and (b) correction by Lessee of the Discrepancies specified in Attachment
3 hereto (which corrections Lessee hereby undertakes to perform as soon as
reasonably possible). The acceptance of the Aircraft, Engines and Parts
hereunder by Lessor shall not constitute any waiver by Lessor of any right or
remedy it may have under the Lease, and shall not relieve or diminish any
obligation of Lessee under the Lease.

     NO DISCREPANCIES, NO LIENS, NAVIGATION AND AIRPORT CHARGES. Lessee
represents and warrants to Lessor that (a) the Aircraft is hereby returned to
Lessor in the condition and the manner required by the Lease (other than the
Discrepancies listed on Attachment 3 hereto), (b) there are no Liens on the
Aircraft, other than Liens arising by or through Lessor, and (c) all navigation
charges, landing fees and other charges and fees payable for the use of or
services provided by any airport, whether in respect of the Aircraft or any
other aircraft owned, leased or operated by Lessee have been paid in full.

     PLACE OF EXECUTION. This Return Acceptance Receipt is executed and
delivered by the parties in _______ [place].

     IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptances
Receipt to be executed in their respective corporate names by their duly
authorized representatives as of the day and year first above written.

LESSOR:

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

                                      xvii


By:
     -----------------------
Its
     -----------------------

LESSEE:

CHAUTAUQUA AIRLINES, INC.

By:
     -----------------------
Its
     -----------------------

                                      xviii


                  ATTACHMENTS TO RETURN ACCEPTANCE CERTIFICATE:

1.   Aircraft Hours and Cycles

2.   Aircraft Documentation

3.   List of Discrepancies

                                       xix



                  ATTACHMENT 1 TO RETURN ACCEPTANCE CERTIFICATE

                            AIRCRAFT HOURS AND CYCLES

                                       xx


                  ATTACHMENT 2 TO RETURN ACCEPTANCE CERTIFICATE

                             AIRCRAFT DOCUMENTATION

     The following documents are to be returned with the Aircraft in a current,
up-to-date and correct status:

                                     MANUALS

             NAME

1.   Approved Flight Manual

2.   Flight Crew Operating Manual

3.   Weight and Balance Manual

4.   Wiring Diagram Manual (including aircraft wiring list)

5.   Illustrated Parts Catalog for Airframe and Engines

6.   Aircraft and Engine Maintenance Manual

7.   Minimum Equipment Lists

8.   All Checklists

9.   Structural Repair Manual

                    AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS

1.   Log book (currently on Aircraft)

2.   Airframe Maintenance Status (with time-to-go or time since last)

3.   Airworthiness Directive Compliance Report

4.   Modification Status Report (with documentation of authority for
     modifications)

5.   Weighing Report (most recent)

6.   Accident and Incident Report

7.   List of Life Limited Components (with time-to-go with installation and use
     history since new)

8.   List of all Major Repairs

                                       xxi


9.   Report of all Maintenance Reliability Reports Filed with the FAA

10.  Test Flight Reports

11.  Job Cards and Work Accomplishment Documents (copies)

12.  X-ray Pictures (most recent)

13.  Maintenance Technical Log books

14.  Aircraft Maintenance History Cards

15.  All Mechanical Interruption Summary and Mechanical Reliability Reports
     submitted to the FAA

16.  Last Overhaul and Repair Documents

17.  Airworthiness Directive Compliance Report

18.  List of Life Limited Components (with time-to-go with installation and use
     history since new)

19.  Component records maintained in accordance with a record-keeping policy
     approved by and acceptable to the FAA to certify the status and maintenance
     histories of the components.

                         ENGINE RECORDS (FOR EACH ENGINE)

1.   Last Overhaul and Repair Documents

2.   Airworthiness Directive Compliance Report

3.   List of Life Limited Components (with time-to-go with installation and use
     history since new)

4.   Modification Status Report (with documented authority for such
     modifications)

                                   CERTIFICATES

1.   Certificate of Airworthiness

2.   Certificate of Registration

                                       xxii


                         MISCELLANEOUS TECHNICAL DOCUMENTS

1.   Passenger Cabin Configuration Drawings

2.   Emergency Equipment Location Drawings

Receipt of the foregoing documents, except as noted, is hereby acknowledged.

                                           TA AIR XVI CORP.

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

                                           Title:
                                                   -----------------------------

                                      xxiii


                                  ATTACHMENT 3
                        TO RETURN ACCEPTANCE CERTIFICATE

                                  DISCREPANCIES

                                      xxiv


                                    EXHIBIT G

                       AIRCRAFT AND EQUIPMENT DESCRIPTION

                                
               Airframe:

               MANUFACTURER:                      Embraer

               MODEL NUMBER:                      EMB-145LR

               UNITED STATES REG. NO.:            N266SK

               SERIAL NUMBER:                     145241

               Engines:

               MANUFACTURER:                      Allison Engine Company, Inc.

               MODEL NUMBER:                      AE3007A1

               SERIAL NUMBERS:                    CAE 311373

                                                  CAE 311374

               

               Basic Equipment List:

                      [Embraer spec description]

          Optional Equipment List:

               1. Options to the Standard Avionics Configuration:

               a) CAT-II

                  b)  2nd Radio Altimeter

                  c)  2nd DME

                  d)  2nd ADF



                  e)  2nd Transponder Mode S

                  f)  Secal - Trimble

                  g)  FMS/GPS- Honeywell

                  h)  EGPWS

                  i)  VHF (1st and 2nd) 8.33khz spacing


                  2.  Optional Systems/ Other Equipment

                  a)  Thrust Reversers

                  b)  LR version

                  c)  Cockpit floodlight

                  d)  External Painting

                  e)  Service door sill protection

                  f)  Cargo door sill protection

                  g)  Cargo door light

                  h)  Wiring provision on panel lamps for filament test (JAA)

                  i)  Structural provision for 10o rudder deflection (JAA)

                  j)  Wiring provision for nose landing gear door position
                  indication in the EICAS (JAA)

                  k)  Provision for warning of the selection of Flaps 22o to
                  take-off (JAA)

                  l)  Provision for limitation of the hydraulic pressure on the
                  speed brake actuator when aircraft is above 200 knots (JAA)


                  3.  Interior Optional Items

                  a)  Interior Option 1

                                       ii


                  b)  Audio entertainment system

                  c)  2nd attendant kit (including handset and cradle)

                  d)  Blue sterile light

                  e)  Class C baggage compartment

                  f)  Plug type door

                  g)  Passenger seats- Customized Cushion Version Top with
                  Ultra-leather

                  h)  Baggage restraint net

                  i)  Extra oxygen masks (3 masks for each double seat)

                                       iii


                                   EXHIBIT H

                               RETURN CONDITIONS

     At the end of the Lease Term:

1. GENERAL CONDITIONS.

          At the time of return (the "Return Date"), the Aircraft shall (i) have
   been continuously and currently maintained in accordance with the Maintenance
   Program as authorized by the FAA, as if the Aircraft were to be kept in
   further commercial passenger service by Lessee and (ii) meet the following
   requirements:

   (a) OPERATING CONDITION - The Aircraft shall be in good operating condition,
       ordinary wear and tear excepted, with all of the Aircraft equipment,
       components, and systems functioning in accordance with their intended use
       irrespective of variations or deviations authorized by the Minimum
       Equipment List or Configuration Deviation List. All replacement
       equipment, parts, components or items installed on the Aircraft shall be
       manufactured by the original manufacturer approved by Embraer or a
       manufacturer holding requisite authority of the FAA, and in case of used,
       rotable parts, have an FAA-approved serviceable tag.

   (b) CONFIGURATION - The Aircraft shall be in the same passenger configuration
       with all equipment installed therein as the Aircraft was when delivered
       by Embraer, ordinary wear and tear excepted, including replacements and
       substitute parts and equipment. The Aircraft shall not suffer any
       modification or alteration (hereinafter "Modifications") after the date
       delivered by Embraer (the "Embraer Delivery Date") provided however that
       Lessee may make Modifications to the Aircraft as long as they are
       included as factory-installed features in EMB-145 aircraft delivered to
       the Lessee subsequent to the delivery of the Aircraft. The term
       Modifications shall be deemed to include, but not be limited to (i)
       changes to the Aircraft structure, performance, weight and balance, (ii)
       changes which materially adversely affect the Aircraft's flight
       qualities, operational characteristics, operational safety, ease or cost
       of maintenance, spare parts interchangeability or replaceability, and
       (iii) substitution of different types of equipment or accessories which
       are not equivalent in cost value and/or operation capability to the
       equipment or accessories being replaced, and shall exclude (i) changes
       pursuant to service bulletins issued by Embraer or the OEMs, and (ii)
       mandatory changes required to be accomplished by Lessee hereunder. All
       permitted Modifications made to the Aircraft shall be in accordance with
       FAA-approved data, and Lessee shall provide complete data and

                                       iv


       documentation to substantiate their certification, approval, and methods
       of compliance (including, without limitation, a copy of the Aircraft
       Illustrated Parts Catalog and a copy of the Aircraft Interior
       Configuration document). A complete listing of all modifications and
       repairs performed shall be supplied together with the Aircraft.
       Modifications, other than permitted ones, shall be removed and the
       appropriate repairs to the Aircraft made prior to the Return Date.

   (c) CERTIFICATION - The Aircraft shall have, a valid and effective
       Certificate of Airworthiness of the type "Transport, Category
       (Passengers)" issued by the FAA, and shall be in full compliance with,
       and capable of immediate registration under, the provisions of Part 121
       of the U.S. Federal Aviation Regulations (or any successor legislation)
       and other US regulations applicable to the Aircraft's operation and
       continued airworthiness, without any restrictions, corrections, repairs,
       limitations, modifications or alterations or overhauls having to be
       performed to meet such standards.

   (d) GENERAL APPEARANCE - The Aircraft shall be clean by commercial passenger
       airline standards, cosmetically acceptable, interior complete, and
       prepared to be placed into scheduled revenue airline operations. Interior
       items which may be broken shall be repaired or replaced. All decals,
       signs and placards shall be clean, secure and legible in the English
       language. The Aircraft shall meet the following minimum requirements:

       (i)   Fuselage, Wings and Empennage - The fuselage shall be within
             Maintenance Program approved limits regarding dents and abrasions
             and loose or pulled rivets; all leading edges shall be within
             Maintenance Program approved limits regarding damage occurring
             since delivery; the airframe, Engines and wings shall be free of
             fuel, oil and hydraulic leaks so as to allow unrestricted
             operation; all leading edges and fuselage areas which are
             aerodynamically critical shall be free of any scab patches other
             than those required by Manufacturer and Lessor (or its designee)
             and shall be repaired with repairs which are permanent in nature in
             accordance with the Structural Repair Manual ("SRM"), or are made
             in accordance with Manufacturer's and Lessor's (or its designee's)
             approval.

       (ii)  Interior - Ceilings, sidewalls, bulkhead panels shall be clean,
             free of cracks and within Maintenance Program approved limits
             regarding dents; all carpets and seat covers shall be in good
             condition and clean and meet FAR fire resistance regulations; all
             seats shall be serviceable and in good condition. All safety
             equipment shall be installed at the correct stations, a loose
             equipment check list and location drawings shall accompany the
             Aircraft and a loose equipment inventory shall be drawn up on the
             Embraer Delivery Date and checked on the

                                       v


            Termination Date.

       (iii) Cockpit - All fairing panels shall be free of cracks and shall be
             clean; all floor coverings shall be clean and effectively sealed
             and secured, all seat covers and cushions shall be in good
             condition and clean and shall, as applicable, conform to FAA fire
             resistance regulations. All seats shall be fully serviceable and in
             good condition. All instruments and light panels shall be clean,
             secure and legible, function in accordance with their intended
             purpose and have all lighting operating properly.

       (iv)  Landing, Gear and Wheel Wells - The landing gear and all wheel
             wells shall be clean, free of leaks, and repaired as necessary. The
             main and nose landing gear components and their associated
             actuators and parts shall be in a good operating condition.

       (v)   Cargo Compartment, Galleys and Toilets - All cargo compartment
             panels shall be installed and be in good condition so as to comply
             with extended range operations requirements. The cargo
             compartments, galleys and toilet of the Aircraft shall be in a
             clean and presentable condition and all cargo securing system
             components shall be serviceable; all galley inserts (to the extent
             delivered with the Aircraft) shall be redelivered with the
             Aircraft.

       (vi)  Windows - Any delamination, and crazing of the windshields and
             cabin windows of the Aircraft shall be within approved limits of
             the Maintenance Program and shall be properly sealed.

       (vii) Doors - All the doors of the Aircraft shall be free moving,
             correctly rigged and properly sealed and all door assist mechanisms
             and shall be charged in accordance with the AMM.

   (e) AIRWORTHINESS DIRECTIVES AND SERVICE BULLETINS - All FAA Airworthiness
       Directives and all manufacturer's "alert" service bulletins and
       amendments or changes to Aviation Regulations issued by the FAA and
       applicable to the Aircraft which require compliance within a period of
       six (06) months following the Termination Date (or the equivalent hours
       or cycles, based on the Lessee EMB-145 last 4 (four) years of operation
       average monthly utilization) shall have been accomplished on a
       Terminating Action basis and in compliance with the issuing agency's and
       the manufacturer's associated service bulletins, regardless of any

                                       vi


       operator-specific waiver, deferral, or deviation from such directive or
       regulation. The Aircraft shall have installed on it all Embraer and OEM
       service bulletin kits requested by Lessee and actually received by Lessee
       in respect of the Aircraft, and if not installed, Lessee shall deliver
       them together with the Aircraft at no charge.

   (f) DEFERRED MAINTENANCE - The Aircraft shall be free of all deferred or
       carried over maintenance items, including without limitation, any pilot
       log book reports, maintenance reports, and the Aircraft's Central
       Maintenance Computer reports. Any such deferred or carried over
       maintenance shall be promptly accomplished in a terminating manner prior
       to the return of the Aircraft at the end of the term of the Lease.

   (g) CORROSION - The Maintenance Program shall include a corrosion control
       program based on the corrosion prevention, treatment and correction
       criteria recommended by Embraer in the Corrosion Prevention and Control
       Program ("CPCP"). The Aircraft shall be free from corrosion or shall have
       been adequately treated in compliance with the Maintenance Program.
       Complete details of the corrosion control program, as well as a summary
       of specific corrosion correction, of the Aircraft in accordance with the
       Maintenance Program shall be available for delivery together with the
       Aircraft. This summary shall include Lessee's identifying Embraer's task
       identifier and cross referencing, Lessee's identifier indicating status
       of accomplishment and findings and incorporation status relative to all
       recommended corrective and preventative actions. The hydraulic system and
       fuel tanks shall be free from contamination as demonstrated by a
       laboratory report to be performed after the Aircraft is removed from
       service and delivered together with the Aircraft.

   (h) LEASED COMPONENTS - The Aircraft shall be free and clear of all liens
       other than Lessor Liens and at return shall not have installed thereon
       any equipment, components and/or parts which are leased or loaned or
       otherwise owned by a third party.

   (i) RECORDS - The Aircraft shall be accompanied by all Aircraft Documents (as
       defined below). The Aircraft Documents shall be provided in English, and
       be in good condition, readable and capable of being reproduced.

       (i)    "Aircraft Document" shall mean, all technical data, manuals, log
              books and weight and balance sheets, and all inspection,
              modification and overhaul records and other service, repair,
              maintenance, and technical records that are maintained with
              respect to the Aircraft, Airframe, Engines, APU, landing gears

                                      vii


              or parts (including, without limitation, all additions, renewals,
              revisions, and replacements of any such materials from time to
              time made, or required to be made, in accordance with the
              Maintenance Program and/or FAA regulations, and in each case in
              whatever form and by whatever means or medium such materials may
              be maintained or retained by or on behalf of Lessee (provided
              however that all such material shall be maintained in the English
              language).

       (ii)   All Parts, components and assemblies identified with safe-life,
              hard time or condition monitored limits (to the extent that such
              condition monitored items are to be tracked in accordance with the
              approved Maintenance Program) shall be provided with part number,
              serial number, their service histories, accumulated cycles and
              flight hours, safe-life, hard time or condition monitored limits
              and remaining service lives on a separate listing and where
              practicable, be physically verified as installed and have hard
              copy documentation (i.e., appropriate overhaul or serviceable
              vendor tags and work orders) to verify their service histories.

       (iii)  All components and assemblies, which are identified on the
              maintenance records by part numbers and/or serial numbers other
              than Embraer's or other manufacturer's shall be provided with
              two-way cross-reference listing necessary to establish complete
              traceability.

       (iv)   All documentation, flight records, and maintenance records as
              specified herein and as specified by FAR's Sections 121.380, and,
              as applicable, Section 91.417 and 91.419 (or FAR's as amended),
              and which normally accompany the transfer of an aircraft or engine
              shall be delivered together with the Aircraft. In the event of
              missing or incomplete records, the tasks necessary to produce such
              complete records shall be accomplished in accordance with the
              Maintenance Program prior to return of the Aircraft.

       (v)    All documentation and records shall be in English and shall be
              made available for inspection in the location they are normally
              kept which location shall permit direct access to the Aircraft, at
              least 14 Business Days before the Return Date.

       (vi)   Any and all documentation, data, drawings, records and manuals as
              required to be maintained by the FAA and Scheduled Maintenance
              Requirements Document ("SMRD"), shall be provided, regardless of
              whether such information is considered proprietary.

                                      viii


       (vii)  Hard Landing inspection reports, Lightning Strike inspection
              reports or High Intensity Radiated Field (HIRF) check reports as
              may be required should Aircraft records show evidence of any
              occurrence indicating such inspections or checks to be necessary.

       (viii) CPCP inspection findings and correction reports, as required by
              the Maintenance Program.

               The head of Lessee's quality control department shall sign a
        statement certifying that the data and information contained in the
        documentation and records are true and correct.

   (j) EXTERIOR MARKINGS - At time of return of the Aircraft, Lessee shall, at
       its cost remove from the exterior and interior of the Aircraft Lessee's
       operator specific exterior and interior markings. The area where such
       markings were removed or painted over shall be refurbished by Lessee as
       necessary to blend in with the surrounding surface in a good and
       workmanlike manner.

   (k) OVERHAUL AND REPAIR - All components, rotables, and assemblies (including
       the Engines, APU, and landing gears) shall be documented with work
       orders, vendor serviceable tags, 8130 tags, form 337, etc. to have been
       repaired or overhauled by FAA-certified repair stations in such manner so
       that such components, rotables, assemblies, Engines, APU, and landing
       gears are approved by the FAA for use on United States-registered and
       certified aircraft. All overhaul and repair procedures shall have met all
       FAA requirements necessary to transfer to a new operator under Part 121
       of the U.S. Federal Aviation Regulations.

   (l) STRUCTURAL REPAIRS - All repairs that were performed since the Delivery
       Date and that then exist on the Aircraft shall conform to the SRM and the
       Aircraft Maintenance Manual ("AMM") and shall have FAA approval if
       required, including without limitation repairs related to impact damage
       to the Aircraft caused by ground handling equipment or foreign objects.
       All repairs not covered by the SRM or the AMM shall have been made in
       accordance with Manufacturer's and Lessor's (or its designee's) approval
       if required, which approval shall not be unreasonably be withheld and
       shall be provided with complete data and documentation to verify and
       substantiate their certification and methods of compliance. A complete
       listing of all repairs performed shall be supplied together with the
       Aircraft.

                                       ix


2. CONDITIONS OF AIRFRAME

   On the Return Date the Aircraft shall be as follows:

   (a) C CHECK INSPECTION - The airframe shall have completed, within 100 flight
       hours of return, the next sequential "C" Check or any multiple thereof.
       If the Aircraft has logged more than 100 flight hours since the last "C"
       Check or any multiple thereof, then Lessee shall perform the next
       scheduled "C" Check or any multiple thereof, as applicable. All observed
       defects observed during such C check shall be rectified at Lessee's
       expense, in accordance with the Maintenance Program;

   (b) Structural and other scheduled Inspections - The Airframe shall have at
       least twelve (12) months, or two thousand (2,000) flight hours or cycles,
       whichever is applicable or most limiting, remaining before any scheduled
       structural tasks or maintenance inspections which are not included in (a)
       above. In the event that an structural task or maintenance inspection
       interval is less than the above, Lessee shall, at its expense, perform
       all such tasks immediately prior to return of the Aircraft;

   (c) Landing Gear Life - The main Landing Gear and the nose Landing Gear shall
       have at least fifty percent (50%) of the cycles remaining prior to
       removal for overhaul in accordance with the Maintenance Program, and the
       landing gear total cycles since new ("TCSN") shall be no more than ten
       percent (10%) greater than the airframe TCSN;

   (d) Brakes - The brakes shall have no less than the C check brake wear limits
       with the brakes set at normal parking brake pressure. The tires shall
       have a remaining useful life of at least fifty percent (50%).

3. CONDITION OF CONTROLLED COMPONENTS.

          Aircraft and Engine hour or cycle controlled components or parts, at
   time of return to Lessor (or its designee), shall have remaining, as a
   minimum, one half life and/or fifty percent (50%) of the Lessee's approved
   hour or cycle limit, whichever is applicable or most limiting, before any
   scheduled removals for overhaul, test, disassembly or replacement. All
   components or parts controlled on a calendar basis

                                        x


   shall have at least twelve (12) months or fifty percent (50%) of its total
   approved life in hours or cycles, if greater remaining before scheduled
   removal for testing, overhaul or replacement.

          However, if a component or part has a life, overhaul or check interval
   limit that is less than the above, Lessee shall, at its expense, perform all
   such tasks immediately prior to return. All such hour/cycle or calendar
   controlled components or parts are defined as those components or parts
   controlled under the Maintenance Program.

4. CONDITION OF INSTALLED ENGINES AND APU.

          At time of return, each Engine shall be capable of certificated, full
   rated performance and its life limited parts ("LLP") will have at least fifty
   percent (50%) of cycles remaining before replacement.

   (a) TIME REMAINING - Each Engine shall have completed no more than two
       thousand five hundred (2500) flight hours since new or since its last
       full performance restoration shop visit at which it was subject to a full
       engine management program rework, based on the reliability goals set out
       in RR Allison workscope guide, which currently state that the workscope
       is designed to give 30 degrees centigrade of exhaust gas temperature
       margin and 5,000 flight hours of on-wing life. To the extent that the
       shop workscope guide is amended in the future to include different
       reliability goals then the Engine shall have at least fifty percent (50%)
       of the on-wing hours remaining in accordance with such amended shop
       workscope guide.

   (b) BORESCOPE INSPECTION - On each installed Engine an external visual
       inspection, accessory inventory check and video-taped borescope
       inspection in accordance with the requirements of the Maintenance Program
       shall be performed by Lessee or a designated representative as mutually
       agreed between Lessee and Lessor during the ground inspection per Article
       7.a accompanied by a written report on the findings of such inspection
       herein and satisfactory evidence shall be provided to Lessor (or its
       designee) reflecting the correction of any discrepancies found during
       such inspection.

   (c) ADVERSE TREND DATA - Complete engine records, including but not limited
       to (i) Group A (Lifed) components (as listed in Rolls-Royce's Time Limits
       Manual) as approved by the FAA and (ii) in flight performance data and
       (iii) shop visit reports from all shop visits, shall be made available to
       Lessor (or its designee) for review

                                       xi


       and evaluation. If the Aircraft and/or engine historical and maintenance
       records and/or trend monitoring indicate a rate of acceleration in
       performance deterioration or oil consumption on any installed engine
       beyond the limits of the Maintenance Program, the causes of such
       conditions shall have been corrected prior to the return date.

   (d) OIL SPECTRUM analysis - an oil spectrum analysis shall be made on the
       installed Engines after the Aircraft is removed from service and a
       written report shall be made available together with the Aircraft. Any
       discrepancy found in the engine's lubrication system shall have been
       corrected prior to the return date.

   (e) APU LIFE -The installed APU shall have remaining at least fifty percent
       (50%) of the expected mean time before removal as evidenced by the
       Lessee's demonstrated on-wing last two years average for APU hours,
       before scheduled removal for overhaul, heavy maintenance, or replacement
       of hour limited or LCF parts at the time of return. The APU shall have a
       video taped borescope inspection and magnetic plug inspection during the
       ground inspection per Article 7.a herein.

5. PROVISION FOR "POWER-BY-THE HOUR AGREEMENTS"

       If the Engines, APU, or any other hour or cycle controlled components on
the Termination Date are maintained under valid Power-By-The-Hour Agreements
(the "PBH Agreements") (and either have been maintained throughout the Lease
term under PBH Agreements, or Lessee has made payments to the maintenance
provider to cover the period in which such components were not under such PBH
Agreements), under which the Lessee is current on all payments and otherwise in
good standing, then, if, following termination of this Lease, Lessor has sold or
leased the Aircraft to an operator that has become a party to Lessee's then
existing PBH Agreements relating to the Engines, APU or other hour or cycle
controlled components, or is itself party to a similar power-by-the-hour
agreement for any of the foregoing, in each case such that the Engines, APU
and/or controlled components are eligible for continued maintenance under the
relevant PBH Agreement (or other power-by-the-hour agreement) without additional
costs, start-up charges or overhaul requirements (unless Lessee agrees to pay
and does pay all such amounts), then in lieu of the relevant requirements in
Sections 2.c, 2.d, 3, 4.a or 4.e hereof, the Lessee shall return each such
component in such condition as shall make it eligible for continued maintenance
under a PBH Agreement.

       If however, the Engines, APU, or any other hour or cycle controlled
components on the Termination Date are maintained under valid PBH Agreements as
set forth in the paragraph above but the Lessor has sold or leased the Aircraft
to an operator that has not become a party to Lessee's then existing PBH
Agreements relating to the Engines, APU or other hour or cycle controlled
components, or is itself party to a similar power-by-the-

                                      xii


hour agreement for any of the foregoing, in each case such that the Engines, APU
and/or controlled components are eligible for continued maintenance under the
relevant PBH Agreement (or other power-by-the-hour agreement) without additional
costs, start-up charges or overhaul requirements (unless Lessee agrees to pay
and does pay all such amounts), then the provisions of this Section 5 with
respect to the Power-by-the-Hour Agreements for such Engines, APU and/or
controlled components, as the case may be, in question shall not be operative
and Lessee shall comply with Sections 2(c), 2(d), 3, 4(a) and 4(e) hereof, as
appropriate, and, on the Return Date, make any Equivalency Payments for the
affected Engines, APU and/or controlled components; provided, however, that if
the Aircraft has not been sold as of the Return Date but, within six (6) months
after the Return Date is sold or leased by Lessor to an operator that has become
a party to and succeeded to Lessee's status under such PBH Agreement(s) or has
itself become a party to another power-by-the-hour agreement such that the
Engines, APU and/or controlled components are eligible for continued maintenance
under the relevant PBH Agreement (or other power-by-the-hour agreement) without
additional costs, start-up charges or overhaul requirements (unless Lessee
agrees to pay and does pay all such amounts), Lessor shall promptly refund to
Lessee the portion of the Equivalency Payments (as defined in Section 6 hereof)
paid by Lessee that have not been incurred or expended for any maintenance,
overhaul requirements associated with any power-by-the-hour agreement) with
respect to the affected Engines, APU and/or controlled of the Aircraft.

       For the purposes hereof, a PBH Agreement shall mean a maintenance
program, provided by the Engines, APU or component manufacturer or its successor
or designee, providing full maintenance (other than routine day-to-day
maintenance; provided, that foreign-object damage and abuse may be excluded or
separately charged) for such Engines, APU and/or other components at no cost
other than standard per-cycle rates (i.e., excluding charges based on the
current maintenance status of such component), all benefits of which program,
including but not limited to the payments made by Lessee under such PBH
Agreements while operating the Aircraft, shall be assignable or otherwise
transferable to any other carrier without restrictions of any kind.

6. RETURN CONDITION ADJUSTMENT

   (a) Each item referred to in Sections 2.c, 2.d, 3, the first two lines of
       Section 4 and in Section 4.a and 4.e (each such item, an "Adjustable
       Item" and each such section, an "Adjustable Return Condition") may be
       returned with less than the required limits, subject, however, to the
       minimum requirements set forth in item (e) below.

   (b) If the Lessee does not meet the conditions set forth for an Adjustable
       Item in the relevant Adjustable Return Condition then, on the Return
       Date, Lessee shall pay to Lessor (or its designee) (for deficient
       condition) an Equivalency Payment in accordance with the following
       formula:

                                      xiii


                                      [*]


               The components of the formula above shall be as agreed between
       Lessor (or its designee) and the Lessee. If Lessor (or its designee) and
       the Lessee fail to reach agreement on any components of the above
       formula, such amount will be determined as the average price that would
       be charged by a third party to restore the Aircraft to the conditions set
       forth in the Lease and herein, based on one quotation obtained by Lessor
       (or its designee) and one quotation obtained by Lessee, both from
       reputable, FAA, Manufacturer, and Lessor (or its designee)-approved,
       EMB-145 repair station in the USA. If the prices of such quotations
       differ by more than ten percent (10%), Lessor (or its designee) and
       Lessee shall obtain a third quotation from a another reputable, FAA,
       Manufacturer and Lessor (or its designee)-approved, EMB-145 repair
       station in the USA, the quotation which is farthest from the average of
       all three quotations shall be disregarded and the average of the two
       remaining quotations shall be binding upon Lessor (or its designee) and
       Lessee as the components of the formula.

                                      xiv


- --------------------
* Confidential


   (c) The Equivalency Payment for each return condition of each Adjustable Item
       in the relevant section referred to in the first paragraph of this
       Section 6, whether positive or negative, shall be aggregated in order to
       determine the total Equivalency Payment due from Lessee. (For
       clarification, items in more than the required condition shall be netted
       against items in less than the required condition when determining the
       amount of the total payment due, provided however that such netting is
       only applicable to the following major components: Engines, APU and
       landing gear). If the cumulative Equivalency Payment after such netting
       is negative, it shall be deemed to be zero.

   (d) In no event shall the Equivalency Payment due from the Lessee to Lessor
       exceed the aggregate amount of any payment and expenses that Embraer may
       make under the Residual Value Guaranty.

   (e) Notwithstanding the equivalency charges that may be otherwise payable or
       available under this Section 6, if:

       (i)   Any installed Engine has completed more than 3,750 flight hours
             since new or since its last full performance restoration shop visit
             at which it was subject to a full engine management program rework
             (or less than twenty-five percent (25%) of the on-wing hours
             remaining in accordance with an amended RR Allison shop workscope
             guide),

       (ii)  Any Engine life limited part has a remaining useful life until the
             next scheduled replacement of less than twenty five percent (25%),

       (iii) The APU has remaining less than twenty five (25%) of the expected
             mean time before removal;

       (iv)  The main landing gear or the nose landing gear has less than twenty
             five percent (25%) of the cycles remaining prior to removal for
             overhaul, or the cycles exceed one hundred and ten percent (110%)
             of the airframe, or

       (v)   The brakes have less than the C check brake wear limits with the
             brakes set at normal parking brake pressure, or the tires have a
             remaining useful life of less than twenty five percent (25%),

                                       xv


       then, in any such case, Lessee shall, at its own cost and expense,
   overhaul, refurbish and/or replace each non-complying item so that it meets
   the applicable level specified in items (i) through (v) above.

7. INSPECTION UPON RETURN

       Lessor (or its designee) shall have the right to inspect the Aircraft
   upon return, and the following conditions shall apply:

   (a) GROUND INSPECTION - The Aircraft including the Aircraft Documentation
       shall be made available to Lessor (or its designee) for ground inspection
       by Lessor (or its designee) at Lessee's facilities. Such inspection shall
       commence no later than fourteen (14) Business Days prior to the date of
       return of the Aircraft. Lessee shall remove the Aircraft from scheduled
       service and open the areas of the Aircraft as required to perform the
       necessary checks as specified in Section 2 hereof. In addition, Lessee
       shall allow Lessor (or its designee) to accomplish its inspection to
       determine that the Aircraft, including the Aircraft Documentation are in
       the condition set forth in Section 1, 2, 3 and 4 hereof. During such
       checks, Lessor's (or its designee's) personnel shall have the right to
       reasonably request that adjacent additional panels or areas be opened in
       order to allow further inspection by Lessor's (or its designee's)
       personnel.

   (b) OPERATIONAL GROUND CHECK - Lessee shall conduct an operations ground
       check on the Aircraft in accordance with the Maintenance Program manual
       criteria for the purpose of demonstrating to Lessor (or its designee) the
       satisfactory operation of the systems, including a full fuel tank leak
       check, pilot and static systems check and hydraulic system internal leak
       check.

   (c) OPERATIONAL TEST FLIGHT - After correction of any Discrepancies
       identified in Sections 7(a) or (b), the Aircraft shall be test flown by
       Lessee, using qualified flight test personnel, for the amount of time
       necessary to satisfactorily demonstrate the airworthiness of the Aircraft
       and the proper functioning of all systems and components in accordance
       with the agreed check flight procedures. During such test flight command,
       care, custody and control of the Aircraft shall remain at all times with
       Lessee. Up to five (5) of Lessor's (or its designee's) designated
       representatives (or more if mutually agreed) may participate in such
       flight as observers. Upon completion of such operational flight-testing,
       the representatives of Lessee and Lessor (or its designee) participating
       in such testing shall agree in

                                      xvi


       writing upon any discrepancies required to be corrected by Lessee in
       order to comply with the conditions required hereunder.

   (d) If requested by Lessor (or its designee) in writing, all discrepancies
       which are noted during the inspection and acceptance flight(s) shall be
       corrected at Lessee's expense. If such discrepancies are substantiated by
       the Maintenance Program and Lessor (or its designee) determines that
       repairs, modifications or other work items are required to cause the
       Aircraft to comply with the requirements provided herein, including,
       without limitation, any maintenance required so that the Engines will
       meet all Engine parameters and trends specified by the Maintenance
       program, Lessee shall cause such repairs and other work items to be
       commenced and completed prior to return.

       DEFINITIONS

       MAINTENANCE PROGRAM: means the maintenance program as originally agreed
among Manufactuer, Lessor (or its designee) and Lessee, as such program may be
from time to time amended and supplemented by Lessee and which (i) shall have
been approved by the U.S. Federal Aviation Administration or any successor
agency (the "FAA"), (ii) shall fully comply with the requirements of the FAA for
the EMB-145 and Rolls-Royce Allison AE3007A1 aero engines (or an improved model,
as the case may be) installed thereon, and (iii) shall incorporate the
requirements of the EMB-145 Scheduled Maintenance Requirements Document Part 1
("SMRD"), the Aircraft Maintenance Manual ("AMM"), the Structural Repair Manual
("SRM"), the CPCP and the Original Equipment Manufacturers' ("OEMs") maintenance
manuals, (all of the foregoing as from time to time amended or supplemented),
the Service Newsletters and the service bulletins issued by Embraer and all OEMs

       CALENDAR CONTROLLED COMPONENTS OR PARTS: those components or parts, which
are identified in the Maintenance Review Board Report ("MRB Report") which have
maintenance tasks at specific calendar-time intervals.

       CYCLE-CONTROLLED COMPONENTS OR PARTS: those components or parts, which
are identified in the MRB Report which have maintenance tasks at specific
flight-cycle intervals.

                                      xvii


       HOUR-CONTROLLED COMPONENTS OR PARTS: those components or parts, which are
identified in the MRB Report which have maintenance tasks at specific
flight-hour intervals.

       LIFE CYCLE FATIGUE ("LCF") PARTS: those rotating parts which have
specific cycle limits as specified by the manufacturer to preclude cycle fatigue
failures.

         MAINTENANCE REVIEW BOARD REPORT ("MRB REPORT"): the report published by
the maintenance review board detailing the intervals and description of the
maintenance tasks and, where applicable, the life limits required for continued
airworthiness of the Aircraft. Where the intervals specified in the MRB Report
differ from the limit specified by the component manufacturer, the MRB Report
shall take precedence.

       TERMINATING ACTION: the alteration or modification of the Aircraft in
accordance with mandatory service bulletins, orders, airworthiness directives,
and instructions required to eliminate repetitive inspections or maintenance
action.

       [The remainder of this page has been left blank intentionally.]

                                xviii

EX-10.56

                                                                   Exhibit 10.56

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

                         INTERIM LOAN AGREEMENT (N375SK)

                                      among

                            CHAUTAUQUA AIRLINES, INC.

                                  As Borrower,

                                       and

                 EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A.

                          Dated as of February 20, 2002

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



            INTERIM LOAN AGREEMENT (N375SK), dated as of February 20, 2002,
between Chautauqua AIRLINES, INC., a New York corporation (the "Borrower" or
"Chautauqua Airlines"), and Embraer-Empresa Brasileira de Aeronautica S.A., a
Brazilian Federal public company, with its main offices in Av. Brig. Faria Lima,
2170, 12227-901, Sao Jose dos Campos, Brazil (the "Lender" or "Manufacturer").

            WHEREAS, Solitair Corp. ("Solitair") and the Manufacturer have
entered into the Purchase Agreement, pursuant to which the Manufacturer has
agreed to manufacture and sell to Solitair, and Solitair has agreed to purchase
and take delivery from the Manufacturer, from time to time, of, among other
things, EMB-145 model EMB-135 KL aircraft, each equipped with two Rolls-Royce
AE3007A1/3 series engines;

            WHEREAS, Solitair desires to assign its right to purchase the
Aircraft (as defined below) to the Borrower and Borrower desires to purchase the
Aircraft, pursuant to a partial assignment of the Purchase Agreement;

            WHEREAS, Borrower and Lender desire to enter into this Loan
Agreement in order to facilitate Borrower's acceptance of delivery of the
Aircraft pursuant to the Purchase Agreement as assigned.

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

                             SECTION 1. DEFINITIONS

            1.1 DEFINITIONAL PROVISIONS. (a) Unless otherwise specified herein
or therein, all capitalized terms used in this Agreement, the Note or any
certificate or other document made or delivered pursuant hereto shall have the
meanings set forth in Annex A hereto.

            (b) As used herein and in the Note, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
Borrower and its Subsidiaries, to the extent not otherwise defined, shall have
the respective meanings given to them under GAAP.

            (c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Annex, Schedule and Exhibit references are to this Agreement unless
otherwise specified.

            (d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

            (e) References to any Person shall include such Person's successors
and assigns subject to any limitations provided for herein or in the other
Borrower Loan Documents.


            (f) References to agreements shall include such agreements as
amended, modified or supplemented.

            (g) The words "include," "includes" and "including" are not
limiting.

                       SECTION 2. AMOUNT AND TERMS OF LOAN

            2.1 PROCEDURE FOR BORROWING. On the Borrowing Date, the Lender shall
make the Loan to the Borrower in Dollars in the amount of the Commitment. The
closing (the "CLOSING") of the Loan shall take place before 12:30 P.M., New York
time, on the Borrowing Date at the offices of Rosenman & Colin LLP, New York,
New York, or at such other time and place as the parties hereto shall have
agreed. The Lender shall make the Loan to the Borrower by delivering the
Aircraft to Borrower pursuant to the Purchase Agreement, which Loan shall be
applied to Borrower's obligation to pay the Purchase Price under the Purchase
Agreement.

            2.2 TERMS OF REPAYMENT OF THE LOAN; INTEREST; EVIDENCE OF DEBT. (a)
the Borrower shall make scheduled principal payments on the Loan in monthly
installments in the amounts and on the dates identified on Schedule 1 hereto
(each such date, a "Payment Date").

            (b) On each Payment Date, the Borrower shall pay interest accrued in
respect of the unpaid principal amount of the Loan from the date the proceeds
made thereof are made available to the Borrower until such date, at the Debt
Rate. The expected amounts of such interest for each Payment Date are stated on
Schedule 1 hereto.

            (c) The Borrower hereby unconditionally promises to pay to the
Lender the unpaid principal amount of and accrued interest on the Loan on the
Maturity Date.

            (d) Payment of all amounts due to the Lender hereunder or under the
Note shall be payable by the Borrower in Dollars in Immediately Available Funds
to the Lender by wire transfer at such account as is specified by the Lender no
later than 11:30 A.M., New York time, on the due date therefor.

            (e) Upon payment in full by the Borrower of the principal of, and
interest on, the Note and all other amounts then due and owing under any
Borrower Loan Document or as otherwise agreed in the Borrower Loan Documents,
the Note shall be surrendered by the Lender to the Borrower for cancellation and
the Lender shall execute and deliver to the Borrower pursuant to Section 7.1 of
the Security Agreement an appropriate instrument or instruments (in due form for
recording) releasing the Aircraft and the balance of the Collateral from the
Lien of the Security Agreement.

            (f) The Borrower agrees to execute and deliver to the Lender on the
Borrowing Date a promissory note of the Borrower evidencing the Loan, such note
to be substantially in the form of Annex B hereto, with appropriate insertions
as to date and principal


                                       3


amount payable to the Lender in a principal amount in Dollars equal to the
principal amount of the Loan (the "NOTE").

            (g) If (i) the principal of the Loan, (ii) any interest payable
thereon or (iii) any other amount relating to the Loan payable hereunder or
under any other Borrower Loan Document shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise and not giving effect to any
grace period in determining when any such amount is due), to the extent
permitted by applicable law, the amount of such overdue principal, interest or
other amount shall bear interest at the Default Rate, in each case from and
including the date of such non-payment until but excluding the date on which
such overdue principal, interest or other amount is paid in full (as well after
as before judgment). Interest accruing pursuant to the preceding sentence of
this Section 2.2(f) shall be payable from time to time on demand.

            (h) Interest shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each. Any payment hereunder that would
otherwise be due on a day that is not a Business Day shall be due on the next
Business Day.

            (i) The Borrower agrees to record separately the name and address
and any other necessary identifying information of Lender in a register
maintained as part of a book-entry system. The Borrower and the Lender shall
treat the party whose name is recorded in such register as Lender with all
entitlements under this Agreement. The Borrower shall record the name of the
transferor, the name of the transferee and the amount of the transfer in the
register in the case of a transfer. Notwithstanding anything to the contrary set
forth in this Agreement or the other Borrower Loan Documents, no assignment or
transfer by the Lender of any rights or obligations under or in respect of the
Loan or the Note shall be effective unless and until the Borrower shall have
recorded such assignment or transfer in the register maintained pursuant to this
paragraph; provided that if any such assignment or transfer occurs while an
Event of Default has occurred and is continuing, Lender may act as Borrower's
agent for effecting registration of such assignment or transfer.

            (j) Payments of principal and other amounts due hereunder shall be
applied as follows: FIRST, to the payment of any amount (other than principal
and interest) due to Lender hereunder or under the Borrower Loan Documents;
SECOND, to the payment of accrued and unpaid interest due hereunder; and THIRD,
to the repayment of principal hereunder.

            (k) the terms of the Loan shall be subject to the provisions of the
Letter Agreement (N375SK) dated as of the date hereof between the Lender, the
Borrower and Solitair Corp., and, to the extent of any inconsistency between any
Borrower Loan Document and the Letter Agreement, the Letter Agreement shall
govern.

            2.3 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If the Note shall
become mutilated, destroyed, lost or stolen, the Borrower shall, upon the
written request of the registered holder thereof, issue, and deliver in
replacement thereof, a new Note, payable to such registered holder in the same
principal amount, with the same final maturity date, bearing the same interest


                                       4


rate and dated the same date as the Note so mutilated, destroyed, lost or
stolen. If the Note being replaced has become mutilated, such Note shall be
surrendered to the Borrower. If destroyed, lost or stolen, Lender shall furnish
to the Borrower such indemnity as may be reasonably required by the Borrower to
save the Borrower harmless from any cost, expense, damage, loss and liability
resulting therefrom, and an affidavit as to the destruction, loss or theft of
such Note and of the ownership thereof.

            2.4 PREPAYMENT.

            (a) Except as expressly provided in SECTIONS 2.4(b) or 2.4(c), the
Borrower may not prepay the Note.

            (b) Upon the occurrence of a Total Loss with respect to the Aircraft
on the Loss Payment Date, the Borrower shall prepay the principal of the Loan
together with all accrued and unpaid interest on the Loan and all other amounts
then due with respect to the Loan. Any sums payable to the Borrower by any
insurer or any other Person respecting the foregoing shall be paid over to the
Lender and applied as provided in Section 3 of the Security Agreement.

            (c) The Borrower shall have the right to prepay the Loan in full
prior to the Maturity Date, without premium or penalty, upon 10 days' prior
notice to the Lender; PROVIDED that no Event of Default shall have occurred and
be continuing, and PROVIDED that such prepayment includes the principal and all
other liabilities of the Borrower then due and owing under the Borrower Loan
Documents.

            2.5 USE OF PROCEEDS OF THE LOAN. The proceeds of the Loan shall be
applied by the Borrower solely towards payment for purchase of the Aircraft.

            2.6 TAXES. All payments to or for the account of the Lender under
this Agreement or the other Borrower Loan Documents shall be made without
deduction or withholding for or on account of any present or future Indemnified
Taxes whether or not collected by way of withholding or deduction from any
payment thereunder. If any amount payable to the Lender under this Agreement or
the other Borrower Loan Documents becomes subject to any Indemnified Tax imposed
by way of withholding or deduction, the Borrower shall indemnify and hold
harmless the Lender against such Indemnified Taxes and shall pay an additional
amount to the Lender so that the net amount actually received by the Lender,
after reduction by withholding of any such Indemnified Tax, including any
reduction for withholding applicable to additional sums payable under this
Section 2.8, shall be equal to the full amount that the Lender would have
otherwise received under this Agreement or the other Borrower Loan Documents.
Whenever any withholding Taxes are paid by the Borrower, the Borrower shall
promptly forward to the Lender an official receipt (or certified copy thereof)
or other documentation reasonably acceptable to the Lender evidencing such
payment to the relevant tax authority. The Lender agrees to provide to the
Borrower, not later than the Borrowing Date, and at reasonable times thereafter
upon the request of the Borrower, an IRS Form W-8 BEN properly completed and
executed by the Lender or any substantively identical successor form, provided


                                       5


that such Form W-8 BEN shall only be required after the Borrowing Date if
payments under this Agreement to the Lender would not otherwise be exempt from
withholding under U.S. Tax Laws; provided, however, that each Loan Transferee or
Loan Participant agrees to provide to Borrower upon its request, either IRS Form
W-9, IRS Form W-8 BEN or such other IRS Form W-8, as appropriate, but such form
will only be required from a Loan Transferee or Loan Participant if payments
under this Agreement to the Loan Transferee or the Loan Participant would not
otherwise be exempt from withholding under U.S. Tax Laws.

                    SECTION 3. REPRESENTATIONS AND WARRANTIES
                                 OF THE BORROWER

            3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Borrower (1) is a
corporation duly organized, validly existing and in good standing pursuant to
the laws of its jurisdiction of incorporation, (2) is duly qualified to do
business as a foreign corporation in good standing in all jurisdictions in which
failure so to qualify would have a Material Adverse Effect, (3) is a Citizen of
the United States and a Certificated Air Carrier, (4) holds all licenses,
certificates, permits and franchises from the appropriate agencies of the United
States of America and/or all other Governmental Authorities having jurisdiction
necessary to authorize it to engage in air transport and to carry on scheduled
passenger service as presently conducted (except for any of the foregoing the
failure of the Borrower to hold or maintain which would not have a Material
Adverse Effect), (5) has its chief place of business and chief executive office
(as such terms are defined in Article 9 of the Uniform Commercial Code) at 2500
S. High School Road, Indianapolis, Indiana, (6) has the corporate power and
authority to carry on its business as currently conducted, and (7) except for
"code sharing" arrangements with other airlines, does not conduct business under
a trade, assumed or fictitious name.

            3.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Borrower of this Agreement have been
duly authorized by all necessary corporate action on the part of the Borrower,
do not require any stockholder approval, or approval or consent of any trustee
or holders of any indebtedness or obligations of the Borrower except such as
have been duly obtained, and this Agreement does not contravene any law,
judgment, government rule, regulation or order now binding on the Borrower, or
the Articles of Incorporation or Bylaws of the Borrower, or contravene the
provisions of, or constitute a default under, or result in the creation of any
Lien (except as provided in the Security Agreement) upon the property of the
Borrower under its Articles of Incorporation or Bylaws or any indenture,
mortgage, contract or other agreement to which the Borrower is a party or by
which it or any of its properties is bound or affected. Neither the execution
and delivery by the Borrower of this Agreement nor the performance by the
Borrower of its obligations hereunder require the consent, approval or
authorization of, the giving of notice to, or the registration with, or the
taking of any other action in respect of any federal, state or foreign
Governmental Authority (other than a Brazilian Governmental Authority) or agency
on the part of the Borrower in connection with the borrowing of the Loan or with
the execution, delivery, performance, validity or enforceability of the Borrower
Loan Documents to which the Borrower is a party other than, with respect to the
Aircraft, (a) the application for registration of such Aircraft in the name of
the Borrower with the


                                       6


FAA pursuant to the FAA Application for Aircraft Registration, (b) the filing
for recordation of the FAA Bill of Sale, the Security Agreement and the Security
Agreement Supplement and (c) the filing of a properly completed Uniform
Commercial Code financing statement and the filing of continuation statements
with respect thereto. Assuming due authorization, execution and delivery of this
Agreement by Lender, this Agreement, when entered into by the Borrower, will
constitute a valid and legally binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law);
and an implied covenant of good faith and fair dealing.

            3.3 PURPOSE OF THE LOAN. The proceeds of the Loan will be used by
the Borrower to purchase the Aircraft under the Purchase Agreement.

            3.4 SECURITY AGREEMENT. Except for (1) the registration of the
Aircraft in the name of the Borrower pursuant to the Transportation Code, (2)
the filing and recordation pursuant to the Transportation Code of the FAA Bill
of Sale, the Security Agreement and the Security Agreement Supplement and, (3)
the filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of New York, no further action,
including any filing or recordation of any document (including any financing
statement in respect thereof under Article 9 of the Uniform Commercial Code of
any applicable jurisdiction), is necessary in order to establish and perfect the
security interest in the Aircraft as against the Borrower and any other Person
in any applicable jurisdiction in the United States;

            3.5 LITIGATION. (a) There is no pending or, to the knowledge of the
Borrower, threatened action or proceeding before any court or administrative
agency, and there are no final judgments of record against the Borrower which,
either individually or in the aggregate in the case of any group of related
lawsuits, is reasonably likely to have a Material Adverse Effect;

            (b) The Borrower is not in default of any material obligation for
the payment of borrowed money, for the deferred purchase price of property or
for the payment of any rent, nor is there any event which has occurred and is
continuing that, under the terms of the indenture, mortgage, loan agreement or
other agreement or instrument relating to such obligation, with the lapse of
time or the giving of notice, or both, would constitute a default thereunder,
which default(s), either individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect; and

            (c) The Borrower is not in violation of any law, order, injunction,
decree, rule or regulation applicable to the Borrower of any court or
administrative body, which violation would be reasonably likely to have a
Material Adverse Effect;


                                       7


            3.6 NO DEFAULT. There has not occurred any event which constitutes a
Default or an Event of Default under this Agreement which is presently
continuing;

            3.7 TAXES. The Borrower has filed or caused to be filed all U.S.
federal, state and local and non-U.S. tax returns that are required to be filed
by them and have paid or caused to be paid all taxes shown to be due on such
return or on any assessment received by the Borrower, except any that are being
contested diligently and in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP;

            3.8 ERISA. (a) No "employee benefit plan" (as defined in Section
3(3) of ERISA) maintained by the Borrower or any ERISA Affiliate of either has
incurred an "accumulated funding deficiency" (within the meaning of ERISA) and
neither the Borrower nor any ERISA Affiliate of either has incurred any material
liability to the Pension Benefit Guaranty Corporation;

            (b) Each Plan is in compliance in all material respects with the
      applicable provisions of ERISA, the Code (including all provisions
      thereof, compliance with which is required for any intended favorable Tax
      treatment) and other federal or state law, except where such
      non-compliance is not reasonably be expected to have a Material Adverse
      Effect. Each Plan which is intended to qualify under Section 401(a) of the
      Code has received a favorable determination letter from the IRS and, to
      the best knowledge of the Borrower, nothing has occurred that would cause
      the loss of such qualification. The Borrower and each ERISA Affiliate have
      made all required contributions to any Plan subject to Section 412 of the
      Code, and no application for a funding waiver or an extension of any
      amortization period pursuant to Section 412 of the Code has been made with
      respect to any Plan. There are no pending or, to the best knowledge of the
      Borrower, threatened claims, actions or lawsuits, or action by any
      Governmental Authority, with respect to any Plan that has resulted, or is
      reasonably expected to result, in a Material Adverse Effect. There has
      been no prohibited transaction or violation of the fiduciary
      responsibility rules with respect to any Plan which has resulted or could
      reasonably be expected to result in a Material Adverse Effect; and

            (c) The Borrower's interest in the Aircraft does not and will not
      constitute the assets of any "employee benefit plan" as defined in Section
      3(3) of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
      the Code;

            3.9 SECTION 1110. Lender is entitled to the protection of Section
1110 of the United States Bankruptcy Code in connection with its right to take
possession of the Aircraft in the event of a case under Chapter 11 of the United
States Bankruptcy Code in which the Borrower is a debtor;

            3.10 INVESTMENT COMPANY. None of the Borrower or any subsidiary or
Affiliate of it is an "investment company" required to be registered under the
Investment Company Act of 1940, as amended;


                                       8


            3.11 MARGIN STOCK. The Borrower is not engaged principally in the
business of extending credit for the purpose of buying or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System ("REGULATION U")) and none of the proceeds from the issuance of
the Note will be used directly or indirectly by the Borrower to purchase or
carry "margin stock" as such term is defined in Regulation G of the Board of
Governors of the Federal Reserve System;

            3.12 FINANCIAL STATEMENTS. The financial statements and any related
notes of the Borrower of the fiscal year ended December 31, 2000 have been
prepared in accordance with GAAP, and fairly present in all material respects in
accordance with GAAP the financial condition of the Borrower as at such date and
the results of its operations for the periods covered by such statements, and
since December 31, 2000, there has been no change in such condition or
operations which would result in any Material Adverse Effect;

           SECTION 4. CONDITIONS PRECEDENT TO THE LENDER'S OBLIGATIONS

            The agreement of the Lender to make the Loan requested to be made by
it to the Borrower on the Borrowing Date is subject to the satisfaction, or
waiver by the Lender, of the following conditions precedent prior to or
concurrently with the making of the Loan:

            4.1 MATERIAL ADVERSE CHANGE. (a) no event shall have occurred that
would result in a Material Adverse Change since December 31, 2000, in the
business, operations or financial condition of the Borrower which change has a
material adverse impact on the Borrower's ability to perform any of its
obligations under the Borrower Loan Documents to which it is a party.

            (b) No change shall have occurred after the date of the execution
and delivery of this Loan Agreement in Applicable Law which would make it a
violation of law or regulations for (1) the Borrower or the Lender to execute,
deliver and/or perform the Borrower Loan Documents to which any of them is a
party or (2) the Lender to make its Commitment available.

            4.2 FEES AND EXPENSES. (a) On the Borrowing Date, the Lender shall
have received from Borrower all amounts then accrued and payable to Lender
pursuant to Section 9.11.

            4.3 DOCUMENTS. Assuming due authorization, execution and delivery by
the Lender and each other party other than the Borrower of the Borrower Loan
Documents to which it is a party, each of the Borrower Loan Documents shall have
been duly authorized, executed and delivered by the Borrower and shall be in
full force and effect and executed counterparts shall have been delivered to the
Borrower and the Lender, and their respective counsel, PROVIDED that only the
Lender shall receive executed originals of the Note.


                                       9


            4.4 SECURITY INTEREST. A Uniform Commercial Code financing statement
naming Lender as secured party in respect of the security interest created by or
pursuant to the Security Agreement shall have been executed and delivered by the
Borrower.

            4.5 AUTHORIZATION. On the Borrowing Date, the Lender shall have
received the following, in each case in form and substance reasonably
satisfactory to it:

            (a) a copy of the Articles of Incorporation of the Borrower
      certified by the Secretary of State of the State of New York and a copy of
      the Bylaws and resolutions of the board of directors of the Borrower
      certified by the Secretary or Assistant Secretary of the Borrower, duly
      authorizing the execution, delivery and performance by the Borrower of
      each of the Borrower Loan Documents to which the Borrower is a party, and
      an incumbency certificate as to the Person or Persons authorized to
      execute and deliver such documents on its behalf and including specimens
      of the signatures of such Person or Persons; and

            (b) such other documents and evidence with respect to the Borrower
      as the Lender or its counsel may reasonably request in order to establish
      the authority of the Borrower to consummate the Borrower Loan Documents to
      which it is a party and the taking of all corporate proceedings in
      connection therewith.

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

            4.7 FAA MATTERS. On the Delivery Date the following statements shall
be true, and the Lender shall have received evidence reasonably satisfactory to
it to the effect that:

            (a) Subject to the filing and recordation with the FAA of the FAA
      Aircraft Registration Application and the FAA Bill of Sale on the Delivery
      Date, the Borrower has good and valid title to the Aircraft, free and
      clear of Liens other than the rights of Lender pursuant to the security
      interest created by the Security Agreement;

            (b) The FAA Aircraft Registration Application in the name of the
      Borrower (together with any required affidavits) has been duly filed with
      the FAA;

            (c) Subject on the Delivery Date to the registration of the Aircraft
      in the name of the Borrower with the FAA, the Borrower has authority from
      all applicable


                                       10


      Governmental Authorities to (i) bring the Aircraft into the United States
      and (ii) operate such Aircraft;

            (d) The FAA Bill of Sale and the Security Agreement have been duly
      filed with the FAA for recordation;

            (e) The Lender is entitled to the protection of Section 1110 of the
      United States Bankruptcy Code in connection with its rights to take
      possession of the Aircraft in the event of a case under Chapter 11 of the
      United States Bankruptcy Code in which the Borrower is a debtor; and

            (f) On the Delivery Date, the Borrower shall be in the process of
      obtaining an FAA Certificate of Airworthiness for the Aircraft;

            4.8 REPRESENTATIONS. The representations and warranties of the
Borrower contained herein and in the other Borrower Loan Documents to which the
Borrower, is a party shall be true and accurate as though made on and as of such
date except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such date), and the Lender shall have
received a certificate of a Responsible Officer of the Borrower to such effect.

            4.9 ADDITIONAL CONDITIONS. On the Delivery Date,

            (a) no event shall have occurred and be continuing, or be reasonably
likely to result from the purchase, sale or mortgage of the Aircraft, which
constitutes a a default or a breach under the Purchase Agreement;

            (b) no Material Adverse Change shall have occurred, or other event
that would have a Material Adverse Effect; and

            (c) the Aircraft shall be located in Sao Jose dos Campos, Sao Paulo,
Brazil or such other location as may be acceptable to the Lender; and

            4.10 OPINIONS. On the Borrowing Date the Lender shall have received
an opinion addressed to it from Hughes Hubbard & Reed, LLP, counsel for the
Borrower, in form and substance reasonably satisfactory to it.

            4.11 CERTIFICATES. The Lender shall have received a certificate
signed by an officer of the Borrower dated the Delivery Date addressed to the
Lender and certifying as to the fulfillment of all conditions in Section 4.6
(insofar as it relates to the United States), Section 4.8 and Section 4.14 (to
the knowledge of the Borrower).


                                       11


            4.12 INSURANCE. The Lender shall have received an independent
insurance broker's report, and certificates of insurance, in form and substance
reasonably satisfactory to the Lender, as to the due compliance with the terms
of Section 3.4 of the Security Agreement relating to insurance with respect to
the Aircraft.

            4.13 TOTAL LOSS. On the Delivery Date no Total Loss (or event which
with the passage of time would be reasonably likely to become a Total Loss) with
respect to the Airframe or any Engine shall have occurred.

            4.14 LITIGATION. No action or proceeding shall have been instituted
nor shall governmental action be threatened before any court or Governmental
Authority, nor shall any order, judgment or decree have been issued or proposed
to be issued by any court or Governmental Authority at the time of the Delivery
Date to set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or any of the transactions contemplated hereby.

            4.15 CLOSING DOCUMENTS. All proceedings taken in connection with the
transactions contemplated hereby and the other Borrower Loan Documents and all
documents and papers relating thereto shall be reasonably satisfactory to the
Lender and its counsel, and the Lender and its counsel shall have received
copies of such documents and papers as the Lender or its counsel may reasonably
request in connection therewith or as a basis for such counsel's closing
opinion, all in form and substance reasonably satisfactory to the Lender and its
counsel.

            4.16 CREDIT APPROVAL. On the Borrowing Date, Lender shall have
received a copy of (1) the printout of the screen of the Register of Export - RE
and of the Register of Credit Operation - RC, obtained through the SISCOMEX
(Bureau of Foreign Trade) System, evidencing the authorization for export of the
Aircraft and showing and Agencia Especial de Financiamento Industrial as
lender/creditor in connection with the financing of the Total Invoice Cost of
the Aircraft, and (2) the written approval (in a form reasonably satisfactory to
Lender) obtained by the Manufacturer from the Governmental Authority
administering the Proex Program relating to the application of the Proex Program
to the Aircraft as financed at the Closing pursuant to the provisions of the
Borrower Loan Documents.

                           SECTION 5. QUIET ENJOYMENT

            The Lender agrees that so long as no Event of Default shall have
occurred and be continuing, neither it nor any other Person claiming by, through
or under it shall take any action contrary to, or otherwise in any way interfere
with or disturb, the quiet enjoyment of the use and possession of the Aircraft,
the Airframe or any Engine by the Borrower or any transferee of any interest in
any thereof permitted under the Security Agreement.

                        SECTION 6. INTENTIONALLY OMITTED


                                       12


                      SECTION 7. COVENANTS OF THE BORROWER

            7.1 COVENANTS OF THE BORROWER. The Borrower hereby agrees that, so
long as the Loan is owing to the Lender hereunder, it shall furnish to the
Lender:

                  (a) (i) within 45 days after the end of each of the first
            three quarterly fiscal periods in each fiscal year of the company, a
            consolidated balance sheet of the Borrower (and its consolidated
            subsidiaries, if any) prepared by it as of the close of such period,
            together with the related consolidated statements of income and
            changes in cash flow for such period, together with a certificate of
            an authorized officer of the Borrower that such financial statements
            present fairly in all material respects in accordance with generally
            accepted accounting principles the information contained therein
            subject to year end adjustments and the absence of required
            footnote,

                  (ii) within 120 days after the close of each fiscal year of
            the Borrower, a consolidated balance sheet of the Borrower (and its
            consolidated subsidiaries, if any) as of the close of such fiscal
            year, together with the related consolidated statements of income
            and changes in cash flow for such fiscal year, as audited by
            independent public accountants.

            (b) together with the delivery of each set of financial statements
      pursuant to paragraphs (a) above, a certificate executed by an authorized
      officer of the Borrower stating that, to his knowledge, no Default or
      Event of Default has occurred thereunder or if any has occurred specifying
      the nature thereof and the steps proposed to be taken to cure such Default
      or Event of Default, if curable;

            (c) such other reports and information regarding the Borrower as
      Lender shall reasonably request;

            (d) INTENTIONALLY OMITTED

            (e) Promptly upon receipt thereof by the Borrower, copies of all
      communications regarding any event that could reasonably be expected to
      result in a Material Adverse Effect, received by the Borrower from the
      manufacturer of any of the Engines or the Borrower's insurance carrier or
      broker, as the case may be, and promptly upon sending the same, copies of
      all notices and communications regarding events described above sent by
      the Borrower to such manufacturer of such Engines or such insurance
      carrier or broker.


                                       13


            7.2 COVENANTS OF THE BORROWER. The Borrower will not consolidate
with or merge into any other person under circumstances in which Borrower 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 of Columbia and, upon consummation of such transaction, such
      person will be a Certificated Air Carrier;

                  (b) such Person executes and delivers to the Lender a duly
      authorized, legal, valid, binding and enforceable agreement, reasonably
      satisfactory in form and substance to Lender, containing an effective
      assumption by such person of the due and punctual performance and
      observance of each covenant, agreement and condition in the Borrower Loan
      Documents to be performed or observed by Borrower;

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

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

                  (e) the net worth (as determined under GAAP) of such Person
      immediately after giving effect to such transaction is not materially less
      than the greater of (x) the net worth (determined as aforesaid) of the
      Borrower immediately prior to such transaction or (y) the net worth
      (determined as aforesaid) of the Borrower on March 31, 2001.

                  Upon any such consolidation or merger of Borrower with or
      into, or the conveyance, transfer or lease by Borrower of all or
      substantially all of its assets to, any person in accordance with this
      Section 7.2, such Person will succeed to, and be substituted for, and may
      exercise every right and power of, Borrower under the Borrower Loan
      Documents with the same effect as if such Person had been named as
      "Borrower" therein. No such consolidation or merger, or conveyance,
      transfer or lease, shall have the effect of releasing Borrower or such
      Person from any of the obligations, liabilities, covenants or undertakings
      of Borrower under the Borrower Loan Documents.

            7.3 CERTAIN ADDITIONAL COVENANTS OF BORROWER . The Borrower agrees
and covenants that it will:

            (a) EXISTENCE AND CITIZENSHIP. At all times maintain (a) subject to
      Section 7.2, its corporate existence in good standing under the laws of
      its charter jurisdiction and keep current all necessary filings related
      thereto, (b) its status as a Citizen of the United States, (c) its status
      as a Certificated Air Carrier, (d) its right to transact business in each


                                       14


      jurisdiction in which the character of the properties owned or leased by
      it or the business conducted by it makes such qualification necessary,
      except to the extent failure to comply with this clause (d) will not have
      a Material Adverse Effect and (e) all licenses, certificates, permits and
      franchises necessary to authorize the Borrower to engage in the business
      of air transport and the carrying on of scheduled passenger service as
      presently conducted.

            (b) PAYMENT OF TAXES AND CLAIMS. Pay when due all Taxes, assessments
      and other liabilities payable by the Borrower, except (other than with
      respect to Taxes collected by withholding) as contested in good faith and
      by appropriate proceedings, PROVIDED reserves reasonably deemed
      appropriate by the Borrower have been established with respect thereto,
      and except to the extent that failure to comply with this Section 7.3(b)
      will not have a Material Adverse Effect.

            (c) NOTICE OF LITIGATION. Give prompt written notice to the Lender
      in reasonable detail of any litigation or governmental proceeding pending
      or, to its knowledge, threatened against the Borrower that Borrower would
      have had to have report if it were subject to, the reporting requirements
      of the Securities Exchange Act of 1934, as amended.

            (d) SALE OF THE COLLATERAL. Not sell, transfer, convey, lease or
      otherwise dispose of (or enter into any commitment to sell, transfer,
      convey, lease or otherwise dispose of) all or part of the Collateral
      (whether in one or a series of transactions), except as permitted pursuant
      to the Security Agreement.

            (e) LOCATION OF CHIEF PLACE OF BUSINESS. Not change the location of
      its chief place of business or chief executive office without 30 days'
      prior written notice to Lender (which relocation shall not occur to a
      jurisdiction in which the Uniform Commercial Code has not been enacted or
      is not in full force and effect).

            (f) CODE-SHARING. Except for "code sharing" arrangements with other
      airlines, shall not conduct business under a trade, assumed or fictitious
      name without 10 days' prior written notice to Lender.

            7.4 CERTAIN ADDITIONAL COVENANTS OF THE BORROWER. The Borrower
covenants and agrees with the Lender, as follows:

            (a) The Borrower, at its expense, will cause to be done, executed,
      acknowledged and delivered all and every such further acts, documents,
      instruments, conveyances and assurances as the Lender shall reasonably
      request to establish and protect the perfected Lien of the Security
      Agreement and the other rights and remedies intended to be created in
      favor of the Lender under the Borrower Loan Documents; PROVIDED, that any
      instrument or other document so executed by the Borrower will not


                                       15


      expand any obligations or limit any rights of the Borrower in respect of
      the transactions contemplated by any of the Borrower Loan Documents.

            (b) The Borrower will, at its expense and forthwith upon delivery of
      the Aircraft to the Borrower under the Purchase Agreement, cause (i) the
      FAA Bill of Sale, the FAA Aircraft Registration Application, the Security
      Agreement and any amendments to the Security Agreement to be promptly
      filed and recorded, or filed for recording, to the extent required under
      the Transportation Code, and (ii) the financing statements referred to in
      Section 4.6 to be promptly filed in all places necessary. The Borrower
      shall at all times thereafter throughout the Term cause the Aircraft to
      remain duly registered in the name of the Borrower under the
      Transportation Code. The Borrower agrees to furnish the Lender with copies
      of the foregoing documents with recording data as promptly as practicable
      following the issuance of same by the FAA.

            (c) Promptly upon the registration of the Aircraft and the recording
      of the FAA Bill of Sale, the Security Agreement pursuant to the
      Transportation Code, the Borrower will cause FAA Counsel to deliver to the
      Lender and the Borrower an opinion as to the due and valid registration of
      the Aircraft in the name of the Borrower, the due recording of the FAA
      Bill of Sale, the Security Agreement and the lack of filing of any
      intervening documents with respect to the Aircraft.

            (d) The Borrower, at its expense, will take or cause to be taken
      such action with respect to the recording, filing, re-recording and
      re-filing of the FAA Bill of Sale, the Security Agreement and any
      financing statements or other instruments as are necessary to maintain the
      ownership interest of the Borrower in the Aircraft and, so long as the
      Security Agreement is in effect, the security interest created by the
      Security Agreement and will furnish to Lender timely notice of the
      necessity of such action, together with such instruments, in execution
      form, and such other information as may be required to enable the Lender
      to take such action.

                          SECTION 8. EVENTS OF DEFAULT

            8.1 EVENTS OF DEFAULT. Each of the following shall constitute an
"EVENT OF DEFAULT":

            (a) (i) The Borrower shall fail to make the payment of principal of
      or interest on the Loan within five (5) Business Days after the same shall
      become due or (ii) the Borrower shall fail to make any payment when the
      same shall become due of any other amount due from Borrower under this
      Agreement or the Security Agreement and such failure shall continue
      unremedied for ten (10) days after the receipt by the Borrower of written
      demand therefor from the Lender, as the case may be; or

            (b) The Borrower shall fail to carry and maintain on or with respect
      to the Aircraft (or cause to be carried and maintained) insurance required
      to be maintained in


                                       16


      accordance with the provisions of the Security Agreement; PROVIDED,
      HOWEVER, that in the case of insurance with respect to which cancellation,
      change or lapse for nonpayment of premium shall not be effective as to the
      Borrower or the Lender for thirty (30) days (seven (7) days or such other
      period as may be customary in the war risk and allied perils coverage)
      after receipt of notice by the Lender of such cancellation, change or
      lapse, no such failure shall constitute an Event of Default until the
      earlier of (x) the date such failure shall have continued unremedied for a
      period of twenty (20) days (five (5) days in the case of any war risk and
      allied perils coverage or such lesser period as shall then be customary
      for such insurance in the major aviation insurance markets) after receipt
      by the Lender of such notice of cancellation, change or lapse or (y) such
      insurances not being in effect as to the Lender; or

            (c) The Borrower shall have failed to perform or observe (or caused
      to be performed and observed) in any material respect any other covenant
      or agreement to be performed or observed by it under any Borrower Loan
      Document, and such failure shall continue unremedied for a period of 30
      days after written notice thereof by Lender; PROVIDED, that if the
      Borrower shall have undertaken to cure any such failure which relates to
      maintenance, service, repair, overhaul or modifications, and,
      notwithstanding the reasonable diligence of the Borrower in attempting to
      cure such failure, such failure cannot be cured by the payment of money or
      otherwise within said 30-day period but is curable with future due
      diligence, there shall exist no Event of Default under this Section 8.1(c)
      so long as the Borrower is proceeding with due diligence to cure such
      failure, and the Lender's rights and interests in the Aircraft are not
      adversely affected thereby in any material respect, and such failure is
      cured within an additional period of 90 days; or

            (d) Any representation or warranty made by the Borrower herein or in
      any other Borrower Loan Document or any other document or certificate
      furnished by the Borrower in connection herewith or therewith or pursuant
      hereto or thereto shall prove to have been incorrect in any material
      respect as of the time made or deemed made, PROVIDED, that no such Event
      of Default shall be deemed to have occurred if the effect of such
      incorrectness is capable of being cured and is cured within a period of 30
      days after the receipt by the Borrower of a written notice from Lender
      notifying the Borrower, of the existence of such incorrectness, and the
      Borrower's and the Lender's rights and interests in the Aircraft are not
      adversely affected thereby in any material respect; or

            (e) The commencement of an involuntary case or other proceeding in
      respect of the Borrower under the federal bankruptcy laws, as now or
      hereafter constituted, or any other applicable federal or state
      bankruptcy, insolvency or other similar law in the United States or
      seeking the appointment of a receiver, liquidator, assignee, custodian,
      trustee, sequestrator or similar official of the Borrower for all or
      substantially all of its property, or seeking the winding-up or
      liquidation of its affairs and the continuation of any such case or other
      proceeding undismissed or unstayed for a period of 60 consecutive days, or
      an order for relief under Chapter 11 of the Bankruptcy Code with respect
      to the Borrower


                                       17


      as debtor or any other order, judgment or decree shall be entered in any
      proceeding by any court of competent jurisdiction appointing, without the
      consent of the Borrower, a receiver, trustee or liquidator of the Borrower
      or for all or substantially all of its property, or sequestering of all or
      substantially all of the property of the Borrower and any such order,
      judgment or decree or appointment or sequestration shall be final or shall
      remain in force undismissed, unstayed or unvacated for a period of 60
      consecutive days after the date of entry thereof; or

            (f) (i) The Borrower shall consent to the appointment of a
      custodian, receiver, trustee or liquidator (or other similar official) of
      itself, the Aircraft or of a substantial part of its property, or shall
      admit in writing its inability to pay its debts generally as they come
      due, or a court of competent jurisdiction shall determine that the
      Borrower is generally not paying its debts as such debts become due, or
      the Borrower shall make a general assignment for the benefit of creditors,
      or the Borrower shall take any corporate action to authorize any of the
      foregoing; or

            (ii) The Borrower shall file a voluntary petition in bankruptcy or a
      voluntary petition or an answer seeking reorganization in a proceeding
      under any bankruptcy laws (as now or hereafter in effect) or an answer
      admitting the material allegations of a petition filed against the
      Borrower in any such proceeding, or the Borrower shall, by voluntary
      petition, answer or consent, seek relief under the provisions of any now
      existing or future bankruptcy or other similar law providing for the
      reorganization or winding-up of debtors, or providing for an agreement,
      composition, extension or adjustment with its creditors, or the Borrower
      shall take any corporate action to authorize any of the foregoing; or

            (iii) The commencement of proceedings to liquidate or dissolve the
      Borrower; or

            (g) The Borrower shall fail to obtain a validly issued FAA Standard
      Airworthiness Certificate (Transport Category) for the Aircraft within
      eight (8) days after the Security Agreement is filed with the FAA for any
      reason within the control of the Borrower;

            (h) An "Event of Default" (as defined in any loan agreement referred
      to below in this Section 8.1(h)) shall have occurred and be continuing
      under any other loan agreement between the Lender and the Borrower
      pursuant to which the Lender has provided aircraft financing to the
      Borrower (but only so long as the initial Lender is the Lender); or

            (i) So long as the lien of the Security Agreement is in effect, the
      Lender shall no longer have a first priority security interest thereunder
      (subject to Permitted Liens) on all or any part of the Collateral subject
      thereto and such failure shall continue for ten (10) days after delivery
      of notice thereof by the Lender to the Borrower; or


                                       18


            (j) the Borrower shall cease to be a Certificated Air Carrier; or

            (k) the Borrower shall receive a notice of default or exercise of
      remedies with respect to the payment or performance of any indebtedness or
      other obligation to any third party and any such default or exercise of
      remedies results in an acceleration of such indebtedness or obligations;
      provided that the aggregate amount of any such indebtedness or obligation
      is in excess of $500,000 (determined in the case of borrowed money by the
      amount outstanding under the agreement pursuant to which such borrowed
      money was borrowed, in the case of a deferred purchase price by the
      remaining balance and in the case of a lease by the present value of the
      remaining rent payable thereunder).

then, and in any such event, (A) if such event is an Event of Default specified
in paragraphs (e) or (f) of this Section 8.1, the Loan (with accrued interest
thereon) and all other amounts owing under this Agreement and the Note shall
immediately become due and payable, and (B) if such event is another Event of
Default, at any time while such Event of Default is continuing, the Lender may,
by written notice to the Borrower, declare the Loan (with accrued interest
thereon) and all other amounts owing under this Agreement and the Note to be due
and payable forthwith, whereupon the same shall immediately become due and
payable and the Lender may exercise the rights and remedies provided in the
Security Agreement and the other Borrower Loan Documents. Except as expressly
provided above in this Section 8.1, presentment, demand, protest and all other
notices of any kind with respect to an Event of Default are hereby expressly
waived.

                            SECTION 9. MISCELLANEOUS

            9.1 AMENDMENTS AND WAIVERS. This Agreement or any terms hereof may
only be amended, supplemented or modified with the prior written consent of the
Borrower and the Lender. The Lender may, from time to time, waive, on such terms
and conditions as the Lender may specify in such instrument, any of the
requirements of this Agreement or any Event of Default and its consequences. In
the case of any waiver the Borrower and the Lender shall be restored to their
former positions and rights hereunder, and any Event of Default waived shall be
deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent on such
subsequent or other Event of Default. Any amendment or waiver effected in
accordance with this Section 9.1 shall be binding upon the Lender and any
subsequent Lender and the Borrower.

            9.2 NOTICES; CONSENT TO JURISDICTION; JOINDER.

            (a) All notices, demands, instructions and other communications of
any kind required or permitted to be given to or made upon any Party pursuant
hereto or in respect of this Agreement shall be made in English, in writing, and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, by facsimile device, or by overnight service or


                                       19


prepaid courier service, and shall be deemed to be given for purposes hereof (A)
if delivered in person or by overnight service or prepaid courier service, on
the day that such writing is delivered, (B) if given by registered or certified
mail, on the date of receipt, or (C) if made by fax, upon receipt by the sender
of transmission confirmation (PROVIDED, that any such fax transmission shall be
confirmed by mailing a copy of such notice or transmission by registered mail).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 9.2(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
Parties hereto at their respective addresses (or to their respective facsimile
numbers) as follows: (i) if to the Borrower or Lender, to the respective
addresses set forth in Section 9.2(e), or to such other address as any such
Party indicates by notice to the other Party; or (ii) if to any subsequent
Lender, addressed to such subsequent Lender at such address as such subsequent
Lender shall have furnished by notice to the parties hereto.

            (b) Each Party hereby irrevocably agrees that any legal suit, action
or proceeding brought by any other Party or any Indemnitee that is not a Party,
which arises out of or relates to the Borrower Loan Documents or any of the
transactions contemplated hereby or thereby or any document referred to herein
or therein, may be instituted in the United States District Court for the
Southern District of New York and the state courts of the State of New York
sitting in the City of New York, and without prejudice to any Party's right to
remove to the federal courts, appellate courts from any thereof (collectively,
the "STIPULATED COURTS"), and each Party hereby expressly submits itself to the
exclusive personal jurisdiction of such Stipulated Courts and waives any
objection that it may now or hereafter have to the personal jurisdiction or
venue of any action in any such Stipulated Court or that any such action was
brought in an inconvenient forum, and agrees not to plead or claim the same by
way of motion as a defense or otherwise. EACH PARTY HEREBY IRREVOCABLY WAIVES
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT, ANY OTHER BORROWER LOAN DOCUMENT OR THE ENFORCEMENT HEREOF OR
THEREOF.

            (c) INTENTIONALLY OMITTED

            (d) Each Party hereby irrevocably and unconditionally waives
personal service of process and consents that service of process upon it may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, at its address for notice
as determined in Section 9.2(e), or by personal service, and service so made
shall be deemed completed when such service is received at such address;
PROVIDED, that nothing herein shall affect the right to serve process in any
other manner permitted by Applicable Law.

            (e) Any such notice or communication to a party hereto shall be made
in English, in writing, by registered mail, fax, telex or cable, as permitted
under applicable law, and shall be given as follows:


                                       20


                     Borrower:   Chautauqua Airlines, Inc.
                                 2500 S. High School Road
                                 Indianapolis, Indiana  46241

                     Attention: President
                     Tel: 317-484-6047
                     Fax: 317-484-6060

                     With a Copy to:

                     Wexford Capital LLC
                     411 West Putnam Avenue
                     Greenwich, Connecticut 06830
                     Attention: Jay Maymudes
                     Tel: 203-862-7050
                     Fax: 203-862-7350

Lender/Manufacturer  Embraer - Empresa Brasileira de Aeronautica S.A.
                     Av. Brigadeiro Faria Lima, 2170
                     12227-901 Sao Jose dos Campos, SP
                     Brazil
                     Attention: Director - Contracts
                     Tel: (011) 5512-3927-1410
                     Fax: (011) 5512-3927-1257

            (f) Any party listed above may change its address and the
transmission numbers for notices by notice in the manner provided in this
Section 9.2.

            9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder and in any document or certificate delivered
pursuant hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the making of the Loan hereunder.

            9.4 LOAN ASSIGNMENTS AND TRANSFERS. The Lender may assign and
transfer its right, title and interest in the Loan, and the Note, including all
of its rights and obligations therein and in the Borrower Loan Documents in
whole or in part ("LOAN TRANSFEREES") or grant participations therein to ("LOAN
PARTICIPANTS") in private nonpublic placements pursuant to Section 4(2) of the
United States Securities Act of 1933, as amended, or Rule 144A ("Rule 144A")
thereunder or similar laws or regulations, and the Borrower shall cooperate
reasonably and in good faith in accordance with the following provisions in
assisting the Lender in effecting such assignment, transfer or grant, PROVIDED
that the Borrower shall have no greater obligation or liability (including any
increased payment pursuant to Section 2.6) to any transferee than it would have
had to the initial Lender or as a result of any grant of a participation. The
Borrower hereby waives any right of set-off it may have against such entity with
respect to claims against the


                                       21


Lender, the Manufacturer and other third parties. A Loan Transferee may create a
perfected lien on the Loan Agreement and the other documents to secure the
indebtedness of the Loan Transferee to its lenders. The Borrower agrees to name
the Loan Transferee as loss payee on hull insurance and as an additional insured
on liability insurance and as an indemnitee with respect to indemnifications
contained in the relevant Borrower Loan Documents. The Parties agree that each
Loan Transferee, upon any such assignment and transfer, shall be and have all
beneficial rights of Lender to the extent of the interest so assigned and
transferred and shall to such extent accede to all rights of Lender under all
the Borrower Loan Documents upon execution and delivery to the Borrower of a
lender transfer notice, and that no consent, approval or other notice of or to
any party to the Borrower Loan Documents is necessary in connection therewith.
Without limiting the generality of the foregoing, the Borrower authorizes Lender
to disclose to any actual or prospective Loan Transferee or Loan Participant any
and all financial information in Lender's possession concerning the Borrower,
which has been delivered to Lender pursuant to the Borrower Loan Documents or in
connection with Lender's credit evaluation of the Borrower prior to entering
into the Borrower Loan Documents.

            This Loan Agreement shall be binding upon and inure to the benefit
of the Borrower, Lender and their respective successors and permitted assigns.
Except as otherwise expressly permitted or required by the provisions of the
Borrower Loan Documents, the Borrower may not assign any of its rights or
obligations hereunder or under any Borrower Loan Document without the prior
written consent of Lender.

            9.5 CONTRACTUAL CURRENCY. (a) All payments of the unpaid balance of
the Loan and interest thereon and any other amount payable hereunder or under
any other Loan Document shall be paid in Dollars.

            (b) If any expense required to be reimbursed pursuant to this Loan
Agreement or any other Borrower Loan Documents is originally incurred in a
currency other than Dollars, the Borrower shall nonetheless make reimbursement
of that expense in Dollars, in an amount equal to the amount in Dollars that
would have been required for the person that incurred that expense to have
purchased, in accordance with normal banking procedures, the sum paid in such
other currency (after any premium and costs of exchange) on the date of payment
of such expenses.

            9.6 SEVERABILITY. Any provision of this Loan Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

            9.7 ENTIRE AGREEMENT. The Borrower Loan Documents embody the entire
agreement and understanding between Lender and the Borrower and supersede all
prior agreements and understandings relating to the subject matter thereof.

            9.8 GOVERNING LAW.


                                       22


            THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO THE LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK, UNITED STATES OF AMERICA. All obligations of the Borrower and the
rights of Lender and any holder of any Note shall be in addition to, and not in
limitation of, those provided by Applicable Law.

            9.9 WAIVER OF IMMUNITIES. The Lender agrees that, to the extent that
the Lender or any of its property is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise from (a) any legal action,
suit, arbitration proceeding or other proceeding, (b) set-off or counterclaim,
(c) the jurisdiction of any court of competent jurisdiction, (d) service of
process, (e) relief by way of injunction, order for specific performance or for
recovery of property, (f) attachment of its assets prior to judgment or after
judgment, (g) attachment in aid of execution or levy, (h) execution or
enforcement of any decree or judgment, (i) judgment or jurisdiction or from any
other legal process in any jurisdiction, the Lender, for itself and its
property, does, to the full extent permitted by Applicable Law, rule or
regulation, hereby irrevocably and unconditionally waive all rights to, and
agrees not to plead or claim, any such immunity with respect to its obligations,
liabilities or any other matter under or arising out of or in connection with
this Agreement or the other Borrower Loan Documents, or the subject matter
hereof or thereof. Such agreement shall be irrevocable and not subject to
withdrawal in any and all jurisdictions or under any statute, including the
Foreign Sovereign Immunities Act of 1976 of the United States of America. The
foregoing waiver shall constitute a present waiver of immunity at any time any
action is initiated against the Lender with respect to this Agreement.

            9.10 CONFIDENTIALITY. Each of the Borrower and Lender hereby assumes
the obligation to maintain in total and absolute confidentiality the terms and
conditions of the Borrower Loan Documents not required by the terms of any of
the Borrower Loan Documents to be filed or recorded in the public record and
shall not disclose or reproduce the same by any means or for any purpose, except
as follows: (1) as otherwise required or contemplated by the Borrower Loan
Documents, (2) to its accountants, lawyers and financial and other professional
advisors, (3) to its employees, its Affiliates and their employees, and to each
other party to the Borrower Loan Documents, (4) as required by force of law, (5)
as required by judicial or administrative decision of a Governmental Authority,
(6) for the purpose of effecting any transfer or participation permitted
pursuant to Section 9.4 hereof, PROVIDED that in case of a disclosure referred
to in Clauses (4) and (5) above, the party requiring disclosure shall use its
reasonable best efforts to limit the extent of such disclosure to the extent
permitted by law.

            9.11 EXPENSES OF LENDER AND TRANSACTION EXPENSES.

            Except as otherwise provided herein, the Borrower agrees (a) to pay
or reimburse the Lender for all its reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of this Agreement and
the other Borrower Loan Documents, and any amendment, supplement or modification
provided for in this Agreement or any other Borrower


                                       23


Loan Document, or requested by the Borrower to, this Agreement and the other
Borrower Loan Documents and any other documents prepared in connection herewith
or therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and disbursements of
counsel to the Lender and (b) to pay, indemnify, and hold the Lender harmless
from, any and all United States recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying such United
States recording and filing fees, if any, which may be payable or determined to
be payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the other Borrower Loan Documents and any such other documents
relating thereto.

            9.12 GENERAL INDEMNITY. (a) The Borrower hereby agrees to indemnify
on an After-Tax Basis each Indemnitee against, and agrees to protect, save and
hold harmless each of them from any and all Expenses imposed on, incurred by or
asserted against any Indemnitee, in any way relating to or arising out of or
which would not have occurred but for (1) the Borrower Loan Documents and the
consummation of the transactions contemplated thereby or any Default or Event of
Default thereunder and the enforcement of any of the terms thereof; (2) the
Aircraft (or any item or other portion thereof) or any engine installed on the
Airframe or any airframe on which an Engine is installed, whether or not arising
out of the manufacture, design, ordering, acceptance, rejection, acquisition,
installation, purchase, registration, re-registration, refinancing, financing,
ownership, delivery, nondelivery, lease, sublease, possession, use or non-use,
operation, storage, maintenance, modification, alteration, condition,
replacement, repair, loss, damage, destruction, removal, substitution, sale,
return, surrender or other disposition of the Aircraft (or any item or other
portion thereof) including, without limitation, latent or other defects, whether
or not discoverable, strict products liability, strict tort liability and any
claim for patent, trademark or copyright infringement, environmental liability
or any violation of an Applicable Law relating to the Aircraft; PROVIDED that
the foregoing indemnity of an Indemnitee shall only apply for claims relating to
Lender in its capacity as lender under the Borrower Loan Documents and not to
Lender in its capacity, if any, as manufacturer, repairer, supplier or aircraft
servicing agent, or any Expense to the extent resulting from or arising out of
or which would not have occurred but for one or more of the following: (A) any
express representation or warranty by such Indemnitee in the Borrower Loan
Documents being incorrect; or (B) the failure by such Indemnitee to perform or
observe any express agreement, covenant or condition in any of the Borrower Loan
Documents except to the extent such failure by such Indemnitee proximately
results from any failure by the Borrower to observe any covenant, agreement or
condition applicable to the Borrower in any Borrower Loan Document; or (C) the
willful misconduct or the gross negligence of or violation of law by such
Indemnitee (other than any of the foregoing imputed to such Indemnitee solely by
reason of its interest in the Aircraft or being party to the Borrower Loan
Documents); or (D) a disposition (voluntary or involuntary) of all or any part
of its interest in any Note (other than as contemplated by the Security
Agreement) or in any of the Borrower Loan Documents other than, in each case,
during the continuance of a Specified Default or an Event of Default under this
Loan Agreement or (E) any Tax, or any loss of Tax benefits or increase in Tax
liability under any Tax law, PROVIDED, HOWEVER, that this CLAUSE (E)


                                       24


shall not apply to any obligation of the Borrower under Section 2.b or to Taxes
arising from making any payment pursuant to this SECTION 9.12 on an After-Tax
Basis; or (F) the authorization or giving or withholding of any future
amendments, supplements, waivers or consents with respect to any of the Borrower
Loan Documents which amendments, supplements, waivers or consents (x) are not or
were not requested by the Borrower, (y) are not occasioned by a specific
requirement of the Borrower Loan Documents and (z) are not entered into pursuant
to a Default or an Event of Default; or (H) except to the extent resulting from
a breach of the Borrower representations contained in SECTION 3.2, the offer,
sale or delivery by such Indemnitee in violation of the Securities Act or a
violation by such Indemnitee of any other applicable law or regulation relating
to the transfer of any Note, or (I) except to the extent caused by acts or
events occurring prior thereto, acts or events which occur after the earlier of:
(x) the payment by the Borrower of all amounts required to be paid under the
Borrower Loan Documents following a Total Loss and termination of the Loan; or
(y) termination of the Loan and payment by the Borrower of all amounts required
to be paid by Borrower pursuant to the terms of the Borrower Loan Documents; or
(J) attributable to a Lender Lien.

            (b) If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to the Borrower; provided,
that the failure to provide such notice shall not diminish any of the Borrower's
obligations to indemnify hereunder except to the extent the Borrower's right to
contest the imposition of such Expense shall be prejudiced or to the extent such
failure otherwise adversely affects the Borrower. The Borrower shall be
entitled, at its cost and expense (and acting through counsel reasonably
acceptable to the respective Indemnitee) (1) in any judicial or administrative
proceeding that involves solely a claim for one or more Expenses, to assume
responsibility for and control thereof, (2) in any judicial or administrative
proceeding involving a claim for one or more Expenses and other claims related
or unrelated to the transactions contemplated by the Borrower Loan Documents, to
assume responsibility for and control of such claim for Expenses to the extent
that the same may be and is severed from such other claims (and such Indemnitee
shall use its best efforts to obtain such severance), and (3) in any other case,
to be consulted by such Indemnitee with respect to judicial proceedings subject
to the control of such Indemnitee and to be allowed, at the Borrower's sole
expense, to participate therein. Notwithstanding any of the foregoing to the
contrary, the Borrower shall not be entitled to assume responsibility for and
control of any such judicial or administrative proceedings if (A) any Specified
Default or Event of Default shall have occurred and be continuing, (B) such
proceedings will involve a material risk of the sale, forfeiture or loss of, or
the creation of any Lien (other than a Lien permitted under the Borrower Loan
Documents) on, the Aircraft or any material part thereof unless in such an event
the Borrower shall have posted a bond or other security reasonably satisfactory
to the relevant Indemnitees in respect to such risk or (C) such proceedings are
reasonably likely to involve the imposition of criminal liability, or material
civil penalty for which such Indemnitee is not indemnified hereunder, on an
Indemnitee; PROVIDED, HOWEVER, no such proceeding shall be compromised or
settled on a basis that admits gross negligence or misconduct on the part of
such Indemnitee without such Indemnitee's prior written consent. The Indemnitee
may participate at its own expense and with its own counsel in any


                                       25


judicial proceeding controlled by the Borrower pursuant to the preceding
provisions so long as such participation shall not materially interfere with the
Borrower's conduct or the defense of any such proceeding.

            (c) The Indemnitee shall cooperate in good faith with the Borrower
and, at the Borrower's expense, shall supply the Borrower with such information
reasonably requested by the Borrower as is necessary or advisable for the
Borrower to control or participate in any proceeding to the extent permitted by
this SECTION 9.12. Such Indemnitee shall not (unless such Indemnitee waives its
right to be indemnified with respect to such Expense under this SECTION 9.12)
enter into a settlement or other compromise with respect to any Expense without
the prior written consent of the Borrower (except during the continuance of an
Event of Default when such consent shall not be required if the Indemnitee has
given the Borrower at least 15 days prior written notice of the nature and scope
of the proposed settlement or compromise), which consent shall not be
unreasonably withheld, conditioned or delayed.

            (d) The Borrower shall supply the Indemnitee with such information
(which may, in the case of confidential or proprietary information be supplied
subject to a reasonable confidentiality requirement) reasonably requested by the
Indemnitee as is necessary or advisable for the Indemnitee to control or
participate in any proceeding to the extent permitted by this SECTION 9.12.

            (e) So long as no Specified Default or Event of Default under this
Loan Agreement shall have occurred and be continuing, upon payment of any
Expense pursuant to this SECTION 9.12, the Borrower, without any further action,
shall be subrogated to, and may pursue, any claims the Indemnitee may have
relating thereto other than claims against any Brazilian government entity. Each
Indemnitee hereby agrees to give, at the Borrower's expense, such further
assurances or agreements and to cooperate with the Borrower to permit the
Borrower to pursue such claims, if any, to the extent reasonably requested by
the Borrower.

            (f) The Borrower's obligations under the indemnities provided for in
this Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from the Borrower pursuant to any provision of this Agreement
may proceed directly against the Borrower without first seeking to enforce any
other right of indemnification.

            (g) To the extent permitted by applicable law, interest at the Debt
Rate plus the Default Rate shall be paid, on demand, on any amount or indemnity
not paid when due pursuant to this SECTION 9.12 until the same shall be paid.
Such interest shall be paid in the same manner as the unpaid amount in respect
of which such interest is due.


                                       26


            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.

                                        CHAUTAUQUA AIRLINES, INC.

                                        By:_____________________________________
                                           Name:
                                           Title:


                                        EMBRAER-EMPRESA BRASILEIRA DE
                                           AERONAUTICA S.A.

                                        By:_____________________________________
                                           Name:
                                           Title:

                                        By:_____________________________________
                                           Name:
                                           Title:

WITNESS:


                                       27


                                                                      Schedule 1
                                                               TO LOAN AGREEMENT



- -----------------------------------------------------------------------------------
                         AMORTIZATION SCHEDULE (N375SK)
- -----------------------------------------------------------------------------------
  DATE             DEBT SERVICE         INTEREST     PRINCIPAL            ENDING
                                                                          BALANCE
- -----------------------------------------------------------------------------------
                                                          
- -----------------------------------------------------------------------------------
20-Feb-02                                                             14,297,288.76
- -----------------------------------------------------------------------------------
20-Mar-02           127,907.31         86,236.25     41,671.06        14,255,617.70
- -----------------------------------------------------------------------------------
20-Apr-02           127,907.31         85,975.80     41,931.50        14,213,686.20
- -----------------------------------------------------------------------------------
20-May-02           127,907.31         85,713.73     42,193.58        14,171,492.62
- -----------------------------------------------------------------------------------
20-Jun-02           127,907.31         85,450.02     42,457.29        14,129,035.33
- -----------------------------------------------------------------------------------
20-Jul-02           127,907.31         85,184.66     42,722.64        14,086,312.69
- -----------------------------------------------------------------------------------
20-Aug-02           127,907.31         84,917.65     42,989.66        14,043,323.03
- -----------------------------------------------------------------------------------



                                       28


                                                                      Schedule 2
                                                               TO LOAN AGREEMENT

                             CERTAIN FINANCIAL TERMS

"COMMITMENT" means an amount equal to ninety percent (90%) of the Total Invoice
Cost.

"DEBT RATE" means an annual rate of seven point five percent (7.5%)

"DEFAULT RATE" means the Debt Rate plus two percent (2.0%).

"MATURITY DATE" means August __, 2002.

"TOTAL INVOICE COST" means $15,885,876.40.


                                       29


                                                                         ANNEX A
                                                               TO LOAN AGREEMENT
                                                       AND TO SECURITY AGREEMENT

                                FINANCING OF ONE
                    EMBRAER EMB-145 MODEL EMB-135 KL AIRCRAFT

                     DEFINITIONS RELATING TO LOAN AGREEMENT
                             AND SECURITY AGREEMENT

            "AFFILIATE" means with respect to a specified Person, any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such Person.

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

            "AIRFRAME" means (i) the Embraer EMB-145 model EMB-135 KL aircraft
having United States registration number N375SK and Manufacturer's serial number
145569 (except Engines and engines installed thereon) and (ii) and any and all
Parts so long as the same shall be incorporated or installed in or attached to
the Airframe, or so long as Lender's security interest shall remain vested in
Lender in accordance with the terms of the Security Agreement after removal from
the Aircraft.

            "AFTER-TAX BASIS" means, with respect to any payment to be received
or accrued by any Person, the amount of such payment supplemented, if necessary,
by a further payment or payments so that the sum of all such payments, after
deduction of all Taxes actually payable to any taxing authority as a result of
the receipt or accrual of such payments shall be equal to the payment to be
received or accrued, after taking into account any Tax savings realized as a
result of the indemnified liability.

            "APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any Governmental Authority having
jurisdiction over the applicable party hereto and rules, regulations, orders,
directives, licenses and permits of any Governmental Authority having
jurisdiction over the applicable party hereto and all interpretations,
implementation and enforcement of any of the foregoing by any Governmental
Authority, in each case having the force of law.

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

            "BORROWER" has the meaning set forth in the recitals hereto.


                                       30


            "BORROWER LOAN DOCUMENTS" means the Loan Agreement, the Note, the
Security Agreement, each Security Agreement Supplement, and any other agreement
or instrument specifically agreed by the Parties hereto to be identified as a
"Borrower Loan Document" for purposes hereof.

            "BORROWING DATE" means the Delivery Date.

            "BRAZIL" means the Federative Republic of Brazil.

            "BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which commercial banks are authorized or required by law, regulation or
executive order to be closed in New York, New York, or Rio de Janeiro, Brazil.

            "CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding an air carrier operating certificate issued under Chapter 447 of the
Transportation Code for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo, or if such certification shall cease to be
available, an air carrier eligible for certification as to the matters
contemplated by such certification.

            "CHANGE IN U.S. TAX LAW" means (a) any change after the Borrowing
Date to the Code, the Regulations or administrative guidance or (b) any formal
or informal change in any Internal Revenue Service position with respect to, or
interpretation of, U.S. Tax Law, regardless of how and when such change is
advanced, announced or articulated.

            "CITIZEN OF THE UNITED STATES" has the meaning set forth in Section
40102(a)(15) of the Transportation Code.

            "CLOSING" has the meaning set forth in Section 2.1 of the Loan
Agreement.

            "CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.

            "COLLATERAL" has the meaning specified in Section 2.1 of the
Security Agreement.

            "COLLATERAL DOCUMENTS" means all items of Collateral that are
agreements, instruments or other documents.

            "COMMITMENT" has the meaning set forth in Schedule 2 to the Loan
Agreement.

            "DEBT RATE" has the meaning set forth on Schedule 2 to the Loan
Agreement

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


                                       31


            "DEFAULT RATE" has the meaning set forth in Schedule 2 to the Loan
Agreement.

            "DELIVERY DATE" or "DATE OF ACTUAL DELIVERY" means the date on which
the Aircraft shall be delivered by the Manufacturer to the Borrower, which date
shall be the date of the Warranty Bill of Sale.

            "DOLLARS" and "$" mean the lawful currency of the United States.

            "ELIGIBLE ACCOUNT" means an account established by and with an
Eligible Institution at the request of the Lender, which institution agrees, for
all purposes of the UCC including Article 8 thereof, that (a) such account shall
be a "securities account" (as defined in Section 8-501 of the UCC), (b) all
property (other than cash) credited to such account shall be treated as a
"financial asset") (as defined in Section 8-102(9) of the UCC), (c) the Lender
shall be the "entitlement holder" (as defined in Section 8-102(7) of the UCC) in
respect of such account, (d) it will comply with all entitlement orders issued
by the Lender to the exclusion of the Borrower, and (e) the "securities
intermediary jurisdiction" (under Section 8-110(e) of the UCC) shall be the
State of New York.

            "ELIGIBLE INSTITUTION" means the corporate trust department of a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any U.S. Branch
of a foreign bank), which has a long-term unsecured debt rating from Moody's and
Standard & Poor's of at least A-3 or its equivalent.

            "ENGINE" means (i) unless and until replaced by a Replacement Engine
pursuant to the Security Agreement each of the two Rolls-Royce AE3007A1/3
engines, having the manufacturer's serial numbers set forth in the initial
Security Agreement Supplement, whether or not from time to time installed on the
Airframe or installed on any other airframe or any other aircraft, or (ii) any
Replacement Engine substituted for an Engine under the Security Agreement,
together in each case with any and all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom so long Lender's
Security interest therein shall remain vested in Lessor in accordance with the
terms of the Security Agreement after removal from such Engine.

            "EQUIPMENT" means the Aircraft, the Airframe, any Engine and/or any
Part

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

            "EXCLUDED TAXES" means (i) Taxes imposed by a jurisdiction within
which Lender is incorporated or maintains its principal place of business and
(ii) Taxes that would not have been imposed but for a connection between the
Lender and the taxing jurisdiction other than the transactions contemplated
hereby, and (iii) Taxes that would not have been imposed but for


                                       32


Lender's, Loan Transferee's or Loan Participant's failure to provide Borrower
with any certification in accordance with Section 2.6 of the Loan Agreement.

            "EVENT OF DEFAULT" means any of the events set forth in Section 8.1
of the Loan Agreement.

            "EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims (including, but not limited to,
negligence, strict or absolute liability, liability in tort and liabilities
arising out of violation of laws or regulatory requirements of any kind),
actions, suits, out-of-pocket costs, expenses and disbursements (including
reasonable legal fees, costs of investigation of whatsoever kind and nature and
expenses, and out-of-pocket costs and expenses relating to enforcement of, and
reasonable out-of-pocket costs and expenses relating to amendments, supplements,
waivers and consents to and under the Borrower Loan Documents.

            "FAA" means the U.S. Federal Aviation Administration and any agency
or instrumentality of the U.S. Government succeeding to its functions.

            "FAA APPLICATION FOR AIRCRAFT REGISTRATION" means an application for
registration of the Aircraft in the name of the Borrower on AC Form 8050-1 or
such other form approved by the FAA.

            "FAA BILL OF SALE" means the bill of sale for the Aircraft on AC
Form 8050-2 or such other form approved by the FAA, dated the Delivery Date,
executed by the Manufacturer in favor of the Borrower.

            "FAA COUNSEL" means Daugherty, Fowler, Peregrin & Haught, or other
FAA counsel in Oklahoma City, Oklahoma, acceptable to all Parties.

            "GAAP" means generally accepted accounting principles in the United
States.

            "GOVERNMENT" means the government of the United States and any
instrumentality or agency thereof.

            "GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof and entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

            "IMMEDIATELY AVAILABLE FUNDS" means funds with good value on the day
and in the city in which payment is received.

            "INDEMNIFIED TAXES" means any Taxes other than Excluded Taxes.


                                       33


            "Indemnitee" means Lender and its officers, directors, employees,
agents, servants, successors and permitted assigns of any of the foregoing
Persons.

            "IRS" means the United States Internal Revenue Service or any agency
or instrumentality of the U.S. Government succeeding to its functions.

            "LENDER" has the meaning set forth in the introductory paragraph of
the Loan Agreement.

            "LENDER LIEN" means any Lien attributable to the Lender on or
against the Aircraft, any interest therein, or any other portion of the
Collateral, arising out of any claim against the Lender that is not related to
the Borrower Loan Documents or out of any act or omission of the Lender that is
not related to the transactions contemplated by the Borrower Loan Documents or
that constitutes a breach by it of its obligations under the Borrower Loan
Documents; PROVIDED, HOWEVER, that any Lien which is attributable solely to
Lender and would otherwise constitute a Lender Lien hereunder shall not, for the
purpose of any warranty or representation of Lender against the existence of the
same or for any covenant or obligation not to allow the same or to immediately
cause the removal of the same, constitute, for such purposes only, a Lender Lien
hereunder so long as (a) the existence of such Lien poses no material risk of
the sale, forfeiture or loss of the airframe or any Engine or any interest
therein, (b) the existence of such Lien does not interfere in any way with the
use or operation of the Aircraft by Borrower, (c) Lender is in good faith
diligently contesting such Lien by appropriate proceeding and (d), in the case
of any Lender Lien on any Engine, Borrower shall not have replaced such Engine
with a Replacement Engine pursuant to the applicable provisions of the Security
Agreement.

            "LIEN" means any mortgage, lease, security interest, lien, title
retention arrangement or other claim or encumbrance.

            "LOAN" means the loan in the amount of the Commitment, made by the
Lender pursuant to the proceeds of which are to be used for the purchase of the
Aircraft by the Borrower, such Loan to be evidenced by the Loan Agreement and
the Note.

            "LOAN AGREEMENT" means the Loan Agreement (N375SK), dated as of
February 20, 2002 between the Borrower and the Lender.

            "MANUFACTURER" means Embraer - Empresa Brasileira de Aeronautica
S.A., and its successors and permitted assigns.

            "MATERIAL ADVERSE CHANGE" means a material adverse change since the
date of the last audited financial statements of the Borrower in the business,
operations or financial condition of the Borrower, which change has a material
adverse impact on the Borrower's ability to perform any of its obligations under
the Borrower Loan Documents to which it is a party. Without limiting the
generality of the foregoing, a material adverse change shall have occurred


                                       34


within the meaning of the immediately preceding sentence if any of the following
shall occur: (i) a material financial or material non-financial default of the
Borrower in any obligation owed to Lender, (ii) any event described in Section
8.1(e) or (f) of the Loan Agreement, (iii) the termination of any of the
Borrower's existing code-sharing agreements with US Airways, Inc., America West
Airlines, Inc., or American Airlines, Inc. (or, as applicable, with any
affiliate of such companies) and the non-replacement of such agreements by
code-sharing or other revenue generating arrangements of substantially
equivalent value within a period of one (1) month after such termination, or
(iv) the material and adverse grounding of all or a substantial portion of
Borrower's fleet of aircraft or the imposition of operating restrictions on
Borrower by any order or administrative action by the FAA or any other aviation
authority, and such order or administrative action is not applicable to regional
air carriers generally; and notwithstanding the specificity of the foregoing
clauses (i) to (iv), the first sentence of this paragraph shall be interpreted
non-exclusively in accordance with normal commercial practices.

            "MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or
a material adverse effect upon, the operations, business, properties or
financial condition of the Borrower or the Borrower and its Affiliates taken as
a whole; (b) a material impairment of the ability of the Borrower to perform its
obligations under any Borrower Loan Document; or (c) a material adverse effect
upon (i) the legality, validity, binding effect or enforceability against the
Borrower of any Borrower Loan Document to which it is a party or (ii) the
protections afforded Lender under Section 1110 of the United States Bankruptcy
Code (other than a change in United States law which would make such benefits
unavailable to aircraft leases or secured loans generally under United States
law).

            "MATURITY DATE" has the meaning provided in Schedule 2 to the Loan
Agreement.

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

            "NOTE" means the Note, dated the Borrowing Date, in the amount of
the Commitment and executed by the Borrower in favor of the Lender pursuant to
Section 2.2 of the Loan Agreement.

            "PARTS" means all parts, appliances, components, instruments,
accessories and furnishings (other than complete engines) which are from time to
time be installed in or attached to the Airframe or to any Engine.

            "PARTY" means each party to the Loan Agreement.

            "PAYMENT DATE" has the meaning provided in Section 2.2(a) of the
Loan Agreement.

            "PERMITTED INVESTMENTS" 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


                                       35


bankers' acceptances of, or time deposits or a deposit account with 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; (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 Rating Services or Moody's Investors Service, Inc.
equal to A1 or higher or (e) shares in money market mutual or similar funds
which invest substantially in assets satisfying the requirements of clauses (a)
through (d) of this definition.

            "PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
trustee(s) of a trust, unincorporated organization or Governmental Authority.

            "PURCHASE AGREEMENT" means that Purchase Agreement No. GCT-025/98
dated June 17, 1998 (together with all amendments and supplements thereto),
between Solitair Corporation and Manufacturer relating to certain Embraer
EMB-145 aircraft, including the Aircraft.

            "REPLACEMENT ENGINE" means a Rolls-Royce AE3007A1/3 engine or an
improved model having a value, utility, condition and remaining useful life at
least equal to the replaced Engine (assuming that such Engine was in the
condition required by the Security Agreement), and being suitable for
installation and use on the Airframe that is substituted for an Engine pursuant
to Section 3.3 of the Security Agreement.

            "RESPONSIBLE OFFICER" means, with respect to any corporation, its
Chairman of the Board, its President, any Senior Vice President, the Chief
Financial Officer, any Vice President or the Treasurer, or any other management
employee (a) whose power to take the action in question has been authorized,
directly or indirectly, by the Board of Directors of such corporation, (B)
working under the supervision of such Chairman of the Board, President, Senior
Vice President, Chief Financial Officer, Vice President or Treasurer and (C)
whose responsibilities include the administration of the transactions and
agreements contemplated by the Loan Agreement and the Security Agreement.

            "SECTION 1110" means Section 1110 of the United States Bankruptcy
Code, or any successor or replacement provision of the United States Bankruptcy
Code.

            "SECURITY AGREEMENT" means the Security Agreement, dated as of the
date of the Loan Agreement, between the Borrower and the Lender, including all
annexes, schedules, exhibits, appendices and supplements thereto.

            "SECURITY AGREEMENT SUPPLEMENT" means (A) the Security Agreement
Supplement No. 1, substantially in the form of Exhibit A to the Security
Agreement, dated the Borrowing Date, which shall describe with particularity the
Airframe and the Engines and which creates a


                                       36


security interest in the Airframe and Engines and (B) any other supplement to
the Security Agreement from time to time executed and delivered by the Borrower
pursuant to the Security Agreement.

            "SPECIFIED DEFAULT" means (a) an event or condition described in
Section 3.3.1(a), (e) or (f) that, after the giving of notice or lapse of time,
or both, would become an Event of Default, or (b) any Event of Default.

            "SUBSIDIARY" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.

            "TAX" and "TAXES" mean any and all fees and taxes imposed or
asserted by any Governmental Authority, including income, gross receipts, sales,
rents, use, turnover, value added, property, excise and stamp taxes, license,
levies, imposts, duties, recording charges or fees, charges, assessments or
withholding of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest thereon.

            "TERM" means the period between the Borrowing Date and the Maturity
Date.

            "TOTAL INVOICE COST" has the meaning provided on Schedule 2 to the
Loan Agreement.

            "TOTAL LOSS" of an Item means the occurrence of any of the
following:

            (i) any theft, hijacking or disappearance of such property for a
      period of 60 consecutive days or more or, if earlier for a period that
      extends until the end of the Term;

            (ii) destruction, damage beyond economic repair or rendition of such
      property permanently unfit for normal use for any reason whatsoever;

            (iii) any event which results in an insurance settlement with
      respect to such property on the basis of an actual, constructive or
      compromised total loss;

            (iv) condemnation, confiscation or seizure of, or requisition of
      title to or use of such property by any foreign government or purported
      government (or in the case of any such requisition of title, by the
      Government) or any agency or instrumentality thereof, for a period in
      excess of (A) in the case of any requisition of use, 30 consecutive days
      or (B) in the case of any condemnation, confiscation or seizure of, or
      requisition of title, 10 consecutive days, or, in any of the cases in this
      clause (iv), such shorter period ending on the expiration of the Term;


                                       37


            (v) condemnation, confiscation or seizure of, or requisition of use
      of such property by the Government for a period extending beyond the Term;

            (vi) as a result of any law, rule, regulation, order or other action
      by the FAA, the use of the Aircraft or Airframe in the normal course of
      air transportation shall have been prohibited by virtue of a condition
      affecting all Embraer EMB-145 model EMB-135 KL aircraft equipped with
      engines of the same make and model as the Engines for a period of 120
      consecutive days (or beyond the end of the Term), unless the Borrower,
      prior to the expiration of such 120-day period, shall be diligently
      carrying forward all necessary and desirable steps to permit normal use of
      the Aircraft and shall within 3 months have conformed at least one Embraer
      EMB-145 model EMB-135 KL aircraft (but not necessarily the Aircraft) to
      the requirements of any such law, rule, regulation, order or action, and
      shall be diligently pursuing conformance of the Aircraft in a
      non-discriminatory manner provided that, notwithstanding the foregoing, if
      such normal use of such property subject to the Lease shall be prohibited
      at the end of the Term, or if such normal use of such property shall be
      prohibited for a period of six (6) consecutive months, a Total Loss shall
      be deemed to have occurred; and

            (vii) with respect to an Engine only, the requisition or taking of
      use thereof by any government, and any divestiture of title or ownership
      deemed to be a Total Loss with respect to an Engine under Section 3.3(b)
      of the Security Agreement.

            The date of such Total Loss shall be (aa) the 31st day following
loss of such property or its use due to theft or disappearance or the 91st day
following such loss if such period shall have been extended (or the end of the
Term if earlier); (bb) the date of any destruction, damage beyond economic
repair or rendition of such property permanently unfit for normal use; (cc) the
date of any insurance settlement on the basis of an actual, constructive or
compromised total loss; (dd) the 31st day following condemnation, confiscation,
seizure or requisition of title to such property by a foreign government
referred to in clause (iv) above (or the 11th day in the case of appropriation
of title), or the end of the Term if earlier than such 31st or 11th day; (ee)
the last day of the Term in the case of requisition of title to or use of such
property by the Government; and (ff) the last day of the applicable period
referred to in clause (vi) above (or if earlier, the end of the Term without the
Borrower's having conformed at least one Embraer EMB-145 model EMB-135 KL
aircraft to the applicable requirements). A Total Loss with respect to the
Aircraft shall be deemed to have occurred if any Total Loss occurs with respect
to the Airframe.

            "TRANSPORTATION CODE" means 49 U.S.C. subtitle VII, as amended, and
any successor statute thereto.

            "UNITED STATES" and "U.S." each means the United States of America.


                                       38


            "UNITED STATES PERSON" shall have the meaning given such term in
Section 7701(a)(30) of the Code.

            "U.S. TAX LAW" includes the Code, any regulations promulgated or
proposed thereunder (the "Regulations") and any private letter rulings as of
November 30, 2001 (as though such rulings have the force of law), in each case.

            "WARRANTY BILL OF SALE" means the full warranty bill of sale
covering the Aircraft (together with the FAA Bill of Sale collectively called
"Bills of Sale"), executed by the Manufacturer in favor of the Borrower, dated
the Delivery Date, and specifically referring to each Engine, as well as to the
Airframe, constituting a part of the Aircraft.


                                       39


                                                                         ANNEX B
                                                               TO LOAN AGREEMENT

          THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE
     SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO THE SECURITIES LAWS
        OF ANY STATE. ACCORDINGLY, THIS PROMISSORY NOTE MAY NOT BE SOLD,
       UNLESS EITHER REGISTERED UNDER SUCH ACT AND SUCH APPLICABLE STATE
        LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

                                 PROMISSORY NOTE

          Relating to One (1) Embraer EMB-145 model EMB-135 KL Aircraft
                          U.S. Registration No. N375SK
                       Manufacturer's Serial Number 145569

$ ______________                                              ________ ___, 2001

      Chautauqua Airlines, Inc., a New York, U.S.A. corporation ("BORROWER"),
for value received, hereby promises to pay to Embraer - Empresa Brasileira de
Aeronautica S.A., a Brazilian corporation, or its registered assigns ("LENDER"),
at Caixa Postal 343, CEP 12227-901, Sao Jose dos Campos, Sao Paulo, Brazil (or
at such other location as Lender may from time to time designate in writing to
Borrower), the principal sum of ________________ dollars (US $ ______________ )
(the " LOAN"), or such other amount as shall equal the aggregate unpaid
principal amount of the Loan made by Lender to Borrower under that certain Loan
Agreement dated as of ________ ___, 2001 (as at any time hereafter amended, the
"LOAN AGREEMENT"), by and among Borrower and Lender, in lawful money of the
United States of America and Immediately Available Funds.

      The Borrower shall make scheduled principal payments on the Loan in
monthly installments in the amounts and on the dates identified on Schedule 1
hereto (each such date, a "Payment Date"). On each Payment Date, the Borrower
shall pay interest accrued in respect of the unpaid principal amount of the Loan
from the date the proceeds made thereof are made available to the Borrower until
such date, at the Debt Rate. The expected amounts of such interest for each
Payment Date are stated on Schedule 1 hereto. The Borrower shall pay the unpaid
principal amount of and accrued interest on the Loan on ____________, 2001 (the
"Maturity Date").

      Any payment of interest, principal or any other payment not paid to Lender
when due and payable hereunder shall, from the date when due and payable until
the date when fully paid, bear


                                       40


interest at the Default Rate.

      All payments of principal, interest and other amounts to be made by
Borrower to Lender hereunder shall be made to the account specified and in the
manner provided in the Loan Agreement. Lender shall apply the payment of
principal and other amounts due on this Promissory Note as follows: FIRST, to
the payment of any amount (other than principal and interest) due to Lender
hereunder or under the Borrower Loan Documents with respect to the Loan; SECOND,
to the payment of accrued and unpaid interest due on this Promissory Note; and
THIRD, to the payment of principal under this Promissory Note.

      This Promissory Note and the Loan may be prepaid in full at any time or
from time to time without penalty, premium or prepayment fee, provided that such
prepayment is of all principal outstanding on the Loan, and all other
liabilities of the Borrower with respect to the Loan then due under the Borrower
Loan Documents. Borrower may be obligated to prepay this Promissory Note as
specified in the Loan Agreement and subject to the requirements thereof.

      Borrower agrees to record separately the name and address and any other
necessary identifying information of Lender in a register maintained as part of
a book-entry system. Borrower and Lender shall treat the party whose name is
recorded in such register as Lender hereunder with all entitlements under this
Promissory Note. Notwithstanding anything to the contrary set forth in this
Promissory Note or the other Borrower Loan Documents, no assignment by Lender of
any rights or obligations under or in respect of the Loan or the Note shall be
effective unless and until Borrower shall have recorded such assignment in the
register maintained pursuant to the preceding paragraph; PROVIDED that if any
such transfer occurs while an Event of Default has occurred and is continuing,
Lender may act as Borrower's agent for effecting registration of such transfer.
Borrower shall record the name of the transferor, the name of the transferee and
the amount of the transfer in the register in the case of a transfer that
complies with the requirements of the Loan Agreement.

      This Promissory Note is the Note referred to in the Loan Agreement and is
entitled to the security and benefits provided in the Security Agreement.

      Upon the occurrence of an Event of Default and for so long as such Event
of Default shall continue, the principal hereof and accrued interest hereon may
be declared to be or may automatically become forthwith due and payable, and
Lender shall be entitled to recover, in addition to all other sums due
hereunder, all of the reasonable costs and expenses, including, without
limitation, court costs and attorney fees, incurred by Lender in enforcing its
rights hereunder.

      Borrower waives diligence, demand, presentment, notice of nonpayment and
protest, all in the sole discretion of Lender and without notice and without
affecting in any manner the liability of Borrower.

      Capitalized terms used herein that are not otherwise defined herein shall
have the meanings ascribed to them in the Loan Agreement and/or the Security
Agreement.


                                       41


      THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

        [REMAINDER OF PAGE INTENTIONALLY BLANK -- SIGNATURE PAGE FOLLOWS]


                                       42


      IN WITNESS WHEREOF, Borrower has caused this Promissory Note to be
executed by one of its authorized officers as of the date hereof.

                                        CHAUTAUQUA AIRLINES, INC.


                                        By:
                                        Name:
                                        Title:


                                       1


NOTE TO EXHIBIT 10.56

The three additional Interim Loan Agreements are substantially identical in all
material respects to the filed Interim Loan Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N372SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N373SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N374SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.57

                                                                   Exhibit 10.57

                            LETTER AGREEMENT (N375SK)

      LETTER AGREEMENT (N375SK), dated as of February 20, 2002, among Solitair
Corp. ("SOLITAIR"), Chautauqua Airlines, Inc. (the "AIRLINE" or "BORROWER") and
Embraer-Empresa Brasileira de Aeronautica S.A. ("EMBRAER").

      Solitair has agreed to purchase from Embraer new EMB-145 model EMB-135 KL
aircraft (the "Purchase Agreement AIRCRAFT") pursuant to the Purchase Agreement
Number GCT-025/98 dated June 17, 1998, as amended (the "PURCHASE AGREEMENT").
Solitair is assigning its right to purchase one of the Purchase Agreement
Aircraft, bearing msn 145569 (the "AIRCRAFT") to the Airline on the date hereof,
and Embraer has agreed to provide interim financing to the Airline for its
purchase of such Aircraft, subject to certain agreements of the parties hereto.
Terms defined in the Loan Agreement and used herein have such defined meanings
unless otherwise defined herein. Accordingly, the parties hereto agree as
follows:

      1. LOAN. (a) On the date hereof, Embraer is financing 90% of the "Aircraft
Purchase Price" (as defined in the Purchase Agreement) for the Aircraft by
making a loan (the "LOAN") to the Airline pursuant to an Interim Loan Agreement
(N375SK) between the Borrower and Embraer dated as of the date hereof (the "Loan
Agreement").

      (b) Embraer and the Airline hereby agree that for purposes of determining
the monthly payment amount during the Term (as defined in the Loan Agreement),
the amount of the Loan shall be reduced by $150,000 for the "Debt Commitment"
and by $349,489.28 for the "Special Credit Rebate" (each as defined in Amendment
No. 1 to Letter Agreement GCT 026/98).

      2. COOPERATION. (a) During the Term (as defined in the Loan Agreement),
the Airline, Solitair and Embraer shall reasonably cooperate and update each
other on the ongoing negotiations among the Airline and FINAME and American
Airlines, Inc. (and, if applicable, its affiliates) ("American"), for the FINAME
Refinancing (as defined in Section 4 below).

            (b) Solitair and the Airline agree that upon the execution of FINAME
Refinancing documentation applicable to EMB-135KL aircraft to be operated
pursuant to a code-share agreement with American, the Aircraft shall, after the
three other EMB-135KL aircraft delivered by Embraer to the Airline on December
31, 2001, be the first aircraft to be financed pursuant to such FINAME
Refinancing, with 80% of the Aircraft Purchase Price to be credited directly by
FINAME to Embraer and 10% (the "Down Payment") to be paid to Embraer by the
Airline; provided that at the time of such FINAME Refinancing, Embraer shall
provide or cause to be provided to the Airline a loan for the remaining 10% of
the Aircraft Purchase Price at a rate of 9% per annum for a loan term of 2
years, with other terms to be reasonably agreed by the Airline and Embraer or
its designee.

            (c) The Airline covenants and agrees that it shall make good faith
efforts with FINAME, and reasonable efforts with American and Embraer, to
complete the FINAME Refinancing.


                                                                          Page 2


            (d) In the event the Airline repays the Loan other than through a
FINAME Refinancing, the Proex notes with respect to the Aircraft shall be
promptly discounted pursuant to Section 5(a) and all proceeds of such
discounting shall be paid directly to Embraer and immediately paid by Embraer to
the Airline.

            (e) (i) Embraer agrees that notwithstanding anything to the contrary
in the Loan Agreement (including without limitation Section 9.4 thereof),
provided that no Event of Default has occurred and is continuing, it will not
assign or transfer any of its rights or obligations thereunder until the
discounting of the Proex notes and payment of the proceeds thereof as referred
to above, except in connection with a FINAME Refinancing.

                  (ii) The Airline agrees that notwithstanding anything to the
contrary in the Loan Agreement, before any discounting of the Proex notes and
payment of the proceeds thereof as referred to above, the rights provided in
Section 7.2 of the Loan Agreement shall not apply.

      3. CREDIT SUPPORT. In the event the Airline seeks to refinance the Loan
other than through a FINAME Refinancing, the Airline shall have the right to
obtain a residual value guarantee and/or a first loss deficiency guarantee to
support its refinancing of the Aircraft ("Credit Support") with investors other
than FINAME, on terms and at prices previously agreed by Solitair and Embraer,
for a refinancing to occur on or before the Maturity Date. The Airline may apply
the $150,000 amount referred to in Section 1.b hereof to the price of any such
support, and any additional amounts due will increase the purchase price of
future deliveries of aircraft under the Purchase Agreement as agreed between
Solitair and Embraer if there are undelivered firm order aircraft at that time,
but otherwise shall be paid by the Airline to Embraer. If the Loan is
refinanced, other than by FINAME, without using Credit Support, the principal
amount of the Loan shall be deemed cancelled and satisfied in the amount of
$150,000.

      4. FINAME REFINANCING. If the Airline refinances the Aircraft (a "FINAME
Refinancing") with a borrowing from Agencia Especial de Financiamento Industrial
("FINAME"), the Loan shall be repaid in the principal amount of the loan made by
FINAME in such refinancing upon the closing of such refinancing, although
Embraer shall accept funds from FINAME in the Brazilian currency in satisfaction
of such Loan. If the principal amount of the loan made by FINAME in such
refinancing as aforesaid exceeds the outstanding principal amount of the Loan on
such closing date Embraer shall refund to the Airline on such closing date an
amount equal to such excess. Upon such refinancing by FINAME, Embraer shall
return for cancellation the promissory note issued by the Airline to Embraer.

      5. PROEX BENEFITS. Embraer represents and warrants to the Airline that,
provided that no Event of Default (as defined in the Loan Agreement) shall have
occurred and be continuing, the Airline will be entitled to the Proex Benefits
as described in Article 1B of Amendment Number 1 to Letter Agreement GCT-026/98,
between Embraer and Solitair (the "PROEX BENEFITS") with respect to the Aircraft
as if the Proex Benefits were made available to the Airline on the date hereof
for such Aircraft.

            (a) In the event the Airline repays the Loan other than through a
FINAME Refinancing, the parties shall take all necessary measures to ensure that
Citibank - Brazil (acting as the "Proex Agent Bank") will promptly discount the
Proex notes which are otherwise due on


                                                                          Page 3


semi-annual basis until the 15th year following the Aircraft Delivery Date,
which value shall be determined using the same methodology and assumptions as
used by the Proex Agent Bank in its previous purchases between itself and
Imprimis Investors LLC ("IMPRIMIS"). If the cash value obtained by the Airline
by the discounting of Proex under this Section 5(a) is less than the cash value
which would have been obtained by the Airline by the discounting of Proex in a
similar manner to that which has been obtained by Imprimis using the same
methodology and assumptions as used by Citibank-Brazil and Embraer in its
previous purchases of Proex notes from Imprimis, as adjusted for the then
current five-year LIBOR swap rate, then Embraer shall immediately pay such
difference to the Airline.

            (b) If on any refinancing of the Aircraft utilizing a loan from
FINAME, the interest rate proposed by FINAME applicable to the debt service
payments on such loan would otherwise exceed the interest rate that would have
been provided by FINAME, which rate is the Commercial Interest Reference Rate in
effect at the time of closing for U.S. dollar loans with more than 17
semi-annual repayment periods, exclusively due to a reduction in the value of
the Proex Benefits, then at the time of such refinancing Embraer shall
compensate FINAME with the necessary amount to adjust the FINAME loan to
preserve the same economics for the Airline.

      6. SPECIAL CREDIT REBATE. On the day that Embraer receives payment in full
under the Promissory Note dated the date hereof with respect to the Aircraft,
Embraer shall pay the Airline the Special Credit Rebate in the amount of
$349,489.28; provided that if the Airline and Embraer agree otherwise, Embraer
may pay such amount after the day that Embraer receives payment.

      7. INSURANCE. If any lease agreement under which Airline leases an Embraer
aircraft from General Electric Company or any of its Affiliates is amended or
modified to reduce the war risk and allied perils insurance required to be
maintained by Airline with respect to such aircraft below the requirements of
the Security Agreement, upon request of the Airline Embraer shall amend the
Security Agreement to require such insurance at the reduced level.

      8. AMERICAN AIRLINES CODE SHARE, END-OF TERM PUT OPTION. (a) The Airline
hereby confirms that by means of a modification to the Air Services Agreement
dated June 11, 2001 (the "Air Services Agreement") between the Airline and AMR
Corporation ("AMR"), the Airline and AMR have agreed that the Airline may
operate the Aircraft for up to the duration of the Term regardless of whether
the terms of the Loan Agreement and related documents satisfy the requirements
of the Air Services Agreement.

            (b) If (i) the Airline and (at Embraer's option) Embraer, are unable
to implement a refinancing of the Aircraft before the end of the 75th day prior
to the Maturity Date, on terms as favorable to the Airline as the FINAME
financing terms planned to be consummated on December 28, 2001 (except that the
FINAME Refinancing shall a financing be for 80% of the Aircraft Purchase Price)
and on terms as shall have been approved by AMR, and no Event of Default
referred to in Section 8.1(a)(i) of the Loan Agreement shall have occurred and
be continuing, then notwithstanding the terms of the Loan Agreement and the
Promissory Note, the Airline shall have the option to put the Aircraft to
Embraer at the end of the Term, on the terms provided in Section 8(c) below,
unless the parties have agreed in writing otherwise or (ii) an Event of Default
under the Loan Agreement shall have occurred and is continuing (other than an


                                                                          Page 4


Event of Default referred to in Section 8.1(a)(i) of the Loan Agreement) and the
principal amount of the Loan shall have been accelerated, the Airline shall have
the option to put the Aircraft to Embraer on ten Business Days' written notice
to Embraer, on the terms provided in Section 8(c) below (other than clauses (i)
and (iv) thereof). If the Airline does not elect to put the Aircraft to Embraer
as required by this Section 8, then it shall be deemed to have waived the put
option.

            (c) The terms of the put shall be as follows: (i) the Airline shall
provide written notice to Embraer of its exercise of the put option no less than
60 days before the end of the Term; (ii) the Airline shall tender the Aircraft
to Embraer or its designee by delivering the same at an airport designated by
Embraer and approved by the Airline (such approval not to be unreasonably
withheld) in the 48 contiguous states of the United States of America on the
Airline's route system; (iii) the Airline shall deliver a warranty bill of sale
and FAA bill of sale conveying good and marketable title to the Aircraft, free
and clear of all Liens other than Liens attributable to Embraer; (iv) the date
for delivery to Embraer or its designee shall be within ten (10) days after the
last day of the Term; (v) the Airline shall assign all remaining warranties with
respect to the Aircraft (to the extent assignable); and (vi) the Airline (and
Solitair, if applicable) shall assign any rights with respect to Proex to
Embraer or its designee. Upon tender by the Airline to Embraer or its designee
as aforesaid, Embraer shall purchase the Aircraft for an amount equal to the
outstanding principal and unpaid interest under the Promissory Note (the "Unpaid
Balance") (to be paid by cancellation of the Promissory Note in the amount of
the Unpaid Balance) plus the Down Payment, reduced by any amounts due to Embraer
pursuant to Exhibit 1 hereto and, in the event of a put pursuant to Section
8(b)(ii), further reduced by all principal that would otherwise have been due
during the remainder of the Term and any other liquidated amounts due pursuant
to the Loan Agreement and Security Agreement (but excluding any other principal
and interest); provided that if such amounts owed by the Airline exceed the
amount of the Down Payment, the Airline shall pay the excess to Embraer at that
time. For the avoidance of doubt, Embraer shall not owe the Special Credit
Rebate or any amounts related to Proex if Buyer exercises its put option, and
the failure of Buyer to satisfy any provision of Exhibit 1 hereto shall not
invalidate Buyer's right to put the Aircraft to Embraer and Embraer's obligation
to purchase it..

      9. ARBITRATION. The provisions of Sections 21 and 22 of the Purchase
Agreement are incorporated herein by reference and made part of this Letter
Agreement as if set forth herein in full.

      10. GOVERNING LAW. This Letter Agreement shall be governed by the laws of
the State of New York applicable to contracts made and to be performed in such
State.

      11. EFFECT UPON PURCHASE AGREEMENT. A breach of this Letter Agreement by
any party hereto shall not be deemed a breach of the Purchase Agreement by that
party.

      12. THIS AGREEMENT GOVERNS. To the extent of any inconsistency between any
Borrower Loan Document and this Letter Agreement, the Letter Agreement shall
govern.

                       [Remainder of this page is blank.]


                                                                          Page 5


IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers, have
entered into and executed this Letter Agreement to be effective as of the date
first written above.

EMBRAER-Empresa Brasileira
de Aeronautica, S.A.                SOLITAIR CORP.

By:  _______________________        By: _______________________________

Name:  _____________________        Name:  ____________________________

Title:  ____________________        Title: ____________________________

Date:  _____________________        Date: _____________________________


                                    CHAUTAUQUA AIRLINES, INC.

By:  _______________________        By:  ______________________________

Name:_______________________        Name:  ____________________________

Title:______________________        Title: ____________________________

Date:_______________________        Date:  ____________________________




NOTE TO EXHIBIT 10.57

The three additional Letter Agreements are substantially identical in all
material respects to the filed Letter Agreement except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N372SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N373SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N374SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.58

                                                                   Exhibit 10.58

          THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE
     SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO THE SECURITIES LAWS
        OF ANY STATE. ACCORDINGLY, THIS PROMISSORY NOTE MAY NOT BE SOLD,
       UNLESS EITHER REGISTERED UNDER SUCH ACT AND SUCH APPLICABLE STATE
        LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

                                 PROMISSORY NOTE

          Relating to One (1) Embraer EMB-145 model EMB-135 KL Aircraft
                          U.S. Registration No. N375SK
                       Manufacturer's Serial Number 145569

$14,297,288.76                                                 February __, 2002

      Chautauqua Airlines, Inc., a New York, U.S.A. corporation ("BORROWER"),
for value received, hereby promises to pay to Embraer - Empresa Brasileira de
Aeronautica S.A., a Brazilian corporation, or its registered assigns ("LENDER"),
at Caixa Postal 343, CEP 12227-901, Sao Jose dos Campos, Sao Paulo, Brazil (or
at such other location as Lender may from time to time designate in writing to
Borrower), the principal sum of fourteen million two hundred ninety-seven
thousand two hundred eighty-eight dollars and seventy-six cents (US
$14,297,288.76) (the " LOAN"), or such other amount as shall equal the aggregate
unpaid principal amount of the Loan made by Lender to Borrower under that
certain Loan Agreement dated as of February __, 2002 (as at any time hereafter
amended, the "LOAN AGREEMENT"), by and among Borrower and Lender, in lawful
money of the United States of America and Immediately Available Funds.

      The Borrower shall make scheduled principal payments on the Loan in
monthly installments in the amounts and on the dates identified on Schedule 1
hereto (each such date, a "Payment Date"). On each Payment Date, the Borrower
shall pay interest accrued in respect of the unpaid principal amount of the Loan
from the date the proceeds made thereof are made available to the Borrower until
such date, at the Debt Rate. The expected amounts of such interest for each
Payment Date are stated on Schedule 1 hereto. The Borrower shall pay the unpaid
principal amount of and accrued interest on the Loan on August __, 2002 (the
"Maturity Date").

      Any payment of interest, principal or any other payment not paid to Lender
when due and payable hereunder shall, from the date when due and payable until
the date when fully paid, bear interest at the Default Rate.

      All payments of principal, interest and other amounts to be made by
Borrower to Lender hereunder shall be made to the account specified and in the
manner provided in the Loan Agreement. Lender shall apply the payment of
principal and other amounts due on this Promissory Note as follows: FIRST, to
the payment of any amount (other than principal and interest) due to Lender
hereunder or under the Borrower Loan Documents with respect to the Loan; SECOND,
to the payment of accrued and unpaid interest due on this Promissory Note; and
THIRD, to the payment of principal under this Promissory Note.

      This Promissory Note and the Loan may be prepaid in full at any time or
from time to time without penalty, premium or prepayment fee, provided that such
prepayment is of all principal outstanding on the Loan, and all other
liabilities of the Borrower with respect to the


                                       1


Loan then due under the Borrower Loan Documents. Borrower may be obligated to
prepay this Promissory Note as specified in the Loan Agreement and subject to
the requirements thereof.

      Borrower agrees to record separately the name and address and any other
necessary identifying information of Lender in a register maintained as part of
a book-entry system. Borrower and Lender shall treat the party whose name is
recorded in such register as Lender hereunder with all entitlements under this
Promissory Note. Notwithstanding anything to the contrary set forth in this
Promissory Note or the other Borrower Loan Documents, no assignment by Lender of
any rights or obligations under or in respect of the Loan or the Note shall be
effective unless and until Borrower shall have recorded such assignment in the
register maintained pursuant to the preceding paragraph; PROVIDED that if any
such transfer occurs while an Event of Default has occurred and is continuing,
Lender may act as Borrower's agent for effecting registration of such transfer.
Borrower shall record the name of the transferor, the name of the transferee and
the amount of the transfer in the register in the case of a transfer that
complies with the requirements of the Loan Agreement.

      This Promissory Note is the Note referred to in the Loan Agreement and is
entitled to the security and benefits provided in the Security Agreement.

      Upon the occurrence of an Event of Default and for so long as such Event
of Default shall continue, the principal hereof and accrued interest hereon may
be declared to be or may automatically become forthwith due and payable, and
Lender shall be entitled to recover, in addition to all other sums due
hereunder, all of the reasonable costs and expenses, including, without
limitation, court costs and attorney fees, incurred by Lender in enforcing its
rights hereunder.

      Borrower waives diligence, demand, presentment, notice of nonpayment and
protest, all in the sole discretion of Lender and without notice and without
affecting in any manner the liability of Borrower.

      Capitalized terms used herein that are not otherwise defined herein shall
have the meanings ascribed to them in the Loan Agreement and/or the Security
Agreement.

      THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

        [REMAINDER OF PAGE INTENTIONALLY BLANK -- SIGNATURE PAGE FOLLOWS]


                                       2


      IN WITNESS WHEREOF, Borrower has caused this Promissory Note to be
executed by one of its authorized officers as of the date hereof.


                                               CHAUTAUQUA AIRLINES, INC.

                                               By:
                                               Name:
                                               Title:



NOTE TO EXHIBIT 10.58

The three additional Promissory Notes are substantially identical in all
material respects to the filed Promissory Note except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N372SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N373SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N374SK                           December, 2001                          Embraer
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.59

                                                                   Exhibit 10.59

                      AIRCRAFT SECURITY AGREEMENT (N375SK)

                                   Dated as of

                                February 20, 2002

                                     between

                 EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A.,

                                    as Lender

                                       and

                           CHAUTAUQUA AIRLINES, INC.,

                                   as Borrower

                                   relating to

                  One Embraer EMB-145 model EMB-135 KL Aircraft
                    United States Registration Number N375SK
                        Manufacturer's Serial No. 145569

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


                                       1


                      AIRCRAFT SECURITY AGREEMENT (N375SK)

            This AIRCRAFT SECURITY AGREEMENT (N375SK), dated as of February 20,
2002, is between CHAUTAUQUA AIRLINES, INC., a New York corporation (together
with its successors and permitted assigns, the "Borrower"), and EMBRAER-EMPRESA
BRASILEIRA DE AERONAUTICA S.A., as Lender hereunder (herein called, together
with its permitted successors and assigns, the "Lender").

                              W I T N E S S E T H:

            WHEREAS, the Lender (such term and other capitalized terms used
herein without definition being defined as hereinafter provided) has agreed,
pursuant and subject to the terms and conditions of the Loan Agreement, to make
a loan to the Borrower, the proceeds of which will be used to enable the
Borrower to purchase the Aircraft on the date of delivery thereof under the
Purchase Agreement, such loan to be evidenced by a Note to be issued by the
Borrower; and

            WHEREAS, the Borrower desires by this Security Agreement, among
other things, to grant to the Lender a Lien on the Collateral in accordance with
the terms hereof as security for the Obligations; and

            WHEREAS, all things have been done to make the Note, when executed,
issued and delivered by the Borrower, the legal, valid and binding obligation of
the Borrower; and

            WHEREAS, all things necessary to make this Security Agreement a
legal, valid and binding obligation of the Borrower and the Lender, for the uses
and purposes herein set forth, in accordance with its terms, have been done and
performed and have occurred;

            NOW, THEREFORE, it is hereby covenanted and agreed by and between
the parties hereto as follows:

                              ARTICLE 1 DEFINITIONS

            SECTION 1.1 CERTAIN DEFINITIONS. For all purposes of this Security
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:

            (a) capitalized terms used herein have the meanings set forth in
ANNEX A hereto unless otherwise defined herein;

            (b) the definitions stated herein and those stated in ANNEX A apply
equally to both the singular and the plural forms of the terms defined;


                                       1


            (c) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Security Agreement as a whole and not to any
particular Article, Section or other subdivision;

            (d) all references herein to articles, sections, appendices and
exhibits pertain to articles, sections, appendices and exhibits in or to this
Security Agreement; and

            (e) references to any agreement shall be to such agreement, as
amended, modified or supplemented.

                               ARTICLE 2 SECURITY

            SECTION 2.1 GRANT OF SECURITY. To secure the prompt and complete
payment (whether at the stated maturity, by acceleration or otherwise) of all
principal of, interest on and all other amounts payable by the Borrower under
the Borrower Loan Documents now in existence or hereafter incurred, and the
performance and observance by the Borrower of all the agreements and covenants
to be performed or observed by it for the benefit of the Lender contained in the
Borrower Loan Documents (collectively, the "OBLIGATIONS"), and in consideration
of the Note, the premises and of the covenants contained herein and in the other
Borrower Loan Documents and of other good and valuable consideration given to
the Borrower by the Lender at or before the Borrowing Date, the receipt of which
is hereby acknowledged, the Borrower does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge, and confirm unto the Lender and its
permitted successors and assigns, for the security and benefit of the Lender, a
security interest in, and mortgage lien on, all estate, right, title and
interest of the Borrower in, to and under, all and singular, the following
described properties, rights, interests and privileges whether now or hereafter
acquired (hereinafter sometimes referred to as the "COLLATERAL"):

            (a) the Aircraft, including the Airframe and the Engines, whether or
      not any such Engine may from time to time be installed on the Airframe or
      any other airframe or any other aircraft, any and all Parts, and, to the
      extent provided herein, all substitutions and replacements of and
      additions, improvements, accessions and accumulations to the Aircraft, the
      Airframe, the Engines and any and all Parts (such Airframe and Engines as
      more particularly described in the Security Agreement Supplement executed
      and delivered with respect to the Aircraft on the Borrowing Date or with
      respect to any substitutions or replacements therefor), and together with
      all flight records, logs, manuals, maintenance data and inspection,
      modification and overhaul records and other documents at any time required
      to be maintained in accordance with the rules and regulations of the FAA
      with respect to the Airframe, Engine and Parts;

            (b) to the extent in each case of the interest of the Lender
      pursuant to the terms hereof, all requisition proceeds with respect to the
      Aircraft or any Part thereof, and all proceeds of hull insurance with
      respect to the Aircraft or any Part thereof but


                                       2


      excluding all proceeds of, and rights under, any insurance maintained by
      the Borrower pursuant to Section 3.4(f);

            (c) all moneys and securities now or hereafter paid or deposited or
      required to be paid or deposited to or with the Lender by or for the
      account of the Borrower pursuant to any term of this Security Agreement or
      any other Borrower Loan Document and held or required to be held by the
      Lender hereunder or thereunder;

            (d) all property that may, from time to time, hereafter in
      accordance with the provision of this Agreement, be expressly subjected to
      the Lien of this Agreement;

            (e) all Proceeds of the foregoing. "PROCEEDS" shall have the
      broadest meaning permissible under the New York Uniform Commercial Code;

PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions of this
ARTICLE II, so long as no Event of Default shall have occurred and be
continuing, the Borrower shall have the right, to the exclusion of the Lender or
any Person claiming by, through or under the Lender, to quiet enjoyment of the
Aircraft, the Airframe and Engines and the other Collateral and to possess, use,
retain and control the Aircraft, the Airframe and Engines and the other
Collateral and all revenues, income and profits derived therefrom.

            TO HAVE AND TO HOLD all and singular the Collateral unto the Lender,
its permitted successors and assigns, forever, in trust, upon the terms and
trusts herein set forth, for the benefit, security and protection of the Lender
from time to time, and for the uses and purposes and subject to the terms and
provisions set forth in this Security Agreement.

            It is hereby further agreed that any and all property described or
referred to in the granting clauses hereof which is hereafter acquired by the
Borrower shall IPSO FACTO, and without any further conveyance, assignment or act
on the part of the Borrower or Lender, become and be subject to the Lien and
security interest herein granted as fully and completely as though specifically
described herein, but nothing contained in this paragraph shall be deemed to
modify or change the obligations of the Borrower contained in the foregoing
paragraphs.

            The Borrower does hereby agree that it will not violate any covenant
or agreement made by it under the Loan Agreement, herein or in any other
Borrower Loan Document and will not take any action from which it is prohibited
by this Security Agreement, or omit to take any action required by this Security
Agreement to be taken by it, the taking or omission of which would reasonably be
expected to result in an alteration or impairment of any Borrower Loan Document
or any of the rights created by any such document or the assignment hereunder.

            The Borrower agrees that at any time and from time to time, upon the
written request of Lender, the Borrower will promptly and duly execute and
deliver or cause to be duly executed and delivered any and all such further
instruments and documents as Lender may reasonably request which are necessary
to perfect, preserve or protect the mortgage, security


                                       3


interests and assignments created or intended to be created hereby or to obtain
for Lender the full benefits of the assignment hereunder and of the rights and
powers herein granted.

            It is expressly agreed that notwithstanding anything herein to the
contrary, the Borrower shall remain liable under the Borrower Loan Documents to
perform all of its obligations thereunder, and, except to the extent expressly
provided herein or in any other Borrower Loan Document, the Lender shall not be
required or obligated in any manner to perform or fulfill any obligations of the
Borrower under or pursuant to any thereof, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or present or file any
claim or take any action to collect or enforce the payment of any amount which
may have been assigned to it or to which it may be entitled at any time or
times.

            The Borrower does hereby constitute and appoint the Lender the true
and lawful attorney of the Borrower (which appointment is coupled with an
interest) with full power (in the name of the Borrower or otherwise) to ask for,
require, demand and receive any and all moneys and claims for moneys due and to
become due under or arising out of all property (in each case including
insurance and requisition proceeds) which now or hereafter constitutes part of
the Collateral, to endorse any checks or other instruments or orders in
connection therewith and to file any claims or to take any action or to
institute any proceeding which the Lender may deem to be necessary or advisable
in the premises; PROVIDED that the Lender shall not exercise any such rights
except during the continuance of an Event of Default. Without limiting the
provisions of the foregoing, during the continuance of any Event of Default but
subject to the terms hereof and any mandatory requirements of applicable law,
the Lender shall have the right under such power of attorney in its discretion
to file any claim or to take any other action or proceedings, either in its own
name or in the name of the Borrower or otherwise, which the Lender may
reasonably deem necessary or appropriate to protect and preserve the right,
title and interest of the Lender in and to the security intended to be afforded
hereby.

                       ARTICLE 3 COVENANTS OF THE BORROWER

            SECTION 3.1 LIENS. The Borrower will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to any of
the Collateral or its title thereto or any of its interest therein except:

            (a) the respective rights of the Lender and the Borrower as provided
      herein and in the other Borrower Loan Documents, and the Lien of this
      Security Agreement, and the rights of the Lender under this Security
      Agreement, the Loan Agreement and the other Borrower Loan Documents;

            (b) the rights of others under agreements or arrangements to the
      extent expressly permitted by Section 3.2;

            (c) Liens for fees, Taxes, levies, duties or other governmental
      charges of any kind, Liens of mechanics, materialmen, laborers, employees
      or suppliers and similar


                                       4


      Liens arising by operation of law, in each case incurred by Borrower in
      the ordinary course of business for sums that are not yet delinquent or
      are being contested in good faith by appropriate proceedings (and for
      which adequate reserves have been provided in accordance with GAAP) which
      suspend the collection thereof (provided that such proceedings do not
      involve any material danger of the sale, forfeiture or loss of the
      Airframe or an Engine, or any interest therein);

            (d) Liens arising out of any judgments or awards against Borrower so
      long as within 30 days after the entry thereof it has been discharged,
      vacated or stayed pending an appeal or proceeding for review (provided
      that such proceedings do not involve any material danger of the sale,
      forfeiture or loss of the Airframe or an Engine, or any interest therein);
      and

            (e) Lender Liens.

Liens described in clauses (a) through (e) above are referred to herein as
"PERMITTED LIENS". The Borrower shall promptly, at its own expense, take such
action as may be necessary duly to discharge (by bonding or otherwise) any Lien
other than a Permitted Lien arising at any time with respect to any Collateral.
The Lender shall promptly, at its own expense, take such action as may be
necessary duly to discharge (by bonding or otherwise) Lender Lien.

            SECTION 3.2 REGISTRATION AND MAINTENANCE; OPERATION; POSSESSION AND
LEASES.

            (a) REGISTRATION AND MAINTENANCE. The Borrower shall, at its own
cost and expense:

            (i) (A) upon delivery of the Aircraft, cause the Aircraft to be duly
registered in the name of the Borrower, and at all times thereafter to remain
duly registered in the United States of America in the name of the Borrower
under the Transportation Code, PROVIDED, that Lender shall execute and deliver
all such documents as the Borrower may reasonably request for the purpose of
effecting and continuing such registration and (B) upon delivery of the
Aircraft, cause the Security Agreement to be duly filed for recording with the
FAA, and at all times thereafter so long as the Loan shall be outstanding or any
amount shall be owing to the Lender, cause the Security Agreement to be
maintained of record as a first priority mortgage on the Aircraft (subject to
Permitted Liens);

            (ii) inspect, maintain, service, repair, and overhaul (or cause to
be inspected, maintained, serviced, repaired, and overhauled) the Aircraft (and
any engine which is not an Engine but which is installed on the Aircraft), so as
to keep the Aircraft in as good condition as when originally delivered to the
Borrower on the Delivery Date, ordinary wear and tear excepted, in compliance at
all times with the Borrower's FAA-approved maintenance program and in accordance
with all applicable FAA regulations for the Aircraft (including all FAA
airworthiness directives applicable to the Aircraft) and to keep the Aircraft in
such condition as may be


                                       5


necessary to enable all certificates, licenses, permits and authorizations
required for the use and operation of the Aircraft and each Engine including the
airworthiness certification for the Aircraft to be maintained in good standing
at all times under the Transportation Code except when (w) the Aircraft is being
temporarily stored, (x) the Aircraft is being serviced, repaired, maintained,
overhauled, tested or modified as permitted or required by the terms of this
Agreement, (y) all Embraer EMB-145 aircraft of the same year of manufacture have
been grounded by the FAA (in which case the Aircraft shall be maintained in
accordance with Borrower's FAA-approved maintenance program for aircraft stored
and not in operation), or (z) laws or regulations affecting airworthiness are
being contested in good faith and by appropriate proceedings so long as such
proceedings would not reasonably be expected to materially adversely affect the
Lender or its legal or financial interest in the Aircraft, PROVIDED, that in the
case of (w) and (x) above such storage, service, repair, maintenance, overhaul,
test or modification is in accordance with applicable FAA regulations at such
time and in accordance with the Borrower's FAA-approved maintenance program and
in substantially the same manner and with the same care as the Borrower
inspects, maintains, services, repairs or overhauls similar aircraft operated by
the Borrower in similar circumstances; and

            (iii) maintain or cause to be maintained in English all records,
logs and other materials required to be maintained in respect of the Aircraft by
the FAA.

Subject in all cases to the provisions of this Agreement and the other Borrower
Loan Documents, determination of the appropriate course of action in
maintenance, including the means of compliance with airworthiness directives,
and all other matters pertaining to the Aircraft will be within the reasonable
discretion of the Borrower.

            (b) PARTS. If any Parts shall from time to time become worn out,
lost, destroyed, damaged beyond repair or otherwise permanently rendered unfit
for use, or are removed pursuant to the terms of the Security Agreement, the
Borrower, at its own expense, will within a reasonable time replace such Parts,
or cause the same to be replaced, by replacement parts or accessories which are
free and clear of all Liens except Permitted Liens and are in a condition and
have a value and utility equal to the greater of the value, condition and
utility (i) of the Parts replaced or (ii) that such replaced Parts would have
had if maintained in the condition and repair required by the terms hereof. All
replacement Parts, and all equipment, accessories and parts that are added to or
become attached to the Aircraft and which are essential to the operation of the
Aircraft (including those essential because of U.S. legal requirements) or which
cannot be detached from the Aircraft without materially interfering with the
operation of the Aircraft or adversely affecting the value, condition or utility
which the Aircraft would have had without the addition thereof or which are in
substitution of any Parts, shall, in each case, be deemed incorporated in the
Aircraft and subject to the terms of this Agreement and to the Lender's security
interest created hereunder. The Borrower agrees to prepare, execute and file, at
its own expense, such documents as may be reasonably requested by the Lender to
create, protect and/or perfect the Lender's interest in any such replacement
Part. Except as otherwise provided herein, all Parts at any time removed from
the Aircraft, Airframe or any Engine shall remain subject to the Lien of this
Agreement no matter where located, until such time as such Parts shall


                                       6


be replaced by parts which have been incorporated or installed in or attached to
the Aircraft, Aircraft or such Engine and which meet the requirements for
replacement Parts specified above. Immediately upon any replacement part
becoming incorporated or installed in or attached to the Aircraft, Airframe or
such Engine as above provided, without further act, (i) such replacement part
shall become subject to the Lien of this Agreement and be deemed part of the
Aircraft, originally incorporated or installed in or attached to such Aircraft,
Airframe or such Engine for all purposes hereof and thereof to the same extent
as the Parts originally incorporated or installed in or attached to such
Aircraft, Airframe or Engine and (ii) the replaced Part shall thereupon be free
and clear of all rights of the Lender and shall no longer be deemed a Part under
this Agreement. Any Part removed from the Aircraft, Airframe or any Engine may
be subjected by Borrower to a normal pooling arrangement customary in the
airline industry and entered into in the ordinary course of business of
Borrower, so long as a Part replacing such removed Part shall be incorporated or
installed in or attached to the Aircraft, Airframe or such Engine in accordance
with this Section 3.2(b) as promptly as practicable after the removal of such
removed part. In addition, any replacement part when incorporated or installed
in or attached to the Aircraft, Airframe or any Engine may be owned by any third
party subject to such a normal pooling arrangement, so long as Borrower, at its
own cost and expense, as promptly thereafter as reasonably possible either (x)
causes such replacement part to become subject to the Lien of this Security
Agreement, free and clear of all Liens (except Permitted Liens) at which time
such replacement part shall become a Part or (y) replaces (or causes to be
replaced) such replacement part by incorporating or installing in or attaching
to the Aircraft, Airframe or such Engine a further replacement Part owned by
Borrower free and clear of all Liens (except Permitted Liens).

            (c) OPERATION. The Borrower will not maintain, use, service, repair,
overhaul or operate the Aircraft in violation of any law, rule, regulation,
treaty, or order of any government or Governmental Authority having
jurisdiction, or in violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any such authority except (1)
unanticipated minor violations not involving any material risk of the sale,
forfeiture or loss of the Aircraft, the Airframe, any Engine or the Lender's
interest therein or any imposition of criminal penalties or material civil
penalties against the Lender if such violation ceases promptly after discovery
thereof by the Borrower, or only requires the Borrower's payment of a fine
levied only against the Borrower, and (2) the Borrower may contest in good faith
the validity or application of any such law, rule, regulation, treaty, order,
certificate, license or registration, so long as there is no material risk of
the sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
Lender's interest therein or any imposition of criminal penalties or material
civil penalties against the Lender; PROVIDED, HOWEVER, that actions taken under
(1) and (2) above will not result in the violation of any requirements of
insurance pursuant to Section 3.4 hereof. The Borrower will not operate, use or
locate the Aircraft in any area excluded from coverage by any insurance required
to be maintained by the terms of Section 3.4, or if war risk insurance specified
in Section 3.4 hereof has not been obtained, in or to any war zone or any area
of threatened or recognized hostility or in either case unless the Aircraft, the
Airframe or any Engine 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 circumstance, so long
as the Borrower diligently and in good faith proceeds to remove the Aircraft
from such area, and


                                       7


such temporary operation, use or location does not result in the violation of
any requirements of insurance pursuant to Section 3.4 hereof. The Borrower shall
not intentionally do or permit to be done anything which will expose the
Aircraft to penalty, forfeiture, impounding or detention, appropriation, damage
or destruction (other than any damage or destruction arising in the ordinary
course of operation of the Aircraft) or (insofar as the same relates to the
operation or use of the Aircraft) the Lender to criminal liability (and in the
event of any forfeiture, impounding, detention or appropriation of the Aircraft
the Borrower shall take all such steps reasonably open to it with a view to
obtaining the immediate release of the Aircraft). The Borrower shall not
represent or hold out the Lender as carrying goods or passengers on the Aircraft
or as being connected or associated with any operation of carriage which may be
undertaken by the Borrower or pledge the credit of the Lender. The Borrower
shall not on any occasion on which the ownership of the Aircraft is relevant
represent to third parties that title to the Aircraft is held by the Borrower
free of the Lien of the Security Agreement so long as the Lien of the Security
Agreement has not been discharged.

            (d) POSSESSION. The Borrower shall not in any manner deliver,
relinquish or transfer possession of the Airframe or any Engine to any Person or
install any Engine, or permit any Engine to be installed, on any airframe other
than the Airframe, during the Term, without the prior consent of the Lender,
which consent may be withheld in its sole discretion, PROVIDED, HOWEVER, that so
long as (A) no Event of Default shall have occurred and be continuing, and (B)
all approvals, consents or authorizations required from the FAA in connection
with any such transfer or relinquishment of possession have been obtained and
remain in full force and effect, the Borrower may, without the prior consent of
the Lender:

                  (i) [intentionally left blank];

                  (ii) deliver possession of the Airframe or any Engine or any
            Part to the manufacturer thereof or to any organization for testing,
            service, repair, maintenance, overhaul work or other similar
            purposes or for alterations or modifications or additions required
            or permitted by the terms of this Security Agreement;

                  (iii) [intentionally left blank];

                  (iv) install an Engine on an airframe owned by the Borrower
            free and clear of all Liens except (A) Permitted Liens, (B) those
            which do not apply to the Engines, and (C) those created by the
            rights of other air carriers under interchange or pooling agreements
            or other arrangements customary in the airline industry which do not
            contemplate, permit or require the transfer of title to such
            airframe or engines installed thereon;

                  (v) install an Engine on an airframe, leased to the Borrower
            or purchased by the Borrower subject to a conditional sale or other
            security agreement, but only if (A) such airframe is free and clear
            of all Liens, except (i)


                                       8


            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 Section 3.2(d)(iv) and (B) Borrower 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 the Lien of this Security Agreement;

                  (vi) [intentionally left blank];

                  (vii) transfer possession of the Airframe or Engine to the
            United States of America or any instrumentality thereof pursuant to
            the Civil Reserve Air Fleet Program (as established and administered
            pursuant to Executive Order 11490, as amended, as superseded by
            United States Executive Order No. 12656) or any similar or
            substitute program ("CRAF Program"), in which event Borrower (or
            such Permitted Sublessee) shall promptly notify Lender in writing of
            any such transfer of possession and, in the case of any transfer
            pursuant to the CRAF Program, in such notification shall identify by
            name, address and telephone numbers the Contracting Office
            Representatives of 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 the CRAF Program;

                  (viii) transfer possession of the Airframe or any Engine to
            the United States of America, or to a foreign government, when
            required by Applicable Law (it being understood that nothing in this
            clause (viii) shall relieve the Borrower from its obligations under
            Section 3.3 if such transfer becomes an Event of Loss), in which
            event Borrower shall promptly notify Lender in writing of any such
            transfer of possession;

                  (ix) [intentionally left blank];

                  (x) [intentionally left blank];

PROVIDED that (1) the rights of any transferee who receives possession by reason
of a transfer permitted by this Section 3.2(d) shall be subject and subordinate
to all the terms of this Security Agreement; (2) the Borrower shall remain
primarily liable hereunder for the performance of all the terms and conditions
of this Security Agreement and the other Borrower Loan Documents shall remain in
effect; and (3) no transfer of possession otherwise in compliance with this
Section 3.2(d) shall (A) result in any registration or re-registration of the
Aircraft or the maintenance, operation or use thereof except in compliance with
Sections 3.2(a), (b) and (c), or (B) permit any action not permitted to the
Borrower hereunder.


                                       9


            The Lender hereby agrees for the benefit of the lessor, conditional
seller, mortgagee or secured party of any engine or of any airframe (other than
the Airframe) leased to the Borrower or owned by the Borrower subject to a
conditional sale or other security agreement, which lease or conditional sale or
other security agreement (in the case of any such airframe) also covers an
engine or engines owned by the lessor under such lease or subject to a security
interest in favor of the secured party under such conditional sale or other
security agreement, that the Lender will not acquire or claim, as against such
lessor or secured party, any right, title or interest in any such engine as the
result of such engine being installed on the Airframe at any time while such
engine is owned by such lessor or is subject to such conditional sale or other
security agreement or security interest in favor of such secured party.

            (e) INSPECTION. The Lender shall have the right (at its own expense,
unless an Event of Default has occurred and is continuing) to inspect the
Aircraft and all logs, flight manuals and maintenance records and any other
books and records related to the Aircraft and identified by the Lender with
respect thereto at reasonable times and on reasonable notice during the Term.
The Lender shall not have any duty to inspect and shall not incur any liability
or obligation by reason of not making any such inspection. So long as no Event
of Default has occurred and is continuing, any such inspection shall be limited
to a visual, walk-around inspection which may include going on board the
Aircraft, but may not include any opening of any panels, bays, or disassembly of
any components, ETC. (unless such inspection is during an overhaul of the
Aircraft and such panels or bays are then opened or components then disassembled
in the course of such maintenance), and any such inspection shall be conducted
so as not to unreasonably interfere in any manner with the Borrower's business
or the operation and maintenance of the Aircraft.

            (f) MODIFICATIONS, ALTERATIONS, IMPROVEMENTS, OBSOLETE PARTS.
Borrower shall have the right, at its sole cost and expense, to make any
modifications, alterations or improvements to the Aircraft (i) which comply with
the terms of this Agreement and do not decrease in more than a non-deminimis
amount the fair market value, utility or remaining useful life of the Aircraft
and (ii) as may be required to be made during the Term to comply with all
applicable laws and to meet the applicable standards of the FAA; PROVIDED,
HOWEVER, that Borrower may, in good faith contest the validity or application of
any such law, rule, regulation or order in any reasonable manner which does not
adversely affect in any material respect Lender or any of its legal or economic
interests in or to such Aircraft or any Borrower Loan Document and such contest
or failure to comply will not result in any material risk of loss, sale,
forfeiture or damage to the Aircraft or subject any Person to any material risk
of criminal or material civil penalties. Any such modification, alteration or
improvement may involve the removal of Parts that the Borrower deems obsolete or
no longer suitable or appropriate for use in the Aircraft, Airframe or an Engine
(provided that the aggregate value of such Parts shall not exceed $200,000 in
aggregate original cost) or of Parts that were installed in addition to, and not
in substitution for, any Part originally installed in the Aircraft, Airframe or
an Engine on the Delivery Date, in each case without replacement of such Parts.


                                       10


            (g) IMPROVEMENTS OWNED BY OTHERS. The Borrower may install in the
Aircraft audio-visual, entertainment, telephonic, or other similar equipment
owned by third parties and leased or otherwise furnished to the Borrower in the
ordinary course of business, provided that (i) such equipment meets all
requirements for removal of Parts as specified in this Agreement, and (ii) the
Borrower shall procure that upon the occurrence of any default under the lease
or other arrangement relating to such equipment, the owner of such equipment
shall not be entitled to repossess such equipment unless it or the Borrower
shall, in connection with such repossession undertake to restore the Aircraft in
a workmanlike manner to a condition acceptable by commercial airline standards
and in compliance with applicable FAA rules and regulations, and the Lender
shall not acquire a Lien thereon and the rights of the owners therein shall not
constitute a default under this Agreement. Notwithstanding the foregoing, in no
event shall the installation or removal of such equipment impair or otherwise
adversely affect the Lender's rights and remedies hereunder.

      SECTION 3.3 LOSS, DESTRUCTION OR REQUISITION. (a) TOTAL LOSS WITH RESPECT
TO THE AIRFRAME. Upon the occurrence of a Total Loss with respect to the
Airframe, the Borrower shall promptly (and, in any event, within 7 days after
such occurrence) give the Lender written notice of such Total Loss. Within 90
days following the occurrence of such Total Loss, the Borrower shall prepay (or,
if applicable, pay) the Note in full in accordance with the Loan Agreement.

            (b) TOTAL LOSS WITH RESPECT TO AN ENGINE. Upon the occurrence of a
Total Loss with respect to an Engine under circumstances in which there has not
occurred a Total Loss with respect to the Airframe, the Borrower shall promptly
(and in any event within 15 days after such occurrence) give the Lender written
notice of such Total Loss and shall, within 120 days after the occurrence of
such Total Loss (or, if (x) the Lender has received all insurance proceeds with
respect to the Total Loss of such Engine, (y) Borrower does not have an engine
that satisfies the requirements for a Replacement Engine and (z) a new engine is
not available within such time from the engine manufacturer, as soon as a new
engine is available from the engine manufacturer), cause to be subjected to the
Lien of this Security Agreement, as replacement for the Engine with respect to
which such Total Loss occurred, a Replacement Engine free and clear of all Liens
(other than Permitted Liens).

            Prior to or at the time of any replacement under this Section
3.3(b), the Borrower will (i) cause a Security Agreement Supplement
substantially in the form of Exhibit A covering such Replacement Engine to be
delivered to the Lender for execution and, upon such execution, to be filed for
recordation pursuant to the Transportation Code, (ii) cause a financing
statement or statements with respect to such Replacement Engine or other
requisite documents or instruments to be filed in such place or places as
necessary in order to perfect the security interest therein created by or
pursuant to this Security Agreement, (iii) furnish the Lender with an opinion of
the Borrower's counsel (which may be the Borrower's or an Affiliate of the
Borrower's General Counsel) addressed to the Lender to the effect that, upon
such replacement, the Replacement Engine will be subject to the Lien of this
Security Agreement, (iv) furnish the Lender with a certificate of an aircraft
engineer or appraiser (who may be an employee of the Borrower or an Affiliate of
the Borrower) certifying that such Replacement Engine has a value and utility at
least


                                       11


equal to, and is in as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Total Loss, (v) furnish the
Lender with a report in the form provided by Section 3.4(b) evidencing
compliance with the insurance provisions of Section 3.4 hereof with respect to
such Replacement Engine and (vi) furnish to the Lender a copy of the bill of
sale respecting such Replacement Engine or other evidence of the Borrower's
ownership of such Replacement Engine, reasonably satisfactory to the Lender. In
the case of each Replacement Engine subjected to the Lien of this Security
Agreement under this Section 3.3, promptly upon the recordation of the Security
Agreement Supplement covering such Replacement Engine pursuant to the
Transportation Code, the Borrower will cause to be delivered to the Lender an
opinion of counsel to the Borrower addressed to the Lender as to the due
recordation of such Security Agreement Supplement or such other requisite
documents or instruments and the validity and perfection of the security
interest in the Replacement Engine granted to the Lender under this Security
Agreement. For all purposes hereof, upon the attachment of the Lien of this
Security Agreement thereto, the Replacement Engine shall become part of the
Collateral and shall be deemed an "Engine" as defined herein (and the replaced
Engine shall cease to be an "Engine" as defined herein). Upon such attachment of
the Lien of this Security Agreement, the Lender shall execute and deliver to the
Borrower an appropriate instrument, in the form provided by the Borrower and
approved by the Lender, releasing, without recourse or warranty, from the Lien
of this Security Agreement such replaced Engine (and shall cause any Lender Lien
with respect thereto to be released), any proceeds (including, without
limitation, insurance proceeds) and all rights relating to any thereof, and
assigning, without recourse or warranty, to the Borrower all claims against
third Persons for damage (if any) to such Engine arising from the Total Loss.

            (c) APPLICATION OF PAYMENTS FOR TOTAL LOSS FROM REQUISITION OF TITLE
OR USE. Any payments (other than insurance proceeds the application of which is
provided for in Section 3.4) received at any time by the Borrower or by the
Lender from any Governmental Authority or other Person with respect to a Total
Loss to the Airframe or any Engine, will be applied as follows:

                  (i) if such payments are received with respect to the Engines
            or engines installed on the Airframe that have been or are being
            replaced by the Borrower pursuant to Section 3.3, such payments
            shall be paid over to, or retained by, the Lender and upon
            completion of such replacement (or if such payments are to be used
            by the Borrower to acquire Replacement Engines, simultaneously with
            the satisfaction of the requirements set forth herein with respect
            to such Replacement Engine) shall be paid over to the Borrower;

                  (ii) if such payments are received with respect to the
            Airframe or the Airframe, or with respect to Engines or engines
            installed on the Airframe that have not been and will not be
            replaced pursuant to Section 3.3, after reimbursement of the Lender
            for costs and expenses, so much of such payments remaining as shall
            not exceed the amounts required to be paid to the Lender pursuant to
            the Loan Agreement shall be applied in reduction of the Borrower's
            obligation to pay such amount, if not already paid by the Borrower,
            or, if already paid


                                       12


            by the Borrower, shall be applied to reimburse the Borrower for its
            payment of such amount, and the balance, if any, of such payment
            remaining thereafter will be paid over to, or retained by, the
            Borrower; and

                  (iii) if such payments are received with respect to an Engine
            under circumstances contemplated by Section 3.3 after reimbursement
            of the Lender for costs and expenses, so much of such payments shall
            be paid over to, or retained by, the Borrower; PROVIDED that the
            Borrower shall have fully performed (or concurrently performs) the
            terms of Section 3.3 with respect to the Total Loss for which such
            payments are made.

            (d) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.
Any amount referred to in Section 3.3 that is payable to the Borrower shall not
be paid to the Borrower or, if it has been previously paid directly to the
Borrower, shall not be retained by the Borrower, if at the time of such payment
an Event of Default shall have occurred and be continuing, but shall be paid to
and held by the Lender as security for the obligations of the Borrower under
this Security Agreement, applied against the Borrower's payment obligations
hereunder when and as they become due and payable and at such time as there
shall not be continuing any such Event of Default, such amount, to the extent
not previously so applied against the Borrower's payment obligations, shall be
paid to the Borrower; PROVIDED that if any such amount has been so held by the
Lender as security for more than 90 days after any such Event of Default shall
have occurred, during which period (i) the Lender shall not have been limited by
operation of law or otherwise from exercising remedies hereunder and (ii) the
Note (with accrued interest thereon) shall not have become due and payable and
the Lender shall not have exercised any remedy available to it under Article V
then such amount, to the extent not previously so applied against the Borrower's
payment obligations, shall be paid to the Borrower.

      SECTION 3.4 INSURANCE.

            (a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE

            Subject to the rights of the Borrower under Section 3.4(f), the
Borrower shall, without expense to the Lender, maintain or cause to be
maintained in effect at all times during the Term with independent insurers of
internationally recognized reputation and responsibility public liability
insurance (including, without limitation, aircraft third party, passenger legal
liability, property damage, general third party legal liability and product
liability coverage but excluding manufacturer's product liability coverage) with
respect to the Aircraft in an amount not less than the greater of (i) the amount
which The Borrower may carry from time to time on other similar aircraft in its
fleet (whether owned or leased) and (ii) the 105% of the outstanding principal
amount of the Note; PROVIDED that an agreement of the Government for the benefit
of the Lender to insure against or indemnify for substantially the same risks to
at least the same amount shall satisfy the requirements of this Section 3.4(a),
PROVIDED that on or prior to the date of such agreement, the Borrower shall
provide an Officer's Certificate of the Borrower certifying that any such
insurance or indemnity provides protection no less favorable than insurance


                                       13


coverage that would comply with this Section 3.4. Such insurance shall be of the
type usually carried by the Borrower with respect to similar aircraft and
engines, and covering risks of the kind customarily insured against by the
Borrower. In addition, without limitation of the requirements of the preceding
sentence (and notwithstanding anything to the contrary contained in the
preceding sentence), the Borrower shall in all events maintain in effect, at all
times during the Term, war risk and allied perils liability insurance in
accordance with the London form AVN52C (as in effect on September 1, 2001) or
its equivalent form reasonably acceptable to Lender (or an agreement of the
Government to insure against or indemnify for substantially the same risks),
from time to time, with respect to the Aircraft , (I) in an amount not less than
the greater of (x) the amount of war risk and allied perils liability insurance
from time to time applicable to similar aircraft owned or operated by the
Borrower and (y) $350,000,000 per occurrence, and (II) maintained with
independent insurers of internationally recognized reputation and
responsibility.

            During any period that the Aircraft is grounded and not in
operation, the Borrower may modify the insurance required by this Section 3.4(a)
to modify the amounts of public liability and property damage insurance, the
scope of the risks covered and the type of insurance, in all circumstances to
conform to such insurance customary in the United States airlines industry for
regional air carriers similarly situated with the Borrower in respect of similar
aircraft which are grounded, not in operation, and stored or hangared, except
that in all instances, the amounts of coverage and scope of risk covered and the
type of insurance shall be at a minimum no less favorable than the insurance as
from time to time applicable to aircraft owned or leased by the Borrower on the
ground, not in operation, and stored or hangared.

            (b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT AND ENGINES

            Subject to the rights of the Borrower under Section 3.4(f), the
Borrower shall, without expense to the Lender, maintain or cause to be
maintained in effect at all times during the Term with insurers of nationally
recognized responsibility all risk, agreed value, ground and flight hull
insurance covering the Aircraft for an amount at all times (even when the
Aircraft is grounded or in storage) of not less than 105% of the outstanding
principal of the Note; PROVIDED THAT, the Borrower shall not be required to
maintain all-risk flight aircraft hull insurance with respect to any period in
which the Aircraft is grounded and properly stored or hangared. Such insurance
shall not provide insurers with a right to replace the Airframe or any Engine
with another airframe or Engine. Such hull insurance or other personal property
insurance of the Borrower shall cover Engines or engines and Parts temporarily
removed from the Airframe, pending replacement by installation of the same or
similar Engines, engines or Parts on the Airframe. Such insurance shall be of
the type usually carried by the Borrower with respect to similar aircraft and
engines, and covering risks of the kind customarily insured against by the
Borrower. The Borrower shall in any event maintain or cause to be maintained in
effect at all times during the Term, with independent insurers of
internationally recognized reputation and responsibility hull war risks and
allied perils insurance (in accordance with the London form LSW555B or its
equivalent form reasonably acceptable to the Lender) with respect to the
Aircraft in the amount at least equal to 105% of the outstanding principal
amount of the Note


                                       14


from time to time. An agreement by the Government to insure against or indemnify
for substantially the same risks to at least the same amount will satisfy any of
the requirements of this Section 3.4(b).

            (c) ADDITIONAL INSUREDS; LOSS PAYMENT.

            The Borrower shall cause all policies of insurance carried in
accordance with this Section 3.4 to name the Lender as an additional insured
("Additional Insureds"). Such policies shall provide with respect to such
Additional Insureds that (i) none of their respective interests in such policies
shall be invalidated by any act or omission or breach of warranty or condition
contained in such policies by the Borrower or, in the case of any particular
Additional Insured, any other Additional Insured; (ii) no cancellation or lapse
of coverage for nonpayment of premium or otherwise, and no substantial change of
coverage which adversely affects the interests of any such Additional Insured,
shall be effective as to such Additional Insured until 30 days (or such lesser
period as may be applicable in the case of any war risk coverage) after receipt
by such Additional Insured of written notice from the insurers of such
cancellation, lapse or change; (iii) they shall have no liability for premiums,
commissions, calls, assessments or advances with respect to such policies; (iv)
such policies will be primary without any right of contribution from any other
insurance carried by such Additional Insureds; (v) the insurers waive any rights
of set-off, counterclaim, deduction or subrogation against such Additional
Insureds; (vi) shall apply worldwide and have no territorial restrictions or
limitations (except, in the case of war, hijacking or related perils insurance,
as may be reasonably acceptable to the Lender); and (vii) shall contain a 50/50%
Clause per Lloyd's Aviation Underwriter's Association Standard Policy Form AVS
103. Each liability policy shall provide that all the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured and provide that the exercise by the
insurer of rights of subrogation derived from rights retained by the Borrower
will not delay payment of any claim that would otherwise be payable but for such
rights of subrogation. Each hull policy shall name the Lender as loss payee;
PROVIDED THAT, so long as the insurers shall not have received written notice
that a Specified Default or Event of Default has occurred and is continuing, if
insurance proceeds in the aggregate equal $1,250,000 or less become payable,
then such proceeds shall be payable to the Borrower and, notwithstanding the
foregoing, any amounts up to Termination Value (i) of any proceeds which in the
aggregate exceed $1,250,000, (ii) of any proceeds in respect of an Event of Loss
or (iii) if the insurers shall have received written notice that an Event of
Default has occurred and is continuing, any proceeds with respect to any single
loss, shall be payable to such loss payee.

            (d) DEDUCTIBLES AND SELF-INSURANCE

            The Borrower may not self-insure, by way of deductible or premium
adjustment provisions in insurance policies or otherwise, except for a
deductible per occurrence that is not in excess of prevailing standard market
deductibles for similar aircraft.

            (e) APPLICATION OF HULL INSURANCE PROCEEDS.


                                       15


            Subject to Section 3.3(d), as between the Lender and the Borrower,
any payments received under policies of hull or other property insurance
required to be maintained by the Borrower pursuant to Section 3.4(b), shall be
applied as follows:

                  (i) if such payments are received with respect to loss or
            damage (including an Event of Loss with respect to an Engine) not
            constituting an Event of Loss with respect to the Airframe, payments
            in the aggregate of $1,250,000 or less shall be paid over to or
            retained by the Borrower and, subject to Section 3.4(c), any
            payments which in the aggregate are greater than $1,250,000 shall be
            paid over to or retained by the Lender for payment to the Borrower
            only upon performance of its repair or replacement obligation; and

                  (ii) if such payments are received with respect to an Event of
            Loss with respect to the Airframe, so much of such payments as shall
            not exceed the outstanding principal and interest on the Note and
            other amounts required to be paid by the Borrower pursuant to the
            Borrower Loan Documents shall be applied in reduction of the
            Borrower's obligation to pay such amounts if not already paid by the
            Borrower, and to reimburse the Borrower if such amounts shall have
            been paid, and the balance, if any, of such payments shall be
            promptly paid over to or retained by the Borrower.

            (f) INSURANCE FOR OWN ACCOUNT

            Nothing in this Section 3.4 shall prohibit the Lender, the Borrower
or any Additional Insured from obtaining insurance with respect to the Aircraft
for its own account (including, without limitation, in the case of the Borrower,
hull insurance under the same policies maintained pursuant to this Section 3.4
in amounts in excess of those required to be maintained pursuant to this Section
3.4) and any proceeds payable thereunder shall be payable as provided in the
insurance policy relating thereto, PROVIDED that no such insurance may be
obtained which would limit or otherwise adversely affect the availability of
coverage or payment of any insurance required to be obtained or maintained
pursuant to this Section 3.4, it being understood that all salvage rights to the
Airframe or the Engines shall remain with the Borrower's insurers at all times.

            (g) REPORTS, ETC.

            The Borrower will furnish to the Lender (A) on or prior to the
Delivery Date, insurance certificates describing in reasonable detail the
insurance maintained by the Borrower as required pursuant to this Section 3.4,
(B) prior to the cancellation, lapse or expiration of the insurance policies
required pursuant to this Section 3.4, evidence of renewal of such insurance
policies, and (C) on or prior to the Delivery Date and on or before the renewal
dates of the insurance policies carried by the Borrower pursuant to this Section
3.4, a report signed by a firm of aircraft insurance brokers, not affiliated
with the Borrower, appointed by the Borrower and reasonably satisfactory to the
Lender, stating the opinion of such firm that all premiums in


                                       16


connection with the insurance then due have been paid and the insurance then
carried and maintained on the Aircraft complies with the terms hereof and, in
the case of renewal insurance, that such renewal insurance will on and after the
effective date thereof so comply with the terms hereof, PROVIDED that all
information contained in such report shall be held confidential by the Lender,
and shall not be furnished or disclosed by them to anyone except their legal
counsel, insurance brokers or advisors, bona fide prospective transferees of the
Lender and their respective agents (PROVIDED that they shall agree for the
benefit of the Borrower to hold all such information similarly confidential) or
as may be required by Applicable Law. The Borrower will instruct such firm to
give prompt written advice to the Lender of any default in the payment of any
premium and of any other act or omission on the part of the Borrower of which it
has knowledge and which would in such firm's opinion invalidate or render
unenforceable, in whole or in any material part, any insurance on the Aircraft.
The Borrower will also instruct such firm to advise the Lender in writing at
least 30 days prior to the termination or cancellation of, or material adverse
change in, such insurance carried and maintained on the Aircraft pursuant to
this Section 3.4 (or such lesser period as may be applicable in the case of war
risk coverage).

            (h) RIGHT TO PAY PREMIUMS.

            The Additional Insureds shall have the rights but not the
obligations of an additional named insured. None of the Additional Insureds
shall have any obligation to pay any premium, commission, assessment or call due
on any such insurance (including reinsurance). Notwithstanding the foregoing, in
the event of cancellation of any insurance due to the nonpayment of premiums,
each of the Lender shall have the option, in its sole discretion, to pay any
such premium in respect of the Aircraft that is due in respect of the coverage
pursuant to this Security Agreement and to maintain such coverage, as the Lender
or any other Additional Insureds may require, until the scheduled expiry date of
such insurance and, in such event, the Borrower shall, upon demand, reimburse
the Lender and any other Additional Insureds for amounts so paid by them.

            SECTION 3.5 ADDITIONAL AGREEMENTS.

            (a) NOTATION OF SECURITY INTEREST. The Borrower shall place on the
Airframe and each Engine a notation or legend stating that the Lender holds a
first priority security interest therein pursuant to this Security Agreement, in
a form reasonably acceptable to the Lender.

            (b) PAYMENT OF CHARGES, ETC. At any time after an Event of Default
shall have occurred and be continuing, the Lender may (without any obligation to
do so) at any time, in accordance with the terms hereof, effect insurance
coverage and necessary repairs to the Collateral and pay the premiums therefor
and the costs thereof, pay and discharge any fees, assessments, charges, Taxes
and Permitted Liens on the Collateral and, upon the occurrence of an Event of
Default, perform any of the Borrower's obligations, or exercise any of the
Borrower's rights, under any Collateral Document, in each case as reasonably
necessary to protect the Collateral. All sums so advanced or paid by the Lender
shall be payable by the Borrower to


                                       17


Lender on demand with interest at the Default Rate, and any amounts remaining
unpaid, together with such interest thereon, shall be a part of the Secured
Obligations.

            (c) FURTHER INFORMATION. The Borrower will furnish Lender such
additional information concerning the Collateral as Lender may from time to time
reasonably request.

            (d) INVESTMENT OF SECURITY FUNDS. Any monies paid to or retained by
the Lender that are required to be paid to the Borrower or applied for the
benefit or at the direction of the Borrower, but which the Lender is entitled to
hold under the terms hereof pending the occurrence of some event or the
performance of some act (including, without limitation, the remedying of an
Event of Default), shall until paid to the Borrower or applied as provided
herein, be invested by the Lender at the written authorization and direction of
the Borrower from time to time at the sole expense and risk of the Borrower in
Permitted Investments. Such authorization and direction of the Borrower shall
specify the particular investment to be made and shall certify that such
investment constitutes a Permitted Investment. All Permitted Investments held by
the Lender pursuant to this Section shall either be (a) registered in the name
of, payable to the order of, or specially endorsed to, the Lender, or (b) held
in an Eligible Account. There shall be promptly remitted to the Borrower any
income or gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless a Specified Default or Event of Default
shall have occurred and be continuing. If a Specified Default or Event of
Default shall have occurred and be continuing, the Lender shall hold any such
income or gain as security for the obligations of the Borrower hereunder and
apply it against such obligations as and when due, and at such time as there
shall not be continuing any such Specified Default or Event of Default, such
amount, to the extent not previously so applied against the Borrower's
obligations, shall be paid to the Borrower; provided that if any such amount has
been so held as security for more than 90 days, during which period (i) the
Lender shall not have been limited by operation of law or otherwise from
exercising remedies and (ii) the Lender shall not have exercised any remedy
available to it, then such amount, to the extent not previously so applied
against such obligations of the Borrower, shall be paid to the Borrower.

            (e) LIABILITY FOR LOSSES. The Lender shall not be liable for any
loss relating to a Permitted Investment made in accordance with instructions
received by it pursuant to Section 3.5(d). The Borrower will promptly pay to the
Lender, on demand, the amount of any loss for which the Lender is not liable
realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment.)

                 ARTICLE 4 RECEIPT, DISTRIBUTION AND APPLICATION
                                OF CERTAIN FUNDS

            SECTION 4.1 APPLICATION OF INCOME FROM THE COLLATERAL. After an
Event of Default shall have occurred and be continuing, and the unpaid principal
of the Note then outstanding and accrued interest thereon shall have become due
and payable, the Lender shall


                                       18


apply any payments received, any amounts then held and any amounts realized by
the Lender with respect to the Collateral in the following order of priority:
FIRST, so much of such payments or amounts as shall be required to pay to the
Lender all amounts payable by the Borrower pursuant to the Loan Agreement or
pursuant to any other provision of any other Borrower Loan Document (other than
amounts payable pursuant to clause "second" of this Section 4.1) to the Lender
and remaining unpaid shall be distributed to the Lender; SECOND so much of such
payments or amounts as shall be required to pay in full the accrued but unpaid
interest on the Note to the date of distribution shall be distributed to the
Lender followed by the aggregate unpaid principal amount of the Note then due;
and THIRD, the balance, if any, of such payments or amounts remaining thereafter
shall be distributed to, or as directed by, the Borrower.

                        ARTICLE 5 REMEDIES OF THE LENDER
                            UPON AN EVENT OF DEFAULT

            SECTION 5.1 EVENT OF DEFAULT. The occurrence of an Event of Default
(as defined in the Loan Agreement) shall constitute an "EVENT OF DEFAULT"
hereunder.

            SECTION 5.2 REMEDIES WITH RESPECT TO COLLATERAL. (a) REMEDIES
AVAILABLE. Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, following acceleration of
the Loan pursuant to Section 8.1 of the Loan Agreement, the Lender may do one or
more of the following to the extent permitted by, and subject to compliance with
the mandatory requirements of, applicable law then in effect:

            (A) cause the Borrower, upon the written demand of the Lender, at
      the Borrower's expense, to deliver promptly, and the Borrower shall
      deliver promptly, the Airframe or any Engine as the Lender may so demand
      to the Lender or its order, or, if the Borrower shall have failed to so
      return the Aircraft after such demand, the Lender, at its option may enter
      upon the premises where all or any part of the Airframe or any Engine are
      located and take immediate possession of and remove the same together with
      any engine which is not an Engine but which is installed on the Airframe,
      subject to all of the rights of the owner, lessor, lienholder or secured
      party of such engine; PROVIDED that the Airframe with an engine (which is
      not an Engine) installed thereon may be flown or returned to a location
      within the continental United States, and such engine shall be held for
      the account of any such owner, lessor, lienholder or secured party or, if
      owned by the Borrower, may at the option of the Lender, be exchanged with
      the Borrower for an Engine in accordance with the provisions of Section
      3.3(b); or (B) sell all or any part of the Airframe and any Engine at
      public or private sale, whether or not the Lender shall at the time have
      possession thereof, as the Lender, may determine, or otherwise dispose of,
      hold, use, operate, lease to others or keep idle all or any part of the
      Airframe or such Engine as the Lender, in its sole discretion may
      determine, all free and clear of any rights or claims of the Borrower, and
      the proceeds of such sale or disposition shall be applied in the order of
      priorities set forth in Section 4.1; or (C) exercise any other remedy of a
      secured party under the Uniform Commercial Code of the State of New York
      (whether or not in effect in the jurisdiction in which enforcement is
      sought).


                                       19


            Upon every taking of possession of Collateral under this Section
5.2, the Lender shall, from time to time, at the expense of the Collateral, make
all such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Collateral, as it may
reasonably deem proper. In each such case, the Lender shall have the right to
maintain, use, operate, store, lease, control or manage the Collateral and to
exercise all rights and powers of the Borrower relating to the Collateral in
connection therewith, as the Lender shall deem best, including the right to
enter into any and all such agreements with respect to the maintenance,
insurance, use, operation, storage, leasing, control, management or disposition
of the Collateral or any part thereof as the Lender may reasonably determine;
and the Lendershall be entitled to collect and receive directly all tolls,
rents, revenues, issues, income, products and profits of the Collateral and
every part thereof. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of use, operation, storage,
leasing, control, management or disposition of the Collateral, and of all
maintenance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Lender may be required or may elect to make, if
any, for Taxes, insurance or other proper charges assessed against or otherwise
imposed upon the Collateral or any part thereof, and all other payments which
the Lender may be required or expressly authorized to make under any provision
of this Security Agreement, and shall otherwise be applied in accordance with
the provisions of Article 4.

            If an Event of Default shall have occurred and be continuing and the
Note shall have been accelerated pursuant to Section 8.1 of the Loan Agreement,
and the Lender shall be entitled to exercise remedies hereunder, at the request
of the Lender, the Borrower shall promptly execute and deliver to the Lender
such instruments of title and other documents as the Lender may deem necessary
or advisable to enable the Lender or an agent or representative designated by
the Lender, at such time or times and place or places as the Lender may specify,
to obtain possession of all or any part of the Collateral to which the Lender
shall at the time be entitled hereunder. If the Borrower shall for any reason
fail to execute and deliver such instruments and documents after such request by
the Lender, the Lender, may obtain a judgment conferring on the Lender the right
to immediate possession and requiring the Borrower to execute and deliver such
instruments and documents to the Lender, to the entry of which judgment the
Borrower hereby specifically consents to the fullest extent it may lawfully do
so.

            Nothing in the foregoing shall affect the right of the Lender to
receive all amounts owing to it as and when the same may be due.

            (b) NOTICE OF SALE. The Lender shall give the Borrower at least 30
days' prior notice of any public sale or of the date on or after which any
private sale will be held, which notice the Borrower hereby agrees to the extent
permitted by applicable law is reasonable notice. The Lender shall be entitled
to bid for and become the purchaser of any Collateral offered for sale pursuant
to this Section 5.2 and to credit against the purchase price bid at such sale by
the Lender all or any part of the due and unpaid amounts of the Obligations
secured by the Lien of this Security Agreement.


                                       20


            SECTION 5.3 REMEDIES CUMULATIVE. To the extent permitted by
applicable law, each and every right, power and remedy herein specifically given
to the Lender or otherwise in this Security Agreement shall be cumulative and
shall be in addition to every other right, power and remedy herein specifically
given or now or hereafter existing at law, in equity, by statute or by the
Borrower Loan Documents, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Lender and
the exercise or the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the Lender
in the exercise of any right, remedy or power or in the pursuit of any remedy
shall, to the extent permitted by applicable law, impair any such right, power
or remedy or be construed to be a waiver of any default on the part of the
Borrower or to be an acquiescence therein.

            SECTION 5.4 DISCONTINUANCE OF PROCEEDING. In case the Lender shall
have instituted any proceeding to enforce any right, power or remedy under this
Security Agreement by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Lender, then and in every such case the Borrower and
the Lender shall, subject to any determination in such proceedings, be restored
to their former positions and rights hereunder with respect to the Collateral,
and all rights, remedies and powers of the Lender shall continue, as if no such
proceedings had been undertaken (but otherwise without prejudice).

                      ARTICLE 6 SUPPLEMENTS AND AMENDMENTS
                 TO THIS SECURITY AGREEMENT AND OTHER DOCUMENTS

            SECTION 6.4 SUPPLEMENTAL SECURITY AGREEMENTS. The Borrower and the
Lender may, at any time and from time to time, enter into an amendment or
amendments hereto for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Security Agreement or of
modifying in any manner the rights and obligations of the Lender and of the
Borrower under this Security Agreement.

                             ARTICLE 7 MISCELLANEOUS

            SECTION 7.1 TERMINATION OF SECURITY AGREEMENT. Upon payment to the
Lender in full of the principal of, and interest on, the Note and all other
amounts then due and owing under any Borrower Loan Document, the Lender shall
cause to be removed any Lender Lien attributable to the Lender and shall, upon
the written request of the Borrower execute and deliver to, or as directed in
writing by, and at the expense of, the Borrower an appropriate instrument or
instruments (in due form for recording and in the form provided by the Borrower
and approved by the Lender) releasing, without recourse or warranty, the
Aircraft and the balance of the Collateral from the Lien of this Security
Agreement and, in such event, this Security Agreement and the trusts created
hereby shall terminate and this Security Agreement shall be of no further


                                       21


force or effect. Except as otherwise provided above, this Security Agreement and
the trusts created hereby shall continue in full force and effect in accordance
with the terms hereof.

            SECTION 7.2 NO LEGAL TITLE TO COLLATERAL IN LENDER. The Lender shall
have no legal title to any part of the Collateral. No transfer, by operation of
law or otherwise, of any right, title and interest of the Lender in and to the
Collateral or this Security Agreement shall operate to terminate this Security
Agreement or the trusts hereunder or entitle any successor or transferee of the
Lender to an accounting or to the transfer to it of legal title to any part of
the Collateral.

            SECTION 7.3 SALE OF THE AIRCRAFT BY LENDER IS BINDING. Any sale or
other conveyance of the Aircraft, the Airframe, any Engine or any interest
therein by the Lender made pursuant to the terms of this Security Agreement
shall bind the Borrower, and shall be effective to transfer or convey all right,
title and interest of the Borrower in and to such Aircraft, Airframe, Engine or
interest therein. No purchaser or other grantee shall be required to inquire as
to the authorization, necessity, expediency or regularity of such sale or
conveyance or as to the application of any sale or other proceeds with respect
thereto by the Lender.

            SECTION 7.4 BENEFIT OF SECURITY AGREEMENT. Nothing in this Security
Agreement, whether express or implied, shall be construed to give to any Person
other than the Borrower and the Lender any legal or equitable right, remedy or
claim under or in respect of this Security Agreement.

            SECTION 7.5 SECTION 1110. It is the intention of the parties hereto
that the secured interest created hereby, to the fullest extent available under
applicable law, entitles the Lender to all of the benefits of Section 1110 with
respect to the Aircraft.

            SECTION 7.6 THE BORROWER'S PERFORMANCE AND RIGHTS. Any obligation
imposed on the Borrower herein shall require only that the Borrower perform or
cause to be performed such obligation, even if stated as a direct obligation,
and the performance of any such obligation by any permitted assignee, Borrower
or transferee under an assignment, lease or transfer agreement then in effect
and in accordance with the provisions of the Borrower Loan Documents shall
constitute performance by the Borrower and to the extent of such performance,
discharge such obligation by the Borrower. Except as otherwise expressly
provided herein, any right granted to the Borrower in this Agreement shall grant
the Borrower the right to permit such right to be exercised by any such
assignee, Borrower or transferee. The inclusion of specific references to
obligations or rights of any such assignee, Borrower or transferee in certain
provisions of this Agreement shall not in any way prevent or diminish the
application of the provisions of the two sentences immediately preceding with
respect to obligations or rights in respect of which specific reference to any
such assignee, Borrower or transferee has not been made in this Agreement.

            SECTION 7.7 NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all notices required or permitted under the terms
and provisions hereof shall be in English and in writing, and any such notice
may be given by U.S. mail, courier service, telegram, cable or facsimile
(confirmed by telephone or in writing in the case of notice by telegram, cable


                                       22


or facsimile) or any other customary means of communication, and any such notice
shall be effective when delivered to a party at its address or number set forth
in Section 9.2 of the Loan Agreement.

            SECTION 7.8 SEVERABILITY. Should any one or more provisions of this
Security Agreement be determined to be illegal or unenforceable by a court of
any jurisdiction, such provision shall be ineffective to the extent of such
illegality or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

            SECTION 7.9 SEPARATE COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts (and each of the parties hereto shall not
be required to execute the same counterpart). Each counterpart of this Security
Agreement including a signature page executed by each of the parties hereto
shall be an original counterpart of this Security Agreement, but all of such
counterparts together shall constitute one instrument.

            SECTION 7.10 SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein and in the other Borrower Loan Documents shall be binding upon,
and inure to the benefit of, the Borrower and its successors and permitted
assigns and the Lender and its successors and permitted assigns, all as provided
herein or in the other Borrower Loan Documents.

            SECTION 7.11 HEADINGS. The headings of the various Articles and
Sections herein and in the table of contents hereto are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

            SECTION 7.12 GOVERNING LAW; JURISDICTION. THIS SECURITY AGREEMENT IS
BEING DELIVERED IN THE STATE OF NEW YORK AND THIS SECURITY AGREEMENT AND ANY
SECURITY AGREEMENT SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK. Each of the parties irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State Court sitting in the
City of New York for any legal proceeding arising out of or relating to this
Security Agreement or any transactions contemplated hereby. Each party, to the
fullest extent it may do so under applicable law, irrevocably waives and agrees
not to assert by way of motion, as a defense or otherwise, any claim that it is
not subject to the jurisdiction of any such court, any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that such suit, action or
proceeding has been brought in an inconvenient forum.

            SECTION 7.13 CONFIDENTIAL INFORMATION. Each of the Borrower and the
Lender hereby assumes the obligation to maintain in total and absolute
confidentiality the terms and conditions of the Borrower


                                       23


Loan Documents not required by the terms of any of the Borrower Loan Documents
to be filed or recorded in the public record and shall not disclose or reproduce
the same by any means or for any purpose, except as follows: (1) as otherwise
required or contemplated by the Borrower Loan Documents, (2) to its accountants,
lawyers and financial and other professional advisors, (3) to its employees, its
Affiliates and their employees, and to each other party to the Borrower Loan
Documents, (4) as required by force of law, (5) as required by judicial or
administrative decision of a Governmental Authority, or (6) for the purpose of
effecting any transfer or participation permitted pursuant to Section 9.4 of the
Loan Agreement, PROVIDED, that in case of a disclosure referred to in Clauses
(4) and (5) above, the party requiring disclosure shall use its reasonable best
efforts to limit the extent of such disclosure to the extent permitted by law.

                [The remainder of this page has been left blank.]


                                       24


            IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective officers, as the case may be,
thereunto duly authorized, as of the day and year first above written.

                              CHAUTAUQUA AIRLINES, INC.

                              By: ______________________________________
                                    Name:
                                    Title:


                              EMBRAER-EMPRESA BRASILEIRA DE
                              AERONAUTICA S.A.

                              By: ______________________________________
                                     Name:
                                     Title:


                                       1


      Exhibit A to SECURITY AGREEMENT

                       SECURITY AGREEMENT SUPPLEMENT NO._

            SECURITY AGREEMENT SUPPLEMENT NO. __, dated ____________, ___
("Security Agreement Supplement"), between [____________] (the "Borrower") and [
], as the Lender under the Security Agreement (each as hereinafter defined).

                              W I T N E S S E T H:

            WHEREAS, the Aircraft Security Agreement (N375SK), dated as of
__________ __, 2001 (the "Security Agreement"; capitalized terms used herein
without definition shall have the meanings specified therefor in Annex A to the
Security Agreement), between the Borrower and _________________________ (the
"Lender"), provides for the execution and delivery of supplements thereto
substantially in the form hereof which shall particularly describe the Aircraft,
and shall specifically grant a security interest in the Aircraft to the Lender;
and

            [WHEREAS, the Security Agreement relates to the Airframe and Engines
described in Annex A attached hereto and made a part hereof, and a counterpart
of the Security Agreement is attached to and made a part of this Security
Agreement Supplement;](1)

            [WHEREAS, the Borrower has, as provided in the Security Agreement,
heretofore executed and delivered to the Lender Security Agreement Supplement(s)
for the purpose of specifically subjecting to the Lien of the Security Agreement
certain airframes and/or engines therein described, which Security Agreement
Supplement(s) is/are dated and has/have been duly recorded with the FAA as set
forth below, to wit:

DATE                      RECORDATION DATE               FAA DOCUMENT NUMBER](2)

                  NOW, THEREFORE, to secure the prompt and complete payment
(whether at the stated maturity, by acceleration or otherwise) of all principal
of, interest on and all other amounts payable by the Borrower under the Note,
the Security Agreement, the Loan Agreement and the other Borrower Loan Documents
now in existence or hereafter incurred, and the performance and observance by
the Borrower of all the agreements and covenants to be performed or observed by

- ----------
1     Use for Security Agreement Supplement No. 1 only.

2     Use for all Security Agreement Supplements other than Security Agreement
      Supplement No. 1.


                                       1


it for the benefit of the Lender contained in the Borrower Loan Documents, and
in consideration of the Note and the premises and of the covenants contained in
the Security Agreement and the other Borrower Loan Documents, and of other good
and valuable consideration given to the Borrower by the Lender at or before the
delivery hereof, the receipt of which is hereby acknowledged, the Borrower has,
on the terms specified in and subject to the limitations provided in the
Security Agreement, granted, bargained, sold, conveyed, transferred, mortgaged,
assigned, pledged and confirmed, and does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge and confirm, unto the Lender and its
permitted successors and assigns, for the security and benefit of the Lender, a
security interest in, and mortgage lien on, all estate, right, title and
interest of the Borrower in, to and under, all and singular, the Airframe and
Engines described in Annex A attached hereto, whether or not any such Engine
shall be installed on the Airframe or any other airframe of any other aircraft,
and any and all Parts which are from time to time installed on the Airframe or
any such Engine, and, to the extent provided in the Security Agreement, all
substitutions and replacements of and additions, improvements, accessions and
accumulations to the Aircraft, the Airframe, the Engines and any and all Parts
relating thereto;

            To have and to hold all and singular the aforesaid property unto the
Lender, its permitted successors and assigns, forever, in trust, upon the terms
and trusts set forth in the Security Agreement, for the benefit, security and
protection of the Lender from time to time, and for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.

            This Security Agreement Supplement shall be construed as
supplemental to the Security Agreement and shall form a part thereof, and the
Security Agreement is hereby incorporated by reference herein and is hereby
ratified, approved and confirmed.

            THIS SECURITY AGREEMENT SUPPLEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK.


                                       2


            IN WITNESS WHEREOF, the undersigned have caused this Supplement No._
to be duly executed by their respective duly authorized officers, on the day and
year first above written.

                                             [BORROWER]

                                             By:____________________________
                                             Name:
                                             Title:

                                             [LENDER]

                                             By:____________________________
                                             Name:
                                             Title:

                                                              Annex A to
                                                              Security Agreement
                                                              SUPPLEMENT NO.

                      DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME

Manufacturer          Model           FAA Registration     Manufacturer's
- ------------          -----                Number            Serial No.
                                        ---------          ------------
Embraer               EMB-145 model EMB-
                      135 KL

                                     ENGINES

Manufacturer          Model                                Manufacturer's
- ------------          -----                                  Serial No.


                                       1


Rolls-Royce Corporation              AE3007A1/3

Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.

         ANNEX A
         TO LOAN AGREEMENT
         AND TO SECURITY AGREEMENT

                                FINANCING OF ONE
                    EMBRAER EMB-145 MODEL EMB-135 KL AIRCRAFT

                     DEFINITIONS RELATING TO LOAN AGREEMENT
                             AND SECURITY AGREEMENT

            "AFFILIATE" means with respect to a specified Person, any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such Person.

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

            "AIRFRAME" means (i) the Embraer model EMB-145 model EMB-135 KL
aircraft having United States registration number N375SK and Manufacturer's
serial number 145569 (except Engines and engines installed thereon) and (ii) and
any and all Parts so long as the same shall be incorporated or installed in or
attached to the Airframe, or so long as Lender's security interest shall remain
vested in Lender in accordance with the terms of the Security Agreement after
removal from the Aircraft.

            "AFTER-TAX BASIS" means, with respect to any payment to be received
or accrued by any Person, the amount of such payment supplemented, if necessary,
by a further payment or payments so that the sum of all such payments, after
deduction of all Taxes actually payable to any taxing authority as a result of
the receipt or accrual of such payments shall be equal to the payment to be
received or accrued, after taking into account any Tax savings realized as a
result of the indemnified liability.


                                       2


            "APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any Governmental Authority having
jurisdiction over the applicable party hereto and rules, regulations, orders,
directives, licenses and permits of any Governmental Authority having
jurisdiction over the applicable party hereto and all interpretations,
implementation and enforcement of any of the foregoing by any Governmental
Authority, in each case having the force of law.

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

            "BORROWER" has the meaning set forth in the recitals hereto.

            "BORROWER LOAN DOCUMENTS" means the Loan Agreement, the Note, the
Security Agreement, each Security Agreement Supplement, and any other agreement
or instrument specifically agreed by the Parties hereto to be identified as a
"Borrower Loan Document" for purposes hereof.

            "BORROWING DATE" means the Delivery Date.

            "BRAZIL" means the Federative Republic of Brazil.

            "BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which commercial banks are authorized or required by law, regulation or
executive order to be closed in New York, New York, or Rio de Janeiro, Brazil.

            "CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding an air carrier operating certificate issued under Chapter 447 of the
Transportation Code for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo, or if such certification shall cease to be
available, an air carrier eligible for certification as to the matters
contemplated by such certification.

            "CHANGE IN U.S. TAX LAW" means (a) any change after the Borrowing
Date to the Code, the Regulations or administrative guidance or (b) any formal
or informal change in any Internal Revenue Service position with respect to, or
interpretation of, U.S. Tax Law, regardless of how and when such change is
advanced, announced or articulated.

            "CITIZEN OF THE UNITED STATES" has the meaning set forth in Section
40102(a)(15) of the Transportation Code.

            "CLOSING" has the meaning set forth in Section 2.1 of the Loan
Agreement.

            "CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.


                                       3


            "COLLATERAL" has the meaning specified in Section 2.1 of the
Security Agreement.

            "COLLATERAL DOCUMENTS" means all items of Collateral that are
agreements, instruments or other documents.

            "COMMITMENT" has the meaning set forth in Schedule 2 to the Loan
Agreement.

            "DEBT RATE" has the meaning set forth on Schedule 2 to the Loan
Agreement

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

            "DEFAULT RATE" has the meaning set forth in Schedule 2 to the Loan
Agreement.

            "DELIVERY DATE" or "DATE OF ACTUAL DELIVERY" means the date on which
the Aircraft shall be delivered by the Manufacturer to the Borrower, which date
shall be the date of the Warranty Bill of Sale.

            "DOLLARS" and "$" mean the lawful currency of the United States.

            "ELIGIBLE ACCOUNT" means an account established by and with an
Eligible Institution at the request of the Lender, which institution agrees, for
all purposes of the UCC including Article 8 thereof, that (a) such account shall
be a "securities account" (as defined in Section 8-501 of the UCC), (b) all
property (other than cash) credited to such account shall be treated as a
"financial asset") (as defined in Section 8-102(9) of the UCC), (c) the Lender
shall be the "entitlement holder" (as defined in Section 8-102(7) of the UCC) in
respect of such account, (d) it will comply with all entitlement orders issued
by the Lender to the exclusion of the Borrower, and (e) the "securities
intermediary jurisdiction" (under Section 8-110(e) of the UCC) shall be the
State of New York.

            "ELIGIBLE INSTITUTION" means the corporate trust department of a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any U.S. Branch
of a foreign bank), which has a long-term unsecured debt rating from Moody's and
Standard & Poor's of at least A-3 or its equivalent.

            "ENGINE" means (i) unless and until replaced by a Replacement Engine
pursuant to the Security Agreement each of the two Rolls-Royce AE3007A1/3
engines, having the manufacturer's serial numbers set forth in the initial
Security Agreement Supplement, whether or not from time to time installed on the
Airframe or installed on any other airframe or any other aircraft, or (ii) any
Replacement Engine substituted for an Engine under the Security Agreement,
together in each case with any and all Parts incorporated or installed in or
attached thereto and


                                       4


any and all Parts removed therefrom so long Lender's Security interest therein
shall remain vested in Lessor in accordance with the terms of the Security
Agreement after removal from such Engine.

            "EQUIPMENT" means the Aircraft, the Airframe, any Engine and/or any
Part

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

            "EXCLUDED TAXES" means (i) Taxes imposed by a jurisdiction within
which Lender is incorporated or maintains its principal place of business and
(ii) Taxes that would not have been imposed but for a connection between the
Lender and the taxing jurisdiction other than the transactions contemplated
hereby, and (iii) Taxes that would not have been imposed but for Lender's, Loan
Transferee's or Loan Participant's failure to provide Borrower with any
certification in accordance with Section 2.6 of the Loan Agreement.

            "EVENT OF DEFAULT" means any of the events set forth in Section 8.1
of the Loan Agreement.

            "EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims (including, but not limited to,
negligence, strict or absolute liability, liability in tort and liabilities
arising out of violation of laws or regulatory requirements of any kind),
actions, suits, out-of-pocket costs, expenses and disbursements (including
reasonable legal fees, costs of investigation of whatsoever kind and nature and
expenses, and out-of-pocket costs and expenses relating to enforcement of, and
reasonable out-of-pocket costs and expenses relating to amendments, supplements,
waivers and consents to and under the Borrower Loan Documents.

            "FAA" means the U.S. Federal Aviation Administration and any agency
or instrumentality of the U.S. Government succeeding to its functions.

            "FAA APPLICATION FOR AIRCRAFT REGISTRATION" means an application for
registration of the Aircraft in the name of the Borrower on AC Form 8050-1 or
such other form approved by the FAA.

            "FAA BILL OF SALE" means the bill of sale for the Aircraft on AC
Form 8050-2 or such other form approved by the FAA, dated the Delivery Date,
executed by the Manufacturer in favor of the Borrower.

            "FAA COUNSEL" means Daugherty, Fowler, Peregrin & Haught, or other
FAA counsel in Oklahoma City, Oklahoma, acceptable to all Parties.


                                       5


            "GAAP" means generally accepted accounting principles in the United
States.

            "GOVERNMENT" means the government of the United States and any
instrumentality or agency thereof.

            "GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof and entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

            "IMMEDIATELY AVAILABLE FUNDS" means funds with good value on the day
and in the city in which payment is received.

            "INDEMNIFIED TAXES" means any Taxes other than Excluded Taxes.

            "Indemnitee" means Lender and its officers, directors, employees,
agents, servants, successors and permitted assigns of any of the foregoing
Persons.

            "IRS" means the United States Internal Revenue Service or any agency
or instrumentality of the U.S. Government succeeding to its functions.

            "LENDER" has the meaning set forth in the introductory paragraph of
the Loan Agreement.

            "LENDER LIEN" means any Lien attributable to the Lender on or
against the Aircraft, any interest therein, or any other portion of the
Collateral, arising out of any claim against the Lender that is not related to
the Borrower Loan Documents or out of any act or omission of the Lender that is
not related to the transactions contemplated by the Borrower Loan Documents or
that constitutes a breach by it of its obligations under the Borrower Loan
Documents; PROVIDED, HOWEVER, that any Lien which is attributable solely to
Lender and would otherwise constitute a Lender Lien hereunder shall not, for the
purpose of any warranty or representation of Lender against the existence of the
same or for any covenant or obligation not to allow the same or to immediately
cause the removal of the same, constitute, for such purposes only, a Lender Lien
hereunder so long as (a) the existence of such Lien poses no material risk of
the sale, forfeiture or loss of the airframe or any Engine or any interest
therein, (b) the existence of such Lien does not interfere in any way with the
use or operation of the Aircraft by Borrower, (c) Lender is in good faith
diligently contesting such Lien by appropriate proceeding and (d), in the case
of any Lender Lien on any Engine, Borrower shall not have replaced such Engine
with a Replacement Engine pursuant to the applicable provisions of the Security
Agreement.


                                       6


            "LIEN" means any mortgage, lease, security interest, lien, title
retention arrangement or other claim or encumbrance.

            "LOAN" means the loan in the amount of the Commitment, made by the
Lender pursuant to the proceeds of which are to be used for the purchase of the
Aircraft by the Borrower, such Loan to be evidenced by the Loan Agreement and
the Note.

            "LOAN AGREEMENT" means the Loan Agreement (N375SK), dated as of
February 20, 2002 between the Borrower and the Lender.

            "MANUFACTURER" means Embraer - Empresa Brasileira de Aeronautica
S.A., and its successors and permitted assigns.

            "MATERIAL ADVERSE CHANGE" means a material adverse change since the
date of the last audited financial statements of the Borrower in the business,
operations or financial condition of the Borrower, which change has a material
adverse impact on the Borrower's ability to perform any of its obligations under
the Borrower Loan Documents to which it is a party. Without limiting the
generality of the foregoing, a material adverse change shall have occurred
within the meaning of the immediately preceding sentence if any of the following
shall occur: (i) a material financial or material non-financial default of the
Borrower in any obligation owed to Lender, (ii) any event described in Section
8.1(e) or (f) of the Loan Agreement, (iii) the termination of any of the
Borrower's existing code-sharing agreements with US Airways, Inc., and America
West Airlines, Inc., or American Airlines, Inc. (or, as applicable, with any
affiliate of such companies) and the non-replacement of such agreements by
code-sharing or other revenue generating arrangements of substantially
equivalent value within a period of one (1) month after such termination, or
(iv) the material and adverse grounding of all or a substantial portion of
Borrower's fleet of aircraft or the imposition of operating restrictions on
Borrower by any order or administrative action by the FAA or any other aviation
authority, and such order or administrative action is not applicable to regional
air carriers generally; and notwithstanding the specificity of the foregoing
clauses (i) to (iv), the first sentence of this paragraph shall be interpreted
non-exclusively in accordance with normal commercial practices.

            "MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or
a material adverse effect upon, the operations, business, properties or
financial condition of the Borrower or the Borrower and its Affiliates taken as
a whole; (b) a material impairment of the ability of the Borrower to perform its
obligations under any Borrower Loan Document; or (c) a material adverse effect
upon (i) the legality, validity, binding effect or enforceability against the
Borrower of any Borrower Loan Document to which it is a party or (ii) the
protections afforded Lender under Section 1110 of the United States Bankruptcy
Code (other than a change in United States law which would make such benefits
unavailable to aircraft leases or secured loans generally under United States
law).


                                       7


            "MATURITY DATE" has the meaning provided in Schedule 2 to the Loan
Agreement.

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

            "NOTE" means the Note, dated the Borrowing Date, in the amount of
the Commitment and executed by the Borrower in favor of the Lender pursuant to
Section 2.2 of the Loan Agreement.

            "PARTS" means all parts, appliances, components, instruments,
accessories and furnishings (other than complete engines) which are from time to
time be installed in or attached to the Airframe or to any Engine.

            "PARTY" means each party to the Loan Agreement.

            "PAYMENT DATE" has the meaning provided in Section 2.2(a) of the
Loan Agreement.

            "PERMITTED INVESTMENTS" 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 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; (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 Rating Services or
Moody's Investors Service, Inc. equal to A1 or higher or (e) shares in money
market mutual or similar funds which invest substantially in assets satisfying
the requirements of clauses (a) through (d) of this definition.

            "PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
trustee(s) of a trust, unincorporated organization or Governmental Authority.

            "PURCHASE AGREEMENT" means that Purchase Agreement No. GCT-025/98
dated June 17, 1998 (together with all amendments and supplements thereto),
between Solitair Corporation and Manufacturer relating to certain Embraer
EMB-145 aircraft, including the Aircraft.

            "REPLACEMENT ENGINE" means a Rolls-Royce AE3007A1/3 engine or an
improved model having a value, utility, condition and remaining useful life at
least equal to the replaced Engine (assuming that such Engine was in the
condition required by the Security Agreement),


                                       8


and being suitable for installation and use on the Airframe that is substituted
for an Engine pursuant to Section 3.3 of the Security Agreement.

            "RESPONSIBLE OFFICER" means, with respect to any corporation, its
Chairman of the Board, its President, any Senior Vice President, the Chief
Financial Officer, any Vice President or the Treasurer, or any other management
employee (a) whose power to take the action in question has been authorized,
directly or indirectly, by the Board of Directors of such corporation, (B)
working under the supervision of such Chairman of the Board, President, Senior
Vice President, Chief Financial Officer, Vice President or Treasurer and (C)
whose responsibilities include the administration of the transactions and
agreements contemplated by the Loan Agreement and the Security Agreement.

            "SECTION 1110" means Section 1110 of the United States Bankruptcy
Code, or any successor or replacement provision of the United States Bankruptcy
Code.

            "SECURITY AGREEMENT" means the Security Agreement, dated as of the
date of the Loan Agreement, between the Borrower and the Lender, including all
annexes, schedules, exhibits, appendices and supplements thereto.

            "SECURITY AGREEMENT SUPPLEMENT" means (A) the Security Agreement
Supplement No. 1, substantially in the form of Exhibit A to the Security
Agreement, dated the Borrowing Date, which shall describe with particularity the
Airframe and the Engines and which creates a security interest in the Airframe
and Engines and (B) any other supplement to the Security Agreement from time to
time executed and delivered by the Borrower pursuant to the Security Agreement.

            "SPECIFIED DEFAULT" means (a) an event or condition described in
Section 3.3.1(a), (e) or (f) that, after the giving of notice or lapse of time,
or both, would become an Event of Default, or (b) any Event of Default.

            "SUBSIDIARY" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.

            "TAX" and "TAXES" mean any and all fees and taxes imposed or
asserted by any Governmental Authority, including income, gross receipts, sales,
rents, use, turnover, value added, property, excise and stamp taxes, license,
levies, imposts, duties, recording charges or fees, charges, assessments or
withholding of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest thereon.


                                       9


            "TERM" means the period between the Borrowing Date and the Maturity
Date.

            "TOTAL INVOICE COST" has the meaning provided on Schedule 2 to the
Loan Agreement.

            "TOTAL LOSS" of an Item means the occurrence of any of the
following:

            (i) any theft, hijacking or disappearance of such property for a
      period of 60 consecutive days or more or, if earlier for a period that
      extends until the end of the Term;

            (ii) destruction, damage beyond economic repair or rendition of such
      property permanently unfit for normal use for any reason whatsoever;

            (iii) any event which results in an insurance settlement with
      respect to such property on the basis of an actual, constructive or
      compromised total loss;

            (iv) condemnation, confiscation or seizure of, or requisition of
      title to or use of such property by any foreign government or purported
      government (or in the case of any such requisition of title, by the
      Government) or any agency or instrumentality thereof, for a period in
      excess of (A) in the case of any requisition of use, 30 consecutive days
      or (B) in the case of any condemnation, confiscation or seizure of, or
      requisition of title, 10 consecutive days, or, in any of the cases in this
      clause (iv), such shorter period ending on the expiration of the Term;

            (v) condemnation, confiscation or seizure of, or requisition of use
      of such property by the Government for a period extending beyond the Term;

            (vi) as a result of any law, rule, regulation, order or other action
      by the FAA, the use of the Aircraft or Airframe in the normal course of
      air transportation shall have been prohibited by virtue of a condition
      affecting all Embraer model EMB-145 model EMB-135 KL aircraft equipped
      with engines of the same make and model as the Engines for a period of 120
      consecutive days (or beyond the end of the Term), unless the Borrower,
      prior to the expiration of such 120-day period, shall be diligently
      carrying forward all necessary and desirable steps to permit normal use of
      the Aircraft and shall within 3 months have conformed at least one Embraer
      model EMB-145 model EMB-135 KL aircraft (but not necessarily the Aircraft)
      to the requirements of any such law, rule, regulation, order or action,
      and shall be diligently pursuing conformance of the Aircraft in a
      non-discriminatory manner provided that, notwithstanding the foregoing, if
      such normal use of such property subject to the Lease shall be prohibited
      at the end of the Term, or if such normal use of such property shall be
      prohibited for a period of six (6) consecutive months, a Total Loss shall
      be deemed to have occurred; and


                                       10


            (vii) with respect to an Engine only, the requisition or taking of
      use thereof by any government, and any divestiture of title or ownership
      deemed to be a Total Loss with respect to an Engine under Section 3.3(b)
      of the Security Agreement.

            The date of such Total Loss shall be (aa) the 31st day following
loss of such property or its use due to theft or disappearance or the 91st day
following such loss if such period shall have been extended (or the end of the
Term if earlier); (bb) the date of any destruction, damage beyond economic
repair or rendition of such property permanently unfit for normal use; (cc) the
date of any insurance settlement on the basis of an actual, constructive or
compromised total loss; (dd) the 31st day following condemnation, confiscation,
seizure or requisition of title to such property by a foreign government
referred to in clause (iv) above (or the 11th day in the case of appropriation
of title), or the end of the Term if earlier than such 31st or 11th day; (ee)
the last day of the Term in the case of requisition of title to or use of such
property by the Government; and (ff) the last day of the applicable period
referred to in clause (vi) above (or if earlier, the end of the Term without the
Borrower's having conformed at least one Embraer model EMB-145 model EMB-135 KL
aircraft to the applicable requirements). A Total Loss with respect to the
Aircraft shall be deemed to have occurred if any Total Loss occurs with respect
to the Airframe.

            "TRANSPORTATION CODE" means 49 U.S.C. subtitle VII, as amended, and
any successor statute thereto.

            "UNITED STATES" and "U.S." each means the United States of America.

            "UNITED STATES PERSON" shall have the meaning given such term in
Section 7701(a)(30) of the Code.

            "U.S. TAX LAW" includes the Code, any regulations promulgated or
proposed thereunder (the "Regulations") and any private letter rulings as of
November 30, 2001 (as though such rulings have the force of law), in each case.

            "WARRANTY BILL OF SALE" means the full warranty bill of sale
covering the Aircraft (together with the FAA Bill of Sale collectively called
"Bills of Sale"), executed by the Manufacturer in favor of the Borrower, dated
the Delivery Date, and specifically referring to each Engine, as well as to the
Airframe, constituting a part of the Aircraft.


                                       11


                       SECURITY AGREEMENT SUPPLEMENT NO. 1

            SECURITY AGREEMENT SUPPLEMENT NO. 1, dated February 20, 2002,
("Security Agreement Supplement"), between Chautauqua Airlines, Inc. (the
"Borrower") and Embraer-Empresa Brasileira de Aeronautica S.A., as the Lender
under the Security Agreement (each as hereinafter defined).

                              W I T N E S S E T H:

            WHEREAS, the Aircraft Security Agreement (N375SK), dated as of
February 20, 2002 (the "Security Agreement"; capitalized terms used herein
without definition shall have the meanings specified therefor in Annex A to the
Security Agreement), between the Borrower and Embraer-Empresa Brasileira de
Aeronautica S.A. (the "Lender"), provides for the execution and delivery of
supplements thereto substantially in the form hereof which shall particularly
describe the Aircraft, and shall specifically grant a security interest in the
Aircraft to the Lender; and

            WHEREAS, the Security Agreement relates to the Airframe and Engines
described in Annex A attached hereto and made a part hereof, and a counterpart
of the Security Agreement is attached to and made a part of this Security
Agreement Supplement;

            NOW, THEREFORE, to secure the prompt and complete payment (whether
at the stated maturity, by acceleration or otherwise) of all principal of,
interest on and all other amounts payable by the Borrower under the Note, the
Security Agreement, the Loan Agreement and the other Borrower Loan Documents now
in existence or hereafter incurred, and the performance and observance by the
Borrower of all the agreements and covenants to be performed or observed by it
for the benefit of the Lender contained in the Borrower Loan Documents, and in
consideration of the Note and the premises and of the covenants contained in the
Security Agreement and the other Borrower Loan Documents, and of other good and
valuable consideration given to the Borrower by the Lender at or before the
delivery hereof, the receipt of which is hereby acknowledged, the Borrower has,
on the terms specified in and subject to the limitations provided in the
Security Agreement, granted, bargained, sold, conveyed, transferred, mortgaged,
assigned, pledged and confirmed, and does hereby grant, bargain, sell, convey,
transfer, mortgage, assign, pledge and confirm, unto the Lender and its
permitted successors and assigns, for the security and benefit of the Lender, a
security interest in, and mortgage lien on, all estate, right, title and
interest of the Borrower in, to and under, all and singular, the Airframe and
Engines described in Annex A attached hereto, whether or not any such Engine
shall be installed on the Airframe or any other airframe of any other aircraft,
and any and all Parts which are from time to time installed on the Airframe or
any such Engine, and, to the extent provided in the Security Agreement, all
substitutions and replacements of and additions, improvements, accessions and
accumulations to the Aircraft, the Airframe, the Engines and any and all Parts
relating thereto;

            To have and to hold all and singular the aforesaid property unto the
Lender, its permitted successors and assigns, forever, in trust, upon the terms
and trusts set forth in the Security Agreement, for the benefit, security and
protection of the Lender from time to time, and for the uses and purposes and
subject to the terms and provisions set forth in the Security Agreement.

            This Security Agreement Supplement shall be construed as
supplemental to the Security Agreement and shall form a part thereof, and the
Security Agreement is hereby incorporated by reference


                                       1


herein and is hereby ratified, approved and confirmed.

            THIS SECURITY AGREEMENT SUPPLEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK.

            IN WITNESS WHEREOF, the undersigned have caused this Supplement No.
1 to be duly executed by their respective duly authorized officers, on the day
and year first above written.


                                  Chautauqua Airlines, Inc.

                                  By:____________________________
                                  Name:
                                  Title:


                                  Embraer-Empresa Brasileira de Aeronautica S.A.

                                  By:____________________________
                                  Name:
                                  Title:


                                       2


                                     Annex A
                                       to
                       SECURITY AGREEMENT SUPPLEMENT NO. 1

                       DESCRIPTION OF AIRFRAME AND ENGINES

                                    AIRFRAME

Manufacturer          Model           FAA Registration     Manufacturer's
- ------------          -----                Number            Serial No.
                                        ---------          ------------

Embraer               EMB-EMB-145 model    N375SK              145569
                      EMB-135 KL

                                     ENGINES

Manufacturer          Model                               Manufacturer's
- ------------          -----                                  Serial No.
                                                           ------------
Rolls-Royce           AE3007A1/3                           CAE312062 and
Corporation                                                CAE312065

Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.


                                        3



NOTE TO EXHIBIT 10.59

The three additional Aircraft Security Agreements are substantially identical
in all material respects to the filed Aircraft Security Agreement except as
follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N372SK                           December, 2001                         Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N373SK                           December, 2001                         Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N374SK                           December, 2001                         Embraer
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.60

                                                                   Exhibit 10.60

                    PARTIAL ASSIGNMENT OF PURCHASE AGREEMENT
                         AND CONSENT (N375SK/MSN145569)

THIS PARTIAL ASSIGNMENT OF PURCHASE AGREEMENT AND CONSENT (N375SK/MSN145569)
(this "Assignment") is dated as of the ___ day of February, 2002, and is among
SOLITAIR CORP., a Delaware corporation ("Seller"), as assignor, CHAUTAUQUA
AIRLINES, INC., a New York corporation ("Buyer"), as assignee, and EMPRESA
BRASILEIRA DE AERONAUTICA S.A., a Brazilian corporation ("Embraer"), as
consenting party.

                              W I T N E S S E T H:

      WHEREAS, pursuant to that certain Purchase Agreement No.GCT-025/98 (the
"Embraer Purchase Agreement") between Seller and Embraer, Embraer has agreed to
sell to Seller, among other things, an Embraer model EMB-145 model EMB-135 KL
aircraft, Embraer's serial number 145569 and United States Registration Number
N375SK (the "Aircraft") and two (2) Allison AE3007A1/3 engines (serial numbers
CAE312062 and CAE312065) (the "Aircraft"); and

      WHEREAS, Seller wishes to assign to Buyer and Buyer is willing to accept
the assignment of, Seller's right under the Embraer Purchase Agreement to take
title to and to accept the Aircraft; and

      WHEREAS, Seller and Buyer wish to accomplish such assignment pursuant to
the terms and conditions of this Assignment, and Embraer wishes to consent to
such assignments.

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree (and
Embraer consents) as follows:

      1.    Seller hereby assigns and transfers to Buyer and Buyer hereby
            accepts such assignment and transfer of, (a) Seller's right, upon
            valid tender by the Manufacturer, to accept and take title to the
            Aircraft; and (b) the following warranties and indemnities to the
            extent that they relate to the Aircraft: the remaining warranties
            set forth in Articles 12, 13, 14, 15 of the Embraer Purchase
            Agreement and Attachments B and C of the Purchase Agreement
            ("Assigned Warranties").

      2.    In accordance with the Purchase Agreement, Seller's assignment
            herein is subject to the following conditions:


                                                                               1


            (a) Buyer is not and will not be owned, effectively controlled or
            managed by any airframe manufacturer which competes with Embraer in
            the thirty-seven (37) to seventy (70) seat turbo jet market; and

            (b) In the event Buyer subsequently transfers the Aircraft and/or
            any of Buyer's remaining rights to the Assigned Warranties with
            respect to the Aircraft, to any other entity, Buyer agrees to notify
            Embraer of the identity of such entity at least thirty (30) calendar
            days prior to such transaction (provided that if Buyer fails to
            notify Embraer within this time, Buyer may not assign its remaining
            rights without Embraer's consent, which shall not be unreasonably
            withheld) and provide Embraer with prior written notice of any
            events under such agreement that would cause any rights thereby
            assigned to revert to Buyer under such agreement; provided, however,
            that, pursuant to the Embraer Purchase Agreement, Buyer shall not
            transfer the Aircraft to an entity which is owned, effectively
            controlled or managed by any airframe manufacturer which competes
            with Embraer in the thirty-seven (37) to seventy (70) seat turbo jet
            market.

      3.    Embraer hereby consents to the foregoing assignment by Seller to
            Buyer under and pursuant to the terms and conditions of this
            Assignment.

      4.    Buyer confirms, for Embraer's benefit, that in exercising any rights
            under the Embraer Purchase Agreement or in making any claim with
            respect to the Aircraft or other goods and services delivered or to
            be delivered pursuant to the Embraer Purchase Agreement, the terms
            and conditions of the Embraer Purchase Agreement shall apply to and
            bind Buyer (and any assignee of Buyer) to the same extent as Seller.

      5.    Except as stated herein, nothing contained herein shall subject
            Embraer to any liability to which it would not otherwise be subject
            under the Embraer Purchase Agreement or modify in any respect the
            rights of Embraer thereunder.

      6.    This Assignment (and the acknowledgement and consent to be signed by
            Embraer) may be executed in separate counterparts, each of which
            when so executed and delivered shall be an original and all such
            counterparts shall together constitute one and the same instrument.


                                                                               2


      7.    This Assignment shall be governed by and construed in accordance
            with the laws of the State of New York without reference to any
            choice of law rules thereof that would result in a choice of law
            other than that of New York.

                                    SIGNATURE PAGE FOLLOWS


                                                                               3


      IN WITNESS WHEREOF, Seller, Buyer and Embraer have caused this Partial
Assignment of Purchase Agreement and Consent (N375SK/MSN145569) to be duly
executed as of the date and year first above written.

                    SOLITAIR CORP., a Delaware corporation

                    BY:
                        -------------------------------------------------------

                    NAME:
                          -----------------------------------------------------

                    TITLE:
                           ----------------------------------------------------


                    CHAUTAUQUA AIRLINES, INC., a New York corporation

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

                    Name:
                          -----------------------------------------------------

                    Title:
                           ----------------------------------------------------


                    CONSENTED TO BY EMPRESA BRASILEIRA DE AERONAUTICA S.A., a
                    Brazilian corporation

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

                    Name:
                          -----------------------------------------------------

                    Title:
                           ----------------------------------------------------

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

                    Name:
                          -----------------------------------------------------

                    Title:
                          -----------------------------------------------------



NOTE TO EXHIBIT 10.60

The three additional Partial Assignments of Purchase Agreements and Consents
are substantially identical in all material respects to the filed Partial
Assignment of Purchase Agreement and Consent except as follows:




- ------------------------------------- ----------------------------------- -----------------------------------
            TAIL NUMBER                          CLOSING DATE                     OWNER-PARTICIPANT

- ------------------------------------- ----------------------------------- -----------------------------------
                                                                    
              N372SK                           December, 2001                         Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N373SK                           December, 2001                         Embraer
- ------------------------------------- ----------------------------------- -----------------------------------
              N374SK                           December, 2001                         Embraer
- ------------------------------------- ----------------------------------- -----------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-10.61

                                                                   Exhibit 10.61


                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") made as of this 15th
day of May, 1998 by and among REPUBLIC AIRWAYS HOLDINGS INC., a Delaware
corporation (the "COMPANY"), IMPRIMIS INVESTORS, LLC, WEXFORD SPECTRUM FUND I,
L.P., WEXFORD OFFSHORE SPECTRUM FUND, WEXFORD PARTNERS INVESTMENT CO. LLC, and
WEXAIR LLC (each, an "INVESTOR", and together, the "INVESTORS").

                              W I T N E S S E T H:

         WHEREAS, the parties hereto desire to promote the interests of the
Company and the interests of the Investors by establishing herein certain terms
and conditions upon which the Company will register the shares of Common Stock
held by each Investor.

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

         1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
    the following respective meanings:

            "COMMON STOCK" shall mean the common stock, par value $.001 per
share, of the Company.

            "COMMISSION" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act of 1933,
as amended (the "SECURITIES ACT").

            "HOLDER" shall mean any Investor (together referred to as
"HOLDERS").

            "RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 2 hereof.

            "REGISTRABLE SECURITIES" shall mean (i) the Common Stock held by
each Investor and (ii) Common Stock issued to the Holders upon any stock split,
stock dividend, merger, consolidation, recapitalization or similar event,
excluding all such shares which (x) have been registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(y) have been publicly sold pursuant to Rule 144 (or any successor rule) under
the Securities Act or (z) are eligible for sale without restriction under Rule
144(k) (or any successor rule) under the Securities Act.

            The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.




            "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in compliance with Sections 4, 5 and 6 hereof, including, without
limitation, all registration, qualification and filing fees, exchange listing
fees, printing expenses, escrow fees, fees and disbursements of counsel for the
Company and one counsel for the Investors, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration.

            "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for the Holders.

         2. RESTRICTIVE LEGEND. Each certificate representing the Common Stock
    or any other securities issued upon any stock split, stock dividend,
    recapitalization, merger, consolidation or similar event shall (unless
    otherwise permitted or unless the securities evidenced by such certificate
    shall have been registered under the Securities Act) be stamped or otherwise
    imprinted with a legend in substantially the following form (in addition to
    any legend required under applicable state securities laws):

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. NO TRANSFER
         OF SAID SECURITIES SHALL BE PERMITTED IN THE ABSENCE OF (I) AN
         EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
         LAWS COVERING THE SHARES PROPOSED TO BE TRANSFERRED OR (II) AN OPINION
         OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER WILL NOT
         REQUIRE COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND OF
         ANY APPLICABLE STATE LAWS.

            Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if (x) with such request, the
Company shall have received either an opinion referred to in Section 3 to the
effect that any transfer by such holder of the securities evidenced by such
certificate will not violate the Securities Act and applicable state securities
laws, (y) in accordance with paragraph (k) of Rule 144, such holder is not and
has not during the last three months been an affiliate of the Company and such
holder has held the securities represented by such certificate for a period of
at least two years. The Company will use its reasonable best efforts to assist
any holder in complying with the provisions of this Section 2 for removal of the
legend set forth above.

         3. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
    representing Restricted Securities by acceptance thereof agrees to comply in
    all respects with the provisions of this Agreement. Prior to any proposed
    transfer of any Restricted Securities (other than under circumstances
    described in Sections 4, 5 and 6 hereof), the holder thereof shall give
    written notice to the Company of such holder's intention to effect such
    transfer. Each such notice shall describe the manner and circumstances of
    the proposed transfer in


                                       2



    sufficient detail, and shall be accompanied (except in transactions in
    compliance with Rule 144) by a written opinion of legal counsel who shall be
    reasonably satisfactory to the Company, addressed to the Company and
    reasonably satisfactory in form and substance to the Company's counsel, to
    the effect that the proposed transfer of the Restricted Securities may be
    effected without registration under the Securities Act and applicable state
    securities laws whereupon the holder of such Restricted Securities, shall be
    entitled to transfer such Restricted Securities in accordance with the terms
    of the notice delivered by the holder to the Company. Each certificate
    evidencing the Restricted Securities transferred as above provided shall
    bear the appropriate restrictive legend set forth above unless the opinion
    of counsel referred to above is to the further effect that no such legend is
    required in order to establish compliance with any provisions of the
    Securities Act or applicable state securities laws.

         4. REGISTRATION RIGHTS.

            4.1 (a) REQUEST FOR REGISTRATION. If, at any time following the
       180th day after any registration statement covering an initial public
       offering of the Common Stock of the Company shall have become effective,
       the Company shall receive from a Holder or Holders owning in excess of
       10% of the Registrable Securities a written request that the Company
       effect any registration with respect to all or a part of the Registrable
       Securities, the Company will, as soon as practicable, but in any event no
       later than ninety (90) days after receipt of such request, use its
       reasonable best efforts to effect such registration (including, without
       limitation, the execution of an undertaking to file post-effective
       amendments, appropriate qualification under applicable blue sky or other
       state securities laws (except that the Company shall not be required to
       qualify the offering under the blue sky laws of any jurisdiction in which
       the Company would be required to execute a general consent to service of
       process unless the Company is already subject to service in such
       jurisdiction) and appropriate compliance with applicable regulations
       issued under the Securities Act) as may be so requested and as would
       permit or facilitate the sale and distribution of all or such portion of
       such Registrable Securities as are specified in such request. The Company
       shall file a registration statement covering the Registrable Securities
       so requested to be registered as soon as practicable after receipt of the
       request.

       The registration statement filed pursuant to the request of such Holder
may, subject to the provisions of Section 4.1(b) below, include other securities
of the Company which are held by officers or directors of the Company or which
are held by persons who, by virtue of agreements with the Company now or
hereinafter in effect are entitled to include their securities in any such
registration (collectively, "OTHER STOCKHOLDERS") and may include securities of
the Company being sold for the account of the Company. The Company shall
promptly give notice of any registration proposed under this Section 4.1 to such
Other Stockholders.

       Following receipt of any notice under this Section 4.1, the Company
shall immediately notify all Other Stockholders from whom notice has not been
received and such Other Stockholders shall have 30 days from receipt of such
notice from the Company to notify the Company of their desire to participate in
the registration. The Company shall use its reasonable best efforts to register
under the Securities Act, for public sale in accordance with the method of



                                       3


distribution specified in such notices from requesting Other Stockholders, the
number of Registrable Securities specified in such notices.

                  (a) UNDERWRITING. If a Holder intends to distribute the
         Registrable Securities covered by its request by means of an
         underwriting, it shall so advise the Company as a part of its request
         made pursuant to Section 4.1(a) above and the Company shall include any
         information that it shall have received as to the nature of the
         underwriting in the written notice of the Company referred to in
         Section 4.1(a) above, including the name of the underwriter or
         representative thereof selected for such underwriting. A Holder may
         elect to include in such underwriting all or a part of the Registrable
         Securities held by it. Any underwriter selected by such Holder shall be
         subject to the Company's consent (which consent shall not be
         unreasonable withheld).

           If the Company wishes to include in any registration pursuant to
Section 4.1 securities being sold for its own account, or if the Other
Stockholders shall request inclusion in any registration pursuant to Section
4.1, the Company may offer to include the securities of the Company and such
Other Stockholders in the underwriting and (in the case of Other Shareholders)
may condition such offer on their acceptance of the further applicable
provisions of this Agreement. The Company shall (together with the Holder and
Other Stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or representative of the underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 4.1, if the
representative of the underwriters advises the Company in writing that, in its
opinion, marketing factors require a limitation on the number of shares to be
underwritten, the Company shall so advise the Holder and the number of shares of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated in the following manner: (i)
the securities being sold for the account of the Company shall be excluded from
such registration and underwriting to the extent required by such limitation
(ii) if a limitation on the number of shares is still required, the securities
held by the Other Stockholders of the Company shall be excluded from such
registration and underwriting to the extent required by such limitation in
proportion, as nearly practicable, to the respective amounts of securities
requested to be registered by such Other Stockholders or otherwise as their
rights may appear and (iii) if a limitation on the number of shares is still
required, the securities held by the Holders of the Company shall be excluded
from such registration and underwriting to the extent required by such
limitation in proportion, as nearly practicable, to the respective amounts of
securities requested to be registered by the Holders or otherwise as their
rights may appear. If the Company or a Holder or any Other Stockholder who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company. The securities so withdrawn shall also be
withdrawn from registration. If, pursuant to this paragraph, any of the
securities being sold for the account of such Holder are to be excluded from
such registration and underwriting, such Holder may withdraw its request for
such registration or underwriting and such request will not be counted as the
registration permitted under Section 4.1 of this Agreement, or such Holder may
have such securities registered as a non-underwritten "shelf" registration
pursuant to Rule 415.



                                       4


                  (b) The Company shall have the right to defer the request of a
         Holder to effect a registration for up to sixty (60) calendar days if,
         in the Company's judgment reasonably set forth in writing and delivered
         to the Holders, effecting a registration would not be in the Company's
         best interest.

           4.2 COMPANY REGISTRATION.

                  (a) If at any time following the 180th day after any
         registration statement covering an initial public offering of the
         Common Stock of the Company shall have become effective, the Company
         shall register any of its securities either for its own account or the
         account of a security holder or holders exercising their respective
         demand registration rights, other than a registration relating solely
         to employee benefit plans, a registration relating solely to a
         Commission Rule 145 transaction (covering mergers, acquisitions and
         corporate reorganizations) or a registration on any registration form
         which does not permit secondary sales, the Company will:

                  (b) within ten (10) days of such determination give to the
         Holders and the Other Stockholders written notice thereof; and

                  (c) include in such registration and in any underwriting
         involved therein, all the Registrable Securities specified in a written
         request or requests, made by a Holder or an Other Stockholder within
         twenty (20) days after receipt of the written notice from the Company
         described (a) above, except as set forth in Section 4.2(d) below. Such
         written request may specify all or a part of such Holder's or Other
         Stockholder's Registrable Securities.

                  (d) UNDERWRITING. If the registration of which the Company
         gives notice is for a registered public offering involving an
         underwriting, the Company shall so advise the Holders and the Other
         Stockholders by written notice. The Holders and the Other Stockholders
         shall (together with the Company, if distributing its securities for
         its own account through such underwriting) enter into an underwriting
         agreement in customary form with the underwriter or underwriters
         selected by the Company. Notwithstanding any other provision of this
         Section 4.2, if the representative of the underwriters advises the
         Company in writing that, in its opinion, marketing factors require a
         limitation on the number of shares to be underwritten, the Company
         shall so advise the Holders and the Other Stockholders, and the number
         of shares that may be included in the registration and underwriting
         shall be allocated first to the Company for securities being sold for
         its account and then in the following manner: (i) the securities
         requested to be registered by officers or directors of the Company
         shall be excluded from such registration and underwriting to the extent



                                       5


         required by such limitation in proportion, as nearly as practicable, to
         the respective amounts of securities requested to be registered by such
         officers and directors and (ii) if a limitation on the number of shares
         is still required, the securities being sold for the accounts of the
         Holders and the Other Stockholders shall be excluded from such
         registration and underwriting to the extent required by such limitation
         in proportion, as nearly as practicable, to the respective amounts of
         Registrable Securities which the Holders and such Other Stockholders
         had requested to be included in such registration or otherwise as their
         rights may appear. If a Holder or any Other Stockholder who has
         requested inclusion in such registration as provided above disapproves
         of the terms of the underwriting, such person may elect to withdraw
         therefrom by written notice to the Company and the underwriter.

           4.3 SUBSEQUENT DEMANDS AND REGISTRATION ON FORM S-3.

                  (a) In addition to the rights contained in the foregoing
         provisions of this Section 4, upon the Company qualifying for the use
         of Form S-3, the Holders or any of them shall have the right to request
         unlimited registrations on Form S-3. Such requests shall be in writing,
         shall state the number of shares of Registrable Securities to be
         disposed of and the intended methods of disposition of such shares by
         the Holders.

                  (b) The Company shall use its reasonable best efforts to
         qualify for registration on Form S-3 or any comparable or successor
         form.

           4.4 EXPENSES OF REGISTRATION.

      The Company shall bear all Registration Expenses and each Holder shall
bear its own Selling Expenses relating to the securities being included by such
Holder in the registration incurred in connection with any registration,
qualification or compliance pursuant to the provisions of Section 4.1 or 4.2.

           4.5 REGISTRATION PROCEDURES. In the case of the registration effected
by the Company pursuant to this Agreement, the Company will keep the Holders
advised in writing as to the initiation of the registration and as to the
completion thereof. At its expense, the Company will:

                  (a) Keep such registration effective for a period of one
         hundred twenty (120) days or until the Holders have completed the
         distribution described in the registration statement relating thereto,
         whichever first occurs; PROVIDED, HOWEVER, that in the case of any
         registration of Registrable Securities on Form S-3 which are intended
         to be offered on a continuous or delayed basis, such 120-day period
         shall be extended, if necessary, to keep the registration statement
         effective until all such Registrable Securities are sold;

                  (b) Prepare and file with the Commission such amendments and
         supplements to such registration statement and the prospectus used in
         connection with such registration statement as may be necessary to
         comply with the provisions of the Securities Act with respect to the
         disposition of securities covered by such registration statement;



                                       6


                  (c) Furnish one registration statement and such number of
         prospectuses and other documents incident thereto, including any term
         sheet or any amendment of or supplement to the prospectus, as a Holder
         from time to time may reasonably request;

                  (d) Notify the Holders, at their addresses as set forth in the
         Company's books and records at any time when a prospectus relating
         thereto is required to be delivered under the Securities Act of the
         happening of any event as a result of which the prospectus included in
         such registration statement, as then in effect, includes an untrue
         statement of a material fact or omits to state a material fact required
         to be stated therein or necessary to make the statements therein not
         misleading or incomplete in the light of the circumstances then
         existing, and at the request of a Holder, prepare and furnish to such
         seller a reasonable number of copies of a supplement to or an amendment
         of such prospectus as may be necessary so that, as thereafter delivered
         to the purchaser of such shares, such prospectus shall not include an
         untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary to make the statements
         therein not misleading or incomplete in the light of the circumstances
         then existing;

                  (e) Cause all such Registrable Securities to be listed on
         each, if any, securities exchange on which similar securities issued by
         the Company are then listed;

                  (f) Provide a transfer agent and registrar for all Registrable
         Securities and a CUSIP number for all such Registrable Securities, in
         each case not later than the effective date of such registration;

                  (g) Make available for inspection by any seller of Registrable
         Securities, any underwriter participating in any disposition pursuant
         to such registration statement, and any attorney or accountant retained
         by any such seller or underwriter, all financial and other records,
         pertinent corporate documents and properties of the Company, and cause
         the Company's officers and directors to supply all information
         reasonably requested by any such seller, underwriter, attorney or
         accountant in connection with such registration statement; PROVIDED,
         HOWEVER, that such seller, underwriter, attorney or accountant shall
         agree in writing to hold in confidence and trust all information so
         provided;

                  (h) Furnish to each Holder a signed counterpart, addressed to
         such Holder, of an opinion of counsel for the Company, dated the
         effective date of the registration statement, and in the case of any
         underwritten public offering obtain "comfort" letters signed by the
         Company's independent public accountants who have examined and reported
         on the Company's financial statements included in the registration
         statement, to the extent permitted by the standards of the AICPA or
         other relevant authorities.

           5. INDEMNIFICATION.



                                       7


                  (a) The Company will indemnify each Holder, each of its
         officers, directors and partners, and each person controlling the
         Holder, with respect to which registration, qualification or compliance
         has been effected pursuant to Section 4 hereof, and each underwriter,
         if any, and each person who controls any underwriter, against all
         claims, losses, damages and liabilities (or actions, proceedings or
         settlements in respect thereof) arising out of or based on any untrue
         statement (or alleged untrue statement) of a material fact contained in
         any prospectus or other document (including any related registration
         statement) incident to any such registration, qualification or
         compliance, or based on any omission (or alleged omission) to state
         therein a material fact required to be stated therein or necessary to
         make the statements therein not misleading, and will reimburse the
         Holder, each of its officers, directors and partners, and each person
         controlling the Holder, each such underwriter and each person who
         controls any such underwriter, for any legal and any other expenses as
         they are reasonably incurred in connection with investigating and
         defending any such claim, loss, damage, liability or action; PROVIDED
         that the Company will not be liable in any such case to the extent that
         any such claim, loss, damage, liability or expense arises out of or is
         based on any untrue statement or omission based upon written
         information furnished to the Company by the Holder or such underwriter
         specifically for use therein or to the extent due to the failure of the
         Holder or such underwriter to provide an updated prospectus or other
         document to a purchaser at a time when the Company has informed the
         Holder or such underwriter of a material misstatement or omission in a
         prospectus or other document and has provided updated prospectuses or
         other documents correcting such misstatement or omission or the Holder
         actually knew of such untrue statement or omission.

                  (b) Each Holder will indemnify the Company, each of its
         directors and officers and each underwriter, if any, of the Company's
         securities covered by such a registration statement, each person who
         controls the Company or such underwriter within the meaning of the
         Securities Act and the rules and regulations thereunder, against all
         claims, losses, damages and liabilities (or actions in respect thereof)
         arising out of or based on any untrue statement (or alleged untrue
         statement) of a material fact contained in any such registration
         statement, prospectus or other document, or any omission (or alleged
         omission) to state therein a material fact required to be stated
         therein or necessary to make the statements therein not misleading, and
         will reimburse the Company and its directors, officers, partners,
         persons, underwriters or control persons for any legal or any other
         expenses reasonably incurred in connection with investigating or
         defending any such claim, loss, damage, liability or action, in each
         case to the extent, but only to the extent, that such untrue statement
         (or alleged untrue statement) or omission (or alleged omission) is made
         in such registration statement, prospectus or other document in
         reliance upon and in conformity with written information furnished to
         the Company by such Holder and stated to be specifically for use
         therein; PROVIDED, HOWEVER, that the obligations of such Holder
         hereunder shall be limited to an amount equal to the proceeds to the
         Holder of securities sold as contemplated herein.



                                       8


                  (c) Each party entitled to indemnification under this Section
         5 (the "INDEMNIFIED PARTY") shall give notice in writing to the party
         required to provide indemnification (the "INDEMNIFYING PARTY") promptly
         after such Indemnified Party has actual knowledge of any claim as to
         which indemnity may be sought, and shall permit the Indemnifying Party
         to assume the defense of any such claim or any litigation resulting
         therefrom, PROVIDED that counsel for the Indemnifying Party, who shall
         conduct the defense of such claim or any litigation resulting
         therefrom, shall be approved by the Indemnified Party (whose approval
         shall not unreasonably be withheld), and the Indemnified Party may
         participate in such defense at such Indemnified Party's expense. No
         Indemnifying Party, in the defense of any such claim or litigation,
         shall, except with the consent of each Indemnified Party, consent to
         entry of any judgment or enter into any settlement which does not
         include as an unconditional term thereof the giving by the claimant or
         plaintiff to such Indemnified Party of a release from all liability in
         respect to such claim or litigation and no Indemnified Party shall
         consent to entry of any judgment or settle such claim or litigation
         without the prior written consent of the Indemnifying Party. Each
         Indemnified Party shall furnish such information regarding itself or
         the claim in question as an Indemnifying Party may reasonably request
         in writing and as shall be reasonably required in connection with
         defense of such claim and litigation resulting therefrom.

                 (d) If the indemnification provided for in this Section 5 is
         unavailable to an Indemnified Party in respect of any losses, claims,
         damages or liabilities referred to therein, then each Indemnifying
         Party, in lieu of indemnifying such Indemnified Party, shall contribute
         to the amount paid or payable by such Indemnified Party as a result of
         such losses, claims, damages or liabilities in such proportion as is
         appropriate to reflect the relative fault of the Company on the one
         hand and the stockholders offering securities in the offering (the
         "SELLING STOCKHOLDERS") on the other in connection with the statements
         or omissions which resulted in such losses, claims, damages or
         liabilities, as well as any other relevant equitable considerations.
         The relative fault of the Company on the one hand and the Holder on the
         other shall be determined by reference to, among other things, whether
         the untrue or alleged untrue statement of material fact or the omission
         or alleged omission to state a material fact relates to information
         supplied by the Company or by the Holder and the parties' relevant
         intent, knowledge, access to information and opportunity to correct or
         prevent such statement or omission. The Company and the Holders agree
         that it would not be just and equitable if contribution pursuant to
         this Section 5(d) were based solely upon the number of entities from
         whom contribution was requested or by any other method of allocation
         which does not take account of the equitable considerations referred to
         above in this Section 5(d). The amount paid or payable by an
         Indemnified Party as a result of the losses, claims, damages and
         liabilities referred to above in this Section 5(d) shall be deemed to
         include any legal or other expenses reasonably incurred by such
         Indemnified Party in connection with investigating or defending any
         such action or claim, subject to the provisions of Section 5(d) hereof.
         Notwithstanding the provisions of this Section 5(d), neither Holder
         shall be required to contribute any


                                       9


         amount or make any other payments under this Agreement which in the
         aggregate exceed the net proceeds received by such Holder. No person
         guilty of fraudulent misrepresentation (within the meaning of the
         Securities Act) shall be entitled to contribution from any person who
         was not guilty of such fraudulent misrepresentation.

         6. INFORMATION BY HOLDER. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.

         7. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:

                  (a) use its reasonable best efforts to make and keep public
         information available as those terms are understood and defined in Rule
         144 under the Securities Act at all times;

                  (b) use its reasonable best efforts to file with the
         Commission in a timely manner all reports and other documents required
         of the Company under the Securities Act and the Exchange Act; and

                  (c) so long as any Holder owns any Restricted Securities,
         furnish to such Holder or Holders forthwith upon request a written
         statement by the Company as to its compliance with the reporting
         requirements of Rule 144 and of the Securities Act and the Exchange
         Act, a copy of the most recent annual or quarterly report of the
         Company, and such other reports and documents so filed as such Holder
         or Holders may reasonably request in availing itself of any rule or
         regulation of the Commission allowing such Holder or Holders to sell
         any such securities without registration.

         8. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register the Registrable Securities held by the Holders under
Section 4 may be transferred or assigned, PROVIDED that the Company is given
written notice at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the Registrable Securities with respect to which such registration
rights are being transferred or assigned, and PROVIDED FURTHER that the
transferee or assignee of such rights assumes the obligations of a Holder under
this Agreement.

         9. TERMINATION. The provisions of Sections 4.1, 4.2 and 4.3 of this
Agreement shall terminate at the latest to occur of (i) the date on which the
Registrable Securities total less than 5% of the outstanding Common Stock of the
Company, and (ii) the seventh anniversary of the date of the closing of the
Company's initial public offering on Form S-1.



                                       10


         10. AMENDMENT; WAIVER. No amendment, alteration or modification of this
Agreement shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument executed by each Holder (so
long as a Holder is a holder of Registrable Securities) and the Company. No
waiver of any provision of this Agreement shall be valid unless it is expressed
in a written instrument duly executed by the party or parties making such
waiver. The failure of any party to insist, in any one or more instances, on
performance of any of the terms and conditions of this Agreement shall not be
construed as a waiver or relinquishment of any rights granted hereunder or of
the future performance of any such term, covenant or condition but the
obligation of any party with respect thereto shall continue in full force and
effect.

         11. SPECIFIC PERFORMANCE. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, all parties hereto shall have the right to specific performance of
the obligations of the other parties under this Agreement, and if any party
hereto shall institute an action or proceeding to enforce the provisions hereof,
any person (including the Company) against whom such action or proceeding is
brought hereby waives the claim or defense therein that such party has an
adequate remedy at law, and such person shall not urge in any such action or
proceeding the claim or defense that such remedy at law exists.

         12. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or transmitted by facsimile or delivered by nationally recognized
overnight courier, addressed:

             (a) if to a Holder, to the following address,

                                    Wexford Plaza
                                    411 West Putnam Avenue
                                    Greenwich, CT 06830
                                    Attention:  Jay Maymudes
                                    Fax:   (203) 862-7350

             and:

             (b) if to the Company, to the following address, or at such
         other address as the Company shall have furnished to the Holders,



                                       11


                                    Republic Airways Holdings Inc.
                                    2500 S. High School Road,
                                    Suite 160
                                    Indianapolis, IN 46241
                                    Attention:  Bryan K. Bedford
                                    Phone:  (317) 484-6000
                                    Fax:  (317) 484-4747

     Alternatively, to such other address as a party hereto supplies to each
other party in writing.

         13. SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective permitted transferees, successors and assigns of the parties
hereto, whether so expressed or not.

         14. GOVERNING LAW. This Agreement is to be governed by and interpreted
under the laws of the State of Delaware without giving effect to the principles
of conflicts of laws thereof.

         15. TITLES AND SUBTITLES. The titles of the sections of this Agreement
are for the convenience of reference only and are not to be considered in
construing this Agreement.

         16. SEVERABILITY. The invalidity or unenforceability of any provisions
of this Agreement shall not be deemed to affect the validity or enforceability
of any other provision of this Agreement.

         17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         18. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all previous agreements, arrangements and
understandings, whether written or oral, with respect to the subject matter
hereof.



                                       12





         IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.

                                    REPUBLIC AIRWAYS HOLDINGS INC.


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

                                    IMPRIMIS INVESTORS, LLC


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

                                    WEXFORD SPECTRUM FUND I, L.P.


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

                                    WEXFORD OFFSHORE SPECTRUM FUND


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

                                    WEXFORD PARTNERS INVESTMENT CO. LLC


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

                                    WEXAIR LLC


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






                                       13

EX-10.62

                                                               Exhibit 10.62

                           WEXFORD AIR HOLDINGS INC.
                            (FKA WEXFORD III CORP.)

                          11.5% NOTE DUE MAY 15, 2002

     16,882,520.34                                             May 14, 2001

     FOR THE VALUE RECEIVED of full satisfaction of principal and interest
due WexAir, LLC by Wexford Air Holdings Inc. (FKA Wexford III Corp.) under
its 11.5% Note due May 15, 2001, the undersigned, Wexford Air Holdings Inc.
(FKA Wexford III Corp.) (herein called the "Company"), a corporation
organized and existing under the laws of the State of Delaware, hereby
promises to pay to the order of WexAir, LLC the principal sum of Sixteen
Million Eight Hundred Eighty Two Thousand, Five Hundred Twenty Dollars and
Thirty Four Cents on May 15, 2002, or if such day is a Saturday, Sunday or
any day in which banks located in the State of New York are authorized or
obligated to close, then on the next day which is not a Saturday, Sunday or
day in which banks located in the State of New York are authorized or
obligated to close, or on such earlier date as the Company may specify in
written notice to WexAir, LLC, with interest (computed on the basis of a
360-day year of twelve 30-day months and compounded semiannually) (a) on the
unpaid balance thereof at the rate of 11.5% per annum from the date hereof,
payable at maturity which interest rate reflects the increased cash flow
needs of the Company and its subsidiaries, and (b) to the extent permitted by
law, on any overdue payment (including any overdue prepayment) of principal
and any overdue payment of interest, payable as aforesaid (or, at the option
of the holder hereof, on demand), at a rate per annum from time to time equal
to the greater of (i) 15% or (ii) 5% over the rate of interest publicly
announced by the Chase Manhattan Bank from time to time in New York, New York
as its "base" or "prime" rate.

     Payments of principal of and interest on this Note are to be made in
lawful money of the United States of America at the office of the Company or
at such other place as the Company shall have designated by written notice to
the holder of this Note.

     The Company agrees, and the holder agrees, that the indebtedness
evidenced by this Note is subordinate in right of payment, to the extent and
in the manner provided in this paragraph, to the prior payment in full of all
Senior Debt, and that the subordination is for the benefit of the holders of
Senior Debt. "Senior Debt" means any indebtedness for borrowed money, or any
guarantee of such indebtedness, of the Company outstanding at any time except
debt that by its terms is not senior in right of payment to this Note. Upon
any distribution to creditors of the Company in a liquidation or dissolution
of the Company or in a bankruptcy, reorganization, insolvency, receivership
or similar proceeding relating to the Company or its property, (1) holders of
Senior Debt shall be entitled to receive payment in full in cash of the
principal of and interest (including interest accruing after the commencement
of any such proceeding) to the date of payment on the Senior Debt before the
holder shall be entitled to receive any payment of principal of or interest
on this Note; and (2) until the Senior Debt is paid in full in cash, any
distribution to which the holder would be entitled but for this paragraph
shall be made to holders of Senior Debt as their interests may appear. The
Company may not pay principal of or interest on this Note and may not acquire
this Note for cash or property other than capital stock of the Company if a
default on Senior Debt occurs and is continuing that permits holders of such
Senior Debt to accelerate its maturity, and if a distribution is made to the
holder that because of this paragraph should not have been made to it, the
holder who receives the distribution shall hold it in trust for holders of
Senior Debt and pay it over to them as their interests may appear. After all
Senior Debt is paid in full and until this Note is paid in full, the holder
shall be subrogated to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the holders have been applied to the payment of Senior
Debt. Nothing in this paragraph shall impair, as between the Company and the
holder, the obligation of the Company, which is absolute and unconditional,
to pay principal of and interest on this Note in accordance with its terms.

     The Company may prepay this Note, in whole or in part, at any time
together with interest accrued to the date of such prepayment. Upon any sale,
assignment, transfer or other disposition of any stock of Chautauqua
Airlines, Inc., or upon any issuance or sale by the Company of any capital
stock, the Company shall prepay principal and interest on this Note in an
amount equal to the cash proceeds of any such disposition, issuance or sale,
net of reasonable costs and expenses and net of any repayments of
indebtedness secured by a lien on any such stock of Chautauqua Airlines, Inc.

     If the Company defaults in the payment of any amount due hereon when
due, and payable, the principal of this Note together with all accrued and
unpaid interest hereon may be declared due and payable by the holder by
notice to the Company.

     This Note, and the rights associated herewith, may be transferred by the
Holder only by surrender to the Maker for reissuance along with appropriate
transfer instructions, The Maker shall reissue this Note as and when
requested by the Holder at any time prior to its maturity in accordance with
those instructions.


                                        WEXFORD AIR HOLDINGS INC.
                                        (FKA WEXFORD III CORP.)



                                        By: JAY MAYMUDES
                                            -------------------------
                                        Name:  Jay Maymudes
                                        Title: Vice President

EX-10.63

                                                                  Exhibit 10.63

                              EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of June 25, 1999, by and between
CHAUTAUQUA AIRLINES, INC. (hereinafter referred to as the "Company"), a New York
corporation, and BRYAN K. BEDFORD (hereinafter referred to as the "Executive").

                                 R E C I T A L S

         WHEREAS, the Company desires to employ the Executive, and the Executive
is desirous of accepting such employment by the Company, upon the terms and
conditions hereinafter set forth,

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:

         1. EMPLOYMENT. Subject to the satisfaction of the conditions set forth
in this Section 1, the Company agrees to employ the Executive, and the Executive
agrees to render his services to the Company, as its President and Chief
Executive Officer, during the Term (as defined below). In connection with his
employment as President and Chief Executive Officer, the Executive shall be
appointed to serve as a member as the Board of Directors of the Company. The
Executive shall render his services at the direction of the Board of Directors
of the Company at the Company's offices in Indianapolis, Indiana. The Executive
agrees to use his best efforts to promote and further the business, reputation
and good name of the Company and the Executive shall promptly and faithfully
comply with all instructions, directions, requests, rules and regulations made
or issued from time to time by the Company. This Agreement shall be subject to
the satisfaction of a satisfactory drug test (which the Company shall promptly
arrange) by the Executive.

         2. TERM. The term of employment pursuant to this Agreement (the "Term")
shall commence on July 6, 1999 and continue until June 30, 2003; provided that
either party may terminate this Agreement by providing the other with 30 days
prior written notice of such termination. Notwithstanding the foregoing, this
Agreement may be terminated by the Company or by the Executive in the event that
"Cause" for such termination exists as provided in Section 7 below. In the event
(i) the Company terminates this Agreement or the Executive's employment other
than for Cause, or (ii) the Executive terminates this Agreement or the
Executive's employment for Cause, the Company shall pay the Executive Severance
Compensation as provided in Section 3(c) hereof. In the event the Company
terminates this Agreement or the Executive's employment for Cause, or in the
event the Executive terminates this Agreement or his employment other than for
Cause, the Executive shall not be entitled to any Severance Compensation or
other compensation of any kind following the effective date of such termination.

         3. COMPENSATION. As full and complete compensation for all the
Executive's services hereunder, the Company shall pay the Executive the
compensation described below.



                                       1


(a)      CASH COMPENSATION.

                  (i) During the Term, the Company shall pay the Executive an
         annual base salary of $280,000 ("Base Salary"). In the event this
         Agreement is terminated prior to the expiration of the Term, the
         Company shall pay to the Executive, in addition to any Severance
         Compensation payable under Section 3(c), any accrued but unpaid Base
         Salary through the termination date.

                  (ii) In addition to the Base Salary, during the Term, the
         Company shall pay to the Executive an annual bonus (a "Bonus") in the
         amount of $140,000 or such greater amount as the board of directors of
         the Company shall determine in its discretion. The Bonus shall be paid
         each year during the Term at the end of the calendar year and shall be
         prorated (x) for the 1999 calendar year for the period from the
         commencement date of the Executive's employment through the end of such
         calendar year, and (y) for the 2003 calendar year for the period from
         January 1, 2003 through the end of the Term. In the event this
         Agreement or the Executive's employment is terminated (x) by the
         Company for Cause or (y) by the Executive other than for Cause, the
         Executive shall not be entitled to any Bonus Compensation for such year
         or any subsequent period. In the event this Agreement or the
         Executive's employment is terminated (x) by the Company other than for
         Cause, or (y) by the Executive for Cause, the Executive's right with
         respect to a Bonus for the year in which such termination occurs shall
         be governed by Section 3(c).

(b)      EQUITY COMPENSATION.

                  (i) Concurrently with the execution and delivery of this
         Agreement, the Company shall issue to the Executive, as compensation
         and without cost to the Executive, options (the "Options") to purchase
         120,000 shares of the Company's Common Stock, par value $.01 per share
         (the "Common Stock"), representing 6% of the shares of Common Stock
         that are currently issued and outstanding. The Options shall have an
         exercise price per share of $26.75, which is equivalent to an
         enterprise value of $53.5 million. The Options shall vest and become
         immediately exercisable as to 1/48 of the shares subject to the Options
         on the last day of each month during the Term, subject to termination
         as provided below. The Executive shall have the right to exercise any
         vested Options at any time within 5 years after the date that such
         Options became vested and any Options not exercised within such
         deadline shall be deemed terminated and void.

                  (ii) In the event this Agreement or the Executive's employment
         is terminated (x) by the Company for Cause, or (y) by the Executive
         other than for Cause, the Options shall cease vesting as of the date
         that the Company or the Executive provides notice of such termination,
         and any unvested Options shall immediately terminate and become void.
         In the event this Agreement or the Executive's employment is terminated
         (x) by the Company other than for Cause, or (y) by the Executive for
         Cause, the Options shall vest as and to the extent provided in Section
         3(c) hereof.



                                       2


                  (iii) Notwithstanding anything to the contrary otherwise
         contained herein, if at any time during the Term the Company shall, by
         stock dividend, stock split, combination, reclassification or exchange,
         or through merger, consolidation or otherwise, change its shares of
         Common Stock into a different number, kind or class of shares or other
         securities or property, then the Board of Directors may, in its sole
         discretion, either make the Options immediately exercisable or arrange
         for a successor or surviving corporation, if any, to grant replacement
         options, or to adjust the number of shares covered by the Options and
         the price of each share. The determination of the Board of Directors
         shall be conclusive.

                  (iv) Notwithstanding anything to the contrary otherwise
         contained herein, if at any time during the Term the Company shall
         issue additional shares of Common Stock to any party that is affiliated
         with Wexford Management LLC (an "Affiliate"), the Executive shall have
         the right, but not the obligation, to purchase for the same
         consideration and on the same terms that such shares of Common Stock
         shall be issued to such Affiliate up to 6% of the shares issued to such
         Affiliate. The grant of any stock options to any director or officer of
         the Company shall not provide the Executive with any rights under this
         Section 3(b)(iv).

                  (v) In the event Wexford Management LLC or any Affiliate has
         the right to sell all or a portion of the shares of Common Stock of the
         Company held by them in an public offering (whether an initial offering
         or a subsequent offering), a private sale or other transaction, or to
         register all or a portion of the shares of Common Stock of the Company
         held by them, the Executive shall be offered the right to sell or
         register as the case may be pro rata with Wexford and such Affiliate
         all or a portion of the Shares of Common Stock for which he holds
         vested Options.

(c) SEVERANCE COMPENSATION. In the event (i) the Company terminates this
Agreement or the Executive's employment other than for Cause, or (ii) the
Executive terminates this Agreement or his employment for Cause, the Company
shall pay to the Executive as Severance Compensation $560,000, provided that in
the event the remainder of the Term is less than 24 months, such Severance
Compensation shall be prorated for the remainder of the Term, but shall not be
less than $140,000. For example, if the Company terminates this Agreement other
than for Cause with 20 months remaining in the Term, the Company shall pay the
Executive Severance Compensation of $466,667. The Executive shall also receive
as Severance Compensation (i) subject to the next following sentence, an
immediate vesting of those Options that would have vested during the 24 months
after such termination, or such lesser period through the end of the Term, if
the Executive's employment had not been terminated, and (ii) continuation of
medical benefits for the lesser of 12 months or the remainder of the Term.
Notwithstanding the foregoing, in the event the Executive terminates this
Agreement or his employment for Cause as a result of a Change of Control (as
defined herein), all unvested Options shall immediately vest.

         4. NO OTHER COMPENSATION. Except as otherwise expressly provided
herein, or in any other written document executed by the Company and the
Executive, no other compensation or other


                                       3



consideration shall become due or payable to the Executive on account of the
services rendered hereunder. The Company shall have the right to deduct and
withhold from the compensation payable to the Executive hereunder any amounts
required to be deducted and withheld under the provisions of any statute,
regulation, ordinance, order or any other amendment thereto, heretofore or
hereafter enacted, requiring the withholding or deduction of compensation.

         5.       BENEFITS.

(a) MEDICAL & 401K BENEFITS. The Company agrees that the Executive shall be
entitled to participate in any retirement, 401K, disability, medical, pension,
profit sharing, group insurance, or any other plan or arrangement, or in any
other benefits now or hereafter generally available to executives of the
Company, in each case to the extent that the Executive shall be eligible under
the general provisions thereof, provided that the Company shall waive any
waiting period for participation in any such plan.

(b) REIMBURSEMENT OF LIVING EXPENSES. Prior to the Executive's relocation to
Indianapolis, Indiana, which shall take place no later than August 15, 1999, the
Company will pay for or reimburse the Executive for all travel, hotel and other
documented out-of-pocket expenses reasonably incurred by him and his immediate
family in connection with the performance of his duties hereunder in
Indianapolis.

(c) RELOCATION EXPENSES. The Company shall pay for or reimburse the Executive
for all out-of-pocket relocation expenses reasonably incurred by him and his
immediate family in connection with his relocation to Indianapolis, including,
without limitation, moving costs, brokerage commission costs, any loss incurred
on the sale of the Executive's current home not to exceed $25,000, and a state
and federal tax "gross up" on such relocation expenses, provided that such
expenses shall not exceed $125,000 in the aggregate.

         6. VACATION. The Executive shall be entitled to take three weeks of
paid vacation which shall accrue monthly during each 12 months of the
Executive's employment hereunder, and which vacation shall be taken on dates to
be selected by mutual agreement of the Company and the Executive.

         7.       TERMINATION FOR CAUSE.

(a) TERMINATION FOR CAUSE BY THE COMPANY. The Company, by written notice to the
Executive, may immediately terminate this Agreement and the Executive's
employment hereunder for Cause. As used herein, a termination by the Company
"for Cause" shall mean that the Executive has (i) willfully or materially
refused to perform a material part of his duties hereunder, (ii) materially
breached the provisions of Sections 8, 9 or 10 hereof, (iii) acted fraudulently
or dishonestly in his relations with the Company, (iv) committed larceny,
embezzlement, conversion or any other act involving the misappropriation of
Company funds or assets in the course of his employment, or (v) been indicted or
convicted of any felony or other crime involving an act of moral turpitude.



                                       4


(b) TERMINATION FOR CAUSE BY THE EXECUTIVE. The Executive, by 20 business days
prior written notice to the Company, may terminate this Agreement and his
employment hereunder for Cause, provided that the Company shall have the right
to cure such Cause within such 20 business day period. As used herein, a
termination by the Executive "for Cause" shall mean that (i) the Company has
materially diminished the duties and responsibilities of the Executive, (ii) the
Company has required the Executive to relocate his residence from Indianapolis
to another location without the consent of the Executive or (iii) a Change of
Control has occurred. As used herein, a "Change of Control" shall mean a
transaction, other than a public offering (whether an initial offering or a
subsequent offering) of Common Stock of the Company, as a result of which the
number of shares of Common Stock of the Company collectively owned by Wexford
and its Affiliates is not greater than the number of shares of Common Stock
owned by any other shareholder of the Company.

         8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he shall receive in the course of his employment hereunder certain
confidential information and trade secrets concerning the Company's business and
affairs which may be of great value to the Company. The Executive therefore
agrees that he will not disclose any such information relating to the Company,
the Company's personnel or its operations other than in the ordinary course of
business or in any way use such information in any manner which could adversely
affect the Company's business. For purposes of this Agreement, the terms "trade
secrets" and "confidential information" shall include any and all information
concerning the business and affairs of the Company and any division, subsidiary
or other affiliate of the Company that is not generally available to the public.

         9. NON-COMPETITION. The Executive agrees that without the prior written
consent of Wexford Management LLC ("Wexford") during the Term and for a period
of 12 months following the termination or expiration of this Agreement, he will
not participate as an advisor, partner, joint venturer, investor, lender,
consultant or in any other capacity in any business transaction or proposed
business transaction (a) with respect to which the Executive had a material
personal involvement on behalf of the Company during the last 12 months of his
employment with the Company, or (b) that could reasonably be expected to
interfere with the Company's business or operations as of the date of such
termination or expiration. For these purposes, the mere ownership by the
Executive of securities of a public company not in excess of 2% of any class of
such securities shall not be considered to be competition with the Company.

         10. NON-SOLICITATION. The Executive agrees that during the Term, and
for a period of 12 months following the termination or expiration of this
Agreement, he shall not, without the prior written consent of the Company,
directly or indirectly, employ or retain, or have or cause any other person or
entity to employ or retain, any person who was employed by the Company or any of
it subsidiaries or affiliates while the Executive was employed by the Company,
provided that this provision shall not apply to any employee of the Company with
whom the Executive had a prior business relationship, who was recruited by the
Executive and whose employment with the Company commenced during the period from
the date of this Agreement through September 30, 1999.



                                       5


         11. BREACH OF THIS AGREEMENT. If the Executive commits a breach, or
threatens to commit a breach, of any of the provisions of Sections 8, 9 or 10 of
this Agreement, then the Company shall have the right and remedy to have those
provisions specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by the Executive that the rights and privileges of
the Company granted in Sections 8, 9 and 10 are of a special, unique and
extraordinary character and any such breach or threatened breach will cause
great and irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company.

         12. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing (including facsimile, telegraphic, telex or cable
communication) and shall be deemed to have been duly given when delivered by
hand, faxed or mailed, certified or registered mail, return receipt requested
and postage prepaid:

         If to the Company:         Chautauqua Airlines, Inc.
                                    c/o Wexford Management LLC
                                    411 West Putnam Avenue
                                    Greenwich, CT 06830
                                    Fax: (203) 862-7312
                                    Attention: Joseph Jacobs, fax 203-862-7320
                                           and Arthur Amron, fax 203-862-7312

         If to the Executive:       Bryan K. Bedford
                                    11495 Bluestem Lane
                                    Eden Prairie, MN  55347
                                    Fax:  (612) 914-9044

         13. APPLICABLE LAW. This Agreement was negotiated and entered into
within the State of Indiana. All matters pertaining to this Agreement shall be
governed by the laws of the State of Indiana applicable to contracts made and to
be performed wholly therein. Nothing in this Agreement shall be construed to
require the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any material present or
future statute, law, governmental regulation or ordinance as a result of which
the parties have no legal right to contract or perform, the latter shall
prevail, but in such event the provision(s) of this Agreement affected shall be
curtailed and limited only to the extent necessary to bring it or them within
the legal requirements.

         14. ENTIRE AGREEMENT; MODIFICATION; CONSENTS AND WAIVERS. This
Agreement contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements or
understandings, written or oral, between the parties with respect to the subject
matter hereof. No interpretation, change, termination or waiver of or extension
of time for performance under any provision of this Agreement shall be binding
upon any party unless in writing and signed by the party intended to be bound
thereby. Except as otherwise provided in this Agreement, no waiver of or other
failure to exercise any right under or default or extension of time for
performance under any provision or this Agreement shall affect the right of
any party to exercise



                                       6



any subsequent right under or otherwise enforce said provision or any other
provision hereof or to exercise any right or remedy in the event of any other
default, whether or not similar.

         15. SEVERABILITY. The parties acknowledge that, in their view, the
terms of this Agreement are fair and reasonable as of the date signed by them,
including as to the scope and duration of post-termination activities.
Accordingly, if any one or more of the provisions contained in this Agreement
shall for any reason, whether by application of existing law or law which may
develop after the date of this Agreement, be determined by an arbitrator or
court of competent jurisdiction to be excessively broad as to scope of activity,
duration or territory, or otherwise unenforceable, the parties hereby jointly
request such court to construe any such provision by limiting or reducing it so
as to be enforceable to the maximum extent in favor of the Company compatible
with then-applicable law. If any one or more of the terms, provisions, covenants
or restrictions of this Agreement shall nonetheless be determined by an
arbitrator or court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

         16. ASSIGNMENT. The Company may, at its election, assign this Agreement
or any of its rights hereunder. This Agreement may not be assigned by the
Executive.

         17. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

         18. ARBITRATION. Each of the parties hereby irrevocably and
unconditionally consents to arbitrate any dispute arising out of or relating in
any manner to this Agreement or the employment relationship contemplated hereby
or the termination thereof, or any alleged breach of any term or provision of
this Agreement. Such arbitration shall be conducted by a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. Judgement may be entered on the arbitrator's award in any federal or
state court in Indiana (and the parties expressly consent to the jurisdiction of
such court), or in any other court having jurisdiction. Each of the Parties
agrees that in any arbitration arising out of or relating to this Agreement or
the employment relationship contemplated hereby or the termination thereof, or
any alleged breach of any term or provision of this Agreement or in any action
to enter judgment on an award in such arbitration each party shall bear its own
fees and expenses.

         19. SURVIVAL. The provisions of Sections 8 through 18 of this Agreement
shall survive any expiration or termination of this Agreement.



                                       7


         IN WITNESS WHEREOF, that parties hereto have executed this Employment
Agreement as of the date first above written.

                                              CHAUTAUQUA AIRLINES, INC.


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

                                              BRYAN K. BEDFORD

                                               /s/ Bryan K. Bedford
                                              ---------------------------

                                       8

EX-10.64

                                                                  Exhibit 10.64

                              EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of July 16, 1999, by and between
CHAUTAUQUA AIRLINES, INC. (hereinafter referred to as the "Company"), a New York
corporation, and Robert Cooper (hereinafter referred to as the "Executive").

                                 R E C I T A L S

         WHEREAS, the Company desires to employ the Executive, and the Executive
is desirous of accepting such employment by the Company, upon the terms and
conditions hereinafter set forth,

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:

         1. EMPLOYMENT. Subject to the satisfaction of the conditions set forth
in this Section 1, the Company agrees to employ the Executive, and the Executive
agrees to render his services to the Company, as its Vice President and Chief
Financial Officer, during the Term (as defined below). The Executive shall
render his services at the direction of the President and the Board of Directors
of the Company at the Company's offices in Indianapolis, Indiana. The Executive
agrees to use his best efforts to promote and further the business, reputation
and good name of the Company and the Executive shall promptly and faithfully
comply with all instructions, directions, requests, rules and regulations made
or issued from time to time by the Company. This Agreement shall be subject to
the satisfaction of a satisfactory drug test (which the Company shall promptly
arrange) by the Executive.

         2. TERM. The term of employment pursuant to this Agreement (the "Term")
shall commence on or before August 2, 1999 and continue until July 31, 2003;
provided that either party may terminate this Agreement by providing the other
with 30 days prior written notice of such termination. Notwithstanding the
foregoing, this Agreement may be terminated by the Company or by the Executive
in the event that "Cause" for such termination exists as provided in Section 7
below. In the event (i) the Company terminates this Agreement or the Executive's
employment other than for Cause, or (ii) the Executive terminates this Agreement
or the Executive's employment for Cause, the Company shall pay the Executive
Severance Compensation as provided in Section 3(c) hereof. In the event the
Company terminates this Agreement or the Executive's employment for Cause, or in
the event the Executive terminates this Agreement or his employment other than
for Cause, the Executive shall not be entitled to any Severance Compensation or
other compensation of any kind following the effective date of such termination.

         3. COMPENSATION. As full and complete compensation for all the
Executive's services hereunder, the Company shall pay the Executive the
compensation described below.

(a)      CASH COMPENSATION.





                  (i) During the Term, the Company shall pay the Executive an
         annual base salary of $130,000 ("Base Salary"). In the event this
         Agreement is terminated prior to the expiration of the Term, the
         Company shall pay to the Executive, in addition to any Severance
         Compensation payable under Section 3(c), any accrued but unpaid Base
         Salary through the termination date.

                  (ii) In addition to the Base Salary, during the Term, the
         Company shall pay to the Executive an annual bonus (a "Bonus") in the
         amount of $52,000 or such greater amount as the board of directors of
         the Company shall determine in its discretion. The Bonus shall be paid
         each year during the Term at the end of the calendar year and shall be
         prorated (x) for the 1999 calendar year for the period from the
         commencement date of the Executive's employment through the end of such
         calendar year, and (y) for the 2003 calendar year for the period from
         January 1, 2003 through the end of the Term. In the event this
         Agreement or the Executive's employment is terminated, the Executive
         shall not be entitled to any Bonus Compensation for such year or any
         subsequent period.

(b)      EQUITY COMPENSATION.

                  (i) Concurrently with the execution and delivery of this
         Agreement, the Company shall issue to the Executive, as compensation
         and without cost to the Executive, options (the "Options") to purchase
         30,000 shares of the Company's Common Stock, par value $.01 per share
         (the "Common Stock"), representing 1.5% of the shares of Common Stock
         that are currently issued and outstanding. The Options shall have an
         exercise price per share of $26.75, which is equivalent to an
         enterprise value of $53.5 million. The Options shall vest and become
         immediately exercisable as to 1/48 of the shares subject to the Options
         on the last day of each month during the Term, subject to termination
         as provided below. The Executive shall have the right to exercise any
         vested Options at any time within 5 years after the date that such
         Options became vested and any Options not exercised within such
         deadline shall be deemed terminated and void.

                  (ii) In the event this Agreement or the Executive's employment
         is terminated (x) by the Company for Cause, or (y) by the Executive
         other than for Cause, the Options shall cease vesting as of the date
         that the Company or the Executive provides notice of such termination,
         and any unvested Options shall immediately terminate and become void.
         In the event this Agreement or the Executive's employment is terminated
         (x) by the Company other than for Cause, or (y) by the Executive for
         Cause, the Options shall vest as and to the extent provided in Section
         3(c) hereof.

                  (iii) Notwithstanding anything to the contrary otherwise
         contained herein, if at any time during the Term the Company shall, by
         stock dividend, stock split, combination, reclassification or exchange,
         or through merger, consolidation or otherwise, change its shares of
         Common Stock into a different number, kind or class of shares or other
         securities or property, then the Board of Directors may, in its sole
         discretion, either make the


                                       2



         Options immediately exercisable or arrange for a successor or surviving
         corporation, if any, to grant replacement options, or to adjust the
         number of shares covered by the Options and the price of each share.
         The determination of the Board of Directors shall be conclusive.

                  (iv) Notwithstanding anything to the contrary otherwise
         contained herein, if at any time during the Term the Company shall
         issue additional shares of Common Stock to any party that is affiliated
         with Wexford Management LLC (an "Affiliate"), the Executive shall have
         the right, but not the obligation, to purchase for the same
         consideration and on the same terms that such shares of Common Stock
         shall be issued to such Affiliate up to 1.5% of the shares issued to
         such Affiliate. The grant of any stock options to any director or
         officer of the Company shall not provide the Executive with any rights
         under this Section 3(b)(iv).

                  (v) In the event Wexford Management LLC or any Affiliate has
         the right to sell all or a portion of the shares of Common Stock of the
         Company held by them in an public offering (whether an initial offering
         or a subsequent offering), a private sale or other transaction, or to
         register all or a portion of the shares of Common Stock of the Company
         held by them, the Executive shall be offered the right to sell or
         register as the case may be pro rata with Wexford and such Affiliate
         all or a portion of the Shares of Common Stock for which he holds
         vested Options.

(c) SEVERANCE COMPENSATION. In the event (i) the Company terminates this
Agreement or the Executive's employment other than for Cause, or (ii) the
Executive terminates this Agreement or his employment for Cause, the Company
shall pay to the Executive as Severance Compensation $130,000, provided that in
the event the remainder of the Term is less than 12 months, such Severance
Compensation shall be prorated for the remainder of the Term. For example, if
the Company terminates this Agreement other than for Cause with 6 months
remaining in the Term, the Company shall pay the Executive Severance
Compensation of $65,000. The Executive shall also receive as Severance
Compensation (i) subject to the next following sentence, an immediate vesting of
those Options that would have vested during the 12 months after such
termination, or such lesser period through the end of the Term, if the
Executive's employment had not been terminated, and (ii) continuation of medical
benefits for the lesser of 12 months or the remainder of the Term.
Notwithstanding the foregoing, in the event the Executive terminates this
Agreement or his employment for Cause as a result of a Change of Control (as
defined herein), all unvested Options shall immediately vest.

         4. NO OTHER COMPENSATION. Except as otherwise expressly provided
herein, or in any other written document executed by the Company and the
Executive, no other compensation or other consideration shall become due or
payable to the Executive on account of the services rendered hereunder. The
Company shall have the right to deduct and withhold from the compensation
payable to the Executive hereunder any amounts required to be deducted and
withheld under the provisions of any statute, regulation, ordinance, order or
any other amendment thereto, heretofore or hereafter enacted, requiring the
withholding or deduction of compensation.



                                       3


         5.       BENEFITS.

(a) MEDICAL & 401K BENEFITS. The Company agrees that the Executive shall be
entitled to participate in any retirement, 401K, disability, medical, pension,
profit sharing, group insurance, or any other plan or arrangement, or in any
other benefits now or hereafter generally available to executives of the
Company, in each case to the extent that the Executive shall be eligible under
the general provisions thereof, provided that the Company shall waive any
waiting period for participation in any such plan.

(b) REIMBURSEMENT OF LIVING EXPENSES. Prior to the Executive's relocation to
Indianapolis, Indiana, which shall take place no later than September 1, 1999,
the Company will pay for or reimburse the Executive for all travel, hotel and
other documented out-of-pocket expenses reasonably incurred by him and his
immediate family in connection with the performance of his duties hereunder in
Indianapolis.

(c) RELOCATION EXPENSES. The Company shall pay for or reimburse the Executive
for all out-of-pocket relocation expenses reasonably incurred by him and his
immediate family in connection with his relocation to Indianapolis, including,
without limitation, moving costs, brokerage commission costs, and a state and
federal tax "gross up" on such relocation expenses, provided that such expenses
shall not exceed $75,000 in the aggregate.

         6. VACATION. The Executive shall be entitled to take three weeks of
paid vacation which shall accrue monthly during each 12 months of the
Executive's employment hereunder, and which vacation shall be taken on dates to
be selected by mutual agreement of the Company and the Executive.

         7.       TERMINATION FOR CAUSE.

(a) TERMINATION FOR CAUSE BY THE COMPANY. The Company, by written notice to the
Executive, may immediately terminate this Agreement and the Executive's
employment hereunder for Cause. As used herein, a termination by the Company
"for Cause" shall mean that the Executive has (i) willfully or materially
refused to perform a material part of his duties hereunder, (ii) materially
breached the provisions of Sections 8, 9 or 10 hereof, (iii) acted fraudulently
or dishonestly in his relations with the Company, (iv) committed larceny,
embezzlement, conversion or any other act involving the misappropriation of
Company funds or assets in the course of his employment, or (v) been indicted or
convicted of any felony or other crime involving an act of moral turpitude.

(b) TERMINATION FOR CAUSE BY THE EXECUTIVE. The Executive, by 20 business days
prior written notice to the Company, may terminate this Agreement and his
employment hereunder for Cause, provided that the Company shall have the right
to cure such Cause within such 20 business day period. As used herein, a
termination by the Executive "for Cause" shall mean that (i) the Company has
materially diminished the duties and responsibilities of the Executive, (ii) the
Company has required the Executive to relocate his residence from Indianapolis
to another location without the


                                       4



consent of the Executive or (iii) a Change of Control has occurred. As used
herein, a "Change of Control" shall mean a transaction, other than a public
offering (whether an initial offering or a subsequent offering) of Common Stock
of the Company, as a result of which the number of shares of Common Stock of the
Company collectively owned by Wexford and its Affiliates is not greater than the
number of shares of Common Stock owned by any other shareholder of the Company.

         8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he shall receive in the course of his employment hereunder certain
confidential information and trade secrets concerning the Company's business and
affairs which may be of great value to the Company. The Executive therefore
agrees that he will not disclose any such information relating to the Company,
the Company's personnel or its operations other than in the ordinary course of
business or in any way use such information in any manner which could adversely
affect the Company's business. For purposes of this Agreement, the terms "trade
secrets" and "confidential information" shall include any and all information
concerning the business and affairs of the Company and any division, subsidiary
or other affiliate of the Company that is not generally available to the public.

         9. NON-COMPETITION. The Executive agrees that without the prior written
consent of Wexford Management LLC ("Wexford") during the Term and for a period
of 12 months following the termination or expiration of this Agreement, he will
not participate as an advisor, partner, joint venturer, investor, lender,
consultant or in any other capacity in any business transaction or proposed
business transaction (a) with respect to which the Executive had a material
personal involvement on behalf of the Company during the last 12 months of his
employment with the Company, or (b) that could reasonably be expected to
interfere with the Company's business or operations as of the date of such
termination or expiration. For these purposes, the mere ownership by the
Executive of securities of a public company not in excess of 2% of any class of
such securities shall not be considered to be competition with the Company.

         10. NON-SOLICITATION. The Executive agrees that during the Term, and
for a period of 12 months following the termination or expiration of this
Agreement, he shall not, without the prior written consent of the Company,
directly or indirectly, employ or retain, or have or cause any other person or
entity to employ or retain, any person who was employed by the Company or any of
it subsidiaries or affiliates while the Executive was employed by the Company.

         11. BREACH OF THIS AGREEMENT. If the Executive commits a breach, or
threatens to commit a breach, of any of the provisions of Sections 8, 9 or 10 of
this Agreement, then the Company shall have the right and remedy to have those
provisions specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by the Executive that the rights and privileges of
the Company granted in Sections 8, 9 and 10 are of a special, unique and
extraordinary character and any such breach or threatened breach will cause
great and irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company.

         12. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing (including facsimile, telegraphic, telex or cable
communication) and shall be deemed to


                                       5



have been duly given when delivered by hand, faxed or mailed, certified or
registered mail, return receipt requested and postage prepaid:

         If to the Company:         Chautauqua Airlines, Inc.
                                    2500 South High School Road
                                    Suite 160
                                    Indianapolis, IN  46421
                                    Fax No.:  317-484-6060
                                    Attention:  Bryan K. Bedford, President

         with a copy to:            Wexford Management LLC
                                    411 West Putnam Avenue
                                    Greenwich, CT 06830
                                    Attention: Joseph Jacobs, fax 203-862-7320
                                            and Arthur Amron, fax 203-862-7312

         If to the Executive:       Robert Cooper
                                    [at his most recent address as provided to
                                    the Company in writing] or by e-mail at:
                                    hcooper947@aol.com

         13. APPLICABLE LAW. This Agreement was negotiated and entered into
within the State of Indiana. All matters pertaining to this Agreement shall be
governed by the laws of the State of Indiana applicable to contracts made and to
be performed wholly therein. Nothing in this Agreement shall be construed to
require the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any material present or
future statute, law, governmental regulation or ordinance as a result of which
the parties have no legal right to contract or perform, the latter shall
prevail, but in such event the provision(s) of this Agreement affected shall be
curtailed and limited only to the extent necessary to bring it or them within
the legal requirements.

         14. ENTIRE AGREEMENT; MODIFICATION; CONSENTS AND WAIVERS. This
Agreement contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements or
understandings, written or oral, between the parties with respect to the subject
matter hereof. No interpretation, change, termination or waiver of or extension
of time for performance under any provision of this Agreement shall be binding
upon any party unless in writing and signed by the party intended to be bound
thereby. Except as otherwise provided in this Agreement, no waiver of or other
failure to exercise any right under or default or extension of time for
performance under any provision or this Agreement shall affect the right of any
party to exercise any subsequent right under or otherwise enforce said provision
or any other provision hereof or to exercise any right or remedy in the event of
any other default, whether or not similar.

         15. SEVERABILITY. The parties acknowledge that, in their view, the
terms of this Agreement are fair and reasonable as of the date signed by them,
including as to the scope and duration of post-termination activities.
Accordingly, if any one or more of the provisions contained in this Agreement


                                       6



shall for any reason, whether by application of existing law or law which may
develop after the date of this Agreement, be determined by an arbitrator or
court of competent jurisdiction to be excessively broad as to scope of activity,
duration or territory, or otherwise unenforceable, the parties hereby jointly
request such court to construe any such provision by limiting or reducing it so
as to be enforceable to the maximum extent in favor of the Company compatible
with then-applicable law. If any one or more of the terms, provisions, covenants
or restrictions of this Agreement shall nonetheless be determined by an
arbitrator or court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

         16. ASSIGNMENT. The Company may, at its election, assign this Agreement
or any of its rights hereunder. This Agreement may not be assigned by the
Executive.

         17. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

         18. ARBITRATION. Each of the parties hereby irrevocably and
unconditionally consents to arbitrate any dispute arising out of or relating in
any manner to this Agreement or the employment relationship contemplated hereby
or the termination thereof, or any alleged breach of any term or provision of
this Agreement. Such arbitration shall be conducted in Indianapolis, Indiana by
a single arbitrator in accordance with the rules of the American Arbitration
Association then in effect. Judgement may be entered on the arbitrator's award
in any federal or state court in Indiana (and the parties expressly consent to
the jurisdiction of such court), or in any other court having jurisdiction. Each
of the Parties agrees that in any arbitration arising out of or relating to this
Agreement or the employment relationship contemplated hereby or the termination
thereof, or any alleged breach of any term or provision of this Agreement or in
any action to enter judgment on an award in such arbitration each party shall
bear its own fees and expenses.

         19. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. The Executive
represents and warrants to the Company that his execution and delivery of this
Agreement and his employment with the Company hereunder do not contravene, and
will not result in any breach of or constitute any default under any agreement
or instrument to which the Executive is a party or may be bound.

         20. SURVIVAL. The provisions of Sections 8 through 19 of this Agreement
shall survive any expiration or termination of this Agreement.


                                       7


         IN WITNESS WHEREOF, that parties hereto have executed this Employment
Agreement as of the date first above written.

                                 CHAUTAUQUA AIRLINES, INC.


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

                                 ROBERT COOPER

                                 /s/ Robert Cooper
                                 ---------------------------

EX-10.65

                                                                  Exhibit 10.65

                              EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of July 16, 1999, by and between
CHAUTAUQUA AIRLINES, INC. (hereinafter referred to as the "Company"), a New York
corporation, and Wayne Heller (hereinafter referred to as the "Executive").

                                 R E C I T A L S

         WHEREAS, the Company desires to employ the Executive, and the Executive
is desirous of accepting such employment by the Company, upon the terms and
conditions hereinafter set forth,

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:

         1. EMPLOYMENT. Subject to the satisfaction of the conditions set forth
in this Section 1, the Company agrees to employ the Executive, and the Executive
agrees to render his services to the Company, as its Vice President - Flight
Operations, during the Term (as defined below). The Executive shall render his
services at the direction of the President and the Board of Directors of the
Company at the Company's offices in Indianapolis, Indiana. The Executive agrees
to use his best efforts to promote and further the business, reputation and good
name of the Company and the Executive shall promptly and faithfully comply with
all instructions, directions, requests, rules and regulations made or issued
from time to time by the Company. This Agreement shall be subject to the
satisfaction of a satisfactory drug test (which the Company shall promptly
arrange) by the Executive.

         2. TERM. The term of employment pursuant to this Agreement (the "Term")
shall commence on or before August 2, 1999 and continue until July 31, 2003;
provided that either party may terminate this Agreement by providing the other
with 30 days prior written notice of such termination. Notwithstanding the
foregoing, this Agreement may be terminated by the Company without such notice
in the event that "Cause" for such termination exists as provided in Section 7
below. In the event (i) the Company terminates this Agreement or the Executive's
employment other than for Cause, or (ii) the Executive terminates this Agreement
or the Executive's employment for Cause, the Company shall pay the Executive
Severance Compensation as provided in Section 3(c) hereof. In the event the
Company terminates this Agreement or the Executive's employment for Cause, or in
the event the Executive terminates this Agreement or his employment other than
for Cause, the Executive shall not be entitled to any Severance Compensation or
other compensation of any kind following the effective date of such termination.

         3. COMPENSATION. As full and complete compensation for all the
Executive's services hereunder, the Company shall pay the Executive the
compensation described below.

(a)      CASH COMPENSATION.




                  (i) During the Term, the Company shall pay the Executive an
         annual base salary of $90,000 ("Base Salary"). In the event this
         Agreement is terminated prior to the expiration of the Term, the
         Company shall pay to the Executive, in addition to any Severance
         Compensation payable under Section 3(c), any accrued but unpaid Base
         Salary through the termination date.

                  (ii) In addition to the Base Salary, during the Term, the
         Company shall pay to the Executive an annual bonus (a "Bonus") in the
         amount of $36,000 or such greater amount as the board of directors of
         the Company shall determine in its discretion. The Bonus shall be paid
         each year during the Term at the end of the calendar year and shall be
         prorated (x) for the 1999 calendar year for the period from the
         commencement date of the Executive's employment through the end of such
         calendar year, and (y) for the 2003 calendar year for the period from
         January 1, 2003 through the end of the Term. In the event this
         Agreement or the Executive's employment is terminated, the Executive
         shall not be entitled to any Bonus Compensation for such year or any
         subsequent period.

(b)      EQUITY COMPENSATION.

                  (i) Concurrently with the execution and delivery of this
         Agreement, the Company shall issue to the Executive, as compensation
         and without cost to the Executive, options (the "Options") to purchase
         20,000 shares of the Company's Common Stock, par value $.01 per share
         (the "Common Stock"), representing 1% of the shares of Common Stock
         that are currently issued and outstanding. The Options shall have an
         exercise price per share of $26.75, which is equivalent to an
         enterprise value of $53.5 million. The Options shall vest and become
         immediately exercisable as to 1/48 of the shares subject to the Options
         on the last day of each month during the Term, subject to termination
         as provided below. The Executive shall have the right to exercise any
         vested Options at any time within 5 years after the date that such
         Options became vested and any Options not exercised within such
         deadline shall be deemed terminated and void.

                  (ii) In the event this Agreement or the Executive's employment
         is terminated (x) by the Company for Cause, or (y) by the Executive
         other than for Cause, the Options shall cease vesting as of the date
         that the Company or the Executive provides notice of such termination,
         and any unvested Options shall immediately terminate and become void.
         In the event this Agreement or the Executive's employment is terminated
         (x) by the Company other than for Cause, or (y) by the Executive for
         Cause, the Options shall vest as and to the extent provided in Section
         3(c) hereof.

                  (iii) Notwithstanding anything to the contrary otherwise
         contained herein, if at any time during the Term the Company shall, by
         stock dividend, stock split, combination, reclassification or exchange,
         or through merger, consolidation or otherwise, change its shares of
         Common Stock into a different number, kind or class of shares or other
         securities or property, then the Board of Directors may, in its sole
         discretion, either make the Options



         immediately exercisable or arrange for a successor or surviving
         corporation, if any, to grant replacement options, or to adjust the
         number of shares covered by the Options and the price of each share.
         The determination of the Board of Directors shall be conclusive.

                  (iv) Notwithstanding anything to the contrary otherwise
         contained herein, if at any time during the Term the Company shall
         issue additional shares of Common Stock to any party that is affiliated
         with Wexford Management LLC (an "Affiliate"), the Executive shall have
         the right, but not the obligation, to purchase for the same
         consideration and on the same terms that such shares of Common Stock
         shall be issued to such Affiliate up to 1% of the shares issued to such
         Affiliate. The grant of any stock options to any director or officer of
         the Company shall not provide the Executive with any rights under this
         Section 3(b)(iv).

                  (v) In the event Wexford Management LLC or any Affiliate has
         the right to sell all or a portion of the shares of Common Stock of the
         Company held by them in an public offering (whether an initial offering
         or a subsequent offering), a private sale or other transaction, or to
         register all or a portion of the shares of Common Stock of the Company
         held by them, the Executive shall be offered the right to sell or
         register as the case may be pro rata with Wexford and such Affiliate
         all or a portion of the Shares of Common Stock for which he holds
         vested Options.

(c) SEVERANCE COMPENSATION. In the event (i) the Company terminates this
Agreement or the Executive's employment other than for Cause, or (ii) the
Executive terminates this Agreement or his employment for Cause, the Company
shall pay to the Executive as Severance Compensation $45,000, provided that in
the event the remainder of the Term is less than 6 months, such Severance
Compensation shall be prorated for the remainder of the Term. For example, if
the Company terminates this Agreement other than for Cause with 3 months
remaining in the Term, the Company shall pay the Executive Severance
Compensation of $22,500. The Executive shall also receive as Severance
Compensation (i) subject to the next following sentence, an immediate vesting of
those Options that would have vested during the 6 months after such termination,
or such lesser period through the end of the Term, if the Executive's employment
had not been terminated, and (ii) continuation of medical benefits for the
lesser of 6 months or the remainder of the Term. Notwithstanding the foregoing,
in the event the Executive terminates this Agreement or his employment for Cause
as a result of a Change of Control (as defined herein), all unvested Options
shall immediately vest.

         4. NO OTHER COMPENSATION. Except as otherwise expressly provided
herein, or in any other written document executed by the Company and the
Executive, no other compensation or other consideration shall become due or
payable to the Executive on account of the services rendered hereunder. The
Company shall have the right to deduct and withhold from the compensation
payable to the Executive hereunder any amounts required to be deducted and
withheld under the provisions of any statute, regulation, ordinance, order or
any other amendment thereto, heretofore or hereafter enacted, requiring the
withholding or deduction of compensation.




         5. BENEFITS.

(a) MEDICAL & 401K BENEFITS. The Company agrees that the Executive shall be
entitled to participate in any retirement, 401K, disability, medical, pension,
profit sharing, group insurance, or any other plan or arrangement, or in any
other benefits now or hereafter generally available to executives of the
Company, in each case to the extent that the Executive shall be eligible under
the general provisions thereof, provided that the Company shall waive any
waiting period for participation in any such plan.

(b) REIMBURSEMENT OF LIVING EXPENSES. Prior to the Executive's relocation to
Indianapolis, Indiana, which shall take place no later than October 1, 1999, the
Company will pay for or reimburse the Executive for all travel, hotel and other
documented out-of-pocket expenses reasonably incurred by him and his immediate
family in connection with the performance of his duties hereunder in
Indianapolis.

(c) RELOCATION EXPENSES. The Company shall pay for or reimburse the Executive
for all out-of-pocket relocation expenses reasonably incurred by him and his
immediate family in connection with his relocation to Indianapolis, including,
without limitation, moving costs, and brokerage commission costs, provided that
such expenses shall not exceed $30,000 in the aggregate.

         6. VACATION. The Executive shall be entitled to take three weeks of
paid vacation which shall accrue monthly during each 12 months of the
Executive's employment hereunder, and which vacation shall be taken on dates to
be selected by mutual agreement of the Company and the Executive.

         7. TERMINATION FOR CAUSE.

(a) TERMINATION FOR CAUSE BY THE COMPANY. The Company, by written notice to the
Executive, may immediately terminate this Agreement and the Executive's
employment hereunder for Cause. As used herein, a termination by the Company
"for Cause" shall mean that the Executive has (i) willfully or materially
refused to perform a material part of his duties hereunder, (ii) materially
breached the provisions of Sections 8, 9 or 10 hereof, (iii) acted fraudulently
or dishonestly in his relations with the Company, (iv) committed larceny,
embezzlement, conversion or any other act involving the misappropriation of
Company funds or assets in the course of his employment, or (v) been indicted or
convicted of any felony or other crime involving an act of moral turpitude.

(b) TERMINATION FOR CAUSE BY THE EXECUTIVE. The Executive, by 20 business days
prior written notice to the Company, may terminate this Agreement and his
employment hereunder for Cause, provided that the Company shall have the right
to cure such Cause within such 20 business day period. As used herein, a
termination by the Executive "for Cause" shall mean that (i) the Company has
materially diminished the duties and responsibilities of the Executive, (ii) the
Company has required the Executive to relocate his residence from Indianapolis
to another location without the consent of the Executive or (iii) a Change of
Control has occurred. As used herein, a "Change of




Control" shall mean a transaction, other than a public offering (whether an
initial offering or a subsequent offering) of Common Stock of the Company, as a
result of which the number of shares of Common Stock of the Company collectively
owned by Wexford and its Affiliates is not greater than the number of shares of
Common Stock owned by any other shareholder of the Company.

         8. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that he shall receive in the course of his employment hereunder certain
confidential information and trade secrets concerning the Company's business and
affairs which may be of great value to the Company. The Executive therefore
agrees that he will not disclose any such information relating to the Company,
the Company's personnel or its operations other than in the ordinary course of
business or in any way use such information in any manner which could adversely
affect the Company's business. For purposes of this Agreement, the terms "trade
secrets" and "confidential information" shall include any and all information
concerning the business and affairs of the Company and any division, subsidiary
or other affiliate of the Company that is not generally available to the public.

         9. NON-COMPETITION. The Executive agrees that without the prior written
consent of Wexford Management LLC ("Wexford") during the Term and for a period
of 12 months following the termination or expiration of this Agreement, he will
not participate as an advisor, partner, joint venturer, investor, lender,
consultant or in any other capacity in any business transaction or proposed
business transaction (a) with respect to which the Executive had a material
personal involvement on behalf of the Company during the last 12 months of his
employment with the Company, or (b) that could reasonably be expected to
interfere with the Company's business or operations as of the date of such
termination or expiration. For these purposes, the mere ownership by the
Executive of securities of a public company not in excess of 2% of any class of
such securities shall not be considered to be competition with the Company.

         10. NON-SOLICITATION. The Executive agrees that during the Term, and
for a period of 12 months following the termination or expiration of this
Agreement, he shall not, without the prior written consent of the Company,
directly or indirectly, employ or retain, or have or cause any other person or
entity to employ or retain, any person who was employed by the Company or any of
it subsidiaries or affiliates while the Executive was employed by the Company.

         11. BREACH OF THIS AGREEMENT. If the Executive commits a breach, or
threatens to commit a breach, of any of the provisions of Sections 8, 9 or 10 of
this Agreement, then the Company shall have the right and remedy to have those
provisions specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by the Executive that the rights and privileges of
the Company granted in Sections 8, 9 and 10 are of a special, unique and
extraordinary character and any such breach or threatened breach will cause
great and irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company.

         12. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing (including facsimile, telegraphic, telex or cable
communication) and shall be deemed to




have been duly given when delivered by hand, faxed or mailed, certified or
registered mail, return receipt requested and postage prepaid:

         If to the Company:         Chautauqua Airlines, Inc.
                                    2500 South High School Road
                                    Suite 160
                                    Indianapolis, IN  46421
                                    Fax No.:  317-484-6060
                                    Attention:  Bryan K. Bedford, President

         with a copy to:            Wexford Management LLC
                                    411 West Putnam Avenue
                                    Greenwich, CT 06830
                                    Attention: Joseph Jacobs, fax 203-862-7320
                                            and Arthur Amron, fax 203-862-7312

         If to the Executive:       Wayne Heller
                                    [at his most recent address as provided to
                                    the Company in writing] or by e-mail at:
                                    air843@aol.com

         13. APPLICABLE LAW. This Agreement was negotiated and entered into
within the State of Indiana. All matters pertaining to this Agreement shall be
governed by the laws of the State of Indiana applicable to contracts made and to
be performed wholly therein. Nothing in this Agreement shall be construed to
require the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any material present or
future statute, law, governmental regulation or ordinance as a result of which
the parties have no legal right to contract or perform, the latter shall
prevail, but in such event the provision(s) of this Agreement affected shall be
curtailed and limited only to the extent necessary to bring it or them within
the legal requirements.

         14. ENTIRE AGREEMENT; MODIFICATION; CONSENTS AND WAIVERS. This
Agreement contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes any and all prior agreements or
understandings, written or oral, between the parties with respect to the subject
matter hereof. No interpretation, change, termination or waiver of or extension
of time for performance under any provision of this Agreement shall be binding
upon any party unless in writing and signed by the party intended to be bound
thereby. Except as otherwise provided in this Agreement, no waiver of or other
failure to exercise any right under or default or extension of time for
performance under any provision or this Agreement shall affect the right of any
party to exercise any subsequent right under or otherwise enforce said provision
or any other provision hereof or to exercise any right or remedy in the event of
any other default, whether or not similar.

         15. SEVERABILITY. The parties acknowledge that, in their view, the
terms of this Agreement are fair and reasonable as of the date signed by them,
including as to the scope and duration of post-termination activities.
Accordingly, if any one or more of the provisions contained in this Agreement



shall for any reason, whether by application of existing law or law which may
develop after the date of this Agreement, be determined by an arbitrator or
court of competent jurisdiction to be excessively broad as to scope of activity,
duration or territory, or otherwise unenforceable, the parties hereby jointly
request such court to construe any such provision by limiting or reducing it so
as to be enforceable to the maximum extent in favor of the Company compatible
with then-applicable law. If any one or more of the terms, provisions, covenants
or restrictions of this Agreement shall nonetheless be determined by an
arbitrator or court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

         16. ASSIGNMENT. The Company may, at its election, assign this Agreement
or any of its rights hereunder. This Agreement may not be assigned by the
Executive.

         17. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

         18. ARBITRATION. Each of the parties hereby irrevocably and
unconditionally consents to arbitrate any dispute arising out of or relating in
any manner to this Agreement or the employment relationship contemplated hereby
or the termination thereof, or any alleged breach of any term or provision of
this Agreement. Such arbitration shall be conducted in Indianapolis, Indiana by
a single arbitrator in accordance with the rules of the American Arbitration
Association then in effect. Judgement may be entered on the arbitrator's award
in any federal or state court in Indiana (and the parties expressly consent to
the jurisdiction of such court), or in any other court having jurisdiction. Each
of the Parties agrees that in any arbitration arising out of or relating to this
Agreement or the employment relationship contemplated hereby or the termination
thereof, or any alleged breach of any term or provision of this Agreement or in
any action to enter judgment on an award in such arbitration each party shall
bear its own fees and expenses.

         19. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. The Executive
represents and warrants to the Company that his execution and delivery of this
Agreement and his employment with the Company hereunder do not contravene, and
will not result in any breach of or constitute any default under any agreement
or instrument to which the Executive is a party or may be bound.



         20. SURVIVAL. The provisions of Sections 8 through 19 of this Agreement
shall survive any expiration or termination of this Agreement.

         IN WITNESS WHEREOF, that parties hereto have executed this Employment
Agreement as of the date first above written.

                      CHAUTAUQUA AIRLINES, INC.


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

                      WAYNE HELLER

                      /s/ Wayne Heller
                      ---------------------------

EX-10.66

                                                                  Exhibit 10.66

                                   **********

                      PORT COLUMBUS INTERNATIONAL AIRPORT

                     SIGNATORY AIRLINE OPERATING AGREEMENT

                                   AND LEASE

                                   **********



                      PORT COLUMBUS INTERNATIONAL AIRPORT
                SIGNATORY AIRLINE OPERATING AGREEMENT AND LEASE

                               TABLE OF CONTENTS


                                                                                   Page
                                                                                  
ARTICLE I ......................................................................      2
  SECTION 101.      MEANINGS AND CONSTRUCTION ..................................      2
  SECTION 102.      INTERPRETATION .............................................     11
  SECTION 103.      INCORPORATION OF EXHIBITS ..................................     12
  SECTION 104.      AFFILIATED AIRLINES ........................................     12

ARTICLE II .....................................................................     13
  SECTION 201.      TERM .......................................................     13
  SECTION 202.      HOLDING OVER ...............................................     13

ARTICLE III ....................................................................     14
  SECTION 301.      USE OF AIRPORT .............................................     14
  SECTION 302.      RESTRICTIONS ON EXERCISE OF RIGHTS AND RESERVATION OF RIGHTS     20
  SECTION 303.      INSURANCE RISKS ............................................     22
  SECTION 304.      HAZARDS ...................................................      22
  SECTION 305.      AIRPORT SECURITY ...........................................     23
  SECTION 306.      IMPACT ON AIRPORT CERTIFICATION ............................     23
  SECTION 307.      AIRLINE SUMMARY ............................................     24

ARTICLE IV .....................................................................     25
  SECTION 401.      GENERAL ....................................................     25
  SECTION 402.      ASSIGNED FACILITIES ........................................     25
  SECTION 403.      RELOCATION OF PREFERENTIAL USE PREMISES ....................     25
  SECTION 404.      ACCOMMODATION THROUGH AUTHORITY-CONTROLLED FACILITIES ......     25
  SECTION 405.      ACCOMMODATION ON PREFERENTIAL USE PREMISES .................     25
  SECTION 406.      SHORT-TERM ACCOMMODATION ...................................     26
  SECTION 407.      LONG-TERM ACCOMMODATION OF OTHER AIRLINES ..................     27
  SECTION 408.      CONSOLIDATION OF OPERATION .................................     28
  SECTION 409.      RELINQUISHMENT OF ABANDONED SPACE ..........................     29

ARTICLE V ......................................................................     30
  SECTION 501.      CALCULATION OF RENTALS, FEES, AND CHARGES ..................     30
  SECTION 502.      CALCULATION OF TERMINAL BUILDING RENTAL RATES ..............     30
  SECTION 503.      CALCULATION OF LANDING FEE RATE ............................     31
  SECTION 504.      CALCULATION OF APRON FEE RATES .............................     32
  SECTION 505.      CALCULATION OF LEO REQUIREMENT .............................     33
  SECTION 506.      TERMINAL BUILDING RENTALS ..................................     33
  SECTION 507.      LANDING FEES ...............................................     34




                                                                                  
  SECTION 508.      APRON FEE ..................................................     34
  SECTION 509.      LEO FEE ....................................................     34
  SECTION 510.      TAXES, ASSESSMENTS, LICENSES, AND PERMIT FEES ..............     34
  SECTION 511.      ELECTRIC SERVICE ...........................................     35
  SECTION 512.      SUPPLEMENTAL CHARGES .......................................     36
  SECTION 513.      GENERAL AIRLINE CREDIT .....................................     36
  SECTION 514.      PFCs TO BE HELD IN TRUST FOR THE AUTHORITY .................     37
  SECTION 515.      ADJUSTMENT OF CERTAIN FEES DURING THE RATE PERIOD ..........     37

ARTICLE VI .....................................................................     39
  SECTION 601.      MANNER OF PAYMENT ..........................................     39
  SECTION 602.      AIRLINE FINANCIAL REPORTS ..................................     39
  SECTION 603.      FAILURE TO REPORT ..........................................     41
  SECTION 604.      AIRLINE AND AUTHORITY RECORDS AND AUDIT ....................     42
  SECTION 605.      SECURITY DEPOSITS ..........................................     44
  SECTION 606.      RIGHT TO CONTEST; NO ABATEMENT OR SET-OFF ..................     45
  SECTION 607.      NO OTHER FEES AND CHARGES ..................................     45
  SECTION 608.      COVENANT NOT TO GRANT MORE FAVORABLE RENTALS, FEES AND CHARGES   45

ARTICLE VII ....................................................................     46
  SECTION 701.      EXHIBIT G ..................................................     46
  SECTION 702.      MAINTENANCE BY THE AUTHORITY ...............................     46
  SECTION 703.      MAINTENANCE BY AIRLINE .....................................     46
  SECTION 704.      AUTHORITY RIGHT TO ENTER AND ACT ...........................     48
  SECTION 705.      AUTHORITY OBLIGATIONS ......................................     49

ARTICLE VIII ...................................................................     50
  SECTION 801.      ALTERATIONS AND IMPROVEMENTS BY AIRLINE ....................     50
  SECTION 802.      NONDISTURBANCE OF AIRPORT TENANTS AND OPERATIONS ...........     51
  SECTION 803.      CONSTRUCTION AND AIRPORT EXPANSION .........................     51

ARTICLE IX .....................................................................     52
  SECTION 901.      RULES AND REGULATIONS ......................................     52
  SECTION 902.      OBSERVANCE AND COMPLIANCE WITH LAWS ........................     52
  SECTION 903.      COMPLIANCE WITH RULE 15C2-12 OF THE SECURITIES EXCHANGE ACT      52
  SECTION 904.      COMPLIANCE WITH ENVIRONMENTAL LAWS .........................     52
  SECTION 905.      COMPLIANCE WITH 14C.F.R.382.40 .............................     56
  SECTION 906.      NONDISCRIMINATION ..........................................     56
  SECTION 907.      RIGHT TO DEVELOP OR IMPROVE THE AIRPORT ....................     57

ARTICLE X ......................................................................     58
  SECTION 1001.     CONSULTATION FOR CAPITAL EXPENDITURES ......................     58
  SECTION 1002.     DEFERRAL ...................................................     58
  SECTION 1003.     COST OVERRUNS ..............................................     59

ARTICLE XI .....................................................................     60
  SECTION 1101.     INSURANCE ..................................................     60





                                                                                  
  SECTION 1102.     DAMAGE TO PREMISES .........................................     63
  SECTION 1103.     INDEMNIFICATION ............................................     65
  SECTION 1104.     AUTHORITY NOT LIABLE .......................................     67

ARTICLE XII ....................................................................     69
  SECTION 1201.     AIRLINE MERGERS AND CONSOLIDATIONS ........................      69
  SECTION 1202.     ASSIGNMENT OR SUBLETTING ...................................     69
  SECTION 1203.     AUTHORITY APPROVAL OF ASSIGNMENTS ..........................     69
  SECTION 1204.     AUTHORITY APPROVAL OF SUBLEASES ............................     70
  SECTION 1205.     METHOD OF OBTAINING APPROVAL ...............................     70
  SECTION 1206.     ADMINISTRATIVE CHARGE ......................................     70
  SECTION 1207.     AIRLINE TO REMAIN LIABLE ...................................     70

ARTICLE XIII ...................................................................     71
  SECTION 1301.     EVENTS OF DEFAULT ..........................................     71
  SECTION 1302.     TERMINATION BY THE AUTHORITY ...............................     72
  SECTION 1303.     CHANGE OF LEASE TERM .......................................     74
  SECTION 1304.     TERMINATION BY AIRLINE .....................................     74

ARTICLE XIV ....................................................................     75
  SECTION 1401.     SURRENDER OF PREMISES                                            75

ARTICLE XV .....................................................................     76
  SECTION 1501.     RELATIONSHIP OF PARTIES ....................................     76
  SECTION 1502.     AMENDMENT ..................................................     76
  SECTION 1503.     SUBORDINATION TO BOND ORDINANCE ...........................      76
  SECTION 1504.     CERTIFICATE IN CONNECTION WITH ISSUANCE OF B0NDS ...........     76
  SECTION 1505.     TO THIRD PARTY BENEFICIARIES ...............................     77
  SECTION 1506.     COUNTERPARTS ...............................................     77
  SECTION 1507.     EXHIBITS ...................................................     77
  SECTION 1508.     SURVIVAL OF WARRANTIES .....................................     77
  SECTION 1509.     QUIET ENJOYMENT ............................................     77
  SECTION 1510.     NO PERSONAL LIABILITY ......................................     77
  SECTION 1511.     AGREEMENTS WITH THE UNITED STATES ..........................     78
  SECTION 1512.     GOVERNING LAW ..............................................     78
  SECTION 1513.     NOTICES ....................................................     78
  SECTION 1514.     ENTIRE AGREEMENT ...........................................     79
  SECTION 1515.     FORCE MAJEURE ..............................................     79
  SECTION 1516.     INVALID PROVISIONS .........................................     80
  SECTION 1517.     NO WAIVER ..................................................     80
  SECTION 1518.     CONSTRUCTION OF AGREEMENT ..................................     80
  SECTION 1519.     AVIATION RIGHTS ...........................................     80
  SECTION 1520.     SECURITY ...................................................     80
  SECTION 1521.     TIMING .....................................................     81
  SECTION 1522.     REPRESENTATIVES ............................................     81
  SECTION 1523.     APPROVALS ..................................................     81
  SECTION 1524.     PROHIBITON AGAINST EXCLUSIVE RIGHTS ........................     81





                                                                                 
  SECTION 1525. SUCCESSORS AND ASSIGNS .........................................     81
  SECTION 1526. AUTHORITY TO EXECUTE ...........................................     82

EXHIBIT A AUTHORITY COST CENTERS ...............................................    A-1
  OVERVIEW .....................................................................    A-1
  DIRECT COST CENTERS ..........................................................    A-1
  INDIRECT COST CENTERS ........................................................    A-3
  COST CENTER ADDITIONS AND SUBSTITUTIONS ......................................    A-4

EXHIBIT B AIRLINE'S TERMINAL BUILDING LEASED PREMISES ..........................    B-1

EXHIBIT C AIRLINE'S ASSIGNED APRON .............................................    C-1

EXHIBIT D SUMMARY OF TERMINAL BUILDING RENTABLE SPACE ..........................    D-1

EXHIBIT E DIFFERENTIAL TERMINAL BUILDING RENTAL RATES ..........................    E-1

EXHIBIT F APPROVED CAPITAL PROJECTS ............................................    F-1

EXHIBIT G MAINTENANCE RESPONSIBILITY ...........................................    G-1

EXHIBIT H AFFILIATED AIRLINES ..................................................    H-1

EXHIBIT 1 SUMMARY OF CHARGES AND SUPPLEMENT ....................................    I-1





                       PORT COLUMBUS INTERNATIONAL AIRPORT
                 SIGNATORY AIRLINE OPERATING AGREEMENT AND LEASE

     THIS SIGNATORY AIRLINE OPERATING AGREEMENT AND LEASE, made and entered into
as of the 1st day of January 2000, by and between the COLUMBUS MUNICIPAL.
AIRPORT AUTHORITY, a Port Authority organized and existing under the laws of the
State of Ohio (the "AUTHORITY"), and the Airline named on the signature page
hereof ("AIRLINE"),

     WITNESSETH: THAT,

     WHEREAS, the AUTHORITY is the operator of the Port Columbus International
Airport located in Columbus, Ohio (the "AIRPORT"); and

     WHEREAS, AIRLINE is engaged in the business of air transportation; and

     WHEREAS, AIRLINE and the AUTHORITY desire to enter into this Agreement for
the lease of terminal space at the AIRPORT and the granting to AIRLINE of
certain rights and privileges for use of the AIRPORT, all as hereinafter
provided; and

     WHEREAS, the AUTHORITY has passed Resolution No. 51-99 on November 23,
1999, authorizing the execution of this Agreement.

     NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained, and the rentals, fees and charges to he paid by
AIRLINE, it is agreed and understood by and between the AUTHORITY and AIRLINE as
follows:

                                        1


                                    ARTICLE I
                                   DEFINITIONS

SECTION 101. MEANINGS AND CONSTRUCTION

     Except as otherwise clearly indicated by the context, the words and phrases
defined in this section shall have the following meanings when used elsewhere in
this Agreement.

     "ADMINISTRATIVE SPACE" means that space within the Terminal Building which
is depicted as administrative space in Exhibit D and such additions thereto and
deletions therefrom as may occur from time-to-time during the term of this
Agreement.

     "AFFILIATE OR AFFILIATED AIRLINE" means (i) any wholly owned-subsidiary or
majority-owned Airline; (ii) any regional Airline operating under the name of
the AIRLINE; or (iii) any Airline participating in a major marketing alliance
with AIRLINE; in any case only if such airline is named on Exhibit H, as may be
revised from time to time or otherwise deemed to be an Affiliated Airline under
this agreement.

     "AGREEMENT' means this Signatory Airline Operating Agreement and Lease.

     "AIR TRANSPORTATION BUSINESS" means the carriage by aircraft of persons or
property as a common carrier for compensation or hire, or the carriage of mail,
by aircraft, in commerce, as defined in the Federal Aviation Act of 1958, as
amended.

     "AIRFIELD AREA COST CENTER" means the Cost Center of the same name
described in Exhibit A.

     "AIRFIELD AREA COST CENTER NON-AIRLINE REVENUE" means aviation fuel flowage
fees, Non-Signatory Airline landing fees, Airfield Area Cost Center aircraft
parking fees and such other Airfield Area Cost Center revenue other than
Signatory Airline and Signatory Cargo Carrier Landing Fees, reported and
classified as such under the AUTHORITY's cost accounting system from time to
time.

     "AIRFIELD AREA REQUIREMENT" means the requirement established pursuant to
Section 503.

     "AIRFIELD OPERATIONS AREA OR AOA" means those areas of the AIRPORT used for
the landing, take-off, and movement about the AIRPORT of aircraft, as the same
now exist or as the same hereafter are added to, modified, changed, or
developed.

     "AIRLINE" means the Airline named on the signature page hereof together
with its Affiliated Airlines operating at the AIRPORT which are not Signatory
Airlines.

     "AIRLINES" means AIRLINE and all other certificated operators of aircraft
providing scheduled or charter air transportation of passengers, property, or
mail, or any combination thereof, by air to and from the AIRPORT.

     "AIRPORT" means Port Columbus International Airport, together with any
additions thereto, or improvements or enlargements thereof; hereafter made.

                                        2


     "AIRPORTS" means the Port Columbus International Airport and Bolton Field
as they presently exist and as they are hereafter modified or expanded and
such other airport or airports as are hereafter acquired or established by the
AUTHORITY.

     "AMORTIZATION PERIOD" means that period determined in accordance with
Generally Accepted Accounting Principles for the amortization of a Capital
Project subject to Authority Equity Recovery under the terms of this Agreement
or any other capital project for which the cost is not expensed or funded from
bond proceeds. Notwithstanding the foregoing, the Amortization Period for land
shall he 30 years.

     "ANNUAL CAPITAL ADJUSTMENT FACTOR" means the change, if any, reported over
the most recently reported twelve-month period in the Consumer Price Index /All
Urban Consumers (CPI) published by the United States Department of Labor, Bureau
of Labor Statistics (1982-84=100) or its designated replacement index.

     "ANNUAL CAPITAL OUTLAY" means each individual improvement constructed or
asset purchased or acquired from the AUTHORITY's operating funds and designated
by Authority as an Annual Capital Outlay for any Rate Period, provided, however,
that any such improvement made or asset purchased for the Airfield Area Cost
Center or Apron Cost Center shall not qualify as an Annual Capital Outlay if the
Net Capital Cost of the same is in excess of $250,000, as adjusted by the Annual
Capital Adjustment Factor.

     "APPLIED PFCS" means PFC revenue approved for use by the FAA and applied as
a credit against Debt Service, the Coverage Requirement, or another element of
the Authority Requirement during any Rate Period.

     "APRON" means those paved areas contiguous to the Terminal Building,
designated as such on Exhibit C, as the same now exist or as the same
hereafter are added to, modified, changed, or developed.

     "APRON COST CENTER" means the Cost Center of the same name as described in
Exhibit A.

     "APRON FEE RATES" means the Apron Fee Rates established pursuant to Section
504.

     "APRON FEES" means the Apron Fees calculated pursuant to Section 508.

     "APRON REQUIREMENT" means the requirement established pursuant to Section
504.

     "ASSIGNED APRON" means that portion of the AIRPORT Apron assigned to
AIRLINE as shown and depicted on Exhibit C.

     "AUTHORITY" means the Columbus Municipal Airport Authority.

     "AUTHORITY EQUITY RECOVERY" means the amortization charge, calculated in
substantially equal annual installments over its Amortization Period, to recover
that portion of the Net Capital Cost, plus implicit interest thereon, of any
Capital Project paid for from the AUTHORITY's accumulated surpluses not derived
from Airline's Rentals, Fees, and Charges. Implicit interest shall be computed
at the rate reported in the Revenue Bond Index for January of the Rate Period

                                        3


said Capital Project is placed in service and implicit interest for the
construction period shall he capitalized.

     "AUTHORITY REQUIREMENT" means, for any Rate Period, the AUTHORITY's
estimate of the following: (1) Operating Expenses; (2) the Net Capital Cost of
Annual Capital Outlays; (3) City Payments; (4) Debt Service; (5) the Coverage
Requirement; (6) Authority Equity Recovery; (7) those amounts required to be
deposited during any Rate Period to any fund created pursuant to the terms of
the Master Trust Indenture or any other Trust Indenture; (8) the net amount of
any judgment or settlement arising out of or as a result of the ownership,
operation, or maintenance of the Airports or any AUTHORITY-owned or operated
airport-related facility payable by the AUTHORITY during said Rate Period,
including, but not limited to, the amount of any such judgment or settlement
arising out of or as a result of any claim, action, proceeding or suit alleging
a taking of property or an interest in property without just or adequate
compensation, trespass, nuisance, property damage, personal injury, or any other
claim, action, proceeding, or suit based upon or relative to any environmental
impact resulting from the use of the Airports for the landing and taking off of
aircraft; (9) any and all other sums, amounts, charges, or requirements of the
AUTHORITY to be recovered, charged, set aside, expensed, or accounted for during
such Rate Period under the AUTHORITY's accounting system or this Agreement;
provided, however, that the Authority Requirement shall not include any amounts
included in (1) through (9) chargeable to a Special Facility or a Tenant
Improvement.

     "AUTHORITY'S RULES REGULATIONS" means those reasonable and
nondiscriminatory rules and regulations including operating directives
promulgated by the AUTHORITY from time to time. Except to the extent necessary
to comply with mandatory federal rules and regulations, such regulations shall
not increase Signatory Airlines' Financial obligations to the AUTHORITY.

     "BOLTON FIELD" means the airport and Cost Center of the same name
described in Exhibit A.

     "BOND OR BONDS" means all notes, bonds, or other obligations issued by the
Authority.

     "CAPITAL COST" means the total cost of any Capital Project or any Annual
Capital Outlay capitalized on the property, plant, and equipment records of the
AUTHORITY, including the cost of design, engineering, and construction
management and construction-related inspection services.

     "CAPITAL PROJECT" means each individual improvement constructed or asset
purchased or acquired by the AUTHORITY other than improvements or assets funded
and designated as an Annual Capital Outlay.

     "CARGO USE AGREEMENT" means an agreement between the AUTHORITY and any one
of the Airlines conducting an Air Transportation Business at the AIRPORT for the
commercial transportation by air of cargo and mail, but not persons, which
authorizes said Airline to use the AIRPORT for such purpose, including the
facilities of the Airfield Operation Area and such other areas required to
support its cargo operations, but does not authorize the use of the Terminal
Building or the Apron.

     "CITY" means the City Of Columbus, Ohio.

                                        4


     "CITY PAYMENTS" means the amounts due the City from the AUTHORITY pursuant
to the City Use Agreement including City Use Payments as defined in the Master
Trust Indenture which are payable on a parity basis with the Bonds issued under
the Master Trust Indenture, plus any amount charged as part of the Authority
Requirement in any Rate Period by the AUTHORITY to recover the principal plus
implicit interest on amounts paid by the AUTHORITY to the City for acquisition
of the Airports or other City assets made in compliance with all applicable
federal regulations, laws and grant assurances.

     "CITY USE AGREEMENT" means the Airport Operation and Use Agreement between
the City and the AUTHORITY made and entered into as of September 23, 1991, and
effective November 10, 1991, as amended or supplemented from time to time.

     "COMMON USE CHARGES FORMULA" means that formula which prorates twenty
percent (20%) of the cost or expense of Common Use Premises or a common service
provided to the Signatory Airlines equally among those Signatory Airlines then
having a Variable Charges Percentage in excess of one percent (1%), and eighty
percent (80%) of the cost or expense among the Signatory Airlines based on each
of the Airlines' Variable Charges Percentage.

     "COMMON USE PREMISES" means those premises in or about the Terminal
Building which AIRLINE or its nominee uses on a common use basis with other
Airlines, as depicted on Exhibit D.

     "COST CENTERS" means the cost centers used by the AUTHORITY in allocating
and accounting for revenues, expenses, and other elements of the Authority
Requirement as described in Exhibit A.

     "COVERAGE REQUIREMENT" means twenty-five percent of Debt Service Charges as
defined in the Master Trust Indenture and such other amounts as may be required
at any time to satisfy a rate covenant in any Trust Indenture.

     "DEBT SERVICE" means, for any period of time or on any date, Debt Service
Charges and Subordinated Debt Service Charges as defined in the Master Trust
Indenture and the principal of (including the compounded accreted amount of any
capital appreciation bonds then payable), whether at stated maturity, by
mandatory sinking fund redemption or otherwise, and interest and any premium due
on Bonds during that period or payable on that date, as the case may be, and
any letter of credit bank reimbursement obligations or municipal bond insurance
obligations, sinking fund payments, call premiums, payments required by forward
purchase agreements, remarketing fees, rebate payments, swap payments, trustee's
fees, paying agent fees, and any other charges and fees payable in connection
with Bonds.

     "DEFERRABLE CAPITAL EXPENDITURE" means a capital expenditure directly
allocated to the Airfield Area Cost Center or the Apron Cost Center other than
(a) Annual Capital Outlays to be included in the Airfield Area Requirement or
the Apron Requirement as provided in this Agreement or (b) expenditures made by
the AUTHORITY under any of the following conditions:

     (i) Expenditures for Capital Projects that are listed on Exhibit F attached
     hereto, provided, however, that the incremental Net Capital Cost of any
     such Capital Project shall constitute a Deferrable Capital Expenditure if
     the Net Capital Cost for such Capital Project exceeds the listed Net
     Capital Cost as

                                        5


     adjusted by the Annual Capital Adjustment Factor by more than ten percent
     (10%) and is not otherwise excepted under this definition;

     (ii) Other expenditures for Capital Projects (not otherwise excepted under
     this definition) whose Net Capital Costs in the aggregate during any Rate
     Period are not greater than the sum of the Consultation Minimum and
     Consultation Carryforward, as defined below, for that Rate Period. The
     "Consultation Minimum" for each Rate Period shall be $2.5 million, as
     adjusted annually by the Annual Capital Adjustment Factor. The
     "Consultation Carryforward" for each Rate Period shall be the unused
     Consultation Minimum from the prior Rate Period with expenditures in the
     current Rate Period applied to the prior Rate Period's Carryforward first.
     Notwithstanding the above, the adjusted Consultation Minimum plus the
     Consultation Carryforward shall net exceed $5 million, adjusted in
     accordance with the Annual Capital Adjustment Factor, in any single Rate
     Period;

     (iii) For emergency or airfield safety purposes;

     (iv) To comply with any applicable law, rule, regulation, policy, or order
     of any federal, state, or local agency or court or any federal or state
     grant agreement or airport certification requirement;

     (v) To remedy any significant environmental problems at the Airport:

     (vi) To repair any casualty damage to AIRPORT property to the extent not
     covered by insurance; or

     (vii) To fund costs or improvements, including the associated costs
     therefor, incurred to settle lawful claims, satisfy judgments, or comply
     with judicial orders against the AUTHORITY by reason of its ownership,
     operation, maintenance, development, improvement (including design and
     construction), or use of the AIRPORT.

     "DEPLANED PASSENGERS" means all arriving passengers of AIRLINE and of all
other Airlines deplaning at the Terminal Building, including all on-line and
off-line deplaning transferring passengers, but excluding through passengers.

     "DIFFERENTIAL TERMINAL BUILDING RENTAL RATES" means those Terminal Building
Rental Rates established pursuant to Section 502(D) and calculated in accordance
with Exhibit E.

     "DIRECT COST CENTERS" means those Cost Centers described as such in Exhibit
A.

     "ENPLANED PASSENGERS" means all originating and on-line and off-line
transfer passengers of AIRLINE and of all other Airlines enplaning at the
Terminal Building.

     "ENVIRONMENTAL LAWS" means every applicable law, ordinance, rule,
regulation, permit or permit condition, order, or directive regulating, relating
to, or imposing liability standards of conduct, or any agency, court or body of
the federal government, any state or any political subdivision thereof,
exercising executive, legislative, judicial, regulatory, or administrative

                                        6


functions relating to environmental matters, including, without limitation,
those relating to fines, orders, injunctions, penalties, damages, contribution,
cost recovery compensation, losses, or injuries resulting from the release or
threatened release of Hazardous Materials and to the generation, use, storage,
transportation, or disposal of Hazardous Materials.

     "ENVIRONMENTAL PERMITS" means any and all permits, licenses, approvals,
authorizations, consents, or registrations required by applicable Environmental
Laws, whether federal. State or local, which pertain to the production, use,
treatment, generation, transportation, processing, handling, disposal, or
storage of Hazardous Materials.

     "EVENT OF DEFAULT" means an Event of Default as defined in Section 1301.

     "EXECUTIVE DIRECTOR" means the Executive Director of the AUTHORITY or the
person performing the functions of that office, as authorized by the Chairman of
the Board, or that person authorized by the Executive Director to act for or on
behalf of the Executive Director with respect to any particular matter under
this Agreement.

     "FEDERAL AVIATION ADMINISTRATION OR FAA" means the Federal Aviation
Administration created under the Federal Aviation Act of 1958, as amended, or
any successor agency thereto.

     "GENERAL AIRLINE CREDIT" means for the applicable Rate Period the amount
set forth in Section 513(B).

     "GRANTS-IN-AID" means the Federal Airport Improvement Program (AIP) funds,
funds from any successor Federal program to AIP, State of Ohio, Division of
Aviation, Department of Transportation funds and funds from any successor Ohio
Department of Transportation program made available to AUTHORITY for capital
projects related to the Airports.

     "HAZARDOUS MATERIALS" means friable asbestos or asbestos-containing
materials, polychlorinated biphenyls (PCBs), petroleum, or crude oil or any
fraction thereof, natural gas, source material, special nuclear material, and
byproduct materials regulated under Environmental Laws, pesticides regulated
under Environmental Laws, and any hazardous waste, toxic, or dangerous
substance or related material, including any material defined or treated as a
hazardous substance, hazardous waste, toxic substance, or contaminant (or
comparable term) under any of the Environmental Laws.

     "INDIRECT COST CENTERS" means those Cost Centers described as such in
Exhibit A.

     "LANDING FEE RATE" means the Landing Fee Rate established pursuant to
Section 503, rounded up to the next whole cent.

     "LANDING FEES" means Landing Fees calculated pursuant to Section 507.

     "LEASED PREMISES" means, at any time, for AIRLINE, those areas and
facilities in the Terminal Building which, pursuant to Article II are leased to
AIRLINE for its preferential, shared, or common use and occupancy as depicted in
Exhibit B and Assigned Apron as depicted in Exhibit "C".

                                        7


     "LEO FEE" means the fee calculated pursuant to Section 509 to reimburse the
AUTHORITY for Operating Expenses incurred by the AUTHORITY for providing law
enforcement officer support under Section 107.15 of the Federal Aviation
Regulations to the Airlines' pre-boarding passenger screening checkpoint
established pursuant to Section 108 of the Federal Aviation Regulations or any
successor charge thereto.

     "LEO REQUIREMENT" means the requirement established pursuant to Section
505.

     "MAJORITY IN INTEREST" or "MII" means

     (i) With respect to any Airfield Area Cost Center matter, at least fifty
     percent (50%) in number of all Signatory Airlines, and Signatory Cargo
     Carriers at the AIRPORT which together landed more than sixty-six percent
     (66%) of the Signatory Airlines', and Signatory Cargo Carriers' Revenue
     Landed Weight at the AIRPORT' during the immediately preceding Rate Period,
     and

     (ii) With respect to any matters concerning the Apron Cost Center, at least
     fifty percent (50%) in number of all Signatory Airlines at the AIRPORT
     which together landed more than sixty-six percent (66%) of the Signatory
     Airlines' Revenue Landed Weight at the AIRPORT during the immediately
     preceding Rate Period and which together lease at least sixty-six percent
     (66%) of the total square footage of Apron leased to the Signatory
     Airlines.

     No Airline shall be deemed to be a Signatory Airline or a Signatory Cargo
Carrier for the purpose of this definition so long as an Event of Default,
including bankruptcy, with respect to such Airline has occurred and is
continuing or if such Airline is no longer operating at the AIRPORT.

     "MASTER TRUST INDENTURE" means the Master Trust Indenture dated as of July
1, 1994, between the AUTHORITY and the Trustee, including the General Bond
Resolution, as amended or supplemented from time to time.

     "MAXIMUM CERTIFICATED GROSS LANDING WEIGHT" means, for any aircraft
operated by an Airline, the maximum certified gross landing weight in one
thousand pound units of such aircraft as certified by the FAA and as listed in
the Airline's FAA approved Flight Operations Manual.

     "NET AIRFIELD AREA REQUIREMENT" means the requirement established pursuant
to Section 503.

     "NET APRON REQUIREMENT" means the requirement established pursuant to
Section 504.

     "NET CAPITAL COST" means the Capital Cost of any Capital Project or Annual
Capital Outlay less amounts financed from the proceeds of: (i) Grants-in-Aid;
(ii) PFCs; (iii) Bonds for which the debt service will not be paid from
Rentals, Fees, and Charges; (iv) Bonds for which the debt service is to be paid
for by PFCs, insurance, or any amount financed by AUTHORITY funds not derived
from Rentals, Fees, and Charges.

     "NET TERMINAL BUILDING REQUIREMENT" means the requirement established
pursuant to Section 502.

                                        8


     "NON-SIGNATORY AIRLINE" means an Airline using the AIRPORT which is not a
Signatory Airline.

     "OPERATING EXPENSES" OR "O&M EXPENSES" means, for any Rate Period, all
expenses, incurred by the AUTHORITY for such Rate Period, in providing for the
administration, operation, maintenance, and management of the AUTHORITY and its
Airports, including, without limitation, the performance by AUTHORITY of any of
its obligations related thereto as set forth is this Agreement. Operating
Expenses shall not include depreciation charges as reflected in the AUTHORITY's
annual financial statements.

     "ORIGINATING ENPLANED PASSENGERS" means all passengers of AIRLINE and of
all other Airlines enplaning at the Terminal Building except enplaning on-line
and off-line transfer passengers.

     "PASSENGER FACILITY CHARGE OR PFC" means moneys collected by AUTHORITY from
charges imposed by the AUTHORITY pursuant to 49 U.S.C. Section 40117, as amended
or supplemented from time to time, and 14 C.F.R. Part 158, as amended or
supplemented from time to time.

     "PASSENGER HOLDROOM OR HOLDROOMS" means that space within the Terminal
Building used to enplane and deplane passengers of AIRLINE or other Airlines.

     "PREFERENTIAL USE PREMISES" means those Leased Premises within the
Terminal Building, including Shared Use Premises, for which AIRLINE holds a
priority over others as to use.

     "RATE PERIOD" means each twelve-month period comprising the AUTHORITY's
fiscal year, initially a calendar year.

     "REIMBURSEMENTS" means those charges payable by AIRLINE and other Airlines
which directly reimburse the AUTHORITY for the cost of utilities, real estate
taxes, or any other direct service provided by the AUTHORITY, and which are
applied as credits against or deductions from the Authority Requirement, or any
element thereof, in determining Rentals, Fees, and Charges under Articles V and
VI.

     "RENTABLE SPACE" means that space within the Terminal Building that is
constructed, identified and segregated as space to be leased by commercial
tenants and depicted as rentable space in Exhibit D and such additions thereto
and deletions therefrom as may occur from time-to-time during the term of this
Agreement. Any space not already included in Rentable Space which is then leased
to a commercial tenant such that the space produces revenue shall be added to
Rentable Space.

     "RENTALS FEES, AND CHARGES" means for any Rate Period the rentals, fees,
and charges payable by AIRLINE pursuant to Articles V and VI,

     "REVENUE AIRCRAFT ARRIVAL" means each landing of an aircraft at the
AIRPORT, by a Signatory Airline or Signatory Cargo Carrier, other than a landing
of an aircraft which departs from the AIRPORT and which returns, without having
landed at another airport, for meteorological. mechanical, safety, or any other
emergency purpose, and training flights except

                                        9


to the extent that such training flights exceed five percent (5%) of such
Airline's scheduled flights for the month.

     "REVENUE BOND INDEX" means the 25 Bond Revenue Index yield rate as
published in the Bond Buyer.

     "REVENUE LANDED WEIGHT" means, for each Rate Period, the sum of the
products determined by multiplying each Revenue Aircraft Arrival by AIRLINE,
other Signatory Airlines and the Signatory Cargo Carriers by the applicable
Maximum Certificated Gross Landing Weight of the aircraft making said Revenue
Aircraft Arrival.

     "SECURITY DEPOSIT" means an irrevocable letter of credit or other security
acceptable to AUTHORITY provided pursuant to Section 605.

     "SHARED USE CHARGES FORMULA" means that formula which prorates the cost or
expense of the Shared Use Premises described in Exhibit B or a service provided
to two or more Signatory Airlines as the circumstances dictate and the AUTHORITY
and such Signatory Airlines agree.

     "SHARED USE PREMISES" means those Preferential Use Premises which AIRLINE
leases and uses on a shared use basis with other Signatory Airlines, as depicted
on Exhibit B, for which all Signatory Airlines under such leasehold an equal
priority right of use over others.

     "SIGNATORY AIRLINE" means at any time, each one of the Airlines which then
has executed a Signatory Airline Operating Agreement and Terminal Building Lease
under substantially the same terms and conditions, and with the same expiration
date as this Agreement in effect with the AUTHORITY or is an Affiliated Airline
of such Airline.

     "SIGNATORY CARGO CARRIER" means, at any time, each one of the Airlines
which then has a Cargo Use Agreement with the same expiration date as this
Agreement in effect with the AUTHORITY.

     "SPECIAL FACILITY OR FACILITIES" means any AUTHORITY-owned facility
acquired or constructed for the benefit or use of any person or persons and the
costs of construction and acquisition of which are paid for (a) by the obligor
under a Special Facility agreement, (b) from the proceeds of Special Facility
revenue bonds, or (c) both.

     "SUPPLEMENTAL CHARGES" means for any Rate Period those fees and charges
payable by AIRLINE pursuant to Section 512.

     "SUPPLEMENTAL TRUST INDENTURE" means any supplemental trust indenture
entered into pursuant to the Master Trust Indenture and which shall include any
related Series Resolution, as amended or supplemented from time to time.

     "TENANT IMPROVEMENTS" means those capital improvements or capital equipment
constructed or installed by the AUTHORITY for an Airline or another tenant under
an agreement in which said Airline or tenant agrees to reimburse the AUTHORITY
for costs related thereto.

     "TERMINAL BUILDING" means the main terminal buildings and concourses of the
AIRPORT, including all supporting and connecting structures and facilities and
all appurtenances

                                       10


to said buildings and facilities, as the same now exist or as the same hereafter
may be added to, modified, changed, or developed and said term shall also
include any additional new terminal structure hereinafter constructed by the
AUTHORITY at the AIRPORT.

     "TERMINAL BUILDING COST CENTER" means the Cost Center of the same name as
described in Exhibit A.

     "TERMINAL BUILDING RENTAL RATE" means the average Terminal Building Rental
Rate established pursuant to Section 502.

     "TERMINAL BUILDING RENTALS" means the Terminal Building Rentals calculated
pursuant to Section 506.

     "TERMINAL BUILDING REQUIREMENT " means the requirement established pursuant
to Section 502.

     "TRANSFERRED COVERAGE" means the amount of a previous Rate Period's funded
Coverage Requirement carried forward to the subsequent Rate Period by the
AUTHORITY.

     "TRUST INDENTURE" means the Master Trust Indenture, all Supplemental Trust
Indentures, and any other trust indenture or AUTHORITY resolution pursuant to
which Net Revenues of the AIRPORT are pledged.

     "VARIABLE CHARGES PERCENTAGE" means for each six-month period beginning
January 1st and July 1st of each Rate Period, AIRLINE'S percentage of the total
Originating Enplaned Passengers of all Signatory Airlines at the AIRPORT for the
most recently reported six-month period with such adjustments as appropriate for
commencement or cessation of service by a Signatory Airline.

SECTION 102. INTERPRETATION

     (A) References in the text of this Agreement to articles, sections,
paragraphs, or exhibits pertain to articles, sections, or exhibits of this
Agreement and to the same articles, sections, paragraphs, and exhibits of each
other Signatory Airline Operating Agreement and Terminal Building Lease, unless
otherwise specified.

     (B) The terms "hereby," "herein," "hereof," "hereto," "hereunder," and any
similar terms used in this Agreement refer to this Agreement.

     (C) Words importing persons shall include firms, associations,
partnerships, trusts, corporations, and other legal entities, including public
bodies, as well as natural persons.

     (D) Any headings preceding the text of the articles and sections of this
Agreement, and any table of contents or marginal notes appended to copies
hereof, shall be solely for convenience of reference and shall not constitute a
part of this Agreement, nor shall they affect its meaning, construction, or
effect.

                                       11


     (E) Words importing the singular shall include the plural and vice versa.
Words of the masculine gender shall be deemed to include correlative words of
the feminine and neuter genders.

     (F) The term "including" shall be construed to mean "including without
limitation", unless otherwise expressly indicated.

     (G) All references to number of days shall mean calendar days.

     (H) Words used in the present tense include the future.

SECTION 103. INCORPORATION OF EXHIBITS

     The following Exhibits are hereby made a part of this Agreement:

            
     Exhibit A      Authority Cost Centers
     Exhibit B      AIRLINE's Terminal Building Leased Premises
     Exhibit C      AIRLINE's Assigned Apron
     Exhibit D      Summary of Terminal Building Rentable Space
     Exhibit E      Calculations of Differential Terminal Building Rental Rates
     Exhibit F      Approved Capital Projects
     Exhibit G      Maintenance Responsibility
     Exhibit H      Affiliated Airlines
     Exhibit I      Summary of Charges and Supplement

     

SECTION 104. AFFILIATED AIRLINES

     The AIRLINE executing this Agreement and its Affiliated Airlines shall be
treated as a single entity for purposes of application of all provisions of this
Agreement. All references to AIRLINE and Signatory Airline shall include
Affiliated Airlines unless otherwise expressly stated in this Agreement. The
AIRLINE executing this Agreement shall have the right to add or delete
Affiliated Airlines from time to time by written notice to the AUTHORITY AIRLINE
agrees to notify the AUTHORITY of any airlines affiliated with AIRLINE that
will be operating at the AIRPORT prior to commencement of such service. AIRLINE
acknowledges that any airline affiliated with AIRLINE that is operating at the
AIRPORT and handled by the AIRLINE but not is otherwise a Signatory Airline the
benefit of Signatory Airline status under this Agreement shall be deemed to be
an Affiliated Airline under this Agreement.

                                       12


                                   ARTICLE II
                                   LEASE TERM

SECTION 201. TERM

     The term of this Agreement shall commence on January 1, 2000 (the
"Effective Date") and shall expire on December 31, 2004, unless sooner
terminated pursuant to the provisions hereof.

SECTION 202. HOLDING OVER

     If AIRLINE shall, with the consent of AUTHORITY, hold over after the
expiration of the term of this Agreement, the resulting tenancy shall, unless
otherwise mutually agreed, be for an indefinite period of time on a
month-to-month basis. During such month-to-month tenancy, AIRLINE shall pay to
AUTHORITY the same rate of rental and landing fees as set forth herein, unless a
different rate shall be agreed upon, and shall be bound by all of the additional
provisions of the Agreement insofar as they may be pertinent.

                                       13


                                   ARTICLE III
                   AIRLINE RIGHTS, PRIVILEGES, AND LIMITATIONS

SECTION 301. USE OF AIRPORT

     Subject to the terms of this Agreement, AIRLINE shall have the right to
conduct its Air Transportation Business at the AIRPORT and to perform the
following operations and functions as are incidental or necessary to the conduct
of such business at the AIRPORT.

     (A) USE IN COMMON OF TERMINAL BUILDING. AIRLINE shall have the right to
use, in common with others so authorized, the public areas and public facilities
of the Terminal Building.

     (B) USE IN COMMON OF AIRFIELD OPERATIONS AREA AND APRON. AIRLINE shall have
the right to use landing field areas, non-assigned aprons, roadways, runways,
taxiways, runway and taxiway lights, beacons, facilities, equipment,
improvements, services, and other conveniences for flying, landing, taxiing,
servicing, and takeoffs of aircraft.

     (C) OPERATION AND MAINTENANCE OF AIRCRAFT AND EQUIPMENT. AIRLINE shall have
the right to conduct routine servicing by AIRLINE, or by its suppliers of
materials or by its furnishers of routine services, of aircraft and other
equipment, operated by AIRLINE or by other Airlines with which AIRLINE has an
approved handling agreement, with fuel, oil, lubricants, line maintenance,
deicing fluids, or other materials or supplies, at its Assigned Aprons or other
aircraft parking positions designated by the AUTHORITY's Rules and Regulations.
AIRLINE shall not perform maintenance and/or repairs on ground support equipment
including, but not limited to, vehicles, baggage carts, power units, and trucks
on the Apron or at any location other than those designated by the AUTHORITY.
AIRLINE shall not do, or permit to be done, at the Apron area any heavy
maintenance (e.g., engine changes, control surface replacements and overhauls)
within areas under AIRLINE's control unless such maintenance is consented to by
the AUTHORITY and suitable, reasonably accessible, space is available for such
purpose.

     All storage of oil, lubricants, or other materials or supplies shall be
maintained in accordance with prudent insurance underwriting and safety
standards and in accordance with the AUTHORITY's Rules and Regulations.

     Exterior cleaning of aircraft shall be limited to instances when special
advance approval of the time and place of such cleaning is given by the
AUTHORITY.

     If, during AIRLINE's servicing of aircraft other than those services that
are normally performed in conjunction with scheduled operations, the AUTHORITY
requires access to one or more of AIRLINE's Assigned Aprons due to an emergency
or for the temporary access by another Airline as provided in Article IV,
AIRLINE shall remove said aircraft from the appropriate Assigned Apron as
quickly as reasonably possible, provided such removal does not interfere with
AIRLINE's own scheduled operation.

     (D) PARKING OF AIRCRAFT AND EQUIPMENT OUTSIDE ASSIGNED AREA. Unless
agreement is reached between AIRLINE and another Airline regarding use of
AIRLINE's Assigned Apron, if AIRLINE repeatedly parks or stores any aircraft,
vehicle, or ground-handling equipment outside of the boundary areas of
AIRLINE's Assigned Apron set out in Exhibit C or as painted, striped,

                                       14


or otherwise indicated on the Apron, AIRLINE shall pay to the AUTHORITY
or the impacted Airline, as appropriate, any applicable fee for such parking or
storage.

     (E) RAMP SUPPORT. AIRLINE shall have the right to use, subject to
applicable fees and charges, water and electric power, telephone and
preconditioned air systems, and loading bridges, to the extent supplied by the
AUTHORITY, at or adjacent to its Leased Premises: and, to the extent not
supplied by the AUTHORITY to purchase, install, use, and maintain, at AIRLINE's
Assigned Aprons, loading bridges and mobile stair devices for the loading,
unloading, and general servicing of AIRLINE's aircraft, auxiliary power systems,
air start systems, preconditioned air systems, and other miscellaneous aircraft
and aircraft-related support equipment and facilities.

     (F) PERSONNEL. AIRLINE shall have the right to hire and train at the
AIRPORT personnel in the employ of or to be employed by AIRLINE.

     (G) CUSTOMER SERVICE. AIRLINE recognizes the importance of the community
and the traveling public to the AIRPORT and will provide such services, as is
AIRLINE'S normal practice at similar airports, such as skycaps, wheel chair and
cart services to AIRLINE's passengers.

     (H) TESTING FLIGHTS. AIRLINE shall have the right to test aircraft and
other equipment owned or operated by AIRLINE; provided that such testing is
incidental to the use of the AIRPORT in the operation by AIRLINE of its Air
Transportation Business and will not hamper or interfere with use of the AIRPORT
and its facilities by others entitled to use of the same. The AUTHORITY reserves
the right to restrict any testing operations it deems to interfere with the safe
and efficient use of the AIRPORT and its facilities or to create excessive noise
as determined by the AUTHORITY.

     (I) SALE, DISPOSAL, OR EXCHANGE OF EQUIPMENT AND PRODUCTS. AIRLINE shall
have the right to sell, dispose, or exchange aircraft, engines, accessories,
gasoline, oil, grease, lubricants, fuel, deicing fluid, and other equipment of
AIRLINE, or supplies including, without limitation, any propellant now or
hereafter used in aircraft or other equipment of AIRLINE; provided that such
rights shall not be construed as authorizing the conduct of a separate business
by AIRLINE, but shall only permit AIRLINE to perform such functions as are
incidental to its conduct of its Air Transportation Business. AIRLINE shall not
routinely sell of exchange gasoline, fuels, or propellants except to an
Affiliate Airline or a company with which AIRLINE has a handling agreement, or
for use in aircraft of others which are being used solely in the operations of
AIRLINE, or except when the particular grade and type of fuel desired by others
is not otherwise available from third-party vendors at the AIRPORT.

     (J) LANDING, TAKEOFF PARKING. AIRLINE shall have the right to land, take
off, fly over, taxi, tow, and condition AIRLINE's aircraft and, in areas
designated by the AUTHORITY. AIRLINE shall have the right to park for an
extended period of time, service, deice, load or unload, store, or maintain
AIRLINE's aircraft and support equipment subject to the availability of space,
and subject to reasonable charges; provided, however, AIRLINE shall not
knowingly permit, without the consent of the AUTHORITY, the use of the Airfield
Operations Area or any portion thereof by any aircraft operated or controlled by
AIRLINE which exceeds the design strength or capability of such area as
described in the then-current FAA-approved Airport Layout

                                       15


Plan (ALP) or other engineering evaluations performed subsequent to the
then-current ALP, including the then-current Airport Certification Manual.

     (K) LOADING AND UNLOADING. AIRLINE shall have the right to load and unload
persons, cargo, and mail by motor vehicles or other means of conveyance, as
AIRLINE may desire or require in the operation of its Air Transportation
Business, via routes and at locations designated by the AUTHORITY. AIRLINE may
designate the particular carrier or carriers which may transport AIRLINE's
employees, property, and mail to, from, and on the AIRPORT; however, the
AUTHORITY reserves the right to require such carrier or carriers to secure a
permit from and pay any applicable fees to the AUTHORITY to conduct such
activity at the AIRPORT.

     (L) ACTIVITIES WITHIN SPACE. AIRLINE shall have the right to conduct the
following activities within its Preferential Use Premises:

     (i) AIRLINE shall have the right to install, maintain and operate, in
     AIRLINE's Preferential Use Premises, customer relations, security and
     waiting room facilities and equipment; reservations offices; administrative
     offices; operations offices; lockers, restrooms, and related facilities for
     its employees; baggage, cargo, and mail handling and storage facilities and
     equipment; provided however, that the particular Preferential Use Premises
     are designed to be used for said purpose or said use has been approved, in
     writing, by the AUTHORITY.

     (ii) AIRLINE shall have the right to install personal property, including
     furniture, furnishings, supplies, machinery, and equipment, in AIRLINE's
     Preferential Use Premises, as AIRLINE may deem necessary or prudent for the
     operation of its Air Transportation Business. Title to such personal
     property shall remain with AIRLINE, subject to the provisions of this
     Agreement.

     (iii) AIRLINE shall have the right to construct modifications, finishes,
     and improvements in its nonpublic Preferential Use Premises as AIRLINE may
     deem necessary or prudent for the operation of its Air Transportation
     Business, subject to the approval and permitting requirement provisions of
     Article VIII.

     (M) ACTIVITIES WITHIN AIRLINE CLUBS. AIRLINE shall have the right to
furnish and operate a preferred customer, "VIP" club or similar private club. In
addition to its per square foot rentals, AIRLINE shall pay a concession fee if
and only if, it provides goods and services for a charge, which concession fee
shall be the applicable concession fee rate for like sales payable on the
AIRPORT; provided that no such payment shall be required with respect to items
obtained from concessionaires already obligated to make such payments to the
AUTHORITY with respect to such obtained items. Notwithstanding the above,
membership fees and sale of consumables purchased from Airport concessionaires,
shall be exempt from such a concession fee. Further, such preferred customer or
"VIP" club may be shared with one or more other Airlines; provided that the
rights of all the Airlines using the club terminate when this Agreement
terminates, unless otherwise permitted under separate agreement.

     (N) HANDLING ARRANGEMENTS. AIRLINE shall have the right to enter into or
conduct the following handling arrangements as part of its Air Transportation
Business at the AIRPORT:

                                       16


     (i) The rights and privileges granted to AIRLINE pursuant to this Article
     III may be exercised on behalf of AIRLINE by other Signatory Airlines or
     contractors authorized by the AUTHORITY to provide such services at the
     AIRPORT, subject to all fees and charges as may be applicable to the
     activities undertaken. Notwithstanding the above, AIRLINE's handling
     agreements with affiliate Airlines or a wholly-owned subsidiary of AIRLINE
     or parent company shall be exempt from such fees.

     (ii) AIRLINE may exercise on behalf of any other Signatory Airlines any of
     the rights granted AIRLINE herein, so long as AIRLINE is concurrently
     exercising those same rights in the operation of AIRLINE's own Air
     Transportation Business at the AIRPORT, subject to the provisions of
     Article X and Paragraph (R) of this Section, and the payment of fees and
     charges for such activities.

     (O) SIGNAGE. AIRLINE shall have the right to install and operate AIRLINE
ticket and check-in counter back wall treatments and identifying signs in its
Preferential Use Premises, subject to the prior approval of the AUTHORITY, and
provided that such signs shall be: (a) substantially uniform in size, type, and
location with those of other Signatory Airlines; (b) harmonious and in keeping
with the pattern and decor of the Terminal Building; and (c) consistent with the
AUTHORITY's graphics standards and standards for mounting.

     (P) USE OF PUBLIC AREAS. AIRLINE shall have the right of free ingress to
and egress from the AIRPORT including its Leased Premises and the public areas
and public facilities of the Terminal Building, for AIRLINE's employees, agents,
passengers, contractors, guests, patrons, invitees, licensees, suppliers of
materials and providers of service, and its or their equipment, vehicles,
machinery, and other property; provided, however, that the foregoing shall not
preclude the AUTHORITY from (a) subjecting such persons to the AUTHORITY's Rules
and Regulations, (b) requiring such persons to enter into an agreement with the
AUTHORITY when such access is required on art ongoing basis, or (c) imposing
any charge, permit or license fee for the right to do business at the Airport.

     (Q) ACCESS TO RESTRICTED AREAS. AIRLINE agrees that all of its tenants,
subtenants, patrons, invitees, agents, employees, servants, or independent
contractors must be authorized by the AUTHORITY to enter restricted areas as
defined by the AUTHORITY or provided escort in accordance with AUTHORITY's
security plan. AIRLINE agrees that no person authorized to enter a restricted
area by virtue of this Agreement shall permit any person who is not otherwise
authorized by AUTHORITY to enter a restricted area unless such unauthorized
person is, at all times while in the restricted area, in the company of an
authorized person. Such right shall be subject to F.A.R. Part 107. All means of
access to restricted areas provided by the AUTHORITY shall be utilized in
common with such other persons as the AUTHORITY may authorize or permit, and all
such users of access shall be subject to and comply with all applicable laws and
ordinances whether federal, slate, or local.

     (R) RIGHT TO PURCHASE SERVICES AND PRODUCTS. Airline shall have the right
to purchase or contract for the purchase of the following services and products
subject to the limitations contained herein:

                                       17


     (i) AIRLINE may purchase or otherwise obtain products of any nature,
     including, but not limited to, aircraft, engines, accessories, gasoline,
     oil, grease, lubricants, fuel, propellants, passenger supplies and other
     materials, equipment, supplies, articles, and goods, used or acquired by
     AIRLINE in connection with or incidental to AIRLINE's Air Transportation
     Business at the AIRPORT from any person or company operating on the AIRPORT
     with a valid permit from the AUTHORITY

     (ii) AIRLINE shall have the right to contract with a third party or Airline
     owned ground handler to provide to it or to perform for it any of the
     services or functions which it is entitled to perform under this Agreement,
     provided that such third party must maintain any permits and pay all fees
     required by the AUTHORITY. The contractual relationship between any third
     party and AIRLINE shall not affect in any way the fulfillment of AIRLINE's
     obligations, including those of insurance and indemnification for
     activities, under this Agreement.

     (iii) Any contractors or agents performing services to Airlines at the
     Airport shall conform to applicable performance standards, lease
     requirements, and AUTHORITY's Rules and Regulations, including any permit
     requirement or payment of fees required by the AUTHORITY. AIRLINE may also
     be subject to the payment of fees for provision of services to other
     Airlines except services provided by AIRLINE to subsidiaries or affiliate
     Airlines.

     (S) TICKETING ACTIVITIES. AIRLINE shall have the right to handle
reservations and the ticketing, including electronic ticketing, billing and
manifesting of passengers, baggage, property, cargo, and mail; load planning;
and conduct of activities relating to flight operations, dispatch, weather,
storage of supplies, crew ready room, locker rooms, and rest rooms.

     (T) BAGGAGE BELTS. AIRLINE shall have the right to use baggage make-up
belts within ticket counter areas leased to other Signatory Airlines if such
belts are required to access baggage make-up areas from ticket counter areas
leased to AIRLINE.

     (U) COMMUNICATIONS AND WEATHER EQUIPMENT, FIDS AND PA SYSTEM. AIRLINE shall
have the right to use the following communications equipment, flight information
displays, and public address systems in conjunction with the conduct of its Air
Transportation Business:

     (i) Subject to the prior approval of the AUTHORITY and conditions stated
     below, AIRLINE shall have the right to install, maintain, and operate,
     alone or in conjunction with any other Signatory Airline or Airlines, or
     through a nominee, such radio, communications, meteorological, aerial
     navigation, and computer equipment, facilities and associated wiring, as
     may be necessary for the conduct of AIRLINE's Air Transportation Business
     at the AIRPORT, in of on its Preferential Use Premises, and at other
     locations at the AIRPORT as may be approved by the AUTHORITY. The location
     of such equipment and facilities, method of installation, and type of
     equipment shall be subject to the prior approval of the AUTHORITY. The
     AUTHORITY shall have the right to charge a fee, surcharge, or rental charge
     for any location outside of Preferential Use Premises and shall be entitled
     to any revenues generated directly from the

                                       18


     operation of such equipment. The AUTHORITY may disapprove or require
     modification, removal, or relocation of such equipment if it interferes
     with other communication, meteorological, or aerial navigation systems
     operated by the AUTHORITY, other tenants, or governmental agencies.

     (ii) AIRLINE shall provide electronic flight arrival and departure
     information through AUTHORITY-installed systems and shall cooperate with
     thee AUTHORITY's installation and maintenance of centralized and remote
     flight information displays.

     (iii) AIRLINE shall have the right to use, in common with others so
     authorized, the public address system serving the Terminal Building.
     AIRLINE shall not install, cause to be installed, or use any other
     public address system at the Terminal Building without the prior approval
     of the AUTHORITY.

     (V) SECURITY. AIRLINE shall have the right directly or in conjunction with
other Signatory Airlines or through a nominee, to erect, maintain, and station
security devices and to conduct a security check operation of passengers,
baggage and packages in Preferential Use Premises and in designated Common Use
Areas; provided, however, that the manner of such installation and the location
of equipment shall be subject to the approval of the AUTHORITY. Such service
shall be in compliance with all FAA standards. Unless circumstances dictate
otherwise, AIRLINE agrees that the Part 108 security checkpoint will open to all
ticketed and non-ticketed patrons approximately one (1) hour prior to the first
scheduled departure and close no sooner than one-half hour after the last
arrival.

     (W) FOOD & BEVERAGE. AIRLINE shall have the following rights to prepare,
package, and/or distribute food and beverages with respect to the conduct of its
Air Transportation Business at the AIRPORT:

     (i) AIRLINE shall have the right to purchase, prepare, package and/or
     distribute food and beverages to be consumed on aircraft operated by
     AIRLINE or an Affiliated Airline without paying a fee. If AIRLINE provides
     in-flight food and beverage preparation services to other Airlines other
     than Affiliates, then AIRLINE shall pay a concession fee. The concession
     fee to be paid by AIRLINE shall be the applicable concession fee rate for
     like sales payable on the AIRPORT.

     (ii) AIRLINE shall have the right to purchase prepared food and beverages
     for consumption by passengers and crews oil AIRLINE's aircraft and in
     AIRLINE's "VIP" club, if any; provided, however, if AIRLINE purchases
     catering, including beverages and complimentary packages of snack food to
     be consumed oil AIRLINE's aircraft from an Off-Airport caterer for delivery
     of prepared food and/or beverages to AIRLINE on the AIRPORT, said caterer
     will be required to have a contract with or permit from the AUTHORITY and
     to pay a fee to the AUTHORITY at a rate equal to the rate paid by in-flight
     food catering concessionaires located on the AIRPORT.

     (iii) AIRLINE shall have the right to distribute food and/or beverages to
     passengers at no cost in the event of major delays or other emergencies.

                                       19


     AIRLINE shall also have the right to distribute food and/or beverages at no
     cost to the public in Passenger Holdrooms subject to 24-hour advance notice
     to the AUTHORITY; such distribution may not exceed 8 days (inclusive of
     partial days of distribution) per year, without the written consent of the
     AUTHORITY, and must be in connection with holidays and promotional events.

     (iv) AIRLINE shall have the right to install soft drink vending machines
     and snack vending machines in its non-publicly accessible Preferential Use
     Premises for the sole use of AIRLINE's employees, contractors, and agents.
     Vending machines shall not be within the view of the general public and all
     machine locations arc subject to the prior approval of the AUTHORITY.

     (X) EMPLOYEE PARKING. The AUTHORITY shall designate parking areas at the
AIRPORT available to AIRLINE's employees while at work at the AIRPORT, in common
with other AIRPORT tenants subject to the payment of such fees as the AUTHORITY
shall determine which shall not be in excess of the amount needed to recover the
costs of providing such parking and related services. The AUTHORITY shall have
the right to relocate or otherwise change the location of such parking areas as
needed.

     (Y) TECHNOLOGICAL ADVANCES. It is understood and agreed that, during the
term of this Agreement, various technological advances may occur that would
improve the efficient handling of passengers, baggage, and cargo in and about
the AIRPORT and the Signatory Airlines' use of anti operations at the AIRPORT,
including share([ or common usage of AIRPORT facilities and the use of common
use terminal equipment. In such event, the AUTHORITY and AIRLINE agree to
consult as to the applicability of such technological advances to the AIRPORT
and the efficient use of facilities if required to implement them.

SECTION 302. RESTRICTIONS ON EXERCISE OF RIGHTS AND RESERVATION OF RIGHTS TO
             AUTHORITY

     The rights established in this Article III shall not be exercised so as to
interfere with the AUTHORITY's operation of the AIRPORT' for the benefit of all
aircraft operators using the AIRPORT and subject at all time to the restrictions
herein and reservation of rights by AUTHORITY.

     (A) NO INTERFERENCE WITH OPERATIONS. If at any time the AUTHORITY shall
determine that the AIRLINE or its contractors exercising the rights and
privileges granted to AIRLINE pursuant to this Article III are exercising such
rights and privileges (a) in a manner which interferes with the operation or
maintenance of the AIRPORT; (b) in a manner which adversely affects the health
or safety of the public or other users of the AIRPORT; or (c) in a manner which
fails to comply with the AUTHORITY's Rules and Regulations or terms of this
Agreement, the AUTHORITY shall notify AIRLINE of such determination including
the specific reasons therefore. AIRLINE shall promptly commence and diligently
pursue action necessary to correct the conditions or actions specified in such
notice. if such conditions or actions are not, in the opinion of the AUTHORITY,
promptly corrected after receipt of such notice or if such conditions or actions
required corrective action over a period of time, and AIRLINE has not, in the
reasonable opinion of the AUTHORITY, promptly commenced and diligently pursued
all such corrective action, then upon 10 days written notice from the AUTHORITY
to AIRLINE, the AUTHORITY may suspend said contractor's access to the AIRPORT.
Notwithstanding the

                                       20


foregoing provision, the AUTHORITY shall have the right, upon notice to AIRLINE,
to immediately suspend operations of the AIRLINE or of said contractors in the
event that it deems such action necessary to protect the health or safety of the
public or other users of the AIRPORT or in emergency situations.

     (B) INTEGRATION WITH SYSTEMS. AIRLINE shall not knowingly do, or permit to
be done, anything that may interfere with the effectiveness or accessibility of
the drainage, sewerage. water, communications, heating or ventilation, air
conditioning, natural gas, sprinkler, alarm or fire protection systems, fire
hydrants and hoses, or any other part of the utility, electrical, or other
systems installed or located from time to time at the AIRPORT.

     (C) RIGHT TO DESIGNATE LOCATION. The AUTHORITY reserves the right to
designate the locations within which all of the activities authorized under this
Agreement shall be conducted.

     (D) ACCESS. The AUTHORITY may, from time to time, temporarily or
permanently close or restrict roadways, taxiways, taxi lanes, runways, apron
areas, doorways, and any other area at the AIRPORT; provided, however, that,
unless an emergency situation exists, to the extent that the AUTHORITY deems
it practical, AIRLINE shall be notified with regard to such closings in order to
minimize the disruption of services being provided. The AUTHORITY shall have
the right at any time or times to relocate, reconstruct, change, alter, or
modify any such means of access provided for pursuant to this Agreement or
otherwise, either temporarily or permanently; provided that reasonable notice to
AIRLINE and to the extent reasonably practicable a reasonably convenient and
adequate means of access, ingress, and egress shall exist or be provided in lieu
thereof.

     (E) ALL OTHER RIGHTS. Any and all rights and privileges not specifically
granted to AIRLINE for its use of and operations at the AIRPORT pursuant to this
Agreement are hereby reserved for and to the AUTHORITY.

     (F) STRICT CONSTRUCTION OF RIGHTS. The rights granted to AIRLINE under this
Agreement may be exercised by AIRLINE only to the extent such rights are
necessary or incidental to the conduct by AIRLINE of its Air Transportation
Business at the AIRPORT.

     (G) TELECOMMUNICATION ANTI DATA NETWORKING INFRASTRUCTURE. The AUTHORITY
has the right to act as the exclusive: provider of public telecommunications
services and public data networking infrastructure at the AIRPORT. The AUTHORITY
shall have the sole right to determine the location of and install or cause to
be installed all public telephones, public telefax, and other public
telecommunications devices and conduit in any part of the AIRPORT, provided that
doing so does not (a) unreasonably interfere with AIRLINE's operations
authorized hereunder or (b) substantially diminish the square footage contained
in or the functionality of AIRLINE's Preferential Use Premises. The AUTHORITY
shall be entitled to reasonable access to AIRLINE's Leased Premises to install
or service such devices. The AUTHORITY shall be entitled to all income generated
by such telephones and devices and shall have the right to collect reasonable
and non-discriminatory charges fir access to the telecommunications/data
networking infrastructure except for systems or components which are unique to a
particular airline.

     (H) INFORMATIONAL DEVICES. The AUTHORITY reserves the right to install or
cause to be installed informational devices, in all public accessible areas of
the Terminal Building

                                       21


provided that such installation shall not unreasonably interfere with the
operations of AIRLINE authorized hereunder. AUTHORITY shall be entitled to
reasonable access upon AIRLINE's Leased Premises to install or service such
devices. The AUTHORITY shall be entitled to all income generated by such
devices.

     (I) BAGGAGE BELTS. In addition to those rights granted in Article IV, the
AUTHORITY reserves the right to grant to other Airlines the right to use
outbound baggage systems used by AIRLINE only if such system is required to
access baggage make-up areas. If another airline is granted the right to use a
portion of AIRLINE's owned baggage belt, AIRLINE shall be entitled to recover a
proportionate share of operation and maintenance costs relating to that portion
of the AIRLINE's belt used by the other airline. Allocation of such costs shall
be made on the respective number of departures.

     (J) ADDITION OF EQUIPMENT. The AUTHORITY reserves the right to acquire and
install equipment adjacent to AIRLINE's Leased Premises provided such
installation does not unreasonably interfere with AIRLINE's use of such Leased
Premises. Alter consultation with AIRLINE and provided such installation does
not interfere with AIRLINE's use of such Leased Premises, the AUTHORITY may
acquire and install equipment in and upon AIRLINE's Leased Premises. In the
event AIRLINE uses such equipment, AUTHORITY shall have the right to charge
Supplemental Charges for such use. AIRLINE agrees to facilitate the installation
of the equipment, including, upon reasonable notice from the AUTHORITY, the
decommissioning and removal of AIRLINE's equipment, if any, that is to be
replaced by equipment. Notwithstanding the above, AUTHORITY shall have the
right to install any safety or security equipment required within AIRLINE's
Leased Promises.

SECTION 303. INSURANCE RISKS

     AIRLINE shall not knowingly do or permit to be done anything, either by act
or failure to act, that shall cause the cancellation or violation of the
provisions, or any part thereof, of any policy of insurance tar the AIRPORT, or
that shall cause a hazardous condition so as to increase the risks normally
attendant upon operations permitted by this Agreement. If such AIRLINE act, or
failure to act, shall cause cancellation of any policy, then AIRLINE shall
immediately, upon notification by AUTHORITY, do whatever shall be necessary to
cause reinstatement of said insurance. Furthermore, if AIRLINE does or permits
to be done any act or fails to do any act which causes an increase in the
AUTHORITY's insurance premiums, AIRLINE shall immediately remedy such actions
and/or pay the increase in premiums, upon notice from AUTHORITY to do so; but
in any event, AIRLINE will hold the AUTHORITY harmless for any expenses and/or
damage resulting from any such action.

SECTION 304. HAZARDS

     AIRLINE shall not do, authorize to be done, or fail to do anything at the
AIRPORT which may create or contribute to (a) a nuisance or in any way obstruct
or interfere with rights of others using the AIRPORT or (b) a hazardous
condition so as to increase the risks normally attendant upon operations
permitted by this Agreement.

     (A) DEICING. AIRLINE shall store de-icing/anti-icing fluids only in areas
approved by the AUTHORITY. The AUTHORITY reserves the right to assess a
reasonable rental charge for any such storage areas. AIRLINE shall apply
de-icing/anti-icing fluids only in areas

                                       22


designated by the AUTHORITY. Upon the installation of a glycol recapture system,
deicing may only be applied at specified containment areas located at the Apron
areas and at remote aircraft parking areas provided that containment areas have
been installed and no application will be allowed at any other location on
AIRPORT property except as designated by the AUTHORITY. The AUTHORITY will
implement a collection, storage, and disposal system for these fluids. The
AUTHORITY reserves the right to include the costs associated with the operation
and maintenance of this system in Airline Rentals, Fees and Charges or to treat
such costs as a Reimbursement or Supplemental Charge.

     (B) FUELING. AIRLINE shall not install fuel storage tanks or pumping
facilities for use in fueling any aircraft at the AIRPORT without prior
approval of the AUTHORITY, in its sole discretion. All refueling trucks must be
approved by the AUTHORITY including their routing and parking.

     (C) NOISE ABATEMENT. AIRLINE shall not engage is any activity prohibited by
the AUTHORITY's applicable noise abatement procedures. AUTHORITY reserves the
right to impose fines and penalties in the event of repeated violations of such
procedures.

     (D) ENGINE RUNUPS. AIRLINE shall perform aircraft engine runups only at
locations and during time periods approved by the AUTHORITY, in its sole
discretion. The AUTHORITY reserves the right to impose fines and penalties for
failure to abide with the AUTHORITY's Rules and Regulations regarding engine
runups.

     (E) DISABLED AIRCRAFT. As soon as possible after release from proper
authorities, AIRLINE shall remove any of its disabled aircraft from the Airfield
Operations Area or aircraft parking positions, shall place any such disabled
aircraft only in such storage areas as may be designated by the AUTHORITY, and
shall store such disabled aircraft only upon such terms and conditions as may be
reasonably established by the AUTHORITY.

SECTION 305. AIRPORT SECURITY

     AIRLINE shall not do or permit its agents or employees to do any act or
thing upon the AIRPORT that will be in conflict with or violate the requirements
of the FAA's Federal Aviation Regulations regarding Airport Security or any
successor document, or the AIRPORT's FAA-approved security plan, Any fines
and/or penalties levied against the AUTHORITY for security violations at the
AIRPORT caused by AIRLINE or any of its employees, agents, contractors, or
suppliers riot directly licensed by AUTHORITY while on the AIRPORT for
AIRLINE's, business, shall be immediately due and payable to the AUTHORITY by
AIRLINE.

SECTION 306. IMPACT ON AIRPORT CERTIFICATION

     AIRLINE shall not knowingly do or permit its agents, directors, or
employees to do any act or thing upon the AIRPORT that will be in conflict or
violate the requirements of Part 139 of the federal Aviation Regulations,
"Certification and Operations: Land Airports Serving Certain Air Carriers," or
any successor regulation, order, or directive, or jeopardize the AIRPORT's
operating certificate obtained pursuant to such Federal regulations.

                                       23


SECTION 307. AIRLINE SUMMARY

     (A) Within 30 days of the date of execution of this Agreement, AIRLINE
shall file an Airline Summary, herein referred to as the "Summary," with the
AUTHORITY. AIRLINE shall provide a written Summary containing the following
information and such additional information as AUTHORITY may reasonably request:

     (i) Names, addresses, and telephone numbers of AIRLINE officials
     responsible for station operations, flight operations, properties, and
     facilities.

     (ii) The current and proposed schedules of AIRLINE's flight activity at the
     AIRPORT. AIRLINE shall notify the AUTHORITY of schedule changes or the
     addition of flights at the AIRPORT prior to or no later than, when the
     public announcement thereof is made.

     (iii) The description of AIRLINE's fleet and identification of the class of
     AIRLINE's aircraft that will serve the AIRPORT. AIRLINE shall provide
     reasonable notice of the introduction of an aircraft that is not being
     operated by AIRLINE at the AIRPORT on the date of this Agreement.

     (iv) The identification of AIRLINE's anticipated facilities requirements at
     the AIRPORT.

     (B) To the extent possible, AIRLINE shall discuss with the AUTHORITY at the
earliest date possible its consideration of changes to its operations or the
type and series of aircraft used at the AIRPORT (other than equipment
substitution necessitated by occurrences beyond the control of AIRLINE). Upon
AIRLINE's written request, the AUTHORITY shall use its best efforts to keep
nonpublic information furnished by the AIRLINE confidential and shall first
receive AIRLINE's written permission to reveal such information.

     (C) For planning purposes, AIRLINE shall, upon request, cooperate as
reasonably possible to furnish to the AUTHORITY any and all pertinent
information regarding AIRLINE's current and future operations (including
forecasts) at the AIRPORT.

     (D) Upon the AUTHORITY's written request, AIRLINE shall submit to the
AUTHORITY information regarding the following: projected levels of operations;
planted aircraft parking position utilization; type of aircraft using the
AIRPORT; operation procedures that might have an effect on the AIRPORT (such as
powerout and pushout procedures); deicing procedures and canceled trip
arrangements. The AUTHORITY shall use its best efforts to keep nonpublic
information furnished by the AIRLINE confidential and shall first receive
AIRLINE's written permission to reveal such information.

                                       24


                                   ARTICLE IV
                               ALLOCATION OF SPACE

SECTION 401. GENERAL

     The AUTHORITY intends to maximize the utilization and flexibility of
current AIRPORT facilities to meet changing air service demands.

SECTION 402. ASSIGNED FACILITIES

     (A) The AUTHORITY hereby leases to AIRLINE, subject to the provisions of
Article III, the Leased Premises as delineated and shown on Exhibits B & C.
AIRLINE will have priority in using its Preferential Use Premises in accordance
with the provisions of this Agreement

     (B) In the event that space changes are made consistent with the provisions
of this Agreement, then revised Exhibits may be substituted for those herein
without the necessity for amendment of this Agreement. In addition, the
Preferential Use Premises may be modified from lime to time by mutual agreement
of the AUTHORITY and AIRLINE.

SECTION 403. RELOCATION OF PREFERENTIAL USE PREMISES

     In order to optimize passenger flow at the AIRPORT and maximize the
functionality of the Terminal Building and operations therein, the AUTHORITY
reserves the right to reassign AIRLINE's Preferential Use Premises. Should any
such reassignment occur, AIRLINE shall be assigned new space comparable in size,
quality, finish, and location. Under no condition shall AIRLINE's costs increase
as a result of any such relocation unless AIRLINE requests additional space
and/or space replacement of a classification at higher rental rates concurrent
with such reassignment and AIRLINE shall be reimbursed for its costs incurred as
part of the relocation together with the unamortized cost of its improvements
which cannot be relocated.

SECTION 404. ACCOMMODATION THROUGH AUTHORITY-CONTROLLED FACILITIES

     The AUTHORITY may retain under its exclusive control and possession certain
AUTHORITY-Controlled Facilities. Initially, the facilities described and shown
on Exhibit D shall be the AUTHORITY-Controlled Facilities. It is the intent of
the AUTHORITY to use, at its discretion, any AUTHORITY-Controlled Facilities to
accommodate (a) the needs of Signatory Airlines and Non-Signatory Airlines and
(b) airlines not requiring permanent facilities or airlines requiring temporary
accommodation pending allocation of permanent facilities. AIRLINE may request
and the AUTHORITY tray grant to AIRLINE the right to use, in common with other
airlines, designated AUTHORITY-Controlled Facilities subject to the AIRLINE's
payment of any applicable fees.

SECTION 405. ACCOMMODATION ON PREFERENTIAL USE PREMISES

     The AUTHORITY may grant other Airlines ("Requesting Airline(s)") the right
of use in common of all or a designated portion of AIRLINE'S Preferential Use
Premises and rights of ingress and egress subject to and in accordance with the
terms and conditions of this Agreement.

                                       25


     (A) The right to use AIRLINE's Passenger Holdrooms and Assigned Apron, and
the right to use loading bridges and other appurtenant equipment and associated
support space which are reasonably necessary for the effective use of such
premises, shall be scheduled so as not to interfere with AIRLINE's scheduled
deplaning, enplaning, and servicing activities or those of any Affiliate Airline
or any other Airline that AIRLINE services under any then existing handling
agreement. In scheduling other Airlines, the AUTHORITY shall provide for
departure not less than one-half hour before AIRLINE's next scheduled arrival
and for arrival not sooner than one-half hour after AIRLINE's scheduled
departure. Provided that there is an extended period between aircraft arrival
and departure, the Passenger Holdroom and Assigned Apron shall be available for
other Airlines' use during such inactive period. AIRLINE shall have priority
over other users with respect to overnight parking on its Assigned Apron,
provided that AIRLINE may be required to remove its parked aircraft from the
gate to accommodate use by others in accordance with the provisions of this
Article IV.

     (B) With respect to AIRLINE's remaining Preferential Use Premises, AIRLINE
shall accommodate other Airlines during extended periods of non-use as requested
by the AUTHORITY in a reasonable manner.

     (C) In no event shall AIRLINE be required to permit others to use systems
proprietary to AIRLINE.

     (D) Upon the request of AIRLINE, and provided that such request does not
delay any short-term accommodation, Requesting Airline shall be required to
enter into a written agreement with AIRLINE providing AIRLINE with
indemnification and proof of insurance to AIRLINE and AUTHORITY with terms no
more stringent than those required under Article Xl hereof. In any event,
AUTHORITY shall require that the Requesting Airline sign an agreement to
indemnify the AUTHORITY and AIRLINE in connection with Requesting Airline's use
of AIRLINE's Preferential Use Premises.

SECTION 406. SHORT-TERM ACCOMMODATION

     If a Requesting Airline is in aced of space or facilities at the AIRPORT on
an immediate or incidental basis and such need cannot be reasonably met by use
of AUTHORITY-Controlled Facilities, or at facilities riot leased to Signatory
Airlines, AUTHORITY tray grant such Airline the right of use in common of a
designated portion of AIRLINE's Preferential Use Premises and the rights of
ingress and egress when such premises are not in use by AIRLINE for its
scheduled charters or irregular operations, including those of Airlines handled
by AIRLINE, in accordance with the provisions stated herein. AUTHORITY agrees to
provide notice to the AIRLINE of any proposed use of its Preferential Use
Premises by another Airline in advance as reasonably practicable under the
circumstances. Such accommodated Airline shall be responsible for its pro rata
share of Rentals, Fees, and Charges applicable to the Preferential Use Premises
used, (pro rata in accordance with the hours used as compared to the total
operating hours - which shall be 18 hours unless actual usage including RON is
greater), applicable operation and maintenance expenses, reasonable charges for
the use of property and equipment owned or leased by AIRLINE and used by such
Airline plus an administrative fee not to exceed fifteen percent (15%).

                                       26


SECTION 407.  LONG-TERM ACCOMMODATION OF OTHER AIRLINES

     (A) If a Requesting Airline, including any Airline seeking to expand its
scheduled service or an Airline seeking to begin scheduled service at the
AIRPORT, is in need of space or facilities at the Airport for an extended
period, to the extent and for so long as such need cannot reasonably be met by
use of facilities not leased to Signatory Airlines, the AUTHORITY on behalf of
the Requesting Airline shall make a written request of all Signatory Airlines
leasing Preferential Use Premises at the AIRPORT for accommodation. The request
shall be made to the person designated to receive notices under this Agreement
with a copy to the local station managers. Such Signatory Airlines shall make
reasonable efforts to accommodate such request and provide a written response to
the Requesting Airline and AUTHORITY within 10 days.

     (B) If no Signatory Airline volunteers to accommodate the Requesting
Airline's operational needs or requirements for facilities at reasonable costs
or on other reasonable terms, the AUTHORITY may, upon 30 days written
notification to AIRLINE sent by certified mail, 'rant the Requesting Airline the
right of use in common of a designated portion of AIRLINE's Preferential Use
Premises subject to the conditions contained herein. In making such
determination, the AUTHORITY will be guided by all pertinent factors, including
AIRLINE's present use and planned use for such premises in the 180 days
immediately after the request, the compatibility of such Requesting Airline's
proposed operations and work force including ground-handling operations with
AIRLINE's own operations and work force, and the security of AIRLINE's and the
Requesting Airline's operations. The AUTHORITY may request that planned uses and
requirements be documented and submitted in writing to the AUTHORITY, but the
AUTHORITY shall treat such planned uses and requirements as confidential,
proprietary information.

     (C) Prior to the implementation of such accommodation:

     (i) Requesting Airline shall pay AIRLINE fur its pro rata share of Rentals,
     Fees, and Charges applicable to the Preferential Use Premises used, (pro
     rata in accordance with the hours used as comparable to the total operating
     hours - which shall be 18 hours unless actual usage including RON is
     greater), applicable operation and maintenance expenses, and reasonable
     charges for the use of property and equipment owned or leased by AIRLINE
     used by Requesting Airline plus an administrative fee not to exceed fifteen
     percent (l5%).

     (ii) Prior to implementing a long-term accommodation, AIRLINE may require a
     reasonable security deposit from the Requesting Airline not to exceed 3
     months estimated payments due AIRLINE under terms and conditions similar to
     those set forth in Section 605. In the event of Requesting Airline's
     failure to make payment when due, AIRLINE shall have the right to use such
     security deposit to pay any amount owed to AIRLINE by the Requesting
     Airline then due and payable and/or to apply the proceeds thereof to any
     cost or expense or damages incurred by AIRLINE as a result of Requesting
     Airline's failure to pay. In the event that any such security deposit or
     portion thereof is utilized, as aforesaid. Requesting Airline shall be
     required to replenish or provide a renewal or replacement security deposit
     within 10 days of being notified to do so by the AIRLINE. At such time as a
     Requesting Airline has operated at the AIRPORT for at least 12 consecutive
     months and during such period has made timely

                                       27


     payment to the AUTHORITY of all Rentals. Fees, and Charges and to the
     AIRLINE of payments owed applicable to its use of AIRLINE's Preferential
     Use Premises, AIRLINE shall release the Requesting Airline of this security
     deposit requirement, refunding any funds or other forms of security held by
     AIRLINE, except that if in the reasonable judgment of AIRLINE the
     accommodated airline retains some risk of non-payment after the expiration
     of the 12 month period, AIRLINE may continue to retain security deposit At
     any time during an accommodation, should the Requesting Airline not
     continue to satisfy the terms of this Section, AIRLINE may demand a
     security deposit from Requesting Airline as described herein. In such
     event, Request Airline shall satisfy such demand within 10 days of notice
     thereof. In the event Requesting Airline fails to provide a security
     deposit, such deposit is insufficient to cover amount due AIRLINE, or
     Requesting Airline is in default to AIRLINE on more than one occasion,
     AIRLINE may institute termination procedures in the following manner: (a)
     AIRLINE shall provide written evidence of the circumstances to the
     AUTHORITY and (b) may terminate the Requesting Airline's use of such
     premises, including AIRLINE-owned equipment upon 15 days notice to
     Requesting Airline.

     (iii) Requesting Airline shall make improvements and alterations
     necessitatcd by the accommodation, the scope of which shall be approved by
     AIRLINE and AUTHORITY.

     (iv) Upon the termination of such use in common with AIRLINE, Requesting
     Airline shall be responsible for returning all facilities to the condition
     received, except normal wear and tear, unless AIRLINE and AUTHORITY release
     Requesting Airline from this requirement.

     (v) AIRLINE shall have the first right to ground-handle Requesting Airline
     if the Requesting Airline does not intend to self-handle or be handled by
     Requesting Airline's then existing contracted handler at the AIRPORT,
     provided that the handling of Requesting Airline does not interfere with
     AIRLINE's operation, including labor work rules, or notably increase risk
     to AIRLINE by increasing ramp congestion in or around AIRLINE's Assigned
     Apron.

SECTION 408. CONSOLIDATION OF OPERATION

     (A) In the event the AUTHORITY has a need for additional facilities for a
Requesting Airline and the AUTHORITY believes that AIRLINE is under-utilizing
its Preferential Use Premises and is able to consolidate its operation without
sacrificing its operational integrity or that of its Affiliated Airline(s) or
those Airlines under contract with AIRLINE for ground-handling services and
being handled in the same facilities, the AUTHORITY may, upon 30 days prior
written notice to AIRLINE, require AIRLINE to consolidate its operations onto
its remaining Preferential Use Premises. In the event that the Requesting
Airline is willing to become a Signatory Airline, AUTHORITY may terminate this
Agreement with respect to and delete from AIRLINE's Preferential Use Premises
such Passenger Holdrooms, associated Assigned Apron and support space as
specified by the AUTHORITY. In the event that the Requesting Airline is not
willing to become a Signatory Airline, Requesting Airline shall be required to
sublease front AIRLINE such specified Passenger Holdrooms and

                                       28


associated Assigned Aprons and associated support space provided by AIRLINE
for Requesting Airline's use. If subsequent to such sublease, AIRLINE desires to
resume use or shared use of such space, AIRLINE shall provide documentation to
AUTHORITY to support such need including; future plans for service. Upon
AIRLINE's submission of such documentation, AUTHORITY shall provide at least 60
days prior written notice to the Requesting Airline and make provisions for
AIRLINE's preferential use of such premises.

     (B) For purposes of Section 408(A), under-utilization shall be determined
by the AUTHORITY in its discretion but taking into account AIRLINE's space
requirements to accommodate normal operating procedures of AIRLINE and planned
use by the AIRLINE for such premises in the next 180 days and normal seasonal
variations.

     (C) AIRLINE may request the AUTHORITY to reconsider its determination of
under-utilization within 15 business days of receipt of AUTHORITY's written
notice to consolidate. In such event, AIRLINE shall provide such documentation
to show future plans for service and other information requested by the
AUTHORITY. The AUTHORITY shall make the determination, which it believes best
meets its overall goals for the AIRPORT.

     (D) If AUTHORITY elects to proceed with the consolidation of space after
such reconsideration, AUTHORITY shall give AIRLINE not less than 30 days notice
to vacate the space in question.

     (E) When granted use of space under the provisions of this Section 408, the
Requesting Airline shall have the right in all cases to ground-handle their own
operations or to be handled by the operators of their choice.

     (F) In the event there is no Event of Default with respect to AIRLINE,
AUTHORITY shall pay the cost to relocate AIRLINE's equipment, furniture, and
signage plus the unamortized cost of AIRLINE's improvements that cannot be
relocated.

SECTION 409. RELINQUISHMENT OF ABANDONED SPACE

     In the event that the AUTHORITY determines that AIRLINE has abandoned or
constructively abandoned all or a portion of its Preferential Use Premises, the
AUTHORITY may, but is not obligated to, upon 30 days' written notice to AIRLINE,
terminate this Agreement with respect to, and delete from AIRLINE's Preferential
Use Premises hereunder, such Passenger hold rooms, Assigned Aprons and
associated support space. For purposes of this Section, abandoned or
constructively abandoned shall be determined by the AUTHORITY in its sole
discretion but taking into account planned use by the AIRLINE for such premises
in the next 180 days and normal seasonal variations. Non use for a period of
more than 30 days shall defacto constitute abandonment. AIRLINE may request the
AUTHORITY to reconsider its determination of abandonment. In such event, AIRLINE
shall provide such documentation to show future plans for service and other
information requested by the AUTHORITY. The AUTHORITY shall make the
determination that it believes best meets its overall goals for the AIRPORT.

                                       29


                                    ARTICLE V
                           RENTALS, FEES, AND CHARGES

SECTION 501. CALCULATION OF RENTALS, FEES, AND CHARGES

     (A) On or before sixty (60) days prior to the end of any Rate Period during
the term of this Agreement, the AUTHORITY shall establish and notify AIRLINE:
and other Signatory Airlines of the Signatory Airlines' Terminal Building Rental
fates, including the schedule of Differential Terminal Building- Rental Rates as
called for in Section 502(F) hereof; the Landing Fee Rate, the Apron Fee Rates,
the LEO Requirement, and other Rentals, Fees, and Charges to be in effect for
the immediately following Rate Period. Said rates arid charges shall be
calculated and set forth in a document prepared by the AUTHORITY. Said document
shall also include a schedule of new Capital Projects to be included in rates
and charges calculations or initiated during the Rate Period which are nut
otherwise covered or excepted by the provisions of Article X. Said schedule
shall include a description, cost estimate and the proposed source of funding
for each Capital Project. The AUTHORITY's notice to AIRLINE and the other
Signatory Airlines shall include notice of the time and place of a meeting, to
be held not earlier than 15 days following the AUTHORITY's notification, to
discuss and answer questions of AIRLINE and other Signatory Airlines concerning
said Rentals. Fees, and Charges and the above referenced Capital Projects.

     (B) For each Rate Period covered by this Agreement, the estimated Authority
Requirement shall be calculated, charged, and allocated to the Authority's
Direct and Indirect Cost Centers by the AUTHORITY in accordance with the
AUTHORITY's cost accounting and cost allocation system. The net amount of the
Authority Requirement allocated to each Indirect Cost Center shall be
reallocated to benefiting Direct Cost Centers based on each benefiting Direct
Cost Center's proportionate share of the estimated direct Operating Expenses for
all benefiting Direct Cost Centers

     (C) Prior to the reallocation of the Indirect Cost Centers to Direct Cost
Centers, the Authority shall reallocate from the Terminal Building Cost Center
to the Administration Cost Center that portion of tire direct Authority
Requirement allocable to the Administrative space within the Terminal Building.
The amount to be allocated shall be calculated by multiplying the direct
Authority Requirement initially allocated to the Terminal Building Cost Center
by the percentage the square footage of Administrative Space is to the total
square footage of Rentable Space, plus Administrative Space.

SECTION 502. CALCULATION OF TERMINAL BUILDING RENTAL RATES

     The AUTHORITY shall calculate the average Terminal Building Rental Rate for
each Rate Period as follows:

     (A) The Terminal Building Requirement shall be calculated as the sum of the
Authority Requirement calculated, charged, allocated, and reallocated to the
Terminal Building Cost Center by the AUTHORITY in accordance with Section 501(B)
plus the allocated share of the net Authority Requirement from Indirect Cost
Centers.

                                       30


     (B) The Terminal Building Requirement shall be reduced by the sum of the
following estimated amounts to the extent allocated to the Terminal Building
Cost Center to determine the Net Terminal Building Requirement:

     (i) Reimbursements

     (ii) Applied PFCs; and

     (iii) Transferred Coverage.

     (C) The average Terminal Building Rental Rate shall be calculated by
dividing the Nut Terminal Building Requirement by the total Rentable Space in
the Terminal Building.

     (D) The Signatory Airline Net Terminal Building Requirement shall be
calculated by multiplying the average Terminal Building Rental Rate determined
in 502(C) above by the Signatory Airline Terminal Building Leased Premises,
adding to said amount the deficit, if any, in the Signatory Airline's Rentals,
Fees, and Charges related to the Terminal Building Cost Center from the
preceding Rate Period and then reducing the amount so determined by (i) the
surplus, if any, in the Signatory Airline Rentals, Fees and Charges related to
the Terminal Building Cost Center from the preceding Rate Period and (ii)
revenue from Non-Signatory Airline allocable to Common Use Premises.

     (E) The average Signatory Airlines Terminal Building Rental Rate shall be
calculated by dividing the Signatory Airline Net Terminal Building Requirement
by the Signatory Airline Terminal Building Leased Premises.

     (F) Based on the average Signatory Airline Terminal Building Rental Rate
calculated in Section 502(E) above, the classifications and weighting factors
for Airline Rentable Space set forth in Exhibit E and the schedule of Signatory
Airline Leased Premises established in Exhibit B. the AUTHORITY shall calculate
a schedule of Differential Terminal Building Rental Rates for said Rate Period
in accordance with the methodology established in Exhibit E.

SECTION 503. CALCULATION OF LANDING FEE RATE

     The AUTHORITY shall calculate the Signatory Airline landing Fee Rate for
each Rate Period as follows:

     (A) The Airfield Area Requirement shall be calculated as the sum of the
Authority Requirement calculated, charged, and allocated to the Airfield Area
Cost Center by the Authority in accordance with Section 501 (B) above, plus:

     (i) The estimated deficit, if any, in the Airfield Area Cost Center from
     the preceding Rate Period; and

     (ii) The allocated share of the net Authority Requirement from Indirect
     Cost Centers.

                                       31


     (B) The Airfield Area Requirement shall be reduced by the sum of the
following estimated amounts to the extent allocated to the Airfield Area Cost
Center to determine the Net Airfield Area Requirement-

     (i) Non-Signatory Airline landing fees exclusive of Signatory Cargo
     Carriers Landing Fees;

     (ii) Other Airfield Area Cost Center Non-Airline Revenue;

     (iii) LEO Fees;

     (iv) Investment Income on the principal and interest account of any debt
     service fund allocated to the Airfield Area Cost Center;

     (v) Applied PFCs;

     (vi) Transferred Coverage; and

     (vii) The estimated surplus, if any, in the Airfield Area Cost Center
     from the previous Rate Period.

     (C) The Signatory Airline Landing Fee Rate shall be that amount determined
by dividing the Net Airfield Area Requirement as determined in Section 503(B)
above by the estimated Maximum Certificated Gross Landed Weight of all Revenue
Aircraft Arrivals by Signatory Airlines and the Signatory Cargo Carriers for
said Rate Period.

SECTION 504. CALCULATION OF APRON FEE RATES

     The AUTHORITY shall calculate the Apron Fee Rates for each Rate Period as
follows:

     (A) The Apron Requirement shall be calculated as the sum of the Authority
Requirement calculated, charged, and allocated, to the Apron Cost Center by the
AUTHORITY in accordance with Section 501 (B) above; plus

     (i) The estimated deficit, if any, in the Apron Cost Center from the
     previous Rate Period; and

     (ii) The allocated share of the net Authority Requirement from Indirect
     Cost Centers.

     (B) The Apron Requirement shall be reduced by the sum of the following
estimated amounts to the extent allocated to the Apron Cost Center to determine
the Net Apron Requirement:

     (i) Non-Signatory Airline Apron Fees;

     (ii) Other Apron Non-Airline Revenue;

     (iii) Applied PFCs;

                                       32


     (iv) Investment income on the principal and interest account of any debt
     service fund allocated to the Apron Cost Center:

     (v) Transferred Coverage; and

     (vi) The estimated surplus, if any, in the Apron Cost Center from the
     previous Rate Period.

     (C) Apron Fee Rates shall then be calculated as follows:

     (i) Fifty percent (50%) of the Net Apron Requirement shall be divided by
     the total square footage of all Signatory Airline Assigned Apron space, as
     shown on Exhibit C, to determine the "Apron Square Footage Rate"; and

     (ii) Fifty percent (50%) of the Net Apron Requirement shall be divided by
     the total of all Signatory Airline Revenue Landed Weight reported during
     the previous twelve-month period to determine the "Apron Landed Weight
     Rate".

SECTION 505. CALCULATION OF LEO REQUIREMENT

     The AUTHORITY shall calculate the LEO Requirement as follows:

     (A) The AUTHORITY shall calculate the total personnel cost and other
Operating Expenses, both direct :and indirectly, for the Rate Period chargeable
or allocable to the operation, management, and administration of the AUTHORITY's
Public Safety Officer Division. The amount so determined hereinafter being
referred to as the "Public Safety Officer Cost" for said Rate Period.

     (B) The AUTHORITY shall then estimate the percentage of Public Safety
Officer Cost for that Rate Period applicable to Public Safely Officers deployed
in providing LEO Support to the Airlines under F.A.R. Part 108, "LEO support
percentage."

     (C) The AUTHORITY shall then determine the LEO Requirement for said Rate
Period which shall be the product of the Public Safety Officer Cost determined
in Section 505(A) and the LEO Support Percentage determined in Section 505(B).

SECTION 506. TERMINAL BUILDING RENTALS

     In accordance with Section 601 of this Agreement, AIRLINE shall pay to the
AUTHORITY annual rentals for its Leased Premises for each Rate Period as
follows:

     (A) For its Leased Premises shown on Exhibit B, AIRLINE shall pay the
amount which is the product of the square footage of said Leased Premises and
the applicable Differential Terminal Building Rental Rates for said Rate Period
determined in accordance with Section 502, hereof, and Exhibit E.

                                       33


     (B) For its use of the Shared Use Premises shown on Exhibit B, AIRLINE
shall pay the amount determined by applying the applicable Shared Use Charges
Formula to the Terminal Building Rental for said Shared Use Premises (the
product of the applicable Differential Terminal Building Rental Rate for said
Rate Period and the square footage of said Shared Use Premises).

     (C) For its use of the Common Use Premises shown on Exhibit B, AIRLINE
shall pay the amount determined by applying the Common Use Charges Formula to
the Terminal Building Rental for said Common Use Premises (the product of the
applicable Differential Terminal Building Rental Rate for said Rate Period and
the square footage of said Common Use premises).

SECTION 507. LANDING FEES

     In accordance with Section 601 of this Agreement, AIRLINE shall pay to the
AUTHORITY a Landing Fee for each Revenue Aircraft Arrival by an aircraft
operated by AIRLINE at the AIRPORT, which shall be an amount equal to the
product of the Maximum Certificated Gross Landed Weight of the aircraft making
said Revenue Aircraft Arrival and the Landing Fee Rate.

SECTION 508. APRON FEE

     In accordance with Section 601 of this Agreement, AIRLINE shall pay to the
AUTHORITY an Apron Fee which shall be the sum of the following amounts:

     (i) The amount determined by multiplying the applicable Apron Square
     Footage Rate, as calculated in Section 504(C), by the square footage in
     AIRLINE's Assigned Apron as shown on Exhibit C;

     (ii) The amount determined by multiplying the Apron Landed Weight Rate, by
     AIRLINE's Revenue Landed Weight using the most recently reported six month
     period fir landed weights, to be effective January 1 and July 1 of each
     rate period; and

     (iii) The AUTHORITY shall estimate Revenue Landed Weight for AIRLINE if
     AIRLINE commences or ceases service at the AIRPORT during any Rate Period.

SECTION 509. LEO FEE

     AIRLINE shall pay the AUTHORITY a LEO Fee each Rate Period which shall be
the amount determined by multiplying the LEO Requirement for said Rate Period by
the applicable AIRLINE's Variable Charges Percentage in effect for the Rate
Period.

SECTION 510. TAXES, ASSESSMENTS, LICENSES, AND PERMIT FEES

     (A) AIRLINE shall pay for the cost of all taxes, including any possessory
interest tax, payment in lieu of taxes, assessments, and charges of a like
nature, if any, which at any tithe during the term of this Agreement may be
levied or become a lien by virtue of any levy, assessment, or charge by the
federal government, the State of Ohio, the County of Franklin, the City of
Columbus, any other municipal corporation, or other local government entity
having

                                       34


jurisdiction over the AIRPORT, any government successor to AUTHORITY to the
foregoing, or any other tax or assessment levying bodies, in whole or in part,
upon or in respect to any of AIRLINE's Leased Premises under this Agreement or
any other space or facilities of the AIRPORT as assigned or otherwise are made
available for use by AIRLINE hereunder, or upon or in respect to any personal
property belonging to AIRLINE situated on the Leased Premises or elsewhere under
this Agreement.  AUTHORITY shall pay and charge back as a Supplemental Charge
any and all applicable taxes or special assessments which may he levied upon
AIRLINE's Leased Premises.  AUTHORITY shall pay and include as an Operating
Expense herein any and all applicable taxes or special assessments which may be
levied upon the non-leased areas of the Terminal Building, Apron, or the
Airfield Operations Area.

     (B) The AIRLINE shall also pay any fees associated with any and all
licenses, permits, certificates and other authorizations required by any
governmental authority in connection with the operations or activities performed
by AIRLINE hereunder.

     (C) The AIRLINE may, at its own expense, contest the amount or validity of
any tax or assessment, or the inclusion of the Leased Premises under this
Agreement as taxable or assessable property, directly against the taxing or
assessing authority.

     (D) Upon the termination or expiration of this Agreement, all lawful taxes
then levied or a lien upon any such property or taxable interest therein,
including the Preferential Use Premises, shall be paid in full by AIRLINE
forthwith, or as soon as a statement thereof has been issued by the tax
collector if termination occurs during the interval between attachment of the
lien and issuance of a statement.

SECTION 511. ELECTRIC SERVICE

     AIRLINE shall pay to the AUTHORITY, for AIRLINE's use and occupancy of
Leased Premises under this Agreement, a charge for electrical current furnished
by the AUTHORITY to each such area, said charge to be computed as follows:

     (A) In metered areas at a rate equal to AIRLINE's usage multiplied by the
rate the AUTHORITY pays for such electric services.

     (B) In unmetered areas at a rate per square foot of occupied Preferential
Use Premises determined by averaging the total electric service charges for all
square footage in the unmetered areas of the Terminal Building, or in proportion
to the amount used as established by an electrical consultant appointed by the
AUTHORITY.

     (C) In Common Use Premises, electrical service charges shall be added to
the operation and maintenance expenses allocated to those premises.

     (D) In Shared Use Premises, the electrical service charges shall be shared
by the users of such premises based on the Shared Use Charges Formula.

                                       35


SECTION 512. SUPPLEMENTAL CHARGES

     AIRLINE shall pay to the AUTHORITY, for each Rate Period hereof, any
applicable Supplemental Charges including, but not limited to: charges for use
of AUTHORITY-owned passenger loading bridges, AUTHORITY-funded Tenant
Improvements, security badging, employee parking, aircraft parking fees, Federal
Inspection Services (FIS) facility fees and other AUTHORITY-provided facilities
and services as may be determined by the AUTHORITY.

SECTION 513. GENERAL AIRLINE CREDIT

     (A) For each Rate Period under this Agreement, the AUTHORITY shall credit
against charges otherwise due from AIRLINE and the outer Signatory Airlines a
"General Airline Credit", as specified in Section 513(B) hereof.

     (B) The General Airline Credit to be applied for each Rate Period of the
term of this Agreement is $5,300,000.

     (C) AIRLINE's share of the General Airline Credit shall be calculated as
follows:

     (i) One-half of the General Airline Credit shall be allocated among
     Signatory Airlines based on each Signatory Airline's percentage of the
     Originating Enplaned Passengers for all the Signatory Airlines for the most
     recently reported 6-month period; and

     (ii) One-half of the General Airline Credit shall be allocated among
     Signatory Airlines ratably according to each Signatory Airline's percentage
     of the total Rentals, Fees, and Charges for all Signatory Airlines for the
     most recently reported six-month period; and

     (iii) The allocation of AIRLINE's and each Signatory Airline's share of the
     General Airline Credit shall be calculated for each six-month period to be
     effective January I and July I of each Rate Period. Said allocation shall
     also be recalculated and adjusted by the AUTHORITY for the commencement or
     cessation of service by a Signatory Airline during any six-month period.

     (D) Credit for AIRLINE's share of each Rate Period's General Airline Credit
shall be made in equal monthly installments by applying said amount as a credit
against AIRLINE's monthly invoices for Rentals, Fees, and Charges hereunder.
Unless AIRLINE specifically directs the AUTHORITY, in writing, to allocate said
credit under a different method, the General Airline Credit shall be applied pro
rata against AIRLINE's estimated charges for Terminal Building Rentals, Landing
Fees, and Apron Fees. AIRLINE may make any changes in its allocation direction
effective only at the beginning of a new Rate Period. At the time the annual
budget is prepared, AUTHORITY shall solicit in writing AIRLINE's preferred
allocation of the General Airline Credit for the subsequent Rate Period.

     (E) Notwithstanding the foregoing, the General Airline Credit shall only
apply as a credit against amounts owed to the AUTHORITY and AIRLINE shall not be
entitled to its share of any General Airline Credit for any month in which it is
in default in its payment of any Rentals, Fees, Charges, PFCs, or any other
amounts owed hereunder to the AUTHORITY. In the

                                       36


event of a Signatory Airline's Event of Default with respect to such nonpayment,
which has not been cured or otherwise remedied to the satisfaction of the
AUTHORITY, the amount of the General Airline Credit that would have been
credited to the defaulting Signatory Airline shall be first applied to
satisfying payment of any such unpaid amounts plus any costs and expenses of the
AUTHORITY relating to such default. The remaining amount of the General Airline
Credit that would otherwise be credited to said defaulting Signatory Airline
shall be apportioned among the remaining Signatory Airlines based on their then
pro rata share of the remaining amount of the General Airline Credit calculated
in accordance with Section 513(C) above,

     (F) The General Airline Credit provided for herein has been formulated and
will be applied by the AUTHORITY solely for the purpose of mitigating the impact
of transitioning from the rates and charges as calculated under the former
AIRPORT operating agreements and terminal building leases to the Rentals, Fees,
and Charges as calculated under this Agreement.

     (G) The General Airline Credit shall expire at the expiration of the term
of this Agreement and the AUTHORITY shall have no obligation to carry forward or
re-institute this credit in any successor agreement to this Agreement or in any
subsequent Airline rates and charges established by the AUTHORITY.

SECTION 514. PFCS TO BE HELD IN TRUST FOR THE AUTHORITY

     (A) AIRLINE acknowledges that AUTHORITY shall have the right to assess
airline passengers a passenger facility charge for the use of the AIRPORT in
accordance with 49 U.S.C. Section 40117 and the rules and regulations thereunder
(14 C.F.R. Part 158, herein the PFC Regulations) and as otherwise hereinafter
authorized or permitted, AIRLINE shall collect on behalf of and remit to
AUTHORITY any such charges in accordance with the requirements of the PFC
Regulations, including but not limited to holding any charges collected by the
AIRLINE, pending remittance to AUTHORITY, in trust for the benefit of AUTHORITY.
AUTHORITY shall have the right to use all such passenger facility charges
collected in any lawful manner.

     (B) AIRLINE and AUTHORITY shall be bound by and shall observe all of the
provisions of the PFC Regulations as they apply to either or both parties.

     (C) If AIRLINE fails to remit PFC revenue to the AUTHORITY within the
time limits established by the PFC Regulations and within 10 calendar days after
receipt of a written notice of non-payment from AUTHORITY, AIRLINE shall be
deemed to be in default pursuant to Section 1301.  Any late payment of PFC's
shall be subject to interest computed in accordance with Section 601(C).

SECTION 515. ADJUSTMENT OF CERTAIN FEES DURING THE RATE PERIOD

     If during a Rate Period, the AUTHORITY's projections, based upon its most
recently available information with regard to the Authority Requirement incurred
and Non-Airline Revenues actually realized during such Rate Period for the
Airfield Area Cost Center and Apron Cost Center, and with regard to the
Authority Requirement incurred for the Terminal Building Cost Center, together
with the most recently available information with respect to actual or projected
Signatory Airline and Signatory Cargo Landing activity and Signatory Airline
Assigned Apron and Terminal Building Leased Premises, indicates that payment of
Landing Fees, Terminal Building Rentals, or Apron Fees by AIRLINE and the other
Signatory Airlines at the then-

                                       37


existing rates would result in an underpayment or overpayment by the
Signatory Airlines of ten percent (10%) or more of the amount required hereunder
during such Rate Period, the AUTHORITY may adjust the remaining monthly
Signatory Landing Fee Rate, Terminal Building Rental Rate, or Apron Fee Rates
for such Rate Period to conform to its current projections. Such adjustments may
not be made more than 2 times per Rate Period. The AUTHORITY shall notify
AIRLINE of its intent to adjust said fees and charges and the effective date of
such proposed adjustment (which shall be no earlier than 45 days after the
giving of such notice) and provide the financial justification therefor. If the
Signatory Airlines shall request, the AUTHORITY shall meet with the Signatory
Airlines within said 45 day period to further explain said adjustment.

                                       38


                                   ARTICLE VI
                     PAYMENT OF RENTALS, FEES, AND CHARGES

SECTION 601. MANNER OF PAYMENT

     (A) AIRLINE agrees to pay all sums due under this Agreement in lawful money
of the United States of America, without notice or demand, without deduction or
setoff, by check, made payable to the Columbus Municipal Airport Authority,
which check shall be delivered postage or other charges prepaid to:

BY U.S. MAIL:                   Columbus Municipal Airport Authority
                                P.O. Box: 360476
                                Columbus, Ohio 43236-0476
                                Attention: Accounts Receivable

BY EXPRESS MAIL:                Columbus Municipal Airport Authority
                                4600 International Gateway
                                Columbus, Ohio 43219
                                Attention: Accounts Receivable

BY WIRE TRANSFER:               Columbus Municipal Airport Authority
                                To routing number as provided by the AUTHORITY

                                With confirmation sent by facsimile to
                                Attention: Accounts Receivable
                                (614) 239-4066
                                or other notification process approved by the
                                Authority

     AIRLINE may pay at such other place or by such other method as may
hereafter be designated by the AUTHORITY.

     (B) Amounts due shall be payable as follows:

     (i) Terminal Building Rentals for Preferential Use Premises within the
     Terminal Building together with all fixed annual sums due as certain
     Supplemental Charges shall be paid in 12 equal monthly installments, in
     advance, not later than the first day of the month for which they are due.

     (ii) Terminal Building Rentals for Common Use Promises shall be paid in 12
     equal monthly installments, in advance, not later than the first day of the
     month for which they are due. AIRLINE's monthly installments for Terminal
     Building Rentals for Common Use Premises shall be that amount determined by
     multiplying one-twelfth of the applicable annual Terminal Building Rental
     for the Common Use Premises in question by the applicable Common Use
     Charges Formula, as defined and further described in Section 506(C) hereof.

     (iii) Terminal Building Rentals for Shared Use Premises shall be paid in 12
     equal monthly installments, in advance, not later than the first day of the
     month for which they are due. AIRLINE's monthly installments for Terminal
     Building

                                       39


     Rentals for Shared Use Premises shall be that amount determined by
     multiplying one-twelfth of the applicable annual Terminal Building Rental
     for the Shared Use Premises in question by the applicable Shared Use
     Charges Formula, as defined and further described in Section 506(B) hereof.

     (iv) Apron Fees shall be paid in monthly installments, in advance, not
     later than the first day of the month for which they are due. AIRLINE's
     monthly installments for Apron Fees for each six-month period beginning
     January I and July I of each Rate Period shall be one-sixth of AIRLINE's
     Apron Fee for the period calculated in accordance with the formula in
     Section 508 hereof.

     (v) Landing Fees shall be paid monthly, in arrears, by the tenth day of the
     month for the preceding month's Revenue Aircraft Arrivals.

     (vi) Landing Fees for all aircraft landings at the AIRPORT ground-handled
     by AIRLINE (except those of a Signatory Airline) which AIRLINE has agreed
     to report and collect or has collected, shall be paid monthly, in arrears,
     by the tenth day of the month for the preceding month's aircraft
     ground-handled by AIRLINE.

     (vii) The LEO Fees shall be paid monthly, in advance, not later than the
     first day of the month for which they are due. AIRLINE's monthly LEO Fee
     shall be that amount determined by multiplying one-twelfth of the LEO
     Requirement for that Rate Period by AIRLINE's applicable Variable Charges
     Percentage.

     (viii) Utility, tax and service charges, and any other charges, payments,
     reimbursements, and fees due under this Agreement and accruing in any
     month, including activity related Supplemental Charges, shall be paid by
     AIRLINE no later than 10 business days following invoicing by the
     AUTHORITY.

     (ix) PFCs shall be paid monthly to the AUTHORITY in accordance with the
     remittance requirements of the PFC Regulations as amended or supplemented
     from time to time.

     (C) If AIRLINE shall fail to make payment of any AIRLINE Rental, Fees,
Charges, PFC, Supplemental Charge, or any other payment due the AUTHORITY by the
due date thereof, AIRLINE shall pay to the AUTHORITY, in addition to all other
remedies available to the AUTHORITY and all other payments to be made by AIRLINE
to the AUTHORITY, a late charge equal to one and one half percent (1 1/2%) per
month on the overdue amount, and the reasonable costs and attorney's fees
incurred by the AUTHORITY in attempting to obtain payment, if any.

     (D) The AUTHORITY shall have the right to set-off any past due amount(s)
owed the AUTHORITY by AIRLINE by applying all or a portion of AIRLINE's current
payments to such past due amount(s). Past due amounts may include sums due under
prior agreements, this Agreement, or for usage of the AIRPORT as a Non-Signatory
Airline. In the event the AUTHORITY exercises its right of set-off, as
aforesaid, it shall notify AIRLINE of the set-off, including the amount thereof.
AIRLINE shall then promptly make payment to the AUTHORITY of such sum as needed
to satisfy current amounts due. Notwithstanding the foregoing, AIRLINE

                                       40


shall not abate, suspend, postpone, set-off, or discontinue any payments of
Rentals, Fees, Charges, Supplemental Charges, or other payments payable to the
AUTHORITY hereunder.

SECTION 602. AIRLINE FINANCIAL REPORTS

     (A) AIRLINE shall complete and file with the AUTHORITY no later than the
10th day of each month, on forms acceptable to the AUTHORITY, reports
summarizing statistics and information for AIRLINE's prior month operations at
the AIRPORT necessary for the computation of Rentals, Fees and Charges and
Supplemental Charges established under this Agreement, and such other
statistical and financial data as is necessary for the computation and
administration of AIRLINE's financial obligations under this Agreement,
including but not limited to the following data:

     (i) A report of AIRLINE's operations at the AIRPORT, (separated by company
     if any Affiliated Airlines are operating at the AIRPORT under this
     Agreement) including aircraft arrivals, aircraft departures, AUTHORITY-
     Controlled Passenger Holdrooms, Maximum Certificated Gross Landed Weight of
     said aircraft arrivals, and Revenue Aircraft Arrivals, by aircraft type;

     (ii) AIRLINE's Originating Enplaned Passengers and Deplaned Passengers,
     separately identified, with deplanements segregated by terminating, and
     on-line and off-line transferring passengers;

     (iii) The amount (in pounds) of cargo, freight, mail, and express mail
     handled by AIRLINE for the month; and

     (iv) Statistics required by subparagraphs (i) through (iii) above, for each
     Airline ground-handled by AIRLINE for which AIRLINE has agreed to make such
     reports and which do not otherwise have an agreement with the AUTHORITY
     governing the reporting of said statistics to the AUTHORITY or does not
     have written authorization from the AUTHORITY to separately report said
     statistics.

     (B) Not later than 120 days prior to the end of each Rate Period, AIRLINE
shall make its best effort to furnish the AUTHORITY with an estimate of:

     (i) The total Revenue Aircraft Arrivals and Maximum Certificated Gross
     Landed Weight of all aircraft to be landed at the AIRPORT by AIRLINE during
     the following Rate Period;

     (ii) The projected number of Originating Enplaned Passengers, Deplaned
     Passengers and through passengers of AIRLINE during the next ensuing Rate
     Period summarized by month with an estimate of terminating Deplaned
     Passengers separately identified; and

     (iii) Such other estimates relating to anticipated operations at the
     AIRPORT by AIRLINE for the next ensuing Rate Period as the AUTHORITY may
     reasonably request.

                                       41


     (C) AIRLINE hereby agrees to cooperate as reasonably practical and possible
with the AUTHORITY in establishing procedures for electronic submission of the
reports required in this Section 602.

SECTION 603. FAILURE TO REPORT

     (A) If AIRLINE fails to furnish the AUTHORITY with complete reports as
required by Section 602 for any month, AIRLINE's Rentals, Fees, Charges and
Supplemental Charges shall be determined by assuming that the Maximum Gross
Landed Weight of AIRLINE's Revenue Aircraft Arrivals, Enplaned Passengers, and
Deplaned Passengers for such month were one hundred twenty-five percent (125%)
of the highest reported monthly Maximum Gross Landed Weight of Revenue Aircraft
Arrivals, Originating Enplaned Passengers, and Deplaned Passengers reported by
AIRLINE in the immediately preceding twelve month period and AIRLINE shall make
payment to the AUTHORITY for Rentals, Fees, and Charges, and Supplemental
Charges based upon said estimates. Any necessary adjustment in such Rentals,
Fees, Charges, or Supplemental Charges shall be calculated after an accurate
report is delivered to the AUTHORITY by AIRLINE for the month in question.
Resulting surpluses or deficits shall be applied as credits or charges to the
appropriate charges or invoices in the month succeeding reconciliation.

     (B) The AUTHORITY shall have the right to rely on said activity reports in
determining Rentals, Fees, Charges, and Supplemental Charges due hereunder.
AIRLINE shall have full responsibility for the accuracy of said reports. Late
payment and payment deficiencies due to incomplete or inaccurate activity
reports shall be subject to the late payment and late penalty charges as set
forth in Section 601(C) hereof.

     (C) The acceptance by the AUTHORITY of any AIRLINE payment shall not
preclude the AUTHORITY from verifying the accuracy of Airline's reports or
computations, or from recovering any additional payment actually due from
AIRLINE. Interest on any additional amount due shall accrue thereon from the
date the payment was originally due at the rate prescribed and calculated in
Section 601(C) hereof.

     (D) AIRLINE acknowledges that the AUTHORITY incurs additional
administrative expense if AIRLINE'S monthly reports are not filed when due, are
incomplete or are inaccurate. To compensate the AUTHORITY for this
administrative expense, AIRLINE agrees to pay the AUTHORITY a charge of $50.00
(increasing by $50 for each instance to a maximum of $250 per instance) for each
monthly report which is not complete or received by its due date. Said payment
shall be paid within thirty (30) days of the AUTHORITY'S invoice therefor. This
charge shall be, in addition to, and not in lieu of charges and reimbursements
required by Section 603(B) above.

SECTION 604. AIRLINE AND AUTHORITY RECORDS AND AUDIT

     (A) AIRLINE shall maintain and/or make available within 10 business days of
notice from the AUTHORITY at its office in Columbus, Ohio, or at the AIRPORT,
books, records, and accounts, including computerized records, relevant to the
determination and payment of any Rentals, Fees, and Charges, Supplemental
Charges, PFCs, and other payments due hereunder including, without limitation,
records of its aircraft arrivals and departures, gate utilization, Originating
Enplaned Passengers, Deplaned Passengers, aircraft of other Airlines
ground-handled, sublease and subcontracted services arrangements at the AIRPORT.
Each such item of

                                       42


information shall be maintained for a period of at least three years from the
reporting period for which the documents were created and longer if necessary
for pending litigation.  AIRLINE shall promptly furnish the AUTHORITY with all
information requested with respect to such books, records, and accounts,
including computerized records.  The AUTHORITY and such persons as may be
designated by it, including its auditors and financial consultants, shall have
the right, during normal business hours, within 10 business days of written
notice to AIRLINE, to examine, audit, make copies of, and take extracts from
such books, records, and accounts, including computerized records.

     In lieu of AIRLINE maintaining or providing the aforereferenced books,
records, and accounts, including computerized records, within the City of
Columbus or at the AIRPORT, AIRLINE may maintain and provide access to said
books, records, and accounts, including computerized records, at its corporate
headquarters.  If such books, records, and accounts, including computerized
records, are made available to the AUTHORITY at AIRLINE's offices, AIRLINE shall
provide the AUTHORITY with adequate office working space and the use of onsite
office equipment to make its examination or audit during normal business hours.

     Except as otherwise provided, the cost of such examination or audit shall
be borne by the AUTHORITY provided, however, the cost of such audit shall be
reimbursed to the AUTHORITY by AIRLINE if: (a) the audit reveals an underpayment
by AIRLINE of at least two percent (2%) for any Rental, Fee or Charge,
Supplemental Charge, PFC remittance, or other payment payable by AIRLINE under
this Agreement for any Rate Period, as determined by such audit, or (b) AIRLINE
has failed to maintain accurate and complete books, records, and accounts in
accordance with this Section 604

     (B) In the event that AIRLINE has failed to maintain true and complete
books, records, and accounts resulting in an underpayment by AIRLINE to
AUTHORITY as described in Section 604(A), the AUTHORITY shall recalculate the
total amount of Rentals, Fees and Charges, Supplemental Charges, PFCs, or other
payments due to the AUTHORITY by AIRLINE and AIRLINE shall remit to the
AUTHORITY within 15 days of receipt of a written demand or invoice therefor from
the AUTHORITY the delinquent amount plus interest, fees and charges as provided
for in Section 601(C) and 603(B) hereof.

     (C) AUTHORITY shall maintain and/or make available within ten (10) business
days of notice from AIRLINE at its office in Columbus, Ohio, books, records, and
accounts, including computerized records, relevant to the determination,
charging and application of any Rentals, Fees and Charges, Supplemental Charges,
Reimbursements, PFCs, and other payments due from AIRLINE hereunder including,
without limitation, records of its revenues and operation and maintenance
expenses. Each such item of information shall be maintained for a period of at
least five years from the date of execution and longer if necessary for pending
litigation. AUTHORITY shall promptly furnish at AUTHORITY's offices all
information requested by AIRLINE with respect to such books, records, and
accounts, including computerized records. The AIRLINE and such persons as may be
designated by it, including its auditors and financial consultants, shall have
the right, during normal business hours, within ten business days of written
notice to AUTHORITY, to examine, audit, make copies of, and take extracts from
such books, records, and accounts, including computerized records. Except as
otherwise provided, the cost of such examination or audit shall be borne by the
AIRLINE; provided, however, the cost of such audit shall be reimbursed to the
AIRLINE by AUTHORITY if (1) the audit reveals an overstatement by AUTHORITY of
two percent (2%) for any Rental, Fee or Charge,

                                       43


Supplemental Charge, or other payment payable by AIRLINE under this Agreement
for any Rate Period, as determined by such audit, or (2) AUTHORITY has failed to
maintain accurate and complete books, records, and accounts in accordance with
this Section 604.

     (D) In the event that AUTHORITY has failed to maintain true and complete
books, records, and accounts resulting in AIRLINE'S overpayment to AUTHORITY as
described in Section 604(C) above, the AUTHORITY shall recalculate the total
amount of Rentals, Fees and Charges, Supplemental Charges, PFCs, or other
payments due to the AUTHORITY by AIRLINE and AUTHORITY shall remit to the
AIRLINE fifteen (l5) days of receipt of a written demand or invoice therefor
from the AIRLINE the delinquent amount plus a penalty charge equal to one and
one half percent (1 1/2%) per month on the overpaid amount, and any reasonable
costs and attorney's fees incurred by the AIRLINE in attempting to obtain
reimbursement.

SECTION 605. SECURITY DEPOSITS

     The following Section shall apply to AIRLINE in the event (1) AIRLINE has
operated at the AIRPORT for less than twelve (12) consecutive months, or (2)
AIRLINE has failed to make payments of any Rentals. Fees, Charges, PFCs,
Reimbursements, or Supplemental Charges within ten (10) days after written
notice from the AUTHORITY of failure to make payments when due or has repeatedly
failed to file with AUTHORITY all reports within thirty (30) days after the due
date for reporting required in this Agreement. For purposes of this Section, the
time allowed for payment and reporting pursuant to this Agreement shall not
include the default cure time periods specified in Article XIII of this
Agreement.

     (A) In order to guarantee the timely payment of all Rentals, Fees and
Charges. Supplemental Charges, PFCs, Reimbursements, and any other payment due
by AIRLINE under this Agreement or otherwise, and to otherwise guarantee
AIRLINE'S performance under this Agreement, AIRLINE shall provide the AUTHORITY,
on or before the execution date of this Agreement or within 10 days of
AUTHORITY'S notification of any failure to make a payment required under this
Agreement and Section 601, a Security Deposit in an amount equal to three months
of the estimated annual Rentals, Fees and Charges, Supplemental Charges, PFCs,
and other sums payable by AIRLINE for the then current Rate Period. Said
Security Deposit shall be updated as to amount and renewed each Rate Period if
required by its terms.

     (B) If AIRLINE shall commit an Event of Default under Section 1301 of this
Agreement or otherwise not satisfy the requirements of this Section, the
AUTHORITY shall have the right to use such Security Deposit to pay AIRLINE'S
Rentals, Fees and Charges, Supplemental Charges, PFCs, and any other amount owed
to the AUTHORITY by AIRLINE then due and payable or to apply the proceeds
thereof to any cost or expense or material damages incurred by the AUTHORITY as
a result of AIRLINE'S default. In the event that any such Security Deposit or
portion thereof is utilized, as aforesaid, AIRLINE shall replenish or provide a
renewal or replacement Security Deposit within 10 days of being notified so to
do by the AUTHORITY. The AUTHORITY'S rights under this Section 605 shall be in
addition to all other rights and remedies provided to the AUTHORITY under this
Agreement.

     At such time as AIRLINE has operated at the AIRPORT for at least twelve
consecutive months and has made timely payment and submission of all charges and
reports required under this Agreement and Section 602 during that period,
AUTHORITY shall release AIRLINE of such Security Deposit requirement, refunding
any AIRLINE funds or other forms of security currently

                                       44


held by AUTHORITY.  At any subsequent time during this Agreement should AIRLINE
not continue to satisfy the terms of this Section, AUTHORITY may reinstitute its
right to demand a Security Deposit from AIRLINE as described herein.

SECTION 606. RIGHT TO CONTEST; NO ABATEMENT OR SET-OFF

     (A) The payment by AIRLINE to the AUTHORITY, and the acceptance by the
AUTHORITY from AIRLINE, of any amount hereunder shall not preclude the AUTH0RITY
from questioning the accuracy of any statement or the basis upon which such
payment was made, or preclude the AUTHORITY from making any claim against
AIRLINE for any additional amount payable by AIRLINE hereunder, or preclude
AIRLINE from making any claim against the AUTHORITY for credit for any excess
amount paid by AIRLINE hereunder.

     (B) Notwithstanding the foregoing, AIRLINE shall not abate, suspend,
postpone, setoff or discontinue any payments of Rentals, Fees, and Charges
payable hereunder, except as herein expressly provided.

SECTION 607. NO OTHER FEES AND CHARGES

     (A) Except as otherwise provided for herein, no other rentals, fees, or
charges shall be imposed by the AUTHORITY on AIRLINE For the use of Leased
Premises and other facilities, and the rights, licenses, and privileges granted
to AIRLINE in Article III of this Agreement. The foregoing provision shall not
be construed to prohibit the AUTHORITY from imposing fees and charges for the
use of specified equipment or facilities at the AIRPORT or from imposing fines,
penalties, or assessments for the enforcement of the Authority's Rules and
Regulations.

     (B) The provisions contained in Section 607(A) shall not preclude the
AUTHORITY from seeking reimbursement from AIRLINE and other Airlines for the
cost of services provided to AIRLINE, the Signatory Airlines, and other Airlines
in compliance with any federal law or rule or regulation which is enacted or
amended subsequent to execution of this Agreement, or for any services or
facilities provided subsequent to the execution date of this Agreement, the cost
of which is not currently included in the estimated Authority Requirement used
to calculate Rentals, Fees, and Charges under this Agreement or included as a
Supplemental Charge recovery, subject to the terms of this Agreement.

SECTION 608. COVENANT NOT TO GRANT MORE FAVORABLE RENTALS, FEES AND CHARGES

     The AUTHORITY agrees that it will not enter into an agreement with any
Airline providing scheduled or charter passenger or all-cargo air transportation
service to and from the AIRPORT, having similar leased premises, facilities,
rights, and privileges and imposing similar obligations to those of AIRLINE
under this Agreement, which grants more favorable rentals, fees, or charges to
said AIRLINE than those granted to AIRLINE under this Agreement unless the
AUTHORITY also makes those more favorable rentals, fees, or charges available
to AIRLINE hereunder.  Notwithstanding the foregoing provision, the AUTHORITY
reserves the right to charge for the AUTHORITY-controlled space and facilities
on a per use basis, and ground lease space at different rates.

                                       45


                                   ARTICLE VII
                      OPERATION AND MAINTENANCE OF AIRPORT

SECTION 707. EXHIBIT G

     A schedule identifying the division of responsibility for operations and
maintenance between the AUTHORITY and AIRLINE is attached hereto as Exhibit G
and made a part hereof.

SECTION 702. MAINTENANCE BY THE AUTHORITY

     The AUTHORITY shall, in accordance with Exhibit G operate, maintain, and
keep in good repair, all of the areas and facilities of the AIRPORT except as
specifically excepted by Section 703, including the following:

     (A) The AUTHORITY shall perform structural maintenance for AUTHORITY
constructed facilities including the roof of the Terminal Building and provide
the maintenance and operation of AUTHORITY-installed mechanical and electrical
systems.

     (B) The AUTHORITY shall provide exterior window and building cleaning and
interior window cleaning of the Terminal Building except in AIRLINE's
non-publicly accessible Preferential Use Premises, which shall be the
responsibility of AIRLINE.

     (C) The AUTHORITY shall provide custodial maintenance in the publicly
accessible areas of the Terminal Building, Passenger Holdrooms, Common Use
Areas, other AUTHORITY-controlled areas, and the mechanical and electrical
equipment rooms.

     (D) The AUTHORITY shall perform structural and routine maintenance and
general snow and ice removal on the Apron and the Airfield Operations Area.

     (E) The AUTHORITY shall maintain the public areas and Common Use Areas of
the Terminal Building in a neat, clean, and sanitary condition.

     (F) The AUTHORITY shall provide maintenance of MUFIDS/BIDS/CUTE equipment
in the Terminal Building, if such equipment is AUTHORITY-installed, and
AUTHORITY-installed public address systems.

SECTION 703. MAINTENANCE BY AIRLINE

     (A) AIRLINE shall at all times maintain its Leased Premises in an orderly,
clean, neat, and sanitary condition, free from trash and debris, provided,
however, that this requirement shall not be construed to mean AIRLINE shall have
janitorial responsibilities designated to be those of the AUTHORITY pursuant to
Exhibit G.

     (i) AIRLINE shall provide all other maintenance and all custodial and
     janitorial services within its nonpublic Leased Premises except as
     described above. AIRLINE shall also provide electrical re-lamping within
     its nonpublic Preferential Use Premises within the Terminal Building and
     all maintenance and operations of tenant-installed improvements and
     systems. AIRLINE shall obtain

                                       46


     written approval of the AUTHORITY for any decorating or redecorating of
     areas exposed to the public view.

     (ii) AIRLINE shall make its best effort to keep its Assigned Apron and such
     other apron and ramp areas used by AIRLINE, free from stones, fuel, oil,
     petroleum products, or grease.

     (B) AIRLINE shall operate, maintain, and repair and provide janitorial
services, at its own expense, to: (a) any loading bridges and ground power unit
or preconditioned air units assigned for its use, and (b) any outbound baggage
makeup conveyor system located on its Leased Premises, whether or not title to
such bridges, ground power unit, or preconditioned air units, or baggage
conveyors rests with AIRLINE or the AUTHORITY; provided, however, that the
AUTHORITY retains the right to assume responsibility for operation, maintenance,
and repair of any AUTHORITY-owned equipment upon 30 days prior written notice to
AIRLINE, and provided, further, that nothing herein shall relieve AIRLINE of the
obligation to pay equipment charges for any AUTHORITY-owned equipment used by
AIRLINE. In the event AUTHORITY assumes responsibility for the operation or
maintenance of such equipment, charges for usage shall be adjusted accordingly.
AIRLINE shall provide maintenance for its owned or assigned loading bridges and
outbound baggage conveyances and claim devices in accordance with the
manufacturer's specifications, provided a copy of such specifications has been
provided AIRLINE. The interior and exterior finish and cleanliness of the
loading bridges must comply with the AUTHORITY's Rules and Regulations for the
AIRPORT.

     (C) AIRLINE shall be responsible for the prompt repair or cost of repair of
any damage to any Leased Premises at the AIRPORT caused by AIRLINE, its
servants, agents, employees, licensees, passengers, and invitees. If practical,
all repairs shall be conducted under the supervision of the AUTHORITY.

     (D) AUTHORITY shall determine the adequacy of maintenance of all premises
at the AIRPORT. AIRLINE agrees to implement all reasonable requests and
suggestions of the AUTHORITY regarding the maintenance of its Leased Premises at
the AIRPORT.

     (E) AIRLINE shall provide and maintain hand fire extinguishers for the
interior of its non-publicly accessible Leased Premises in accordance with
applicable safety codes.

     (F) AIRLINE shall, in accordance with Exhibit G, be responsible for and
shall perform or cause to be performed, maintenance, and repair of its Leased
Premises. AIRLINE shall, at all times:

     (i) Keep all fixtures, equipment, and personal property in a clean, safe,
     sanitary and orderly condition and appearance;

     (ii) Maintain the same in good condition (reasonable wear and tear which
     could not have been prevented by proper maintenance excepted) and perform
     all ordinary repairs, replacements, and inside painting, such repairs,
     replacements and painting by AIRLINE to be of a quality and class not
     inferior to the original material and workmanship, and all finishes within
     public premises shall be consistent with the AUTHORITY's approved finishes
     for the area;

                                       47


     (iii) For any equipment, installed in or on the Leased Premises, that is
     purchased using the proceeds of any financing sponsored by the AUTHORITY,
     repair, maintain, and replace such equipment as is necessary to assure that
     at the end of the term hereof, provided equipment ownership is to be
     retained by AUTHORITY. The condition of such equipment shall be consistent
     with the expected useful life of similar equipment of the same age and
     function in accordance with generally accepted safety and operations
     standards;

     (iv) Control all of its vehicular traffic in the AIRPORT, and specific to
     such vehicular traffic, take all precautions reasonably necessary to
     promote the safety of its passengers, customers, employees, business
     visitors, and other persons, and employ such means as may be necessary to
     direct the movements of its vehicular traffic; and

     (v) Dispose of its garbage, debris, and other waste materials (excluding
     snow and ice) in the AUTHORITY's designated collection containers and shall
     not allow trash to collect on AIRLINE's Leased Premises or otherwise create
     unsanitary or unsafe conditions.

SECTION 704. AUTHORITY RIGHT TO ENTER AND ACT

     The AUTHORITY shall have the right at reasonable times to enter upon any of
the Leased Premises or other premises occupied by AIRLINE for any of the
purposes listed below. AUTHORITY shall provide reasonable notice and such right
of entry shall not unreasonably interfere with AIRLINE's use or occupancy of
such premises except if the situation endangers the health or safety of persons
or the safety of operations at the AIRPORT.

     (i) To inspect the Leased Premises to determine whether AIRLINE has
     complied and is complying with the terms and conditions of this Agreement,
     including without limitation, the AUTHORITY may inspect for repairs to
     utilities systems, for environmental testing, and for any other purpose
     necessary for or incidental to or connected with the AUTHORITY's
     obligations hereunder, or in the exercise of the AUTHORITY's capacity as
     AIRPORT owner.

     (ii) To do anything in or about the Leased Premises in order to cure
     failures, omissions or violations of any terms, covenants and conditions of
     this Agreement on AIRLINE's part including to perform maintenance and make
     repairs in any case where AIRLINE is obligated, but has failed to do so.

     (iii) Upon reasonable notice, except in emergencies, to perform such
     maintenance, cleaning, or repair as the AUTHORITY reasonably deems
     necessary, and which is the responsibility of the AUTHORITY under this
     Agreement.

     (iv) For fire protection, safety, or security purposes.

     (v) To make structural additions and alterations to the AIRPORT.

     (vi) Upon the termination or cancellation of this Agreement.

                                       48


     The right of inspection reserved to the AUTHORITY shall impose no
obligation on the AUTHORITY to make inspections to ascertain the condition of
such space and shall impart no liability upon the AUTHORITY for failure to make
such inspections.  The failure of the AUTHORITY to inspect or monitor or give
AIRLINE notice of a default or a notice of a hazardous or unsafe condition with
respect to AIRLINE's operations under this Agreement shall not release AIRLINE
from its liability to perform its obligations under this Agreement or impose any
liability on the AUTHORITY, and in any other event where the AUTHORITY
determines that it is necessary or desirable to do so to preserve the AIRPORT
or any portion thereof or to correct any conditions likely to cause injury or
damage.  As to any such repairs or replacements performed by the AUTHORITY that
arc occasioned by the negligence or willful misconduct by AIRLINE, AIRLINE shall
pay the AUTHORITY for its entire cost of performing such work, plus a
fifteen-percent (15%) administrative charge.

SECTION 705. AUTHORITY OBLIGATIONS

     Except as specifically provided for in this Agreement, the AUTHORITY shall
not be under any duty or obligation to AIRLINE to repair or maintain the
Preferential Use Premises or any portion thereof, or any facilities or equipment
constructed thereon. The AUTHORITY shall not be responsible or liable to AIRLINE
for any claims for compensation for any losses, damages, Or injury, including
lost profits, sustained by AIRLINE resulting from failure of any water supply,
heat, air conditioning, electrical power, or sewer or drainage facility, or
caused by the natural physical conditions on the AIRPORT, whether on the surface
or underground, including stability, moving, shifting, settlement of ground, or
displacement of materials by fire, water, windstorm, tornado, act of God, or
state of war, civilian commotion or riot, or any other cause or peril beyond the
control of the AUTHORITY, except to the extent covered by the AUTHORITY's
insurance or as may be caused by the AUTHORITY's negligence or willful
misconduct.

                                       49


                                  ARTICLE VIII
                                  CONSTRUCTION

SECTION 801. ALTERATIONS AND IMPROVEMENTS BY AIRLINE

     AIRLINE may construct and install, at AIRLINE's sole expense, such
improvements in its Preferential Use Premises as AIRLINE deems to be necessary
for its operations; provided, however, that the plans and specifications,
location, and construction schedule for such improvements including any
substantial alteration or addition thereto have been submitted to and approved
by AUTHORITY in writing prior to the commencement of any and all such
construction or installation and that AIRLINE complies with the requirements of
all applicable laws and building codes and the AUTHORITY's Rules and Regulations
governing tenant construction, alterations, and improvements.  Provided further,
that no reduction or abatement of Rentals, Fees, and Charges shall he allowed
for any interference with AIRLINE's operations by such construction.  All such
alterations and improvements by AIRLINE shall be subject to the following:

     (i) The AUTHORITY shall have the right to refuse approval of such plans and
     specifications if the external appearance of such improvements and
     facilities in publicly-viewed areas does not meet the AUTHORITY's
     requirements for substantial uniformity of appearance of improvements and
     facilities on the AIRPORT, or, if the type or time of construction or
     installation, or the location thereof does not meet the AUTHORITY's
     requirements for safe use of the AIRPORT and appurtenances by other
     authorized persons. The AUTHORITY may, at its own cost, inspect any such
     construction or installation.

     (ii) All improvements made to AIRLINE's Preferential Use Premises and
     permanent additions or alterations thereto made by AIRLINE, except those
     financed by the AUTHORITY, shall be and remain the property of AIRLINE
     until expiration of the term of this Agreement. Upon termination or
     cancellation of this Agreement, said additions and alterations shall become
     the property of the AUTHORITY; provided, however, that any trade fixtures,
     signs, equipment, and other movable personal property of AIRLINE not
     considered a permanent improvement to AIRLINE's Preferential Use Premises
     shall remain the property of AIRLINE, subject to the terms of Article XIV.

     (iii) AIRLINE shall promptly pay all lawful claims made against the
     AUTHORITY and discharge all liens filed or which exist against the
     Preferential Use Premises, any other portion of the AIRPORT, or AIRLINE's
     trade fixtures or trade equipment arising out of or in connection with the
     failure to make payment for work done or materials provided by AIRLINE, its
     contractors, subcontractors, or materialmen, provided, however, AIRLINE
     shall have the right to contest the amount or validity of any such claim or
     lien without being in default under this Agreement. The AUTHORITY shall
     give timely notice to AIRLINE of all such claims and liens of which it
     becomes aware. Within 10 days of said notice, AIRLINE shall provide such
     security, in such form and amount as is satisfactory to the AUTHORITY's
     legal counsel.

                                       50


     (iv) AIRLINE shall use, and shall cause each of its officers, employees,
     agents, and contractors, to use, the highest degree of care when entering
     upon any property owned by the AUTHORITY in connection with the work. In
     the case of any property owned by the AUTHORITY, or property owned by and
     leased from the AUTHORITY, AIRLINE shall comply, and shall cause each of
     its officers, employees, agents, and contractors to comply with any and all
     instructions and requirements for the use of such property.

SECTION 802. NONDISTURBANCE OF AIRPORT TENANTS AND OPERATIONS

     Any work by AIRLINE and its contractors shall be conducted in an orderly
and proper manner, and shall not otherwise annoy, disturb, create a hazard or
be offensive to others at the AIRPORT, or interfere with other projects on, or
the operation of, the AIRPORT.  AIRLINE shall promptly comply, and shall cause
its contractors to comply, with any reasonable request from the AUTHORITY to
correct the demeanor or conduct of the contractors.  In the event AIRLINE or its
contractors fail to so comply, the AUTHORITY shall have the right to stop any or
all work being performed, until such compliance is achieved, without terminating
this Agreement.

SECTION 803. CONSTRUCTION AND AIRPORT EXPANSION

     The AUTHORITY shall have the right, at such times as may be reasonable for
purposes of maintaining or constructing improvements, modifications, or
expansions to the AIRPORT, including construction of Capital Projects, to close,
relocate, reconstruct, change, alter, or modify the Leased Premises anti/or the
means of access to the Leased Premises pursuant to this Agreement or otherwise,
either temporarily or permanently, provided, however, that the AUTHORITY shall
provide:

     (i) Reasonable notice of the construction activities to AIRLINE;

     (ii) Adequate means of ingress and egress for Preferential Use Premises or,
     in lieu thereof, alternate premises of comparable size, condition, utility,
     and location to those being vacated by AIRLINE to the extent reasonably
     possible, with adequate means of ingress and egress. In the event alternate
     premises are provided to AIRLINE by the AUTHORITY, the AUTHORITY shall pay
     all costs resulting from such relocation, including the value of AIRLINE's
     unamortized improvements. All such costs shall be considered a cost of the
     Capital Project unless AIRLINE's relocation is a result of AUTHORITY's
     accommodation of a Requesting Airline as provided for in Sections 405, 406,
     and 407; and

     (iii) Any AUTHORITY sponsored project that is undertaken shall not
     adversely interfere with AIRLINE's operation to the extent reasonably
     possible.

                                       51


                                   ARTICLE IX
                  RULES AND REGULATIONS; COMPLIANCE WITH LAWS

SECTION 901. RULES AND REGULATIONS

     AIRLINE shall comply, and shall use reasonable efforts to cause its agents,
employees, contractors and shall encourage its passengers, guests, and invitees
to comply, with all the AUTHORITY's Rules and Regulations governing the conduct
at and the operations of the AIRPORT.

SECTION 902. OBSERVANCE AND COMPLIANCE WITH LAWS

     (A) AIRLINE shall, and shall cause its agents, employees, contractors, and
licensees to observe and comply with and pay all taxes and obtain all licenses,
permits, certificates, and other authorizations required by all applicable
federal, state, county, and municipal laws, statutes, ordinances, regulations,
and executive orders, including but not limited to all rules, regulations, and
directives of the FAA or any successor agency thereto applicable to the
AIRLINE's operation at the AIRPORT.

     (B) Notwithstanding anything herein to the contrary, references herein to a
statute or law shall be deemed to be a reference to (i) such statute or law as
may be amended from time to time, (ii) all regulations, rules, executive orders,
policies and instructions pertaining to or promulgated pursuant to such statute
or law as they now exist or may be amended from time to time, and (iii) all
future statutes, laws, regulations, rules, executive orders, policies, and
instructions pertaining to the same or similar subject matter as they now exist
or may be amended from time to time.

     (C) AIRLINE shall make all non-structural improvements, repairs, and
alterations to its Preferential use Premises (subject to prior written approval
of the AUTHORITY), equipment, and personal property that are required to comply
with or conform to any of such statutes and ordinances or building codes which
are applicable to AIRLINE's operation at the Airport.

SECTION 903. COMPLIANCE WITH RULE 15c2-12 OF THE SECURITIES EXCHANGE ACT

     If at any time when Bonds are outstanding and AIRLINE is not complying with
the annual reporting requirements under the Security Exchange Act of 1934, as
amended (the Securities Exchange Act), AIRLINE will provide to the AUTHORITY,
upon the AUTHORITY'S written request such information with respect to AIRLINE as
is reasonably necessary in order to comply with Rule 15c2-12 under the
Securities Exchange Act.

SECTION 904. COMPLIANCE WITH ENVIRONMENTAL LAWS

     AIRLINE expressly covenants, represents, and warrants that in conducting
any activities or business on the Leased Premises or at the AIRPORT, and in
performing any work pursuant to this Agreement, AIRLINE shall comply with any
and all applicable Environmental Laws.  AIRLINE further covenants, represents,
and warrants:

                                       52


     (A) ENVIRONMENTAL PERMITS. AIRLINE shall obtain and maintain any and all
Environmental Permits required by any applicable Environmental Laws to conduct
the activities or business in which AIRLINE will engage on the Leased Premises
or at the AIRPORT.

     (B) REVIEW OF ENVIRONMENTAL DOCUMENTS. At the AUTHORITY's request, AIRLINE
shall make available for inspection and copying, upon reasonable notice and at
reasonable times, any and all documents and materials AIRLINE has prepared
pursuant to any applicable Environmental Laws or Environmental Permits, or
submitted to arty governmental agency, which documents and materials relate to
environmental issues, Environmental Laws or Environmental Permits and which
pertain to the AIRPORT or the Leased Premises and would be discoverable in
litigation.

     (C) ACCESS FOR ENVIRONMENTAL INSPECTION. The AUTHORITY shall have access to
the Leased Premises upon prior notice to inspect the same in order to confirm
that AIRLINE is using the Leased Premises in accordance with all applicable
Environmental Laws and Environmental Permits. AIRLINE agrees to fully cooperate
with any such inspections provided that such inspections shall not unreasonably
interfere with AIRLINE's operations. Upon receipt of written notification of
non-compliance or upon assertion of a claim by a third party and at the request
of the AUTHORITY, AIRLINE shall conduct, such testing and analysis as AIRLINE
deems reasonable to ascertain whether AIRLINE is using the Leased Premises in
compliance with all applicable Environmental Laws and Environmental Permits. Any
such tests shall be conducted by qualified independent experts chosen by
AIRLINE, but shall be subject to the AUTHORITY's approval which shall not be
unreasonably withheld. AIRLINE shall provide copies of any and all reports
prepared by such experts to the AUTHORITY within a reasonable time after AIRLINE
receives such reports.

     (D) ENVIRONMENTAL NONCOMPLIANCE. If AIRLINE fails to comply with any
applicable Environmental Laws or Environmental Permits governing activity at the
Airport, or if AIRLINE fails to commence immediate corrective actions and any
required mediation, the AUTHORITY, in addition to the rights and remedies
described elsewhere in this Agreement and any other rights and remedies
otherwise available to the AUTHORITY, may enter the Leased Premises and take all
reasonable and necessary actions, at AIRLINE's expense, to insure such
compliance with such Environmental Laws and Environmental Permits.

     (E) DUTY TO NOTIFY AUTHORITY. In the event of any release or threatened
release of Hazardous Materials caused by AIRLINE, its employees, agents or
contractors, and which is required by applicable Environmental Laws or Authority
Rules and Regulations to be reported by AIRLINE, whether as a result of
negligent conduct or otherwise, at, on, under or about the Leased Premises or
the AIRPORT, or in the event any claim, demand, complaint or action is made or
taken against AIRLINE that pertains to the environment at the Leased Premises or
at the AIRPORT, or if AIRLINE receives any notice pertaining to AIRLINE's
failure or alleged failure to comply with any Environmental Laws or
Environmental Permits at the AIRPORT, AIRLINE shall promptly notify the
AUTHORITY, of all known facts pertinent to such release, threatened release,
claim, demand, complaint, action, or notice, and shall provide the AUTHORITY
with copies of any and all claims, demands, complaints, notices, or actions so
made. If AIRLINE is required, by any Environmental Laws, Environmental Permits,
or governmental agency, to file any notice or report of a release or threatened
release of Hazardous Materials at, on, under or about the Leased Premises or the
AIRPORT, AIRLINE shall simultaneously provide a copy of such notice or report to
the AUTHORITY.

                                       53


     (F) ENVIRONMENTAL REMEDIATION.

     (i) AIRLINE shall undertake all necessary steps to remedy and remove any
     other environmental pollution, contamination, condition or damage to the
     extent caused by or results from the activities, conduct or presence of
     AIRLINE or its agents, employees or licensees on the Leased Premises or at
     the AIRPORT, whether resulting front negligent conduct or otherwise, as
     determined by the appropriate governmental agency to he necessary to
     reasonably protect the public health and safety to the extent required by
     applicable law, or to bring the Leased Premises or the AIRPORT into
     compliance with all applicable Environmental Laws and Environmental
     Permits. Such work shall be performed at AIRLINE's expense. Except in the
     event of an emergency, such work shall be performed after AIRLINE submits
     to the AUTHORITY a written plan for completing such work and receives the
     prior approval of the AUTHORITY, which shall not be unreasonably withheld.
     The AUTHORITY shall have the right to review and inspect all such work at
     any time using consultants and representatives of its choice. The actual
     cost of such review and inspection shall be paid by AIRLINE. Specific
     cleanup levels for any environmental remediation work AIRLINE performs
     shall be designed to meet and satisfy the requirements of all applicable
     Environmental Laws and Environmental Permits. AIRLINE expressly warrants
     that all work performed pursuant to this Agreement shall be performed in
     accordance with all applicable Environmental Laws and Environmental Permits
     specifically including, without limiting the generality of the foregoing,
     any applicable National Emission Standards for Hazardous Air Pollutants
     (NESHAP), 40 C.F.R. 61.145.

     (ii) Notwithstanding the obligations imposed on AIRLINE in paragraph (F)
     (i) of this Section of the Agreement, the AUTHORITY and other federal,
     state, and local agencies having jurisdiction shall at all times have the
     right should the AIRLINE fail to respond to the notification, after a
     specified cure period, if any, or immediately if necessary to mediate
     further contamination, to take any and all actions as they may individually
     or collectively deem appropriate to cease, contain, investigate, remediate,
     or otherwise respond to a condition which results from, causes or threatens
     to cause environmental pollution, contamination, or damage at, under or
     about the Leased Premises or at the AIRPORT. AIRLINE agrees to cooperate
     with any and all such actions.

     (G) STORMWATER.

     (i) Notwithstanding any other provisions or terms of this Agreement,
     AIRLINE acknowledges that certain properties within the AIRPORT, or on
     AUTHORITY-owned land, are subject to stormwater rules and regulations.
     AIRLINE agrees to observe and abide by such stormwater rules and
     regulations as may be applicable to AIRPORT property and uses thereof.

     (ii) The AUTHORITY and AIRLINE will cooperate to ensure compliance with any
     stormwater discharge permit terms and conditions, as well as to insure
     safety and to minimize cost of compliance. AIRLINE acknowledges further
     that it may be necessary to undertake such actions to minimize the exposure
     of

                                       54


     stormwater to "significant materials" generated, stored, handled, or
     otherwise used by AIRLINE, as such term may be defined by applicable storm
     water rules and regulations, by implementing and maintaining appropriate
     and relevant "best management practices" as that term may be defined in
     applicable stormwater rules and regulations.

     (iii) The AUTHORITY will invite AIRLINE to participate in discussions with
     the Ohio EPA regarding discharge permit requirements and shall provide
     AIRLINE with written notice of any stormwater discharge permit requirements
     applicable to AIRLINE and with which AIRLINE will be obligated to comply
     from time-to-time, including certification of non-stormwater discharges;
     collection of stormwater samples; preparation of stormwater pollution
     prevention or similar plans; implementation of best management practices;
     and maintenance of necessary records. Such written notice shall include
     applicable deadlines. AIRLINE agrees to undertake, at its expense, unless
     otherwise agreed to in writing between the AUTHORITY and AIRLINE, those
     stormwater permit requirements for which it is reasonably responsible and
     for which it has received written notice from the AUTHORITY and which are
     applicable exclusively to Airline, and AIRLINE agrees that it will hold
     harmless and indemnify the AUTHORITY for any violations or non-compliance
     by AIRLINE with any such permit requirements for which it has undertaken.

     (H) NO LIABILITY FOR BUSINESS INTERRUPTION. The AUTHORITY shall not be
responsible to AIRLINE, its agents, or employees, for any environmental
condition in existence on the Leased Premises or at the AIRPORT, which condition
may interfere with AIRLINE's business or other operations or activities, or
which might otherwise cause damages to AIRLINE through loss of business,
destruction of property, or injury to AIRLINE, its owners, directors, officers,
agents, employees, customers, clients, vendees, invitees, concessionaires, or
licensees except to the extent such conditions are caused by the Authority, its
employees or agents.

     (I) HOLD HARMLESS. AIRLINE shall assume the risk of, be responsible for,
defend, indemnify and hold harmless the AUTHORITY, including without limitation
its directors, officers, agents, and employees, from any and all losses, claims,
liabilities, damages, costs, and expenses including reasonable attorneys' fees,
the AUTHORITY may incur in connection with any actual, threatened, or potential
environmental pollution, contamination, condition, or damage to the extent
caused by or resulting form the activities, conduct, or presence of AIRLINE or
AIRLINE's directors, officers, agents, contractors, or employees, at the
AIRPORT, or from AIRLINE's failure to comply with any Environmental Laws or
Environmental Permits at the AIRPORT.

     (J) AIRLINE agrees that all remedies of the AUTHORITY as provided in this
Agreement with regard to environmental pollution, contamination, damage, or any
actual or threatened violations of any Environmental Laws or Environmental
Permits shall be deemed cumulative in nature and the Authority's right to
indemnification as provided under this Section 904 shall survive the termination
of this Agreement.

                                       55


SECTION 905.  COMPLIANCE WITH 14 C.F.R. 382.40

     AIRLINE, when required by 14 C.F.R. Part 382 or any other laws, rules or
applicable regulations now or hereafter adopted by federal or state governments,
shall provide certain facilities for the movement of passengers with
disabilities while enplaning and deplaning its aircraft.  To the extent required
by law, AIRLINE shall be responsible for acquiring or making arrangement for the
use of boarding assistance devices, when applicable, for its aircraft.  AIRLINE
shall ensure that all lifts and other accessibility equipment used by it are
maintained in proper working condition.  AIRLINE shall ensure that those
personnel involved in providing boarding assistance through the use of lifts or
other accessibility equipment are properly trained in the use and operation of
the devices and appropriate boarding assistance procedures that safeguard the
safety and dignity of passengers.

SECTION 906.  NONDISCRIMINATION

     (A) AIRLINE for itself; its personal representatives, successors in
interest, and assigns, as a part of the consideration hereof, does hereby agree
as a covenant running with the land that (i) no person on the grounds of race,
color, or national origin shall be excluded from participation in, denied the
benefits of, or be otherwise subjected to discrimination in the use of Leased
Premises; (ii) in the construction of any improvements on, over, or under Leased
Premises and the furnishing of services thereon, no person on the grounds of
race, color, or national origin shall he excluded from participation in, denied
the benefits of, or be otherwise subjected to discrimination; and (iii) AIRLINE
shall use the Leased Premises in compliance with all other requirements imposed
by or pursuant to the Airport and Airway Improvement Act of 1982, as amended or
superseded, and any regulations issued thereunder, as well as in compliance with
Title VI of the Civil Rights Act of 1964.

     (B) AIRLINE acknowledges that the provisions of 49 C.F.R. Part 23,
"Participation by Minority Business Enterprise in Department of Transportation
Programs," as said regulations may be amended, and such other similar
regulations that may be enacted governing Disadvantaged Business Enterprises,
may be applicable to the activities of AIRLINE under the terms of this
Agreement, unless exempted by said regulations, and hereby agrees to comply with
the applicable regulations. These requirements may include, but not be limited
to, compliance with Disadvantaged Business Enterprise or Minority Business
Enterprise, as such terms are defined in 49 U.S.C. 2204, 49 C.F.R. 23.5, or such
other statutes or regulations as may be enacted governing minority or
disadvantaged business enterprises, participation goals, the keeping of certain
records of good faith compliance efforts, which would be subject to review by
the various agencies, the submission of various reports and, if so directed, the
contracting of specified percentages of goods and services contracts to Minority
and Disadvantaged Business Enterprises.

     (C) AIRLINE agrees to furnish services in the United States in compliance
with federal law and on a fair and not unjustly discriminatory basis to all
users thereof, and to charge fair, reasonable and not unjustly discriminatory
prices for each unit of service; provided, that AIRLINE may be allowed to make
reasonable and nondiscriminatory discounts, rebates or other similar types of
price reductions or as otherwise required by 49 C.F.R., Subtitle A, Part 21,
Nondiscrimination in Federally Assisted Programs of the United States Department
of Transportation, as said Statute and regulations may be amended.

                                       56


     (D) In the event of the breach of any of the above nondiscrimination
covenants, the AUTHORITY shall have the right to terminate this Agreement and to
reenter and repossess the Leased premises and said land and the facilities
thereon, and hold the same as if said Agreement had never been made or issued.
Unless precluded by the provisions of the above assurance or regulation, the
AUTHORITY shall treat such breach as an Event of Default under Section 1301 of
this Agreement and follow the notice and termination provisions contained in
Section 1302 of this Agreement.

SECTION 907. RIGHT TO DEVELOP OR IMPROVE THE AIRPORT

     The AUTHORITY reserves the right to further develop or improve the AIRPORT
as it sees fit, regardless of the desires or view of AIRLINE and without
interference or hindrance provided that the AUTHORITY agrees to consider
reasonable alternatives which may reduce interference with AIRLINE's operations.

                                       57


                                   ARTICLE X
                        DEFERRABLE CAPITAL EXPENDITURES

SECTION 1001.  CONSULTATION FOR CAPITAL EXPENDITURES

     (A) The AUTHORITY shall engage in the following consultation process with
the Signatory Airlines, and Signatory Cargo Carriers, if applicable, prior to
undertaking any Deferrable Capital Expenditure. Such consultation process shall
include the following:

     (i) The AUTHORITY shall provide the Signatory Airlines, and Signatory Cargo
     Carriers, if applicable, written notice of the proposed Deferrable Capital
     Expenditure, including a full conceptual description of the project to be
     funded, general information regarding the need for and benefits to be
     derived from the project, cost estimates for the project, the sources of
     financing to he used for the project, and the project's estimated effect on
     Rentals, Fees, and Charges, including estimated annual operations and
     maintenance expenses associated with the project to the extent available. A
     form for AIRLINE's response shall be included with the information provided
     to the applicable airlines.

     (ii) Within 15 days of receipt of such notice, any Signatory Airline or
     Signatory Cargo Carrier may request in writing a meeting with the AUTHORITY
     and the other Signatory Airlines and Cargo Carriers for the purpose of
     discussing the proposed project.

     (iii) In the event no such airline requests a meeting and a deferral is not
     requested by the Signatory Airlines or Signatory Cargo Carriers, if
     applicable, as provided below, the AUTHORITY may proceed with the
     Deferrable Capital Expenditure and include the cost thereof in the
     Authority Requirement for calculation of Landing Fees under Section 503 or
     Apron Fees under Section 504 pursuant to this Agreement.

     (iv) In the event a Signatory Airline or Signatory Cargo Carrier, if
     applicable, requests a meeting, the AUTHORITY shall convene such meeting no
     sooner than 15 days following the airline's request for same and shall duty
     consider the comments and recommendations of the Signatory Airlines and
     Signatory Cargo Carriers, if applicable, received at such meeting prior to
     incurring the Deferrable Capital Expenditure.

SECTION 1002.  DEFERRAL

     Any Deferrable Capital Expenditure so presented for the airlines
consideration shall be deferred upon receipt of requests for deferral by a
Majority In Interest, as defined and appropriate to each proposed Deferrable
Capital Expenditure. All such airline requests for deferral must be in writing
and submitted to the AUTHORITY by each individual carrier requesting deferral
within 30 days following the meeting described above or, in the event no such
meeting is requested, within 15 days following the distribution of the
AUTHORITY's notice described above. In the event a Majority In Interest requests
a deferral of a proposed Deferrable Capital Expenditure, the AUTHORITY shall not
undertake said Deferrable Capital Expenditure for at least 1-year

                                       58


following the deferral request, or such shorter period if specified in the
written deferral requests by a Majority In Interest.  A Majority In Interest may
at any time eliminate any remaining portion of a 1-year deferral period for a
particular Deferrable Capital Expenditure by requesting such elimination in
writing to the AUTHORITY or by approving a request by the AUTHORITY to eliminate
the balance of the deferral period.  Following any deferral period set forth in
this Section, the AUTHORITY shall have the right to undertake such Deferrable
Capital Expenditure and include the cost thereof in the Authority Requirement
for the calculation of Landing Fees under Section 503 or Apron Fees under
Section 504 pursuant to this Agreement.  Absent requests for deferral by a
Majority in Interest of Signatory Airlines and Signatory Cargo Carriers, as
applicable, under the conditions provided herein, AUTHORITY may proceed with the
Deferrable Capital Expenditure and include the cost thereof in the Authority
Requirement for calculation of Landing Fees under Section 503 or Apron Fees
under Section 504.

SECTION 1003.  COST OVERRUNS

     A cost overrun for a Deferrable Capital Expenditure or any project listed
on Exhibit F shall be treated us a separate Deferrable Capital Expenditure.
However, AIRLINE agrees that in the event that such cost overrun is not the
result of a material change in the project's scope, AIRLINE shall not
unreasonably withhold its approval of the additional expenditure; provided,
however, AUTHORITY has made reasonable and diligent effort to complete the
project as originally defined within the projected cost as originally presented
to the Signatory Airlines, and Signatory Cargo Carriers if applicable.

                                       59


                                   ARTICLE XI
           INSURANCE, DAMAGE TO LEASED PROPERTIES AND INDEMNIFICATION

SECTION 1101.  INSURANCE

     (A) GENERAL. AIRLINE shall provide and maintain adequate insurance in full
force and effect at all times during the term of this Agreement and all
extensions thereto, as set forth below, with limits as hereinafter stated,
insuring against the liabilities set forth below, if AIRLINE does not wish to
provide and maintain insurance coverage for its Affiliated Airlines operating at
the AIRPORT under this Agreement it shall cause such Affiliated Airlines to
provide and maintain such coverage as set forth below. Such insurance shall
include, by way of example but not by way of limitation, comprehensive general
liability coverage and automobile liability insurance coverage and shall not be
in amounts less than hereinafter stated.

     If any of the insurance is written as "claims made" coverage, then AIRLINE
agrees to keep and cause Affiliated Airlines operating at the AIRPORT under this
Agreement to keep such "claims made" insurance in full force and effect for at
least 5 years after the expiration or termination of this Agreement.

     (B) RISKS AND MINIMUM LIMITS OF COVERAGE.

     (i) COMMERCIAL GENERAL LIABILITY INCLUDING AIRCRAFT LIABILITY. AIRLINE and
     its Affiliated Airlines shall procure and maintain policies of insurance
     for commercial general liability insurance. Such insurance shall be in an
     amount not less than of One Hundred Million Dollars ($100,000,000) if tile
     largest number of available passenger and AIRLINE crew seats on any single
     aircraft regularly operated by AIRLINE at the AIRPORT is less than 70
     seats, or not less than Two Hundred Million Dollars ($200,000,000) if the
     largest number of available passenger and AIRLINE crew seats on any single
     aircraft regularly operated by AIRLINE at the AIRPORT is at least 70 seats
     In each case, such coverage shall be single limit liability with no annual
     aggregate.

     (ii) AUTOMOBILE LIABILITY INSURANCE. Five Million Dollars ($5,000,000)
     combined single limit per occurrence (for automobiles used by AIRLINE in
     the course of its performance under this Agreement, including AIRLINE's
     non-owned and hired autos).

     (iii) WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE. Workers'
     Compensation Insurance and Employer's Liability Insurance in accordance
     with Ohio laws and regulations. With respect to Workers' Compensation
     Insurance, if AIRLINE elects to be self-insured, AIRLINE shall comply with
     the applicable requirements of law. If any portion of work is to be
     subcontracted, AIRLINE shall require the subcontractors similarly to
     provide such coverage (or qualify as a self-insured) for all the latter's
     employees to be engaged in such work. AIRLINE hereby covenants and agrees
     that the AUTHORITY, its officers, or employees will not be liable or
     responsible for any claims or actions occasioned by AIRLINE's failure to
     comply with the provisions of this subparagraph and that the
     indemnification provisions of this Agreement shall apply to this Section.

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     It is expressly agreed that the employees of AIRLINE are not AUTHORITY
     employees for any purpose.

     (iv) CONTENTS INSURANCE. AIRLINE shall be solely responsible for obtaining
     insurance policies that provide coverage for losses of AIRLINE owned
     property. The AUTHORITY shall not be required to provide such insurance
     coverage or be responsible for payment of AIRLINE's cost for such
     insurance.

     (v) BUILDERS RISK INSURANCE. During any period of construction or
     reconstruction for which AIRLINE contracts, AIRLINE shall carry, or shall
     require its contractor or contractors to carry, a policy of Builders Risk
     Insurance in an amount sufficient to insure the value of the work. The
     AUTHORITY shall he named Loss Payee on Builders Risk coverage to the extent
     of the AUTHORITY's interest therein (except to the extent coverage relates
     to AIRLINE's equipment and personal property).

     (vi) DEDUCTIBLES AND SELF-INSURANCE RETENTION. AIRLINE agrees AUTHORITY may
     determine the reasonableness of retention and deductibles applicable to its
     coverage at the AIRPORT.

     (vii) ALL RISK. Covering AIRLINE improvements, trade fixtures, and
     equipment, including fire, lighting, vandalism, and extended coverage
     perils. The AUTHORITY shall be named Loss Payee on such coverage to the
     extent of the AUTHORITY's interest therein (except to the extent coverage
     relates to AIRLINE's equipment and personal property).

     (C) OTHER PROVISIONS.

     (i) FORM OF POLICIES. The insurance may be in one or more policies of
     insurance. Nothing the AUTHORITY does or fails to do shall relieve AIRLINE
     from its duties to provide the required coverage hereunder, and the
     AUTHORITY's actions or inactions shall not be construed as waiving the
     AUTHORITY's rights hereunder,

     (ii) ISSUERS OF POLICIES. The issuer of any policy shall be a financially
     sound insurance company of recognized responsibility and subject to the
     reasonable approval of the AUTHORITY. Such issuer shall be authorized to
     cover losses in the State of Ohio,

     (iii) INSURED PARTIES. Each policy, except those for Workers' Compensation
     and Employer's Liability, shall name the AUTHORITY (and its officers,
     agents, and employees) as Additional Insured as its interest may appear, to
     the extent of the AIRLINE's indemnification obligations under this
     Agreement on the issued certificate of insurance and all renewal
     certificates (such certificates to accurately reflect the AUTHORITY'S
     Additional Insured status on AIRLINE'S original policies and any renewals
     or replacements thereof during the term of this Agreement).

                                       61


     (iv) DEDUCTIBLES. Without increasing, decreasing or expanding its duties
     under Section 1101(B) hereof, AIRLINE shall assume and bear any claims or
     losses to the extent of any deductible amounts and waives any claim it may
     ever have for the same against the AUTHORITY, its officers, agents, or
     employees; provided, however, that nothing herein stated shall diminish
     AIRLINE's rights or increase AIRLINE's obligations in respect to its
     undertakings or hold harmless defense and indemnification set forth in
     Section 1103 hereof.

     (v) CANCELLATION. Each policy shall expressly state that it may not be
     cancelled, materially modified or nonrenewed unless 30 days advance written
     notice is given in writing to the AUTHORITY by the insurance company.

     (vi) AGGREGATES. AIRLINE shall give written notice to the AUTHORITY within
     thirty (30) days of the date upon which total claims by any party against
     AIRLINE reduce the aggregate amount of coverage below the amounts required
     by this Agreement. In the alternative, the policy may contain an
     endorsement establishing a policy aggregate for the particular project or
     location subject to this Agreement.

     (vii) SUBROGATION.  Each policy shall contain an endorsement to the effect
     that the issuer waives any claim or right in the nature of subrogation to
     recover against the AUTHORITY, its officers, agents, or employees.

     (viii) ENDORSEMENT OF PRIMARY INSURANCE. Each policy hereunder except
     Workers' Compensation shall be primary insurance to any other insurance
     available to the Additional Insured and Loss Payee with respect to claims
     arising hereunder,

     (ix) LIABILITY FOR PREMIUM. AIRLINE shall be solely responsible for payment
     of all insurance premiums required hereunder, and the AUTHORITY shall not
     be obligated to pay any premiums.

     (x) PROOF OF INSURANCE. Within thirty (30) days of the Effective Date of
     this Agreement and at any time during the term of this Agreement, AIRLINE
     shall furnish the AUTHORITY with certificates of insurance. If reasonably
     requested in writing by the AUTHORITY, AUTHORITY shall have the right to
     examine AIRLINE's insurance policies.

     (D) Notwithstanding the proof of insurance requirements set forth above, it
is the intention of the parties hereto that AIRLINE, continuously and without
interruption, maintain in force the required insurance coverages to be carried
by AIRLINE set forth above.

     (E) AUTHORITY RIGHT TO REVIEW AND ADJUST COVERAGE LIMITS. The AUTHORITY
reserves the right at reasonable intervals during the term of this Agreement to
cause the insurance requirements of this Article XI to be reviewed by an
independent insurance consultant experienced in insurance for public airports,
taking into consideration changes in statutory law, court decisions, or the
claims history of the airline industry as well as that of AIRLINE, and, based on
the written recommendations of such

                                       62


consultant, and in consultation with AIRLINE, to reasonably adjust the insurance
coverages and limits required herein but not more often than every twenty-four
months.

SECTION 1102.  DAMAGE TO PREMISES

     (A) MINOR DAMAGE. If any part of the Leased Premises, or adjacent
facilities directly and substantially affecting the use of the Leased Premises,
shall be partially damaged by fire or other casualty, but said circumstances do
not render the Leased Premises untenantable as determined by the AUTHORITY, the
same shall be repaired to usable condition with due diligence by the AUTHORITY
as provided in this Section 1102.

     (B) SUBSTANTIAL DAMAGE. If any part of the Leased Premises, or adjacent
facilities directly and substantially affecting the use of the Leased Premises,
shall be so extensively damaged by fire, or other casualty, as to render any
portion of said Leased Premises untenantable but capable of being repaired, as
determined by the AUTHORITY, the same shall be repaired to usable condition with
due diligence by the AUTHORITY as provided in this Section 1102. In such case,
the rentals payable hereunder with respect to affected Leased Premises shall be
paid up to the time of such damage and shall thereafter be abated ratably in the
proportion that the part of the urea rendered untenantable bears to total Leased
Premises of the same category and area. Such abatement in rent will continue
until such time as such affected Leased Premises shall be restored adequately
for AIRLINE's use. The AUTHORITY shall use its best efforts to provide alternate
facilities to continue AIRLINE's operation while repair, reconstruction, or
replacement is being completed, at a rental rate not to exceed that provided in
this Agreement for comparable space provided that AIRLINE's rental costs shall
not increase as a result of any such alternate facilities unless AIRLINE
requests additional space and/or space replacement of a classification at higher
rental rates concurrent with such reassignment to alternate facilities.

     (C) TOTAL DAMAGE.

     (i) If any part of the Leased Premises, or adjacent facilities directly and
     substantially affecting the use of the Leased Premises, shall be damaged by
     fire or other casualty, and is so extensively damaged as to render any
     portion of said Leased Premises incapable of being repaired, as determined
     by the AUTHORITY, the AUTHORITY shall notify AIRLINE as soon as practicable
     under the circumstances after the date of such damage of its decision
     whether to reconstruct or replace said space. However, the AUTHORITY shall
     be under no obligation to replace or reconstruct such premises. The rentals
     payable hereunder with respect to affected Leased Premises shall be paid up
     to the time of such damage and thereafter shall cease until such time as
     replacement or reconstructed space shall be available for use by AIRLINE.

     (ii) In the event the AUTHORITY elects to reconstruct or replace affected
     Leased Premises, the AUTHORITY shall use its best efforts to provide
     alternate facilities to continue AIRLINE's operation while repair,
     reconstruction, or replacement is being completed, at a rental rate not to
     exceed that provided in this Agreement for comparable space. However, if
     such damaged space shall not have been replaced or reconstructed, or the
     AUTHORITY is not diligently pursuing such replacement or reconstruction,
     within six months after the date of such damage or destruction, AIRLINE
     shall have the right, upon giving the

                                       63


     AUTHORITY 30 days advance written notice, to delete the affected Leased
     Premises from this Agreement, but this Agreement shall remain in effect
     with respect to the remainder of said Leased Promises, unless such damaged
     or destroyed premises prevent AIRLINE from operating its Air Transportation
     Business at the AIRPORT.

     (iii) In the event the AUTHORITY elects not to reconstruct or replace
     affected Leased Premises, the AUTHORITY shall meet and consult with AIRLINE
     on ways to permanently provide AIRLINE with adequate replacement space for
     affected Leased Premises.  AIRLINE shall have the right, upon giving the
     AUTHORITY 30 days advance written notice, to delete the affected Leased
     Premises from this Agreement, but this Agreement shall remain in full force
     and effect with respect to the remainder of said Leased Premises, unless
     the loss of such premises prevents AIRLINE from operating its Air
     Transportation Business at the AIRPORT.

     (D) SCOPE OF RESTORATION OF PREMISES.

     (i) The AUTHORITY's obligations to repair, reconstruct, or replace affected
     premises under the provisions of this Section shall in any event be limited
     to using due diligence and best efforts to restore affected Leased Premises
     to substantially the same condition that existed prior to any such damage
     and shall further be limited to the extent of insurance proceeds available
     to the AUTHORITY for such repair, reconstruction, or replacement. AIRLINE
     agrees that if the AUTHORITY elects to repair, reconstruct, or replace
     affected premises as provided in this Section, then AIRLINE shall proceed
     with reasonable diligence and at its sole cost and expense to repair,
     reconstruct, or replace its signs, fixtures, furnishings, equipment, and
     other items provided or installed by AIRLINE in or about the Leased
     Premises in a manner and in a condition at least equal to that which
     existed prior to said damage or destruction.

     (ii) In lieu of the AUTHORITY's repair, reconstruction, or replacement of
     the affected premises, as provided in this Section, if AIRLINE requests to
     perform said function with respect to damage under Sections 1102(A) and
     1102(B), the AUTHORITY may in its sole discretion, allow AIRLINE to perform
     such work. AIRLINE shall not be performing such work as an agent or
     contractor of the AUTHORITY. Any such work by AIRLINE must be done in
     accordance with the requirements of Section 801. The AUTHORITY shall
     reimburse AIRLINE for the cost of such work performed by AIRLINE.

     (E) DAMAGE FROM AIRLINE NEGLIGENCE. Notwithstanding the provisions of this
Section, in the event that due to the negligent or willful acts of AIRLINE, its
agents, servants, or employees, or those under its control, Leased Premises
shall be damaged or destroyed by fire, casualty, or otherwise, there shall be no
abatement of rent during the restoration or replacement of said Leased Premises
and AIRLINE shall have no option to delete the affected Leased Premises from
this Agreement under the provisions of this Section. To the extent that the
costs of repairs pursuant to this section shall exceed the amount of any
insurance proceeds payable to the AUTHORITY by reason of such damage or
destruction, AIRLINE shall pay the amount of such additional costs to the
AUTHORITY.

                                       64


SECTION 1103.  INDEMNIFICATION

     (A) AIRLINE agrees to defend, indemnify, and hold harmless the AUTHORITY,
its past, present and future directors, officers, employees, and agents from and
against any and all loss, liability, penalties, damages of whatever nature,
causes of action, suits, claims, demands, judgments, injunctive relief, awards
and settlements, costs and expenses, including, without limitation, payments of
claims of liability resulting from any injury or death of any person or damage
to or destruction of any property, arising out of or in connection with the
conduct of AIRLINE's Air Transportation Business or the AIRLINE's use of its
Leased Premises or other areas or facilities at the AIRPORT by AIRLINE, its
agents, employees, business invitees, contractors, or subcontractors, including,
but not limited to:

     (i) The acts or omissions of AIRLINE, its agents, employees, business
     invitees, contractors, or subcontractors;

     (ii) AIRLINE's use or occupancy of the AIRPORT and the Leased Premises;

     (iii) The violation by AIRLINE in the conduct of AIRLINE's Air
     Transportation Business or its use of its Leased Premises or other areas or
     facilities at the AIRPORT of any provision, warranty, covenant, or
     condition of this Agreement, of any applicable, law, ordinance, regulation,
     or court order affecting the AIRPORT, including the AUTHORITY's Rules and
     Regulations; and

     (iv) Violations or alleged violations of any federal or state laws as a
     result of any actions taken by AIRLINE, pursuant to this Agreement.

     AIRLINE will, at its own cost and expense, defend all such claims, demands
and suits, whether frivolous or not.

     (B) Without limiting the foregoing, AIRLINE also agrees to defend,
indemnify, and hold harmless the AUTHORITY, its past, present and future
directors, officers, agents, and employees:

     (i) From and against any and all claims or liability for compensation under
     any workers' compensation statute arising out of injuries sustained by any
     employee of AIRLINE. AIRLINE shall require by contract that its licensees
     and contractors to maintain in effect at all times workers' compensation
     insurance as required by law;

     (ii) From, and to assume all liability for, and to pay, all applicable
     taxes and assessments for payment of which the AUTHORITY may become liable
     and which by law may be levied or assessed on the Leased Premises, or which
     arise out of the operations of AIRLINE or by reason of AIRLINE's occupancy
     of its Leased Premises except for any taxes or assessments based on the
     gross or net income or gross or net receipts of the AUTHORITY that are not
     allocable to airline-related receipts. However, AIRLINE may, at its own
     risk, cost, and expense, and at no cost to the AUTHORITY, contest, by
     appropriate judicial or

                                       65


     administrative proceedings, the applicability or the legal or
     constitutional validity of any such tax or assessment, and the AUTHORITY
     will, to the extent permitted by law, execute such documents as are
     necessary to permit AIRLINE to contest or appeal the same.  AIRLINE shall
     be responsible for obtaining bills for all of said taxes and assessments
     directly from the taxing authority and shall promptly deliver to the
     AUTHORITY, upon request, copies of receipts of payment.  In the event the
     AUTHORITY receives any tax billings, it will forward said billings to
     AIRLINE; and

     (iii) From and against any and all suits, claims, actions, or proceedings
     alleging a taking of property or interests in property without just
     compensation, trespass, nuisance, property damage, personal injury or
     similar claims, actions, proceedings or suits based upon the environmental
     impacts resulting from AIRLINE'S use of the AIRPORT for the landing and
     taking-off of aircraft including noise, smoke, or vibration.

     (C) AIRLINE shall defend, indemnify, and hold the AUTHORITY, and its
agents, officers, and employees, completely harmless from and against any claim,
suit, demand, action, liability, loss, damage, judgment, or fine, and all costs
and expenses of whatever kind or nature (including, but not limited to,
reasonable and actual attorney's fees, court costs, investigation expenses, and
expert fees) associated therewith in any way arising from or based upon the
violation of any federal, state, or municipal laws, statutes, resolutions, or
regulations by AIRLINE, its agents, employees, contractors, or tenants, in
conjunction with AIRLINE'S use and/or occupancy of the Leased Premises or its
operations at the AIRPORT.

     (D) AIRLINE further agrees that if a prohibited incursion into the air
operations area occurs, or if the Airfield Operations Area or sterile area
security is breached, by or due to the negligence or willful act or omission of
any of AIRLINE'S employees, agents, contractors, and such incursion or breach
results in a civil penalty action against the AUTHORITY, AIRLINE shall assume
the defense of any such action and be responsible for any civil penalty or
settlement amount required to be paid by the AUTHORITY as a result of such
incursion or breach. The AUTHORITY shall notify AIRLINE of any allegation,
investigation, or proposed or actual civil penalty sought for such incursion or
breach. Civil penalties and settlement and associated expenses reimbursable
under this paragraph include but are not limited to those paid or incurred as a
result of violation of FAA Federal Aviation Regulation Part 107, "Airport
Security," FAA Federal Aviation Regulation Part 108, "Airplane Operator
Security," and FAA Federal Aviation Regulation Part 139, "Certification and
Operations: Land Airports Serving Certain Air Carriers."

     (E) AIRLINE'S obligation to defend and indemnify past directors, officers
and employees of the AUTHORITY shall apply to such persons only for such periods
during which said directors, officers and employees held their office or
position with the AUTHORITY.

     (F) The AUTHORITY shall promptly notify AIRLINE of each claim, action,
proceeding, or suit in respect of which indemnity may be sought by the AUTHORITY
against AIRLINE hereunder, setting forth the particulars of such claim, action,
proceeding or suit, and shall furnish AIRLINE with a copy of all judicial
filings and legal process and any correspondence received by the AUTHORITY
related thereto.

                                       66


     (G) The duty to defend, indemnify, hold harmless, and reimburse shall apply
to any claim, demands, or suits made against the AUTHORITY, whether or not
meritorious for which AIRLINE is responsible pursuant to Section 1103. Provided,
however, that upon the filing by anyone of a claim with the AUTHORITY for
damages arising out of incidents for which AIRLINE herein agrees to indemnify
and hold the AUTHORITY harmless, the AUTHORITY shall promptly notify AIRLINE of
such claim and, in the event that AIRLINE does not settle or compromise such
claim, then AIRLINE shall undertake the legal defense of such claim both on
behalf of AIRLINE and on behalf of the AUTHORITY. It is specifically agreed,
however, that the AUTHORITY, at its option and at its own expense, may
participate in the legal defense of such claim. Any final judgment rendered
against the AUTHORITY for any cause for which AIRLINE is liable hereunder shall
be conclusive against AIRLINE as to amount upon the expiration of the time for
appeal therefrom. In the event the AUTHORITY shall fail to give AIRLINE notice
of any such demand, notice, summons, or other process received by the AUTHORITY
and such failure to give notice shall result in prejudice to AIRLINE in the
defense of any action or legal proceeding contemplated herein, such failure or
delay shall release AIRLINE of its liability as set forth in this paragraph
insofar as only the particular claim or legal proceeding is concerned, and only
to the extent of such prejudice. Nothing in this Article XI shall be deemed a
change or modification in any manner whatsoever of the method or conditions of
preserving, asserting, or enforcing arty claim of legal liability against the
AUTHORITY. This Section 1103 shall not be construed as a waiver of the
AUTHORITY's immunity.

     (H) The AUTHORITY, at its own expense except as otherwise provided herein,
shall be invited to attend and participate in all meetings (including those
related to settlement) and to appear and participate in all judicial proceedings
and to the extent of its interests, approve, in writing, the terms of any
settlement related to any claim, action, proceeding or suit set forth in (his
Section.

     (I) Notwithstanding the provisions of this Section, AIRLINE shall have no
obligation to indemnify the AUTHORITY for any amounts to be paid in connection
with losses, liabilities, penalties, damages of whatever nature, causes of
action, suits, claims, demands, injunctive relief, judgments, awards and
settlements to the extent such are the result of the AUTHORITY's negligence or
willful misconduct.

     (J) This Section shall survive the expiration or early termination of this
Agreement. AIRLINE understands and agrees that any insurance protection
furnished by AIRLINE pursuant to Section 1101 shall in no way limit AIRLINE's
responsibility to indemnify and hold harmless the AUTHORITY under the provisions
of this Agreement.

SECTION 1104.  AUTHORITY NOT LIABLE

     The AUTHORITY shall not in any event be liable for any acts or omissions of
AIRLINE, its officers, agents, employees, invitees, and independent contractors,
or for any conditions resulting from the operations or activities of any such
lessee, tenant, or concessionaire, AIRLINE officers, employees, invitees, or
independent contractors, or for any conditions resulting from the operations or
activities of AIRLINE's officers, agents, employees, invitees, or independent
contractors either to AIRLINE or to any other person.  The AUTHORITY shall not
be liable for AIRLINE's failure to perform any of the obligations under this
Agreement or for any delay in the performance thereof.  AIRLINE expressly agrees
that the AUTHORITY shall not be liable to AIRLINE, for bodily injury or for any
loss or damage to real or personal property occasioned by flood, fire,
earthquake, lightning, windstorm, hail, explosion, riot, strike, civil
commotion, smoke,

                                       67


vandalism, malicious mischief, or acts of civil authority and not caused by the
negligence or willful acts or omissions of the AUTHORITY.

                                       68


                                  ARTICLE XII
                       MERGERS, ASSIGNMENT AND SUBLETTING

SECTION 1201.  AIRLINE MERGERS AND CONSOLIDATIONS

     If AIRLINE consolidates with or merges into another corporation or permits
one or more other corporations to consolidate with or merge into it, or
transfers or conveys all or substantially all of its property, assets and
licenses to another corporation, the corporation resulting from or surviving
such merger (if other than AIRLINE) or consolidation or the corporation to which
such transfer or conveyance is made shall (a) expressly assume in writing and
agree to perform all of AIRLINE's obligations hereunder, (h) he qualified to do
business in the State of Ohio, and (c) if such corporation shall not be
organized and existing under the laws of the United States of America or any
state or territory thereof or the District of Columbia, furnish to the AUTHORITY
an irrevocable consent to service of process in, and to the jurisdiction of the
courts of, the State of Ohio with respect to any action or suit, in law or at
equity, brought by the AUTHORITY to enforce this Agreement.  If AIRLINE is the
surviving corporation in such a merger, the express assumption referred to in
the preceding sentence shall not be required.

SECTION 1202.  ASSIGNMENT OR SUBLETTING

     AIRLINE shall not assign, transfer, convey, sell, mortgage, pledge, or
encumber (hereinafter collectively referred to as "Assignment") or sublet its
Leased Premises without the advance approval of the AUTHORITY.  If AIRLINE fails
to obtain advance approval of any such assignment or sublease or the AUTHORITY,
in addition to the rights and remedies set forth in Article XIII, shall have the
right to refuse to recognize such agreement, and the assignee or sublessee shall
acquire no interest in this Agreement or any rights to use the Leased Premises.

SECTION 1203.  AUTHORITY APPROVAL OF ASSIGNMENTS

     (A) Without in any manner limiting AUTHORITY's general right to approve
assignments, it shall not be unreasonable for the AUTHORITY to disapprove or
condition an assignment of AIRLINE's Leased Premises on any or all of the
following circumstances, among others:

     (i) The assignment is for less than the full remainder of the term of this
     Agreement.

     (ii) The assignment does not require the assignee to accept and comply with
     all provisions of the Agreement, including but not limited to accepting
     Signatory Airline status.

     (B) Notwithstanding the foregoing, this Section shall not be interpreted to
preclude or to require the AUTHORITY's approval of the assignment of this
Agreement and AIRLINE's rights and obligations hereunder to a parent,
subsidiary, or merged company if such parent, subsidiary, or merged company
conducts an Air Transportation Business at the AIRPORT and assumes all rights
and obligations hereunder. Written notice of such assumption shall be provided
by the parent, subsidiary, or merged company 30 days prior to the effective date
of such assignment.

                                       69


SECTION 1204.  AUTHORITY APPROVAL OF SUBLEASES

     (A) Without in any manner limiting AUTHORITY's general right to approve
subleases, it shall not be unreasonable for the AUTHORITY to disapprove or
condition a sublease of AIRLINE's Leased Premises on any or all of the following
circumstances, among others:

     (i) If a Signatory Airline, including a Signatory Airline which is not
     leasing space directly from the AUTHORITY because of the unavailability of
     such space, is, in the determination of the AUTHORITY, in need of tile
     Leased Premises proposed to be subleased; provided, however, that such
     Signatory Airline is willing to take such Leased Premises on substantially
     the same terms and conditions as proposed in the sublease and is willing to
     provide AIRLINE with a reasonable security deposit not to exceed 3 month's
     rentals, fees, and charges

     (ii) If the AUTHORITY determines that there is available space and/or
     Passenger Holdrooms for lease directly from the AUTHORITY by the proposed
     sublessee or if the sublease does not contain a provision which permits it
     to be terminated upon notice from the AUTHORITY to the parties thereto of
     the availability of AUTHORITY controlled space, provided that this
     paragraph shall not apply to Airlines which are code shares.

SECTION 1205.  METHOD OF OBTAINING APPROVAL

     AIRLINE, when requesting an approval of an assignment or sublease under
Section 1202, shall include with its request a copy of the proposed agreement,
if prepared, or a detailed summary of the material terms and conditions to be
contained in such agreement. Any proposed agreement or detailed summary thereof
shall provide the following information: (a) the Leased Premises to be assigned
or sublet; (b) the terms; (c) if a sublease, the rentals and fees to be charged;
and (d) all material terms and conditions of the assignment or sublease the
AUTHORITY may reasonably require. If approved, AIRLINE shall submit a fully
executed copy of such agreement to the AUTHORITY within 30 days after the
commencement of the assignment or sublease.

SECTION 1206.  ADMINISTRATIVE CHARGE

     In the event AIRLINE is authorized by the AUTHORITY to sublease any portion
of its Leased Premises, AIRLINE may charge such sublessee, in addition to a
reasonable charge for any services and AIRLINE-owned property provided by
AIRLINE or actual costs other than rental costs incurred by AIRLINE, reasonable
rentals not to exceed one hundred fifteen percent (115%) of AIRLINE's rentals
for such portion of the Leased Premises.

SECTION 1207.  AIRLINE TO REMAIN LIABLE

     AIRLINE shall remain fully and primarily liable during the term of this
Agreement for the payment of all of the rentals due and payable to the
AUTHORITY for the Leased Premises that are subject to an assignment or a
sublease under Article XII, and fully responsible for the performance of all the
other obligations hereunder, unless otherwise agreed to by the AUTHORITY.

                                       70


                                  ARTICLE XIII
                 DEFAULT, TERMINATION AND CHANGE OF LEASE TERM

SECTION 1301.  EVENTS OF DEFAULT

     Each of the following shall be an "Event of Default" under this Agreement:

     (A) AIRLINE fails to punctually pay when due any PFC, Rentals, Fees,
Charges, Supplemental Charge, or any other sum required to be paid hereunder,
and such failure continues for a period of 10 business (lays after written
notice of non-payment has been given to AIRLINE by the AUTHORITY.

     (B) AIRLINE shall fail to keep, perform and observe any material promise,
covenant or other provision of this Agreement for a period of 30 days after
written notice specifying such failure by the AUTHORITY; provided, however, that
any such failure which can be remedied, but which cannot with due diligence he
remedied within such 30 day period, shall not give rise to the AUTHORITY'S right
to terminate this Agreement if corrective action is instituted by AIRLINE within
such 30 day period and diligently pursued until the failure is remedied.

     (C) AIRLINE shall discontinue its Air Transportation Business at the
AIRPORT for a period of 30 consecutive days or, after exhausting or abandoning
any further appeals. AIRLINE shall be prevented for a period of 30 consecutive
days by action of any governmental agency other than the AUTHORITY from
conducting its Air Transportation Business at the AIRPORT.

     (D) AIRLINE shall cease using or abandon substantially all of its Leased
Premises for a period of 30 days.

     (E) AIRLINE shall fail to meet any of the Security Deposit requirements set
forth in Section 605.

     (F) AIRLINE shall fail to make its Preferential Use Premises available for
use by other AIRLINEs as required pursuant to Article IV on more than 2
instances after written notice by the AUTHORITY or for a period of 30 days after
written notice specifying such failure by the AUTHORITY.

     (G) AIRLINE shall fail to maintain the minimum required insurance coverage
as required by Section 1101 for a period of 30 days after written notice
specifying such failure by the AUTHORITY, provided that the AUTHORITY shall have
the right to immediately suspend AIRLINE'S right to operate at the AIRPORT until
AIRLINE has obtained the minimum required insurance coverage.

     (H) AIRLINE shall become insolvent (as such term is defined under Section
101 of the Federal Bankruptcy Code, II U.S.C. 101 et seq. (the "Code"), or any
successor statute thereto); or shall fail to pay its debts generally as they
mature; or shall take the benefit of any present or future federal or state
insolvency statue; or shall make a general assignment for the benefit of
creditors.

                                       71


     (I) AIRLINE shall file a voluntary petition in bankruptcy or a petition or
answer seeking an arrangement of its indebtedness under the Code or under any
other law or statute of the United States or of any state thereof; or consent to
the appointment of a receiver, trustee, custodian, liquidator, or other similar
official, of all or substantially all of its property; or an order for relief
shall be entered by or against AIRLINE under any chapter of the Code.

     (J) By order or decree of a court, AIRLINE shall be adjudged a debtor or
bankrupt or an order shall he made approving a petition filed by any of its
creditors or by any of its stockholders, seeking its reorganization or the
restructuring of its indebtedness under the Code or under any other law or
statute of the United States or any state thereof and such order or decree shall
not be stayed or vacated within 60 days of its issuance.

     (K) A petition under any chapter of the Code or an action under any federal
or state insolvency law or statute law shall be filed against AIRLINE and shall
not be dismissed or stayed within 60 days after the filing thereof.

     (L) By or pursuant to, or under authority of any legislative act,
resolution, or rule, or any order or decree of any court or governmental board,
agency or officer, a receiver, trustee, custodian, liquidator, or other similar
official shall take possession or control of all or substantially all of the
property of AIRLINE and such possession or control shall continue in effect for
a period of 60 days.

     (M) AIRLINE shall become a corporation in dissolution.

     (N) If any of AIRLINE's Leased Premises is financed in whole or in part
with PFC revenue, and any portion of AIRLINE'S existing exclusive use facilities
is not fully utilized and is not made available for use by potentially competing
air carriers or foreign air carriers.

     (O) The letting, license, or other interest of or rights of AIRLINE
hereunder shall be transferred to, pass to or devolve upon, by operation of law
or otherwise, any other person, firm, corporation, or other entity, by, in
connection with or as a result of any bankruptcy, insolvency, trusteeship,
liquidation, or other proceedings or occurrence described in subparagraphs (A)
through (M) of this Section 1301.

     (P) The assignment or subletting of premises which is not approved by the
AUTHORITY in accordance with the provisions of Article XII and the failure to
nullify such assignment or subletting within a period of 30 days after written
notice specifying such failure by the AUTHORITY.

SECTION 1302.  TERMINATION BY THE AUTHORITY

     (A) Whenever an Event of Default has occurred, the AUTHORITY may, at its
option, immediately and without further notice of such Event of Default:

     (i) Terminate this Agreement and the lettings, licenses, and other rights
     of AIRLINE hereunder, without discharging any of AIRLINE's obligations
     hereunder and, at the AUTHORITY's further option, exclude AIRLINE from its
     Leased Premises. In the event AIRLINE uses, occupies, or fails to surrender
     or remove its property from its Leased Premises, or any portion thereof,
     without the

                                       72


     written consent of the AUTHORITY after this Agreement has been terminated
     or expires, AIRLINE may be deemed a tenant at sufferance during the period
     of such use or failure and, in such event, AIRLINE shall pay the rate for
     rentals, fees, and charges established by the AUTHORITY for Airlines which
     are not Signatory Airlines during such period.  In such event, the
     AUTHORITY shall have, in addition to whatever other rights are available to
     the AUTHORITY, the right to all remedies provided under applicable laws,
     and reasonable costs, disbursements, and attorney fees including
     consequential damages incurred as a result of the holdover.

     (ii) Without terminating this Agreement, exclude AIRLINE from its Leased
     Premises and use its best efforts to lease such Leased Premises to another
     airline with any rentals received credited to the amounts owed by AIRLINE,
     minus a fifteen percent (15%) administrative fee of all sublease rentals
     received, holding AIRLINE liable for all Rentals, Fees, and Charges and
     other payments due hereunder up to the effective date of such leasing and
     for the excess, if any, of the Rentals, Fees, and Charges and other amounts
     payable by AIRLINE under this Agreement for the remainder of the term of
     this Agreement over the rentals and other amounts which are paid by such
     new airline under such new agreement.

     (iii)  In addition, the AUTHORITY may, from time to time, take whatever
     action at law or in equity appears necessary or desirable to collect
     Rentals, Fees, and Charges and any other amounts payable by AIRLINE
     hereunder then due and thereafter to become due, and to enforce the
     performance and observance of any obligation, agreement or covenant of
     AIRLINE under this Agreement.

     (B) In the event of an Event of Default, the AUTHORITY may exercise any and
all of the rights provided to it in this Section 1302 irrespective of any
subsequent cure by AIRLINE, unless otherwise mutually agreed by AIRLINE and
AUTHORITY.

     (C) The remedies set forth in this Article, shall be in addition to all
other remedies which are or may be available to the AUTHORITY at law or in
equity.

     (D) All rights and remedies hereinbefore given to the AUTHORITY and all
rights and remedies given to the AUTHORITY by law, shall be cumulative and
concurrent. No termination of this Agreement or the taking or recovering of the
Leased Premises shall deprive the AUTHORITY of any of the AUTHORITY's remedies
or actions against AIRLINE for rentals, fees, and charges or for damages or for
the breach of any covenant herein contained, nor shall the bringing of any
action for rentals, fees, and charges or breach of covenant, or the resort to
any other remedy herein provided for the recovery of rentals, fees, and charges
be construed as a waiver of the right to obtain possession of the Leased
Premises.

     (E) In no event shall this Agreement or any rights or privileges hereunder
be an asset of AIRLINE under any bankruptcy, insolvency, or reorganization
proceedings.

                                       73


SECTION 1303.  CHANGE OF LEASE TERM

     (A) Notwithstanding the provisions of Section 201, automatically and
immediately upon the occurrence of an Event of Default described in Section 1301
(H), (I), (J), (K), (L) or (M), the term of this Agreement shall convert to
month-to-month, commencing on the date of the automatic conversion and in
addition to its rights under Article XIII either party shall have the right to
terminate the Agreement upon 30 days written notice from the AUTHORITY to
AIRLINE, or from AIRLINE to the AUTHORITY.

     (B) The conversion of the term of this Agreement pursuant to this Section
1303 shall not discharge any of AIRLINE's obligations hereunder nor affect any
of the AUTHORITY's other remedies set forth herein.

SECTION 1304.  TERMINATION BY AIRLINE

     (A) At any time that AIRLINE is not in default hereunder, AIRLINE may
terminate this Agreement and its obligations hereunder to the extent set forth
below, at AIRLINE's option, prior to the scheduled expiration date set forth in
Section 201, by giving the AUTHORITY 60 days' advance written notice by
registered or certified mail upon or after the happening and during the
continuance of any of the following events:

     (i) Any action of the Federal Aviation Administration or any other federal,
     state, county, or municipal governmental agency refusing to permit AIRLINE
     to operate into, from, or through the AIRPORT such aircraft (licensed for
     use in scheduled air transportation) as AIRLINE has previously operated
     regularly thereon, and the remaining in force of such refusal for a period
     of at least 60 days; provided however, that this provision shall not apply
     if occasioned by AIRLINE's failure to comply with airworthiness or noise
     standards for such aircraft as promulgated by FAA;

     (ii) Any failure by the AUTHORITY to keep, perform and observe any material
     promise, covenant, or other provision of this Agreement for a period of 30
     days after written notice specifying such failure and requesting that it be
     remedied is given to the AUTHORITY by AIRLINE; provided, however, that any
     such failure which can be cured, but which cannot with due diligence be
     cured within such 30 day period, shall not give rise to AIRLINE's right to
     terminate this Agreement if corrective action is instituted by the
     AUTHORITY within such 30 day period and diligently pursued until the
     failure is corrected; or

     (iii) AIRLINE is prevented from conducting its Air Transportation Business
     at the AIRPORT for a period in excess of 60 consecutive days for any reason
     other than causes directly controlled by AIRLINE.

                                       74


                                  ARTICLE XIV
                             SURRENDER OF PREMISES

SECTION 1401. SURRENDER OF PREMISES

     (A) SURRENDER OF PREMISES. AIRLINE covenants and agrees that on expiration
of the term of this Agreement, or earlier termination as hereinafter provided,
or on reassignment or reallocation of the Leased Premises as provided herein, it
will peaceably surrender possession of the Leased Premises, and other space made
available to AIRLINE hereunder in a clean, sanitary, and good condition,
reasonable wear and tear taking into account maintenance required to be done by
AIRLINE, and acts of God, fire, and other casualties excepted, and the AUTHORITY
shall have the right to take possession of said Leased Premises and other space
made available to AIRLINE hereunder. The AUTHORITY shall not be required to give
notice to quit possession at the expiration date of the term of this Agreement.

     (B) REMOVAL OF PERSONAL PROPERTY. Provided AIRLINE is not in default for
payment of Rentals, Fees, Charges, PFCs, or any other payment due hereunder,
AIRLINE shall have the right, on expiration or early termination of this
Agreement and within 30 days thereafter, to remove or dispose of all trade
fixtures and equipment and other personal property installed or placed by
AIRLINE, in, on, or about the AIRPORT; provided, however, that the AUTHORITY
reserves the right to purchase from AIRLINE its ticket counter inserts and
baggage conveyors at AIRLINE's netbook value of such inserts and conveyors at
fair market value as of the date of such expiration or early termination.
AIRLINE shall not be entitled to remove non-trade fixtures without the advance
written consent of the AUTHORITY.

     (C) REMOVAL DAMAGES. In the event AIRLINE removes its trade fixtures and
equipment and other personal property and/or is allowed to remove its non-trade
fixtures and removes such fixtures, AIRLINE shall repair any damage caused by
such removal. Removal shall be at AIRLINE's expense. Notwithstanding the above,
consideration shall be given to the intended long-term use of the Premises and
in the event it is determined that such Premises shall not be maintained for a
period warranting the repairs indicated above, AIRLINE's requirement to perform
such may be reduced or eliminated by AUTHORITY. In the event the Leased Premises
are yielded or delivered to the AUTHORITY in need of repair, reconditioning, or
restoration to its original condition (reasonable wear and tear taking into
account maintenance required to be done by AIRLINE excepted), after reasonable
notice to AIRLINE, the AUTHORITY shall repair or recondition said excepted
Leased Premises and the cost thereof will be invoiced to AIRLINE as provided in
Section 704. The AUTHORITY shall determine the condition of the Leased Premises
at the termination of this Agreement by expiration or otherwise.

     (D) OWNERSHIP OF FIXTURES NOT REMOVED. In the event AIRLINE fails to remove
its property, in addition to whatever other rights are available to the
AUTHORITY, with prior notification of AIRLINE the AUTHORITY shall have the
options of (a) removing, selling, or storing AIRLINE property at AIRLINE's
expense, or (b) taking title to AIRLINE property in lieu of removal on behalf of
AIRLINE. In the event the AUTHORITY takes title to such property or otherwise
disposes of the property, the AUTHORITY shall be entitled to all proceeds of
sale of such AIRLINE property as liquidated damages for the breach of this
covenant to remove.

                                       75


                                   ARTICLE XV
                            MISCELLANEOUS PROVISIONS

SECTION 1501. RELATIONSHIP OF PARTIES

     Nothing herein contained is intended or shall be construed to in any
respect create or establish any relationship other than that of lessor and
lessee, and nothing herein shall be construed to establish any partnership,
joint venture or association or to make AIRLINE the general representative or
agent of the AUTHORITY for any purpose whatsoever.

SECTION 1502. AMENDMENT

     Except as otherwise expressly provided herein, this Agreement, including
the attached exhibits and endorsements, may not be changed, modified,
discharged, or extended except by written amendment duly executed by the
parties.

SECTION 1503. SUBORDINATION TO BOND ORDINANCE

     (A) This Agreement and all rights granted to AIRLINE hereunder, are
expressly subordinated and subject to the lien and provisions of the pledges,
transfer, hypothecation, or assignment made by the AUTHORITY in any Trust
Indenture executed by the AUTHORITY to issue Bonds. The AUTHORITY expressly
reserves the right to make such pledges and grant such liens and enter into
covenants as it may deem necessary or desirable to secure and provide for the
payment of Bonds, including the creation of reserves therefor, provided that the
AUTHORITY shall not take any actions that would he inconsistent with the term
and conditions of this Agreement.

     (B) AIRLINE understands that the AUTHORITY is and will be the issuer of
Bonds. With respect to Bonds that may be issued in the future, the interest on
which is intended to be excludable from gross income from the holders of such
Bonds for Federal income tax purposes under the Internal Revenue Code of 1986,
AIRLINE agrees that it will not act, or fail to act (and will immediately cease
and desist from any action, or failure to act) with respect to the use of the
Leased Premises, if the act or failure to act may cause the AUTHORITY to be in
noncompliance with the provisions of the Internal Revenue Code of 1986 as they
now exist or may be amended, supplemented, or replaced, or the regulations or
rulings issued thereunder, nor will AIRLINE take, or persist in, any action or
omission which may cause the interest on the tax-exempt Bonds either (a) not to
be excludable from the gross income of the holders thereof for Federal income
tax purposes; or (b) to become subject to the alternative minimum tax (the AMT)
for Federal income tax purposes.

SECTION 1504. CERTIFICATE IN CONNECTION WITH ISSUANCE OF BONDS

     AIRLINE agrees that in connection with any issuance of Bonds by the
AUTHORITY, upon not less than 30 days prior written request by the AUTHORITY,
AIRLINE will deliver to the AUTHORITY a statement in writing certifying:

     (i) That this Agreement is unmodified and in full force and effect (or if
     there have been modifications, a description of such modifications and that
     the Agreement as modified is in full force and effect);

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     (ii) That to the AIRLINE's knowledge the AUTHORITY is not in default under
     any provision of this Agreement, or, if in default, the nature thereof in
     detail; and

     (iii) Such further matters as may be reasonably requested by the AUTHORITY,
     it being intended that any such statement may be relied upon by the parties
     involved in such issuance of Bonds.

SECTION 1505. NO THIRD PARTY BENEFICIARIES

     This Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person or entity (including other Signatory Airlines)
other than the parties hereto and their assigns any legal or equitable rights
hereunder.

SECTION 1506. COUNTERPARTS

     This Agreement may be executed in one or more counterparts.

SECTION 1507. EXHIBITS

     All certificates, documents, exhibits, attachments, riders, and addenda
referred to in this Agreement, including but not limited to the exhibits
referred to in this Agreement, are hereby incorporated into this Agreement by
reference and made a part hereof as though set forth in full in this Agreement
to the extent they are consistent with its conditions and terms.

SECTION 1508. SURVIVAL OF WARRANTIES

     All warranties and covenants set forth in this Agreement shall survive the
execution and performance of this Agreement.

SECTION 1509. QUIET ENJOYMENT

     The AUTHORITY agrees that, upon payment of all amounts due hereunder and
performance of the covenants and agreements on the part of AIRLINE to be
performed hereunder, the AUTHORITY shall not act or fail to act, except as
otherwise provided by this Agreement, in a manner that will prevent AIRLINE from
peaceably having and, in accordance with the terms hereof, enjoying the Leased
Premises and all rights, licenses, services, and privileges of the AIRPORT and
its appurtenances and facilities granted herein.

SECTION 1510. NO PERSONAL LIABILITY

     (A) The AUTHORITY shall not be liable for any acts or omissions of any
airline or any condition resulting from the operations or activities of tenants
or their representatives.

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     (B) No director, officer, employee, or agent of the AUTHORITY or AIRLINE
shall be charged personally or held contractually liable by or to the other
party under any term or provision of this Agreement or because of any breach
hereof or because of its or their execution of this Agreement.

SECTION 1511. AGREEMENTS WITH THE UNITED STATES

     (A) GOVERNMENT INCLUSION. AIRLINE covenants and agrees that this Agreement
shall be subordinated to the provisions of any existing or future agreement
between the AUTHORITY and the United States Government or governmental
authority, relative to the operation or maintenance of the AIRPORT, the
execution of which has been or will be required as a condition precedent to the
granting of federal funds or the approval to impose or use PFCs for the
improvement or development of the AIRPORT. AIRLINE further agrees that it shall
not cause the AUTHORITY to violate any assurances made by the AUTHORITY to the
federal government in connection with the granting of such federal funds or the
approval of such PFCs.

     (B) FEDERAL GOVERNMENT'S EMERGENCY CLAUSE. All provisions of this Agreement
shall be subordinate to the rights of the United States of America to operate
all of the AIRPORT or any part thereof during time of war or national emergency.
Such rights shall supersede any provisions of this Agreement inconsistent with
the operation of the AIRPORT by the United States of America.

SECTION 1512. GOVERNING LAW

     This Agreement is made and entered into in Franklin County, Ohio and Ohio
law shall govern and apply to this Agreement. In the event of a dispute or
disputes between the parties hereto, and in the event litigation is instituted,
such litigation shall be commenced only in a federal or state court in Franklin
County, Ohio. AIRLINE hereby consents to the jurisdiction and venue of such
courts and waives personal service of any and all process upon the AIRLINE
herein, and consents that all such service of process shall be made by certified
mail, return receipt requested, directed to AIRLINE at the address herein
stated, and service so made shall be completed 7 days after the same shall have
been posted as aforesaid.

SECTION 1513. NOTICES

     Except as otherwise expressly provided hereunder, all notices and other
communications provided for under this Agreement shall be in writing and shall
be mailed via certified mail return-receipt requested, telecopied (with
confirmation of transmission) or personally delivered to the AUTHORITY and
AIRLINE at the following addresses:

If to the AUTHORITY, to:

Executive Director
Columbus Municipal Airport Authority
Port Columbus International Airport
4600 International Gateway
Columbus, Ohio 43219
Telecopy (614) 238-7834

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With a copy to General Counsel, same address.

If to AIRLINE, to:

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

or to such other person or address as either the AUTHORITY or AIRLINE may
hereafter designate by notice to the other in accordance with this Section 1513.
Except as otherwise expressly provided hereunder, any notice or communication
under this Agreement shall be deemed to have been given or made: (a) if a
messenger or courier service is used, when delivered to the addressee; (b) if
sent by certified mail, 5 days after being deposited in the mails, postage
prepaid and properly addressed; or (c) if sent by telecopy, the earlier of (l)
actual receipt by addressee and (2) 24 hours after confirmation of transmission.

SECTION 1514. ENTIRE AGREEMENT

     This Agreement, including the attached exhibits, embodies the entire
agreement between the AUTHORITY and AIRLINE relating to the subject matter
hereof, and supersedes all prior agreements and understandings, written or oral,
express or implied, between the AUTHORITY and AIRLINE relating thereto.

SECTION 1515. FORCE MAJEURE

     (A) Neither party hereto shall be liable to the other for any failure,
delay, or interruption in performing its obligations hereunder to the extent due
to acts, events or conditions beyond its control, including, but not limited to,
acts of God, weather conditions, shortages of energy or materials, embargoes,
riots, rebellions, sabotage, acts of a public enemy, war, blockade,
insurrection, strikes, boycotts, picketing, slow-downs, work stoppages or other
labor actions affecting the rights or obligations of the AUTHORITY or AIRLINE
hereunder, their respective contractors or subcontractors, except to the extent
that such failure, delay or interruption directly or indirectly results from
failure on the part of the AUTHORITY or AIRLINE to use reasonable care to
prevent, or make reasonable efforts to cure, such failure, delay or
interruption; provided, however, that, except as herein specifically provided,
nothing in this Section is intended or shall be construed to abate, postpone or
in any respect diminish AIRLINE's obligations to make any payments due to the
AUTHORITY pursuant to this Agreement.

     (B) The AUTHORITY shall be under no obligation to supply any service if and
to the extent and during any period that the supplying of any such service or
the use of any component necessary therefor shall be prohibited or rationed by
any law, ordinance, rule, regulation, requirement, order or directive of any
federal, state, county or municipal government having jurisdiction.

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SECTION 1516. INVALID PROVISIONS

     In the event any covenant, condition, or provision herein is held to be
invalid, illegal, or unenforceable by any court of competent jurisdiction, such
covenant, condition, or provision shall be deemed amended to conform to
applicable laws so as to be valid or enforceable or, if it cannot be so amended
without materially altering the intention of the parties, it shall be stricken.
If stricken, all other covenants, conditions and provisions of this Agreement
shall remain in full force and effect provided that the striking of such
covenants, conditions or provisions does not materially prejudice either the
AUTHORITY or AIRLINE in its respective rights and obligations contained in the
valid covenants, conditions, or provisions of this Agreement.

SECTION 1517. NO WAIVER

     No provision of this Agreement shall be deemed to have been waived by
either party unless such waiver is in writing, signed by the party making the
waiver and addressed to the other party, nor shall any custom or practice which
may evolve between the parties in the administration of the terms of this
Agreement be construed to waive or lessen the right of either party to insist
upon the performance of the other party in strict accordance with the terms of
this Agreement.

SECTION 1518. CONSTRUCTION OF AGREEMENT

     The parties hereto acknowledge that they have thoroughly read this
Agreement, including any exhibits or attachments hereto and have sought and
received whatever competent advice and counsel was necessary for them to form a
full and complete understanding of all rights and obligations herein. The
parties further acknowledge that this Agreement is the result of extensive
negotiations between the parties and shall not be construed against the
AUTHORITY by reason of the preparation of this Agreement by the AUTHORITY.

SECTION 1519. AVIATION RIGHTS

     The AUTHORITY reserves unto itself, its successors and assigns, for the use
and benefit of the public, a right of flight for the passage of aircraft in the
airspace above the surface of the AIRPORT, including but not limited to
AIRLINE's Leased Premises, for navigation or fight in said airspace for landing
on, taking off from, or operating at the AIRPORT.

SECTION 1520. SECURITY

     AIRLINE shall supervise, or cause to be supervised, all persons lawfully
present on its loading bridges, persons traveling within secured areas directly
to or from AIRLINE's aircraft, persons traveling on buses or similar vehicles
operated by AIRLINE, and on all paths, walkways, and areas within secured areas
used by the passengers to move between the Terminal Building and AIRLINE's
aircraft.

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SECTION 1521. TIMING

     The parties expressly agree that time is of the essence in this Agreement.
Failure by a party to complete performance within the time specified, or within
a reasonable time if no time is specified herein, shall relieve the other party,
without liability, of any obligation to accept such performance.

SECTION 1522. REPRESENTATIVES

     The AUTHORITY and AIRLINE shall each designate a representative who, except
as otherwise provided hereunder, shall be authorized to act for the AUTHORITY
and AIRLINE, respectively, with respect to any actions to be taken by either of
them under the terms of this Agreement. Except as specifically set forth herein,
for the purposes of actions to be taken by it or by the AUTHORITY, the
AUTHORITY's representative shall be the Executive Director. The AIRLINE's
representative shall be designated in a written notice delivered to the
AUTHORITY. Any party hereto may change its designated representative by notice
to the other party.

SECTION 1523. APPROVALS

     (A) Whenever in this Agreement any approval is required from AIRLINE, such
decision shall be promptly rendered and shall not be unreasonably withheld or
conditioned. No disapproval shall be valid if such disapproval constitutes an
anticompetitive act as described by a federal agency having jurisdiction over
such matters.

     (B) Wherever in this Agreement the approval of the AUTHORITY is required,
such approval may be given by the Executive Director, shall be promptly rendered
and shall not be unreasonably withheld except as otherwise expressly provided
herein.

     (C) In all instances in this Agreement where consent or approval of one
party is required for an action by the other party, such consent shall be in
writing unless otherwise agreed by the parties.

SECTION 1524. PROHIBITION AGAINST EXCLUSIVE RIGHTS

     It is hereby specifically understood and agreed that nothing herein
contained shall be construed to grant or authorize the granting of an exclusive
right to provide aeronautical services to the public as prohibited by
Section 308(a) of the Federal Aviation Act of 1958, as amended, and the
AUTHORITY reserves the right to grant to others the privileges and right of
conducting any or all activities of an aeronautical nature.

SECTION 1525. SUCCESSORS AND ASSIGNS

     BINDING EFFECT. The terms, conditions, and covenants of this Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and upon
their successors, assigns and sublessees, if any. This provision shall not
constitute a waiver of any conditions regarding assignment or subletting
contained in this Agreement.

                                       81


SECTION 1526. AUTHORITY TO EXECUTE

     The person(s) executing this Agreement on behalf of AIRLINE warrants to the
AUTHORITY that AIRLINE is a duly authorized and existing corporation, that
AIRLINE is qualified to do business in the State of Ohio, that AIRLINE has full
right and authority to enter into this Agreement, and that each and every person
signing on behalf of AIRLINE is authorized to do so.

                                       82


     IN WITNESS WHEREOF, the Columbus Municipal Airport Authority has caused its
name to be subscribed to these present by Larry Hedrick, Executive Director of
the Columbus Municipal Airport Authority, duly authorized by Resolution No.
51-99, passed November 23, 1999, and Chautauqua has caused this instrument to be
executed on its behalf by___________, its___________, all as of the day and year
first above written.

Signed in the presence of:

                                          CHAUTAUQUA
/s/ [ILLEGIBLE]
- -------------------------
Witness

/s/ [ILLEGIBLE]                           /s/ [ILLEGIBLE]              9/29/00
- -------------------------                 --------------------------------------
Witness                                                                  Date
                                          VP - CUSTOMER SERVICE
                                          CHAUTAUQUA AIRLINES INC.

                                          COLUMBUS MUNICIPAL AIRPORT
                                          AUTHORITY

/s/ [ILLEGIBLE]
- -------------------------
Witness

/s/ [ILLEGIBLE]                           /s/ Elaine Roberts, A.A.E    2/6/01
- -------------------------                 --------------------------------------
Witness                                   Elaine Roberts, A.A.E          Date
                                          Executive Director
                                          Columbus Municipal Airport Authority

                                       83


State of Ohio
County of Franklin, ss:

Before me, a Notary Public in and for said County and State, personally appeared
the above named Elaine Roberts, Executive Director for the Columbus Municipal
Airport Authority, who represented that he is authorized to execute the
foregoing instrument as his free act and deed as such authorized representative
of the Columbus Municipal Airport Authority.

In testimony whereof; I have hereunto set my hand and official seal at Columbus,
Ohio, this 6th day of February 2001.

                                          /s/ [ILLEGIBLE]
                                          -------------------------
                                          Notary Public

                                          [SEAL OF ROD COURTNEY BORDEN ATTORNEY
                                          AT LAW NOTARY PUBLIC - STATE OF OHIO
                                          LIFETIME COMMISSION]

State of Indiana
County of Marion, ss:

Before me, a Notary Public in and for said County and State, personally appeared
the above named who represented that he is authorized to execute the foregoing
instrument as his free act and deed as such authorized representative of.

In testimony whereof, I have hereunto set my hand and official seal at
Indianapolis IN this 5th day of March 2001.

                                          /s/ [ILLEGIBLE]
                                          -------------------------
                                          Notary Public

THE PERSON SIGNING SHALL, IN HIS OWN HANDWRITING, SIGN THE AIRLINE'S NAME, HIS
OWN NAME AND HIS TITLE. WHERE THE PERSON SIGNING FOR A CORPORATION, COMPANY OR
PARTNERSHIP, IS OTHER THAN THE PRESIDENT, HE MUST, BY AFFIDAVIT, SHOW HIS
AUTHORITY TO BIND THE CORPORATION, COMPANY OR PARTNERSHIP.

                                       84


                      COLUMBUS MUNICIPAL AIRPORT AUTHORITY
                         SPACE RENTAL AND OTHER CHARGES
                  EFFECTIVE JULY 1, 2000 TO DECEMBER 31, 2000

                                   CHAUTAUQUA



                                  FIXED RENTALS
- --------------------------------------------------------------------------------
                                                             (C)
                                          (A)       (B)     ANNUAL        (D)
            RENTAL AREAS                 SQUARE    RATE     AMOUNT      MONTHLY
                                          FEET     sfpa    (A X B)      AMOUNT
- --------------------------------------------------------------------------------
                                                                 
 TERMINAL SPACE                                         $        0.00  $    0.00
================================================================================
            TOTAL FIXED RENTAL CHARGES                  $        0.00  $    0.00
- --------------------------------------------------------------------------------


                                  COMMON SPACE
- --------------------------------------------------------------------------------
                                                                 
 SECURITY AREAS - (SCHEDULE I)                          $    1,238.28  $  103.19

 SKYCAP / BAG CLAIM AREAS - (SCHEDULE II)               $   10,903.92  $  908.66

 TUG DRIVES - (SCHEDULE III)                            $    3,957.96  $  329.83
- --------------------------------------------------------========================
            TOTAL COMMON SPACE CHARGES                  $   16,100.16  $1,341.68
- --------------------------------------------------------------------------------


                              OTHER CHARGES/CREDITS
- --------------------------------------------------------------------------------
                                                                
 LEO FEE REIMBURSEMENT-(SCHEDULE IV)                    $    9,082.08  $  756.84

 APRON FEES - (SCHEDULE V)                              $   15.865.92  $1,322.16
- --------------------------------------------------------========================
            TOTAL OTHER CHARGES                         $   24,948.00  $2,079.00
- --------------------------------------------------------========================
                            GRAND TOTAL                 $   41,048.16  $3,420.68
================================================================================
 GENERAL AIRLINE CREDITS - LANDING FEES                ($   45,145.08)($3,762.09)
================================================================================




                                   SCHEDULE I

                      COLUMBUS MUNICIPAL AIRPORT AUTHORITY
           COMPUTATION OF MONTHLY RENTAL CHARGES FOR COMMON USE AREAS
                          SHARED BY SCHEDULED AIRLINES

                  EFFECTIVE JULY 1, 2000 TO DECEMBER 31, 2000

     COMMON SPACE - TYPE 2
       SECURITY AREAS                       3,095.1

RENTAL RATE PER SQUARE FOOT                  550.66
             ANNUAL CHARGE  =           $156,797.77
             MONTHLY CHARGE =           $ 13,066.48



                              ENPLANED                                20% SHARED
                             PASSENGERS   PERCENTAGE                   EQUALLY BY
                              01-DEC-99      OF                     AIRLINES WITH MORE
CUSTOMER                      THROUGH     ENPLANED     PRO-RATED     THAN ONE PERCENT     MONTHLY
 NUMBER   AIRLINE             31-MAY-00   PASSENGERS    AMOUNT       OF ENPLANMENTS       AMOUNT
- -------------------------------------------------------------------------------------------------
                                                                      
  123    AIR ONTARIO             11,822     0.7299%   $     76.29      $     0.00       $   76.29

  119    AMERICA WEST           170,322    10.5153%   $  1,099.19      $   186.66       $1,285.85

  102    AMERICAN                68,048     3.5838%   $    374.62      $   186.66       $  551.28

  124    AMERICAN EAGLE          68,020     4.1994%   $    438.98      $   186.66       $  625.64

  131    ATLANTIC COAST          26,829     1.6564%   $    173.15      $   186.66       $  359.81

  129    CHAUTAUQUA              15,990     0.9872%   $    103.19      $     0.00       $  103.18

  195    COLGAN AIR               3,874     0.2392%   $     25.00      $     0.00       $   25.00

  115    COMAIR                  11,491     0.7094%   $     74.16      $     0.00       $   74.16

  118    CONTINENTAL             74,812     4.6187%   $    402.81      $   186.66       $  659.47

  125    CONTINENTAL EXPRESS     17,064     1.0535%   $    110.13      $   186.66       $  296.70

  103    DELTA AIRLINES         303,735    18.7519%   $  1,960.18      $   186.66       $2,146.84

EX-10.67

                                                                  Exhibit 10.67

                         OFFICE / SHOP SPACE USE PERMIT

                                     between

                              SIGNATURE COMBS INC.

                                       and

                               CHAUTAUQUA AIRLINES

                                    covering

                                  OFFICE SPACE
                          BULDING #3, 6390 CARGO DRIVE

                                    effective

                                 JANUARY 16, 2001

1st Revision: 3/1/00



                         OFFICE / SHOP SPACE USE PERMIT

     This OFFICE / SHOP SPACE PERMIT, ("Permit") is entered into as of this 16th
day of JANUARY, 2001 by and between SIGNATURE COMBS, a DELAWARE corporation,
with its principal offices at 201 South Orange Avenue, Suite 1100, Orlando,
Florida 32801 ("Signature") and CHATAUQUA AIRLINES., with offices located at
2500 S. High School Rd. Suite 160, Indianapolis IN 46241 ("Permittee"). For
purposes of this Permit, Signature and the Permittee may, from time to time, be
individually referred to as a "Party" and collectively as the "Parties".

     In consideration of the mutual covenants contained herein, and for other
good and valuable consideration, the Parties hereby agree as follows:

1. USE OF STORAGE SPACE AND PARTIES' REPRESENTATIONS

     1a. USE OF OFFICE SPACE. Signature hereby authorizes Permittee to use and
occupy on a dedicated, exclusive basis, the office located in Signature's
building 3 facility (the "Facility") and comprising approximately 2,984 square
feet (the "Space") at INDIANAPOLIS Airport, INDIANAPOLIS, IN (the "Airport").
The Office Space is more specifically situated within Building 3 suite #'s
21,23,25,26,28,30,32,34.

     Permittee represents that the Space shall be utilized solely for
administration and business purposes consistent with the operational and/or
maintenance requirements of its business. Violation of this provision in any
manner shall constitute an act of default hereunder. No other commercial
activity of any kind whatsoever shall be conducted by Permittee in, from or
around the Space, except as specifically authorized by this Permit.

     Permittee shall be authorized to utilize designated common use areas of the
Facility, including, but not limited to, restrooms, entry ways, hallways and
vending areas, as specified by Signature's general manager or designate at the
Airport.

     1b. PERMITTEE'S REPRESENTATIONS. Permittee represents it is fully
authorized to enter into this Permit on behalf of itself or any third party
which it herein represents and to bind itself or any third party to the terms
and conditions set forth in this Permit.

     Permittee further represents that it shall not at any time place a load
upon the interior floor, wall or ceiling of the Space, which in any way exceeds
the weight bearing capacity of any such Space components or accelerates the
deterioration of same beyond ordinary wear and tear. Permittee agrees to obtain
the advance permission of Signature prior to placing any items which potentially
could cause damage or structural failure upon the interior floor, ceiling or
walls of the Space. Any repair or restoration required to be undertaken to the
Space or Facility as a result of Permittee's breach or violation of the
foregoing provision, shall be the sole responsibility and cost of Permittee.

                                        2


2. TERM

     The initial term of this Permit shall be for a period of 12 months,
commencing January 16, 2001 and continuing through January 16, 2002 ("Initial
Term") and month to month thereafter, unless earlier terminated under the
provisions of this Permit. Following the expiration of the Initial Term, either
party may effect termination of this Permit, with or without cause, by
furnishing the opposite party thirty (30) days advance written notice.

     The Initial Term and any subsequent extension (including, but not limited
to, month to month extension) or renewal of this Permit shall collectively be
referred to as the "Term".

3. RENT AND ADDITIONAL CHARGES

     3a. PAYMENT OF RENT AND ADDITIONAL CHARGES. For use of the Space, Permittee
agrees to pay Signature, monthly rentals, payable in advance, on the first (1st)
day of each calendar month during the Term hereof, the following sum(s), plus
any and all Airport concession fees or charges and any and all applicable sales
or use taxes due thereon, as specified below:

                         OFFICE RENTAL RATE: $2,025.00

     In the event that the term of this Permit shall commence or end on any day
other than the first and last day, respectively, of a calendar month, the sums
due hereunder for a portion of such month shall be prorated on a per-diem basis,
and the first payment shall be due on or before the effective date hereof.

     3b. AIRPORT CONCESSION FEES AND CHARGES. Airport concession fees or
charges, sales and use taxes shall be the prevailing fees, charges and/or taxes
applicable at the time of each monthly rental payment, as specified below:

                           AIRPORT CONCESSION FEE(S): $____0________

                           APPLICABLE SALES TAX:      $____0________

     3c. FULL PAYMENT. Monthly rent and all additional charges shall be paid
promptly when due, without notice or demand and without deduction, diminution,
abatement, counterclaim or setoff of any amount or for any reason whatsoever, to
Signature at the Airport address set forth in Article 26.

     3d. LATE PAYMENT. In the event payment is not received within ten (10)
calendar days from the applicable monthly due date, Signature reserves the right
to impose a late payment fee of one and one-half percent (1.5%) per month of the
outstanding balance which shall be added to the amount due and owing to
Signature. The assessment of late charges by Signature or the payment of same by
Permittee shall not in any manner prejudice or diminish the rights of Signature
as set forth in Article 25. Imposition of a late payment fee is solely at
Signature's option and failure by Signature to exercise this option does not
waive Signature's right to exercise this right at a future date.

                                        3


     3e. ADJUSTMENT OF FEES AND CHARGES. Consistent with the passing of each
annual period, it is mutually agreed the Space rental rate may be increased
5% by Signature. Permittee shall be notified, in writing, at least
thirty (30) days prior to the implementation of the adjusted Space rental rate.
Permittee's acceptance of Signature's adjusted rental rate, either in writing or
by Permittee's payment of the adjusted rate, shall constitute an amendment of
this Permit solely to the extent of revising the Term and rental rate. Unless
expressly set forth in writing to the contrary, all other terms and conditions
of the Permit shall continue in full force and effect and without alteration.

     3f. ALTERATION OF PREVAILING LAND RENTS BY THE AIRPORT. During the Term of
this Permit, if the Airport or other local, state or federal agency having
jurisdiction over Signature's leasehold promulgates, legislates, invokes,
exercises or otherwise enacts rules, regulations or laws which result in the
prevailing land rents and/or concession fees applicable to Signature's leasehold
to be increased, then Signature, commensurate with written notification of such
occurrence to the Permittee, reserves the right to increase Permittee's
prevailing monthly Space rent by a corresponding and proportionate amount as of
the effective date of such increase.

4. SECURITY DEPOSIT N/A

5. PROPERTY RIGHTS NOT CREATED

     Nothing in this Permit shall be construed or deemed to constitute a grant
of an interest in real property or to convey an estate or to vest property
rights in the Permittee. Nor shall this Permit or its performance be interpreted
to create a landlord/tenant, partnership, agency, joint venture, bailment, trust
or fiduciary relationship between Signature and Permittee.

6. MAINTENANCE AND SERVICES

     6a. SIGNATURE'S MAINTENANCE OBLIGATIONS. Signature shall operate, maintain,
repair and replace the systems, facilities and equipment of the Facility
necessary for the operation by Permittee of its business in the Space. Signature
shall maintain and repair the Facility's foundation, structure, roof, mechanical
systems and other related structural systems. Signature shall maintain all
exterior portions of the Space, hallways and other related facilities in a clean
and orderly condition, free of dirt, rubbish and unlawful obstructions.
Signature shall provide utilities, excepting telephone and all other
communication equipment to the Space, including sufficient heat and air
conditioning systems to maintain the temperature of all applicable interior,
enclosed office space at a comfortable, proper level.

     Permittee shall be liable for any and all expenses reasonably incurred by
Signature for any maintenance, repair or replacement required to be performed
which result from the use or occupancy of the Space by Permittee or Permittee's
agents, servants, officers, directors, employees or invitees, excepting such
maintenance or repairs necessitated by normal wear and tear, as determined by
Signature.

                                        4


     6b. PERMITTEE'S MAINTENANCE OBLIGATIONS. Permittee shall be responsible to
maintain the interior of the Space in a clean and orderly condition at all times
during the Term.

     6c. CLOSURE OF SPACE DURING REPAIR. Consistent with Signature's obligations
as set forth in Sub-Paragraph 6a to keep the Facility in proper repair, should
Facility or Space maintenance or repairs, whether preventive or non-routine, be
required to be undertaken by Signature and such maintenance or repair, in
Signature's sole judgment, shall compromise or potentially compromise the safety
of Permittee's personnel or property or other Facility permittee's personnel or
property, then Signature, concurrent with notification of Permittee, shall close
the Space until such time as the maintenance/repair work is completed or, in
Signature's sole determination, the maintenance/repair work is completed to the
extent that no further danger exists to the Space or Permittee's personnel or
property. Signature agrees to pro-rate the following month's Space rent of
Permittee for all days the Space cannot be utilized. The foregoing proration of
rent shall be the only compensation due Permittee from Signature hereunder.

7. SECURING / LOCKING OF SPACE

     7a. SECURING OF SPACE. Unless otherwise expressly agreed to by Signature,
the securing of the Space and ensuring the proper shutdown of all office
machines, coffee makers, lights, space heaters and other unique equipment owned
or leased, shall at all times remain solely with the Permittee.

     7b. LOCKING OF SPACE. Unless otherwise agreed to in writing, Permittee
shall be solely responsible for the locking of the Space. Subject to advance
approval by Signature's local general manager, Permittee may, at its sole cost,
have supplemental locks installed on Space access door(s), provided the
Signature general manager is afforded a key(s) in the event access is required.

     7c. NON-LIABILITY OF SIGNATURE. Under no circumstances shall Signature, its
officers, directors or employees be held responsible in any manner for losses
from the Space sustained by the Permittee for the services rendered by Signature
under this Permit except for its gross negligence or willful misconduct.

8. PERFORMANCE OF ANCILLARY SERVICES BY SIGNATURE

     It is acknowledged by the Parties that other services not described in this
Permit may be requested by Permittee for the office. (or on behalf of the
owner/operator) to be performed by Signature. Such ancillary services may
include, but are not limited to, interior cleaning of the Space or other
services which may or may not be directly related to Permittee's use and
occupancy of the Space (collectively, "Ancillary Services"). Signature agrees to
furnish and/or perform such Ancillary Services at the request of the Permittee
at Signature's prevailing and locally-established rates or as otherwise
negotiated between Signature local management and Permittee. Such requests may
be made by Permittee verbally or pursuant to a verbal or written request. If
such Ancillary Services are provided, Permittee agrees to pay Signature for all
such work which shall be considered additional charges under Article 3 herein
and subject to all of the terms and conditions of this Permit.

                                        5


9. PERMITTEE'S RESPONSIBILITY FOR CONDUCT

     All Permittee employees will obtain and display proper identification in
accordance with prevailing Airport regulations for all areas of the Airport
where required. All costs incurred in obtaining such required identification
badge authorizations or endorsements shall be borne solely by Permittee.

     Permittee shall indemnify and hold harmless Signature (inclusive of its
subsidiaries, affiliates and parent company, as now or hereafter constituted)
and its officers, directors, agents, tenants, customers, contractors,
subcontractors, invitees and employees from and against any and all fines,
penalties, damages or legal actions which may be imposed by the Airport, United
States Customs Service or any other agency having jurisdiction at or on the
Airport as a result of Permittee's or its officers, directors, agents,
contractors, subcontractors, invitees or employees failure to comply and adhere
to any and all federal, state, local or Airport regulations in effect as of the
effective date of this Permit or promulgated from time to time thereafter.

10. ENVIRONMENTAL RESPONSIBILITIES OF PERMITTEE

     10a. ENVIRONMENTAL REMOVAL AND DISPOSAL. Permittee shall be responsible for
the proper removal and disposal of all Hazardous and Regulated Substances, as
defined herein, generated by Permittee as a result of Permittee's activities in,
on and from the Space. Such removal and disposal shall include, but not be
limited to Permittee's manifesting such regulated substances under Permittee's
assigned Environmental Protection Agency (EPA) identification number and
ensuring that removal of such regulated materials from the Storage and
Signature's leasehold is accomplished in accordance with Airport, local, state
and federal guidelines. Additionally, environmental contamination which impacts
Signature's Airport leasehold as a result of Permittee's improper handling,
disposal, release or leakage of any regulated substances while utilizing the
Space, shall be the sole responsibility of Permittee. Permittee shall also be
responsible for the safe and proper removal of all regulated substances it
generates in conjunction with its use and occupancy of the Space upon
termination of this Permit. For purposes of this provision, "Hazardous and
Regulated Substances" shall mean any hazardous or toxic substances, materials or
wastes, pollutants or contaminants, as defined, listed or regulated now or in
the future by any federal, state or local law, rule, regulation, ordinance,
statute or order or by common law decision, including, without limitation,
petroleum products or by-products.

     10b. ENVIRONMENTAL INDEMNIFICATION. Permittee shall indemnify, defend and
hold harmless Signature (including Signature's subsidiaries, affiliates and
parent company, as now or hereafter constituted), the Airport and their
respective officers, directors, agents, customers, tenants, contractors,
subcontractors, invitees, guests and employees from and against any and all
claims (including, without limitation, third party claims from bodily injury or
real or personal property damage), actions, administrative proceedings
(including informal proceedings), judgements, damages, punitive damages,
penalties, fines, taxes and assessments, liabilities (including sums paid in
settlement of claims), interest, impairments, losses, fees and expenses
(including attorneys' fees and expenses incurred in enforcing this provision or
collecting any sums due hereunder), consultant and expert fees, together with
all other costs and expenses of any kind or nature, including any and all
expenses of cleaning up or disposing of any such Hazardous and Regulated
Substances (collectively, "Environmental Damages"), that

                                        6


arise directly or indirectly in connection with the presence, suspected
presence, release or suspected or threatened release of any Hazardous and
Regulated Substances arising from or caused by Permittee's use of the Space or
Permittee's failure to perform the covenants of this Article 10. Permittee shall
have no responsibility for any Environmental Damages which preceded Permittee's
initial date of use of the Space. For the purpose of this provision, the Parties
mutually agree Permittee's initial date of Space use was January 16, 2000.

     The obligations, covenants and agreements of Permittee contained in this
Article 10 shall survive termination of this Permit for any reason.

11. MASTER LEASE / COMPLIANCE WITH LAWS

     11a. MASTER LEASE. It is expressly understood and agreed that if the lease
or operating authorization between the governing agency of the Airport and
Signature ("Master Lease") covering the Facility or Signature's right to conduct
business, is terminated, canceled or abated as to any portion of the Space, such
termination, cancellation or abatement will operate as a cancellation of this
Permit, and Signature shall be relieved of liability for any and all damages
Permittee may sustain as a result thereof. This Permit is subject to and
conditioned upon the prior written approval of the governing agency of the
Airport and the continuing authority and/or discretion of Signature to operate
at the Airport. Signature will promptly advise Permittee in writing of such
termination, cancellation or abatement.

     11b. PERMIT SUBORDINATION TO MASTER LEASE. It is expressly agreed and
understood by Permittee that this Permit shall be subordinate at all times to
the Master Lease.

     11c. COMPLIANCE WITH LAWS. Permittee agrees to abide by all applicable
laws, statutes, ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments and the appropriate agencies, officers,
departments, boards and commissions thereof and the board of underwriters and/or
the insurance rating organization or similar organization performing the same or
similar functions, whether now or hereafter in force, applicable to the Space or
any part thereof, as to the manner of use or occupancy or the maintenance,
repair or condition of the Space, and the usual and customary requirements of
the carriers of all insurance policies maintained by Signature on the Facility.

     Without prejudice to the provisions of the foregoing paragraph, Permittee
shall comply with (and shall further cause its officers, directors, contractors,
subcontractors, agents, employees and invitees) to comply with and observe all
Signature rules and regulations as now in effect, and as modified from time to
time, concerning the use, operation, safety and good order of the Space,
provided that such rules and regulations are not inconsistent with the
provisions of this Permit.

12. ASSIGNMENT AND SUBLETTING

                                        7


     12a. PROHIBITION AGAINST ASSIGNMENT OR TRANSFER. Permittee shall not
pledge, encumber, sell, assign or transfer this Permit, in whole or in part, by
operation of law or otherwise, or sublet, assign or transfer all or any part of
the Space, without Signature's prior written approval. Any attempted sale,
assignment, transfer or subletting in violation of this provision shall be
deemed null and void. Permittee shall not take any action or suffer action to be
taken which has the effect of transferring any rights herein to any person or
legal representative whether by operation of law or otherwise. Breach of this
covenant shall terminate Permittee's rights hereunder as of and from the date of
such transfer, action or sufferance.

     12b. CONSENT BY SIGNATURE. The consent by Signature to any assignment,
sublet or transfer request shall not relieve Permittee from its obligation to
obtain the express prior consent of Signature to any further assignment, sublet
or transfer.

     12c. PERMITTEE NOT RELIEVED OF OBLIGATIONS. Neither an assignment of
Permittee's interest in this Permit nor a subletting, occupancy or use of the
Space or any part thereof by any person or entity other than Permittee, nor the
collection of rent by Signature from any person or entity other than Permittee
as provided in this provision, nor the application of any such rent shall, in
any circumstances, relieve Permittee from its obligation fully to observe and
perform the terms, covenants and conditions of this Permit on Permittee's part
to be observed and performed.

13. CONDITION OF PREMISES

     Without prejudice to the provisions of Article 6, Permittee shall accept
the Space in its "as is" condition on the effective date of this Permit and
Signature shall have no liability or obligation to make any alterations or
improvements of any kind on or about the Space or any portion.

14. PERMITTEE'S ALTERATIONS AND INSTALLATIONS

     Permittee shall not install any fixtures or make, perform or permit the
making or performance of any alterations, additions, installations or
improvements or other physical changes to any portion of the Space, inclusive of
signage, without the prior written consent of Signature, which consent may be
granted or withheld in Signature's sole and absolute discretion. All fixtures
installed, personal property of Permittee, or additions and improvements made to
the Space by Permittee may be removed, provided Permittee is not then in default
hereunder, (a) from time to time in the ordinary course of Permittee's business
or in the course of reconstruction, renovation or alteration of the Facility or
Space by Permittee, with Signature's prior written consent in accordance with
the first sentence of this Article, and (b) during a reasonable period prior to
the expiration of the Term of this Permit, provided that Permittee shall
promptly repair, at its own expense, damage to any portion of the Facility
resulting from such installation and removal, with all such repairs or
restorations being in quality at least equal to the original work or
installation.

                                        8


15.  INSURANCE

     15a. INSURANCE COVERAGES. Permittee shall obtain and maintain at all times
     during the term of this Permit, from financially solvent insurance
     carrier(s) authorized to conduct business in the State of Indiana, the
     following types and minimum amounts of insurance:

          Workers' Compensation - per statutory coverage as prescribed by the
          State of Indiana, as required, consistent with Permittee's use of the
          Space;

          Employer's Liability Insurance, in a minimum amount as set forth on
          Exhibit A, a copy of which is attached hereto and incorporated herein,
          as required, consistent with Permittee's use of the Space;

          Commercial General Liability Insurance, inclusive of premises
          liability, with a combined single limit set forth in Exhibit A,
          insuring Permittee's liability against bodily injury to persons,
          invitees, including passengers and damage to property;

          All-Risk Property Insurance, with coverage to be commensurate with the
          value of the Space's furnishings, equipment, tooling, spare parts and
          other contents;

          Automobile Liability Insurance, consistent with the coverage set forth
          in Exhibit A, and an express representation specifying the policy's
          effectiveness on airport premises.

     15b. CERTIFICATES OF INSURANCE. All Permittee insurance is to be carried
by one or more insurance companies licensed to do business in the State where
this Permit is effective and approved by Signature. Signature shall be named as
an additional insured under the applicable liability policies and furnished duly
executed certificate(s) of all required insurance, together with satisfactory
evidence of the payment of the premiums therefore, on the date Permittee first
occupies the Space and, upon renewals of such policies, no less than thirty (30)
days prior to the expiration of the terms of such coverage. The insurance
policies of Permittee shall further provide at least thirty (30) days advance
written notice to Signature and Permittee of any material changes, cancellation,
non-renewal or changes adverse to the interests of Signature or Permittee.

     It is expressly understood by Permittee that the receipt of any required
insurance certificate(s) by Signature hereunder does not constitute agreement
that the insurance requirements of this Permit have been fully met or that the
insurance policies indicated on the certificate are in compliance with all
requirements of this Permit. Further, the failure of Signature to obtain
certificates or other evidence of insurance from the Permittee shall not be
deemed a waiver by Signature. Non-conforming insurance shall not relieve
Permittee of its obligation to provide the insurance specified herein.
Nonfulfillment of the insurance conditions by Permittee hereunder may constitute
a material breach of this Permit and Signature retains the right to suspend the
Permit until proper evidence of insurance is provided or, in the continued
absence of such insurance evidence, terminate this Permit, in Signature's sole
discretion.

                                        9


     15c. WAIVER OF SUBROGATION. All policies shall expressly waive the
underwriters and insurance carriers' right of subrogation against Signature
and/or its insurance carriers.

     15d. PRIMARY INSURANCE. Consistent with the indemnification provisions of
this Permit, Permittee's insurance policies will respond on a primary basis,
with any insurance carried by Signature to be construed as secondary or excess
insurance.

     15e. PERMITTEE'S LIABILITY NOT LIMITED. NOTWITHSTANDING THE PROVISIONS OF
THIS SECTION, FOR PURPOSES OF THIS PERMIT, PERMITTEE ACKNOWLEDGES THAT ITS
POTENTIAL LIABILITY IS NOT LIMITED TO THE AMOUNT OF LIABILITY INSURANCE COVERAGE
IT MAINTAINS NOR TO THE LIMITS REQUIRED HEREIN.

     15f. INVALIDATION OR CONFLICT WITH EXISTING INSURANCE POLICIES. Permittee
shall not do, permit or suffer to be done any act, matter, thing or failure to
act in respect to the Space that will a) invalidate or be in conflict with any
insurance policies covering the Space, the Facility or any part thereof;
b) increase the rate of insurance on the Space or any property located therein.
If, by reason of the failure of Permittee to comply with the provisions of this
Permit, the insurance rate shall at any time be higher than it otherwise would
be, then Permittee shall reimburse Signature and any other Facility tenants, on
demand, for that part of all premiums for any insurance coverage that shall have
been charged because of such actions by Permittee.

     15g. SIGNATURE INSURANCE. During the Term of this Permit, Signature shall
maintain, at Signature's expense, liability insurance, fire insurance with
extended coverage and other insurance on Signature's leased premises with
coverages and in amounts not less than those which are from time to time
acceptable and customary to a prudent fixed base operator; provided, however,
that such liability coverage shall not be less than that required of Permittee
during the Term of this Permit.

16.  INDEMNIFICATION

     16a. INDEMNIFICATION BY PERMITTEE. Subject to the provisions of Article
17, Permittee agrees to indemnify, defend and hold harmless Signature
(including, without limitation, Signature's subsidiaries, affiliates and parent
company as now or hereafter constituted), the Airport and their respective
officers, directors, agents, tenants, customers, contractors, subcontractors,
invitees, guests and employees from and against any and all liabilities,
damages, losses, claims, suits, fines, penalties or judgments, of any kind
whatsoever (including those arising from third parties), including all costs,
reasonable attorneys' fees and expenses incidental thereto (hereinafter
collectively referred to as, "Damages"), which may be suffered by or charged to
Signature by reason of any loss of or damage to any property or injury to or
death of any person arising out of or by reason of any breach, violation or
non-performance by Permittee or its officers, directors, agents, contractors,
subcontractors, invitees, guests and employees of any covenant or condition of
this Permit or by any act or omission of those persons, excepting those Damages
caused by the gross negligence or willful misconduct of Signature.

                                       10


     16b. INDEMNIFICATION BY SIGNATURE. Subject to the provisions of Article
17, Signature agrees to indemnify, defend and hold harmless Permittee
(including, without limitation, Permittee's subsidiaries, affiliates and parent
company as now or hereafter constituted), the Airport and their respective
officers, directors, agents, tenants, customers, contractors, subcontractors,
invitees, guests and employees from and against any and all Damages, which may
be suffered by or charged to Permittee by reason of any loss of or damage to any
property or injury to or death of any person arising out of or by reason of any
breach, violation or non-performance by Signature or its officers, directors,
agents, contractors, subcontractors, invitees, guests and employees of any
covenant or condition of this Permit or by any act or omission of those persons,
excepting those Damages caused by the gross negligence or willful misconduct of
Permittee.

     The foregoing indemnifications expressly exclude all Environmental
Damages, as defined in Article 10 herein, and shall survive the termination or
expiration of this Permit and shall not be construed to negate or abridge any
other obligation of indemnification running to the opposite party which would
exist at common law or under other provisions of this Permit and the extent of
the obligation of indemnification shall not be limited by any provision of
insurance undertaken in accordance with this Permit.

17.  DISCLAIMER OF LIABILITY

     THE PARTIES HEREBY AGREE THAT UNDER NO CIRCUMSTANCES SHALL EITHER PARTY
BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES, WHETHER IN CONTRACT OR TORT (INCLUDING STRICT LIABILITY AND
NEGLIGENCE), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE, DIMINUTION OR LOSS OF
VALUE, LOSS OF USE, LOSS OF ANTICIPATED PROFITS OR THE COST ASSOCIATED WITH
SUBSTITUTE OR REPLACEMENT AIRCRAFT.

18.  FORCE MAJEURE

     Neither Signature nor Permittee shall be liable for their failure to
perform under this Permit (or for any loss, injury, damage or delay of any
nature whatsoever resulting therefrom) caused by any act of God, act of nature,
fire, flood, wind storm, strike, labor dispute, riot, insurrection, war or any
other cause beyond either Party's control.

19.  DEFAULT

     (a)  It shall be considered a default of this Permit if: (a) Permittee
shall fail to make timely payments required hereunder on the date due and said
default shall continue for ten (10) days after receipt by Permittee of notice
thereof from Signature; (b) Permittee shall fail to perform any other material
covenant herein, and such default shall continue for a period of thirty (30)
days after receipt by Permittee of written notice of said default from
Signature; (c) Signature shall fail to perform any of its covenants, agreements
and material undertakings contained herein and said default shall continue for a
period of thirty (30) days after receipt by Signature of written notice from
Permittee,

                                       11


provided, however, that should Signature initiate corrective action in response
to a notification of default within thirty (30) days and the nature of the
corrective action required precludes Signature from rectifying such default
within thirty (30) days, then Signature shall be permitted the reasonable
additional time as may be required to pursue, through its best and most diligent
efforts, the required corrective action to completion without being adjudicated
non-responsive or in default under the terms of this Permit; (d) either of the
Parties shall cease to do business as a going concern; (e) a petition is filed
by or against either Party under the Bankruptcy Act or any amendment thereto
(including a petition for reorganization or an arrangement) or under any other
debtor protection laws; or (f) either Party assigns its property for the benefit
of creditors. In the event of any default hereunder, either Party shall, at its
option and without further notice, have the right to terminate this Permit. In
the event Signature terminates this Permit, it shall have the right to remove
the personal property of Permittee from the Space, in the event Permittee does
not forthwith vacate and surrender the Space and remove its personal property.
In the event either Party shall institute any action for the enforcement of its
rights under this Permit, the prevailing Party shall be reimbursed by the other
Party for its reasonable attorneys' fees in addition to any other damages
recoverable in such action.

     (b)  The assignment, transfer or encumbering of this Permit or the
subletting of the Space in a manner not permitted by Article 12 hereunder, shall
be considered to be a default.

     (c)  It shall further be considered a default if there is a taking of this
Permit or the Space, or any part thereof, upon execution or by other process of
law directed against Permittee, or upon or subject to any attachment at the
instance of any creditor of or claimant against Permittee, which execution or
attachment shall not be discharged or disposed of within thirty (30) days after
the levy thereof; or the vacating or abandonment of the Space by Permittee.

20.  TAXES, ASSESSMENTS AND FEES

     Permittee shall be solely responsible for the payment of all taxes,
assessments, license fees or other charges that may be levied or assessed during
the Term of this Permit upon or against any personal property or equipment
located within or on the Space which is owned by, leased to or in the care,
custody and control of the Permittee.

21.  GOVERNING LAW / VENUE

     This Permit shall be construed, interpreted and enforced in accordance
with the laws of the State of Indiana.

22.  MEDIATION /ARBITRATION

     (a)  If a dispute arises from or relates to this Permit or the breach
thereof and if the dispute cannot be settled through direct discussions, the
Parties agree to first endeavor to settle the dispute by mediation to be held
within thirty (30) days from

                                       12


demand by either party, to be administered by the American Arbitration
Association (AAA) under its Commercial Dispute Resolution Procedures. If the
matter cannot be resolved by mediation, any unresolved controversy or claim
arising from or relating to this contract or breach thereof shall be settled
exclusively by arbitration administered by the AAA in accordance with its
Commercial Dispute Resolution Procedures, with the Parties splitting the costs
of arbitration evenly. Any demand for arbitration must be filed within one (1)
year of the conclusion of the mediation session in which an impasse was reached
or any unresolved controversy remained. Judgment on any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.

     (b)  With regard to the arbitration process, in the event of a conflict
between this clause and applicable State law, arbitration shall be governed by
Title 9 of the US Code (United States Arbitration Act) and the Commercial
Dispute Resolution Procedures of the AAA.

     (c)  Either Party may, without inconsistency with this Permit, seek from a
court any interim or provisional relief that is necessary to protect the rights
or property of that Party, pending the establishment of the arbitral tribunal
(or pending the arbitral tribunal's determination of the merits of the
controversy).

     (d)  Mediation and arbitration shall be held in Orlando, Orange County,
Florida, or at any other place selected by mutual agreement of the Parties.

     (e)  A mediator shall be selected by mutual agreement of the Parties. If
the Parties cannot agree, then by the AAA.

     (f)  An arbitration shall be by a single arbitrator, unless the Parties
mutually agree to more than one. AAA shall provide a list of neutral
arbitrators, from which the Parties shall select an arbitrator.

     (g)  The arbitrator(s) shall have the authority to award any remedy or
relief that a court in the applicable State could order or grant, including,
without limitation, specific performance, attorneys' fees, if otherwise provided
in this Permit, and costs, the issuance of an injunction, or the imposition of
sanctions for abuse or frustration of the arbitration process and costs.

     (h)  Neither a Party nor an arbitrator may disclose the existence,
content, or results of any mediation or arbitration hereunder without the prior
written consent of both Parties.

     (i)  The Parties shall allow and participate in limited discovery for a
period of ninety (90) days after the filing of an answer or another responsive
pleading to the demand for arbitration. Limited discovery shall mean no more
than three (3) depositions (including one (1) expert) and no more than
twenty-five (25) interrogatories and requests for admissions. The arbitrators
can expand discovery only for good cause shown. The final arbitration hearing
must be held within one hundred twenty (120) days of the initial demand for
arbitration unless continued by the arbitrators, and only for good cause shown.

     (J)  THE PARTIES STIPULATE THAT TRIAL BY JURY IS WAIVED.

                                       13


     (k)  The arbitration award shall be in writing, and upon the request of a
Party, include findings of fact and conclusions of law.

     (l)  The arbitrator(s) shall award to the substantially prevailing Party
all of the Party's costs and fees. "Costs and fees" mean all reasonable preaward
expenses of the arbitration, including the arbitrators' fees, administrative
fees, travel expenses, out-of-pocket expenses such as copying and telephone,
court costs, witness fees and attorneys' fees.

23.  INDEPENDENT CONTRACTOR

     The relationship between Signature and Permittee shall be that of
permitor and permittee. Signature and Permittee shall act at all times as
independent contractors and nothing contained herein shall be construed to
create the relationship of principal and agent nor employer and employee.
Additionally, neither Party shall be considered the partner, joint venturer,
agent, fiduciary, bailee or trustee of the other and neither Party shall be
responsible for the acts or omissions of the other.

24.  RIGHTS NOT WAIVED

     No failure by Signature to insist upon the strict performance of any
term, covenant, agreement, provision, condition or limitation of this Permit or
to exercise any right or remedy consequent upon a breach thereof, and no
acceptance by Signature of full or partial rent during the continuance of any
such breach or application of the security deposit in light of any breach, shall
constitute a waiver of any such breach or of any such term, covenant, agreement,
provision, condition, limitation, right or remedy. No term, covenant, agreement,
provision, condition or limitation of this Permit to be kept, observed or
performed by Signature or by Permittee, and no breach thereof, shall be waived,
altered or modified except by a written instrument executed by Signature or by
Permittee, as the case may be. No waiver of any breach shall affect or alter
this Permit, but each and every term, covenant, agreement, provision, condition
and limitation of this Permit shall continue in full force and effect with
respect to any other then existing or subsequent breach thereof.

25.  REMEDIES CUMULATIVE

     The rights and remedies with respect to any of the terms and conditions
of this Permit shall be cumulative and not exclusive and shall be in addition to
all other rights and remedies. The waiver by either Party of any covenant or
condition of this Permit shall not preclude such Party from demanding
performance thereafter in accordance with the terms hereof.

                                       14


26.  NOTICES

     Any notice given by one Party to the other in connection with this Permit
shall be in writing and shall be sent by U.S. certified mail, return receipt
requested, via hand delivery (with advance copy to be forwarded via facsimile):

                  (1)      If to Signature, addressed to:

                           Signature Combs Inc.
                           Attention: General Manager
                           P.O. Box 51568
                           Indianapolis Int'l Airport
                           Indianapolis, IN 46251
                           Facsimile: 317-248-4962

                                    --and--

                           Signature Flight Support Corporation
                           Attention: Director of Contracts
                           201 South Orange Avenue, Suite 1100
                           Orlando, Florida 32801
                           Facsimile: (407) 648-7352

                  (2)      If to Permittee, addressed to:

                           Chautauqua Airlines
                           Attention: Jeff Domrese
                           2500 S. High School Rd.
                           Indianapolis,
                           IN 46251 Facsimile:___________

     Notice shall be deemed to have been given on the date of receipt as shown
on the return receipt or facsimile confirmation document.

27.  INTEGRATION

     It is mutually agreed and understood that this Permit (and any exhibits,
amendments and addendums duly entered into between the Parties) contains the
final and entire agreement between the Parties. The Parties shall not be bound
by any terms, statements, conditions or representations, oral or written,
express or implied, not herein contained. Any change or modification to this
Permit must be in writing, signed by both Parties, as of its effective date, and
supercedes all prior independent agreements between the Parties related to the
use of the Space at the Airport.

28.  SUCCESSORS BOUND

     Except as otherwise provided herein, this Permit shall be binding upon,
and shall inure to the benefit of the Parties hereto, and each of their
respective heirs, legal representatives, successors and assigns.

                                       15


29.  PREMISES SECURITY

     The Space which is the subject of this Permit is located within the
boundaries of the Airport's perimeter fence and situated on the AOA. Signature
and Permittee represent their activities shall adhere at all times to the
prevailing Airport and Federal Aviation Administration security regulations set
forth within Federal Air Regulation (FAR) Part 107.

30.  TIME IS OF THE ESSENCE

     Time is of the essence in the performance of all Permittee's obligations
under this Permit.

31.  SEVERABILITY OF PROVISIONS

     If any provision of this Permit shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be affected thereby.

32.  BASIS OF BARGAIN

     Permittee acknowledges that it is familiar with the operation of aircraft
hangar facilities, aircraft storage areas, parking ramp areas and has inspected
the Space and surrounding Facility. Permittee further acknowledges that it is
aware that aircraft will be operated, stored and maintained in and around the
Facility where the Space is located and that there are certain dangers inherent
in the storage of aircraft and operation of such facilities. Permittee
acknowledges that it has considered these dangers along with the benefits which
flow to Permittee as a result of this Permit and that such considerations
constitute part of the basis for the bargain reached herein between Signature
and Permittee. Specifically, Permittee understands that its obligations to
Signature with regard to the specified insurance coverages and Permittee's
indemnification and limitation of liability as to Signature constitute a
material consideration for Signature to agree to enter into this Permit.

                                       16


     IN WITNESS WHEREOF, the Parties have executed this Permit as of the day
and year first above written.

(Signature)                                       (Permittee)
SIGNATURE COMBS INC.                              Chautauqua Airlines

/s/ Philip S. Kerr                                /s/ Jeff Domrese
- --------------------------                        -----------------------
By: Philip S. Kerr                                By: Jeff Domrese

Its: General Manager                              Its: Director of Maintenance
                                                      ------------------------

Date: Jan 16, 2001                                Date: 1/16/01
      ---------------                                   ----------------

                                       17


                                    EXHIBIT A

MAIL CERTIFICATES TO: SIGNATURE INSURANCE DEPARTMENT, P.O. BOX 9085, MISSION
VIEJO, CALIFORNIA 92690-9085 ATTENTION: MR. LEE ROTH

                INSURANCE COMPANY FINANCIAL STRENGTH REQUIREMENTS

                              - AM Best Rating : B+
                              - Financial Size : V

         MINIMUM INSURANCE LIMITS FAR SFSC CUSTOMERS, TENANTS & VENDORS
      entering or using SFSC ramp and/or hangars as services apply and/or
                         construction /vendor activity:

- -  LIABILITY - AIRPORT PREMISES:

- -  Commercial General           *for products and completed operations
- -  Tie Downs/T Hangars/Office   Combined Single Limit $2,000,000 per occurrence*
- -  All Others                   Combined Single Limit $5,000,000 per occurrence*

- -  Auto                         Combined Single Limit $5,000,000 per occurrence

- -  Environmental/Pollution

- -  LIABILITY - OFF AIRPORT PREMISES

- -  Auto                         Combined Single Limit $1,000,000 per occurrence

- -  Commercial General           Combined Single Limit $1,000,000 per occurrence
                                for products and completed operations

- -  LIABILITY OTHER:

   Builders Risk                "All Risk", Full Completed Value of Project and
                                must include "Delay in Start-Up"

- -  Professional (Errors &       Combined Single Limit $ 5,000,000 per occurrence
   Omissions)

- -  PROPERTY

- -  Property                     "All Risk", Full Replacement Value

- -  WORKER'S COMPENSATION & EMPLOYER'S LIABILITY:

- -  Worker's Compensation        Statutory

- -  Employer's Liability     $1,000,000 each occurrence for bodily injury by
                            accident
                            $ 1,000,000 each occurrence for bodily injury by
                            disease
                            $1,000,000 policy limit for bodily injury by
                            disease

SPECIAL PROVISIONS FOR CERTIFICATE OF INSURANCE: All such required liability
insurance, except Automobile, Workers Compensation and Employers Liability shall
name Signature Flight Support Corporation (SFSC) and its subsidiaries as
additional insureds. If the required liability polices do not contain a standard
separation of insured provision, they shall be endorsed to provide cross
liability coverage. All required insurance policies, except Workers
Compensation, Employers Liability and Automobile Liability shall contain a
waiver of subrogation in favor of Signature Flight Support Corporation and its
subsidiaries. All required insurance policies shall be evidenced by Certificates
of Insurance, which provide at least thirty (30) days advance written notice of
any cancellation or changes adverse to the interests of Signature Flight Support
Corporation and its subsidiaries.

NOTE: MINIMUM INSURANCE AMOUNTS STATED CANNOT BE LOWERED WITHOUT EXPRESS WRITTEN
CONSENT OF SIGNATURE FLIGHT SUPPORT CORPORATION. HIGHER INSURANCE LIMITS
REQUIRED BY AIRPORT AUTHORITIES WILL SUPERSEDE THE LIMITS STATED ABOVE AND WILL
REQUIRE VERIFICATION AND POSSIBLE COVERAGE AND PREMIUM INCREASES.

                                                             REVISED: 1/10/00MSB

                                18

EX-10.68

                                                                  Exhibit 10.68

                             HANGAR AND OFFICE LEASE

     1. PARTIES. This Hangar and Office Lease ("Lease") is made by and between
AMR Combs, Inc. (hereinafter "LESSOR"), a Delaware corporation, being the owner
and operator of a fixed base operation at Indianapolis, Indiana, (doing business
as "AMR Combs Indianapolis"), and Chautauqua Airlines, having a mailing address
of 2500 S. High School Rd. Suite 160, Indianapolis IN 46241 (hereinafter
"LESSEE").

     2. LEASED SPACE. LESSOR hereby leases to LESSEE and LESSEE accepts from
LESSOR, for the Term and upon the terms and conditions set forth in this Lease,
the following space in LESSOR's fixed base operation at Indianapolis, Indiana
(collectively referred to as the "Leased Space':

          30,398 useable square feet of office, shop and ramp space (the
          Space"), more particularly described in the diagram attached hereto as
          Exhibit A- 1; and

          Dedicated space in LESSOR's Hangar #2 more particularly described in
          Exhibit A-2 (the "Hangar Space") to park LESSEE's VARIOUS AIRCRAFT.

     3. TERM. The Initial Term of this Lease shall commence on JANUARY 1ST 1999.
and end on DECEMBER 31ST 2001. unless sooner terminated or extended as
hereinafter provided.

     4. HOLDING OVER. Should LESSEE remain in the Leased Space at the expiration
of the Initial Tern, or renewal terns as applicable, and LESSOR assents thereto,
this Lease shall automatically continue in force on a month-to-month basis in
accordance with the same terms and conditions herein as applicable. Should
LESSEE remain in the Leased Space after such expiration of the Initial Terns,
renewal term, or such other mutually agreed term, after receipt of LESSOR'S
written demand to vacate, the monthly rental shall increase sixty days after the
date of demand to vacate to one hundred and fifty (150) percent the monthly
rental as in effect for the last month of the immediately preceding Initial
Term, renewal tern or mutually agreed term as applicable. Notwithstanding the
foregoing, this Lease may be terminated as herein provided or as otherwise under
law, which rights of LESSOR shall not be prejudiced hereby.

     5. RENT. Effective JANUARY 1. 1999, LESSEE agrees to pay to LESSOR at AMR
Combs, Indianapolis, ATTN: Accounts Payable Department, or at such other place
as LESSOR may hereafter notify LESSEE in writing, rental of 18,400.00 per month
for the Space, payable in advance on the first day of each month during the
Initial Term of this Lease, time being of the essence. Effective upon the first
day of each annual renewal, the monthly rental shall be increased by 5 percent.
(SEE ADDENDUM #1 for rent structure and future leased space).

NOTE: HANGAR RENT EFFECTIVE 1/1/99 $17,000.00 PER MONTH. RAMP SPACE RENT
EFFECTIVE UPON OCCUPATION $1,400.00 PER MONTH.



Hangar and Office Lease
Page 2

     6. USE. The Space shall be used for general use. The Hangar Space shall be
used exclusively for storage and maintenance of Various aircraft and maintenance
equipment owned or operated by LESSEE (the "Aircraft"). 'The Hangar Space shall
be maintained by LESSEE in a neat and orderly condition in compliance with all
laws, rules and regulations and LESSEE shall prevent same from becoming
hazardous or unsightly. LESSEE shall conduct its business in a manner that does
not interfere with LESSOR'S or other person's use of the area surrounding the
Leased Space.

     7. UTILITIES. LESSOR agrees at its expense to supply electric power, gas
and water as may be reasonably required for the Leased Space, but in no event
shall LESSOR be liable or responsible for damages of any kind whatsoever
resulting from failure, shortage or stoppage of the supply thereof, unless due
to the negligence of LESSOR, its employees, agents and invitees. If interruption
is in excess of five (5) days, rent shall be equitably abated to the extent that
LESSEE is deprived of the use of the Leased Space.

     8. MAINTENANCE AND REPAIR. LESSOR agrees, at its expense, to maintain the
structural soundness of the buildings upon the Leased Space and to maintain and
repair the mechanical, electrical, plumbing and heating, ventilation and air
conditioning systems; provided that LESSEE shall reimburse LESSOR for the cost
of any maintenance and repairs occasioned by the negligent or intentional acts
of LESSEE, its employees, agents and invitees. LESSOR shall also make all
repairs, alterations or additions required to be made by any governmental
authority having jurisdiction, except to the extent resulting from LESSEE's
exclusive use of the premises which is different in nature from the customary
uses of the Lessor's fixed base operations. LESSOR shall be liable for damages
sustained by LESSEE resulting from the failure of LESSOR to make any of said
repairs; provided, however, that LESSOR shall not be liable for any incidental
or consequential damages, or lost revenues or profits, sustained by LESSEE
resulting front the failure of LESSOR to make any said repairs. LESSOR shall
keep the sidewalks, corridors, stairways and all other means of ingress and
egress for the Leased Space and all common areas, parking areas and facilities
and public portions of the Leased Space in good repair and in a clean and safe
condition, free of any accumulation of debris. LESSOR shall, at its cost,
provide janitorial services for the Hangar Space, including the restrooms.

LESSEE agrees that it will keep and maintain the Leased Space in a similar
condition and state of repair as received at the commencement of this Lease,
reasonable wear and tear and casualty damage not caused or contributed to by
LESSEE excepted, at LESSEE's own expense. LESSEE will not permit the undesirable
accumulation of trash or other undesirable material in or around the Leased
Space. LESSEE shall at its expense, provide janitorial services for the Office
Space.

     9. HAZARDOUS MATERIALS. LESSOR hereby represents, warrants and agrees that
(i) all operations or use of the Leased Space or any portion thereof (except
LESSOR shall not be responsible for the operations or use of LESSEE) shall at
all times



Hangar and Office Lease
Page 3

during the Term be in full compliance with all laws then governing Hazardous
Materials, and (ii) as to any Hazardous Material discovered in, on, under or
about the Leased Space during or after the Term (which hazardous material was
not released by any act or omission of LESSEE), required to be remediated under
applicable laws or standards governing the health and safety of LESSEE's
employees or invitees, LESSOR shall at its sole expense (a) promptly commence
and diligently prosecute to completion remediation thereof in compliance with
all laws; and (b) indemnify, defend and hold LESSEE harmless from all claims and
damages asserted by any governmental agency or by adjacent and successor
landowners or other lessees or third parties arising therefrom. The foregoing
indemnification and responsibilities of LESSOR shall survive the termination or
expiration of this Lease.  With respect to any Hazardous Material released by
an act or omission of LESSEE and discovered in, on, under or about the Leased
Space during or after the Term, LESSEE agrees to indemnify, defend and hold
LESSOR harmless from all claims and damages asserted by any governmental agency
or by adjacent and successor landowners or other lessees or third parties
arising therefrom; provided, that, LESSEE shall not in any event be required to
indemnify, defend or hold LESSOR harmless for decontamination or other cleanup
of its Leased Space unless and to the extent required in respect of oil or other
Hazardous Materials released by an act or omission of LESSEE and LESSEE shall
not be liable to or be required to indemnify LESSOR for claims and damages
arising merely as a result of LESSEE'S status as a tenant, occupant or operator
of the Leased Space.

"Hazardous Material" shall mean any hazardous, explosive, radioactive or toxic
substance, material or waste which is regulated by any federal, state or local
governmental authority, including any material or substance which is (i) defined
or listed as a "hazardous waste," "extremely hazardous waste," "restricted
hazardous waste," "hazardous substance," "hazardous material," "pollutant" or
"contaminant," under any law, (ii) petroleum or any petroleum derivative, (iii)
any flammable explosive, (iv) any asbestos, asbestos containing material or
"resumed asbestos containing material".

     10. DELIVERY OF POSSESSION. Actual possession of the Leased Space shall be
delivered by LESSOR to LESSEE free and clear of all tenancies and occupancies,
broom clean, and in good order and condition.

     11.A. DEFAULT BY LESSEE. Should LESSEE default in the payment of any rent
or other monies required hereunder to be paid by LESSEE, as and when the same
become due, or should LESSEE default in the performance of any other covenant of
this Lease, LESSOR may, after twenty (20) days' written notice to LESSEE of any
such default in the payment of rent or other monies, or after thirty (30) days'
written notice to LESSEE of default in the performance of any other covenant by
LESSEE, if such default or other violation shall not have been corrected or
cured during such 20-day or 30-day period (or if the default is of such a nature
that it cannot be cured in the stated cure period and LESSEE shall not be
actively engaged during such period in attempting to correct or cure same),
terminate this Lease, re-enter and take possession of the Leased Space and relet
the same or any part thereof on such terms, conditions and rentals as LESSOR may
deem proper. In such event, LESSOR shall apply the proceeds that may



Hangar and Office Lease
Page 4

be collected from any such reletting, less the reasonable expense of doing so,
against the rent and other sums to be paid by LESSEE and hold LESSEE for any
balance that may be due under this Lease. LESSOR shall also retain all other
rights and remedies under law with respect to LESSEE's default.

     11.B. DEFAULT BY LESSOR shall default in the performance of any material
covenant or agreement hereunder, LESSEE may, after thirty (30) days' written
notice to LESSOR of default in the performance of any material covenant or
agreement by LESSOR, if such default shall not have been corrected or cured
during such period (or, if the default is of such nature that it cannot, in the
exercise of reasonable diligence, be cured within the applicable cure period,
and LESSOR shall not be actively engaged in correcting or curing same), perform
any material covenant or agreement and shall offset the amounts spent to cure
LESSOR's default from LESSEE's rent. LESSEE shall also retain all other rights
and remedies under law with respect to LESSOR's default, including but not
limited to the right to terminate the Lease.

     12. ALTERATION ND INSTALLATION A REMOVAL OF EQUIPMENT. LESSEE may, from
time to time, make, at its own expense, such interior non-structural changes,
improvements, alterations and additions to the Leased Space as proposed to and
approved in writing by LESSOR. Any changes, improvements, alterations or
additions affecting the exterior of the Leased Space or the structural parts
thereof or of the Hangar Space, shall only be made after LESSEE shall have
obtained the written consent of LESSOR. In addition, LESSEE shall have the
right, from time-to-time, to install, at its own costs and expense, in any
reasonable manner, such office or other equipment, fixtures and furnishings,
including without limitation, self-standing partitions, shelving, cabinets and
safes, as it may require for the conduct of its business, so long as they are
not attached or affixed to the walls or other structures of the Leased Space and
do not cause any damage thereto. All such equipment, fixtures and furnishings
shall be and remain the property of LESSEE, and may be removed by LESSEE upon
the termination of this Lease, or within thirty (30) days after the expiration
of the Initial Term hereof; or any time prior thereto; provided, however, that
any damage to the Leased Space caused by such removal (excluding redecoration)
shall be repaired by LESSEE. Any such items not removed by LESSEE within such
thirty (30) day period shall be deemed abandoned by LESSEE and, at LESSOR's
option, be removed by LESSOR and the related expenses shall be chargeable to
LESSEE, or shall become the property of LESSOR

     13. ASSIGNMENT AND SUBLEASING. LESSEE shall not assign this Lease or sublet
the Leased Space or portion thereof without the prior written consent of LESSOR.
Notwithstanding the foregoing, LESSEE may, without LESSOR's prior written
consent, assign this Lease or sublet all or a portion of the Leased Space to any
wholly-owned subsidiary of LESSEE or to any corporation which may be the
successor-in-interest of LESSEE by reason of any merger or consolidation.



Hangar and Office Lease
Page 5

     14. INSURANCE

          (a) LESSOR is not a guarantor or insurer of the Aircraft, its
components or any other property owned by LESSEE, or for which LESSEE is
responsible. LESSEE currently maintains and will maintain at its expense at all
times during the term of this Lease, a policy or policies of all risk property
insurance, including hull coverage on the Aircraft. LESSEE shall be responsible
for determining the limits of such insurance from time-to-time. The policy or
policies of property insurance shall be endorsed to include a waiver of
subrogation in favor of LESSOR.

          (b) LESSEE, at its expense, shall procure and maintain in force,
throughout the term of this Lease and during any additional period that it
occupies the Leased Space, a policy of public liability insurance, including
broad form contractual coverage, with limits of at least One Million Dollars
($1,000,000.00) per occurrence combined single limit for death, bodily injury or
damage to or loss of property. Prior to the effective date hereof, and at least
annually thereafter, LESSEE shall cause the insurance carrier to mail a
certificate of such insurance to AMR Combs, Inc., 8001 Lemmon Avenue Dallas,
Texas 75209 ATTN: Contract Administration.

          (c) LESSOR shall keep the buildings on the Leased Space and other
structures (including all improvements, alterations, additions and changes
thereto) including, without limitation, the Leased Space demised to LESSEE
hereunder, insured against damage or destruction by fire and the perils commonly
covered under an extended coverage endorsement to the extent of the full
insurable value thereof. LESSOR shall be responsible for determining the amount
of fire and extended coverage insurance to be maintained, but warrants that such
an amount will be equal to not less than full replacement cost.

          (d) LESSOR shall also maintain throughout the term of this Lease:
(i) comprehensive public liability insurance against claims on account of bodily
injury, death or property damage incurred upon any part of the Leased Space or
the common facilities, with limits of not less than One Million Dollars
($1,000,000.00) per occurrence in respect to bodily injury or death, and not
less than Two Hundred Thousand Dollars ($200,000.00) per occurrence in respect
to property damage, and (ii) Hangarkeeper's and Legal Liability Insurance in an
amount not less than Twenty Million Dollars ($20,000,000) for each Aircraft and
Fifty Million Dollars ($50,000,000) per occurrence. LESSOR shall cause the
insurance carrier to mail a certificate of such insurance to LESSEE at the
address provided in Section 23 hereof.

          (e) LESSOR shall maintain through the term of this Lease such
Hangarkeeper's and Legal Liability insurance, and Lessee shall maintain
throughout the term of this Lease, hull coverage insurance with respect to the
Aircraft. To the extent that the Aircraft or other personal property of LESSEE
is damaged, the parties agree to look



Hangar and Office Lease
Page 6

to the insurance of the party responsible for such damage. In the event there is
a dispute as to which party is responsible for such damage to the Aircraft, then
each party shall submit such claim to its respective insurance company for
adjustment.

     15.  CASUALTY. If the Leased Space shall be destroyed or damaged by fire
or arty other casualty to such an extent that the same cannot be restored to
tenantable condition in LESSOR'S sole opinion within one hundred and twenty
(120) days from the date of such destruction or damage, then either party hereto
may termite this Lease as of the date of such destruction by notice given to the
other party not later than thirty (30) days subsequent to the date of such
destruction or damage, and the rent and other charges payable by LESSEE
hereunder shall abate as of the date of destruction or damage. In the event of
any destruction or damage to the Leased Space not resulting in the termination
of this Lease as hereinabove provided, the Leased Space shall be promptly
repaired by and at the expense of LESSOR and, until such repairs shall have been
completed, the rent herein reserved shall be equitably abated from the date of
such destruction or damage in the proportion and to the extent that the Leased
Space is unusable. Unreasonable delay in excess of sixty (60) days on the part
of LESSOR in commencing or carrying out repairs following destruction or damage
shall entitle LESSEE to terminate this Lease as of the date of such destruction
or damage.

     16. INDEMNITY.

          (a) LESSEE agrees to indemnify, defend, release and hold harmless
LESSOR, its parent, subsidiaries, affiliates, directors, officers, employees and
agents for and from any and all liabilities, claims, causes of action, fines,
penalties, damages, expenses (including reasonable attorney's fees and related
expenses) or demands arising out of or related to the occupancy, use, or control
of the Leased Space by LESSEE, its directors, officers, employees, licensees and
invitees, including, but not limited to, injury to or death of persons, or
damage to property, except to the extent that such liability, claim or demand
results from the negligence, contractual breach or other fault of LESSOR. In any
event, LESSEE shall not he liable for consequential, incidental or economic
damages. LESSEE shall not be liable or responsible to LESSOR, its officers,
employees, agents or representatives for any loss or damage to any property, or
death or injury of any person occasioned by: theft, fire, except to the extent
that any fire results from negligence, contractual breach or other fault of
LESSEE, acts of God, acts of any governmental body or authority, acts of the
public enemy, injunction, riot, strike, insurrection, war, acts or omissions of
other tenants or other persons in or around the Leased Space, or any other
matter beyond the control of LESSEE. LESSEE's foregoing indemnity obligation
shall survive the expiration or termination of this Lease.

          (b) LESSOR agrees to indemnify, defend, release and hold harmless
LESSEE, its parent, subsidiaries, affiliates, directors, officers, employees and
agents for and from any and all liabilities, claims, causes of action, fines,
penalties, damages, expenses (including reasonable attorney's fees and related
expenses) or demands arising out of or resulting from the negligence or other
fault of LESSOR, its directors, officers, or



Hangar and Office Lease
Page 7

employees, including, but not limited to, injury to or death of persons, or
damage to property, except to the extent that such liability, claim or demand
results from the negligence, contractual breach or other fault of LESSEE. In any
event, LESSOR shall not be liable for consequential, incidental or economic
damages. LESSOR shall not be liable or responsible to LESSEE, its officers,
employees, agents or representatives for any loss or damage to any property, or
death or injury of any person occasioned by: theft, fire, acts of God, acts of
any governmental body or authority, acts of the public enemy, injunction, riot,
strike, insurrection, war, acts or omissions of other tenants or other persons
in or around the Leased Space, or any other matter beyond the control of LESSOR
LESSOR's foregoing indemnity obligation shall survive the expiration or
termination of this Lease.

     17.  SUBJECT TO THE AIRPORT LEASE. LESSEE acknowledges and agrees that
this Lease shall be in all respects subject and subordinate to the consent and
agreement of the Master Lease between LESSOR and the 1NDIANAPOLIS AIRPORT
AUTHORITY (and the underlying lease referenced therein) governing the Leased
Space, and any extension, modification, or amendment thereof ("Master
Agreement"). In the event that the Master Lease Agreement is cancelled or
terminated, the tern, of the Lease shall automatically terminate simultaneously
therewith and neither LESSOR nor LESSEE shall have any further liability
hereunder, except that liability, if any, accruing pursuant to those sections of
this Lease that expressly survive termination or expiration of this Lease.

     18.  COMPLIANCE WITH REGULATIONS. LESSOR represents and warrants that the
Leased Space currently complies with all federal, state and local laws,
statutes, regulations and orders with respect to LESSEE's anticipated use of the
space. LESSEE shay conduct its business at the Leased Space in accordance with
all federal, state, county and municipal laws and ordinances, and all rules,
regulations and orders of any duly constituted authority, present or future,
affecting the Leased Space, irrespective of the nature of the work, if any,
required for such compliance. LESSEE, its employees, agents, representatives and
invitees, agree to abide by the Rules and Regulations of LESSOR, a copy of which
is attached hereto, which may be hereafter amended by LESSOR No fuel shall be
brought by LESSEE onto the Leased Space for the fueling of any aircraft.

     19.  TOWING. LESSOR shall not provide towing or tractor services in and
around the Hangar and the terminal ramp.

     20.  SIGNAGE Any and all signs affixed to the interior or exterior of
the Leased Space shall be subject to written approval by LESSOR. LESSOR shall
provide sufficient signage on the exterior of the building to inform visitors of
the location of Leased Space,

     21.  QUIET POSSESSION. LESSOR represents and warrants that it has full
right and lawful authority to enter into this Lease and the undersigned have
corporate authority to act on its behalf. LESSEE, upon paying the rent and
observing the covenants



Hangar and Office Lease
Page 8

of this Lease, shall and may lawfully and quietly hold and enjoy the Leased
Space, together with all appurtenances and rights appertaining thereto, during
the term hereof without hindrance, ejection, molestation or interruption.

     22.  TAXES AND ASSESSMENTS. LESSEE shall pay all taxes and assessments
with respect to its personal property and any other taxes, assessments, etc.
levied against LESSEE arising from or relating to LESSEE's occupancy, use or
control of the Leased Space.

     23.  CONDEMNATION. If the Leased Space or any part thereof shall be taken
in any proceeding by any public authority by condemnation or otherwise, or be
acquired for public or quasi-public purposes, LESSEE shall have the option of
terminating this Lease as of the date of such taking by notice given to LESSOR
not less than thirty (30) days subsequent to the date on which LESSEE shall have
been deprived of possession of the part so taken and the rent and other charges
payable by LESSEE shall be adjusted as of such date of condemnation. In the
event that only a portion of the Leased Space shall be so taken and LESSOR and
LESSEE mutually agree, then LESSOR shall restore the Leased Space to a condition
substantially similar to that existing before such taking, and the rent payable
hereunder shall be reduced in the same proportion that the amount of floor space
in the Leased Space is reduced by such taking.

     24.  NOTICES. Notice required or permitted to be given by either party
to the other shall be in writing and delivered either in person to the other
party by overnight delivery with proof of receipt, or by United States certified
mail, return receipt requested, postage fully prepaid, to the address set forth
hereinafter, or to such other address as either party may designate in writing
and deliver as herein provided:

       If to LESSOR:            AMR Combs Indianapolis
                                P.O. Box 51568
                                Indianapolis, IN 46251
                                ATTN: General Manager

       With a Copy to:          AMR COMBS, INC.
                                8001 Lemmon Avenue
                                Dallas, Texas 75209
                                ATTN: Contract Administration

       If to LESSEE:            Chautauqua Airlines, Inc.
                                Box 160, 2500 S. High School Rd.
                                Indianapolis, IN 46241

All such communications shall be deemed given on the date of hand-delivery or
three days after first class mailing. LESSOR shall promptly notify LESSEE of any
change in the address of LESSOR and of any change in the ownership of the Leased
Space, giving



Hangar and Office Lease
Page 9

LESSEE the name and address of the new owner and instructions regarding the
payment of rent.

     25.  MODIFICATION OF AGREEMENT The terms, covenants and conditions hereof
may not be changed orally, but only by an instrument in writing signed by the
party against whom enforcement of the change, modification or discharge is
sought, or by its agent. The failure of either party hereto to insist in any one
or more cases upon the strict performance of any term, covenant or condition of
this Lease to be performed or observed by the other party hereto shall .not
constitute a waiver or relinquishment for the future of any such term, covenant
or condition.

     26.  SUCCESSORS OR ASSIGNS. The terms, covenants and conditions of this
Lease shall be binding upon and shall inure to the benefit of LESSOR and LESSEE
and their respective executors, administrators, heirs, legal representatives,
successors and assigns.

     27.  HEADINGS. The headings herein contained are inserted only as a matter
of convenience and for reference and in no way define, limit or describe the
scope or intent of this Lease or in any way affect the terms and provisions
hereof.

     28.  CONSTRUCTION. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF INDIANA, WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPALS THEREOF.

     29.  COMPLETE AGREEMENT. This Lease contains the complete expression of
the agreement between the parties with respect to the subject matter herein, and
there are no promises, representations or inducements except such as are herein
provided. This Lease shall inure to the benefit and be binding upon the parties
hereto and their respective legal representatives, successors and assigns.

     30.  FUELING AGREEMENT. The parties may concurrently herewith enter into a
Fueling Agreement. Reference is hereby made to such agreement as same may be
necessary to interpret any of the terms or obligations detailed herein.

     31.  LESSOR'S CONSENT: Whenever, LESSOR's consent or approval is required
under the terms of this Lease, such consent shall not be unreasonably withheld,
denied, delayed or conditioned.



Hangar and Office Lease
Page 10

     EXECUTED by LESSOR this 22 day of DEC, 1998.

                                  AMR COMBS, INC.

                                  By: /s/ [Illegible]
                                      ---------------------
                                  Its: VP/General Manager
                                       --------------------

     EXECUTED by LESSEE this 22 day of DEC., 1998.

                                  Chautauqua Airlines
                                  ---------------------

                                  By: /s/ James Muroski
                                      -----------------
                                  Its: Vice President
                                       ----------------



Hangar and Office Lease
Page 11

[CHART]



Hangar and Office Lease
Page 12

EXHIBIT A-2

AMR Combs, Indianapolis Hangar #2.

196' long by 156' wide. 24' 3" door height not including tail door opening.

Airport security clearance and badges required on all persons present in the
hangar. Security procedures required by local Airport Authority and FAA.

[CHART]



Hangar and Office Lease
Page 13

ADDEMDUM #1

Rent structure calculation

Hangar #2, floor and office space in EXHIBIT A-1. Exhibit A-1 includes
floor space and offices inside hangar 2, with the exception of that space
currently occupied by AMR Combs Properties Department.
27,518 SQ. FT. @ $7.50 per sq. ft. annually is $17,000.00 per month

Ramp Space shown on EXHIBIT A-1 Is the area outside the south end of hangar 2.
2,880 SQ. FT. @ $.50 per sq. ft. monthly is $1,400.00 per month EFFECTIVE
UPON OCCUPATION.

FUTURE SPACE AGREEMENT

AMR Combs, Indianapolis agrees to offer, to Chautauqua Airlines, Inc., first
right of refusal on the space currently referred to as the AMR Combs Ground
Maintenance Facility. This space is described as the garage area to the east and
adjacent to hangar 2.

AMR Combs, Indianapolis will offer this space to Chautauqua Airlines, Inc.
at 1/2 the sq. ft. hangar 2 rate or $3.75 per sq. ft. annually. This space
consists of 1,612 sq. ft, and would be leased at the rate of $503.00 per month.

AMR Combs, reserves the right to occupy this space until such time it is no
longer needed through the completion of our new Ground Maintenance Facility. The
completion date of this new facility has not yet been determined or implied
herein.

When this space becomes available, AMR Combs will complete an addendum
to this lease specifying the term and conditions under which to lease the garage
area.



                               CONSENT TO SUBLEASE

Consent to Hangar and Office Lease by and between AMR Combs Indianapolis
and Chautauqua Airlines executed December 22, 1998.

                              INDIANAPOLIS AIRPORT AUTHORITY

                              By /s/ Michael W. Wells
                                 ----------------------------------------
                                 Michael W. Wells, President

                              By /s/ Gordon St. Angelo
                                 ----------------------------------------
                                 Gordon St. Angelo, Vice President

                              By /s/ Gene P. Haflich
                                 ----------------------------------------
                                 Gene P. Haflich, Secretary

                              By /s/ H. Patrick Callahan
                                 ----------------------------------------
                                 H. Patrick Callahan, Member

                              By /s/ Richard L. Cunningham
                                 ----------------------------------------
                                 Richard L. Cunningham, Member

                              By [SEAL]
                                 ----------------------------------------
                                 Max L. Siegel, Member

                              By /s/ David E. Mansfield
                                 ----------------------------------------
                                 David E. Mansfield, Member

EX-23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Republic Airways
Holdings Inc. on Form S-1 of our report dated March 7, 2002, appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Selected Consolidated
Financial Information" and "Experts" in such Prospectus.



DELOITTE & TOUCHE LLP

Indianapolis, Indiana

March 7, 2002