ATLAS AIR INC, 10-K405, 1997-03-31

ATLAS AIR INC
10-K405, 1997-03-31
AIR TRANSPORTATION, NONSCHEDULED

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR FISCAL YEAR ENDED DECEMBER 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NO. 0-25732
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ATLAS AIR, INC.
(Exact name of registrant as specified in its charter)

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<C> <C>
DELAWARE 84-1207329
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

538 COMMONS DRIVE, GOLDEN, COLORADO 80401
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 526-5050

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par
value $.01 per share

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of voting stock held by non-affiliates of the
registrant at March 14, 1997 was $526,177,000 (based on the average bid and
asked price of $23 7/16 as reported on the Nasdaq National Market).

DOCUMENTS INCORPORATED BY REFERENCE

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<CAPTION>
DESCRIPTION OF DOCUMENT PART OF THE FORM 10-K
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<S> <C>
Portions of the Definitive Proxy Statement to be Part III (Item 10 through Item 13)
used in connection with the registrant's 1997
Annual Meeting of Stockholders.
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PART I

ITEM 1. BUSINESS

GENERAL

Atlas Air, Inc. (the "Company") is a cargo carrier which provides, through
its all Boeing 747 aircraft fleet, reliable airport-to-airport air
transportation services throughout the world to major international airlines
consisting of China Airlines Ltd. ("China Airlines"), KLM Royal Dutch Airlines
("KLM"), Lufthansa Cargo AG ("Lufthansa"), British Airways World Cargo ("British
Airways"), Scandinavian Airlines System ("SAS"), Varig Brazilian Airlines
("Varig"), Emirates Airline ("Emirates"), Thai Airways International Public
Company Limited ("Thai Airways"), Cargolux Airlines International, S.A.
("Cargolux"), Fast Air Carrier, S.A. ("Fast Air"), and Lineas Aereas
Suramericanas, S.A. ("LAS") under fixed-rate, long-term contracts. The Company
is able to provide efficient, cost-effective service to its customers primarily
as a result of its productive and flexible work force, the outsourcing of a
significant part of its regular maintenance work on a fixed-cost basis and the
advantageous cost economies realized in the operation of its fleet comprised
solely of Boeing 747 aircraft which are configured for service in long-haul
cargo markets.

The Company's contractual arrangements with its customers, which accounted
for 96% of the Company's operating revenues in 1996, typically provide for its
customers to guarantee monthly minimum aircraft utilization levels at fixed
hourly rates and are typically in force for periods of one to five years,
subject to certain termination provisions. These contracts typically require
that the Company supply aircraft, crew, maintenance and insurance and that its
customers bear all other operating expenses, including fuel and fuel servicing;
marketing costs associated with obtaining cargo; airport cargo handling; landing
fees; ground handling, aircraft push-back and de-icing services; and specific
cargo and mail insurance. The Company's customers are also responsible under
these contracts for utilizing the cargo capacity of each of the contracted
aircraft. These contracts, therefore, minimize for the Company the load factor
and yield risk traditionally associated with the air cargo business. The Company
also occasionally provides its own ad hoc charter or scheduled air cargo
service.

The Company's utilization of High Gross Weight Aircraft (i.e. aircraft with
a maximum take-off weight ("MTOW") of not less than 800,000 pounds) provides
significant cost and marketing advantages because these aircraft, relative to
most other cargo aircraft that are commercially available, have higher maximum
payload and cubic capacities, and longer range. Additionally, the uniformity of
the Company's Boeing 747 aircraft fleet allows for standardization in
maintenance and crew training, resulting in substantial cost savings in these
areas. Partially as a result of the Company's high level of standardization, KLM
has agreed to provide on a long-term basis a significant part of the regular
maintenance of the aircraft and GE engines in the Company's fleet at a fixed
cost per flight hour, rather than on a more traditional straight payment basis
for actual labor time incurred and part costs. In addition, the Company has
contracted with General Electric Company ("GE") on a long-term basis for
maintenance support of certain GE engines acquired in 1996 as well as for future
GE engine acquisitions. These agreements require payment for certain
introductory costs based on time since most recent shop visit and/or the
modification status of each engine, which will vary on an engine by engine
basis. See "Item 2. Properties -- Aircraft" and "Maintenance."

The primary focus of most of the Company's customers' business is on the
transportation of passengers, not cargo. Nevertheless, most passenger airlines
have air cargo customers that require quick and dependable air cargo lift
between hubs serviced by such airlines. To the extent that airlines have the
cargo capacity on any of their flights, which are generally scheduled for the
convenience of passengers rather than for the needs of air cargo customers, air
cargo service can be provided by them to meet such demand. However, there is a
trend in the passenger-airline business toward replacing Boeing 747 passenger
aircraft and Boeing 747 combination passenger and cargo aircraft ("Combi
Aircraft") with smaller, more efficient twin-engine aircraft. The Company's
customers have therefore found that they must outsource additional cargo
capacity, or add other resources and expand their fleet of aircraft to service
their air cargo customers in order to avoid losing that portion of their
business. The Company believes that it provides a cost-effective solution to
this problem.
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INDUSTRY BACKGROUND

While the air cargo industry is highly competitive, the Company believes
that current industry trends are favorable to the continued growth of its
business. The world air cargo market grew by approximately 10% in 1995 as
measured in revenue ton kilometers ("RTKs") and has grown at an average rate of
more than 9.0% per year from 1985 to 1995 as measured in RTKs, according to the
1996/1997 World Air Cargo Forecast, a report published annually by Boeing (the
"Boeing Report").* The Boeing Report forecasts continued growth in the world air
cargo market at an average annual rate of approximately 6.7% through 2015, with
international air cargo market growth significantly outpacing U.S. domestic
growth. The Company believes this growth has been fueled, in part, by economic
growth, the relaxation of international trade barriers (as indicated by the
passage of the NAFTA and GATT treaties), reductions in the price of shipping by
air, manufacturers' search for low-cost labor in developing countries, and the
increasingly time-sensitive nature of product-delivery schedules due to shorter
product life-cycles and "just-in-time" inventory management.

In addition to growth in the global air cargo market, the Company expects
to benefit from growth in the export-driven economies of the countries in the
Pacific Rim where the Company has focused a significant amount of its flight
operations. According to the Boeing Report, eastbound and westbound freight
volumes (cargo volumes excluding mail) between Asia and the U.S. grew by an
average of 8.2% and 13.2% per year, respectively, between 1985 and 1995, while
air cargo volumes between Europe and Asia grew by an average 8.0% per year
between 1985 and 1995.

The Company also expects to benefit from its focus on increasing its share
of air cargo volumes currently transported by non-U.S. airlines which were
responsible for over 68% of the 110.1 billion RTKs of world air cargo traffic in
1995, according to the Boeing Report.

STRATEGY

The Company provides airport to airport cargo services throughout the world
to major international airlines pursuant to contractual arrangements with its
customers in which the Company provides the aircraft, crew, maintenance and
insurance ("ACMI"). The Company's business strategy is to grow its business
profitably by (i) securing long-term ACMI contracts with new customers, and
expanding its long-term ACMI relationships with its existing customers by
continuing to provide a dependable, efficient and less costly outsourcing
alternative to major international airlines; (ii) maintaining its own costs at
the lowest practicable level and, where feasible, locking in its costs at
predictable levels, such as through the outsourcing of a significant part of its
regular aircraft maintenance at a fixed cost per flight hour; and (iii) in most
cases, differentiating itself from other air cargo carriers by not directly or
indirectly competing with its customers by offering its services to freight
forwarders or shippers with whom its customers deal. By focusing on expanding
its ACMI contracts, the Company can obtain assured minimum annual revenues and
more predictable profit margins and minimize the load factor and yield risk
traditionally associated with the air cargo business.

The Company presently provides air cargo services to the high-growth Asia
and Pacific Rim markets from the United States and Europe and believes that,
with the necessary underlying U.S. operating authorities, landing slots and
expertise already established, it is well positioned to take advantage of the
continued relaxation of international trade barriers and the expected market
growth. Competition for access to certain areas such as Japan, Hong Kong, South
America and Eastern Europe has traditionally been fierce. Management believes
that, as a U.S. certificated carrier, the Company maintains a distinct
competitive advantage over air cargo carriers from foreign nations because of
the demand for access to the United States market by foreign certificated
carriers, which tends to facilitate reciprocity in access to landing slots and
route authority for U.S. carriers. See "Competition."

In order to meet the expected increase in demand for its services, the
Company continuously searches the market for additional High Gross Weight
Aircraft that may become available. In that regard, it entered into

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* The information in the Boeing Report was compiled from many sources. Data
represented in such report should be considered estimates based on Boeing
analyses.

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an agreement with Langdon Asset Management, Inc. in January 1996 to acquire six
747-200 passenger aircraft, plus spare engines (the "Thai Aircraft") from Thai
Airways. The Thai Aircraft are being converted to High Gross Weight freighter
configuration and are being delivered to the Company over a period which began
in the fourth quarter of 1996 and extends through the fourth quarter of 1997.

In addition, the Company entered into an agreement with Federal Express
Corporation ("Federal Express") in March 1996 to lease five 747-200 High Gross
Weight Aircraft, plus spare engines (the "Federal Express Aircraft") four of
which were delivered to the Company between March and September 1996. The
remaining Federal Express Aircraft will be delivered to the Company at the
beginning of the second quarter of 1997. Each aircraft has a lease term ending
in January 1998 and the Company expects to secure replacement aircraft in the
event that the lease term for some or all of the Federal Express Aircraft is not
extended beyond such date.

At the end of 1996, the Company acquired a 747-200 passenger aircraft
currently under lease to Philippine Airlines, Inc. ("PAL"). Upon lease
termination, the Company intends to modify this aircraft to cargo configuration
as part of its fleet expansion plans. See "Item 2. Properties -- Aircraft."

The Company has been successful in securing new customers, or additional
arrangements with existing customers upon delivery dates of aircraft into the
fleet, or soon thereafter. However, from time to time, the Company accepts
delivery of aircraft that have not been committed to a particular ACMI contract.
These aircraft have been utilized as replacement aircraft during scheduled and
unscheduled maintenance, as well as for ad hoc charter arrangements,
particularly since the third quarter of 1996 as the Company began phasing out of
its fleet its spare 747-100 maintenance aircraft. Although the Company intends
to have new ACMI contracts in place upon delivery of the remaining aircraft,
there can be no assurance that such arrangements will have been made.

ACMI CONTRACTS

The Company's contractual arrangements with its customers, which accounted
for 96% of the Company's operating revenues in 1996, typically provide for its
customers to guarantee monthly minimum aircraft utilization levels at fixed
hourly rates and are typically in force for periods of one to five years,
subject to certain termination provisions. These contracts typically require
that the Company supply aircraft, crew, maintenance and insurance and that its
customers bear all other operating expenses, including fuel and fuel servicing;
marketing costs associated with obtaining cargo; airport cargo handling; landing
fees; ground handling, aircraft push-back and de-icing services; and specific
cargo and mail insurance. These contracts, therefore, minimize for the Company
the load factor and yield risk traditionally associated with the air cargo
business. The ACMI contracts typically require minimum air freight capacity to
be provided to its customers by the Company. All of the Company's revenues, and
virtually all of its costs, are in U.S. dollars, thus avoiding currency risks
normally associated with doing business primarily overseas.

The Company is currently operating under fifteen ACMI contracts: four with
China Airlines, two with Fast Air, one each with KLM, Lufthansa, SAS, British
Airways, Cargolux, Thai Airways, Varig, Emirates and LAS. In most cases, one
aircraft is dedicated under each contract. China Airlines, KLM and Lufthansa
accounted for approximately 34%, 12% and 11%, of the Company's total revenues,
respectively, for the year ended December 31, 1996.

The Company's ACMI contracts typically allow the Company's customers to
cancel a maximum of 5% of the guaranteed hours of aircraft utilization over the
course of a year. The Company's customers most often exercise such cancellation
options early in the first quarter or late in the fourth quarter of the year,
when the demand for air cargo capacity has been historically low. The Company
has found that such cancellations provide a timely opportunity for the
scheduling of maintenance on its aircraft, to the extent possible. See
"Maintenance." Certain of the Company's ACMI contracts (which accounted for
approximately 12% of its revenues in 1996) are terminable upon six months'
notice by the customer and certain of such contracts permit the customer to
terminate in the event its relevant route authority is revoked. The Company
believes that its relationships with its customers are mutually satisfactory, as
evidenced by the fact it has renewed eight

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ACMI contracts and added five ACMI contracts with its existing customers,
although there can be no assurance that such contracts will not be canceled in
accordance with their terms.

All of the ACMI contracts provide that each of the Company's aircraft is
deemed to be at all times under the exclusive operating control, possession and
direction of the Company and that, in order to service the route designated by
the contract, the Company obtain the underlying authority from the governments
having jurisdiction over the route. See "Governmental Regulation." Additionally,
if the Company is required to use the customer's "call sign" in identifying
itself throughout its route, the customer must also have obtained underlying
authority from the governments having jurisdiction over the route. Therefore,
the Company's route structure is limited to areas in which it can gain access
from the relevant governments.

OTHER FLIGHT OPERATIONS

To the extent the Company has available excess aircraft capacity at any
time, it will seek to obtain ad hoc charter service contracts, which the Company
believes are generally readily available.

SALES AND MARKETING

From its offices in Colorado, New York, Miami and Luxembourg, the Company
services its air cargo customers and solicits ACMI contract business. The
Company's efforts to obtain new ACMI contract business focus principally on
international airlines with established air cargo customers, high operating
costs and hub and spoke systems which gather cargo at a particular location and
who have the need for long-distance capacity to move such cargo to another
distribution point. On occasion, the Company may utilize independent cargo
brokers to obtain new ACMI contracts. The Company markets its services by
guaranteeing its customers a reliable, low-cost dedicated High Gross Weight
Aircraft with the capacity to ensure the efficient linkage of such customers'
distribution points without the customers' having to purchase and maintain
additional aircraft, schedule additional flights and add other resources.

MAINTENANCE

Due to the average age of the Company's aircraft, it is likely that they
will require greater maintenance than newer aircraft. See "Aircraft." Aircraft
maintenance includes, among other things, routine daily maintenance, maintenance
every six weeks (an "A Check"), significant maintenance work every 18 months (a
"C Check") and a major maintenance event (a "D Check") every five years or
25,000 flight hours, whichever comes later if the aircraft is over the age of 18
years, or every 6 years or 25,000 flight hours whichever comes later for
aircraft under the age of 18 years, with a maximum interval in either case of
nine years. The Company attempts to schedule major maintenance on its aircraft
in the first quarter of the calendar year when the demand for air cargo capacity
has historically been low, taking advantage of cancellations of flights by the
Company's customers that generally occur most frequently during these periods.

Pursuant to a maintenance contract with KLM (the "Maintenance Contract") in
effect until January 2005, a significant part of the regular maintenance
(principally C Checks and engine overhauls, excluding D Checks) of certain of
the Company's aircraft and their GE engines is undertaken by KLM, primarily at
its headquarters located at Schiphol International Airport in Amsterdam, The
Netherlands. KLM supplies engineering and diagnostic testing for each aircraft
and their respective components in compliance with FAA and other applicable
regulations. The Maintenance Contract provides that KLM will perform repairs and
maintenance on the Company's aircraft on the same basis and order of priority as
repairs to its own fleet. Such service is provided to the Company at a cost, for
which a large part is a fixed rate per flight hour, subject to a 3.5% annual
escalation factor for the first five years. Pratt & Whitney ("P&W") engines are
serviced elsewhere, each at a cost based upon the actual labor time and the
parts necessary for such service.

Under the terms of the Maintenance Contract, in the event that the Company
wishes to maintain more than ten of its aircraft under such contract, the terms
of the contract are subject to adjustment by KLM. Ten of the Company's aircraft
are currently subject to the Maintenance Contract. Federal Express provides
certain scheduled maintenance on the Federal Express Aircraft. In June 1996, the
Company entered into a ten year engine maintenance agreement with GE for the
engine maintenance of up to 15 aircraft powered by

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CF6-50E2 engines at a fixed rate per flight hour, subject to an annual formula
increase. The agreement commenced in the third quarter of 1996 with the
acceptance of engines associated with aircraft acquired in the third and fourth
quarter of 1996. Effective in the year 2000, the Company has an option to add
not less than 40 engines to the program.

Routine, daily maintenance, consisting of the inspection and minor repair,
if necessary, of an aircraft and its components, and A Checks are conducted by
various parties subcontracted by the Company at the airports in which it
operates based upon actual labor time and the parts necessary for such service.
The Company has an agreement with a contract-maintenance operator, Hong Kong
Aircraft Engineering Company ("HAECO") pursuant to which HAECO has agreed to
convert and/or undertake D Checks on ten Boeing 747 aircraft through September
1997 at fixed rates, with the Company guaranteeing a minimum number of man
hours. Pursuant to this contract, the Company has the right to release, at a
minimum of six months in advance, the contract hours back to HAECO for use by
other HAECO customers. During 1996 and for the first eight months of 1997, the
Company exercised its right to release the contract hours back to HAECO and
believes that it thereby has fulfilled its commitment under this contract. In
addition, the Company has an agreement, subject to acceptable rates, terms and
conditions with Alitalia to utilize, or find other parties to utilize, an amount
of Alitalia's maintenance services with an aggregate cost of $25 million over a
five-year period ending in June 2000. The Company also has a fixed cost per
landing contract with the B.F. Goodrich Co. ("BF Goodrich") to perform
maintenance on its brakes and for the replacement of tires. The Company believes
that fixed-cost contracts such as these, provide the most efficient means of
ensuring the continued service of its aircraft fleet and the most reliable way
in which to predict its maintenance costs; however, the Company believes it is
more cost effective for routine line maintenance and A Checks to be performed on
a time and labor basis due to the frequency of such maintenance.

GOVERNMENTAL REGULATION

Under the Aviation Act, the Department of Transportation (the "DOT") and
the Federal Aviation Administration (the "FAA") exercise regulatory authority
over the Company. DOT's jurisdiction extends primarily to economic issues
related to the air transportation industry, including, among other things, air
carrier certification and fitness, insurance, certain leasing arrangements, the
authorization of proposed scheduled and charter operations, tariffs, consumer
protection, unfair methods of competition, unjust discrimination and deceptive
practices. The FAA's regulatory authority relates primarily to air safety,
including aircraft certification and operations, crew licensing/training and
maintenance standards.

To provide air cargo transportation services under long-term contracts with
major international airlines, the Company relies primarily on its worldwide
charter authority. The Company requires separate DOT and FAA authorization for
each long-term arrangement.

In order to engage in its air transportation business, the Company is
required to maintain a Certificate of Public Convenience and Necessity (a
"CPCN") from DOT. Prior to issuing a CPCN, DOT examines a company's managerial
competence, financial resources and plans and compliance disposition in order to
determine whether a carrier is fit, willing and able to engage in the
transportation services it has proposed to undertake, and whether a carrier
conforms with the Aviation Act requiring that the transportation services
proposed are consistent with the public convenience and necessity. Among other
things, a company holding a CPCN must qualify as a United States citizen, which
requires that it be organized under the laws of the United States or a State,
territory or possession thereof; that its chief executive officer and at least
two-thirds of its Board of Directors and other managing officers be United
States citizens; that not more than 25% of its voting stock be owned or
controlled, directly or indirectly, by foreign nationals; and that it not
otherwise be subject to foreign control. The DOT may impose conditions or
restrictions on such a CPCN.

DOT has issued the Company a CPCN to engage in interstate and overseas air
transportation of property and mail, and a CPCN to engage in foreign air
transportation of property and mail between the United States and Taiwan. Both
CPCNs are subject to standard terms, conditions and limitations. By virtue of
holding those CPCNs, the Company also possesses worldwide charter authority. It
also holds limited-term DOT exemption

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authority to engage in scheduled air transportation of property and mail between
certain points in the U.S. and Hong Kong.

International air services are generally governed by a network of bilateral
civil air transport agreements in which rights are exchanged between
governments, which then select and designate air carriers authorized to exercise
such rights. Insofar as scheduled service is involved, bilateral agreements may
specify the city-pair markets that may be served; may restrict the number of
carriers that may be designated; may provide for prior approval by one or both
governments of the prices the carriers may charge; may limit frequencies or the
amount of capacity to be offered in the market; and, in various other ways, may
impose limitations on the operations of air carriers. The provisions of
bilateral agreements pertaining to charter services vary considerably from
country to country. Some agreements, such as that between the United States and
Brazil, limit the number of charter flights that carriers of each country may
operate. The Company is subject to various international bilateral air services
agreements between the United States and the countries to which the Company
provides service. The Company also operates on behalf of foreign flag air
carriers between various foreign points without serving the United States. These
services are subject to the bilateral agreements of the respective governments.
Furthermore, these services require FAA approval but not DOT approval. The
Company must obtain permission from the applicable foreign governments to
provide service to foreign points.

The Company has obtained an operating certificate issued by the FAA
pursuant to Part 121 of the Federal Aviation Regulations. The FAA has
jurisdiction over the regulation of flight operations generally, including the
licensing of pilots and maintenance personnel; the establishment of minimum
standards for training and retraining; maintenance of technical standards for
flight; communications and ground equipment; security programs; and other
matters affecting air safety. In addition, the FAA mandates certain
recordkeeping procedures. The Company must obtain and maintain FAA certificates
of airworthiness for all of its aircraft. The Company's aircraft, flight
personnel and flight and emergency procedures are subject to periodic
inspections and tests by the FAA. All air carriers are subject to the strict
scrutiny of FAA officials to ensure proper compliance with FAA regulations.

The DOT and the FAA have authority under the Aviation Safety and Noise
Abatement Act of 1979, as amended and recodified, and under the Airport Noise
and Capacity Act of 1990 (the "ANCA"), to monitor and regulate aircraft engine
noise. Under the ANCA, the Company's aircraft fleet must comply with Stage III
Standards by specified deadlines. Of the Existing Fleet, one aircraft must be
modified to maintain Stage III Standards prior to December 31, 1999, at an
estimated cost of $100,000.

Under the FAA's Airworthiness Directives issued under its "Aging Aircraft"
program, the Company is subject to extensive aircraft examinations and may be
required to undertake structural modifications to address the problem of
corrosion and structural fatigue. For instance, on September 21, 1993 and June
4, 1994, the FAA issued Directives requiring the inspection and replacement of
certain engine components with which the Company must comply by December 1997 at
an aggregate estimated cost of $1.1 million for all of the Company's aircraft.
In November 1994, the FAA issued Nacelle Strut Modification Service Bulletins
which are expected to be converted into Directives. The Company's aircraft would
have to be brought into compliance with such Directives within the next four
years at an estimated cost of approximately $500,000 for each aircraft in its
fleet. The FAA has also issued Directives relating to pylon modifications. The
Company has 12 aircraft to be modified pursuant to these Directives prior to
March 2000 at a total modification cost of approximately $7.2 million. As part
of the FAA's overall aging aircraft program, it has issued Directives requiring
certain additional aircraft modifications to be accomplished prior to the
aircraft reaching 20,000 cycles. The average cycle time for the 12 aircraft
(excluding the Federal Express Aircraft) is 12,000 cycles and the average cycles
operated per year is 800 cycles. The Company estimates that the modification
costs per aircraft will range between $2 million and $3 million. Between now and
the year 2000, only one aircraft is expected to reach the 20,000 cycle limit and
the entire current fleet will require modification prior to the year 2009. It is
possible that additional Directives applicable to the types of aircraft or
engines included in the Company's fleet could be issued in the future, the cost
of which could be substantial.

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The Company is also subject to the regulations of the EPA regarding air
quality in the United States. With respect to aircraft that it purchases, the
Company meets the fuel venting requirements and smoke emissions standards
established by the EPA.

COMPETITION

The market for air cargo services is highly competitive. A number of
airlines currently provide services for themselves and for others similar to the
services offered by the Company and new airlines may be formed that would also
compete with the Company. Such airlines may have substantially greater financial
resources and a larger fleet of aircraft than the Company. The Company believes
that the most important bases for competition in the air cargo business are the
payload and cubic capacities of the aircraft and the price, flexibility, quality
and reliability of service. The ability of the Company to achieve the growth
anticipated by its strategic plan depends upon its success in convincing major
international airlines that outsourcing some portion of their air cargo business
remains more cost-effective than undertaking cargo operations with their own
incremental capacity and resources. See "Strategy."

FUEL

Although fuel costs are typically the largest operating expense for
companies providing air services, the Company has limited exposure to the
volatility of fuel costs and disruptions in fuel supply as a result of its ACMI
contractual arrangements, whereby the Company's customers bear the fuel costs
and concomitant risks thereof. However, an increase in fuel costs could reduce
the Company's cost advantages because of its older aircraft, which are not as
fuel-efficient as newer cargo aircraft. In addition, to the extent the Company
operates scheduled cargo or ad hoc charter services, or ferries its aircraft, it
would be responsible for fuel and other costs that are normally borne by its
customers through its ACMI contracts. In 1996, approximately 3% of the Company's
block hours represented scheduled cargo, ad hoc charter services or ferrying its
aircraft for its own account. The Company may, for periods of time, have excess
capacity, in which case it may deploy such aircraft in scheduled cargo or ad hoc
charter services, pending dedication of the aircraft to an ACMI contract.

EMPLOYEES

As of March 1, 1997, the Company had 570 employees, 372 of whom were air
crew members. In connection with the increase in its fleet upon the delivery of
the Federal Express Aircraft and the Thai Aircraft, the Company hired a
substantial number of additional pilots during 1996. The Company will hire more
pilots in 1997 associated with the delivery of additional aircraft. The Company
maintains a comprehensive training program for its pilots in compliance with FAA
requirements in which each pilot regularly attends update programs.

The Company believes that its employees' participation in the growth and
profitability of its business is essential to maintain its productivity and low
cost structure, and has therefore established programs for that purpose such as
the Profit Sharing Plan, the Stock Purchase Plan, and a Company percentage
contribution of the employee deferral contribution to the Retirement Plan (an
I.R.C. Section 401(k) plan). Such programs are designed to allow employees to
share financially in the Company's success and to augment base salary levels and
retirement income.

The Company's labor relations are covered under Title II of the Railway
Labor Act of 1926, as amended, and are subject to the jurisdiction of the
National Mediation Board. None of the Company's employees is subject to a
collective bargaining agreement; however, many airline industry employees are
subject to such agreements and the Company's employees have been and are
routinely solicited by union representatives seeking to organize them. The
Company considers its relations with its employees to be good.

INSURANCE

The Company is vulnerable to potential losses which may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and its consequent temporary or permanent
loss from service, but also potential claims involving injury to persons or
property.

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The Company is required by DOT to carry liability insurance on each of its
aircraft, and each of the Company's aircraft leases and ACMI contracts also
requires the Company to carry such insurance. While the Company carries business
interruption insurance, any extended interruption of the Company's operations
due to the loss of an aircraft could have a material adverse effect on the
Company. The Company currently maintains public liability and property damage
insurance and aircraft hull and liability insurance for each of the aircraft in
the fleet in amounts consistent with industry standards. The Company maintains
baggage and cargo liability insurance if not provided by its customers under
ACMI contracts. Although the Company believes that its insurance coverage is
adequate, there can be no assurance that the amount of such coverage will not be
changed upon renewal or that the Company will not be forced to bear substantial
losses from accidents. Substantial claims resulting from an accident could have
a material adverse effect on the Company's financial condition and could affect
the ability of the Company to obtain insurance in the future. The Company
believes that it has good relations with its insurance providers.

ITEM 2. PROPERTIES

AIRCRAFT

The Company's utilization of primarily High Gross Weight Aircraft provides
significant marketing advantages because these aircraft, relative to most other
cargo aircraft that are commercially available, have higher maximum payload and
cubic capacities, and longer range. All of the existing fleet and the remaining
three Thai Aircraft and the remaining one Federal Express Aircraft are (or will
be following modification) configured as High Gross Weight Aircraft.
Additionally, the uniformity of the Company's Boeing 747 aircraft fleet allows
for standardization in maintenance and crew training, resulting in substantial
cost savings in these areas.

<TABLE>
<CAPTION>
AIRCRAFT OWNED LEASED DATE OF MANUFACTURE
-------- ----- ------ -------------------
<S> <C> <C> <C>
747-200............................................. 13 5 1974-1986
</TABLE>

Thai Aircraft. The Company contracted to purchase the Thai Aircraft
consisting of six Boeing 747-200 passenger aircraft (equipped with GE engines).
Such purchase contract was assigned by Thai Airways to a third party, from whom
the Company has acquired such aircraft. The Thai Aircraft have cost an average
of approximately $45 million for each of the aircraft (including the cost of
converting the aircraft for cargo service as well as spare engines and parts).
The first three Thai Aircraft were placed into service in each of the third
quarter and fourth quarter of 1996 and the first quarter of 1997. The remaining
three Thai Aircraft are expected to be available to be placed in service in each
of the second, third and fourth quarters of 1997. The Company has obtained
satisfactory financing for the acquisition and conversion of the remaining Thai
Aircraft through its Aircraft Credit Facility, which was recently increased from
$175 to $275 million.

Federal Express Aircraft. The Company entered into an agreement with
Federal Express to lease the five Federal Express Aircraft, plus spare engines.
Four of the Federal Express Aircraft were delivered to the Company from March to
September 1996; the remaining Federal Express Aircraft will be delivered to the
Company at the beginning of the second quarter of 1997. Each aircraft has a
lease term ending in January 1998.

In addition, the Company purchased on January 2, 1997 a 747 flight training
simulator from Federal Express for a purchase price of $2.1 million. The Company
has purchased and will continue to purchase certain Boeing 747 spare parts from
Federal Express during the lease period.

PAL Aircraft. In December 1996, the Company entered into an agreement with
Marine Midland Bank ("Marine Midland") for the purchase of one 747-200 passenger
aircraft (the "PAL Aircraft") for a purchase price of $22 million, including a
spare engine. In connection with the purchase of the PAL Aircraft, the Company
assumed Marine Midland's lessor interest in the lease of such aircraft to
Philippine Airlines ("PAL") for the remainder of the lease term (January 2000).
The Company is currently negotiating with PAL for the early termination of the
lease and delivery of the PAL Aircraft to the Company for conversion to
freighter configuration, although there can be no assurances in that regard.

8
<PAGE> 10

High Gross Weight Aircraft. The Company's aircraft fleet, currently
consists of eighteen High Gross Weight Aircraft. Although the world inventory of
aircraft with MTOW of more than 800,000 lbs is low relative to other cargo
aircraft (with the Company's fleet in 1997 expected to consist of approximately
15% of such aircraft that were produced by Boeing and which remain in service),
the Company believes it can obtain a sufficient number of such aircraft to
maintain its strategic growth. These aircraft generally have been available to
the Company, due primarily to the commercial airline trend toward aircraft
downsizing and modernization, at approximately 30% of the cost of a new aircraft
of similar size and capabilities (such as the Boeing 747-400 aircraft). To the
extent suitable High Gross Weight Aircraft are not available to the Company in
the future, other aircraft (such as Boeing 747 passenger aircraft similar to the
Thai Aircraft) could be acquired and modified, or the Company may seek to
acquire 747-400 aircraft.

FACILITIES

The Company's principal executive offices are located in a 7,000 square
foot office building owned by the Company at 538 Commons Drive, Golden,
Colorado. The Company also rents 2,500 square feet of adjacent office space in
Golden, Colorado.

The Company presently occupies a 21,000 square foot facility located at
John F. Kennedy Airport ("JFK"). This facility includes administrative offices,
maintenance work areas and hangar and parts storage facilities, as well as
flight dispatch operations. The Company occupies this facility pursuant to a
lease agreement with Japan Airlines ("JAL") for a five-year period with two
five-year renewal rights from JAL, which began on June 1, 1995, at a monthly
rate of approximately $41,000. The Company believes the JAL facility is adequate
to support the near term growth in operations that will result from the
anticipated acquisition of additional aircraft.

In addition, the Company leases 7,750 square feet of warehouse space at JFK
for the storage of aircraft components, tires and other aircraft related
equipment. The monthly lease rate is $5,000. The initial lease term expires at
the end of September 1997, with rights for two five-year renewal periods.

Due to increased operations at Miami International Airport, the Company
entered into a month-to-month office lease and a month-to-month warehouse lease
with Dade County, Florida in March 1997. The leased warehouse space will be used
to store aviation related equipment and aircraft components used to maintain
aircraft operated by the Company.

ITEM 3. LEGAL PROCEEDINGS

While the Company is from time to time involved in litigation in the
ordinary course of its business, there are no material legal proceedings pending
against the Company or to which any of its property is subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1996.

9
<PAGE> 11

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

The Company's common stock trades on the Nasdaq National Market under the
symbol "ATLS." The approximate number of shareholders of record at March 14,
1997 was 161.

The following table sets forth for the periods indicated the high and low
bid quotations in the over-the counter market, as quoted by NASDAQ. Such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
1996 1995*
------------- -------------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31........................................... $41 7/8 $15 $-- $--
June 30............................................ 64 1/4 36 3/4 -- --
September 30....................................... 58 1/4 36 3/4 -- --
December 31........................................ 50 7/8 28 1/8 23 12
</TABLE>

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

* The fourth quarter of 1995 was the first full quarterly period for reporting
the high and the low price for the Company's common stock.

The Company has not declared any cash dividends and does not plan to do so
in the foreseeable future. The indentures governing the Company's 12 1/4% Senior
Secured Notes due 2002 (the "Equipment Notes") in certain circumstances may
restrict the Company from paying dividends or making other distributions on its
common stock. See Note 3 to the Consolidated Financial Statements of the
Company.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data presented below have been derived from the
consolidated financial statements of the Company. This information should be
read in conjunction with the consolidated financial statements and related
notes, and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this report.

<TABLE>
<CAPTION>
THE COMPANY AND
PREDECESSORS(1)
---------------
THE COMPANY APRIL 22, 1992
YEARS ENDED DECEMBER 31, THROUGH
------------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1992
-------- -------- --------- --------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenues.... $315,659 $171,267 $ 102,979 $ 41,263 $ 19,568
Operating income...... 88,063 42,674 13,894 446 4,743
Net income (loss)..... 37,838 17,831 3,586 (8,023) (9,114)
Net income (loss) per
common share....... 1.76 1.06 .24 (.53) (.61)
Weighted average
common shares
outstanding during
the period......... 21,503 16,783 15,000 15,000 15,000
</TABLE>

10
<PAGE> 12

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and short-term
investments............... $124,663 $ 96,990 $ 10,524 $ 6,198 $ 13,323
Working capital (deficit).... 98,675 81,022 (1,937) (5,291) 2,067
Total assets................. 773,707 447,323 162,731 125,005 133,410
Long-term debt(2)............ 462,868 335,902 158,730 129,663 132,438
Stockholders' equity
(deficit)................. 212,373 68,715 (15,753) (19,339) (11,316)
</TABLE>

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

(1) For the period April 22, 1992 (inception) through December 31, 1992, the
financial information for the Company, which was formed in August 1992, has
been combined with the financial information of the Company's predecessors
in a manner similar to a pooling-of-interests transaction. The Company
received its required FAA and DOT operating certificates in February 1993
and began operations under its own name at that time. Prior to 1993,
financial results reflect the costs associated with the formation of the
Company and the operating results from the ownership of two Boeing 747
aircraft which were leased to another carrier for operation by such carrier
pursuant to leases with China Airlines beginning in April 1992 and November
1992, respectively, as well as to the United States military during November
and December 1992.

(2) Excludes current maturities.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The Company, through its predecessors, began its operations on April 22,
1992 with one Boeing 747-200 High Gross Weight Aircraft in the service of China
Airlines and expanded its operations to a second Boeing 747-200 High Gross
Weight Aircraft in November 1992. These operations were undertaken on behalf of
the Company by another carrier utilizing pilot crews, dispatch facilities,
maintenance operations and other services provided by such carrier. As a result,
the Company's operations prior to 1993 were primarily limited to aircraft
leasing and start-up activities. The Company initiated cargo services under the
name Atlas Air, Inc. in February 1993.

The table below sets forth selected financial and operating data for the
four quarters of the years ended December 31, 1996, 1995 and 1994 (dollars in
thousands).

<TABLE>
<CAPTION>
1996
---------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total operating revenues................... $315,659 $104,715 $79,681 $72,614 $58,649
Operating expenses......................... 227,596 74,775 59,635 49,947 43,239
Operating income........................... 88,063 29,940 20,046 22,667 15,410
Other (expense)............................ (28,475) (8,569) (7,207) (6,982) (5,717)
Net income................................. 37,838 13,397 8,201 10,037 6,203
Block hours................................ 59,445 18,803 15,444 14,073 11,125
Average aircraft operated.................. 14.7 18.4 15.4 14.0 10.8
Operating margin........................... 27.9% 28.6% 25.2% 31.2% 26.3%
</TABLE>

11
<PAGE> 13

<TABLE>
<CAPTION>
1995
---------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total operating revenues................... $171,267 $ 56,142 $47,769 $38,418 $28,938
Operating expenses......................... 128,593 39,982 34,844 28,370 25,397
Operating income........................... 42,674 16,160 12,925 10,048 3,541
Other (expense)............................ (16,435) (4,014) (4,805) (4,287) (3,330)
Net income................................. 17,831 8,352 5,568 3,861 50
Block hours................................ 33,265 10,809 9,076 7,568 5,812
Average aircraft operated.................. 7.7 9.4 8.2 6.9 6.1
Operating margin........................... 24.9% 28.8% 27.1% 26.2% 12.2%
</TABLE>

<TABLE>
<CAPTION>
1994
---------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total operating revenues................... $102,979 $ 35,729 $34,271 $20,802 $12,177
Operating expenses......................... 89,085 29,848 27,400 17,743 14,094
Operating income (loss).................... 13,894 5,881 6,871 3,059 (1,917)
Other (expense)............................ (10,294) (2,560) (2,635) (2,700) (2,399)
Net income (loss).......................... 3,586 3,321 4,235 346 (4,316)
Block hours................................ 19,049 6,619 6,226 3,789 2,415
Average aircraft operated.................. 5.2 6 5.8 5 3.8
Operating margin........................... 13.5% 16.5% 20.0% 14.7% (15.7%)
</TABLE>

Operating Revenues and Results of Operations. Total operating revenues for
the year ended December 31, 1996 increased to $315.7 million compared to $171.3
million for 1995, an increase of approximately 84%. The average number of
aircraft in the Company's fleet during 1996 was 14.7, compared to 7.7 during
1995. Total block hours for 1996 were 59,445 compared to 33,265 for 1995, an
increase of approximately 79%. Revenue per block hour increased by 3% to $5,310
for 1996 compared to $5,149 for the year-earlier period reflecting a slight
increase in the level of charter and scheduled service hours. While charter and
scheduled service activity provides a higher revenue rate per block hour, costs
are also higher due to fuel and ground handling costs which the Company must
bear. The Company's operating results improved from a $42.7 million operating
profit for 1995 to an operating profit of $88.1 million for 1996, or
approximately 106%. Net income of $17.8 million for 1995 improved to a net
income of $37.8 million for 1996, or approximately 112%.

Operating levels increased during the first quarter of 1996 as a result of
placing in service four additional aircraft. In January 1996, the Company placed
in service one aircraft upon completion of its cargo modification by Hong Kong
Aircraft Engineering Company ("HAECO"). Two additional aircraft were re-
delivered to the Company upon completion of their modification by Boeing in
March 1996. Finally, at the close of the first quarter, the Company took
delivery of the first Federal Express Aircraft. During the third quarter of
1996, the Company placed in service the next three Federal Express Aircraft. At
the end of the third quarter the Company took delivery of the first Thai
Aircraft upon completion by Boeing of its modification to cargo configuration.
In the fourth quarter of 1996, the second Thai Aircraft was placed in service
upon its delivery by Boeing subsequent to modification to cargo configuration.
At the end of 1996, two leased aircraft were taken out of service for required
maintenance prior to re-delivery to the lessors.

The Company's operating levels increased significantly during 1996 as a
result of these aircraft acquisitions. Block hours increased from 11,125 in the
first quarter of 1996 to 18,803 in the fourth quarter of
1996, relative to the growth in fleet size from 10.8 to 18.4 aircraft for the
two periods. Total operating revenue increased from $58.6 million in the first
quarter to $104.7 million in the fourth quarter, representing slightly higher
block hour rates for the fourth quarter compared to those of the first quarter
of 1996, primarily due to the seasonality of the business of the Company's
customers. The Company achieved $29.9 million operating income and $13.4 million
net income in the fourth quarter of 1996, compared to $15.4 million operating
income and $6.2 million net income in the first quarter of 1996.

12
<PAGE> 14

The Company's operating levels increased substantially during 1995 also as
a result of aircraft acquisitions. Block hours rose from 5,812 hours in the
first quarter of 1995 to 10,809 in the fourth quarter, as the average number of
aircraft in the Company's fleet grew from 6.1 aircraft to 9.4 aircraft over the
corresponding period. Total operating revenue increased from $28.9 million in
the first quarter of 1995 to $56.1 million in the fourth quarter, with the
Company's operating income increasing from $3.5 million to $16.2 million and its
net income improving from $0.1 million to $8.4 million over that same period.
For the year 1995, total block hours were 33,265 and the average fleet size was
7.7 aircraft. Total operating revenue was $171.3 million, operating income was
$42.7 million and net income was $17.8 million.

The Company's operating levels grew substantially in the last three
quarters of 1994, with block hours increasing from 2,415 hours in the first
quarter to 6,619 hours in the fourth quarter. Over the corresponding period,
total operating revenue increased from $12.2 million in the first quarter to
$35.7 million in the fourth quarter and the Company's operating results improved
from a first quarter operating loss of approximately $1.9 million to operating
profits of $6.9 million and $5.9 million in the third and fourth quarters,
respectively. In addition, the first quarter net loss of $4.3 million improved
to third and fourth quarter net incomes of $4.2 million and $3.3 million,
respectively. For the year 1994, total block hours were 19,049 and the average
fleet size was 5.2 aircraft. Total operating revenue was $103.0 million,
operating income was $13.9 million and net income was $3.6 million.

Operating Expenses. The Company's principal operating expenses include
flight crew salaries and benefits; other flight-related expenses; maintenance;
aircraft and engine rentals; fuel costs and ground handling; depreciation and
amortization; and selling, general and administrative expenses.

Flight crew salaries and benefits include all such expenses for the
Company's pilot work force. Expenses for flight crew salaries and benefits
increased to $25.0 million in 1996 from $14.6 million in 1995, primarily as a
result of the increase in the Company's fleet of Boeing 747 aircraft from an
average of 7.7 aircraft in 1995 to 14.7 aircraft in 1996, while aircraft block
hours increased from 33,265 to 59,445, or 79%, over such period. On a block hour
basis, this expense declined to $421 per hour for 1996 from $438 per hour for
1995, or approximately 4%, due to increased staffing and scheduling efficiencies
associated with increased operations.

Flight crew salaries and benefits increased to $14.6 million in 1995
compared to $8.9 million in 1994, due to an increase in the number of aircraft
in the Company's fleet and aircraft block hours. While actual expense increased
by approximately 64% during 1995 as a result of the increase in the number of
aircraft in the Company's fleet and aircraft block hours, on a block hour basis
this expense declined to $438 per hour for 1995 from $467 per hour for 1994.
This reduction of 6% was due to increased efficiency in staffing levels and
scheduling resulting from the increased level of operations.

Other flight-related expenses include hull and liability insurance on the
Company's fleet of Boeing 747 aircraft, crew travel and meal expenses, initial
and recurring crew training costs and other expenses necessary to conduct its
flight operations.

Other flight-related expenses rose to $27.4 million in 1996 from $12.4
million in 1995, or approximately 120%, primarily due to fleet expansion and
higher travel costs associated with operational difficulties related to the
Federal Express Aircraft. On a per block hour basis, other flight-related
expenses increased from $372 per block hour in 1995 to $461 per block hour in
1996, or approximately 24%.

Other flight-related expenses increased to $12.4 million in 1995 compared
to $9.3 million in 1994, or approximately 33%, due primarily to the larger fleet
size. On a block hour basis, this expense declined to $372 per hour for 1995
compared to $487 per hour for 1994. This reduction of 24% was due primarily to
reduced insurance and training costs on a block hour basis due to cost savings
created by the larger fleet.

Maintenance expenses include all expenses related to the upkeep of the
aircraft, including maintenance labor, parts, supplies and maintenance reserves.
The costs of C Checks, D Checks, engine overhauls and other modifications not
otherwise covered by maintenance reserves, are capitalized as they are incurred
and amortized over the life of the maintenance event. In addition, in January
1995 the Company contracted with KLM for a significant part of its regular
maintenance operations and support on a fixed cost per flight hour basis.
Effective October 1996, certain aircraft engines were additionally accepted into
the GE engine

13
<PAGE> 15

maintenance program, also on a fixed cost per flight hour basis, pursuant to a
10 year maintenance agreement. See "Item 1. Business -- Maintenance."

Maintenance expense increased to $84.3 million in 1996 from $42.6 million
in 1995, or approximately 98%, due to the increase in average fleet size and
certain increased costs associated with introducing the Federal Express Aircraft
into the Company's fleet and higher ongoing maintenance costs. The Federal
Express Aircraft are not covered by the Company's maintenance contracts with KLM
and GE described above. On a block hour basis, maintenance expense increased by
11%, primarily due to parts support requirements associated with scheduled and
unscheduled maintenance events, and due to the Federal Express Aircraft
maintenance costs discussed above.

Maintenance expense increased to $42.6 million in 1995 from $24.5 million
in 1994, or approximately 74%. On a block hour basis, maintenance expense
decreased by 1% during 1995, primarily reflecting new hourly rates negotiated in
conjunction with the long-term maintenance agreement with KLM described above
that became effective as of January 1, 1995.

Aircraft and engine rentals include the cost of leasing aircraft and spare
engines, as well as the cost of short-term engine leases required to replace
engines removed from the Company's aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease costs.

Aircraft and engine rentals were $27.3 million in 1996 compared to $22.9
million in 1995, representing an increase of 19%. Lease costs in 1996 for the
Federal Express Aircraft represented $9.7 million of this increase, offset by a
$2.4 million decrease in sub-service rentals in 1996 compared to 1995. In
addition, the lease costs for one aircraft in 1995 exceeded the lease costs in
1996 by $1.6 million, due to the Company's purchase of the aircraft in the
second quarter of 1996. Engine rentals decreased by $1.8 million in 1996 to $1.8
million, due to the purchase of eight spare engines which reduced the Company's
need for leased engines.

Aircraft and engine rentals were $22.9 million in 1995 compared to $14.0
million in 1994, or an increase of approximately 63%. Maintenance events during
1995 resulted in substitute leased engine expense of $3.7 million, and the
Company incurred $2.8 million in sublease costs for aircraft necessary to
service contract obligations which could otherwise not be met with the Company's
fleet due principally to the scheduled major maintenance events which occurred
during the period. This increase was also due to the greater mix of leased
versus owned aircraft from an average of 3.2 leased aircraft in 1994 to an
average of 3.6 leased aircraft in 1995. The Company purchased three spare
engines in 1995 in order to ensure adequate future spares levels. In each of the
first three quarters of 1994, the Company added a leased aircraft to its fleet
as the Company entered into additional ACMI contracts for dedicated aircraft.

Because of the nature of the Company's ACMI contracts with its airline
customers, under which the Company is responsible only for the ownership cost
and maintenance of the aircraft and for supplying aircraft crews and insurance,
the Company's airline customers bear all other operating expenses, including
fuel and fuel servicing; marketing costs associated with obtaining cargo;
airport cargo handling; landing fees; ground handling; aircraft push-back and
de-icing services; and specific cargo and mail insurance. As a result, the
Company incurs fuel and ground handling expenses only when it operates on its
own behalf, either in scheduled services, for ad hoc charters or for ferry
flights. Fuel expenses for the Company's non-ACMI contract services include both
the direct cost of aircraft fuel as well as the cost of delivering fuel into the
aircraft. Ground handling expenses for non-ACMI contract service include the
costs associated with servicing the Company's aircraft at the various airports
to which it operates as well as other direct flight related costs.

Fuel and ground handling costs increased to $10.6 million in 1996 from $5.0
million in 1995, or approximately 110%. This increase was primarily due to an
increase in block hours for scheduled service, charters, ferry and other from
1,070 in 1995 to 2,042 in 1996, or approximately 91%. In addition, the airline
industry experienced a rise in fuel costs over the period.

Fuel and ground handling costs decreased to $5.0 million in 1995 from $9.7
million in 1994, or approximately 48%. The decrease in total fuel and ground
handling costs was caused principally by a decline of 57% in scheduled service,
charter and non-revenue hours flown.

14
<PAGE> 16

Depreciation and amortization expense includes depreciation on aircraft,
spare parts and ground equipment, and the amortization of capitalized major
aircraft maintenance and engine overhauls.

Depreciation and amortization expense increased to $25.5 million in 1996
from $14.8 million in 1995, reflecting the increase in the number of owned
aircraft in the Company's fleet. On a per block hour basis, this expense
decreased from $445 per block hour in 1995 to $429 per block hour in 1995, or
approximately 4%. The proportion of owned aircraft to leased aircraft was
relatively the same for 1996 as it was for 1995.

Depreciation and amortization expense increased to $14.8 million in 1995
from $7.5 million in 1994, or approximately 99%. This increase primarily
reflected the impact of the owned aircraft, engines and spare parts added to the
Company's fleet and to the amortization of capitalized engine overhaul costs.

Other operating expenses include salaries, wages and benefits for all
employees other than pilots; accounting and legal expenses; supplies; travel and
meal expenses, excluding those of the aircraft crews; commissions; and other
miscellaneous operating costs.

Other operating expenses increased to $27.5 million in 1996 from $16.4
million in 1995, or approximately 68%. On a block hour basis, Other operating
expenses decreased from $492 per block hour in 1995 to $462 per block hour in
1996, or approximately 6%, reflecting a lower rate of growth in the Company's
overhead as compared to its operational growth.

Other operating expenses increased to $16.4 million in 1995 from $15.2
million in 1994, or approximately 7.9%. On a block hour basis, these expenses
declined to $492 per hour in 1995 from $796 in 1994, or 38%, as overhead growth
did not match operational growth.

Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income increased to $7.1 million for 1996 from
$2.0 million in 1995. This increase was primarily due to the investment of $99.6
million of funds received from the secondary public offering in May 1996, as
well as funds retained from the Company's initial public offering ("IPO") in
August 1995. Interest expense increased to $35.6 million in 1996 from $18.5
million in 1995, resulting from the increase in financed flight equipment
between these periods.

Interest income increased to $2.0 million for 1995 from $0.5 million in
1994 due primarily to the receipt in August 1995 of approximately $67 million of
net proceeds from the IPO and to the receipt of approximately $100 million in
proceeds from the Company's issuance of the Equipment Notes in November 1995,
approximately two thirds of which was utilized immediately to make payments with
respect to the acquisition of additional aircraft. Interest expense increased to
$18.5 million in 1995 from $10.8 million in 1994, or approximately 71%,
substantially all of which relates to a net increase in indebtedness associated
with the acquisition of flight equipment.

Income Taxes. Pursuant to the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," the
Company has recorded a tax provision based on tax rates in effect during the
period. Accordingly, the Company accrued taxes at the rate of 36.5%, 32.0% and
0.4% in 1996, 1995 and 1994, respectively. Due to significant capital costs,
which are depreciated at an accelerated rate for tax purposes, a majority of the
Company's tax provision in both 1996 and 1995 is deferred. The Company's tax
provision in 1994 was not material.

Seasonality. The cargo operations of the Company's airline customers are
seasonal in nature, with peak activity traditionally in the second half of the
year, and with a significant decline occurring in the first quarter. This
decline in cargo activity is largely due to the decrease in shipping that occurs
following the December and January holiday seasons associated with the
celebration of Christmas and the Chinese New Year. Certain of the Company's
customers have, in the past, elected to use that period of the year to exercise
their contractual options to cancel a limited number (generally not more than
5%) of cargo flights with the Company, and are expected to continue to do so in
the future. As a result, the Company's revenues typically decline in the first
quarter of the year as its minimum contractual aircraft utilization level
temporarily decreases. The Company seeks to schedule, to the extent possible,
its major aircraft maintenance activities during this period to take advantage
of any unutilized aircraft time.

15
<PAGE> 17

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the Company had cash and cash equivalents of
approximately $9.8 million, short-term investments of approximately $114.9
million and working capital of approximately $98.7 million. During 1996, cash
and cash equivalents decreased $87.2 million, principally reflecting investments
in flight and other equipment of $289.7 million, the net purchase of $114.9
million of short-term investments, debt issuance costs of $6.0 million and
principal reductions of indebtedness of $21.6 million, partially offset by cash
provided from operations of $84.4 million, proceeds from equipment financings of
$154.8 million and net Common Stock issuances of $105.8 million, including the
$99.6 million received from a secondary public offering of the Company's Common
Stock in the second quarter of 1996.

At December 31, 1995, the Company had cash and cash equivalents of
approximately $97.0 million and working capital of approximately $81.0 million.
During 1995, cash and cash equivalents increased by $86.5 million, principally
reflecting cash provided from operations of $43.6 million, the receipt of
approximately $66.6 million of net proceeds from the IPO, the receipt of net
proceeds of approximately $95.9 million from the Equipment Notes and proceeds
from bank financings of approximately $81.2 million, partially offset by
principal reductions on indebtedness of $7.8 million and investments in flight
equipment of $190.8 million.

The Company had previously contracted to purchase three Boeing 747-200
aircraft at an average cost of approximately $37.2 million each (including the
cost of modifying the aircraft for long-haul cargo service), one of which was
delivered to the Company in January 1996 and the other two of which were
delivered to the Company during March 1996. The Company utilized the proceeds
from an Equipment Notes offering consummated in November 1995, together with
funds from the Company, to pay the purchase price, including modification cost,
of these three aircraft.

In March 1996, the Company entered into an agreement with Federal Express
Corporation ("Federal Express") to lease five 747-200 freighter aircraft (the
"Federal Express Aircraft"), plus spare engines. The first four Federal Express
Aircraft were delivered to the Company between March and September 1996. The
remaining Federal Express Aircraft is scheduled to be delivered to the Company
at the beginning of the second quarter of 1997. The lease term ends in January
1998 for all five of the aircraft. The lease rate is $450,000 per month per
aircraft. In addition, the Company purchased a Boeing 747 simulator from Federal
Express for a purchase price of $2.1 million on January 2, 1997. The Company is
in negotiations with respect to the potential sale and leaseback of the
simulator with a third party. The Company has also purchased and leased certain
Boeing 747-200 spare parts from Federal Express.

In May 1996, the Company consummated the sale of 2,300,000 shares of its
Common Stock and 1,643,999 shares of its Common Stock held by a selling
stockholder, Michael A. Chowdry, at an offering price of $45.75 per share, for
aggregate net proceeds to the Company of $99.6 million, including exercise in
full of the underwriters' over-allotment option, and after deducting the
aggregate underwriting discounts and the estimated expenses of the offering. All
net proceeds were retained for working capital and other general corporate
purposes including, but not limited to, the acquisition and conversion of
aircraft. The Company did not receive any proceeds from the sale of shares of
its Common Stock by the selling stockholder.

16
<PAGE> 18

The Cargolux Aircraft was delivered to the Company in August 1996 following the
performance by Cargolux of maintenance required to induct the aircraft into the
Company's fleet.

In December 1996, the Company entered into an agreement with Marine Midland
Bank ("Marine Midland") for the purchase of one 747-200 passenger aircraft (the
"PAL Aircraft") for a purchase price of $22 million, including a spare engine.
In connection with the purchase of the PAL Aircraft, the Company assumed Marine
Midland's lessor interest in the lease of such aircraft to Philippine Airlines
("PAL") for the remainder of the lease term (January 2000). The Company is
currently negotiating with PAL for the early termination of the lease and
delivery of the PAL Aircraft to the Company for conversion to freighter
configuration, although there can be no assurances in that regard.

Due to the contractual nature of the Company's business, the Company's
management does not consider its operations to be highly working
capital-intensive in nature. Because most of the non-ACMI costs normally
associated with operations are borne by and directly paid for by the Company's
customers, the Company does not incur significant costs in advance of the
receipt of corresponding revenues. Moreover, ACMI costs, which are the
responsibility of the Company, are generally incurred on a regular, periodic
basis ranging from flight hours to months. These costs are largely matched by
revenue receipts, as the Company's contracts require regular payments from its
customers, based upon current flight activity, generally every two to four
weeks. As a result, the Company has not in the past had a requirement for a
working capital facility. The Company has, however, in light of the continued
growth of its operations, reached agreement with a lender for the provision of a
$25 million working capital facility, subject to final documentation, although
there can be no assurance that such a facility will ultimately be finalized.

The Company obtained financing from a single lender for approximately 80%
of the total acquisition and conversion cost of the first Thai Aircraft,
pursuant to which it borrowed approximately $32.8 million from the first quarter
of 1996 through the third quarter of 1996. In addition, in May 1996, the Company
entered into a $175 million revolving credit facility provided by two lenders
for the acquisition and conversion of flight equipment, including any or all of
the remaining five Thai Aircraft. The facility has a two-year revolving period
with a subsequent two-year term loan period in the event that permanent
financing has not been obtained for any flight equipment financed under the
facility. The Company closed upon and drew down its initial borrowing pursuant
to the facility in May 1996 in the amount of approximately $21.4 million with
respect to the purchase of the second Thai Aircraft and a related spare engine.
In August 1996, an additional $31.5 million was drawn down under the facility
with respect to the purchase of the Cargolux Aircraft, an associated spare
engine, and the downpayment of modification costs related to the second Thai
Aircraft. The Company made subsequent drawings upon the facility in the
aggregate amount of $60.6 million through December 31, 1996 with respect to the
Thai Aircraft and associated spare engines. In January 1997, $22.0 million was
drawn down under the facility with respect to the purchase of the PAL Aircraft
and the related spare engine, which occurred on December 31, 1996.

In February 1997, the $175 million revolving credit facility was expanded
by an additional $100 million for the same purposes and under the same terms and
conditions as the initial facility. The revolving period and subsequent term
loan period for the additional $100 million will be coterminous with the period
under the initial facility. Certain financial tests must be met before each
purchase of aircraft and related drawdown on the facility. To date, the Company
has met these tests. If in the future, the Company cannot meet such tests
because of the difficult sequencing of aircraft acquisition, aircraft conversion
and customer contracts, the Company believes that other financing sources would
be available to the Company or the Company would acquire aircraft using its
internal cash or seek a waiver of any necessary conditions. The Company has not
drawn down any amounts under the additional $100 million facility as of the date
of this filing.

In addition, the Company has reached agreement with a lender, subject to
final documentation, for the long-term financing of one of the aircraft
currently financed under the revolving credit facility. The Company anticipates
that such financing will be completed during the second quarter of 1997 and that
the aircraft will be concurrently released from the revolving credit facility.

The Company has an agreement with HAECO, pursuant to which HAECO has agreed
to convert and/or undertake D Checks on ten Boeing 747 aircraft through
September 1997 at fixed rates, with the Company

17
<PAGE> 19

guaranteeing a minimum number of man hours. Pursuant to this contract, the
Company has the right to release, at a minimum of six months in advance, the
contract hours back to HAECO for use by other HAECO customers. During 1996 and
for the first eight months of 1997, the Company exercised its right to release
the contract hours back to HAECO and believes that it thereby has fulfilled its
commitment under this contract. In addition, the Company has an agreement,
subject to acceptable rates, terms and conditions with Alitalia to utilize, or
find other parties to utilize, an amount of Alitalia's maintenance services with
an aggregate cost of $25 million over a five-year period ending in June 2000.
Pursuant to the Company's maintenance agreement with KLM (see "Item 1.
Business -- Maintenance"), engines may be upgraded when inducted into the
maintenance pool in order to improve engine reliability and to lower Company
operating costs. When such costs are incurred and identified, they are
capitalized and amortized over the remaining life of each applicable engine. The
Company expects to incur between $10 million and $15 million for such upgrades
over the term of the contract.

On September 21, 1993 and June 4, 1994, the FAA issued Airworthiness
Directives requiring the inspection and replacement of certain engine components
with which the Company must comply by December 1997 at an estimated aggregate
cost of $1.1 million for all of the aircraft in the Company's fleet. In November
1994, the FAA issued Nacelle Strut Modification Service Bulletins which are
expected to be converted into Airworthiness Directives. The Company's aircraft
would have to be brought into compliance with such Airworthiness Directives
within the next five years at an estimated cost of approximately $500,000 for
each aircraft in its fleet. The FAA has also issued Directives relating to pylon
modifications. The Company has 12 aircraft to be modified pursuant to these
Directives prior to March 2000 at a total modification cost of approximately
$7.2 million. As part of the FAA's overall aging aircraft program, it has issued
Directives requiring certain additional aircraft modifications to be
accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the 12 aircraft (excluding the Federal Express Aircraft) is 12,000
cycles and the average cycles operated per year is 800 cycles. The Company
estimates that the modification costs per aircraft will range between $2 million
and $3 million. Between now and the year 2000, only one aircraft is expected to
reach the 20,000 cycle limit and the entire current fleet will require
modification prior to the year 2009. It is possible that additional Service
Bulletins or Airworthiness Directives applicable to the types of aircraft
included in the Company's fleet could be issued in the future. The cost of
compliance with such Airworthiness Directives cannot currently be estimated, but
could be substantial.

The Company is in negotiations for the acquisition of additional aircraft,
principally for delivery to the Company in 1998 and beyond. In that regard, it
has reached agreement with one party for the purchase of one 747-200 passenger
aircraft, subject to final approvals and completion of definitive documentation.

The Company believes that the cash flow generated from its operations and
the proceeds from the May 1996 public offering of its Common Stock, coupled with
the availability of the above referenced revolving credit facility, will be
sufficient to meet its normal ongoing liquidity needs for 1997, including the
acquisition of the remaining Thai Aircraft.

FORWARD-LOOKING STATEMENTS

To the extent that any of the statements contained herein relating to the
Company's expectations, assumptions and other Company matters are
forward-looking, they are made in reliance upon the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such statements are based
on current expectations that involve a number of uncertainties and risks that
could cause actual results to differ materially from those projected in the
forward-looking statements, including, but not limited to, risks associated
with: worldwide business and economic conditions; product demand and the rate of
growth in the air cargo industry; the impact of competitors and competitive
aircraft and aircraft financing availability; the ability to attract and retain
new and existing customers; normalized aircraft operating costs and reliability;
management of growth; the continued productivity of its workforce; dependence on
key personnel; and regulatory matters.

18
<PAGE> 20

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and schedules that constitute Item 8
follow the text of this report. An index to the Consolidated Financial
Statements appears in Item 14(a) of this report.

<TABLE>
<CAPTION>
INCOME NET
OPERATING BEFORE NET INCOME
REVENUE INCOME INCOME TAXES INCOME PER SHARE(1)
-------- --------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
1996
First Quarter........................... $ 58,649 $15,410 $ 9,693 $ 6,203 $ .32
Second Quarter.......................... 72,614 22,667 15,685 10,037 .47
Third Quarter........................... 79,681 20,046 12,839 8,201 .37
Fourth Quarter.......................... 104,715 29,940 21,371 13,397 .60
1995
First Quarter........................... $ 28,938 $ 3,541 $ 211 $ 50 $ .00
Second Quarter.......................... 38,418 10,048 5,762 3,861 .26
Third Quarter........................... 47,769 12,925 8,120 5,568 .32
Fourth Quarter.......................... 56,142 16,160 12,146 8,352 .43
</TABLE>

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

(1) Calculated on 15,000,000 shares for the First Quarter 1994 through the
Second Quarter 1995, 17,530,435 weighted average shares for the Third
Quarter 1995, and 19,600,000 shares for the Fourth Quarter 1995. Calculated
on 19,686,177, 21,425,328, 22,429,685 and 22,450,229 weighted average
shares for the First Quarter, Second Quarter, Third Quarter and Fourth
Quarter 1996, respectively.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On December 30, 1994, the Company entered into a refinancing transaction
that was reflected in its December 31, 1994 financial statements which were
audited by Ernst & Young LLP ("Ernst & Young") and were included in a
Registration Statement filed by the Company on March 14, 1995 with the
Securities and Exchange Commission (the "Commission"). In the Commission's
comment letter to the March 14 filing, the Commission staff raised questions
about the accounting treatment of the refinancing transaction which the Company
had adopted after consultation with, and with the concurrence of, Ernst & Young.
Although Ernst & Young and the Company worked together to respond to questions
raised by the Commission staff, the working relationship between certain members
of management and Ernst & Young personnel became acrimonious with the Company
expressing concerns that Ernst & Young was not being sufficiently supportive
regarding the accounting treatment of the refinancing transaction. Following a
May 5, 1995 meeting between Company and Ernst & Young personnel at which the
Company threatened litigation against Ernst & Young, Ernst & Young advised the
Company that it would be unable to continue to rely upon the representations of
members of management pertaining to the refinancing and that it was resigning as
the Company's auditors and withdrawing its report on the Company's 1994
financial statements.

No report of Ernst & Young on the financial statements of the Company for
either of the past two fiscal years preceding such resignation contained an
adverse opinion or a disclaimer of opinion, or was qualified as to uncertainty,
audit scope, or accounting principles. During the Company's two most recent
fiscal years and the subsequent interim period preceding such resignation, there
were no disagreements with Ernst & Young on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures;
the only reportable event within such period was the statement of Ernst & Young
referred to above with respect to its inability to continue to rely on the
representations of management. Such statement was based on Ernst & Young's
contentions that (i) it was unaware of a higher fair market value aircraft
appraisal that had been performed after the financing transaction had been
completed, notwithstanding the Company's contention that it had delivered the
appraisal to Ernst & Young and (ii) the Company had indicated that it exercised
a lease extension option with its affiliate when in fact it was still in process
of completing the documentation. The Company authorized Ernst & Young to respond
fully to the inquiries of

19
<PAGE> 21

Arthur Andersen LLP ("Arthur Andersen"), the Company's successor auditors,
concerning such reportable event.

On May 10, 1995, the Company requested that Arthur Andersen serve as the
Company's successor auditors. Following Arthur Andersen's inquiry of members of
Company management, Ernst & Young personnel and certain of the Company's outside
consultants regarding the Company and in particular, the issues which led to
Ernst & Young's resignation, Arthur Andersen accepted the engagement as the
Company's auditors on May 22, 1995 and subsequently issued an unqualified
opinion with respect to the Company's financial statements included in the
Company's IPO Registration Statement dated August 16, 1995.

In the Company's initial filing with the Commission for the IPO, the
financial statements of Atlas Air, Inc. ("Air") only were included and Air used
capitalized lease accounting for certain aircraft that Air had leased from a
special purpose corporation ("ATO") without consolidating such entity. This
resulted in capitalized property and debt of approximately $66 million and a
positive shareholder equity of $12.2 million at December 31, 1994. Subsequent to
the resignation of Ernst & Young, the Company asked Arthur Andersen for their
opinion with respect to the appropriate accounting treatment. Arthur Andersen
reviewed the accounting and determined that if the Company were to refile, it
should follow the accounting as set forth in Emerging Issue Task Force Issue No.
90-15 which calls for the consolidation of special purpose entities such as ATO.
In light of the requirement for such consolidation, the Company reviewed its
operations and determined that Atlas Holdings, Inc. ("Holdings"), a holding
company for Air, should be merged into Air after spinning off the assets of
Aeronautics Leasing, Inc.; consequently, a new entity that contains Air and ATO
along with the remaining assets of Holdings was included in the 1995 Form 10-K
and in this Form 10-K.

PART III

Certain information required by Part III is omitted from this report since
the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the year
covered by this report, and certain information included therein is incorporated
herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information concerning the Company's executive officers and directors
required by this Item is incorporated by reference from the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference from the
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is incorporated by reference from the
Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is incorporated by reference from the
Proxy Statement.

20
<PAGE> 22

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)(1) FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Index to Consolidated Financial Statements.................. F-1
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

(A)(2) FINANCIAL STATEMENT SCHEDULES

None required.

(A)(3) LIST OF EXHIBITS

21
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+10.28 -- Secured Loan Agreement by and between Atlas One and
Internationale Nederlanden Aviation Lease B.V. dated as
of December 30, 1994, including Amendment No. 1 thereto
and certain related agreements.
+10.30 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYS.
+10.31 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYL.
*10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996
between Langdon Asset Management, Inc. and the Company.
**10.51 -- Employment Agreement dated as of April 19, 1996 between
the Company and Mickey P. Foret.
10.52 -- Employment Agreement dated as of November 18, 1996
between the Company and R. Terrence Rendleman.
10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
10.54 -- Second Amended and Restated Credit Agreement among the
Company and the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as syndication agent) and Bankers
Trust Company (as Administrative Agent) dated February
28, 1997.
***10.55 -- Engine Maintenance Agreement between the Company and
General Electric Company dated June 6, 1996.
+16.1 -- Letter dated July 21, 1995 from Ernst & Young to the
Securities and Exchange Commission.
+21.1 -- Subsidiaries of the Registrant.
**23.1 -- Consent of Independent Public Accountants.
**23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit
5.1).
23.3 -- Consent of Independent Public Accountants.
**24.1 -- Powers of Attorney (set forth on the signature page of
the Registration Statement).
27 -- Financial Data Schedule.
</TABLE>

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

+ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-90304).

++ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-97892).

* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).

** Previously filed.

*** Portions of this document, for which the Company has requested confidential
treatment, have been redacted and filed separately with the Securities and
Exchange Commission.

(B) REPORTS ON FORM 8-K

No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.

22
<PAGE> 24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
March, 1997.

ATLAS AIR, INC.

By: /s/ RICHARD H. SHUYLER
----------------------------------
Richard H. Shuyler
Senior Vice President-Finance,
Chief Financial Officer
and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ MICHAEL A. CHOWDRY Chairman of the Board of March 28, 1997
- ----------------------------------------------------- Directors, Chief Executive
Michael A. Chowdry Officer

/s/ MICKEY P. FORET President and Director March 28, 1997
- -----------------------------------------------------
Mickey P. Foret

/s/ RICHARD H. SHUYLER Senior Vice President -- Finance, March 28, 1997
- ----------------------------------------------------- Chief Financial Officer and
Richard H. Shuyler Treasurer (Principal Accounting
Officer) and Director

/s/ JAMES J. BLANCHARD Director March 28, 1997
- -----------------------------------------------------
James J. Blanchard

/s/ DAVID M. MCELROY Director March 28, 1997
- -----------------------------------------------------
David M. McElroy

/s/ DAVID T. MCLAUGHLIN Director March 28, 1997
- -----------------------------------------------------
David T. McLaughlin

/s/ BRIAN ROWE Director March 28, 1997
- -----------------------------------------------------
Brian Rowe
</TABLE>
<PAGE> 25

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
December 31, 1995......................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 26

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO ATLAS AIR, INC.:

We have audited the accompanying consolidated balance sheets of Atlas Air,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atlas Air, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Denver, Colorado
February 14, 1997.

F-2
<PAGE> 27

ATLAS AIR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 9,793 $ 96,990
Short-term investments.................................... 114,870 --
Accounts receivable, net and other........................ 49,603 18,594
-------- --------
Total current assets.............................. 174,266 115,584
Property and equipment:
Flight equipment.......................................... 638,630 349,836
Other..................................................... 3,933 3,055
-------- --------
642,563 352,891
Less accumulated depreciation............................. (58,293) (33,140)
-------- --------
Net property and equipment................................ 584,270 319,751
Other assets:
Debt issuance costs....................................... 12,382 8,607
Deposits.................................................. 2,789 3,381
-------- --------
15,171 11,988
-------- --------
Total assets...................................... $773,707 $447,323
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 21,561 $ 15,359
Accounts payable and accrued expenses..................... 47,763 18,939
Income tax payable........................................ 6,267 264
-------- --------
Total current liabilities......................... 75,591 34,562
Long-term debt, net of current portion...................... 462,868 335,902
Deferred income tax payable................................. 22,875 8,144
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred Stock, $1 par value; 10,000,000 shares
authorized; no shares issued........................... -- --
Common Stock, $0.01 par value; 50,000,000 shares
authorized; 22,450,229 and 19,600,000 shares issued.... 225 196
Additional paid-in capital................................ 172,841 66,591
Retained earnings......................................... 39,543 1,928
Treasury Stock, at cost; 5,850 shares at December 31,
1996................................................... (236) --
-------- --------
Total stockholders' equity........................ 212,373 68,715
-------- --------
Total liabilities and stockholders' equity........ $773,707 $447,323
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 28

ATLAS AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Contract services........................................ $296,289 $166,070 $ 86,704
Scheduled services....................................... 6,005 1,335 10,917
Charters and other....................................... 13,365 3,862 5,358
-------- -------- --------
Total operating revenues......................... 315,659 171,267 102,979
Operating expenses:
Flight crew salaries and benefits........................ 25,020 14,584 8,887
Other flight-related expenses............................ 27,404 12,361 9,270
Maintenance.............................................. 84,305 42,574 24,517
Aircraft and engine rentals.............................. 27,341 22,902 14,044
Fuel and ground handling................................. 10,554 5,027 9,747
Depreciation and amortization............................ 25,515 14,793 7,451
Other.................................................... 27,457 16,352 15,169
-------- -------- --------
Total operating expenses......................... 227,596 128,593 89,085
Operating income........................................... 88,063 42,674 13,894
Other income (expense):
Interest income.......................................... 7,102 2,025 490
Interest expense......................................... (35,577) (18,460) (10,784)
-------- -------- --------
(28,475) (16,435) (10,294)
-------- -------- --------
Income before income taxes................................. 59,588 26,239 3,600
Provision for income taxes................................. (21,750) (8,408) (14)
-------- -------- --------
Net income................................................. $ 37,838 $ 17,831 $ 3,586
======== ======== ========
Net income per common share................................ $ 1.76 $ 1.06 $ .24
======== ======== ========
Weighted average common shares outstanding................. 21,503 16,783 15,000
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 29

ATLAS AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
--------------- PAID-IN EARNINGS TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) STOCK EQUITY
------ ------ ---------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993....... 15,000 $ 150 $ -- $(19,489) $ -- $(19,339)
Net income..................... -- -- -- 3,586 -- 3,586
------ ------ -------- -------- ----- --------
Balance, December 31, 1994....... 15,000 150 -- (15,903) -- (15,753)
Issuance of Common Stock....... 4,600 46 66,591 -- -- 66,637
Net income..................... -- -- -- 17,831 -- 17,831
------ ------ -------- -------- ----- --------
Balance, December 31, 1995....... 19,600 196 66,591 1,928 -- 68,715
Issuance of Common Stock....... 2,850 29 106,250 -- -- 106,279
Purchase of Treasury Stock..... -- -- -- -- (933) (933)
Issuance of Treasury Stock..... -- -- -- (223) 697 474
Net income..................... -- -- -- 37,838 -- 37,838
------ ------ -------- -------- ----- --------
Balance, December 31, 1996....... 22,450 $ 225 $172,841 $ 39,543 $(236) $212,373
====== ====== ======== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 30

ATLAS AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................. $ 37,838 $ 17,831 $ 3,586
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 25,155 14,793 7,451
Amortization of debt issuance cost....................... 2,278 546 217
Interest financed........................................ -- 1,258 --
Change in deferred income tax payable.................... 14,731 8,144 --
Changes in operating assets and liabilities:
Accounts receivable and other......................... (31,009) (10,751) (4,101)
Deposits.............................................. 593 5,716 (1,850)
Accounts payable and accrued expenses................. 28,824 5,770 7,516
Income tax payable.................................... 6,003 264 --
--------- --------- --------
Net cash provided by operating activities........ 84,413 43,571 12,819

INVESTMENT ACTIVITIES:
Purchase of property and equipment......................... (289,675) (190,807) (18,617)
Purchase of short-term investments......................... (246,387) -- --
Maturity of short-term investments......................... 131,517 -- --
Advances of notes receivable............................... -- (550) --
--------- --------- --------
Net cash used in investing activities............ (404,545) (191,357) (18,617)

FINANCING ACTIVITIES:
Issuance of Common Stock................................... 106,279 66,637 --
Purchase of Treasury Stock................................. (933) -- --
Issuance of Treasury Stock................................. 474 -- --
Borrowings on notes payable................................ 154,808 181,680 11,653
Principal payments on notes payable........................ (21,640) (7,792) (1,043)
Debt issuance costs........................................ (6,053) (4,573) --
Advances from affiliate, net............................... -- (1,700) (486)
--------- --------- --------
Net cash provided by financing activities........ 232,935 234,252 10,124
--------- --------- --------
Net increase (decrease) in cash.................. (87,197) 86,466 4,326
Cash and cash equivalents at beginning of period........... 96,990 10,524 6,198
--------- --------- --------
Cash and cash equivalents at end of period................. $ 9,793 $ 96,990 $ 10,524
========= ========= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 31

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and History

Atlas Air, Inc. (the "Company") was incorporated in Delaware in August 1992
as a wholly-owned subsidiary of Aeronautics Leasing, Inc. ("Leasing"). Leasing's
sole stockholder was Michael A. Chowdry. In December 1992, Mr. Chowdry
incorporated Atlas Holdings, Inc. ("Holdings") to serve as a holding company for
both the Company and Leasing in order to separate the third-party leasing
activities of Leasing from the Company's air cargo operations. During this
reorganization of entities under common control (accounted for in a manner
similar to a pooling of interests), the Company became a wholly-owned subsidiary
of Holdings. On July 12, 1995, Leasing and certain other assets and liabilities
not related to the Company's business were spun off from Holdings to Mr. Chowdry
and certain of his affiliates in a tax-free transaction and Holdings was merged
into the Company which was accounted for in a manner similar to a pooling of
interests (see Note 11 for discussion of the spin-off). The accompanying
consolidated financial statements do not include operations of Leasing as those
operations are distinctly dissimilar to the operations of the Company. The
accompanying consolidated financial statements have been retroactively restated
to reflect the spin-off discussed above. As part of the merger, Atlas One, Inc.,
and LHC Properties became wholly-owned subsidiaries of the Company. Atlas One,
Inc. owns certain aircraft acquired through financing provided by Internationale
Nederlanden Aviation Lease B.V. ("ING Bank") (see Note 3) and leases these
aircraft to the Company. LHC Properties owns the building and other fixed assets
which the Company leases for its corporate offices.

Until the Company obtained its Federal Aviation Administration ("FAA")
certification in February 1993, the Company, together with its predecessors,
provided air freight services to its customer through the leasing of its
aircraft to another air cargo operator. The relationship with the air cargo
operator ceased in April 1993 upon completion of the one year contract with such
operator and subsequent to receiving FAA certification. While the Company had no
significant revenue until it received its FAA certification, two special purpose
entities affiliated with the Company, Aeronautics I, Inc. ("Aero I") and
Aeronautics O, Inc. ("Aero O"), provided air cargo services to its principal
customer (see following discussion of concentration of credit risk) from April
1992 through December 1992. The principal assets consisted of two Boeing 747-200
freighter aircraft (collectively, the "Existing Aircraft"), one in each of Aero
I and Aero O, which were financed by ING Bank. The financial statements of these
predecessor companies have been combined with the financial statements of the
Company as entities under common control in a manner similar to a pooling of
interests.

Basis of Presentation

On March 13, 1995, the Company's Board of Directors approved a restated
certificate of incorporation in Delaware. Upon filing of the restated
certificate, the Company split the Common Stock on a 15,000-for-1 basis (the
"Stock Split") and adjusted the par value of the Common Stock from $1 to $0.01.
All par value, authorized shares, common share and common per share amounts have
been retroactively restated in the consolidated financial statements to reflect
the Stock Split.

F-7
<PAGE> 32

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries and predecessors. All material
intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles 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 period. Actual results could differ from those estimates.

Property and Equipment

Owned aircraft are stated at cost. Expenditures for major additions,
improvements, flight equipment modifications and certain overhaul and
maintenance costs are capitalized. A significant portion of scheduled and
unscheduled maintenance is contracted with a maintenance provider under a
long-term agreement pursuant to which monthly reserve payments are made to the
provider based on flight-hours and such amount is charged to expense currently.
Other maintenance and repairs are charged to expense as incurred, except for
significant engine overhaul maintenance which is capitalized and charged to
expense on a flight-hour basis and D checks which are capitalized and amortized
over the corresponding life. Owned aircraft are depreciated over their estimated
useful lives of 20 years, using the straight-line method and estimated salvage
values of 10% of cost. The cost and accumulated depreciation of property and
equipment disposed of are removed from the related accounts and any gain or loss
is reflected in the results of operations. Substantially all property and
equipment is specifically pledged as collateral for indebtedness of the Company.
Whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable, management evaluates the recorded asset
balances, net of accumulated depreciation, for impairment based on the
undiscounted cash flows associated with the asset. Management believes that
there have been no events or changes in circumstances which would require review
of such recoverability.

Capitalized Interest

Interest attributable to funds used to finance the acquisition and
modification of aircraft is capitalized as an additional cost of the related
aircraft. Interest is capitalized at the Company's weighted average interest
rate on long-term debt, or where applicable, the interest rate related to
specific borrowings. Capitalization of interest ceases when the aircraft is
placed in service. Capitalized interest was $5,347,000, $3,573,000, and $261,000
for the years ended December 31, 1996, 1995 and 1994, respectively.

Deferred Costs

Debt issuance costs consist of loan costs associated with the ING Bank
financing, offering costs associated with the sale of the 12 1/4% Pass Through
Certificates and the Bankers Trust credit facility (see Note 3). These costs are
being amortized over the life of the respective debt obligation, using the
effective interest method for amortization. Amortization of debt issuance costs
was $2,278,000, $546,000 and $218,000 for the years ended December 31, 1996,
1995 and 1994, respectively.

Cash Equivalents

All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents.

F-8
<PAGE> 33

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Short-Term Investments

All investments in debt securities with an original maturity beyond three
months, but with a current maturity of less than one year, are considered to be
short-term investments (see Note 2).

Net Income Per Common Share

Net income per common share is computed based on the weighted average
number of common shares outstanding during the period. The effect of outstanding
stock options is immaterial.

Income Taxes

The Company provides for income taxes using the asset and liability method
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Under this method deferred income taxes are
recognized for the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. The effect on deferred taxes of a change in tax laws or tax rates
is recognized in income in the period that includes the enactment date.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash, certificates of
deposit, short-term investments, short-term trade receivables and payables and
long-term debt. The carrying values of cash, certificates of deposit, and
short-term trade receivables and payables approximate fair value. The fair value
of long-term debt is estimated based on current rates available for similar debt
with similar maturities and security (see Note 3).

Significant Customers and Concentration of Credit Risk

China Airlines Ltd., KLM Royal Dutch Airlines and Lufthansa Cargo AG
accounted for approximately 34%, 12% and 11%, of the Company's total revenues,
respectively, for the year ended December 31, 1996. China Airlines Ltd., KLM
Royal Dutch Airlines and Varig Brazilian Airlines accounted for approximately
60%, 19% and 11% of the Company's total revenue, respectively, for the year
ended December 31, 1995 and approximately 47%, 20% and 14%, respectively, for
the year ended December 31, 1994. Accounts receivable from these principal
customers were $18,344,000 and $11,038,000 in the aggregate at December 31, 1996
and 1995, respectively. The Company is in dispute with one of its customers with
respect to the validity of certain charges for materials and labor that the
customer has invoiced to the Company, and with respect to certain ACMI billings.

Significant Transactions

During 1994, the Company committed to the purchase of four Boeing 747-200
aircraft from Deutsche Lufthansa AG (the "Lufthansa Aircraft"). Upon completion
of cargo modification by The Boeing Company ("Boeing"), the first, second and
third Lufthansa Aircraft were placed in service by the Company in March, April
and June 1995, respectively. Payments to Boeing were financed with funds
available under the ING Bank loan agreement (see Note 3). The fourth Lufthansa
Aircraft was delivered to Boeing in December 1995 and was placed in service in
March 1996. Funding for this aircraft was made available through the issuance by
the Company of Equipment Notes (see Note 3).

During 1995, the Company committed to the purchase of three Boeing 747-200
aircraft (the "Alitalia Aircraft") from Alitalia Linee Aeree Italiane S.p.A.
("Alitalia"). The first Alitalia Aircraft was delivered to Boeing for cargo
modification in June 1995. This aircraft was placed in service by the Company in
November 1995. The second Alitalia Aircraft was delivered to Hong Kong Aircraft
Engineering Co., Ltd. ("HAECO") in November 1995 for cargo modification and was
placed in service by the Company in

F-9
<PAGE> 34

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

January 1996. The third Alitalia Aircraft was delivered to HAECO in December
1995 for cargo modification and was placed in service by the Company in April
1996.

In accordance with the terms of the ING Bank loan agreement, the Company
financed the purchase and cargo modification of the first Alitalia Aircraft with
funds previously committed for the purchase and cargo modification of the fourth
Lufthansa Aircraft under the ING Bank loan agreement (see Note 3). In addition,
in June 1995, the Company utilized approximately $4 million available under the
ING Bank loan agreement to fund deposits with Alitalia for the second and third
Alitalia Aircraft.

In August 1995, the Company consummated its initial public offering ("IPO")
covering 4,600,000 shares of its Common Stock at a price of $16 per share. IPO
proceeds in excess of par value, net of costs, are reflected in Additional
Paid-in Capital. The proceeds of the IPO were used for working capital and other
general corporate purposes.

In November 1995, the Company sold $100 million of 12 1/4% Pass Through
Certificates, for which it issued Equipment Notes (see Note 3), the proceeds of
which were utilized to complete the purchase and cargo modification of the
fourth Lufthansa Aircraft and the second and third Alitalia Aircraft.

In January 1996, the Company entered into a contract with Langdon Asset
Management, Inc. for the purpose of acquiring six Boeing 747-200 passenger
aircraft (the "Thai Aircraft") and certain spare engines and spare parts from
Thai Airways International Public Company Limited ("Thai Airways"). The Thai
Aircraft are being converted into freighter configuration by Boeing. The first
of these aircraft was placed into service by the Company at the end of September
1996. The average cost of each of the six aircraft, including conversion costs,
is expected to average approximately $45 million. The Company has placed a
nonrefundable deposit of $3 million with Thai Airways with respect to its
acquisition of the Thai Aircraft. The Company obtained financing from Finova
Capital Corporation (see Note 3) for approximately 80% of the total acquisition
and conversion cost of the first Thai Aircraft, pursuant to which it borrowed
approximately $21.2 million in the first quarter of 1996 and $11.6 million at
the end of the third quarter of 1996, upon re-delivery of the aircraft from
Boeing. In August and September 1996, the second and third Thai Aircraft were
delivered to Boeing for conversion into freighter configuration. These aircraft
were re-delivered to the Company and placed into service by the Company in the
fourth quarter of 1996 and the first quarter of 1997, respectively. The fourth
Thai Aircraft was purchased in November 1996 and delivered to Boeing for
conversion into freighter configuration for re-delivery to the Company in the
second quarter of 1997. Financing for the second, third and fourth Thai Aircraft
was secured through the revolving credit facility, which was established in May
1996 and is discussed below. The fifth and sixth Thai Aircraft will be purchased
from Thai Airways in April 1997 and delivered to Boeing for conversion into
freighter configuration for re-delivery to the Company during the second half of
1997.

In March 1996, the Company entered into an agreement with Federal Express
Corporation ("Federal Express") to lease five 747-200 freighter aircraft (the
"Federal Express Aircraft"), plus spare engines. The first four Federal Express
Aircraft were delivered to the Company between March and September 1996. The
remaining Federal Express Aircraft is scheduled to be delivered to the Company
at the beginning of the second quarter of 1997. The lease term ends in January
1998 for all five of the aircraft. The lease rate is $450,000 per month per
aircraft. In addition, in January 1997 the Company purchased a Boeing 747
simulator from Federal Express for $2.1 million.

In May 1996, the Company consummated its secondary public offering ("SPO")
covering 2,300,000 shares of its Common Stock at a price of $45.75 per share.
SPO proceeds in excess of par value, net of costs, are reflected in Additional
Paid-in Capital. The net proceeds were retained for working capital and other
general corporate purposes including, but not limited to, the acquisition and
conversion of aircraft.

In May 1996, the Company entered into a $175 million revolving credit
facility provided by two lenders for the acquisition and conversion of flight
equipment, including any or all of the remaining five Thai Aircraft.

F-10
<PAGE> 35

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The facility has a two-year revolving period with a subsequent two-year term
loan period in the event that permanent financing has not been obtained for any
flight equipment financed under the facility. The Company closed on and drew
down its initial borrowing pursuant to the facility in May 1996. As of December
31, 1996, the Company had drawn down $113.5 million for the purchase of four
aircraft, including modification costs, and three spare engines (see Note 17).

In May 1996, the Company entered into an agreement with Cargolux Airlines
International S.A. ("Cargolux") for the purchase of one 747-200 freighter
aircraft (the "Cargolux Aircraft") previously leased by the Company from
Cargolux, for a purchase price of approximately $31.7 million, including a spare
engine. The Cargolux Aircraft was delivered to the Company in August 1996
following the performance by Cargolux of maintenance required to induct the
aircraft into the Company's fleet.

In June 1996, the Company entered into a ten year engine maintenance
agreement with General Electric Company ("GE") for the engine maintenance of up
to 15 aircraft powered by CF6-50E2 engines. The agreement commenced in the third
quarter with the testing of several engines for acceptance into the GE program.
The engines associated with certain aircraft acquired in 1996 have been placed
into this maintenance program. Effective in the year 2000, the Company has an
option to add not less than 40 additional engines to the program.

Reclassifications

Certain prior year amounts have been reclassified to conform to current
year presentation.

Supplemental Cash Flow Information

The aggregate interest payments made by the Company net of amounts
capitalized were $30,744,000, $15,563,000 and $9,724,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. Prior to December 1995, the
required monthly payment under the ING Bank loan agreement was less than the
accrued interest, thus causing $1,258,000 of accrued interest in 1995 to be
financed by the lender as an increase in the principal balance (see Note 3).

The Company made federal and state income tax payments of approximately
$750,000, $399,000 and $60,000 in the years ended December 31, 1996, 1995 and
1994, respectively.

F-11
<PAGE> 36

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SHORT-TERM INVESTMENTS

Proceeds from the SPO, plus additional funds, were invested in various
held-to-maturity securities, as defined in SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", which requires investments in debt
securities to be classified as held-to-maturity and measured at amortized cost
only if the reporting enterprise has the positive intent and ability to hold
those securities to maturity. The following table sets forth the aggregate fair
value, gross unrealized holding gains, gross unrealized holding losses, and
amortized/accreted cost basis by major security type as of December 31, 1996 (in
thousands):

<TABLE>
<CAPTION>
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED (AMORTIZATION)
SECURITY TYPE FAIR VALUE HOLDING GAINS HOLDING LOSSES ACCRETION
- ---------------------------- ---------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Commercial Paper............ $ 14,931 $ -- $ 1 $(39)
Medium Term Notes........... 47,839 16 5 91
U.S. Government Agencies.... 15,174 18 9 (34)
Corporate Notes............. 16,586 1 1 163
Market Auction Preferreds... 10,500 -- -- --
Corporate Bonds............. 8,088 -- 23 8
-------- ------- ------- ----
Totals............ $113,118 $ 35 $ 39 $189
======== ======= ======= ====
</TABLE>

In addition, accrued interest on short-term investments at December 31, 1996 was
approximately $1.7 million. Interest earned on these investments and maturities
of these investments are reinvested in similar securities.

3. LONG-TERM DEBT

Long-term debt and current maturities are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
ING Bank debt............................................... $225,112 $232,494
Lufthansa Debt.............................................. 9,556 18,373
Equipment Notes............................................. 100,000 100,000
Finova Debt................................................. 32,503 --
Aircraft Credit Facility.................................... 113,469 --
Other....................................................... 3,789 394
-------- --------
484,429 351,261
Current maturities.......................................... (21,561) (15,359)
-------- --------
Long-term debt.............................................. $462,868 $335,902
======== ========
</TABLE>

ING Bank Debt

In December 1994, the Company renegotiated its loan agreement with ING
Bank. Pursuant to the new loan agreement, ING Bank agreed to provide up to $231
million of financing to the Company for the following purposes: refinance
amounts previously borrowed by the Company; finance the purchase price of two
Lufthansa Aircraft ("ING Bank Financed Lufthansa Aircraft"); finance the costs
of converting the Lufthansa Aircraft to freighter configuration; finance
advances to Deutsche Lufthansa AG ("Lufthansa") for the purchase of the
Lufthansa Aircraft; provide financing for the cost of a maintenance event (D
Check) in 1995 on an Existing Aircraft; pay certain loan origination fees and
finance a previous obligation of the Company to ING Bank arising as a result of
a guarantee of the debt of an unrelated party. Subsequently, ING Bank increased
the size of its commitment under the new loan agreement to $232.9 million.

F-12
<PAGE> 37

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The loan agreement required three consecutive monthly payments by the
Company to ING Bank of $1,100,000 from January 1995 through March 1995 and
requires monthly payments of $980,000 thereafter for the two Existing Aircraft.
As to the Lufthansa Aircraft that are financed by Lufthansa ("Lufthansa Financed
Aircraft") (see discussion of Lufthansa Debt below), the terms of the loan
agreement require payments by the Company of $90,000 per month per Lufthansa
Financed Aircraft to ING Bank and $400,000 per month per Lufthansa Financed
Aircraft to Lufthansa until the Lufthansa Debt is paid in full. At such time,
the payment to ING Bank will increase to $490,000 per month per Lufthansa
Financed Aircraft. The terms of the loan agreement require payments by the
Company of $490,000 per month per ING Bank Financed Lufthansa Aircraft to ING
Bank.

For all but $30,000,000 of the total indebtedness to ING Bank (which amount
was financed at a fixed interest rate of 11.53% through September 1995, at which
time the interest rate was converted to one-month LIBOR (London Interbank
Offered Rate) plus 2.65%), the loan agreement accrues interest at one-month
LIBOR plus 2.65%. To the extent one-month LIBOR increases or decreases, the
loan's maturity date will lengthen or shorten, respectively. Should LIBOR exceed
7.5% after November 1997, the scheduled payments described above will be
increased in accordance with a prescribed formula; likewise, if LIBOR should
decrease below 2.5%, the scheduled payments will be decreased in accordance with
a prescribed formula. The one-month LIBOR rate at December 31, 1996 was 5.64%
for purposes of this loan.

The collateral for the loan agreement between the Company and ING Bank
consists of the following: a first priority lien and security interest in and to
all aircraft owned by the Company (other than the Lufthansa Financed Aircraft,
the Equipment Notes Financed Aircraft, the Finova Financed Aircraft and the
Bankers Trust Financed Aircraft) and the common stock of the Company's
subsidiary owning such aircraft; a pledge of shares of Common Stock of the
Company held by Mr. Chowdry with a fair market value of $20,000,000; an
assignment of the Boeing Modification Agreement for the Lufthansa Aircraft; and
a second priority lien and security interest in and to the Lufthansa Financed
Aircraft (which converts to a first priority lien when the Lufthansa Debt is
paid in full).

Certain debt covenants under the ING Bank debt preclude one of the
Company's subsidiaries from declaring dividends, redeeming its own stock for
value, or returning any capital to its stockholders.

Lufthansa Debt

Lufthansa financed approximately $12.5 million of the purchase price of
each Lufthansa Financed Aircraft ("Lufthansa Debt"). The Lufthansa Debt
associated with the first and second Lufthansa Financed Aircraft is included in
long-term debt at December 31, 1996 and 1995.

The loan agreement requires monthly payments of $400,000 per Lufthansa
Financed Aircraft commencing three months after scheduled delivery until the
Lufthansa Debt and related interest is paid in full. The Company began remitting
payments on the first and second Lufthansa Financed Aircraft in January 1995,
and February 1995, respectively. The Lufthansa Debt accrues interest at an
annual rate of approximately 8.8%. The loan is secured by a first priority lien
and security interest in and to the Lufthansa Financed Aircraft.

Equipment Notes

In November 1995, the Company sold $100 million of 12 1/4% Pass Through
Certificates. Each 12 1/4% Pass Through Certificate due 2002 (each a
"Certificate") represents a fractional undivided interest in the Atlas Air Pass
Through Trust (the "Trust") formed pursuant to a pass through trust agreement
between the Company and First Fidelity Bank, N.A., as trustee under the Trust.
The property of the Trust consists of 12 1/4% Senior Secured Notes due 2002 (the
"Equipment Notes") issued by the Company to finance, together with funds from
the Company, the acquisition and conversion cost of three Boeing 747 aircraft
(the "Collateral Aircraft") that were acquired by the Company in the fourth
quarter of 1995 and converted to freighter

F-13
<PAGE> 38

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

configuration in the first quarter of 1996. The Company issued the related
Equipment Notes during the fourth quarter of 1995 and the first quarter of 1996
at or prior to the time predelivery deposits and final purchase price payments
were required to be made with respect to the Collateral Aircraft.

The Equipment Notes are senior obligations of the Company issued under
separate indentures relating to each of the Collateral Aircraft, and have an
interest rate equal to the interest rate payable on the Certificates. The
Equipment Notes issued with respect to each Collateral Aircraft are secured by a
first priority security interest in such Collateral Aircraft, and by a second
priority security interest in each of the other Collateral Aircraft. The amounts
payable by the Company on account of the Equipment Notes, together with other
amounts payable by the Company, will be sufficient to pay in full when due all
payments of principal, premium, if any, and interest on, the Certificates.

Interest paid on the Equipment Notes commenced June 1, 1996 and is passed
through to the Certificateholders on June 1 and December 1 of each year, at a
rate per annum of 12 1/4%. The Equipment Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after December 1, 1998 at
redemption prices ranging from 108% in 1998 to 100% in 2001 and thereafter,
together with accrued and unpaid interest, if any, to the date of redemption.
The Company is required to provide for the retirement of one-third of the
aggregate principal amount of the Equipment Notes on December 1 in each of 2000
and 2001 through the operation of a sinking fund at a redemption price of 100%
of the principal amount thereof, together with accrued interest thereon to the
redemption date.

Covenants with respect to the Collateral Aircraft require specific levels
of insurance, as well as contain requirements regarding possession, maintenance,
lease or transfer of the aircraft. Certain covenants applicable to the Company
include, among other restrictions, limitations on indebtedness, restricted
payments and asset sales. The Company is in compliance with all of its
covenants.

With respect to limitation on indebtedness, the Company is limited as to
the amount and type of indebtedness it may incur, unless it meets or exceeds a
consolidated fixed charge coverage ratio. This ratio is the sum of (a) net
income, interest expense, tax expense and non-cash charges deducted in computing
net income for a certain period, as compared to (b) the interest expense for
that period. The Company may not incur more than $15,000,000 of additional
indebtedness, unless at the time of such incurrence the consolidated fixed
charge coverage ratio would have been at least equal to 2.5 to 1.0 through
December 31, 1996 and 2.75 to 1.0 thereafter. The Company may, however, incur up
to $100 million of indebtedness secured by aircraft at any time outstanding
without regard to the foregoing test.

Restricted payments of the Company include (a) the payment of dividends or
distributions to shareholders, other than in shares of its capital stock; (b)
the purchase or redemption of shares of its capital stock; (c) the payment
towards debt prior to any scheduled principal payment or maturity; and (d) the
investment in an entity unless the entity becomes a wholly-owned subsidiary.
Restricted payments are allowable provided that (a) the Company is not in
default of its covenants; (b) the Company meets or exceeds the consolidated
fixed charge coverage ratio; and (c) the aggregate amount of all restricted
payments does not exceed the sum of (1) 50% of the cumulative net income during
the period of indenture to date; (2) net cash proceeds from any sale of its
capital stock or debt securities subsequent to the period of indenture; (3) any
return of capital from other than a wholly-owned subsidiary; and (4)
$10,000,000.

Finova Debt

The Company obtained financing from Finova Capital Corporation for
approximately 80% of the total acquisition and conversion cost of the first Thai
Aircraft, or $32.8 million. The loan accrues interest at 10.13% and calls for
the payment of interest only prior to re-delivery of the aircraft to the
Company. Subsequent to re-delivery, principal and interest is paid monthly such
that the loan matures on October 1, 2003. The loan is secured by a first
priority security interest in the first Thai Aircraft.

F-14
<PAGE> 39

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aircraft Credit Facility

In May 1996, the Company entered into a $175 million revolving credit
facility. This revolving loan facility provides for the acquisition and
conversion of flight equipment, including any or all of the remaining five Thai
Aircraft. The facility has a two-year revolving period with a subsequent
two-year term loan period in the event that permanent financing has not been
obtained for any flight equipment financed under the facility. At the time of
each borrowing the Company must select either a Base Rate Loan (prime rate, plus
1.5% through May 8, 1998, thereafter plus 2.0%) or a Eurodollar Rate Loan
(Eurodollar rate, plus 2.5% through May 8, 1998, thereafter plus 3.0%). The
Eurodollar Rate Loan was selected by the Company for all borrowings in 1996.
Each borrowing is secured by a first priority security interest in the
collateral flight equipment of that borrowing. Certain tests must be met before
each purchase of aircraft and related drawdown on the facility. To date, the
Company has met these tests. If in the future, the Company cannot meet all the
tests because of the difficult sequencing of aircraft acquisition, aircraft
conversion and customer contracts, the Company believes that other financing
sources would be available to the Company or that it would acquire aircraft
using its internal cash or seek a waiver of any necessary conditions (see Note
17.).

Covenants with respect to the credit facility require specific levels of
insurance, as well as contain requirements regarding possession, maintenance,
and lease or transfer of the flight equipment. Certain covenants applicable to
the Company include, among other restrictions, limitations on indebtedness,
liens, investments, contingent obligations, restricted junior payments, capital
expenditures and leases. The Company must maintain a Minimum Interest Coverage
Ratio (as defined) of 2.50:1.00 (increasing in 1998 to 2.75:1.00, with
additional increases in subsequent years), a Minimum Fixed Charge Coverage Ratio
(as defined) of 1.25:1.00 (decreasing in 1998 to 1.10:1.00), a Maximum Leverage
Ratio (as defined) of 4.50:1.00 (decreasing in 1998 to 4.25:1.00, further
decreasing in subsequent years), and a Minimum Consolidated Net Worth (as
defined) of $100 million (increasing in 1997 to $120 million, with additional
increases in subsequent years). The Company is in compliance with all of its
covenants at December 31, 1996.

Fair Value of Long-Term Debt

Based on current rates available for similar debt with similar maturities
and security, the fair values of the ING Bank debt, Lufthansa Debt, Finova Debt
and Aircraft Credit Facility at December 31, 1996, are estimated to be their
carrying values. The Equipment Notes are publicly traded. Based on published
trading prices at December 31, 1996, the fair value of the Equipment Notes is
estimated to be $109 million.

Five Year Debt Maturities

At December 31, 1996, principal repayments on long-term debt for the next
five years were as follows (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 THEREAFTER
------- ------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
ING Bank debt............. $ 7,280 $17,449 $19,384 $ 21,055 $22,869 $137,075
Lufthansa Debt............ 9,158 398 -- -- -- --
Equipment Notes........... -- -- -- 33,333 33,333 33,334
Finova Debt............... 2,455 2,710 3,001 3,317 3,672 17,348
Aircraft Credit
Facility................ -- 18,911 37,823 56,735 -- --
Other..................... 2,668 699 124 13 13 272
------- ------- ------- -------- ------- --------
$21,561 $40,167 $60,332 $114,453 $59,887 $188,029
======= ======= ======= ======== ======= ========
</TABLE>

F-15
<PAGE> 40

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INCOME TAXES

The Company has historically filed a consolidated federal income tax return
with Holdings and Leasing. Subsequent to the completion of the spin-off in July
1995 (discussed in Note 11), Leasing is no longer included in the consolidated
group. The Company has net operating loss carryforwards of approximately
$57,000,000 (inclusive of the allocable net operating loss of approximately
$45,100,000 that resulted from the spin-off) as of December 31, 1996 which
expire between 2008 and 2011. The Company has generated approximately $7,020,000
of alternative minimum tax credit carryforwards which are available in
subsequent years to reduce its regular tax liability subject to statutory
limitations. All tax years of the Company that are statutorily open are
currently under examination by the Internal Revenue Service ("IRS"), as well as
state and local authorities. The Company believes that it has adequately
provided for all income tax liabilities and that final resolution of any IRS
examination will not have a material effect on its financial position or results
of operations.

The provision for income taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------ ----
<S> <C> <C> <C>
Current:
Federal.................................................. $ 6,625 $ 251 $--
State and local.......................................... 394 13 14
Deferred:
Federal.................................................. 14,731 8,144 --
State and local.......................................... -- -- --
------- ------ ---
Provision for income taxes............................ $21,750 $8,408 $14
======= ====== ===
</TABLE>

The provisions for income taxes were at rates different from the U.S.
federal statutory rate for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
----- ----- ------
<S> <C> <C> <C>
Statutory federal income tax provision rate................ 35.00% 35.00% 35.00%
State and local income taxes, net of federal tax benefit... .66% -- .25%
Nondeductible items........................................ 2.04% 1.44% 6.92%
Reversal of prior year valuation allowance................. -- (4.83)% --
Benefit of net operating loss.............................. (1.20)% -- (41.78)%
Other...................................................... -- .43% --
----- ----- ------
Effective tax provision rate............................. 36.50% 32.04% .39%
===== ===== ======
</TABLE>

F-16
<PAGE> 41

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The net deferred income tax liability components are as follows (in
thousands):

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1996 1995
------- -------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book depreciation........... $57,127 $29,602
Other..................................................... 1,564 --
------- -------
Total deferred tax liabilities.................... 58,691 29,602
Deferred tax assets:
Tax benefit of net operating loss carryforwards........... 20,804 15,793
Tax benefit of passive loss carryforwards................. -- 2,920
Tax benefit of alternative minimum tax credits............ 7,020 --
Other..................................................... 7,992 2,745
------- -------
Total deferred tax assets......................... 35,816 21,458
------- -------
Net deferred tax liability........................ $22,875 $ 8,144
======= =======
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

Aircraft

Minimum annual rental commitments under noncancelable aircraft operating
leases for years ending December 31, are approximately (in thousands):

<TABLE>
<S> <C>
1997 (six Boeing 747-200 aircraft).......................... $30,150
1998 (one Boeing 747-200 aircraft).......................... 4,500
1999 (one Boeing 747-200 aircraft).......................... 4,500
2000 (one Boeing 747-200 aircraft).......................... 4,500
2001 (one Boeing 747-200 aircraft).......................... 4,500
Thereafter (one Boeing 747-200 aircraft).................... 37,125
</TABLE>

In addition to the above commitments, the Company leases engines under
short-term lease agreements on an as needed basis.

Aircraft and engine rentals, including short-term rentals, were
$27,341,000, $22,902,000 and $14,044,000 for the years ended December 31, 1996,
1995 and 1994, respectively.

Cargo Modification

As of December 31, 1996, the third and fourth Thai Aircraft were undergoing
cargo modification as to which certain of the costs had already been paid to
Boeing and other vendors. Such amounts are recorded in Flight Equipment in the
December 31, 1996 balance sheet. The remaining commitments to Boeing and other
vendors as of December 31, 1996 for the third and fourth Thai Aircraft at Boeing
were approximately $15 million and $19 million, respectively. These commitments
are expected to be paid in the first quarter of 1997.

Maintenance Agreements

In January 1995, the Company entered into a maintenance agreement with one
of its principal customers. This agreement includes a provision which requires
the Company to remit a fixed amount per flight hour each month to the customer,
for which the customer will perform most regular maintenance on a substantial
portion

F-17
<PAGE> 42

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the aircraft in the Company's fleet. The agreement extends for a period of
ten years. Pursuant to its maintenance agreement, engines may be upgraded when
inducted into the maintenance pool in order to improve engine reliability and to
lower Company operating costs. When such costs are incurred and identified, they
are capitalized and amortized over the remaining life of each applicable engine.
As of December 31, 1996, the customer had not invoiced the Company for any such
costs. However, the Company expects to incur between $10 million and $15 million
for such upgrades over the term of the contract.

In April 1995, the Company entered into an agreement with a
contract-maintenance operator, Hong Kong Aircraft Engineering Company ("HAECO"),
pursuant to which HAECO agreed to convert to full freighter configuration and/or
undertake D-checks on ten Boeing 747 aircraft, by October 1, 1997, at a fixed
rate per man hour. The Company has guaranteed a minimum number of such man
hours. Pursuant to this contract, the Company has the right to release, at a
minimum of six months in advance, the contract hours back to HAECO for use by
other HAECO customers. During 1996 and for the first eight months of 1997, the
Company exercised its right to release the contract hours back to HAECO and
believes that it thereby has fulfilled its commitment under this contract.

As part of the purchase of the Alitalia Aircraft in 1995, the Company
agreed with Alitalia to utilize, or cause other parties to utilize, Alitalia's
maintenance services for an aggregate cost of $25 million over a five year
period. The Company anticipates that it will be able to fulfill this commitment
during the life of the agreement.

In June 1996, the Company entered into a ten year engine maintenance
agreement with GE for the engine maintenance of up to 15 aircraft powered by
CF6-50E2 engines. The agreement commenced in the third quarter of 1996 with the
acceptance of engines associated with aircraft acquired in the third and fourth
quarter of 1996. Effective in the year 2000, the Company has an option to add
not less than 40 engines to the program.

Office and Warehouse

In 1995, the Company entered into an operating lease for office space
expiring in the year 2000, with two five year renewal provisions. In 1996, the
Company entered into an operating lease for warehouse space expiring in
September 1997, with two five year renewal provisions. Future minimum rental
commitments by year are as follows for the years ending December 31:
1997 -- $535,000; 1998 and 1999 -- $492,000 per year; 2000 -- $205,000. Rental
expense, including short-term rentals, was $615,000, $579,000 and $248,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.

Employment Agreements

An officer resigned from employment in February 1996, at which time his
options fully vested, pursuant to his employment agreement. In addition, he was
paid $262,500 as well as certain relocation costs.

The Company entered into an employment agreement with Mickey Foret dated as
of April 19, 1996, pursuant to which Mr. Foret began his employment as President
of the Company effective June 1, 1996. The agreement will expire on May 31,
1999. The employment agreement provides for a base annual salary of $400,000. In
addition, Mr. Foret received signing bonuses of $750,000 and $2,115,639, on June
1, 1996 and January 1, 1997, respectively, and is entitled to an annual bonus at
the discretion of the Compensation Committee. The agreement provides that Mr.
Foret be granted options on the commencement of his employment under the 1995
Stock Option Plan to purchase 300,000 shares of Common Stock at an exercise
price of $41.75 per share, exercisable in five equal installments commencing one
year following the date of grant and annually thereafter. The agreement is
subject to termination by the Company with or without cause. If the agreement is
terminated by the Company without cause, Mr. Foret is entitled to receive a
termination

F-18
<PAGE> 43

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

payment equal to 24 months of his base compensation and all options granted to
Mr. Foret under the 1995 Stock Option Plan would vest on the date of his
termination.

In August 1996, an officer resigned from the Company, but retained his
position as a Board member. Upon becoming an outside Board member, he received
the same Board fee arrangement as the other outside board members, including an
annual grant of 1,000 options to purchase shares of Company common stock. This
former officer will be retained as a consultant for a period of nine months from
the date of resignation.

The Company has entered into employment agreements with certain other key
employees. Such employment agreements provide for, among other things, base
annual salary, certain bonuses, the grant of options to purchase common stock of
the Company under the 1995 Stock Option Plan (see Note 13), and in certain
circumstances relocation and severance benefits.

The Company has an obligation which arose in prior years to pay an officer
of the Company $332,000 should his employment by the Company and its affiliates
be terminated for any reason. On July 11, 1995, this officer resigned his
position with the Company to accept a position with an affiliate of the Company.
This obligation is recorded in accrued salaries and wages (see Note 8).

FAA Airworthiness Directives

On September 21, 1993 and June 4, 1994, the FAA issued Airworthiness
Directives requiring the inspection and replacement of certain engine components
with which the Company must comply by December 1997 at an estimated aggregate
cost of $1.1 million for all of the aircraft in the Company's fleet. In November
1994, the FAA issued Nacelle Strut Modification Service Bulletins which are
expected to be converted into Airworthiness Directives. The Company's aircraft
would have to be brought into compliance with such Airworthiness Directives
within the next four years at an estimated cost of approximately $500,000 for
each aircraft in its fleet. The FAA has also issued Directives relating to pylon
modifications. The Company has 12 aircraft to be modified pursuant to these
Directives prior to March 2000 at a total modification cost of approximately
$7.2 million. As part of the FAA's overall aging aircraft program, it has issued
Directives requiring certain additional aircraft modifications to be
accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the 12 aircraft (excluding the Federal Express Aircraft) is 12,000
cycles and the average cycles operated per year is 800 cycles. The Company
estimates that the modification costs per aircraft will range between $2 million
and $3 million. Between now and the year 2000, only one aircraft is expected to
reach the 20,000 cycle limit and the entire current fleet will require
modification prior to the year 2009. It is possible that additional Service
Bulletins or Airworthiness Directives applicable to the types of aircraft
included in the Company's fleet could be issued in the future. The cost of
compliance with such Airworthiness Directives cannot currently be estimated, but
could be substantial.

Upon acquisition of an aircraft, the Company determines whether or not the
aircraft is in compliance with Airworthiness Directives and tries to anticipate
all future compliance requirements. The necessary work to bring the aircraft
into compliance is then scheduled at the time of conversion of the aircraft to
freighter configuration, in order to minimize unscheduled maintenance events.

6. RELATED PARTY TRANSACTIONS

Leasing paid the Company $360,000 in 1994 for office, management and
administrative personnel expenses incurred by the Company on Leasing's behalf.
Effective December 31, 1994, the Company ceased providing such services to
Leasing. The Company recorded the payments from Leasing as other income in 1994.
During 1995 and 1996, the Company performed minor accounting and payroll
services on behalf of Leasing for which it was reimbursed for out-of-pocket
expenses.

F-19
<PAGE> 44

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1995, the Company extended a non-interest bearing loan to an
officer of the Company in the amount of $125,000 in connection with such
officer's relocation to Colorado, which the Company forgave in July 1995.

In August and September 1995, the Company extended demand loans to three
senior vice presidents of the Company in the aggregate amount of $550,000,
bearing interest at an annual rate of 7.50%. Two of the loans plus interest were
paid in full in April and May 1996. A loan of up to $750,000, bearing interest
at 5.87%, was extended in June 1996 to one officer for the purpose of
constructing a residence. As of December 31, 1996 the outstanding balance of
officer demand loans was $473,000.

In November 1995, the Company began renting a Cessna Citation SP, on an as
needed basis, from MAC Flightlease, Inc. for the purpose of corporate business
travel. MAC Flightlease, Inc. is wholly-owned by Mr. Chowdry. The Company paid
$265,000 in 1996 and $52,000 in 1995 for such travel, at rates which are
considered by the Company to be at fair market value.

7. ACCOUNTS RECEIVABLE AND OTHER

The components of accounts receivable and other are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
<S> <C> <C>
Accounts receivable-trade................................... $41,687 $14,422
Insurance and vendor claims................................. 5,952 3,365
Employee receivables........................................ 606 561
Prepaids and other.......................................... 1,979 870
Less: Allowance for doubtful accounts....................... (621) (624)
------- -------
$49,603 $18,594
======= =======
</TABLE>

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The components of accounts payable and accrued expenses are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
<S> <C> <C>
Accounts payable-trade...................................... $15,745 $ 1,708
Accrued salaries and wages.................................. 5,547 3,859
Accrued maintenance......................................... 11,621 6,538
Accrued interest............................................ 3,348 1,055
Other accrued expenses...................................... 11,502 5,779
------- -------
$47,763 $18,939
======= =======
</TABLE>

9. SAVINGS AND RETIREMENT PLAN

The Company implemented a 401(k) Retirement Plan (the "Plan") in June 1994,
under which eligible employees may contribute up to 15% of their total pay. The
Plan covers substantially all employees. The Company did not make contributions
to the Plan in 1994 or 1995. Effective May 1, 1996, the Plan was amended to
provide for Company contributions equal to 50% of the first 10% of contributions
made by employees, for which the Company incurred an expense of $559,000 for the
year ended December 31, 1996.

F-20
<PAGE> 45

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. BUSINESS SEGMENTS

The Company operates in one business segment, which is to provide the
common carriage of freight over various worldwide routes.

The assets of the Company, principally flight equipment, support its entire
worldwide transportation system and are not readily identifiable by geographic
area. Property and equipment, other than flight equipment, located in foreign
locations is not significant.

Foreign sales accounted for 98%, 99% and 99% of total revenues for the
years ended December 31, 1996, 1995 and 1994, respectively. All foreign sales
were U.S. dollar denominated.

11. SPIN-OFF OF LEASING

On July 12, 1995, Leasing and all other assets and liabilities of Holdings
not related to the Company's operation were spun off from Holdings to Mr.
Chowdry and certain of his affiliates (other than the Company) in a tax-free
transaction. The consolidated financial statements have been retroactively
restated to reflect the spin-off. At December 31, 1994, the Company had a
remaining accrual of approximately $1.6 million for amounts representing a cash
capital contribution payable to Leasing intended to provide funding necessary
for Leasing to be independent from the Company after completion of the spin-off.
The contribution was deducted from the equity of Holdings in 1994.

12. PREFERRED STOCK

The Board of Directors is authorized under the restated certificate of
incorporation to issue up to 10,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of Preferred
Stock with voting and conversion rights may adversely affect the voting power of
the holders of Common Stock, including the loss of voting control to others. At
present, the Company has no plans to issue any shares of Preferred Stock.

13. STOCK-BASED COMPENSATION PLANS

Employee Stock Purchase Plan

In 1995, the Company established an Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Employees eligible to participate in the Stock Purchase
Plan are those who have completed at least one year of employment with the
Company, but excluding employees whose customary employment is not more than
five months in any calendar year or 20 hours or less per week. The Stock
Purchase Plan is administered by the Compensation Committee of the Board of
Directors of the Company which determines the terms and conditions under which
shares are offered and corresponding options granted under the Stock Purchase
Plan for any Purchase Period, as defined in the Stock Purchase Plan. Employees
may contribute up to 15% of their gross base compensation subject to certain
limitations. The price per share at which the Common Stock is purchased pursuant
to the Stock Purchase Plan is the lesser of 85% of the fair market value of the
Common Stock on the first or last day of the applicable Purchase Period. The
maximum number of shares of Common Stock which may be issued on the exercise of
options purchased under the Stock Purchase Plan is 1,000,000 shares. As of
December 31, 1996, 22,668 shares have been issued at a weighted average cost of
$20.95 to 120 employees who have participated in the Stock Purchase Plan.

F-21
<PAGE> 46

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1995 Stock Option Plan

In 1995, the Company adopted the 1995 Stock Option Plan ("1995 Plan"),
whereby employees may be granted options, incentive stock options, share
appreciation rights, and restricted shares. The portion of the 1995 Plan
applicable to employees is administered by the Compensation Committee of the
Board of Directors of the Company which also establishes the terms of the
awards. The 1995 Plan also provides for certain automatic grants of nonqualified
stock options to non-employee directors which become exercisable on the date of
grant and expire on the tenth anniversary of the date of grant. Originally, an
aggregate of 1,800,000 shares were reserved for issuance in connection with
awards and director's options under the 1995 Stock Option Plan. Following
shareholder approval, an additional 300,000 shares were reserved.

Other

In July 1995, options to purchase 125,000 and 71,430 shares of the
Company's Common Stock were granted to an officer ("July 1995 Grant"), who
subsequently resigned from his position with the Company to accept a position
with an affiliate of the Company, at exercise prices of $10.00 per share and
$14.00 per share, respectively.

Statement of Financial Accounting Standards No. 123

SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value based method of accounting for employee stock options or similar equity
instruments. However, SFAS No. 123 allows the continued measurement of
compensation cost for such plans using the intrinsic value based method
prescribed by Accounting Principals Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," provided that pro forma disclosures are made of
net income or loss and net income or loss per share, assuming the fair value
based method of SFAS No. 123 had been applied. The Company has elected to
account for its stock-based compensation plans under APB Opinion No. 25;
accordingly, for purposes of the pro forma disclosures presented below, the
Company has computed the fair value of all options granted during 1996 and 1995,
using the Black-Scholes pricing model and the following weighted average
assumptions:

<TABLE>
<CAPTION>
ASSUMPTIONS -- 1995 PLAN 1996 1995
------------------------ ------- ---------
<S> <C> <C>
Risk-free interest rates.................................... 6.31% 6.04%
Expected dividend yields.................................... -- --
Expected lives.............................................. 5 years 2.5 years
Expected volatility......................................... 73.44% 73.44%
</TABLE>

If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's pro forma net income and pro forma
net income per common share would have been reported as follows:

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C> <C>
Net income (in thousands):........................ As Reported $37,838 $17,831
Pro Forma $35,211 $15,857
Net income per common share:...................... As Reported $ 1.76 $ 1.06
Pro Forma $ 1.64 $ .94
</TABLE>

F-22
<PAGE> 47

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the status of the 1995 Plan and the July 1995 Grant at
December 31, 1996 and 1995 and changes during the years then ended is presented
in the table below:

<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beg. of year...... 853,650 $12.99 -- --
Granted.......................... 369,000 $41.44 853,650 $12.99
Exercised........................ (550,229) $12.11 -- --
Forfeited........................ (36,459) $16.00 -- --
-------- -------
Outstanding at end of year....... 635,962 $30.09 853,650 $12.99
======== =======
Exercisable at end of year....... 166,273 $14.21 561,930 $10.54
Weighted average fair value of
options granted................ $ 27.27 $ 5.02
</TABLE>

The following table summarizes information with regard to the options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
----------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$10.00 -- $14.00................ 111,930 4.6 years $12.20 111,930 $12.20
$16.00 -- $22.25................ 155,032 8.8 years $16.00 50,343 $16.00
$38.25 -- $56.38................ 369,000 9.4 years $41.44 4,000 $48.03
------- -------
$10.00 -- $56.38................ 635,962 8.4 years $30.09 166,273 $14.21
</TABLE>

14. PROFIT SHARING PLAN

Employees who have been employed by the Company for at least twelve months
as full-time employees are eligible to participate in the Company's Profit
Sharing Plan, which was adopted in 1994. The Profit Sharing Plan provides for
payments to eligible employees in semiannual distributions based on the
Company's pretax profits. The Company is obligated to make an annual profit
sharing contribution of ten percent of the Company's pretax profits, which is
defined as net income before taxes, but excluding (i) any income or loss related
to charges or credits for unusual or infrequently occurring items or related to
intangible assets, and (ii) extraordinary items. Annual profit sharing
contributions may be in the form of cash or Common Stock of the Company. The
expense for the Profit Sharing Plan and the Pilot Completion Bonus Program was
$581,000 for the year ended December 31, 1994. The Pilot Completion Bonus
Program began in March 1993 and terminated in 1994. The expense for the Profit
Sharing Plan for the years ended December 31, 1996 and 1995 was $6,779,000 and
$2,768,000, respectively.

15. SUBSEQUENT EVENTS

In January 1997, the Company entered into two ACMI contracts, each for a
three year term commencing January 1, 1997.

On January 2, 1997, the Company purchased a B747 flight simulator from
Federal Express for $2.1 million. This flight simulator will be utilized by the
Company for crew training. In addition, the Company has contracted with an
intermediary to sell time on the flight simulator to third parties.

F-23
<PAGE> 48

ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On January 21, 1997, the Company signed a Letter of Commitment to enter
into a revolving line of credit for general working capital purposes with Bank
One, Colorado, N.A. ("Bank One"), subject to final documentation. Standby
Letters of Credit would also be issued under the line of credit for the purpose
of obtaining trade credit. Payment of interest only would be required monthly,
with principal due in full at maturity, March 3, 1998. The covenants of this
line of credit would be similar to those of existing long-term debt (see Note
3).

16. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)

17. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

On February 28, 1997, the Company entered into the Second Amended and
Restated Credit Agreement with its existing aircraft credit facility (see Note
3). The purpose of the amendment was to increase the revolving line from $175
million to $275 million for the purpose of acquiring additional aircraft,
including spare engines and modification costs associated with cargo
configuration as necessary. In addition, certain sections of the existing credit
agreement were modified slightly, in order to permit the Company to enter into
the revolving line of credit with Bank One (see Note 15).

F-24
<PAGE> 49

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+2.1 -- Plan of Reorganization and Merger Agreement dated as of
July 12, 1995 by and between Holdings and the Company.
+3.2 -- Restated Certificate of Incorporation of the Company.
+3.3 -- Amended and Restated By-Laws of the Company.
++4.1 -- Form of Indenture between the Company and First fidelity
Bank, N.A., as Trustee.
++4.2 -- Form of Second Indenture between the Company and First
Fidelity Bank, N.A., as Trustee.
++4.3 -- Form of Pass Through Trust Agreement between the Company
and First Fidelity Bank, N.A., as Trustee (with form of
Pass Through Certificate attached as exhibit thereto).
++4.4 -- Form of Pass Through Trust Agreement between the Company
and First Fidelity Bank, N.A., as Trustee (with form of
Pass Through Certificate attached as exhibit thereto).
**5.1 -- Opinion of Cahill Gordon & Reindel as to the legality of
the Certificates.
+10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995,
between the Company and KLM Royal Dutch Airlines, as
amended.
+10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award
Plan.
+10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan.
+10.17 -- Atlas Air, Inc. Profit Sharing Plan.
+10.18 -- Atlas Air, Inc. Retirement Plan.
++10.19 -- Employment Agreement between the Company and Michael A.
Chowdry.
++10.20 -- Employment Agreement between the Company and Richard H.
Shuyler.
++10.21 -- Employment Agreement between the Company and Clark H.
Onstad.
++10.23 -- Employment Agreement between the Company and James T.
Matheny.
+10.26 -- Maintenance Agreement between the Company and Hong Kong
Aircraft Engineering Company Limited dated April 12,
1995, for the performance of certain maintenance events.
+10.28 -- Secured Loan Agreement by and between Atlas One and
Internationale Nederlanden Aviation Lease B.V. dated as
of December 30, 1994, including Amendment No. 1 thereto
and certain related agreements.
+10.30 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYS.
+10.31 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYL.
*10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996
between Langdon Asset Management, Inc. and the Company.
**10.51 -- Employment Agreement dated as of April 19, 1996 between
the Company and Mickey P. Foret.
10.52 -- Employment Agreement dated as of November 18, 1996
between the Company and R. Terrence Rendleman.
10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.54 -- Second Amended and Restated Credit Agreement among the
Company and the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as syndication agent) and Bankers
Trust Company (as Administrative Agent) dated February
28, 1997.
***10.55 -- Engine Maintenance Agreement between the Company and
General Electric Company dated June 6, 1996.
+16.1 -- Letter dated July 21, 1995 from Ernst & Young to the
Securities and Exchange Commission.
+21.1 -- Subsidiaries of the Registrant.
**23.1 -- Consent of Independent Public Accountants.
**23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit
5.1).
23.3 -- Consent of Independent Public Accountants.
**24.1 -- Powers of Attorney (set forth on the signature page of
the Registration Statement).
27 -- Financial Data Schedule.
</TABLE>

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

+ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-90304).

++ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-97892).

* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).

** Previously filed.

*** Portions of this document, for which the Company has requested confidential
treatment, have been redacted and filed separately with the Securities and
Exchange Commission.

<PAGE> 1
EXHIBIT 10.52

EMPLOYMENT AGREEMENT

WHEREAS, R. Terrence Rendleman (hereinafter referred to as "Employee")
and Atlas Air, Inc. ("Atlas") wish to enter an Employment Agreement; and

WHEREAS, R. Terrence Rendleman warrants that he is entering
voluntarily into this Agreement, and that no promises or inducements for this
Agreement have been made outside of the terms and conditions referred to
herein, and Employee enters into this Agreement without reliance upon any
statement or representation by Atlas or any other person, concerning any fact
material hereto.

NOW, THEREFORE, in consideration of the covenants contained herein,
Employee and Atlas agree to this Employment Agreement as of this 18th day of

November, 1996.

1. DEFINITIONS

1.1 For purposes of this Agreement, "Cause" means (i) an act or
acts of personal dishonesty taken by the Employee and intended to result in
substantial personal enrichment of the Employee at the expense of Atlas, (ii)
repeated violations by the Employee of the Employee's obligations under this
Agreement which are demonstrably willful and deliberate on the Employee's part
and which are not remedied in a reasonable period of time after receipt of
written notice from Atlas or (iii) the conviction of the Employee of a felony.

1.2 For purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon the happening of two of the following:
<PAGE> 2
(a) Michael Chowdry ceasing to have a direct or indirect
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934) of at
least 51% of the combined voting power of Atlas' then
outstanding voting securities entitled to vote generally in
the election of directors; or

(b) Michael Chowdry ceasing to be, on a substantially
full-time basis, the Chief Executive Officer of Atlas; or

(c) The acquisition by any person, entity or "group,"
within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (excluding, for this purpose,
any employee benefit plan of Atlas or its subsidiaries which
acquires beneficial ownership of voting securities of Atlas)
of beneficial ownership, within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, of a
percentage of the combined voting power of Atlas' then
outstanding voting securities entitled to vote generally in
the election of directors which is greater than the percentage
beneficially owned directly or indirectly by Michael Chowdry.

1.3 The "Employment Period" shall be defined as the
period commencing on the date hereof and extending until November 16,
2001, unless sooner terminated as set forth in Section 4 below.

1.4 "Permanent Disability" as used herein shall be deemed
to have been sustained by Employee if he shall have been continuously
disabled from performing the duties assigned to him during the
Employment Period for a period of six consecutive calendar months, and
such Permanent Disability shall be deemed to have commenced on the day
following the end of such six consecutive calendar months.

1.5 "Confidential or Proprietary" as used herein shall
refer to all information relative to Atlas' plans for going public or
its structure and practices except:

2
<PAGE> 3
(a) information that is or becomes a matter of public
knowledge through no fault of the Employee; or

(b) information rightfully received by the Employee from
a third party without a duty of confidentiality; or

(d) information disclosed to Employee with Atlas' prior
written approval for public dissemination.

1.6 For purposes of this Agreement "Good Reason" means
reduction by Atlas during the term of this Agreement in base
salary, or substantial reduction in the Employee's title, job
authorities or responsibilities.

2. EMPLOYMENT AND OBLIGATIONS OF EMPLOYEE

2.1 Employment. During the Employment Period, Atlas
agrees to employ the Employee as Senior Vice President Flight and
Technical Operations of Atlas. Technical Operations will consist of
quality assurance and quality control, line maintenance, heavy
maintenance, engineering, material and reliability. Flight Operations
will consist of line management of all flight crew members, including
supervision, selection, training and standards. Employee shall not be
entitled to any additional compensation for serving in any other
office for Atlas or any subsidiary or affiliate of Atlas.

2.2 Obligations of Employee. During the Employment,
Period, the Employee agrees, except when prevented by illness or
Permanent Disability or during a period of vacation, to devote
substantially all of his business time and attention to the good faith
performance of such services.

3
<PAGE> 4
2.3 Principal Residence of Employee. After a reasonable
period of time, Employee shall maintain his principal residence in the
Denver Colorado area. Between the date of this Agreement and not
later than July 1, 1998, Employee's office shall be located at a place
to be designated by Atlas. No later than July 1, 1998, Employee's
office shall be at Atlas' offices in Colorado. During the time
Employee is at a temporary office, Employee shall receive an allowance
of $5,000 to $5,500 per month for an apartment which is to be in the
name of ATLAS. If this amount is insufficient, ATLAS will revisit the
issue with the Employee.

3. COMPENSATION

During the Employment Period, Atlas will pay Employee as
follows:

3.1 Base Annual Salary. Atlas will pay Employee a base
annual salary (the "Base Annual Salary") of no less than $150,000 per
annum, payable in semi-monthly installments.

3.2 Sign-up Bonus. The employee will be entitled to a
"sign up" bonus of $300,000 payable January 1, 1997. However, if the
Employee leaves the Company for reasons other than termination without
cause within the first two years, Employee agrees to reimburse the
Company for this "sign up" bonus within thirty (30) days of the
termination date. This payment is intended to supplement Employee's
base pay for the first two years of employment.

3.3 Incentive Bonus Payments. The Employee will be
eligible to receive an Incentive Bonus payment based on performance
for each calendar year

4
<PAGE> 5
during the Employment Period upon approval of the Compensation
Committee of the Board of Directors at Atlas (the "Compensation
Committee"). Employee's annual bonus payment may range from 50
percent to 100 percent of his base salary per Article 3.1 beginning
with the year 1997. Employee shall be guaranteed no less than 50
percent for calendar years 1997 and 1998.

3.4 Stock Options. Employee will be entitled to a stock
option grant of 50,000 Atlas Air, Inc. shares. The shares will vest
starting on the first anniversary of this Agreement and for four years
thereafter in five (5) equal portions at the rate of 10,000 options
per year. The option price shall be $ 38.25 per share which was the
NASDAQ closing price on November 18, 1996. All other terms of this
grant are contained in the Stock Option Grant which in incorporated
herewith and made a part hereof.

3.5 Profit Sharing. Employee will be entitled to
participate in the Company's profit sharing plan beginning in calendar
year 1998.

3.6 401K Plan. Employee will be eligible to participate
in the Company's 401K Plan which provides for a 50% match by the
Company of your contribution up to a maximum employee contribution of
10% of your base salary.

3.7 Stock Purchase Plan. After one year of service,
Employee will be eligible to participate in the Company's stock
purchase plan wherein Employee may purchase company stock at a 15%
discount up to 15% of Employee's base pay.

5
<PAGE> 6
3.8 Sale of Home. On the sale of Employee's home in San
Francisco, the Company will reimburse Employee for the real estate
brokerage commission and related sales costs and, in addition
compensate Employee for a loss on the sale of the house against what
you paid for the house to a maximum of $100,000. Also, the Company
will reimburse Employee for the moving costs and closing costs
associated with the purchase of another home.

3.9 Health Care. Employee and his dependents shall be
entitled to participate in the Atlas health insurance plan, and Atlas
will pay Employee's monthly premium. Atlas reserves the right to
discontinue participation in any health insurance plan at any time
with the understanding that Atlas will comply in full measure with all
state and federal laws regarding the changes of insurance coverage by
private employers and notification under the Consolidated Omnibus
Budget Reconciliation Act. Employee shall also be entitled, to the
same extent and at a level commensurate with the corporate officers of
Atlas, to participate in any other benefit plans or arrangements of
Atlas.

3.10 Corporate Automobile. Employee will be entitled to
professional and personal use of a company vehicle initially blue-book
valued at up to, or actual value not to exceed, $40,000.00. The
decision to lease or purchase is at the discretion of the Company.
Title to the automobile shall be in the Company's name. Atlas will be
responsible for all insurance premium payments related to the vehicle,
and all other vehicle related expenses, except that Employee will pay
the costs of fuel.

6
<PAGE> 7
3.11 Expenses. During the Employment Period, the Employee
shall be entitled to receive promptly reimbursement for all reasonable
expenses incurred by the Employee in accordance with the most
favorable expense reimbursement policies, practices and procedures in
effect with respect to key executives of Atlas and its subsidiaries.

4. TERMINATION OF EMPLOYMENT PERIOD

The Employment Period shall terminate under the following
terms and conditions:

4.1 At Will Arrangement. Atlas may terminate the
Employment Period upon written notice to the Employee at any time and
for any reason. Both Atlas and Employee expressly understand and
agree that the employment relationship is at-will. Atlas is entitled
to sever the employment relationship for any reason.

4.2 Rights Following Termination.

(a) If the Employment Period is terminated by Atlas for
reasons other than Cause or it the Employment Period is terminated by
the Employee for Good Reason, the Employee shall receive, in a single
lump sum payment within 10 business days after such termination, an
amount equal to twice Base Annual Salary.

(b) Upon the death or Permanent Disability of the
Employee, the Employment Period shall terminate and the Employee's
Base Annual Salary

7
<PAGE> 8
which is accrued but unpaid as of the date of such death or Permanent
Disability shall be paid to the Employee or his personal
representative.

(c) If the Employment Period is terminated by Atlas for
Cause or by the Employee for other than Good Reason, the Employee
shall be entitled to receive his Base Annual Salary which is accrued
by unpaid as of the date of termination.

4.3 Non-Competition Provision. Employee covenants and
agrees that he will not, at any time before five years after his
termination of employment with Atlas, reveal, divulge or make known to
any third party any confidential or proprietary records, data, trade
secrets, pricing policies, strategy, rate structure, personnel policy,
management methods, financial reports, methods or practice of
obtaining or doing business, or any other confidential or proprietary
information of Atlas or any of its affiliates which is not in the
public domain. In addition, Employee agrees that, at no time before
five years after his termination of employment with Atlas, will he
engage in any of the following activities directly or indirectly, for
any reason, whether for his own account or for the account of any
other person, firm, corporation or other organization:

(a) solicit, employ, deal with or otherwise interfere
with any of Atlas' contracts or relationships with any client,
employee, officer, director or any independent contractor
whether the person is employed by or associated with Atlas on
the date of this Agreement or at any time thereafter, to the
extent that Employee learns of or is introduces to any such
person by virtue of his performance as an employee of Atlas;
or

(b) solicit, accept, deal with or otherwise interfere
with any of Atlas' contracts or relationships with any
independent contractor, customer, client or supplier, or any
person who is a bonafide prospective independent contractor,
customer, client or supplier of Atlas, at any time, to the
extent

8
<PAGE> 9
that Employee learns of or is introduced to any such person by
virtue of his performance as an employee of Atlas.

The parties agree and intend that breach of this non-competition
clause shall subject Employee to the full measure of contract and
equitable damages including punitive damages.

5. EXCISE TAX GROSS-UP

5.1 (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment
or distribution made, or benefit provided, by Atlas to or for the
benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.1) (a "payment") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue code of 1986, as
amended and then in effect (the "Code") (or any similar excise tax) or
any interest or penalties are incurred by the Employee with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
the Employee of all Federal, state, local or other taxes (including
any interest or penalties imposed with respect to any such taxes),
including, without limitation, any such income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the

9
<PAGE> 10
Employee retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.

(b) Subject to the provisions of paragraph (c) of this
Section 5.1, all determinations required to be made under this Section
5.1, including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur Andersen (the
"Accounting Firm") which shall provide detailed supporting
calculations both to Atlas and the Employee within 20 calendar days of
the receipt of written notice from the Employee that there has been a
Payment, or such earlier time as is requested by Atlas. In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the change in control, the
Employee shall have the right be written notice to Atlas to appoint
another nationally recognized accounting fir to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by Atlas and shall be
paid by Atlas upon demand of the Employee as incurred or billed by the
Accounting Firm. Any Gross-Up Payment, as determined pursuant to this
Section 5.1, shall be paid by Atlas to the employee within five days
of the receipt of the Accounting firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the
Employee, it shall furnish the Employee with an unqualified written
opinion in form and substance satisfactory to the Employee that
failure to report the Excise Tax on the

10
<PAGE> 11
Employee's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. As a result of the
uncertainty in the application of Section 4999 of the code at the time
of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by Atlas
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Atlas
exhausts its remedies described in paragraph (c) of this Section 5.1
and the employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be paid
by Atlas to or for the benefit of the Employee within five days of the
receipt of the Accounting Firm's determination. All determinations
made by the Accounting Firm in connection with any Gross-Up Payment or
Underpayment shall be final and binding upon Atlas and the Employee.

(c) The Employee shall notify Atlas in writing of any
claim asserted in writing by the Internal Revenue Service to the
Employee that, if successful, would require the payment by Atlas of
the Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than 60 days after the Employee is informed
in writing of such claim and shall apprise Atlas of the nature of such
claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-
day period following the date on which it gives such notice to Atlas
(or such shorter period ending on the

11
<PAGE> 12
date that any payment of taxes with respect to such claim is due). If
Atlas notifies the Employee in writing prior to the expiration of such
period that it desires to contest such claim, the Employee shall at
Atlas' expense:

(i) give Atlas any information reasonably
requested by Atlas relating to such claim,

(ii) take such action in connection with
contesting such claim as Atlas shall reasonably requesting
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by Atlas,

(iii) cooperate with Atlas in good faith in order
effectively to contest such claim, and

(iv) permit Atlas to participate in any
proceedings relating to such claim;

provided, however, that Atlas shall bear and pay directly as incurred
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Employee harmless, on an after-tax basis, for any Excise Tax or
any Federal, state, local or other income or other tax (including
interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5.1, Atlas
shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings, and conferences with
the taxing authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a

12
<PAGE> 13
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as Atlas
shall determine; provided, however, that if Atlas directs the Employee
to pay such claim and sue for a refund, Atlas shall advance the amount
of such payment to the Employee, on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or Federal, state, local or other income or other tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of the Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, Atlas; control of the contest shall be limited
to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

(d) If, after the receipt by the Employee of an amount advanced
by Atlas pursuant to paragraph (c) of this Section 5.1, the Employee
becomes entitled to receive any refund with respect to such claim, the
Employee shall subject to Atlas' complying with the requirements of
paragraph (ii) of this Section 5.1) promptly pay to Atlas the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto) upon receipt thereof. If, after the
receipt by the Employee of an amount advanced by Atlas pursuant to

13
<PAGE> 14
paragraph (c) of this Section 5.1, a determination is made that the
Employee shall not be entitled to any refund with respect to such
claim and Atlas does not notify the Employee in writing of its intent
to contest such denial of refund prior to the expiration of 30 days
after such determination, the such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.

6. CHOICE OF LAW

This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference
to principles of conflict of laws. Employee shall submit to
jurisdiction in the state of Colorado (state or federal as is
applicable).

7. SEVERABILITY AND ENFORCEABILITY

It is expressly acknowledged and agreed that the covenants and
provisions hereof are separable; that the enforceability of one
covenant or provision shall in no event affect the full enforceability
of any other covenant or provision herein. Further, it is agreed
that, in the event of any covenant or provision of this Agreement is
found by any court of competent jurisdiction to be unenforceable,
illegal or invalid, such invalidity, illegality or unenforceability
shall not affect any other term or condition had never been contained
herein. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement.

14
<PAGE> 15
8. MISCELLANEOUS

8.1 No Mitigation. The amounts to be paid Employee are
net to Employee, without any reduction or duty to mitigate, except for
taxes, other governmental charges or amounts owed to Atlas by
Employee.

8.2 Pro-Ration. In the event the Employment Period is
terminated in the middle of any calendar month, the amount due for
such month shall be pro-rated on a daily basis.

8.3 No Waiver Except in Writing. No waiver or
modification of this Agreement or any of the terms and conditions set
forth herein shall be effective unless submitted to a writing duly
executed by the parties.

8.4 Successors and Assigns. This Agreement shall be
binding on Atlas and any successor thereto, whether by reason of
merger, consolidation or otherwise. The duties and obligations of
Employee may not be assigned by Employee.

8.5 Confidentiality of Terms. Atlas and Employee agree
that the terms and conditions of this Agreement are confidential and
that they will not disclose the terms of this Agreement to any third
parties, other than the Employee's spouse, their attorneys, auditors,
accountants or as required by law or as may be necessary to enforce
this Agreement.

8.6 Full Understanding. Employee declares and represents
that he has carefully read and fully understands the terms of this
Agreement, has had the opportunity to obtain advice and assistance of
counsel with respect thereto, and

15
<PAGE> 16
knowingly and of his own free will, without any duress, being fully
informed and after due deliberation, voluntarily accepts the terms of
this Agreement.

8.7 Entire Agreement. This Agreement sets forth the
entire agreement and understanding between the parties with respect to
the subject matter hereof and supersedes all prior agreements,
arrangements, and understandings between the parties with respect to
the subject matter hereof.

EMPLOYEE ATLAS AIR, INC.

/s/ R. TERRENCE RENDLEMAN /s/ MICKEY FORET
_____________________________ _____________________________

R. Terrence Rendleman Mickey Foret

<PAGE> 1

EXHIBIT 10.53

SECURED LOAN AGREEMENT

THIS SECURED LOAN AGREEMENT, made as of the 11th day of April, 1996 by
and among FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender"), and
ATLAS AIR, INC., a Delaware corporation ("Borrower"),

W I T N E S S E T H:

WHEREAS, Lender has agreed to provide to Borrower a loan in the
aggregate principal amount of not more than thirty-two million eight hundred
seventy-five thousand seven hundred twenty-one and seventy-five one-hundredths
Dollars ($32,875,721.75), which loan and other financial accommodations shall
be used to permit Borrower to acquire a certain Boeing model 747-200 aircraft,
and the four General Electric model CF6-50E2 jet aircraft engines installed
thereon, all as provided herein,

NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower and
Lender hereby agree as follows:

1. DEFINITIONS.

1.1 DEFINITIONS. Capitalized terms defined elsewhere in this
Agreement shall have the meanings there ascribed to them, and the following
words and expressions shall have the following meanings and shall be equally
applicable to both the singular and plural forms of the terms so defined:

"ACQUISITION ADVANCE" shall mean the Advance, which is made on
the Closing Date, in the amount of $21,200,000, which is payable by Borrower to
Seller pursuant to the terms of the Purchase Agreement.

"ACQUISITION COLLATERAL" shall mean, collectively, all right,
title and interest of Borrower in, to and under (a) the Purchase Agreement, (b)
the Atlas Security Agreement and (c) all of the "Mortgaged Property" (as such
term is defined in the Atlas Security Agreement) in which Borrower is granted a
Lien pursuant to the Atlas Security Agreement, including, without limitation,
all right, title and interest of Seller in, to and under (i) the Aircraft, (ii)
the Langdon Purchase Agreement and (iii) the Modification Agreement.

"ADJUSTED NET INCOME" shall mean, for any period, the sum of
(a) net income of Borrower for such period, plus (b) interest expense of
Borrower which is payable in such period, plus (c) one-third of the rental
expense of Borrower which is payable in such period plus (d) income taxes of
Borrower which are payable in such period.
<PAGE> 2
"ADVANCES" shall mean, collectively, the Acquisition Advance
and the Final Advance.

"ADVANCE DATES" shall mean the dates, including the Closing
Date, on which Advances are made by Lender to or for the benefit of Borrower
pursuant to this Agreement.

"AGREEMENT" shall mean this Secured Loan Agreement.

"AIR CARRIER" shall mean the holder of a valid, current and
effective air carrier operating certificate issued by the FAA pursuant to 49
U.S.C. Section 44705 and 14 C.F.R. Part 121.

"AIRCRAFT" shall mean, collectively, the "Airframe" and the
"Engines," under, and as defined in the Security Agreement.

"ATLAS SECURITY AGREEMENT" shall mean the First Priority
Aircraft Chattel Mortgage and Security Agreement between Borrower, as secured
party, and Seller, as debtor, dated as of the Closing Date, as from time to
time amended and supplemented, with respect to the Aircraft, pursuant to which
Seller grants to Borrower, as security for the performance by Seller of its
obligations under the Purchase Agreement, a continuing first priority security
interest (subject to Permitted Liens) in the interest of Seller in (a) the
Aircraft, (b) the Langdon Purchase Agreement and (c) the Modification
Agreement.

"BASIC INTEREST" shall mean interest in respect of the Loan at
the Interest Rate or the Default Rate, as applicable, pursuant to Section 6
hereof.

"BUSINESS DAY" shall mean any day on which national banks are
open for business in Phoenix, Arizona.

"CHIEF FINANCIAL OFFICER" shall mean, with respect to any
corporation, the principal financial officer of such corporation, who shall be
a duly elected officer of such corporation at the time acting as such.

"CHOWDRY" shall mean Michael A. Chowdry, the chairman of the
board of directors and chief executive officer of Borrower.

"CLOSING DATE" shall mean the date on which the Acquisition
Advance is made by Lender for the benefit of Borrower pursuant to the terms and
conditions hereof.

"COLLATERAL" shall mean, collectively, the Acquisition
Collateral and the Final Advance Collateral.

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<PAGE> 3
"DEFAULT" shall mean an event which, with the passage of time,
or giving of notice, or both, would constitute an Event of Default.

"DEFAULT RATE" shall have the meaning ascribed to such term in
Section 6.2 hereof.

"DOLLARS" OR "($)" shall mean the legal currency, at the
relevant time, of the United States of America.

"FAA" shall mean the Federal Aviation Administration provided
for in the Department of Transportation Act of 1966, as in effect on the date
of this Agreement and as modified or amended hereafter, or any successor or
substituted governmental authority at the time having jurisdiction over the
Mortgaged Property.

"FINAL ADVANCE" shall mean the Advance in payment of the
"Final Payment" (as defined in the Purchase Agreement), in an amount subject
to the limitation set forth in Section 2.4 hereof.

"FINAL ADVANCE COLLATERAL" shall mean, collectively, all of
the "Mortgaged Property" under the Security Agreement, including, without
limitation, all right, title and interest of Borrower in, to and under (a) the
Aircraft, (b) the Purchase Agreement, (c) the Langdon Purchase Agreement and
(d) the Modification Agreement.

"FIXED CHARGES" shall mean, for any period, the sum of (a)
interest expense of Borrower which is payable in such period, plus (b)
one-third of the rental expense of Borrower which is payable in such period
plus (c) income taxes of Borrower which are payable in such period.

"INSPECTION" shall have the meaning ascribed to such term in
Section 2.4(b) hereof.

"INTEREST RATE" shall mean the per annum rate of interest set
forth in Section 6.1 hereof, to be paid on the principal outstanding under the
Note and all other amounts outstanding to Lender under this Agreement and the
other Loan Documents (other than amounts which bear interest at the Default
Rate pursuant to the provisions of this Agreement or the other Loan Documents).

"LANGDON" shall mean Langdon Asset Management, Inc., a
Florida corporation.

"LANGDON PURCHASE AGREEMENT" shall mean that certain Aircraft
Purchase Agreement dated January 19, 1996 between Borrower and Langdon,
pursuant to which Langdon agreed to sell to Borrower, among other things, the
Aircraft (a) as such Aircraft Purchase Agreement has been amended, as it
applies to

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<PAGE> 4
the Aircraft, pursuant to that certain Amendment to Aircraft Purchase Agreement
dated as of March 29, 1996 between Atlas and Langdon, (b) as the rights of
Borrower under such Aircraft Purchase Agreement, as it applies to the Aircraft,
have been assigned to Seller pursuant to that certain Assignment and Assumption
of Purchase Agreement dated as of March 29, 1996 between Seller and Borrower,
and as such assignment has been acknowledged by Langdon pursuant to the Notice
of Assignment and Assumption dated as of March 29, 1996 among Borrower, Seller
and Langdon, and (c) the obligations of Langdon under which have been secured
by the Langdon Security Agreement.

"LANGDON SECURITY AGREEMENT" shall mean the Security Agreement
dated as of March 29, 1996 between Langdon and Seller, pursuant to which
Langdon has granted to Seller a security interest in the Aircraft in order to
secure Langdon's obligations to deliver the Aircraft to Seller in accordance
with the terms of the Langdon Purchase Agreement, the rights of Seller under
which have been assigned to Borrower pursuant to a Revised and Restated
Collateral Assignment of Security Agreement dated as of March 31, 1996 between
Borrower and Seller.

"LIEN" shall mean any mortgage, pledge, lien, charge,
encumbrance, option, security interest or lease (including any conditional sale
agreement, equipment trust agreement, or other title retention agreement) or
right or claim of any person, whether voluntary or involuntary in nature.

"LOAN" shall mean the principal amount outstanding from time
to time and due Lender pursuant to this Agreement and the other Loan Documents,
including, without limitation, all amounts from time to time outstanding under
the Note.

"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Note, the Security Agreement and all other documents executed in connection
with each of the foregoing agreements or contemplated thereby or the
transactions related thereto.

"LOAN FEE" shall mean two hundred eighty-eight thousand
Dollars ($288,000), which is payable by Borrower to Lender on or prior to the
Closing Date, the receipt of which is hereby acknowledged by Lender.

"MARKET VALUE" shall have the meaning ascribed to such term in
Section 2.4(b) hereof.

"MATURITY DATE" shall mean October 1, 2003.

"MODIFICATIONS" shall mean the modifications to the Aircraft
described on the attached EXHIBIT A, all of which are to be accomplished
pursuant to the Modification Agreement.

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<PAGE> 5
"MODIFICATION ADVANCE" shall mean the Final Advance.

"MODIFICATION AGREEMENT" shall mean the Modification Contract,
No. M0273, dated as of March 23, 1996 between Vendor and Borrower, as from
time to time amended and supplemented, pursuant to which Vendor agrees to make
the Modifications to the Aircraft for a price and on the terms and conditions
set forth therein, as such Modification Contract has been (a) modified by the
Modification Letter Agreement, and (b) assigned to Seller pursuant to that
certain Assignment of Modification Contract dated as of April 6, 1996 between
Borrower and Seller.

"MODIFICATION LETTER AGREEMENT" shall mean that certain Letter
Agreement No. 3-1101-DES-1560 dated March 22, 1996 between Borrower and Vendor.

"MORTGAGED PROPERTY" shall mean, the "Mortgaged Property"
under, and as defined in, the Security Agreement.

"NOTE" shall mean the Promissory Note, in form and substance
satisfactory to Lender, executed by Borrower, as maker, in favor of Lender, as
holder, dated the Closing Date, in the original principal amount equal to the
amount of the Advance.

"OBLIGATIONS" shall have the meaning ascribed to such term in
Section 4 hereof.

"PERMITTED LIENS" shall mean: (a) Liens for Taxes either not
yet due or being contested in good faith by appropriate proceedings (so long as
adequate reserves are maintained with respect to such Liens from and after the
date the Taxes, as to which such Liens relate, became due and so long as the
Aircraft is not in material danger of being lost, sold, confiscated, forfeited
or seized as a result of such Lien); (b) materialmen's, mechanics', workmen's,
repairmen's, employees' or other like Liens arising in the ordinary course of
business of Borrower and not delinquent for more than sixty (60) days or being
contested in good faith so long as the Aircraft is not in material danger of
being lost, sold, confiscated, forfeited or seized as a result of such Lien;
(c) Liens arising out of any judgment or award unless such judgment shall not,
within thirty (30) days of the entry thereof, have been discharged or vacated
or execution thereof stayed pending appeal or bonded in a manner satisfactory
to Lender and so long as the Aircraft is not in material danger of being lost,
sold, confiscated, forfeited or seized as a result of such judgment; (d) the
Lien of the Security Agreement as security for the payment and performance of
the Obligations; (e) until the Final Advance is made hereunder, the Lien of the
Atlas Security Agreement on the Aircraft, the Langdon Purchase Agreement and
the Modification Agreement; and (f) until the Final Advance is made hereunder,
the Lien of Vendor as security for payment and performance by Seller of its
obligations to Vendor under the Modification Agreement.

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<PAGE> 6
"PURCHASE AGREEMENT" shall mean the Aircraft Purchase
Agreement between Borrower and Seller pursuant to which Borrower will acquire
from Seller on the Advance Date on which the Final Advance is made all right,
title and interest of Seller in, to and under the Aircraft, the Langdon
Purchase Agreement and the Modification Agreement.

"SECURITY AGREEMENT" shall mean the First Priority Aircraft
Chattel Mortgage and Security Agreement between Borrower and Lender, dated as
of the Closing Date, as from time to time amended and supplemented, with
respect to the Aircraft, pursuant to which Borrower grants to Lender a
continuing first priority security interest (subject to Permitted Liens) in the
interest of Borrower in (a) from the Closing Date until the Advance Date on
which the Final Advance is made, the Acquisition Collateral, and (b) from and
after the Advance Date on which the Final Advance is made, the Final Advance
Collateral.

"SELLER" shall mean Badger Aviation Management, Inc., a
Delaware corporation.

"TAXES" shall have the meaning ascribed to such term in
Section 11.3.

"UNITED STATES CITIZEN" shall mean a "United States citizen"
as that term is used and defined in 49 U.S.C. 40102(15) of the Federal Aviation
Act of 1958 as amended.

"VENDOR" shall mean The Boeing Company.

1.2 TERMS DEFINED IN SECURITY AGREEMENT. Capitalized terms used
herein which are defined in the Security Agreement, unless otherwise defined
herein, shall have the respective meanings ascribed to them in the Security
Agreement.

2. ADVANCE.

2.1 ADVANCES. Subject to the terms and conditions of this
Agreement, Lender hereby agrees with Borrower that on the Closing Date,
provided that there does not then exist any Default or Event of Default, Lender
shall make the Acquisition Advance to or for the benefit of Borrower, and on
the Advance Date on which the Final Advance is to be made, provided that there
does not then exist any Default or Event of Default, Lender shall make the
Final Advance. The Advances shall be repayable in accordance with the terms of
this Agreement and the Note.

2.2 OBLIGATION TO ADVANCE NOT ABSOLUTE. The obligation of Lender
to make the Advances to Borrower under this Agreement shall be expressly
subject to the terms of this Agreement in general and in particular to the
fulfillment by Borrower of all of the conditions set forth in Section 5 hereof
(except to the extent that such fulfillment is waived by Lender) not later than
at the time or times therein

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<PAGE> 7
specified. Lender shall have no obligation in respect of the Advances or the
Loan except as expressly set forth in this Agreement and the other Loan
Documents.

2.3 FINAL ADVANCE DATE. Notwithstanding anything to the contrary
set forth herein, Lender shall have no obligation to make any Advance to
Borrower pursuant to the terms of this Agreement, after October 31, 1996, or
such other date as Lender and Borrower may agree in writing.

2.4 LIMITATION ON OUTSTANDING AGGREGATE ADVANCES. (a)
Notwithstanding anything to the contrary set forth herein, Borrower and Lender
hereby agree that (i) the Acquisition Advance shall not exceed the lesser of
(A) $21,200,000 or (B) eighty percent (80%) of the value of the Aircraft
reflected in the statement of fair market value of the Aircraft delivered to
Lender prior to the Closing Date and (ii) the aggregate amount of all Advances
at any time outstanding hereunder shall not exceed the lesser of (A) thirty-two
million eight hundred seventy-five thousand seven hundred twenty-one and
seventy-five one-hundredths Dollars ($32,875,721.75) or (B) eighty percent
(80%) of the "Market Value" of the Aircraft.

(b) As soon as practicable following the Closing Date, Borrower
shall provide access, by Lender's agents and representatives (including,
without limitation, Pro-Tech Advisors) to the Aircraft and the records,
logbooks and documents related thereto, in order to permit Lender's agents and
representatives to inspect the Aircraft and such records, logbooks and
documents (the "Inspection"), for the purposes of confirming the market value
of the Aircraft (which market value shall be based on the assumption that the
Modifications are accomplished in accordance with the Modification Agreement
and all applicable regulations, including the regulations of the FAA) (the
"Market Value"), including, without limitation, that (A) such records, logbooks
and documents with respect to the Aircraft have been maintained and updated as
required by the regulations of the FAA, (B) such records, logbooks and
documents support the configuration of the Aircraft as represented to Lender by
Borrower, as such configuration is described on EXHIBIT B attached hereto, and
(C) the life limited components of which the Aircraft is comprised have
substantially the status represented to Lender by Borrower, as such
configuration is described on EXHIBIT B attached hereto. Lender hereby agrees
to initiate the Inspection as soon as practicable following the Closing Date.

(c) In the event that the Inspection results in Lender reasonably
determining that such records, logbooks or documents and/or the condition of
such components, as applicable, do not conform to the requirements set forth in
Section 2.4(b), and as a result that the Market Value of the Aircraft is less
than $41,000,000, then:

(i) Borrower shall take such steps as may be necessary in
order to cause such records, logbooks and documents or such
components, as applicable, to conform to such regulations or such
status, as applicable (and the funding of the Final Advance shall be
postponed until Lender reasonably

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<PAGE> 8
determines that such records, logbooks and documents or such
components, as applicable, to conform to such regulations or such
status, as applicable), or

(ii) the amount of the Final Advance shall be reduced to
the amount which is equal to 80% of the Market Value of the Aircraft;

provided, however, that in the event that Lender reasonably determines that the
Market Value of the Aircraft is less than $41,000,000 in accordance with the
provisions of this Section, as a result of Lender's reasonable determination
that the records, logbooks or documents and/or the condition of such
components do not conform to the requirements of the FAA or the configuration
described on EXHIBIT B attached hereto, and Borrower disagrees with such
determination, then:

(x) if (i) Lender's determination that the Market Value
of the Aircraft is less than $41,000,000 is based, in whole or in
part, on Lender's determination that the records, logbooks or
documents do not conform to the requirements of the FAA, and (ii) the
FAA determines that the Aircraft is eligible for inclusion on the
Operating Specifications of Borrower, then the records, logbooks or
documents shall be deemed to conform to the requirements of the FAA,
and Lender shall make the Final Advance based on a Market Value of the
Aircraft of $41,000,000 (subject to the adjustments referred to in
clause (z) below, if any); or

(y) if (i) Lender's determination that the Market Value
of the Aircraft is less than $41,000,000 is based, in whole or in
part, on Lender's determination that the records, logbooks or
documents do not conform to the requirements of the FAA, and (ii) the
FAA determines that the Aircraft is not eligible for inclusion on the
Operating Specifications of Borrower, then the Final Advance shall be
made based on a Market Value of the Aircraft which is equal to (i)
$41,000,000 less (ii) the amount, determined by agreement of Borrower
and Lender (or, if Borrower and Lender are unable to agree, the amount
determined by a third party aviation consultant selected by agreement
of Borrower and Lender) required in order to cause the records,
logbooks or documents to conform to the requirements of the FAA; and

(z) if (i) Lender's determination that the Market Value
of the Aircraft is less than $41,000,000 is based, in whole or in
part, on Lender's determination that the condition of such components
does not conform to the configuration described on EXHIBIT B attached
hereto, then the Final Advance shall be made based on a Market Value
of the Aircraft which is equal to (i) $41,000,000 less (ii) the
amount, determined by agreement of Borrower and Lender (or, if
Borrower and Lender are unable to agree, the amount determined by a
third party aviation consultant selected by agreement of Borrower and
Lender) required in order to cause the such components to conform to
the configuration described on EXHIBIT B attached hereto;

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<PAGE> 9
provided, further, however, that in the event that the amount
determined by such third party aviation consultant pursuant to this
clause (z) is not acceptable to Lender, Lender may, at its option,
provide Borrower with written notice of Lender's election that the
Loan be prepaid by Borrower, which written notice shall require that
Borrower repay the principal of the Loan together with all accrued and
unpaid interest thereon, on or before a date specified therein, which
date shall be not less than forty-five (45) days following the date of
such notice from Lender to Borrower; provided, further, however, that
in the event that Borrower is required to prepay the Loan at the
election of Lender pursuant to this clause (z), Lender shall
contemporaneously with such repayment refund to Borrower the amount of
the Loan Fee, and Borrower shall not be required to pay any prepayment
fee pursuant to Section 8.4 hereof, in connection with such
prepayment.

2.5 ACQUISITION ADVANCE REPRESENTS SATISFACTION OF OBLIGATIONS
UNDER LOAN COMMITMENT AGREEMENT. Borrower and Lender acknowledge and agree that
the making by Lender of the Acquisition Advance and the execution and delivery
by Borrower and Lender of this Agreement and the other Loan Documents shall (a)
constitute satisfaction of Lender's obligations to Borrower under that certain
Loan Commitment Agreement dated as of March 28, 1996 between Borrower and
Lender (the "Commitment Agreement").

3. LOAN; ADVANCE DATES; FAILURE TO ADVANCE; LOAN FEE.

3.1 FORM OF ADVANCES; OBLIGATION TO BORROW. The Advances shall be
made available to Borrower in Dollars via wire transfer of same-day funds,
subject to the terms of this Agreement, or as may otherwise be agreed by
Borrower and Lender. Borrower agrees to borrow the Advances from Lender in
accordance with the terms hereof.

3.2 NOTICE OF ADVANCE DATES. Unless otherwise agreed by Borrower
and Lender, Borrower shall deliver a notice to Lender at least three (3)
Business Days prior to any proposed Advance Date specifying such Advance Date.
Such notice may not be rescinded by Borrower once received by Lender. Such
notice shall:

(a) be in writing and be signed on behalf of Borrower;

(b) be effective on receipt by Lender;

(d) specify the account or accounts to which the proceeds
of such Advance are to be made available (subject always to Lender's
agreement and the provisions hereof).

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<PAGE> 10
3.3 FAILURE TO ACCEPT ADVANCE; INDEMNITY. In the event that
Borrower shall have sent a notice specified in Section 3.2 above and the
Advance contemplated thereby is not accepted by Borrower on the date specified
in such notice for any reason other than the willful misconduct or negligence
of Lender, Borrower shall, upon Lender's demand, indemnify Lender for, from and
against any and all interest expense incurred by Lender in connection with
funds borrowed by Lender to fund such Advance or any portion thereof in
reliance upon Borrower's notice to Lender pursuant to Section 3.2.

4. DESCRIPTION OF SECURITY.

4.1 COLLATERAL SECURITY. (a) As collateral security for the prompt
and complete payment of Borrower's obligations hereunder and under the Note and
the other Loan Documents, and the payment of any sum advanced or subsequently
advanced or obligation incurred pursuant to any provision hereof or thereof and
in order to secure all of Borrower's obligations of performance under the Loan
Documents (collectively, the "Obligations"), Borrower shall grant to Lender a
first priority perfected Lien upon and security interest in all right, title
and interest of Borrower in the following items and types of property: (i) from
the Closing Date until the Advance Date on which the Final Advance is made, the
Acquisition Collateral and (ii) from and after the date that the Final Advance
is made, the Final Advance Collateral.

(b) From the Closing Date until the Advance Date on which
the Final Advance is made, Lender shall retain a continuous first priority Lien
and security interest in all of the Acquisition Collateral, subject to
Permitted Liens. From the Advance Date on which the Final Advance is made until
the date on which all of the Obligations have been fully paid and discharged,
Lender shall retain a continuous first priority Lien and security interest in
all of the Final Advance Collateral, subject to Permitted Liens.

5. CONDITIONS PRECEDENT.

5.1 CONDITIONS PRECEDENT TO ACQUISITION ADVANCE. Lender's
obligation to make the Acquisition Advance hereunder is conditional upon the
following, all of which shall take place, occur or be delivered to Lender, as
applicable, not later than the Closing Date:

(a) Borrower shall have performed all of its agreements
and, subject to the making of the Advance, paid all sums, to be
performed or paid hereunder (including sums payable under Section 14.1
and all accrued interest payable to Lender in respect of the "Advance"
as defined in the Commitment Agreement) on or prior to the Closing
Date and the representations and warranties of Borrower contained
herein and in each Loan Document to which Borrower is a party shall be
true and correct as of the Closing

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<PAGE> 11
Date as if made on and as of the Closing Date and Borrower shall have
so certified to Lender;

(b) Borrower shall have (i) duly executed and delivered
to Lender and Lender shall have approved and accepted the Security
Agreement, all UCC-1 financing statements and assignments or other
similar documents reasonably deemed necessary by Lender to perfect,
maintain and preserve the Liens in and to, and the security interest
in, the Acquisition Collateral and the Final Advance Collateral, and
(ii) delivered or caused to be delivered to Lender such documents as
Lender may require in connection with the termination of any and all
liens, claims or encumbrances affecting any of such Collateral in
which Borrower has or is to have rights as of the Closing Date (after
giving effect to the Acquisition Advance);

(c) The Security Agreement, and all such financing
statements, assignments, releases or other similar documents shall (i)
be suitable for filing in all public offices reasonably deemed
necessary by Lender to perfect the security interests granted to
Lender under the Security Agreement, and (ii) have been executed by
Borrower and each other person or entity whose signature is
contemplated thereby, and delivered to Lender;

(d) No Event of Default or Default under this Agreement
or any other Loan Document shall have occurred and be continuing;

(e) All documents, instruments and certificates relating
to the making of the Acquisition Advance to be made on the Closing
Date and all proceedings in connection with the transactions
contemplated by this Agreement or any other Loan Document shall be
satisfactory in form and substance to Lender, and Lender shall have
received copies of all such instruments, certificates, and other
evidence as Lender may reasonably request with respect to such
transactions in form and substance satisfactory to Lender and its
counsel;

(f) Borrower shall have caused to be delivered to Lender,
and Lender shall have reviewed and found satisfactory, copies of (i)
its Articles of Incorporation, certified as being true, complete and
accurate by the Secretary of State of the State of Borrower's
incorporation, and (ii) its By-Laws, certified as being true, complete
and accurate by a duly authorized corporate officer of Borrower;

(g) Borrower shall have caused to be delivered to Lender,
and Lender shall have reviewed and found satisfactory, copies of
resolutions adopted by the Board of Directors of Borrower, certified
by the corporate secretary or an executive officer of Borrower as
being true, accurate and complete, authorizing the entry into and
performance by Borrower of its

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<PAGE> 12
obligations under this Agreement, each other Loan Document to which
Borrower is a party, and all transactions contemplated herein and
therein;

(h) Borrower shall have caused to be delivered to Lender,
and Lender shall have reviewed and found satisfactory, a certificate
of the corporate secretary or an executive officer of Borrower as
being true, accurate and complete, evidencing the signing authority of
the officers of Borrower to sign this Agreement, each Loan Document to
which Borrower is a party, and all documents and instruments executed
by Borrower in connection herewith or therewith;

(i) Borrower shall have caused to be delivered to Lender
a certificate as to Borrower, certified by an authorized officer of
Borrower, certifying that no Event of Default or, to the knowledge of
such officer, no Default has occurred and is continuing;

(j) Borrower shall have executed and delivered to Lender
the Note;

(k) Lender shall be satisfied that following the making
of the Acquisition Advance (i) Seller shall be the holder of good and
marketable title to the Aircraft, and the Aircraft shall be free of
all Liens other than the Lien of Borrower thereon arising pursuant to
the Atlas Security Agreement, the Lien of Vendor arising pursuant to
the Modification Agreement, and Liens which would constitute Permitted
Liens hereunder, (ii) pursuant to the Atlas Security Agreement,
Borrower shall hold a valid first priority perfected Lien on the
rights of Seller under the Langdon Purchase Agreement and the
Modification Agreement, and (iii) Lender shall have a valid first
priority perfected Lien on the Acquisition Collateral, pursuant to the
Security Agreement;

(l) All documents, instruments and certificates relating
to the making of the proposed Advance, and all proceedings in
connection with the transactions contemplated by this Agreement or any
other Loan Document shall be satisfactory in form and substance to
Lender, and Lender shall have received copies of all such instruments,
certificates, and other evidence as Lender may reasonably request with
respect to such transactions in form satisfactory to Lender and its
counsel, including, without limitation:

(i) at least one (1) Business Day prior to the
date the Acquisition Advance is to be made, one or more
Certificates of Insurance, satisfactory in all respects to
Lender, evidencing that insurance conforming to all of the
requirements of the Security Agreement is in force with
respect to the Aircraft and, if requested by Lender, a written
opinion of each insurance broker issuing such Insurance
Certificate confirming that the insurance coverage described
in such Insurance

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<PAGE> 13
Certificate complies with the provisions of the Security
Agreement pertaining to insurance;

(ii) a favorable opinion, dated as of the Closing
Date, in form and substance, and with assumptions and
qualifications, and reliance upon other opinions, satisfactory
to Lender, of the General Counsel of Borrower, opining, among
other things, that: (A) the respective representations and
warranties of Borrower set forth in Section 9.2 of this
Agreement are true (such opinions as to "factual matters" as
opposed to "legal matters" may be made on the basis of the
best knowledge of counsel after due inquiry and
investigation); (B) Lender will, upon filing of the applicable
UCC financing statements and the taking of the actions
required pursuant to the Security Agreement have a perfected,
first priority security interest in and to the Acquisition
Collateral; provided, that to the extent special FAA counsel
provides an opinion as to such matters, the opinion of counsel
to Borrower need not address such matters; (C) the Loan
Documents are legal, valid and binding obligations of the
parties thereto (other than Lender), including, without
limitation (x) that the provisions of the Loan Documents with
respect to choice of law to govern the interpretation and
enforcement of such Loan Documents and consent to jurisdiction
and choice of forum in connection with such interpretation and
enforcement are legal, valid and binding and (y) that the Loan
Documents do not violate any law relating to the charging,
contracting for, or payment or collection of interest or the
like; (D) Borrower is duly organized and validly existing in
its jurisdiction of incorporation; (E) Borrower has the
requisite power and authority to conduct its businesses, own
its properties, and carry out the terms of the Loan Documents
to which it is a party; (F) the Loan Documents to which
Borrower is a party have been duly authorized, executed and
delivered by Borrower; (G) such counsel has no knowledge of
any material litigation affecting Borrower, except as
described therein; (H) the execution, delivery and performance
by Borrower of the Loan Documents to which it is a party will
not violate the charter or by-laws of Borrower, or any law,
rule, judgment, order, decree, agreement or instrument to
which Borrower is a party or by which Borrower is bound; and
(I) no consent to the execution, delivery or performance by
Borrower of the Loan Documents to which it is a party is
required of any governmental authority (or if required, has
been obtained);

(iii) a favorable opinion, dated the Closing Date,
in form and substance satisfactory to Lender, of special FAA
counsel satisfactory to Lender, which opinion shall include,
without limitation, the opinion of such special FAA counsel
that Seller has title to the Aircraft and that there are no
outstanding liens, mortgages, charges, options, interests

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<PAGE> 14
or encumbrances on or security interests therein or thereon or
of record with respect thereto, including tax liens or
assessments (other than the Lien on the Aircraft in favor of
Borrower arising pursuant to the Atlas Security Agreement);
and

(iv) a favorable opinion of Cahill, Gordon and
Reindel, counsel to Borrower, in the form previously provided
to Lender, to the effect that upon the making of the Final
Advance, Lender, as a provider of purchase money financing
secured by the Aircraft, is entitled to the protection and
rights of a purchase money lender with respect to the Aircraft
under Section 1110 of the federal Bankruptcy Code;

(m) No material adverse change shall have occurred in the
finances, operations or business of Borrower since December 31, 1995,
as such finances, operations and business are reflected in the draft
financial statements of Borrower delivered to Lender as of such date);

(n) Lender shall have received confirmation from special
FAA counsel satisfactory to Lender that Borrower has delivered
executed copies of the Security Agreement to such FAA counsel, who
shall have approved same as being in appropriate form for recordation
with the FAA Aircraft Registry, in accordance with Title 14, Part 49
of the Code of Federal Regulations, and shall have delivered to such
FAA counsel a letter, in form and substance satisfactory to Lender,
authorizing and directing such FAA counsel to file the Security
Agreement, which letter shall provide that such authorization and
direction may not be revoked or revised without the prior written
consent of Lender;

(o) All sums due and owing to Lender's counsel, Herriot,
Coti & Sugrue, and special FAA counsel, on account of legal services
rendered and disbursements incurred in connection with this
transaction shall have been paid in accordance with invoices to be
provided by Herriot, Coti & Sugrue and special FAA counsel;

(p) Lender shall have conducted and found acceptable the
results of an inspection (and received a statement of fair market
value of the Aircraft), all logbooks, books, records, and
documentation related thereto, all documents recorded in the FAA
Aircraft Registry, and any documents referred to therein which pertain
to the Aircraft and which are not recorded in the FAA Aircraft
Registry, and such other inspection and inquiry as Lender may deem
appropriate with respect to the condition of the Aircraft or any
component thereof or title thereto, which statement of fair market
value shall, without limitation confirm a value, as of the Closing
Date, of at least $26,500,000;

(q) Borrower shall have provided to Lender evidence
satisfactory to Lender that (i) upon the making of the Acquisition
Advance, Borrower has

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<PAGE> 15
sufficient funds in order to permit Seller to acquire the Aircraft,
and (ii) the only condition precedent to Seller's acquisition of the
Aircraft is Lender's making the Acquisition Advance;

(r) No default shall have occurred by Borrower or Seller
under the Purchase Agreement;

(s) Lender shall have conducted and found satisfactory
the results of credit and reference due diligence checks with respect
to Chowdry, including a credit bureau report and tax lien, litigation,
judgment and UCC searches;

(t) Lender shall have received and found satisfactory (i)
a Dun & Bradstreet report as to Borrower and (ii) references from not
less than three business reference sources provided by Borrower; and

(u) Borrower shall have provided to Lender evidence
satisfactory to Lender that (i) Borrower has, prior to the Closing
Date, caused at least $500,000 to be advanced to Langdon (or Langdon's
designee) pursuant to the Langdon Purchase Agreement against the
purchase price of the Aircraft thereunder, (ii) Borrower has, prior to
the Closing Date, caused at least $925,000 to be advanced to Seller
pursuant to the Purchase Agreement, and Seller has caused such amount
to be paid to Vendor in respect of amounts payable by Seller under the
Modification Agreement and (iii) not less than $3,700,000 (in addition
to the $925,000 referred to in the preceding clause (ii)) which is
payable by Seller to Vendor under the Modification Agreement shall
have been either (A) advanced by Borrower to Seller pursuant to the
Purchase Agreement, and in turn paid by Seller to Vendor, in respect
of amounts payable by Seller under the Modification Agreement, or (B)
paid by Borrower into an escrow arrangement satisfactory to Lender,
for advance from such escrow arrangement to Seller by Borrower
pursuant to the Purchase Agreement and subsequent payment by Seller to
Vendor under the Modification Agreement or (C) withheld by Lender from
the proceeds of the Acquisition Advance, for subsequent Advance by
Lender to Borrower hereunder, which amount when so advanced will be
immediately re-advanced by Borrower to Seller pursuant to the Purchase
Agreement, and in turn paid by Seller to Vendor, in respect of amounts
payable by Seller under the Modification Agreement.

In the event that Lender, in its sole and absolute discretion, waives
satisfaction of any condition set forth in this Section, such waiver shall
constitute a waiver only as to the time for satisfaction of such condition, and
Borrower shall be obligated to comply with such condition as soon as
practicable following the Closing Date, and in any event within thirty (30)
days thereafter.

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<PAGE> 16
5.2 CONDITIONS PRECEDENT TO FINAL ADVANCE. Lender's obligation to
make the Final Advance hereunder is conditional upon the following, all of
which shall take place, occur or be delivered to Lender, as applicable, not
later than the Advance Date on which the Final Advance is made:

(a) The representations and warranties of Borrower
contained herein and in each Loan Document to which Borrower is a
party (other than the representations and warranties set forth in
Sections 9.1(e) and 9.1(f) hereof), shall be true and correct as of
such Advance Date as if made on and as of such Advance Date and, by
making the request for the Final Advance pursuant to section 3.2
hereof, Borrower shall be deemed to have so certified to Lender;

(b) No Event of Default or Default under this Agreement
or any other Loan Document shall have occurred and be continuing;

(c) All documents, instruments and certificates relating
to the making of such Final Advance to be made on such Advance Date
and all proceedings in connection with the transactions contemplated
by this Agreement or any other Loan Document shall be satisfactory in
form and substance to Lender, and Lender shall have received copies of
all such instruments, certificates, and other evidence as Lender may
reasonably request with respect to such transactions in form and
substance satisfactory to Lender and its counsel;

(d) Borrower shall have provided to Lender evidence
satisfactory to Lender that the amount of such Final Advance is due
and payable to Seller by Borrower as an "Additional Amount" (as
defined in the Purchase Agreement) pursuant to the terms of the
Purchase Agreement, and Borrower shall have provided to Lender all
backup documentation available to Seller which supports the amount and
nature of such "Additional Amount";

(e) No default shall have occurred by Borrower or Seller
under the Purchase Agreement;

(f) Borrower shall have (i) duly executed and delivered
to Lender and Lender shall have approved and accepted the Security
Agreement, all UCC-1 financing statements and assignments or other
similar documents reasonably deemed necessary by Lender to perfect,
maintain and preserve the Liens in and to, and the security interest
in, the Final Advance Collateral, and (ii) delivered or caused to be
delivered to Lender such documents as Lender may require in connection
with the termination of any and all liens, claims or encumbrances
affecting any of the Final Advance Collateral in which Borrower has or
is to have rights as of the Advance Date on which the Final Advance is
made (after giving effect to the Final Advance);

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<PAGE> 17
(g) Lender shall be satisfied that following the making
of the Final Advance (i) Borrower shall be the holder of good and
marketable title to the Aircraft, (ii) the Aircraft shall be free of
all Liens other than Permitted Liens, (iii) the Modifications shall
have been completed, (iv) all amounts payable to Vendor pursuant to
the Modification Agreement shall have been paid in full, (v) Lender
shall have a valid first priority Lien on the Final Advance Collateral
(subject to Permitted Liens), (vi) the credits contemplated by the
Modification Letter Agreement shall have been provided by Vendor,
(vii) neither Borrower nor Vendor shall have any further obligations
or liability under the Modification Agreement other than pursuant to
Articles 7, 8 and 9, and Section 12.3 of the Modification Agreement;

(h) All documents, instruments and certificates relating
to the making of the Final Advance, and all proceedings in connection
with the transactions contemplated by this Agreement or any other Loan
Document shall be satisfactory in form and substance to Lender, and
Lender shall have received copies of all such instruments,
certificates, and other evidence as Lender may reasonably request with
respect to such transactions in form satisfactory to Lender and its
counsel, including, without limitation:

(ii) a favorable opinion, dated such Advance Date,
in form and substance satisfactory to Lender, of special FAA
counsel satisfactory to Lender, which opinion shall include,
without limitation, the opinion of such special FAA counsel
that (A) Borrower has title to the Aircraft and that there are
no outstanding liens, mortgages, charges, options, interests
or encumbrances on or security interests therein or thereon or
of record with respect thereto, including tax liens or
assessments (other than the Lien on the Aircraft in favor of
Borrower arising pursuant to the Atlas Security Agreement) and
(B) the Lien of Lender on the Aircraft pursuant to the
Security Agreement is a first priority purchase money Lien and
security interest;

(i) Lender shall have received confirmation from special
FAA counsel satisfactory to Lender that Seller has delivered executed
copies of an FAA Bill of Sale and a Special Warranty Bill of Sale to
such FAA counsel, and

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<PAGE> 18
that Borrower has delivered an executed copy of an Aircraft
Registration Application, and FAA counsel shall have approved same as
being in appropriate form for recordation with the FAA Aircraft
Registry, in accordance with Title 14, Part 49 of the Code of Federal
Regulations, and Seller shall have delivered to such FAA counsel a
letter, in form and substance satisfactory to Lender, authorizing and
directing such FAA counsel to file such FAA Bill of Sale, and release
such Special Warranty Bill of Sale to Borrower, which letter shall
provide that such authorization and direction may not be revoked or
revised without the prior written consent of Lender;

(j) all sums due and owing to Lender's counsel, Herriot,
Coti & Sugrue, and special FAA counsel, on account of legal services
rendered and disbursements incurred in connection with this
transaction shall have been paid in accordance with invoices to be
provided by Herriot, Coti & Sugrue and special FAA counsel;

(k) Lender's agents and representatives shall have
conducted the Inspection of the Aircraft and the Market Value of the
Aircraft shall be sufficient to support the amount of the Final
Advance in accordance with Section 2.4 hereof;

(l) Borrower shall have provided to Lender evidence
satisfactory to Lender that (i) upon the making of the Final Advance,
Borrower has sufficient funds in order to acquire the Aircraft from
Seller, and (ii) the only condition precedent to Borrower's
acquisition of the Aircraft from Seller pursuant to the Purchase
Agreement is Lender's making the Final Advance;

(m) No default shall have occurred by Borrower under the
Purchase Agreement;

(n) The Security Agreement shall have been re-filed with
the FAA, in furtherance of the provisions of Section 5.2(f) above;

(o) Borrower, Seller and Vendor shall have executed and
delivered an Assignment and Assumption Agreement, pursuant to which
Seller assigns to Borrower all right, title and interest of Seller in,
to and under the Modification Agreement, and Vendor acknowledges and
consents to such assignment and assumption; and

(p) Pursuant to an Acknowledgment of Assignment in form
and substance satisfactory to Lender, Vendor shall have acknowledged
and consented to the collateral assignment to Lender by Borrower of
all Borrower's right, title and interest in, to and under the
Modification Agreement, pursuant to the Security Agreement.

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<PAGE> 19
In the event that Lender, in its sole and absolute discretion, waives
satisfaction of any condition set forth in this Section, such waiver shall
constitute a waiver only as to the time for satisfaction of such condition, and
Borrower shall be obligated to comply with such condition as soon as
practicable following such Advance Date, and in any event within thirty (30)
days thereafter.

6. INTEREST.

6.1 INTEREST RATE. Basic Interest on the Advances and all other
amounts outstanding hereunder (other than amounts outstanding hereunder or
under the other Loan Documents which are to bear interest at the Default Rate
in accordance with the express provisions of this Agreement or the other Loan
Documents) shall: (i) accrue from the date of each Advance, at a fixed rate in
each case equal to ten and thirteen one-hundredths percent (10.13%) per annum;
(ii) be paid by Borrower, in arrears, on each date on which a payment of
principal is due and payable under the Note; and (iii) be calculated on the
basis of a year of 360 days for the actual days elapsed.

6.2 DEFAULT INTEREST. Should Borrower fail to pay any amount under
this Agreement, the Note or any of the other Loan Documents, on the due date
for payment thereof (whether by acceleration, prepayment or otherwise), then in
addition to any other sum or fees which may become payable hereunder or under
the Note or the other Loan Documents, Borrower shall pay interest on such
amount from the due date up to and including the date of actual payment at a
per annum interest rate equal to the Interest Rate plus two percentage points
(2%) (the "Default Rate").

7. REPAYMENT.

7.1 REPAYMENT. Until the Loan shall be repaid, prepaid or
discharged under the provisions of this Agreement, in addition to any other
sums which may become payable hereunder or under any other Loan Document,
Borrower shall repay the Loan in the amounts, and on the dates, set forth in
the Note.

7.2 APPLICATION OF PAYMENTS. The amount of all payments in respect
of the Loan shall first be applied to the prepayment fee payable pursuant to
Section 8.4, if any, and any other amount (other than (i) principal, (ii) Basic
Interest at the Interest Rate or the Default Rate) which is payable by Borrower
to Lender pursuant to this Agreement, next to payment of accrued Basic Interest
on the Loan, at the Interest Rate or the Default Rate, as applicable, and (iii)
next to principal of the Loan. All prepayments of principal of the Loan shall
be applied in inverse order of the scheduled maturity of such principal.

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<PAGE> 20
8. MANDATORY PREPAYMENTS.

8.1 UPON EVENT OF DEFAULT. Immediately upon (a) the occurrence of
an Event of Default under Sections 13(f) or 13(g) hereof, or (b) Lender's
declaration that the Loan is due and payable in full pursuant to Section 13, in
the case of any Event of Default other than under Sections 13(f) or 13(g)
hereof, the Loan and all accrued but unpaid interest on the Loan and any and
all other fees and sums which may be or become payable hereunder and under the
Note or any other Loan Document shall become immediately due and payable.
Payments on the Loan pursuant to this Section shall be subject to the
prepayment premium described in Section 8.4 below.

8.2 INSURANCE PROCEEDS; OTHER AMOUNTS IN RESPECT OF CASUALTY. In
the event that any proceeds of insurance, with respect to the Aircraft or any
portion of the Mortgaged Property, are payable to Lender pursuant to the
Security Agreement or in the event that Borrower is obligated to pay any amount
to Lender pursuant to the Security Agreement, upon the occurrence of an Event
of Loss or other loss of or damage or casualty to any portion of the Mortgaged
Property, Borrower shall pay such proceeds of insurance or other amount in
accordance with the requirements of the Security Agreement. Payments on the
Loan pursuant to this Section shall not be subject to the prepayment premium
described in Section 8.4 below.

8.3 UPON SALE OF AIRCRAFT. In the event that the Aircraft is sold,
transferred or otherwise disposed of by Borrower, then not more than ten (10)
days following such sale, transfer or other disposition, Borrower shall make a
prepayment of principal of the Loan, in an amount equal to the outstanding
principal amount of the Note as of the date of such sale, transfer or other
disposition, together with all accrued and unpaid Basic Interest, and the
prepayment fee referred to in Section 8.4 in respect of such prepayment. All
amounts delivered to Lender in connection with such prepayment shall be applied
in accordance with Section 7.2 hereof. Upon payment to Lender of such amounts,
Lender shall release its Lien on the Aircraft so sold. Payments on the Loan
pursuant to this Section shall be subject to the prepayment premium described
in Section 8.4 below. This Section shall not be deemed to constitute Lender's
authorization to Borrower to sell or otherwise dispose of the Aircraft, which
shall be subject to the express provisions of this Agreement governing same.

8.4 PREPAYMENT PREMIUM. Any prepayment, whether voluntary or
involuntary, optional or mandatory, shall, except to the extent expressly
provided to the contrary herein, be made together with: (a) accrued and unpaid
Basic Interest on the Loan through the date of such prepayment, (b) a
prepayment fee equal to the following:

(i) if such prepayment is made on or prior to the first
anniversary of the Closing Date, three percent (3%) of the principal
amount of the Loan so prepaid;

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<PAGE> 21
(ii) if such prepayment is made after the first
anniversary of the Closing Date and on or prior to the second
anniversary of the Closing Date, two percent (2%) of the principal
amount of the Loan so prepaid; and

(iii) if such prepayment is made after the second
anniversary of the Closing Date and on or prior to the third
anniversary of the Closing Date, one percent (1%) of the principal
amount of the Loan so prepaid, and

8.5 OTHER PREPAYMENTS PERMITTED IN WHOLE. The Loan shall be
prepayable in whole, but not in part, under circumstances other than those
described in Sections 8.1, 8.2 and 8.3 above; provided, that in each case, such
prepayment shall be accompanied by the prepayment fee referred to in Section
8.4.

9. REPRESENTATIONS AND WARRANTIES.

9.1 REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby
represents and warrants to Lender that, as of the date hereof:

(a) Borrower is duly formed, validly existing and in good standing
as a Delaware corporation, qualified to do business in all jurisdictions in
which the nature of its business or its properties requires it to be qualified,
maintains its principal place of business and chief executive office in Golden,
Colorado, and has full power to carry on its business as it is now being
conducted and to enter into, legally bind itself by, and perform its
obligations under this Agreement, all of the other Loan Documents to which it
is a party, and Borrower has complied with all material statutory and other
requirements relative to the business carried on by it;

(b) All consents, resolutions and authorizations necessary or
advisable in order for Borrower to enter into this Agreement and all of the
other Loan Documents to which it is a party and to borrow and repay the Loan in
accordance with the terms and conditions hereof have been obtained, no further
consents or authorizations are necessary for the service and repayment of the
Loan pursuant to the provisions hereof and of the Note and for the performance
by Borrower of all of its obligations pursuant to the provisions of all of the
Loan Documents to which it is a party;

(c) This Agreement and all of the other Loan Documents (i)
constitute valid and binding obligations of the respective parties thereto
(other than Lender, as to which Borrower makes no representation or warranty),
are enforceable in accordance with their terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency or other laws affecting
creditors' rights in general, and (ii) are in full force and effect;

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<PAGE> 22
(d) The execution and delivery of, and the performance of the
provisions of, this Agreement and the Loan Documents, and of the transactions
contemplated thereby and hereby, do not contravene in any material respect any
applicable law, regulation, decree, order, permit or contractual or other
restriction now existing and binding on Borrower or on any of the properties of
Borrower (including any of the Mortgaged Property), and the performance of the
provisions of this Agreement or the Loan Documents, all as in effect on the
Advance Date, and of the transactions contemplated thereby and hereby will not
contravene in any material respect any applicable law, regulation, decree,
order or permit currently in effect or contractual or other restriction now
existing and binding on Borrower or on any of the properties of Borrower
(including any of the Mortgaged Property);

(e) There are no outstanding judgments against Borrower and, to
the knowledge of Borrower, no action, claim, suit or proceeding is pending or
threatened (including, but not limited to, tax liens or tax actions) against or
affecting Borrower or any of the property of Borrower before any court, board
of arbitration or administrative agency which would likely result in any
material adverse change in the business or condition (financial or otherwise)
of Borrower;

(f) Borrower is not in default under any agreement to which it is
a party or by which it may be bound, nor in default of any kind in respect of
any financial commitment or obligation (including obligations under guarantees)
which could have a material adverse effect on the ability of Borrower to
perform its obligations under this Agreement or any other Loan Document, nor
upon due inquiry is Borrower aware of a fact which by giving of notice or by
lapse of time or otherwise might constitute such default by Borrower;

(g) None of this Agreement, any other Loan Document, any other
document executed in connection with the foregoing documents or contemplated
thereby nor any filing required or permitted hereunder or thereunder is subject
to any registration tax, any stamp duty or similar tax and to the extent the
same is due then the same shall be paid by Borrower when due;

(h) No security agreement, financing statement, equivalent
security or lien instrument or continuation statement or other Lien, whether
voluntary or involuntary, covering all or any part of the Collateral is on file
or of record with any governmental agency or bureau or any political
subdivision thereof or is otherwise in effect with respect to any of the
Collateral, except such as may have been filed in connection with the Lien of
Lender arising pursuant to the Security Agreement or the Lien of Borrower
arising pursuant to the Atlas Security Agreement, and such as may be satisfied,
discharged and removed of record in connection with the funding of the Advance
or as is expressly contemplated hereby;

(i) Borrower has furnished Lender with unaudited draft financial
statements of Borrower as of December 31, 1995;

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<PAGE> 23
(j) Borrower is a United States Citizen and an Air Carrier;

(k) No written information given by Borrower in relation to this
Agreement or any other Loan Document contains any misstatement of fact or omits
to state a fact which would be adverse to the interest of Lender or which would
be necessary to make any statement or representation or warranty contained
herein or therein not misleading;

(l) There has occurred no event which, with the giving of notice
or lapse of time or both, would constitute an Event of Default or Default
hereunder or under any of the Loan Documents;

(m) Borrower maintains its principal place of business and chief
executive office, and the place where Borrower maintains records relating to
the Collateral, at the address set out in Section 15 hereof;

(n) Borrower does not do business under any assumed or trade name;

(o) On the Closing Date and until the Loan is paid in full,
Borrower will have good and marketable title to, and will be the sole legal
owner of, all of the "Mortgaged Property" (as defined in the Security
Agreement) in which Borrower has granted, or purported to have granted, to
Lender a security interest pursuant to the Security Agreement (as such
Mortgaged Property is in effect in accordance with Section 2.1 of the Security
Agreement), free and clear of all liens, pledges, options, mortgages, claims,
charges, encumbrances, security interests and use restrictions which materially
and adversely affect the value and utility of the Aircraft, except for
Permitted Liens;

(p) Borrower's United States taxpayer identification number is
correctly set forth beneath Borrower's signature below;

(q) Chowdry has available cash reserves of at least $1,700,000 and
believes that such amount will be sufficient to resolve the liability of
Chowdry which was assumed by Chowdry from Aeronautics Leasing, Inc., with
respect to residual guaranties and long-term obligations associated with three
Boeing 747 Aircraft previously owned by Aeronautics Leasing, Inc.; and

(r) Borrower has no liability (contingent or otherwise) to Chowdry
or Aeronautics Leasing, Inc. in connection with (i) the residual guaranties and
long-term obligations associated with three Boeing 747 Aircraft previously
owned by Aeronautics Leasing, Inc. and assumed by Chowdry or (ii) the liability
of Chowdry with respect thereto.

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<PAGE> 24
10. UNDERTAKINGS.

10.1 UNDERTAKINGS OF BORROWER.

Borrower hereby undertakes, during the period commencing with the
Closing Date and ending with the date on which the Loan is paid in full, as
follows:

(a) To furnish Lender with (i) sufficient copies of its audited
annual report or audited annual financial statements, as the case may be,
prepared in accordance with generally accepted accounting principles
consistently applied and certified by the public accounting firm of Borrower,
as soon as the same are made available by Borrower to the shareholders of
Borrower, but in no event later that 120 days after the end of Borrower's
fiscal year, which annual financial statements shall set forth the previous
year's results in comparative form and (ii) its quarterly unaudited financial
statements, prepared and/or certified by the public accounting firm of Borrower
in conformity with the laws and regulations applicable to Borrower as a
publicly traded company, within 30 days following the close of each of the
fiscal quarters of Borrower, which quarterly financial statements shall set
forth the previous year's results in comparative form;

(b) To furnish Lender with proof satisfactory to Lender that all
insurance required under the Security Agreement is in full force and effect on
the Closing Date and at each renewal (but no less frequently than once a year)
of any such contract or policy of insurance or upon Lender's request;

(c) To at all times preserve and keep in full force and effect its
corporate existence, its rights and franchises deemed material to its
performance under this Agreement and the other Loan Documents as in effect on
the Closing Date;

(d) To at all times be in good standing as a Delaware corporation
and qualified to do business in all jurisdictions where the nature of its
business or properties requires it to be so qualified;

(e) Not, without the prior written consent of Lender (which
consent shall not be unreasonably withheld by Lender), to merge with or into or
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to
any entity;

(f) To furnish to Lender within thirty (30) days of the last day
of each calendar quarter, and at any other time upon Lender's request to
Borrower therefor, a statement, prepared and certified by the Chief Financial
Officer of Borrower, stating that, as of the date thereof, no condition or
event which constitutes an Event of Default or Default has occurred and is
continuing or if an Event of Default or Default

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<PAGE> 25
has occurred and is continuing or exists, specifying in detail the nature and
period of existence thereof and any action taken or contemplated to be taken
with respect thereto, and stating that the signer has personally reviewed this
Agreement and that such certificate is based on an examination sufficient to
assure that such certificate is accurate;

(g) To inform Lender no later than ten (10) days before Borrower
changes its principal place of business or chief executive office or promptly
upon its knowledge of the occurrence of any Event of Default, and to use its
best efforts to inform Lender, promptly upon Borrower's obtaining actual
knowledge thereof, of any event which, in its reasonable opinion, might
materially adversely affect its ability fully to perform its obligations under
this Agreement or any other Loan Document to which it is a party;

(h) To provide Lender with the following information regarding the
Aircraft within fifteen (15) days following the end of each calendar quarter
during which the Loan is outstanding:

(i) if any engine included in the Aircraft is not
attached to the Aircraft, to provide Lender with the current location
of such engine (in the event that an engine comprising the Aircraft is
attached to another aircraft, Borrower shall provide Lender with
information identifying such aircraft and if such aircraft is subject
to a lease, Borrower shall inform Lender of the name and address of
the lessee thereunder and the term of such lease and such other
information as is reasonably requested by Lender regarding the
location of such engine);

(ii) the total number of hours and cycles with respect to
the engines and airframe of which the Aircraft is composed;

(iii) the number of hours remaining on the Aircraft until
the next required or scheduled "D" Check with respect to the Aircraft;

(iv) the number of engine cycles remaining with respect to
each engine included in the Aircraft prior to the next scheduled
removal for maintenance of such engines from the Aircraft or any other
aircraft;

(v) as soon as such information becomes available to
Borrower, the dates on which any "D" Check or "C" Check is scheduled
with respect to the Aircraft or any part thereof; and

(vi) whether the FAA has during the preceding month
conducted any inspection of any facility or records of Borrower or
taken any action with respect to any facility or procedure of
Borrower, and, if so, the nature and

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<PAGE> 26
results and resolution of such inspection or action (including,
without limitation, any fines and settlements in connection
therewith).

(i) Not to grant or permit to remain outstanding with respect to
any of the Collateral any Lien other than Permitted Liens;

(j) Not to lease or sublease the Aircraft, without the prior
written consent of Lender; provided, that Borrower 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 Borrower;
provided that any such charter or other agreement (i) shall be subordinate in
all respects to this the interest of Lender in the Aircraft pursuant to the
Security Agreement and (ii) will not result in any transfer of possession or
control of, or create an interest in, the Aircraft, to or in favor of any
person or entity, such possession and control remaining at all times
exclusively with Borrower;

(k) Not to (i) sell, lease, transfer or otherwise dispose of the
Aircraft or any constituent part thereof, except for sales of the Aircraft,
subject to the provisions of this Agreement regarding payment of the Loan upon
such sale or (ii) except to the extent expressly permitted pursuant to the
terms of the Security Agreement, permit to be installed on or incorporated in
the Aircraft any part, component or equipment which is owned by, or subject to
any claim of, any Person other than Borrower or which is subject to any Lien
other than the Lien of Lender;

(l) To cause the Aircraft to at all times be continuously
registered under the laws of the United States of America with the FAA and to
cause a valid certificate of airworthiness from the FAA to be maintained in
continuous effect with respect to the Aircraft;

(m) To maintain at all times stockholder's net equity, determined
in accordance with generally accepted accounting principles, consistently
applied, of not less than $40,000,000;

(n) Not to permit at any time following the Closing Date until the
Loan is fully repaid and discharged the ratio of Borrower's indebtedness, as of
the last day of any fiscal quarter of Borrower, to its shareholders' equity as
of the last day of such fiscal quarter, to exceed 9.0:1.0;

(o) To maintain at all times following the Closing Date until the
Loan is fully repaid and discharged, Adjusted Net Income as of the last day of
each fiscal quarter of Borrower of at least one hundred ten percent (110%) of
the Fixed Charges of Borrower for the twelve month period ending on the last
day of such fiscal quarter; and

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<PAGE> 27
(p) To cooperate with Lender and its agents and representatives in
connection with the Inspection of the Aircraft and the determination by Lender
and such agents and representatives of the Market Value of the Aircraft.

11. FORCE MAJEURE, CHANGE IN LAW, INCREASED COSTS.

11.1 LOSS FOR WHICH LENDER NOT RESPONSIBLE. Lender shall not be
held responsible for any loss or damage, to any of the Mortgaged Property, any
of the other Collateral or Borrower, arising out of any action taken or omitted
by Lender, or to which Lender becomes subject, resulting from a legal enactment
or any measure of a public authority, or war, strike, boycott, blockade or any
other cause beyond its control, except for any such loss or damage which is the
direct result of the gross negligence or wilful misconduct of Lender or its
agents.

11.2 UNLAWFULNESS OF TRANSACTION. In the event that the making or
maintaining of the Loan by Lender or the performance by Borrower of any
obligation to be performed by Borrower hereunder or under any other Loan
Document to which Borrower is party, has become unlawful by reason of any
change after the date of this Agreement in any applicable law or governmental
regulation or order, or in the interpretation of any of the same, with respect
to this Agreement, any other Loan Document to which Borrower is party or the
Loan, then Lender shall notify Borrower thereof immediately and to the extent
that the Advances have not been made, the obligation pursuant to Section 2 of
Lender to make the Advances available shall terminate, and in the case of that
portion of the Advances which have been made (or which Lender has irrevocably
committed (contingent or otherwise) to a third party to make), Borrower shall,
within 30 days after receipt of such notice or any later date permitted by
applicable law or governmental regulation or order, either (a) repay the Loan
and pay interest accrued thereon at the Interest Rate and all other sums
payable hereunder (except for the prepayment fee set forth in Section 8.4
hereof) and under the other Loan Documents, and all actual out-of-pocket
expenses incurred by Lender in complying with any changed law, governmental
regulation or order prior to the date on which Borrower repays the Loan,
together with interest thereon at the Interest Rate, or (b) have taken steps
satisfactory to Lender to cure or remedy the matters giving rise to such
unlawfulness.

11.3 INCREASED EXPENSE. Should Lender become subject to levies,
imposts, duties, fees, or sales, use, excise, gross receipts, value added,
personal property, stamp or documentary taxes, ad valorem taxes, license fees,
registration fees, assessments, fines, penalties or similar charges imposed on
the Aircraft or to any other taxes of whatsoever kind imposed upon Lender with
respect to the Aircraft or this Agreement, any other Loan Document, the
transactions contemplated by any of the aforesaid documents or any documents
executed in connection therewith or contemplated thereby, or the payments to be
made pursuant to this Agreement, the Note and any other payments of whatsoever
kind required to be paid by Borrower to Lender pursuant to the terms of this
Agreement, other than taxes payable by

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<PAGE> 28
Lender and measured by the income of Lender (collectively, "Taxes"), which will
increase Lender's total cost with respect to the Loan, then, in such event,
Borrower shall at the request of Lender pay to Lender an amount which will
compensate Lender for such increased costs (after taking into account any tax
benefits realized by Lender as a result of the payment or accrual of such
Taxes).

11.4 PREPAYMENT IN RESPECT OF INCREASED EXPENSES. In the event that
Lender exercises its rights pursuant to Section 11.3 hereof, Borrower may
prepay the Loan in accordance with the provisions of this Agreement. In such
case, Borrower shall repay to Lender the Loan plus interest accrued thereon and
all other sums payable hereunder then due and payable, and excluding the
prepayment fee described in Section 8.4 hereof.

12. PAYMENTS.

12.1 DIRECTION OF PAYMENTS. All payments required to be made to
Lender hereunder or under the Note or the other Loan Documents shall be made in
Dollars by wire transfer in good, immediately available funds to:

BANK: Citibank, N.A.
New York, New York
FOR THE ACCOUNT OF: FINOVA Capital
Corporation
ACCOUNT NO.: 4068-0522
ABA NO.: 021-000-089
REFERENCE: Atlas Air
OTHER BANKING INFORMATION: ZQX _________ ZQX

or to such other account as Lender may designate by written notice sent
pursuant to Section 15 hereof.

12.2 NON-BUSINESS DAY. All payments falling due on a non-Business
Day shall be paid on the next succeeding Business Day.

12.3 NO OFFSET. All payments by Borrower under this Agreement shall
be made without deduction by reason of any defense, setoff or counterclaim of
any kind, nature or description whatever.

12.4 NO DEDUCTION FOR TAXES. All payments under this Agreement
shall be made free and clear of, and without deduction for, any Taxes, now or
hereafter imposed by or within any governmental authority or pursuant to any
governmental rule or regulation or any administrative subdivision or taxing
authority thereof or therein, respectively, unless Borrower is compelled by law
to deduct or withhold such Taxes, in which event Borrower shall pay to Lender
such additional amounts as shall result in the effective receipt by Lender of
the gross amount of all sums due Lender hereunder and under the Note had no
such deduction or withholding been

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made; provided, however, that Borrower shall have no obligation to pay any
additional amount with respect to United States withholding taxes imposed as a
result of any transfer, assignment or grant of a participation in Lender's
rights hereunder to a third party.

13. EVENTS OF DEFAULT.

13.1 EVENTS OF DEFAULT. Upon the occurrence of any of the
following, each of which is referred to herein as an "Event of Default":

(a) Failure of Borrower to pay, within three (3) days following
Lender's notice to Borrower that such sum is due and payable, any principal of
the Loan, Basic Interest or any other sum with respect to the Loan, the Note,
or either of them, or Security Agreement or other sums which may become due
hereunder or under any Loan Document, whether by reason of stated maturity or
due date, notice of prepayment, cancellation, acceleration or otherwise;

(b) (i) Any failure by Borrower to perform or cause to be
performed its obligations as set forth in any of the Loan Documents (x) the
preparation or recordation of any document or instrument required by Lender for
the maintenance or perfection of any lien on the Mortgaged Property or any of
the other Collateral, or (y) maintenance of any part of the Mortgaged Property
or any of the other Collateral, within five (5) Business Days after notice
thereof from Lender or (ii) any failure by Borrower to fulfill any other
covenant or to perform any other obligation of Borrower under this Agreement or
any other Loan Document to which Borrower is party and such failure is not
cured within fifteen (15) days after notice by Lender to Borrower of such
failure; provided, however, that if such failure is capable of being cured and
cannot with diligence be cured within fifteen (15) days, then such failure
shall not constitute an Event of Default so long as Borrower is in good faith
taking all steps necessary, in the reasonable opinion of Lender, to diligently
cure such failure and such failure is cured within sixty (60) days of such
notice to Lender by Borrower;

(c) If any representation or warranty made by Borrower in this
Agreement, or any other Loan Document or any financial statement shall prove to
have been untrue, inaccurate or incomplete in any material respect at the time
when made or when effective and such party fails to do that which shall be
necessary in order that said representation or warranty shall be true, accurate
or complete within thirty (30) days after receipt of notice thereof;

(d) If: (i) Any indebtedness of Borrower other than the
indebtedness created hereunder, shall become due and payable prior to the
stated maturity thereof resulting from a default thereunder, or if such
indebtedness shall not be paid at the maturity thereof or any guaranty or
similar obligation of Borrower is not discharged at maturity or when due and
called or if Borrower shall otherwise be in breach or default under any
agreement pursuant to which such indebtedness was incurred, and

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(ii) Borrower fails to cure such default within (A) thirty (30) days after
written notice thereof, or (B) any cure period provided for under the agreement
pursuant to which the default occurred, whichever is less, and (iii) the
aggregate amount of all such indebtedness at the time exceeds five million
Dollars ($5,000,000) and (iv) either (A) a judgment has been entered against
Borrower with respect to such indebtedness pursuant to which Borrower is found
liable therefor or (B) Borrower is not contesting in good faith and with
reasonable diligence the acceleration of the maturity of such indebtedness or
other alleged breach by Borrower referred to in clause (i) above;

(e) Any approval of any governmental or regulatory authority
having or asserting jurisdiction over Borrower, or any of the Mortgaged
Property or the other Collateral, required or to be issued to Borrower in
connection with this Agreement or under any other Loan Document or the
transactions contemplated herein or therein, shall be revoked, rescinded,
suspended or otherwise limited in effect and same shall not have been
reinstated within sixty (60) days after the first effective date of such
revocation, rescission, suspension or limitation;

(f) If Borrower files a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking readjustment of its debts or for any
other relief under any bankruptcy, insolvency, or other similar act or law of
any jurisdiction, domestic or foreign, now or hereafter existing, or Borrower
takes any action indicating its consent to, approval of, or acquiescence in or
failure to oppose, any such petition or proceeding; or if Borrower applies for,
or sustains the appointment by consent or acquiescence of, a receiver or
trustee for Borrower or for all or a substantial part of their respective
property; or if Borrower makes an assignment for the benefit of its creditors,
or if Borrower fails to pay or becomes unable to pay its debts as they mature;

(g) If there is filed an involuntary petition against Borrower in
bankruptcy or seeking readjustment of its debts or for any other relief under
any bankruptcy, insolvency, or other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing, or a receiver or trustee is
involuntarily appointed for Borrower or for all or a substantial part of the
property or assets of Borrower or Lessee, respectively, or there is served on
Borrower a warrant of attachment, execution or similar process against any
substantial part of the property of Borrower, respectively, and any of such
events continues for one hundred twenty (120) days undismissed, unbonded or
undischarged;

(h) If this Agreement or any other Loan Document, shall at any
time after its respective execution and delivery and for any reason cease to be
in full force and effect or any certificate, instrument or documents issued and
executed pursuant hereto or thereto shall for any reason cease to be effective
to constitute a valid and perfected first priority Lien and security interest
in and to the Mortgaged Property or the other Collateral, except for Permitted
Liens;

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<PAGE> 31
(i) If the Aircraft or any part thereof shall be sold,
transferred, assigned, leased or otherwise disposed of by Borrower without
Lender's prior written consent, except (i) for Permitted Liens, (ii) as
otherwise permitted herein or in the Security Agreement;

(j) If material damage, destruction, or loss to any of the
Mortgaged Property or the other Collateral shall occur, and (i) the insurer
thereof does not (x) acknowledge that such loss is covered under the applicable
insurance policy within a reasonable period (not to exceed one hundred twenty
(120) days) which is customary in the commercial aviation industry under the
circumstances of the damage, destruction or loss involved, or (y) make payment
in respect thereof within seven (7) Business Days thereafter, or (ii) Borrower
fails to diligently pursue collection of the proceeds of any insurance policy
covering such damage, destruction or loss;

(k) If any governmental or judicial authority shall condemn, seize
or appropriate all or a material part of the Mortgaged Property or the other
Collateral or all or substantially all of the assets of Borrower (other than a
requisition for use by the government of the United States of America) ;

(l) If there shall occur an Event of Default under, and as defined
in, any of the other Loan Documents;

(m) If there shall occur any lapse of, or failure to maintain,
insurance coverage on the Mortgaged Property required to be maintained under
the Security Agreement; or

(n) If any amount is not paid by Borrower when due under the
Modification Agreement (including any failure arising from Borrower's failure
or inability to satisfy the conditions set forth in Section 5.2 hereof to the
making by Lender of the Final Advance, but excluding any failure to make the
Final Advance which arises as a result of Lender's deliberate, wilful or
grossly negligent failure to make the Final Advance notwithstanding Borrower's
satisfaction of the conditions set forth in Section 5.2 hereof);

then (other than upon the occurrence of an Event of Default specified in clause
(f) or (g) of this Section), in any such event, Lender, upon notice to
Borrower, may declare the principal of, and accrued interest on, the Loan, the
Note and this Agreement and any and all other sums payable by Borrower to
Lender under this Agreement, the Note or any other Loan Document including any
penalties or other amounts to be, and the Loan, the Note and all such other
amounts shall thereupon become, due and payable. Upon the occurrence of an
Event of Default specified in clause (f) or (g) of this Section, automatically
and without any notice to Borrower, the principal of, and accrued interest on,
the Loan, the Note and this Agreement and any and all other sums payable by
Borrower to Lender under this Agreement, the

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<PAGE> 32
Note or any other Loan Document including penalties and all other amounts shall
be due and payable. In any such case, such amounts shall be paid without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note or any other
Loan Document to the contrary notwithstanding, and Lender may exercise any and
all rights and remedies of a secured party under the Arizona Uniform Commercial
Code and under the applicable Loan Document, or under any governing law.

13.2 WHEN CURE PERIOD COMMENCES. In the event that Lender shall be
prevented by operation of the automatic stay under 11 U.S.C. Section 362 from
sending any notice permitted or required to commence a period during which
Borrower may cure any Event of Default hereunder, then, in the event that the
automatic stay is lifted as to Lender, or in the event that Borrower's
bankruptcy proceeding is dismissed, the period during which Borrower may cure
such Event of Default shall be deemed to have commenced, without further
notice, on the first date on which Lender would have been entitled to give such
notice pursuant to the terms hereof or of the other Loan Documents, as
applicable, but for the operation of the automatic stay.

13.3 REMEDIES NOT PREJUDICED. Borrower and Lender hereby agree
that, to the extent permitted by law, the rights and remedies of Lender in
relation to any misrepresentation or breach of warranty on the part of Borrower
shall not be prejudiced by any lack of investigation by or on behalf of Lender
into the affairs of Borrower or by the performance of this Agreement.

14. FEES AND EXPENSES.

14.1 FEES AND EXPENSES THROUGH EACH ADVANCE DATE. Borrower shall on
each Advance Date reimburse Lender for all reasonable out-of-pocket expenses of
Lender incurred in connection with this Agreement and each other Loan Documents
and the transactions contemplated hereby and thereby, including, without
limitation, all third party appraisal fees, inspection fees, recordation fees
and legal fees and disbursements of Lender's counsel, including special FAA
counsel, and in connection with all professional services rendered and
disbursements incurred by said counsel with respect to all transactions
relevant to the subject matter hereof including, without limitation, the
preparation and negotiation of this Agreement and any other Loan Document and
the review and negotiation of all other agreements and instruments contemplated
by this Agreement and the other Loan Documents, and any other instruments or
documents to be reviewed, prepared or to be executed in connection with the
transactions contemplated hereby and thereby. Borrower agrees that the
obligations of Borrower pursuant to the provisions of this Section 14.1 shall
arise irrespective of whether Lender makes all, none or any part of the
Advances, except in the event of Lender's wilful failure to make an Advance
hereunder after the conditions precedent to the making of such Advance have
been fulfilled by Borrower.

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14.2 FEES AND EXPENSES OF ENFORCEMENT AND RELATED AMOUNTS. Borrower
shall pay to Lender, on demand, any expenses or other costs (including, without
limitation, attorneys' fees and disbursements, expert witness fees, and all
travel, hotel, telephone, postage, copying, appraisal, inspection, and
consulting expenses) incurred by Lender in connection with (a) the enforcement
and collection against Borrower or any other party (other than Lender) to any
of the Loan Documents of any provision thereof or the indebtedness contemplated
hereby, or (b) any actual or threatened litigation, investigation or proceeding
relating to the Loan Documents, whether or not suit is instituted, relating to
any of the Loan Documents or the indebtedness contemplated thereby, (c) any
proceeding or enforcement in any state or federal bankruptcy or reorganization
proceeding, and (d) any actual or proposed amendment of the Loan Documents or
any of them or modification of the indebtedness contemplated thereby.

14.3 OBLIGATIONS SECURED. The obligations of Borrower under this
Section 14 shall at all times constitute a portion of the Obligations secured
by the Collateral.

15. NOTICES.

Except as otherwise specifically provided to the contrary herein or in
the Security Agreement:

(a) Every notice or demand under this Agreement shall be in
writing and may be given or made by registered mail, return receipt requested
or by internationally recognized overnight courier service.

(b) Every notice or demand shall be sent, in the case of overnight
courier or registered mail, to Lender or to Borrower, at the following address,
or to such other address as Borrower or Lender may designate for itself by
notice to the other conforming to the requirements for notice set forth in this
Section:

If to Borrower: Atlas Air, Inc.
538 Commons Drive
Golden, Colorado
Attention: Chief Executive Officer

and

If to Lender: FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85077
Attention: Vice President-Law
and

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<PAGE> 34
FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85077
Attention: Vice President-Operations
Management--Transportation Finance
Department

(c) Every notice or demand shall, except so far as otherwise
expressly provided by this Agreement, be deemed to have been received in the
case of an internationally recognized overnight courier service or registered
mail, upon acknowledgment of receipt or as of the date on which receipt of such
notice delivered by overnight courier or registered mail is refused or such
courier or the U.S. Postal Service advises that such letter is not deliverable
at the address set out in paragraph (b) of this Section 15.

(d) A copy of all notices sent to Lender shall be sent to Herriot,
Coti & Sugrue, 3200 North Central Avenue, Suite 1910, Phoenix, Arizona 85012,
Attention: Mark R. Herriot, Esq., telefax number 602/222-9725.

16. ENTIRE AGREEMENT; AMENDMENTS.

This Agreement (including all Exhibits hereto) embodies the entire
agreement and understanding between Borrower and Lender relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and none of the parties hereto shall be bound by or charged with any
oral or written agreements, representations, warranties, statements, promises
or understandings not specifically set forth herein or therein. This Agreement
may not be changed and no right granted or obligation imposed hereunder may be
waived, except pursuant to an instrument in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.

17. GOVERNING LAW: JURISDICTION AND VENUE.

(A) THE OBLIGATIONS OF BORROWER HEREUNDER ARE TO BE PERFORMED IN,
AND THIS AGREEMENT IS EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS AND DECISIONS
OF THE STATE OF ARIZONA, AND BY EXECUTION HEREOF BORROWER AND BY ACCEPTANCE
HEREOF LENDER, EACH AGREES THAT SUCH LAWS AND DECISIONS OF THE STATE OF ARIZONA
SHALL GOVERN THIS AGREEMENT NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER
JURISDICTIONS WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS
CONTEMPLATED HEREBY.

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<PAGE> 35
(B) BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY
BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA
COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT
SUCH COURT HAS JURISDICTION. BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN
ANY OF SUCH COURTS, AND HEREBY AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT
PURSUANT HERETO. BORROWER HEREBY WAIVES ANY CLAIM THAT PHOENIX, ARIZONA OR THE
DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK
OF VENUE. SHOULD BORROWER AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, THEN BORROWER SHALL BE DEEMED IN
DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY LENDER AGAINST BORROWER
AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE
EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET FORTH IN THIS SECTION SHALL NOT BE
DEEMED TO PRECLUDE THE ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY
OTHER FORUM OR THE TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY
OTHER APPROPRIATE JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.

18. CONTRACTED FOR RATE OF INTEREST UNDER ARIZONA LAW.

(a) For purposes of determining compliance with Arizona law
regulating the payment of interest, the "contracted for rate of interest," as
such term is defined under the laws of the State of Arizona, of the Loan
contemplated hereby, without limitation, shall consist of the following:

(i) The Interest Rate, calculated and applied to
the principal balance of the Loan in accordance with the provisions of this
Agreement;

(ii) All interest at the Default Rate, as provided
for in Section 6.2 hereof;

(iii) The Loan Fee; and

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<PAGE> 36
(iv) All Additional Sums (as hereinafter defined),
if any.

Borrower agrees to pay an effective contracted for rate of interest which is
the sum of the Interest Rate, plus any additional rate of interest resulting
from the payment of interest at the Default Rate, the Loan Fee and the
Additional Sums, if any, as contemplated by the foregoing clauses (i) through
(v), respectively.

(b) For purposes of determining compliance with Arizona
law regulating the payment of interest, all fees, charges, goods, things in
action or any other sums or things of value (other than interest resulting from
the payment by Borrower of the amounts referred to in clauses (i) through (iv)
of Section 18(a) above) paid or payable by Borrower (collectively, the
"Additional Sums"), whether pursuant to this Agreement, the other Loan
Documents or any other document or instrument in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction,
that, under the applicable law may be deemed to be interest with respect to
this lending transaction, for the purpose of any applicable law that may limit
the maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest, and for such purposes only, the agreed upon and
"contracted for rate of interest" of this lending transaction shall be deemed
to be increased by the rate of interest resulting from the Additional Sums.

(c) Borrower understands and believes that this lending
transaction complies with the usury laws of the State of Arizona and with the
usury laws of all other jurisdictions, to the extent such laws are applicable
hereto; however, if any interest or other charges in connection with this
lending transaction are ever determined to exceed the maximum amount permitted
by law, then Borrower agrees that (i) the amount of interest or charges payable
pursuant to this lending transaction shall be reduced to the maximum amount
permitted by law and (ii) any excess amount previously collected from Borrower
in connection with this lending transaction that exceeded the maximum amount
permitted by law, shall be credited to the principal balance of the Loan then
outstanding. If the outstanding principal balance hereunder has been paid in
full, the excess amount paid shall be refunded to Borrower.

19. NO BROKER.

Borrower and Lender each hereby represent and warrant to the other
that no broker brought about the transactions contemplated hereby and each
party hereby agrees to indemnify and hold the other party harmless from, any
and all liabilities and costs (including without limitation, costs of counsel)
to any person or entity claiming brokerage commissions or finder's fees on
account of this Agreement.

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<PAGE> 37
20. SURVIVAL.

Each of the representations, warranties and covenants of Borrower
contained herein shall survive the closing of the Loan.

21. INDEMNIFICATION.

In addition to Borrower's obligations and Lender's remedies provided
elsewhere in this Agreement: (a) Borrower hereby indemnifies Lender and agrees
to hold Lender harmless for, from and against any and all liabilities, damages,
losses, claims, reasonable costs or expenses whatsoever, and to reimburse
Lender for any reasonable legal or other fees or expenses (including but not
limited to the fees and expenses of expert witnesses, consultants and
appraisers) incurred by it in connection with any claim or defending or
prosecuting any action or proceeding relating to this Agreement (including, but
not limited to, the disbursement of the Advances), the Note and any Loan
Document to which Borrower is a party; and (b) Borrower hereby indemnifies
Lender and agrees to hold Lender harmless for, from and against any and all
liabilities, damages, losses, claims, costs or expenses whatsoever and to
reimburse Lender for any legal or other fees or expenses incurred by it in
connection with or arising out of or resulting from any breach of warranty or
material misrepresentation by Borrower, or the non-performance of any covenant
or obligation to be performed on the part of Borrower, under this Agreement,
the Note or any Loan Document, or arising out of or resulting from any
misrepresentation or omission from any certificate, instrument or paper
delivered or to be delivered by Borrower to Lender pursuant to this Agreement
or any Loan Document or in connection with the transactions contemplated herein
or therein.

22. WAIVER OF JURY.

BORROWER AND LENDER IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS LOAN
AGREEMENT, THE NOTE, THE SECURITY AGREEMENT OR ANY OTHER OF THE LOAN DOCUMENTS.

23. ASSIGNMENT, SUCCESSORS AND ASSIGNS.

Lender may assign or obtain participations with other Lenders in
regard to its rights hereunder and under the Note, or either of them, and any
other Loan Document and in respect of the Loan, provided only that no such
assignment or participation shall impose any greater obligation on Borrower
than set forth herein or therein. Borrower shall not assign any rights under
this Agreement nor shall any of Borrower's duties hereunder or under the Note
or Security Agreement be assigned or delegable without the prior written
consent of Lender. Nothing contained in this

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<PAGE> 38
Agreement, express or implied, is intended to confer upon any person or entity,
other than the parties hereto and their permitted successors in interest and
permitted assigns, any rights or remedies under or by reason of this Agreement
unless expressly herein stated to the contrary. All covenants, representations,
warranties and agreements of the parties contained herein shall, subject to the
provisions of the preceding sentence, be binding upon and inure to the benefit
of their respective successors and permitted assigns.

24. CAPTIONS AND SECTION HEADINGS: CONSTRUCTION.

Captions and paragraph headings used herein are for convenience only
and are not a part of this Agreement and shall not be used in construing it.
This Agreement and all documents executed in connection herewith shall be
construed without regard to the identity of the party which prepared the same,
and no presumption shall arise as a result thereof.

25. SEVERABILITY.

In the event that any one or more of the provisions of this Agreement,
any Loan Document, or the Note shall be invalid, illegal or unenforceable in
any respect or in any jurisdiction, the validity, legality and enforceability
of the remaining provisions contained herein and therein or of the same
provisions in any other jurisdiction shall not in any way be affected or
impaired thereby.

26. TIME OF THE ESSENCE.

Time is of the essence with respect to all of the payment and
performance obligations of Borrower hereunder. Time is of the essence with
respect to all of the performance obligations of Lender hereunder.

27. COUNTERPARTS.

This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and, when taken together, all of which shall
constitute one and the same Agreement.

28. FURTHER ASSURANCES.

Borrower agrees to execute such agreements, instruments and documents,
and take such actions, without cost to Lender, as Lender may reasonably
determine are necessary or appropriate in order to effect the transactions
contemplated by this Agreement and the other Loan Documents, or to preserve,
protect and perfect the Lien of Lender in the Collateral.

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<PAGE> 39
29. PAYMENTS BY LENDER ON BEHALF OF BORROWER.

In the event that at any time Borrower shall fail to do or perform any
act, or pay any amount, or take any action (including, without limitation,
failure to maintain insurance coverage on the Mortgaged Property in accordance
with the requirements of the Security Agreement to which such Mortgaged
Property is subject), when such performance, payment or action is required
under this Agreement or the other Loan Documents (and, if applicable, following
lapse of any grace or compliance period in which such payment, performance or
action may be taken or made by Borrower under the applicable Loan Document),
then Lender may, but shall not be obligated to, make such payment or cause such
performance or action to be taken, and any and all expenses incurred by Lender
in connection therewith, together with the amount of any such payment, shall
(i) be immediately due and payable by Borrower to Lender, (ii) constitute a
portion of the Obligations hereunder, (iii) at all times be secured by the
Collateral, and (iv) bear interest at the Default Rate from the date paid or
incurred by Lender, as applicable, through the date paid to Lender.

-39-
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers as of the day and year first
above written.

LENDER:
FINOVA CAPITAL CORPORATION, a Delaware
corporation

By: /s/ MARTIN G. ROTH
-----------------------------------
Its: Group Vice President
----------------------------------

BORROWER:
ATLAS AIR, INC., a Delaware corporation

By: /s/ CLARK H. ONSTAD
-----------------------------------
Its: General Counsel
----------------------------------
Taxpayer Identification No.: 84-1207329

-40-
<PAGE> 41
EXHIBIT A

SECURED LOAN AGREEMENT

_________________________________________

DESCRIPTION OF MODIFICATIONS
_________________________________________
<PAGE> 42
EXHIBIT B

SECURED LOAN AGREEMENT

_________________________________________

AIRCRAFT STATUS AND CONDITION
_________________________________________

<PAGE> 1
EXHIBIT 10.54

ATLAS AIR, INC.
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT

This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of
February 28, 1997 and entered into by and among ATLAS AIR, INC., a Delaware
corporation ("COMPANY"), GOLDMAN SACHS CREDIT PARTNERS L.P. ("CREDIT
PARTNERS") (formerly known as Pearl Street L.P.), THE FINANCIAL INSTITUTIONS
LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a
"LENDER" and collectively as "LENDERS"), GOLDMAN SACHS CREDIT PARTNERS L.P.
("CREDIT PARTNERS"), as syndication agent (in such capacity, "SYNDICATION
AGENT") and BANKERS TRUST COMPANY ("BANKERS TRUST"), as administrative agent
for Lenders (in such capacity, "ADMINISTRATIVE AGENT").

R E C I T A L S

WHEREAS, pursuant to that certain First Amended and Restated Credit
Agreement dated as of July 15, 1996, by and among Company, as Borrower, the
financial institutions listed on the signature pages thereof, Syndication Agent
and Administrative Agent (the "EXISTING AGREEMENT"), Lenders have made
certain credit facilities available to Company for the purpose of acquisition
and modification of certain aircraft to be used in Company's air cargo
business;

WHEREAS, the parties of the Existing Agreement desire to amend and
restate the Existing Agreement in order to increase the Revolving Loan
Commitments by $100,000,000 to $275,000,000, to add certain Lenders not party
to the Existing Agreement and to make certain other amendments to the Existing
Agreement.

NOW THEREFORE, in consideration of the premises and agreements,
provisions and covenants herein contained, Company, Lenders, Syndication Agent
and Administrative Agent hereby agree that the Existing Agreement shall be
amended and restated in its entirety as follows:

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<PAGE> 2
SECTION 1.
DEFINITIONS

1.1 CERTAIN DEFINED TERMS.

The following terms used in this Agreement shall have the following
meanings:

"ACMI CONTRACT" means (i) any contract entered into by
Company pursuant to which Company furnishes the aircraft, crew,
maintenance and insurance and customers bear all other operating
expenses and (ii) any similar contract in which the customer provides
the flight crew, all in accordance with Company's historical
practices.

"ACMI CONTRACTED AIRCRAFT" means an aircraft acquired by
Company or its Subsidiaries and dedicated to a new ACMI Contract
entered into in connection with the acquisition of such aircraft
(which ACMI Contract shall not represent a renewal or replacement of a
prior ACMI Contract unless the aircraft dedicated to such prior ACMI
Contract was operated under an operating lease and returned to the
lessor) which is in effect on the date of calculation and has a
remaining term of one year or more on the date such aircraft was
dedicated to such ACMI Contract (subject to cancellation terms, which
may include the right to cancel on six months notice). When making
any calculation on a Pro Forma Basis effect shall be given to the
acquisition of an ACMI Contracted Aircraft by adding to the
appropriate components of Consolidated Adjusted EBITDA (i) the net
projected annualized revenues from the operation of the ACMI
Contracted Aircraft under such ACMI Contract for that portion of the
period for which Consolidated Adjusted EBITDA is being calculated
prior to the acquisition of such aircraft, assuming operation for the
minimum guaranteed number of block hours (less any block hours subject
to cancellation) at the minimum guaranteed rate under such ACMI
Contract less (ii) the projected annualized cash operating expenses
from such operation for the same period for which the related
projected revenues are determined in clause (i) above; provided that
such projected cash operating expenses shall not be less on a per
block hour basis than the average historical per block hour operating
expenses of Company for the four full fiscal quarters immediately
preceding the date of calculation, and provided, further, that if such
aircraft is of a model other than a Boeing 747 freighter, such
projected cash operating expenses shall include maintenance costs
which shall not be less than the average for such aircraft type
disclosed on the most recently available DOT Forms 41 with respect to
such aircraft type or any summary of such data as reported in a
nationally recognized industry publication. For purposes of this
definition, "ACMI CONTRACT" shall include contracts pursuant to
which Company does not pay any crew costs, in which event pro forma
effect shall be given as described above but excluding from the
projected annualized cash operating expenses all crew costs. Cash
operating expenses means for purposes of this definition consolidated
operating expenses, less consolidated depreciation and amortization
and Consolidated Rental Payments, to the extent included in computing
consolidated operating expenses.

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<PAGE> 3
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date, (x) until such time as Reference Lenders are
determined in accordance with the definition thereof, the rate per
annum obtained by dividing the offered rate (expressed as a rate per
annum and rounded upward to the nearest 1/16 of one percent) appearing
on the Dow Jones/Telerate Monitor on Telerate Access Service Page 3750
(British Bankers Association Settlement Rate) (or such other page as
may, in the opinion of Administrative Agent, replace such page on that
system for the purpose of displaying such rate) at or about 11:00 a.m.
(London time) on such Interest Rate Determination Date for U.S. dollar
deposits of amounts in same day funds comparable to the principal
amount of the Eurodollar Rate Loan for which Adjusted Eurodollar Rate
is then being determined with maturities comparable to the Interest
Period for which such Adjusted Eurodollar Rate will apply by (ii) a
percentage equal to 100% minus the stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest
Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurodollar liabilities" as defined in
Regulation D (or any successor category of liabilities under
Regulation D) and (y) thereafter, the rate per annum obtained by
dividing (i) the arithmetic average (rounded upward to the nearest
1/16 of one percent) of the offered quotation, if any, to first class
banks in the interbank Eurodollar market by each of the Reference
Lenders for U.S. dollar deposits of amounts in same day funds
comparable to the principal amount of the Eurodollar Rate Loan of that
Reference Lender for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such Interest Period as of
approximately 10:00 A.M. (New York time) on such Interest Rate
Determination Date by (ii) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any
member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D (or any successor category of
liabilities under Regulation D); provided that if any Reference Lender
fails to provide Administrative Agent with its aforementioned
quotation then the Adjusted Eurodollar Rate shall be determined based
on the quotation(s) provided to Administrative Agent by the other
Reference Lender(s).

"ADMINISTRATIVE AGENT" has the meaning assigned to that term
in the introduction to this Agreement and also means and includes any
successor Administrative Agent appointed pursuant to subsection 8.6.

"AERONAUTICAL AUTHORITY" means, at any date, the Federal
Aviation Administration or other governmental airworthiness authority
having jurisdiction over any Eligible Aircraft or Airframe or Engine
under the laws of the country in which the Airframe is then
registered.

"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.

"AFFECTED LOANS" has the meaning assigned to that term in
subsection 2.6C.

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<PAGE> 4
"AFFILIATE" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under
common control with, that Person. For the purposes of this definition,
"control" (including, with correlative meanings, 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 or by contract or otherwise.

"AGREEMENT" means this Second Amended and Restated Credit
Agreement dated as of February 28, 1997, as it may be amended,
supplemented or otherwise modified from time to time.

"AIRCRAFT CHATTEL MORTGAGE" means any or all of the First
Aircraft Chattel Mortgages and the Second Aircraft Chattel Mortgages.

"AIRFRAME" means, as the context requires, an Airframe as
defined in a particular Aircraft Chattel Mortgage or all Airframes as
defined in all Aircraft Chattel Mortgages.

"AMENDED AND RESTATED NOTES" means (i) the promissory notes
of Company amended and restated pursuant to subsection 2.1D on the
Conversion Date and (ii) any promissory notes issued by Company
pursuant to the last sentence of subsection 9.1B(i) in connection with
assignments of the Term Loan Commitments or Term Loans of any Lenders,
in each case, substantially in the form of Exhibit IIIB annexed
hereto, as they may be amended, supplemented or otherwise modified
from time to time.

"APPLICABLE MARGIN" has the meaning assigned to that term in
subsection 2.2A.

"APPRAISED VALUE" means, with respect to any Financed
Aircraft, the average of the appraised value of such Financed Aircraft
by two Approved Appraisers as most recently determined pursuant to
subsection 5.11.

"APPROVED APPRAISER" means any of the following: B.K.
Associates, Jack B. Feir Associates, Morton S. Beyer & Associates,
Airclaims, Ltd., Aircraft Information Services, Inc., Simat, Helleisen
& Eichner, Inc. and AVITAS, Inc.

"ASSET SALE" means the sale (including any sale-leaseback
transaction) by Company or any of its Subsidiaries to any other Person
of (i) any of the stock of any of Company's Subsidiaries, (ii)
substantially all of the assets of any division or line of business of
Company or any of its Subsidiaries, or (iii) any other assets (whether
tangible or intangible) of Company or any of its Subsidiaries outside
of the ordinary course of business excluding (A) any such other assets
to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to
$500,000 or less, (B) transactions related to aircraft engines,
components, parts or spare

4
<PAGE> 5
parts pursuant to customary pooling, exchange or similar arrangements
and (C) asset swaps involving aircraft engines, components, parts or
spare parts (other than any engines encumbered pursuant to an Aircraft
Chattel Mortgage); provided that the assets received by the Company or
any Subsidiary have a fair market value at least equal to the assets
transferred (provided that with respect to any asset swap or series of
related asset swaps involving assets of Company or any Subsidiary with
a fair market value exceeding $3,000,000, such determination shall be
made by the Board of Directors of Company)).

"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit VII annexed hereto.

"ATLAS ONE" means Atlas One, Inc., a Delaware corporation.

"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any
successor statute.

"BASE RATE" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds
Effective Rate.

"BASE RATE LOANS" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection
2.2A.

"BFE AGREEMENT" means (i) that certain Purchase Agreement
dated as of June 19, 1995 between Ancra International Corporation and
Company, (ii) that certain letter agreement dated March 15, 1996
between Aero Union Corporation and Company and (iii) any other
agreement relating to buyer furnished equipment entered into by
Company, in form and substance satisfactory to Administrative Agent,
in each case, as amended, restated, supplement or otherwise modified
from time to time in accordance with this Agreement.

"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the States of New
York or Colorado or is a day on which banking institutions located in
either such state are authorized or required by law or other
governmental action to close.

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

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

"CASH EQUIVALENTS" means, as at any date of determination,
(i) marketable securities (a) issued or directly and unconditionally
guaranteed as to interest and principal by the United States
Government or (b) issued by any agency of the United States the

5
<PAGE> 6
obligations of which are backed by the full faith and credit of the
United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or
any public instrumentality thereof, in each case maturing within one
year after such date and having, at the time of the acquisition
thereof, the highest rating obtainable from either S&P or Moody's;
(iii) commercial paper maturing no more than one year from the date of
creation thereof and having, at the time of the acquisition thereof, a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one
year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of
America or any state thereof or the District of Columbia that (a) is
at least "adequately capitalized" (as defined in the regulations of
its primary Federal banking regulator) and (b) has Tier 1 capital (as
defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of
its assets invested continuously in the types of investments referred
to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either
S&P or Moody's.

"CASH PROCEEDS" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment
pursuant to, or monetization of, a note receivable or otherwise, but
only as and when so received) received from such Asset Sale.

"CERTIFICATE RE NON-BANK STATUS" means a certificate
substantially in the form of Exhibit VIII annexed hereto delivered by
a Lender to Administrative Agent pursuant to subsection 2.7B(iii).

"CERTIFICATED AIR CARRIER" means a United States "air
carrier" within the meaning of the Federal Aviation Act, operating
pursuant to a certificate issued under Section 401 of such Act, or a
carrier of comparable status under any successor law or provision.

"CLOSING DATE" means the date on or before May 8, 1996 on
which the initial Loans were made to finance a portion of the purchase
of the Thai Aircraft which was leased pursuant to the New Zealand
Lease.

"COLLATERAL" means all of the properties and assets in which
Liens are purported to be granted by the Collateral Documents.

"COLLATERAL DOCUMENTS" means each First Aircraft Chattel
Mortgage and each Second Aircraft Chattel Mortgage and any security
agreement executed pursuant to subsection 5.10.

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<PAGE> 7
"COMMITMENTS" means the commitments of Lenders to make and
convert Loans as set forth in subsection 2.1A.

"COMPANY" has the meaning assigned to that term in the
introduction to this Agreement.

"COMPANY COMMON STOCK" means the common stock of Company,
par value $0.01 per share.

"COMPLIANCE CERTIFICATE" means a certificate substantially
in the form of Exhibit IV annexed hereto delivered to Administrative
Agent and Lenders by Company pursuant to subsection 5.1(iv).

"CONDEMNATION PROCEEDS" has the meaning assigned to that
term in subsection 2.4B(iii)(c).

"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the
sum of the amounts for such period of (i) Consolidated Net Income,
(ii) Consolidated Interest Expense, (iii) provisions for taxes based
on income, (iv) total depreciation expense, (v) total amortization
expense, and (vi) other non-cash items reducing Consolidated Net
Income less other non-cash items increasing Consolidated Net Income,
all of the foregoing as determined on a consolidated basis for Company
and its Subsidiaries in conformity with GAAP.

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

"CONSOLIDATED CURRENT ASSETS" means, as at any date of
determination, the total assets of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current assets
in conformity with GAAP (it being understood that Cash on hand of
$65,000,000 or less shall not be taken into account for purposes of
calculating the Consolidated Working Capital Adjustment).

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<PAGE> 8
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries
on a consolidated basis which may properly be classified as current
liabilities in conformity with GAAP.

"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year,
an amount equal to the sum of Consolidated Adjusted EBITDA for such
Fiscal Year and the Consolidated Working Capital Adjustment for such
Fiscal Year, minus the sum of the amounts for such Fiscal Year of (i)
scheduled repayments of principal of Indebtedness, mandatory
prepayments of the principal of Indebtedness (other than from the
proceeds of Asset Sales), voluntary prepayments of the principal of
Indebtedness to the extent that such amount is not simultaneously
reborrowed, and other permanent reductions in the availability of
revolving credit facilities (ii) Consolidated Interest Expense, (iii)
permitted Consolidated Capital Expenditures (net of any proceeds of
any related financing with respect to such Consolidated Capital
Expenditures), and (iv) the portion of taxes based on income or
revenues actually paid in cash.

"CONSOLIDATED FIXED CHARGES" means, for any period, the sum
of the amounts for such period of (i) Consolidated Interest Expense,
(ii) provisions for taxes based on income, (iii) one third of
Consolidated Rental Payments and (iv) scheduled repayments of
principal of Indebtedness, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with
GAAP.

"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
net interest expense (to be computed by reducing interest expense by
the amount of interest income) (including that portion attributable to
Capital Leases in accordance with GAAP and capitalized interest) of
Company and its Subsidiaries on a consolidated basis with respect to
all outstanding Indebtedness of Company and its Subsidiaries,
including, without limitation, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements, but
excluding, however, any amounts referred to in subsection 2.3 payable
to Credit Partners, Syndication Agent, Administrative Agent and
Lenders on or before the Closing Date.

"CONSOLIDATED NET INCOME" means, for any period, the net
income (or loss) of Company and its Subsidiaries on a consolidated
basis for such period taken as a single accounting period determined
in conformity with GAAP; provided that there shall be excluded (i) the
income (or loss) of any Person (other than a Subsidiary of Company) in
which any other Person (other than Company or any of its Subsidiaries)
has a joint interest, except to the extent of the amount of dividends
or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary
of Company or is merged into or consolidated with Company or any of
its Subsidiaries or that Person's assets are acquired by Company or
any of its Subsidiaries, (iii) the income of any Subsidiary of Company
to the extent that the declaration or payment of dividends

8
<PAGE> 9
or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to Asset Sales or returned
surplus assets of any Pension Plan, and (v) (to the extent not
included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.

"CONSOLIDATED NET WORTH" means, as at any date of
determination, the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficits) of
Company and its Subsidiaries on a consolidated basis determined in
conformity with GAAP.

"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the
aggregate amount of all rents paid or payable by Company and its
Subsidiaries on a consolidated basis during that period under all
Capital Leases and Operating Leases to which Company or any of its
Subsidiaries is a party as lessee (net of sublease income other than
income from ACMI Contracts).

"CONSOLIDATED TOTAL DEBT" means, as at any date of
determination, the aggregate stated balance sheet amount of all
Indebtedness of Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.

"CONSOLIDATED WORKING CAPITAL" means, as at any date of
determination, the excess of Consolidated Current Assets over
Consolidated Current Liabilities.

"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any
Fiscal Year on a consolidated basis, the amount (which may be a
negative number) by which the Consolidated Working Capital of Company
and its Subsidiaries as of the beginning of the period exceeds (or is
less than) the Consolidated Working Capital of Company and its
Subsidiaries as of the end of such period.

"CONTINGENT OBLIGATION" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person
(i) with respect to any Indebtedness, lease, dividend or other
obligation of another if the primary purpose or intent thereof by the
Person incurring the Contingent Obligation is to provide assurance to
the obligee of such obligation of another that such obligation of
another will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings, or (iii) under Interest Rate Agreements
and Currency Agreements. Contingent Obligations shall include,
without limitation, (a) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to
make

9
<PAGE> 10
take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c)
any liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether
in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet
item, level of income or financial condition of another if, in the
case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be
equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation
is specifically limited.

"CONTRACTUAL OBLIGATION", as applied to any Person, means
any provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement
or other instrument to which that Person is a party or by which it or
any of its properties is bound or to which it or any of its properties
is subject.

"CONVERSION DATE" means the date on which Revolving Loans
are converted to Term Loans pursuant to subsection 2.1A(ii).

"CREDIT PARTNERS" has the meaning assigned to that term in
the introduction to this Agreement.

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

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

"DESIGNATED INDEBTEDNESS" means Indebtedness incurred
pursuant to the ING Financing Agreement, the FINOVA Agreement, the
Pass Through Trust Documents and the Unsecured Revolving Credit
Facility, any Permitted Extension Indebtedness and any Other Permitted
Indebtedness.

"DETERMINATION DATE" has the meaning assigned to that term
in subsection 3.4C.

"DOLLARS" and the sign "$" mean the lawful money of the
United States of America.

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<PAGE> 11
"ELIGIBLE AIRCRAFT" means a Boeing 747-100, 747-200,
747-300, 747-400, DC-10-30 or MD-11 aircraft, including any engines
installed thereon and any spare engines of the same type and model,
which (i) is in a cargo configuration capable of immediate operation
in the business of Company or is eligible for delivery under the
Modification Agreement with a delivery slot available within a six
month period (or is leased in accordance with the Collateral Documents
for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of
at least 800,000 pounds, in the case of any 747-200, 747-300, or
747-400 aircraft, 750,000 pounds in the case of any 747-100 aircraft,
630,000 pounds in the case of any MD-11 aircraft and 580,000 pounds in
the case of any DC-10-30 aircraft.

"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank
organized under the laws of the United States or any state thereof;
(ii) a savings and loan association or savings bank organized under
the laws of the United States or any state thereof; (iii) a commercial
bank organized under the laws of any other country or a political
subdivision thereof; provided that (x) such bank is acting through a
branch or agency located in the United States or (y) such bank is
organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an
"accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its
businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, in each case (under clauses (i)
through (iv) above) that is reasonably acceptable to Administrative
Agent; and (B) any Lender and any Affiliate of any Lender; provided
that no Affiliate of Company shall be an Eligible Assignee.

"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan"
as defined in Section 3(3) of ERISA which is, or was at any time,
maintained or contributed to by Company or any of its ERISA
Affiliates.

"ENGINE" means, as the context requires, an Engine as
defined in a particular Aircraft Chattel Mortgage or Engines as
defined in all Aircraft Chattel Mortgages.

"ENVIRONMENTAL CLAIM" means any investigation, notice,
claim, suit or order, by any governmental authority or any Person
arising in connection with any alleged or actual violation of
Environmental Laws or with any Hazardous Material, or any actual or
alleged damage, or harm to health, safety or the environment.

"ENVIRONMENTAL LAWS" means any and all current or future
statutes, ordinances, orders, rules, regulations, guidance documents,
judgments, governmental authorizations, or any other requirement of
governmental authorities relating to environmental matters, including,
without limitation, those relating to any Hazardous Materials
Activity.

"EQUITY PROCEEDS" means the cash proceeds (net of
underwriting discounts and commissions and other reasonable costs
associated therewith) from the issuance of any

11
<PAGE> 12
equity Securities of Company including, without limitation, additional
issuances of Company Common Stock.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.

"ERISA AFFILIATE" means, as applied to any Person, (i) any
corporation which is, or was at any time, a member of a controlled
group of corporations within the meaning of Section 414(b) of the
Internal Revenue Code of which that Person is, or was at any time, a
member; (ii) any trade or business (whether or not incorporated) which
is, or was at any time, a member of a group of trades or businesses
under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a
member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which
that Person, any corporation described in clause (i) above or any
trade or business described in clause (ii) above is, or was at any
time, a member.

"EURODOLLAR RATE LOANS" means Loans bearing interest at
rates determined by reference to the Adjusted Eurodollar Rate as
provided in subsection 2.2A.

"EVENT OF DEFAULT" means each of the events set forth in
Section 7.

"EVENT OF LOSS" shall mean any of the following events with
respect to any Financed Aircraft (whether the Airframe or an Engine of
such Financed Aircraft or both): (A) loss of such or the use thereof
due to theft or disappearance of such Financed Aircraft which shall
result in the loss of possession thereof for a period of 120 days (or
for a shorter period ending on the date on which there is an insurance
settlement for a total loss on the basis of the theft or disappearance
of such Financed Aircraft); (B) the destruction, damage beyond repair
or rendition of such Financed Aircraft permanently unfit for normal
use for any reason whatsoever; (C) the condemnation, confiscation or
seizure of, or requisition of title to, or use or possession (other
than use by the United States Government if Company obtains adequate
compensation from the United States Government) of such Financed
Aircraft; (D) as a result of any rule, regulation, order or other
action by the FAA or other governmental body having jurisdiction, the
use of such Financed Aircraft in the normal course of interstate air
transportation of persons or cargo shall have been prohibited for a
period of more than nine consecutive months unless Company, prior to
the expiration of such nine month period, shall have undertaken and
shall be diligently carrying forward all steps which are necessary or
desirable to permit the normal use of such property by Company or, in
any event, if such use shall have been prohibited for a period of
twelve consecutive months; (E) the operation or location of such
Financed Aircraft, while under requisition for use by the United
States or any instrumentality or agency thereof, in any area excluded
from coverage by any insurance policy in effect with respect to such
Financed Aircraft, if Company shall be unable to obtain indemnity in
lieu thereof from the United States; (F) any damage which results

12
<PAGE> 13
in an insurance settlement with respect to such Financed Aircraft on
the basis of an actual or constructive total loss or (G) a divestiture
of such Airframe as described in Section 4(d)(iii), Section 4(d)(vi),
Section 4(d)(vii)(B) or Section 4(d)(viii)(B) of any Aircraft Chattel
Mortgage. An Event of Loss with respect to any Financed Aircraft
shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe of such Financed Aircraft.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.

"EXISTING AGREEMENT" has the meaning assigned to that term
in the Recitals hereto.

"FACILITIES" means any and all real property now, hereafter
or heretofore owned, leased, operated or used by Company or any of its
predecessors.

"FEDERAL AVIATION ACT" means the Federal Aviation Act of
1958, as amended and as recodified in Title 49, United States Code, or
any similar legislation of the United States enacted to supersede,
amend or supplement such Act and the rules and regulations promulgated
thereunder.

"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the
United States Federal Aviation Administration or any successor thereto
administering the functions of the Federal Aviation Administration
under the Federal Aviation Act.

"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day on which
is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.

"FINANCED AIRCRAFT" means all Eligible Aircraft, including
the airframes and engines, purchased by Company with proceeds of
Revolving Loans made under this Agreement and with respect to which a
First Aircraft Chattel Mortgage has been executed and delivered.

"FINOVA AGREEMENT" means that certain Secured Loan Agreement
dated as of April 11, 1996 between FINOVA and Company, as amended,
restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.

13
<PAGE> 14
"FIRST AIRCRAFT CHATTEL MORTGAGE" means, with respect to
each Eligible Aircraft purchased with the proceeds of Loans, a
Security Agreement and Chattel Mortgage (Aircraft No. ___) and
substantially in the form of Exhibit X annexed hereto granting to
Administrative Agent for the benefit of Lenders a purchase money first
priority security interest in such Eligible Aircraft, as such First
Aircraft Chattel Mortgage may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms
hereof and thereof.

"FISCAL YEAR" means (i) with respect to the financial
statements to be delivered by Company pursuant to subsection 5.1,
Company's fiscal year on the date of such delivery and (ii) for all
other purposes hereunder, a calendar year.

"FUNDING AND PAYMENT OFFICE" means the office of
Administrative Agent located at 130 Liberty Street, New York, New York
10006, Attention: Gina Thompson.

"FUNDING DATE" means the date of the funding of a Loan.

"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting
principles set forth in 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 or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (ii), (iii) and
(xiii) of subsection 5.1 shall be prepared in accordance with GAAP as
in effect at the time of such preparation (and delivered together with
the reconciliation statements provided for in subsection 5.1(v)).
Calculations in connection with the definitions, covenants and other
provisions of this Agreement shall utilize accounting principles and
policies in conformity with those used to prepare the financial
statements referred to in subsection 4.3.

"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or
from any federal, state or local governmental authority, agency or
court.

"HAZARDOUS MATERIALS" means any chemical or other material
or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any law.

"HAZARDOUS MATERIALS ACTIVITY" means any past, current,
proposed, or threatened use, storage, release, generation, treatment,
remediation or transportation of any Hazardous Material (i) from,
under, in, into or on the Facilities or surrounding property; and (ii)
caused by, or undertaken by or on behalf of, Company.

14
<PAGE> 15
"INDEBTEDNESS" means, as applied to any Person, (i) all
indebtedness for borrowed money, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability
on a balance sheet in conformity with GAAP, (iii) notes payable and
drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money, (iv) any obligation owed
for all or any part of the deferred purchase price of property or
services (excluding any such obligations incurred under ERISA), which
purchase price is (a) due more than six months from the date of
incurrence of the obligation in respect thereof or (b) evidenced by a
note or similar written instrument, and (v) all indebtedness secured
by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements
constitute Contingent Obligations and not Indebtedness.

"INDEMNITEE" has the meaning assigned to that term in
subsection 9.3.

"ING FINANCING AGREEMENT" means that certain Secured Loan
Agreement dated as of December 30, 1994 between Company and
Internationale Nederlanden Aviation Lease B.V., as amended by
Amendment No. 1 thereto and as further amended, restated, supplemented
and otherwise modified from time to time in accordance with this
Agreement.

"INSURANCE PROCEEDS" has the meaning assigned to that term
in subsection 2.4B(iii)(c).

"INTEREST PAYMENT DATE" means (i) with respect to any Base
Rate Loan, each March 31, June 30, September 30 and December 31 of
each year, commencing on the first such date to occur after the
Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the
last day of each Interest Period applicable to such Loan; provided
that in the case of each Interest Period of six months "Interest
Payment Date" shall also include the date that is three months after
the commencement of such Interest Period.

"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.

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

"INTEREST RATE DETERMINATION DATE" means, with respect to
any Interest Period, the second Business Day prior to the first day of
such Interest Period.

"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.

15
<PAGE> 16
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a
beneficial interest in, any Securities of any other Person, (ii) any
direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person
other than Company or any of its Subsidiaries, of any equity Securities
of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution by Company or any of its
Subsidiaries to any other Person (other than a wholly-owned Subsidiary
of Company), including all indebtedness and accounts receivable from
that other Person that are not current assets or did not arise from
sales to that other Person in the ordinary course of business. The
amount of any Investment shall be the original cost of such Investment
plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.

"JOINT VENTURE" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal
form; provided that in no event shall any corporate Subsidiary of any
Person be considered to be a Joint Venture to which such Person is a
party.

"LENDER" and "LENDERS" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together
with their successors and permitted assigns pursuant to subsection 9.1.

"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge, hypothecation, preference, priority, privilege, lease
or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing.

"LOAN" or "LOANS" means one or more of the Revolving Loans or
Term Loans or any combination thereof.

"LOAN DOCUMENTS" means this Agreement, the Notes, any guaranty
entered into pursuant to subsection 5.10 and the Collateral Documents.

"LOAN PARTIES" means Company and any persons who enter into
guaranties pursuant to subsection 5.10.

"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as
in effect from time to time.

"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects

16
<PAGE> 17
of Company or any of its Subsidiaries or (ii) the impairment of the
ability of any Loan Party to perform the Obligations, or the
impairment, as a result of actions or inaction by Company, of the
ability of Credit Partners, Syndication Agent, Administrative Agent or
Lenders to enforce the Obligations.

"MATERIAL AGREEMENT" means any or all of the ING Financing
Agreements, the Pass Through Trust Documents, the FINOVA Agreement,
the Unsecured Revolving Credit Facility, each Purchase Agreement, the
Modification Agreement, each BFE Agreement, the New Zealand Lease, the
Philippine Lease and agreements in respect of Permitted Extension
Indebtedness and Other Permitted Indebtedness.

"MAXIMUM NOTE AMOUNT" means, with respect to any Eligible
Aircraft, 80% of the Appraised Value of such Eligible Aircraft based
on appraisals obtained pursuant to subsection 5.11 of such Eligible
Aircraft made within 30 days prior to the purchase thereof and giving
effect to the proposed modifications of such Eligible Aircraft
pursuant to the Modification Agreement.

"MODIFICATION AGREEMENT" means that certain Modification
Agreement dated as of March 25, 1996 between Company and The Boeing
Company, as amended through the date hereof and as further amended,
restated, supplemented or otherwise modified from time to time in
accordance with this Agreement and other modification agreements
entered into by Company in form and substance satisfactory to
Administrative Agent.

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

"NET CASH PROCEEDS" means, with respect to any Asset Sale,
Cash Proceeds of such Asset Sale net of bona fide direct costs of sale
including (i) income taxes reasonably estimated to be actually payable
as a result of such Asset Sale within two years of the date of such
Asset Sale and (ii) payment of the outstanding principal amount of,
premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the stock or assets of
Company and that is required to be repaid under the terms thereof as a
result of such Asset Sale.

"NEW ZEALAND LEASE" means that certain Lease Agreement dated
as of March 29, 1996 between Company, as lessor, and Air New Zealand
Limited, as lessee, as amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement.

"NON-US LENDER" has the meaning assigned to that term in
subsection 2.7B(iii)(a).

"NOTES" means one or more of the Revolving Notes or the
Amended and Restated Notes, as the context requires.

17
<PAGE> 18
"NOTICE OF BORROWING" means a notice substantially in the
form of Exhibit I annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 2.1B with respect to a
proposed borrowing.

"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of Exhibit II annexed hereto delivered by
Company to Administrative Agent pursuant to subsection 2.2D with
respect to a proposed conversion or continuation of the applicable
basis for determining the interest rate with respect to the Loans
specified therein.

"OBLIGATIONS" means all obligations of every nature of each
Loan Party from time to time owed to Syndication Agent, Administrative
Agent, Lenders or any of them under the Loan Documents, whether for
principal, interest, fees, expenses, indemnification or otherwise.

"OFFICERS' CERTIFICATE" means, as applied to any
corporation, a certificate executed on behalf of such corporation by
its chairman of the board (if an officer) or its president or one of
its vice presidents and by its chief financial officer or its
treasurer; provided that every Officers' Certificate with respect to
the compliance with a condition precedent to the making of any Loans
hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition
and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed
opinion as to whether or not such condition has been complied with,
and (iii) a statement as to whether, in the opinion of the signers,
such condition has been complied with.

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

"OTHER PERMITTED INDEBTEDNESS" means Indebtedness incurred
for the purpose of financing the acquisition of aircraft so long as
(i) any such Indebtedness bears interest at a rate which does not
exceed 15% per annum, (ii) such Indebtedness has a final stated
maturity later than the final stated maturity of the Notes after
giving effect to the conversion of Revolving Loans into Term Loans and
(iii) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no
more onerous or restrictive from the perspective of Company and its
Subsidiaries or any less favorable, from the perspective of Lenders
than any other Designated Indebtedness.

"PART" means, as the context requires, a Part as defined in
a particular Aircraft Chattel Mortgage or Parts as defined in all
Aircraft Chattel Mortgages.

18
<PAGE> 19
"PASS THROUGH TRUST DOCUMENTS" means that certain Pass
Through Trust Agreement dated as of November 30, 1995 between Atlas
Air, Inc. and First Fidelity Bank, National Association, as Trustee
(the "PASS THROUGH TRUST AGREEMENT") and any trust indenture and
security agreements including any related trust indenture and security
agreement supplements which related to the equipment notes to be held
in trust pursuant to the Pass Through Trust Agreement and all related
agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this
Agreement.

"PERMITTED ENCUMBRANCES" means the following types of Liens
(other than any such Lien imposed pursuant to Section 401(a)(29) or
412(n) of the Internal Revenue Code or by ERISA):

(i) Liens for taxes, assessments or governmental
charges or claims the payment of which is not, at the time,
required by subsection 5.3;

(ii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics and materialmen and other
Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in
good faith by appropriate proceedings that do not involve any
danger of the sale, forfeiture or loss of any Collateral, if
such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor;

(iii) Liens incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);

(iv) any attachment or judgment Lien not
constituting an Event of Default under subsection 7.8;

(v) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other
similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries;

(vi) any (a) interest or title of a lessor or
sublessor under any lease permitted by subsection 6.9, (b)
restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to, or (c) subordination of
the interest of the lessee or sublessee under such lease to
any restriction or encumbrance referred to in the preceding
clause (b);

19
<PAGE> 20
(vii) Liens arising from filing UCC financing
statements relating solely to leases permitted by this
Agreement;

(viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;

(ix) the rights of others under agreements or
arrangements to the extent expressly permitted by the terms of
Sections 4(d) and 4(e) of the First Aircraft Chattel
Mortgages;

(x) Liens described in Schedule 6.2 annexed
hereto; and

(xi) Liens granted pursuant to the Collateral
Documents.

"PERMITTED EXTENSION INDEBTEDNESS" means renewals,
extensions, substitutions, refinancings or replacements (each an
"EXTENSION") by Company of any Indebtedness of Company, including
any such successive transactions by Company, so long as (i) any such
Indebtedness bears interest at a rate which does not exceed 15% per
annum, (ii) any such Permitted Extension Indebtedness shall be in a
principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be
paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of Company incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is
made subordinate to the Obligations at least to the same extent as the
Indebtedness immediately prior to such extension, (iv) such Permitted
Extension Indebtedness has a final stated maturity later than the
final stated maturity of the Notes after giving effect to the
conversion of Revolving Loans into Term Loans and (v) the amortization
and the other terms, provisions, conditions, covenants and events of
default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Company and its Subsidiaries or
any less favorable, from the perspective of Lenders than those
contained in the Indebtedness immediately prior to such extension.

"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.

"PHILIPPINE AIRCRAFT" means the Financed Aircraft subject to
the Philippine Lease.

"PHILIPPINE LEASE" means, that certain Lease Agreement dated
as of February 23, 1995 by and between First Security Bank of Utah,
National Association and Philippine Airlines Inc. as amended by an
Amendment dated March 31, 1995, as

20
<PAGE> 21
modified pursuant to an acknowledgement dated December 31, 1996 by and
between Philippine Airlines and Company, and as assigned to Atlas Air,
Inc. pursuant to an Assignment and Acceptance of Lease dated December
31, 1996 as the Lease Agreement may be further amended, restated,
supplemented or otherwise modified from time to time in accordance
with this Agreement.

"POTENTIAL EVENT OF DEFAULT" means a condition or event
that, after notice or the expiration of any grace period or both,
would constitute an Event of Default.

"PRICING CERTIFICATE" has the meaning assigned to that term
in subsection 5.1(xvii).

"PRICING REDUCTION" means, if at any time Company's
obligations in respect of the Pass Through Trust Documents are rated
by Moody's or S&P at the levels specified below, a pricing reduction
equal to the percentage corresponding to the applicable rating set
forth in the chart below:

<TABLE>
<CAPTION>
Rating Pricing Reduction
------ -----------------
<S> <C>
Ba 3 or below by Moody's and
BB- or below by S&P None

Ba 2 by Moody's and
BB by S&P 0.25%

Ba 1 or higher by Moody's and
BB+ by S&P 0.50%
</TABLE>

In the event of a split rating, the more creditworthy of the two
ratings shall be used to determine the Pricing Reduction; provided
that, if the less creditworthy of the two ratings is two or more
rating categories below the more creditworthy rating, the more
creditworthy rating shall be deemed to be the rating category which is
one rating category above the less creditworthy rating. The Pricing
Reduction shall be determined with reference to the most recent
Pricing Certificate delivered by Company to Administrative Agent
pursuant to subsection 5.1(xvii). Any changes to the Pricing
Reduction shall become effective on the day following the delivery of
the relevant Pricing Certificate to Administrative Agent and shall
remain in effect through the next date a Pricing Certificate is
required to be delivered. It is understood and agreed that the
Pricing Reduction percentages provided are not cumulative.
Notwithstanding anything to the contrary herein, at any time an Event
of Default shall have occurred and be continuing, the Pricing
Reduction shall be zero.

"PRIME RATE" means the rate that Administrative Agent
announces from time to time as its prime lending rate, as in effect
from time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged

21
<PAGE> 22
to any customer. Administrative Agent or any other Lender may make
commercial loans or other loans at rates of interest at, above or
below the Prime Rate.

"PRO FORMA BASIS" means, with respect to compliance with any
covenant hereunder, compliance with such covenant after giving effect
to any proposed incurrence of Indebtedness by Company or any of its
Subsidiaries and the application of the proceeds thereof, the
acquisition (whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any company, entity or
business or any asset (including any ACMI Contracted Aircraft) by
Company or any of its Subsidiaries or any other related action which
requires compliance on a Pro Forma Basis. In making any determination
of compliance on a Pro Forma Basis, such determination shall be
performed after good faith consultation with Administrative Agent
using the consolidated financial statements of Company and its
Subsidiaries which shall be reformulated as if any such incurrence of
Indebtedness and the application of proceeds, acquisition, disposition
or other related action had been consummated at the beginning of the
period specified in the covenant with respect to which Pro Forma Basis
compliance is required.

"PRO RATA SHARE" means, with respect to each Lender, (i)
prior to any Conversion Date the percentage obtained by dividing the
Revolving Loan Exposure of that Lender by the aggregate Revolving Loan
Exposure of all Lenders, and (ii) thereafter, the percentage obtained
by dividing the Term Loan Exposure of that Lender by the aggregate
Term Loan Exposure of all Lenders, in each case as such percentage may
be adjusted by assignments permitted pursuant to subsection 9.1. The
initial Pro Rata Share of each Lender is set forth opposite the name
of that Lender in Schedule 2.1 annexed hereto.

"PROCEEDINGS" has the meaning assigned to that term in
subsection 5.1(x).

"PURCHASE AGREEMENT" means, with respect to the purchase of
any Eligible Aircraft to be financed with the proceeds of Revolving
Loans, an aircraft purchase agreement and any related bill of sale
providing, among other things, for the sale to Company of such
Eligible Aircraft in form and substance satisfactory to Administrative
Agent.

"REFERENCE LENDERS" means Bankers Trust and one or more
other Lenders designated by Credit Partners and Administrative Agent
and reasonably satisfactory to Company.

"REGISTER" has the meaning assigned to that term in
subsection 2.1.E.

"REGULATION D" means Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.

22
<PAGE> 23
"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Materials into
the indoor or outdoor environment (including, without limitation, the
abandonment or disposal of any barrels, containers or other closed
receptacles containing any Hazardous Materials), or into or out of any
Facility, including the movement of any Hazardous Material through the
air, soil, surface water, groundwater or property.

"REQUISITE LENDERS" means Lenders having or holding 50.1% or
more of (i) prior to any Conversion Date, the aggregate Revolving Loan
Exposure of all Lenders and (ii) thereafter, the aggregate Term Loan
Exposure of all Lenders.

"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any
class of stock of Company now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to the
holders of that class, (ii) any redemption, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Company now or hereafter
outstanding, and (iv) any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in-substance or legal defeasance), sinking fund
or similar payment with respect to, any Designated Indebtedness.

"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to
make Revolving Loans to Company pursuant to subsection 2.1A(i), and
"REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders in
the aggregate.

"REVOLVING LOAN COMMITMENT TERMINATION DATE" means June 30,
1998.

"REVOLVING LOAN EXPOSURE" means, with respect to any Lender
as of any date of determination (i) prior to the termination of the
Revolving Loan Commitments, that Lender's Revolving Loan Commitment
and (ii) after the termination of the Revolving Loan Commitments, the
aggregate outstanding principal amount of the Revolving Loans of that
Lender.

"REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(i).

"REVOLVING NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1D on the Closing Date and on each
Funding Date on which Company purchases an aircraft with the proceeds
of Revolving Loans and (ii) any promissory notes issued by Company
pursuant to the last sentence of subsection 9.1B(i) in connection with
assignments of the Revolving Loan Commitments and Revolving Loans of
any Lenders,

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<PAGE> 24
in each case substantially in the form of Exhibit IIIA annexed hereto,
as they may be amended, supplemented or otherwise modified from time
to time.

"S&P" means Standard & Poor's Corporation.

"SECOND AIRCRAFT CHATTEL MORTGAGE" means with respect to
each Eligible Aircraft purchased with the proceeds of Loans, a Second
Security Agreement and Chattel Mortgage (Aircraft No. _____) and
substantially in the form of Exhibit XI annexed hereto, granting a
security interest in such Eligible Aircraft and Parts securing all
Obligations that are not secured by the First Chattel Mortgage entered
into concurrently therewith, as such Second Aircraft Chattel Mortgage
may be amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms hereof and thereof.

"SECOND AMENDED AND RESTATED CLOSING DATE" means the date on
or before February 28, 1997, on which the conditions set forth in
subsection 3.6 are met and this Agreement becomes effective.

"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation
in any profit-sharing agreement or arrangement, options, warrants,
bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities" or any certificates
of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.

"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time, and any successor statute.

"SOLVENT" means, with respect to any Person, that as of the
date of determination both (A) (i) the then fair saleable value of the
property of such Person is (y) greater than the total amount of
liabilities (including contingent liabilities) of such Person and (z)
not less than the amount that will be required to pay the probable
liabilities on such Person's then existing debts as they become
absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such
Person's capital is not unreasonably small in relation to its business
or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably
believe) that it will incur, debts beyond its ability to pay such
debts as they become due; and (B) such Person is "solvent" within
the meaning given that term and similar terms under applicable laws
relating to fraudulent transfers and conveyances. For purposes of
this definition, the amount of any contingent liability at any time
shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

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<PAGE> 25
"SPECIAL PURPOSE SUBSIDIARY" means (i) a Subsidiary of
Company formed solely for the purpose of refinancing Notes associated
with a Financed Aircraft or acquiring or refinancing other aircraft
with Other Permitted Indebtedness the only assets of which are such
Financed Aircraft and contributions to capital of such Subsidiary,
which together with all other contributions to capital made to other
such Subsidiaries, are not in excess of 15% of the consolidated book
value of the assets of the Company and its Subsidiaries, and the only
liability of which is the Permitted Extension Indebtedness incurred to
refinance such Notes; provided that Company beneficially owns and
controls at least 95% of the issued and outstanding capital stock of
such Subsidiary or (ii) a wholly-owned Subsidiary formed pursuant to
subsection 9.21.

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

"SUPPLEMENTAL TYPE CERTIFICATES" has the meaning assigned to
that term in the First Aircraft Chattel Mortgage.

"SYNDICATION AGENT" means Goldman Sachs in its capacity as
syndication agent.

"TAX" or "TAXES" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and
whatever called, by whomsoever, on whomsoever and wherever imposed,
levied, collected, withheld or assessed; provided that "TAX ON THE
OVERALL NET INCOME" of a Person shall be construed as a reference to
a tax imposed by the jurisdiction in which that Person's principal
office (and/or, in the case of a Lender, its lending office) is
located or in which that Person is deemed to be doing business on all
or part of the net income, profits or gains of that Person (whether
worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or
otherwise).

"TERM LOAN COMMITMENT" means the commitment of a Lender to
convert Revolving Loans into Term Loans pursuant to subsection
2.1A(ii), and "TERM LOAN COMMITMENTS" means such commitments of all
Lenders in the aggregate.

"TERM LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to any Conversion Date, that
Lender's Term Loan Commitment and (ii) thereafter, the outstanding
principal amount of the Term Loan of that Lender.

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<PAGE> 26
"TERM LOANS" means the Loans converted into Term Loans
pursuant to subsection 2.1A(ii).

"THAI AIRCRAFT" means the Financed Aircraft subject to that
certain First Security Agreement and Chattel Mortgage (Aircraft No.
21782) dated the Closing Date between Company and Administrative
Agent, as amended, restated, supplement or otherwise modified from
time to time in accordance with the terms hereof and thereof.

"UNITED STATES CITIZEN" has the meaning assigned to that
term in subsection 4.1B.

"UNSECURED REVOLVING CREDIT FACILITY" means that certain
credit facility to be entered into between Atlas Air, Inc. and Bank
One, Colorado, N.A., which provides for a $25,000,000 revolving
working capital line of credit and a $1,000,000 term real estate loan,
on terms substantially similar to the term sheet delivered to
Administrative Agent as amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement.

1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT.

Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP.

1.3 OTHER DEFINITIONAL PROVISIONS.

References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.

SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

2.1 COMMITMENTS; MAKING OF LOANS; NOTES; REGISTER.

A. COMMITMENTS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company
herein set forth, each Lender hereby severally agrees to make the Loans
described in this subsection 2.1A.

(i) Revolving Loans. Prior to the Second Amended and
Restated Closing Date, Lenders have made Revolving Loans in the
aggregate principal amount of

26
<PAGE> 27
$135,469,221.60 against the Revolving Loan Commitments, the proceeds
of which were used to purchase and modify Eligible Aircraft. From and
after the Second Amended and Restated Closing Date, each Lender
severally agrees, subject to the conditions set forth in Section 3 and
subject to the limitations set forth below, to lend to Company from
time to time during the period from the Closing Date to but excluding
the Revolving Loan Commitment Termination Date an aggregate amount,
together with the amount of Revolving Loans made prior to the Second
Amended and Restated Closing Date, not exceeding its Pro Rata Share of
the aggregate amount of the Revolving Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each
Lender's Revolving Loan Commitment on the date hereof is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate
amount of the Revolving Loan Commitments on the date hereof is
$275,000,000; provided that the Revolving Loan Commitments of Lenders
shall be adjusted to give effect to any assignments of the Revolving
Loan Commitments pursuant to subsection 9.1B; and provided, further
that the amount of the Revolving Loan Commitments shall be reduced
from time to time by the amount of any reductions thereto made
pursuant to subsection 2.4B(ii). Each Lender's Revolving Loan
Commitment shall expire on the Revolving Loan Commitment Termination
Date and all Revolving Loans and all other amounts owed hereunder with
respect to the Revolving Loans and the Revolving Loan Commitments
shall be paid in full no later than that date unless converted to Term
Loans pursuant to subsection 2.1A(ii). Amounts borrowed under this
subsection 2.1A may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date. Amounts reborrowed after
prepayment pursuant to subsection 2.4B(iii)(e) shall be allocated
ratably among the Revolving Notes relating to all Financed Aircraft.

Anything to the contrary in this Agreement notwithstanding,
the Revolving Loans shall be subject to the limitation that in no
event shall the Lenders lend an amount in excess of (x) on the date of
acquisition of an Eligible Aircraft the lesser of (i) an amount equal
to the purchase price of such Eligible Aircraft and (ii) 80% of the
Appraised Value of such Eligible Aircraft as of the date of
acquisition (but without giving effect to the contemplated
modifications) or (y) on any date Revolving Loans are made to finance
the modification of an Eligible Aircraft, 80% of the cost thereof as
reflected in invoices delivered to Administrative Agent pursuant to
subsection 3.3A (other than the final Revolving Loan to finance the
cost of modification of such Eligible Aircraft which may be in an
amount up to the lesser of (x) 100% of the costs of modification
associated with such final Revolving Loan and (y) an amount which when
added to all other Loans made with respect to such Eligible Aircraft
does not exceed 80% of the Appraised Value as set forth in appraisals
delivered pursuant to subsection 3.2(iv) after giving effect to
completion of modification).

(ii) Term Loans. Each Lender severally agrees, at the
request of Company, to convert all of its Revolving Loans outstanding
on the Revolving Loan Commitment Termination Date into Term Loans upon
the terms and conditions set forth in this Agreement. Any request by
Company for a conversion of Revolving Loans to Term

27
<PAGE> 28
Loans shall be made at least 30 days prior to the Revolving Loan
Commitment Termination Date and shall be accompanied by an Officer's
Certificate stating that no Potential Event of Default or Event of
Default has occurred and is continuing. On the Conversion Date,
Company shall deliver to each Lender an Amended and Restated Note with
respect to each Financed Aircraft in substantially the form of Exhibit
IIIB annexed hereto and such further documents as Administrative Agent
may reasonably request.

B. BORROWING MECHANICS. Revolving Loans made on any Funding Date
shall be in an aggregate minimum amount of $1,500,000. Whenever Company
desires that Lenders make Revolving Loans it shall deliver to Administrative
Agent a Notice of Borrowing no later than 12:00 Noon (New York time) at least
three Business Days in advance of the proposed Funding Date (in the case of a
Eurodollar Rate Loan) or at least one Business Day in advance of the proposed
Funding Date (in the case of a Base Rate Loan). The Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount of Loans requested, (iii) whether such Loans shall be Base Rate Loans or
Eurodollar Rate Loans, (iv) in the case of any Loans requested to be made as
Eurodollar Rate Loans, the initial Interest Period requested therefor and (v)
whether such Loans are for the purpose of the purchase or the modification of
an Eligible Aircraft. Revolving Loans and Term Loans may be continued as or
converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided
in subsection 2.2D. In lieu of delivering the above-described Notice of
Borrowing, Company may give Administrative Agent telephonic notice by the
required time of any proposed borrowing under this subsection 2.1B; provided
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Administrative Agent on or before the applicable Funding Date.

Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.

Company shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds
of any Loans shall constitute a re-certification by Company, as of the
applicable Funding Date, as to the matters to which Company is required to
certify in the applicable Notice of Borrowing.

Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in
accordance therewith.

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<PAGE> 29
C. DISBURSEMENT OF FUNDS. All Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic
notice in lieu thereof), Administrative Agent shall notify each Lender of the
proposed borrowing. Each Lender shall make the amount of its Loan available to
Administrative Agent not later than 12:00 Noon (New York time) on the
applicable Funding Date, in each case in same day funds in Dollars, at the
Funding and Payment Office.

Unless Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to
make available to Administrative Agent the amount of such Lender's Loan
requested on such Funding Date, Administrative Agent may assume that such
Lender has made such amount available to Administrative Agent on such Funding
Date and Administrative Agent may, in its sole discretion, but shall not be
obligated to, make available to Company a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to
Administrative Agent by such Lender, Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from such Funding Date until the date such
amount is paid to Administrative Agent, at the customary rate set by
Administrative Agent for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. If such Lender does not pay
such corresponding amount forthwith upon Administrative Agent's demand
therefor, Administrative Agent shall promptly notify Company and Company shall
immediately pay such corresponding amount to Administrative Agent together with
interest thereon, for each day from such Funding Date until the date such
amount is paid to Administrative Agent, at the rate payable under this
Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed
to relieve any Lender from its obligation to fulfill its Commitments hereunder
or to prejudice any rights that Company may have against any Lender as a result
of any default by such Lender hereunder.

D. NOTES. Company shall execute and deliver on the Closing Date
to each Lender (or to Administrative Agent for that Lender), with respect to
each Eligible Aircraft purchased by Company on the Closing Date, a Revolving
Note substantially in the form of Exhibit IIIA annexed hereto to evidence that
Lender's Revolving Loans in respect of such Eligible Aircraft, in the principal
amount of such Eligible Aircraft's Maximum Note Amount and with other
appropriate insertions. Following the Closing Date, on each date on which
Company delivers a Notice of Borrowing pursuant to subsection 2.1B for the
purpose of financing the purchase of an Eligible Aircraft, Company shall
execute and deliver on such date to each Lender (or to Administrative Agent for
that Lender) with respect to such Eligible Aircraft a Revolving Note
substantially in the form of Exhibit IIIA annexed hereto to evidence that
Lender's Revolving Loans in respect of such Eligible Aircraft in the principal
amount of such Eligible Aircraft's Maximum Note Amount with other appropriate
insertions. Company shall execute and deliver

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<PAGE> 30
on the Conversion Date an Amended and Restated Note substantially in the form
of Exhibit IIIB annexed hereto amending and restating each Revolving Note to
evidence that Lender's Term Loans in the principal amount of such Revolving
Note and with other appropriate insertions.

E. THE REGISTER.

(i) Administrative Agent shall maintain, at its address
referred to in subsection 9.8, a register for the recordation of the
names and addresses of Lenders and the Commitments and Loans of each
Lender from time to time (the "REGISTER"). The Register shall be
available for inspection by Company or any Lender at any reasonable
time and from time to time upon reasonable prior notice.

(ii) Administrative Agent shall record in the Register the
Revolving Loan commitment and the Term Loan Commitment and the
Revolving Loans and Term Loans from time to time of each Lender and
each repayment or prepayment in respect of the principal amount of the
Revolving Loans or Term Loans of each Lender. Any such recordation
shall be conclusive and binding on Company and each Lender, absent
manifest error; provided that failure to make any such recordation, or
any error in such recordation, shall not affect Company's Obligations
in respect of the applicable Loans.

(iii) Each Lender shall record on its internal records
(including, without limitation the Notes held by such Lender) the
amount of each Revolving Loan and each Term Loan made by it and each
payment in respect thereof. Any such recordation shall be conclusive
and binding on Company, absent manifest error; provided that failure
to make any such recordation, or any error in such recordation, shall
not affect Company's Obligations in respect of the applicable Loans;
and provided, further, that in the event of any inconsistency between
the Register and any Lender's records, the recordations in the
Register shall govern.

(iv) Company, Administrative Agent and Lenders shall deem
and treat the Persons listed as Lenders in the Register as the holders
and owners of the corresponding Commitments and Loans listed therein
for all purposes hereof, and no assignment or transfer of any such
Commitment or Loan shall be effective, in each case unless and until
an assignment Agreement effecting the assignment or transfer thereof
shall have ben accepted by Administrative Agent and recorded in the
Register as provided in subsection 9.1B(ii). Prior to such
recordation, all amounts owed with respect to the applicable
Commitment or Loan shall be owed to the Lender listed in the Register
as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Commitments or Loans.

(v) Company hereby designates Administrative Agent to
serve as Company's agent solely for purposes of maintaining the
Register as provided in this subsection 2.1E,

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<PAGE> 31
and Company hereby agrees that, to the extent Administrative Agent
serves in such capacity, Administrative Agent and its officers,
directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 9.3.

F. REALLOCATION OF PRO RATA SHARES. On the Second Amended and
Restated Closing Date, each Lender that will have a greater Pro Rata
Share upon the Second Amended and Restated Closing Date than its Pro
Rata Share (under and as defined in the Existing Credit Agreement)
immediately prior to the Second Amended and Restated Closing Date
(including any Lender not party to the Existing Credit Agreement
immediately prior to the Second Amended and Restated Closing Date)
(each a "PURCHASING LENDER"), without executing an Assignment
Agreement, shall be deemed to have automatically purchased assignments
pro rata from each Lender that will have a smaller Pro Rata Share upon
the Second Amended and Restated Closing Date (a "SELLING LENDER") in
all such Selling Lenders' rights and obligations under this Agreement
and the other Loan Documents, including with respect to Revolving Loan
Commitments and outstanding Revolving Loans (collectively, except as
set forth below, the "ASSIGNED RIGHTS AND OBLIGATIONS") so that,
after giving effect to such assignments, each Lender shall have its
respective Pro Rata Share as set forth in Schedule 2.1 of the Assigned
Rights and Obligations. Each such purchase hereunder shall be at par
for a purchase price equal to the principal amount of Loans and
without recourse, representation or warranty, except that, each
Selling Lender shall be deemed to represent and warrant to each
Purchasing Lender that the Assigned Rights and Obligations of such
Selling Lender are not subject to any Liens created by that Selling
Lender.

Administrative Agent shall calculate the net amount to be paid
or received by each Lender in connection with the assignments effected
hereunder on the Second Amended and Restated Closing Date. Each
Purchasing Lender required to make a payment shall make the net amount
of its required payment available to Administrative Agent, in same day
funds, at the office of Administrative Agent located at One Bankers
Trust Plaza, 130 Liberty Street, New York, New York, not later than
12:00 p.m. (New York time) on the Second Amended and Restated Closing
Date. Administrative Agent shall distribute on the Second Amended and
Restated Closing Date the proceeds of such amounts to the Selling
Lenders entitled to receive payments, pro rata in proportion to the
amount each Selling Lender is entitled to receive at the primary
address set forth below such Selling Lender's name on the signature
pages hereof or at such other address as such Selling Lender may
request in writing to Administrative Agent.

2.2 INTEREST ON THE LOANS.

A. RATE OF INTEREST. Subject to the provisions of subsections
2.6 and 2.7, each Revolving Loan and each Term Loan shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate
or the Adjusted Eurodollar Rate, as the case may be. The applicable basis for
determining the rate of interest with respect to any Loan shall be selected by

31
<PAGE> 32
Company initially at the time a Notice of Borrowing is given with respect to
such Loan pursuant to subsection 2.1B; provided that for the first 60 days
following the Closing Date, only Eurodollar Rate Loans with Interest Periods of
one month shall be available. The basis for determining the interest rate with
respect to any Revolving Loan or any Term Loan may be changed from time to time
pursuant to subsection 2.2D. If on any day a Revolving Loan or a Term Loan is
outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.

Subject to the provisions of subsections 2.2E and 2.7, each Revolving
Loan and each Term Loan shall bear interest through maturity as follows:

(i) if a Base Rate Loan, then at the sum of the Base Rate
plus the Applicable Margin per annum; or

(ii) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin per annum.

The "APPLICABLE MARGIN" for each Base Rate Loan and Eurodollar Rate
Loan shall be the percentage set forth below for that type of Loan for the
periods set forth below.

<TABLE>
<CAPTION>
---------------------------------------------------------------------
APPLICABLE MARGIN
-------------------------
BASE EURODOLLAR
TIME PERIOD RATE LOAN RATE LOAN
---------------------------------------------------------------------
<S> <C> <C>
From the Closing Date through the
second anniversary of the Closing Date 1.50% 2.50%
---------------------------------------------------------------------
Thereafter 2.00% 3.00%
---------------------------------------------------------------------
</TABLE>

Notwithstanding the foregoing, the Applicable Margin shall be reduced in an
amount equal to the applicable Pricing Reduction effective from the date
following the delivery by Company to Administrative Agent of a Pricing
Certificate through the date a subsequent Pricing Certificate is required to be
delivered. If Company fails to deliver a Pricing Certificate or delivers an
incorrect Pricing Certificate, no Pricing Reduction shall be effective until
Company delivers a correct Pricing Certificate.

B. INTEREST PERIODS. In connection with each Eurodollar Rate
Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
that:

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<PAGE> 33
(i) the initial Interest Period for any Eurodollar Rate
Loan shall commence on the Funding Date in respect of such Loan, in
the case of a Loan initially made as a Eurodollar Rate Loan, or on the
date specified in the applicable Notice of Conversion/Continuation, in
the case of a Loan converted to a Eurodollar Rate Loan;

(ii) in the case of immediately successive Interest
Periods applicable to a Eurodollar Rate Loan continued as such
pursuant to a Notice of Conversion/Continuation, each successive
Interest Period shall commence on the day on which the next preceding
Interest Period expires;

(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
would otherwise expire on a day that is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;

(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;

(v) no Interest Period with respect to any portion of the
Term Loans shall extend beyond June 30, 2000;

(vi) no Interest Period with respect to any portion of the
Term Loans shall extend beyond a date on which Company is required to
make a scheduled payment of principal of the Term Loans unless the sum
of (a) the aggregate principal amount of Term Loans that are Base Rate
Loans plus (b) the aggregate principal amount of Term Loans that are
Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the
Term Loans on such date;

(vii) there shall be no more than twelve Interest Periods
outstanding at any time; and

(viii) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of Conversion/Continuation, Company shall be
deemed to have selected an Interest Period of one month.

C. INTEREST PAYMENTS. Subject to the provisions of subsection
2.2E, interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).

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<PAGE> 34
D. CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.6, Company shall have the option (i) to convert at any time all or
any part of its outstanding Revolving Loans or Term Loans equal to $3,000,000
and integral multiples of $100,000 in excess of that amount from Loans bearing
interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by reference to an alternative basis or (ii) upon
the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to
continue all or any portion of such Loan equal to $3,000,000 and integral
multiples of $100,000 in excess of that amount as a Eurodollar Rate Loan;
provided, however, that a Eurodollar Rate Loan may only be converted into a
Base Rate Loan on the expiration date of an Interest Period applicable thereto.

Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of,
a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default
has occurred and is continuing. In lieu of delivering the above-described
Notice of Conversion/Continuation, Company may give Administrative Agent
telephonic notice by the required time of any proposed conversion/continuation
under this subsection 2.2D; provided that such notice shall be promptly
confirmed in writing by delivery of a Notice of Conversion/ Continuation to
Administrative Agent on or before the proposed conversion/continuation date.

Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or
for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to
any such telephonic notice Company shall have effected a conversion or
continuation, as the case may be, hereunder.

Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to effect a conversion or continuation in accordance
therewith.

E. DEFAULT RATE. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due

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and payable hereunder, shall thereafter bear interest (including post-petition
interest in any proceeding under the Bankruptcy Code or other applicable
bankruptcy laws) payable upon demand at a rate that is 2% per annum in excess
of the interest rate otherwise payable under this Agreement with respect to the
applicable Loans (or, in the case of any such fees and other amounts, at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans) ; provided that, in the case of Eurodollar
Rate Loans, upon the expiration of the Interest Period in effect at the time
any such increase in interest rate is effective such Eurodollar Rate Loans
shall thereupon become Base Rate Loans and shall thereafter bear interest
payable upon demand at a rate which is 2% per annum in excess of the interest
rate otherwise payable under this Agreement for Base Rate Loans. Payment or
acceptance of the increased rates of interest provided for in this subsection
2.2E is not a permitted alternative to timely payment and shall not constitute
a waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of Administrative Agent or any Lender.

F. COMPUTATION OF INTEREST. Interest on each Loan shall be
computed on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan or the first day of an Interest
Period applicable to such Loan or, with respect to a Base Rate Loan being
converted from a Eurodollar Rate Loan, the date of conversion of such
Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one
day's interest shall be paid on that Loan.

2.3 FEES.

A. COMMITMENT FEES. Company agrees to pay to Administrative
Agent, for distribution to each Lender in proportion to that Lender's Pro Rata
Share, commitment fees for the period from and including the Closing Date to
and excluding the Revolving Loan Commitment Termination Date equal to the
average of the daily excess of the Revolving Loan Commitments over the
aggregate principal amount of Revolving Loans outstanding multiplied by
one-half of 1% (.50%) per annum, such commitment fees to be calculated on the
basis of a 360-day year and the actual number of days elapsed and to be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing on the first such date to occur after the Closing Date, and on
the Revolving Loan Commitment Termination Date.

B. ADMINISTRATIVE FEE. Company agrees to pay to Administrative
Agent, an Administrative Agent's fee in the amount of $75,000 on the Closing
Date and on each anniversary thereof.

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C. OTHER FEES. Company agrees to pay to Credit Partners, Goldman
Sachs and Administrative Agent such other fees in the amounts and at the times
separately agreed upon between Company and Credit Partners, Goldman Sachs and
Administrative Agent.

2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS.

A. SCHEDULED REDUCTIONS OF TERM LOAN COMMITMENTS. Company shall
make principal payments on the Term Loans in installments the last day of each
fiscal quarter commencing on September 30, 1998 in an amount equal to 1/12th of
the principal amount of Term Loans outstanding on the Conversion Date; provided
that such scheduled installments of principal of the Term Loans shall be
reduced in connection with any voluntary or mandatory prepayments of the Term
Loans in accordance with subsection 2.4B(iv); and provided, further that the
Term Loans and all other amounts owed hereunder with respect to the Term Loans
shall be paid in full no later than June 30, 2000, and the final installment
payable by Company in respect of the Term Loans on such date shall be in an
amount, sufficient to repay all amounts owing by Company under this Agreement
with respect to the Term Loans. Any payment pursuant to this subsection 2.4A
will be applied ratably among the Notes relating to all Financed Aircraft;
provided that, at Administrative Agent's election, any prepayment may be deemed
first to pay Loans made to finance labor costs associated with conversion, if
any, and second to pay Loans made to finance other costs of conversion of the
Financed Aircraft and thereafter to all other Loans.

B. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN
COMMITMENTS.

(i) Voluntary Prepayments. Company may, upon not less
than three Business Days' prior written or telephonic notice given to
Administrative Agent by 12:00 Noon (New York time) on the date
required and, if given by telephone, promptly confirmed in writing to
Administrative Agent (which original written or telephonic notice
Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time prepay,
without premium or penalty (other than pursuant to subsection 2.6D),
any Term Loans or Revolving Loans on any Business Day in whole or in
part in an aggregate minimum amount of $3,000,000 and integral
multiples of $100,000 in excess of that amount; provided, however,
that a Eurodollar Rate Loan may only be prepaid on the expiration of
the Interest Period applicable thereto. Notice of prepayment having
been given as aforesaid, the principal amount of the Loans specified
in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as
specified in subsection 2.4B(iv).

(ii) Voluntary Reductions of Revolving Loan Commitments.
Company may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender), at
any

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time and from time to time terminate in whole or permanently reduce in
part, without premium or penalty (other than pursuant to subsection
2.6D), the Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the aggregate amount of
all outstanding Revolving Loans at the time of such proposed
termination or reduction; provided that any such partial reduction of
the Revolving Loan Commitments shall be in an aggregate minimum amount
of $3,000,000 and integral multiples of $100,000 in excess of that
amount. Company's notice to Administrative Agent shall designate the
date (which shall be a Business Day) of such termination or reduction
and the amount of any partial reduction, and such termination or
reduction of the Revolving Loan Commitments shall be effective on the
date specified in Company's notice and shall reduce the Revolving Loan
Commitment of each Lender proportionately to its Pro Rata Share.

(iii) Mandatory Prepayments and Mandatory Reductions of
Revolving Loan Commitments.

(a) Prepayments and Reductions from Asset Sales.
No later than the second Business Day following the date of
receipt by Company or any of its Subsidiaries of Cash Proceeds
of any Asset Sale, Company shall (1) if such Asset Sale occurs
prior to the Conversion Date, prepay, without premium or
penalty (other than pursuant to subsection 2.6D), the
Revolving Loans in an amount equal to the Net Cash Proceeds of
such Asset Sale and (2) if such Asset Sale occurs following
the Conversion Date, prepay, without premium or penalty (other
than pursuant to subsection 2.6D), Term Loans in such amount;
provided that, with respect to Asset Sales which do not
include the sale of a Financed Aircraft, Company may retain
Net Cash Proceeds in respect of such Asset Sales of up to $10
million in any Fiscal Year and $20 million in the aggregate.
Concurrently with any prepayment of the Loans pursuant to this
subsection 2.4B(iii)(a), Company shall deliver to
Administrative Agent an Officers' Certificate demonstrating
the derivation of the Net Cash Proceeds of the correlative
Asset Sale from the gross sales price thereof. In the event
that Company shall, at any time after receipt of Cash Proceeds
of any Asset Sale requiring a prepayment pursuant to this
subsection 2.4B(iii)(a), determine that the prepayments
previously made in respect of such Asset Sale were in an
aggregate amount less than that required by the terms of this
subsection 2.4B(iii)(a), Company shall promptly make an
additional prepayment of the Revolving Loans or Term Loans, as
the case may be, in the manner described above in an amount
equal to the amount of any such deficit, and Company shall
concurrently therewith deliver to Administrative Agent an
Officers' Certificate demonstrating the derivation of the
additional Net Cash Proceeds resulting in such deficit. Any
mandatory prepayments pursuant to this subsection 2.4B(iii)(a)
shall be applied as specified in subsection 2.4B(iv).

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(b) Prepayments and Reductions Due to Issuance of
Certain Indebtedness. On the date of receipt by Company of
the cash proceeds (net of underwriting discounts and
commissions and other reasonable costs associated therewith)
from the issuance of Permitted Extension Indebtedness with
respect to a Financed Aircraft, Company shall (1) if such
issuance occurs prior to the Conversion Date, prepay, without
premium or penalty (other than pursuant to subsection 2.6D),
the Revolving Loans in an amount equal to such net cash
proceeds and (2) if such issuance occurs following the
Conversion Date, prepay, without premium or penalty (other
than pursuant to subsection 2.6D), Term Loans in such amount.
Any such mandatory prepayments shall be applied as specified
in subsection 2.4B(iv).

(c) Prepayments and Reductions Due to Insurance
and Condemnation Proceeds. No later than the second Business
Day following the date of receipt by Company or any of its
Subsidiaries of any cash payments under any of the casualty
insurance policies covering damage to or loss of property
maintained pursuant to subsection 5.4 resulting from damage to
or loss of all or any portion of the Collateral or any other
tangible asset (net of actual and documented reasonable costs
incurred by Company in connection with adjustment and
settlement thereof, "INSURANCE PROCEEDS") or any proceeds
resulting from the taking of assets by the power of eminent
domain, condemnation or otherwise (net of actual and
documented reasonable costs incurred by Company in connection
with adjustment and settlement thereof, "CONDEMNATION
PROCEEDS") (other than (x) the portion of such proceeds
promptly applied to repair or replace the property in respect
of which such proceeds were paid, (y) the portion of such
proceeds required to be paid to lien holders on aircraft other
than Financed Aircraft or (z) proceeds applied pursuant to
subsection 2.4B(iii)(d)), Company shall (1) if such receipt of
cash payments occurs prior to the Conversion Date, prepay,
without premium or penalty (other than pursuant to subsection
2.6D), the Revolving Loans in an amount equal to such proceeds
and (2) if such receipt of cash payments occurs following the
Conversion Date, prepay, without premium or penalty (other
than pursuant to subsection 2.6D), Term Loans in such amount.
Company shall, no later than 180 days after receipt of any
such Insurance Proceeds or Condemnation Proceeds that have not
theretofore been applied to the Obligations, make an
additional prepayment of Revolving Loans or Term Loans, as the
case may be, in the manner described above, in the full amount
of all such proceeds that have not then been applied to repair
or replace the property in respect of which such proceeds were
paid. Any such mandatory prepayments shall be applied as
specified in subsection 2.4B(iv).

(d) Prepayments and Reductions Due to an Event of
Loss. No later than the earlier of (x) the second Business
Day following the date of receipt by Company or any of its
Subsidiaries of any Insurance Proceeds or Condemnation
Proceeds with respect to a Financed Aircraft or (y) 180 days
following an Event

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of Loss with respect to a Financed Aircraft, Company shall (1)
if such receipt of proceeds or Event of Loss occurs prior to
the Conversion Date, prepay, without premium or penalty (other
than pursuant to subsection 2.6D), the Revolving Loans
associated with such Financed Aircraft and (2) if such receipt
of proceeds or Event of Loss occurs following the Conversion
Date, prepay, without premium or penalty (other than pursuant
to subsection 2.6D), the Term Loans associated with such
Financed Aircraft; provided that Company and its Subsidiaries
shall not be required to make a prepayment pursuant to this
subsection 2.4B(iii)(d) with respect to any proceeds applied
pursuant to Section 4(f)(vi)(A) or 4(f)(vi)(B) of any Aircraft
Chattel Mortgage.

(e) Prepayments and Reductions from Consolidated
Excess Cash Flow. In the event that there shall be
Consolidated Excess Cash Flow for any Fiscal Year, or, in the
case of Fiscal Year 1996, for the period from the Closing Date
through the end of such Fiscal Year, within 100 days after the
last day of such Fiscal Year Company shall (1) prior to the
Conversion Date, prepay, without premium or penalty (other
than pursuant to subsection 2.6D), the Revolving Loans in an
amount equal to 50% of such Consolidated Excess Cash Flow and
(2) following the Conversion Date, prepay, without premium or
penalty (other than pursuant to subsection 2.6D), Term Loans
in such amount; provided that, if as of the last day of such
Fiscal Year, the aggregate principal amount of all Loans was
less than 60% of the aggregate Appraised Value of all Financed
Aircraft, no prepayment will be required under this subsection
2.4B(iii)(e). Any such mandatory prepayments shall be applied
as specified in subsection 2.4B(iv).

(f) Prepayments Due to Reductions in Appraised
Value. Company shall from time to time prepay, without
premium or penalty (other than pursuant to subsection 2.6D),
the Revolving Loans to the extent necessary so that the
outstanding principal amount of any Revolving Loans made to
finance the acquisition or conversion of a Financed Aircraft
shall not at any time exceed 80% of the Appraised Value of
such Financed Aircraft as most recently determined pursuant to
subsection 5.11; provided that, in lieu of making a prepayment
hereunder, Company may provide Administrative Agent with cash
collateral or a letter of credit in the amount of such
prepayment pursuant to arrangements in form and substance
satisfactory to Administrative Agent.

(g) Prepayments Due to Failure to Register
Aircraft with the FAA. In the event that, with respect to any
Financed Aircraft, Administrative Agent's security interest in
such Financed Aircraft is not fully perfected within five (5)
business days of the funding of Loans with respect to such
Financed Aircraft, Company shall prepay the full amount of
such Loans.

(iv) Application of Prepayments.

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(a) Application of Voluntary Prepayments by Type
of Loans and Order of Maturity. Any voluntary prepayments
pursuant to subsection 2.4B(i) shall be applied ratably among
the Notes relating to all of the Financed Aircraft; provided
that, at Administrative Agent's election, any prepayment may
be deemed first to prepay Loans made to finance labor costs
associated with conversion, if any, second to prepay Loans
made to finance other costs of conversion of a Financed
Aircraft and thereafter to all other Loans. Any voluntary
prepayments of the Term Loans pursuant to subsection 2.4B(i)
shall be applied to reduce the scheduled installments of
principal of the Term Loans set forth in subsection 2.4A in
inverse order of maturity.

(b) Application of Mandatory Prepayments of
Loans. Any mandatory prepayments of the Loans pursuant to
subsection 2.4B(iii) shall be applied ratably among the Notes
relating to all of the Financed Aircraft; provided that in the
event a prepayment pursuant to subsection 2.4B(iii)(a), (b),
(c), (d) (f) or (g) relates to Financed Aircraft, such
prepayment shall be applied first to the Notes relating to
such Financed Aircraft and second ratably among the Notes
relating to all other Financed Aircraft, and then, in the case
of Term Loans, to scheduled amortization payments in inverse
order of maturity; provided further that, at Administrative
Agent's election, any such prepayment may be deemed first to
prepay Loans made to finance labor costs associated with
conversion, if any, second to prepay Loans made to finance
other costs of conversion of a Financed Aircraft and
thereafter to all other Loans.

(c) Application of Prepayments to Base Rate Loans
and Eurodollar Rate Loans. Any prepayment of Loans shall be
applied first to Base Rate Loans to the full extent thereof
before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to
be made by Company pursuant to subsection 2.6D.

C. GENERAL PROVISIONS REGARDING PAYMENTS.

(i) Manner and Time of Payment. All payments by Company
of principal, interest, fees and other Obligations hereunder and under
the Notes shall be made in Dollars in same day funds, without defense,
set-off or counterclaim, free of any restriction or condition, and
delivered to Administrative Agent not later than 12:00 Noon (New York
time) on the date due at the Funding and Payment Office for the
account of Lenders; funds received by Administrative Agent after that
time on such due date shall be deemed to have been paid by Company on
the next succeeding Business Day. Company hereby authorizes
Administrative Agent to charge its accounts with Administrative Agent
in order to cause timely payment to be made to Administrative Agent of
all principal, interest, fees and expenses due hereunder (subject to
sufficient funds being available in its accounts for that purpose).

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(ii) Application of Payments to Principal and Interest.
All payments in respect of the principal amount of any Loan shall
include payment of accrued interest on the principal amount being
repaid or prepaid, and all such payments shall be applied to the
payment of interest before application to principal.

(iii) Apportionment of Payments. Aggregate principal and
interest payments in respect of Term Loans and Revolving Loans shall
be apportioned among all outstanding Loans to which such payments
relate, in each case proportionately to Lenders' respective Pro Rata
Shares. Administrative Agent shall promptly distribute to each
Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such
Lender may request, its Pro Rata Share of all such payments received
by Administrative Agent and the commitment fees of such Lender when
received by Administrative Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4C(iii),
if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if
any Affected Lender makes Base Rate Loans in lieu of its Pro Rata
Share of any Eurodollar Rate Loans, Administrative Agent shall give
effect thereto in apportioning payments received thereafter.

(iv) Payments on Business Days. Whenever any payment to
be made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or of the commitment
fees hereunder, as the case may be.

(v) Notation of Payment. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to any Loan or any payments of principal or interest
on such Note.

2.5 USE OF PROCEEDS.

A. The proceeds of Revolving Loans shall be applied to finance
(i) the purchase of an Eligible Aircraft pursuant to a Purchase Agreement in an
amount up to the lesser of the purchase price of such Eligible Aircraft and 80%
of the Appraised Value of such Eligible Aircraft (but without giving effect to
any contemplated modifications) and (ii) the cost of making an Eligible
Aircraft usable by Company as a cargo aircraft by paying for those
modifications identified in the Modification Agreement and the BFE Agreements
(but not for maintenance costs) in an amount that when added to the amount
financed in (i) does not exceed 80% the Appraised Value of such modified
Eligible Aircraft; provided that the final Revolving Loan to

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finance the modification of such Eligible Aircraft may be in an amount equal to
the lesser of (x) 100% of the costs of modification associated with such final
Revolving Loan and (y) an amount which, when added to all other Revolving Loans
made with respect to such Eligible Aircraft, does not exceed 80% of the
Appraised Value of such Eligible Aircraft after giving effect to the completion
of modification.

B. MARGIN REGULATIONS. No portion of the proceeds of any
borrowing under this Agreement shall be used by Company or any of its
Subsidiaries in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board or to violate the Exchange Act, in each case as in
effect on the date or dates of such borrowing and such use of proceeds.

2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.

Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:

A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, Administrative Agent shall determine (which determination
shall, absent manifest error, be final, conclusive and binding upon all
parties) the interest rate that shall apply to the Eurodollar Rate Loans for
which an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to Company and each Lender.

B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event
that Administrative Agent shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate,
Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Loans in respect of which such determination was
made shall be deemed to be rescinded by Company.

C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In
the event that on any date any Lender shall have determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and Administrative
Agent) that the making, maintaining or continuation of its Eurodollar Rate
Loans (i) has become unlawful as a result of compliance by such Lender in good
faith with any law, treaty, governmental rule, regulation, guideline or order
(or would conflict with any such treaty,

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governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful) or (ii) has
become impracticable, or would cause such Lender material hardship, as a result
of contingencies occurring after the date of this Agreement which materially
and adversely affect the interbank Eurodollar market or the position of such
Lender in that market, then, and in any such event, such Lender shall be an
"AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or
by telephone confirmed in writing) to Company and Administrative Agent of such
determination (which notice Agent shall promptly transmit to each other
Lender). Thereafter (a) the obligation of the Affected Lender to make Loans
as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or
convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected
Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the
"AFFECTED LOANS") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
Company shall have the option, subject to the provisions of subsection 2.6D, to
rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all
Lenders by giving notice (by telefacsimile or by telephone confirmed in
writing) to Administrative Agent of such rescission on the date on which the
Affected Lender gives notice of its determination as described above (which
notice of rescission Administrative Agent shall promptly transmit to each other
Lender). Except as provided in the immediately preceding sentence, nothing in
this subsection 2.6C shall affect the obligation of any Lender other than an
Affected Lender to make or maintain Loans as, or to convert Loans to,
Eurodollar Rate Loans in accordance with the terms of this Agreement.

D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. Company shall compensate each Lender, upon written request by that
Lender (which request shall set forth the basis for requesting such amounts),
for all reasonable losses, expenses and liabilities (including, without
limitation, any interest paid by that Lender to lenders of funds borrowed by it
to make or carry its Eurodollar Rate Loans and any loss, expense or liability
sustained by that Lender in connection with the liquidation or re-employment of
such funds) which that Lender may sustain: (i) if for any reason (other than a
default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur
on a date specified therefor in a Notice of Borrowing or a telephonic request
for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan
does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment or other principal payment or any conversion of any of
its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given

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by Company, or (iv) as a consequence of any other default by Company in the
repayment of its Eurodollar Rate Loans when required by the terms of this
Agreement.

E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry
or transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.

F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such Eurodollar deposit from an offshore
office of that Lender to a domestic office of that Lender in the United States
of America; provided, however, that each Lender may fund each of its Eurodollar
Rate Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.

G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of
and during the continuation of a Potential Event of Default or an Event of
Default, (i) Company may not elect to have a Loan be made or maintained as, or
converted to, a Eurodollar Rate Loan after the expiration of any Interest
Period then in effect for that Loan and (ii) subject to the provisions of
subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation
given by Company with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.

2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.

A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B, in the event that any Lender shall determine
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after
the date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force
of law):

(i) subjects such Lender (or its applicable lending
office) to any additional Tax (other than any Tax on the overall net
income of such Lender) with respect to this Agreement or any of its
obligations hereunder or any payments to such Lender (or its

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applicable lending office) of principal, interest, fees or any other
amount payable hereunder;

(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, or advances or loans
by, or other credit extended by, or any other acquisition of funds by,
any office of such Lender (other than any such reserve or other
requirements with respect to Eurodollar Rate Loans that are reflected
in the definition of Adjusted Eurodollar Rate); or

(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Lender (or its applicable
lending office) or its obligations hereunder or the interbank
Eurodollar market;

and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Loans hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.

B. WITHHOLDING OF TAXES.

(i) Payments to Be Free and Clear. All sums payable by
Company under this Agreement and the other Loan Documents shall be
paid free and clear of and (except to the extent required by law)
without any deduction or withholding on account of any Tax (other than
a Tax on the overall net income of any Lender) imposed, levied,
collected, withheld or assessed by or within the United States of
America or any political subdivision in or of the United States of
America or any other jurisdiction from or to which a payment is made
by or on behalf of Company or by any federation or organization of
which the United States of America or any such jurisdiction is a
member at the time of payment.

(ii) Grossing-up of Payments. If Company or any other
Person is required by law to make any deduction or withholding on
account of any such Tax from any sum paid or payable by Company to
Administrative Agent or any Lender under any of the Loan Documents:

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<PAGE> 46
(a) Company shall notify Administrative Agent of
any such requirement or any change in any such requirement as
soon as Company becomes aware of it;

(b) Company shall pay any such Tax before the
date on which penalties attach thereto, such payment to be
made (if the liability to pay is imposed on Company) for its
own account or (if that liability is imposed on Administrative
Agent or such Lender, as the case may be) on behalf of and in
the name of Administrative Agent or such Lender;

(c) the sum payable by Company in respect of
which the relevant deduction, withholding or payment is
required shall be increased to the extent necessary to ensure
that, after the making of that deduction, withholding or
payment, Administrative Agent or such Lender, as the case may
be, receives on the due date a net sum equal to what it would
have received had no such deduction, withholding or payment
been required or made; and

(d) within 30 days after paying any sum from
which it is required by law to make any deduction or
withholding, and within 30 days after the due date of payment
of any Tax which it is required by clause (b) above to pay,
Company shall deliver to Administrative Agent evidence
satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the
relevant taxing or other authority;

provided that no such additional amount shall be required to be paid
to any Lender under clause (c) above except to the extent that any
change after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each
other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the
rate of such deduction, withholding or payment from that in effect at
the date of this Agreement or at the date of such Assignment
Agreement, as the case may be, in respect of payments to such Lender.

(iii) Evidence of Exemption from U.S. Withholding Tax.

(a) Each Lender that is organized under the laws
of any jurisdiction other than the United States or any state
or other political subdivision thereof (for purposes of this
subsection 2.7B(iii), a "NON-US LENDER") shall deliver to
Administrative Agent for transmission to Company, on or prior
to the Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment
Agreement pursuant to which it becomes a Lender (in the case
of each other Lender), and at such other times as may be
necessary in the determination of Company or Administrative
Agent (each in the reasonable exercise of its discretion), (1)
two original copies of Internal Revenue Service

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<PAGE> 47
Form 1001 or 4224 (or any successor forms), properly completed
and duly executed by such Lender, together with any other
certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect
to any payments to such Lender of principal, interest, fees or
other amounts payable under any of the Loan Documents or (2)
if such Lender is not a "bank" or other Person described in
Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (1) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service
Form W-8 (or any successor form), properly completed and duly
executed by such Lender, together with any other certificate
or statement of exemption required under the Internal Revenue
Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of
United States federal income tax with respect to any payments
to such Lender of interest payable under any of the Loan
Documents.

(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the
initial delivery by such Lender of such forms, certificates or
other evidence, whenever a lapse in time or change in
circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, such
Lender shall (1) deliver to Administrative Agent for
transmission to Company two new original copies of Internal
Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue
Service Form W-8, as the case may be, properly completed and
duly executed by such Lender, together with any other
certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to
deduction or withholding of United States federal income tax
with respect to payments to such Lender under the Loan
Documents or (2) immediately notify Administrative Agent and
Company of its inability to deliver any such forms,
certificates or other evidence.

(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii) if such Lender shall have failed to
satisfy the requirements of subsection 2.7B(iii)(a); provided
that if such Lender shall have satisfied such requirements on
the Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment
Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this subsection 2.7B(iii)(c)
shall relieve Company of its obligation to pay any additional
amounts pursuant to clause (c) of subsection 2.7B(ii) in the
event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any
change in the interpretation,

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<PAGE> 48
administration or application thereof, such Lender is no
longer properly entitled to deliver forms, certificates or
other evidence at a subsequent date establishing the fact that
such Lender is not subject to withholding as described in
subsection 2.7B(iii)(a).

C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after
the date hereof of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its applicable lending office) with any guideline,
request or directive regarding capital adequacy (whether or not having the
force of law) of any such governmental authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Commitments or
other obligations hereunder to a level below that which such Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation with
regard to capital adequacy), then from time to time, within five Business Days
after receipt by Company from such Lender of the statement referred to in the
next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to Company (with
a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such additional amounts,
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.

D. SUBSTITUTE LENDERS. In the event Company is required
under the provisions of this subsection 2.7 to make payments in a material
amount to any Lender or in the event any Lender fails to lend to Company in
accordance with this Agreement, Company may, so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing, elect to
terminate such Lender as a party to this Agreement; provided that, concurrently
with such termination, (i) Company shall pay that Lender all principal,
interest and fees and other amounts (including without limitation, amounts, if
any, owed under this subsection 2.7) owed to such Lender through such date of
termination, (ii) another financial institution satisfactory to Company and
Administrative Agent (or if Administrative Agent is also the Lender to be
terminated, the successor Administrative Agent) shall agree, as of such date,
to become a Lender for all purposes under this Agreement (whether by assignment
or amendment) and to assume all obligations of the Lender to be terminated as
of such date, and (iii) all documents and supporting materials necessary, in
the judgment of Administrative Agent (or if Administrative Agent is also the
Lender to be terminated, the successor Administrative Agent) to evidence the
substitution of such Lender shall have been received and approved by
Administrative Agent as of such date.

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2.8 OBLIGATION OF LENDERS TO MITIGATE.

Each Lender agrees that, as promptly as practicable after the officer
of such Lender responsible for administering the Loans of such Lender becomes
aware of the occurrence of an event or the existence of a condition that would
cause such Lender to become an Affected Lender or that would entitle such
Lender to receive payments under subsection 2.7, it will, to the extent not
inconsistent with the internal policies of such Lender and any applicable legal
or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or
maintain the Commitments of such Lender or the affected Loans of such Lender
through another lending office of such Lender, or (ii) take such other measures
as such Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender pursuant to subsection 2.7 would be materially reduced and if, as
determined by such Lender in its sole discretion, the making, issuing, funding
or maintaining of such Commitments or Loans through such other lending office
or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or the
interests of such Lender; provided that such Lender will not be obligated to
utilize such other lending office pursuant to this subsection 2.8 unless
Company agrees to pay all incremental expenses incurred by such Lender as a
result of utilizing such other lending office as described in clause (i) above.
A certificate as to the amount of any such expenses payable by Company pursuant
to this subsection 2.8 (setting forth in reasonable detail the basis for
requesting such amount) submitted by such Lender to Company (with a copy to
Administrative Agent) shall be conclusive absent manifest error.

SECTION 3.
CONDITIONS TO LOANS

The obligations of Administrative Agent and Lenders to make Loans
hereunder are subject to the satisfaction of the following conditions:

3.1 CONDITIONS TO INITIAL REVOLVING LOANS.

The obligations of Lenders to make the Revolving Loans to be made on
the Closing Date are, in addition to the conditions precedent specified in
subsections 3.2 and 3.4, subject to prior or concurrent satisfaction of the
following conditions:

A. COMPANY DOCUMENTS. On or before the Closing Date, Company
shall deliver or cause to be delivered to Lenders (or to Administrative Agent
for Lenders with sufficient originally executed copies, where appropriate, for
each Lender and its counsel) the following, each, unless otherwise noted, dated
the Closing Date:

(i) certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State
of the State of Delaware and each other

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state in which it is qualified as a foreign corporation to do business
and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such
states, each dated a recent date prior to the Closing Date;

(ii) copies of its Bylaws, certified as of the Closing
Date by its corporate secretary or an assistant secretary;

(iii) resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement
and the other Loan Documents, certified as of the Closing Date by its
corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment;

(iv) signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents;

(v) executed originals of this Agreement, the Revolving
Notes (duly executed in accordance with subsection 2.1D, drawn to the
order of each Lender and with appropriate insertions) and the other
Loan Documents including a First Aircraft Chattel Mortgage with
respect to each Eligible Aircraft purchased on the Closing Date; and

(vi) such other documents as Administrative Agent may
reasonably request.

B. CAPITALIZATION; RELATED AGREEMENTS. Administrative Agent
shall be satisfied with the capital, organization, ownership and management
structure of Company and its Subsidiaries and with the form and substance of
the ACMI Contracts, the Modification Agreement, the BFE Agreements, aircraft
lease arrangements (including, without limitation, the New Zealand Lease),
Purchase Agreements and existing financing agreements and intercreditor
arrangements (including, without limitation, the ING Financing Agreement and
the Pass Through Trust Documents).

C. NECESSARY CONSENTS. Company shall have obtained all consents
necessary or advisable in connection with the transactions contemplated by the
Loan Documents and the continued operation of the business of Company and its
Subsidiaries, and each of the foregoing shall be in full force and effect and
in form and substance satisfactory to Administrative Agent other than those
which the failure to obtain, either individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.

D. PERFECTION OF SECURITY INTERESTS. Company shall have taken or
caused to be taken such actions in such a manner so that Administrative Agent
has a valid and perfected first priority security interest in the entire
Collateral (subject to Liens consented to in writing by Administrative Agent
with respect to such Collateral and other Liens permitted by subsection 6.2)
granted by the Collateral Documents. Such actions shall include, without
limitation: (i) the delivery to Administrative Agent of Uniform Commercial Code
financing statements, executed

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by the applicable Loan Parties as to the Collateral granted by such Loan
Parties for all jurisdictions as may be necessary or desirable to perfect
Administrative Agent's security interest in such Collateral; and (ii) evidence
reasonably satisfactory to Administrative Agent that all other filings
(including, without limitation, filing of the First Aircraft Chattel Mortgage
with the FAA (as it relates to the Engines mortgaged thereunder) and filings
with the appropriate Aeronautical Authority in New Zealand and the New Zealand
High Court in the appropriate jurisdiction and evidence of delivery of the
Aircraft Chattel Mortgages to the relevant Company Offices in New Zealand),
recordings and other actions Credit Partners and Administrative Agent deem
necessary or advisable to establish, preserve and perfect the first priority
Liens (subject to Permitted Encumbrances and Liens consented to in writing by
Credit Partners and Administrative Agent or permitted by subsection 6.2 with
respect to such Collateral) granted to Administrative Agent in personal and
mixed property shall have been made.

E. FINANCIAL CONDITION CERTIFICATE. Company shall have delivered
to Administrative Agent a Financial Condition Certificate dated the Closing
Date, substantially in the form annexed hereto as Exhibit IX, with appropriate
attachments demonstrating that, after giving effect to the consummation of the
financing transactions contemplated hereby, Company and its Subsidiaries, taken
as a whole, are Solvent.

F. OPINIONS OF COMPANY'S COUNSEL. Lenders and their respective
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of Cahill Gordon & Reindel, counsel for Company, in
form and substance reasonably satisfactory to Administrative Agent and its
counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit VA annexed hereto and as to such
other matters as Administrative Agent acting on behalf of Lenders may
reasonably request (ii) the opinion of Cahill Gordon & Reindel regarding
Section 1110 of the Bankruptcy Code, dated the Closing Date and setting forth
substantially the matters in the opinions designated in Exhibit VB annexed
hereto and (iii) evidence satisfactory to Administrative Agent that Company has
requested such counsel to deliver such opinions to Lenders.

G. OPINIONS OF CLARK ONSTAD. Lenders and their respective
counsel shall have received executed copies of one or more favorable written
opinions of Clark Onstad, General Counsel of Company, in form and substance
reasonably satisfactory to Administrative Agent and its counsel, dated the
Closing Date, and setting forth substantially the matters in the opinions
designated in Exhibit VC annexed hereto.

H. OPINIONS OF COLORADO COUNSEL. Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of local Colorado counsel regarding perfection of
Administrative Agent's security interest in the Collateral, in form and
substance satisfactory to Administrative Agent and its counsel, dated the
Closing Date, and setting forth substantially the matters in the opinions
designated in Exhibit VD annexed hereto.

I. OPINIONS OF NEW ZEALAND COUNSEL. Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of local New

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Zealand counsel, in form and substance reasonably satisfactory to
Administrative Agent and its counsel, dated the Closing Date, setting forth
substantially the matters in the opinions designated in Exhibit VE annexed
hereto.

J. OPINIONS OF O'MELVENY & MYERS. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers dated as of the Closing Date, substantially in the form of
Exhibit VI annexed hereto and as to such other matters as Administrative Agent
acting on behalf of Lenders may reasonably request.

K. FEES. Company shall have paid to Administrative Agent, for
distribution (as appropriate) to Administrative Agent and Lenders, the fees
payable on the Closing Date referred to in subsection 2.3.

L. FINANCIAL STATEMENTS. On or before the Closing Date,
Administrative Agent shall have received from Company the unaudited quarterly
balance sheet of Company as at March 31, 1996 and the related consolidated and
consolidating statements of operations, stockholders' equity and cash flows of
Company for the three month period ending on such date, all in reasonable
detail and certified by the chief financial officer of Company that they fairly
present the financial condition of Company as at the dates indicated and the
results of their operations and their cash flows for the period indicated,
subject to changes resulting from audit and normal year-end adjustments, which
financial statements demonstrate to Administrative Agent's satisfaction that no
material adverse change in the condition (financial or otherwise), results of
operations, assets, liabilities or prospects of Company has occurred relative
to the information previously disclosed to Administrative Agent.

M. EVIDENCE OF INSURANCE. Company shall have delivered to
Administrative Agent certificates of insurance naming Administrative Agent on
behalf of Administrative Agent and Lenders as loss payee under the casualty
insurance policies and as additional insured under the liability policies of
Company and a broker's report from each of Company's and Air New Zealand
Limited's insurance broker evidencing compliance with the requirements of each
Aircraft Chattel Mortgage, all as required pursuant to subsection 5.4 hereof or
pursuant to the Collateral Documents. All such certificates of insurance shall
contain such endorsements as are reasonably required by Administrative Agent.

N. NO MATERIAL ADVERSE EFFECT. Since December 31, 1995, no
Material Adverse Effect (in the opinion of Administrative Agent) shall have
occurred.

O. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS.
Company shall have delivered to Administrative Agent an Officers' Certificate,
in form and substance satisfactory to Administrative Agent, to the effect that
the representations and warranties in Section 4 hereof are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date and that Company shall have
performed in all material respects all agreements and satisfied all conditions
which this

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Agreement provides shall be performed or satisfied by it on or before the
Closing Date except as otherwise disclosed to and agreed to in writing by
Administrative Agent and Requisite Lenders.

P. CASH ON HAND. After giving effect to the transactions
contemplated hereby (including the initial funding made pursuant to the
Revolving Loan Commitment and the payment of, or taking reserves for, all
transactions fees and expenses), Company shall not have less than $50 million
cash on its consolidated balance sheet.

Q. COMPLIANCE CERTIFICATE. Company shall have delivered to
Administrative Agent a Compliance Certificate dated the Closing Date,
substantially in the form annexed hereto as Exhibit IV.

R. COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Administrative Agent and
such counsel, and Administrative Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as Credit
Partners and Administrative Agent may reasonably request.

3.2 CONDITIONS TO LOANS TO FINANCE AIRCRAFT ACQUISITION.

The obligations of Lenders to make Loans to finance the acquisition of
an aircraft on any Funding Date are subject to the following additional
conditions:

(i) Company shall deliver to Administrative Agent an
Officer's Certificate and such supportive documents as may be
requested by Administrative Agent, certifying that the aircraft to be
acquired is an Eligible Aircraft;

(ii) as of the date of purchase of such Eligible Aircraft,
Administrative Agent shall be reasonably satisfied that Company and
its Subsidiaries have entered into binding ACMI Contracts sufficient
to ensure the continued employment (consistent with past practices) of
substantially all other aircraft owned and operated by Company and its
Subsidiaries other than the new aircraft being acquired;

(iii) on the date of purchase of any such Eligible
Aircraft, Administrative Agent, on behalf of Lenders, shall have been
granted a first priority lien on such Eligible Aircraft, spare parts
and related assets (including, without limitation, the Purchase
Agreement and the Modification Agreement) and the Purchase Agreement,
the Modification Agreement and the BFE Agreements shall have been
assigned to Administrative Agent and any Persons whose consent is
necessary for an effective assignment of such agreements shall have so
consented (other than initial purchase

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pursuant to the Purchase Agreement with respect to the Thai Aircraft),
in each case, pursuant to documentation and procedures acceptable to
Administrative Agent;

(iv) Company shall have delivered to Administrative Agent
appraisals demonstrating that the amount of the Revolving Loan
requested does not exceed 80% of the Appraised Value of the Eligible
Aircraft to be acquired as of the Funding Date and that, after giving
effect to all proposed modifications of such Eligible Aircraft, the
Maximum Note Amount shall not exceed 80% of the Appraised Value of
such Eligible Aircraft as so modified;

(v) with respect to any Eligible Aircraft other than the
Thai Aircraft, a First Aircraft Chattel Mortgage and a Second Aircraft
Chattel Mortgage with respect to such Eligible Aircraft shall have
been filed in such order for recordation with the FAA under the
Federal Aviation Act and, with respect to the second Eligible Aircraft
financed hereunder, a Second Aircraft Chattel Mortgage relating to the
first Eligible Aircraft financed hereunder shall have been filed for
recordation with the FAA under the Federal Aviation Act;

(vi) Uniform Commercial Code Financing Statements naming
Administrative Agent as the secured party covering such Eligible
Aircraft and spare parts shall have been duly executed and delivered
and duly filed in all jurisdictions necessary or desirable to perfect
a security interest in the Collateral;

(vii) with respect to Eligible Aircraft other than the Thai
Aircraft, the FAA Bill of Sale shall have been delivered for
recordation with the FAA pursuant to the Federal Aviation Act;

(viii) with respect to an Eligible Aircraft other than the
Thai Aircraft, such Eligible Aircraft shall have been registered with
the FAA in the name of Company or if previously registered in the
United States, an application for registration shall have been filed;

(ix) Administrative Agent shall have received originally
executed copies of one or more favorable written opinions of counsel
to Company in form and substance satisfactory to Administrative Agent
dated as of the Funding Date and setting forth the matters designated
in the opinions in Exhibits VA, VB and VC and such other matters as
Administrative Agent may reasonably request; provided that with
respect to the opinion regarding matters set forth in Exhibit VB no
such opinion shall be required unless Administrative Agent in its
reasonable judgment determines that any factual assumption set forth
in the corresponding opinion delivered pursuant to subdivision F of
subsection 3.1 no longer applies or there have been any change in
applicable law or the contemplation thereof as a result of which the
opinion delivered pursuant to subdivision F of subsection 3.1 does not
apply to the aircraft being financed with such Loan.

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(x) Administrative Agent shall have received originally
executed copies of one or more favorable written opinions of FAA
counsel or other counsel in form and substance satisfactory to
Administrative Agent dated as of the Funding Date or the date such
Eligible Aircraft is registered with the FAA if such registration
occurs after the Funding Date and setting forth such matters related
to the FAA or other Aeronautical Authority having jurisdiction over
the Eligible Aircraft being acquired as Administrative Agent may
reasonably request;

(xi) Administrative Agent shall have received evidence
satisfactory to it to the effect that as of such Funding Date Company
is an air carrier certificated under Sections 401 and 604(b) of the
Federal Aviation Act; with respect to any Eligible Aircraft other than
the Thai Aircraft, certificates of airworthiness with respect to such
Eligible Aircraft shall have been duly issued by an Aeronautical
Authority pursuant to the Federal Aviation Act and shall be in full
force and effect; and each Engine shall be in compliance with all
airworthiness standards of the FAA or shall be maintained in
accordance with an FAA approved program;

(xii) Company shall have good and marketable title to and a
valid ownership interest in the Collateral free and clear of all Liens
other than Liens permitted by subsection 6.2;

(xiii) no Event of Loss with respect to the Airframe or any
Engine to be delivered shall have occurred and no event or condition
which with the giving of notice or lapse of time or both, would result
in any such Event of Loss shall have occurred and be continuing;

(xiv) Company shall have delivered to Administrative Agent
certificates of insurance naming Administrative Agent on behalf of
Administrative Agent and Lenders as loss payee under casualty
insurance policies with respect to the Eligible Aircraft to be
acquired and a broker's report evidencing compliance with the
requirements of the First Aircraft Chattel Mortgage with respect to
such Eligible Aircraft;

(xv) Company shall have delivered to Administrative Agent
all documents executed in connection with the Purchase Agreement
related to such aircraft and such documents shall be in form and
substance satisfactory to Administrative Agent;

(xvi) any Revolving Loan made to finance the purchase of a
Financed Aircraft shall be made no later than ten days after the later
of Company's payment of the purchase price with respect to or
acquisition of title to such Financed Aircraft; and

(xvii) Company shall have delivered to Administrative Agent
such other documents as Administrative Agent may reasonably request
and all such documents shall be in form and substance reasonably
satisfactory to Administrative Agent.

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(xviii) In addition to the foregoing conditions, with respect
to the Loans made to finance the acquisition of the Philippine
Aircraft, Company shall have delivered to Administrative Agent and
Requisite Lenders a copy of the Philippine Lease in form and substance
satisfactory to Administrative Agent and Requisite Lenders including,
without limitation, provisions permitting the grant to Administrative
Agent on behalf of Lenders of the Liens contemplated by subdivision
(iii) of this subsection 3.2 and satisfaction of the requirements of
subdivision (xiv) of this subsection 3.2. In addition, the form of
Mortgages delivered with respect to the Philippine Aircraft will
permit the Philippine Lease and include provisions granting security
interests to Administrative Agent, on behalf of Lenders, in the
Philippine Lease and all rights and privileges of Company thereunder
and will require that ground and flight all-risk hull insurance be
maintained on the Philippine Aircraft in an amount of at least
$30,000,000. Finally, Company will not be required to enter into a
Modification Agreement with respect to the Philippine Aircraft or to
assign such Modification Agreement to Administrative Agent for the
benefit of Lenders; provided that Company will enter into a
Modification Agreement with respect to the Philippine Aircraft and
will assign such Modification Agreement to Administrative Agent for
the benefit of Lenders prior to or concurrently with the termination
of the Philippine Lease.

Notwithstanding the foregoing, Administrative Agent may in its
sole and absolute discretion waive the conditions set forth in clauses
(iii), (v), (vii), (viii) and (x) to the extent necessary by reason of
the fact that Company is unable to obtain a deregistration certificate
with respect to the applicable Eligible Aircraft prior to the purchase
of such Eligible Aircraft; provided that, if Administrative Agent's
security interest in such Eligible Aircraft is not fully perfected
within five (5) business days of full funding of the Loans with
respect to such Eligible Aircraft, Company shall prepay such Loans in
accordance with subsection 2.4B(iii)(g); provided further, that
Administrative Agent may not waive such conditions with respect to
more than one Eligible Aircraft at any time.

3.3 CONDITION TO LOANS TO FINANCE CARGO CONVERSION.

The obligations of Lenders to make Loans to finance the costs of
conversion of an aircraft on any Funding Date are subject to the additional
conditions set forth below:

A. CONDITIONS TO EACH LOAN TO FINANCE THE COSTS OF CONVERSION.

(i) Administrative Agent shall have received an invoice
and bill of sale with respect to any Parts delivered in connection
with the modification of Financed Aircraft and with respect to any
buyer furnished equipment, and an invoice for any services or other
costs associated with the modification of such Financed Aircraft
and/or such other information and materials as may be reasonably
requested by Administrative Agent confirming the name of the vendor
performing the service, the Parts or service to be

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financed by such Revolving Loan, the amount due from or previously
paid by Company, the satisfactory completion of the services for which
such Revolving Loan proceeds shall be applied and such other
information regarding such service as Administrative Agent may
request. To the extent practicable, each Revolving Loan made shall be
allocated only to the costs of conversion other than labor costs
associated with such conversion; and

(ii) with respect to any Revolving Loan to finance the
purchase of a Part, such Revolving Loan shall be made no later than
ten days after later of Company's payment for or acquisition of title
to such part.

B. CONDITIONS TO THE FINAL LOAN TO FINANCE THE COST OF
CONVERSION.

(i) If there has been any material deviation from the
terms of the Modification Agreement after the date of the appraisals
delivered pursuant to subsection 3.2(iv), Company shall have delivered
to Administrative Agent appraisals demonstrating that the amount of
the Revolving Loans requested when added to all previous Revolving
Loans made with respect to the Financed Aircraft which has been
converted as of the Funding Date does not exceed the lesser of (x)
100% of the remaining costs of conversion and (y) 80% of the Appraised
Value of the Financed Aircraft;

(ii) Company shall deliver to Administrative Agent an
Officer's Certificate (x) certifying that the conversion of the
Financed Aircraft has been completed and that all obligations of
Company with respect to the modifications of the Financed Aircraft
under the Modification Agreement and any BFE Agreement have been
satisfied and (y) stating the total cost of the purchase and
modification of such Financed Aircraft, which shall not be less than
all Loans made in respect of such Financed Aircraft.

(iii) Company shall deliver to Administrative Agent (a) a
copy of the Aircraft Re-Delivery receipt and evidence of transfer of
title to each Part included in the modification, (b) copies of any
Supplemental Types Certificates issued by the FAA, and (c) copies of
any FAA Form 337s to be filed in connection with such modification;

(iv) Administrative Agent shall have received evidence
satisfactory to it to the effect that as of such Funding Date Company
is an air carrier certificated under Sections 401 and 604(b) of the
Federal Aviation Act; with respect to Eligible Aircraft other than the
Thai Aircraft certificates of airworthiness with respect to such
Eligible Aircraft shall have been duly issued pursuant to the Federal
Aviation Act and shall be in full force and effect; and each Engine
shall be in compliance with all airworthiness standards of the FAA or
shall be maintained in accordance with an FAA approved program; and

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(v) Company shall have delivered to Administrative Agent
such other documents as Administrative Agent may reasonably request
and all such documents shall be in form and substance reasonably
satisfactory to Administrative Agent.

3.4 CONDITIONS TO ALL LOANS.

The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:

A. Administrative Agent shall have received before that Funding
Date, in accordance with the provisions of subsection 2.1B, an originally
executed Notice of Borrowing, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of Company or by any
executive officer of Company designated by any of the above-described officers
on behalf of Company in a writing delivered to Administrative Agent.

B. As of that Funding Date:

(i) the representations and warranties contained herein
and in the other Loan Documents shall be true, correct and complete in
all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except to the extent
such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall have
been true, correct and complete in all material respects on and as of
such earlier date; provided that, with respect to any Funding Date
referred to in subsection 3.3, Company's representations and
warranties shall be to its best knowledge;

(ii) no event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated by
such Notice of Borrowing that would constitute an Event of Default or
a Potential Event of Default;

(iii) Company shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement
provides shall be performed or satisfied by it on or before that
Funding Date;

(iv) no order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain any
Lender from making the Loans to be made by it on that Funding Date;

(v) the making of the Loans requested on such Funding
Date shall not violate any law including, without limitation,
Regulation G, Regulation T, Regulation U or Regulation X of the Board
of Governors of the Federal Reserve System; and

(vi) there shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting

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Company or any of its Subsidiaries or any property of Company or any
of its Subsidiaries that has not been disclosed by Company in writing
pursuant to subsection 4.6 or 5.1(x) prior to the making of the last
preceding Loans (or, in the case of the initial Loans, prior to the
execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in
either event, in the opinion of Administrative Agent or of Requisite
Lenders, would be expected to have a Material Adverse Effect; and no
injunction or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to be issued
shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of Loans
hereunder.

C. Company shall have delivered to Administrative Agent at least
three Business Days in advance of that Funding Date an Officer's Certificate of
Company, in form and substance satisfactory to Administrative Agent,
demonstrating that (i) the ratio of Consolidated Total Debt (less Cash and Cash
Equivalents held by Company in excess of $25 million) as of the last day of the
most recently ended fiscal quarter (the "DETERMINATION DATE") to Consolidated
Adjusted EBITDA for the four-fiscal quarter period ending on such Determination
Date did not exceed than 4.5:1.0 and (ii) the ratio of Consolidated Adjusted
EBITDA for such four-fiscal quarter period to Consolidated Interest Expense for
such four-fiscal quarter period was not less than 3.0:1.0; provided, that to
the extent Consolidated Adjusted EBITDA is being determined for purposes of
calculation made under this paragraph for any period ending on or prior to
December 31, 1996, the amount of Consolidated Adjusted EBITDA to be used for
purposes of calculations being made pursuant hereto shall be equal to the
product of the amount of Consolidated Adjusted EBITDA for the period commencing
January 1, 1996 and ending on the Determination Date and a fraction, the
numerator of which is 365 and the denominator of which is the number of days
elapsed during such period.

D. With respect to any Revolving Loans made on a Funding Date for
the purpose of reborrowing prior to the Conversion Date an amount equal to the
amount of mandatory prepayments made pursuant to subsection 2.4B(iii)(e),
Administrative Agent shall have received an opinion of Cahill Gordon & Reindel,
or such other counsel as may be acceptable to Administrative Agent, dated as of
such Funding Date confirming the applicability of Section 1110 of the
Bankruptcy Code, to such Revolving Loans made on such Funding Date, in form and
substance satisfactory to Administrative Agent.

3.5 CONDITIONS TO CONVERSION OF REVOLVING LOANS INTO TERM LOANS.

The obligations of Lenders to convert Revolving Loans into Term Loans
on the Conversion Date are subject to the following conditions precedent:

(i) each of the conditions set forth in Subsections 3.4B
and 3.4C shall have been satisfied as of the Conversion Date;

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(ii) Company shall have delivered to Lenders (or to
Administrative Agent for Lenders) executed originals of the Amended
and Restated Notes, duly executed in accordance with subsection 2.1D,
drawn to the order of each Lender and with appropriate insertions;

(iii) Lenders and their respective counsel shall have
received originally executed copies of one or more favorable written
opinions of counsel for Company in form and substance reasonably
satisfactory to Administrative Agent and its counsel, dated as of the
Conversion Date, as setting forth such matters as Administrative Agent
may reasonably request; and

(iv) Administrative Agent shall have received copies of
such other documents as Administrative Agent may reasonably request
and all such documents shall be in form and substance reasonably
satisfactory to Administrative Agent.

3.6 CONDITIONS TO EFFECTIVENESS.

The effectiveness of this Agreement and the obligations of Lenders to
make the Loans are subject to the satisfaction of all of the following
conditions:

(i) each of the parties hereto shall have executed and
delivered counterparts of this Agreement to Administrative Agent;

(ii) each of the Purchasing Lenders shall have purchased
assignments pro rata from each Selling Lender in the Assigned Rights
and Obligations so that, after giving effect to such assignments, each
Lender shall have its respective Pro Rata Share as set forth in
Schedule 2.1 of the Assigned Rights and Obligations in accordance with
subsection 2.1F;

(iii) Company shall have furnished such opinions of counsel
as Administrative Agent may reasonably request; and

(iv) Company and Credit Partners shall have taken such
actions and delivered to Administrative Agent such documents as
Administrative Agent may reasonably request and all such documents
shall be in form and substance reasonably satisfactory to
Administrative Agent.

SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES

In order to induce Lenders to enter into this Agreement and to make
the Loans, Company represents and warrants to each Lender, on the date of this
Agreement, on each Funding Date, that the following statements are true,
correct and complete:

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4.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.

A. ORGANIZATION AND POWERS. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Company has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents and to carry out the
transactions contemplated thereby.

B. QUALIFICATION AND GOOD STANDING; AIR CARRIER CERTIFICATION.
Company is qualified to do business and in good standing in every jurisdiction
where its assets are located and wherever necessary to carry out its business
and operations, except in jurisdictions where the failure to be so qualified or
in good standing has not had and will not have a Material Adverse Effect.
Company is a "citizen of the United States" within the meaning of the Federal
Aviation Act (a "UNITED STATES CITIZEN") and holds an air carrier operating
certificate under the Federal Aviation Act for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo.

C. SUBSIDIARIES. All of the Subsidiaries of Company as of the
Closing Date are identified in Schedule 4.1 annexed hereto, as said Schedule
4.1 may be supplemented from time to time pursuant to the provisions of
subsection 5.1(xvii). The capital stock of each of the Subsidiaries of Company
identified in Schedule 4.1 annexed hereto (as so supplemented) is duly
authorized, validly issued, fully paid and nonassessable and none of such
capital stock constitutes Margin Stock. Each of the Subsidiaries of Company
identified in Schedule 4.1 annexed hereto (as so supplemented) is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as proposed to be conducted, and is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in
each case except where failure to be so qualified or in good standing or a lack
of such corporate power and authority has not had and will not have a Material
Adverse Effect. Schedule 4.1 annexed hereto (as so supplemented) correctly
sets forth the ownership interest of Company and each of its Subsidiaries in
each of the Subsidiaries of Company identified therein.

D. COLLATERAL DOCUMENTS. The security interests created in favor
of Administrative Agent under the Collateral Documents will at all times from
and after the Closing Date constitute, as security for the obligations
purported to be secured thereby, a legal, valid and enforceable security
interest in and Lien on all of the Collateral referred to therein in favor of
Administrative Agent for the benefit of the Lenders, perfected and prior to the
rights of all third persons in accordance with the requirements of all
applicable Collateral Documents. Each Loan Party has good and marketable title
to its respective Collateral, and all such Collateral is free and clear of all
Liens except for Liens permitted by subsection 6.2. No consents, filings or
recordings are required in order to perfect (or maintain the perfection or
priority of) the security interests purported to be created by any of the
Collateral Documents, other than such as have

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been obtained and which remain in full force and effect and uniform commercial
code financing statements to be filed, or delivered to Administrative Agent for
filing, on the Closing Date and periodic uniform commercial code continuation
filings or as is specifically otherwise permitted by the terms of any
applicable Collateral Document.

4.2 AUTHORIZATION OF BORROWING, ETC.

A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of the Loan Documents have been duly authorized by all necessary
corporate action on the part of each Loan Party.

B. NO CONFLICT. The execution, delivery and performance by the
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with in any material respect,
result in a material breach of or constitute (with due notice or lapse of time
or both) a material default under any Contractual Obligation of Company or any
of its Subsidiaries, (iii) result in or require the creation or imposition of
any Lien upon any of the properties or assets of Company or any of its
Subsidiaries (other than any Liens created under any of the Loan Documents in
favor of Administrative Agent on behalf of Lenders), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of Company or any of its Subsidiaries, except for such
approvals or consents which will be obtained on or before the Closing Date and
disclosed in writing to Lenders.

C. GOVERNMENTAL CONSENTS. The execution, delivery and
performance by the Loan Parties of the Loan Documents and the consummation of
the transactions contemplated by the Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other action
to, with or by, any federal, state or other governmental authority or
regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.

D. BINDING OBLIGATION. Each of the Loan Documents has been duly
executed and delivered by each of the Loan Parties party thereto and is the
legally valid and binding obligation of each such Loan Party, enforceable
against such Loan Party in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.

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4.3 FINANCIAL CONDITION.

Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Company and its Subsidiaries as at December
31, 1995, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for the
Fiscal Year then ended and (ii) the unaudited consolidated and consolidating
balance sheets of Company and its Subsidiaries as at September 30, 1996 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for the
nine months then ended. All such statements were prepared in conformity with
GAAP and fairly present the financial position (on a consolidated and, where
applicable, consolidating basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of
the entities described therein for each of the periods then ended, subject, in
the case of any such unaudited financial statements, to changes resulting from
audit and normal year-end adjustments. Company does not (and will not
following the funding of the initial Loans) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Company or any of its Subsidiaries.

4.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.

Since December 31, 1995, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Since December 31, 1995, neither Company nor any of its Subsidiaries
has directly or indirectly declared, ordered, paid or made, or set apart any
sum or property for, any Restricted Junior Payment or agreed to do so except as
permitted by subsection 6.5.

4.5 TITLE TO PROPERTIES; LIENS.

A. Company and its Subsidiaries have (i) good, sufficient and
legal title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), or (iii) good title to (in the case of all other personal property),
all of the properties and assets reflected in the financial statements referred
to in subsection 4.3 or in the most recent financial statements delivered
pursuant to subsection 5.1, in each case except for assets disposed of since
the date of such financial statements in the ordinary course of business or as
otherwise permitted under subsection 6.7. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens.

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B. Each Financed Aircraft operated in the United States has a
current and valid airworthiness certificate issued by the FAA pursuant to the
Federal Aviation Act in effect and is in such condition as may be necessary to
enable the airworthiness certificate to be maintained in good standing. Each
Engine has a rated takeoff horsepower greater than 750 horsepower, or the
equivalent of such horsepower. Each Financed Aircraft operated in the United
States is registered with the FAA in the name of Company, and Company has
authority to operate such Financed Aircraft. Company has good title to such
Financed Aircraft, free and clear of all Liens other than Liens permitted by
subsection 6.2.

4.6 LITIGATION; ADVERSE FACTS.

There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Company nor any of its Subsidiaries is (i) in violation of any
applicable laws that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.

4.7 PAYMENT OF TAXES.

Except to the extent permitted by subsection 5.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes, assessments, fees and other governmental
charges upon Company and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Company does not know of any proposed tax
assessment against Company or any of its Subsidiaries which is not being
actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, for liabilities for taxes as shall be required in
conformity with GAAP shall have been made or provided in the financial
statements of Company. There are no agreements with respect to taxes between
Company and any tax agency or authority.

4.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.

A. Neither Company nor any of its Subsidiaries is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse

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of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, would
not have a Material Adverse Effect.

B. Neither Company nor any of its Subsidiaries is a party to or
is otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.

4.9 GOVERNMENTAL REGULATION.

Neither Company nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of the
Obligations unenforceable.

4.10 SECURITIES ACTIVITIES.

A. Neither Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock.

B. Following application of the proceeds of each Loan, not more
than 25% of the value of the assets (either of Company only or of Company and
its Subsidiaries on a consolidated basis) subject to the provisions of
subsection 6.2 or 6.7 or subject to any restriction contained in any agreement
or instrument, between any Loan Party, on the one had, and any Lender or any
Affiliate of any Lender, on the other hand, relating to Indebtedness and within
the scope of subsection 7.2, will be Margin Stock.

4.11 EMPLOYEE BENEFIT PLANS.

Company maintains a qualified retirement plan under Section 401(k) of
the Internal Revenue Code (the ``Company 401(k) Plan'') and a medical benefit
plan. Company's 401(k) Plan has no unfunded liabilities in excess of
$10,000,000, and Company is in compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan and has performed all its
obligations under such Employee Benefit Plan in all material respects. The
Company has no Employee Benefit Plans, other than the Company 401(k) Plan and
the medical benefit plan. The Company has no ERISA Affiliates that sponsor,
maintain, contribute to or are liable with respect to any Employee Benefit
Plans.

4.12 CERTAIN FEES.

No broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders

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against, and agrees that it will hold Lenders harmless from, any claim, demand
or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.

4.13 ENVIRONMENTAL PROTECTION.

A. All Facilities and operations of the Company are, and have
been to the best of Company's knowledge, in compliance with all Environmental
Laws.

B. There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity (a) arising at any Facilities or at any other
location or (b) arising in connection with the operations of Company (including
the transportation of Hazardous Materials in accordance with applicable
regulations), which conditions, occurrences or Hazardous Materials Activity
could reasonably be expected to form the basis of an Environmental Claim
against Company and which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.

C. To the best of Company's knowledge, there are no pending or
threatened Environmental Claims against Company, and Company has received no
notices, inquiries, or requests for information with respect to any
Environmental Claims.

4.14 EMPLOYEE MATTERS.

There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.

4.15 SOLVENCY.

Company and each of its Subsidiaries is and, upon the incurrence of
any Obligations by Company on any date on which this representation is made,
will be, Solvent.

4.16 DISCLOSURE.

No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact (known to Company, in the case of any document not furnished by
them) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during

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the period or periods covered by any such projections may differ from the
projected results. There are no facts known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.

SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS

Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 5.

5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

Company will maintain, and cause Company and each of its Subsidiaries
to maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Administrative Agent and
Lenders:

(i) Monthly Financials: as soon as available and in any
event within 30 days after the end of each month ending after the
Closing Date, financial statements prepared by Company in the ordinary
course of business certified by the chief financial officer of Company
that they fairly present the financial condition of Company and its
Subsidiaries for such month, subject to changes resulting from audit
and normal year-end adjustments;

(ii) Quarterly Financials: as soon as available and in
any event within 45 days after the end of each fiscal quarter of each
Fiscal Year, (a) the consolidated and consolidating balance sheets of
Company and its Subsidiaries as at the end of such fiscal quarter and
the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries
for such fiscal quarter and for the period from the beginning of the
then current Fiscal Year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding periods of the previous Fiscal Year and the
corresponding figures from the consolidated plan and financial
forecast for the current Fiscal Year delivered pursuant to subsection
5.1(xii), all in reasonable detail and certified by the chief
financial officer of Company that they fairly present the financial
condition of Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal
year-end adjustments, and (b) a narrative report describing the
operations of Company and its Subsidiaries in the form prepared for
presentation to senior management for such fiscal

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quarter and for the period from the beginning of the then current
Fiscal Year to the end of such fiscal quarter; provided that delivery
of Company's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 5.1(ii);

(iii) Year-End Financials: as soon as available and in any
event within 90 days after the end of each Fiscal Year, (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures
from the consolidated plan and financial forecast delivered pursuant
to subsection 5.1(xii) for the Fiscal Year covered by such financial
statements, all in reasonable detail and certified by the chief
financial officer of Company that they fairly present the financial
condition of Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the
periods indicated, (b) a narrative report describing the operations of
Company and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Year, and (c) in the case of such
consolidated financial statements, a report thereon of Arthur Andersen
LLP or other independent certified public accountants of recognized
national standing selected by Company and satisfactory to
Administrative Agent, which report shall be unqualified, shall express
no doubts about the ability of Company and its Subsidiaries to
continue as a going concern, and shall state that such consolidated
financial statements fairly present the consolidated financial
position of Company and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with
prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; provided that
delivery of Company's Form 10-K for such Fiscal Year shall be deemed
to satisfy the requirements of clauses (a) and (b) of this subsection
5.1(iii);

(iv) Officers' and Compliance Certificates: together with
each delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above after the Closing Date,
(a) an Officers' Certificate of Company stating that the signers have
reviewed the terms of this Agreement and have made, or caused to be
made under their supervision, a review in reasonable detail of the
transactions and condition of Company and its Subsidiaries during the
accounting period covered by such financial statements and that such
review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any
condition or event that constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Company has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the

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applicable quarterly and annual accounting periods with the
restrictions contained in Section 6;

(v) Reconciliation Statements: if, as a result of any
change in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 4.3, the consolidated financial statements of Company and
its Subsidiaries delivered pursuant to subdivisions (ii), (iii) or
(xii) of this subsection 5.1 will differ in any material respect from
the consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (ii), (iii)
or (xii) of this subsection 5.1 following such change, consolidated
financial statements of Company and its Subsidiaries for (y) the
current Fiscal Year to the effective date of such change and (z) the
two full Fiscal Years immediately preceding the Fiscal Year in which
such change is made, in each case prepared on a pro forma basis as if
such change had been in effect during such periods, and (b) together
with each delivery of financial statements pursuant to subdivision
(ii), (iii) or (xii) of this subsection 6.1 following such change, a
written statement of the chief accounting officer or chief financial
officer of Company setting forth the differences which would have
resulted if such financial statements had been prepared without giving
effect to such change;

(vi) Accountants' Certification: together with each
delivery of consolidated financial statements of Company and its
Subsidiaries pursuant to subdivision (iii) above, a written statement
by the independent certified public accountants giving the report
thereon (a) stating that their audit examination has included a review
of the terms of this Agreement and the other Loan Documents as they
relate to accounting matters, (b) stating whether, in connection with
their audit examination, any condition or event that constitutes an
Event of Default or Potential Event of Default has come to their
attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any
failure to obtain knowledge of any such Event of Default or Potential
Event of Default that would not be disclosed in the course of their
audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to
believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (iv) above is
not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision
(iv) above for the applicable Fiscal Year are not stated in accordance
with the terms of this Agreement;

(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of
all reports submitted to Company by independent certified public
accountants in connection with each annual, interim or special audit
of the financial statements of Company and its Subsidiaries made by
such accoun-

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tants, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit;

(viii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Company or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made
available generally by Company or any of its Subsidiaries to the
public concerning material developments in the business of Company or
any of its Subsidiaries;

(ix) Events of Default, etc.: promptly upon any officer
of Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) that any
Person has given any notice to Company or any of its Subsidiaries or
taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 7.2, (c) of any
condition or event that would be required to be disclosed in a current
report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Company were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the
nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Company has taken, is
taking and proposes to take with respect thereto;

(x) Litigation or Other Proceedings: (a) promptly upon
any officer of Company obtaining knowledge of (X) the institution of,
or non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to
Lenders or (Y) any material development in any Proceeding that, in any
case:

(1) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or

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(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby;

written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of
each fiscal quarter of Company, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting,
Company or any of its Subsidiaries equal to or greater than $500,000
and promptly after request by Administrative Agent such other
information as may be reasonably requested by Administrative Agent to
enable Administrative Agent and its counsel to evaluate any of such
Proceedings;

(xi) ERISA Notices: with reasonable promptness, copies of
(a) each annual report (Form 5500 Series) filed by Company or any of
its ERISA Affiliates with the Internal Revenue Service with respect to
each Employee Benefit Plan, (b) any notices received by Company or any
of its ERISA Affiliates with respect to a "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA, and (c) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as Administrative Agent shall reasonably request;

(xii) Financial Plans and Projections: as soon as
practicable after preparation thereof by Company in the normal course
of business, Company shall provide copies of its financial plans and
projections and at the reasonable request of Administrative Agent or
Requisite Lenders an opportunity for Lenders to question and discuss
such materials with the Chief Financial Officer of Company; provided
that, at the request of Company, all copies of such financial plans
and projections shall be returned to Company after review thereof and
the completion of such discussion;

(xiii) Insurance: as soon as practicable and in any event
by the last day of each Fiscal Year, a report in form and substance
satisfactory to Administrative Agent outlining all material insurance
coverage maintained as of the date of such report by Company and its
Subsidiaries and all material insurance coverage planned to be
maintained by Company and its Subsidiaries in the immediately
succeeding Fiscal Year;

(xiv) Environmental Audits and Reports: as soon as
practicable following receipt thereof, copies of all environmental
audits and reports, whether prepared by personnel of Company or any of
its Subsidiaries or by independent consultants, with respect to
significant environmental matters at any Facility or which relate to
an Environmental Claim which could result in a Material Adverse
Effect;

(xv) Board of Directors: with reasonable promptness,
written notice of any change in the Board of Directors of Company or
any of its Subsidiaries;

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(xvi) Special Purpose Subsidiaries: promptly upon any
Special Purpose Subsidiary becoming a Subsidiary of Company, a written
notice setting forth with respect to such Special Purpose Subsidiary
(a) the date on which such Special Purpose Subsidiary became a
Subsidiary of Company and (b) all of the data required to be set forth
in Schedule 4.1 annexed hereto with respect to all Subsidiaries of
Company (it being understood that such written notice shall be deemed
to supplement Schedule 4.1 annexed hereto for all purposes of this
Agreement); and

(xvii) Pricing Certificates (a) together with each delivery
of financial statements of Company and its Subsidiaries pursuant to
subdivisions (ii) and (iii) above, (b) within one Business Day after
any public release by S&P or Moody's lowering its credit rating on
Company's obligations under the Pass Through Trust Documents, and (c)
at such additional times as Company may elect, a certificate setting
forth the credit rating on Company's obligations under the Pass
Through Trust Documents (each, a "Pricing Certificate"); and

(xviii) Other Information: with reasonable promptness, such
other information and data with respect to Company or any of its
Subsidiaries as from time to time may be reasonably requested by any
Lender.

5.2 CORPORATE EXISTENCE.

Except as permitted under subsection 6.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the best interests of
Company and its Subsidiaries and is not materially disadvantageous to any
Lender. Company will, and will cause each of its Subsidiaries to, at all times
maintain its corporate existence as a United States Citizen.

5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.

A. Company will, and will cause its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Company.

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B. Company will not, and will not permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return with
any Person (other than any Subsidiary of Company or Company).

5.4 MAINTENANCE OF PROPERTIES; INSURANCE.

Company will, and will cause its Subsidiaries to, maintain or cause to
be maintained in good repair, working order and condition, ordinary wear and
tear excepted, all material properties used or useful in the business of
Company and its Subsidiaries and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof. Company will
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage
(including, without limitation, flood insurance, if necessary or advisable) of
the kinds customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses and
Company will, with respect to each Financed Aircraft, maintain the insurance
specified in the First Aircraft Chattel Mortgage with respect to such Financed
Aircraft.

5.5 INSPECTION; LENDER MEETING.

Company will, and will cause its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Company
may, if it so chooses, be present at or participate in any such discussion),
all upon reasonable notice and at such reasonable times during normal business
hours and as often as may be reasonably requested; provided that so long as no
Event of Default shall have occurred and be continuing, such inspection shall
not be disruptive to Company's business, as reasonably determined by Company.
Without in any way limiting the foregoing, Company will, upon the request of
Administrative Agent or Requisite Lenders, participate in a meeting of
Administrative Agent and Lenders once during each Fiscal Year to be held at
Company's corporate offices (or such other location as may be agreed to by
Company and Administrative Agent) at such time as may be agreed to by Company
and Administrative Agent.

5.6 COMPLIANCE WITH LAWS, ETC.

Company will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Company shall not conduct, and shall not permit the conduct
of, any Hazardous Materials Activity at any Facility or at any other location
which could reasonably be expected to form the basis of an Environmental Claim
against Company and which could reasonably be expected to have a Material
Adverse Effect.

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5.7 ENVIRONMENTAL INDEMNITY.

Company agrees to indemnify, defend, and hold harmless Administrative
Agent and Lenders, and the officers, directors, employees, agents and
affiliates of Administrative Agent and Lenders from and against any and all
losses, claims, liability or expenses arising in connection with Environmental
Claims against Company or with any Hazardous Materials Activity.

5.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.

Company will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any Facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the event
Company or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any Facility, Company or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Company's or such Subsidiary's liability for
such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Company or such
Subsidiary.

5.9 REGISTRATION OF THAI AIRCRAFT WITH FAA.

Upon termination of the New Zealand Lease, Company shall cause the
Thai Aircraft to be deregistered under the New Zealand Act and registered under
the Federal Aviation Act and file for recordation with the FAA following such
deregistration mortgage supplements with respect to the First Aircraft Chattel
Mortgage and Second Aircraft Chattel Mortgage to which the Thai Aircraft is
subject and shall cause FAA counsel to deliver an opinion in form and substance
reasonably satisfactory to Administrative Agent and cause Company's insurance
broker to deliver the report required by Section 4(g)(v) of such First Aircraft
Chattel Mortgage. In furtherance of the foregoing, within 5 days after the
Closing Date, Company shall deliver to an acceptable escrow agent the original
Thai Bill of Sale, supplements to the First Aircraft Chattel Mortgage and
Second Aircraft Chattel Mortgage to which the Thai Aircraft is subject and an
executed Registration Application on Form 8050-1 with respect to the Thai
Aircraft and shall instruct the escrow agent to file such documents along with
all other documents required to be filed with the FAA in connection with
registration of the Thai Aircraft and the protection of Administrative Agent's
rights under the First Aircraft Chattel Mortgage and the Second Aircraft
Chattel Mortgage under the Federal Aviation Act.

5.10 FURTHER ASSURANCES; NEW SUBSIDIARIES.

At any time or from time to time upon the request of Administrative
Agent, Company will, at its expense, promptly execute, acknowledge and deliver
such further documents and do

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such other acts and things as Administrative Agent may reasonably request in
order to effect fully the purposes of the Loan Documents and to provide for
payment of the Obligations in accordance with the terms of this Agreement, the
Notes and the other Loan Documents. In furtherance and not in limitation of
the foregoing, Company will cause any Subsidiary whose total assets exceed 15%
of the consolidated total assets of Company, in each case determined in
accordance with GAAP (other than a Special Purpose Subsidiary or Atlas One), to
take such actions as Administrative Agent may reasonably request from time to
time to ensure that the Obligations are guarantied by any such Subsidiary. If,
after the Closing Date, Company or any of its Subsidiaries (other than a
Special Purpose Subsidiary or Atlas One) acquires any asset, other than an
Aircraft financed with Loans hereunder or with Other Permitted Indebtedness,
with a fair market value in excess of $2 million, or the value of spare parts
of Company and its Subsidiaries not subject to Liens securing Designated
Indebtedness exceeds $15 million in the aggregate, Company shall so notify
Administrative Agent and take, or cause such Subsidiaries to take, such actions
as Administrative Agent may reasonably request from time to time (including,
without limitation, the execution and delivery of guaranties, security
agreements, mortgages, deeds of trust, financing statements and other
documents, the filing or recording of any of the foregoing, title insurance
with respect to any of the foregoing that relates to an interest in real
property, and the delivery of stock certificates and other collateral with
respect to which perfection is obtained by possession) to ensure that the
Obligations are secured by a first priority security interest in such asset or
spare parts (other than capital stock of a Subsidiary), as the case may be;
provided that, in the case of any engine otherwise subject to such security
interest, such Lien may be released at the request of Company in connection
with a refinancing thereof with Other Permitted Indebtedness.

5.11 APPRAISALS.

Upon Administrative Agent's request after the occurrence and during
the continuance of an Event of Default and in any event no less than once each
calendar year, Company will obtain appraisals of each of the Financed Aircraft
from two Approved Appraisers, in form and substance satisfactory to
Administrative Agent. On or prior to the initial Funding Date for each
Financed Aircraft, and substantially contemporaneously with the final Funding
Date with respect to such Financed Aircraft, Company will obtain appraisals of
the Financed Aircraft to be purchased or which has been converted on such
Funding Date from two Approved Appraisers, in form and substance satisfactory
to Administrative Agent.

5.12 KEY MAN LIFE INSURANCE.

In the event Company is not required (or no longer required) by the
terms of the ING Financing Agreement to provide keyman life insurance policies
with respect to Mr. Chowdry in an amount of $10 million or more, Company shall
use its best efforts to obtain Key Man Life Insurance in an amount and for a
period to be agreed upon by Company and Administrative Agent and with respect
to which Administrative Agent, on behalf of Lenders, shall be named
beneficiary.

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5.13 MAINTENANCE CONTRACTS.

Company shall maintain contracts with respect to the maintenance of
each Financed Aircraft sufficient to insure compliance with the Federal
Aviation Act and in a manner consistent with Company's past practices, in form
and substance reasonably satisfactory to Administrative Agent.

5.14 CONSENT WITH RESPECT TO THAI AIRCRAFT.

Company shall use its best efforts to obtain the consent of all
parties to the Purchase Agreement with respect to the Thai Aircraft to the
assignment of Company's rights under such Purchase Agreement to Administrative
Agent for the benefit of Lenders.

5.15 EMPLOYEE BENEFIT PLANS.

Company will not establish or permit to be established any Employee
Benefit Plans for Company or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
result in a liability for Company, under ERISA, in excess of $10 million.

SECTION 6.
COMPANY'S NEGATIVE COVENANTS

Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations, unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 6.

6.1 INDEBTEDNESS.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:

(i) Company may become and remain liable with respect to
the Obligations;

(ii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
6.4 and, upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations
so extinguished;

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(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases;
provided that such Capital Leases are permitted under the terms of
subsection 6.9;

(iv) Company and its Subsidiaries, as applicable, may
remain liable with respect to Indebtedness described in Schedule 6.1
annexed hereto;

(v) Company may become and remain liable with respect to
Permitted Extension Indebtedness; provided, that with respect to any
transaction in which Permitted Extension Indebtedness is incurred with
respect to any Financed Aircraft, the cash proceeds from such
Permitted Extension Indebtedness are sufficient to repay in full the
Notes associated with such Financed Aircraft;

(vi) so long as no Event of Default or Potential Event of
Default shall have occurred and be continuing or would result
therefrom and Company delivers an Officers' Certificate to
Administrative Agent and Lenders, in form and substance reasonably
satisfactory to Administrative Agent, confirming that, on a Pro Forma
Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held
by Company in excess of $25 million) as of the last day of the most
recently ended fiscal quarter (the "Determination Date") to
Consolidated Adjusted EBITDA for the four-fiscal quarter period ending
on such Determination Date did not exceed 4.5:1.0, (ii) the ratio of
Consolidated Adjusted EBITDA for such four-fiscal quarter period to
Consolidated Interest Expense for such four-fiscal quarter period was
not less than 3.0:1.0; provided, that to the extent Consolidated
Adjusted EBITDA is being determined for purposes of calculation made
under this paragraph for any period ending on or prior to December 31,
1996, the amount of Consolidated Adjusted EBITDA to be used for
purposes of calculations being made pursuant hereto shall be equal to
the product of the amount of Consolidated Adjusted EBITDA for the
period commencing January 1, 1996 and ending on the Determination Date
and a fraction, the numerator of which is 365 and the denominator of
which is the number of days elapsed during such period; and (iii)
Company will be in compliance with all covenants set forth in
subsection 6.6 hereof, Company and its Subsidiaries may incur Other
Permitted Indebtedness; and

(vii) Company may become and remain liable with respect to
Indebtedness under the Unsecured Revolving Credit Facility in an
aggregate principal amount not to exceed $26 million at any time
outstanding.

(viii) Company may become and remain liable with respect to
other Indebtedness in an aggregate principal amount not to exceed $10
million at any time outstanding.

6.2 LIENS AND RELATED MATTERS.

A. PROHIBITION ON LIENS. Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
permit to exist any Lien on or

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with respect to any property or asset of any kind (including any document or
instrument in respect of goods or accounts receivable) of Company or any of its
Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any
such property, asset, income or profits under the Uniform Commercial Code of
any state or under any similar recording or notice statute, except:

(i) Permitted Encumbrances;

(ii) Liens in respect of Permitted Extension Indebtedness
and Other Permitted Indebtedness; provided that such Liens encumber
only assets subject to purchase money Liens securing such
Indebtedness; and

(iii) other Liens securing Indebtedness in an aggregate
amount not to exceed $10 million at any time outstanding.

B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 6.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 6.2A.

C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither
Company nor any of its Subsidiaries shall enter into any agreement prohibiting
the creation or assumption of any Lien upon any of its properties or assets,
whether now owned or hereafter acquired.

D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR
OTHER SUBSIDIARIES. Except (i) as provided herein, as (ii) described on
Schedule 6.2 annexed hereto and (iii) with respect to Special Purpose
Subsidiaries, Company will not, and will not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(i) pay dividends or make any other distributions on any of such Subsidiary's
capital stock owned by Company or any other Subsidiary of Company, (ii) repay
or prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to
Company or any other Subsidiary of Company.

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6.3 INVESTMENTS; JOINT VENTURES.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:

(i) Company may make and own Investments in Cash
Equivalents;

(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries
of Company;

(iii) Company may make and own Investments in Special
Purpose Subsidiaries; provided that Company delivers to Administrative
Agent an Officer's Certificate in form and substance satisfactory to
Administrative Agent demonstrating that such Special Purpose
Subsidiary meets the requirements set forth in the definition thereof;

(iv) Company may make Investments in Joint Ventures in an
aggregate amount not to exceed in any Fiscal Year, (A) the lesser of
25% of Consolidated Net Income for such Fiscal Year and $10 million
less (B) the sum of (x) the aggregate amount of dividends on Company
Common Stock declared or paid in such Fiscal Year and (y) the
aggregate amount contributed to capital of Special Purpose
Subsidiaries in such Fiscal Year; provided that Company shall not
incur liabilities related to any such Joint Venture in excess of
Company's Investment therein;

(v) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 6.3 annexed hereto
and Investments made in compliance with subsection 6.3(iv); and

(vi) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $5
million.

6.4 CONTINGENT OBLIGATIONS.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:

(i) any Subsidiary may become and remain liable with
respect to Contingent Obligations arising under their guaranties of
the Obligations;

(ii) Company may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements with a Lender;

(iii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price

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adjustment obligations incurred in connection with Asset Sales or
other sales of assets or securities;

(iv) Company and its Subsidiaries, as applicable, may
remain liable with respect to Contingent Obligations described in
Schedule 6.4 annexed hereto; and

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

6.5 RESTRICTED JUNIOR PAYMENTS.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Company may make scheduled payments of
principal and interest from time to time on Designated Indebtedness; and
provided, further, that so long as no Event of Default or Potential Event of
Default has occurred and is continuing, or would result therefrom:

(i) Company may prepay Designated Indebtedness from the
proceeds of Permitted Extension Indebtedness or Other Permitted
Indebtedness;

(ii) Company may declare and pay dividends on Company
Common Stock in an amount not to exceed in any Fiscal Year, the lesser
of 25% of Consolidated Net Income for such Fiscal Year and $10
million; and

(iii) Company may apply Equity Proceeds to prepay
Designated Indebtedness.

6.6 FINANCIAL COVENANTS.

A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense
for any four-fiscal quarter period ending as of the last day of any fiscal
quarter of Company occurring during any of the periods set forth below to be
less than the correlative ratio indicated; provided, that to the extent
Consolidated Adjusted EBITDA is being determined for purposes of calculation
made under this paragraph for any period ending on or prior to December 31,
1996, the amount of Consolidated Adjusted EBITDA to be used for purposes of
calculations being made pursuant hereto shall be equal to the product of the
amount of Consolidated Adjusted EBITDA for the period commencing January 1,
1996 and ending on the date of determination and a fraction, the numerator of
which is 365 and the denominator of which is the number of days elapsed during
such period:

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<TABLE>
<CAPTION>
---------------------------------------------------
Minimum Interest
Period Coverage Ratio
---------------------------------------------------
<S> <C>
Fiscal Year 1996 2.50:1.00
---------------------------------------------------
Fiscal Year 1997 2.50:1.00
---------------------------------------------------
Fiscal Year 1998 2.75:1.00
---------------------------------------------------
Fiscal Year 1999 3.00:1.00
---------------------------------------------------
Thereafter 3.25:1.00
---------------------------------------------------
</TABLE>

B. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit
the ratio of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated
Rental Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Company occurring during any
of the periods set forth below to be less than the correlative ratio indicated:

<TABLE>
<CAPTION>
---------------------------------------------------
Minimum Fixed
Period Charge Coverage Ratio
---------------------------------------------------
<S> <C>
Fiscal Year 1996 1.25:1.00
---------------------------------------------------
Fiscal Year 1997 1.25:1.00
---------------------------------------------------
Thereafter 1.10:1.00
---------------------------------------------------

</TABLE>

C. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of
(i) Consolidated Total Debt as of each date set forth below (less Cash and Cash
Equivalents held by Company in excess of $25 million as of such date) to (ii)
Consolidated Adjusted EBITDA for the four-fiscal quarter period ending on such
date to exceed the correlative ratio indicated; provided, that to the extent
Consolidated Adjusted EBITDA is being determined for purposes of calculation
made under this paragraph for any period ending on or prior to December 31,
1996, the amount of Consolidated Adjusted EBITDA to be used for purposes of
calculations being made pursuant hereto shall be equal to the product of the
amount of Consolidated Adjusted EBITDA for the period commencing January 1,
1996 and ending on the date of determination and a fraction, the numerator of
which is 365 and the denominator of which is the number of days elapsed during
such period:

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<PAGE> 82
<TABLE>
<CAPTION>
---------------------------------------------------
Maximum
Period Leverage Ratio
---------------------------------------------------
<S> <C>
Fiscal Year 1996 4.50:1.00
---------------------------------------------------
Fiscal Year 1997 4.50:1.00
---------------------------------------------------
Fiscal Year 1998 4.25:1.00
---------------------------------------------------
Fiscal Year 1999 4.00:1.00
---------------------------------------------------
Thereafter 3.75:1.00
---------------------------------------------------
</TABLE>

D. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit
Consolidated Net Worth at any time during any of the periods set forth below to
be less than the correlative amount indicated:

<TABLE>
<CAPTION>
---------------------------------------------------------------
Minimum Consolidated
Period Net Worth
---------------------------------------------------------------
<S> <C>
Closing Date - 12/31/96 $100 million
---------------------------------------------------------------
Fiscal Year 1997 $120 million
---------------------------------------------------------------
Fiscal Year 1998 $145 million
---------------------------------------------------------------
Fiscal Year 1999 $170 million
---------------------------------------------------------------
Thereafter $195 million
---------------------------------------------------------------
</TABLE>

6.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS; NEW
SUBSIDIARIES.

Company shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:

(i) any Subsidiary of Company may be merged with or into
Company or any wholly-owned Subsidiary of Company that has entered
into a valid and effective guaranty and security agreement pursuant to
subsection 5.10, or be liquidated, wound up or dissolved, or all or
any part of its business, property or assets may be conveyed, sold,

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leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Company or any such wholly-owned Subsidiary
of Company; provided that, in the case of such a merger, Company or
such wholly-owned Subsidiary shall be the continuing or surviving
corporation;

(ii) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof;

(iii) subject to subsection 6.13, Company and its
Subsidiaries may make Asset Sales of assets having a fair market value
not in excess of $100 million in any Fiscal Year or $400 million in
the aggregate; provided that (w) with respect to the sale of any
Financed Aircraft, the cash proceeds of the sale of such Financed
Aircraft are sufficient to repay in full the Notes associated with
such Financed Aircraft; (x) the consideration received for such assets
shall be in an amount at least equal to the fair market value thereof;
(y) the consideration received shall be at least 75% cash; and (z) the
proceeds of such Asset Sales shall be applied as required by
subsection 2.4B(iii)(a);

(iv) Company may lease or transfer any Financed Aircraft
to the extent expressly permitted by Section 4(d) of the First
Aircraft Chattel Mortgage with respect to such Financed Aircraft or as
contemplated by subsection 9.21; and

(v) Company may make acquisitions of the capital stock of
another Person or all or substantially all of the assets of the
business of another Person provided that, (a) the acquisition
primarily involves the acquisition of assets to be used in the
business of Company, (b) with respect to such acquisition any newly
acquired or created subsidiary of Company shall be a wholly-owned
subsidiary and shall execute a guaranty of the Obligations and grant a
security interest in the assets acquired to Administrative Agent for
the benefit of Lenders which may be subordinate to debt incurred in
such acquisition, (c) immediately before and after giving effect
thereto, no Potential Event of Default or Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Company shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 6.6 and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance,
(e) Administrative Agent shall have reviewed and be reasonably
satisfied with the nature and amount of all contingent liabilities or
other liabilities not on the balance sheet of Company assumed in
connection with such acquisition and a business plan prepared by
Company with respect to such acquisition and (f) the aggregate amount
of cash payments made in connection with all such acquisitions other
than with the proceeds from sales or issuances of equity by Company
does not exceed $100,000,000;

(vi) Company and its Subsidiaries may make Consolidated
Capital Expenditures in connection with the purchase of up to twelve
Eligible Aircraft during each Fiscal Year, such number of Eligible
Aircraft permitted during any Fiscal Year to be increased

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<PAGE> 84
by any number of Eligible Aircraft permitted to be purchased, but not
purchased, during the previous Fiscal Year (but in no event shall any
such number of Eligible Aircraft once carried forward to the next
Fiscal Year be carried forward to any Fiscal Year thereafter) together
with Consolidated Capital Expenditures with respect to the
acquisition, in the normal course of business, of spare parts and
spare engines associated with such Eligible Aircraft;

(vii) Company and its Subsidiaries may make Consolidated
Capital Expenditures with respect to maintenance of aircraft in the
normal course of business; and

(viii) Company and its Subsidiaries may make other
Consolidated Capital Expenditures not in excess of $10 million during
any Fiscal Year; provided that, any amount of such other Consolidated
Capital Expenditures permitted, but not made, in any Fiscal Year may
be carried forward to and made during the immediately succeeding
Fiscal Year (but no amount once carried forward to the next Fiscal
Year may be carried forward to any Fiscal Year thereafter).

6.8 AMENDMENTS OF MATERIAL AGREEMENTS.

Company shall not permit (i) the certificate or articles of
incorporation or bylaws of any Loan Party to be amended or otherwise modified
in any manner which could reasonably be expected to have a Material Adverse
Effect or (ii) any Material Agreement to be amended or otherwise modified in
any manner with respect to any provision providing material representations and
warranties to Company, indemnification rights to Company, or limiting Company's
remedies or rights upon the other party to such agreements failure to perform
or which could otherwise reasonably be expected to have Material Adverse Effect
on the value of any Financed Aircraft.

6.9 RESTRICTION ON LEASES.

Company shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a guarantor
or other surety, for the obligations of the lessee under any lease, whether an
Operating Lease or a Capital Lease (other than intercompany leases between
Company and its wholly-owned Subsidiaries); provided however that Company may
become so obligated to the extent that, and only to the extent that,
immediately after giving effect to the incurrence of liability with respect to
such lease, the Consolidated Rental Payments at the time in effect during the
then current Fiscal Year do not exceed $60 million plus the amount of
Consolidated Rental Payments made during such Fiscal Year in respect of up to
five Eligible Aircraft leased by Company from McDonnell Douglas Corporation
within twelve months following the Closing Date plus, an amount not to exceed
$12 million during any Fiscal Year, equal to Consolidated Rental Payments
incurred in connection with sale leaseback transactions described in subsection
6.10 plus Consolidated Rental Payments assumed pursuant to acquisitions
permitted under subsection 6.7(v).

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<PAGE> 85
6.10 SALES AND LEASE-BACKS.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company
or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection
with such lease; provided that Company and its Subsidiaries may become and
remain liable as lessee, guarantor or other surety with respect to any such
lease if and to the extent that Company or any of its Subsidiaries would be
permitted to enter into, and remain liable under, such lease under subsection
6.9.

6.11 SALE OR DISCOUNT OF RECEIVABLES.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.

6.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.

Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Company or with any Affiliate of Company or of
any such holder, on terms that are less favorable to Company or that
Subsidiary, as the case may be, than those that might be obtained at the time
from Persons who are not such a holder or Affiliate; provided that the
foregoing restriction shall not apply to (i) reasonable and customary fees paid
to and indemnification of members of the Boards of Directors of Company and its
Subsidiaries or (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Company or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Company.

6.13 DISPOSAL OF SUBSIDIARY STOCK.

Company shall not:

(i) directly or indirectly sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock or other
equity Securities of any of its Subsidiaries, except to qualify
directors if required by applicable law or to a wholly-owned
Subsidiary of Company; or

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<PAGE> 86
(ii) permit any of its Subsidiaries directly or indirectly
to sell, assign, pledge or otherwise encumber or dispose of any shares
of capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to Company, another wholly-owned
Subsidiary of Company, or to qualify directors if required by
applicable law.

6.14 CONDUCT OF BUSINESS.

From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than (i) the
businesses engaged in by Company and its Subsidiaries on the Closing Date and
similar or related businesses and (ii) such other lines of business as may be
consented to by Requisite Lenders.

SECTION 7.
EVENTS OF DEFAULT

If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur:

7.1 FAILURE TO MAKE PAYMENTS WHEN DUE.

Failure by Company to pay any installment of principal of any Loan
when due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; or failure by Company to pay
any interest on any Loan or any fee or any other amount due under this
Agreement within five days after the date due; or

7.2 DEFAULT IN OTHER AGREEMENTS.

(i) Failure of Company or any of its Subsidiaries to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness (other than Indebtedness referred to in subsection 7.1) in an
individual principal amount of $5 million or more or any items of Indebtedness
with an aggregate principal amount of $10 million or more or (b) any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million or
more, in each case beyond the end of any grace period provided therefor; or
(ii) breach or default by Company or any of its Subsidiaries with respect to
any other material term of (a) any evidence of any Indebtedness in an
individual principal amount of $5 million or more or any items of Indebtedness
with an aggregate principal amount of $10 million or more or any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million or
more or (b) any loan agreement, mortgage, indenture or other agreement relating
to such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that Indebtedness
or Contingent Obligation(s) (or a trustee on behalf of such holder or holders)
to cause, that Indebtedness or Contingent Obligation(s) to become or be
declared due and payable prior to its

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<PAGE> 87
stated maturity or the stated maturity of any underlying obligation, as the
case may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or

7.3 BREACH OF CERTAIN COVENANTS.

Failure of Company to perform or comply in any material respect with
any term or condition contained in subsection 2.5 or 5.2 or subsection 6.1, 6.2
(as it relates to prohibitions on Liens on Financed Aircraft), 6.5, 6.7 (as it
relates to the sale of any Financed Aircraft or all or substantially all of the
assets of Company or to the merger of Company into any other Person), 6.8, 6.10
and 6.13 of this Agreement or in clauses (i) and (ii) of Section 4(c), Section
4(d) or Section 4(g) of any First Aircraft Chattel Mortgage; or

7.4 BREACH OF WARRANTY.

Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be
false in any material respect on the date as of which made; or

7.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.

(i) Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 7,
and such default shall not have been remedied or waived (x) within 15 days
after the earlier of (a) an officer of Company becoming aware of such default
or (b) receipt by Company of notice from Administrative Agent or any Lender of
such default or (y) with respect to a default under subsection 6.6, the earlier
of (a) an officer of Company becoming aware of the default after the applicable
measurement date and (b) the delivery of financial statements pursuant to
subsection 5.1 or (ii) a guaranty, if any, of the Obligations for any reason
ceases to be in full force and effect; or

7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Company or any of its material Subsidiaries under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Company or any of its
Subsidiaries, or over all or a substantial part of its property, shall have
been entered; or there shall have occurred the involuntary appointment of an
interim receiver, trustee or other custodian

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of Company or any of its Subsidiaries for all or a substantial part of its
property; or a warrant of attachment, execution or similar process shall have
been issued against any substantial part of the property of Company or any of
its Subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged; or

7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) Company or any of its material Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in
writing its inability, to pay its debts as such debts become due; or the Board
of Directors of Company or any of its Subsidiaries (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or

7.8 JUDGMENTS AND ATTACHMENTS.

Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $5 million or (ii)
in the aggregate at any time an amount in excess of $10 million (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60 days
(or in any event later than five days prior to the date of any proposed sale
thereunder); or

7.9 DISSOLUTION.

Any order, judgment or decree shall be entered against Company or any
of its material Subsidiaries decreeing the dissolution or split up of Company
or that Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 30 days; or

7.10 CHANGE IN CONTROL.

(i) (a) Michael A. Chowdry shall cease to beneficially own and control
at least a number of the issued and outstanding shares of capital stock of
Company entitled (without regard to the occurrence of any contingency) to vote
for the election of members of the Board of Directors of Company sufficient to
elect a majority of the members of the Board of Directors or (b) any Person or
any two or more Persons acting in concert (in any such case, excluding Mr.
Chowdry) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and

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Exchange Commission under the Exchange Act), directly or indirectly, of
Securities of Company (or other Securities convertible into such Securities)
representing 25% or more of the combined voting power of all Securities of
Company entitled to vote in the election of directors, other than Securities
having such power only by reason of the happening of a contingency or (ii) a
"Change of Control" shall occur under the Pass Through Trust Documents or any
other Material Agreement (as in effect on the date of such occurrence); or

7.11 FAILURE OF SECURITY.

Upon execution and delivery thereof, any Collateral Document shall, at
any time, cease to be in full force and effect (other than by reason of a
release of Collateral thereunder in accordance with the terms hereof or
thereof, the satisfaction in full of the Obligations or any other termination
of such Collateral Document in accordance with the terms hereof or thereof) or
shall be declared null and void, or the validity or enforceability thereof
shall be contested in writing by any Loan Party, or Administrative Agent shall
not have or shall cease to have a valid security interest in any Collateral
purported to be covered thereby, perfected and with the priority required by
the relevant Collateral Document, for any reason other than the failure of
Administrative Agent or any Lender to take any action within its control,
subject only to Liens permitted under the applicable Collateral Documents; or

7.12 CERTIFICATED AS AIR CARRIER.

Company for any reason ceases to be a United States Citizen or to hold
an air carrier operating certificate under the Federal Aviation Act for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo; or

7.13 MATERIAL AGREEMENTS.

Any Material Agreement, other than the Philippine Lease, shall at any
time be terminated other than by its terms or cease to be in full force and
effect other than by its terms, or any party to the Modification Agreement or
any Purchase Agreement shall default in the observance or performance of any
material covenants or agreements contained in any such agreement:

THEN (i) upon the occurrence of any Event of Default described in subsection
7.6 or 7.7, each of (a) the unpaid principal amount of and accrued interest on
the Loans and (b) all other Obligations shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements of
any kind, all of which are hereby expressly waived by Company, and the
obligation of each Lender to make any Loan shall thereupon terminate and (ii)
upon the occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written
consent of Requisite Lenders, by written notice to Company, declare all or any
portion of the amounts described in clauses (a) and (b) above to be, and the
same shall forthwith become, immediately due and payable, and the obligation of
each Lender to make any Loan shall thereupon terminate.

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Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
such paragraph Company shall pay all arrears of interest and all payments on
account of principal which shall have become due otherwise than as a result of
such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Events of Default and Potential Events of Default (other than non-payment of
the principal of and accrued interest on the Loans, in each case which is due
and payable solely by virtue of acceleration) shall be remedied or waived
pursuant to subsection 9.6, then Requisite Lenders, by written notice to
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended to
benefit Company and do not grant Company the right to require Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth
herein are met.

SECTION 8.
AGENTS

8.1 APPOINTMENT.

Goldman Sachs is hereby appointed Syndication Agent hereunder and each
Lender hereby authorizes Syndication Agent to act as its agent in accordance
with the terms of this Agreement and the other Loan Documents. Bankers Trust
is hereby appointed Administrative Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Administrative Agent to act as its
agent in accordance with the terms of this Agreement and the other Loan
Documents. Agents agree to act upon the express conditions contained in this
Agreement and the other Loan Documents, as applicable. The provisions of this
Section 8 are solely for the benefit of Agents and Lenders and Company shall
have no rights as a third party beneficiary of any of the provisions thereof.
In performing its functions and duties under this Agreement, each Agent shall
act solely as an agent of Lenders and does not assume and shall not be deemed
to have assumed any obligation towards or relationship of agency or trust with
or for Company or any of its Subsidiaries. Syndication Agent, without consent
of or notice to any party hereto, may assign any and all of its rights or
obligations hereunder to any of its Affiliates, including, without limitation,
Credit Partners. As of the Closing Date, all obligations of Syndication Agent
hereunder shall terminate.

8.2 POWERS AND DUTIES; GENERAL IMMUNITY.

A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes
each of the Agents to take such action on such Lender's behalf and to exercise
such powers, rights and remedies hereunder and under the other Loan Documents
as are specifically delegated or granted to such Agent by the terms hereof and
thereof, together with such powers, rights and remedies as are reasonably
incidental thereto. Agents shall have only those duties and responsibilities
that

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are expressly specified in this Agreement and the other Loan Documents. Agents
may each exercise such powers, rights and remedies and perform such duties by
or through their agents or employees. Agents shall not have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon Agents any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.

B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agents shall not be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or
any other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Agents to Lenders or by or on behalf
of Company to Agents or any Lender in connection with the Loan Documents and
the transactions contemplated thereby or for the financial condition or
business affairs of Company or any other Person liable for the payment of any
Obligations, nor shall Agents be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Loan Documents or as to the use
of the proceeds of the Loans or as to the existence or possible existence of
any Event of Default or Potential Event of Default. Anything contained in this
Agreement to the contrary notwithstanding, Administrative Agent shall not have
any liability arising from confirmations of the amount of outstanding Loans or
the component amounts thereof.

C. EXCULPATORY PROVISIONS. None of Agents nor any of their
respective officers, directors, partners, employees or agents shall be liable
to Lenders for any action taken or omitted by Agents under or in connection
with any of the Loan Documents except to the extent caused by their respective
gross negligence or willful misconduct. If Agents shall request instructions
from Lenders with respect to any act or action (including the failure to take
an action) in connection with this Agreement or any of the other Loan
Documents, Agents shall be entitled to refrain from such act or taking such
action unless and until Agents shall have received instructions from Requisite
Lenders. Without prejudice to the generality of the foregoing, (i) Agents
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender
shall have any right of action whatsoever against any Agent as a result of such
Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders. Each Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in it under this
Agreement or any of the other Loan Documents unless and until it has obtained
the instructions of Requisite Lenders.

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D. AGENTS ENTITLED TO ACT AS LENDERS. The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, any Agent in its individual capacity as a Lender
hereunder. With respect to its participations in the Loans, each Agent shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not performing the duties and functions delegated to
it hereunder, and the term "Lender" or "Lenders" or any similar term shall,
unless the context clearly otherwise indicates, include each Agent in its
individual capacity. Each Agent and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of banking, trust, financial
advisory or other business with Company or any of its Affiliates as if it were
not performing the duties specified herein, and may accept fees and other
consideration from Company for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.

8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.

Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans hereunder and that
it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. No Agent shall have any duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter, and no Agent shall have any responsibility with respect to
the accuracy of or the completeness of any information provided to Lenders.

8.4 RIGHT TO INDEMNITY.

Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent (and its respective affiliates and partners), to
the extent that Administrative Agent shall not have been reimbursed by Company,
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Loan Documents or otherwise
in its capacity as Administrative Agent, in any way relating to or arising out
of this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Administrative Agent's gross negligence or willful misconduct.

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8.5 COLLATERAL DOCUMENTS.

Without limiting the generality of subsection 8.1, each Lender hereby
further authorizes Administrative Agent to enter into the Collateral Documents
as secured party on behalf of and for the benefit of such Lender and agrees to
be bound by the terms of each of the Collateral Documents; provided that,
except as otherwise provided below, Administrative Agent shall not enter into
or consent to any amendment, modification, termination or waiver of any
provision contained in any Collateral Document without prior written consent of
Requisite Lenders. Anything contained in any of the Loan Documents to the
contrary notwithstanding, each Lender agrees that no Lender shall have any
right individually to realize upon any of the collateral under any Collateral
Document, it being understood and agreed that all powers, rights and remedies
under the Collateral Documents may be exercised solely by Administrative Agent
for the benefit of Lenders in accordance with the terms thereof. Each Lender
hereby authorizes Administrative Agent (i) to release or subordinate Collateral
as permitted or required under this Agreement or the Collateral Documents, and
agrees that a certificate executed by Administrative Agent evidencing such
release of Collateral shall be conclusive evidence of such release as to any
third party and (ii) to enter into any amendments of the Collateral Documents
to cure any ambiguity, defect or inconsistency or to amend provisions relating
to ministerial or administrative matters which do not materially adversely
affect the rights of the Lenders thereunder.

8.6 SUCCESSOR ADMINISTRATIVE AGENT.

Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Company. Upon any such notice of
resignation, Requisite Lenders shall have the right, upon consultation with
Company, to appoint a successor Administrative Agent. Upon the acceptance of
any appointment hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring or removed Administrative Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.

SECTION 9.
MISCELLANEOUS

9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.

A. GENERAL. Each Lender shall have the right at any time to (i)
sell, assign or transfer to any Eligible Assignee, or (ii) sell participations
to any Person in, all or any part of its Commitments or any Loan or Loans made
by it or any other interest herein or in any other Obligations owed to it;
provided that no such sale, assignment, transfer or participation shall,
without the consent of Company, require Company to file a registration
statement with the

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Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided,
further that no such sale, assignment or transfer described in clause (i) above
shall be effective unless and until (a) an Assignment Agreement effecting such
sale, assignment or transfer shall have been accepted by Administrative Agent
and recorded in the Register as provided in subsection 9.1B(ii) or (b) the
sale, assignment or transfer is made in accordance with subsection 9.21.
Except as otherwise provided in this subsection 9.1, no Lender shall, as
between Company and such Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment or transfer of, or any granting
of participations in, all or any part of its Commitments or the Loans, or the
other Obligations owed to such Lender.

B. ASSIGNMENTS.

(i) Amounts and Terms of Assignments. Each Commitment,
Loan or other Obligation may (a) be assigned in any amount to another
Lender, or to an Affiliate of the assigning Lender or another Lender,
with the giving of notice to Company and Administrative Agent or (b)
be assigned in an aggregate amount of not less than $5,000,000 (or
such lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, and other Obligations of the assigning Lender) to
any other Eligible Assignee with the giving of notice to Company and
with the consent of Administrative Agent and Company (which consent
shall not be unreasonably withheld). Any assignment of Loans
hereunder shall effect a pro rata assignment of the Notes with respect
to each Financed Aircraft. To the extent of any such assignment in
accordance with either clause (a) or (b) above, the assigning Lender
shall be relieved of its obligations with respect to its Commitments,
Loans, or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the
Register, an Assignment Agreement, together with a processing and
recordation fee of $3,000 and such forms, certificates or other
evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement
may be required to deliver to Administrative Agent pursuant to
subsection 2.7B(iii)(a); provided, however that such processing fee
shall not be required where the assignee is an existing Lender. Upon
such execution, delivery and acceptance, from and after the effective
date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and (z) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights and be
released from its obligations under this Agreement (and, in the case
of an Assignment Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The Commitments hereunder
shall be modified to reflect the Commitment of such assignee and any
remaining Commitment of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall,

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upon the effectiveness of such assignment or as promptly thereafter as
practicable, surrender its applicable Notes to Administrative Agent
for cancellation, and thereupon new Notes shall be issued to the
assignee substantially in the form of Exhibit IIIA annexed hereto or
Exhibit IIIB, as the case may be, with appropriate insertions, to
reflect the new Commitments and/or outstanding Term Loans, as the case
may be, of the assignee and/or the assigning Lender.

(ii) Acceptance by Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing and recordation fee referred to
in subsection 9.1B(i) and any forms, certificates or other evidence
with respect to United States federal income tax withholding matters
that such assignee may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if
such Assignment Agreement has been completed and is in substantially
the form of Exhibit VII hereto and if Administrative Agent has
consented to the assignment evidenced thereby to the extent such
consent is required pursuant to subsection 9.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided
therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register and (c) give prompt notice thereof
to Company. Administrative Agent shall maintain a copy of each
Assignment Agreement delivered to and accepted by it as provided in
this subsection 9.1B(ii).

C. PARTICIPATIONS. The holder of any participation, other than
an Affiliate of the Lender granting such participation, shall not be entitled
to require such Lender to take or omit to take any action hereunder except
action directly affecting (i) the extension of the scheduled final maturity
date of any Loan allocated to such participation, (ii) a reduction of the
principal amount of or the rate of interest payable on any Loan allocated to
such participation or (iii) a release of Collateral, and all amounts payable by
Company hereunder (including without limitation amounts payable to such Lender
pursuant to subsections 2.6D and 2.7) shall be determined as if such Lender had
not sold such participation. Company and each Lender hereby acknowledge and
agree that, solely for purposes of subsection 9.5, (a) any participation will
give rise to a direct obligation of Company to the participant and (b) the
participant shall be considered to be a "Lender".

D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 9.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Lender shall, as between
Company and such Lender, be relieved of any of its obligations hereunder as a
result of any such assignment and pledge and (ii) in no event shall such
Federal Reserve Bank be considered to be a "Lender" or be entitled to require
the assigning Lender to take or omit to take any action hereunder.

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E. INFORMATION. Each Lender may furnish any information
concerning Company and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees and
participants), subject to subsection 9.19.

9.2 EXPENSES.

Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents; (ii) all the costs of
furnishing all opinions by counsel for Company (including without limitation
any opinions requested by Lenders as to any legal matters arising hereunder)
and of Company's performance of and compliance with all agreements and
conditions on its part to be performed or complied with under this Agreement
and the other Loan Documents including, without limitation, with respect to
confirming compliance with environmental and insurance requirements; (iii) the
reasonable fees, expenses and disbursements of counsel to Administrative Agent
in connection with the negotiation, preparation, execution and administration
of the Loan Documents and the Loans and any consents, amendments, waivers or
other modifications hereto or thereto and any other documents or matters
requested by Company; (iv) all the costs and expenses of creating and
perfecting the Liens in favor of Administrative Agent for the benefit of
Lenders pursuant to the Loan Documents, including filing and recording fees and
expenses, title insurance, fees and expenses of counsel for providing such
opinions as Lenders may reasonably request and fees and expenses of legal
counsel to Administrative Agent (including local counsel); (v) all other actual
and reasonable costs and expenses incurred by Administrative Agent in
connection with the syndication of the Commitments and the negotiation,
preparation and execution of the Loan Documents and the transactions
contemplated hereby and thereby; provided that such costs and expenses of
syndication shall not exceed $10,000; and (vi) after the occurrence of an Event
of Default, all costs and expenses, including reasonable attorneys' fees
(including allocated costs of internal counsel) and costs of settlement,
incurred by Administrative Agent and Lenders in enforcing any Obligations of or
in collecting any payments due from Company hereunder or under the other Loan
Documents by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.

9.3 INDEMNITY.

In addition to the payment of expenses pursuant to subsection 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend, indemnify, pay and hold harmless Agents and Lenders,
and the officers, directors, employees, agents and affiliates of Agents and
Lenders (collectively called the "INDEMNITEES") from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened by any Person,
whether or not any such Indemnitee shall be designated as a party or a
potential party thereto),

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whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including without
limitation securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds of any of the Loans) or the statements
contained in the commitment letter delivered by any Lender to Company with
respect thereto (collectively called the ``INDEMNIFIED LIABILITIES''); provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of
that Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.

9.4 SET-OFF.

In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Company at any time or
from time to time, without notice to Company or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to
apply any and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other Indebtedness at any
time held or owing by that Lender to or for the credit or the account of
Company against and on account of the obligations and liabilities of Company to
that Lender under this Agreement, the Notes, and the other Loan Documents,
including, but not limited to, all claims of any nature or description arising
out of or connected with this Agreement, the Notes, or any other Loan Document,
irrespective of whether or not (i) that Lender shall have made any demand
hereunder or (ii) the principal of or the interest on the Loans or any other
amounts due hereunder shall have become due and payable pursuant to Section 7
and although said obligations and liabilities, or any of them, may be
contingent or unmatured.

9.5 RATABLE SHARING.

Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment, by realization upon security, through the
exercise of any right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, fees and other amounts then due and
owing to that Lender hereunder or under

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the other Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such
Lender) which is greater than the proportion received by any other Lender in
respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (i) notify Administrative
Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
them; provided that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered from such Lender
upon the bankruptcy or reorganization of Company or otherwise, those purchases
shall be rescinded and the purchase prices paid for such participations shall
be returned to such purchasing Lender ratably to the extent of such recovery,
but without interest. Company expressly consents to the foregoing arrangement
and agrees that any holder of a participation so purchased may exercise any and
all rights of banker's lien, set-off or counterclaim with respect to any and
all monies owing by Company to that holder with respect thereto as fully as if
that holder were owed the amount of the participation held by that holder.

9.6 AMENDMENTS AND WAIVERS.

A. No amendment, modification, termination or waiver of any
provision of this Agreement or of the Notes, or consent to any departure by
Company therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
modification, termination, waiver or consent which: increases the amount of
any of the Commitments or reduces the principal amount of any of the Loans;
changes any Lender's Pro Rata Share; changes in any manner the definition of
"Requisite Lenders"; changes in any manner any provision of this Agreement
which, by its terms, expressly requires the approval or concurrence of all
Lenders; postpones the scheduled final maturity date (but not the date of any
scheduled installment of principal) of any of the Loans; postpones the date or
reduces the amount of any scheduled payment (but not prepayment) (other than
the prepayment required by subsection 2.4B(iii)(g))) of principal of any of the
Loans; postpones the date on which any interest or any fees are payable;
decreases the interest rate borne by any of the Loans (other than any waiver of
any increase in the interest rate applicable to any of the Loans pursuant to
subsection 2.2E) or the amount of any fees payable hereunder; increases the
maximum duration of Interest Periods permitted hereunder; releases all or
substantially all of the Collateral; or changes in any manner the provisions
contained in subsection 7.1 or this subsection 9.6 shall be effective only if
evidenced by a writing signed by or on behalf of all Lenders to whom are owed
Obligations being directly affected by such amendment, modification,
termination, waiver or consent. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 3 shall be
effective only if evidenced by a writing signed by or on behalf of Credit
Partners, Administrative Agent and Requisite Lenders, (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without

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the written concurrence of the Lender which is the holder of that Note, (iii)
no increase in the Commitments of any Lender over the amount thereof then in
effect shall be effective without the written concurrence of that Lender, it
being understood and agreed that in no event shall waivers or modifications of
conditions precedent, covenants, Events of Default, Potential Events of Default
or of a mandatory prepayment or a reduction of any or all of the Commitments be
deemed to constitute an increase of the Commitment of any Lender and that an
increase in the available portion of any Commitment of any Lender shall not be
deemed to constitute an increase in the Commitment of such Lender, and (iv) no
amendment, modification, termination or waiver of any provision of Section 7 or
of any other provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of any Agent shall be effective without
the written concurrence of such Agent. Administrative Agent may, but shall
have no obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this subsection 9.6 shall be binding upon
each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company. Notwithstanding anything in this subsection 9.6A to the
contrary, the Notes and Aircraft Chattel Mortgages may be amended in the manner
and for the purposes set forth in subsection 9.21 without the consents required
by this subsection 9.6A.

B. If, in connection with any proposed change, waiver, discharge
or termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 9.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a
party to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other
amounts owed to such Lender through such date of termination, (ii) another
financial institution satisfactory to Company and Administrative Agent (or if
Administrative Agent is also the Lender to be terminated, the successor
Administrative Agent) shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to
assume all obligations of the Lender to be terminated as of such date, and
(iii) all documents and supporting materials necessary, in the judgment of
Administrative Agent (or if Administrative Agent is also the Lender to be
terminated, the successor Administrative Agent) to evidence the substitution of
such Lender shall have been received and approved by Administrative Agent as of
such date.

9.7 INDEPENDENCE OF COVENANTS.

All covenants under this Agreement shall be given independent effect
so that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.

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9.8 NOTICES.

Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered
in person or by courier service, upon receipt of telefacsimile or telex, or
three Business Days after depositing it in the United States mail with postage
prepaid and properly addressed; provided that notices to Credit Partners,
Syndication Agent and Administrative Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or (i) as to
Company and Administrative Agent, such other address as shall be designated by
such Person in a written notice delivered to the other parties hereto and (ii)
as to each other party, such other address as shall be designated by such party
in a written notice delivered to Administrative Agent.

9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

A. All representations, warranties and agreements made herein
shall survive the execution and delivery of this Agreement and the making of
the Loans hereunder.

B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7,
9.2, 9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C,
8.4 and 9.5 shall survive the payment of the Loans, and the termination of this
Agreement.

9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.

No failure or delay on the part of Administrative Agent or any Lender
in the exercise of any power, right or privilege hereunder or under any other
Loan Document shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.

9.11 MARSHALLING; PAYMENTS SET ASIDE.

Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of set-off, and
such payment or payments or the proceeds of such enforcement or set-off or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to

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a trustee, receiver or any other party under any bankruptcy law, any other
state or federal law, common law or any equitable cause, then, to the extent of
such recovery, the obligation or part thereof originally intended to be
satisfied, and all Liens, rights and remedies therefor or related thereto,
shall be revived and continued in full force and effect as if such payment or
payments had not been made or such enforcement or set-off had not occurred.

9.12 SEVERABILITY.

In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

9.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.

The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not
be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.

9.14 HEADINGS.

Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

9.15 APPLICABLE LAW.

THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

9.16 SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 9.1). Neither
Company's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Company without the prior written consent of all
Lenders.

101
<PAGE> 102
9.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR
SUCH OBLIGATION (SUBJECT TO ANY RIGHT TO APPEAL TO A COURT IN THE STATE OF NEW
YORK). Company hereby agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail,
return receipt requested, to Company at its address provided in subsection 9.8,
such service being hereby acknowledged by Company to be sufficient for personal
jurisdiction in any action against Company in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Lender to bring proceedings against Company in the
courts of any other jurisdiction.

9.18 WAIVER OF JURY TRIAL.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of
this waiver is intended to be all-encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in
their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE LOANS MADE

102
<PAGE> 103
HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.

9.19 CONFIDENTIALITY.

Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may make disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process or in accordance with any
applicable law or regulation; provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify Company of any request
by any governmental agency or representative thereof (other than any such
request in connection with any examination of the financial condition of such
Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.

9.20 COUNTERPARTS; EFFECTIVENESS.

This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company, Credit
Partners, Syndication Agent and Administrative Agent of written or telephonic
notification of such execution and authorization of delivery thereof.

9.21 COOPERATION IN REFINANCING, SYNDICATION AND ASSIGNMENT.

Company, Administrative Agent and Lenders agree that, in connection
with the refinancing, syndication or assignment of the Notes, to the extent
deemed reasonably necessary by Company or Administrative Agent, some or all of
the Financed Aircraft may be transferred to a Special Purpose Subsidiary which
will lease such aircraft to Company under arrangements reasonably acceptable to
Company and Administrative Agent all in a manner designed to retain the
economic obligations and benefits of the Company, Administrative Agent and
Lenders hereunder and under the other Loan Documents. Company, Administrative
Agent and Lenders further agree that, in connection with an assignment of Notes
to a Person who will not become a Lender hereunder, Administrative Agent and
Lenders shall agree to any amendments to the

103
<PAGE> 104
Notes to be assigned and the related Aircraft Chattel Mortgages and/or releases
of the related First Aircraft Chattel Mortgage and Second Aircraft Chattel
Mortgage, in each case, as requested by Company; provided that the terms of
such amended Notes and Aircraft Chattel Mortgages do not violate any term of
this Agreement and provided, further, that such amendments shall be effective
only upon and simultaneous with (i) the assignment of such Notes and Aircraft
Chattel Mortgages to such Person, (ii) indefeasible payment in full to Lenders
of an amount equal to all amounts owing under such Notes and (iii) releases
from any liability relating to such Notes and Aircraft Chattel Mortgages of
Administrative Agent and Lenders in form and substance satisfactory to
Administrative Agent.

[Remainder of page intentionally left blank]

104
<PAGE> 105
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

<TABLE>
<CAPTION>
COMPANY:
<S> <C>
ATLAS AIR, INC.

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

Notice Address:

538 Commons Drive
Golden, Colorado 80401
Attention: Clark H. Onstad
Senior Vice President,
General Counsel and Secretary

ADMINISTRATIVE AGENT:

BANKERS TRUST COMPANY,
as Administrative Agent and Lender

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

Notice Address:

Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Gina Thompson
</TABLE>

S-1
<PAGE> 106
<TABLE>
<S> <C>
SYNDICATION AGENT:

GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent

-------------------------------------------
Notice Address:

Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Justin Vorwerk

LENDERS:

GOLDMAN SACHS CREDIT PARTNERS L.P.
(formerly Pearl Street L.P.),

By:
------------------------------------------------
Authorized Signatory

BANK ONE, COLORADO, N.A.

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

CITY NATIONAL BANK

By:
------------------------------------------------
Name:
Title:
</TABLE>

S-2
<PAGE> 107

<TABLE>
<S> <C>
COLORADO NATIONAL BANK

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

FIRST SECURITY BANK

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

FUJI BANK

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

IMPERIAL BANK, A CALIFORNIA BANKING
CORPORATION

By:
------------------------------------------------
Name:
Title:
</TABLE>

S-3
<PAGE> 108
<TABLE>
<S> <C>
KEY BANK

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

KEYPORT LIFE INSURANCE COMPANY

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

NORWEST-COLORADO N.A.

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

MASSACHUSETTS MUTUAL LIFE INSURANCE CO.

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

MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.

By:
------------------------------------------------
Name:
Title:
</TABLE>

S-4
<PAGE> 109
<TABLE>
<S> <C>
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(A UNIT OF THE CHASE MANHATTAN BANK)

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

PILGRIM AMERICA PRIME RATE TRUST

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

PPM AMERICA, INC., AS ATTORNEY-IN-FACT,
ON BEHALF OF JACKSON NATIONAL LIFE
INSURANCE COMPANY

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

THE SAKURA BANK, LIMITED

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

SOUTHERN PACIFIC THRIFT AND LOAN
ASSOCIATION

By:
--------------------------------
Name:
Title:
</TABLE>

S-5
<PAGE> 110
<TABLE>
<S> <C>
TRANSAMERICA BUSINESS CREDIT CORP.

By:
------------------------------------------------
Name:
Title:
</TABLE>

S-6
<PAGE> 111
EXECUTION

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

SECOND AMENDED AND RESTATED
CREDIT AGREEMENT

DATED AS OF FEBRUARY 28, 1997

AMONG

ATLAS AIR, INC.,
AS BORROWER,

THE LENDERS LISTED HEREIN,
AS LENDERS,

GOLDMAN SACHS CREDIT PARTNERS L.P.
AS SYNDICATION AGENT
AND

BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT

================================================================================
<PAGE> 112
ATLAS AIR, INC.

SECOND AMENDED AND RESTATED
CREDIT AGREEMENT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1.
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement . . . . . . . . . 26
1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . . . . . . . . . 27
2.1 Commitments; Making of Loans; Notes; Register . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.2 Interest on the Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions
Regarding Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.5 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.6 Special Provisions Governing Eurodollar Rate Loans. . . . . . . . . . . . . . . . . . . . . . . . . 42
2.7 Increased Costs; Taxes; Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.8 Obligation of Lenders to Mitigate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

SECTION 3.
CONDITIONS TO LOANS . . . . . . . . . . . . . . . . . . . . . . . 50
3.1 Conditions to Initial Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.2 Conditions to Loans to Finance Aircraft Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . 54
3.3 Condition to Loans to Finance Cargo Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.4 Conditions to All Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
3.5 Conditions to Conversion of Revolving Loans Into Term Loans . . . . . . . . . . . . . . . . . . . . 60
3.6 Conditions to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 61
4.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries. . . . . . . . . . . . 61
4.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.3 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.4 No Material Adverse Change; No Restricted Junior Payments. . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>

(i)
<PAGE> 113
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.5 Title to Properties; Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.6 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.7 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.8 Performance of Agreements; Materially Adverse Agreements. . . . . . . . . . . . . . . . . . . . . . 65
4.9 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.10 Securities Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.12 Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.13 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.14 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.15 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.16 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 67
5.1 Financial Statements and Other Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.2 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
5.3 Payment of Taxes and Claims; Tax Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
5.4 Maintenance of Properties; Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
5.5 Inspection; Lender Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.7 Environmental Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.8 Company's Remedial Action Regarding Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . 74
5.9 Registration of Thai Aircraft with FAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
5.10 Further Assurances; New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
5.11 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.12 Key Man Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.13 Maintenance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.14 Consent with Respect to Thai Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.15 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

SECTION 6.
COMPANY'S NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 77
6.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.2 Liens and Related Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
6.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.4 Contingent Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6.6 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions; New Subsidiaries. . . . . . . . . 83
6.8 Amendments of Material Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>

(ii)
<PAGE> 114
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.9 Restriction on Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6.10 Sales and Lease-Backs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6.11 Sale or Discount of Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
6.12 Transactions with Shareholders and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
6.13 Disposal of Subsidiary Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
6.14 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

SECTION 7.
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 87
7.1 Failure to Make Payments When Due. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.2 Default in Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.3 Breach of Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.4 Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.5 Other Defaults Under Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . . . . . . . . 88
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . . . . . . . . . 88
7.8 Judgments and Attachments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.9 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.10 Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.11 Failure of Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.12 Certificated as Air Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.13 Material Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

SECTION 8.
AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.2 Powers and Duties; General Immunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness. . . . . . . . . 93
8.4 Right to Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.5 Collateral Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.6 Successor Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

SECTION 9.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 94
9.1 Assignments and Participations in Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.4 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.5 Ratable Sharing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.6 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.7 Independence of Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
</TABLE>

(iii)
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.9 Survival of Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . . . . . . . 101
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 101
9.11 Marshalling; Payments Set Aside. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.13 Obligations Several; Independent Nature of Lenders' Rights. . . . . . . . . . . . . . . . . . . . . 102
9.14 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.15 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.16 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.17 Consent to Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.19 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.20 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.21 Cooperation in Refinancing, Syndication and Assignment. . . . . . . . . . . . . . . . . . . . . . . 104

Signature pages S-1
</TABLE>

(iv)
<PAGE> 116
EXHIBITS

I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
IIIA FORM OF REVOLVING NOTE
IIIB FORM OF AMENDED AND RESTATED NOTE
IV FORM OF COMPLIANCE CERTIFICATE
VA FORM OF OPINION OF CAHILL GORDON & REINDEL
VB FORM OF SECTION 1110 OPINION
VC FORM OF OPINION OF CLARK ONSTAD
VD FORM OF OPINION OF COLORADO COUNSEL
VI FORM OF OPINION OF O'MELVENY & MYERS
VII FORM OF ASSIGNMENT AGREEMENT
VIII FORM OF CERTIFICATE RE NON-BANK STATUS
IX FORM OF FINANCIAL CONDITION CERTIFICATE
X FORM OF FIRST AIRCRAFT CHATTEL MORTGAGE
XI FORM OF SECOND AIRCRAFT CHATTEL MORTGAGE

(v)
<PAGE> 117
SCHEDULES

2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
6.1 CERTAIN EXISTING INDEBTEDNESS
6.2 CERTAIN EXISTING LIENS
6.3 CERTAIN EXISTING INVESTMENTS
6.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS

(vi)

<PAGE> 1
EXHIBIT 10.55

ENGINE MAINTENANCE AGREEMENT

BETWEEN

ATLAS AIR, INC.

AND

GENERAL ELECTRIC COMPANY

Proposal No. ESD-96-232I

June, 1996

This Proposal Shall Remain Valid Through June 7, 1996

PROPRIETARY INFORMATION
<PAGE> 2

PROPRIETARY INFORMATION NOTICE

The information contained in this document is disclosed in confidence. It is
the property of GE and shall not be used, disclosed to others, or reproduced
without the express written consent of GE. If consent is given for
reproduction in whole or in part, this notice shall appear on any such
reproduction, in whole or in part.

TABLE OF CONTENTS

[REDACTED]

RECITALS

[REDACTED]

CF6-5OE2 ENGINE MAINTENANCE AGREEMENT

THIS AGREEMENT, by and between General Electric Company, a corporation
organized and existing under the law of the State of New York, U.S.A. and
having an office in Cincinnati, Ohio, ("GE"), and Atlas Air, Inc., a
corporation organized under the law of Delaware, with its principal place of
business at Building 243, John F. Kennedy International Airport, Jamaica, New
York, U.S.A. ("Buyer").

SECTION 1 - COMMERCIAL TERMS

ARTICLE I. - INTRODUCTION

A. Coverage

This Engine Maintenance Agreement ("the Agreement") will cover the
maintenance of CF6-50E2 Engines operated by Buyer in its B747
aircraft fleet ("Eligible Engines") as follows:

1. Services covered on a Maintenance Cost Per Hour ("MCPH") basis as
specified in Section 2 - Article I., "Scope of Work", Paragraph A,
below; and,

2. Other Services covered on a Time and Material ("T&M") basis and
defined in Section 2 - Article I., "Scope of Work" [REDACTED].

3. This Agreement shall remain in full force and effect until
September 30, 2006 [REDACTED] unless extended by mutual agreement
or, at GE's option, to achieve up to one hundred twenty (120)
months coverage under this Agreement for individual Engines added
after the Effective Date. Services set forth in this Agreement
shall commence thirty (30) days after the Effective Date.

B. Specification

The Buyer's CF6-50E2 Engines will be inspected, Repaired, modified,
and tested in accordance with GE's MCPH Engine Repair
Specification in coordination with FAA approved manufacture's
Engine Manuals and Service Bulletins and other associated technical
documents.
<PAGE> 3
C. Configuration

Buyer and GE shall mutually define an external Equipment configuration
specification for Equipment to be covered under this Agreement.

ARTICLE II. - PRICE AND PRICE ADJUSTMENT
[REDACTED]

E. Addition or Removal of Engines

1. Addition of Engines under this Agreement shall be as follows:

a) Engines over and above those contemplated by [REDACTED]
which are transitioned into the Buyer fleet after the
execution of this Agreement, will be included at Buyer's
written request and GE's concurrence. Such written
request shall include Engine serial number, aircraft
identification (including previous owner), TSN, TSLV, CSN,
CSLV and Component identification by serial number.

b) Inclusion shall be mutually agreed upon and the date for
inclusion may be retroactive. Engines requested by Buyer
to be included in MCPH will be evaluated by GE and the
parties will negotiate any adjustments to the MCPH pricing
considering but not limited to, LLP life remaining, Engine
age versus fleet average and workscope for the Engine's
last shop visit. Engines will be included in MCPH after
such negotiation.

2. Removal of Engines from this Agreement shall be as follows:

Selection of Engines to be phased out of this Agreement shall
be mutually agreed upon by GE and Buyer. GE and Buyer shall
negotiate any adjustment to the MCPH Rate and/or credits, if
applicable.

3. Basis for Addition Over and Above Those Contemplated By
[REDACTED] or Removal of Engines [REDACTED].

a) Adjustments for addition or removal of used Engines
[REDACTED] to/from MCPH will consider, but not be limited
to, GE maintenance cost baselines, severity ratios,
time/cycles since new, workscope history, EGT margin and
Life limited part replacement experience.

b) New Engines may be added to MCPH during any Pricing Period
at a Rate no higher than the then current Rate for that
Pricing Period included in the Agreement. At the
completion of each year, GE will propose and the parties
shall negotiate adjustments to subsequent Pricing Periods
to account for the addition of the New Engines during that
year. In the event the parties, after good faith
negotiations, cannot reach agreement on adding new Engines
to MCPH, such new Engines may, at Buyer's election, be
Repaired as Supplemental Work. New Engines are defined as
those with zero (0) flying hours since new.

c) Used Engines may be added to MCPH on the same basis as
specified in Paragraph b., above, for new Engines after
Buyer, at its option, either (1) makes payment to GE in a
lump sum an amount equal to the then current MCPH Rate
multiplied by the EFH for that used Engine since new or
its last shop visit, whichever occurred last, or
<PAGE> 4
(2) such used Engine has been Redelivered to Buyer after
Buyer has Delivered the used Engine to GE for a shop
visit on a Supplemental Work basis.

[REDACTED]

ARTICLE III. - TERMS OF PAYMENT
[REDACTED]

SECTION 2 - TECHNICAL

ARTICLE I.- SCOPE OF WORK

A. Scope of MCPH:

1. MCPH Qualifying Shop Visits

Buyer's Engines meeting any of the following criteria shall be
eligible for maintenance on a MCPH basis ("Qualifying Shop
Visit"):

a) The shop visit is necessary to correct a known defect,
failure, or performance deterioration which is beyond
service limits and cannot be corrected on-wing (See
Paragraph e., below).

b) The shop visit is necessary to comply with an
Airworthiness Directive issued by the FAA or with
recommendations contained in GE's Mandatory Compliance
Service Bulletins.

c) The shop visit is necessary to comply with a GE written
recommendation requiring shop visits of Engines at
scheduled intervals.

d) The shop visit is necessary to replace Life Limited Parts
("LLP").

e) The shop visit is necessary because troubleshooting in
accordance with the applicable Engine Maintenance Manual
by Buyer on-wing could not resolve the problem. Such
Qualifying Shop Visits shall be included as MCPH
Qualifying Shop Visits if GE's designated Senior Field
Service Representative or his duly authorized alternate is
in agreement that required maintenance could not
reasonably have been accomplished on-wing.

f) The shop visit occurs as maintenance for convenience with
prior written concurrence from GE.

[REST OF AGREEMENT, INCLUDING APPENDICES AND ATTACHMENT REDACTED]

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into Atlas Air, Inc.'s previously filed
Registration Statement File No. 33-96682.

/s/ Arthur Andersen LLP
-----------------------------------
Arthur Andersen LLP

Denver, Colorado
March 28, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000

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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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</TABLE>