IN RE NATIONAL AIRLINES, INC. (Bankr.D.Nev. 2001)

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BK-S-00-19258 (LBR)

Attorney(S)

The B.F. Goodrich Company, BF Goodrich Aerospace Component Overhaul and Repair, Inc., The BF Goodrich Aerospace MRO Group, Inc., By their attorneys WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP Dennis M. O'Dea, Esq., New York, New York, Gretchen Santamour, Esq., Philadelphia, PA, Daniel T. Foley, Esq., FOLEY FOLEY, Las Vegas, Nevada. NATIONAL AIRLINES, INC., By its attorneys, BRYAN CAVE LLP, Laurence M. Frazen, Esq., Kansas City, Missouri, SHEA CARLYON, LTD., James Patrick Shea, Esq., Candace C. Carlyon, Esq., Las Vegas, NV,

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In re: NATIONAL AIRLINES, INC., a Delaware corporation, Chapter 11, Debtor.

ORDER APPROVING ASSUMPTION OF B.F. GOODRICH EXECUTORY CONTRACTS

LINDA RIEGLE, United States Bankruptcy Judge.

This mater came before the Court on the Joint Motion of The B.F. Goodrich Company and Certain Affiliates and National Airlines for an Order Approving Assumption of Executory Contracts and, after hearing the parties, it is ORDERED

That the assumption of the BFGoodrich Contracts by National Airlines, Inc. is approved pursuant to the Assumption of Executory Contracts Agreement attached hereto and incorporated herein.

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT

This Assumption of Executory Contracts Agreement ("Assumption Agreement") is made effective as of the 28th day of February 2001 by and between The B.F. Goodrich Company, BFGoodrich Aerospace Component Overhaul Repair, Inc., and BFGoodrich Aerospace MRO Group, Inc, (collectively, "BFGoodrich") and National Airlines, r Inc., a debtor in possession in a case entitled In Re: National Airlines, Inc. pending before the United States Bankruptcy Court for the District of Nevada (the "Court") as Case No. 00-19258-LBR ("National").

RECITALS

A. BFGoodrich and National are parties to a series of executory contracts (the "BFGoodrich Contracts") under which National receives goods and services from BFGoodrich which include the following: Airframe Heavy Maintenance, Wheel and Brake Services, Component Overhaul and Repair Services, and aerostructure goods and services. National leases aircraft from various lessors and is obligated to maintain those aircraft under those leases (the "Aircraft Leases").

B. On February 28, 2001, National agreed to assume the BFGoodrich Contracts pursuant to its powers under 11 U.S.C. § 365 ("Section 365").

C. National is obligated under Section 365 to cure defaults under its assumed executory contracts and to provide adequate assurance of future performance of those contacts.

D. National is unable to cure the existing defaults under the BFGoodrich Contracts, but has entered into this Assumption Agreement pursuant to which it will provide deferred payments to BFGoodrich with regard to the payment defaults, perform its obligations under the BF Goodrich Contracts as modified by this Assumption Agreement and give adequate assurance of its future performance of the BFGoodrich Contracts including timely payment for the goods and services provided subsequent to its decision to assume the BFGoodrich Contracts as set forth in this Assumption Agreement

AGREEMENTS

1. Assumed Agreements. The agreements identified in Exhibit 1 to this Assumption Agreement constitute the agreements assumed by National pursuant to Section 365 (the "Assumed Agreements"). The terms and provisions of each of the Assumed Agreements are incorporated in this Assumption Agreement by reference to them and made a part of' this Assumption Agreement and constitute essential terms to this Assumption Agreement.

2. Terms of Assumed Agreements. National and BFGoodrich restate and reaffirm and promise to faithfully perform the terms of each of the Assumed Agreements as modified, amended or affected by this Assumption Agreement. The terms of each of the Assumed Agreements shall continue in fdll force and effect except as specifically modified or amended by this Assumption Agreement

3. Preservation of Lien Rights.

3.1 Continued Right To Assert and Preserve Liens Nothing in this Assumption Agreement shall be construed to alter, amend or limit the fights of BF Goodrich to avail itself of the common law or statutory law of any jurisdiction which creates, recognizes, permits or otherwise facilitates the assertion of lien rights by BF Goodrich as those rights may exist except as otherwise specifically set forth in this Assumption Agreement

3.2 Liens National, on behalf of itself, the estate and successors including any Trustee appointed in this case, and none other, waives and releases any objection or avoidance right under any provision of the Bankruptcy Code or any other law of the United States to the validity, enforceability, perfection or priority of the chattel liens it has asserted under the law of the State of Washington (the "Chattel Liens") upon the following aircraft and also upon National's interest in such aircraft for materials and services provided in connection with the Airframe Services rendered by BFGoodrich in the amounts indicated for an aggregate lien claim of $4,733,648.43 (the "Secured Accrued Airframe Services Charges") subject to verification by National and amendment by BFGoodrich: Aircraft Amount of Asserted Chattel Lien N544NA $ 269,254.01 N757NA $1,100,988.45 N521NA $1,044,593.68 N547NA $ 249,646.56 N517NA $ 942,501.73 N508NA $ 407,741.28 N513NA $ 718,922.72 Lien Claim Amount $4,733,648.43 4. Payment Terms. National affirms and promises to make the payments due under the terms of the Assumed Agreements subject to the following specific modifications to the Assumed Agreements set forth in this Section 4.

4.1 The Services Ordering Agreement dated 21 June 2000

4.1.1 Airframe and Services requested and provided prior to March 30, 2001 National has received Airframe Services from BFGoodrich under the terms of the Services Ordering Agreement during the period from May 6, 2000 through March 30, 2001 for which it owed BFGoodrich the amount of $8,265,828.22. (the "Accrued Airframe Services Charges") as set forth in Schedule 1 to this Assumption Agreement

4.1.1.1 Payments Made By National for Airframe Services National has made the following payments to BFGoodrich pursuant to the terms of the Services Ordering Agreement as of March 30, 2001 in the aggregate amount of $1,015,500.00:

12/28/00 $254,500

2/16/01 31,000

2/28/01 250,000

3/5/01 100,000

3/9/01 200,000

3/16/01 180,000

4.1.1.2 Balance Due for Airframe Services. Subject to final reconciliation by the parties, National and BFGoodrich agree that the Statement of Account in the principal amount of $7,250,328.22 for the Accrued Airframe Services Charges as set forth in Schedule 1 to this Assumption Agreement is a complete and accurate statement of the balance due to BFGoodrich for Airframe Services rendered through March 30, 2001 and National agrees to pay the amount due under the terms set forth in this Assumption Agreement and the documents and instruments executed in connection with this Assumption Agreement

4.1.1.3 Payment Terms for Airframe Services Provide Prior to February 28, 2001 Subject to final reconciliation by the parties, National promises to pay to BFGoodrich the principal amount of $7,250,328.22 by making deferred payments of the principal amount due plus interest as provided in this Assumption Agreement.

4.1.1.4 Payment of Secured Airframe Services Charges. National shall pay that portion of the Accrued Airframe Services Charges that are included in the Secured Accrued Airframe Services Charges under the terms of that certain 10% Deferred Note A annexed as Exhibit 2 to this Assumption Agreement and described in Section 4.2.1 hereof in the total principal amount of $4,733,648.43. Subject to final reconciliation, National agrees, acknowledges and promises to pay the total principal amount of $4,733,648.43 as the balance due for the Secured Accrued Airframe Services Charges due to BFGoodrich.as set forth in Schedule 3 to this Assumption Agreement.

4.1.1.5 Payment of Unsecured Accrued Airframe Service Charges The remainder of the Accrued Airframe Services Charges that are not included in the Secured Accrued Airframe Service Charges in the principal amount of $2,516,679.79 (the "Unsecured Accrued Airframe Services Charges") shall be added to the balance of $1,382,559.13 which, subject to final verification by National and BFGoodrich, constitutes the amount due as Cure for Other BFGoodrich Contracts as described in Section 4.4.2 of this Assumption Agreement to create a principal amount due of $3,899,238.92 as set forth in Schedule 4 to this Assumption Agreement and under the terms of that certain 10% Deferred Note B annexed as Exhibit 3 to this Assumption Agreement and described in Section 4.2.2 hereof.

The 10% Deferred Note A and the 10% Deferred Note B shall be referred to collectively as the "Notes".

4.2 The Notes

4.2.1 The 10% Deferred Note A Subject to final reconciliation of the parties, the 10% Deferred Note A shall be made by National in the principal amount of $4,733,648.43. The 10% Deferred Note A shall be paid in 24 equal installments plus accrued simple interest at 10 per cent per annum. The 10% Deferred Note A shall be made payable to BFGoodrich Aerospace MRO Group, Inc. and payment of principal and accrued interest thereunder shall commence on the earlier of August 1, 2001 or entry of an order of the Court (i) approving debtor in possession financing, or (ii) confirming a plan of reorganization, or (iii) authorizing the sale or assignment of all or substantially all of the assets of National. Interest under the 10% Deferred Note A shall begin to accrue on the date of entry of an order of the Court approving this Assumption Agreement National covenants and agrees that it will make timely and complete payments due and perform all of the obligations set forth in the 10 % Deferred Note A.

4.2.2 The 10% Deferred Note B Subject to final reconciliation by the parties, the 10 % Deferred Note B shall be made by National in the principal amount of $3,899,238.92 in 60 equal installments plus accrued simple interest at 10 per cent per annum. The 10% Deferred Note B shall be made payable to BFGoodrich Aerospace MRO Group, Inc. and payment of principal and accrued interest thereunder shall commence on the earlier of August 1, 2001 or entry of an order of the Court (i) approving debtor in possession financing, or (ii) confirming a plan of reorganization, or (iii) authorizing a sale or assignment of all or substantially all of the assets of National. Interest under the 10% Deferred Note B shall begin to accrue on the date of entry of an order of the Court approving this Assumption Agreement. National covenants and agrees that it will make timely and complete payments due and perform all of the obligations set forth in the 10% Deferred Note B.

4.3 Airframe Services Provided Subsequent to March 30, 2001

4.3.1 Scheduled Airframe Services. National has received or will receive the following Airframe Services provided or scheduled by BFGoodrich subsequent to February 28, 2001 ("Current Airframe Services"): Tail Number Balance Due N522NA 500,000-750,000.00 Estimated Amount N541NA 750,000-1,000,000.00 Estimated Amount 4.3.2 Payment Terms for Airframe Services To Aircraft N522NA and N541NA National will pay to BFGoodrich in cash or by wire transfer (a "Wire Transfer") pursuant to the wire instructions provided by BFGoodrich in the amount stated by BFGoodrich as due and payable for Airframe Services to Aircraft N522NA and N541NA (the "Estimated Amount") prior to the release of each of the aircraft by BFGoodrich. National acknowledges and agrees that the Estimated Amount may include amounts due and payable that BFGoodrich reasonably expects to incur for repairs by outside service vendors for these Aircraft. National reserves the right to review and reconcile such amounts after payment

4.3.3 Amended Payment Terms For Airframe Services Under Services Ordering Agreement

4.3.3.1 Payment Due Prior to Release of Aircraft The Services Ordering Agreement shall be amended to provide that payment for Airframe Services provided to BFGoodrich after the entry of the Order approving the assumption of the Services Ordering Agreement by National shall be made by National to BFGoodrich in cash or by Wire Transfer in the amount set forth in the Initial Invoice as defined in Section 4.2.1(a) of the Services Ordering Agreement prior to the release of the aircraft upon completion of services by BFGoodrich.

4.3.3.2 Payment of Initial Invoice The Services Ordering Agreement shall be modified to provide that the Initial Invoice shall be submitted by BFGoodrich to National prior to the Aircraft redelivery and shall be due and payable prior to the Aircraft redelivery.

4.3.3.3 Payment of Final Invoice The Services Ordering Agreement shall be modified to provide that payment of the Final Invoice as defined in Section 4.2.1(c) of the Services Ordering Agreement shall be due no later than sixty days after the Aircraft redelivery.

4.4 Goods and Services Provided by BFGoodrich through other Business Units and Affiliates

4.4.1 Assumption of Other BFGoodrich Contracts. BFGoodrich has provided goods and services to National through business units other than its Airframe Services Division under the terms of various agreements (the "Other BFGoodrich Contracts") which National agrees to assume and perform in accordance with their terms as modified by BFGoodrich and National in the course of their business dealings following the commencement of this case.

4.4.2 Cure of Defaults in Other BFGoodrich Contracts Subject to verification by the parties, National acknowledges and agrees to pay to BFGoodrich the amount of $1,382,559. (the "Cure for Other BFGoodrich Contracts") to cure payment defaults and which amount it acknowledges is due and owing to the business units in the amounts set forth on Schedule 2 to this Assumption Agreement for goods and services provided and performed prior to December 6, 2001 under the terms of the Other BFGoodrich Contracts.

4.4.3 Cure Payment Terms for Other BFGoodrich Contracts The Cure for Other BFGoodrich Contracts shall be included in the principal amount due under the 10% Deferred Note B described in Section 4.2.2 of this Assumption Agreement and shall be paid under the terms of the 10% Deferred Note B in satisfaction of the obligations of National under the Other BFGoodrich Contracts.

5. Covenants

5.1 Incorporation of Assumption Agreement into Terms of DIP Financing Agreement, Reorganization or Sale National covenants for itself; its successors, and assigns and agrees that it will not (i) support, consent to or enter into any agreement, understanding, or other undertaking to sell or assign all or substantially all of its property including, without limitation, its Aircraft Leases, or (ii) propose, agree to or support a plan of reorganization, or (iii) propose any agreement for the purpose of obtaining debtor in possession financing, that do not include within their terms an assumption of the liability and obligations of National to BFGoodrich under the terms of this Assumption Agreement and Notes by any such purchaser or assignee or person acquiring control of the assets or business of National which lender, purchaser, assignee or person shall demonstrate to the satisfaction of BF Goodrich that it has the financial ability to satisfy the obligations under the Assumption Agreement and Notes.

5.2 Treatment of Chattel Liens and Lien Rights BFGoodrich covenants that, if a person or entity whose credit worthiness and ability to perform the obligations imposed upon National under this Assumption Agreement and as maker under the Notes and to pay according to their terms are demonstrated and established to the reasonable satisfaction of BFGoodrich, BFGoodrich will agree, in exchange for the agreement of such person or entity(the "New Maker") to perform and assume the obligations of National under the Assumption Agreement and the Notes, (i) to release its Chattel Liens and (ii) accept payment of the amounts due under the Notes by the New Maker in consideration of the Notes and the agreement by BFGoodrich to release its liens. To the extent BFGoodrich receives payment from a lessor or any other third party in respect of the Chattel Liens, BFGoodrich shall give credit to the Notes in the amount of the payment such that the total amount received does not exceed the total amount due under the Notes.

5.3 Stay bnposed by 11 U.S.C. § 362 and § 549

5.3.1 National maintains that BFGoodrich is stayed from enforcing its lien rights asserted against the following aircraft in National's possession, which National claims are necessary for its business: N544NA, N757NA, N521NA, N517NA, N513NA, N5087NA, and N547NA (the "Liened Aircraft").

5.3.2 Subject to the provisions and the obligations of National under 11 U.S.C. § 1110 and its aircraft leases, in the event that National shall cease to utilize any of the Liened Aircraft in its business or determine that it will not use any of the Liened Aircraft in its business, National shall immediately give notice to BFGoodrich of those facts and retain possession of the aircraft for not less than three business days after giving such notice and be deemed to consent to the immediate relief to BFGoodrich from the automatic stay upon delivery of such notice to BFGoodrich so that BFGoodrich may pursue its lien rights.

5.3.3 To the extent that BFGoodrich is required to take any action to preserve its claims or lien rights against any person, other than National, claiming an interest in any of the Liened Aircraft under applicable state or federal law, National agrees to cooperate with BFGoodrich in its efforts to preserve and pursue such rights.

6. Defaults

6.1 Events of Default Under Assumption Agreement Without limiting, modifying or in any way affecting the rights of the parties under the Notes, the Assumed Agreements or any other rights which rights shall be cumulative and in addition to the rights of the parties hereto, the following shall constitute events of default under this Assumption Agreement:

(a) The failure of National to submit the Joint Motion to the Court by May 1, 2001;

(b) The failure of National to execute and deliver to BFGoodrich either or both of the Notes within ten days of the entity of an order approving or granting the relief sought in the Joint Motion;

(c) The failure of National to comply with the provisions of Section 4.3 of this Assumption Agreement;

(d) The submission of (i) a proposal for debtor in possession financing, or (ii) a proposed plan of reorganization by, with the agreement, or without the opposition of National, or (iii) a motion by any party to sell all or substantially all of the assets of National or assign any of its material contracts without satisfying the covenants set for the in Section 5 of this Assumption Agreement;

(e) The occurrence of an Event of Default under either of the Notes;

(f) The appointment or election of a trustee or examiner with expanded powers;

(g) The conversion of this Case to a case under Chapter 7 prior to the confirmation of a plan of reorganization in the Case or a sale or assignment of all or substantially all of National's assets; or

(h) The dismissal of this Case. prior to the confirmation of a plan of reorganization in the Case or a sale or assignment of all or substantially all of National's assets.

6.2 Remedies Upon the occurrence of an Event of Default under this Assumption Agreement, in addition to the remedies available under the Notes, the Assumed Agreements and other rights and remedies that the parties may have, BFGoodrich shall have immediate relief from the stay imposed by 11 U.S.C. § 362 and shall be free to assert its Chattel Liens and any other lien rights or interests which it holds against National and any other person or entity, and National shall return the Aircraft N517NA to the BFGoodrich facility in Everett Washington and the possessory lien previously held by BFGoodrich shall be reinstated and continue in full force and effect as though the Aircraft had not been released by BFGoodrich, in accordance with the December 28, 2000 order of the Court.

7. Miscellaneous

7.1 Entire Agreement This Agreement contains the entire agreement and understanding of the parties with respect to the assumption of the BFGoodrich Contracts, cure of defaults, and adequacy of the assurance of future performance of the BFGoodrich Contracts by National. No other representations, promises, agreements or understandings regarding the subject mailer hereof shall be of any force or effect unless in writing, executed by the parties hereto subsequent to the date hereof

7.2 Chattel Liens

7.2.1 Preserving Lien Rights Subject to Section 5.2 hereof, notwithstanding any term or provision of this Assumption Agreement, nothing in this Assumption Agreement shall impair, limit, or prevent BFGoodrich from taking the actions which it deems appropriate to perfect, execute upon and realize upon the liens it has asserted or may assert against any aircraft with regard to which it has or will provide materials or services which entitle it to assert lien rights under relevant law.

7.2.2 No Third Party Beneficiary Rights It is not the intent of the parties to benefit any persons other than the parties to this agreement or to create rights in third parties, including without limitation, lessors or financers of any aircraft that is the subject of any present or future lien claims by BFGoodrich.

7.2.3 Stipulated Order of February 2, 2001 National and BFGoodrich shall modify and amend the terms of the Notice of Stipulation and Order of Forbearance By BFGoodrich entered on February 2, 2001 (the "February 2, 2001 Stipulation")and the Stipulated Order Requiring Turnover and Adequate Protection entered in the adversary proceeding brought by National against BFGoodrich styled as National Airlines, Inc. v. B. F. Goodrich Aerospace MRO Group Inc,., Chapter 11 Case No BKS-00-19258 LBR, Adv. Pro. No. 002356LBR to provide that BFGoodrich will forbear from exercising its rights to demand possession of Aircraft N517NA so long as National is not in default under this Assumption Agreement and the Notes by amending the decretal paragraphs of the February 2, 2001 Stipulation to read as follows:

IT IS THEREFORE STIPULATED by and between National and BFG and ORDERED as to MSA I and ILFC as follows:

1. The December 28, 2000 Stipulation is confirmed and continued in fall force and effect.

2. BFG shall not seek enforcement of the provision of paragraph 6 of December 28, 2000 Stipulation so long as National is not in default under the terms of the Assumption Agreement dated as of February 28, 2001 by and between National and BFG and certain of BFG's affiliates and of the Notes executed in connection with that agreement. Paragraph 6 of the Stipulation is hereby amended and revised to provide as follows:

Upon the occurrence of an Event of Default under the Assumption Agreement or the 10% Deferred Note A, National shall promptly deliver the Aircraft to the BFG facility in Everett, Washington and the possessory lien held by BFG as perfected by filings with the FAA and Snohomish County Auditor shall be reinstated as a possessory lien and continue in fall force and effect as though the Aircraft had not been released by BFG pursuant to this Order.

3. The provisions of the December 28, 2000 Stipulation shall otherwise remain in full force and effect.

7.3 Notices All notices (including by facsimile) or other communications required or permitted by this Assumption Agreement shall be in writing and shall have been duly given upon receipt if delivered in person or by United States mail, postage prepaid, overnight delivery service or facsimile as provided in the BFGoodrich Contracts. Copies of any such notices to BFGoodrich shall be sent in the same manner as they are sent to BFGoodrich to:

Dennis M. O'Dea, Esq. Wolf; Block, Schorr and Solis-Cohen L.L.P. 250 Park Avenue, Suite 1000 New York, New York 10177 Telephone: 212-883-4918 Fax: 212-986-0604

Copies of any such notices to National shall be sent in the same manner as they are sent to National to:

Laurence M. Frazen, Esq. Bryan Cave, L.L.P. 1200 Main Street, Suite 3500 Kansas City, Missouri 64105 Telephone: 816-374-3252 Fax: 816-374-3200

7.4 Waiver No waiver of any provision of this Assumption Agreement shall be valid or binding unless it is in writing dated subsequent to the date hereof and signed by the parties hereto. No waiver of any breach, term or condition of this Assumption Agreement by either party shall constitute a subsequent waiver of the same or any other breach, term or condition. No failure or delay of either party in exercising any rights under this Assumption Agreement shall operate as a waiver thereof; nor shall any partial exercise by either party of any right under this Assumption Agreement preclude another or further exercise thereof or the exercise of any other right

7.5 Effective Date and Joint Motion This Assumption Agreement and the related documents, subject to approval by the. Court, should be effective as of February 28, 2001. National and BFGoodrich agree to promptly apply to the Court for the entry of an order approving this Assumption Agreement pursuant to a joint motion which shall be substantially in the form of the attached Joint Motion as Exhibit 4 to this Assumption Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Assumption Agreement as of the date first above written.

THE B.F.GOODRICH COMPANY BFGOODRICH AEROSPACE MRO GROUP, INC. BFGOODRICH AEROSPACE COMPONENT OVERHAUL AND REPAIR, INC.

By:_

Its

NATIONAL AIRLINES, INC.

IN WITNESS WHEREOF, the parties hereto have executed this Assumption Agreement as of the date first above written.

THE B.F.GOODRICH COMPANY BFGOODRICH AEROSPACE MRO GROUP, INC. BFGOODRICH AEROSPACE COMPONENT OVERHAUL AND REPAIR, INC,

By:

Its

NATIONAL AIRLINES, INC.

By:

Its

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT SCHEDULE 1 STATEMENT OF ACCRUED AIRFRAME SERVICES CHARGES

Invoice Number Tail Number Invoice Amount Balance Due 225129-2 N545NA 11,702.00 11,702.00 711184 N545NA 298,452.71 0.00 71123 N545NA 7,627.47 0.00 317,782.18 11,702.00 71062B N523NA 12,999.00 12,999.00 710634 N506NA 50,250.00 50,250.00 710672 N506NA 1,820,234.09 1,820,234.09 1,870,484.09 1,870,484.09 710736 N521NA 1,023,293.68 1,023,293.68 710953 N521NA 21,300.00 21,300.00 1,044,593.68 1,044,593.68 710736 N512NA 621,494.70 621,494.70 710732 N544NA 269,254.01 269,254.01 710733 N757NA 1,056,228.45 1,056,228.45 711038 N757NA 44,760.00 44,760.00 1,100,988.45 1,100,988.45 710735 N517NA 1,227,831.46 927,831.46 711348 N517NA 45,670.27 14,670.27 1,273,501.73 942,501.73 711194 N547NA 249,646.56 249,646.56 711286 N508NA 357,881.77 357,881.77 711286 N508NA 49,859.51 49,859.51 407,741.28 407,741.28 711192 N546NA 287,332.40 0.00 711476 2,000.00 0.00 289,332.40 0.00 710734 N513NA 730,226.5 641,139.33 710734 76,78339 76,783.39 711452 1,00.00 1,000.00 808,010.14 718,922.72 TOTAL 8,265,828.22 Total after Payments Credited 7,250,328.22

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT SCHEDULE 2 CURE FOR OTHER B.F. GOODRICH CONTRACTS

Rohr 358,000 Fort Lauderdale 23,000 Components 157,000 Evacuation Systems 9,559.13 Austin 6,000 Fairhope 556,000 Menasco 260,000 Simmonds 5,000 Ontario 8,000 Total 1,382,559.13

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT SCHEDULE 3 10% DEFERRED NOTE A

Payment of Secured Airframe Charges P.O./ Invoice A/C Depart Due Invoice Applied Balance Invoice Number Tail No. Date Date Date Amount Amount Due 710916-1A N521NA 17-Oct-00 Engineering 18-Nov-00 14,000.00 0.00 14,000.00 710916-2 credit memo N521NA 07-Dec-00 Engineering 07-dec-00 (14,000.00) 0.00 (14,000.00) 710732-1 N544NA 05-Oct-00 15-Sep-00 04-Nov-00 221,327.38 0.00 221,327.38 710732-2 N544NA 13-Oct-00 15-Sep-00 12-Nov-00 45,905.03 0.00 45,905.03 710736-1 N521NA 26-Oct-00 16-Oct-00 25-Nov-00 766,321.68 0.00 766,321.68 710736-2 N521NA 30-Oct-00 16-Oct-00 25-Nov-00 222,310.07 0.00 222,310.07 710733 N757NA 20-Nov-00 15-Nov-00 20-Dec-00 1,008,090.53 0.00 1,008,090.53 710953-1 N521NA 07-Dec-00 16-Oct-00 06-Jan-01 21,300.00 0.00 21,300.00 711038-1 N757NA 20-Dec-00 15-Nov-00 19-Jan-01 44,760.00 0.00 44,760.00 710733-3 N757NA 21-Dec-00 15-Nov-00 20-Jan-01 46,180.99 0.00 46,180.99 710736-3 N521NA 21-Dec-00 16-Oct-00 20-Jan-01 33,573.20 0.00 33,573.20 710732-3 N544NA 22-Dec-00 15-Sep-00 21-Jan-01 2,021.60 0.00 2,021.60 710736-4 N521NA 26-Jan-01 16-Oct-00 25-Feb-01 1,088.73 0.00 1,088.73 710733-4 N757NA 07-Feb-01 15-Nov-00 09-Mar-01 1,957.33 0.00 1,957.33 710735-1 N517NA 04-Jan-01 31-Dec-00 03-Feb-01 1,209,607.10 (300,000.00) 909,807.10 711194-1 N547NA 23-Jan-01 21-Jan-01 22-Feb-01 245,378.54 0.00 245,376.54 711286-1 N508NA 16-Feb-01 11-Feb-01 18-Mar-01 357,881.77 0.00 357,881.77 711348-1 N517NA 16-Feb-01 14-Feb-01 18-Mar-01 45,670.10 (31,000.00) 14,870.27 710734-1A N513NA 27-Feb-01 05-Mar-01 29-Mar-01 730,226.75 (89,087.42) 641,139.33 711286-2 N508NA 28-Feb-01 11-Feb-01 30-Mar-01 48,859.51 0.00 48,859.51 711194-2 N547NA 12-Mar-01 21-Jan-01 11-Apr-01 4,268.02 0.00 4,268.02 710735-2 N517NA 16-Mar-01 31-Dec-00 15-Apr-01 18,224.36 0.00 18,224.36 710734-2 N513NA 20-Mar-01 08-Mar-01 19-Apr-01 76,783.39 0.00 76,783.39 711452-1 N513NA 30-Mar-01 08-Mar-01 29-Apr-01 1,000.00 0.00 1,000.00 5,153,735.85 (420,087.42) 4,733,648.43

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT SCHEDULE 4 10% DEFERRED NOTE B

Payment of Unsecured Airframe Service Charges P.O/ Invoice A/C Depart Due Invoice Applied Balance Invoice Number Tail No. Date Date Date Amount Amount Due 225129-2 N545NA 08-May-00 AOT 05-Jun-00 11,702.00 0.00 11,702.00 710628-1 N523NA 05-Jun-00 21-May-00 05-Jul-00 12,999.08 0.00 12,999.00 710834-1 N506NA 14-Sep-00 Engineering 14-Oct-00 60,250.00 0.00 60,250.00 710672-1 N506NA 29-Sep-00 08-Aug-00 29-Oct-00 1,354,347.72 0.00 1,354,347.72 710731-1 N512NA 03-Oct-00 02-Sep-00 02-Nov-00 480,953.41 0.00 480,953.41 710872-2 N506NA 12-Oct-00 08-Aug-00 11-Nov-00 465,886.37 0.00 465,886.37 710731-2 N512NA 13-Oct-00 02-Sep-00 12-Nov-00 138,776.51 0.00 138,776.51 710731-3 N512NA 21-Dec-00 02-Sep-00 20-Jan-01 1,764.78 0.00 1,764.78 711184-1 N545NA 15-Dec-00 13-Dec-00 14-Jan-01 254,498.09 (254,498.09) 0.00 711223-1 N545NA 20-Dec-00 15-Dec-00 19-Jan-01 7,372.26 (7,372.26) 0.00 711184-2 N545NA 26-Jan-01 13-Dec-00 25-Feb-01 42,944.15 (42,944.15) 0.00 711223-2 N545NA 07-Feb-01 15-Dec-00 09-Mar-01 255.21 (255.21) 0.00 711184-3 N545NA 12-Mar-01 13-Dec-00 11-Apr-01 1,010.47 (1,010.47) 0.00 711192-1 N545NA 21-Mar-01 16-Mar-01 20-Apr-01 287,332.40 (287,332.40) 0.00 711475-1 N546NA 30-Mar-01 16-Mar-01 29-Apr-01 2,000.00 (2,000.00) 0.00 3,112,892.37 (595,412.58) 2,516,679.79 Other BF Goodrich Contracts (Schedule 2) 1,382,559.13 TOTAL 3,899,238.92

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT EXHIBIT I

Services Ordering Agreement dated 21 June 20001 Component Services Agreement dated June 11, 1999

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT EXHIBIT 2 10% DEFERRED NOTE A (this "Note")

U.S. $4,733,645.43 Execution Date:

May 10, 2001 Las Vegas, NV

FOR VALUE RECEIVED, the undersigned, NATIONAL AIRLINES, INC., a Delaware corporation (the "Maker") promises to pay to the order of B.F. GOODRICH AEROSPACE MRO GROUP, NC., a Washington corporation (the "Payee"), at its offices located at 11323 30th Avenue West, Payne Field, Everett, Washington 98204, or at such other address as the Payee may from time to time designate, the principal sum of U.S. $4,733,648.43, together with interest from the date of this Note on the unpaid principal balance, upon the terms and conditions specified below.

WHEREAS, the Maker is a debtor in possession in a case entitled "In Re: National Airlines, Inc." pending before the United States Bankruptcy Court for the District of Nevada (the "Court"), as Case No. 00-19258-LBR (the "Case"); and

WHEREAS, the Maker and the Payee have entered into an Assumption of Executory Contracts Agreement, dated as of February 28, 2001 (the "Assumption Agreement"), under which the Maker, pursuant to its powers under Section 365 of Title 11 of the United States Code (the "Bankruptcy Code"), has agreed to assume certain executory contracts between the Payee and the Maker (the "Assumed Agreements") for materials and services provided by the Payee to the Maker and to cure certain defaults; and

WHEREAS, the Payee has asserted chattel liens (the "Chattel Liens") arising under the laws of the State of Washington upon those aircraft identified in Paragraph 3.1.2 of the Assumption Agreement and in the Maker's interest in such aircraft; and

WHEREAS, the Maker has executed this Note to cure defaults under the Assumed Agreements; and

WHEREAS, the Maker has also executed simultaneously with this Note a second promissory note with respect to its cure obligations to the Payee under certain of the Assumed Agreements in the amount of $3,899,238.92 (the "10% Deferred Note B").

NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows:

1. TERM. The principal amount hereof shall be repaid in twenty-four (24) equal and consecutive installments of $197,235.35, each of which shall be due and payable on the first day of each month, commencing on the earlier of August 1, 2001, or entry of an order of the Court (i) approving debtor-in-possession financing, (ii) confirming of a plan of reorganization, or (iii) authorizing a sale or assignment of all or substantially all of National's assets.

2. RATE OF INTEREST. Interest shall accrue under this Note on any unpaid principal balance at the rate of TEN percent (10%) per annum commencing on the date of entry of an order approving the Assumption Agreement. Interest hereunder shall be computed on the basis of a 360-day year consisting of twelve 30-day months. All accrued and unpaid interest on the Note shall be paid arrears on the first day of each month, commencing on the earlier of August 1, 2001, or entry of an order of the Court (i) approving debtor-in-possession financing, (ii) confirming of a plan of reorganization, or (iii) authorizing a sale or assignment of all or substantially all of National's assets.

Should interest not be paid when due, such interest shall thereafter bear like interest as the unpaid principal balance, but such unpaid interest, compounded annually, shall in no event exceed an amount equal to simple interest on the unpaid principal at the maximum rate permitted bylaw.

3. PAYMENTS. Prepayment of principal and interest (accrued through the date of prepayment) may be made at any time without penalty. All payments made hereunder shall be applied first to all costs and expenses incurred by the Payee in the collection of this Note, as set forth below, then to accrued but unpaid interest hereunder and then to the principal balance hereof

Principal and interest evidenced hereby are payable only in lawful money of the United States. The receipt of a check by the Payee does not, in and of itself, constitute payment hereunder unless and until such check is paid in good funds.

4. DEFAULT INTEREST.

(a) The Maker agrees that time is of the essence in respect of payment of the principal balance hereunder and that in the event payment of principal due under this Note is not made when due or when any Event of Default has occurred and is continuing, in addition to any other remedies available to the Payee, the outstanding principal balance hereof shall bear interest at the rate of TWELVE percent (12%) per annum, for so long and until such overdue payment is made in full.

(b) The Maker agrees that time is of the essence in respect of payment of interest hereunder and that in the event payment of interest due under this Note is not made when due (including any applicable grace period), in addition to any other remedies available to the holder, the overdue interest payment shall immediately bear interest at the rate of TWELVE percent (12%) per annum, for so long and until such overdue payment is made in full.

5. SECURITY. Subject to Section 5.2 of the Assumption Agreement, these obligations of the Maker under this Note which are the subject of the Chattel Liens are and remain secured by the Chattel Liens.

6. COMPLIANCE WITH USURY LAW. All agreements between the Maker and the Payee of this Note are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance, or otherwise, shall the amount paid or agreed to be paid to the Payee for the use, forbearance or detention of money advanced hereunder exceed the highest lawful rate permissible under any law which a court of competent jurisdiction may deem applicable hereto. If, from any circumstances whatsoever, fulfillment of any provision hereof or any instrument securing this Note or any other agreement referred to herein, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any circumstances the holder hereof shall ever receive as interest an amount which would exceed the higher lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest. This provision shall control every other provision of all agreements between the Maker and the Payee.

7. REPRESENTATIONS AND WARRANTIES.

(a) The Maker is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. The Maker is in good standing in all other states and jurisdictions where failure to be so qualified would have a material adverse effect on the business or financial condition of the Maker.

(b) The Maker is duly authorized and empowered to execute, deliver and perform its obligations under this Note. The execution, delivery and performance of this Note have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the shareholders of the Maker; (ii) contravene the Maker's charter, articles or certificate of incorporation or by-laws; (iii) violate or cause the Maker to be in default under any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award in effect having applicability to the Maker; (iv) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Maker is a party or by which it or its properties may be bound or affected; or (v) result in or require the creation or imposition of any lien upon or with respect to any of the properties now owned or hereafter acquired by the Maker, except in favor of the Payee.

(c) This Note, when delivered to the Payee by the Maker, will be, a legal, valid and binding obligation of the Maker, enforceable against it in accordance with its respective terms.

(d) The Maker has, and is in good standing with respect to, all material governmental consents, approvals, licenses, authorizations, permits, certificates, inspections and franchises necessary to continue to conduct its business as heretofore or proposed to be conducted by it and to own or lease and operate its property as now owned or leased by it.

8. COVENANTS.

(a) The Maker will deliver, or cause to be delivered, to the Payee, in form and detail acceptable to the Payee, as soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Maker, the Maker's audited and consolidating financial statements for such fiscal year, which shall include the consolidated and consolidating balance sheet of the Maker as at the end of such fiscal year and the related statements of the Maker's income, retained earnings and cash flows for the fiscal year then ended, all in reasonable detail and prepared in accordance with GAAP, certified by an independent certified public accountant of national standing, together with a copy of all management letters prepared by such accountants.

(b) Promptly upon the occurrence thereof, and in any event within three (3) business days after any officer of the Maker obtains knowledge thereof, notice of(i) the occurrence of any event which constitutes and Event of Default or of(ii) any litigation pending or threatened against the Maker or any of its subsidiaries reasonably expected to materially and adversely affect the business, operations, assets, property, liabilities and condition (financial or otherwise) of the Maker and its subsidiaries taken as a whole.

(c) The Maker will preserve and maintain its existence and all of its rights, privileges and franchises necessary or desirable in the normal conduct of its business and shall conduct its business in an orderly, efficient and regular manner.

(d) The Maker will comply with the requirements of applicable laws and regulations, the non-compliance with which could reasonably be expected to have a material adverse effect on the business, assets, property, prospects, profits or condition (financial or otherwise) of the Maker.

9. EVENTS OF DEFAULT / ACCELERATION. This Note shall become immediately due and payable and the Maker consents to immediate automatic relief from the stay imposed by Section 362 of the Bankruptcy Code without the necessity of further order of the Court to permit Payee to enforce this Note and the rights under the Chattel Liens upon any of the following events (each, an "Event of Default"):

(a) With Notice. At the option of the Payee and exercised by written notice to the Maker: (i) the Maker's failure to pay when due any payment of principal, (ii) the Maker's failure to pay when due any payment of interest; (iii) any representation, warranty or statement made by the Maker herein or in any certificate delivered hereunder shall prove to be untrue in any material respect on the date on and as of which made or deemed to be made; (iv) the Maker shall fail to perform or observe any term, covenant or agreement contained in this Note or the Assumption Agreement; (v) an Event of Default shall occur and be continuing under the 10% Deferred Note B; or (vi) the rendering of a final judgment or judgments for payment of money aggregating in excess of $500,000 against the Maker and the same is not discharged within a sixty (60) day period, without a stay of execution.

(b) Without Notice. Without notice or demand and without the need for any action or election by the Payee: (i) conversion of the Maker's Case under Chapter 11 to a case under Chapter 7 of the Bankruptcy Code; (ii) dismissal of the Maker's Case in Chapter 11 of the Bankruptcy Code; or (iii) appointment of a trustee or an examiner with enlarged powers under the Maker's Case under Chapter 11.

10. COLLECTION. If this Note or any installment of principal or interest of this Note is not paid when due, whether at maturity or by acceleration, the Maker promises to pay all reasonable costs of collection, including without limitation, reasonable attorneys' fees, and all reasonable expenses in connection with the protection or realization of the collateral securing this Note incurred by the Payee on account of such collection. Such costs and expenses shall include, without limitation, all reasonable costs, expenses and attorneys' fees actually incurred by the Payee in connection with any insolvency, bankruptcy, arrangement or other similar proceedings involving the Maker, which in any way affects the exercise by the Payee of its rights and remedies under this Note.

11. CHATTEL LIENS.

(a) Preserving Lien Rights Subject to Section 5.2 hereof, notwithstanding any term or provision of the Assumption Agreement, nothing in this Assumption Agreement shall impair, limit, or prevent BFGoodrich from taking the actions which it deems appropriate to perfect, execute upon and realize upon the liens it has asserted or may assert against any aircraft with regard to which it has or will provide materials or services which entitle it to assert lien rights under relevant law.

(b) No Third Party Beneficiary Rights It is not the intent of the parties to benefit any persons other than the parties to this agreement or to create rights in third parties, including without limitation, lessors or financers of any aircraft that is the subject of any present or future lien claims by BFGoodrich.

(c) Stipulated Order of February 2, 2001 National and BFGoodrich shall modify and amend the terms of the Notice of Stipulation and Order of Forbearance By BFGoodrich entered on February 2, 2001 (the "February 2, 2001 Stipulation")and the Stipulated Order Requiring Turnover and Adequate Protection entered in the adversary proceeding brought by National against BFGoodrich styled as National Airlines, Inc. v. B. F. Goodrich Aerospace MRO Group Inc., Chapter 11 Case No BK-S-00-19258 LBR, Adv. Pro. No. 002356LBR to provide that BFGoodrich will forbear from exercising its rights to demand possession of Aircraft N517NA so long as National is not in default under this Assumption Agreement and the Notes by amending the decretal paragraphs of the February 2, 2001 Stipulation to read as follows:

IT IS THEREFORE STIPULATED by and between National and BFG and ORDERED as to MSA I and ILFC as follows:

1. The December 28, 2000 Stipulation is confirmed and continued in full force and effect.

2. BFG shall not seek enforcement of the provision of paragraph 6 of December 28, 2000 Stipulation so long as National is not in default under the terms of the Assumption Agreement dated as of February 28, 2001 by and between National and BFG and certain of BFG's affiliates and of the Notes executed in connection with that agreement. Paragraph 6 of the Stipulation is hereby amended and revised to provide as follows:

Upon the occurrence of an Event of Default under the Assumption Agreement or the 10% Deferred Note A, National shall promptly deliver the Aircraft to the BFG facility in Everett, Washington and the possessory lien held by BFG as perfected by filings with the FAA and Snohomish County Auditor shall be reinstated as a possessory lien and continue in full force and effect as though the Aircraft had not been released by BFG pursuant to this Order.

3. The provisions of the December 28, 2000 Stipulation shall otherwise remain in full force and effect.

12. PARTIAL EXERCISE OF POWER. No single or partial exercise of any power hereunder shall preclude other or further exercise thereof or the exercise of any other power. The Payee shall at all times have the right to proceed against any portion of the security held herefor in any such order and in any such manner as the Payee may deem fit, without waiving any rights with respect to any other security. No delay or omission on the part of the Payee in exercising any right hereunder shall operate as a waiver of such right or of any other right under this Note. The acceptance of any amount due and payable hereunder shall not operate as a waiver with respect to any other amounts then owing and unpaid. The rights, remedies, powers and privileges provided herein and in the Assumption Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges provided.

13. WAIVER, PRESENTMENT AND DEMAND. The Maker hereby waives presentment, demand, protest, notices of protest, dishonor and nonpayment of this Note and all notices of every kind (to the maximum extent permitted by applicable law) in connection with this Note.

14. PAYMENT DUE ON THE NEXT SUCCEEDING BUSINESS DAY. Whenever any payment on this Note shall be stated to be due on a day which is not a business day, such payment shall be due on the next succeeding business day and such extension of time shall be included in the computation of the payment of interest on this Note.

15. GOVERNING LAW, JURISDICTION, WAIVER OF JURY TRIAL. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER ARE TO BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF WASHINGTON. THE MAKER CONSENTS TO PERSONAL JURISDICTION IN THE STATE OR FEDERAL COURTS OF THE STATE OF WASHINGTON.

THE MAKER HEREBY WAIVES AND COVENANTS THAT THE MAKER WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE, THE SUBJECT MATTER HEREOF OR ANY DOCUMENT RELATING HERETO, IN EACH CASE WHETHER OR NOT EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR IN TORT OR OTHERWISE.

16. ENTIRE AGREEMENT. This Note, the Assumption Agreement and all documents or instruments incorporated by reference therein and/or to be delivered to the Payee contain all of the terms and conditions agreed upon by the parties relating to the subject matter of this Note and supersede any and all prior and contemporaneous agreements, negotiations, correspondence, understandings and communications of the parties, whether oral or written, respecting that subject matter.

17. VARIATION OR MODIFICATION. No variation or modification of this Note, or any waiver of any of its provisions or conditions, shall in any event be valid unless the same shall be in writing and signed by an authorized representative of the Maker and the Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

18. SEVERABILITY. If any provision of this Note is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the pates to the extent possible. In any event, all other provisions of this Note shall be deemed valid and enforceable to the full extent possible.

19. HEADINGS. The section headings used in this Note are intended principally for convenience and shall not by themselves determine the rights and obligations of the parties to this Note.

20. OBLIGATION OF THE MAKER. The obligations of the Maker under this Note are absolute and not subject to any right of set-off, or recoupment against the Payee or any kind whatsoever.

NATIONAL AIRLINES, INC.

Name:

Title: Raymond T. Nakano Sr. Vice President Finance Chief Financial Officer Accepted:

BF GOODRICH AEROSPACE MRO GROUP, INC.

By_______________________________

Name:

Title:

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT EXHIBIT 3

10% DEFERRED NOTE B (this "Note")

U.S. $3,899,238.92 Execution Date: May 10, 2001

Las Vegas, NV

FOR VALUE RECEIVED, the undersigned, NATIONAL AIRLINES, INC., a Delaware corporation (the "Maker") promises to pay to the order of B.F. GOODRICH AEROSPACE MRO GROUP, INC., a Washington corporation (the "Payee"), at its offices located at 11323 30th Avenue West, Payne Field, Everett, Washington 98204, or at such other address as the Payee may from time to time designate, the principal sum of U.S. $3,899,238.92, together with interest from the date of this Note on the unpaid principal balance, upon the terms and conditions specified below.

WHEREAS, the Maker and the Payee have entered into an Assumption of Executory Contracts Agreement, dated as of February 28, 2001 (the "Assumption Agreement"), under which the Maker, pursuant to its powers under Section 365 of Title 11 of the United States Code (the "Bankruptcy Code"), has agreed to assume responsibility for certain executory contracts between the Payee and the Maker (the "Assumed Agreements") for materials and services provided by the Payee to the Maker and to cure certain defaults; and

WHEREAS, the Maker has executed this Note to cure defaults under the Assumed Agreements; and

WHEREAS, the Maker has also executed simultaneously with this Note a second promissory note with respect to its cure obligations to the Payee under the Assumed Agreements in the amount of $4,733,648.43 (the "10% Deferred Note A").

NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows:

1. TERM. The principal amount hereof shall be repaid in sixty (60) equal and consecutive installments of $64,987.32, each of which shall be due and payable on the first day of each month, commencing on the earlier of August 1, 2001, or entry of an order of the Court (i) approving debtor-in-possession financing, or (ii) confirming a plan of reorganization, or (iii) authorizing the sale or assignment of all or substantially all of the assets of National.

2. RATE OF INTEREST. Interest shall accrue under this Note on any unpaid principal balance at the rate of TEN percent (10%) per annum beginning on the date of entry of an order approving the Assumption Agreement. Interest hereunder shall be computed on the basis of a 360-day year consisting of twelve 30-day months. All accrued and unpaid interest on the Note shall be paid in arrears on the first day of each month, commencing on the earlier of August 1, 2001, or entry of an order of the Court (i) approving debtor-in-possession financing, or (ii) confirming of a plan of reorganization, or (iii) authorizing the sale or assignment of all or substantially all of the assets of National.

4. DEFAULT INTEREST.

(b) The Maker agrees that time is of the essence in respect of payment of interest hereunder and that in the event payment of interest due under this Note is not made when due, in addition to any other remedies available to the holder, the overdue interest payment shall immediately bear interest at the rate of TWELVE percent (12%) per annum, for so long and until such overdue payment is made in full.

5. COMPLIANCE WITH USURY LAW. All agreements between the Maker and the Payee of this Note are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance, or otherwise, shall the amount paid or agreed to be paid to the Payee for the use, forbearance or detention of money advanced hereunder exceed the highest lawful rate permissible under any law which a court of competent jurisdiction may deem applicable hereto. If, from any circumstances whatsoever, fulfillment of any provision hereof or any instrument securing this Note or any other agreement referred to herein, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any circumstances the holder hereof shall ever receive as interest an amount which would exceed the higher lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest. This provision shall control every other provision of all agreements between the Maker and the Payee.

6. REPRESENTATIONS AND WARRANTIES.

(b) The Maker is duly authorized and empowered to execute, deliver and perform its obligations under this Note. The execution, delivery and performance of this Note have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the shareholders of the Maker; (ii) contravene the Maker's charter, articles or certificate of incorporation or by-laws; (iii) violate or cause the Maker to be in default under any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award in effect having applicability to the Maker; (iv) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Maker is a party or by which it or its properties or interests in properties may be bound or affected; or (v) result in or require the creation or imposition of any lien upon or with respect to any of the properties or interests in properties now owned or hereafter acquired by the Maker, except in favor of the Payee.

(c) This Note, when delivered to the Payee by the Maker, will be, a legal, valid and binding obligation of the Maker, enforceable against it in accordance with its respective terms.

(d). The financial information pertaining to the Maker previously delivered by the Maker to the Payee, does not, nor does any other written statement of the Maker, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading. There is no fact which the Maker has failed to disclose to the Payee in writing which materially and adversely affects or, so far as the Maker can now foresee, will materially and adversely affect, the business, assets, property, prospects, profits or condition (financial or otherwise) of the Maker or the ability of the Maker to perform its obligations under this Note.

(e) The Maker has, and is in good standing with respect to, all material governmental consents, approvals, licenses, authorizations, permits, certificates, inspections and franchises necessary to continue to conduct its business as heretofore or proposed to be conducted by it and to own or lease and operate its property as now owned or leased by it.

7. COVENANTS.

(a) The Maker will deliver, or cause to be delivered, to the Payee, as soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Maker, the Maker's audited consolidated and consolidating financial statements for such fiscal year, which shall include the consolidated and consolidating balance sheet of the Maker as at the end of such fiscal year and the related statements of the Maker's income, retained earnings and cash flows for the fiscal year then ended, all in reasonable detail and prepared in accordance with GAAP, certified by an independent certified public accountant of national standing, together with a copy of all management letters prepared by such accountants.

(b) Promptly upon the occurrence thereof, and in any event within three (3) business days after any officer of the Maker obtains knowledge thereof, notice of(i) the occurrence of any event which constitutes an Event of Default or of (ii) any litigation pending or threatened against the Maker or any of its subsidiaries reasonably expected to materially and adversely affect the business, operations, assets, property, liabilities and condition (financial or otherwise) of the Maker and its subsidiaries taken as a whole.

8. EVENTS OF DEFAULT / ACCELERATION. This Note shall become immediately due and payable and the Maker consents to immediate automatic relief from the stay imposed by 11 U.S.C. § 362 without the necessity of further order of the Court to permit Payee to enforce this Note and the rights under the Chattel Liens (as defined in the Assumption Agreement) upon the occurrence of any of the following events (each, an "Event of Default"):

(a) With Notice. At the option of the Payee and exercised by written notice to the Maker: (i) the Maker's failure to pay when due any payment of principal, (ii) the Maker's failure to pay when due any payment of interest; (iii) any representation, warranty or statement made by the Maker herein or in any certificate delivered hereunder shall prove to be untrue in any material respect on the date on and as of which made or deemed to be made; (iv) the Maker shall fail to perform or observe any term, covenant or agreement contained in this Note or the Assumption Agreement; (v) an Event of Default shall occur and be continuing under the 10% Deferred Note A; or (vi) the rendering of a final judgment or judgments for payment of money aggregating in excess of $500,000 against the Maker and the same is not discharged within a sixty (60) day period, without a stay of execution.

(b) Without Notice. Without notice or demand and without the need for any action or election by the Payee: (i) conversion of the Maker's Case to a case under Chapter 7 of the Bankruptcy Code; (ii) dismissal of the Maker's Case; (iii) appointment of a trustee or an examiner in the Maker's Case with enlarged powers.

9. COLLECTION. If this Note or any installment of principal or interest of this Note is not paid when due, whether at maturity or by acceleration, the Maker promises to pay all reasonable costs of collection, including without limitation, reasonable attorneys' fees, and all reasonable expenses in connection with the protection or realization of the collateral securing this Note incurred by the Payee on account of such collection. Such costs and expenses shall include, without limitation, all reasonable costs, expenses and attorneys' fees actually incurred by the Payee in connection with any insolvency, bankruptcy, arrangement or other similar proceedings involving the Maker, which in any way affects the exercise by the Payee of its rights and remedies under this Note.

10. PARTIAL EXERCISE OF POWER. No single or partial exercise of any power hereunder shall preclude other or further exercise thereof or the exercise of any other power. The Payee shall at all times have the right to proceed against any portion of the security held herefor in any such order and in any such manner as the Payee may deem fit, without waiving any rights with respect to any other security. No delay or omission on the part of the Payee in exercising any right hereunder shall operate as a waiver of such right or of any other right under this Note. The acceptance of any amount due and payable hereunder shall not operate as a waiver with respect to any other amounts then owing and unpaid. The rights, remedies, powers and privileges provided herein and in the Assumption Agreements are cumulative and not exclusive of any rights, remedies, powers and privileges provided.

11. WAIVER, PRESENTMENT AND DEMAND. The Maker hereby waives presentment, demand, protest, notices of protest, dishonor and nonpayment of this Note and all notices of every kind (to the maximum extent permitted by applicable law) in connection with this Note.

12. PAYMENT DUE ON THE NEXT SUCCEEDING BUSINESS DAY. Whenever any payment on this Note shall be stated to be due on a day which is not a business day, such payment shall be due on the next succeeding business day and such extension of time shall be included in the computation of the payment of interest on this Note.

13. GOVERNING LAW JURISDICTION, WAIVER OF JURY TRIAL. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER ARE TO BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF WASHINGTON. THE MAKER CONSENTS TO PERSONAL JURISDICTION IN THE STATE OR FEDERAL COURTS OF THE STATE OF WASHINGTON.

THE MAKER HEREBY WAIVES AND COVENANTS THAT THE MAKER WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE, THE SUBJECT MATTER HEREOF OR ANY DOCUMENT RELATING HERETO, IN EACH CASE WHETHER NOT EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR IN TORT OR OTHERWISE.

14. ENTIRE AGREEMENT. This Note, the Assumption Agreement and all documents or instruments incorporated by reference therein and/or to be delivered to the Payee hereunder, contain all of the terms and conditions agreed upon by the parties relating to the subject matter of this Note and supersede any and all prior and contemporaneous agreements, negotiations, correspondence, understandings and communications of the parties, whether oral or written, respecting that subject matter.

15. VARIATION OR MODIFICATION. No variation or modification of this Note, or any waiver of any of its provisions or conditions, shall in any event be valid unless the same shall be in writing and signed by an authorized representative of the Maker and the Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

16. SEVERABILITY. If any provision of this Note is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Note shall be deemed valid and enforceable to the full extent possible.

17. HEADINGS. The section headings used in this Note are intended principally for convenience and shall not by themselves determine the rights and obligations of the parties to this Note.

18. OBLIGATION OF THE MAKER. The obligations of the Maker under this Note are absolute and not subject to any right of set-off, or recoupment against the Payee or any kind whatsoever.

NATIONAL AIRLINES, INC.

Name:

Title: Raymond T. Nakano Sr. Vice President Finance Accepted: Chief Financial Officer

BF GOODRICH AEROSPACE MRO GROUP, INC.

By_____________________________

Name:

Title:

ASSUMPTION OF EXECUTORY CONTRACTS AGREEMENT EXHIBIT 4

Daniel T. Foley, Esq. Nevada State Bar No. 1078 FOLEY FOLEY 850 East Bonneville Avenue Las Vegas, Nevada 89101 (702) 384-2070 (702) 384-2128 (Fax) E-Mail: dtf@pclv.com

Dennis M. O'Dea, Esq. New York State Bar No. DO-6283 pro hac vice WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP 250 Park Avenue New York, New York 10177 (212) 986-1116 (212)672-1118 (Fax) E-Mail: dodea@wolfblock.com

Attorneys for Creditors The B.F. Goodrich Company and affiliates

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA

In re: : BK-S-00-19258 (LBR) Chapter 11 NATIONAL AIRLINES, INC., a Delaware : corporation, Honorable Linda B. Riegle : Debtor. Date of Hearing: May 9, 2001 : Time of Hearing: 3:30 p.m. :

JOINT MOTION OF THE B.F. GOODRICH COMPANY AND CERTAIN AFFILIATES AND NATIONAL AIRLINES FOR AN ORDER APPROVING ASSUMPTION OF EXECUTORY CONTRACTS

The debtor National Airlines, Inc. ("National") and The B.F. Goodrich Company, BF Goodrich Aerospace MRO Group, Inc., BF Goodrich Aerospace Component Overhaul Repair, Inc. and certain of their business units (collectively "BFGoodrich") move that the court enter an order approving the assumption by National of its executory contracts with BFGoodrich.

In support of this motion National and BFGoodrich say as follows:

1. BFGoodrich provides Airframe Services to National under the terms of a certain Services Ordering Agreement dated 21 June 2000 which is attached to a motion previously filed with the court entitled: the Motion of BFGoodrich Aerospace MRO Group Inc., to Require Debtor to Assume or Reject Executory Contract and Provide Adequate Protection.

2. BFGoodrich also provides goods and services to National under the terms of a Component Services Agreement dated June 11, 1999 as amended and pursuant to a series of agreements entered into between National and various affiliates and business units of BFGoodrich.

3. The Airframe Services Agreement, Component Services Agreement and other agreements between National and BFGoodrich (the "BFGoodrich Contracts") are executory contracts under which BFGoodrich has continued to provide goods and services to National since the commencement of this bankruptcy case on December 6, 2000.

4. The BFGoodrich Contracts provide unique and essential goods and services to National at competitive prices which National would have great difficulty replacing or duplicating.

5. After reviewing the BFGoodrich Contracts and conferring with BFGoodrich and evaluating the benefit of the BFGoodrich Contracts to National, National has concluded in the excercise of its business judgment that it is in the best interest of the estate, creditors and National for the BFGoodrich Contracts to be assumed by National pursuant to 11 U.S.C. § 365. BF Goodrich and National have memorialized the terms under which the BF Goodrich Contracts are assumed in an Assumption Agreement effective as of February 28, 2001, a copy of which is attached hereto, incorporated herein and made a part hereof.

6. BFGoodrich and National have negotiated reasonable terms to cure the defaults by National under the BFGoodrich Contracts (the "Cure Provisions") in a manner consistent with the provisions of 11 U.S.C. § 365.

7. The Cure Provisions represent material concessions and modifications in the contractual rights of BFGoodrich which enable National to continue to operate its business and utilize the goods and services provided by BFGoodrich. BFGoodrich has agreed to modifications to certain payment terms under the BFGoodrich Contracts to enable National to continue to conduct its business operations while it seeks to reorganize.

8. BFGoodrich has preserved under 11 U.S.C. § 546 (b) and asserted by appropriate filings certain lien rights in the following aircraft which were the subject of Airframe Services from September 2000 to the present date. Aircraft Departure Date Amount N757NA 11/15/2000 1,100,988.45 N547NA 01/23/2001 249,646.56 N521NA 10/16/2000 1,044,593.68 N517NA 12/31/2000 942,501.73 N544NA 09/15/2000 269,254.01 N505NA 02/11/2000 407,741.28 N513NA 03/08/2000 718,922.72 BFGoodrich holds chattel liens in nearly half of the aircraft in the National Airlines fleet. Each of those aircraft is owned by a non-debtor third party and leased to National. All of National's lessors have acquiesced in National's continued operation and possession of their aircraft which includes delivery of the aircraft from time to time to BFGoodrich for maintenance.

9. The BFGoodrich Contracts are essential to the continued operation of National. Rejection of the BFGoodrich Contracts would deprive National of access to Wheel and Brake, Component Repair and Overhaul, and Heavy Maintenance goods and services that it could not economically replace.

10. On February 28, 2001, National announced to the court that it would assume the Services Ordering Agreement which was the subject of a pending motion to compel assumption or rejection. At the time of that bearing, BFGoodrich was providing heavy maintenance to aircraft N513NA for which maintenance, goods and services National was unable to pay under the agreed terms. in addition, National had failed to pay BFGoodrich the amount due for its work on Aircraft N517NA. BFGoodrich was free to seek to enforce its Stipulation with National by order to show cause on one day notice and request delivery of Aircraft N517NA to Everett, Washington as provided in the Stipulation. National continues default of its performance due under the Stipulation. BFGoodrich and National shall modify the Notice of Stipulation and Order of Forbearance by BFGoodrich entered on February 2, 2001 to provide (or continuing forbearance so long as National is not in default under the Assumption Agreement and Notes.

11. The charges for the goods and services provided by BFGoodrich in connection with the heavy maintenance to Aircraft N513NA were set forth in the initial invoice submitted by BFGoodrich in the amount of $808,010.14 a portion of which has been paid leaving a balance due of $718,922.72. Based in part upon National's representation that it would assume the BFGoodrich Contracts, BFGoodrich allowed National to take possession of Aircraft N513NA despite National's acknowledgment that it could not pay the amount due within thirty days.

12. Subsequent to receiving the advice of National on February 28, 2001 that is would assume the BFGoodrich Contracts and negotiate cure and adequate assurance of future performance terms, BFGoodrich has provided goods and services to National including Airframe Services to Aircraft N522NA and N546NA under a "nose to tail" procedure. pursuant to which National has delivered its aircraft in need of heavy maintenance immediately following the conclusion of the work by BFGoodrich and the certification that the preceding aircraft was airworthy and could be returned to service.

13. During the period from the commencement of this case and continuing to the present date, National has been unable to pay for the goods and services provided by BFGoodrich in the manner required by the BFGoodrich Contracts. BFGoodrich maintains that it is not obligated to provide goods and services to National unless and until its contracts are assumed.

14. BFGoodrich has provided goods and services subsequent to the commencement of this case for which it has charged National approximately $3 Million and for which it has received less than $1 Million in payments. Future services requested by National from BFGoodrich subsequent to February 28 will create additional liabilities for essential goods and services.

15. The Assumption Agreement between BFGoodrich and National to provide for the assumption of the BFGoodrich Contracts ensures that National will continue to receive essential goods and services and cure its postpetition defaults in payment for the goods and services provided by BFGoodrich.

WHEREFORE, National and BFGoodrich Pray that the court approve the assumption of the BFGoodrich Contracts by National under the terms of the Assumption Agreement.

In re: NATIONAL AIRLINES, INC., a Delaware corporation, Chapter 11, Debtor.

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