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                                    INDENTURE



                          Dated as of December 6, 2002



                                      Among



                           CONTINENTAL AIRLINES, INC.


                            WILMINGTON TRUST COMPANY,
                                   as Trustee


                      MORGAN STANLEY CAPITAL SERVICES INC.,
                             as Liquidity Provider


                                       and


                           MBIA INSURANCE CORPORATION,
                               as Policy Provider




                                  $200,000,000


                      Floating Rate Secured Notes due 2007




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                                TABLE OF CONTENTS

                                                                         PAGE

                                   ARTICLE 1.

                      DEFINITIONS AND RULES OF CONSTRUCTION


Section 1.1     Definitions.................................................1

Section 1.2     Rules of Construction.......................................1

                                   ARTICLE 2.

                                 THE SECURITIES


Section 2.1     Title, Form, Denomination and Execution of Securities.......1

Section 2.2     Restrictive Legends.........................................3

Section 2.3     Authentication of Securities................................5

Section 2.4     Transfer and Exchange.......................................5

Section 2.5     Book-Entry Provisions for Restricted Global Securities and
                Regulation S Global Securities..............................6

Section 2.6     Special Transfer Provisions.................................8

Section 2.7     Terms of Securities........................................11

Section 2.8     Registrar and Paying Agent.................................11

Section 2.9     Paying Agent to Hold Payments In Trust.....................12

Section 2.10    Record Dates...............................................13

Section 2.11    Securityholder Lists.......................................13

Section 2.12    Mutilated, Defaced, Destroyed, Lost and Stolen Securities..14

Section 2.13    Treasury Securities........................................15

Section 2.14    Temporary Securities.......................................15

Section 2.15    Cancellation...............................................15

Section 2.16    Defaulted Interest.........................................16

Section 2.17    CUSIP Numbers..............................................16

Section 2.18    Issuance of Subordinated Securities........................16

                                   ARTICLE 3.

                     LIQUIDITY PROVIDER AND POLICY PROVIDER

Section 3.1     Written Notice of Distribution.............................17

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Section 3.2     Priority of Distributions; Subordination...................18

Section 3.3     Other Payments.............................................20

Section 3.4     Payments to Liquidity Provider and Policy Provider.........21

Section 3.5     Liquidity Facility.........................................21

Section 3.6     The Policy.................................................28

Section 3.7     Designated Representatives.................................32

Section 3.8     Controlling Party..........................................32

Section 3.9     Company's Payment Obligations..............................33

Section 3.10    Execution of Support Documents.............................34

                                   ARTICLE 4.

                                   REDEMPTIONS


Section 4.1     Optional Redemption........................................34

Section 4.2     Redemption Notice to Trustee...............................34

Section 4.3     Selection of Securities to be Redeemed.....................35

Section 4.4     Notice of Redemption.......................................35

Section 4.5     Effect of Notice of Redemption.............................36

Section 4.6     Deposit of Redemption Price................................36

Section 4.7     Securities Redeemed in Part................................36

                                   ARTICLE 5.

                                    COVENANTS


Section 5.1     Payment of Securities......................................36

Section 5.2     Maintenance of Office or Agency............................37

Section 5.3     Corporate Existence........................................37

Section 5.4     Company Not to Consolidate, Merge, Convey or Transfer
                Except Under Certain Conditions............................37

Section 5.5     Reports by the Company.....................................39

                                   ARTICLE 6.

                                 INDEMNIFICATION

Section 6.1     General Indemnity..........................................39

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Section 6.2     Separate Agreement.........................................42

Section 6.3     Notice.....................................................42

Section 6.4     Notice of Proceedings; Defense of Claims; Limitations......42

Section 6.5     Information................................................43

Section 6.6     Subrogation; Further Assurances............................43

Section 6.7     Refunds....................................................43

                                   ARTICLE 7.

                              DEFAULT AND REMEDIES


Section 7.1     Events of Default..........................................44

Section 7.2     Acceleration...............................................45

Section 7.3     Other Remedies.............................................46

Section 7.4     Waiver of Past Defaults....................................46

Section 7.5     Control of Remedies........................................47

Section 7.6     Limitation on Suits........................................47

Section 7.7     Rights of Holders to Receive Payment.......................47

Section 7.8     Collection Suit by Trustee.................................48

Section 7.9     Trustee May File Proofs of Claim...........................48

Section 7.10    Application of Proceeds....................................49

Section 7.11    Undertaking for Costs......................................49

Section 7.12    Restoration of Rights on Abandonment of Proceedings........49

Section 7.13    Powers and Remedies Cumulative; Delay or Omission Not
                Waiver of Default..........................................49

                                   ARTICLE 8.

                                     TRUSTEE


Section 8.1     Duties of Trustee..........................................50

Section 8.2     Rights of Trustee..........................................51

Section 8.3     Individual Rights of Trustee...............................51

Section 8.4     Trustee's Disclaimer.......................................52

Section 8.5     Notice of Defaults.........................................52

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Section 8.6     Reports by Trustee to Holders..............................52

Section 8.7     Compensation and Indemnity.................................52

Section 8.8     Replacement of Trustee.....................................53

Section 8.9     Successor Trustee by Merger, etc...........................54

Section 8.10    Eligibility; Disqualification..............................54

Section 8.11    Preferential Collection of Claims Against Company..........54

Section 8.12    Other Capacities...........................................55

Section 8.13    Trust Accounts.............................................55

Section 8.14    Deposits to the Collection Account.........................56

Section 8.15    Certain Payments...........................................56

                                   ARTICLE 9.

                             DISCHARGE OF INDENTURE


Section 9.1     Discharge of Liability on Securities.......................57

Section 9.2     Application of Trust Money.................................57

Section 9.3     Repayment to Company.......................................57

Section 9.4     Reinstatement..............................................58

                                   ARTICLE 10.

                       AMENDMENTS, SUPPLEMENTS AND WAIVERS


Section 10.1    Without Consent of The Controlling Party or Holders........58

Section 10.2    With Consent of the Controlling Party, Liquidity Provider
                and Holders................................................59

Section 10.3    Compliance with Trust Indenture Act........................60

Section 10.4    Revocation and Effect of Consents..........................60

Section 10.5    Notation on or Exchange of Securities......................61

Section 10.6    Trustee to Sign Amendments, etc............................61

Section 10.7    Effect of Supplement and/or Amendment......................61

                                   ARTICLE 11.

                                    SECURITY


Section 11.1    Other Operative Documents..................................61

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Section 11.2    Opinions, Certificates and Appraisals......................62

Section 11.3    Authorization of Actions to be Taken by the Trustee Under
                the Operative Documents....................................63

Section 11.4    Authorization of Receipt of Funds by the Trustee Under the
                Operative Documents and the Support Documents..............63

Section 11.5    Agreement as to Fair Market Value..........................63

                                   ARTICLE 12.

                                  MISCELLANEOUS


Section 12.1    Conflict with Trust Indenture Act of 1939..................64

Section 12.2    Notices; Waivers...........................................64

Section 12.3    Communications By Holders With Other Holders...............65

Section 12.4    Certificate and Opinion as to Conditions Precedent.........66

Section 12.5    Statements Required In Certificate or Opinion..............66

Section 12.6    Rules By Trustee, Paying Agent, Registrar..................67

Section 12.7    Effect of Headings.........................................67

Section 12.8    Governing Law..............................................67

Section 12.9    Quiet Enjoyment............................................68

Section 12.10   No Recourse Against Others.................................68

Section 12.11   Benefits of Indenture and the Securities Restricted........68

Section 12.12   Successors and Assigns.....................................68

Section 12.13   Counterpart Originals......................................68

Section 12.14   Severability...............................................68

APPENDIX I      Definitions
EXHIBIT A       Form of Security
EXHIBIT B       Form of Certificate to Request Removal of Restricted Legend
EXHIBIT C       Form of Certificate to be Delivered by an Institutional
                Accredited Investor

<PAGE>

     INDENTURE dated as of December 6, 2002, among CONTINENTAL AIRLINES, INC., a
Delaware  corporation  (the  "COMPANY"),  WILMINGTON  TRUST COMPANY,  a Delaware
banking  corporation  ("WTC"),  not in its  individual  capacity  but  solely as
Trustee  (the  "TRUSTEE"),  MORGAN  STANLEY  CAPITAL  SERVICES  INC., a Delaware
corporation ("MSCS"), as Liquidity Provider, and MBIA INSURANCE  CORPORATION,  a
New York insurance company, as Policy Provider.

     Each party  agrees as follows for the benefit of the other  parties and for
the equal and ratable benefit of the Holders of the Securities.


                                   ARTICLE 1.

                      DEFINITIONS AND RULES OF CONSTRUCTION

     Section 1.1    DEFINITIONS.

     Capitalized  terms used herein and not otherwise  defined herein shall have
the  meanings  ascribed to such terms in Section 1 of the  Definitions  Appendix
attached  hereto as Appendix I, which  shall be a part of this  Indenture  as if
fully set forth in this place.

     Section 1.2    RULES OF CONSTRUCTION.

     The rules of construction  for this Indenture are set forth in Section 2 of
the Definitions Appendix.

                                   ARTICLE 2.

                                 THE SECURITIES

     Section 2.1    TITLE, FORM, DENOMINATION AND EXECUTION OF SECURITIES.

     (a)   The Initial  Securities shall be known as the "INITIAL FLOATING RATE
SECURED  NOTES  DUE  2007"  and the  Exchange  Securities  shall be known as the
"EXCHANGE  FLOATING RATE SECURED NOTES DUE 2007",  in each case, of the Company.
Each Security shall be  substantially in the form set forth as Exhibit A hereto,
with such appropriate insertions, omissions,  substitutions and other variations
as are  required  or  permitted  by this  Indenture  and may have such  letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any  securities  exchange
or as may,  consistently  herewith, be determined by the Company or the Officers
executing  the  Securities,  as  evidenced  by the  Company's  or the  Officers'
execution of the Securities.

     (b)   The Initial  Securities shall be issued only in fully registered form
without coupons and only in denominations  of $100,000 or integral  multiples of
$1,000 in excess thereof,  except that one Security may be issued in a different
denomination.  The Exchange Securities will be issued in denominations of $1,000

<PAGE>

or  integral  multiples  thereof,  except that one  Security  may be issued in a
different   denomination.   Each  Security  shall  be  dated  the  date  of  its
authentication.  The  aggregate  principal  amount  of  Securities  which may be
authenticated  and  delivered  under this  Indenture is limited to  $200,000,000
except for Securities  authenticated and delivered upon registration of transfer
of, or in exchange  for, or in lieu of,  other  Securities  pursuant to Sections
2.4, 2.6, 2.12, 2.14 or 10.5. The issuance of the Securities  hereunder shall be
collectively considered a single extension of credit to the Company.

     (c) The Initial  Securities offered and sold in reliance on Rule 144A shall
be  issued,  and  will  only be  available,  in the  form of one or more  global
Securities  substantially  in the form of Exhibit A hereto with such  applicable
legends  as  are  provided  for in  Section  2.2  (each,  a  "RESTRICTED  GLOBAL
SECURITY") duly executed by the Company and duly authenticated by the Trustee as
herein provided. The Restricted Global Securities shall be in definitive,  fully
registered  form without  interest  coupons and be registered in the name of DTC
and deposited with the Trustee,  at its Corporate Trust office, as custodian for
DTC. The aggregate  principal amount of any Restricted  Global Security may from
time to time be increased or decreased by adjustments made on the records of the
Trustee,  as custodian for DTC for such Restricted Global Security,  as provided
in Section 2.6 hereof, which adjustments shall be conclusive as to the aggregate
principal amount of any such Global Security.

     (d)   The Initial  Securities offered and sold outside the United States in
reliance on  Regulation S shall be issued,  and will only be  available,  in the
form of one or more  global  Securities  substantially  in the form of Exhibit A
hereto (each, a "REGULATION S GLOBAL SECURITY") duly executed by the Company and
duly  authenticated by the Trustee as herein  provided.  The Regulation S Global
Securities  shall be in  definitive,  fully  registered  form  without  interest
coupons and be registered in the name of DTC and deposited with the Trustee,  at
its  Corporate  Trust  Office,  as custodian  for DTC, for credit  initially and
during the Restricted Period to the respective  accounts of beneficial owners of
such  Securities  (or to such  other  accounts  as they may  direct)  at  Morgan
Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or
Clearstream.  As used herein, the term "RESTRICTED PERIOD",  with respect to the
Regulation S Global  Securities  offered and sold in reliance on  Regulation  S,
means the period of 40 consecutive  days beginning on and including the later of
(i) the day on which the  Securities  are first  offered to  persons  other than
distributors  (as defined in  Regulation S) in reliance on Regulation S and (ii)
the Closing Date.  The  aggregate  principal  amount of any  Regulation S Global
Security may from time to time be increased or decreased by adjustments  made on
the records of the Trustee,  as custodian for DTC for such Global  Security,  as
provided in Section 2.6 hereof,  which adjustments shall be conclusive as to the
aggregate  principal amount of any such Global Security.  The Restricted  Global
Security and Regulation S Global Security are sometimes collectively referred to
herein as the "GLOBAL SECURITIES".

     (e) Initial  Securities  offered and sold to any  Institutional  Accredited
Investor that is not a QIB in a transaction  exempt from registration  under the
Securities  Act (and other than as described in Section  2.1(d)) shall be issued
substantially  in the form of Exhibit A hereto in definitive,  fully  registered
form without interest  coupons with such applicable  legends as are provided for

<PAGE>

in Section 2.2 (the  "RESTRICTED  DEFINITIVE  SECURITIES")  duly executed by the
Company and duly  authenticated  by the Trustee as herein  provided.  Securities
issued  pursuant to Section  2.5(b) in exchange for  interests in a Regulation S
Global  Security shall be issued in definitive,  fully  registered  form without
interest  coupons (the  "REGULATION S DEFINITIVE  SECURITIES").  The  Restricted
Definitive  Securities and the Regulation S Definitive  Securities are sometimes
collectively referred to herein as the "DEFINITIVE SECURITIES".

     (f)   The  Exchange  Securities  shall be issued in the form of one or more
global Securities substantially in the form of Exhibit A hereto (each, a "GLOBAL
EXCHANGE SECURITY"),  except that (i) the Restricted Legend shall be omitted and
(ii)  the  Exchange  Securities  shall  contain  such  appropriate   insertions,
omissions, substitutions and other variations from the form set forth in Exhibit
A hereto  relating to the nature of the Exchange  Securities  as the Officers of
the Company  executing  such  Exchange  Securities  on behalf of the Company may
determine,  as evidenced by such Officers' execution on behalf of the Company of
such Exchange Securities.  The Global Exchange Securities shall be in registered
form and be registered in the name of DTC and deposited with the Trustee, at its
Corporate Trust Office, as custodian for DTC. The aggregate  principal amount of
any Global Exchange  Security may from time to time be increased or decreased by
adjustments  made on the records of the Trustee,  as custodian  for DTC for such
Global  Exchange  Security,  which  adjustments  shall be  conclusive  as to the
aggregate  principal  amount of any such Global  Exchange  Security.  Subject to
clauses (i) and (ii) of the first  sentence of this  Section  2.1(f),  the terms
hereof  applicable to the Global  Securities  shall apply to the Global Exchange
Securities, MUTATIS MUTANDIS, unless the context otherwise requires.

     (g)   The  definitive  Securities  shall be in registered form and shall be
typed, printed, lithographed or engraved or produced by any combination of these
methods  or may be  produced  in any  other  manner,  all as  determined  by the
Officers  executing  such  Securities,  as evidenced by their  execution of such
Securities.

     (h)   The  Securities  shall be signed  for the  Company  by the  manual or
facsimile  signatures  of two Officers.  If an Officer  whose  signature is on a
Security no longer holds that office at the time the Trustee  authenticates  the
Security, the Security shall be valid nevertheless.

     Section 2.2    RESTRICTIVE LEGENDS.

     All  Initial   Securities  issued  pursuant  to  this  Indenture  shall  be
"RESTRICTED  SECURITIES"  and shall bear a legend to the  following  effect (the
"RESTRICTED LEGEND") except as provided in Section 2.6 or unless the Company and
the Trustee determine otherwise consistent with applicable law:

         "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
     1933,  AS AMENDED  (THE  "SECURITIES  ACT"),  AND  ACCORDINGLY,  MAY NOT BE
     OFFERED  OR SOLD  WITHIN  THE  UNITED  STATES OR TO, OR FOR THE  ACCOUNT OR

<PAGE>

     BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING  SENTENCE.  BY
     ITS  ACQUISITION  HEREOF,  THE  HOLDER  (1)  REPRESENTS  THAT  (A)  IT IS A
     "QUALIFIED  INSTITUTIONAL  BUYER"  (AS  DEFINED  IN  RULE  144A  UNDER  THE
     SECURITIES  ACT),  (B) IT IS AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  (AS
     DEFINED  IN RULE  501(a)(1),  (2),  (3) OR (7) OF  REGULATION  D UNDER  THE
     SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
     U.S.  PERSON AND IS ACQUIRING  THIS SECURITY IN AN OFFSHORE  TRANSACTION IN
     COMPLIANCE  WITH  REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT
     WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL  ISSUANCE OF THIS
     SECURITY OR THE LAST DATE ON WHICH THIS  SECURITY  WAS HELD BY  CONTINENTAL
     AIRLINES,  INC. OR ANY AFFILIATE OF CONTINENTAL  AIRLINES,  INC.  RESELL OR
     OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO CONTINENTAL AIRLINES,  INC.,
     (B) TO A QUALIFIED  INSTITUTIONAL  BUYER IN COMPLIANCE WITH RULE 144A UNDER
     THE  SECURITIES   ACT,  (C)  OUTSIDE  THE  UNITED  STATES  IN  AN  OFFSHORE
     TRANSACTION  IN  COMPLIANCE  WITH RULE 904 UNDER THE  SECURITIES  ACT,  (D)
     PURSUANT TO THE EXEMPTION FROM REGISTRATION  PROVIDED BY RULE 144 UNDER THE
     SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE  REGISTRATION
     STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IF IT SHOULD RESELL
     OR OTHERWISE  TRANSFER THIS SECURITY IT WILL DELIVER TO EACH PERSON TO WHOM
     THIS SECURITY IS TRANSFERRED A NOTICE  SUBSTANTIALLY  TO THE EFFECT OF THIS
     LEGEND.  IN CONNECTION  WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
     AFTER THE LATER OF THE ORIGINAL  ISSUANCE OF THIS SECURITY OR THE LAST DATE
     ON WHICH  THIS  SECURITY  WAS HELD BY  CONTINENTAL  AIRLINES,  INC.  OR ANY
     AFFILIATE  OF  CONTINENTAL  AIRLINES,  INC.,  THE  HOLDER  MUST  CHECK  THE
     APPROPRIATE  BOX SET FORTH ON THE REVERSE HEREOF  RELATING TO THE MANNER OF
     SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL AIRLINES, INC. OR ITS
     AGENT. AS USED HEREIN,  THE TERMS "OFFSHORE  TRANSACTION",  "UNITED STATES"
     AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
     SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
     REFUSE TO REGISTER  ANY  TRANSFER  OF THIS  SECURITY  IN  VIOLATION  OF THE
     FOREGOING RESTRICTIONS."

     Each Global Security and Global Exchange  Security shall bear the following
legend on the face thereof:

         "UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF
     THE  DEPOSITORY  TRUST  COMPANY,  A  NEW  YORK  CORPORATION   ("DTC"),   TO
     CONTINENTAL  AIRLINES,  INC.  OR ITS AGENT FOR  REGISTRATION  OF  TRANSFER,

<PAGE>

     EXCHANGE OR PAYMENT,  AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY
     IS  REGISTERED  IN THE  NAME OF  CEDE & CO.  OR IN  SUCH  OTHER  NAME AS IS
     REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
     MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC), ANY TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE
     OR  OTHERWISE  BY OR TO ANY PERSON IS WRONGFUL  INASMUCH AS THE  REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

         TRANSFERS  OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO  TRANSFERS  IN
     WHOLE,  BUT NOT IN PART,  TO NOMINEES  OF DTC OR TO A SUCCESSOR  THEREOF OR
     SUCH SUCCESSOR'S  NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
     SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE  RESTRICTIONS SET
     FORTH IN SECTIONS 2.5 AND 2.6 OF THE INDENTURE REFERRED TO HEREIN."

     Section 2.3    AUTHENTICATION OF SECURITIES.

     (a)   Subject   to  the  limits  set  forth   herein,   the  Trustee  shall
authenticate  Securities  for original  issue upon written  order of the Company
signed by two  Officers.  The order shall specify the amount of Securities to be
authenticated  and the date on which the original  issue of  Securities is to be
authenticated,  shall provide  instructions with respect to the delivery thereof
and shall be accompanied by the documents specified in Section 12.4.

     The Trustee may appoint an  authenticating  agent acceptable to the Company
to authenticate Securities.  An authenticating agent may authenticate Securities
whenever  the  Trustee  may  do  so.  Each   reference  in  this   Indenture  to
authentication  by  the  Trustee  includes  authentication  by  such  agent.  An
authenticating agent has the same rights as an Agent to deal with the Company or
any Affiliate of the Company.

     (b)   No  Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose,  unless there appears on such Security a
certificate  of  authentication  substantially  in the form  provided for herein
executed  by  the  Trustee  by the  manual  signature  of one of its  authorized
signatories,  and  such  certificate  upon  any  Security  shall  be  conclusive
evidence, and the only evidence,  that such Security has been duly authenticated
and delivered hereunder

     Section 2.4    TRANSFER AND EXCHANGE.

     All  Securities  issued  upon any  registration  of transfer or exchange of
Securities  shall be  valid  obligations  of the  Company,  evidencing  the same
interest therein, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.

<PAGE>

     A  Securityholder  may  transfer a Security,  or request that a Security be
exchanged for Securities (including,  without limitation, subject to the proviso
to this sentence,  Exchange  Securities) in authorized  denominations  and in an
aggregate  principal  amount  equal to the  principal  amount  of such  Security
surrendered for exchange of other authorized denominations, by surrender of such
Security to the Trustee with the form of transfer  notice thereon duly completed
and  executed,  and  otherwise  complying  with  the  terms  of this  Indenture,
including providing evidence of compliance with any restrictions on transfer, in
form satisfactory to the Company,  the Trustee and the Registrar;  PROVIDED that
exchanges of Initial  Securities for Exchange  Securities shall occur only after
an Exchange Offer  Registration  Statement shall have been declared effective by
the SEC (notice of which shall be  provided to the Trustee by the  Company)  and
otherwise  only in  accordance  with the terms of the  Exchange  Offer.  No such
transfer  shall be effected  until,  and such  transferee  shall  succeed to the
rights of a  Securityholder  only upon, final acceptance and registration of the
transfer by the  Registrar in the  Register.  Prior to the  registration  of any
transfer of a Security by a Securityholder as provided herein, the Company,  the
Registrar,  the Paying Agent and the Trustee  shall deem and treat the person in
whose name the Security is registered on the Register as the absolute  owner and
holder thereof for the purpose of receiving  payment of all amounts payable with
respect to such  Security and for all other  purposes,  and none of the Company,
the  Registrar,  the Paying Agent or the Trustee shall be affected by any notice
to the contrary.  Furthermore,  DTC shall,  by acceptance of a Global  Security,
agree that  transfers of  beneficial  interests  in such Global  Security may be
effected only through a book-entry  system  maintained by DTC (or its agent) and
that ownership of a beneficial  interest in the Security shall be required to be
reflected in a book-entry. When Securities are presented to the Registrar with a
request  to  register  the  transfer  thereof  or to  exchange  them  for  other
authorized  denominations  of a  Security  in a  principal  amount  equal to the
aggregate principal amount of Securities surrendered for exchange, the Registrar
shall   register  the  transfer  or  make  the  exchange  as  requested  if  its
requirements for such transactions are met.

     To permit  registrations  of transfers and exchanges in accordance with the
terms,  conditions and restrictions  hereof, the Company shall execute,  and the
Trustee shall  authenticate,  Securities at the Registrar's  request. No service
charge shall be made to a  Securityholder  for any  registration  of transfer or
exchange of Securities,  but the Company may require payment of a sum sufficient
to cover any tax or  governmental  charge that may be imposed in connection with
any  transfer  or  exchange  of  Securities.   All  Securities  surrendered  for
registration  of  transfer  or  exchange  shall  be  canceled  and  subsequently
destroyed by the Trustee.

     Section 2.5    BOOK-ENTRY PROVISIONS FOR RESTRICTED GLOBAL SECURITIES AND
 REGULATION S GLOBAL SECURITIES.

     (a) Members of, or  participants  in, DTC ("AGENT  MEMBERS")  shall have no
rights under this  Indenture  with respect to any Global  Security held on their
behalf by DTC,  or the Trustee as its  custodian,  and DTC may be treated by the
Company,  the Trustee and any agent of the Trustee as the absolute owner of such
Global  Security for all purposes  whatsoever.  Notwithstanding  the  foregoing,
nothing  herein  shall  prevent  the  Company,  the  Trustee or any agent of the
Trustee  from  giving  effect  to any  written  certification,  proxy  or  other

<PAGE>

authorization  furnished  by DTC or shall  impair,  as between DTC and its Agent
Members,  the  operation of customary  practices  governing  the exercise of the
rights of a holder of any  Security.  Upon the issuance of any Global  Security,
the  Registrar or its duly  appointed  agent shall record DTC as the  registered
holder of such Global Security.

     (b)   Transfers  of any Global  Security  shall be limited to  transfers of
such Restricted  Global  Security or Regulation S Global Security in whole,  but
not in part, to DTC. Beneficial  interests in the Restricted Global Security and
any Regulation S Global Security may be transferred in accordance with the rules
and procedures of DTC and the provisions of Section 2.6. Beneficial interests in
a  Restricted  Global  Security  or a  Regulation  S  Global  Security  shall be
delivered to all beneficial owners thereof in the form of Restricted  Definitive
Securities or Regulation S Definitive Securities, as the case may be, if (i) DTC
notifies the Trustee  that it is  unwilling or unable to continue as  depositary
for such Restricted Global Security or Regulation S Global Security, as the case
may be, and a successor  depositary  is not  appointed by the Trustee  within 90
days of such notice, and (ii) after the occurrence and during the continuance of
an Event of Default,  owners of beneficial interests in a Global Security with a
principal  amount  aggregating  not  less  than a  majority  of the  outstanding
principal amount of the Global Security advise the Trustee,  the Company and DTC
through Agent Members in writing that the  continuation  of a book-entry  system
through DTC or its successor is no longer in their best interests.

     (c)   Any  beneficial  interest  in one of the  Global  Securities  that is
transferred to a Person who takes delivery in the form of an interest in another
Global Security will, upon such transfer, cease to be an interest in such Global
Security and become an interest in the other Global  Security and,  accordingly,
will  thereafter  be subject to all  transfer  restrictions,  if any,  and other
procedures  applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.

     (d)   In  connection  with the  transfer  of an  entire  Restricted  Global
Security or an entire  Regulation  S Global  Security to the  beneficial  owners
thereof  pursuant to paragraph (b) of this Section 2.5, such  Restricted  Global
Security or Regulation S Global Security, as the case may be, shall be deemed to
be surrendered to the Trustee for  cancellation,  and the Company shall execute,
and the Trustee shall  authenticate,  to each beneficial owner identified by DTC
in exchange for its beneficial  interest in such  Restricted  Global Security or
Regulation S Global Security,  as the case may be, an equal aggregate  principal
amount  of   Restricted   Definitive   Securities  or  Regulation  S  Definitive
Securities,  as the  case  may  be,  of  authorized  denominations.  None of the
Company, the Registrar,  the Paying Agent or the Trustee shall be liable for any
delay in delivery of such  instructions and may conclusively  rely on, and shall
be protected in relying on, such registration instructions. Upon the issuance of
Definitive Securities, the Company and the Trustee shall recognize the Person in
whose  name  the  Definitive  Securities  are  registered  in  the  Register  as
Securityholders hereunder.

<PAGE>

     (e)   Any  Definitive Security delivered in exchange for an interest in the
Restricted  Global Security pursuant to paragraph (b) of this Section 2.5 shall,
except  as  otherwise  provided  by  paragraph  (e) of  Section  2.6,  bear  the
Restricted Legend.

     (f)   Prior to the expiration of the  Restricted  Period,  any Regulation S
Definitive  Security  delivered  in exchange  for an interest in a  Regulation S
Global  Security  pursuant to  paragraph  (b) of this Section 2.5 shall bear the
Restricted Legend.

     (g)   The registered holder of any Restricted Global Security or Regulation
S Global  Security  may  grant  proxies  and  otherwise  authorize  any  Person,
including  Agent  Members  and Persons  that may hold  interests  through  Agent
Members,  to take any  action  which a Holder is  entitled  to take  under  this
Indenture or the Securities.

     (h)   Neither the Company nor the Trustee shall be liable if the Trustee or
the Company is unable to locate a qualified successor clearing agency.

     Section 2.6    SPECIAL TRANSFER PROVISIONS.

     Unless and until (i) an Initial  Security is sold under an effective  Shelf
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security pursuant to an effective Exchange Offer Registration Statement, in each
case pursuant to the terms of the Registration  Rights Agreement,  the following
provisions shall apply to such Initial Securities:

     (a)   TRANSFERS  TO  NON-QIB  INSTITUTIONAL   ACCREDITED   INVESTORS.   The
following  provisions  shall  apply  with  respect  to the  registration  of any
proposed transfer of a Security to any Institutional Accredited Investor that is
neither a QIB nor a Non-U.S. Person:

           (i) The  Registrar  shall  register  the  transfer  of any  Security,
     whether or not bearing the  Restricted  Legend,  only if (x) the  requested
     transfer is at least two years after the later of the (A) Closing  Date and
     (B) the last date on which  such  Security  was held by the  Company or any
     affiliate  of the  Company  or (y) the  proposed  transferor  is an Initial
     Purchaser  who is  transferring  Securities  purchased  under the  Purchase
     Agreement  and the proposed  transferee  has  delivered to the  Registrar a
     letter  substantially  in the form of  Exhibit C hereto  and the  aggregate
     principal amount of the Securities being  transferred is at least $100,000.
     Except as provided  in the  foregoing  sentence,  the  Registrar  shall not
     register  the  transfer  of any  Security to any  Institutional  Accredited
     Investor that is neither a QIB nor a Non-U.S. Person.

          (ii)  If  the  proposed  transferor  is  an  Agent  Member  holding  a
     beneficial  interest in a Restricted  Global Security,  upon receipt by the
     Registrar of (x) the documents,  if any,  required by paragraph (i) and (y)
     instructions given in accordance with DTC's and the Registrar's procedures,
     the  Registrar  shall  reflect  on its  books and  records  the date of the
     transfer and a decrease in the principal  amount of such Restricted  Global
     Security  in an amount  equal to the  principal  amount  of the  beneficial
     interest in such  Restricted  Global  Security to be  transferred,  and the

<PAGE>

     Trustee shall execute, authenticate and deliver to the transferor or at its
     direction,  one or more Restricted  Definitive Securities of like tenor and
     amount.

     (b)   TRANSFERS TO QIBS. The following  provisions shall apply with respect
to the  registration  of any proposed  transfer of an Initial  Security to a QIB
(excluding Non-U.S. Persons):

           (i)  If the  Security  to be  transferred  consists  of a  Restricted
     Definitive Security,  or of an interest in any Regulation S Global Security
     during the Restricted  Period, the Registrar shall register the transfer if
     such  transfer is being made by a proposed  transferor  who has checked the
     box provided for on the form of Initial Security stating,  or has otherwise
     advised the Company,  the Trustee and the  Registrar  in writing,  that the
     sale has been  made in  compliance  with the  provisions  of Rule 144A to a
     transferee  who has signed the  certification  provided  for on the form of
     Initial Security stating, or has otherwise advised the Company, the Trustee
     and the Registrar in writing,  that it is purchasing  the Initial  Security
     for its own account or an account with  respect to which it exercises  sole
     investment  discretion  and that it, or the  Person  on whose  behalf it is
     acting  with  respect to any such  account,  is a QIB within the meaning of
     Rule 144A,  and is aware that the sale to it is being made in  reliance  on
     Rule 144A and acknowledges that it has received such information  regarding
     the Company as it has requested pursuant to Rule 144A or has determined not
     to request such  information  and that it is aware that the  transferor  is
     relying upon its foregoing  representations in order to claim the exemption
     from registration provided by Rule 144A.

           (ii) Upon  receipt by the  Registrar  of the  documents  required  by
     clause (i) above and  instructions  given in accordance  with DTC's and the
     Registrar's  procedures therefor,  the Registrar shall reflect on its books
     and records  the date of such  transfer  and an  increase in the  principal
     amount of a Restricted  Global Security in an amount equal to the principal
     amount  of the  Restricted  Definitive  Securities  or  interests  in  such
     Regulation S Global Security,  as the case may be, being  transferred,  and
     the Trustee shall cancel such Definitive  Securities or decrease the amount
     of such Regulation S Global Security so transferred.

     (c)   TRANSFERS  OF  INTERESTS  IN THE  REGULATION  S  GLOBAL  SECURITY  OR
REGULATION S  DEFINITIVE  SECURITIES.  After the  expiration  of the  Restricted
Period, the Registrar shall register any transfer of interests in any Regulation
S Global  Security or  Regulation S Definitive  Security  without  requiring any
additional  certification.  Until  the  expiration  of  the  Restricted  Period,
interests  in the  Regulation S Global  Security may only be held through  Agent
Members acting for and on behalf of Euroclear and Clearstream.

     (d) TRANSFERS TO NON-U.S.  PERSONS AT ANY TIME.  The  following  provisions
shall  apply with  respect to any  registration  of any  transfer  of an Initial
Security to a Non-U.S. Person:

<PAGE>

           (i) Prior to the expiration of the Restricted  Period,  the Registrar
     shall register any proposed  transfer of an Initial  Security to a Non-U.S.
     Person upon receipt of a certificate substantially in the form set forth as
     Exhibit B hereto from the proposed transferor.

           (ii) After the  expiration of the  Restricted  Period,  the Registrar
     shall register any proposed transfer to any Non-U.S. Person if the Security
     to be transferred is a Restricted  Definitive  Security or an interest in a
     Restricted Global Security, upon receipt of a certificate  substantially in
     the form of Exhibit B from the proposed  transferor.  The  Registrar  shall
     promptly send a copy of such certificate to the Company.

           (iii) Upon  receipt by the  Registrar of (x) the  documents,  if any,
     required by clause (ii) and (y)  instructions  in accordance with DTC's and
     the  Registrar's  procedures,  the Registrar shall reflect on its books and
     records the date of such transfer and a decrease in the principal amount of
     such Restricted  Global Security in an amount equal to the principal amount
     of the  beneficial  interest  in  such  Restricted  Global  Security  to be
     transferred,  and, upon receipt by the Registrar of  instructions  given in
     accordance with DTC's and the Registrar's  procedures,  the Registrar shall
     reflect on its books and records the date and an increase in the  principal
     amount  of the  Regulation  S Global  Security  in an  amount  equal to the
     principal  amount of the Restricted  Definitive  Security or the Restricted
     Global  Security,  as the case may be, to be  transferred,  and the Trustee
     shall cancel the  Definitive  Security,  if any, so transferred or decrease
     the amount of such Restricted Global Security.

     (e)   RESTRICTED  LEGEND.  Upon the transfer,  exchange or  replacement  of
Securities  not bearing the  Restricted  Legend,  the  Registrar  shall  deliver
Securities that do not bear the Restricted Legend.  Upon the transfer,  exchange
or replacement of Securities  bearing the Restricted Legend, the Registrar shall
deliver only  Securities  that bear the Restricted  Legend unless either (i) the
circumstances  contemplated  by  paragraph  (d)(ii) of this Section 2.6 exist or
(ii) there is  delivered  to the  Registrar  an opinion of counsel to the effect
that neither such legend nor the related  restrictions  on transfer are required
in order to maintain compliance with the provisions of the Securities Act.

     (f) GENERAL.  By acceptance of any Security bearing the Restricted  Legend,
each Holder of such Security  acknowledges  the restrictions on transfer of such
Security set forth in such Restricted Legend and otherwise in this Indenture and
agrees that it will transfer  such Security only as provided in such  Restricted
Legend and  otherwise  in this  Indenture.  The  Registrar  shall not register a
transfer of any Security unless such transfer  complies with the restrictions on
transfer,  if any,  of such  Security  set forth in such  Restricted  Legend and
otherwise in this Indenture. In connection with any transfer of Securities, each
Securityholder  agrees  by its  acceptance  of the  Securities  to  furnish  the
Registrar  or  the  Trustee  such   certifications,   legal  opinions  or  other
information  as either  of them may  reasonably  require  to  confirm  that such
transfer is being made  pursuant to an  exemption  from,  or a  transaction  not
subject  to,  the  registration  requirements  of  the  Securities  Act  and  in
accordance  with the terms and  provisions  of this Article 2; PROVIDED that the

<PAGE>

     Registrar  shall not be required to determine the  sufficiency  of any such
     certifications, legal opinions or other information.

     Until such time as no Securities  remain  Outstanding,  the Registrar shall
retain copies of all letters,  notices and other written communications received
pursuant to Section 2.5 or this Section 2.6. The Trustee,  if not the  Registrar
at such  time,  shall  have the  right to  inspect  and make  copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.

     Section 2.7    TERMS OF SECURITIES.

     The outstanding principal amount of the Securities shall be due on December
6, 2007.  The  Securities  shall bear  interest on the unpaid  principal  amount
thereof from time to time outstanding from the most recent Interest Payment Date
to which  interest  has been paid (or,  if no interest  has been paid,  from the
Closing Date) at the rate per annum for each  Interest  Period equal to the Debt
Rate for such Interest Period (calculated on the basis of a year of 360 days and
actual days elapsed  during the period for which such amount  accrues).  Accrued
interest on the Securities  shall be payable in arrears on each Interest Payment
Date,  until  the  principal  amount  of the  Securities  has been paid in full,
PROVIDED  that if such payment in full is not made on an Interest  Payment Date,
accrued  interest  shall be paid on the date of such payment in full rather than
the next Interest  Payment Date.  Interest on the  Securities  shall accrue with
respect  to the  first  but  not  the  last  day of each  Interest  Period.  The
Securities  shall bear  interest,  payable on demand,  at the  Payment  Due Rate
(calculated  on the basis of a year of 360 days and actual days  elapsed  during
the period for which such amount  accrues) on any part of the principal  amount,
and, to the extent  permitted by applicable Law,  interest and any other amounts
payable  thereunder  not paid when due,  in each case for the period the same is
overdue.  Amounts  under  any  Security  shall be  overdue  if not paid when due
(whether at stated  maturity,  by  acceleration  or otherwise).  Notwithstanding
anything to the contrary  contained herein, if any date on which a payment under
any  Security  becomes due and payable is not a Business  Day then such  payment
shall  not be  made  on such  scheduled  date  but  shall  be  made on the  next
succeeding  Business  Day,  and such  extension of time shall be included in the
computation of interest payable thereunder.

     Section 2.8    REGISTRAR AND PAYING AGENT.

     The Company shall  maintain an office or agency where  Securities  eligible
for transfer or exchange may be presented  for  registration  of transfer or for
exchange ("REGISTRAR") and an office or agency where Securities may be presented
for  payment  ("PAYING  AGENT").  The  Registrar  shall keep a  register  of the
Securities and of their transfer and exchange ("REGISTER").  Such Register shall
be in  written  form in the  English  language.  At all  reasonable  times  such
Register shall be open for  inspection by the Trustee.  The Company may have one
or more co-Registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.

<PAGE>

     The Company may enter into an appropriate  agency  agreement with any Agent
not a party to this  Indenture.  The agreement shall implement the provisions of
this Indenture  that relate to such Agent.  The Company shall notify the Trustee
of the name and  address of any such Agent.  If the Company  fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such.

     The Company initially appoints WTC as Registrar and Paying Agent.

     Section 2.9    PAYING AGENT TO HOLD PAYMENTS IN TRUST.

     Each Paying  Agent  shall hold in trust for the benefit of  Securityholders
all Payments held by the Paying Agent for the payment of principal of,  interest
on,  and  Premium,  if any,  and Break  Amount,  if any,  with  respect  to, the
Securities  and shall notify the Trustee of any default by the Company in making
any such payment.  The Company at any time may require a Paying Agent to pay all
Payments  held by it to the Trustee and account for any funds  disbursed and the
Trustee may at any time during the  continuance  of any  Payment  Default,  upon
written request to a Paying Agent, require such Paying Agent to pay all Payments
held by it to the  Trustee  and to account for any  Payments  distributed.  Upon
receipt of such Payment,  the Trustee shall immediately deposit all such amounts
in the Collection Account.  Upon doing so the Paying Agent shall have no further
liability for the Payments.

     The Paying Agent,  as agent for the Company,  shall exclude and withhold at
the appropriate rate from each payment of principal of, interest on, Premium, if
any,  Break  Amount,  if any,  and other  amounts  due  hereunder  or under each
Security (and such exclusion and withholding shall constitute payment in respect
of such Security) any and all United States withholding taxes applicable thereto
as required by Law.  The Paying Agent  agrees to act as such  withholding  agent
and, in connection therewith, whenever any present or future United States taxes
or similar  charges  are  required to be  withheld  with  respect to any amounts
payable hereunder or in respect of the Securities,  to withhold such amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the  Securityholders,  that it will file any necessary United States withholding
tax returns or statements  when due, and that as promptly as possible  after the
payment  thereof  it will  deliver  to each  Securityholder  (with a copy to the
Company)  appropriate  receipts showing the payment thereof,  together with such
additional  documentary  evidence  as any  such  Securityholder  may  reasonably
request from time to time.

     The Company  will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an  instrument in which such Paying Agent shall agree
with the Trustee,  subject to the  provisions of this Section,  that such Paying
Agent will:

     (a)   hold all Payments received by it as such agent for the payment of the
principal  of,  interest on,  Premium,  if any, or Break  Amount,  if any,  with
respect  to the  Securities  in trust for the  benefit of the  Persons  entitled
thereto until such Payments shall be paid to such Persons or otherwise  disposed
of as herein provided;

<PAGE>

     (b)   promptly  give the  Trustee  notice of any  failure by the Company to
make any payment of the principal  of,  interest on,  Premium,  if any, or Break
Amount,  if any, with respect to, the Securities  when the same shall be due and
payable; and

     (c)   at  any time during the  continuance  of any such  failure,  upon the
written  request of the  Trustee,  forthwith  pay to the Trustee all Payments so
held in trust by such Paying Agent.

     The Company may at any time, for the purpose of obtaining the  satisfaction
and  discharge  of this  Indenture or for any other  purpose,  direct any Paying
Agent to pay to the Trustee  all  Payments  held in trust by such Paying  Agent,
such Payments to be held by the Trustee upon the same trusts as those upon which
such  Payments  were held by such Paying  Agent;  and,  upon such payment by any
Paying  Agent to the  Trustee,  such Paying  Agent  shall be  released  from all
further liability with respect to such Payments held by it as Paying Agent.

     Any  Payments  deposited  with the Trustee or any Paying Agent in trust for
the payment of the  principal  of,  interest  on, or  Premium,  if any, or Break
Amount,  if any,  with respect to, any Security and  unclaimed for two (2) years
after such principal,  interest,  Premium,  if any, or Break Amount, if any, has
become  due and  payable  shall be paid to the  Company on its  request,  unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, and the Holder of such Security shall thereafter,  as an
unsecured general creditor, look only to the Company for payment thereof and all
liability of the Trustee or such Paying Agent with regard to such Payments shall
thereupon cease.

     Section 2.10   RECORD DATES.

     The  Person  in whose  name any  Security  is  registered  at the  close of
business on any Record Date with respect to any  Interest  Payment Date shall be
entitled to receive the interest  payable on such  Interest  Payment Date to the
extent provided by such Security,  except if and to the extent the Company shall
default in the payment of the interest due on such  Interest  Payment  Date,  in
which  case  defaulted  interest  shall be paid to the  Person in whose name the
Outstanding  Security is registered  at the close of business on the  subsequent
record date (which  shall be not less than five (5)  Business  Days prior to the
date of payment of such defaulted interest)  established by notice given by mail
by or on  behalf of the  Company  to the  Holders  of  Securities  not less than
fifteen  (15) days  preceding  such  subsequent  record date (a "SPECIAL  RECORD
DATE") pursuant to Section 2.16.

     Section 2.11   SECURITYHOLDER LISTS.

     The  Trustee  shall  preserve  in  as  current  a  form  as  is  reasonably
practicable  the most recent list  available to it of the names and addresses of
Securityholders.  If the Trustee is not the Registrar, the Company shall furnish
to the  Trustee on or before each  Distribution  Date and at such other times as
the  Trustee  may  request in writing a list in such form and as of such date as

<PAGE>

the   Trustee   may   reasonably   require  of  the  names  and   addresses   of
Securityholders.

     Section 2.12   MUTILATED,  DEFACED,  DESTROYED,  LOST AND STOLEN
                    SECURITIES.

     In case any  temporary  or  definitive  Security  shall  become  mutilated,
defaced or be apparently destroyed,  lost or stolen,  subject to compliance with
the  following  sentence  and in the  absence  of notice to the  Company  or the
Trustee  that such  Security  has been  acquired by a bona fide  purchaser,  the
Company shall execute,  and the Trustee shall  authenticate  and deliver,  a new
Security,  bearing a number not contemporaneously  outstanding,  in exchange and
substitution  for  the  mutilated  or  defaced  Security,  or  in  lieu  of  and
substitution for the Security so apparently destroyed,  lost or stolen. In every
case the applicant for a substitute Security shall furnish to the Company and to
the  Trustee  and any agent of the  Company  or the  Trustee  such  security  or
indemnity as may be required by them to indemnify and defend and to save each of
them  harmless  and, in every case of  destruction,  loss or theft,  evidence to
their satisfaction of the apparent  destruction,  loss or theft of such Security
and of the ownership thereof.

     Upon the  issuance of any  substitute  Security  pursuant to the  preceding
paragraph,  the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other  expenses  (including  the fees and  expenses  of the  Trustee)  connected
therewith.  In case any Security which has matured or is about to mature,  shall
become  mutilated or defaced or be  apparently  destroyed,  lost or stolen,  the
Company may,  instead of issuing a  substitute  Security,  pay or authorize  the
payment of such Security (without  surrender of such Security except in the case
of a mutilated or defaced  Security),  as applicable,  if the applicant for such
payment  shall  furnish to the  Company  and to the Trustee and any agent of the
Company or the Trustee such  security or indemnity as any of them may require to
save each of them harmless from all risks, however remote, and, in every case of
apparent  destruction,  loss or theft,  the applicant  shall also furnish to the
Company and the Trustee and any agent of the Company or the Trustee  evidence to
their satisfaction of the apparent  destruction,  loss or theft of such Security
and of the ownership thereof.

     Every substitute Security issued pursuant to the provisions of this Section
by virtue of the fact that any Security is apparently destroyed,  lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the  apparently  destroyed,  lost or  stolen  Security  shall be at any time
enforceable  by anyone and shall be entitled  to all the  benefits of (but shall
also be subject to all the  limitations  of rights set forth in) this  Indenture
equally and proportionately with any and all other Securities duly authenticated
and  delivered  hereunder.  Every  substitute  Security  issued  pursuant to the
provisions  of this  Section  2.12 by virtue of the fact  that any  Security  is
mutilated or defaced shall  constitute an additional  contractual  obligation of
the  Company  and shall be  entitled  to all the  benefits of (but shall also be
subject to all the  limitations of rights set forth in) this  Indenture  equally
and  proportionately  with any and all other  Securities of the same series duly
authenticated  and delivered  hereunder.  All Securities shall be held and owned
upon the express  condition that, to the extent  permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of mutilated

<PAGE>

or defaced or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter  enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.

     Section 2.13   TREASURY SECURITIES.

     In  determining  whether the Holders of the  required  principal  amount of
Securities  have  given  or  concurred  in  any  amendment,   request,   demand,
authorization,  direction, notice, consent or waiver under this Indenture or any
other  Operative  Document,  Securities  owned  by  the  Company  or  any of its
Affiliates shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination,  except that, for the purposes of determining whether
the  Trustee  shall be  protected  in  relying on any such  amendment,  request,
demand,  authorization,  direction,  notice,  consent or waiver, only Securities
which the Trustee  knows are so owned  shall be so  disregarded.  Securities  so
owned which have been  pledged in good faith may be regarded as  Outstanding  if
the pledgee  establishes  to the  satisfaction  of the Trustee  that neither the
Company  nor any of its  majority-owned  subsidiaries  is  affiliated  with  the
pledgee or any  Affiliate  of the  pledgee  and that the pledgee has the present
right  (subject  to no  contrary  obligation  or  understanding)  so to act with
respect to the  Securities  as a Holder  independently  of any  direction  by or
interest  of the  Company or any of its  Affiliates.  In case of a dispute as to
such right,  the Trustee in good faith shall be entitled to rely upon the advice
of counsel,  including counsel for the Company. Upon request of the Trustee, the
Company  shall  promptly  furnish  to the  Trustee a  certificate  of an Officer
listing and identifying all Securities, if any, known by the Company to be owned
or held by or for the  account  of the  Company  or any of its  Affiliates;  and
subject to Sections 8.1 and 8.2 herein,  the Trustee shall be entitled to accept
such  certificate  as conclusive  evidence of the facts therein set forth and of
the fact that all Securities not listed therein are  Outstanding for the purpose
of any such determination.

     Section 2.14   TEMPORARY SECURITIES.

     Until  definitive  Securities  are  ready for  delivery,  the  Company  may
prepare, and, upon written order of the Company, the Trustee shall authenticate,
temporary Securities in any authorized denominations. Temporary Securities shall
be substantially of the tenor of the definitive Securities in lieu of which they
are issued but may have  variations that the Company  considers  appropriate for
temporary Securities.  Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate and deliver definitive Securities in exchange for
temporary  Securities.  Until so exchanged,  the temporary  Securities  shall be
entitled to the same benefits under this  Indenture as definitive  Securities of
the same series.

     Section 2.15   CANCELLATION.

     The  Company  may  at any  time  deliver  Securities  to  the  Trustee  for
cancellation.  The  Registrar  and the Paying Agent shall forward to the Trustee
any  Securities  surrendered  to them for  transfer,  exchange or  payment.  The

<PAGE>

Trustee and no one else shall cancel all  Securities  surrendered  for transfer,
exchange,  payment or cancellation.  The Company may not issue new Securities to
replace  Securities it has paid or which have been  delivered to the Trustee for
cancellation.  The  Trustee  shall  destroy  all  canceled  Securities  and,  if
requested,  deliver a certificate  of such  destruction  to the Company.  If the
Company shall acquire any of the Securities,  such acquisition shall not operate
as a satisfaction of the indebtedness  represented by such Securities unless and
until the same are delivered to the Trustee for cancellation.

     Section 2.16   DEFAULTED INTEREST.

     If any payment of interest on the  Securities  due on any Interest  Payment
Date becomes an Overdue Scheduled Payment,  the Company shall pay such defaulted
interest,  plus interest on the defaulted  interest,  at the Payment Due Rate to
the  extent  permitted  by law and the terms  thereof,  to the  persons  who are
Securityholders  on a subsequent  Special Record Date. The Company shall fix the
Special  Record Date and payment  date.  At least  fifteen  (15) days before the
Special Record Date, the Company shall mail to each Securityholder a notice that
states the Special  Record  Date,  the payment  date and the amount of defaulted
interest to be paid.

     Section 2.17   CUSIP NUMBERS.

     The Company in issuing  the  Securities  may use  "CUSIP"  numbers (if then
generally in use) and, if so, the Trustee  shall use "CUSIP"  numbers in notices
of redemption  as a convenience  to Holders;  PROVIDED,  HOWEVER,  that any such
notice may state that no  representation  is made as to the  correctness of such
numbers  either as printed on the  Securities or as contained in any notice of a
redemption  and that  reliance  may be placed  only on the other  identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.

     Section 2.18   ISSUANCE OF SUBORDINATED SECURITIES.

     After the Closing  Date,  the  Company  shall be entitled to issue a second
series of securities under this Indenture (the  "SUBORDINATED  SECURITIES") that
shall have such terms as shall be set forth in an amendment  to this  Indenture,
PROVIDED  that  in  no  event  shall  any  such  amendment  (i)  provide  for  a
distribution to be made on such  Subordinated  Securities on a Distribution Date
prior to all  distributions  having been made  pursuant to clauses FIRST through
SEVENTH,  inclusive,  of  Section  3.2 or (ii)  (x)  provide  such  Subordinated
Securities the benefit of any credit support  similar to the Liquidity  Facility
or the Policy  (unless claims for fees,  interest,  expenses,  reimbursement  of
advances  and other  obligations  arising  from such credit  support  rank below
clause  SEVENTH of Section 3.2) or (y) amend or modify any of the  provisions of
Section 3.5, 3.6(d) or 3.8(c),  unless, in the case of either clause (x) or (y),
the prior written  consent of the Liquidity  Provider  shall have been obtained.
The Subordinated  Securities shall not be issued,  and no such amendment to this
Indenture shall be made,  unless the  Controlling  Party shall have consented in
writing to such  issuance  and  amendment  and the Company  shall have  obtained
Ratings  Confirmation with respect to such issuance and amendment.  Upon Request

<PAGE>

of the  Company,  the Trustee  shall  execute and  deliver an  amendment  to the
Indenture permitted by this Section 2.18.


                                   ARTICLE 3.

                     LIQUIDITY PROVIDER AND POLICY PROVIDER

     Section 3.1    WRITTEN NOTICE OF DISTRIBUTION.

     (a)   No  later  than 3:00 p.m.  (New York City time) on the  Business  Day
immediately  preceding each  Distribution  Date,  each of the following  Persons
shall  deliver  to the  Trustee a Written  Notice  setting  forth the  following
information as at the close of business on such Business Day:

           (i) The Liquidity  Provider shall set forth the amounts to be paid to
     it in accordance  with clauses  "first",  "second",  "third",  "fourth" and
     "fifth" of Section 3.2; and

           (ii) The Policy Provider shall set forth the amounts to be paid to it
     in  accordance  with  clauses  "first",  "second",  "third",  "fourth"  and
     "eighth" of Section 3.2.

     The  notices  required  under this  Section  3.1(a) may be in the form of a
schedule or similar document  provided to the Trustee by the Persons  referenced
therein or by any one of them,  which  schedule  or similar  document  may state
that,  unless there has been a prepayment  of the  Securities,  such schedule or
similar document is to remain in effect until any substitute notice or amendment
shall be given to the Trustee by the Person  providing such notice.  Any amounts
requested  and  received  under the Policy  Fee  Letter or the  Policy  Provider
Agreement  or any  amounts for which the Policy  Provider is not  entitled to be
reimbursed  pursuant to the provisions of the Policy Provider  Agreement may not
be requested by the Policy Provider under this Section 3.1(a) nor distributed to
the Policy Provider under Section 3.2.

     (b)   At such time as the Liquidity  Provider or the Policy  Provider shall
have  received  all  amounts  owing to it pursuant to Section 3.2 hereof and its
commitment or  obligations  under the Liquidity  Facility or the Policy,  as the
case may be, shall have  terminated or expired,  such Person shall, by a Written
Notice, so inform the Trustee.

     (c)   The  Trustee  shall  be  fully  protected  in  relying  on any of the
information set forth in a Written Notice provided by the Liquidity  Provider or
the Policy  Provider  pursuant to paragraphs  (a) or (b) above and shall have no
independent obligation to verify,  calculate or recalculate any amount set forth
in any Written Notice delivered in accordance with such paragraphs.

     (d)   In  the event the  Trustee  shall not  receive  from any  Person  any
information  set forth in  paragraph  (a) above  which is required to enable the
Trustee to make a  distribution  to such  Person  pursuant to Section  3.2,  the

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Trustee  shall  request  such  information  and,  failing  to  receive  any such
information,  the Trustee shall not make such distribution(s) to such Person. In
such event,  the Trustee shall make  distributions  pursuant to clauses  "FIRST"
through  "TENTH"  of  Section  3.2  to  the  extent  it  shall  have  sufficient
information to enable it to make such distributions,  and shall continue to hold
any funds remaining,  after making such  distributions,  until the Trustee shall
receive  all  necessary  information  to  enable it to  distribute  any funds so
withheld.

     (e)   On such dates (but not more frequently than monthly) as the Liquidity
Provider or the Policy Provider shall request, but in any event automatically at
the end of each  calendar  quarter,  the  Trustee  shall  send to such  Person a
written statement reflecting all amounts on deposit with the Trustee pursuant to
Section 3.1(d) hereof.

     Section 3.2    PRIORITY OF DISTRIBUTIONS; SUBORDINATION.

     Except as otherwise  provided in Sections 3.1(d),  3.3, 3.5(b),  3.5(k) and
3.6, amounts on deposit in the Collection Account on any Distribution Date shall
be promptly  distributed  in the  following  order of priority and in accordance
with the information provided to the Trustee pursuant to Section 3.1(a) hereof:

           FIRST,  if an Event of Default  shall have occurred and be continuing
     on such  Distribution  Date,  such amount as shall be required to reimburse
     (i) the  Trustee  for  any  reasonable  out-of-pocket  costs  and  expenses
     actually  incurred by it (to the extent not  previously  reimbursed) in the
     protection of, or the realization of the value of, the Collateral, shall be
     applied by the Trustee in  reimbursement  of such costs and expenses,  (ii)
     the Policy  Provider for any amounts of the nature  described in clause (i)
     above actually  incurred by it under the Policy Provider  Agreement (to the
     extent  not  previously  reimbursed),  shall be  distributed  to the Policy
     Provider,  and (iii) the  Liquidity  Provider,  the Policy  Provider or any
     Securityholder  for payments,  if any, made by it to the Trustee in respect
     of  amounts  described  in clause (i) above,  shall be  distributed  to the
     Liquidity  Provider,  the Policy Provider or to the Trustee for the account
     of such  Securityholder,  in each such  case,  pro rata on the basis of all
     amounts described in clauses (i) through (iii) above.

           SECOND,  such  amount as shall be required to pay (i) all accrued and
     unpaid  Liquidity  Expenses  owed to the  Liquidity  Provider  and (ii) all
     accrued and unpaid Policy  Expenses owed to the Policy  Provider,  shall be
     distributed to the Liquidity  Provider and the Policy  Provider pro rata on
     the basis of the amount of Liquidity  Expenses and Policy  Expenses owed to
     the Liquidity Provider and the Policy Provider;

          THIRD,  such  amount  as shall be  required  to pay (i) the  aggregate
     amount of accrued and unpaid interest on all Liquidity  Obligations (at the
     rate, or in the amount,  provided in the Liquidity  Facility and determined
     after application of the proceeds of any Policy Drawing pursuant to Section
     3.6(d) or other payment by the Policy Provider to the Liquidity Provider in
     respect of any interest on Drawings in  accordance  with the  provisions of
     Section  3.8(c)),  (ii) the  aggregate  amount of accrued and unpaid Policy

<PAGE>

     Provider  Interest  Obligations  and (iii) if the Policy  Provider has paid
     pursuant  to  Section  3.6(d)  or the  proviso  to  Section  3.8(c)  to the
     Liquidity  Provider all outstanding  Drawings and interest thereon owing to
     the Liquidity  Provider  under the Liquidity  Facility,  the amount of such
     payments made to the Liquidity Provider attributable to interest accrued on
     Drawings  under  the  Liquidity  Facility,  shall  be  distributed  to  the
     Liquidity Provider and the Policy Provider, as the case may be, pro rata on
     the basis of the  amounts  owed to the  Liquidity  Provider  and the Policy
     Provider under subclauses (i), (ii) and (iii) of this clause "third";

           FOURTH,  such  amount  as  shall  be  required  (i)(A)  if  the  Cash
     Collateral  Account  had been  previously  funded as  provided  in  Section
     3.5(f),   unless  (1)  on  such   Distribution   Date  the  Securities  are
     Non-Performing  and a Liquidity Event of Default shall have occurred and be
     continuing or (2) the Final Drawing shall have  occurred,  to fund the Cash
     Collateral  Account  up to the  Required  Amount  (less  the  amount of any
     repayments  of  Interest  Drawings  under  the  Liquidity   Facility  while
     subclause  (i)(A)(1)  above is  applicable)  shall be deposited in the Cash
     Collateral Account, (B) if the Liquidity Facility shall become a Downgraded
     Facility or a Non-Extended  Facility at a time when  unreimbursed  Interest
     Drawings under the Liquidity  Facility have reduced the Available Amount to
     zero,   unless  (1)  on  such   Distribution   Date  the   Securities   are
     Non-Performing  and a Liquidity Event of Default shall have occurred and be
     continuing or (2) the Final Drawing  shall have  occurred,  to deposit into
     the Cash  Collateral  Account an amount equal to the Required  Amount (less
     the amount of any  repayments  of  Interest  Drawings  under the  Liquidity
     Facility while subclause  (i)(B)(1) above is applicable) shall be deposited
     in the Cash Collateral  Account,  and (C) if neither  subclause  (i)(A) nor
     subclause (i)(B) of this clause "fourth" is applicable, to pay or reimburse
     the  Liquidity  Provider in an amount equal to the amount of all  Liquidity
     Obligations  then due under the  Liquidity  Facility  (other  than  amounts
     payable  pursuant to Section  3.6(d) or clause  "second" or "third" of this
     Section 3.2),  net of any and all payments  made by the Policy  Provider to
     the  Liquidity  Provider  with  respect to the  principal  of any  Interest
     Drawing,  and (ii) if the Policy  Provider has paid pursuant to the proviso
     to Section 3.8(c) to the Liquidity  Provider all  outstanding  Drawings and
     interest  thereon  owing to the  Liquidity  Provider  under  the  Liquidity
     Facility,  the amount of such payments  made to the  Liquidity  Provider in
     respect of principal of Drawings  under the  Liquidity  Facility,  shall be
     paid to the Policy  Provider,  pro rata on the basis of the  amounts of all
     such deficiencies and/or unreimbursed  Liquidity Obligations payable to the
     Liquidity  Provider  and the amount of such  unreimbursed  Policy  Provider
     Obligations  payable to the Policy Provider,  in each instance,  under this
     clause "fourth";

           FIFTH,  if any  amounts  are to be  distributed  pursuant  to  either
     subclause  (i)(A) or (i)(B) of clause  "fourth"  above,  then the Liquidity
     Provider shall be paid the excess of (x) the aggregate  outstanding  amount
     of  unreimbursed  Advances  (whether  or not then due) under the  Liquidity
     Facility over (y) the Required Amount (less the amount of any repayments of

<PAGE>

     Interest Drawings under the Liquidity Facility while subclause (i)(A)(1) or
     (i)(B)(1), as the case may be, of clause "fourth" above is applicable);

           SIXTH,  if an Event of Default  shall have occurred and be continuing
     on such Distribution Date and at all times thereafter, such amount as shall
     be  required  to  reimburse  or pay (i) the Trustee for any Tax (other than
     Taxes imposed on  compensation  paid  hereunder),  expense,  fee, charge or
     other  loss  incurred  by or any other  amount  payable  to the  Trustee in
     connection  with the  transactions  contemplated  hereby (to the extent not
     previously reimbursed), shall be applied by the Trustee in reimbursement of
     such amount, and (ii) each Securityholder for payments,  if any, made by it
     pursuant to an  indemnity  provided  pursuant to Section  7.6(c)  hereof in
     respect of amounts  described in subclause (i) above,  shall be distributed
     to the Trustee for the account of such  Securityholder,  in each such case,
     pro rata on the basis of all amounts  described in subclauses  (i) and (ii)
     of this clause "sixth";

           SEVENTH,  such amount as shall be required to pay in full amounts due
     to the Securityholders on such Distribution Date;

           EIGHTH,  such amount as shall be required to pay the Policy  Provider
     all Policy  Provider  Obligations  then due and unpaid  (other than amounts
     payable pursuant to clauses "first", "second", "third" and "fourth" of this
     Section 3.2) shall be paid to the Policy Provider;

           NINTH,  such amount as shall be required to pay in full the aggregate
     unpaid amount of fees and expenses payable as of such  Distribution Date to
     the Trustee  pursuant to the terms of this  Indenture  (other than  amounts
     payable pursuant to clauses "first" and "sixth" of this Section 3.2), shall
     be distributed to the Trustee; and

           TENTH, the balance,  if any, of any such amount remaining  thereafter
     shall be paid to the Company unless on such  Distribution Date (i) an Event
     of Default has  occurred  and is  continuing  or (ii) any amount due to the
     Liquidity  Provider  or the Policy  Provider  from the Company has not been
     paid, in which case such amount shall be held in the Collection Account for
     later distribution in accordance with this Article 3 or paid to the Company
     upon discharge of the Indenture pursuant to Article 9.

     Section 3.3    OTHER PAYMENTS.

     (a)   Any payments received by the Trustee for which no provision as to the
application  thereof  is made in this  Indenture  shall  be  distributed  by the
Trustee in the order of priority specified in Section 3.2 hereof.

     (b)   Notwithstanding the priority of payments specified in Section 3.2, in
the event any Investment  Earnings on amounts on deposit in the Cash  Collateral
Account  resulting  from an  Unapplied  Provider  Advance are  deposited  in the

<PAGE>

Collection  Account,  such  Investment  Earnings  shall be used to pay  interest
payable  in  respect of such  Unapplied  Provider  Advance to the extent of such
Investment Earnings.

     (c)   If the Trustee receives any Payment after the Scheduled  Payment Date
relating thereto,  then the Trustee shall deposit such Payment in the Collection
Account and distribute such Payment on the next  Distribution Date in accordance
with the priority of distributions set forth in Section 3.2 hereof.

     Section  3.4   PAYMENTS  TO  LIQUIDITY   PROVIDER   AND  POLICY   PROVIDER.

     Any  amounts  distributed  hereunder  to the  Liquidity  Provider or Policy
Provider  shall be paid to the  Liquidity  Provider  or Policy  Provider by wire
transfer of funds to the address the Liquidity Provider or Policy Provider shall
provide to the Trustee.  The Trustee shall provide a Written  Notice of any such
transfer to the Liquidity  Provider or Policy  Provider,  as the case may be, at
the time of such transfer.

     Section 3.5    LIQUIDITY FACILITY.

     (a)   INTEREST  DRAWINGS.  If on any Distribution Date, after giving effect
to the  subordination  provisions  of Section  3.2,  the Trustee  shall not have
sufficient  funds for the  payment  of any  amounts  due and owing in respect of
accrued interest on the Securities (at the Debt Rate), then, prior to 12:30 p.m.
(New York City time) on such  Distribution  Date,  the Trustee  shall  request a
drawing (each such drawing,  an "INTEREST DRAWING") under the Liquidity Facility
(and concurrently with the making of such request,  the Trustee will give notice
to the Policy Provider of such insufficiency of funds) in an amount equal to the
lesser of (x) an amount  sufficient  to pay the amount of such accrued  interest
(at the Debt Rate) and (y) the  Available  Amount,  and shall pay such amount to
the  Securityholders  in accordance  with the  provisions  of this  Indenture in
payment of such accrued interest.

     (b)   APPLICATION  OF INTEREST  DRAWINGS.  Notwithstanding  anything to the
contrary  contained in this Indenture,  all payments  received by the Trustee in
respect of an Interest  Drawing  under the  Liquidity  Facility  and all amounts
withdrawn by the Trustee from the Cash Collateral  Account,  and payable in each
case  to  the   Securityholders,   shall   be   promptly   distributed   to  the
Securityholders  in accordance with the provisions of this  Indenture,  PROVIDED
that if (x) the  Trustee  shall  receive  any amount in  respect of an  Interest
Drawing under the Liquidity  Facility or a withdrawal  from the Cash  Collateral
Account to pay Accrued  Interest after such Accrued Interest has been fully paid
to the  Securityholders by a Policy Drawing under the Policy pursuant to Section
3.6(a) hereof or (y) the Trustee shall receive any amount in respect of a Policy
Drawing under the Policy  pursuant to Section 3.6(a) hereof to fully pay Accrued
Interest  after such Accrued  Interest has been paid (in full or in part) to the
Securityholders  by an  Interest  Drawing  under  the  Liquidity  Facility  or a
withdrawal from the Cash Collateral Account,  the Trustee, in the case of either
clause  (x) or (y),  shall pay an amount  equal to the  amount of such  Interest
Drawing or withdrawal  directly to the Policy Provider as  reimbursement of such
Policy Drawing rather than to the Securityholders.

<PAGE>

     (c)   DOWNGRADE  DRAWINGS.  (i) A  Downgrade  Drawing  under the  Liquidity
Facility  shall be requested by the Trustee as provided in Section  3.5(c)(iii),
if at any time,  (x) so long as MSCS is the Liquidity  Provider,  the short-term
unsecured  debt rating of the Liquidity  Guarantor is lower than the  applicable
Threshold  Rating  issued by either  Moody's or Standard & Poor's or the related
Liquidity  Guarantee ceases to be in full force and effect or becomes invalid or
unenforceable or the Liquidity Guarantor denies its liability thereunder, or (y)
if MSCS is not the Liquidity Provider,  the short-term  unsecured debt rating of
the Liquidity  Provider is lower than the applicable  Threshold Rating issued by
either Moody's or Standard & Poor's (in each case, a "DOWNGRADE  EVENT", and the
Liquidity  Facility,  a  "DOWNGRADED  FACILITY"),  unless an event  described in
Section 3.5(c)(ii) occurs.

           (ii) If at any time  the  Liquidity  Facility  becomes  a  Downgraded
     Facility,  the Trustee shall not request a Downgrade Drawing  thereunder in
     accordance  with  Section  3.5(c)(iii),  if the  Liquidity  Provider or the
     Company has  arranged  for a  Replacement  Liquidity  Provider to issue and
     deliver a  Replacement  Liquidity  Facility to the  Trustee  within 10 days
     after  receiving  notice  of a  Downgrade  Event  (but not  later  than the
     expiration date of such Downgraded Facility).

           (iii) If the Trustee is required to request a Downgrade Drawing under
     Section  3.5(c)(i),  the  Trustee  shall,  on the 10th day  referred  to in
     Section  3.5(c)(ii) (or if such 10th day is not a Business Day, on the next
     succeeding  Business  Day) (or, if  earlier,  the  expiration  date of such
     Downgraded  Facility),  request a  drawing  in  accordance  with and to the
     extent  permitted by such Downgraded  Facility (such drawing,  a "DOWNGRADE
     DRAWING") of the Available  Amount.  Amounts drawn  pursuant to a Downgrade
     Drawing  shall be  maintained  and  invested as provided in Section  3.5(f)
     hereof. The Liquidity Provider may also arrange for a Replacement Liquidity
     Provider to issue and deliver a Replacement  Liquidity Facility at any time
     after such Downgrade Drawing so long as such Downgrade Drawing has not been
     reimbursed in full to the Liquidity Provider.

     (d)   NON-EXTENSION  DRAWINGS.  If the  Liquidity  Facility is scheduled to
expire on a date (the  "STATED  EXPIRATION  DATE")  prior to the date that is 15
days after the Final Legal Maturity Date, then, no earlier than the 60th day and
no later than the 40th day prior to the then Stated Expiration Date, the Trustee
shall  request that the Liquidity  Provider  extend the Stated  Expiration  Date
until  the  earlier  of (i) the date  which is 15 days  after  the  Final  Legal
Maturity Date and (ii) the date that is the day immediately  preceding the 364th
day occurring  after the last day of the  applicable  Consent Period (unless the
obligations of the Liquidity  Provider under the Liquidity  Facility are earlier
terminated  in  accordance  with the  Liquidity  Facility).  Whether  or not the
Liquidity  Provider  has  received a request  from the  Trustee,  the  Liquidity
Provider shall advise the Trustee, no earlier than the 40th day (or, if earlier,
the date of the Liquidity  Provider's receipt of such request,  if any, from the
Trustee) and no later than the 25th day prior to the Stated Expiration Date then
in effect (such period, the "CONSENT PERIOD"),  whether, in its sole discretion,
it agrees to extend such Stated Expiration Date. If (A) on or before the date on
which such  Consent  Period ends,  the  Liquidity  Facility  shall not have been

<PAGE>

replaced in accordance with Section 3.5(e) and (B) the Liquidity  Provider fails
irrevocably and  unconditionally  to advise the Trustee on or before the date on
which such Consent Period ends that such Stated  Expiration  Date then in effect
shall be so  extended,  the  Trustee  shall,  on the date on which such  Consent
Period ends (or as soon as possible thereafter), in accordance with the terms of
the expiring Liquidity Facility (a "NON-EXTENDED  FACILITY"),  request a drawing
under such expiring Liquidity Facility (such drawing, a "NON-EXTENSION DRAWING")
of all available and undrawn amounts thereunder. Notwithstanding the immediately
preceding three sentences, so long as MSCS is the Liquidity Provider, the Stated
Expiration Date shall be automatically extended, effective on the 25th day prior
to such Stated  Expiration  Date  (unless such Stated  Expiration  Date is on or
after the date  that is 15 days  after the Final  Legal  Maturity  Date),  for a
period of 364 days after the Stated  Expiration  Date (unless the obligations of
the Liquidity  Provider are earlier  terminated in accordance with the Liquidity
Facility)  without  the  necessity  of any act by the  Trustee or the  Liquidity
Provider,  unless the Liquidity Provider shall advise the Trustee, prior to such
25th day,  that it does not agree to such  extension  of the  Stated  Expiration
Date,  in  which  event,  the  Trustee  shall,  on such  25th day (or as soon as
possible  thereafter),  in  accordance  with and to the extent  permitted by the
terms of the Non-Extended  Facility,  request a Non-Extension  Drawing under the
Non-Extended  Facility of all available and undrawn amounts thereunder.  Amounts
drawn  pursuant to a  Non-Extension  Drawing shall be maintained and invested in
accordance with Section 3.5(f) hereof.

     (e)   ISSUANCE  OF  REPLACEMENT  LIQUIDITY  FACILITY.  (i) At any time, the
Company  may,  at its  option,  with  cause  or  without  cause,  arrange  for a
Replacement  Liquidity Facility to replace any Liquidity Facility (including any
Replacement  Liquidity Facility provided pursuant to Section 3.5(e)(ii) hereof);
PROVIDED,  HOWEVER, that the initial Liquidity Provider shall not be replaced by
the  Company  as a  Liquidity  Provider  without  the  consent  of such  initial
Liquidity  Provider  unless  (A) there  shall have  become  due to such  initial
Liquidity  Provider,  or such initial  Liquidity  Provider  shall have demanded,
amounts pursuant to Section 3.01, 3.02 or 3.03 of the Liquidity Facility and the
replacement  of such initial  Liquidity  Provider  would reduce or eliminate the
obligation  to pay such  amounts or the  Company  determines  in good faith that
there is a substantial likelihood that such initial Liquidity Provider will have
the right to claim any such  amounts  (unless such  initial  Liquidity  Provider
waives,  in  writing,  any  right  it may  have to claim  such  amounts),  which
determination  shall be set forth in a  certificate  delivered by the Company to
such initial Liquidity  Provider setting forth the basis for such  determination
and  accompanied  by an opinion of outside  counsel  selected by the Company and
reasonably  acceptable to such initial  Liquidity  Provider  verifying the legal
conclusions,  if any, of such certificate relating to such basis, PROVIDED that,
in the case of any likely claim for such  amounts  based upon any  proposed,  or
proposed   change  in,  law,  rule,   regulation,   interpretation,   directive,
requirement,  request or  administrative  practice,  such opinion may assume the
adoption or promulgation of such proposed  matter,  (B) it shall become unlawful
or impossible for such initial  Liquidity  Provider (or its Facility  Office) to
maintain  or fund  its  LIBOR  Advances  as  described  in  Section  3.10 of the
Liquidity Facility, (C) the Liquidity Facility of the initial Liquidity Provider
shall become a  Downgraded  Facility or a  Non-Extended  Facility or a Downgrade
Drawing or a  Non-Extension  Drawing  shall have  occurred  under the  Liquidity

<PAGE>

Facility of the initial Liquidity Provider or (D) the initial Liquidity Provider
shall have breached any of its payment (including, without limitation,  funding)
obligations under the Liquidity Facility. If such Replacement Liquidity Facility
is provided at any time after a Downgrade  Drawing or Non-Extension  Drawing has
been made, all funds on deposit in the Cash Collateral  Account will be returned
to the Liquidity Provider being replaced.

           (ii) If the  Liquidity  Provider  shall  determine  not to extend the
     Liquidity  Facility in accordance with Section  3.5(d),  then the Liquidity
     Provider may, at its option,  arrange for a Replacement  Liquidity Facility
     to replace the Liquidity Facility during the period no earlier than 40 days
     and no later than 25 days  prior to the then  effective  Stated  Expiration
     Date.  In  addition,  so  long as the  initial  Liquidity  Provider  is the
     Liquidity Provider, at any time after a Non-Extension Drawing has been made
     under the Liquidity  Facility,  the Liquidity  Provider may, at its option,
     arrange for a  Replacement  Liquidity  Facility  to replace  the  Liquidity
     Facility.

           (iii) No Replacement  Liquidity Facility arranged by the Company or a
     Liquidity  Provider in accordance with clause (i) or (ii) above or pursuant
     to  Section  3.5(c),  respectively,  shall  become  effective  and no  such
     Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under
     the  Operative  Documents and the Support  Documents,  unless and until (A)
     each of the  conditions  referred to in  sub-clauses  (iv)(x) and (z) below
     shall have been satisfied, (B) if such Replacement Liquidity Facility shall
     materially adversely affect the rights, remedies,  interests or obligations
     of the Securityholders  under any of the Operative Documents or the Support
     Documents,  the Trustee shall have consented,  in writing, to the execution
     and issuance of such Replacement  Liquidity Facility and (C) in the case of
     a Replacement  Liquidity  Facility  arranged by a Liquidity  Provider under
     Section  3.5(e)(ii)  or  pursuant  to  Section  3.5(c),   such  Replacement
     Liquidity Facility is acceptable to the Company.

           (iv) In connection  with the issuance of each  Replacement  Liquidity
     Facility,  the Trustee shall (x) prior to the issuance of such  Replacement
     Liquidity  Facility,  obtain written  confirmation  from each Rating Agency
     that such Replacement  Liquidity Facility will not cause a reduction of any
     rating then in effect for the  Securities  by such Rating  Agency  (without
     regard to any  downgrading  of any rating of any Liquidity  Provider  being
     replaced  pursuant  to  Section  3.5(c)  hereof and  without  regard to the
     Policy) or a withdrawal or  suspension  of the rating of the  Securities by
     such Rating Agency and the written  consent of the Policy  Provider  (which
     consent  will  not be  unreasonably  withheld  or  delayed),  (y)  pay  all
     Liquidity  Obligations then owing to the replaced Liquidity Provider (which
     payment  shall be made first from  available  funds in the Cash  Collateral
     Account  as  described  in  clause  (iii) of  Section  3.5(f)  hereof,  and
     thereafter from any other available source, including,  without limitation,
     a  drawing  under the  Replacement  Liquidity  Facility)  and (z) cause the
     issuer of the  Replacement  Liquidity  Facility to deliver the  Replacement
     Liquidity  Facility to the Trustee,  together with a legal opinion  opining

<PAGE>

     that such Replacement  Liquidity  Facility is an enforceable  obligation of
     such Replacement Liquidity Provider.

           (v) Upon  satisfaction  of the  conditions set forth in clauses (iii)
     and (iv) of this  Section  3.5(e) with respect to a  Replacement  Liquidity
     Facility,  (w) the replaced  Liquidity  Facility shall  terminate,  (x) the
     Trustee  shall,  if and to the extent so  requested  by the  Company or the
     Liquidity  Provider being replaced,  execute and deliver any certificate or
     other  instrument  required in order to terminate  the  replaced  Liquidity
     Facility,  shall surrender the replaced Liquidity Facility to the Liquidity
     Provider  being  replaced  and shall  execute and  deliver the  Replacement
     Liquidity  Facility and any associated Fee Letter,  (y) each of the parties
     hereto shall enter into any amendments to this Indenture  necessary to give
     effect to (1) the replacement of the applicable Liquidity Provider with the
     applicable  Replacement  Liquidity  Provider and (2) the replacement of the
     applicable  Liquidity  Facility with the applicable  Replacement  Liquidity
     Facility and (z) the  applicable  Replacement  Liquidity  Provider shall be
     deemed to be a  Liquidity  Provider  with the rights and  obligations  of a
     Liquidity  Provider  hereunder and under the other Operative  Documents and
     the Support  Documents and such  Replacement  Liquidity  Facility  shall be
     deemed to be a Liquidity  Facility  hereunder and under the other Operative
     Documents and the Support Documents.

     (f)   CASH COLLATERAL ACCOUNT;  WITHDRAWALS;  INVESTMENTS. In the event the
Trustee shall draw all available  amounts under the Liquidity  Facility pursuant
to Section  3.5(c),  3.5(d) or 3.5(i) hereof,  or in the event amounts are to be
deposited in the Cash Collateral  Account pursuant to subclause (i)(A) or (i)(B)
of clause "fourth" of Section 3.2,  amounts so drawn or to be deposited,  as the
case may be, shall be deposited by the Trustee in the Cash  Collateral  Account.
All amounts on deposit in the Cash  Collateral  Account  shall be  invested  and
reinvested in Eligible Investments in accordance with Section 8.13(b) hereof.

     On each Interest Payment Date, Investment Earnings on amounts on deposit in
the Cash  Collateral  Account shall be deposited in the  Collection  Account and
applied on such Interest  Payment Date in accordance with Section 3.2 or 3.3 (as
applicable).  The Trustee shall deliver a written statement to the Company,  the
Liquidity  Provider  and the  Policy  Provider  one day  prior to each  Interest
Payment Date setting  forth the amount of  Investment  Earnings held in the Cash
Collateral  Account as of such date. In addition,  from and after the date funds
are so  deposited,  the Trustee  shall make  withdrawals  from such  accounts as
follows:

           (i) on each  Distribution  Date, the Trustee shall,  to the extent it
     shall not have  received  funds to pay accrued and unpaid  interest due and
     owing on the  Securities  (at the Debt  Rate)  after  giving  effect to the
     subordination  provisions of Section 3.2, withdraw from the Cash Collateral
     Account, and pay to the  Securityholders,  an amount equal to the lesser of
     (x) an amount  necessary  to pay accrued and unpaid  interest  (at the Debt
     Rate)  on such  Securities  and (y)  the  amount  on  deposit  in the  Cash

<PAGE>

     Collateral  Account  (so  long as the  aggregate  amount  of  unreplenished
     withdrawals, including such withdrawal, does not exceed the Required Amount
     for such Distribution Date);

           (ii) on each date on which  principal  of the  Securities  shall have
     been paid to the  Securityholders  pursuant  to  Section  3.2  hereof,  the
     Trustee shall withdraw from the Cash  Collateral  Account such amount as is
     necessary so that, after giving effect to such payment of principal on such
     date (and any  reduction  in the amounts on deposit in the Cash  Collateral
     Account resulting from a prior withdrawal of amounts on deposit in the Cash
     Collateral  Account on such date) and any transfer of  Investment  Earnings
     from such Cash Collateral  Account to the Collection  Account on such date,
     an amount equal to the sum of the Required Amount  (calculated for purposes
     of this clause (ii) on the basis of the Capped Interest Rate) plus (if on a
     Distribution  Date not coinciding with an Interest Payment Date) Investment
     Earnings on deposit in the Cash Collateral  Account (after giving effect to
     any such  transfer of Investment  Earnings)  will be on deposit in the Cash
     Collateral  Account  and  shall  first,  pay such  withdrawn  amount to the
     Liquidity  Provider  until  the  Liquidity  Obligations  owing  to such the
     Liquidity  Provider shall have been paid in full,  and second,  deposit any
     remaining withdrawn amount in the Collection Account;

           (iii) if a Replacement  Liquidity  Facility shall be delivered to the
     Trustee following the date on which funds have been deposited into the Cash
     Collateral  Account,  the Trustee shall  withdraw all amounts on deposit in
     the Cash  Collateral  Account  and shall pay such  amounts to the  replaced
     Liquidity  Provider  until all  Liquidity  Obligations  owed to such Person
     shall have been paid in full, and shall deposit any remaining amount in the
     Collection Account; and

           (iv)  following  the payment of all sums  payable with respect to the
     Securities,  on the date on which the Trustee  shall have been  notified by
     the Liquidity Provider that the Liquidity Obligations owed to the Liquidity
     Provider have been paid in full,  the Trustee shall withdraw all amounts on
     deposit in the Cash Collateral Account and shall distribute such amounts in
     accordance with the order of priority set forth in Section 3.2.

     (g) REINSTATEMENT. With respect to any Interest Drawing under the Liquidity
Facility,  upon the reimbursement of the Liquidity  Provider for all or any part
of the amount of such  Interest  Drawing,  together  with any  accrued  interest
thereon,  the Available Amount of the Liquidity  Facility shall be reinstated by
an amount  equal to the amount of such  Interest  Drawing so  reimbursed  to the
Liquidity Provider but not to exceed the Stated Amount; PROVIDED,  HOWEVER, that
the Liquidity Facility shall not be so reinstated in part or in full at any time
if (x) the Securities are  Non-Performing and a Liquidity Event of Default shall
have occurred and be  continuing  or (y) the Final Drawing shall have  occurred;
PROVIDED  FURTHER,  that any  payment by the Policy  Provider  to the  Liquidity
Provider of any amounts  pursuant to the second  proviso to Section 3.8(c) shall
not reinstate the Liquidity Facility, but the Liquidity Facility (so long as the
Liquidity  Facility is in effect) shall be reinstated,  PRO TANTO, to the extent
the Policy Provider  receives any reimbursement in respect of such payment under
clause "FOURTH" of Section 3.2, unless (x) the Securities are Non-Performing and

<PAGE>

a Liquidity  Event of Default  shall have  occurred and be continuing or (y) the
Final  Drawing  shall have  occurred.  In the event that (i) funds are withdrawn
from the Cash Collateral Account pursuant to clause (i) of Section 3.5(f) hereof
or  (ii)  the  Liquidity  Facility  shall  become  a  Downgraded  Facility  or a
Non-Extended Facility at a time when unreimbursed Interest Drawings have reduced
the  Available  Amount to zero,  then funds  received by the Trustee at any time
other than (x) any time when the  Securities  are  Non-Performing  and Liquidity
Event of Default shall have occurred and be continuing or (y) any time after the
Final Drawing  shall have  occurred,  shall be deposited in the Cash  Collateral
Account as and to the extent  provided in clause  "FOURTH" of Section  3.2,  and
applied in accordance with Section 3.5(f) hereof.

     (h)   REIMBURSEMENT.  The  amount  of  each  drawing  under  the  Liquidity
Facility shall be due and payable,  together with interest thereon, on the dates
and at the rate, respectively, provided in the Liquidity Facility.

     (i)   FINAL  DRAWING.  Upon  receipt  from  the  Liquidity  Provider  of  a
Termination Notice, the Trustee shall, not later than the date specified in such
Termination  Notice,  in accordance  with the terms of the  Liquidity  Facility,
request a drawing  under the  Liquidity  Facility of all  available  and undrawn
amounts  thereunder  (a "FINAL  DRAWING").  Amounts  drawn  pursuant  to a Final
Drawing  shall be  maintained  and invested in  accordance  with Section  3.5(f)
hereof.

     (j)   ADJUSTMENTS  OF STATED AMOUNT.  Promptly following each date on which
the Required Amount is reduced as a result of a payment of the principal  amount
of the  Securities,  the Stated  Amount  shall  automatically  be adjusted to an
amount equal to the Required  Amount (as  calculated by the Trustee after giving
effect to such payment).

     (k)   RELATION  TO  SUBORDINATION   PROVISIONS.   Subject  to  the  proviso
contained in Section 3.5(b),  Interest Drawings under the Liquidity Facility and
withdrawals from the Cash Collateral Account will be distributed to the Trustee,
and the Trustee will distribute such Interest Drawings and withdrawals  promptly
to the  Securityholders in accordance with the provisions of this Indenture,  in
each case, notwithstanding Section 3.2 hereof.

     (l)    ASSIGNMENT OF LIQUIDITY FACILITY.  The Trustee agrees not to consent
to the assignment by the Liquidity  Provider of any of its rights or obligations
under the  Liquidity  Facility or any interest  therein,  unless (i) the Company
shall have  consented to such  assignment and (ii) each Rating Agency shall have
provided a Ratings  Confirmation  in respect  of such  assignment  and (iii) the
Policy Provider shall have consented to such assignment (which consent shall not
be unreasonably withheld or delayed);  PROVIDED,  that the Trustee shall consent
to such  assignment if the  conditions  in the  foregoing  clauses (i), (ii) and
(iii) are  satisfied,  and the  foregoing  is not  intended  to and shall not be
construed to limit the rights of the initial  Liquidity  Provider  under Section
3.5(e)(ii).

     (m)   NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of interest on
the  Securities  with funds drawn under the Liquidity  Facility or from the Cash

<PAGE>

Collateral Account shall not be deemed to discharge the Company's  obligation to
make such payment, which obligation shall continue in full force and effect.

     (n)   INTEREST  COVERAGE.  The interest  payable by the Liquidity  Provider
under the Liquidity Facility shall include interest accruing during the pendency
of  any  bankruptcy,  insolvency,  receivership  or  other  similar  proceeding,
regardless of whether allowed or allowable in such proceeding.

     Section 3.6    THE POLICY.

     (a)   INTEREST  DRAWINGS. If on any Distribution Date (other than the Final
Legal  Maturity  Date,  the  Election  Distribution  Date,  the Policy  Election
Distribution Date, the Non-Performance  Payment Date or a date on which a Policy
Drawing is to be made  pursuant  to  Section  3.6(b) of this  Indenture),  after
giving  effect  to  the  subordination  provisions  of  Section  3.2  and to the
application  of Prior  Funds,  the Trustee does not then have  sufficient  funds
available for the payment of all amounts due and owing in respect of accrued and
unpaid interest on the Securities at the Debt Rate (without giving effect to any
Acceleration  and  calculated  assuming  that  the  Company  will  not  cure the
nonpayment of interest) ("ACCRUED INTEREST"), then the Trustee (i) prior to 1:00
p.m. (New York City time) on such  Distribution  Date shall deliver a Notice for
Payment,  as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting  a Policy  Drawing  under the  Policy  (for  payment  into the Policy
Account)  in an amount  sufficient  to enable the  Trustee  to pay such  Accrued
Interest and (ii) upon receipt shall pay such amount from the Policy  Account to
the Securityholders in payment of such Accrued Interest.

         (b)   PROCEEDS  DEFICIENCY  DRAWING.  If on  any  Distribution  Date
(other than the Final Legal Maturity Date, the Election  Distribution  Date, the
Policy  Election   Distribution  Date  or  the  Non-Performance   Payment  Date)
established  by the Trustee by reason of its  receipt of a payment  constituting
the proceeds from the sale of Pledged Spare Parts  comprising all of the Pledged
Spare Parts  subject to the Lien of the  Security  Agreement at the time of such
sale, after giving effect to the subordination provisions of Section 3.2 and, if
such payment is received prior to a Policy Provider Election, to the application
of Prior Funds,  the Trustee does not then have  sufficient  funds available for
the payment in full of the then  outstanding  principal amount of the Securities
together with accrued and unpaid  interest  thereon at the Debt Rate  (excluding
any accrued and unpaid Premium or Break Amount and calculated  assuming that the
Company  will  not  cure  the   nonpayment  of  interest)   (collectively,   the
"OUTSTANDING  AMOUNT"),  then the Trustee (i) prior to 1:00 p.m.  (New York City
time) on such Distribution Date shall deliver a Notice for Payment,  as provided
in the Policy,  to the Policy Provider or its fiscal agent,  requesting a Policy
Drawing (the "PROCEEDS  DEFICIENCY  DRAWING") under the Policy (for payment into
the Policy  Account)  in an amount  sufficient  to enable the Trustee to pay the
Outstanding  Amount and (ii) upon receipt  shall pay such amount from the Policy
Account to the Securityholders in payment of the Outstanding Amount.

     (c)   NON-PERFORMANCE  DRAWING.  If a  Payment  Default  exists  under  the
Securities  (without  giving effect to any  Acceleration  or any payments by the

<PAGE>

Liquidity  Provider or the Policy  Provider)  for a period of eight  consecutive
Interest  Periods (such period,  the  "NON-PERFORMING  PERIOD")  (regardless  of
whether any proceeds  from the sale of any  Collateral  are  distributed  by the
Trustee during such period) and continues to exist on the Interest  Payment Date
on which such eighth  Interest  Period ends (or, if such  Interest  Payment Date
falls within the applicable period specified in the proviso to the definition of
"Non-Performing",  continues to exist on the Business Day immediately  following
such period (the "RELEVANT DATE")),  and on the 25th day following such Interest
Payment Date or, if applicable, the Relevant Date (or, if such 25th day is not a
Business Day, the next Business Day) (the "NON-PERFORMANCE  PAYMENT DATE") after
giving  effect  to  the  subordination  provisions  of  Section  3.2  and to the
application  of Prior  Funds,  the Trustee does not then have  sufficient  funds
available  for  the  payment  in  full  of  the  Outstanding  Amount  as of  the
Non-Performance Payment Date, then unless the Policy Provider shall have paid on
any day prior thereto the Outstanding  Amount as of such day pursuant to Section
3.6(b) or 3.6(e) of this Indenture,  the Trustee (i) prior to the 1:00 p.m. (New
York City time) on the  Non-Performance  Payment Date shall deliver a Notice for
Payment,  as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting a Policy  Drawing (the  "NON-PERFORMANCE  DRAWING")  under the Policy
(for  payment  into the Policy  Account) in an amount  sufficient  to enable the
Trustee to pay such  Outstanding  Amount,  and (ii) upon receipt  shall pay such
amount  from the  Policy  Account  to the  Securityholders  in  payment  of such
Outstanding  Amount.  If the  Non-Performance  Payment Date is established,  the
Trustee shall send to the Securityholders  Written Notice thereof promptly,  but
no later than three Business Days,  after the occurrence of the Interest Payment
Date on which the  Non-Performing  Period ends or, if  applicable,  the Relevant
Date.

     Notwithstanding the foregoing, if, and only if, the Non-Performance Payment
Date is scheduled to occur prior to the Final Scheduled Payment Date, the Policy
Provider has the right,  by Written Notice to the Trustee given at least 10 days
prior to the Non-Performance Payment Date, so long as no Policy Provider Default
shall have occurred and be continuing, to elect (the "POLICY PROVIDER ELECTION")
not to pay  the  deficiency  necessary  to pay  the  Outstanding  Amount  on the
Non-Performance  Payment Date pursuant to the preceding paragraph, in which case
the  Policy  Provider  shall  (i) pay on the  Non-Performance  Payment  Date any
shortfall in funds required to pay accrued  interest on the Securities  (without
regard to Acceleration and after giving effect to the  subordination  provisions
of Section 3.2 and to the application of Prior Funds), (ii) thereafter,  on each
Distribution Date until the establishment of an Election  Distribution Date or a
Policy  Election  Distribution  Date,  pay an  amount  equal  to  the  scheduled
principal on the Final  Scheduled  Payment Date and interest  (without regard to
any Acceleration) payable on the Securities on such Distribution Date, and (iii)
(A) on any  Business Day elected by the Policy  Provider  upon at least 20 days'
Written  Notice to the Trustee,  direct the Trustee (such Business Day a "POLICY
ELECTION  DISTRIBUTION  DATE")  or (B)  following  the  occurrence  of a  Policy
Provider Default,  on any Business Day specified by the Trustee upon at least 20
days'  Written  Notice to the Policy  Provider  (such  Business Day an "ELECTION
DISTRIBUTION  DATE") permit the Trustee,  in each case, to make a Policy Drawing
under the Policy for an amount equal to the Outstanding Amount as of such Policy
Election  Distribution Date or Election  Distribution  Date, as applicable.  The
Trustee  shall  (i)  prior to 1:00  p.m.  (New  York  City  time)  on each  such

<PAGE>

Distribution  Date  referred to in the  preceding  sentence  deliver a Notice of
Payment,  as provided in the Policy,  to the Policy Provider or its fiscal agent
requesting a Policy Drawing under the Policy for payment into the Policy Account
to pay the amount  then due under this  paragraph  and (ii) upon  receipt of the
proceeds  thereof  pay  the  amount  thereof  from  the  Policy  Account  to the
Securityholders in payment of such amount.

     (d)   LIQUIDITY  PROVIDER DRAWING. On or after the Business Day which is 24
months from the  earliest to occur of (i) the date on which an Interest  Drawing
shall have been made under the Liquidity Facility and remains  unreimbursed from
payments made by the Company at the end of such 24-month  period,  (ii) the date
on which any Downgrade Drawing,  Non-Extension Drawing or Final Drawing that was
deposited  into the Cash  Collateral  Account shall have been applied to pay any
scheduled  payment of interest on the Securities and remains  unreimbursed  from
payments  made by the Company at the end of such  24-month  period and (iii) the
date on which all of the Securities  have been  accelerated  and such Securities
remain unpaid by the Company at the end of such  24-month  period (in each case,
disregarding  any  reimbursements  from payments by the Policy Provider and from
proceeds  from the sale of  Collateral  distributed  by the Trustee  during such
24-month  period) (such  Business  Day, the  "LIQUIDITY  PROVIDER  REIMBURSEMENT
DATE"),  the  Policy  Provider  (upon at least 20 days'  prior  notice  from the
Trustee  on behalf  of the  Liquidity  Provider,  which  notice  can be given in
advance of the expiry of such  twenty-four  month  period)  will be  required to
honor  drawings  under the  Policy  by the  Trustee  on behalf of the  Liquidity
Provider in an amount  sufficient to repay all  outstanding  drawings  under the
Liquidity  Facility,  together with interest  accrued thereon in accordance with
the Liquidity  Facility.  The Liquidity  Provider hereby appoints the Trustee as
its agent for  purposes  of making the  drawing  pursuant to this clause (d) and
clause  (vii) of the  definition  of  "Deficiency  Amount" in the Policy and the
Trustee hereby accepts such  appointment  and agrees to make such drawing at the
direction  of the  Liquidity  Provider  and to promptly  distribute  all amounts
received in respect of such drawing to the Liquidity Provider.

     (e)   FINAL  POLICY  DRAWING.  If on the Final Legal Maturity  Date,  after
giving  effect  to  the  subordination  provisions  of  Section  3.2  and to the
application  of Prior Funds,  unless the Policy  Provider shall have paid on any
day prior  thereto  the  Outstanding  Amount as of such day  pursuant to Section
3.6(b) or 3.6(c) of this  Indenture,  the Trustee does not then have  sufficient
funds available on such date for the payment in full of the  Outstanding  Amount
as of such date,  then the Trustee  shall (i) prior to 1:00 p.m.  (New York City
time) on such date deliver a Notice for Payment,  as provided in the Policy,  to
the Policy  Provider or its fiscal agent,  requesting a Policy Drawing under the
Policy (for payment into the Policy  Account) in an amount  sufficient to enable
the  Trustee to pay such  Outstanding  Amount,  and (ii) upon  receipt  pay such
amount from the Policy Account to Securityholders in payment of such amount.

     (f)   AVOIDANCE  DRAWINGS.  If at any time the  Trustee  shall have  actual
knowledge of the issuance of any Final Order,  the Trustee  shall  promptly give
notice thereof to the Liquidity  Provider and the Policy  Provider.  The Trustee
shall thereupon  calculate the relevant Avoided Payments resulting therefrom and
shall promptly: (a) send to the Securityholders a Written Notice of such amounts

<PAGE>

and (b) prior to the expiration of the Policy, deliver to the Policy Provider or
its fiscal agent a Notice of Avoided  Payment under the Policy,  together with a
copy  of  the  documentation  required  by  the  Policy  with  respect  thereto,
requesting  a  Policy   Drawing   thereunder   (for  payment  to  the  receiver,
conservator,  debtor-in-possession,  trustee in  bankruptcy  or the Trustee (for
deposit  into the Policy  Account),  as  applicable)  in an amount  equal to the
amount of  relevant  Avoided  Payment.  To the extent  that any  portion of such
Avoided Payment is to be paid to the Trustee, such Written Notice shall also set
the date for the  distribution  of such  portion of the  proceeds of such Policy
Drawing which date shall constitute a Distribution Date and shall be the earlier
of three  Business  Days after the date of the  expiration of the Policy and the
Business  Day that  immediately  follows  the 25th  day  after  the date of such
Written  Notice.  Upon  receipt,  the  Trustee  shall  pay the  proceeds  of the
specified  Policy  Drawing  under  the  Policy  to  the  Securityholders  or the
Liquidity Provider, as applicable on such Distribution Date.

     (g)   APPLICATION  OF  POLICY  DRAWINGS.  Notwithstanding  anything  to the
contrary contained in this Indenture (including, without limitation, Section 3.2
hereof),  except as provided in Section 3.6(d) hereof,  all payments received by
the Trustee in respect of a Policy Drawing (including,  without limitation, that
portion,  if any, of the  proceeds of a Policy  Drawing for any Avoided  Payment
that  is to be  paid  to the  Trustee  and  not to  any  receiver,  conservator,
debtor-in-possession  or trustee in  bankruptcy as provided in the Policy) shall
be promptly paid from the Policy Account to the Securityholders.

     (h)   LIMITATION  TO  OUTSTANDING  PRINCIPAL  AMOUNT;  INTEREST  ON  POLICY
DRAWINGS.  Notwithstanding  anything to the contrary in this Section 3.6, except
as provided  in Section  3.6(f),  at no time shall the  Trustee  make any Policy
Drawing  under the Policy  under  clause (b),  (c) or (e) of this Section 3.6 in
excess of the then outstanding  principal amount of the Securities,  and accrued
and unpaid interest at the Debt Rate.  Nothing contained in this Indenture shall
alter or amend the liabilities,  obligations,  requirements or procedures of the
Policy Provider under the Policy, and the Policy Provider shall not be obligated
to  make  payment  except  at the  times  and  in  the  amounts  and  under  the
circumstances  expressly  set forth in the  Policy.  Except for Policy  Provider
Interest  Obligations,  no interest  shall  accrue on any Policy  Drawing or any
other payment made by the Policy Provider.

     (i)   RESUBMISSION  OF NOTICE FOR  PAYMENT.  If the Policy  Provider at any
time informs the Trustee in accordance with the Policy that a Notice for Payment
or  Notice  of  Avoided  Payment  submitted  by the  Trustee  does  not meet the
requirements  of the Policy,  the Trustee  shall,  as promptly as possible after
being so informed,  submit to the Policy  Provider an amended and revised Notice
for Payment or Notice of Avoided  Payment,  as the case may be, and shall pay to
Securityholders  out of the Policy Account the amount received  pursuant to such
amended or revised Notice for Payment or Notice of Avoided Payment,  as the case
may be, when received.

     (j)   NO DISCHARGE OF THE COMPANY'S  OBLIGATIONS.  The payment of principal
of or interest on the Securities  with funds drawn under the Policy shall not be
deemed  to  discharge  the  Company's  obligation  to make such  payment,  which
obligation shall continue in full force and effect.

<PAGE>

     (k)   INTEREST  COVERAGE. The interest payable by the Policy Provider under
the  Policy  shall  include  interest   accruing  during  the  pendency  of  any
bankruptcy, insolvency,  receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding.

     Section 3.7    DESIGNATED REPRESENTATIVES.

     (a)   With the delivery of this Indenture, the Trustee shall furnish to the
Liquidity Provider and the Policy Provider, and from time to time thereafter may
furnish to the  Liquidity  Provider and the Policy  Provider,  at the  Trustee's
discretion,  or upon the Liquidity  Provider's or the Policy Provider's  request
(which request shall not be made more than one time in any 12-month  period),  a
certificate (a "TRUSTEE INCUMBENCY CERTIFICATE") of a Responsible Officer of the
Trustee certifying as to the incumbency and specimen  signatures of the officers
of the Trustee and the  attorney-in-fact and agents of the Trustee (the "TRUSTEE
REPRESENTATIVES")  authorized  to give Written  Notices on behalf of the Trustee
hereunder.  Until the  Liquidity  Provider  and the Policy  Provider  receives a
subsequent Trustee Incumbency  Certificate,  it shall be entitled to rely on the
last Trustee Incumbency Certificate delivered to it hereunder.

     (b)   With the delivery of this Indenture,  the Liquidity  Provider and the
Policy  Provider shall furnish to the Trustee,  and from time to time thereafter
may furnish to the Trustee,  at the Liquidity  Provider's  or Policy  Provider's
discretion,  or upon the Trustee's request (which request shall not be made more
than  one  time in any  12-month  period),  a  certificate  (each,  a  "PROVIDER
INCUMBENCY  CERTIFICATE") of any Responsible  Officer of such Liquidity Provider
or Policy  Provider  certifying as to the incumbency and specimen  signatures of
any officer, attorney-in-fact,  agent or other designated representative of such
Liquidity   Provider  or  Policy   Provider   (in  each  case,   the   "PROVIDER
REPRESENTATIVES" and, together with the Trustee Representatives, the "DESIGNATED
REPRESENTATIVES")  authorized to give Written Notices on behalf of the Liquidity
Provider or Policy Provider  hereunder.  Until the Trustee receives a subsequent
Provider  Incumbency  Certificate,  it  shall  be  entitled  to rely on the last
Provider  Incumbency  Certificate  delivered to it  hereunder  by the  Liquidity
Provider or the Policy Provider.

     Section 3.8    CONTROLLING PARTY.

     (a)   Subject to the rights of the Holders  hereunder  (including,  without
limitation, Sections 7.4, 7.6, 7.7 and 10.2) and the requirements of the TIA, in
taking,  or refraining  from taking,  any action under this  Indenture,  whether
before or after the  occurrence  of an Event of  Default,  the  Trustee  will be
directed by the Controlling Party. In particular,  in taking, or refraining from
taking,  any action  under this  Indenture  pursuant to the exercise of remedies
hereunder as provided in Article 7 and under the Security  Agreement pursuant to
the exercise of remedies  thereunder as provided in Article 6 thereof (including
foreclosing the Lien on the Collateral),  the Trustee and the Collateral  Agents
will be directed by the Controlling  Party. The provisions of Section  316(a)(1)
of the TIA and,  except  during any period  that the  Required  Holders  are the
Controlling  Party, the provisions of Section 315(d)(3) of the TIA are expressly
excluded from this Indenture.

<PAGE>

     (b)   The Person who shall be the  "CONTROLLING  PARTY" shall be the Policy
Provider  (or,  if any  Policy  Provider  Default  shall  have  occurred  and be
continuing, the Required Holders).

     The  Trustee  shall  give  Written  Notice to the Policy  Provider  and the
Liquidity  Provider  promptly  upon a change in the identity of the  Controlling
Party. Each of the Securityholders,  by their acceptance of the Securities,  the
Policy  Provider,  by  entering  into the  Policy  Provider  Agreement,  and the
Liquidity Provider, by entering into the Liquidity Facility,  has agreed that it
shall not exercise any of the rights of the Controlling Party at such time as it
is not the Controlling Party hereunder;  PROVIDED,  HOWEVER, that nothing herein
contained  shall prevent or prohibit any  Non-Controlling  Party from exercising
such  rights as shall be  specifically  granted  to such  Non-Controlling  Party
hereunder and under the other Operative Documents or the Support Documents.

     (c)   Notwithstanding  the  foregoing,  if at any time after the  Liquidity
Provider  Reimbursement Date a Policy Provider Default attributable to a failure
to make a payment  referred  to in Section  3.6(d)  shall have  occurred  and be
continuing,  the Liquidity  Provider (so long as the Liquidity  Provider has not
defaulted in its  obligation to make any Drawing  under the Liquidity  Facility)
shall have the right to elect,  by Written  Notice to the Trustee and the Policy
Provider,  to  become  the  Controlling  Party  hereunder  at any time  from and
including the Liquidity Provider Reimbursement Date; PROVIDED,  HOWEVER, that if
the Policy Provider  subsequently pays to the Liquidity Provider all outstanding
Drawings,  together with accrued interest thereon, under the Liquidity Facility,
and no other Policy Provider  Default has occurred and is continuing,  then, the
Policy  Provider  rather than the Liquidity  Provider  shall be the  Controlling
Party, subject to Section 3.8(b).

     (d)   The  Controlling  Party  shall not be entitled to require or obligate
any  Non-Controlling  Party to provide funds  necessary to exercise any right or
remedy hereunder.

     Section 3.9    COMPANY'S PAYMENT OBLIGATIONS.

     The Company  agrees to pay to the Trustee for  distribution  in  accordance
with  Section  3.2  hereof:  (a)(i) an amount  equal to the fees  payable to the
Liquidity  Provider under Section 2.03 of the Liquidity Facility and the related
Fee Letter;  (ii) the amount equal to interest on any Downgrade  Advance  (other
than any Applied Downgrade  Advance) payable under Section 3.07 of the Liquidity
Facility minus Investment Earnings from such Downgrade Advance; (iii) the amount
equal  to  interest  on  any  Non-Extension  Advance  (other  than  any  Applied
Non-Extension  Advance)  payable under  Section 3.07 of the  Liquidity  Facility
minus Investment Earnings from such Non-Extension  Advance;  (iv) if any payment
default shall have  occurred and be  continuing  with respect to interest on any
Securities, the excess, if any, of (1) an amount equal to interest on any Unpaid
Advance,  Applied  Downgrade  Advance or Applied  Non-Extension  Advance payable
under  Section 3.07 of the Liquidity  Facility  (or, if the Policy  Provider has
made a payment  equivalent to such an Advance,  as would have been payable under
Section 3.07 of the Liquidity  Facility had such Advance been made) over (2) the
sum of Investment Earnings from any Final Advance plus any amount of interest at
the  Payment  Due Rate  actually  payable  (whether  or not in fact paid) by the

<PAGE>

Company on the overdue scheduled  interest on the Securities in respect of which
such Unpaid Advance,  Applied Downgrade Advance or Applied Non-Extension Advance
was made by the Liquidity  Provider (or an equivalent payment made by the Policy
Provider);  (v) any other amounts owed to the Liquidity  Provider by the Trustee
as borrower under the Liquidity  Facility other than amounts due as repayment of
advances  thereunder  or as  interest  on such  advances,  except to the  extent
payable  pursuant to clause (ii),  (iii) or (iv) above, and (vi) an amount equal
to the fees payable to the Policy  Provider under Section  3.02(d) of the Policy
Provider  Agreement and all other compensation and reimbursement of expenses and
disbursements  (but excluding  reimbursement of advances)  payable to the Policy
Provider  under the Policy  Provider  Agreement  (but excluding all such amounts
actually paid by the Company to the Policy  Provider  under the Policy  Provider
Agreement or the Policy Fee Letter).  The Trustee shall  immediately  deposit in
the Collection  Account all payments from the Company received  pursuant to this
Section.

     Section 3.10.  EXECUTION OF SUPPORT DOCUMENTS.

     The  Trustee  is  authorized   and   directed,   for  the  benefit  of  the
Securityholders,  to enter into the Support  Documents on the Closing Date.  The
Trustee shall not amend or supplement,  or grant any waiver with respect to, any
Support Document, except pursuant to the provisions of Article 10.


                                   ARTICLE 4.

                                  REDEMPTIONS

     Section 4.1    OPTIONAL REDEMPTION.

     The  Securities  may be  redeemed  at any  time in  whole or (so long as no
Payment  Default  has  occurred  and is  continuing)  in part  (in any  integral
multiple  of $1,000) by the  Company at its sole  option at a  redemption  price
equal to the sum of 100% of the principal amount of, accrued and unpaid interest
on, and Premium, if any, and Break Amount, if any, with respect to, the redeemed
Securities to and including the Redemption Date.

     Section 4.2    REDEMPTION NOTICE TO TRUSTEE.

     If the Company  elects to redeem  Securities as provided in Section 4.1, it
shall  notify the  Trustee  of the  Redemption  Date,  the  principal  amount of
Securities to be redeemed and all other information  needed for the notice to be
given by the Trustee pursuant to Section 4.4.

     The Company shall give the notice provided for in this Section at least ten
(10) days (unless a shorter notice shall be  satisfactory  to the Trustee) prior
to the date the Trustee must give notice pursuant to Section 4.4.

<PAGE>

     Section 4.3    SELECTION OF SECURITIES TO BE REDEEMED.

     If less than all the  Securities  are to be  redeemed,  the  Trustee  shall
select the  Securities to be redeemed on either a PRO RATA basis or by lot or by
any other equitable manner determined by the Trustee in its sole discretion. The
Trustee shall make the selection  from  Securities  outstanding  not  previously
called for  redemption.  The Trustee may select for  redemption  portions of the
principal of Securities that have denominations  larger than $1,000.  Securities
and portions of them it selects shall be in amounts of $1,000 or whole multiples
of $1,000.  Provisions of this  Indenture  that apply to  Securities  called for
redemption  also apply to  portions of  Securities  called for  redemption,  and
references  to  such  Securities  shall  also  refer  to such  portions  of such
Securities.

     Section 4.4    NOTICE OF REDEMPTION.

     At least 15 days but not more than 60 days before a  Redemption  Date,  the
Trustee  shall mail by  first-class  mail a notice of  redemption to each Holder
whose Securities are to be redeemed.

     The notice shall identify the  Securities and the principal  amount thereof
to be redeemed and shall state:

           (1) the Redemption Date;

           (2) the redemption  price (including the amount of accrued and unpaid
     interest,  and  Premium,  if any, to be paid on the  Securities  called for
     redemption);

           (3) if any  Security is being  redeemed  in part,  the portion of the
     principal  amount of such  Security  to be  redeemed  and  that,  after the
     Redemption  Date,  upon  surrender  of such  Security,  a new  Security  or
     Securities  in  principal  amount equal to the  unredeemed  portion will be
     issued;

           (4) the name and address of the Paying Agent;

           (5) that Securities  called for redemption must be surrendered to the
     Paying Agent to collect the redemption price; and

           (6) that,  unless the Company fails to make the  redemption  payment,
     interest on the Securities to be redeemed ceases to accrue on and after the
     Redemption  Date  and the  only  remaining  right  of the  Holders  of such
     Securities is to receive  payment of the  redemption  price  (including the
     amount of accrued and unpaid interest,  and Premium,  if any, to be paid on
     the Securities called for redemption) upon surrender to the Paying Agent of
     the Securities.

     At the Company's  request,  the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.

<PAGE>

     Section 4.5    EFFECT OF NOTICE OF REDEMPTION.

     Once a notice of redemption  is mailed,  Securities  called for  redemption
become due and payable on the Redemption  Date at the  redemption  price and, on
and after such date  (unless the  Company  shall fail to make the payment of the
redemption price), such Securities shall cease to bear interest.  Upon surrender
to the Paying Agent,  such  Securities  shall be paid at the  redemption  price.
Notwithstanding  the foregoing,  if the Trustee gives notice of redemption,  but
the  Company  fails  to pay  when  due all  amounts  necessary  to  effect  such
redemption,  such redemption  shall be deemed revoked and no amount shall be due
as a result of notice of redemption having been given.

     Section 4.6    DEPOSIT OF REDEMPTION PRICE.

     On or before 12:30 p.m.,  Eastern Time, on the Redemption Date, the Company
shall deposit with the Paying Agent money in funds immediately  available on the
Redemption Date sufficient to pay the principal  amount of and accrued  interest
on and  Premium,  if any,  and  Break  Amount,  if any,  with  respect  to,  all
Securities to be redeemed on that date,  PROVIDED that the Company's  failure to
make  such  deposit  shall  result  in the  revocation  of  such  redemption  in
accordance with Section 4.5.

     Section 4.7    SECURITIES REDEEMED IN PART.

     Upon  surrender of a Security  that is redeemed in part,  the Trustee shall
authenticate  for the Holder a new  Security  equal in  principal  amount of the
unredeemed portion of the Security surrendered.


                                   ARTICLE 5.

                                   COVENANTS

     Section 5.1    PAYMENT OF SECURITIES.

     The Company shall pay the principal  of,  interest on and Premium,  if any,
and Break Amount,  if any,  with respect to, the  Securities on the dates and in
the manner provided in this Indenture and in the  Securities.  The Company will,
on or before each due date for the payment of the  principal  of,  interest  on,
Premium,  if any,  or Break  Amount,  if any,  due under any of the  Securities,
deposit with the Trustee  payments  sufficient to pay the  principal,  interest,
Premium, if any, or Break Amount, if any, so becoming due, and the Trustee shall
immediately deposit all such payments in the Collection Account.

     The principal of, interest on, Premium,  if any, Break Amount,  if any, and
other amounts due under any of the  Securities  or hereunder  will be payable in
Dollars by wire  transfer of  immediately  available  funds not later than 12:30
p.m.,  New York time, on the due date of payment to the Trustee at the Corporate
Trust Office for  distribution in the manner provided  herein.  The Trustee will
make  funds  deposited  in the  Collection  Account on a  Distribution  Date and
required to be distributed to Securityholders  pursuant to Section 3.2 available

<PAGE>

to the Paying Agent for such  distribution.  The Paying  Agent shall  distribute
amounts payable to each Securityholder by check mailed to such Securityholder at
its address  appearing in the  Register,  except that with respect to Securities
registered on the  applicable  Record Date in the name of a Clearing  Agency (or
its nominee),  such  distribution  shall be made by wire transfer in immediately
available  funds to the  account  designated  by such  Clearing  Agency (or such
nominee).  The Company shall not have any responsibility for the distribution of
such payments to any  Securityholder.  Any payment made hereunder  shall be made
without any presentment or surrender of any Securities, except that, in the case
of the  final  payment  in  respect  of any  Security,  such  Security  shall be
surrendered  to the  Paying  Agent  for  cancellation  against  receipt  of such
payment.

     Section 5.2    MAINTENANCE OF OFFICE OR AGENCY.

     The Company  shall  maintain in the Borough of  Manhattan,  The City of New
York, an office or agency where  Securities may be surrendered for  registration
of transfer or exchange or for  presentation  for payment and where  notices and
demands to or upon the Company in respect of the  Securities  and this Indenture
may be served.  At the request of the  Company,  said office or agency may be an
office of the Trustee or an agent appointed by the Trustee for such purpose. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location,  of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address  thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.

     The Company may also from time to time  designate one or more other offices
or agencies where the Securities may be presented or surrendered  for any or all
such  purposes and may from time to time rescind  such  designations;  PROVIDED,
HOWEVER,  that no such designation or rescission shall in any manner relieve the
Company of its  obligation  to  maintain  an office or agency in the  Borough of
Manhattan, The City of New York, for such purposes. The Company will give prompt
written  notice to the Trustee of any such  designation or rescission and of any
change in the  location of any such other office or agency.  The Company  hereby
designates  the  Corporate  Trust  Office  as one such  office  or agency of the
Company in accordance with Section 2.8.

     Section 5.3    CORPORATE EXISTENCE.

     Except as otherwise  provided in Section 5.4, the Company shall do or cause
to be done all things  necessary  to preserve  and keep in full force and effect
its corporate existence and shall at all times remain a U.S. Air Carrier.

     Section 5.4    COMPANY NOT TO  CONSOLIDATE,  MERGE,  CONVEY OR TRANSFER
EXCEPT UNDER CERTAIN CONDITIONS.

     (a)   The  Company  shall not  consolidate  with, or merge into, or convey,
transfer or lease all or substantially all of its assets to any Person unless:

<PAGE>

           (i) the  resulting,  surviving,  transferee  or  lessee  Person  (the
     "SUCCESSOR  COMPANY")  shall be a Person  organized and existing  under the
     laws of the U.S.,  any state thereof or the District of Columbia and a U.S.
     Air Carrier,  and the  Successor  Company  shall  expressly  assume,  by an
     indenture  supplemental  hereto,  executed and delivered to the Trustee, in
     form satisfactory to the Trustee,  all the obligations of the Company under
     the  Securities,  the  Indenture,  the other  Operative  Documents  and the
     Support Documents to which the Company is a party;

           (ii) the Company  shall have  delivered  to the Trustee an  Officers'
     Certificate  and  an  Opinion  of  Counsel,  each  stating  that  (i)  such
     consolidation,  merger, conveyance, transfer or lease and such supplemental
     indenture  comply with the terms of this Indenture and (ii) this Indenture,
     each other Operative  Document and the Securities  constitute the valid and
     legally binding obligations of the Successor Company;

           (iii)  the  Company  or  the  Successor  Company  complies  with  the
     requirements of Section 4.04(c) of the Security Agreement; and

           (iv) immediately after giving effect to such transaction, no Event of
     Default shall have occurred and be continuing.

     (b)   The Successor Company shall be the successor to the Company and shall
succeed to, and be  substituted  for,  and be bound by and  obligated to pay the
obligations of, and may exercise every right and power of, the Company under the
Indenture,  each  other  Operative  Document,  the  Securities  and the  Support
Documents to which the Company is a party,  but the  predecessor  Company in the
case  of a  conveyance,  transfer  or  lease  shall  not be  released  from  the
obligation to pay the principal of, interest on, and Premium,  if any, and Break
Amount, if any, with respect to, the Securities and any other amounts payable by
the Company hereunder.

     (c)   The Successor Company may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such  succession  any or all
of the  Securities  issuable  hereunder  which  theretofore  shall not have been
signed by the Company and  delivered to the  Trustee;  and upon the order of the
Successor  Company,  instead  of the  Company,  and  subject  to all the  terms,
conditions  and  limitations  in this  Indenture  prescribed,  the Trustee shall
authenticate  and shall deliver any Securities  which previously shall have been
signed  and  delivered  by the  officers  of the  Company  to  the  Trustee  for
authentication, and any Securities which such Successor Company thereafter shall
cause to be signed and  delivered  to the Trustee for that  purpose.  All of the
Securities  so issued shall in all respects have the same legal rank and benefit
under this  Indenture  as though all of such  Securities  had been issued at the
date of the execution hereof.

     (d)   In case of any such consolidation, merger, sale, conveyance, transfer
or lease such changes in phraseology and form (but not in substance) may be made
in the Securities thereafter to be issued as may be appropriate.

<PAGE>

     Section 5.5    REPORTS BY THE COMPANY.

     (a)   The  Company  shall file with the  Trustee,  within 15 days after the
Company is required to file the same with the SEC,  copies of the annual reports
and of the information, documents, and other reports (or copies of such portions
of any of the  foregoing  as the  SEC  may  from  time  to  time  by  rules  and
regulations  prescribe)  that the  Company  may be required to file with the SEC
pursuant to Section 13 or Section  15(d) of the Exchange Act; or, if the Company
is not required to file information, documents, or reports pursuant to either of
said  sections,  then to file with the Trustee and the SEC, in  accordance  with
rules  and  regulations  prescribed  from  time to time by the SEC,  such of the
supplementary  and  periodic  information,  documents,  and reports  that may be
required  pursuant  to Section 13 of the  Exchange  Act in respect of a security
listed and  registered  on a national  securities  exchange as may be prescribed
from time to time in such rules and regulations.

     (b)   So  long as required by the TIA,  the  Company  shall  deliver to the
Trustee,  within 120 days after the end of each  calendar  year,  a  certificate
signed by the Company's principal executive officer, principal financial officer
or principal  accounting officer (which certificate need not comply with Section
12.4  or  12.5)  stating  that to his or her  knowledge  during  such  preceding
calendar  year no Default or Event of Default has occurred  (or, if a Default or
Event of Default shall have occurred,  describing all such Defaults or Events of
Default of which he or she may have knowledge).


                                   ARTICLE 6.

                                INDEMNIFICATION

     Section 6.1    GENERAL INDEMNITY.

     (a)   The Company shall indemnify,  protect,  defend and hold harmless each
Indemnitee  from,  against and in respect  of, and shall pay on a net  after-tax
basis, any and all Expenses of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against any Indemnitee, relating to, resulting from,
or arising out of or in connection with, any one or more of the following:

           (i)  The  Operative  Documents  or  the  Support  Documents,  or  the
     enforcement  of any of the terms of any of the  Operative  Documents or the
     Support Documents;

           (ii) The Spare Parts Collateral,  including, without limitation, with
     respect  thereto,  (A)  the  manufacture,   design,  purchase,  acceptance,
     nonacceptance  or  rejection,   ownership,  delivery,  nondelivery,  lease,
     sublease, assignment,  possession, use or non-use, operation,  maintenance,
     testing, repair, overhaul, condition, alteration,  modification,  addition,
     improvement,    storage,   airworthiness,    replacement,   repair,   sale,
     substitution,  return, abandonment,  redelivery or other disposition of any
     Spare Parts Collateral,  (B) any claim or penalty arising out of violations
     of  applicable  Laws by the Company  (or any  Permitted  Lessee),  (C) tort

<PAGE>

     liability,  whether or not arising out of the  negligence of any Indemnitee
     (whether  active,  passive or  imputed),  (D) death or  property  damage of
     passengers,  shippers  or  others,  (E)  environmental  control,  noise  or
     pollution and (F) any Liens in respect of the Spare Parts Collateral;

           (iii) The offer,  sale, or delivery of any Securities or any interest
     therein or represented thereby; and

           (iv) Any breach of or failure  to  perform or  observe,  or any other
     noncompliance  with,  any covenant or agreement or other  obligation  to be
     performed by the Company under any Operative  Document or Support  Document
     to which it is party or the  falsity of any  representation  or warranty of
     the Company in any  Operative  Document or Support  Document to which it is
     party.

     (b)   Notwithstanding  anything  contained in Section  6.1(a),  the Company
shall not be  required  to  indemnify,  protect,  defend and hold  harmless  any
Indemnitee  pursuant  to  Section  6.1(a)  in  respect  of any  Expense  of such
Indemnitee:

           (i) For any Taxes or a loss of Tax benefit;

           (ii) Except to the extent  attributable  to acts or events  occurring
     prior  thereto,  acts or events  (other than acts or events  related to the
     performance by the Company of its obligations  pursuant to the terms of the
     Operative  Documents or the Support  Documents to which it is a party) that
     occur after the Indenture is required to be  terminated in accordance  with
     Section 9.1 of this Indenture;  PROVIDED,  that nothing in this clause (ii)
     shall be deemed to exclude or limit any claim that any  Indemnitee may have
     under  applicable  Law by reason of an Event of Default or for damages from
     the  Company  for  breach  of  the  Company's  covenants  contained  in the
     Operative  Documents or the Support  Documents to which it is a party or to
     release  the  Company  from  any of its  obligations  under  the  Operative
     Documents or the Support  Documents  to which it is a party that  expressly
     provide for performance after termination of the Indenture;

           (iii)  To the  extent  attributable  to any  transfer  (voluntary  or
     involuntary) by or on behalf of such  Indemnitee or any related  Indemnitee
     of any Security or interest therein;

           (iv) To the extent  attributable  to the gross  negligence or willful
     misconduct of such Indemnitee or any related  Indemnitee (as defined below)
     (other than gross negligence or willful  misconduct  imputed to such person
     by reason of its interest in the Spare Parts  Collateral  or any  Operative
     Document);

           (v) To the extent  attributable to the incorrectness or breach of any
     representation  or warranty of such  Indemnitee  or any related  Indemnitee
     contained  in or made  pursuant  to any  Operative  Document or any Support
     Document;

<PAGE>

           (vi) To the extent  attributable to the failure by such Indemnitee or
     any related  Indemnitee  to perform or observe any  agreement,  covenant or
     condition on its part to be performed or observed in any Operative Document
     or any Support Document;

           (vii)  To the  extent  attributable  to the  offer  or  sale  by such
     Indemnitee  or any related  Indemnitee  of any  interest in the Spare Parts
     Collateral,  any  Security,  or any similar  interest,  in violation of the
     Securities Act or other  applicable  federal,  state or foreign  securities
     Laws (other than any thereof caused by acts or omissions of the Company);

           (viii) (x) With  respect to any  Indemnitee  (other than the Trustee,
     any Agent or any  Collateral  Agent),  to the  extent  attributable  to the
     failure of the Trustee,  any Agent or any  Collateral  Agent to  distribute
     funds received and  distributable by it in accordance with the Indenture or
     a  Collateral  Agreement,  as the case may be, or (y) with  respect  to the
     Trustee,  any Agent or any Collateral Agent, to the extent  attributable to
     the  negligence  or willful  misconduct  of the  Trustee,  any Agent or any
     Collateral Agent in the distribution of funds received and distributable by
     it in accordance with the Indenture or a Collateral Agreement,  as the case
     may be;

           (ix) Other than during the  continuation  of an Event of Default,  to
     the extent  attributable to the  authorization  or giving or withholding of
     any future amendments, supplements, waivers or consents with respect to any
     Operative  Document  or  Support  Document  other  than  such as have  been
     requested  by the  Company or as are  required  by or made  pursuant to the
     terms  of  the  Operative  Documents  or  Support  Documents  (unless  such
     requirement  results from the actions of an  Indemnitee  not required by or
     made pursuant to the Operative Documents or the Support Documents);

           (x) To the extent  attributable  to any amount  which any  Indemnitee
     expressly  agrees to pay or such Indemnitee  expressly  agrees shall not be
     paid by or be reimbursed by the Company;

           (xi) To the extent  that it is an  ordinary  and usual  operating  or
     overhead expense;

           (xii) For any Lien  attributable  to such  Indemnitee  or any related
     Indemnitee;

           (xiii) If another  provision  of an  Operative  Document or a Support
     Document specifies the extent of the Company's responsibility or obligation
     with respect to such Expense, to the extent arising from other than failure
     of the Company to comply with such specified  responsibility or obligation;
     or

           (xiv) To the extent incurred by or asserted  against an Indemnitee as
     a result of any "prohibited transaction", within the meaning of Section 406
     of ERISA or Section 4975(c)(1) of the Code.

<PAGE>

     For purposes of this Section 6.1, a Person shall be  considered a "related"
Indemnitee  with  respect to an  Indemnitee  if such Person is an  Affiliate  or
employer of such Indemnitee, a director, officer, employee, agent, or servant of
such  Indemnitee or any such  Affiliate or a successor or permitted  assignee of
any of the foregoing.

     Section 6.2    SEPARATE AGREEMENT.

     This  Article 6  constitutes  a  separate  agreement  with  respect to each
Indemnitee and is enforceable directly by each such Indemnitee.

     Section 6.3    NOTICE.

     If a claim for any Expense that an Indemnitee shall be indemnified  against
under this Article 6 is made, such  Indemnitee  shall give prompt written notice
thereof  to the  Company.  Notwithstanding  the  foregoing,  the  failure of any
Indemnitee  to notify the Company as provided in this Section 6.3, or in Section
6.4, shall not release the Company from any of its obligations to indemnify such
Indemnitee  hereunder,  except to the  extent  that such  failure  results in an
additional  Expense to the  Company  (in which  event the  Company  shall not be
responsible  for such  additional  expense) or materially  impairs the Company's
ability to contest such claim.

     Section 6.4    NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS.

     (a)   In case any action,  suit or proceeding  shall be brought against any
Indemnitee  for which the  Company is  responsible  under  this  Article 6, such
Indemnitee shall notify the Company of the commencement  thereof and the Company
may,  at its  expense,  participate  in and to the  extent  that it  shall  wish
(subject to the provisions of the following  paragraph),  assume and control the
defense thereof and, subject to Section 6.4(c), settle or compromise the same.

     (b)   The  Company or its insurer(s)  shall have the right, at its or their
expense,  to investigate or, if the Company or its insurer(s) shall agree not to
dispute  liability  to the  Indemnitee  giving  notice of such  action,  suit or
proceeding  under this  Section 6.4 for  indemnification  hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of,
any   action,   suit  or   proceeding,   relating   to  any  Expense  for  which
indemnification  is sought pursuant to this Article 6, and each Indemnitee shall
cooperate with the Company or its  insurer(s)  with respect  thereto;  PROVIDED,
that the  Company  shall not be  entitled  to  control  the  defense of any such
action,  suit,  proceeding or compromise any such Expense during the continuance
of any Event of Default.  In connection with any such action, suit or proceeding
being  controlled  by the  Company,  such  Indemnitee  shall  have the  right to
participate  therein,  at its sole cost and  expense,  with  counsel  reasonably
satisfactory to the Company; PROVIDED, that such Indemnitee's participation does
not, in the  reasonable  opinion of the  independent  counsel  appointed  by the
Company or its insurers to conduct such proceedings,  interfere with the defense
of such case.

     (c)   In no event shall any  Indemnitee  enter into a  settlement  or other
compromise  with respect to any Expense without the prior written consent of the

<PAGE>

Company,  which consent shall not be  unreasonably  withheld or delayed,  unless
such Indemnitee  waives its right to be indemnified with respect to such Expense
under this Article 6.

     (d)   In the case of any Expense indemnified by the Company hereunder which
is covered by a policy of  insurance  maintained  by the  Company  pursuant to a
Collateral  Agreement,  at the  Company's  expense,  each  Indemnitee  agrees to
cooperate  with the  insurers in the  exercise of their  rights to  investigate,
defend or  compromise  such Expense as may be required to retain the benefits of
such insurance with respect to such Expense.

     (e)   If an  Indemnitee is not a party to this  Indenture,  the Company may
require such Indemnitee to agree in writing to the terms of this Article 6 prior
to making any payment to such Indemnitee under this Article 6.

     (f)   Nothing  contained  in this Section 6.4 shall be deemed to require an
Indemnitee to contest any Expense or to assume  responsibility for or control of
any judicial proceeding with respect thereto.

     Section 6.5    INFORMATION.

     The Company will provide the relevant  Indemnitee with such information not
within the  control of such  Indemnitee,  as is in the  Company's  control or is
reasonably  available  to the  Company,  which such  Indemnitee  may  reasonably
request and will otherwise  cooperate with such  Indemnitee so as to enable such
Indemnitee to fulfill its  obligations  under Section 6.4. The Indemnitee  shall
supply the Company with such  information not within the control of the Company,
as  is  in  such  Indemnitee's  control  or  is  reasonably  available  to  such
Indemnitee,  which the Company may reasonably  request to control or participate
in any proceeding to the extent permitted by Section 6.4.

     Section 6.6    SUBROGATION; FURTHER ASSURANCES.

     Upon the payment in full by the Company of any indemnity provided for under
this Article 6, the Company,  without any further  action and to the full extent
permitted by Law,  will be  subrogated  to all rights and remedies of the person
indemnified  (other  than with  respect  to any of such  Indemnitee's  insurance
policies)  in respect of the matter as to which such  indemnity  was paid.  Each
Indemnitee  will give such further  assurances or agreements  and cooperate with
the Company to permit the Company to pursue such  claims,  if any, to the extent
reasonably requested by the Company and at the Company's expense.

     Section 6.7    REFUNDS.

     If an Indemnitee  receives any refund, in whole or in part, with respect to
any  Expense  paid by the Company  hereunder,  it will  promptly  pay the amount
refunded  (but not an amount in excess of the amount  the  Company or any of its
insurers  has paid in respect of such  Expense)  over to the  Company  unless an
Event of  Default  shall have  occurred  and be  continuing,  in which case such
amounts  shall be paid over to the  Security  Agent to hold as security  for the

<PAGE>

Company's obligations under the Operative Documents and the Support Documents to
which the Company is a party or, if requested by the Company, applied to satisfy
such obligations.


                                   ARTICLE 7.

                              DEFAULT AND REMEDIES

     Section 7.1    EVENTS OF DEFAULT.

     The  term  "EVENT  OF  DEFAULT"  shall  mean  any of the  following  events
(whatever  the reason for such Event of Default and whether  such event shall be
voluntary  or  involuntary  or come about or be effected by  operation of law or
pursuant to or in compliance with any judgment,  decree or order of any court or
any order, rule or regulation of any administration or governmental body):

     (a)   the  Company  shall fail to pay (i)  principal  of,  interest  on, or
Premium, if any, or Break Amount, if any, with respect to any Security when due,
and such failure  shall  continue  unremedied  for a period of 10 Business  Days
thereafter (it being understood that any amount  distributed to  Securityholders
in respect of the  foregoing  from funds  provided by the Policy  Provider,  the
Liquidity  Provider or the Cash  Collateral  Account shall not be deemed to cure
such Default),  or (ii) any other amount payable by it to the Holders under this
Indenture or any Operative  Document  when due, and such failure shall  continue
for a period in excess of 10  Business  Days  after  the  Company  has  received
written notice from the Trustee of the failure to make such payment when due;

     (b)   the  Company  shall  fail to  observe  or  perform  (or  caused to be
observed and performed) in any material respect any other covenant, agreement or
obligation  set forth  herein or in any other  Operative  Document  to which the
Company is a party and such failure shall continue unremedied for a period of 30
days from and after the date of written  notice  thereof to the Company from the
Trustee, unless such failure is capable of being corrected and the Company shall
be diligently  proceeding to correct such failure,  in which case there shall be
no Event of Default unless and until such failure shall continue  unremedied for
a period of 270 days after receipt of such notice;

     (c)   any  representation  or warranty made by the Company herein or in any
other Operative Document to which the Company is a party (a) shall prove to have
been untrue or inaccurate in any material  respect as of the date made, (b) such
untrue or  inaccurate  representation  or  warranty  is  material at the time in
question,  and (c) the same shall  remain  uncured (to the extent of the adverse
impact of such  incorrectness  on the  interest of the  Trustee) for a period in
excess of 30 days from and after the date of written notice thereof from Trustee
to the Company;

     (d)   the  Company shall consent to the appointment of or taking possession
by a receiver,  trustee or liquidator of itself or of a substantial  part of its
property,  or the Company  shall admit in writing its inability to pay its debts
generally as they come due or shall make a general assignment for the benefit of
its creditors, or the Company shall file a voluntary petition in bankruptcy or a

<PAGE>

voluntary  petition or an answer  seeking  reorganization,  liquidation or other
relief under any bankruptcy laws or insolvency laws (as in effect at such time),
or an answer  admitting the material  allegations of a petition filed against it
in any such case, or the Company shall seek relief by voluntary petition, answer
or  consent,  under  the  provisions  of any other  bankruptcy  or  similar  law
providing for the  reorganization or winding-up of corporations (as in effect at
such time),  or the Company shall seek an agreement,  composition,  extension or
adjustment  with  its  creditors  under  such  laws or the  Company's  board  of
directors shall adopt a resolution  authorizing  corporate action in furtherance
of any of the foregoing;

     (e)   an  order,  judgment  or  decree  shall be  entered  by any  court of
competent  jurisdiction  appointing,  without  the  consent  of the  Company,  a
receiver, trustee or liquidator of the Company or of any substantial part of its
property,  or any  substantial  part of the  property  of the  Company  shall be
sequestered,  or granting any other relief in respect of the Company as a debtor
under any bankruptcy laws or other  insolvency laws (as in effect at such time),
and any such order, judgment,  decree, or decree of appointment or sequestration
shall remain in force undismissed, unstayed or unvacated for a period of 90 days
after the date of entry thereof; or

     (f)   a  petition  against the Company in a proceeding under any bankruptcy
laws or other  insolvency  laws (as in  effect  at such  time) is filed  and not
withdrawn or dismissed within 90 days thereafter, or if, under the provisions of
any law providing for  reorganization  or winding-up of  corporations  which may
apply  to  the  Company,  any  court  of  competent  jurisdiction  shall  assume
jurisdiction,  custody or control of the Company of any substantial  part of its
property  and such  jurisdiction,  custody  or  control  shall  remain  in force
unrelinquished, unstayed or unterminated for a period of 90 days.

     Section 7.2    ACCELERATION.

     If an Event of Default (other than an Event of Default specified in Section
7.1(d), (e) or (f) with respect to the Company) occurs,  and is continuing,  the
Controlling Party may, by notice to the Company and the Trustee, and the Trustee
shall, upon the request of such Controlling Party,  declare all unpaid principal
of, accrued but unpaid interest on, and Premium,  if any, Break Amount,  if any,
with respect to the Securities  Outstanding and other amounts  otherwise payable
hereunder,  if any, to the date of  acceleration  to be due and payable and upon
any such declaration,  the same shall become and be immediately due and payable.
If an Event of Default  specified  in  Section  7.1(d),  (e) or (f) occurs  with
respect to the Company, all unpaid principal of, accrued but unpaid interest on,
and Premium,  if any,  Break  Amount,  if any,  with respect to, the  Securities
Outstanding  and  other  amounts  otherwise  payable  hereunder,  if any,  shall
automatically  become and be immediately due and payable without any declaration
or  other  act  on the  part  of  the  Trustee,  the  Controlling  Party  or any
Securityholder.  Upon payment of such principal amount,  interest,  Premium,  if
any, Break Amount, if any, and other amounts,  all of the Company's  obligations
under the Securities and this Indenture,  other than obligations under Article 6
and Section 8.7, shall terminate. The Controlling Party by notice to the Trustee
may rescind an acceleration  and its  consequences if (a) all existing Events of
Default,  other than the  non-payment  as to the  Securities  of the  principal,
interest,  Premium,  if any, and Break Amount,  if any, with respect thereto and

<PAGE>

other amounts otherwise payable  hereunder,  if any, which has become due solely
by such  declaration  of  acceleration,  have been cured or  waived,  (b) to the
extent the payment of such  interest is  permitted  by law,  interest on overdue
installments of interest and on overdue principal which has become due otherwise
than by such  declaration  of  acceleration,  has been paid,  (c) the rescission
would  not  conflict  with  any  judgment  or  decree  of a court  of  competent
jurisdiction,  and (d)  all  payments  due to the  Trustee  and any  predecessor
Trustee under Section 8.7 have been made.  No such  rescission  shall affect any
subsequent default or impair any right arising from any subsequent default.

     Section 7.3    OTHER REMEDIES.

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available  remedy by  proceeding  at law or in equity to collect  the payment of
principal of,  interest on, or Premium,  if any, or Break  Amount,  if any, with
respect to the Securities or other amounts otherwise payable hereunder,  if any,
or to  enforce  the  performance  of any  provision  of the  Securities  or this
Indenture including, without limitation,  instituting proceedings and exercising
and enforcing, or directing exercise and enforcement of, all rights and remedies
of the Trustee and the Collateral Agent under the other Operative  Documents and
directing  the  Collateral  Agent to deposit  with the  Trustee  all cash and/or
Investment Securities held by the Collateral Agent.

     The Trustee may  maintain a  proceeding  even if it does not possess any of
the  Securities  or does not produce any of them in the  proceeding.  A delay or
omission by the Trustee or any  Securityholder in exercising any right or remedy
accruing  upon an Event of  Default  shall  not  impair  the  right or remedy or
constitute  a waiver of or  acquiescence  in the Event of Default.  No remedy is
exclusive of any other remedy. All available remedies are cumulative.

     Section 7.4    WAIVER OF PAST DEFAULTS.

     Subject to Sections 7.7, 10.2 and 10.6, the Controlling  Party by notice to
the Trustee may authorize  the Trustee to waive an existing  Default or Event of
Default  and its  consequences,  except a Default or Event of Default (i) in the
payment of principal of,  interest on, or Premium,  if any, or Break Amount,  if
any,  with respect to, any Security as specified in Section  7.1(a) that has not
been paid from funds provided by the Policy Provider,  the Liquidity Provider or
the Cash Collateral Account or (ii) in respect of a covenant or provision hereof
which  cannot be  modified  or amended  without  the  consent  of the  Liquidity
Provider,  the Policy Provider and the Holder of each Security affected.  When a
Default  or Event of  Default  is so  waived,  it is cured and  ceases,  and the
Company,  the  Liquidity  Provider,  the Policy  Provider,  the  Holders and the
Trustee  shall be  restored  to their  former  positions  and  rights  hereunder
respectively; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.

<PAGE>

     Section 7.5    CONTROL OF REMEDIES.

     The Controlling  Party may direct the time,  method and place of conducting
any proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral  Agent, to any limitations  otherwise  expressly  provided for in the
other  Operative  Documents) or exercising  any trust or power  conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.  The Trustee may refuse to follow
any direction  hereunder or authorization  under Section 7.4 that conflicts with
law or this  Indenture,  that the Trustee  determines may subject the Trustee to
personal  liability  or,  after a Policy  Provider  Default,  that  the  Trustee
determines may be unduly  prejudicial  to the rights of another  Securityholder.
However, the Trustee shall have no liability for any actions or omissions to act
which  are  in  accordance  with  any  such  direction  or  authorization.   The
Controlling  Party shall not direct the Trustee or any Collateral  Agent to sell
or otherwise  dispose of any Collateral  unless all unpaid principal of, accrued
but unpaid  interest on, and Premium,  if any, and Break  Amount,  if any,  with
respect to, the Outstanding Securities and other amounts otherwise payable under
this  Indenture,  if any, shall be declared or otherwise  become due and payable
immediately.

     Section 7.6    LIMITATION ON SUITS.

     A  Securityholder  may not pursue any remedy with respect to this Indenture
or the Securities unless:

     (a)   the  Holder gives to the Trustee written notice of a continuing Event
of Default;

     (b)   the Holders of at least twenty-five percent (25%) in principal amount
of the Securities  Outstanding  make a written  request to the Trustee to pursue
the remedy;

     (c)   such Holder or Holders offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;

     (d)   the  Trustee does not comply with the request  within sixty (60) days
after receipt of the request and the offer of indemnity; and

     (e)   during  such 60-day  period the  Controlling  Party does not give the
Trustee a direction which, in the opinion of the Trustee,  is inconsistent  with
such request.

     A  Securityholder  may not use this  Indenture to  prejudice  the rights of
another  Securityholder  or to obtain a preference  or priority  over such other
Securityholder.

     Section 7.7    RIGHTS OF HOLDERS TO RECEIVE PAYMENT.

     Notwithstanding  any other  provision of this  Indenture,  the right of any
Holder of a  Security  to receive  payment of  principal  of,  interest  on, and
Premium,  if any,  and Break  Amount,  if any,  with respect to, the Security in

<PAGE>

cash, on or after the  respective  due dates  expressed in the  Security,  or to
bring suit for the  enforcement of any such payment on or after such  respective
dates, shall not be impaired or affected without the consent of the Holder.

     It is hereby  expressly  understood,  intended  and agreed that any and all
actions which a Holder of the  Securities  may take to enforce the provisions of
this Indenture  and/or collect  Payments due hereunder or under the  Securities,
except to the  extent  that such  action  is  determined  to be on behalf of all
Holders  of the  Securities,  shall be in  addition  to and shall not in any way
change,  adversely affect or impair the rights and remedies of the Trustee,  the
Controlling Party or any other Holder of the Securities thereunder or under this
Indenture,  the other Operative  Documents and the Support Documents,  including
the right to foreclose  upon and sell the  Collateral or any part thereof and to
apply any proceeds realized in accordance with the provisions of this Indenture.

     Section 7.8    COLLECTION SUIT BY TRUSTEE.

     If an Event of Default in payment of principal,  interest, Premium or Break
Amount  specified in Section  7.1(a) occurs and is  continuing,  the Trustee may
recover  judgment in its own name and as trustee of an express trust against the
Company  or any  other  obligor  on the  Securities  for  the  whole  amount  of
principal, accrued interest, Premium, if any, or Break Amount, if any, remaining
unpaid,  together  with interest on overdue  principal and on overdue  interest,
Premium or Break Amount to the extent that payment of such interest is permitted
by law, in each case at the rate per annum provided for by the  Securities,  and
such further  amount as shall be  sufficient  to cover the costs and expenses of
collection,  including the reasonable compensation,  expenses, disbursements and
advances of the Trustee, its agents and counsel.

     Section 7.9    TRUSTEE MAY FILE PROOFS OF CLAIM.

     The Trustee may file such proofs of claim and other  papers or documents as
may be  necessary  or  advisable  in  order to have the  claims  of the  Trustee
(including any claim for the reasonable  compensation,  expenses,  disbursements
and  advances of the Trustee,  its agents and  counsel) and the  Securityholders
allowed  in any  judicial  proceedings  relative  to the  Company  (or any other
obligor  upon the  Securities),  its  creditors  or its  property  and  shall be
entitled  and  empowered  to collect and  receive  any moneys or other  property
payable or  deliverable  on any such claims and to distribute  the same, and any
Custodian  in any  such  judicial  proceedings  is  hereby  authorized  by  each
Securityholder  to make such  payments to the Trustee and, in the event that the
Trustee  shall  consent  to  the  making  of  such  payments   directly  to  the
Securityholders,  to pay to the Trustee any amount due to it for the  reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel,  and any other  amounts due the Trustee  under  Section 8.7, and unless
prohibited by law or applicable  regulations to vote on behalf of the Holders of
Securities  for  the  election  of a  trustee  in  bankruptcy  or  other  person
performing  similar  functions.  Nothing  herein  contained  shall be  deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any  Securityholder  any  plan of  reorganization,  arrangement,  adjustment  or

<PAGE>

composition  affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any  Securityholder  in
any such  proceeding  except,  as  aforesaid,  for the  election of a trustee in
bankruptcy or person performing similar functions.

     Section 7.10   APPLICATION OF PROCEEDS.

     Any moneys  collected  by the Trustee  pursuant to this Article 7 or by the
Security Agent under Section 6.02 of the Security Agreement shall be distributed
in the order  provided  in Section 3.2 at the date or dates fixed by the Trustee
and,  in case of the  distribution  of such  moneys  on  account  of  principal,
interest,  Premium,  if any, or Break Amount,  if any, upon  presentation of the
several  Securities and stamping (or otherwise  noting) thereon the payment,  or
issuing  Securities in reduced  principal  amounts in exchange for the presented
Securities if only partially paid, or upon surrender thereof if fully paid.

     The  Trustee  may fix a record  date and  payment  date for any  payment to
Securityholders  pursuant to this Section  7.10,  and the Trustee shall give the
Company  and the  Securityholders  written  notice  thereof no less than 15 days
prior to any such record date.

     Section 7.11   UNDERTAKING FOR COSTS.

     All parties to this Indenture agree, and each Holder of any Security by his
acceptance  thereof  shall be  deemed  to have  agreed,  that  any  court in its
discretion  may require in any suit for the  enforcement  of any right or remedy
under this  Indenture or in any suit against the Trustee for any action taken or
omitted by it as  Trustee,  the filing by any party  litigant  in the suit of an
undertaking  to pay the costs of the suit,  and the court in its  discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant  in the suit,  having  due  regard to the  merits and good faith of the
claims or defenses made by the party litigant.  This Section 7.11 does not apply
to a suit by the Trustee,  a suit by a Holder pursuant to Section 7.7, or a suit
by Holders of more than ten percent (10%) in principal  amount of the Securities
Outstanding.

     Section 7.12   RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS.

     In case the Trustee  shall have  proceeded  to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned for any
reason,  or shall have been  determined  adversely to the  Trustee,  then and in
every  such case the  Company,  the  Trustee  and the  Securityholders  shall be
restored  respectively to their former positions and rights  hereunder,  and all
rights,  remedies and powers of the Company, the Trustee and the Securityholders
shall continue as though no such proceedings had been taken.

     Section  7.13  POWERS AND  REMEDIES  CUMULATIVE;  DELAY OR OMISSION NOT
WAIVER OF DEFAULT.

     No right or remedy herein  conferred  upon or reserved to the Trustee or to
the  Securityholders  is intended to be  exclusive of any other right or remedy,
and every right and remedy shall, to the extent  permitted by law, be cumulative

<PAGE>

and in  addition  to every  other  right and remedy  given  hereunder  or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

     No  delay  or  omission  of  the  Trustee  or of any  Holder  of any of the
Securities  to exercise  any right or power  accruing  upon any Event of Default
occurring and  continuing  as aforesaid  shall impair any such right or power or
shall  be  construed  to  be a  waiver  of  any  such  Event  of  Default  or an
acquiescence  therein;  and, subject to the other applicable  provisions of this
Indenture,  every  power and  remedy  given by this  Indenture  or by law to the
Trustee, a Liquidity Provider, the Policy Provider or to the Securityholders may
be exercised  from time to time, and as often as shall be deemed  expedient,  by
the Trustee or by the Securityholders.

     Any right or remedy herein conferred upon or reserved to the Trustee may be
exercised by it in its capacity as Trustee and/or as Collateral Agent, as it may
deem most efficacious, if it is then acting in such capacity.


                                   ARTICLE 8.

                                    TRUSTEE

     Section 8.1    DUTIES OF TRUSTEE.

     (a)   If an Event of Default has  occurred and is  continuing,  the Trustee
shall  exercise such of the rights and powers vested in it by this Indenture and
use the same  degree of care and  skill in their  exercise  as a prudent  person
would exercise or use under the circumstances in the conduct of his own affairs.

     (b)   Except during the continuance of an Event of Default:

           (i) The Trustee need  perform  only those duties as are  specifically
     set forth in this Indenture,  the other Operative Documents and the Support
     Documents and no others.

           (ii) In the  absence  of bad  faith  on its  part,  the  Trustee  may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein,  upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture.  However,
     the  Trustee  shall  examine the  certificates  and  opinions to  determine
     whether or not they conform to the requirements of this Indenture.

     (c)   The  Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct,  except
that:

           (i) This  paragraph (c) does not limit the effect of paragraph (b) of
     this Section 8.1 or of Section 8.2.

<PAGE>

           (ii) The Trustee  shall not be liable for any error of judgment  made
     in good faith by a Trust Officer,  unless it is proved that the Trustee was
     negligent in ascertaining the pertinent facts.

           (iii) The Trustee  shall not be liable with  respect to any action it
     takes  or  omits  to take in good  faith  in  accordance  with a  direction
     received by it pursuant to Section 7.5.

     (d)   The  Trustee may refuse to perform any duty or exercise  any right or
power  unless  it  receives  indemnity  satisfactory  to it  against  any  loss,
liability or expense.

     (e)   Every  provision  of this  Indenture  that in any way  relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 8.1.

     (f)   Funds  held in trust for the benefit of the Holders of the Securities
by the  Trustee or any Paying  Agent on deposit  with itself or  elsewhere,  and
Investment  Securities  held in trust  for the  benefit  of the  Holders  of the
Securities by the Trustee, shall be held in distinct, identifiable accounts, and
other funds or  investments  of any nature or from any source  whatsoever may be
held in such accounts,  except, in each case, to the extent required by law. The
Trustee  shall not be liable for interest on any money  received by it except as
the Trustee may agree with the Company.

     Section 8.2    RIGHTS OF TRUSTEE.

     (a)   The Trustee may rely on any document believed by it to be genuine and
to have been signed or  presented  by the proper  person.  The Trustee  need not
investigate any fact or matter stated in the document.

     (b)   Before  the Trustee acts or refrains  from acting,  it may require an
Officers'  Certificate or an Opinion of Counsel,  which shall conform to Section
12.5.  The Trustee  shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.

     (c)   The  Trustee  may execute  any of the trusts or powers  hereunder  or
perform any duties  hereunder either directly or by or through its attorneys and
agents and the Trustee shall not be responsible for the misconduct or negligence
of any agent or attorney appointed with due care.

     (d)   The  Trustee  shall not be liable for any action it takes or omits to
take in good faith which it  reasonably  believes to be authorized or within its
rights or powers.

     Section 8.3    INDIVIDUAL RIGHTS OF TRUSTEE.

     The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with and collect  obligations  owed
to it by the Company or  Affiliates of the Company with the same rights it would
have if it were not  Trustee.  Any  Agent  may do the  same  with  like  rights.
However, the Trustee is subject to Sections 8.10 and 8.11.

<PAGE>

     Section 8.4    TRUSTEE'S DISCLAIMER.

     The Trustee makes no  representation as to the validity or adequacy of this
Indenture or the  Securities,  it shall not be accountable for the Company's use
of the proceeds from the  Securities,  and it shall not be  responsible  for any
statement in the Securities or in this Indenture  other than its  certificate of
authentication.

     Section 8.5    NOTICE OF DEFAULTS.

     If a Default  occurs and is  continuing  and if it is known to the Trustee,
the Trustee shall mail to each  Securityholder,  the Liquidity  Provider and the
Policy  Provider  a notice of the  Default  within  ninety  (90) days  after the
occurrence thereof except as otherwise  permitted by the TIA. Except in the case
of a Default in payment of principal of, or interest on, or Premium,  if any, or
Break Amount,  if any,  with respect to, any Security,  the Trustee may withhold
the notice if and so long as it, in good faith,  determines that withholding the
notice is in the interests of the Securityholders.

     Section 8.6    REPORTS BY TRUSTEE TO HOLDERS.

     If  circumstances  require any report to Holders under TIA ss.  313(a),  it
shall be mailed to  Securityholders  within  sixty  (60) days  after each May 15
(beginning  with the May 15 following  the date of this  Indenture)  as of which
such  circumstances  exist.  The Trustee also shall comply with the remainder of
TIA ss. 313.

     The Company shall notify the Trustee if the Securities  become listed on or
delisted from any stock exchange or other recognized trading market.

     The Trustee shall, upon the written request of any Holder of Securities but
subject to applicable laws and contractual  limitations,  provide to such Holder
copies of any reports, certificates,  opinions or other materials of any kind or
nature  required to be  delivered to the Trustee  (including  in its capacity as
Collateral Agent) under this Indenture,  any of the other Operative Documents or
the Support  Documents or otherwise  delivered by or on behalf of the Company to
the Trustee (including in its capacity as Collateral Agent).

     Section 8.7    COMPENSATION AND INDEMNITY.

     The  Company  shall  pay  to the  Trustee  from  time  to  time  reasonable
compensation,  as agreed upon from time to time, for its services,  including as
Collateral Agent. The Trustee's  compensation shall not be limited by any law on
compensation  of a trustee of an express trust.  The Company shall reimburse the
Trustee upon  request for all  reasonable  disbursements,  expenses and advances
incurred or made by it in any such  capacities.  Such expenses shall include the
reasonable compensation,  disbursements and expenses of the Trustee's agents and
counsel and all agents and other persons not regularly in its employ.

     The Company shall  indemnify the Trustee (in its  capacities as Trustee and
Collateral  Agent)  and each  predecessor  Trustee  for,  and hold  each of them

<PAGE>

harmless against,  any loss or liability  incurred by each of them in connection
with the  administration of this trust and its duties  hereunder.  In connection
with any defense of such a claim,  the Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel.  The Company
need not  reimburse  any  expense or  indemnify  against  any loss or  liability
incurred by the Trustee or any predecessor Trustee through the negligence or bad
faith of such Trustee or each such predecessor Trustee.

     To secure the  Company's  payment  obligations  in this  Section  8.7,  the
Trustee shall have a Lien (legal and  equitable)  prior to the Securities on all
money or property held or collected by the Trustee,  in its capacity as Trustee,
or otherwise  distributable  to  Securityholders,  except  money,  securities or
property held in trust to pay principal of,  interest on or Premium,  if any, or
Break Amount, if any, with respect to the particular Securities.

     When the  Trustee  incurs  expenses or renders  services  after an Event of
Default  specified in Section  7.1(d),  (e) or (f) occurs,  the expenses and the
compensation   for  the  services  are  intended  to   constitute   expenses  of
administration  under the Bankruptcy Code or any similar law of any jurisdiction
other than the U.S.

     Section 8.8    REPLACEMENT OF TRUSTEE.

     The Trustee (in its capacities as Trustee and Collateral  Agent) may resign
by so notifying the Company,  the Liquidity  Provider and the Policy Provider in
writing.  The  Controlling  Party may remove the Trustee (in its  capacities  as
Trustee and  Collateral  Agent) by so  notifying  the Trustee in writing and may
appoint a successor Trustee with the Company's consent,  which consent shall not
be unreasonably  refused or delayed.  The Company may remove the Trustee (in its
capacities as Trustee and Collateral Agent) if:

     (a)   the Trustee fails to comply with Section 8.10;

     (b)   the Trustee is adjudged a bankrupt or an insolvent;

     (c)   a receiver or other public officer takes charge of the Trustee or its
property;

     (d)   the Trustee becomes incapable of acting; or

     (e)   no Default or Event of Default has occurred and is continuing and the
Company determines in good faith to remove the Trustee.

     If the Trustee  resigns or is removed or if a vacancy  exists in the office
of Trustee  for any  reason,  the  Company  shall  promptly  appoint a successor
Trustee.  Within  one  year  after  the  successor  Trustee  takes  office,  the
Controlling  Party may  appoint a  successor  Trustee to replace  the  successor
Trustee appointed by the Company.

<PAGE>

     A successor  Trustee shall deliver a written  acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the retiring
Trustee  shall  transfer  all  property  held by it as Trustee to the  successor
Trustee, subject to the Lien provided in Section 8.7, the resignation or removal
of the retiring Trustee shall become effective,  and the successor Trustee shall
have all the rights,  powers and duties of the Trustee under this  Indenture.  A
successor Trustee shall mail notice of its succession to each Securityholder.

     No  resignation or removal of the Trustee and no appointment of a successor
Trustee,  pursuant to this Article,  shall become effective until the acceptance
of appointment  by the successor  Trustee under this Section 8.8. If a successor
Trustee does not take office  within sixty (60) days after the retiring  Trustee
resigns  or is  removed,  the  retiring  Trustee,  the  Company,  the  Liquidity
Provider,  the Policy  Provider or the Holders of at least ten percent  (10%) in
principal  amount  of the  Securities  Outstanding  may  petition  any  court of
competent jurisdiction for the appointment of a successor Trustee.

     If the Trustee fails to comply with Section 8.10,  any Holder of Securities
may petition any court of competent  jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

     Notwithstanding  replacement  of the Trustee  pursuant to this Section 8.8,
the Company's  obligations  under Section 8.7 shall  continue for the benefit of
the retiring Trustee which shall retain its claim pursuant to Section 8.7.

     Section 8.9    SUCCESSOR TRUSTEE BY MERGER, ETC.

     If the Trustee consolidates with, merges or converts into, or transfers all
or  substantially  all of its corporate trust business to, another  corporation,
the resulting, surviving or transferee corporation without any further act shall
be the successor Trustee.

     Section 8.10   ELIGIBILITY; DISQUALIFICATION.

     This Indenture  shall always have a Trustee who satisfies the  requirements
of TIA ss.  310(a)(1)  and ss.  310(a)(5).  The  Trustee  shall  have a combined
capital and  surplus of at least  $50,000,000  as set forth in its most  recent,
published  annual  report of  condition.  The Trustee  shall comply with TIA ss.
310(b);  PROVIDED,  HOWEVER,  that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other  securities,  or
certificates of interest or  participation in other  securities,  of the Company
are  outstanding,  if the  requirements  for such exclusion set forth in TIA ss.
310(b)(1) are met.

     Section  8.11  PREFERENTIAL   COLLECTION   OF  CLAIMS   AGAINST   COMPANY.

     The  Trustee  shall  comply with TIA ss.  311(a),  excluding  any  creditor
relationship  listed in TIA ss.  311(b).  A  Trustee  who has  resigned  or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.

<PAGE>

     Section 8.12   OTHER CAPACITIES.

     At all times during which any Securities are Outstanding,  unless otherwise
permitted  under  the  Operative  Documents,  the  Trustee  shall  serve  as the
Collateral Agent and any resignation,  removal or disqualification  from any one
such  office  shall,  without  action on the part of any  Person,  result in the
resignation,  removal,  or  disqualification  from all such offices.  Any Person
serving in such  capacities  shall  have and may  effectively  exercise  all the
rights,   remedies  and  powers,   and  be  entitled  to  all   protections  and
indemnifications,  provided to such Person in  whatever  capacities  such Person
then serves under any and all of the Indenture,  the other  Operative  Documents
and the Support  Documents,  regardless  of the capacity or  capacities in which
such Person may purport to take or omit any  action.  The Trustee  agrees to and
shall have the  benefit of all  provisions  of the  Operative  Documents  stated
therein to be applicable to the Trustee.

     Section 8.13   TRUST ACCOUNTS.

     (a)   Upon the execution of this Indenture, the Trustee shall establish and
maintain in its name (i) the Collection  Account as an Eligible Deposit Account,
bearing a designation  clearly  indicating that the funds deposited  therein are
held in trust for the benefit of the Securityholders, the Liquidity Provider and
the Policy  Provider,  and (ii) a Policy Account as an Eligible  Deposit Account
bearing a designation  clearly  indicating that the funds deposited  therein are
held in trust for the  benefit  of the  Securityholders  and,  with  respect  to
amounts paid by the Policy Provider under Section 3.6(d) and clause (vii) of the
definition of "Deficiency  Amount" in the Policy,  the Liquidity  Provider.  The
Trustee shall establish and maintain the Cash Collateral Account pursuant to and
under  the  circumstances  set  forth  in  Section  3.5(f)  hereof.   Upon  such
establishment and maintenance  under Section 3.5(f) hereof,  the Cash Collateral
Account  shall,  together with the  Collection  Account and the Policy  Account,
constitute the "TRUST ACCOUNTS" hereunder.

     (b)   Funds  on  deposit  in the  Trust  Accounts  shall  be  invested  and
reinvested  by the  Trustee in Eligible  Investments  selected by the Trustee if
such investments are reasonably  available and have maturities no later than the
earlier  of (i) 90 days  following  the  date of such  investment  and  (ii) the
Business Day immediately  preceding the Interest Payment Date next following the
date of such  investment;  PROVIDED,  HOWEVER,  that  following  the making of a
Downgrade Drawing or a Non-Extension  Drawing under the Liquidity Facility,  the
Trustee  shall invest and reinvest such amounts in Eligible  Investments  at the
direction  of the Company  (or, if and to the extent so specified to the Trustee
by the Company,  the  Liquidity  Provider);  PROVIDED  FURTHER,  HOWEVER,  that,
notwithstanding  the foregoing proviso,  following the making of a Non-Extension
Drawing  under the initial  Liquidity  Facility,  the Trustee  shall  invest and
reinvest  the  amounts  in the Cash  Collateral  Account  with  respect  to such
Liquidity Facility in Eligible  Investments pursuant to the written instructions
of the Liquidity Provider;  PROVIDED FURTHER,  HOWEVER, that upon the occurrence
and during the continuation of an Event of Default, the Trustee shall invest and
reinvest  such  amounts  in  accordance  with the  written  instructions  of the
Controlling  Party.  Unless  otherwise  expressly  provided  in  this  Indenture
(including,  without limitation,  with respect to Investment Earnings on amounts

<PAGE>

on deposit in the Cash  Collateral  Account  pursuant to Section 3.5(f) hereof),
any  Investment  Earnings  shall be  deposited  in the  Collection  Account when
received  by the  Trustee and shall be applied by the Trustee in the same manner
as the other amounts on deposit in the Collection  Account are to be applied and
any losses shall be charged against the principal amount invested,  in each case
net of the Trustee's  reasonable  fees and expenses in making such  investments.
The  Trustee  shall not be liable for any loss  resulting  from any  investment,
reinvestment or liquidation  required to be made under this Indenture other than
by reason of its willful  misconduct or gross negligence.  Eligible  Investments
and any other  investment  required to be made hereunder  shall be held to their
maturities  except that any such  investment may be sold (without  regard to its
maturity) by the Trustee without instructions whenever such sale is necessary to
make  a  distribution  required  under  the  Indenture.  Uninvested  funds  held
hereunder shall not earn or accrue interest.

     (c)   The Trustee shall possess all right,  title and interest in all funds
on deposit from time to time in the Trust  Accounts and in all proceeds  thereof
(including all income thereon, except as otherwise expressly provided in Section
3.3(b) with respect to Investment Earnings). The Trust Accounts shall be held in
trust by the Trustee  under the sole dominion and control of the Trustee for the
benefit of the Securityholders,  the Liquidity Provider and the Policy Provider,
as the case may be. If, at any time, any of the Trust  Accounts  ceases to be an
Eligible  Deposit  Account,  the Trustee  shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, for which a Ratings  Confirmation
for the Securities and the consent of the Policy  Provider  (which consent shall
not be unreasonably  withheld or delayed) shall have been obtained)  establish a
new Collection  Account,  Policy Account or Cash Collateral Account, as the case
may be, as an Eligible  Deposit  Account and shall  transfer any cash and/or any
investments to such new Collection  Account,  Policy Account or Cash  Collateral
Account,  as the case may be.  So long as WTC is an  Eligible  Institution,  the
Trust Accounts shall be maintained with it as Eligible Deposit Accounts.

     Section 8.14   DEPOSITS TO THE COLLECTION ACCOUNT.

     The Trustee shall, upon receipt thereof,  deposit in the Collection Account
all Payments  received by it (other than any Payment  which by the express terms
hereof is to be deposited in the Policy Account or the Cash Collateral Account).

     Section 8.15   CERTAIN PAYMENTS.

     Except for amounts constituting Liquidity  Obligations,  Policy Expenses or
Policy Provider  Obligations which shall be deposited in the Collection  Account
and distributed as provided in Section 3.2, the Trustee will distribute promptly
upon receipt  thereof to the Person  entitled  thereto any indemnity  payment or
expense  reimbursement  received  by it  from  the  Company  in  respect  of the
Liquidity Provider or the Policy Provider.

<PAGE>

                                   ARTICLE 9.

                             DISCHARGE OF INDENTURE

     Section 9.1    DISCHARGE OF LIABILITY ON SECURITIES.

     (a)   When  (i)  the  Company  delivers  to  the  Trustee  all  Outstanding
Securities  (other  than  Securities  replaced  pursuant  to  Section  2.12) for
cancellation  or (ii) all  Outstanding  Securities  have become due and payable,
whether at  maturity  or as a result of the  mailing  of a notice of  redemption
pursuant  to  Article 4 hereof and the  Company  irrevocably  deposits  with the
Trustee funds  sufficient to pay at maturity or upon  redemption all Outstanding
Securities,  including  interest  thereon to  maturity or such  redemption  date
(other than Securities replaced pursuant to Section 2.12),  Premium, if any, and
Break  Amount,  if any,  and if in either case the  Company  pays all other sums
payable  hereunder  by the  Company  and due on or  prior  to such  maturity  or
redemption date, then this Indenture shall,  subject to Section 9.1(b), cease to
be of further effect.  The Trustee shall acknowledge  satisfaction and discharge
of this  Indenture by executing  and  delivering to the Company on demand of the
Company  accompanied by an Officers'  Certificate  and an Opinion of Counsel,  a
written  instrument to such effect  prepared by the Company at its sole cost and
expense.

     (b)   Notwithstanding  clause (a) above,  the  provisions  of Sections  2.1
through  2.17,  inclusive,  6.1, 8.7 and 8.8 and in this Article 9 shall survive
until  the  Outstanding  Securities  have  been  paid in full.  Thereafter,  the
Company's obligations in Sections 6.1, 8.7, 9.4 and 9.5 shall survive.

     Section 9.2    APPLICATION OF TRUST MONEY.

     The  Trustee  shall hold in trust cash  deposited  with it pursuant to this
Article 9. It shall apply the  deposited  cash  through the Paying  Agent and in
accordance  with this  Indenture  to the payment of principal  of,  interest on,
Premium, if any, and Break Amount, if any, on the Securities.

     Section 9.3    REPAYMENT TO COMPANY.

     The Trustee and the Paying Agent shall  promptly  turn over to the Company,
upon request  accompanied by a certificate from a nationally  recognized firm of
independent  accountants expressing their opinion that any cash then held by the
Trustee  is in  excess  of the  amounts  sufficient  to pay  when due all of the
principal of, interest on, and Premium,  if any, and Break Amount,  if any, with
respect to the  Securities to  redemption  or maturity,  as the case may be, any
such excess cash held by them.

     Subject to any  applicable  abandoned  property  law,  the  Trustee and the
Paying Agent shall pay to the Company upon request any cash held by them for the
payment of principal,  interest,  Premium or Break Amount that remains unclaimed
for two years, and, thereafter,  Securityholders  entitled to the cash must look
to the Company for payment as general creditors.

<PAGE>

     Section 9.4    REINSTATEMENT.

     If the  Trustee or Paying  Agent is unable to apply any cash in  accordance
with this Article 9 by reason of any legal  proceeding or by reason of any order
or judgment of any court or  governmental  authority  enjoining,  restraining or
otherwise  prohibiting such  application,  the Company's  obligations under this
Indenture,  the  other  Operative  Documents,  the  Support  Documents  and  the
Securities  shall be revived and  reinstated  as though no deposit had  occurred
pursuant  to this  Article 9 until such time as the  Trustee or Paying  Agent is
permitted to apply all such cash in  accordance  with this Article 9;  PROVIDED,
HOWEVER, that, if the Company has made any payment of principal of, interest on,
or Premium,  if any, or Break  Amount,  if any,  with respect to any  Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
cash held by the Trustee or Paying Agent.


                                   ARTICLE 10.

                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

     Section 10.1   WITHOUT CONSENT OF THE CONTROLLING PARTY OR HOLDERS.


     The Company and the Trustee or the  Collateral  Agent,  as the case may be,
may amend or supplement this  Indenture,  the Securities and the other Operative
Documents  and,  upon  request  of the  Company,  the  Trustee  shall  amend  or
supplement the Support  Documents,  in each case without notice to or consent of
any  Securityholder  and, except as otherwise provided in the Support Documents,
without notice to or consent of the Liquidity Provider or the Policy Provider:

           (i) to provide  for  uncertificated  Securities  in addition to or in
     place of certificated Securities;

           (ii) to provide for the assumption of the Company's obligations under
     the  Operative  Documents  and the  Securities  in the case of a merger  or
     consolidation or conveyance,  transfer or lease of all or substantially all
     of the assets of the Company or otherwise to comply with Section 5.4;

           (iii) to comply with any  requirements  of the SEC in connection with
     the qualification of this Indenture under the TIA;

           (iv) to effect the amendments contemplated by Section 3.5(e)(v)(y);

           (v) to  provide  for  the  effectiveness  of a  Collateral  Agreement
     pursuant to Section 3.1 of the Collateral Maintenance Agreement;

           (vi) to provide for the issuance of the Subordinated Securities;

<PAGE>

           (vii)  to  comply  with  the   requirements  of  DTC,   Euroclear  or
     Clearstream  or the Trustee with respect to the provisions of the Indenture
     or the Securities  relating to transfers and exchanges of the Securities or
     beneficial interests therein;

           (viii) to provide for any successor Trustee or Collateral Agent;

           (ix) to cure any ambiguity, defect or inconsistency; or

           (x) to make any other  change not  inconsistent  with the  provisions
     hereof,  PROVIDED that such action does not materially adversely affect the
     interests of any Securityholder.

     Section 10.2   WITH CONSENT OF THE CONTROLLING PARTY,  LIQUIDITY PROVIDER
AND HOLDERS.

     (a)   The  Company and the Trustee or the Collateral Agent, as the case may
be,  may  amend or  supplement  this  Indenture,  the  Securities  and the other
Operative Documents and, upon request of the Company, the Trustee shall amend or
supplement the Support  Documents,  in each case without notice to or consent of
the  Liquidity  Provider  or the  Policy  Provider  and  without  notice  to any
Securityholder but with the written consent of the Controlling  Party,  PROVIDED
that (i) Sections  3.5,  3.6, 3.8 and 3.9 of this  Indenture may not be modified
without the consent of the Liquidity  Provider and the Policy  Provider and (ii)
the  Collateral  Maintenance  Agreement  and the  Support  Documents  may not be
modified  other  than in  accordance  with the  provisions  thereof.  Subject to
Sections  7.4,  7.5 and 7.7,  unless any Event of Default  has  occurred  and is
continuing, the Controlling Party may authorize the Trustee to, and the Trustee,
subject to Section 10.6, upon such authorization  shall, waive compliance by the
Company  with any  provision  of this  Indenture,  the  Securities  or the other
Operative Documents.  However, an amendment,  supplement or waiver,  including a
waiver  pursuant to any provision of Section 7.4, may not without the consent of
the Liquidity Provider, the Policy Provider and each Securityholder affected:

           (i) reduce the amount of Securities  whose Holders must consent to an
     amendment, supplement or waiver;

           (ii)  reduce the rate or extend the time for  payment of  interest on
     any Security;

           (iii)  reduce the amount or extend the time for payment of  principal
     of or Premium,  if any or Break  Amount,  if any,  with respect to (in each
     case, whether on redemption or otherwise) any Security;

           (iv)  change the place of payment  where,  or the coin or currency in
     which, any Security (or the redemption price thereof), interest thereon, or
     Premium, if any, or Break Amount, if any, with respect thereto is payable;

<PAGE>

           (v) change the  distribution and application of payments as described
     in Section 3.2 of this Indenture  (except to provide for  distributions  on
     Subordinated Securities as permitted by Section 2.18);

           (vi) waive a default in the payment of the principal of, interest on,
     or Premium, if any, or Break Amount, if any, with respect to any Security;

           (vii) make any  changes  in  Sections  7.4,  7.7 or 7.10 or the third
     sentence of this Section 10.2(a); or

           (viii)  impair  the  right of any  Holder to  institute  suit for the
     enforcement of any amount payable on any Security when due.

     (b)   It  shall not be necessary  for the consent of the Holders under this
Section to approve the particular form of any proposed amendment,  supplement or
waiver,  but it shall be  sufficient  if such  consent  approves  the  substance
thereof.

     (c)   After  an  amendment,  supplement  or waiver  under this Section 10.2
becomes  effective,  the Company  shall mail to the Holders  affected  thereby a
brief notice describing such amendment, supplement or waiver. Any failure of the
Company to mail such notice,  or any defect therein,  shall not,  however in any
way impair or affect the validity of any such amendment, supplement or waiver.

     Section 10.3   COMPLIANCE WITH TRUST INDENTURE ACT.

     Every  amendment to or supplement of this  Indenture,  any other  Operative
Document or the Securities shall comply with the TIA as then in effect.

     Section 10.4   REVOCATION AND EFFECT OF CONSENTS.

     (a)   Until an amendment or waiver becomes effective,  a consent to it by a
Holder is a continuing  consent by the Holder and every  subsequent  Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder's Security,  even if notation of the consent is not made on any Security.
However,  any such Holder or subsequent  Holder may revoke the consent as to his
Security or portion of a Security.  Such  revocation  shall be effective only if
the Trustee  receives the notice of  revocation  before the date the  amendment,
supplement or waiver becomes effective.

     (b) After an amendment,  supplement or waiver becomes  effective,  it shall
bind every Securityholder,  unless it makes a change described in any of clauses
(i) through (viii) of Section 10.2(a). In that case the amendment, supplement or
waiver  shall bind each Holder of a Security  who has  consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security;  PROVIDED, HOWEVER, that no amendment,
supplement  or  waiver  relating  to any  impairment  of the  right  to  receive
principal,  interest,  Premium,  if any, or Break  Amount,  if any, when due and
payable  consented to by a Holder shall be binding upon any subsequent Holder of
a  Security  or a portion  of a  Security  that  evidences  the same debt as the

<PAGE>

consenting  Holder's  Security  unless notation with regard thereto is made upon
such Security or the Security representing such portion.

     Section 10.5   NOTATION ON OR EXCHANGE OF SECURITIES.

     If an amendment,  supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee. The
Trustee  may place an  appropriate  notation on the  Security  about the changed
terms and return it to the Holder. Alternatively,  if the Company or the Trustee
so  determines,  the Company in exchange  for the  Security  shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.

     Section 10.6   TRUSTEE TO SIGN AMENDMENTS, ETC.

     Upon the Request of the Company,  the Trustee shall execute any  amendment,
supplement or waiver  authorized  pursuant to this Article 10; PROVIDED that the
Trustee  shall not be obligated  to execute any such  amendment,  supplement  or
waiver which affects the Trustee's own rights,  duties or immunities  under this
Indenture or otherwise.

     Section 10.7   EFFECT OF SUPPLEMENT AND/OR AMENDMENT.

     Upon the execution of any supplemental  indenture and/or any such amendment
or supplement to the Operative  Documents or the Support  Documents  pursuant to
the provisions of this Article 10, this Indenture,  such Operative Documents and
such  Support  Documents  shall be and be deemed to be  modified  and amended in
accordance   therewith  and  the  respective  rights,   limitations  of  rights,
obligations,  duties and immunities  under this  Indenture,  the other Operative
Documents and the Support  Documents of the Trustee,  the Collateral  Agent, the
Liquidity  Provider,  the  Policy  Provider,  the  Company  and the  Holders  of
Securities shall thereafter be determined,  exercised and enforced hereunder and
thereunder subject in all respects to such modifications and amendments, and all
terms  and  conditions  of any  such  supplemental  indenture  and/or  any  such
amendment  or  supplement  to the  other  Operative  Documents  or  the  Support
Documents  shall be and be deemed to be part of the terms and conditions of this
Indenture,  the other Operative  Documents and the Support Documents for any and
all purposes.


                                   ARTICLE 11.

                                    SECURITY

     Section 11.1   OTHER OPERATIVE DOCUMENTS.

     (a) To secure the due and punctual  payment,  performance and observance of
the  Obligations,  the Company has  simultaneously  with the  execution  of this
Indenture  entered  into the  Security  Agreement  and has  granted  a  security
interest on the Spare Parts  Collateral to the Security  Agent in the manner and
to the extent therein  provided.  WTC is hereby  appointed as Security Agent and
authorized  and  directed to enter into the  Security  Agreement  on the Closing
Date. Each Securityholder,  by accepting a Security,  agrees to all of the terms

<PAGE>

and provisions of each Operative Document  (including,  without limitation,  the
provisions  providing  for the  release  of  Collateral),  as the same may be in
effect or may be amended  from time to time  pursuant to its terms and the terms
hereof. The Company will execute,  acknowledge and deliver to the Trustee or the
Collateral  Agent  such  further  assignments,  transfers,  assurances  or other
instruments  as the Trustee  may require or request,  and will do or cause to be
done all such  acts and  things  as may be  necessary  or  proper,  or as may be
reasonably required by the Trustee or the Collateral Agent to assure and confirm
to the Trustee or the Collateral  Agent the security  interest in the Collateral
contemplated hereby and by the other Operative  Documents,  as from time to time
constituted,  so as to render the same available for the security and benefit of
this Indenture and of the Securities secured hereby, according to the intent and
purposes herein expressed.

     (b)   The Trustee acknowledges that it is a third-party  beneficiary of the
Trustee Provisions and agrees to perform its obligations  expressly set forth in
the Collateral Maintenance Agreement.

     Section 11.2   OPINIONS, CERTIFICATES AND APPRAISALS.

     (a)   The Company shall furnish to the Trustee promptly after the execution
and delivery of this Indenture an Opinion of Counsel stating that in the opinion
of such counsel the Indenture or Security  Agreement has been properly  recorded
and filed so as to make  effective the Lien  intended to be created  thereby and
reciting the details of such  actions,  or (ii) stating  that, in the opinion of
such counsel, no such action is necessary to make such Lien effective.

     (b)   The  Company  shall furnish to the Trustee not later than one hundred
and twenty  (120) days after  January 1 in each year  beginning  with January 1,
2003, an Opinion of Counsel,  dated as of such date, either (a) stating that, in
the  opinion of such  counsel,  such  action has been taken with  respect to the
recording,  filing,  rerecording,  and refiling of the Indenture, any Collateral
Agreement,  any amendment or supplement thereto,  and all financing  statements,
continuation  statements  or  other  instruments  of  further  assurance  as  is
necessary to maintain the Lien created by the Collateral Agreements (if not then
terminated  pursuant to its terms) and reciting  the details of such action,  or
(b) stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien.

     (c)   The  release  of any  Collateral  from the  terms  of any  Collateral
Agreement,  will not be deemed to impair the  security  under this  Indenture in
contravention  of the  provisions  hereof if and to the extent the Collateral is
released  pursuant  to  the  applicable  Collateral  Agreement.  To  the  extent
applicable,  the Company shall cause TIA ss.  314(d)  relating to the release of
property or securities from the Lien of any Collateral  Agreement,  and relating
to the  substitution  therefor of any property or  securities to be subjected to
the Lien of such Collateral Agreement,  to be complied with. With respect to any
such  substitution,  the Company  shall  furnish to the  Trustee an  Independent
Appraiser's  Certificate  if  required by TIA ss.  314(d).  Any  certificate  or
opinion  required  by TIA ss.  314(d) may be made by an Officer of the  Company,

<PAGE>

except in cases where TIA ss. 314(d)  requires that such  certificate or opinion
be made by an independent  person,  which person shall meet the requirements set
forth in clause (ii) of the definition of the term "Independent Appraiser."

     Section 11.3   AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER
THE OPERATIVE DOCUMENTS.

     The Trustee (in its  capacities  as such or as a Collateral  Agent) may, in
its sole  discretion  and without the consent of the  Securityholders,  take all
actions it deems necessary or appropriate to (a) enforce any of the terms of the
Operative  Documents  and the Support  Documents and (b) collect and receive any
and all amounts payable in respect of the obligations of the Company  hereunder.
Subject to the provisions of this Indenture,  the other Operative  Documents and
the Support  Documents,  the Trustee  (in such  capacities)  shall have power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts which may be unlawful or in
violation of the other Operative Documents or this Indenture, and such suits and
proceedings as it may deem expedient to preserve or protect its interest and the
interests of the Securityholders in the Collateral (including power to institute
and maintain suits or  proceedings to restrain the  enforcement of or compliance
with any legislative or other governmental enactment,  rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial  to the  interests of the  Securityholders  or of the Trustee in any
such capacity).

     Section 11.4   AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
OPERATIVE DOCUMENTS AND THE SUPPORT DOCUMENTS.

     The  Trustee  is  authorized  to  receive  any  funds  for the  benefit  of
Securityholders  distributed  under the  Collateral  Agreements  and the Support
Documents,  and to make  further  distributions  of such  funds  to the  Holders
according to the provisions of this Indenture.

     Section 11.5   AGREEMENT AS TO FAIR MARKET VALUE.

     The Company and the Trustee  acknowledge  that the use of Fair Market Value
herein  or  in  the  other  Operative  Documents  is  strictly  and  solely  for
convenience  in  establishing  the amount of  Collateral  and any  substitutions
therefor under the Operative  Documents.  Accordingly,  the Fair Market Value of
any  Collateral  subjected  to the  Lien  of a  Collateral  Agreement  is not an
indication  of and shall not be deemed an  agreement by the parties as the basis
for valuation of such  Collateral for purposes of  determining  the value of the
Trustee's  secured  claim  against  the  Company,  adequate  protection  of  the
Trustee's interest in the Collateral or for any other purpose in any bankruptcy,
receivership  or  insolvency  proceeding  involving  the Company or any remedial
action  brought by the Trustee or  Collateral  Agent,  except to the extent such
valuations are mandated by applicable law, or any court with  jurisdiction  over
such  proceedings,  in either case  without  regard to the use of the concept of
Fair Market Value by the parties hereto.

<PAGE>

                                  ARTICLE 12.

                                 MISCELLANEOUS

     Section 12.1   CONFLICT WITH TRUST INDENTURE ACT OF 1939.

     If  and to  the  extent  that  any  provision  of  this  Indenture  limits,
qualifies,  or  conflicts  with  the  duties  imposed  by  Sections  310 to 317,
inclusive, of the TIA, such imposed duties shall control.

     Section 12.2   NOTICES; WAIVERS.

     Any request, demand,  authorization,  direction, notice, consent, waiver or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with

     (a)   the  Company  shall be sufficient  for every purpose  hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier,  postage or courier charges,
as the case may be, prepaid, to the Company at:

                    Continental Airlines, Inc.
                    1600 Smith Street
                    Dept. HQS-FN
                    Houston, TX  77002
                    Attention:  Treasurer

                    Telecopier No.:  (713) 324-2447

     (b)   the  Trustee  shall be sufficient  for every purpose  hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier,  postage or courier charges,
as the case may be, prepaid, to the Trustee at:

                    Wilmington Trust Company
                    Rodney Square North
                    1100 North Market Street
                    Wilmington, Delaware  19890
                    Attention:  Corporate Trust Administration

                    Telecopier No.:  (302) 651-8882

     (c)   the   Liquidity  Provider  shall  be  sufficient  for  every  purpose
hereunder  if in  writing  and sent by  personal  delivery,  by  telecopier,  by
registered or certified  mail or by  nationally  recognized  overnight  courier,
postage  or  courier  charges,  as the case may be,  prepaid,  to the  Liquidity
Provider at:

<PAGE>

                    Morgan Stanley Capital Services Inc.
                    1585 Broadway
                    New York, New York  10036
                    Attention:  David Rogers

                    Telecopier No.:  (212) 761-0350

     (d)   the  Policy Provider shall be sufficient for every purpose  hereunder
if in writing and sent by personal  delivery,  by  telecopier,  by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Policy Provider at:

                    MBIA Insurance Corporation
                    113 King Street
                    Armonk, New York  10504
                    Attention:  Insured Portfolio Management, Structured Finance

                    Telecopier No.:  (914) 765-3163

or to any of the  above  parties  at any  other  address  or  telecopier  number
subsequently  furnished  in  writing by it to each of the other  parties  listed
above.  An  affidavit  by any  person  representing  or  acting on behalf of the
Company, the Trustee,  Liquidity Provider or Policy Provider as to such mailing,
having  any  registry  receipt  required  by this  Section  attached,  shall  be
conclusive evidence of the giving of such demand, notice or communication.

     Any notice or communication mailed to a Holder shall be sent to such Holder
by first-class mail or by nationally  recognized  overnight courier,  postage or
courier  charges,  as the case may be, prepaid,  at such Holder's  address as it
appears on the  Register  and shall be  sufficiently  given to such Holder if so
sent within the time prescribed.  Any notice or communication  shall comply with
TIA ss. 313(c) to the extent required by the TIA.

     Failure to mail a notice or send a communication  to a Holder or any defect
in it shall not affect its  sufficiency  with respect to other Holders.  Notices
under this Indenture to the Trustee,  to the Policy  Provider,  to the Liquidity
Provider  or to the  Company  are deemed  given only when  received.  Where this
Indenture  provides  for  notice in any  manner,  such  notice  may be waived in
writing by the Person  entitled to receive such notice,  either  before or after
the event,  and such waiver shall be the  equivalent of such notice.  Waivers of
notice by the Holders shall be filed with the Trustee, but such filing shall not
be a condition  precedent to the  validity of any action taken in reliance  upon
such waiver.

     Section 12.3   COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.

     Securityholders  may  communicate  pursuant  to TIA ss.  312(b)  with other
Securityholders  with  respect  to their  rights  under  this  Indenture  or the

<PAGE>

Securities.  The Company,  the Trustee, the Registrar and any other person shall
have the protection of TIA ss. 312(c).

     Section 12.4   CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

     Upon any Request or  application  by the Company to the Trustee to take any
action under this  Indenture or another  Operative  Document,  the Company shall
furnish  to the  Trustee:  (a) an  Officers'  Certificate  and (b) an Opinion of
Counsel,  each  stating  that,  in the opinion of the  signers,  all  conditions
precedent, if any, provided for in this Indenture or such Operative Document, as
the case may be,  relating  to the  proposed  action  have been  complied  with,
provided,  that in the case of any such  application  or Request as to which the
furnishing  of an Officers'  Certificate  or Opinion of Counsel is  specifically
required  by any  provision  of this  Indenture  or another  Operative  Document
relating to such particular application or Request, no additional certificate or
opinion, as the case may be, need be furnished.

     Section 12.5   STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.

     Each  certificate  or opinion  provided for and delivered to the Trustee or
the  Collateral  Agent with respect to  compliance  with a condition or covenant
provided for in this Indenture or another Operative Document shall include:  (a)
a statement  that the Person  signing such  certificate or opinion has read such
condition or covenant and the definitions  herein or therein  relating  thereto;
(b) a  brief  statement  as to  the  nature  and  scope  of the  examination  or
investigation   upon  which  the  statements  or  opinions   contained  in  such
certificate or opinion are based;  (c) a statement  that, in the opinion of such
Person,  he has made such examination or investigation as is necessary to enable
him to express an  informed  opinion  as to  whether  or not such  condition  or
covenant has been complied with; and (d) a statement as to whether or not in the
opinion of such Person, such condition or covenant has been complied with.

     Any certificate or opinion of an Officer or an engineer,  insurance broker,
accountant or other expert may be based, insofar as it relates to legal matters,
upon a certificate or opinion of or upon representations by counsel, unless such
officer,  engineer,  insurance broker, accountant or other expert knows that the
certificate or opinion or representations with respect to the matters upon which
his opinion  may be based as  aforesaid  are  erroneous,  or in the  exercise of
reasonable care should have known that the same were erroneous.

     Any  certificate or Opinion of Counsel may be based,  insofar as it relates
to factual matters,  upon the certificate or opinion of or representations by an
officer or officers of the Company stating that the information  with respect to
such factual matters is in possession of the Company,  unless such counsel knows
that the certificate or opinion or  representations  with respect to the matters
upon which his opinion may be based as aforesaid are erroneous and insofar as it
relates to legal matters in a  jurisdiction  or area of law beyond the expertise
of such counsel,  such counsel may rely upon the opinion of counsel qualified in
such other jurisdiction or area of law.

<PAGE>

     Wherever in this Indenture or another Operative Document in connection with
any application, certificate or report to the Trustee or the Collateral Agent it
is provided  that the Company  shall  deliver any document as a condition of the
granting of such application or as evidence of the Company's compliance with any
term  hereof,  it is  intended  that the truth and  accuracy  at the time of the
granting of such  application  or at the effective  date of such  certificate or
report,  as the case may be, of the facts and opinions  stated in such  document
shall in each such case be a condition  precedent to the right of the Company to
have such  application  granted or to the  sufficiency  of such  certificate  or
report.  Nevertheless,  in the  case of any  such  application,  certificate  or
report,  any document  required by any  provision  of this  Indenture or another
Operative  Document to be delivered to the Trustee or the Collateral  Agent as a
condition of the granting of such  application or as evidence of such compliance
may be received by the Trustee or the Collateral Agent as conclusive evidence of
any  statement  therein  contained  and  shall be full  warrant,  authority  and
protection to the Trustee or the Collateral Agent acting on the faith thereof.

     In any case where  several  matters  are  required to be  certified  by, or
covered by an opinion of, any specified  Person,  it is not  necessary  that all
such  matters  be  certified  by, or covered by the  opinion  of,  only one such
Person,  or that they be so certified or covered by only one  document,  but one
such Person may certify or give an opinion  with respect to some matters and one
or more other such Persons as to other matters,  and any such Person may certify
or give an opinion as to such matters in one or several documents.

     Whenever  any  Person is  required  to make,  give or  execute  two or more
applications, requests, consents, certificates,  statements or opinions or other
instruments under this Indenture or another Operative  Document he may, but need
not, consolidate such instruments into one.

     Section 12.6   RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.

     The  Trustee  may make  reasonable  rules for  action by or at a meeting of
Securityholders.  The  Registrar or Paying Agent may make  reasonable  rules for
their respective functions.

     Section 12.7   EFFECT OF HEADINGS.

     The Article and Section  headings  and the Table of Contents  contained  in
this Indenture have been inserted for convenience of reference only, and are and
shall be without  substantive  meaning or content of any kind whatsoever and are
not a part of this Indenture.

     Section 12.8   GOVERNING LAW.

     THIS INDENTURE IS BEING  DELIVERED IN THE STATE OF NEW YORK. THIS INDENTURE
AND THE  SECURITIES  ISSUED  HEREUNDER  SHALL BE GOVERNED  BY, AND  CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

<PAGE>

     Section 12.9   QUIET ENJOYMENT.

     The Trustee,  the Policy Provider and the Liquidity Provider each agrees as
to itself  with the  Company  that,  so long as no Event of  Default  shall have
occurred and be  continuing,  such Person shall not (and shall not permit any of
its  Affiliates or other Person  claiming by,  through or under it to) interfere
with the  Company's  rights  in  accordance  with the  Indenture  and the  other
Operative  Documents  to  the  quiet  enjoyment,   possession  and  use  of  the
Collateral.

     Section 12.10  NO RECOURSE AGAINST OTHERS.

     A director, officer, employee or stockholder, as such, of the Company shall
not have any personal  liability  for any  obligations  of the Company under the
Securities,  the Indenture or the other Operative  Documents by reason of his or
her  status  as  such  director,   officer,   employee  or   stockholder.   Each
Securityholder  by accepting a Security  waives and releases all such liability.
The  waiver  and  release  are part of the  consideration  for the  issue of the
Securities.

     Section 12.11  BENEFITS OF INDENTURE AND THE SECURITIES RESTRICTED.

     Subject  to the  provisions  of  Section  12.12  hereof,  nothing  in  this
Indenture or the Securities,  express or implied,  shall give or be construed to
give to any Person,  firm or corporation,  other than the parties hereto and the
Holders,  any legal or equitable  right,  remedy or claim under or in respect of
this Indenture or under any covenant,  condition, or provision herein contained,
all such covenants,  conditions and provisions, subject to Section 12.12 hereof,
being for the sole benefit of the parties hereto and of the Holders.

     Section 12.12  SUCCESSORS AND ASSIGNS.

     This  Indenture  and all  obligations  of the  Company  hereunder  shall be
binding upon the  successors  and permitted  assigns of the Company,  and shall,
together  with the rights and  remedies of the Trustee  hereunder,  inure to the
benefit  of the  Trustee,  the  Holders,  and their  respective  successors  and
assigns. Any assignment in violation of this Indenture shall be null and void ab
initio.

     Section 12.13  COUNTERPART ORIGINALS.

     This  Indenture  may be signed in two or more  counterparts,  each of which
shall be deemed an original,  but all of which shall together constitute one and
the same agreement.

     Section 12.14  SEVERABILITY.

     The  provisions  of this  Indenture  are  severable,  and if any  clause or
provision shall be held invalid, illegal or unenforceable in whole or in part in
any jurisdiction,  then such invalidity or unenforceability shall affect in that
jurisdiction  only such clause or provision,  or part thereof,  and shall not in
any manner  affect such clause or  provision  in any other  jurisdiction  or any

<PAGE>

other clause or provision of this  Indenture in any  jurisdiction,  and a Holder
shall have no claim therefor against any party hereto.

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Indenture to be
duly executed and delivered all as of the date first written above.

                                 CONTINENTAL AIRLINES, INC.


                                 By:
                                    -----------------------------------------
                                 Name:
                                      ---------------------------------------
                                 Title:
                                       --------------------------------------



                                 WILMINGTON TRUST COMPANY,
                                 as Trustee


                                 By:
                                    -----------------------------------------
                                 Name:
                                      ---------------------------------------
                                 Title:
                                       --------------------------------------



                                 MORGAN STANLEY CAPITAL
                                 SERVICES INC.,
                                 as Liquidity Provider


                                 By:
                                    -----------------------------------------
                                 Name:
                                      ---------------------------------------
                                 Title:
                                       --------------------------------------



                                 MBIA INSURANCE CORPORATION,
                                 as Policy Provider


                                 By:
                                    -----------------------------------------
                                 Name:
                                      ---------------------------------------
                                 Title:
                                       --------------------------------------

<PAGE>

                                   Appendix I

                              DEFINITIONS APPENDIX


SECTION 1.  DEFINED TERMS.

     "ACCELERATION" means, with respect to the amounts payable in respect of the
Securities issued under the Indenture, such amounts becoming immediately due and
payable  pursuant to Section 7.2 of the Indenture.  "ACCELERATE",  "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.

     "ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.

     "ADDITIONAL  PARTS" is  defined  in  Section  3.1(a)(i)  of the  Collateral
Maintenance Agreement.

     "ADDITIONAL  ROTABLES" is defined in Section  3.1(b)(i)  of the  Collateral
Maintenance Agreement.

     "ADVANCE" means any Advance as defined in the Liquidity Facility.

     "AFFILIATE"  of any specified  Person means any other  Person,  directly or
indirectly,  controlling  or  controlled  by or under direct or indirect  common
control  with  such  specified  Person.  For the  purposes  of this  definition,
"CONTROL"  when used with  respect to any  Person  means the power to direct the
management and policies of such Person, directly or indirectly,  whether through
the  ownership of voting  securities,  by contract or  otherwise;  and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.

     "AGENT"  means any  Registrar,  Paying Agent or  co-Registrar  or co-Paying
Agent.

     "AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.

     "AIRCRAFT" means any contrivance  invented,  used, or designed to navigate,
or fly in, the air.

     "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral,  taking at least the following actions: (i)
reviewing the Parts  Inventory  Report  prepared as of the applicable  Valuation
Date;  (ii) reviewing the  Independent  Appraiser's  internal value database for
values  applicable  to  Qualified  Spare  Parts  included  in  the  Spare  Parts
Collateral; (iii) developing a representative sampling of a reasonable number of
the different Qualified Spare Parts included in Spare Parts Collateral for which
a  market  check  will  be  conducted;  (iv)  checking  other  sources,  such as
manufacturers,  other airlines,  U.S.  government  procurement  data and airline
parts  pooling  price  lists,  for  current  market  prices of the sample  parts
referred to in clause (iii);  (v)  establishing  an assumed ratio of Serviceable
Parts to  Unserviceable  Parts as of the  applicable  Valuation  Date based upon
information  provided  by the Company and the  Independent  Appraiser's  limited
physical  review of the Spare  Parts  Collateral  referred  to in the  following

<PAGE>

clause (vi);  (vi) visiting at least two locations  selected by the  Independent
Appraiser  where the Pledged  Spare  Parts are kept by the  Company  (neither of
which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of
the Collateral Maintenance Agreement,  whichever was most recent), PROVIDED that
at least one such location shall be one of the top three  locations at which the
Company keeps the largest  number of Pledged  Spare Parts,  to conduct a limited
physical  inspection of the Spare Parts  Collateral;  (vii) conducting a limited
review of the inventory  reporting system applicable to the Pledged Spare Parts,
including  checking  information  reported  in such system  against  information
determined through physical inspection pursuant to the preceding clause (vi) and
(viii)  reviewing a sampling of the Spare Parts Documents  (including  tear-down
reports).

     "ANNUAL  VALUATION  DATE"  is  defined  in  Section  2.1 of the  Collateral
Maintenance Agreement.

     "APPLIANCE"  means  an  instrument,   equipment,   apparatus,  a  part,  an
appurtenance,  or an accessory  used,  capable of being used,  or intended to be
used,  in operating or  controlling  Aircraft in flight,  including a parachute,
communication  equipment,  and  another  mechanism  installed  in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.

     "APPLICABLE MARGIN" means 0.90%.

     "APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.

     "APPRAISAL  COMPLIANCE  REPORT" means,  as of any date, a report  providing
information  relating to the  calculation  of the  Collateral  Ratio and Rotable
Ratio, which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.

     "APPRAISED  VALUE" means,  with respect to any Collateral,  the Fair Market
Value of such Collateral as most recently  determined pursuant to (i) the report
attached  as  Appendix  II to the  Offering  Memo  or  (ii)  Article  2 and,  if
applicable, Section 3.1 of the Collateral Maintenance Agreement.

     "AVAILABLE AMOUNT" means, as of any date, the Maximum Available  Commitment
(as defined in the Liquidity Facility) on such date.

     "AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.

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

     "BOARD OF  DIRECTORS"  means the Board of  Directors  of the Company or any
committee  of such board  duly  authorized  to act in respect of any  particular
matter.

     "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the  Applicable  Date pursuant to
the formula set forth  below;  PROVIDED,  HOWEVER,  that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below,  is equal to or less than zero or (y) on or in respect of any  Applicable

<PAGE>

Date that is an Interest  Payment Date (or, if such an Interest  Payment Date is
not a Business Day, the next succeeding Business Day)

          Break Amount = Z-Y

          Where:

          X = with respect to any applicable Interest Period, the sum of (i) the
              amount of the outstanding  principal amount of such Note as of the
              first  day  of the  then  applicable  Interest  Period  plus  (ii)
              interest  payable  thereon during such entire  Interest  Period at
              then effective LIBOR.

          Y = X,  discounted  to  present  value  from  the last day of the then
              applicable  Interest  Period to the  Applicable  Date,  using then
              effective LIBOR as the discount rate.

          Z = X,  discounted  to  present  value  from  the last day of the then
              applicable  Interest Period to the Applicable  Date,  using a rate
              equal to the applicable London interbank offered rate for a period
              commencing  on the  Applicable  Date and ending on the last day of
              the then applicable  Interest Period,  determined by the Reference
              Agent as of two Business Days prior to the Applicable  Date as the
              discount rate.

     "BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank  Eurodollar  market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston,  Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with  respect to draws under any Policy,  the city and state in which the
office of the Policy  Provider at which notices,  presentations,  transmissions,
deliveries and  communications  are to be made under the Policy is located,  and
that,  solely with  respect to draws  under the  Liquidity  Facility,  also is a
"Business Day" as defined in the Liquidity Facility.

     "CAPPED INTEREST RATE" means a rate per annum equal to 12%.

     "CASH COLLATERAL" means cash and/or Investment  Securities  deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.

     "CASH COLLATERAL  ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify,  into which all amounts drawn under the Liquidity  Facility
pursuant  to  Section  3.5(c),  3.5(d)  or  3.5(i)  of the  Indenture  shall  be
deposited.

     "CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).

     "CLEARING  AGENCY" means an organization  registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.

<PAGE>

     "CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.

     "CLOSING DATE" means the Issuance Date.

     "CODE" means the Internal Revenue Code of 1986, as amended.

     "COLLATERAL"  means the Spare Parts  Collateral and all other collateral in
which the Collateral  Agent has a security  interest  pursuant to the Collateral
Agreements.

     "COLLATERAL  AGENT" means the Trustee in its capacity as Security  Agent or
as agent on behalf of the Holders under any other Collateral Agreement.

     "COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.

     "COLLATERAL   MAINTENANCE   AGREEMENT"  means  the  Collateral  Maintenance
Agreement,  dated as of the date of the  Indenture,  between the Company and the
Policy Provider.

     "COLLATERAL  RATIO" shall mean a percentage  determined by dividing (i) the
aggregate  principal amount of all Securities  Outstanding  minus the sum of the
Cash  Collateral  held by the Collateral  Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral),  as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance  Agreement,  as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.

     "COLLECTION  ACCOUNT" means the Eligible Deposit Account established by the
Trustee  pursuant to Section 8.13 of the Indenture  which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.

     "COMPANY"  means the party named as such in the Indenture or any obligor on
the  Securities  until a successor  replaces it  pursuant to the  Indenture  and
thereafter means the successor.

     "CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.

     "CONTINENTAL  BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.

     "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents  that would have been shown on the balance sheet of Continental  and
its  consolidated  subsidiaries  prepared  in  accordance  with  GAAP  as of any
Valuation  Date,  plus (b) the amount of marketable  securities  that would have
been  reflected on such balance  sheet which had, as of such  Valuation  Date, a
maturity  of less than one year and which,  but for their  maturity,  would have
qualified to be reflected on such balance sheet as cash equivalents.

     "CONTROLLING  PARTY" means the Person  entitled to act as such  pursuant to
the terms of Section 3.8 of the Indenture.

<PAGE>

     "CORPORATE  TRUST  OFFICE" when used with respect to the Trustee  means the
office  of the  Trustee  at which at any  particular  time its  corporate  trust
business  is  administered  and  which,  at the  Closing  Date,  is  located  at
Wilmington  Trust  Company,  as Trustee,  Rodney  Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.

     "DEBT  BALANCE"  means  110% of the  principal  amount  of the  Outstanding
Securities.

     "DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period, to 2.32% and, in the case of any subsequent  Interest Period,  LIBOR for
such Interest Period, as determined  pursuant to the Reference Agency Agreement,
plus the Applicable  Margin,  PROVIDED that, solely in the event no Registration
Event (as defined in the Registration  Rights  Agreement)  occurs on or prior to
the 210th day after the Closing  Date,  the Debt Rate shall be  increased  by an
additional margin equal to 0.50% per annum, from and including such 210th day to
and  excluding  the  earlier  of (i) the date on which such  Registration  Event
occurs and (ii) the date on which there ceases to be any Registrable  Securities
(as defined in the Registration Rights Agreement)); or if the Shelf Registration
Statement (as defined in the  Registration  Rights  Agreement) (if it is filed),
after being  declared  effective by the SEC,  ceases to be effective at any time
during  the period  specified  by Section  2(b)(B)  of the  Registration  Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period,  the Debt Rate shall be increased by an additional margin equal to 0.50%
per annum from and including the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to and excluding the date on
which the Shelf Registration  Statement again becomes effective (or, if earlier,
the end of the period  specified by Section 2(b)(B) of the  Registration  Rights
Agreement),  PROVIDED that the additional margin added to the Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time,  PROVIDED FURTHER
that,  if a default in the payment of interest on the  Securities  occurs and is
continuing on any Interest  Payment Date,  then the Debt Rate  applicable to the
Interest Period ending on such Interest Payment Date shall not exceed the Capped
Interest  Rate,  except that for  purposes  of any  payment  made by the Company
intended to cure such default, this proviso shall not apply.

     "DEFAULT"  means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.

     "DEFINITIONS  APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.

     "DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.

     "DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged  Spare Parts may be maintained by or
on behalf of the Company,  which  initially  shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional  locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.

     "DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

<PAGE>

     "DISTRIBUTION  DATE"  means (i) each  Scheduled  Payment  Date  (and,  if a
Payment  required to be paid to the Trustee for  distribution  on such Scheduled
Payment Date has not been so paid by 12:30 p.m.,  New York time,  in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time,  except for a
defaulted  payment  of  interest  that is not paid  within  five days  after the
Scheduled  Payment Date therefor),  (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the  Non-Performance  Payment Date, (iv)
the Final Legal  Maturity  Date, (v) the Election  Distribution  Date,  (vi) the
Policy Election  Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section  3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider  pursuant to Section 3.6(d) of the
Indenture  and not for purposes of any other payment or  distribution  under the
Indenture, the date established for such payment in accordance with the Policy.

     "DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.

     "DOWNGRADE  EVENT" has the meaning  assigned to such term in Section 3.5(c)
of the Indenture.

     "DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.

     "DRAWING"  means an Interest  Drawing,  a Final  Drawing,  a  Non-Extension
Drawing or a Downgrade Drawing, as the case may be.

     "DTC" means The Depository Trust Company, its nominees and their respective
successors.

     "ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.

     "ELIGIBLE  ACCOUNT"  means an account  established  by and with an Eligible
Institution at the request of the Security Agent, which institution  agrees, for
all  purposes  of the New York UCC  including  Article 8 thereof,  that (a) such
account shall be a "securities  account" (as defined in Section 8-501 of the New
York UCC), (b) such  institution is a "securities  intermediary"  (as defined in
Section  8-102(a)(14)  of the New York UCC), (c) all property  (other than cash)
credited to such account shall be treated as a "financial  asset" (as defined in
Section  8-102(9)  of the New York UCC),  (d) the  Security  Agent  shall be the
"entitlement  holder"  (as  defined in Section  8-102(7) of the New York UCC) in
respect of such account,  (e) it will comply with all entitlement  orders issued
by the Security  Agent to the  exclusion  of the  Company,  (f) it will waive or
subordinate  in  favor of the  Security  Agent  all  claims  (including  without
limitation,  claims by way of  security  interest,  lien or right of  set-off or
right of recoupment),  and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.

     "ELIGIBLE  DEPOSIT  ACCOUNT" means either (a) a segregated  account with an
Eligible  Institution or (b) a segregated trust account with the corporate trust
department of a depository  institution  organized  under the laws of the United
States of America or any one of the states  thereof or the  District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository  institution has a long-term  unsecured debt rating or issuer
credit  rating,  as the  case  may  be,  from  Moody's  of at  least  A-3 or its

<PAGE>

equivalent.  An Eligible  Deposit  Account may be maintained  with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution;  provided
that such  Liquidity  Provider  shall have  waived  all  rights of  set-off  and
counterclaim with respect to such account.

     "ELIGIBLE  INSTITUTION"  means (a) the  Security  Agent or (b) a depository
institution  organized under the laws of the United States of America or any one
of the states  thereof or the  District  of  Columbia  (or any U.S.  branch of a
foreign  bank),  which has a long-term  unsecured  debt rating or issuer  credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.

     "ELIGIBLE   INVESTMENTS"  means  (a)  investments  in  obligations  of,  or
guaranteed  by,  the U.S.  Government  having  maturities  no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any  corporation  incorporated  under the laws of the United  States of
America or any state thereof with a short-term  unsecured  debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having  maturities no later than 90 days  following the
date of  such  investment  or (c)  investments  in  negotiable  certificates  of
deposit, time deposits,  banker's acceptances,  commercial paper or other direct
obligations of, or obligations  guaranteed by,  commercial banks organized under
the laws of the United  States or of any political  subdivision  thereof (or any
U.S.  branch of a foreign  bank)  with a  short-term  unsecured  debt  rating by
Moody's of at least P-1 and a  short-term  issuer  credit  rating by  Standard &
Poor's of at least A-1,  having  maturities no later than 90 days  following the
date of such investment;  PROVIDED,  HOWEVER,  that (x) all Eligible Investments
that are bank  obligations  shall be  denominated in U.S.  dollars;  and (y) the
aggregate  amount  of  Eligible  Investments  at any  one  time  that  are  bank
obligations  issued by any one bank shall not be in excess of 5% of such  bank's
capital surplus;  PROVIDED FURTHER that any investment of the types described in
clauses (a),  (b) and (c) above may be made  through a  repurchase  agreement in
commercially  reasonable  form  with  a  bank  or  other  financial  institution
qualifying as an Eligible  Institution  so long as such  investment is held by a
third party  custodian  also  qualifying  as an Eligible  Institution;  PROVIDED
FURTHER,  HOWEVER,  that in the  case of any  Eligible  Investment  issued  by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code.  Notwithstanding  the
foregoing,  no  investment  of the types  described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates,  and no investment
in the  obligations  of any one  bank in  excess  of  $10,000,000,  shall  be an
Eligible  Investment  unless written  approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.

     "ENGINE"  means an  engine  used,  or  intended  to be used,  to  propel an
Aircraft, including a part, appurtenance,  and accessory of the Engine, except a
Propeller.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time

     "EUROCLEAR"  means Euroclear Bank  S.A./N.V.,  as operator of the Euroclear
System.

     "EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.

<PAGE>

     "EVENT OF LOSS" means (i) the loss of any of the Pledged  Spare Parts or of
the use thereof due to destruction,  damage beyond repair or rendition of any of
the  Pledged  Spare  Parts  permanently  unfit  for  normal  use for any  reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged  Spare  Parts  which  results in the receipt of
insurance  proceeds  with respect to such Pledged Spare Parts on the basis of an
actual  or  constructive  loss;  or (iii) the loss of  possession  of any of the
Pledged Spare Parts by the Company for ninety (90)  consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.

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

     "EXCHANGE  FLOATING  RATE  SECURED  NOTES DUE 2007" is  defined  in Section
2.1(a) of the Indenture.

     "EXCHANGE OFFER" means the exchange offer which may be made pursuant to the
Registration  Rights  Agreement to exchange  Initial  Certificates  for Exchange
Certificates.

     "EXCHANGE OFFER  REGISTRATION  STATEMENT" means the registration  statement
that,  pursuant to the Registration  Rights  Agreement,  is filed by the Company
with the SEC with  respect to the  exchange of Initial  Securities  for Exchange
Securities.

     "EXCHANGE  SECURITIES"  means the securities  substantially  in the form of
Exhibit  A to the  Indenture  issued  in  exchange  for the  Initial  Securities
pursuant to the Registration Rights Agreement and authenticated  pursuant to the
Indenture.

     "EXCLUDED  PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.

     "EXPENDABLES" means Qualified Spare Parts other than Rotables.

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

     "FAA"  means the  Federal  Aviation  Administration  or similar  regulatory
authority established to replace it.

     "FAA FILED DOCUMENTS" means the Security Agreement.

     "FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider  thereunder,  presently located at 1585 Broadway,  New
York, New York 10036, or such other office as such Liquidity  Provider from time
to time  shall  notify  the  Trustee  as its  "Facility  Office"  under any such
Liquidity  Facility;  provided that such Liquidity Provider shall not change its
Facility Office to another  Facility Office outside the United States of America
except in accordance  with  Sections  3.01,  3.02 or 3.03 of any such  Liquidity
Facility.

<PAGE>

     "FAIR MARKET VALUE" means, with respect to any Collateral,  its fair market
value  determined  on the basis of a  hypothetical  sale  negotiated in an arm's
length free market  transaction  between a willing and able seller and a willing
and able  buyer,  neither  of whom is  under  undue  pressure  to  complete  the
transaction,  under then current market conditions,  provided that cash shall be
valued at its Dollar amount.

     "FEDERAL   AVIATION  ACT"  means  Title  49  of  the  United  States  Code,
"Transportation",  as amended from time to time, or any similar  legislation  of
the United States enacted in substitution or replacement thereof.

     "FEE  LETTERS"  means,  collectively,  (i) the Fee  Letter  dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial  Liquidity  Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.

     "FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.

     "FINAL LEGAL MATURITY DATE" means December 6, 2009.

     "FINAL ORDER" has the meaning assigned to such term in the Policy.

     "FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.

     "FINANCING  STATEMENTS"  means,  collectively,  UCC-1 financing  statements
covering  the Spare Parts  Collateral,  by the Company,  as debtor,  showing the
Security  Agent as secured  party,  for filing in Delaware,  Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.

     "GAAP" means generally accepted accounting  principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the  opinions  and  pronouncements  of the  Accounting  Principles  Board of the
American  Institute  of  Certified  Public  Accountants,   (ii)  statements  and
pronouncements  of the Financial  Accounting  Standards Board,  (iii) such other
statements  by such other  entity as  approved by a  significant  segment of the
accounting  profession  and (iv) the rules and  regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic  reports required to be filed pursuant to Section 13 of the Exchange
Act,  including  opinions and  pronouncements in staff accounting  bulletins and
similar written statements from the accounting staff of the SEC.

     "GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.

     "GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.

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

<PAGE>

to the observance or performance of the obligations of any of the parties to the
Operative Documents.

     "HOLDER" or  "SECURITYHOLDER"  means the Person in whose name a Security is
registered on the Registrar's books.

     "INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or  additional  trustee or  security  agent  appointed  pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.

     "INDENTURE"  means the  Indenture  dated as of December 6, 2002,  among the
Company, the Trustee, the Liquidity Provider and the Policy Provider under which
the Securities are issued.

     "INDENTURE  DISCHARGE  DATE"  means  the  date  of the  termination  of the
effectiveness  of the  Indenture  pursuant to Section  9.1(a)  thereof  (without
giving effect to Section 9.1(b) thereof).

     "INDENTURE TRUSTEE" means the Trustee.

     "INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes  appraising  Aircraft and assets
related to the operation and  maintenance of Aircraft from time to time and (ii)
who does not have any  material  financial  interest  in the  Company and is not
connected  with the Company or any of its  Affiliates  as an officer,  director,
employee, promoter, underwriter, partner or person performing similar functions.

     "INDEPENDENT  APPRAISER'S  CERTIFICATE"  means a  certificate  signed by an
Independent  Appraiser  and  attached  as Appendix  II to the  Offering  Memo or
delivered  thereafter  pursuant  to Article 2 or Section  3.1 of the  Collateral
Maintenance Agreement.

     "INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.

     "INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.

     "INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.

     "INITIAL SECURITIES" mean the securities issued and authenticated  pursuant
to the Indenture and substantially in the form of Exhibit A thereto,  other than
the Exchange Securities.

     "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited  investor"  within the meaning set forth in Rule 501(a)(1),  (2),
(3) or (7) of Regulation D under the Securities Act.

     "INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.

     "INTEREST  PAYMENT DATE" means March 6, June 6,  September 6 and December 6
of each year so long as any Security is Outstanding  (commencing March 6, 2003),

<PAGE>

PROVIDED that if any such day is not a Business Day, then the relevant  Interest
Payment Date shall be the next succeeding Business Day.

     "INTEREST  PERIOD" means (i) in the case of the first Interest Period,  the
period  commencing  on (and  including)  the  Closing  Date and  ending  on (but
excluding) the first  Interest  Payment Date following such date and (ii) in the
case  of  each  subsequent  Interest  Period,  the  period  commencing  on  (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.

     "INVESTMENT  EARNINGS" means investment earnings on funds on deposit in the
Trust  Accounts net of losses and  investment  expenses of the Trustee in making
such investments.

     "INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof;  (b) any
obligation  which is a direct  obligation  of or  guaranteed by any state of the
U.S. or any subdivision  thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's;  (c)
any commercial  paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment  instrument relying
upon the credit and  backing of any bank or trust  company  which is a member of
the Federal Reserve System and which has a combined capital  (including  capital
reserves  to the extent not  included in  capital)  and  surplus  and  undivided
profits of not less than  $250,000,000  (including the Collateral  Agent and its
Affiliates if such  requirements  as to Federal  Reserve  System  membership and
combined  capital and surplus and undivided  profits are satisfied),  including,
without  limitation,  certificates of deposit,  time and other  interest-bearing
deposits,   bankers'   acceptances,   commercial   paper,   loan  and   mortgage
participation   certificates  and  documented   discount  notes  accompanied  by
irrevocable  letters  of  credit  and  money  market  fund  investing  solely in
securities  backed by the full  faith and credit of the  United  States;  or (e)
repurchase agreements collateralized by any of the foregoing.

     "ISSUANCE DATE" means the date of issuance of the Initial Securities.

     "LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order,  rule or  directive  of any  Government  Entity,  and (b) any judicial or
administrative  interpretation  or application of, or decision under, any of the
foregoing.

     "LIBOR" has the meaning specified in the Reference Agency Agreement.

     "LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.

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

     "LIQUIDITY  EVENT OF DEFAULT" has the meaning  assigned to such term in the
Liquidity Facility.

     "LIQUIDITY  EXPENSES"  means all Liquidity  Obligations  other than (i) the
principal  amount of any  Drawings  under the  Liquidity  Facility  and (ii) any
interest accrued on any Liquidity Obligations.

<PAGE>

     "LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit  Agreement  pursuant
hereto, the Replacement  Liquidity  Facility  therefor,  if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.

     "LIQUIDITY  GUARANTEE" means the Guarantee Agreement,  dated as of the date
of the Indenture,  providing for the guarantee by the Liquidity Guarantor of the
obligations of the Liquidity Provider under the Liquidity Facility.

     "LIQUIDITY GUARANTOR" means Morgan Stanley.

     "LIQUIDITY  OBLIGATIONS"  means  all  principal,  interest,  fees and other
amounts owing to the Liquidity  Provider under the Liquidity Facility or the Fee
Letter.

     "LIQUIDITY  PROVIDER" means Morgan Stanley Capital Services Inc.,  together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any  Liquidity  Facility  pursuant to Section  3.5(e) of the
Indenture.

     "LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.

     "LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.

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

     "MAXIMUM COLLATERAL RATIO" means 45%.

     "MINIMUM ROTABLE RATIO" means 150%.

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

     "MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "MSCS" has the meaning specified in the first paragraph of the Indenture.

     "NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.

     "NONAPPRAISAL  COMPLIANCE  REPORT"  means a  report  providing  information
relating  to  compliance  by the  Company  with  Section  3.2 of the  Collateral
Maintenance Agreement,  which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.

     "NON-CONTROLLING  PARTY"  means,  at any time,  the Holders,  the Liquidity
Provider and the Policy Provider,  excluding  whichever is the Controlling Party
at such time.

     "NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.

<PAGE>

     "NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.

     "NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.

     "NON-PERFORMANCE  PAYMENT  DATE"  is  defined  in  Section  3.6(c)  of  the
Indenture.

     "NON-PERFORMING"  means,  with respect to any Security,  a Payment  Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy  proceeding  under the Bankruptcy Code in which the
Company is a debtor,  any Payment Default  existing at the  commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy  Code or as may apply for the cure of such Payment  Default under
Section   1110(a)(2)(B)  of  the  Bankruptcy  Code)  shall  not  be  taken  into
consideration until the expiration of the applicable period.

     "NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.

     "NON-U.S.  PERSON" means any Person other than a U.S. person, as defined in
Regulation S.

     "NOTICE OF AVOIDED  PAYMENT"  has the meaning  assigned to such term in the
Policy.

     "NOTICE FOR PAYMENT"  means a Notice of  Nonpayment as such term is defined
in the Policy.

     "OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.

     "OFFERING MEMO" means the Offering  Memorandum,  dated December 2, 2002, of
the Company relating to the offering of the Securities.

     "OFFICER"  means  the  Chairman  of the  Board,  the  President,  any  Vice
President  of any  grade,  the  Chief  Financial  Officer,  the  Treasurer,  any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.

     "OFFICERS'   CERTIFICATE"  means  a  certificate  signed  by  two  Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.

     "OPERATIVE DOCUMENTS" means the Indenture,  the Collateral Agreements,  the
Collateral Maintenance Agreement and the Reference Agency Agreement.

     "OPINION OF COUNSEL"  means a written  opinion from the General  Counsel of
the  Company,  legal  counsel to the  Company or another  legal  counsel  who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the  Indenture.  The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days  following  receipt) of, or its action on,
an opinion of counsel not  specifically  referred  to above shall be  sufficient
evidence that such counsel is acceptable to the Trustee.

<PAGE>

         "OUTSTANDING" or "OUTSTANDING"  when used with respect to Securities or
a Security,  means all Securities theretofore  authenticated and delivered under
the Indenture, except:

          (a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;

          (b) Securities,  or portions thereof,  for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Securities,  PROVIDED that, if such Securities are
to be redeemed,  notice of such  redemption  has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee has been made;

          (c)  Securities  for which payment has been deposited with the Trustee
or any Paying Agent in trust  pursuant to Article 9 of the Indenture  (except to
the extent provided therein); and

          (d)  Securities  which have been paid,  or for which other  Securities
shall have been  authenticated  and delivered in lieu thereof or in substitution
therefor  pursuant to the terms of Section 2.12 of the  Indenture,  unless proof
satisfactory  to the Trustee is presented  that any such  Securities are held by
bona fide purchasers in whose hands the Securities are valid  obligations of the
Company.

     A Security does not cease to be  Outstanding  because the Company or one of
its  Affiliates  holds the  Security;  PROVIDED,  HOWEVER,  that in  determining
whether the Holders of the requisite  aggregate  principal  amount of Securities
Outstanding have given any request, demand,  authorization,  direction,  notice,
consent or waiver under the Indenture or any other Operative  Document,  Section
2.13 of the Indenture shall be applicable.

     "OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.

     "OVERDUE  SCHEDULED  PAYMENT" means any Payment of accrued  interest on the
Securities  which  is not in fact  received  by the  Trustee  (whether  from the
Company, the Liquidity Provider,  the Policy Provider or otherwise) on or within
five days after the  Scheduled  Payment Date  relating  thereto and which is not
subsequently  paid in  connection  with the  redemption  or final  maturity of a
Security.

     "PARTS  INVENTORY  REPORT" means,  as of any date, a list  identifying  the
Pledged  Spare Parts by  manufacturer's  part number and brief  description  and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.

     "PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.

     "PAYMENT"  means (i) any payment of principal of,  interest on, or Premium,
if any,  or Break  Amount,  if any,  with  respect  to the  Securities  from the
Company,  (ii) any payment of interest on the Securities  with funds drawn under
the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal  of  Securities  with funds drawn under the Policy,  or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.

<PAGE>

     "PAYMENT  DEFAULT"  means a Default  referred  to in Section  7.1(a) of the
Indenture.

     "PAYMENT  DUE RATE"  means  (a) the Debt Rate plus 2% or, if less,  (b) the
maximum rate permitted by applicable law.

     "PERMITTED  DAYS" is defined in Section 2.1 of the  Collateral  Maintenance
Agreement.

     "PERMITTED  LESSEE"  has the  meaning  provided  in  Section  3.6(b) of the
Collateral Maintenance Agreement.

     "PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents;  (b) Liens  attributable  to Security  Agent (both in its capacity as
Security Agent and in its individual  capacity);  (c) the rights of others under
agreements or  arrangements  to the extent  expressly  permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement;  (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being  contested in good faith by appropriate  proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged  Spare Parts or the  interest of Security  Agent  therein or
impair  the  Lien of the  Security  Agreement;  (e)  materialmen's,  mechanics',
workers',  repairers',  employees'  or other like Liens  arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for  more  than 60 days or is  being  contested  in good  faith  by  appropriate
proceedings,  so long as such  Liens and such  proceedings  do not  involve  any
material risk of the sale,  forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award  against the Company,  so long as
such  judgment  shall,  within  60 days  after  the  entry  thereof,  have  been
discharged or vacated,  or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result,  or
any such  judgment or award does not  involve,  any  material  risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security  Agent
therein or any impairment of the Lien of the Security  Agreement;  (g) any other
Lien  with  respect  to which the  Company  shall  have  provided  a bond,  cash
collateral  or other  security  adequate in the  reasonable  opinion of Security
Agent.

     "PERSON" means any individual, corporation,  partnership, limited liability
company,  joint  venture,  association,  joint-stock  company,  trust,  trustee,
unincorporated  organization,  government or any agency or political subdivision
thereof or any other entity.

     "PLEDGED  SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.

     "POLICY"  means MBIA Insurance  Corporation  Financial  Guaranty  Insurance
Policy No. 39753,  issued as of the Closing Date,  as amended,  supplemented  or
otherwise modified from time to time in accordance with its respective terms.

     "POLICY  ACCOUNT"  means the Eligible  Deposit  Account  established by the
Trustee  pursuant to Section  8.13(a) of the  Indenture  which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.

<PAGE>

     "POLICY DRAWING" means any payment of a claim under the Policy.

     "POLICY  ELECTION  DISTRIBUTION  DATE" is defined in Section  3.6(c) of the
Indenture.

     "POLICY  EXPENSES"  means all  amounts  (including  amounts  in  respect of
premiums,  fees,  expenses or indemnities)  due to the Policy Provider under the
Policy Provider  Agreement other than (i) any Policy Drawing,  (ii) any interest
accrued on any  Policy  Provider  Obligations,  and (iii)  reimbursement  of and
interest on the Liquidity  Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider;  provided that if, at the time
of  determination,  a Policy Provider Default exists,  Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.

     "POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from
the Policy  Provider to Continental  and  acknowledged  by the Trustee,  setting
forth the fees and premiums payable with respect to the Policy.

     "POLICY  PROVIDER" means MBIA Insurance  Corporation,  a New York insurance
company, and its successors and permitted assigns.

     "POLICY  PROVIDER  AGREEMENT"  means the Insurance and Indemnity  Agreement
dated as of the date  hereof  among the  Trustee,  the  Company  and the  Policy
Provider,  as amended,  supplemented or otherwise  modified from time to time in
accordance with its terms.

     "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events:  (a) the  Policy  Provider  fails to make a payment  required  under the
Policy in accordance with its terms and such failure remains  unremedied for two
Business Days  following  the delivery of Written  Notice of such failure to the
Policy  Provider or (b) the Policy  Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy,  rehabilitation,  liquidation or reorganization, (ii)
makes a general  assignment  for the  benefit of its  creditors  or (iii) has an
order for relief  entered  against it under any federal or state law relating to
insolvency,  bankruptcy,  rehabilitation,  liquidation or reorganization that is
final and nonappealable,  or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material  portion of
its  property  or (ii)  authorizing  the taking of  possession  by a  custodian,
trustee,  agent or receiver of the Policy  Provider (or taking of  possession of
all or any material portion of the Policy Provider's property).

     "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.

     "POLICY  PROVIDER  INTEREST  OBLIGATIONS"  means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity  Facility in an amount equal to the amount of interest that would have
accrued on such  Interest  Drawing  if such  Interest  Drawing  had been made in
accordance with Section  2.02(e) of the Liquidity  Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.

<PAGE>

     "POLICY PROVIDER  OBLIGATIONS"  means all  reimbursement and other amounts,
including,  without limitation, fees and indemnities (to the extent not included
in Policy  Expenses),  due to the  Policy  Provider  under the  Policy  Provider
Agreement  but shall not include  any  interest  on Policy  Drawings  other than
Policy Provider Interest Obligations.

     "PREMIUM" means,  with respect to any Security redeemed pursuant to Article
4 of the  Indenture,  the following  percentage of the principal  amount of such
Security:  (i) if redeemed  before the first  anniversary  of the Issuance Date,
1.5%; (ii) if redeemed on or after such first  anniversary and before the second
anniversary of the Issuance  Date,  1.0%; and (iii) if redeemed on or after such
second  anniversary and before the third anniversary of the Issuance Date, 0.5%;
PROVIDED that no Premium shall be payable in connection  with a redemption  made
by the Company to satisfy the Maximum  Collateral Ratio or Minimum Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement.

     "PRIOR FUNDS" means, on any  Distribution  Date, any Drawing paid under the
Liquidity  Facility on such  Distribution  Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.

     "PROCEEDS   DEFICIENCY  DRAWING"  is  defined  in  Section  3.6(b)  of  the
Indenture.

     "PROPELLER" includes a part, appurtenance, and accessory of a propeller.

     "PROVIDER  INCUMBENCY  CERTIFICATE"  is defined  in  Section  3.7(b) of the
Indenture.

     "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

     "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.

     "QIB" means a qualified institutional buyer as defined in Rule 144A.

     "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.

     "RATING  AGENCIES"  means,  collectively,  at  any  time,  each  nationally
recognized  rating agency which shall have been requested by the Company to rate
the Securities and which shall then be rating the Securities. The initial Rating
Agency will be Moody's.

     "RATINGS  CONFIRMATION"  means,  with respect to any action  proposed to be
taken, a written  confirmation from each of the Rating Agencies that such action
would not result in (i) a reduction of the rating for the  Securities  below the
then current rating for the Securities (such rating as determined without regard
to the  Policy)  or  (ii) a  withdrawal  or  suspension  of  the  rating  of the
Securities.

     "RECORD  DATE"  means the  fifteenth  (15th) day  preceding  any  Scheduled
Interest Payment Date, whether or not a Business Day.

<PAGE>

     "REDEMPTION  DATE",  when used with respect to any Security to be redeemed,
means the date fixed for such  redemption  by or pursuant to the  Indenture  and
such Security.

     "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.

     "REGISTER" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRATION  RIGHTS  AGREEMENT" means the  Registration  Rights Agreement
dated as of  December  6, 2002,  by and  between  the  Company  and the  Initial
Purchaser.

     "REGULATION S" means Regulation S under the Securities Act.

     "REGULATION S DEFINITIVE  SECURITIES"  is defined in Section  2.1(e) of the
Indenture.

     "REGULATION  S  GLOBAL  SECURITY"  is  defined  in  Section  2.1(d)  of the
Indenture.

     "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.

     "REPLACEMENT  LIQUIDITY  FACILITY"  means an irrevocable  revolving  credit
agreement (or agreements) in  substantially  the form of the replaced  Liquidity
Facility,  including reinstatement  provisions, or in such other form (which may
include a letter of credit) as shall  permit the Rating  Agencies  to confirm in
writing  their  respective  ratings  then in effect for the  Securities  (before
downgrading  of such  ratings,  if any,  as a result of the  downgrading  of the
Liquidity Provider),  and be consented to by the Policy Provider,  which consent
shall not be  unreasonably  withheld  or  delayed,  in a face  amount  (or in an
aggregate face amount) equal to the amount of interest payable on the Securities
(at the Capped  Interest Rate, and without regard to expected  future  principal
payments) on the eight Interest  Payment Dates following the date of replacement
of such Liquidity Facility (or if such date is an Interest Payment Date, on such
day and the seven  Interest  Payment Dates  following the date of replacement of
such Liquidity  Facility) and issued by a Person (or Persons)  having  unsecured
short-term  debt rating or issuer credit  rating,  as the case may be, issued by
the Rating  Agencies  which are equal to or higher  than the  Threshold  Rating.
Without  limitation of the form that a Replacement  Liquidity Facility otherwise
may have pursuant to the preceding  sentence,  a Replacement  Liquidity Facility
for the Securities may have a stated  expiration date earlier than 15 days after
the Final Legal  Maturity Date so long as such  Replacement  Liquidity  Facility
provides for a  Non-Extension  Drawing as  contemplated by Section 3.5(d) of the
Indenture.

     "REQUEST" means a written request for the action therein  specified  signed
on behalf of the Company by any  Officer  and  delivered  to the  Trustee.  Each
Request shall be  accompanied  by an Officers'  Certificate if and to the extent
required by Section 12.4 of the Indenture.

     "REQUIRED  AMOUNT" means,  for any day, the sum of the aggregate  amount of
interest,  calculated at the Capped  Interest Rate, that would be payable on the
Securities on each of the eight successive  Interest  Payment Dates  immediately
following such day or, if such day is an Interest  Payment Date, on such day and
the succeeding  seven Interest  Payment  Dates,  in each case  calculated on the

<PAGE>

basis of the  outstanding  principal  amount of the  Securities on such date and
without regard to expected future payments of principal on the Securities.

     "REQUIRED  HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.

     "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the  corporate  trust  administration  department  of the  Trustee  or any other
officer  customarily  performing  functions  similar to those  performed  by the
Persons who at the time shall be such  officers or to whom any  corporate  trust
matter is referred  because of his or her  knowledge of and  familiarity  with a
particular subject, (ii) with respect to the Liquidity Provider,  any authorized
officer  of the  Liquidity  Provider,  and  (iii)  with  respect  to the  Policy
Provider, any authorized officer of the Policy Provider.

     "RESTRICTED  DEFINITIVE  SECURITIES"  is defined  in Section  2.1(e) of the
Indenture.

     "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.

     "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.

     "RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture.

     "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.

     "ROTABLE"  means a  Qualified  Spare  Part that  wears over time and can be
repeatedly restored to a serviceable  condition over a period  approximating the
life of the flight equipment to which it relates.

     "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market  Value of the  Rotables,  as set  forth in the  most  recent  Independent
Appraiser's  Certificate  delivered by the Company  pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities  Outstanding  minus the sum of the Cash Collateral held
by the Collateral Agent.

     "RULE 144A" means Rule 144A under the Securities Act.

     "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.

     "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable  thereto,  (ii) with respect to any payment
of defaulted  interest,  the payment date established  pursuant to Section 2.16,
(iii)  with  respect to  amounts  due on the  redemption  of any  Security,  the
Redemption Date applicable thereto,  and (iv) with respect to the final maturity
of the Securities, December 6, 2007.

<PAGE>

     "SEC" means the  Securities  and  Exchange  Commission  and any  government
agency succeeding to its functions.

     "SECTION 1110" means Section 1110 of the Bankruptcy Code.

     "SECTION 1110 PERIOD" means the continuous  period of (i) 60 days specified
in Section  1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period,  if any,  commencing  with the trustee or  debtor-in-possession  in such
proceeding agreeing,  with court approval,  to perform its obligations under the
Operative  Documents  within  such 60 days (or  longer  period  as  agreed)  and
continuing  until such time as such  trustee or  debtor-in-possession  ceases to
fully perform its obligations  thereunder with the result that the period during
which the Collateral Agent is prohibited from  repossessing the collateral under
any Collateral Agreement comes to an end.

     "SECURITIES" means the "Securities",  as defined in the Indenture, that are
issued under the Indenture.

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

     "SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement.

     "SECURITY  AGREEMENT" means the Spare Parts Security  Agreement dated as of
the date of the Indenture between the Company and the Security Agent.

     "SECURITYHOLDER" means any holder of one or more Securities.

     "SEMIANNUAL  METHODOLOGY" means the Annual  Methodology,  excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.

     "SEMIANNUAL  VALUATION  DATE" is defined in Section  2.2 of the  Collateral
Maintenance Agreement.

     "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation  in,  installation on,  attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.

     "SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be  required  to be  filed  by the  Company  with  the SEC  pursuant  to the
Registration  Rights  Agreement,  other  than  an  Exchange  Offer  Registration
Statement.

     "SPARE  PART"  means an  accessory,  appurtenance,  or part of an  Aircraft
(except an Engine or  Propeller),  Engine  (except a Propeller),  Propeller,  or
Appliance,  that is to be  installed  at a later  time in an  Aircraft,  Engine,
Propeller or Appliance.

     "SPARE PARTS  COLLATERAL" has the meaning  specified in Section 2.01 of the
Security Agreement.

<PAGE>

     "SPARE  PARTS  DOCUMENTS"  has the  meaning  set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.

     "SPECIAL  DEFAULT"  means a Payment  Default  or a  Continental  Bankruptcy
Event.

     "SPECIAL  RECORD  DATE" has the  meaning  provided  in Section  2.10 of the
Indenture.

     "SPECIAL  VALUATION  DATE" is  defined  in  Section  2.4 of the  Collateral
Maintenance Agreement.

     "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.

     "STATED  AMOUNT" means the Maximum  Commitment (as defined in the Liquidity
Facility).

     "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.

     "SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture.

     "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.

     "SUPPLEMENTAL  SECURITY  AGREEMENT"  means  a  supplement  to the  Security
Agreement substantially in the form of Exhibit A to the Security Agreement.

     "SUPPORT  DOCUMENTS" means the Liquidity  Facility,  the Policy, the Policy
Provider Agreement and the Fee Letters.

     "TAX" and "TAXES" mean any and all taxes,  fees, levies,  duties,  tariffs,
imposts,  and other  charges of any kind  (together  with any and all  interest,
penalties,  loss, damage,  liability,  expense,  additions to tax and additional
amounts or costs incurred or imposed with respect  thereto) imposed or otherwise
assessed  by the United  States of  America  or by any  state,  local or foreign
government  (or any  subdivision or agency  thereof) or other taxing  authority,
including,  without  limitation:  taxes or other  charges on or with  respect to
income, franchises,  windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment  compensation,  or net worth and  similar  charges;  taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added,  taxes on goods and  services,  gains taxes,  license,  registration  and
documentation fees, customs duties, tariffs, and similar charges.

     "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.

     "THRESHOLD AMOUNT" means $2,000,000.

     "THRESHOLD  RATING" means the  short-term  unsecured  debt rating of P-1 by
Moody's  and A-1 by  Standard  & Poor's;  PROVIDED  that so long as the  initial
Liquidity Provider is the Liquidity  Provider,  the Threshold Rating shall apply
to the Liquidity Guarantor.

<PAGE>

     "TIA"  means  the  Trust  Indenture  Act  of  1939  (15  U.S.  Code  ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is  amended  after such date,  "TIA"  means,  to the extent
required by any such amendment, the TIA as so amended.

     "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.

     "TRUST OFFICER" means any officer in the corporate trust  department of the
Trustee,  or any other officer or assistant  officer of the Trustee  assigned by
the Trustee to administer its corporate trust matters.

     "TRUSTEE"  means the party named as such in the Indenture until a successor
replaces it in accordance  with the  provisions of the Indenture and  thereafter
means the successor.

     "TRUSTEE  INCUMBENCY  CERTIFICATE"  is  defined  in  Section  3.7(a) of the
Indenture.

     "TRUSTEE   PROVISIONS"   is  defined  in  Section  4.1  of  the  Collateral
Maintenance Agreement.

     "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.

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

     "UNAPPLIED   PROVIDER  ADVANCE"  is  defined  in  the  Liquidity  Facility.

     "UNSERVICEABLE  PARTS" means Pledged  Spare Parts that are not  Serviceable
Parts.

     "U.S." or "UNITED STATES" means the United States of America.

     "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating  certificate  issued pursuant
to chapter  447 of title 49 of the United  States Code for  aircraft  capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.

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

     "U.S.  GOVERNMENT  OBLIGATIONS"  means direct  obligations (or certificates
representing an ownership  interest in such obligations) of the United States of
America  (including  any agency or  instrumentality  thereof) for the payment of
which the full faith and credit of the United  States of America is pledged  and
which are not callable at the option of the issuer thereof.

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

     "VALUATION  DATES" is defined in Section 2.4 of the Collateral  Maintenance
Agreement.

     "WARRANTIES"  is  defined in clause  (2) of  Section  2.01 of the  Security
Agreement.

     "WRITTEN  NOTICE" means,  from the Trustee,  the Liquidity  Provider or the
Policy Provider, a written instrument executed by the Designated  Representative

<PAGE>

of such Person.  An invoice  delivered  by the  Liquidity  Provider  pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing  procedures
shall constitute Written Notice under such Section.

     "WTC" has the meaning specified in the first paragraph of the Indenture.

SECTION 2. RULES OF CONSTRUCTION.  Unless the context  otherwise  requires,  the
following  rules of  construction  shall apply for all purposes of the Operative
Documents  (including  this appendix) and of such  agreements as may incorporate
this appendix by reference.

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

     (i)   each of the Company,  the Trustee, the Collateral Agent, the Security
           Agent  or  any  other  person  includes,  without  prejudice  to  the
           provisions of any Operative Document, any successor in interest to it
           and  any  permitted  transferee,  permitted  purchaser  or  permitted
           assignee of it;

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

     (iii) any  agreement,  instrument  or document,  or any annex,  schedule or
           exhibit  thereto,  or  any  other  part  thereof,  includes,  without
           prejudice  to  the  provisions  of  any  Operative   Document,   that
           agreement,  instrument or document, or annex, schedule or exhibit, or
           part, respectively, as amended, modified or supplemented from time to
           time  in  accordance  with  its  terms  and in  accordance  with  the
           Operative  Documents,  and  any  agreement,  instrument  or  document
           entered into in substitution or replacement therefor;

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

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

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

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

<PAGE>

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

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

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

          (e) For  purposes  of each  Operative  Document,  the  occurrence  and
continuance of a Default or Event of Default referred to in Section 7.1(d),  (e)
or (f) of the Indenture  shall not be deemed to prohibit the Company from taking
any action or exercising any right that is  conditioned  on no Special  Default,
Default or Event of Default  having  occurred and be  continuing if such Special
Default,   Default  or  Event  of  Default   consists  of  the   institution  of
reorganization  proceedings  with respect to the Company under Chapter 11 of the
Bankruptcy  Code and the  trustee or  debtor-in-possession  in such  proceedings
shall have agreed to perform its obligations under the Operative  Documents with
the approval of the  applicable  court and  thereafter  shall have  continued to
perform such obligations in accordance with Section 1110.

<PAGE>

                                                                       EXHIBIT A

                               [FORM OF SECURITY]


[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE  "SECURITIES  ACT"),  AND  ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED  STATES OR TO, OR FOR THE  ACCOUNT OR BENEFIT  OF, ANY PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING  SENTENCE.  BY ITS ACQUISITION  HEREOF, THE
HOLDER  (1)  REPRESENTS  THAT (A) IT IS A  "QUALIFIED  INSTITUTIONAL  BUYER" (AS
DEFINED  IN RULE 144A  UNDER THE  SECURITIES  ACT),  (B) IT IS AN  INSTITUTIONAL
"ACCREDITED  INVESTOR"  (AS  DEFINED  IN  RULE  501(a)(1),  (2),  (3)  OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL  ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S.  PERSON AND IS  ACQUIRING  THIS  SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES
THAT IT WILL NOT WITHIN TWO YEARS  AFTER THE LATER OF THE  ORIGINAL  ISSUANCE OF
THIS  SECURITY OR THE LAST DATE ON WHICH THIS  SECURITY WAS HELD BY  CONTINENTAL
AIRLINES,  INC.  OR ANY  AFFILIATE  OF  CONTINENTAL  AIRLINES,  INC.  RESELL  OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO CONTINENTAL  AIRLINES,  INC., (B)
TO A  QUALIFIED  INSTITUTIONAL  BUYER IN  COMPLIANCE  WITH RULE  144A  UNDER THE
SECURITIES  ACT,  (C) OUTSIDE THE UNITED  STATES IN AN OFFSHORE  TRANSACTION  IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM  REGISTRATION  PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT;
AND (3) AGREES THAT IF IT SHOULD  RESELL OR OTHERWISE  TRANSFER THIS SECURITY IT
WILL  DELIVER  TO EACH  PERSON TO WHOM THIS  SECURITY  IS  TRANSFERRED  A NOTICE
SUBSTANTIALLY  TO THE EFFECT OF THIS LEGEND.  IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL  ISSUANCE OF THIS
SECURITY  OR THE  LAST  DATE ON WHICH  THIS  SECURITY  WAS  HELD BY  CONTINENTAL
AIRLINES,  INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES,  INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL  AIRLINES,  INC. OR ITS
AGENT.  AS USED HEREIN,  THE TERMS "OFFSHORE  TRANSACTION",  "UNITED STATES" AND
"U.S.  PERSON"  HAVE  THE  MEANINGS  GIVEN  TO THEM BY  REGULATION  S UNDER  THE

<PAGE>

SECURITIES  ACT. THE  INDENTURE  CONTAINS A PROVISION  REQUIRING  THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS  SECURITY IN VIOLATION OF THE  FOREGOING
RESTRICTIONS.]<F1>

[UNLESS  THIS  SECURITY IS  PRESENTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY  TRUST  COMPANY,  A NEW  YORK  CORPORATION  ("DTC"),  TO  CONTINENTAL
AIRLINES,  INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE OR PAYMENT,
AND ANY SECURITY  ISSUED IN EXCHANGE FOR THIS SECURITY IS REGISTERED IN THE NAME
OF  CEDE  &  CO.  OR  IN  SUCH  OTHER  NAME  AS IS  REQUESTED  BY AN  AUTHORIZED
REPRESENTATIVE  OF DTC (AND ANY PAYMENT  HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER  ENTITY AS IS  REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC),  ANY
TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

TRANSFERS OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO TRANSFERS IN WHOLE,  BUT
NOT IN PART,  TO NOMINEES OF DTC OR TO A SUCCESSOR  THEREOF OR SUCH  SUCCESSOR'S
NOMINEE AND  TRANSFERS OF PORTIONS OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.5 AND
2.6 OF THE INDENTURE REFERRED TO HEREIN.]<F2>










------------------
<F1>
To be included on the face of each Restricted Security.
<F2>
To be included on the face of each Global Security.


<PAGE>

No. [    ]                                       CUSIP/Common Code No. [       ]
     ----                                                               -------
                                                                   $[          ]
                                                                     ----------

                       [[REGULATION S] GLOBAL SECURITY]<F3>

            [INITIAL] [EXCHANGE] FLOATING RATE SECURED NOTE DUE 2007

     CONTINENTAL  AIRLINES,   INC.,  a  Delaware  corporation  (the  "Company"),
promises  to pay  to  [__________],  or the  registered  assignee  thereof,  the
principal  sum of  $[_______]  Dollars (the  "Principal  Amount") on December 6,
2007,  subject to earlier  payment as  provided  in the  Indenture  referred  to
herein.  This Security shall bear interest on the unpaid  Principal  Amount from
time to time  outstanding  from the most recent  Interest  Payment Date to which
interest  has been paid (or, if no interest  has been paid under the  Indenture,
from  December 6, 2002) at a rate annum for each  Interest  Period  equal to the
Debt Rate for such  Interest  Period  (calculated  on the basis of a year of 360
days and actual days elapsed  during the period for which such amount  accrues).
The  Company  shall pay  accrued  interest  in  arrears on each March 6, June 6,
September 6 and December 6 of each year,  commencing March 6, 2003 (or, if not a
Business Day, the next  succeeding  Business Day) (an "Interest  Payment  Date")
until the Principal Amount has been paid in full,  PROVIDED that if such payment
in full is not made on an Interest Payment Date,  accrued interest shall be paid
on the date of such payment in full rather than the next Interest  Payment Date.
Interest  shall  accrue  with  respect to the first but not the last day of each
Interest Period.  This Security shall bear interest,  payable on demand,  at the
Payment Due Rate  (calculated on the basis of a year of 360 days and actual days
elapsed  during the period for which  such  amount  accrues)  on any part of the
Principal  Amount and, to the extent  permitted by applicable Law,  interest and
any other  amounts  payable  hereunder  not paid when due,  in each case for the
period  the same is  overdue.  Amounts  shall be  overdue  if not paid  when due
(whether at stated  maturity,  by  acceleration  or otherwise).  Notwithstanding
anything to the contrary  contained herein, if any date on which a payment under
this  Security  becomes due and payable is not a Business Day, then such payment
shall  not be  made  on such  scheduled  date  but  shall  be  made on the  next
succeeding  Business  Day,  and such  extension of time shall be included in the
computation of interest payable.

     1. GENERAL.  This Security is one of a duly authorized  issue of securities
of the Company designated as "[Initial]  [Exchange]  Floating Rate Secured Notes
due 2007"  (herein,  called the  "Securities"),  limited in aggregate  principal
amount to  $200,000,000,  issued,  authenticated  and delivered  pursuant to the
Indenture,  dated as of December 6, 2002 (the  "Indenture"),  among the Company,
Wilmington  Trust Company,  as Trustee (the  "Trustee"),  Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation,  as Policy
Provider. To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings  assigned to them in the  Indenture.  This  Security is
subject to the terms,  provisions and conditions of the Indenture and those made



------------------
<F3>
To be included on the face of each Global Security

<PAGE>

applicable  to the  Indenture  by the TIA. To the extent any  provision  of this
Security conflicts with the express provisions of the Indenture,  the provisions
of the Indenture  shall govern and be  controlling.  Reference is hereby made to
the Indenture,  the TIA, the Security  Agreement,  the other Operative Documents
and the Support Documents for a complete statement of the rights and obligations
of the holders of, and the nature and extent of the security for, this Security.
By virtue of its acceptance  hereof the  Securityholder of this Security assents
to and agrees to be bound by the provisions of the Indenture.

     2. RECORD DATES. The Person in whose name any Security is registered at the
close of business on the fifteenth day  preceding a Scheduled  Interest  Payment
Date  shall be  entitled  to receive  the  interest  payable  on the  applicable
Interest Payment Date to the extent provided by such Security,  except if and to
the extent the Company  shall default in the payment of the interest due on such
Interest  Payment Date, in which case  defaulted  interest  shall be paid to the
Person in whose name the Security is  registered at the close of business on the
subsequent  record date  established  by notice given by mail by or on behalf of
the Company to the Holders of Securities pursuant to the Indenture.

     3. OPTIONAL  REDEMPTION.  The Company may redeem the Securities at any time
in whole or (so long as no Payment  Default has occurred and is  continuing)  in
part (in any  integral  multiple of $1,000) at its sole  option at a  redemption
price equal to the sum of 100% of the  principal  amount of,  accrued and unpaid
interest on, and Premium, if any, and Break Amount, if any, with respect to, the
redeemed Securities to and including the Redemption Date.  "Premium" means, with
respect to any  Security  redeemed  pursuant  to the  Indenture,  the  following
percentage of the principal amount of such Security:  (i) if redeemed before the
first  anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such
first anniversary and before the second  anniversary of the Issuance Date, 1.0%;
and (iii) if redeemed on or after such second  anniversary  and before the third
anniversary  of the  Issuance  Date,  0.5%;  PROVIDED  that no Premium  shall be
payable in  connection  with a  redemption  made by the  Company to satisfy  the
Maximum  Collateral  Ratio or Minimum  Rotable  Ratio  requirement  pursuant  to
Section 3.1 of the Collateral  Maintenance  Agreement.  The Trustee shall mail a
notice of any  redemption  at least 15 days but not more than 60 days before the
Redemption  Date to each  Holder  whose  Securities  are to be  redeemed  at his
registered  address.  If the Trustee gives notice of redemption  but the Company
fails to pay when due all  amounts  necessary  to effect such  redemption,  such
redemption  shall be deemed  revoked  and no amount  shall be due as a result of
notice of redemption  having been given.  Securities called for redemption shall
cease to bear  interest  on and after the  Redemption  Date  (unless the Company
shall fail to pay the  redemption  price).  Upon  surrender to the Paying Agent,
such Securities shall be paid the redemption price.

     4. METHOD OF PAYMENT.  The Paying Agent shall distribute amounts payable to
each  Securityholder  by check  mailed  to such  Securityholder  at its  address
appearing in the Register,  except that with respect to Securities registered on
the  applicable  Record Date in the name of a Clearing  Agency (or its nominee),
such distribution shall be made by wire transfer in immediately  available funds
to the account designated by such Clearing Agency (or such nominee). The Company
shall not have any  responsibility  for the distribution of such payments to any
Securityholder. Any payment made hereunder shall be made without any presentment
or surrender of this Security,  except that, in the case of the final payment in

<PAGE>

respect of this Security, this Security shall be surrendered to the Paying Agent
for cancellation against receipt of such payment.

     5. CREDIT SUPPORT. The Company's obligations with respect to the Securities
are secured by a lien on the Pledged Spare Parts and certain  other  property of
the  Company.  In addition,  the Trustee has entered  into a Liquidity  Facility
under which the Liquidity  Provider is obligated to make advances to the Trustee
in an aggregate amount  sufficient to pay interest on the Securities up to eight
successive quarterly Interest Payment Dates. The Trustee is also the beneficiary
of the Policy under which the Policy  Provider is obligated to honor drawings to
cover  interest on the  Securities  when due and principal of the  Securities no
later than 24 months after the Final Scheduled Payment Date of the Securities.

     6.  REGISTRAR  AND PAYING AGENT.  The Company  shall  maintain an office or
agency where  Securities  eligible for transfer or exchange may be presented for
registration  of  transfer  or for  exchange,  and an  office  or  agency  where
Securities  may be  presented  for payment.  Initially,  the Trustee will act as
Registrar  and Paying  Agent.  If the Company  fails to maintain a Registrar  or
Paying Agent, the Trustee shall act as such.

     7.  DENOMINATIONS,  TRANSFER AND EXCHANGE.  The Securities  shall be issued
only in fully  registered  form without  coupons and [only in  denominations  of
$100,000  or  integral   multiples  of  $1,000  in  excess   thereof,]<F4>   [in
denominations  of $1,000 or  integral  multiples  thereof,]<F5>  except that one
Security may be issued in a different  denomination.  The transfer of Securities
may be registered  and Securities may be exchanged as provided in the Indenture.
No transfer shall be effected until,  and such  transferee  shall succeed to the
rights of a  Securityholder  only upon, final acceptance and registration of the
transfer by the Registrar in the Register.  No service charge shall be made to a
Securityholder  for any registration of transfer or exchange of Securities,  but
the  Company  may  require  payment  of a sum  sufficient  to  cover  any tax or
governmental  charge  that may be imposed in  connection  with any  transfer  or
exchange of Securities.

     8. PERSONS DEEMED OWNERS.  Prior to the  registration  of any transfer of a
Security by a  Securityholder  as provided in the  Indenture,  the Company,  the
Registrar,  the Paying Agent and the Trustee  shall deem and treat the person in
whose name the Security is registered on the Register as the absolute  owner and
holder thereof for the purpose of receiving  payment of all amounts payable with
respect to such  Security and for all other  purposes,  and none of the Company,
the  Registrar,  the Paying Agent or the Trustee shall be affected by any notice
to the contrary.

     9.  AMENDMENTS  AND WAIVERS.  The Company and the Trustee or the Collateral
Agent,  as the  case  may  be,  may  amend  or  supplement  the  Indenture,  the



------------------
<F4>
To be used for Initial Securities.
<F5>
To be used for Exchange Securities.

<PAGE>

Securities,  or any of the other  Operative  Documents  and, upon request of the
Company,  the Trustee shall amend or supplement the Support  Documents,  in each
case only with the  written  consent of the  Controlling  Party,  PROVIDED  that
certain amendments,  supplements and waivers may not be made without the consent
of each  Securityholder  affected thereby.  Any consent by the Securityholder of
this Security  shall be conclusive and binding on such  Securityholder  and upon
all future  Securityholders of this Security and of any Security issued upon the
transfer  hereof or in exchange hereof or in lieu hereof whether or not notation
of such  consent  is  made  upon  such  Security.  Without  the  consent  of the
Controlling  Party or any Holder,  the  Indenture,  the  Securities,  any of the
Operative  Documents  and any of the Support  Documents may be amended to, among
other things,  cure any ambiguity,  defect or inconsistency or to make any other
change not inconsistent with the provisions of the Indenture, provided that such
action does not materially adversely affect the interests of any Securityholder.

     10.  DEFAULTS AND REMEDIES.  Events of Default under the Indenture  include
the following:  (a) failure by the Company to pay (1) principal of, interest on,
Premium, if any, or Break Amount, if any, with respect to any Security when due,
and such failure  shall  continue  unremedied  for a period of 10 Business  Days
thereafter (it being understood that any amount  distributed to  Securityholders
in respect of the  foregoing  from funds  provided by the Policy  Provider,  the
Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such
Default)  or (2)  any  other  amount  payable  by it to the  Holders  under  the
Indenture or any Operative  Document  when due, and such failure shall  continue
for a period in excess of 10  Business  Days  after  the  Company  has  received
written  notice from the Trustee of the failure to make such  payment  when due;
(b) failure by the Company to observe  and perform in any  material  respect any
other  covenant,  agreement or  obligation  set forth in the Indenture or in any
other  Operative  Documents,  with such  failure  continuing  after  notice  and
specified cure periods;  (c) any  representation or warranty made by the Company
in the  Indenture or any other  Operative  Document (1) shall prove to have been
untrue or  inaccurate  in any  material  respect as of the date  made,  (2) such
untrue or  inaccurate  representation  or  warranty  is  material at the time in
question and (3) the same shall remain  uncured  following  notice;  and (d) the
occurrence of certain events of bankruptcy,  reorganization or insolvency of the
Company. Subject to certain limitations in the Indenture, if an Event of Default
occurs and is continuing,  the  Controlling  Party may, by notice to Company and
the Trustee,  and the Trustee shall, upon the request of the Controlling  Party,
declare all unpaid principal of, accrued interest on, Premium, if any, and Break
Amount,  if any, with respect to the  Securities  Outstanding  and other amounts
otherwise  payable  under  the  Indenture,   if  any,  to  be  due  and  payable
immediately.  In the case of an Event of Default  arising from certain events of
bankruptcy,  reorganization  or  insolvency,  such amounts  shall  automatically
become and be  immediately  due and payable  without  further  action or notice.
Under certain  circumstance,  the Controlling Party by notice to the Trustee may
rescind an acceleration and its consequences.

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available  remedy by  proceeding  at law or in equity to collect  the payment of
principal of,  interest on, or Premium,  if any, or Break  Amount,  if any, with
respect  to,  the  Securities  or other  amounts  otherwise  payable  under  the
Indenture,  if any. Subject to the Indenture, so long as an Event of Default has
occurred and is continuing,  the Controlling  Party by notice to the Trustee may
authorize  the Trustee to waive an existing  Default or Event of Default and its
consequences.  The  Controlling  Party may direct the time,  method and place of

<PAGE>

conducting any proceeding for any remedy available to the Trustee (as Trustee or
Collateral Agent, subject, in the case of any actions based on the status of the
Trustee as Collateral Agent, to any limitations otherwise expressly provided for
in the Operative  Documents) or exercising  any trust or power  conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.  Securityholders  may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities.  The  Trustee  may  withhold  from  Securityholders  notice  of  any
continuing default (except a default in payment of principal,  interest, Premium
or Break Amount) if it determines  in good faith that  withholding  notice is in
their  interests.  The above  description  of Events of Default and  remedies is
qualified  by  reference,  and  subject  in its  entirety  to the more  complete
description thereof contained in the Indenture.

     11.  NO  RECOURSE  AGAINST  OTHERS.  A  director,   officer,   employee  or
stockholder,  as such, of the Company shall not have any personal  liability for
any obligations of the Company under the Securities,  the Indenture or the other
Operative  Documents by reason of his or her status as such  director,  officer,
employee or stockholder.  Each Securityholder by accepting a Security waives and
releases  all  such   liability.   The  waiver  and  release  are  part  of  the
consideration for the issue of the Securities.

     12.  AUTHENTICATION.  This  Security  shall not be  entitled to any benefit
under  the  Indenture  or be valid  or  obligatory  for any  purpose  until  the
certificate of  authentication  attached  hereto has been executed by the manual
signature of an authorized  signatory of the Trustee or an authenticating  agent
appointed by the Trustee.

     13.  UNCLAIMED  MONEY.  If money  deposited  with the Trustee or any Paying
Agent in trust for the payment of the principal of, interest on, or Premium,  if
any, or Break  Amount,  if any,  with respect to, any Security and unclaimed for
two (2) years after such principal,  interest, Premium, if any, or Break Amount,
if any, has become due and payable  shall be paid to the Company on its request,
subject  to any  applicable  abandoned  property  law,  and the  Holder  of such
Security shall thereafter,  as an unsecured  general creditor,  look only to the
Company for payment thereof.

     14.  ABBREVIATIONS.  Customary  abbreviations  may be used in the name of a
Holder or an  assignee,  such as:  TEN COM (=  tenants  in  common),  TEN ENT (=
tenants by the  entireties),  JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian),  and U/G/M/A (= Uniform Gifts
to Minors Act).

     15. CUSIP  NUMBERS.  The Company in issuing this Security may use a "CUSIP"
number (if then  generally  in use) and,  if so, the  Trustee  shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER,
that  any  such  notice  may  state  that  no  representation  is made as to the
correctness  of such numbers either as printed on the Securities or as contained
in any notice of a redemption  and that reliance may be placed only on the other
identification numbers printed on the Securities,  and any such redemption shall
not be affected by any defect in or omission of such numbers.

<PAGE>

     [16. REGISTRATION.  The Holder of this Security is entitled to the benefits
of the Registration  Rights Agreement.  In the event that no Registration  Event
(as  defined in the  Registration  Rights  Agreement)  occurs on or prior to the
210th day after the  Issuance  Date,  the Debt  Rate  shall be  increased  by an
additional  margin  equal to 0.50%,  from and  including  such  210th day to and
excluding the earlier of (i) the date on which a  Registration  Event occurs and
(ii) the date on which there ceases to be any Registrable Securities (as defined
in the Registration  Rights Agreement);  or if the Shelf Registration  Statement
(as defined in the Registration Rights Agreement) (if it is filed),  after being
declared  effective  by the SEC,  ceases to be  effective at any time during the
period  specified by Section 2(b)(B) of the  Registration  Rights  Agreement for
more than 60 days,  whether or not consecutive,  during any 12-month period, the
Debt Rate shall be  increased  by an  additional  margin equal to 0.50% from and
including the 61st day of the applicable 12-month period such Shelf Registration
Statement  ceases to be effective to and  excluding  the date on which the Shelf
Registration  Statement again becomes effective (or, if earlier,  the end of the
period  specified  by Section  2(b)(B) of the  Registration  Rights  Agreement);
PROVIDED  that the  additional  margin  added to the Debt Rate  pursuant to this
section shall never exceed 0.50% at any time.]<F6>

     [17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of
a Security,  by acceptance hereof,  acknowledges and agrees to the provisions of
the  Registration  Rights  Agreement,   including,   without   limitation,   the
obligations   of  the  Holders   with   respect  to  a   registration   and  the
indemnification of the Company to the extent provided therein.]<F7>

     18.  GOVERNING  LAW. THIS  SECURITY  SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     The  Company  will  furnish to any Holder of this  Security,  upon  written
request and without  charge,  a copy of the  Indenture.  Request may be made to:
Continental Airlines,  Inc., 1600 Smith Street, Houston, Texas 77002, Attention:
Corporate Secretary.

------------------
<F6>
To be included only on each Initial Certificate.
<F7>
To be included only on each Initial Certificate.

<PAGE>

     IN WITNESS  WHEREOF,  the  Company  has  caused  this  Security  to be duly
executed in its corporate name by its officer  thereunto duly  authorized on the
date hereof.

Dated:



                                               CONTINENTAL AIRLINES, INC.


                                               By:
                                                  -----------------------
                                                  Name:
                                                  Title:


                                               By:
                                                  -----------------------
                                                  Name:
                                                  Title:



<PAGE>

             [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]



                     This is one of the Securities referred
                              to in the Indenture.





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


                                               By:
                                                  ------------------------------
                                                        Authorized Officer


<PAGE>

                             FORM OF TRANSFER NOTICE



           FOR VALUE RECEIVED the undersigned  registered holder hereby sell(s),
assign(s) and transfer(s) unto

INSERT TAXPAYER IDENTIFICATION NO.


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

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

please print or typewrite name and address including zip code of assignee

--------------------
the within Security and all rights thereunder,  hereby irrevocably  constituting
and appointing




--------------------
attorney to transfer said Security on the books of the Registrar with full power
of substitution in the premises.




                    [THE FOLLOWING PROVISION TO BE INCLUDED

                               ON ALL SECURITIES,

                          EXCEPT REGULATION S GLOBAL,

          REGULATION S DEFINITIVE SECURITIES AND EXCHANGE SECURITIES]

           In connection with any transfer of this  Certificate  occurring prior
to the  date  that  is the  earlier  of the  date of an  effective  Registration
Statement or the date two years after the later of the original issuance of this
Security  or the  last  date on which  this  Security  was  held by  Continental
Airlines,  Inc. or any affiliate of Continental Airlines,  Inc., the undersigned
confirms that without utilizing any general  solicitation or general advertising
that:


<PAGE>

                                   [CHECK ONE]

[_] (a) this Security is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by Rule 144A
thereunder.

                                       OR

[_] (b) this Security is being  transferred  other than in  accordance  with (a)
above and  documents  are being  furnished  that comply with the  conditions  of
transfer set forth in this Security and the Indenture.

If  neither  of the  foregoing  boxes is  checked,  the  Registrar  shall not be
obligated  to register  this  Security in the name of any Person  other than the
Holder  hereof  unless  and  until  the  conditions  to  any  such  transfer  of
registration  set forth  herein and in Section 2.6 of the  Indenture  shall have
been satisfied.

Date:[___________, __]       [Name of Transferor]
                             -------------------------------------

                             NOTE: The signature must  correspond  with the name
                             as  written  upon the face of the  within-mentioned
                             instrument in every particular,  without alteration
                             or any change whatsoever.


Signature Guarantee:
                     --------------------------

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

     The undersigned represents and warrants that it is purchasing this Security
for its own  account  or an account  with  respect  to which it  exercises  sole
investment  discretion  and  that  it  and  any  such  account  is a  "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended,  and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges  that it has received such information  regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request  such  information  and that it is aware that the  transferor  is
relying upon the undersigned's  foregoing  representations in order to claim the
exemption from registration provided by Rule 144A.


Dated:[___________, __]
                             -------------------------------------
                             NOTE:  To be executed by an executive officer.




<PAGE>

                                                                       EXHIBIT B


             FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
                TRANSFERS OF SECURITIES PURSUANT TO REGULATION S

                                                          [_____________,____]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention:  Corporate Trust Administration

     Re: FLOATING RATE SECURED NOTES DUE 2007 (THE "SECURITIES")

Ladies and Gentlemen:

     In connection with our proposed sale of US $[______] of the Securities,  we
confirm  that such sale has been  effected  pursuant to and in  accordance  with
Regulation S under the Securities Act of 1933, as amended, and, accordingly,  we
represent that:

           (1) the  offer of the  Securities  was not  made to a  person  in the
     United States;

           (2)  either  (a) at the  time  the  buy  order  was  originated,  the
     transferee was outside the United States or we and any person acting on our
     behalf  reasonably  believed  that the  transferee  was  outside the United
     States or (b) the transaction was executed in, on or through the facilities
     of a designated  off-shore  securities market and neither we nor any person
     acting on our behalf knows that the transaction has been  pre-arranged with
     a buyer in the United States;

           (3) no directed  selling  efforts have been made in the United States
     in  contravention  of the  requirements  of Rule  903(a) or Rule  904(a) of
     Regulation S, as applicable; and

           (4) the  transaction  is not part of a plan or  scheme  to evade  the
     registration requirements of the Securities Act.

     In  addition,  if the  sale is made  during  a  restricted  period  and the
provisions of Rule  903(b)(2) or Rule  904(b)(1) of Regulation S are  applicable
thereto,  we  confirm  that  such  sale has  been  made in  accordance  with the
applicable provisions of Rule 903(b)(2) or Rule 904(b)(1), as the case may be.



<PAGE>

     You and  Continental  Airlines,  Inc. are entitled to rely upon this letter
and are  irrevocably  authorized  to produce this letter or a copy hereof to any
interested party in any  administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.  Terms used in this certificate have
the meanings set forth in Regulation S.


                                             Very truly yours,



                                             [Name of Transferor]


<PAGE>
                                                                       EXHIBIT C


                FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
                         WITH TRANSFERS OF SECURITIES TO
                   NON-QIB INSTITUTIONAL ACCREDITED INVESTORS

                                                    [_______________,_____]


Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention:  Corporate Trust Administration

Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
                              CONTINENTAL AIRLINES
             Floating Rate Secured Notes due 2007 (the "Securities")
                            ________________________

Ladies and Gentlemen:

     In  connection  with our  proposed  purchase  of U.S.  $[_____________]  of
Securities (the "Purchased Securities"), we confirm that:

           1. We  understand  that  any  subsequent  transfer  of the  Purchased
     Securities is subject to certain  restrictions  and conditions set forth in
     the Indenture,  dated as of December 6, 2002, among  Continental  Airlines,
     Inc. (the  "Company"),  Wilmington  Trust Company (the  "Trustee"),  Morgan
     Stanley Capital  Services Inc., as Liquidity  Provider,  and MBIA Insurance
     Corporation,  as Policy Provider,  relating to the Securities, and we agree
     to be bound  by,  and not to  resell,  pledge  or  otherwise  transfer  the
     Purchased  Securities  except in compliance  with,  such  restrictions  and
     conditions  and the  Securities  Act of 1933,  as amended (the  "Securities
     Act").

           2. We are purchasing  Securities having an aggregate principal amount
     of not less  than  $100,000  and  each  account  (if any) for  which we are
     purchasing   Securities  is  purchasing   Securities  having  an  aggregate
     principal amount of not less than $100,000.

           3.  We  understand  that  the  Purchased  Securities  have  not  been
     registered  under the  Securities  Act, that the Purchased  Securities  are
     being  sold to us in a  transaction  that is exempt  from the  registration
     requirements  of the Securities  Act and that the Purchased  Securities may
     not be offered or resold except as permitted in the following sentence.  We
     agree,  on our own  behalf and on behalf of any  accounts  for which we are
     acting  as  hereinafter  stated,  that,  if we  should  sell any  Purchased
     Securities  within two years  after the later of the  original  issuance of
     such  Purchased  Securities  and the  last  date on  which  such  Purchased
     Securities  are owned by the Company or any  affiliate of the  Company,  we
     will do so only (A) to the Company,  (B) in accordance with Rule 144A under
     the  Securities  Act  to a  "qualified  institutional  buyer"  (as  defined

<PAGE>

     therein),  (C) outside  the United  States in  accordance  with Rule 904 of
     Regulation S under the  Securities  Act, (D) pursuant to the exemption from
     registration  provided by Rule 144 under the Securities Act or (E) pursuant
     to an effective  registration  statement  under the Securities  Act, and we
     further  agree to  provide to any person  purchasing  any of the  Purchased
     Securities  from us a notice  advising such  purchaser  that resales of the
     Purchased Securities are restricted as stated herein.

           4. We  understand  that,  on any  proposed  resale  of any  Purchased
     Securities,  we will be  required to furnish to the Company and the Trustee
     such  certifications,  legal opinions and other  information as the Company
     and the Trustee may  reasonably  require to confirm that the proposed  sale
     complies with the foregoing  restrictions.  We further  understand that the
     Purchased  Securities  purchased by us will bear a legend to the  foregoing
     effect.

           5. We are an institutional  "accredited investor" (as defined in Rule
     501(a)(1),  (2), (3) or (7) of Regulation D under the  Securities  Act) and
     have such knowledge and experience in financial and business  matters as to
     be capable of  evaluating  the  merits and risks of our  investment  in the
     Purchased  Securities,  and we and any accounts for which we are acting are
     each able to bear the economic risk of our or their investments.

           6. We are acquiring the Purchased  Securities  for our own account or
     for one or more  accounts  (each of which is an  institutional  "accredited
     investor") as to each of which we exercise sole  investment  discretion and
     not with a view to any distribution of the Purchased  Securities,  subject,
     nevertheless  to the  understanding  that the  disposition  of our property
     shall at all times be and remain within our control.

     You are entitled to rely upon this letter and are irrevocably authorized to
produce  this  letter  or  a  copy  thereof  to  any  interested  party  in  any
administrative  or legal  proceedings  or official  inquiry  with respect to the
matters covered hereby.


                                            Very truly yours,



                                             By:
                                                -------------------------------
                                                Name:
                                                Title: