Document:

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                   Exchange and Registration Rights Agreement

                          Dated as of December 6, 2002

                                     between

                           Continental Airlines, Inc.

                                       and

                       Morgan Stanley & Co. Incorporated.

                              Continental Airlines
                      Floating Rate Secured Notes due 2007

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                   EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

          THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is
made and entered into as of December 6, 2002, between Continental Airlines,
Inc., a Delaware corporation (the "COMPANY") and Morgan Stanley & Co.
Incorporated (the "INITIAL PURCHASER").

          This Agreement is made pursuant to the Purchase Agreement dated
December 2, 2002 between the Company and the Initial Purchaser (the "PURCHASE
AGREEMENT"), which provides that the Company will issue and sell an aggregate of
$200,000,000 principal amount of Floating Rate Secured Notes due 2007 (the
"INITIAL SECURITIES"). In order to induce the Initial Purchaser to enter into
the Purchase Agreement, the Company has agreed to provide to the Initial
Purchaser and its successors, assigns and direct and indirect transferees the
exchange and registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the closing under the Purchase
Agreement.

          In consideration of the foregoing, the parties hereto agree as
follows:

          1. DEFINITIONS. The definitions set forth in this Agreement shall
apply equally to both singular and plural forms of the terms defined. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:

          "1933 ACT" shall mean the Securities Act of 1933, as amended from time
     to time.

          "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended
     from time to time.

          "AGREEMENT" shall have the meaning set forth in the preamble of this
     Agreement.

          "BUSINESS DAY" shall mean any day on which the New York Stock
     Exchange, Inc. is open for trading and banks in The City of New York are
     open for business; references to "day" shall mean a calendar day.

          "CLOSING DATE" shall mean the Closing Date as defined in the Purchase
     Agreement.

          "COMPANY" shall have the meaning set forth in the preamble of this
     Agreement and shall include the Company's successors.

          "DTC" shall mean the Depository Trust Company or any other depositary
     appointed by the Company; PROVIDED, HOWEVER, that any such depositary must
     have an address in the Borough of Manhattan, in The City of New York.

          "EXCHANGE OFFER" shall mean the exchange offer by the Company of
     Exchange Securities for Registrable Securities pursuant to Section 2(a)
     hereof.

<PAGE>

          "EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933
     Act effected pursuant to Section 2(a) hereof.

          "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean a Registration
     Statement on Form S-4 (or, if applicable, on another appropriate form)
     filed with the SEC pursuant to Section 2(a) hereof, and all amendments and
     supplements to such Registration Statement, in each case including the
     Prospectus contained therein, all exhibits thereto and all material
     incorporated by reference therein.

          "EXCHANGE SECURITIES" shall mean the securities issued under the
     Indenture and otherwise containing terms identical in all material respects
     to the Initial Securities (except that, with respect to the Exchange
     Securities, (i) interest thereon shall accrue as set forth in Section 2(a)
     hereof, (ii) the transfer restrictions thereon shall be eliminated, (iii)
     certain provisions relating to an increase in the stated rate of interest
     thereon shall be eliminated and (iv) such Exchange Securities shall
     initially be available only in book-entry form) to be offered to Holders of
     Initial Securities in exchange for Initial Securities pursuant to the
     Exchange Offer.

          "HOLDER INFORMATION" shall have the meaning set forth in Section 5(a)
     of this Agreement.

          "HOLDERS" shall mean the Initial Purchaser, for so long as it owns any
     Registrable Securities, and its successors, assigns and direct and indirect
     transferees who become registered owners of Registrable Securities under
     the Indenture; PROVIDED that for purposes of Section 5 hereof, the term
     "Holder" shall include Participating Broker-Dealers.

          "INDENTURE" shall mean the Indenture entered into as of December 6,
     2002, among (i) the Company, (ii) the Trustee, (iii) the Liquidity Provider
     and (iv) the Policy Provider under which the Initial Securities are issued,
     as amended from time to time in accordance with the provisions thereof.

          "INITIAL PURCHASER" shall have the meaning set forth in the preamble
     of this Agreement.

          "INITIAL SECURITIES" shall have the meaning set forth in the preamble
     of this Agreement.

          "LIQUIDITY PROVIDER" shall have the meaning set forth in the
     Indenture.

          "MAJORITY HOLDERS" shall mean the Holders of a majority of the
     aggregate principal amount of outstanding Registrable Securities; PROVIDED
     that whenever the consent or approval of Holders of a specified percentage
     of Registrable Securities is required hereunder, Registrable Securities
     held by the Company or any of its "affiliates" (as such term is defined in
     Rule 405 under the 1933 Act) (other than the Initial Purchaser or

<PAGE>

     subsequent holders of Registrable Securities if such subsequent holders are
     deemed to be affiliates solely by reason of their holding of such
     Registrable Securities) shall be disregarded in determining whether such
     consent or approval was given by the Holders of such required percentage or
     amount.

          "NASD" shall mean the National Association of Securities Dealers, Inc.

          "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in
     Section 3(f) hereof.

          "PERSON" shall mean an individual, partnership, limited liability
     company, corporation, trust or unincorporated organization, or a government
     or agency or political subdivision thereof.

          "POLICY PROVIDER" shall have the meaning set forth in the Indenture.

          "POLICY PROVIDER INFORMATION" shall have the meaning set forth in the
     Indemnification Agreement.

          "PROSPECTUS" shall mean the prospectus included in a Registration
     Statement, including any preliminary prospectus, and any such prospectus as
     amended or supplemented by any prospectus supplement, including a
     prospectus supplement with respect to the terms of the offering of any
     portion of the Registrable Securities covered by a Shelf Registration
     Statement, and by all other amendments and supplements to a prospectus,
     including post-effective amendments, and in each case including all
     material incorporated by reference therein.

          "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble
     of this Agreement.

          "REGISTRABLE SECURITIES" shall mean the Initial Securities; PROVIDED,
     HOWEVER, that the Initial Securities shall cease to be Registrable
     Securities when (i) a Shelf Registration Statement with respect to such
     Initial Securities shall have been declared effective under the 1933 Act
     and such Initial Securities shall have been disposed of pursuant to such
     Shelf Registration Statement, (ii) such Initial Securities shall have been
     sold to the public pursuant to Rule 144 (or any similar provision then in
     force, but not Rule 144A) under the 1933 Act or may then be sold to the
     public pursuant to paragraph (k) of said Rule 144 (or any similar provision
     then in force) by Holders other than "affiliates" or former "affiliates"
     (as such term is defined in paragraph (a) of Rule 144) of the Company,
     (iii) such Initial Securities shall have ceased to be outstanding or (iv)
     such Initial Securities have been exchanged for Exchange Securities upon
     consummation of the Exchange Offer.

          "REGISTRATION DEFAULT" shall have the meaning set forth in Section
     2(b) hereof.

<PAGE>

          "REGISTRATION EVENT" shall mean the declaration of the effectiveness
     by the SEC of an Exchange Offer Registration Statement or a Shelf
     Registration Statement.

          "REGISTRATION EXPENSES" shall mean any and all expenses incident to
     performance of or compliance by the Company with this Agreement, including
     without limitation: (i) all SEC, stock exchange or NASD registration and
     filing fees, (ii) all fees and expenses incurred in connection with
     compliance with state or other securities or blue sky laws and compliance
     with the rules of the NASD (including reasonable fees and disbursements of
     counsel for any underwriters or Holders in connection with state or other
     securities or blue sky qualification of any of the Exchange Securities or
     Registrable Securities), (iii) all expenses of any Persons in preparing or
     assisting in preparing, word processing, printing and distributing any
     Registration Statement, any Prospectus, any amendments or supplements
     thereto, any underwriting agreements, securities sales agreements and other
     documents relating to the performance of and compliance with this
     Agreement, (iv) all rating agency fees, (v) all fees and expenses incurred
     in connection with the listing, if any, of any of the Registrable
     Securities on any securities exchange or exchanges, (vi) all fees and
     disbursements relating to the qualification of the Indenture under
     applicable securities laws, (vii) the fees and disbursements of counsel for
     the Company and of the independent public accountants of the Company,
     including the expenses of any special audits or "cold comfort" letters
     required by or incident to such performance and compliance, (viii) the fees
     and expenses of the Trustee, including its counsel, and any custodian, and
     (ix) any reasonable fees and disbursements of the underwriters, if any, and
     the reasonable fees and expenses of any special experts retained by the
     Company in connection with any Registration Statement, in each case as are
     customarily required to be paid by issuers or sellers of securities, but
     excluding fees of counsel to the underwriters or the Holders and
     underwriting discounts and commissions and transfer taxes, if any relating
     to the sale or disposition of Registrable Securities by a Holder.

          "REGISTRATION STATEMENT" shall mean any registration statement of the
     Company which covers any of the Exchange Securities or Registrable
     Securities pursuant to the provisions of this Agreement, and all amendments
     and supplements to any such Registration Statement, including
     post-effective amendments, in each case including the Prospectus contained
     therein, all exhibits thereto and all material incorporated by reference
     therein.

          "SEC" shall mean the Securities and Exchange Commission, as from time
     to time constituted or created under the 1934 Act, or, if at any time after
     the execution of this instrument such Commission is not existing and
     performing the duties now assigned to it under the TIA, then the body
     performing such duties on such date.

          "SHELF REGISTRATION" shall mean a registration under the 1933 Act
     effected pursuant to Section 2(b) hereof.

          "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
     statement of the Company pursuant to the provisions of Section 2(b) hereof

<PAGE>

     which covers some or all of the Registrable Securities on an appropriate
     form under Rule 415 under the 1933 Act, or any similar rule that may be
     adopted by the SEC, and all amendments and supplements to such registration
     statement, including post-effective amendments, in each case including the
     Prospectus contained therein, all exhibits thereto and all material
     incorporated by reference therein.

          "STAFF" shall mean the Staff of the Division of Corporation Finance of
     the SEC.

          "TIA" shall have the meaning set forth in Section 3(l) hereof.

          "TRUSTEE" shall mean the trustee under the Indenture.

          "UPDATED POLICY PROVIDER INFORMATION" shall mean the Policy Provider
     Information as updated by the Company in accordance with the Policy
     Provider's instructions, if any.

          2. REGISTRATION UNDER THE 1933 ACT. (a) EXCHANGE OFFER REGISTRATION.
To the extent not prohibited by any applicable law or applicable interpretation
of the Staff, the Company shall use its best efforts (A) to file with the SEC
within 120 days after the Closing Date an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities, (B) to cause such Exchange Offer
Registration Statement to be declared effective by the SEC within 180 days after
the Closing Date, (C) to cause such Registration Statement to remain effective
until the closing of the Exchange Offer and (D) to consummate the Exchange Offer
within 210 days after the Closing Date. Upon the effectiveness of the Exchange
Offer Registration Statement, the Company shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
(other than Participating Broker-Dealers) eligible and electing to exchange
Registrable Securities for Exchange Securities (assuming that such Holder is not
an affiliate of the Company within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Securities) to trade such Exchange Securities from and after their receipt
without any limitations or restrictions under the 1933 Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.

          In connection with the Exchange Offer, the Company shall:

          (i) mail to each Holder a copy of the Prospectus forming part of the
     Exchange Offer Registration Statement, together with an appropriate letter
     of transmittal and related documents;

          (ii) keep the Exchange Offer open for not less than 30 days after the
     date notice thereof is mailed to the Holders (or longer if required by
     applicable law);

<PAGE>

          (iii) use the services of DTC for the Exchange Offer with respect to
     Initial Securities evidenced by global certificates;

          (iv) permit Holders to withdraw tendered Registrable Securities at any
     time prior to the close of business, New York City time, on the last
     Business Day on which the Exchange Offer shall remain open, by sending to
     the institution specified in the notice, a telegram, telex, facsimile
     transmission or letter setting forth the name of such Holder, the principal
     amount of Registrable Securities delivered for exchange, and a statement
     that such Holder is withdrawing its election to have such Registrable
     Securities exchanged;

          (v) use its best efforts to ensure that (i) any Exchange Offer
     Registration Statement and any amendment thereto and any Prospectus forming
     part thereof and any supplement thereto complies in all material respects
     with the 1933 Act and the rules and regulations thereunder, (ii) any
     Exchange Offer Registration Statement and any amendment thereto does not,
     when it becomes effective, contain an untrue statement of a material fact
     or omit to state a material fact required to be stated therein or necessary
     to make the statements therein not misleading and (iii) any Prospectus
     forming part of any Exchange Offer Registration Statement, and any
     supplement to such Prospectus (as amended or supplemented from time to
     time), does not include an untrue statement of a material fact or omit to
     state a material fact necessary in order to make the statements, in the
     light of the circumstances under which they were made, not misleading;
     PROVIDED, HOWEVER, that in no such case shall the Company be responsible
     for the Updated Policy Provider Information or Holder Information included
     in the Exchange Offer Registration Statement, any Prospectus forming a part
     thereof, or any amendment or supplement thereto, as the case may be; and

          (vi) otherwise comply in all respects with all applicable laws
     relating to the Exchange Offer.

          As soon as practicable after the close of the Exchange Offer, the .
Company shall:

          (i) accept for exchange Registrable Securities duly tendered and not
     validly withdrawn pursuant to the Exchange Offer in accordance with the
     terms of the Exchange Offer Registration Statement and the letter of
     transmittal which is an exhibit thereto;

          (ii) cancel or cause to be canceled all Registrable Securities so
     accepted for exchange by the Company; and

          (iii) promptly cause to be authenticated and delivered Exchange
     Securities to each Holder of Registrable Securities equal in amount to the
     Registrable Securities of such Holder so accepted for exchange.

          Interest on each Exchange Security will accrue from the last date on
which interest was paid on the Registrable Securities surrendered in exchange
therefor or, if no interest has been paid on the Registrable Securities, from
the Closing Date. The Exchange Offer shall not be subject to any conditions,

<PAGE>

other than that the Exchange Offer, or the making of any exchange by a Holder,
does not violate applicable law or any applicable interpretation of the Staff.
Each Holder of Registrable Securities (other than Participating Broker-Dealers)
who wishes to exchange such Registrable Securities for Exchange Securities in
the Exchange Offer shall represent that (i) it is not an "affiliate" of the
Company within the meaning of Rule 405 under the 1933 Act, (ii) any Exchange
Securities to be received by it were acquired in the ordinary course of business
and (iii) it has no arrangement with any Person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange Securities.

          (b) SHELF REGISTRATION. (i) If, because of any change in law or
applicable interpretations thereof by the Staff, the Company is not permitted to
effect the Exchange Offer as contemplated by Section 2(a) hereof, or (ii) if for
any other reason the Exchange Offer Registration Statement is not declared
effective within 180 days after the Closing Date or the Exchange Offer is not
consummated within 210 days after the Closing Date (a "REGISTRATION DEFAULT"),
or (iii) if any Holder (other than the Initial Purchaser) is not eligible to
participate in the Exchange Offer or (iv) upon the request of the Initial
Purchaser (with respect to any Registrable Securities which it acquired directly
from the Company) following the consummation of the Exchange Offer if the
Initial Purchaser shall hold Registrable Securities which it acquired directly
from the Company and if the Initial Purchaser is not permitted, in the opinion
of counsel to the Initial Purchaser, pursuant to applicable law or applicable
interpretation of the Staff to participate in the Exchange Offer, the Company
shall, at its cost:

          (A) as promptly as practicable, file with the SEC a Shelf Registration
     Statement relating to the offer and sale of the Registrable Securities by
     the Holders from time to time in accordance with the methods of
     distribution elected by the Majority Holders of such Registrable Securities
     and set forth in such Shelf Registration Statement, and use its best
     efforts to cause such Shelf Registration Statement to be declared effective
     by the SEC by the 180th day after the Closing Date (or promptly in the
     event of a request by any Holder pursuant to clause (iii) above or the
     Initial Purchaser pursuant to clause (iv) above). In the event that the
     Company is required to file a Shelf Registration Statement upon the request
     of any Holder (other than the Initial Purchaser) not eligible to
     participate in the Exchange Offer pursuant to clause (iii) above or upon
     the request of the Initial Purchaser pursuant to clause (iv) above, the
     Company shall file and have declared effective by the SEC both an Exchange
     Offer Registration Statement pursuant to Section 2(a) hereof with respect
     to all Registrable Securities and a Shelf Registration Statement (which may
     be a combined Registration Statement with the Exchange Offer Registration
     Statement) with respect to offers and sales of Registrable Securities held
     by such Holder or the Initial Purchaser after completion of the Exchange
     Offer. If the Company files a Shelf Registration Statement pursuant to
     Section 2(b)(i) or (ii) hereof, the Company will no longer be required to
     effect the Exchange Offer;

          (B) use its best efforts to keep the Shelf Registration Statement
     continuously effective, in order to permit the Prospectus forming part
     thereof to be usable by Holders, until the end of the period referred to in
     Rule 144(k) (or one year from the Closing Date if such Shelf Registration
     Statement is filed upon the request of the Initial Purchaser pursuant to
     clause (iv) above) or such shorter period as shall end when all of the

<PAGE>

     Registrable Securities covered by the Shelf Registration Statement have
     been sold pursuant to the Shelf Registration Statement; and

          (C) notwithstanding any other provisions hereof, use its best efforts
     to ensure that (i) any Shelf Registration Statement and any amendment
     thereto and any Prospectus forming part thereof and any supplement thereto
     complies in all material respects with the 1933 Act and the rules and
     regulations thereunder, (ii) any Shelf Registration Statement and any
     amendment thereto does not, when it becomes effective, contain an untrue
     statement of a material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading and (iii) any Prospectus forming part of any Shelf Registration
     Statement, and any supplement to such Prospectus (as amended or
     supplemented from time to time), does not include an untrue statement of a
     material fact or omit to state a material fact necessary in order to make
     the statements, in the light of the circumstances under which they were
     made, not misleading; PROVIDED, HOWEVER, that in no such case shall the
     Company be responsible for the Updated Policy Provider Information or
     Holder Information included in the Shelf Offer Registration Statement, any
     Prospectus forming a part thereof, or any amendment or supplement thereto,
     as the case may be.

          The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) hereof, to use all reasonable efforts to cause any such amendment
to become effective and such Shelf Registration Statement to become usable as
soon as practicable thereafter and to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.

          The Company shall be allowed a period of five days, beginning on the
first day a Registration Default occurs, to cure such Registration Default
before the Company will be required to comply with the requirements of Section
2(b) hereof.

          (c) EXPENSES. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or 2(b) hereof and, in
the case of any Shelf Registration Statement, will reimburse the Holders or the
Initial Purchaser for the reasonable fees and disbursements of one firm or
counsel designated in writing by the Majority Holders to act as counsel for the
Holders of the Registrable Securities in connection therewith. Each Holder shall
pay all expenses of its counsel, other than as set forth in the preceding
sentence, underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.

          (d) EFFECTIVE REGISTRATION STATEMENT. (i) The Company will be deemed
not to have used its best efforts to cause the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, to become, or
to remain, effective during the requisite period if the Company voluntarily

<PAGE>

takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Securities covered thereby
not being able to exchange or offer and sell such Registrable Securities during
that period unless (A) such action is required by applicable law or (B) such
action is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including, without
limitation, the acquisition or divestiture of assets, so long as the Company
promptly complies with the requirements of Section 3(j) hereof, if applicable.

          (ii) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; PROVIDED, HOWEVER, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to a Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume.

          (e) INCREASE IN INTEREST RATE. In the event that no Registration Event
has occurred on or prior to the 210th day after the Closing Date, the interest
rate per annum payable in respect of the Initial Securities shall be increased
by 0.50%, effective from and including such 210th day to but excluding the
earlier of (i) the date on which a Registration Event occurs and (ii) the date
on which there cease to be any Registrable Securities. In the event that the
Shelf Registration Statement (if it is filed), after it is declared effective by
the SEC, ceases to be effective at any time during the period specified by
Section 2(b)(B) hereof for more than 60 days, whether or not consecutive, during
any 12-month period, the interest rate payable in respect of the Initial
Securities shall be increased by 0.50% per annum from the 61st day of the
applicable 12-month period such Shelf Registration Statement ceases to be
effective until such time as the Shelf Registration Statement again becomes
effective (or, if earlier, the end of the period specified by Section 2(b)(B)
hereof).

          3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Company shall:

          (a) prepare and file with the SEC a Registration Statement, within the
     time period specified in Section 2 hereof, on the appropriate form under
     the 1933 Act, which form (i) shall be selected by the Company, (ii) shall,
     in the case of a Shelf Registration, be available for the sale of the
     Registrable Securities by the selling Holders thereof and (iii) shall
     comply as to form in all material respects with the requirements of the
     applicable form;

          (b) prepare and file with the SEC such amendments and post-effective
     amendments to each Registration Statement as may be necessary under
     applicable law to keep such Registration Statement effective for the
     applicable period; cause each Prospectus to be supplemented by any required

<PAGE>

     prospectus supplement, and as so supplemented to be filed pursuant to Rule
     424 under the 1933 Act;

          (c) in the case of a Shelf Registration, (i) notify each Holder of
     Registrable Securities when a Shelf Registration Statement with respect to
     the Registrable Securities has been filed and advise such Holders that the
     distribution of Registrable Securities will be made in accordance with the
     method elected by the Majority Holders; (ii) furnish to each Holder of
     Registrable Securities included within the coverage of the Shelf
     Registration Statement at least one copy of such Shelf Registration
     Statement and any post-effective amendment thereto, including financial
     statements and schedules, and, if the Holder so requests in writing, all
     reports, other documents and exhibits (including those incorporated by
     reference) at the expense of the Company; (iii) furnish to each Holder of
     Registrable Securities included within the coverage of the Shelf
     Registration Statement, to counsel for the Holders and to each underwriter
     of an underwritten offering of Registrable Securities, if any, without
     charge, as many copies of each Prospectus, including each preliminary
     Prospectus, and any amendment or supplement thereto as such Holder or
     underwriter may reasonably request in order to facilitate the public sale
     or other disposition of the Registrable Securities; and (iv) subject to the
     last paragraph of Section 3 hereof, consent to the use of the Prospectus or
     any amendment or supplement thereto by each of the selling Holders of
     Registrable Securities included in the Shelf Registration Statement in
     connection with the offering and sale of the Registrable Securities covered
     by the Prospectus or any amendment or supplement thereto;

          (d) use its best efforts to register or qualify the Registrable
     Securities or cooperate with the Holders of Registrable Securities and
     their counsel in the registration or qualification of such Registrable
     Securities under all applicable state securities or "blue sky" laws of such
     jurisdictions as any Holder of Registrable Securities covered by a
     Registration Statement and each underwriter of an underwritten offering of
     Registrable Securities shall reasonably request in writing to cooperate
     with the Holders in connection with any filings required to be made with
     the NASD, and do any and all other acts and things which may be reasonably
     necessary or advisable to enable such Holders to consummate the disposition
     in each such jurisdiction of such Registrable Securities owned by such
     Holders; PROVIDED, HOWEVER, that in no event shall the Company be required
     to (i) qualify as a foreign corporation or as a dealer in securities in any
     jurisdiction where it would not otherwise be required to qualify but for
     this Section 3(d) or (ii) take any action which would subject it to general
     service of process or taxation in any such jurisdiction if it is not then
     so subject;

          (e) in the case of a Shelf Registration, notify each Holder of
     Registrable Securities promptly and, if requested by such Holder or its
     counsel, confirm such advice in writing promptly (i) when a Shelf
     Registration Statement has become effective and when any post-effective
     amendments and supplements thereto become effective, (ii) of any request by
     the SEC or any state securities authority for post-effective amendments and
     supplements to a Shelf Registration Statement and Prospectus or for
     additional information after the Shelf Registration Statement has become
     effective, (iii) of the issuance by the SEC or any state securities

<PAGE>

     authority of any stop order suspending the effectiveness of a Shelf
     Registration Statement or the initiation of any proceedings for that
     purpose, (iv) at the closing of any sale of Registrable Securities if,
     between the effective date of a Shelf Registration Statement and such
     closing, the representations and warranties of the Company contained in any
     underwriting agreement, securities sales agreement or other similar
     agreement, if any, relating to such offering cease to be true and correct
     in all material respects, (v) of the receipt by the Company of any
     notification with respect to the suspension of the qualification of the
     Registrable Securities for sale in any jurisdiction or the initiation or
     threatening of any proceeding for such purpose, (vi) of the happening of
     any material event or the discovery of any material facts during the period
     a Shelf Registration Statement is effective which makes any statement made
     in such Registration Statement or the related Prospectus untrue or which
     requires the making of any changes in such Registration Statement or
     Prospectus in order to make the statements therein (in the case of the
     Prospectus in the light of the circumstances under which they were made)
     not misleading and (vii) of any determination by the Company that a
     post-effective amendment to a Registration Statement would be appropriate;

          (f) (A) in the case of the Exchange Offer, (i) include in the Exchange
     Offer Registration Statement a "Plan of Distribution" section covering the
     use of the Prospectus included in the Exchange Offer Registration Statement
     by broker-dealers who have exchanged their Registrable Securities for
     Exchange Securities for the resale of such Exchange Securities, (ii)
     furnish to each broker-dealer who desires to participate in the Exchange
     Offer, without charge, as many copies of each Prospectus included in the
     Exchange Offer Registration Statement, including any preliminary
     prospectus, and any amendment or supplement thereto, as such broker-dealer
     may reasonably request, (iii) include in the Exchange Offer Registration
     Statement a statement that any broker-dealer who holds Registrable
     Securities acquired for its own account as a result of market-making
     activities or other trading activities (a "PARTICIPATING BROKER-DEALER"),
     and who receives Exchange Securities for Registrable Securities pursuant to
     the Exchange Offer, may be a statutory underwriter and must deliver a
     prospectus meeting the requirements of the 1933 Act in connection with any
     resale of such Exchange Securities, (iv) subject to the last paragraph of
     Section 3 hereof, hereby consent to the use of the Prospectus forming part
     of the Exchange Offer Registration Statement or any amendment or supplement
     thereto, by any broker-dealer in connection with the sale or transfer of
     the Exchange Securities covered by the Prospectus or any amendment or
     supplement thereto, and (v) include in the transmittal letter or similar
     documentation to be executed by an exchange offeree in order to participate
     in the Exchange Offer (x) the following provision:

          "If the undersigned is not a broker-dealer, the undersigned represents
          that it is not engaged in, and does not intend to engage in, a
          distribution of Exchange Securities. If the undersigned is a
          broker-dealer that will receive Exchange Securities for its own
          account in exchange for Registrable Securities, it represents that the
          Registrable Securities to be exchanged for Exchange Securities were
          acquired by it as a result of market-making activities or other

<PAGE>

          trading activities and acknowledges that it will deliver a prospectus
          meeting the requirements of the 1933 Act in connection with any resale
          of such Exchange Securities pursuant to the Exchange Offer; however,
          by so acknowledging and by delivering a prospectus, the undersigned
          will not be deemed to admit that it is an "underwriter" within the
          meaning of the 1933 Act"; and

          (y) a statement to the effect that a broker-dealer making the
          acknowledgment described in subclause (x) and by delivering a
          Prospectus in connection with the exchange of Registrable
          Certificates, the broker-dealer will not be deemed to admit that it is
          an underwriter within the meaning of the 1933 Act;

          (B) to the extent any Participating Broker-Dealer participates in the
     Exchange Offer, use its best efforts to cause to be delivered at the
     request of an entity representing the Participating Broker-Dealers (which
     entity shall be the Initial Purchaser, unless it elects not to act as such
     representative) only one, if any, "cold comfort" letter with respect to the
     Prospectus in the form existing on the last date for which exchanges are
     accepted pursuant to the Exchange Offer and with respect to each subsequent
     amendment or supplement, if any, effected during the period specified in
     clause (C) below;

          (C) to the extent any Participating Broker-Dealer participates in the
     Exchange Offer, use its best efforts to maintain the effectiveness of the
     Exchange Offer Registration Statement for the 180-day period specified in
     clause (D) below; and

          (D) not be required to amend or supplement the Prospectus contained in
     the Exchange Offer Registration Statement as would otherwise be
     contemplated by Section 3(b) hereof, or take any other action as a result
     of this Section 3(f), for a period exceeding 180 days after the last date
     for which exchanges are accepted pursuant to the Exchange Offer (as such
     period may be extended by the Company) and Participating Broker-Dealers
     shall not be authorized by the Company to, and shall not, deliver such
     Prospectus after such period in connection with resales contemplated by
     this Section 3;

          (g) (A) in the case of an Exchange Offer, furnish counsel for the
     Initial Purchaser and (B) in the case of a Shelf Registration, furnish
     counsel for the Holders of Registrable Securities copies of any request by
     the SEC or any state securities authority for amendments or supplements to
     a Registration Statement and Prospectus or for additional information;

          (h) make every reasonable effort to obtain the withdrawal of any order
     suspending the effectiveness of a Registration Statement as soon as
     practicable and provide immediate notice to each Holder of the withdrawal
     of any such order;

          (i) unless any Registrable Securities are in book entry form only, in
     the case of a Shelf Registration, cooperate with the selling Holders of

<PAGE>

     Registrable Securities to facilitate the timely preparation and delivery of
     certificates representing Registrable Securities to be sold free from any
     restrictive legends; and cause such Registrable Securities to be in such
     denominations (consistent with the provisions of the Indenture) and
     registered in such names as the selling Holders or the underwriters, if
     any, may reasonably request at least one Business Day prior to the closing
     of any sale of Registrable Securities;

          (j) in the case of a Shelf Registration, upon the occurrence of any
     event or the discovery of any facts, each as contemplated by Sections
     2(d)(i)(B) or 3(e)(ii)-(vi) hereof, use its best efforts to prepare a
     post-effective amendment to a Registration Statement or an amendment or
     supplement to the related Prospectus or file any other required document so
     that, as thereafter delivered to the purchasers of the Registrable
     Securities, such Prospectus will not contain at the time of such delivery
     any untrue statement of a material fact or omit to state a material fact
     necessary to make the statements therein, in the light of the circumstances
     under which they were made, not misleading. The Company agrees to notify
     each Holder to suspend use of the Prospectus as promptly as practicable
     after the occurrence of such an event, and each Holder hereby agrees to
     suspend use of the Prospectus as promptly as practicable upon receipt of
     such notice until the Company has amended or supplemented the Prospectus to
     correct such misstatement or omission, PROVIDED that the Company shall
     cause such suspension not to last more than 30 days per occurrence or more
     than 60 days in aggregate in a calendar year. At such time as such public
     disclosure is otherwise made or the Company determines that such disclosure
     is not necessary, in each case to correct any misstatement of a material
     fact or to include any omitted material fact, the Company agrees promptly
     to notify each Holder of such determination and to furnish each Holder such
     numbers of copies of the Prospectus, as amended or supplemented, as such
     Holder may reasonably request;

          (k) obtain a CUSIP number for all Exchange Securities, or Registrable
     Securities, as the case may be, not later than the effective date of an
     Exchange Offer Registration Statement or Shelf Registration Statement, as
     the case may be, and provide the Trustee with printed certificates
     evidencing the Exchange Securities or the Registrable Securities, as the
     case may be, held in book entry form, in a form eligible for deposit with
     DTC;

          (l) (i) cause the Indenture to be qualified under the Trust Indenture
     Act of 1939, as amended (the "TIA"), in connection with the registration of
     the Exchange Securities, or Registrable Securities, as the case may be,
     (ii) cooperate with the Trustee and the Holders to effect such changes to
     the Indenture as may be required for the Indenture to be so qualified in
     accordance with the terms of the TIA and (iii) execute, and use its best
     efforts to cause the Trustee to execute, all documents as may be required
     to effect such changes, and all other forms and documents required to be
     filed with the SEC to enable the Indenture to be so qualified in a timely
     manner;

          (m) in the case of a Shelf Registration, enter into such customary
     agreements (including underwriting agreements in customary form) and take

<PAGE>

     all other customary and appropriate actions (including those reasonably
     requested by the Holders of a majority in principal amount of Registrable
     Securities being sold) in order to expedite or facilitate the disposition
     of such Registrable Securities and in such connection whether or not an
     underwriting agreement is entered into and whether or not the registration
     is an underwritten registration:

               (i) make such representations and warranties to the Holders of
          such Registrable Securities and the underwriters, if any, in form,
          substance and scope as are customarily made by the Company to
          underwriters in similar underwritten offerings as may be reasonably
          requested by them;

               (ii) obtain opinions of counsel to the Company (who may be the
          general counsel of the Company) and updates thereof (which counsel and
          opinions (in form, scope and substance) shall be reasonably
          satisfactory to the managing underwriters, if any, or if there are no
          such managing underwriters, to the Holders of a majority in principal
          amount of the Registrable Securities being sold) addressed to each
          selling Holder and the underwriters, if any, covering the matters
          customarily covered in opinions requested in sales of securities or
          underwritten offerings and such other matters as may be reasonably
          requested by such Holders and underwriters;

               (iii) obtain a "cold comfort" letter and updates thereof from the
          Company's independent certified public accountants addressed to the
          underwriters, if any, and use its best efforts to have such letter
          addressed to the selling Holders of Registrable Securities, such
          letter to be in customary form and covering such matters of the type
          customarily covered in "cold comfort" letters in connection with
          similar underwritten offerings as the Holders of a majority in
          principal amount of the Registrable Securities being sold shall
          request;

               (iv) enter into a securities sales agreement with the Holders and
          an agent of the Holders providing for, among other things, the
          appointment of such agent for the selling Holders for the purpose of
          soliciting purchases of Registrable Securities, which agreement shall
          be in form, substance and scope customary for similar offerings;

               (v) if an underwriting agreement is entered into, cause the same
          to set forth indemnification provisions and procedures substantially
          equivalent to the indemnification provisions and procedures set forth
          in Section 5 hereof with respect to all parties to be indemnified
          pursuant to said Section; and

               (vi) deliver such other documents and certificates as may be
          reasonably requested by Holders of a majority in principal amount of
          Registrable Securities being sold and as are customarily delivered in
          similar offerings.

<PAGE>

     The above shall be done at (i) the effectiveness of such Registration
     Statement (and, if appropriate, each post-effective amendment thereto) if
     appropriate in connection with any particular disposition of Registrable
     Securities and (ii) each closing under any underwriting or similar
     agreement as and to the extent required thereunder. In the case of any
     underwritten offering, the Company shall provide written notice to the
     Holders of all Registrable Securities of such underwritten offering at
     least 30 days prior to the filing of a prospectus supplement for such
     underwritten offering. Such notice shall (x) offer each such Holder the
     right to participate in such underwritten offering, (y) specify a date,
     which shall be no earlier than 10 days following the date of such notice,
     by which such Holder must inform the Company of its intent to participate
     in such underwritten offering and (z) include the instructions such Holder
     must follow in order to participate in such underwritten offering;

          (n) in the case of a Shelf Registration, make available for inspection
     by representatives of the Holders of the Registrable Securities and any
     underwriters participating in any disposition pursuant to a Shelf
     Registration Statement and any counsel or accountant retained by such
     Holders or underwriters, all financial and other records, pertinent
     corporate documents and properties of the Company reasonably requested by
     it, and cause the respective officers, directors, employees, and any other
     agents of the Company to make reasonably available all relevant information
     reasonably requested by any such representative, underwriter, counsel or
     accountant in connection with a Registration Statement, in each case as is
     customary for similar due diligence examinations; PROVIDED, HOWEVER, that
     any information that is designated in writing by the Company, in good
     faith, as confidential at the time of delivery of such information shall be
     kept confidential by such representatives, underwriters, counsel or
     accountant, unless such disclosure is made in connection with a court
     proceeding or required by law, or such information becomes available to the
     public generally or through a third party without an accompanying
     obligation of confidentiality; and PROVIDED FURTHER that the foregoing
     inspection and information gathering shall, to the extent reasonably
     possible, be coordinated on behalf of the Holders and the other parties
     entitled thereto by one counsel designated by and on behalf of such Holders
     and other parties;

          (o) (i) a reasonable time prior to the filing of any Exchange Offer
     Registration Statement, any Prospectus forming a part thereof, any
     amendment to an Exchange Offer Registration Statement or amendment or
     supplement to a Prospectus, provide copies of such document to the Initial
     Purchaser, and use its best efforts to reflect in any such document when
     filed such comments as the Initial Purchaser or its counsel may reasonably
     request; (ii) in the case of a Shelf Registration, a reasonable time prior
     to filing any Shelf Registration Statement, any Prospectus forming a part
     thereof, any amendment to such Shelf Registration Statement or amendment or
     supplement to such Prospectus, provide copies of such document to the
     Holders of Registrable Securities, to the Initial Purchaser, to counsel on
     behalf of the Holders and to the underwriter or underwriters of an
     underwritten offering of Registrable Securities, if any, and use its best
     efforts to reflect such comments in any such document when filed as the
     Holders of Registrable Securities, their counsel and any

<PAGE>

     underwriter may reasonably request; and (iii) cause the representatives of
     the Company to be available for discussion of such document as shall be
     reasonably requested by the Holders of Registrable Securities, the Initial
     Purchaser on behalf of such Holders or any underwriter and shall not at any
     time make any filing of any such document of which such Holders, the
     Initial Purchaser on behalf of such Holders, their counsel or any
     underwriter shall not have previously been advised and furnished a copy or
     to which such Holders, the Initial Purchaser on behalf of such Holders,
     their counsel or any underwriter shall reasonably object;

          (p) in the case of a Shelf Registration, use its best efforts to cause
     the Registrable Securities to be rated with the appropriate rating agency
     at the time of effectiveness of such Shelf Registration Statement, unless
     the Registrable Securities are already so rated; and

          (q) otherwise use its best efforts to comply with all applicable rules
     and regulations of the SEC and make generally available to its security
     holders, as soon as reasonably practicable after the effective date of a
     Registration Statement, an earnings statement which shall satisfy the
     provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder.

          In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding such Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
and the Company may exclude from such registration the Registrable Securities of
any Holder that fails to furnish such information within a reasonable time after
receiving such request.

          In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Sections 2(d)(i)(B)
or 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to such Shelf Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(j) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in its
possession other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice. If the Company shall give any such notice to suspend the
disposition of Registrable Securities pursuant to a Shelf Registration Statement
as a result of the happening of any event or the discovery of any facts, each of
the kind described in Sections 2(d)(i)(B) or 3(e)(ii)-(vi) hereof, the Company
shall be deemed to have used its best efforts to keep the Shelf Registration
Statement effective during such period of suspension provided that the Company
shall use its best efforts to file and have declared effective (if an amendment)
as soon as practicable an amendment or supplement to the Shelf Registration
Statement and shall extend the period during which the Registration Statement
shall be maintained effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such notice to

<PAGE>

and including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions.

          4. UNDERWRITTEN OFFERING. The Holders of Registrable Securities
covered by a Shelf Registration Statement who desire to do so may sell such
Registrable Securities in an underwritten offering. In any such underwritten
offering, the investment banker or bankers and manager or managers that will
administer the offering will be selected by, and the underwriting arrangements
with respect thereto will be approved by, the Holders of a majority of the
Registrable Securities to be included in such offering; PROVIDED, HOWEVER, that
(i) such investment bankers and managers and underwriting arrangements must be
reasonably satisfactory to the Company and (ii) the Company shall not be
obligated to arrange for more than one underwritten offering during the period
such Shelf Registration Statement is required to be effective pursuant to
Section 2(b)(B) hereof. No Holder may participate in any underwritten offering
contemplated hereby unless such Holder (a) agrees to sell such Holder's
Registrable Securities in accordance with any approved underwriting
arrangements, (b) completes and executes all reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such approved underwriting arrangements
and (c) at least 20% of the outstanding Registrable Securities are included in
such underwritten offering. The Holders participating in any underwritten
offering shall be responsible for any expenses customarily borne by selling
securityholders, including underwriting discounts and commissions and fees and
expenses of counsel to the selling securityholders.

          5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Holder and each Person, if any, who controls
any such Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Holder or any such controlling Person in connection
with defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Exchange
Securities or Registrable Securities were registered under the 1933 Act,
including all documents incorporated therein by reference, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished or filed with the Commission any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon Updated Policy
Provider Information or information relating to any Holder furnished to the
Company in writing by any selling Holder expressly for use therein ("HOLDER
INFORMATION"); PROVIDED, HOWEVER, that the foregoing indemnity agreement with
respect to any preliminary Prospectus shall not inure to the benefit of any
Person from whom the Person asserting any such losses, claims, damages or
liabilities purchased Registrable Securities, or any Person controlling such

<PAGE>

seller, if a copy of the final Prospectus (as then amended or supplemented if
the Company shall have furnished or filed with the Commission any amendments or
supplements thereto) was not sent or given by or on behalf of such seller to
such purchaser with or prior to the written confirmation of the sale of the
Registrable Securities to such Person, and if the final Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities. In connection with any underwritten offering
permitted by Section 4 hereof, the Company will also indemnify the underwriters
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of the 1933 Act and the 1934 Act)
to the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.

          (b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company and the other selling Holders, and each of their
respective directors, officers who sign the Registration Statement and each
Person, if any, who controls the Company and any other selling Holder within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to
the same extent as the foregoing indemnity from the Company to the Holders, but
only with reference to information relating to such Holder furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).

          (c) In case any proceeding (including any governmental investigation)
shall be instituted involving any Person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the
"INDEMNIFIED PARTY") shall promptly notify the Person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, or (iii) the indemnifying party shall have
failed to retain counsel as required by the prior sentence to represent the
indemnified party within a reasonable amount of time. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by (x) Morgan
Stanley & Co. Incorporated, if Morgan Stanley & Co. Incorporated is a Holder at
such time, or (y) otherwise, the Majority Holders in the case of parties
indemnified pursuant to paragraph (a) above. Such firm shall be designated by
the Company in the case of parties indemnified pursuant to paragraph (b) above.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to

<PAGE>

indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested in writing an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this Section 5(c), the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 90 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement, unless such fees and expenses are
being disputed in good faith. The indemnifying party at any time may, subject to
the last sentence of this Section 5(c), settle or compromise any proceeding
described in this Section 5(c) at the expense of the indemnifying party. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement (i) includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding and (ii)
does not include a statement as to, or an admission of, fault, culpability or a
failure to act by or on behalf of an indemnified party.

          (d) To the extent the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is required to be made but is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages or
liabilities, then the applicable indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the indemnifying party or parties on the one hand and of
the indemnified party or parties on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the Holders shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders' respective
obligations to contribute pursuant to this Section 5(d) are several in
proportion to the respective aggregate principal amount of Registrable
Securities of such Holder that were registered pursuant to a Registration
Statement, and not joint.

          (e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this

<PAGE>

Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities
were sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any Person controlling such Holder or by or on behalf of the
Company, its officers or directors or any Person controlling the Company, (iii)
acceptance of and payment for any of the Exchange Securities and (iv) any sale
of Registrable Certificates pursuant to a Shelf Registration Statement. The
remedies provided for in this Section 5 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.

          6. MISCELLANEOUS. (a) RULE 144 AND RULE 144A. The Company covenants
that (A) for so long as the Company is subject to the reporting requirements of
Section 13 or 15 of the 1934 Act, it will file the reports required to be filed
by it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations
adopted by the SEC thereunder, and (B) if it ceases to be so required to file
such reports, it will upon the request of any Holder of Registrable Securities
(i) make publicly available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to a
prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the 1933 Act and it will take such further action as any Holder of
Registrable Securities may reasonably request, and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may be
amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the request of any Holder of Registrable Securities,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

          (b) OTHER REGISTRATION RIGHTS. The Company may grant registration
rights that would permit any Person the right to piggyback on any Shelf
Registration Statement, PROVIDED that if the managing underwriter, if any, of an
offering pursuant to such Shelf Registration Statement delivers an opinion of
the selling Holders that the total amount of securities which they and the
holders of such piggyback rights intend to include in any Shelf Registration
Statement materially adversely affects the success of such offering (including
the price at which such securities can be sold), then the amount, number or kind
of securities to be offered for the account of holders of such piggyback rights
will be reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount, number or kind recommended by
such managing underwriter; and PROVIDED FURTHER that such piggyback registration
rights shall in no event materially adversely affect the interests of any
Holder.

<PAGE>

          (c) NO INCONSISTENT AGREEMENTS. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.

          (d) AMENDMENTS AND WAIVERS. Except as otherwise expressly permitted in
the Indenture, the provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Holders of at least a majority in
aggregate principal amount of the outstanding Registrable Securities affected by
such amendment, modification, supplement, waiver or consent to a departure;
PROVIDED, HOWEVER, that no amendment, modification, supplement or waiver or
consent to any departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Securities unless consented to in
writing by such Holder.

          (e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(e), which address initially is, with respect to the Initial Purchaser,
the address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(e).

          All such notices and communications shall be deemed to have been duly
given; at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.

          Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.

          (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms hereof or of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement

<PAGE>

and, if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.

          (g) THIRD PARTY BENEFICIARIES. The Holders shall be third party
beneficiaries to the agreements made hereunder and to the obligations of the
Company hereunder and shall have the right to enforce such agreements and
obligations directly to the extent any such Holder deems such enforcement
necessary or advisable to protect its rights hereunder.

          (h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

          (i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

          (j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

          (k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

          (l) TERMINATION. This Agreement shall terminate and be of no further
force or effect when there shall not be any Registrable Securities outstanding,
except that the provisions of Sections 2(c), 2(e), 5, 6(g) and 6(j) hereof shall
survive any such termination.

<PAGE>

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

                                       CONTINENTAL AIRLINES, INC.

                                       BY:
                                          --------------------------------------
                                          Name:  Gerald Laderman
                                          Title: Senior Vice President - Finance

Confirmed and accepted as of the date first above written:

MORGAN STANLEY & CO. INCORPORATED

BY:
   --------------------------------------
   Name:  Cecilia Park
   Title:    Vice PresidentCONTINENTAL AIRLINES, INC.

                                  $200,000,000

                      Floating Rate Secured Notes due 2007

                               PURCHASE AGREEMENT

                                                 December 2, 2002

MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York  10036

Ladies and Gentlemen:

          Continental  Airlines,  Inc., a Delaware  corporation (the "COMPANY"),
proposes to issue and sell to Morgan  Stanley & Co.  Incorporated  (the "INITIAL
PURCHASER") $200,000,000 principal amount of its Floating Rate Secured Notes due
2007  bearing  interest at the rate of USD 3-Month  LIBOR + 0.90% (the  "OFFERED
SECURITIES") to be issued pursuant to the provisions of an Indenture to be dated
as of the Closing Date (as defined below) (the  "INDENTURE")  among the Company,
Wilmington  Trust Company,  as trustee (the  "TRUSTEE"),  Morgan Stanley Capital
Services  Inc.,  as Liquidity  Provider  (the  "LIQUIDITY  PROVIDER"),  and MBIA
Insurance Corporation, as Policy Provider (the "POLICY PROVIDER").

          The holders of the Offered Securities will be entitled to the benefits
of  an  Exchange  and  Registration  Rights  Agreement,  in  a  form  reasonably
satisfactory  to the Initial  Purchaser  to be dated as of the Closing Date (the
"REGISTRATION  RIGHTS AGREEMENT") between the Company and the Initial Purchaser,
pursuant  to which the  Company  will  file a  registration  statement  with the
Securities and Exchange  Commission (the "COMMISSION")  registering the Exchange
Securities  referred to in such  Registration  Rights  Agreement  (the "EXCHANGE
SECURITIES")  or the Offered  Securities  under the  Securities  Act of 1933, as
amended (the "SECURITIES ACT").

          The Offered  Securities will only be offered (A) in the case of offers
inside  the  United  States,  to  persons  reasonably  believed  by the  Initial
Purchaser to be (1)  "qualified  institutional  buyers" (as defined in Rule 144A

<PAGE>

under the Securities Act) ("QIBS") in reliance on Rule 144A under the Securities
Act or (2) institutional  "accredited  investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) ("INSTITUTIONAL ACCREDITED INVESTORS")
that deliver a letter in the form  annexed as Annex III to the Final  Memorandum
(as defined below) and (B) in the case of offers  outside the United States,  to
persons  other  than  U.S.  persons  (including  dealers  or other  professional
fiduciaries  in the United  States acting on a  discretionary  basis for foreign
beneficial owners (other than an estate or trust)) in accordance with Regulation
S under the Securities Act ("REGULATION S").

          In connection with the sale of the Offered Securities, the Company has
prepared  a  preliminary  offering  memorandum  dated  November  26,  2002  (the
"PRELIMINARY MEMORANDUM") and a final offering memorandum dated the date of this
Agreement (the "FINAL MEMORANDUM" and, with the Preliminary  Memorandum,  each a
"MEMORANDUM") including or incorporating by reference a description of the terms
of the Offered  Securities,  the terms of the offering and a description  of the
Company. As used herein, the terms "Preliminary Memorandum",  "Final Memorandum"
and  "Memorandum"  shall include,  in each case, the documents  incorporated  by
reference  therein.  The terms  "SUPPLEMENT",  "AMENDMENT"  and  "AMEND" as used
herein with respect to a Memorandum  shall  include all  documents  deemed to be
incorporated by reference in such  Memorandum  that are filed  subsequent to the
date of such Memorandum with the Commission  pursuant to the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT").

          The Offered Securities and the Exchange  Securities will be secured by
a lien on the Collateral (as defined in the Indenture),  which includes  certain
aircraft  spare  parts and  related  assets  owned by the  Company.  The Offered
Securities  and the  Exchange  Securities  will rank equally in right of payment
with all of the Company's other unsubordinated obligations, except to the extent
of the assets  subject to such lien, as to which the Offered  Securities and the
Exchange Securities will effectively rank senior.

          Certain amounts of interest payable on the Offered  Securities and the
Exchange  Securities  will be entitled to the benefits of a liquidity  facility.
The  Liquidity  Provider  and the  Trustee  will enter into a  revolving  credit
agreement to be dated as of the Closing Date (the "LIQUIDITY  FACILITY") for the
benefit of the holders of the Offered Securities and the Exchange Securities.

          Payments  of  interest  on the  Offered  Securities  and the  Exchange
Securities  will be  supported  by a financial  guaranty  insurance  policy (the
"POLICY") issued by the Policy Provider to the extent the Liquidity Facility and
any funds contained in the Cash Collateral Account (as defined in the Indenture)
are  insufficient or unavailable for that purpose.  The Policy will also support
the  payment  of the  principal  of the  Offered  Securities  and  the  Exchange
Securities  on the Final Legal  Maturity  Date (as defined in the  Indenture) as
well as the payment of  principal  of the Offered  Securities  and the  Exchange
Securities  prior to the Final Legal  Maturity Date under certain  circumstances
described in the Indenture and the Policy. The Policy will be issued pursuant to
an  Insurance  and  Indemnity  Agreement to be dated as of the Closing Date (the
"POLICY  PROVIDER  AGREEMENT")  among the Policy  Provider,  the Company and the
Trustee.  Under the  Indenture  and the Policy  Provider  Agreement,  the Policy
Provider will be entitled to  reimbursement  for amounts paid pursuant to claims
made under the Policy, subject to certain limitations.

<PAGE>

          The Company understands that the Initial Purchaser proposes to make an
offering of the Offered  Securities on the terms,  subject to the conditions and
in the manner set forth in the Final Memorandum and Section 5 hereof, as soon as
the Initial  Purchaser  deems  advisable after this Agreement (as defined below)
has been executed and delivered.

          Capitalized terms used but not defined in this Purchase Agreement (the
"AGREEMENT")  shall have the meanings  specified  therefor in the Indenture.  As
used  in  this  Agreement,  the  term  "OPERATIVE  AGREEMENTS"  shall  mean  the
Indenture,  the Security Agreement,  the Collateral Maintenance  Agreement,  the
Reference Agency Agreement,  the Registration  Rights  Agreement,  the Liquidity
Facility,  the Policy,  the Policy  Provider  Agreement and the  Indemnification
Agreement  dated the date hereof  (the  "INDEMNIFICATION  AGREEMENT")  among the
Policy Provider, the Company and the Initial Purchaser.

          1.  REPRESENTATIONS  AND  WARRANTIES.  (a) The Company  represents and
warrants to, and agrees with, the Initial Purchaser that:

          (i) In connection with the sale of the Offered Securities, the Company
     has prepared  the  Preliminary  Memorandum  and the Final  Memorandum.  The
     Company hereby  confirms that it has authorized the use of the  Preliminary
     Memorandum  in connection  with the offer of the Offered  Securities by the
     Initial  Purchaser on and prior to the date of this Agreement and the Final
     Memorandum  in  connection  with  the  offer  and  resale  of  the  Offered
     Securities by the Initial  Purchaser after the date of this  Agreement.  On
     the date of this  Agreement,  the Final  Memorandum  does not  contain  any
     untrue  statement  of a material  fact or omit to state any  material  fact
     necessary  in order to make the  statements  therein,  in the  light of the
     circumstances  under which they were made,  not  misleading.  The preceding
     sentence  does not  apply to  statements  in or  omissions  from the  Final
     Memorandum  based upon (A) information  furnished in writing by the Initial
     Purchaser  to the Company  expressly  for use therein  ("INITIAL  PURCHASER
     INFORMATION")  or (B)  information  under the caption  "Description  of the
     Policy  Provider"  in the Final  Memorandum  or documents  incorporated  by
     reference   under  such  caption   (collectively,   the  "POLICY   PROVIDER
     INFORMATION").

          (ii) The documents  incorporated by reference in the Final  Memorandum
     (excluding  the  Policy  Provider  Information),  at the time  they were or
     hereafter,  during the period  mentioned in Section 4(a) hereof,  are filed
     with the  Commission,  complied or will comply,  as the case may be, in all
     material respects with the requirements of the Exchange Act.

          (iii)  The  Company  has been  duly  incorporated  and is an  existing
     corporation in good standing under the laws of the State of Delaware,  with
     corporate power and authority to own, lease and operate its property and to
     conduct its business as described in the Final Memorandum;  and the Company
     is duly qualified to do business as a foreign  corporation in good standing
     in all other  jurisdictions  in which its ownership or lease of property or
     the conduct of its business requires such  qualification,  except where the
     failure to be so qualified would not have a material  adverse effect on the
     condition  (financial  or  otherwise),  business,  properties or results of

<PAGE>

     operations  of the Company  and its  consolidated  subsidiaries  taken as a
     whole (a "CONTINENTAL MATERIAL ADVERSE EFFECT").

          (iv) Each of Continental  Micronesia,  Inc., Air Micronesia,  Inc. and
     ExpressJet  Airlines,  Inc.  (together,  the  "SUBSIDIARIES") has been duly
     incorporated and is an existing corporation in good standing under the laws
     of  the  jurisdiction  of  its  incorporation,  with  corporate  power  and
     authority  to own,  lease and  operate  its  properties  and to conduct its
     business as described in the Final Memorandum;  and each Subsidiary is duly
     qualified to do business as a foreign  corporation  in good standing in all
     other  jurisdictions  in which its  ownership  or lease of  property or the
     conduct of its  business  requires  such  qualification,  except  where the
     failure to be so qualified  would not have a Continental  Material  Adverse
     Effect; all of the issued and outstanding  capital stock of each Subsidiary
     has  been  duly  authorized  and  validly  issued  and is  fully  paid  and
     nonassessable;  and,  except as  described  in the Final  Memorandum,  each
     Subsidiary's  capital  stock  owned by the  Company,  directly  or  through
     subsidiaries, is owned free from liens, encumbrances and defects.

          (v) Except as described in the Final Memorandum, the Company is not in
     default in the  performance  or  observance of any  obligation,  agreement,
     covenant or condition contained in any contract, indenture,  mortgage, loan
     agreement,  note,  lease or other  instrument  to which it is a party or by
     which it may be bound or to which  any of its  properties  may be  subject,
     except for such defaults that would not have a Continental Material Adverse
     Effect.  The execution,  delivery and  performance of this  Agreement,  the
     Offered Securities, the Exchange Securities and the Operative Agreements to
     which  the  Company  is  or  will  be a  party,  the  consummation  of  the
     transactions  contemplated herein and therein, the issuance and sale of the
     Offered Securities and the issuance and exchange of the Exchange Securities
     have been duly authorized by all necessary  corporate action of the Company
     and will not  result  in any  breach  of any of the  terms,  conditions  or
     provisions of, or constitute a default under,  or result in the creation or
     imposition of any lien, charge or encumbrance  (other than any lien, charge
     or encumbrance created under any Operative  Agreement) upon any property or
     assets of the Company pursuant to, any indenture, loan agreement, contract,
     mortgage,  note,  lease or other instrument to which the Company is a party
     or by which the  Company  may be bound or to which any of the  property  or
     assets of the Company is subject,  which breach,  default,  lien, charge or
     encumbrance,  individually  or in the  aggregate,  would have a Continental
     Material  Adverse  Effect,  nor  will  any  such  execution,   delivery  or
     performance  result in any  violation of the  provisions  of the charter or
     by-laws of the Company or any  statute,  rule,  regulation  or order of any
     governmental  agency  or body or any  court  having  jurisdiction  over the
     Company.

          (vi) No consent, approval, authorization, or order of, or filing with,
     any  governmental  agency  or body or any court is  required  for the valid
     authorization, execution and delivery by the Company of this Agreement, the
     Offered Securities, the Exchange Securities and the Operative Agreements to
     which it is or will be a party and for the consummation of the transactions
     contemplated  herein and therein,  except (x) such as may be required under
     the Securities Act, the Trust Indenture Act of 1939, as amended (the "TRUST

<PAGE>

     INDENTURE  ACT"),  the  securities  or "blue  sky" or  similar  laws of the
     various states and of foreign jurisdictions or rules and regulations of the
     National  Association of Securities  Dealers,  Inc.  ("NASD") in connection
     with the  registration of the Offered  Securities  under the Securities Act
     pursuant to the Registration  Rights  Agreement,  (y) filings or recordings
     with the Federal Aviation  Administration  (the "FAA") and under the UCC or
     other  laws  in  effect  in  any  applicable   jurisdiction  governing  the
     perfection  of  security  interests  in the  Collateral,  which  filings or
     recordings  referred  to in this  clause (y) shall have been made,  or duly
     presented  for filing or  recordation,  or shall be in the process of being
     duly filed or filed for  recordation,  on or prior to the Closing  Date and
     (z) the order of the Commission  declaring the Exchange Offer  Registration
     Statement or the Shelf Registration Statement effective.

          (vii) This  Agreement  has been duly  executed  and  delivered  by the
     Company,  and the Operative Agreements to which the Company will be a party
     and the Offered  Securities  will be duly  executed  and  delivered  by the
     Company  on or  prior to the  Closing  Date,  as the  case may be,  and the
     Exchange  Securities  will be duly executed and delivered by the Company on
     the  date  of  their  delivery  as  described  in the  Registration  Rights
     Agreement.

          (viii) The  Operative  Agreements to which the Company is or will be a
     party, when duly executed and delivered by the Company,  assuming that such
     Operative Agreements have been duly authorized,  executed and delivered by,
     and  constitute  the legal,  valid and binding  obligations  of, each other
     party thereto, will constitute valid and binding obligations of the Company
     enforceable  in  accordance  with their  terms,  except (w) as  enforcement
     thereof  may be  limited  by  bankruptcy,  insolvency  (including,  without
     limitation,  all laws  relating to fraudulent  transfers),  reorganization,
     moratorium  or other  similar laws now or  hereafter in effect  relating to
     creditors'  rights  generally,  (x) as  enforcement  thereof  is subject to
     general  principles  of  equity  (regardless  of  whether   enforcement  is
     considered  in a  proceeding  in equity or at law) and (y) with  respect to
     indemnification and contribution provisions,  as enforcement thereof may be
     limited by applicable law. The Operative Agreements to which the Company is
     or will be a party will,  upon execution and delivery  thereof,  conform in
     all material respects to the descriptions thereof in the Final Memorandum.

          (ix) The consolidated financial statements of the Company incorporated
     by  reference  in the Final  Memorandum,  together  with the related  notes
     thereto,  present fairly in all material respects the financial position of
     the Company and its  consolidated  subsidiaries  at the dates indicated and
     the  consolidated  results of operations  and cash flows of the Company and
     its  consolidated  subsidiaries for the periods  specified.  Such financial
     statements  have  been  prepared  in  conformity  with  generally  accepted
     accounting  principles applied on a consistent basis throughout the periods
     involved,  except as  otherwise  stated  therein and except that  unaudited
     financial  statements  do not have all required  footnotes.  The  financial
     statement  schedules of the Company,  if any,  incorporated by reference in
     the Final Memorandum present the information required to be stated therein.

<PAGE>

          (x) The Company is a "citizen of the United States" within the meaning
     of Section  40102(a)(15) of Title 49 of the United States Code, as amended,
     and holds an air carrier operating  certificate  issued pursuant to Chapter
     447 of Title 49 of the United States Code, as amended, for aircraft capable
     of carrying 10 or more individuals or 6,000 pounds or more of cargo. All of
     the  outstanding  shares of  capital  stock of the  Company  have been duly
     authorized and validly issued and are fully paid and non-assessable.

          (xi) When duly  executed,  authenticated,  issued and delivered in the
     manner  provided for in the  Indenture and sold and paid for as provided in
     this Agreement,  the Offered  Securities will constitute  valid and binding
     obligations  of the Company  enforceable  in  accordance  with their terms,
     except (w) as enforcement thereof may be limited by bankruptcy,  insolvency
     (including, without limitation, all laws relating to fraudulent transfers),
     reorganization, moratorium or other similar laws now or hereafter in effect
     relating to creditors'  rights  generally,  (x) as  enforcement  thereof is
     subject to general principles of equity (regardless of whether  enforcement
     is  considered in a proceeding in equity or at law) and (y) with respect to
     indemnification  provisions,  as  enforcement  thereof  may be  limited  by
     applicable law, and the holders thereof will be entitled to the benefits of
     the Indenture. The Offered Securities will conform in all material respects
     to the description thereof in the Final Memorandum.

          (xii) When duly executed,  authenticated,  issued and delivered in the
     manner provided for in the Indenture and the Registration Rights Agreement,
     the Exchange  Securities will constitute  valid and binding  obligations of
     the Company  enforceable  in  accordance  with their  terms,  except (w) as
     enforcement  thereof may be limited by bankruptcy,  insolvency  (including,
     without   limitation,   all  laws   relating  to   fraudulent   transfers),
     reorganization, moratorium or other similar laws now or hereafter in effect
     relating to creditors'  rights  generally,  (x) as  enforcement  thereof is
     subject to general principles of equity (regardless of whether  enforcement
     is  considered in a proceeding in equity or at law) and (y) with respect to
     indemnification  provisions,  as  enforcement  thereof  may be  limited  by
     applicable law, and the holders thereof will be entitled to the benefits of
     the  Indenture.  The  Exchange  Securities  will  conform  in all  material
     respects to the description thereof in the Final Memorandum.

          (xiii) The security interest created by the Security Agreement will be
     for the benefit of the Holders and the Indemnitees and will constitute,  on
     and at all times  after the  Closing  Date  until  the  termination  of the
     Security Agreement,  valid and perfected Liens on the Collateral  purported
     to be covered thereby,  subject to no equal or prior Lien, except Permitted
     Liens.

          (xiv) Except as disclosed in the Final Memorandum, the Company and the
     Subsidiaries  have good and marketable title to all real properties and all
     other  properties  and assets owned by them,  in each case free from liens,
     encumbrances  and defects except where the failure to have such title would
     not have a Continental  Material Adverse Effect; and except as disclosed in
     the Final Memorandum, the Company and the Subsidiaries hold any leased real
     or personal property under valid and enforceable  leases with no exceptions
     that would have a Continental Material Adverse Effect.

<PAGE>

          (xv) Except as disclosed in the Final Memorandum,  there is no action,
     suit or proceeding  before or by any governmental  agency or body or court,
     domestic or  foreign,  now pending  or, to the  knowledge  of the  Company,
     threatened  against the Company or any of its  subsidiaries or any of their
     respective properties that individually (or in the aggregate in the case of
     any class of related lawsuits), could reasonably be expected to result in a
     Continental Material Adverse Effect or that could reasonably be expected to
     materially  and  adversely  affect  the  consummation  of the  transactions
     contemplated  by this  Agreement,  the  Offered  Securities,  the  Exchange
     Securities or the Operative Agreements.

          (xvi) Except as disclosed in the Final  Memorandum,  no labor  dispute
     with the  employees  of the  Company  or any  subsidiary  exists or, to the
     knowledge of the Company,  is imminent that could reasonably be expected to
     have a Continental Material Adverse Effect.

          (xvii)  Each of the  Company and the  Subsidiaries  has all  necessary
     consents,  authorizations,  approvals,  orders, certificates and permits of
     and from,  and has made all  declarations  and filings  with,  all federal,
     state,  local  and  other  governmental  authorities,  all  self-regulatory
     organizations  and all courts and other tribunals,  to own, lease,  license
     and use its properties and assets and to conduct its business in the manner
     described in the Final Memorandum, except to the extent that the failure to
     so obtain,  declare or file would not have a Continental  Material  Adverse
     Effect.

          (xviii) Except as disclosed in the Final  Memorandum,  (x) neither the
     Company nor any of the  Subsidiaries is in violation of any statute,  rule,
     regulation,  decision  or order of any  governmental  agency or body or any
     court,  domestic  or foreign,  relating to the use,  disposal or release of
     hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or
     operates any real property  contaminated with any substance that is subject
     to any  environmental  laws,  or is  subject to any claim  relating  to any
     environmental  laws,  which  violation,  contamination,  liability or claim
     individually  or  in  the  aggregate  is  reasonably  expected  to  have  a
     Continental  Material  Adverse Effect,  and (y) the Company is not aware of
     any  pending  investigation  which  might  lead  to  such a  claim  that is
     reasonably expected to have a Continental Material Adverse Effect.

          (xix) The  accountants  that  examined and issued an auditors'  report
     with respect to the  consolidated  financial  statements of the Company and
     the  financial  statement  schedules  of the Company,  if any,  included or
     incorporated by reference in the Final  Memorandum are  independent  public
     accountants within the meaning of the Securities Act.

          (xx) The Company is not (based on  applicable  law as in effect on the
     date  hereof) an  "investment  company",  or an entity  "controlled"  by an
     "investment  company",  within the meaning of the Investment Company Act of
     1940, as amended (the "INVESTMENT COMPANY ACT"), required to register under
     the Investment Company Act.

<PAGE>

          (xxi) The Offered Securities  satisfy the eligibility  requirements of
     Rule 144A(d)(3) under the Securities Act.

          (xxii) Assuming the accuracy of the representations and warranties and
     compliance  with  the  agreements  made by the  Initial  Purchaser  in this
     Agreement,  the offer and sale of the  Offered  Securities  to the  Initial
     Purchaser in the manner  contemplated by this Agreement will be exempt from
     the  registration  requirements  of the Securities Act by reason of Section
     4(2) thereof and Regulation S thereunder  and, except as required under the
     Registration Rights Agreement, it is not necessary to qualify the Indenture
     under the Trust Indenture Act in respect of any such offer or sale.

          (xxiii) Neither the Company nor any of its affiliates,  nor any person
     acting on their behalf,  (i) has, within the six-month  period prior to the
     date hereof, offered or sold in the United States or to any U.S. person (as
     such  terms are  defined  in  Regulation  S under the  Securities  Act) the
     Offered  Securities  or any  security  of the same  class or  series as the
     Offered Securities or (ii) has offered or will solicit any offer to buy, or
     will offer or sell the Offered  Securities  (x) in the United States by any
     form of "general  solicitation" or "general advertising" within the meaning
     of Rule 502(c) under the Securities Act or in any manner involving a public
     offering  within the meaning of Section 4(2) of the  Securities  Act or (y)
     with respect to any securities sold in reliance on Rule 903 of Regulation S
     under the Securities Act, by means of any "directed selling efforts" within
     the meaning of Rule 902(c) of Regulation S. The Company has not entered and
     will not  enter  into  any  contractual  arrangement  with  respect  to the
     distribution  of the  Offered  Securities  except for this  Agreement.  The
     Company and its  affiliates  and any person  acting on its or their  behalf
     have complied and will comply with the offering restrictions requirement of
     Regulation S.

          (xxiv) Simat,  Helliesen & Eichner,  Inc. ("SH&E") is not an affiliate
     of the  Company  and,  to the  knowledge  of the  Company,  does not have a
     substantial interest,  direct or indirect, in the Company. To the knowledge
     of the Company,  none of the  officers  and  directors of SH&E is connected
     with  the  Company  or any  of  its  affiliates  as an  officer,  employee,
     promoter,  underwriter,  trustee,  partner,  director or person  performing
     similar functions.

          (b) The parties agree that any certificate signed by a duly authorized
officer of the Company and delivered to the Initial Purchaser, or to counsel for
the Initial Purchaser, on the Closing Date and in connection with this Agreement
or the offering of the Offered Securities,  shall be deemed a representation and
warranty by (and only by) the Company to the Initial Purchaser as to the matters
covered thereby.

          2. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. (a) On the basis
of the representations,  warranties and agreements herein contained, but subject
to the terms and the conditions  herein set forth, the Company agrees to sell to
the Initial  Purchaser,  and the Initial  Purchaser  agrees to purchase from the
Company,  the  aggregate  principal  amount of Offered  Securities at a purchase
price of 98.875% of the principal amount thereof plus accrued interest,  if any,
from the date of issuance.

<PAGE>

          (b) The  Company  shall  issue  and  deliver  against  payment  of the
purchase  price  the  Offered  Securities  purchased  by the  Initial  Purchaser
hereunder  and to be offered  and sold by the Initial  Purchaser  in reliance on
Regulation S under the  Securities Act (the  "REGULATION S  SECURITIES")  in the
form of one or more global  securities  in  definitive,  fully  registered  form
without interest coupons (the "REGULATION S GLOBAL  SECURITIES")  which shall be
deposited with the Trustee as custodian for The Depository Trust Company ("DTC")
and registered in the name of a nominee of DTC, for the  respective  accounts of
the DTC participants for Euroclear Bank S.A./N.V.,  as operator of the Euroclear
System ("EUROCLEAR"),  and Clearstream Banking, societe anonyme ("CLEARSTREAM").
On or prior to the 40th day  after  the  later of the day on which  the  Offered
Securities are first offered to persons other than  distributors  (as defined in
Regulation  S under  the  Securities  Act)  and  the  Closing  Date,  beneficial
interests  in the  Regulation  S  Global  Securities  may be held  only  through
Euroclear and  Clearstream.  Regulation S Securities  shall be available only in
book-entry  form,  except in the limited  circumstances  described  in the Final
Memorandum.

          (c) The  Company  shall  issue  and  deliver  against  payment  of the
purchase price the Offered  Securities to be purchased by the Initial  Purchaser
hereunder  and to be  offered  and  sold  by the  Initial  Purchaser  to QIBs in
reliance on Rule 144A under the  Securities Act (the "144A  SECURITIES")  in the
form of one or more permanent global securities in definitive,  fully registered
form without interest coupons (the "RESTRICTED  GLOBAL SECURITIES" and, together
with the Regulation S Global Securities, the "GLOBAL SECURITIES") which shall be
deposited  with the related  Trustee as custodian for DTC and  registered in the
name of a nominee of DTC for credit to the  account  of the  Initial  Purchaser.
Each Restricted Global Security shall include the legend regarding  restrictions
on transfer set forth under "Transfer Restrictions" in the Final Memorandum. The
Regulation S Securities and the 144A Securities shall be assigned separate CUSIP
numbers.

          (d) Payment for the  Offered  Securities  shall be made by the Initial
Purchaser  in  federal  (same  day)  funds by  official  check or checks or wire
transfer to an account  previously  designated  to the Initial  Purchaser by the
Company at 10:00 a.m.  (New York time),  on  December 6, 2002,  or at such other
date and time as may be agreed upon by the  Company  and the  Initial  Purchaser
(such date and time of delivery  and payment  for the Offered  Securities  being
herein referred to as the "CLOSING  DATE"),  against  delivery to the Trustee as
custodian  for DTC at the  offices of Hughes  Hubbard & Reed LLP at One  Battery
Park Plaza, New York, New York 10004 (or at such other location as may be agreed
to by the Initial  Purchaser  and the  Company) of (i) the  Regulation  S Global
Securities  representing  all of the  Regulation S Securities for the respective
accounts of the DTC  participants  for  Euroclear and  Clearstream  and (ii) the
Restricted  Global  Securities  representing  all of the  144A  Securities.  The
Regulation S Global  Securities and the Restricted  Global  Securities  shall be
made  available  for checking at the office of Hughes  Hubbard & Reed LLP (or at
such  other  location  as may be  agreed  to by the  Initial  Purchaser  and the
Company) not later than 1:00 p.m. on the business day prior to the Closing Date.

          (e) Notwithstanding the foregoing,  any Offered Securities sold by the
Initial  Purchaser  pursuant to Section 5(a) hereof to Institutional  Accredited

<PAGE>

Investors who are not QIBs and are not purchasers of interests in the Regulation
S Global Securities shall be issued in definitive, fully registered form without
interest  coupons  ("DEFINITIVE  SECURITIES") and shall bear the legend relating
thereto set forth under "Transfer  Restrictions"  in the Final  Memorandum,  but
shall be paid for in the manner set forth in Section 2(d) hereof.  Upon transfer
of Definitive  Securities to a QIB or in accordance  with Regulation S under the
Securities Act, such Definitive Securities shall be exchanged for an interest in
the appropriate  Global Security.  Definitive  Securities shall be registered in
such names and in such  authorized  denominations  as the Initial  Purchaser may
request not less than two full business days in advance of the Closing Date.

          3. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASER. The Initial
Purchaser's  obligations to purchase and pay for the Offered Securities pursuant
to this Agreement are subject to the following conditions:

          (a) On the Closing Date, the Initial  Purchaser shall have received an
opinion of Hughes Hubbard & Reed LLP, counsel for the Company, dated the Closing
Date, in form and substance reasonably satisfactory to the Initial Purchaser.

          (b) On the Closing Date, the Initial  Purchaser shall have received an
opinion of the General  Counsel of the Company,  dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchaser.

          (c) On the Closing Date, the Initial  Purchaser shall have received an
opinion  of  Richards,  Layton & Finger,  P.A.,  counsel  for  Wilmington  Trust
Company,  individually  and as  Trustee,  dated the  Closing  Date,  in form and
substance reasonably satisfactory to the Initial Purchaser.

          (d) On the Closing Date, the Initial  Purchaser shall have received an
opinion of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel for the
Liquidity Provider and the Liquidity Provider Guarantor, dated the Closing Date,
in form and substance reasonably satisfactory to the Initial Purchaser.

          (e) On the Closing Date, the Initial  Purchaser shall have received an
opinion  of  in-house  counsel  for the  Liquidity  Provider  and the  Liquidity
Provider  Guarantor,  dated the Closing Date,  in form and substance  reasonably
satisfactory to the Initial Purchaser.

          (f) On the Closing Date, the Initial  Purchaser shall have received an
opinion of Latham & Watkins,  special New York counsel for the Policy  Provider,
dated the Closing  Date, in form and substance  reasonably  satisfactory  to the
Initial Purchaser.

          (g) On the Closing Date, the Initial  Purchaser shall have received an
opinion of in-house counsel for the Policy Provider,  dated the Closing Date, in
form and substance reasonably satisfactory to the Initial Purchaser.

          (h) On the Closing Date, the Initial  Purchaser shall have received an
opinion of Lytle,  Soule & Curlee,  special counsel in Oklahoma City,  Oklahoma,
dated the Closing  Date, in form and substance  reasonably  satisfactory  to the
Initial Purchaser.

<PAGE>

          (i) On the Closing Date, the Initial  Purchaser shall have received an
opinion  of  Milbank,  Tweed,  Hadley  & McCloy  LLP,  counsel  for the  Initial
Purchaser,  dated the Closing Date,  with respect to the validity of the Offered
Securities,  the Final Memorandum, the exemption from registration for the offer
and sale of the Offered  Securities  to the Initial  Purchaser  as  contemplated
hereby  and other  related  matters  as the  Initial  Purchaser  may  reasonably
require,  and the Company shall have furnished to such counsel such documents as
they  reasonably  request  for the  purpose of  enabling  them to pass upon such
matters.

          (j) Subsequent to the execution and delivery of this Agreement,  there
shall not have occurred any change,  or any development  involving a prospective
change, in the condition (financial or other),  business,  properties or results
of operations of the Company and its  subsidiaries  considered as one enterprise
that,  in the Initial  Purchaser's  judgment,  is material  and adverse and that
makes it, in the  Initial  Purchaser's  judgment,  impracticable  to market  the
Offered  Securities  on the terms and in the  manner  contemplated  by the Final
Memorandum.

          (k) Subsequent to the execution and delivery of this Agreement,  there
shall not have occurred any change,  or any development  involving a prospective
change, in the condition (financial or other),  business,  properties or results
of  operations  of the Policy  Provider and its  subsidiaries  considered as one
enterprise that, in the Initial  Purchaser's  judgment,  is material and adverse
and that makes it, in the Initial Purchaser's judgment,  impracticable to market
the Offered Securities on the terms and in the manner  contemplated by the Final
Memorandum.

          (l) The Initial  Purchaser  shall have  received on the Closing Date a
certificate,  dated the  Closing  Date and signed by the  President  or any Vice
President of the Company,  to the effect that the representations and warranties
of the  Company  contained  in this  Agreement  are true and  correct  as of the
Closing  Date as if made on the  Closing  Date  (except to the extent  that they
relate  solely to an earlier date, in which case they shall be true and accurate
as of such earlier date),  that the Company has performed all its obligations to
be performed  hereunder on or prior to the Closing Date and that,  subsequent to
the execution and delivery of this Agreement,  there shall not have occurred any
material  adverse  change,  or any  development or event involving a prospective
material  adverse  change,  in the  condition  (financial  or other),  business,
properties  or  results  of  operations  of the  Company  and  its  subsidiaries
considered  as one  enterprise,  except as set forth in or  contemplated  by the
Final Memorandum.

          (m) As of the Closing Date, the  representations and warranties of the
Policy  Provider  contained in the  Indemnification  Agreement shall be true and
correct in all  material  respects as of the Closing  Date (except to the extent
that they relate solely to an earlier or later date, in which case they shall be
true and correct as of such  earlier or later  date) and the  Initial  Purchaser
shall have  received a certificate  of the President or a Vice  President of the
Policy Provider, dated the Closing Date, to such effect.

          (n) The Initial Purchaser shall have received from Ernst & Young LLP a
letter, dated the date hereof, in form and substance satisfactory to the Initial
Purchaser.

<PAGE>

          (o)  Subsequent to the  execution  and delivery of this  Agreement and
prior to the  Closing  Date,  there shall not have been any  downgrading  in the
rating  accorded any of the  Company's  securities  (except for any pass through
certificates) by any "nationally recognized statistical rating organization", as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act, or
any public  announcement  that any such  organization has under  surveillance or
review,  in each case for possible  change,  its ratings of any such  securities
other than pass through  certificates  (other than an announcement with positive
implications  of  a  possible  upgrading,  and  no  implication  of  a  possible
downgrading, of such rating).

          (p) SH&E shall  have  furnished  to the  Initial  Purchaser  a letter,
addressed to the Company and dated the Closing  Date,  confirming  that SH&E and
each of its directors and officers (i) is not an affiliate of the Company or any
of its  affiliates,  (ii)  does not have any  substantial  interest,  direct  or
indirect,  in the Company or any of its  affiliates  and (iii) is not  connected
with the Company or any of its  affiliates  as an officer,  employee,  promoter,
underwriter, trustee, partner, director or person performing similar functions.

          (q) At the Closing Date, each of the Operative  Agreements  shall have
been  duly  executed  and  delivered  by each of the  parties  thereto;  and the
representations and warranties of the Company contained in each of such executed
Operative Agreements shall be true and correct as of the Closing Date (except to
the extent that they relate  solely to an earlier date, in which case they shall
be true and correct as of such  earlier  date) and the Initial  Purchaser  shall
have received a certificate of the President or a Vice President of the Company,
dated as of the Closing Date, to such effect.

          (r) On the Closing Date, the Offered  Securities  shall be rated "Aaa"
by Moody's Investors Service, Inc.

          (s) The Initial Purchaser shall have received from Ernst & Young LLP a
letter,  dated the Closing Date,  which meets the requirements of subsection (n)
of this Section 3, except that the specified date referred to in such subsection
will be a date not more than three  business  days prior to the Closing Date for
the purposes of this subsection.

          (t) On the Closing  Date (a) the  Security  Agreement  shall have been
duly filed for recordation  with the FAA in accordance with the Federal Aviation
Act and  (b)  each  Financing  Statement  shall  have  been  duly  filed  in the
appropriate jurisdiction.

          The Company will  furnish the Initial  Purchaser  with such  conformed
copies of such  opinions,  certificates,  letters and  documents  as the Initial
Purchaser reasonably requests.

          4.  CERTAIN  AGREEMENTS  OF THE COMPANY.  The Company  agrees with the
Initial Purchaser that:

          (a) During the period  described  in the  following  sentence  of this
Section  4(a),  the Company shall advise the Initial  Purchaser  promptly of any
proposal to amend or supplement the Final Memorandum  (except by documents filed
under the Exchange Act) and will not effect such amendment or supplement (except
by  documents  filed under the  Exchange  Act)  without the Initial  Purchaser's

<PAGE>

consent,  which consent will not be unreasonably withheld. If, at any time prior
to the  completion  of the  resale  of the  Offered  Securities  by the  Initial
Purchaser,  any event shall occur as a result of which it is  necessary to amend
or supplement the Final Memorandum in order to make the statements  therein,  in
the light of the  circumstances  when the Final  Memorandum  is  delivered  to a
purchaser, not misleading in any material respect, the Company shall prepare and
furnish  to  the  Initial  Purchaser,  at  the  Company's  own  expense,  either
amendments or supplements to the Final  Memorandum so that the statements in the
Final  Memorandum  as so amended or  supplemented  will not, in the light of the
circumstances  when  the  Final  Memorandum  is  delivered  to a  purchaser,  be
misleading in any material respect.  Neither the Initial Purchaser's consent to,
nor the Initial  Purchaser's  delivery to  offerees  or  investors  of, any such
amendment or supplement  shall  constitute a waiver of any of the conditions set
forth in Section 3 hereof.

          (b)  Notwithstanding  any  provision  of  Section  4(a)  hereof to the
contrary, the Company's obligations under Section 4(a) hereof shall terminate on
the  earlier  to  occur  of  (i)  the  effective  date  of  the  Exchange  Offer
Registration  Statement or Shelf  Registration  Statement and (ii) the date upon
which the Initial Purchaser and the Initial Purchaser's affiliates cease to hold
Offered  Securities   acquired  as  part  of  the  Initial  Purchaser's  initial
distributions.

          (c) The Company  will furnish to the Initial  Purchaser  copies of the
Preliminary Memorandum,  the Final Memorandum and all amendments and supplements
to such documents  (excluding all documents  incorporated by reference therein),
in each  case  as  soon as  available  and in  such  quantities  as the  Initial
Purchaser  reasonably  requests.  So long as any of the Offered  Securities  are
Registrable Securities (as defined in the Registration Rights Agreement), at any
time when the Company is not subject to Section 13 or 15(d) of the Exchange Act,
the Company will provide to any holder of such Registrable Securities, or to any
prospective  purchaser of such  Registrable  Securities  designated by a holder,
upon the  request  of such  holder or  prospective  purchaser,  any  information
required to be delivered to holders and  prospective  purchasers  of the Offered
Securities  pursuant to Rule 144A(d)(4)  under the Securities Act. This covenant
is intended to be for the benefit of the  holders,  and  prospective  purchasers
designated by such holders from time to time, of such Registrable Securities.

          (d) If requested by the Initial  Purchaser,  the Company shall use its
reasonable  efforts to permit the Offered  Securities  to be  designated  PORTAL
securities  in  accordance  with the rules and  regulations  adopted by the NASD
relating to trading in the PORTAL Market.

          (e) The Company  shall,  in  cooperation  with the Initial  Purchaser,
endeavor to arrange for the  qualification  of the Offered  Securities for offer
and  sale  under  the   applicable   securities  or  "blue  sky"  laws  of  such
jurisdictions  in  the  United  States  as  the  Initial  Purchaser   reasonably
designates and will endeavor to maintain such  qualifications  in effect so long
as required for the resale of the Offered  Securities by the Initial  Purchaser;
PROVIDED  that the  Company  shall not be  required  to (i) qualify as a foreign
corporation or as a dealer in securities, (ii) file a general consent to service
of process or (iii) subject itself to taxation in any such jurisdiction.

<PAGE>

          (f) During the period of ten years after the Closing Date, the Company
will promptly  furnish to the Initial  Purchaser,  upon  request,  copies of all
Annual  Reports on Form 10-K and any definitive  proxy  statement of the Company
filed with the  Commission;  PROVIDED that providing a website  address at which
such Annual  Reports and any such  definitive  proxy  statements may be accessed
will satisfy this clause (f).

          (g)  Between the date of this  Agreement  and the  Closing  Date,  the
Company shall not,  without the prior written consent of the Initial  Purchaser,
offer,  sell,  or enter into any  agreement  to sell (as public debt  securities
registered under the Securities Act or as debt securities which may be resold in
a transaction exempt from the registration requirements of the Securities Act in
reliance on Rule 144A thereunder  (other than the Offered  Securities) and which
are marketed through the use of a disclosure document  containing  substantially
the same  information  as a prospectus  for similar debt  securities  registered
under the Securities  Act),  any notes of the Company  secured by Spare Parts or
Appliances (or rights relating thereto).

          (h) During the period of two years after the Closing Date, the Company
will, upon request,  furnish to the Initial  Purchaser and any holder of Offered
Securities  or  Exchange  Securities,  as  the  case  may  be,  a  copy  of  the
restrictions  on transfer  applicable  to such  Offered  Securities  or Exchange
Securities.

          (i) During the period of two years after the Closing Date, the Company
will not,  and will not permit  any of its  affiliates  (as  defined in Rule 144
under the Securities  Act) to, resell any of the Offered  Securities or Exchange
Securities that have been reacquired by any of them.

          (j) During  the period of two years  after the  Closing  Date (or,  if
shorter,  the period  beginning  on the  Closing  Date and ending on the date on
which there ceases to be any Registrable Securities), the Company will not be or
become an open-end  investment  company,  unit  investment  trust or face-amount
certificate  company that is or is required to be registered  under Section 8 of
the Investment  Company Act, or a closed-end  investment  company required to be
registered, but not registered, under the Investment Company Act.

          (k) Neither the Company nor any  affiliate  of the Company  will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities  Act) which would be integrated  with the
sale of the Offered  Securities in a manner which would require the registration
under the Securities Act of the Offered Securities sold to the Initial Purchaser
pursuant to this Agreement.

          (l) The Company  shall not take any action  prohibited by Regulation M
under the  Exchange  Act in  connection  with the  distribution  of the  Offered
Securities contemplated hereby.

          5. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER.

          (a)  The  Initial  Purchaser  represents  and  warrants  that it is an
"accredited  investor"  within the meaning of Regulation D under the  Securities

<PAGE>

Act. The Initial Purchaser represents, warrants and agrees with the Company that
(i) it has not solicited and will not solicit  offers for, or offer or sell, the
Offered   Securities  by  any  form  of  "general   solicitation"   or  "general
advertising"  (as those terms are used in Regulation D under the Securities Act)
or in any manner  involving a public offering within the meaning of Section 4(2)
of the  Securities Act and (ii) it has solicited and will solicit offers for the
Offered  Securities  only  from,  and has  offered  and will  offer and sell the
Offered Securities only to (A) in the case of offers and sales inside the United
States,  persons that it reasonably  believes to be (1) QIBs in compliance  with
Rule 144A under the Securities  Act or (2)  Institutional  Accredited  Investors
that, prior to their purchase of the Offered Securities,  execute and deliver to
the  Initial  Purchaser  a letter in the form  annexed as Annex III to the Final
Memorandum  and (B) in the case of offers and sales  outside the United  States,
persons  other  than  U.S.  persons  (including  dealers  or other  professional
fiduciaries  in the United  States acting on a  discretionary  basis for foreign
beneficial owners (other than an estate or trust)) in accordance with Regulation
S under the Securities Act; provided, in the case of each of clauses (A) and (B)
that, in  purchasing  such Offered  Securities,  such persons are deemed to have
represented  and agreed as  provided in the Final  Memorandum  under the caption
"Transfer Restrictions".

          (b) The Initial Purchaser represents, warrants and agrees with respect
to offers and sales outside the United States that:

          (i) it  understands  that no  action  has been or will be taken in any
     jurisdiction  by the  Company  that would  permit a public  offering of the
     Offered Securities, or possession or distribution of either the Preliminary
     Memorandum  or the Final  Memorandum  or any other  offering  or  publicity
     material relating to the Offered Securities, in any country or jurisdiction
     where action for that purpose is required;

          (ii) it will comply with all applicable  laws and  regulations in each
     jurisdiction  in which it  acquires,  offers,  sells  or  delivers  Offered
     Securities or has in its possession or distributes  either the  Preliminary
     Memorandum  or the Final  Memorandum  or any other  offering  or  publicity
     material  relating  to the  Offered  Securities,  in all  cases  at its own
     expense;

          (iii)  the  Offered  Securities  have not been  registered  under  the
     Securities  Act and may not be offered or sold within the United  States or
     to, or for the  account or benefit of, U.S.  persons  except in  accordance
     with Rule 144A or  Regulation  S under the  Securities  Act or  pursuant to
     another exemption from the registration requirements of the Securities Act;

          (iv) it has offered the Offered Securities and will offer and sell the
     Offered  Securities  (A) as part of its  distribution  at any  time and (B)
     otherwise until 40 days after the later of the commencement of the offering
     and the Closing Date,  only in accordance  with Rule 903 of Regulation S or
     as  otherwise  permitted  in  Section  5(a)  hereof;  neither  the  Initial
     Purchaser,  its  affiliates  nor any persons  acting on its or their behalf
     have engaged or will engage in any "directed  selling  efforts" (within the
     meaning of  Regulation S) with respect to the Offered  Securities,  and the
     Initial  Purchaser,  its  affiliates and any such persons have complied and
     will comply with the offering restrictions requirement of Regulation S;

<PAGE>

          (v) it (A) has not  offered or sold and,  prior to the date six months
     after the Closing  Date,  will not offer or sell any Offered  Securities to
     persons in the United Kingdom  except to persons whose ordinary  activities
     involve them in acquiring,  holding,  managing or disposing of  investments
     (as  principal or agent) for the purposes of their  businesses or otherwise
     in circumstances which have not resulted and will not result in an offer to
     the public in the United Kingdom within the meaning of the Public Offers of
     Securities  Regulations  1995;  (B) has  complied  and will comply with all
     applicable  provisions of the Financial  Services and Markets Act 2000 (the
     "FSMA")  with  respect to  anything  done by it in  relation to the Offered
     Securities in, from or otherwise involving the United Kingdom; and (C) will
     only  communicate or cause to be communicated  any invitation or inducement
     to engage in investment  activity  (within the meaning of section 21 of the
     FSMA)  received by it in  connection  with the issue or sale of the Offered
     Securities  in  circumstances  in which  section 21(1) of the FSMA does not
     apply to the Company;

          (vi) it  agrees  that,  at or  prior to  confirmation  of sales of the
     Offered Securities, it will have sent to each distributor, dealer or person
     receiving a selling  concession,  fee or other  remuneration that purchases
     Offered  Securities from it during the restricted  period a confirmation or
     notice to substantially the following effect:

          "The Offered  Securities covered hereby have not been registered under
          the U.S.  Securities Act of 1933 (the "Securities Act") and may not be
          offered and sold within the United States or to, or for the account or
          benefit of, U.S. persons (i) as part of their distribution at any time
          or (ii) otherwise until 40 days after the later of the commencement of
          the offering and the closing date, except in either case in accordance
          with  Regulation S (or Rule 144A if  available)  under the  Securities
          Act. Terms used above have the meaning given to them by Regulation S."

Terms used in this Section 5 have the meanings given to them by Regulation S.

          6. INDEMNIFICATION AND CONTRIBUTION.

          (a) The Company  agrees to  indemnify  and hold  harmless  the Initial
Purchaser,  and each Person,  if any, who controls the Initial  Purchaser within
the  meaning  of either  Section 15 of the  Securities  Act or Section 20 of the
Exchange  Act  from  and  against  any  and  all  losses,  claims,  damages  and
liabilities  (including,   without  limitation,  any  legal  or  other  expenses
reasonably  incurred by the Initial Purchaser or any such controlling  person in
connection with defending or  investigating  any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the  Preliminary   Memorandum  or  the  Final   Memorandum  (in  each  case,  as
supplemented or amended) or caused by any omission or alleged  omission to state
therein a material fact necessary to make the statements therein in the light of
the circumstances  under which they were made not misleading,  except insofar as
such  losses,  claims,  damages or  liabilities  are  caused by any such  untrue
statement or omission or alleged untrue statement or omission based upon Initial
Purchaser  Information or Policy Provider Information;  PROVIDED,  HOWEVER, that
the foregoing  indemnity  agreement with respect to the  Preliminary  Memorandum
shall not inure to the  benefit of the Initial  Purchaser,  or to the benefit of

<PAGE>

any person controlling the Initial  Purchaser,  with respect to any such losses,
claims,  damages  or  liabilities  asserted  by a person who  purchased  Offered
Securities  from the Initial  Purchaser,  if a copy of the Final  Memorandum (as
then amended or  supplemented  if the Company shall have furnished or filed with
the Commission  any amendments or supplements  thereto) was not sent or given by
or on behalf of the Initial  Purchaser to such person at or prior to the written
confirmation of the sale of such Offered  Securities to such person,  and if the
Final  Memorandum  (as so amended or  supplemented)  would have cured the defect
giving rise to such losses,  claims,  damages or liabilities unless such failure
to deliver the Final  Memorandum  was a result of  noncompliance  by the Company
with its delivery requirements set forth in Section 4(a) hereof.

          (b) The Initial  Purchaser  agrees to indemnify  and hold harmless the
Company,  its directors,  its officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the  foregoing  indemnity  from the
Company  to the  Initial  Purchaser,  but only  with  reference  to the  Initial
Purchaser Information.

          (c) In case any proceeding (including any governmental  investigation)
shall be instituted  involving  any person in respect of which  indemnity may be
sought pursuant to either Section 6(a) or Section 6(b) hereof,  such person (the
"INDEMNIFIED  PARTY")  shall  promptly  notify  the  person  against  whom  such
indemnity may be sought (the "INDEMNIFYING  PARTY") in writing. The indemnifying
party, upon request of the indemnified party,  shall, and the indemnifying party
may elect to, retain counsel reasonably satisfactory to the indemnified party to
represent  the  indemnified  party and any  others  the  indemnifying  party may
designate in such proceeding and the  indemnifying  party shall pay the fees and
disbursements  of  such  counsel  related  to  such  proceeding.   In  any  such
proceeding,  any  indemnified  party  shall  have the  right to  retain  its own
counsel,  but the fees and expenses of such  counsel  shall be at the expense of
such  indemnified  party unless (i) the  indemnifying  party and the indemnified
party shall have  mutually  agreed to the  retention of such  counsel,  (ii) the
named parties to any such proceeding  (including any impleaded  parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel  would be  inappropriate  due to actual or potential
differing  interests  between them, or (iii) the  indemnifying  party shall have
failed to retain  counsel as required by the prior  sentence  to  represent  the
indemnified  party within a reasonable amount of time. It is understood that the
indemnifying  party  shall not, in  connection  with any  proceeding  or related
proceedings  in the same  jurisdiction,  be liable for the fees and  expenses of
more than one  separate  firm (in  addition to any local  counsel)  for all such
indemnified  parties and that all such fees and expenses  shall be reimbursed as
they are  incurred.  Such firm shall be  designated  in  writing by the  Initial
Purchaser in the case of parties indemnified pursuant to Section 6(a) hereof and
by the  Company  in the case of parties  indemnified  pursuant  to Section  6(b)
hereof.  The  indemnifying  party shall not be liable for any  settlement of any
proceeding  effected  without  its  written  consent,  but if settled  with such
consent or if there be a final  judgment  for the  plaintiff,  the  indemnifying
party agrees to  indemnify  the  indemnified  party from and against any loss or
liability  by  reason  of  such  settlement  or  judgment.  Notwithstanding  the
foregoing sentence,  if at any time an indemnified party shall have requested in
writing an indemnifying  party to reimburse the  indemnified  party for fees and
expenses of counsel as  contemplated  by the second and third  sentences of this
Section  6(c),  the  indemnifying  party  agrees that it shall be liable for any
settlement of any proceeding  effected  without its written  consent if (i) such

<PAGE>

settlement is entered into more than 90 days after receipt by such  indemnifying
party of the aforesaid request and (ii) such  indemnifying  party shall not have
reimbursed the  indemnified  party in accordance  with such request prior to the
date of such  settlement,  unless such fees and expenses  are being  disputed in
good faith. The indemnifying party at any time may, subject to the last sentence
of this Section 6(c),  settle or  compromise  any  proceeding  described in this
Section 6(c) at the expense of the  indemnifying  party. No  indemnifying  party
shall,  without the prior written consent of the indemnified  party,  effect any
settlement  of any  pending  or  threatened  proceeding  in respect of which any
indemnified  party is or could have been a party and  indemnity  could have been
sought hereunder by such indemnified party,  unless such settlement (i) includes
an unconditional  release of such indemnified party from all liability on claims
that are the  subject  matter of such  proceeding  and (ii)  does not  include a
statement as to, or an admission of, fault,  culpability  or a failure to act by
or on behalf of an indemnified party.

          (d) To the extent the indemnification  provided for in Section 6(a) or
Section 6(b) hereof is required to be made but is  unavailable to an indemnified
party or insufficient in respect of any losses,  claims, damages or liabilities,
then  the  applicable   indemnifying  party  under  such  Section,  in  lieu  of
indemnifying such indemnified  party thereunder,  shall contribute to the amount
paid or payable by such  indemnified  party as a result of such losses,  claims,
damages or liabilities  (i) in such  proportion as is appropriate to reflect the
relative  benefits  received by the  Company,  on the one hand,  and the Initial
Purchaser,  on the other hand,  from the offering of the Offered  Securities  or
(ii) if the  allocation  provided  by  clause  (i)  above  is not  permitted  by
applicable  law, in such  proportion as is  appropriate  to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the  Company  on the one hand and the  Initial  Purchaser  on the other  hand in
connection  with the  statements  or  omissions  that  resulted in such  losses,
claims,  damages  or  liabilities,  as  well  as any  other  relevant  equitable
considerations.  The relative  benefits  received by the Company on the one hand
and the Initial  Purchaser on the other hand in connection  with the offering of
the Offered Securities shall be deemed to be in the same respective  proportions
as the  proceeds  from the  offering of the Offered  Securities  received by the
Company  (before  deducting  expenses)  and  the  total  underwriting  discounts
received by the Initial  Purchaser,  bear to the aggregate offering price of the
Offered Securities. The relative fault of the Company on the one hand and of the
Initial  Purchaser on the other hand shall be  determined by reference to, among
other things,  whether the untrue or alleged untrue statement of a material fact
or the  omission  or  alleged  omission  to state a  material  fact  relates  to
information  supplied  by the  Company or  information  supplied  by the Initial
Purchaser,  and the parties' relative intent,  knowledge,  access to information
and opportunity to correct or prevent such statement or omission.

          (e) The Company and the Initial  Purchaser  agree that it would not be
just or equitable if contribution  pursuant to this Section 6 were determined by
PRO RATA  allocation  or by any other  method of  allocation  that does not take
account of the equitable  considerations referred to in Section 6(d) hereof. The
amount  paid or  payable  by an  indemnified  party as a result  of the  losses,
claims,  damages and  liabilities  referred to in Section  6(d) hereof  shall be
deemed to include,  subject to the  limitations  set forth  above,  any legal or
other expenses  reasonably incurred by such indemnified party in connection with
investigating  or  defending  any such  action  or  claim.  Notwithstanding  the
provisions  of this  Section 6, the Initial  Purchaser  shall not be required to

<PAGE>

contribute  any amount in excess of the amount by which the total price at which
the Offered  Securities  resold by it in the initial  placement  of such Offered
Securities were offered to investors  exceeds the amount of any damages that the
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue  statement or omission or alleged  omission.  No person guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such  fraudulent  misrepresentation.  The indemnity  and  contribution
provisions contained in this Section 6 and the representations and warranties of
the Company contained in this Agreement shall remain operative and in full force
and  effect  regardless  of (i) any  termination  of this  Agreement,  (ii)  any
investigation  made by or on  behalf  of the  Initial  Purchaser  or any  person
controlling  the  Initial  Purchaser  or by or on  behalf  of the  Company,  its
officers  or  directors  or  any  person  controlling  the  Company,  and  (iii)
acceptance  of and  payment  for any of the  Offered  Securities.  The  remedies
provided for in this Section 6 are not  exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified  party at law or
in equity.

          7. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company  or its  officers  and of the  Initial  Purchaser  set  forth in or made
pursuant to this Agreement  will remain in full force and effect,  regardless of
any termination of this  Agreement,  any  investigation,  or statement as to the
results thereof,  made by or on behalf of the Initial Purchaser,  the Company or
any  of  their  respective   representatives,   officers  or  directors  or  any
controlling  person and will  survive  delivery  of and  payment for the Offered
Securities.  If for any reason the  purchase  of the Offered  Securities  by the
Initial Purchaser is not consummated,  the Company shall remain  responsible for
the expenses to be paid or reimbursed by it pursuant to Section 9 hereof and the
respective  obligations  of the Company and the  Initial  Purchaser  pursuant to
Section  6 hereof  shall  remain  in  effect.  If the  purchase  of the  Offered
Securities by the Initial Purchaser is not consummated for any reason other than
solely because of the occurrence of the termination of the Agreement pursuant to
Section 8 hereof,  the Company  will  reimburse  the Initial  Purchaser  for all
out-of-pocket  expenses (including reasonable fees and disbursements of counsel)
reasonably  incurred by the Initial Purchaser in connection with the offering of
such Offered  Securities and will comply with its  obligations  under Sections 6
and 9 hereof.

          8.  TERMINATION.  This  Agreement  shall be subject to  termination by
notice given by the Initial Purchaser to the Company, if (a) after the execution
and  delivery  of this  Agreement  and  prior to the  Closing  Date (i)  trading
generally shall have been materially  suspended or materially  limited on or by,
as the case may be,  any of the New York  Stock  Exchange,  the  American  Stock
Exchange or the NASD,  (ii) trading of any  securities of the Company shall have
been suspended on any exchange or in any over-the-counter  market, (iii) a major
disruption of  settlements  of  securities  or clearance  services in the United
States that would materially impair settlement and clearance with respect to the
Offered Securities, (iv) any general moratorium on commercial banking activities
in New York  shall  have been  declared  by  either  Federal  or New York  State
authorities  or (v) there  shall  have  occurred  any  attack  on,  outbreak  or
escalation of hostilities or act of terrorism  involving,  the United States, or
any change in financial markets or any calamity or crisis that, in each case, in
the  judgment of the Initial  Purchaser,  is material and adverse and (b) in the
case of any of the events  specified in clauses  (a)(i)  through (v), such event
singly or together  with any other such event  makes it, in the  judgment of the

<PAGE>

Initial  Purchaser,  impracticable to market the Offered Securities on the terms
and in the manner contemplated in the Final Memorandum.

          9.  PAYMENT OF  EXPENSES.  (a) As between  the Company and the Initial
Purchaser,  the Company shall pay all expenses  incidental to the performance of
the Company's obligations under this Agreement, including the following:

          (i) expenses  incurred in connection  with (A)  qualifying the Offered
     Securities  or the  Exchange  Securities  for  offer  and  sale  under  the
     applicable  securities  or "blue  sky"  laws of such  jurisdictions  in the
     United States as the Initial  Purchaser  reasonably  designates  (including
     filing fees and fees and disbursements of counsel for the Initial Purchaser
     in connection  therewith),  (B) endeavoring to maintain such qualifications
     in  effect  so  long  as  required  for the  distribution  of such  Offered
     Securities,  (C)  the  review  (if  any)  of the  offering  of the  Offered
     Securities or the Exchange Securities by the NASD, (D) the determination of
     the  eligibility of the Offered  Securities or the Exchange  Securities for
     investment under the laws of such  jurisdictions  as the Initial  Purchaser
     may designate,  (E) the  preparation  and  distribution  of any blue sky or
     legal  investment  memorandum by counsel for the Initial  Purchaser and (F)
     qualifying the Offered Securities for trading in The PortalSM Market of the
     Nasdaq Stock Market and any expenses incidental thereto;

          (ii)  expenses   incurred  in  connection  with  the  preparation  and
     distribution  to the Initial  Purchaser  and the dealers  (whose  names and
     addresses  the  Initial  Purchaser  will  furnish to the  Company) to which
     Offered Securities or Exchange Securities may have been sold by the Initial
     Purchaser  on  its  behalf  and to  any  other  dealers  upon  request,  of
     amendments  or  supplements  to  the  Final  Memorandum  (excluding  Policy
     Provider Information) in order to make the statements therein, in the light
     of the circumstances when the Final Memorandum is delivered to a purchaser,
     not materially misleading;

          (iii) expenses  incurred in connection with the preparation,  printing
     and  distribution of the Preliminary  Memorandum,  the Final Memorandum and
     any amendments  thereof or supplements  thereto  (excluding Policy Provider
     Information);

          (iv) expenses  incurred in connection with the  preparation,  printing
     and distribution of this Agreement,  the Offered  Securities,  the Exchange
     Securities and the Operative Agreements;

          (v) expenses  incurred in connection  with the delivery of the Offered
     Securities to the Initial Purchaser;

          (vi) reasonable fees and  disbursements of the counsel and accountants
     for the Company;

<PAGE>

          (vii) to the extent the  Company is so  required  under any  Operative
     Agreement to which it is a party, the fees and expenses of the Trustee, the
     Liquidity  Provider  and the Policy  Provider and the  reasonable  fees and
     disbursements of their respective counsel;

          (viii)  fees  charged  by  rating  agencies  for  rating  the  Offered
     Securities or the Exchange  Securities at the Company's request  (including
     annual  surveillance fees related to the Offered Securities or the Exchange
     Securities as long as they are outstanding);

          (ix)  reasonable  fees and  disbursements  of counsel  for the Initial
     Purchaser in an amount to be agreed  between the Initial  Purchaser and the
     Company;

          (x) all fees and expenses  relating to appraisals of the Pledged Spare
     Parts; and

          (xi) all  other  reasonable  out-of-pocket  expenses  incurred  by the
     Initial Purchaser in connection with the transactions  contemplated by this
     Agreement.

          (b) In connection with the offering, until the Initial Purchaser shall
have  notified  the  Company  of the  completion  of the  resale of the  Offered
Securities,  neither  the  Company  nor  any of its  affiliates  has  bid for or
purchased  or will bid for or  purchase,  either alone or with one or more other
persons,  for any account in which it or any of its  affiliates has a beneficial
interest any Offered  Securities;  and neither it nor any of its affiliates will
make bids or purchases for the purpose of creating actual,  or apparent,  active
trading in, or of raising the price of, the Offered Securities.

          10. NOTICES.  All communications  hereunder will be in writing and, if
sent to the Initial  Purchaser,  will be mailed,  delivered or sent by facsimile
transmission and confirmed to Morgan Stanley & Co. Incorporated,  1585 Broadway,
New York, NY 10036,  Attention:  Equipment Finance Group, facsimile number (212)
761-0786  and,  if sent to the  Company,  will be mailed,  delivered  or sent by
facsimile transmission and confirmed to it at 1600 Smith Street, HQSEO, Houston,
TX 77002,  Attention:  Treasurer  and General  Counsel,  facsimile  number (713)
324-2447.

          11.  SUCCESSORS.  This  Agreement  will inure to the benefit of and be
binding  upon  the  parties  hereto  and  their  respective  successors  and the
controlling  persons  referred to in Section 6 hereof,  and no other person will
have any right or obligation hereunder.

          12.  COUNTERPARTS.  This  Agreement  may be  executed in any number of
counterparts,  each of which  will be  deemed  to be an  original,  but all such
counterparts shall together constitute one and the same Agreement.

          13.  APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN  ACCORDANCE  WITH  THE  LAWS OF THE  STATE  OF NEW  YORK  WITHOUT  REGARD  TO
PRINCIPLES OF CONFLICTS OF LAW.

          14.  JURISDICTION.  Each of the parties  hereto  agrees that any legal
suit,  action or proceeding  arising out of or relating to this Agreement or the

<PAGE>

transactions  contemplated  hereby may be instituted in any U.S.  federal or New
York State court in the Borough of Manhattan in The City of New York and each of
the parties hereto hereby  irrevocably  waives any objection which it may now or
hereafter have to the laying of venue of any such  proceeding,  and  irrevocably
submits to the  jurisdiction  of such courts,  with  respect to actions  brought
against it as defendant, in any suit, action or proceeding.  Each of the parties
to this  Agreement  agrees  that a final  judgment  in any such suit,  action or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on the judgment or in any other manner  provided by law in accordance  with
applicable law.

          15. LIBOR FOR INITIAL  INTEREST  PERIOD.  The interest rate applicable
for the initial  Interest Period under the Indenture shall be LIBOR,  determined
by the Initial  Purchaser as the rate for deposits in U.S.  dollars for a period
of three months which appears on the Telerate Page 3750 as of 11:00 a.m., London
time, on December 4, 2002.

<PAGE>

          If  the  foregoing  is in  accordance  with  the  Initial  Purchaser's
understanding of our agreement, kindly sign and return to the Company one of the
counterparts  hereof,  whereupon it will become a binding  agreement between the
Initial Purchaser and the Company in accordance with its terms.

                                       Very truly yours,

                                       CONTINENTAL AIRLINES, INC.

                                       By:
                                           -------------------------------------
                                           Name:  Gerald Laderman
                                           Title: Senior Vice President-Finance

The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written:

MORGAN STANLEY & CO. INCORPORATED

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

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